LETTER AMENDMENT NO. 2
Dated as of May 28, 1997
To the banks, financial institutions
and other institutional lenders
(collectively, the "BANKS") parties
to the Loan Agreement referred to
below and to Citibank, N.A., as agent
(the "AGENT") for the Banks
Ladies and Gentlemen:
We refer to the Amended and Restated Loan Agreement dated as of April 11,
1995 (as amended, supplemented or otherwise modified through the date hereof,
the "LOAN AGREEMENT") among the undersigned and you. Capitalized terms not
otherwise defined in this Letter Amendment have the same meanings as specified
in the Loan Agreement.
The Loan Agreement is, effective as of the date of this Letter Amendment,
hereby amended as follows:
(a) Section 1.01 is amended by adding the following after the definition
of "Business Day":
""CAPITAL EXPENDITURES" means, for any Person for any period, all
expenditures made, directly or indirectly, by such Person or any of
its Subsidiaries during such period for equipment, fixed assets, real
property or improvements, or for replacements or substitutions
therefor or additions thereto, that have been or should be, in
accordance with GAAP, reflected as additions to property, plant or
equipment on a Consolidated balance sheet of such Person or have a
useful life of more than one year."
(b) Section 6.01 is amended as follows:
(i) Section 6.01(a) is amended by adding a PROVISO to the end
thereof as follows:
", PROVIDED HOWEVER, that
(i) during the first quarter of the fiscal year ending
May 31, 1998, the Borrowers shall maintain a Consolidated
Debt Ratio of not more than .58:1;
(ii) during the second quarter of the fiscal year
ending May 31, 1998, the Borrowers shall maintain a
Consolidated Debt Ratio of not more than .55:1; and
(iii) during the third quarter of the fiscal year
ending May 31, 1998, the Borrowers shall maintain a
Consolidated Debt Ratio of not more than .55:1."
(ii) Section 6.01(b) is amended by adding a PROVISO to the end
thereof as follows:
", PROVIDED, HOWEVER, that
(i) computation of the Consolidated Interest Coverage Ratio shall
not include the following charges accrued during the third quarter of
the fiscal year ending May 31, 1997: (A) a reserve for returns of
$9,000,000 and (B) restructuring costs of $4,000,000;
(ii) computation of the Consolidated Interest Coverage Ratio
shall not include the following charges accrued during the fourth
quarter of the fiscal year ending May 31, 1997 (to the extent
otherwise includible in such computation): (A) a reserve for returns,
(B) additional restructuring and related costs and (C) adjustments for
inventory; the aggregate amount of such items (ii)(A) through (ii)(C)
above not to exceed $17,000,000 in the aggregate;
(iii) during the fourth quarter of the fiscal year ending May 31,
1997, the Borrowers shall maintain a Consolidated Interest Coverage
Ratio of not less than 3.75:1;
(iv) during the first quarter of the fiscal year ending May 31,
1998, the Borrowers shall maintain a Consolidated Interest Coverage
Ratio of not less than 3.75:1;
(v) during the second quarter of the fiscal year ending May 31,
1998, the Borrowers shall maintain a Consolidated Interest Coverage
Ratio of not less than 3.10:1; and
(vi) during the third quarter of the fiscal year ending May 31,
1998, the Borrowers shall maintain a Consolidated Interest Coverage
Ratio of not less than 3.25:1."
(c) Section 6.03 is amended by adding a PROVISO to the end thereof as
follows:
", PROVIDED FURTHER, that no such sale of accounts receivable
permitted by this Section 6.03(b)(ii) may be made during the fiscal
year ending May 31, 1998."
(d) Article VI is amended by adding a new Section 6.09 as follows:
"Section 6.09. CAPITAL EXPENDITURES. The Borrowers shall not make, or
permit any of the Subsidiaries to make, any Capital Expenditures that
would cause the aggregate of all such Capital Expenditures made by the
Borrowers and the Subsidiaries for the fiscal year ending May 31, 1998
to exceed $30,000,000.
(e) Section 7.01(f) is amended in full to read as follows:
"(f) (i) any payment default of $1,000,000 or more shall occur under
any instrument or agreement (other than a Loan Instrument) respecting
any Debt of either Borrower or any of the Subsidiaries, unless payment
shall be made or action shall be taken within three (3) Business Days
after such default in an amount or manner sufficient to cure it,
PROVIDED that such payment or action will not result in a breach of
any term or provision of this Agreement and the other Loan
Instruments, with the various financial measurements and covenants set
forth in Section 6.01 of this Agreement being recalculated on a pro
forma basis (from the then most recent quarterly or subsequent pro
forma calculations) to include the effect of any such payment or (ii)
any Debt of either Borrower or of any of the Subsidiaries of
$5,000,000 or more in principal or notional amount shall be
accelerated or otherwise become due or be required to be prepaid,
repurchased or redeemed (other than pursuant to a regularly scheduled
mandatory prepayment, repurchase or redemption or the application of
the change of control provision contained in the Holding Company's
outstanding 5% convertible subordinated debentures due August 15,
2005, as in effect on the date hereof, or any substantially identical
provision contained in any subsequent issuance of debt) prior to its
scheduled maturity;"
This Letter Amendment shall become effective as of the date first above
written when, and only when, on or before May 28, 1997, the Agent shall have
received counterparts of this Letter Amendment executed by the undersigned and
the Majority Banks or, as to any of the Banks, advice satisfactory to the Agent
that such Bank has executed this Letter Amendment. This Letter Amendment is
subject to the provisions of Section 8.11 of the Loan Agreement.
On the effective date of this Letter Amendment, the undersigned shall pay
to the Agent for the account of each Bank executing this Letter Amendment on or
before the date hereof (the "SIGNING BANKS") an amendment fee of six basis
points on each Signing Bank's Commitment.
On and after the effectiveness of this Letter Amendment, each reference in
the Loan Agreement to "this Agreement", "hereunder", "hereof" or words of like
import referring to the Loan Agreement, and each reference in the Notes and each
of the other Loan Instruments to "the Loan Agreement", "thereunder", "thereof"
or words of like import referring to the Loan Agreement, shall mean and be a
reference to the Loan Agreement, as amended by this Letter Amendment.
The Loan Agreement, the Notes and each of the other Loan Instruments, as
specifically amended by this Letter Amendment, are and shall continue to be in
full force and effect and are hereby in all respects ratified and confirmed. The
execution, delivery and effectiveness of this Letter Amendment shall not, except
as expressly provided herein, operate as a waiver of any right, power or remedy
of any Bank or the Agent under any of the Loan Instruments, nor constitute a
waiver of any provision of any of the Loan Instruments.
If you agree to the terms and provisions hereof, please evidence such
agreement by executing and returning at least three counterparts of this Letter
Amendment to Citibank, N.A., 000 Xxxx Xxxxxx, Xxx Xxxx, XX 00000, Attn: Xxxxxx
Xxxxxxx.
This Letter Amendment may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement. Delivery of an executed counterpart of a
signature page to this Letter Amendment by telecopier shall be effective as
delivery of a manually executed counterpart of this Letter Amendment.
This Letter Amendment shall be governed by, and construed in accordance
with, the laws of the State of New York.
Very truly yours,
SCHOLASTIC CORPORATION
By:_______________________________________
Name:
Title:
XXXXXXXXXX XXX.
By:_______________________________________
Name:
Title:
Agreed as of the date first above written:
CITIBANK, N.A., as Agent
By:_______________________________________
Name:
Title:
BANKS
CITIBANK, N.A.
By:_______________________________________
Name:
Title:
THE CHASE MANHATTAN BANK, N.A.
By:_______________________________________
Name:
Title:
BANK BOSTON, N.A. (formerly known as
The First National Bank of Boston)
By:_______________________________________
Name:
Title:
MARINE MIDLAND BANK
By:_______________________________________
Name:
Title:
UNITED JERSEY BANK
By:_______________________________________
Name:
Title: