FRANKLIN ELECTRONIC PUBLISHERS, INCORPORATED
SECOND AMENDMENT AND CONSENT
TO NOTE PURCHASE AGREEMENT
$40,000,000 Principal Amount
7.71% Senior Notes
Due March 31, 2007
Dated as of December 7, 1999
To Each of the Holders of Senior Notes
of Franklin Electronic Publishers,
Incorporated Named in the
Attached Schedule I
Ladies and Gentlemen:
Reference is made to the Note Purchase Agreement dated as of March 27,
1997 among Franklin Electronic Publishers, Incorporated (the "Company") and each
of the Purchasers named in Schedule A to the Note Agreement (as amended, the
"Note Agreement"), pursuant to which the Company issued $40,000,000 principal
amount of its 7.71% Senior Notes due March 31, 2007 (the "Notes"). You are
referred to herein individually as a "Holder" and collectively as the "Holders."
Capitalized terms used and not otherwise defined herein shall have the meanings
ascribed to them in the Note Agreement.
The Company is not in compliance with various covenants contained in
Article 10 of the Note Agreement and expects to continue to be in noncompliance
with such covenants. The Holders have waived the Company's noncompliance with
such covenants through the date of this Second Amendment pursuant to a Waiver
dated November 11, 1999.
The Company has requested the modification of certain of the covenants and
other provisions contained in the Note Agreement and the consent of the Holders
to permit it to enter into a credit facility. The Holders are willing to grant
an amendment on the terms and conditions hereinafter set forth.
In consideration of the premises and for good and valuable consideration,
the receipt and sufficiency of which are acknowledged, the Company and the
Holders agree as follows:
SECTION 1. AMENDMENTS
1.1. Amendment of Section 1. Section 1 of the Note Agreement is amended to
include the following final sentence:
"The Notes will be secured pursuant to the Security Documents by a Lien,
which Lien will be junior to Liens in favor of the Banks, on the
Collateral."
1.2. Amendment of Section 7.1. Section 7.1 of the Note Agreement is
amended by deleting the word "and" at the end of Section 7.1(f), by
redesignating Section 7.1(g) as Section 7.1(h) and by adding a new Section
7.1(g) to read in its entirety as follows:
(g) Collateral Reports - upon request of such holder, copies of all
reports concerning the Collateral that are provided to the Banks,
concurrently with their delivery to the Banks; and
1.3. Amendment of Section 7.2. The reference in Section 7.2(a) of the Note
Agreement to "Section 10.14" is amended to read "Section 10.16."
1.4. Amendment of Section 8.1.
1.4.1. Section 8.1(a) of the Note Agreement is amended to read in
its entirety as follows:
"(a) On or prior to June 30, 2000 (including on the date of
effectiveness of the Second Amendment), and on March 31, 2001 and each
March 31 thereafter to and including March 31, 2005, the Company will
prepay $2,000,000 principal amount (or such lesser principal amount as
shall then be outstanding) of the Notes at 100% of the principal amount
prepaid and without payment of the Make-Whole Amount or any premium,
provided that upon any partial prepayment of the Notes pursuant to
Sections 8.1(b), 8.2 or 10.3, or purchase of the Notes permitted by
Section 8.5, the principal amount of each required prepayment of the Notes
becoming due under this Section 8.1 on and after the date of such
prepayment or purchase shall be reduced in the same proportion as the
aggregate unpaid principal amount of the Notes is reduced as a result of
such prepayment or purchase. The remaining unpaid principal amount of the
Notes is payable on March 31, 2006."
1.4.2. Section 8.1(c) of the Note Agreement is amended to read in
its entirety as follows:
"(c) Intentionally omitted."
1.4.3. Section 8.1 of the Note Agreement is amended to include the
following paragraph at the end of such Section:
"(e) Contemporaneously with the execution and delivery of the Second
Amendment by the Company and each holder of Notes, but without additional
2
notice to such holders, the Company shall prepay the Notes in a principal
amount not less than $10,000,000 at 100% of such principal amount so
prepaid, plus accrued interest. Such prepayment shall not require the
Company to make any additional payment, including, but not limited to,
payment of the Make-Whole Amount, and shall be allocated in accordance
with the provisions of Section 8.3 of the Note Agreement."
1.5. Amendment of Section 8.2. Section 8.2 of the Note Agreement is
amended to read in its entirety as follows:
"8.2. Optional Prepayments.
The Company may, at its option, upon notice as provided below,
prepay at any time all, or from time to time any part of, the Notes, in a
principal amount not less than $1,000,000 in the case of a partial
prepayment (without the payment of any additional amount, including the
Make-Whole Amount, except as provided below), as follows:
(a) at 100% of the principal amount so prepaid, plus accrued
interest, during the period commencing on the date on which the
Second Amendment becomes effective and ending December 31, 2000;
(b) at 102.5% of the principal amount so prepaid, plus accrued
interest, during the period commencing on January 1, 2001 and ending
December 31, 2001; and
(c) at 105% of the principal amount so prepaid, plus accrued
interest, thereafter.
The Company will give each holder of Notes written notice of each optional
prepayment under this Section 8.2 not less than 30 days and not more than
60 days prior to the date fixed for such prepayment. Each such notice
shall specify such date, the aggregate principal amount of the Notes to be
prepaid on such date, the principal amount of each Note held by such
holder to be prepaid (determined in accordance with Section 8.3), and the
interest to be paid on the prepayment date with respect to such principal
amount being prepaid."
1.6. Amendment of Section 9.7. Section 9.7 of the Note Agreement is
amended to read in its entirety as follows:
"9.7. Intentionally Omitted."
1.7. Addition of Section 9.8. New Section 9.8 is added to the Note
Agreement to read in its entirety as follows:
3
"9.8. Interest.
Commencing October 1, 1999, on each interest payment date
specified in the Notes, the Company shall pay (a) interest in cash on the
Notes at the rate of 11% per annum and (b) additional interest on the
Notes at a rate of 2% per annum, or such lesser applicable rate as
specified below (the "PIK Percentage"), in cash or, in lieu of cash and at
the Company's option, through the issuance of additional Notes ("Secondary
Notes") in an aggregate principal amount equal to the amount of interest
(rounded to the nearest whole cent) that would be payable with respect to
such Notes if such interest (the "PIK Portion") were paid in cash;
provided that the Company shall pay cash in lieu of issuing Secondary
Notes in any denominations of less than $1,000 (determined for each holder
of Notes with respect to the aggregate principal amount of Notes held by
such holder as shown in the note register of the Company). On each
interest payment date on which the Company elects to pay the PIK Portion
through the issuance of Secondary Notes, the Company shall issue and
deliver Secondary Notes to each holder of Notes, in the aggregate
principal amount required to pay such PIK Portion, together with cash in
the amount necessary to pay the portion of the interest due on such
interest payment date that is payable in cash. Any Secondary Note so
issued shall be dated the applicable interest payment date, shall mature
on March 31, 2006, shall be governed by, and subject to, the terms,
provisions and conditions of this Agreement, and shall bear interest from
and after such date in the same manner as, and have the same rights and
benefits as, the Notes previously issued. Any Secondary Notes shall be in
substantially the form of Exhibit 1 but shall be issued with the
designation "PIK" on its face. The Company shall pay any interest payable
on or after the date of maturity of any Note solely in cash.
The PIK Percentage shall be reduced upon the prepayment by the
Company of the $2,000,000 required to be paid on or prior to June 30, 2000
in accordance with the provisions of Section 8.1(a) (in addition to the
$10,000,000 prepayment required by Section 4.3 of the Second Amendment) in
principal amount of the Notes as follows: (i) one percent in the event
that such prepayment is made on the date of effectiveness of the Second
Amendment or (ii) one-half of one percent in the event that such
prepayment is made after the date of effectiveness of the Second Amendment
and on or prior to June 30, 2000. Such reduction shall be effective from
the date such optional prepayment is received in full by the holders of
the Notes. No adjustment in the PIK Percentage shall be made until the
full $2,000,000 prepayment has been made.
In the event of any prepayments in addition to those referred
to in the preceding paragraph, the PIK Percentage shall be further reduced
by one-third of one percent for each "qualifying optional prepayment" by
the Company of $1,000,000 in principal amount of the Notes pursuant to
Section 8.2 on or prior to September 30, 2000. Such reduction shall be
effective from the date such optional prepayment is received in full by
the holders of the Notes. The
4
$10,000,000 prepayment required by Section 4.3 of the Second Amendment
shall not affect the PIK Percentage. For purposes of this paragraph,
"qualifying optional prepayment" means a prepayment using the proceeds (A)
of the sale by the Company of its equity securities or (B) of Indebtedness
of the Company subordinated to the Notes on terms satisfactory to the
Required Holders.
The Company shall have the right to aggregate amounts of
interest payable in the form of Secondary Notes to any holder of Notes and
issue to such holder a single Secondary Note in payment thereof."
1.8. Amendment of Section 10.3. Section 10.3 of the Note Agreement is
amended to read in its entirety as follows:
"10.3. Sale of Assets.
Except as permitted by Section 10.2, the Company will not, and
will not permit any Subsidiary to, sell, lease, transfer or otherwise
(including by way of merger) dispose of (collectively a "Disposition") any
assets, including any shares of capital stock of Subsidiaries, in one or a
series of transactions, other than in the ordinary course of business, to
any Person, except to the Company or a Wholly-Owned Subsidiary, unless (i)
no Default or Event of Default has occurred and is continuing and (ii) the
net proceeds of such Disposition are applied to reduce outstanding
Indebtedness of the Company or its Subsidiaries that is not subordinated
to the Notes. Any such reduction in Indebtedness shall be permanent and,
therefore, such proceeds shall not be applied to Indebtedness of a
revolving nature absent a corresponding permanent reduction in the
commitment of the holders of such Indebtedness to lend on a revolving
basis. Any prepayment of Notes pursuant to this Section 10.3 shall be in
accordance with Section 8.2, without regard to the minimum prepayment
requirements thereof."
1.9. Amendment of Section 10.4. Section 10.4 of the Note Agreement is
amended by deleting the word "and" at the end of Section 10.4(g), by replacing
the period at the end of Section 10.4(h) with "; and" and by adding a new
Section 10.4(i) to read in its entirety as follows:
"(i) The first priority Lien on the Collateral, as such term is
defined herein and in the New Credit Agreement, in favor of the Banks as
contemplated by the New Credit Agreement."
1.10. Amendment of Section 10.6. Section 10.6(b) of the Note Agreement is
amended to read in its entirety as follows:
"(b) Indebtedness not exceeding $25,000,000 in aggregate principal
amount from time to time outstanding under the New Credit Agreement;"
1.11. Amendment of Section 10.8. Section 10.8 of the Note Agreement is
amended to read in its entirety as follows:
5
"10.8. Interest Coverage.
The Company will not at any time permit the ratio of EBITDA to
Consolidated Interest Expense to be less than:
(a) 2.25 to 1.0 for the period of two consecutive fiscal
quarters ending December 31, 1999;
(b) 2.5 to 1.0 for the period of three consecutive fiscal
quarters ending March 31, 2000;
(c) 2.5 to 1.0 for the period of four consecutive fiscal
quarters ending June 30, 2000;
(d) 2.75 to 1.0 for the period of four consecutive fiscal
quarters ending September 30, 2000; and
(e) 3.0 to 1.0 for each period of four consecutive fiscal
quarters ending on the last day of each fiscal quarter commencing
with the quarter ending December 31, 2000."
1.12. Amendment of Section 10.9. Section 10.9 of the Note Agreement is
amended to read in its entirety as follows:
"10.9. Fixed Charge Ratio.
The Company will not at any time permit the ratio of (i)
EBITDA plus one-third of Consolidated Rental Expense to (ii) Consolidated
Fixed Charges to be less than:
(a) 2.0 to 1.0 for the period of two consecutive fiscal
quarters ending December 31, 1999;
(b) 2.25 to 1.0 for the period of three consecutive fiscal
quarters ending March 31, 2000;
(c) 2.25 to 1.0 for the period of four consecutive fiscal
quarters ending June 30, 2000;
(d) 2.5 to 1.0 for the period of four consecutive fiscal
quarters ending September 30, 2000; and
(e) 2.5 to 1.0 for each period of four consecutive fiscal
quarters ending on the last day of each fiscal quarter commencing
with the quarter ending December 31, 2000."
6
1.13. Amendment of Section 10.10. Section 10.10 of the Note Agreement is
amended to read in its entirety as follows:
"10.10. Consolidated Net Worth.
The Company will not permit Consolidated Net Worth at the end
of any fiscal quarter to be less than $40,000,000 plus the cumulative sum
of 50% of Consolidated Net Income (without reduction for any losses) for
each fiscal year ending after March 31, 1999."
1.14. Amendment of Section 10.11. The heading of Section 10.11 of the Note
Agreement is amended to read as follows:
"10.11. Restricted Payments; Restricted Investments."
1.15. Addition of Section 10.15. New Section 10.15 is added to the Note
Agreement to read as follows:
"10.15. Current Asset Coverage.
The Company will not at any time permit the ratio of
Consolidated Current Assets to the principal amount of Notes then
outstanding to be less than 1.0 to 1.0."
1.16. Addition of Section 10.16. New Section 10.16 is added to the Note
Agreement to read as follows:
"10.16. Amendment of New Credit Agreement.
The Company will not amend, modify or change the New Credit
Agreement in any way without the prior written consent of the Required
Holders, except that without such consent (i) waivers may be requested and
given thereunder, (ii) the rate of interest and amounts of fees payable
thereunder may be reduced and (iii) the financial covenants contained
therein may be relaxed."
1.17. Amendment of Section 11. Section 11(c) of the Note Agreement is
amended to read in its entirety as follows:
"(c) the Company defaults in the performance of or compliance with
(i) any term contained in Section 7.1(d) or Sections 10.1 through 10.16,
or (ii) any term contained in any Security Document and such default
continues beyond any period of grace provided therein."
1.18. Amendment of Section 22. New Section 22.7 is added to the Note
Agreement to read as follows:
7
"22.7. Action in respect of Collateral.
Notwithstanding anything to the contrary in any Security
Document, the holders of the Notes agree to take action in respect of the
Collateral only with the consent or pursuant to the direction of the
Required Holders. Any proceeds received pursuant to the enforcement of the
Liens in favor of the holders by any holder of Notes shall be shared
ratably, net of expenses, with all holders of Notes. Each holder of Notes
agrees (i) that any action in respect of the Collateral shall be brought
in the name of all holders of Notes and (ii) to execute all documents
reasonably necessary to institute or pursue any such actions.
No holder of Notes shall have any liability to any other
holder of Notes or to the Company for actions it has taken, or omitted
from taking, in respect of the Collateral, except upon a finding of gross
negligence or willful misconduct on the part of such holder of Notes.
Failure of a holder to exercise any rights in respect of the Collateral
shall not constitute gross negligence or willful misconduct."
1.19. Amendment of Schedule B.
1.19.1. Schedule B of the Note Agreement is amended to include the
following defined terms:
"'Banks' means Banc of America Commercial Finance Corporation,
through its Commercial Funding Division, and any other institutions party
to the New Credit Agreement.
'Collateral' means (i) all assets of the Company subject to
the Lien created by the Security Documents and (ii) any assets of the
Company or any Subsidiary subsequently subjected to any Lien securing the
Notes pursuant to Section 5.2 of the Second Amendment.
'Consolidated Current Assets' means, as of any date, (a) cash
of the Company and its Subsidiaries on such date, plus (b) 85% of the sum
of accounts receivable and inventory of the Company and its Subsidiaries
on such date (each as determined in accordance with GAAP), less (c) the
principal amount of Indebtedness then outstanding under the New Credit
Agreement (excluding any amount allocated to fixed assets).
'PIK Percentage' is defined in Section 9.8.
'PIK Portion' is defined in Section 9.8.
'Secondary Notes' is defined in Section 9.8.
8
'Second Amendment' means the Second Amendment and Consent to
Note Agreement dated as of December 7, 1999 between the Company and each
other institution named in the signature pages thereto.
'Security Documents' means the mortgages, deeds of trust,
security agreements, financing statements and any other agreements or
documents entered into by the Company or any Subsidiary creating Liens
securing the Notes and other obligations payable by the Company or any
Subsidiary pursuant to this Agreement."
1.19.2. The following definitions are amended to read in their
entirety as follows:
"'Consolidated Interest Expense' means, for any period, the
consolidated interest expense (including imputed interest on Capitalized
Lease Obligations, but excluding interest paid in the form of Secondary
Notes) of the Company and its Subsidiaries for such period determined in
accordance with GAAP.
'New Credit Agreement' means the Loan and Security Agreement
dated as of December 7, 1999 among the Company, Franklin Electronic
Publishers (Europe) Ltd., Franklin Electronic Publishers (Deutschland)
GmbH and the Banks, as it may hereafter be amended, modified or changed.
'Restricted Investments' means any Investment of the Company
and its Subsidiaries other than:
(a) property or assets to be used or consumed in the ordinary
course of business;
(b) current assets (as determined in accordance with GAAP)
arising from the sale of goods and services in the ordinary course
of business;
(c) Investments in Wholly-Owned Subsidiaries existing at the
time of effectiveness of the Second Amendment;
(d) Advances not exceeding $250,000 in the aggregate at any
time to officers and employees in the ordinary course of business;
(e) Investments in:
(i) commercial paper and loan participations maturing in
270 days or less from the date of issuance which at the
time of acquisition are rated in one of the top two rating
classifications by at least one credit rating agency of
recognized national standing;
9
(ii) certificates of deposit or banker's acceptances
maturing within two years from the date of acquisition
issued by commercial banks (A) having capital, surplus and
undistributed profits (or their equivalent) of at least
$100,000,000, or (B) assets of at least $1,000,000,000,
and whose long-term debt is rated in one of the top two
rating classifications by at least one credit rating
agency of recognized national standing;
(iii) obligations maturing within two years from the date
of acquisition (A) of or fully guaranteed by the United
States of America or an agency thereof or (B) of a foreign
government of at least comparable credit quality;
(iv) repurchase agreements, having a term of not more than
90 days and fully collateralized with obligations of the
type described in clause (iii), with a bank satisfying the
requirements of clause (ii); and
(v) money market mutual funds primarily investing in
Investments described in foregoing clauses (i) through
(iv).
For purposes of this Agreement, an Investment shall be valued at the
lesser of (i) cost and (ii) the value at which such Investment is to be
shown on the books of the Company and its Subsidiaries in accordance with
GAAP."
1.20. Amendment of Exhibit 1. Exhibit 1 to the Note Agreement is amended
in the form attached as Exhibit 1 to this Second Amendment.
SECTION 2. REAFFIRMATION; REPRESENTATIONS AND WARRANTIES
2.1. Reaffirmation of Note Agreement. The Company reaffirms its agreement
to comply with each of the covenants, agreements and other provisions of the
Note Agreement and the Notes, including the additions and amendments of such
provisions effected by this Second Amendment.
2.2. Note Agreement. The Company represents and warrants that, subject to
the effectiveness of this Second Amendment, the representations and warranties
contained in the Note Agreement are true and correct as of the date hereof,
except for such changes, facts, transactions and occurrences that have arisen
since April 15, 1999 in the ordinary course of business and such other matters
as have been previously disclosed in writing by the Company to the Holders.
2.3. No Default or Event of Default. After giving effect to the
transactions contemplated hereby, there will exist no Default or Event of
Default.
2.4. Authorization. The execution, delivery and performance by the Company
of this Second Amendment have been duly authorized by all necessary corporate
and other action and
10
do not and will not require any registration with, consent or approval of,
notice to or action by, any Person (including any Governmental Authority) in
order to be effective and enforceable. Each of the Note Agreement and this
Second Amendment constitutes the legal, valid and binding obligations of the
Company, enforceable against it in accordance with its respective terms, without
defense, counterclaim or offset.
SECTION 3. [RESERVED]
SECTION 4. EFFECTIVE DATE
This Second Amendment shall become effective as of the date set forth
above upon satisfaction of the following conditions:
4.1. Consent of Holders to Second Amendment. The Holders of 100% of the
aggregate principal amount of the Notes outstanding shall have executed
counterparts of this Second Amendment.
4.2. Consent of Holders to New Credit Agreement. The Holders of 100% of
the aggregate principal amount of the Notes outstanding shall have consented to
the form and substance of the New Credit Agreement, such consent to evidenced by
the execution by the Holders of this Second Amendment.
4.3. Prepayment. The Company shall have prepaid at least $10,000,000
principal amount of the Notes at 100% of such principal amount so prepaid, plus
accrued interest, which prepayment shall not require the Company to make any
additional payment, including, but not limited to, payment of the Make-Whole
Amount. Such prepayment shall be allocated in accordance with the provisions of
Section 8.3 of the Note Agreement. Notes evidencing the PIK Portion of the
accrued interest being paid pursuant to this Section 4.3 must be issued within
five Business Days of the effective date of this Second Amendment and failure by
the Company to issue and deliver such Notes shall constitute an Event of Default
under the Note Agreement.
4.4. Amendment Fee. Each Holder, whether or not such Holder executes this
Second Amendment, shall have received payment of an amendment fee equal to 0.25%
of the principal amount of the outstanding Notes held by such Holder prior to
the application of the prepayment described in Section 4.3.
4.5. Opinion of Company Counsel. The Holders shall have received an
opinion of counsel for the Company, in form and substance satisfactory to the
Holders and their special counsel, to the effect set forth in Section 2.4.
4.6. Expenses. The Company shall have paid all fees and expenses of
special counsel to the Holders.
4.7. Security Interest. The Holders shall have (i) received executed
Security Documents satisfactory to the Holders in a form such that the proper
filing thereof will create perfected Liens on the Collateral, junior only to the
Liens in favor of the Banks, and (ii) entered into an agreement with the Banks
for the subordination of the Liens in favor of the Holders to the Liens in favor
of the Banks.
11
SECTION 5. MISCELLANEOUS
5.1. Filing and Recording Security Documents. The Company agrees to
provide such information, execute such documents and take such other actions
necessary for the Holders to effect the proper filing of the Security Documents
within seven Business Days following a request therefor by any Holder, and the
failure of the Company to do so shall constitute an Event of Default under the
Note Agreement.
5.2. Foreign Collateral. So long as the Holders request, prior to January
30, 2000, the Company to do the following, the Company agrees, and agrees to
cause its Subsidiaries, Franklin Electronic Publishers (Europe) Ltd. and
Franklin Electronic Publishers (Deutschland) GmbH, to, execute such security
documents and take such other steps as may be requested by the Holders to
further secure the Notes with a Lien on the assets of such Subsidiaries;
provided, that such Lien (a) only covers assets that are then subject to Liens
in favor of the Banks, (b) is junior to the Liens in favor of the Banks pursuant
to a subordination agreement in form and substance acceptable to the Banks and
the Holders, and (c) shall only be required to be granted to the extent that the
Holders and the Banks determine that such Liens can be granted without
significant risk of Material liability to the Company or any of its Subsidiaries
or any liability to the Banks. Failure by the Company to comply with this
Section 5.2 shall constitute an Event of Default under the Note Agreement.
5.3. Ratification. Except to the extent amended, modified, deleted or
added to hereby, the terms and provisions of the Note Agreement, including the
representations and warranties contained therein, shall remain in full force and
effect and are ratified, confirmed, remade and approved in all respects as of
the date hereof.
5.4. Reference to and Effect on the Note Agreement and the Notes. Upon the
final effectiveness of this Second Amendment, (a) each reference in the Note
Agreement and in other documents describing or referencing the Note Agreement to
the "Agreement," "Note Agreement," "hereunder," "hereof," "herein," or words of
like import referring to the Note Agreement, shall mean and be a reference to
the Note Agreement, as amended hereby and (b) each reference to a "Note" or
"Notes" shall mean and include any or all Notes and any or all Secondary Notes.
5.5. Binding Effect. This Second Amendment shall be binding upon and inure
to the benefit of the respective successors and assigns of the parties hereto.
5.6. Governing Law. This Second Amendment shall be governed by and
construed in accordance with New York law.
5.7. Counterparts. This Second Amendment may be executed in any number of
counterparts, each executed counterpart constituting an original, but altogether
only one instrument.
5.8. Exchange of Notes. It shall not be necessary for the Holders to
surrender their Notes in exchange for new Notes. However, upon any surrender for
exchange or transfer, Notes issued in exchange or in connection with a transfer
shall be in the form of the attached Exhibit 1.
12
5.9. Waiver. The Holders waive through the date of this Second Amendment
any Default or Event of Default under the Note Agreement resulting from the
Company's failure to comply with the provisions of Sections 10.8 (Interest
Coverage), 10.9 (Fixed Charge Ratio) and 10.10 (Consolidated Net Worth) of the
Note Agreement from the period beginning April 1, 1999 and ending September 30,
1999. This waiver is limited to its terms and shall not constitute a waiver of
any other term, condition, representation or covenant under the Note Agreement
or any of the other agreements, documents or instruments executed and delivered
in connection therewith.
13
If you are in agreement with the foregoing, please sign the accompanying
counterpart of this Second Amendment and return it to the Company, whereupon the
foregoing shall become a binding agreement between you and the Company upon
satisfaction of the conditions set forth in Section 4 of this Second Amendment.
FRANKLIN ELECTRONIC PUBLISHERS,
INCORPORATED
By:_____________________________________
Name:___________________________________
Title:__________________________________
The foregoing is hereby agreed
to as of the date thereof.
THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY
By:__________________________________
Name:________________________________
Title:_______________________________
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LIFE
INSURANCE COMPANY OF AMERICA
By:__________________________________
Name:________________________________
Title:_______________________________
PACIFIC LIFE INSURANCE COMPANY
By:__________________________________
Name:________________________________
Title:_______________________________
By:__________________________________
Name:________________________________
Title:_______________________________
S-1
SCHEDULE I
Information as to Holders of Notes
Outstanding Principal
Name of Holder Amount of Notes
-------------- ---------------
The Northwestern Mutual Life Insurance Company $13,200,000
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Life Insurance Company of America 6,000,000
Pacific Life Insurance Company 4,800,000
-----------
$24,000,000
Schedule I
EXHIBIT 1
[FORM OF NOTE]
FRANKLIN ELECTRONIC PUBLISHERS, INCORPORATED
SENIOR SECURED NOTE DUE MARCH 31, 2006
No. [_____] [Date]
$_________ PPN ___________
FOR VALUE RECEIVED, the undersigned, FRANKLIN ELECTRONIC PUBLISHERS,
INCORPORATED (herein called the "Company"), a corporation organized and existing
under the laws of the State of Pennsylvania, hereby promises to pay to [name of
purchaser] or registered assigns, the principal sum of _______________ DOLLARS
on March 31, 2006, with interest (computed on the basis of a 360-day year of
twelve 30-day months) (a) on the unpaid balance thereof at the rate of 13% per
annum (or such lesser applicable rate as specified in the Note Purchase
Agreement referred to below), from the date hereof, payable semiannually, on
March 31 and September 30 of each year, commencing with the March 31 or
September 30 next succeeding the date hereof, until the principal hereof shall
have become due and payable and (b) to the extent permitted by law on any
overdue payment (including any overdue prepayment) of principal, any overdue
payment of interest and any overdue payment of any Make-Whole Amount and
Modified Make-Whole Amount (as defined in the Note Purchase Agreements), payable
semiannually as aforesaid (or, at the option of the registered holder hereof, on
demand), at a rate per annum from time to time equal to the greater of (i) 2%
over the then applicable rate or (ii) 2% over the rate of interest publicly
announced by The Chase Manhattan Bank from time to time in New York City as its
"base" or "prime" rate.
Except as hereinafter provided, payments of principal of, interest
on and any Make-Whole Amount or Modified Make Whole Amount with respect to this
Note are to be made in lawful money of the United States of America at the
principal office of the Company in Burlington, New Jersey or at such other place
as the Company shall have designated by written notice to the holder of this
Note as provided in the Note Purchase Agreements referred to below. As provided
in the Note Purchase Agreement, on each interest payment date the Company shall
pay (i) interest in cash on this Note at the rate of 11% per annum and (ii)
additional interest at a rate of 2% per annum, or such lesser applicable rate as
specified in the Note Purchase Agreement (the "PIK Percentage"), in cash or, in
lieu of cash and at the Company's option (other than the interest payment date
that is the date of maturity of this Note), through the issuance of additional
Notes ("Secondary Notes") in an aggregate principal amount equal to the amount
of interest (rounded to the nearest whole cent) that would be payable with
respect to such Note if such
Exhibit 1
interest (the "PIK Portion") were paid in cash; provided that the Company shall
pay cash in lieu of issuing Secondary Notes in any denominations of less than
$1,000 (determined for each holder of Notes with respect to the aggregate
principal amount of Notes held by such holder as shown in the note register of
the Company). On each interest payment date on which the Company elects to pay
the PIK Portion through the issuance of Secondary Notes, the Company shall issue
and deliver Secondary Notes to the holder, in the aggregate principal amount
required to pay such PIK Portion, together with cash in the amount necessary to
pay the portion of the interest due on such interest payment date that is
payable in cash. Each Secondary Note shall mature on March 31, 2006, shall be
governed by, and subject to, the terms, provisions and conditions of the Note
Purchase Agreements, and shall bear interest from and after such date in the
same manner as, and have the same rights and benefits as, this Note. Any
Secondary Notes shall be in substantially the form of this Note but shall be
issued with the designation "PIK" on its face. The Company shall pay any
interest payable on or after the date of maturity of any Note solely in cash.
This Note is one of a series of Senior Secured Notes (herein called
the "Notes") issued pursuant to separate Note Purchase Agreements, dated as of
March 27, 1997 (as from time to time amended, the "Note Purchase Agreements"),
between the Company and the respective Purchasers named therein and is entitled
to the benefits thereof. Each holder of this Note will be deemed, by its
acceptance hereof, (i) to have agreed to the confidentiality provisions set
forth in Section 20 of the Note Purchase Agreements and (ii) to have made the
representation set forth in Section 6.2 of the Note Purchase Agreements. The
rights of the holder of this Note in the Collateral securing this Note may be
subject to one or more lien subordination agreements with Banc of America
Commercial Finance Corporation, acting through its Commercial Funding Division.
This Note is a registered Note and, as provided in the Note Purchase
Agreements, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company will not be affected by any notice to
the contrary.
The Company will make required prepayments of principal on the dates
and in the amounts specified in the Note Purchase Agreements. This Note is also
subject to optional prepayment, in whole or from time to time in part, at the
times and on the terms specified in the Note Purchase Agreements, but not
otherwise.
If an Event of Default, as defined in the Note Purchase Agreements,
occurs and is continuing, the principal of this Note may be declared or
otherwise become due and payable in the manner, at the price (including any
applicable Make-Whole Amount and Modified Make-Whole Amount) and with the effect
provided in the Note Purchase Agreements.
2
Exhibit 1
This Agreement shall be construed and enforced in accordance with,
and the rights of parties shall be governed by, the law of the State of New York
excluding choice-of-law principles of such State that would require the
application of the laws of a jurisdiction other than such State.
FRANKLIN ELECTRONIC PUBLISHERS,
INCORPORATED
By: ______________________________
Name: ______________________________
Title:______________________________
3
Exhibit 1
