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Exhibit 10.6
Letter of Intent
February 25, 1997
Franklin Electronic Publishers, Inc., a Pennsylvania corporation ("Franklin"),
and Voice Powered Technology International, Inc., a California corporation
("VPTII"), hereby set forth their present intention to enter into an agreement
regarding a merger of VPTII with Franklin or a wholly-owned subsidiary of
Franklin upon the following principal terms and conditions:
1. Structure; Timing. VPTII will merge (the "Merger")
with Xxxxxxxx or Franklin's wholly-owned subsidiary pursuant to a mutually
agreed upon definitive Agreement and Plan of Merger (the "Agreement")
containing terms and conditions customary for transactions of this size and
nature.
2. Effect of Merger; Purchase Price. The Agreement will
provide that Xxxxxxxx will pay $0.25 per share for each issued and outstanding
share of VPTII Common Stock, payable in cash or in shares of common stock of
Franklin as mutually agreed to by the parties hereto.
3. Corporate Approval; Shareholder Approval. VPTII
represents that its Board of Directors has authorized and approved the
execution of this Letter of Intent. VPTII shareholder approval will be
required for the Merger.
4. Representations and Warranties; Covenants. The
Agreement will provide for customary representations, warranties and covenants.
5. Due Diligence. Xxxxxxxx and its attorneys and
accountants will have full access to the books and records of VPTII from the
date hereof through and including April 30, 1997 (the "Inspection Period") to
complete a due diligence investigation of VPTII. At any time during the
Inspection Period, Xxxxxxxx may upon written notice to VPTII terminate this
Letter of Intent or the Agreement, as applicable, without liability to VPTII.
If the parties agree that Xxxxxxxx will pay for the VPTII Common Stock in
shares of common stock of Franklin, VPTII and its attorneys and accountants
will have such access to the books and records of Xxxxxxxx during the
Inspection Period as shall be appropriate to conduct a due diligence
investigation of Xxxxxxxx.
6. Post Merger Employment Benefits. Employees of VPTII
who become employed by Xxxxxxxx after the Merger will become eligible to
participate in comparable employee benefit plans as are generally available to
similarly situated employees of Xxxxxxxx.
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7. Closing Conditions; Covenants. Each party's
obligations will be subject to customary closing conditions, including, without
limitation, (i) those required to implement the deal terms described above,
(ii) the negotiation of payment terms in respect of the accounts payable and
other commitments owed by VPTII to third parties on terms satisfactory to
Franklin, and (iii) such other conditions as the parties shall mutually agree
upon.
8. No-Shop Provision. VPTII will immediately cease any
existing discussions or negotiations with any third parties conducted prior to
the date hereof with respect to any merger, business combination, sale of a
significant amount of its assets outside of the ordinary course of business,
change of control or similar transaction involving such party or any of its
subsidiaries or divisions (an "Acquisition Transaction"). Xxxxxxxx
acknowledges that VPTII is engaged in discussions regarding the raising of
funds, and that the raising of funds may involve the sale of shares of capital
stock of VPTII outside the ordinary course of business. VPTII agrees that it
will not complete a transaction involving the sale of shares of capital stock
of VPTII nor enter into a commitment to do so without Xxxxxxxx'x concurrence
until the earlier of the mutual abandonment of the transaction contemplated
hereby or April 30, 1997. The parties will immediately advise each other of
any determination by their respective Boards of Directors not to proceed with
the transactions contemplated hereby. VPTII agrees that, until April 30, 1997
or the earlier mutual abandonment of the transaction contemplated hereby, VPTII
will not, and will not authorize any officer, director or affiliate of VPTII or
any other person on its behalf to, directly or indirectly, solicit, initiate or
encourage (including by way of furnishing information), any offer or proposal
from any party concerning a possible Acquisition Transaction; provided,
however, that nothing in this Section 8 shall preclude VPTII's Board of
Directors, pursuant to its fiduciary duties under applicable law, from entering
into, or causing the officers of VPTII from entering into negotiations with or
furnishing information to a third party which has initiated contact with VPTII,
from passing on to VPTII's shareholders information regarding any such third
party offer or from otherwise fulfilling such fiduciary duties. VPTII will
promptly notify Xxxxxxxx in writing of any such inquiries or proposals. VPTII
shall have no obligations under this Section if Xxxxxxxx unilaterally decides
not to proceed with the proposed merger or causes it not to occur other than as
a result of VPTII's breach of its obligations hereunder.
9. Break-up Fee. In the event that VPTII breaches the
agreements contained in Section 8 above and/or enters into an agreement for an
Acquisition Transaction with a third party, then, whether or not such
Acquisition Transaction is consummated, (i) if Xxxxxxxx shall have made the
$500,000 loan to VPTII described in Section 11 below, such loan and any and all
interest
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accrued thereon shall immediately become due and payable, and (ii) VPTII shall
immediately pay to Franklin $100,000 in cash.
10. Continuation of Business. From the date hereof until
the earlier of the mutual abandonment of the transaction contemplated hereby or
April 30, 1997, except as Franklin and VPTII mutually agree in writing, VPTII
(i) will preserve and operate its business in the ordinary course and will not
enter into any transaction or agreement or take any action out of the ordinary
course or enter into any transaction or make any commitment involving an
individual expense or capital expenditure by VPTII in excess of $50,000, (ii)
will not declare any dividends, grant new stock options (except that VPTII may
issue new stock options to its employees after conferring with Franklin),
accelerate any options or issue new shares of stock or other securities (other
than pursuant to exercise of events of outstanding options, warrants or rights)
or rights to acquire any such options, shares or securities, or make any
commitments with respect to any of the foregoing, and (iii) will not borrow
more than $3,000,000 (including existing borrowings) under its line of credit
with KBK Financial Inc.
11. Loan to VPTII. Xxxxxxxx shall make a $500,000 loan
to VPTII on or prior to March 12, 1997, which loan shall be evidenced by a
promissory note, on which interest shall accrue on the outstanding principal
amount at a rate of 9% per annum from the date of issuance. The principal and
interest due on the note shall be payable (whether or not the Agreement is
executed) on December 31, 1997, and shall be secured by all of VPTII's tangible
and intangible assets, subordinate only to KBK Financial Inc.'s security
interest therein.
12. Term. This Letter of Intent shall expire upon the
earlier of (i) March 12, 1997, if the $500,000 loan from Xxxxxxxx to VPTII
described in Section 11 above is not made on or prior to March 12, 1997, (ii)
the date of execution of the definitive Agreement, (iii) the close of business
(5:00 p.m. E.S.T.) on April 30, 1997, (iv) the date Xxxxxxxx notifies VPTII
that it has elected to terminate this Letter of Intent pursuant to the
provisions of Section 5 hereof, and (v) the date of termination of this Letter
of Intent by mutual consent of Xxxxxxxx and VPTII.
13. Fees and Expenses. All costs and expenses incurred
in connection with the transaction shall be paid by the party incurring such
expenses.
14. Public Disclosure. Except as a party may reasonably
determine is required by law (in which event, it shall give to the other party
notice and an opportunity to review and approve the proposed release or other
publication), neither party shall, or shall permit any of its subsidiaries to,
issue or cause the publication of any press release or other public
announcement with respect to the transactions contemplated by this Agreement
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without prior approval of the other party, which approval shall not be
unreasonably withheld.
15. Counterparts; Governing Law. This Letter of Intent may
be executed in counterparts and the counterparts together will constitute a
single, fully-executed original. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York.
16. Severability. The invalidity or unenforceability of
any provision of this Agreement shall not affect the validity or enforceability
of the other provisions of this Agreement, which shall remain in full force and
effect. If any of the covenants or provisions of this Agreement shall be
deemed to be unenforceable by reason of its extent, duration, scope or
otherwise, the parties contemplate that the court making such determination
shall reduce such extent, duration, scope or other provision, and shall enforce
them in their reduced form for all purposes contemplated by this Agreement.
17. Nonbinding Document. This Letter of Intent does not
constitute an offer and is not binding (except for Sections 5, 8, 9, 10, 12, 13
and 14 above, which the parties hereby represent and warrant and acknowledge
are binding and enforceable and not subject to further corporate or shareholder
approval). Except as expressly provided in the previous sentence, all rights
and obligations of the parties are subject to execution of definitive mutually
satisfactory agreements and obtaining all required corporate approvals.
Neither VPTII nor Xxxxxxxx will be under any legal obligation of any kind
whatsoever in respect of the Merger by virtue of this Letter of Intent except
for the matters specifically agreed to herein. A binding commitment with
respect to the Merger will result only from the execution of a definitive
agreement.
This Letter of Intent is executed as of the date first set forth above.
FRANKLIN ELECTRONIC VOICE POWERED TECHNOLOGY
PUBLISHERS, INC. INTERNATIONAL, INC.
By [SIG] By /s/ XXXXXX XXXXXXXX
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Name: X. Xxxxxx Name: Xxxxxx Xxxxxxxx
Title: SVP Title: Pres. and CEO
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