THIS NOTE HAS
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD,
TRANSFERRED, OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE
STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS.
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$12,973,131.22
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New York, New York
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April 12, 2007
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FOR VALUE
RECEIVED, the
undersigned, CAMBIUM LEARNING, INC., a Delaware corporation
(the “Company”) and successor-in-interest to
VSS-CAMBIUM MERGER CORP., a Delaware corporation, hereby
promises to pay to the order of TCW/CRESCENT MEZZANINE PARTNERS
IV, L.P., a Delaware limited partnership (the
“Holder”), or its registered assigns, on the
Maturity Date (as hereinafter defined) (or earlier as hereinafter
provided) the principal sum of TWELVE MILLION NINE HUNDRED
SEVENTY THREE THOUSAND ONE HUNDRED THIRTY ONE DOLLARS AND TWENTY
TWO CENTS ($12,973,131.22), plus all “PIK
Amounts” (as hereinafter defined) added to the principal
amount hereof pursuant to the terms of this Note, with interest on
the unpaid principal amount of this Note from time to time as
provided herein. For the purposes of this Note, the term
“Maturity Date” shall mean April 11,
2014.
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1.
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Note Purchase Agreement;
Definitions .
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This Promissory Note (as amended,
modified, restated and/or supplemented from time to time, this
“Note” ) is issued by the Company, on the date
hereof, pursuant to the Note Purchase Agreement dated as of
April 12, 2007 (as amended, modified, restated and/or
supplemented from time to time, the “Note Purchase
Agreement”) by and among the Company, as
successor-in-interest to VSS-Cambium Merger Corp., VSS-Cambium
Holdings, LLC, a Delaware limited liability company, the Holder,
the other purchasers from time to time party thereto and the
Administrative Agent. The Holder is entitled to the benefits of
this Note, the Note Purchase Agreement and the other Transaction
Documents, and may enforce the agreements of each Issuer Party
contained herein and therein and exercise the remedies provided for
hereby and thereby or otherwise available in respect hereto and
thereto, to the extent provided herein or therein. Capitalized
terms used herein without definition are used herein with the
meanings ascribed to such terms in the Note Purchase
Agreement.
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2.
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Interest .
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(a)
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The
Company promises to pay interest on the Accreted Principal Amount
(as hereinafter defined) of this Note at the rate of eleven and
three-quarters percent (11.75%) per annum. The Company shall pay
accrued interest quarterly on the last Business Day of each March,
June, September and December during the term hereof and on the
Maturity Date (each date upon which interest shall be so
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payable, an
“Interest Payment Date” ), commencing on
June 29, 2007 and on each Interest Payment Date shall pay
interest accrued through and including such Interest Payment Date.
Interest on this Note shall accrue from the date of issuance of the
Original Note (as hereinafter defined) until repayment of the
Accreted Principal Amount and payment of all accrued interest in
full. Interest shall accrue and be computed on the basis of the
actual number of days in the related period over 360 days.
Through any Interest Payment Date, interest on the Accreted
Principal Amount of this Note at the rate of ten percent (10%) per
annum that shall have accrued and shall be unpaid as of such
Interest Payment Date shall be paid on such Interest Payment Date
by wire transfer of immediately available funds to an account at a
bank designated by the Holder. Through any Interest Payment Date,
interest on the Accreted Principal Amount of this Note at the rate
of one and three-quarters percent (1.75%) per annum that shall have
accrued and shall remain unpaid as of such Interest Payment Date
(for any Interest Payment Date, a “PIK Amount” )
shall be paid on such Interest Payment Date by addition of such PIK
Amount to the principal amount outstanding under this Note. No
later than 10 Business Days following the end of each Fiscal Year,
the PIK Amounts added to the principal amount outstanding under
this Note during such Fiscal Year shall be evidenced by a PIK Note
and, following the Holder’s receipt of such PIK Note, shall
no longer be a PIK Amount evidenced by this Note. At any time, the
outstanding principal amount of this Note, including all PIK
Amounts added thereto through such time and not evidenced by a PIK
Note, is referred to in this Note as the “Accreted
Principal Amount” . Notwithstanding any other provision
of this Note and the addition of any PIK Amount to the principal
amount outstanding under this Note, the Company may, in its sole
discretion, pay any PIK Amount in cash on any Interest Payment Date
without any premium or penalty by wire transfer of immediately
available funds to an account at a bank designated by the Holder.
The Company shall give written notice to the Holder of any such
payment of a PIK Amount not less than 1 Business Day prior to the
applicable Interest Payment Date. All cash payments by the Company
of any PIK Amount that has been added to the principal amount of
this Note shall be deducted from the Accreted Principal Amount. If
any promissory notes issued pursuant to the Note Purchase
Agreement, in addition to this Note and all notes issued pursuant
to Section
7(b), (d) or Section 8 hereof, are outstanding
(collectively, “Outstanding Notes”) and the Company
pursuant to this paragraph elects to pay all or any portion of the
PIK Amount in cash on any Interest Payment Date, then the Company
shall take the same action with respect to all Outstanding Notes
and make such elective cash payments to all holders of Outstanding
Notes on a pro rata basis based upon the Accreted Principal Amount
of each Outstanding Note.
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(b)
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Notwithstanding subsection
(a) of this Section 2, but subject to applicable law,
upon and during the occurrence of an Event of Default, the Accreted
Principal Amount of this Note shall bear interest, from the date of
the occurrence of such Event of Default until such Event of Default
is cured or waived, payable on demand in immediately available
funds, at a rate equal to the applicable interest rate in effect
hereunder plus two percent (2%) (and interest shall be paid
entirely
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in
cash and no PIK Amount shall be added to the Accreted Principal
Amount of this Note in respect of such interest). In addition, any
overdue interest on this Note shall bear interest, payable on
demand in immediately available funds, at a rate equal to the
applicable interest rate in effect hereunder plus two percent (2%)
(and interest shall be paid entirely in cash and no PIK Amount
shall be added to the Accreted Principal Amount of this Note in
respect of such interest).
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(c)
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In
the event that any interest rate provided for herein shall be
determined to be unlawful, such interest rate shall be computed at
the highest rate permitted by applicable law. Any payment by the
Company of any interest amount in excess of that permitted by law
shall be considered a mistake, with the excess being applied to the
principal of this Note without prepayment premium or
penalty.
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3.
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Principal .
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The
Company shall pay the principal amount due under this Note
including all PIK Amounts and all accrued and unpaid interest (all
of which shall be payable in cash and no portion of which shall be
payable by addition of a PIK Amount to the Accreted Principal
Amount) on the Maturity Date.
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4.
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Voluntary Prepayment
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(a)
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The
Outstanding Notes are subject to prepayment at the option of the
Company, in whole or in part, on any date following the second
anniversary of the Closing Date. The Company shall give written
notice of voluntary prepayment of this Note or any portion thereof
to the Holder not less than five (5) Business Days prior to
the date fixed for such prepayment. Such notice of voluntary
prepayment shall be given in the manner specified in
Section 12.2 of the Note Purchase Agreement. Upon notice of
prepayment being given by the Company to the Holder, the Company
covenants and agrees that the Company shall prepay, on the date
fixed for prepayment in the notice therefor, this Note or the
portion hereof so called for prepayment, at the Accreted Principal
Amount thereof or the portion thereof so called for prepayment
together with the prepayment premium thereon described in Section
4(c) below, if applicable, and interest accrued and unpaid thereon
to the date fixed for such prepayment (which interest shall be paid
entirely in cash and no portion of which shall be payable by the
addition of a PIK Amount to the Accreted Principal Amount),
together with costs and expenses including, without limitation,
reasonable fees, charges and disbursements of counsel.
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(b)
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All
prepayments under this Section 4 shall include payment of
accrued interest on the Accreted Principal Amount so prepaid (which
interest shall be paid entirely in cash and no portion of which
shall be payable by the addition of a PIK Amount to the Accreted
Principal Amount) and shall be applied first to all costs, expenses
and indemnities payable under the Note Purchase Agreement, then to
payment of default interest, if any, then to payment of accrued
interest, then to the prepayment premium described in Section 4(c)
below, if applicable, and thereafter
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to principal,
provided , however, each voluntary prepayment of less
than the full outstanding principal balance of the Outstanding
Notes shall be in an aggregate principal amount of $1,000,000 or a
whole multiple thereof.
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(c)
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In
the event that any portion of the Accreted Principal Amount is
voluntarily prepaid as provided in this Section 4 on any date
following the second anniversary of the Closing Date but prior to
the third anniversary of the Closing Date, subject to Section
8.2(a)(iii) of the Note Purchase Agreement, there shall be a
prepayment premium payable to the Holder at the time of such
prepayment equal to one percent (1%) of the amount being
prepaid.
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(d)
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If
there is more than one (1) Outstanding Note, the amounts
payable under this Section 4 and under Section 4 of such
other Outstanding Notes shall be applied to the Outstanding Notes
on a pro rata basis.
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5.
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Mandatory Prepayment
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(a)
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Not
later than five (5) Business Days following the receipt of any
Net Cash Proceeds of any Asset Sale by Holdings or any of its
Subsidiaries, to the extent such Net Cash Proceeds are not fully
utilized to prepay the Senior Debt, the Company shall make
prepayments of this Note in an aggregate amount equal to 100% of
such Net Cash Proceeds; provided that:
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(i)
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no
such prepayment shall be required under this 5(a)(i) with respect
to (A) any Asset Sale permitted by Sections 8.2(f)(i) and
(vi) of the Note Purchase Agreement, (B) the disposition
of property which constitutes a Casualty Event, or (C) Asset
Sales for fair market value resulting in no more t
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