UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended September 27, 1998
OR
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-19717
WPI GROUP, INC.
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(Exact Name of Registrant as Specified in Its Charter)
New Hampshire 02-0218767
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1155 Elm Street, Manchester, New Hampshire 03101
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (603) 627-3500
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Securities registered under Section 12(b) of the Act: None
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Securities registered under Section 12(g) of the Act:
Common Stock, par value $.01 per share
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(Title of Class)
Indicate by check mark whether the registrant (1) filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act of
1934 during the past 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
- -
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K [ X ]
As of December 7, 1998, the aggregate market value of the 5,053,103
outstanding shares of voting stock held by non-affiliates of the
registrant was $33,158,461.
As of December 7, 1998, 6,031,404 shares of the Registrant's Common
Stock, par value $.01 per share, were issued and outstanding.
Documents Incorporated by Reference
-----------------------------------
Portions of the following documents are incorporated by reference in this
report on Form 10-K:
1) Annual Report to Shareholders for fiscal year ended
September 27,1998 (Part II).
2) Proxy Statement dated January 15, 1999 for the Registrant's
Annual Shareholder's Meeting to be held on February 9, 1999
(Part III).
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PART I
Item 1. Business
General
WPI Group, Inc. ("WPI" or the "Company") designs, manufactures
and markets high value added products used in mission critical
systems for a wide range of applications through two operating groups:
Information Solutions and Industrial Technology. The Information
Solutions Group is a leading manufacturer of rugged handheld
computers and terminals designed to function under harsh
environmental conditions. Unlike conventional computer equipment,
many of WPI's computers and terminals can function after a 10
foot drop to concrete, total immersion in water, exposure to extreme
temperatures as well as dust and other harmful agents, and can
operate for up to 30 hours on a single battery charge. WPI's
products are used in a variety of applications such as vehicle
monitoring and maintenance, utility field service and factory
automation. The Industrial Technology Group produces four distinct
product lines: Industrial Power Conversion Systems (heavy duty
power supplies used in elevators and semiconductor and thermal
processing equipment); Electronic Ballasts (small specialized
power supplies that power lamps used in medical equipment,
multimedia projectors and lighting systems); Precision Solenoids
(electro-mechanical devices which are incorporated into
cameras, printers and other products); and Precision
Electromechanical Instruments (avionic components and subsystems,
inertial sensors,and digital and analog panel meters).
The Information Solutions Group's product line consists of three
types of handheld devices: terminals, sold under the
Oyster/Termiflex and MPSI brand names; handheld computers, sold
under the Husky and MicroPalm brand names; and laptop computers,
sold under the Husky and MPSI brand names. WPI sells these
products through a direct sales force, value-added resellers
("VARs") and distributors, primarily to original equipment
manufacturers ("OEMs") and end-users.
The Industrial Technology Group manufactures highly engineered
electrical and electronic equipment and electromechanical
devices and precision electromechanical instruments which are
typically mission critical components designed into larger systems.
These systems are used in products as diverse as aircraft,
telecommunications, consumer electronics,elevators, semiconductor
processing and thermal processing,specialty lamps, cameras,
printers and computer equipment. WPI sells its Industrial Technology
Group products through a direct sales force and independent sales
representatives, primarily to OEMs and end-users.
The Company was incorporated in New Hampshire in 1948 and its corporate
headquarters are located at 1155 Elm Street, Manchester, New
Hampshire 03101. Its telephone number is (603) 627-3500.
Growth Strategy
WPI employs an aggressive growth strategy focused on internal
expansion and growth through acquisitions. The following are key
elements of WPI's strategy:
- - - Expansion Into New Vertical Markets. The rugged handheld
market is composed of a series of discrete vertical markets
focused on application software, such as utility meter reading or
vehicle maintenance. The WPI sales force works closely with OEMs,
VARs and end-users to identify niche market applications and
develops products, driven from existing technology when possible,
to meet customer requirements in these markets. By collaborating
with software suppliers or in some cases supplying the software
itself, WPI works aggressively to increase the number of vertical
markets into which its rugged handheld products are sold.
- - - Penetration of Existing Vertical Markets. Once WPI has
developed a specific market application, it works to expand its
market penetration through strategic alliances with OEMs, VARs
and distributors who are market leaders within their industries.
WPI also increases its penetration of the markets it serves by
collaborating with its existing customers to design and
manufacture specialized products, driven from existing technology
when possible, to meet its customers' individual needs on a cost-
effective and timely basis.
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- - - Leverage of Existing Customer Relationships. WPI's
substantial applications and engineering expertise positions it
to capitalize on the trend among manufacturers to rely more
heavily on specialized component providers for key value-added
components and services. WPI strives to become an integral part
of the customer's product development activities and an exclusive
or preferred supplier to the customer over the product life
cycle. By bringing its extensive engineering capabilities to the
development effort, WPI is able to design creative solutions for
its customers' product requirements, maximize the performance
features and functionality of the components it sells and shorten
the time-to-market for new product introductions, allowing its
customers to focus on their core technologies and rationalize
their production activities.
- - - Emphasis on Product Value. WPI designs its products for
efficient and low-cost manufacturing and structures its
manufacturing operations to achieve low manufacturing costs while
maintaining maximum production flexibility. By manufacturing
products with "dock to stock" reliability, WPI enables its
customers to minimize costly and time consuming in-house
inspections and to bring their products to market as quickly and
cost-effectively as possible. Moreover, WPI products must
perform consistently over the product's life cycle. Its ability
to design and manufacture highly reliable, cost-effective
products on a timely basis gives WPI a competitive advantage.
- - - Strict Profit Center Management. While WPI's corporate
management team provides overall guidance, strategic direction
and administrative support. In addition, group vice presidents
have responsibility for the day-to-day operations of its two
business units and supervision of their respective managers. WPI
operates each business unit as a largely autonomous separate
profit center which is held accountable for achieving its
financial goals. WPI believes that this profit center approach
to management increases its responsiveness to changes in the
market place and its customers' requirements and contributes to
the Company's ability to grow profitably.
- - - Acquisitions. Since 1993, WPI has completed eight acquisitions.
Management analyzes each acquisition opportunity using a
stringent set of criteria, including its fit with existing
operations, opportunities for product line enhancements and
rationalizations, facilities consolidation and marketing
leverage. WPI intends to aggressively pursue acquisitions which
will expand and enhance its existing products and sales and
service capabilities as well as provide entry into new vertical
markets.
Acquisitions
In October 1993, WPI acquired the solenoid product line from
Magnetec Corporation ("Magnetec"). Magnetec had been a supplier
of standard and custom linear actuators to the industry for more
than two decades. The Magnetec product line complemented the
product offerings and manufacturing capabilities of WPI's Industrial
Technology Group.
In May 1994, WPI completed the acquisition of all of the
outstanding stock of Termiflex Corporation, a New Hampshire-based
manufacturer of rugged hand-held and panel- mounted programmable
terminals. The acquisition allowed WPI to expand into the rapidly
growing market for industria information solutions. Later that year,
in September 1994, WPI acquired all of the outstanding stock of
Micro Palm Computers, Inc. ("Micro Palm"), a Florida-based
manufacturer of rugged, DOS/386 compatible hand-held
PCs designed for use in hostile, field-based applications.
Micro Palm's operations were moved to Termiflex's New Hampshire facility
in 1994.
In November 1995, WPI acquired all of the outstanding stock of
Micro Processor Systems, Inc. ("MPSI"), a Michigan-based
manufacturer of diagnostic and information-related systems and
equipment,including Windows(registered trademark)-based computers,
for the automotive and heavy duty vehicle industries. In addition
to the expansion of its hardware offerings, the acquisition of
MPSI gave WPI significant capabilities in the development
of advanced diagnostic and decision support software as well as
a significant presence in the growing market for information
systems in the transportation industry.
In July 1996, WPI acquired all of the outstanding stock of Oyster
Terminals Limited ("Oyster"), a United Kingdom - based
manufacturer of rugged hand-held programmable terminals,
including RF terminals, used in a variety of industries. Oyster
is widely-known in Europe and the United States for the wide
variety of options available on its standard terminals and for
its ability to customize for unique applications.
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In June 1997, WPI completed the acquisition of Husky Computers
Limited. Based in the United Kingdom with locations throughout
Europe and the United States, Husky is a leading producer of
rugged handheld computers used in utility meter reading,
geotechnical, field service and other applications.
In August 1998, WPI completed the acquisition of ANG Instruments and the
Lucas Schaevitz inertial sensor product line. ANG is a New Hampshire-
based producer of avionics components and subsystems, inertial sensors
and digital and analog panel meters used in the aerospace, electronic
instrumentation, telecommunications,consumer electronics and other
industries. Lucas Schaevitz is a Virginia-based manufacturer of inertial
sensors are used in flight control systems for helicopters, aircraft guidance
and control systems, guidance systems for missiles,earthmoving and paving
equipment,shipboard systems, mass transit deceleration systems, and fault
detection for high speed railways.
Products
Information Solutions
WPI's Information Solutions Group designs, manufactures and
markets rugged handheld terminals, PCs and laptop computers for a
variety of applications worldwide. The designation "rugged"
signifies that the products are capable of withstanding levels of
impact, moisture, dust and temperature range in excess of the
design tolerances of conventional handheld terminals and
computers. For example, many of WPI's products are designed to
endure up to a ten foot drop to concrete, submersion in water
indefinitely, temperature ranges from minus 20 degrees to
140 degrees Fahrenheit and exposure to heavy dust and other harmful
agents. Because these characteristics are most useful in non-office
locations such as construction sites, service vehicles, garages,
forests and other remote locations where electric power is often
unavailable, many of WPI's products are battery operated and are designed
to run between 10 and 30 hours on a single battery charge. WPI
achieves these performance characteristics through a combination
of proprietary design techniques and the use of special components.
Special shock-resistant internal suspensions, together with
casings of high impact plastics or lightweight magnesium, shield
the circuit boards and other components from severe impacts.
WPI's rugged handheld product line is divided into three main
categories:
PCs: The handheld PCs are rugged DOS-based, fully programmable
computers with alpha/numeric keyboards and displays, internal
memory and modems that perform sophisticated data collection and
other computing functions. Rugged handheld PCs are used in
applications which require equipment that is portable, flexible,
able to collect and process large amounts of data and, perhaps
most importantly, rugged and reliable enough to ensure the
absolute safety and integrity of the data being collected,
whatever the field conditions might be. They are used for many
applications, including over-the-road vehicle management, meter
reading, oil and gas production, surveying and forestry.
Laptop Computers: These rugged devices are Windows(registered
trademark) -based systems with full function displays. WPI's
rugged laptop computers are specifically designed for use
in the field. Although they have the same computing power,
flexibility and connectivity as a conventional laptop computer,
WPI's laptops, unlike conventional equipment, can withstand
knocks, dust, dampness and temperature shocks. Moreover, while
a conventional computer might have a battery life of 2 to 3
hours, WPI's laptops can last up to 10 hours on a single charge.
They are used in applications which require a full function
computer and the absolute safety and integrity of data in all
field conditions. WPI's rugged laptop computers are used in many
applications, including field service engineering, mapping,
geographic information processing and "scene of incident"
reporting.
Terminals: These devices are designed to be either passive
terminals with functionality limited to simple data input or
programmable terminals capable of performing low level data
processing. The rugged, passive terminals have easily
customizable displays, keypads, colors and cables, and are found
in many commercial and industrial settings. The programmable
terminals have expanded memory, larger displays, RF and infrared
communications capabilities, and can serve as gateways to
networks. They are used in many applications, including portable
theater lighting controls, environmental monitoring and setup of
industrial inkjet printers.
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In addition to the three WPI rugged handheld product lines, WPI
offers diagnostic and decision support software, ranging from
application cartridges with connectivity and diagnostic support
for particular vehicles to powerful database building tools
incorporated with expert "reasoning agents" that support solving
maintenance and service problems and decision making. WPI has
developed programs for the maintenance and monitoring of autos,
heavy duty trucks, construction equipment and agricultural vehicles.
Industrial Technology
WPI's Industrial Technology Group designs, manufactures and sells
four lines of power products: Industrial power conversion
systems, electronic ballasts, precision solenoids and precision
instruments. All of the product lines are highly engineered
application-critical components that are designed into larger systems.
Typically, WPI engineers will work closely with a customer during
the design of the customer's system. This high degree of customer
involvement results in WPI's products being designed into the system,
often making WPI a sole source or preferred supplier. The Industrial
Technology Group contains the original product line on which WPI
was founded. The predecessor company to WPI entered the
industrial transformer business in 1948. Since that time, WPI has
entered the electronic ballast business in 1983, the precision
solenoid business in 1993, with the acquisition of the Magnetec
product line and the precision instruments business in 1998, with
the acquisition of ANG Instruments and the Lucas Schaevitz product line.
Industrial Power Conversion Systems. These systems are large
power supplies that are sold for industrial applications. Power
supplies are specialized electrical devices that are used to
control, condition, convert or alter an electrical current within
a larger electrically powered system. These functions include
converting alternating current to direct current, controlling the
wave form of a current and changing the voltage of a current.
The largest current market for WPI's power conversion systems is
the high-rise elevator market. WPI's systems are used in both
new elevator construction and modernization of existing
elevators. The second largest market is the thermal processing
industry. Customers are manufacturers of high temperature
furnaces used for heat treating, crystal growing and material
processing. WPI's power conversion systems regulate the power
applied to the furnace heating elements, allowing for control of
the furnace temperature. Other applications include industrial
microwave ovens, plasma cutting equipment and electronic test
equipment.
Electronic Ballasts. These products are specialized power
supplies used to ignite and power high intensity arc lamps. Arc
lamps provide approximately five times the light intensity of
incandescent lamps and are used in a variety of medical and
commercial applications, including medical endoscopes,
multimedia projection, entertainment lighting and high intensity
discharge ("HID") commercial lighting. An arc lamp is a sealed
glass bulb containing gases or metal vapors and electrodes. Upon
application of high voltage by the ballast, an arc is ignited
between the electrodes, resulting in the ionization of the gas or
vapor and the emission of light. Following ignition, the ballast
maintains constant power to assure consistent light intensity.
WPI's electronic ballasts are used to power metal halide, mercury
vapor, high pressure sodium and xenon arc lamps.
Precision Solenoids. These products convert electrical energy
into linear mechanical motion. When electrical power is applied
to a solenoid, its plunger moves, either pulling or pushing a
load a predetermined distance to accomplish a repetitive function
as part of a larger system. WPI's solenoids are used in a
variety of commercial and industrial applications, including
instant camera shutter controls, dot matrix printer heads,
printer paper cutters, banking ATMs, door locks, blood gas
analyzers, ground fault circuit interrupters and aircraft air
supply controls.
Precision Electromechanical Instruments. These products include
avionic components and subsystems, analog panel meters, eliptical
bargraph panel meters, and accelerometers, inclinometers and
inertial sensor systems. The Company's avionic components and
subsystems include reliably engineered instrumentation components
which are designed to present information accurately, simply and
intelligently to the aircraft pilot. The Company's avionic components
and subsystems are found in most major commercial, military and private
aircraft. The Company's digital and analog panel meters are used to
measure and display a wide variety of variables and inputs in a number
of applications,including industrial process control systems, handheld
instrumentation,consumer electronics, medical devices and telecommunications.
The Company's inertial sensors are highly accurate measuring devices which
detect and measure changes in acceleration, horizontal angle or
vertical deviation. They are used in a wide variety of applications,
including helicopter flight control systems,
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aircraft guidance and control systems, large machinery installation, pipeline
leveling,heavy construction equipment and control systems, weapons platform
systems, and fault detection equipment.
Customers
For Fiscal 1998, no customer represented 10% or more of WPI's net sales.
For Fiscal 1997, one customer represented 11% of WPI's net sales.
For Fiscal 1996, two customers accounted for 11% and 10%,
respectively, of WPI's net sales.
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Sales and Marketing
WPI's marketing efforts are directed at identifying emerging
markets for its products. WPI's cooperative marketing efforts
and design capabilities often result in long-term customer
relationships and have contributed to a stable customer base.
Further, such cooperative efforts enable WPI to identify new
product opportunities and participate in new product
specifications as they are determined. Other marketing efforts
include market research, lead generation, production and
distribution of WPI's product literature, trade shows and
advertising.
Sales and marketing of rugged handheld hardware and software is
carried out by a group of approximately 85 employees. The sales
force operates out of offices in the United States, the United
Kingdom, France, Germany and Sweden. Information Solutions Group
products are sold directly to OEMs, end-users, VARs and
distributors. A typical end-user utilizes WPI's products for
specific applications rather than general computing purposes.
Accordingly, applications software is an integral part of the
rugged handheld hardware products and is an important part of the
sale. WPI has focused its sales efforts on a number of vertical
markets where it sells its own applications software, on VARs
that supply the applications software and on sophisticated end-
users that develop their own application software.
WPI's Industrial Technology Group products are sold through
approximately 40 sales and marketing employees and approximately
25 manufacturers' representatives throughout North America and,
to a lesser extent, in Europe. Because of the technical nature
of the products and WPI's emphasis on custom-design and
development, the Company relies on its engineering staff to
support sales efforts. Applications engineers are available to
discuss new applications, technical matters and customer needs
with existing and potential customers. WPI's sales force works
closely with its marketing group to follow up on sales leads and
with the product development team to develop cost-effective
solutions to its customers' requirements. To complement these
activities, the customer service staff interfaces with customers
regarding delivery schedules and monitors customer satisfaction.
Manufacturing and Raw Materials
WPI manufactures nearly 100% of its products. The Company
generally operates its manufacturing facilities one shift per
day, five days per week. WPI uses many different raw materials in
its manufacturing processes. However, WPI is not dependent on
any one or several raw materials used in its manufacturing. WPI
has multiple sources for each raw material used in the
manufacture of its products and is not dependent on any one or
group of its vendors for its raw material purchases.
Backlog
WPI manufactures its products against orders from customers.
Backlog is comprised of orders for products that generally have
scheduled shipment dates within 12 months. Some orders in WPI's
backlog may be canceled under certain conditions, although cancellation
rarely occurs. As of September 27, 1998, WPI had a backlog of
approximately $23.6 million, compared with a total backlog of
approximately $16.9 million at September 28, 1997. Management
believes that most of WPI's backlog at September 27, 1998 will be
shipped in the 12 months following that date. Because many of
its contracts are performed within short time periods after
receipt of an order, WPI does not believe that the level of its
backlog is a meaningful predictor of its future results.
Product Development
WPI believes that its commitment to product development in its
Information Solutions and Industrial Technology groups is a
critical element of its strategy aimed at exploiting niche
markets for each group's products. WPI's product development
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activities are focused on the design of products identified by
both its customers and its sales and marketing groups. A key
element of WPI's product development activities is the expansion
of product offerings based on its existing technologies. WPI
charged to operations approximately $2.9 million, $4.0 million and
$5.1 million for new product development in Fiscal 1996, 1997
and 1998, respectively. Expenditures on new product
development represented approximately 6%, 6% and 5% of net revenues in
Fiscal 1996, 1997 and 1998, respectively.
Patents and Proprietary Information
WPI has a number of United States and foreign patents on certain
products. WPI also relies on trade secrets, in-house expertise
and technological advancement to maintain its competitive
position.
WPI does not believe patent protection to be significant to its
current operations. However, WPI considers its patents to be a
strong deterrent against unauthorized copying of its products and
key product attributes. WPI believes in vigorously protecting
its rights under its patents.
Similarly, WPI and its subsidiaries have certain registered
trademarks, none of which is considered significant to current
operations.
Competition
Although WPI believes it is one of the leading manufacturers and
distributors of certain of its products, the industries in which
WPI competes are highly competitive. WPI competes with a
relatively small number of full-line national manufacturers and a
much larger number of regional manufacturers and manufacturers
with limited product lines. WPI believes that competition is
largely based on, among other things, price, quality, breadth of
product lines, distribution capabilities (including quick
delivery times) and customer service. Certain of WPI's
competitors are larger and have greater financial, technical and
marketing resources than the Company. In certain circumstances,
due primarily to factors such as freight rates, quick delivery
times and customer preference for local suppliers, certain
manufacturers and suppliers may have a competitive advantage over
WPI in a given geographic region. WPI believes that its size
provides it with certain advantages of scale in both distribution
and production relative to its competitors. In addition, WPI
believes that it competes effectively by offering superior
customer service.
Information Solutions Group
The major competitive factors in the programmable and DOS-based
hand-held terminals and computer markets are portability, product
performance, the ability to customize the unit to a customer's
specific needs, customer support and ruggedness. WPI has several
competitors in specified niche markets. Certain of the Company's
competitors in the data entry terminal market have developed
terminals to complement their own product lines. Many of WPI's
potential customers for handheld terminals and control panels now
satisfy their needs by designing and producing their own units.
Management believes that WPI competes effectively in this market
by offering products that are rugged and easily customized and by
providing excellent customer service.
Currently, WPI's diagnostic systems and related software are sold
primarily to the transportation industry. The major competitive
factors in this market include product features, portability,
product knowledge and customer service. WPI has a number of
competitors in certain segments of the transportation market.
Management believes that WPI competes effectively in these
markets by offering innovative, rugged and portable products and
by providing excellent customer service.
Industrial Technology Group
WPI has a number of competitors in the markets for industrial
power conversion systems. The major competitive factors in the
markets for industrial power conversion systems are applications
knowledge, product reliability, fully integrated design and
manufacturing, delivery schedule, performance features and cost.
Management believes that WPI competes effectively in these
markets by offering high quality products, applications
expertise, superior customer service and quick delivery.
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WPI has some competition in the market for ballasts in endoscopes
and multimedia projectors incorporating metal halide and xenon
arc lamps. In addition, some of WPI's potential customers for
electronic ballasts now satisfy their needs by designing and
producing their own units. The Company's principal sources of
competition in the metal halide lamp ballast market outside of
endoscopes and multimedia projection are manufacturers of
magnetic lamp ballasts and, to a more limited extent, certain
manufacturers of electronic ballasts. In such applications where
cost is a more important factor, magnetic lamp ballasts are often
preferred over electronic ballasts. In each of these markets, WPI
believes that it competes favorably against its competitors by
offering quality, reliability and solutions tailored to its
customers' unique needs.
WPI has several established competitors in the market for
solenoids, some of which are larger, and some of which are
smaller, than WPI. WPI believes that, in these markets, it
competes favorably against its competitors by offering high
quality, dependable products, superior engineering expertise and
innovative, custom-tailored solutions.
WPI has several established competitors in the market for avionics,
inertial sensors and digital and analog meters. Some of these
competitors are larger, and some are smaller than WPI. WPI believes
that it competes favorably against its competitors in these markets
by offering vertical integration, high quality dependable products,
superior engineering expertise and a high level of customer support.
Employees
As of December 18, 1998, WPI employed approximately 1,025
people, 725 of whom work in manufacturing, 75 of whom work
in administration, 100 of whom work in product development
and 125 of whom work in sales and marketing. None of the
Company's employees is represented by a union, and
management believes that the Company's employee relations are
good.
Item 2. Property
Properties
The Company currently owns and operates properties located in
Warner, New Hampshire and Cwmbran, United Kingdom. The Warner
property is comprised of approximately 80,000 square feet of
modern facilities used primarily for the manufacture of
Industrial Technology Group products. The Cwmbran property is
comprised of approximately 26,000 square feet of manufacturing
facilities to produce handheld terminals. The Company leases
approximately 17,000 square feet of modern manufacturing
facilities in Sterling Heights, Michigan to produce diagnostic
tools; 40,000 square feet of manufacturing facilities in
Coventry, United Kingdom to produce handheld and laptop
computers; 60,000 square feet of manufacturing facilities in
Manchester, New Hampshire to produce digital and analog meters,
inertial sensors and avionics; and 19,000 square feet of manufacturing
facilities in Bridgetown, Barbados to produce analog meters. The Company
leases approximately 12,000 square feet of
office space in Manchester, New Hampshire which houses its
corporate offices. In addition, the Company leases office space
in six locations in the United States, France, Germany and
Sweden for use by its sales and service staff. WPI believes that
its existing space is adequate for its current needs.
Regulatory Matters
The Company is subject to regulation under various and changing
federal, state, local and foreign laws and regulations relating
to the environment and to employee safety and health. These
environmental laws and regulations govern the generation,
storage, transportation, disposal and emission of various
substances. Permits are required for operation of the Company's
business and these permits are subject to renewal, modification
and, in certain circumstances, revocation. The Company believes
that it is in substantial compliance with such laws and
permitting requirements. The Company is also subject to
regulation under various and changing federal, state, local and
foreign laws and regulations which allow regulatory authorities
to compel (or seek reimbursement for) cleanup of environmental
contamination at its own sites and at facilities where its waste
is or has been disposed.
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The Company expects to incur on-going capital and operating costs
to maintain compliance with currently applicable environmental
laws and regulations. The Company does not expect such costs, in
the aggregate, to be material to its financial condition, results
of operations or liquidity.
Item 3. Legal Proceedings
The Company is not a party to any litigation that in management's
opinion would have a material adverse effect upon the Company's
financial position or results of operations.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Part II
Item 5. Market for Registrant's Common Stock and Related
Stockholder Matters
The information required by this item is incorporated herein by
reference to the information captioned "Shareholder Information"
on page 28 of the Registrant's Annual report to Shareholders for
the fiscal year ended September 27, 1998 (the "1998 Annual
Report").
Item 6. Selected Financial Data
The information required by this item is incorporated by reference
to the information captioned "Financial Highlights" on the inside
front cover of the 1998 Annual Report.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The information required by this item is incorporated herein by
reference to the information captioned "Management's Discussion
and Analysis of Financial Condition and Results of Operations" on
pages 13, 14 and 15 of the 1998 Annual Report.
Item 8. Financial Statements and Supplementary Data
The financial statements of the Registrant required by this item
are incorporated herein by reference to pages 16 through 27
of the 1998 Annual Report.
Item 9. Changes In and Disagreements with Accountants on Accounting
and Financial Disclosure
None
Part III
Item 10. Directors and Executive Officers of the Registrant
(a) Directors. The information with respect to directors
required by this item is incorporated herein
by reference to pages 5 and 6 of the Registrant's Proxy Statement
dated January 15, 1999 for the annual shareholders meeting to be
held on February 9, 1999 (the "1999 Proxy Statement").
(b) Executive Officers. The information with respect to
executive officers required by this item is set forth below:
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EXECUTIVE OFFICERS OF THE REGISTRANT
Name Age Position with the Company
- - ---- --- -------------------------
Michael Foster 63 Chairman of the Board of
Directors and
Chief Executive Officer
Dennis Deegan 54 President and Chief Operating
Officer
John Allard 33 Senior Vice President, Business
Development
John Powers 41 Vice President and Chief
Financial Officer
Karen Hebert 38 Vice President, Human Resources
Timothy Jones 54 Vice President, Information
Solutions Group
Richard Longo 52 Vice President, Industrial
Technology Group
Michael Tule 37 Vice President, General Counsel
and Secretary
Michael Foster, Chairman of the Board of Directors and Chief
Executive Officer, led the leveraged buy-out of the Company from
Walker Magnetics Group, Inc. in October 1988. Since 1997, Mr.
Foster has been a director of Foilmark, Inc., a Massachusetts-
based manufacturer of metallic foils and foil stamping machinery.
Dennis Deegan has served as President and Chief Operating Officer
of the Company since June 1996. From October 1988 to June 1996,
Mr. Deegan served as Executive Vice President, Treasurer and
Chief Financial Officer.
John Allard has been Senior Vice President, Business Development
since September 1998. From December 1992 to August 1998, Mr.
Allard was President and CEO of Allard Nazarian Group, Inc., which
included Jewell Electrical Instruments, a manufacturer of avoinics
components, subsystems, and panel meters, and Granite State
Manufacturing, a contract manufacturing service. From June 1988 to
November 1992, Mr. Allard was President and CEO of Jewell Electronics,
Inc. From December 1992 to December 1996, Mr. Allard also served as CEO
and a Director of the Aerospace Displays Systems Group located in Hatfield,
Pennsylvania.
John Powers has been Vice President and Chief Financial Officer
of WPI since February 1997. From August 1993 to February 1997,
he was the Chief Financial Officer of Janco Companies, a
manufacturer of medical and electronic products. From October
1987 to August 1993, he was a principal of Smith, Batchelder &
Rugg, a certified public accounting firm.
Karen Hebert has served as Vice President of Human Resources
since August 1995. From November 1993 to August 1995, she served
as Director of Human Resources. From 1987 until 1993, Ms.
Hebert served as Manager of Human Resources with the Company.
Timothy Jones has served as Vice President, Information Solutions
Group since November 1995. From September 1995 to November 1995,
Mr. Jones served as Assistant to the Chairman. From 1993 to
1995, Mr. Jones was President of Ionic Fuel Technology, Inc. From
1991 to 1995, Mr. Jones was President of Plume & Atwood, Inc.
Richard Longo has served as Vice President, Industrial Technology
Group since June 1998. From September 1996 to June 1998, Mr.
Longo was President of Thunderline-Z, a New Hampshire-based
manufacturer of components for the microelectric and microwave
industries. From July 1986 to September 1996, Mr. Longo
was Vice President for O.S. Walker Corporation, the world's largest
manufacturer of industrial magnetics. At O.S. Walker, Mr. Longo
was responsible for leading the sales and marketing group and had
operational responsibility for several facilities worldwide.
- 10 -
<PAGE>
Michael Tule has served as Vice President and General Counsel of
the Company since March 1996. Mr. Tule has served as Secretary
since December 1994. From 1987 to 1996, Mr. Tule was an attorney
at McLane, Graf, Raulerson & Middleton, Professional Association.
Item 11. Executive Compensation
The information required under this item is incorporated herein
by reference to pages 7 through 10 of the 1999 Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
The information required by this item is incorporated herein by
reference to pages 3 and 4 of the 1999 Proxy Statement.
Item 13. Certain Relationships and Related Transactions
The information required by this item is incorporated by reference
to page 11 of the 1999 Proxy Statement.
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K
(a) Documents filed as part of the Report:
(1) Financial Statements of the Registrant and Report of
Independent Public Accountants thereon incorporated herein by
reference to pages 16 through 27
of the 1998 Annual Report.
Consolidated Balance Sheets, September 27, 1998
and September 28, 1997.
Consolidated Statements of Income for the Years
Ended September 27, 1998, September 28, 1997 and
September 29, 1996.
Consolidated Statements of Stockholders' Equity
for the Years Ended September 27, 1998, September
28, 1997 and September 29, 1996.
Consolidated Statements of Cash Flows for the
Years Ended September 27, 1998, September 28, 1997
and September 29, 1996.
Notes to Consolidated Financial Statements.
Report of Independent Public Accountants.
(2) Financial Statement Schedule and Auditors'
Report
Title Schedule
----- --------
Valuation and Qualifying Accounts II
All schedules omitted are inapplicable or the
information required is shown in the
Consolidated Financial Statements or notes
thereto. The auditors' report of Arthur
Andersen LLP with respect to the Financial
Statement Schedule is located on page 13 of
this Report.
(3) Exhibits:
Incorporated by reference to the Exhibit Index at
the end of this report.
(b) The Registrant has filed the following reports on Form
8-K during quarter ended September 27,
1998:
On August 4, 1998, the Registrant filed a Current
Report on Form 8-K dated as of August 3, 1998
announcing the acquisition of the assets of the
ANG Instruments division of Allard-Nazarian Group,
Inc.
On October 16, 1998, the Registrant filed Amendment
No. 1 to Current Report on Form 8-K dated as of
August 3, 1998 with respect to the acquisition of
the assets of ANG Instruments in which the following
financial statements were filed:
- 11-
<PAGE>
ANG Instruments, a division of Allard-Nazarian
Group, Inc. Financial Statements as of July 31,
1998.
Pro Forma Combined Financial Statements for WPI
Group, Inc. and ANG Instruments as of June 28,
1998.
- 12 -
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SUPPLEMENTARY
SCHEDULE
TO WPI GROUP, INC.
We have audited, in accordance with generally accepted auditing
standards, the consolidated balance sheets as of September 27,
1998 and September 28, 1997 and the related statements of
operations, stockholders' equity and cash flows for each of the
three years in the period ended September 27, 1998 of WPI Group,
Inc. included in this Form 10-K, and have issued our report
thereon dated December 10, 1998 (except with respect to the matter
discussed in Note 3, as to which the date is December 27, 1998). Our
audit was made for the purpose of forming an opinion on those
statements taken as a whole. The schedule listed in Item 14(a)
of the index is the responsibility of the Company's management and
is presented for purposes of complying with the Securities
and Exchange Commission's rules and are not part of the basic
consolidated financial statements. This schedule has been subjected
to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, fairly state, in all material
respects, the supplemental financial data required to be set
forth therein in relation to the basic financial statements taken
as a whole.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
December 10, 1998
- 13 -
<PAGE>
<TABLE>
WPI GROUP, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
For the years ended September 27, 1998, September 28, 1997 and
September 29, 1996
<CAPTION>
Additions
-------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <S><S>
Balance at Charged to
beginning costs and Charged to Balance at
of period expenses Acquisitions other accounts Deductions end of period
--------- ---------- ------------ -------------- ---------- -------------
1998
Allowance for doubtful accounts $1,237,000 $ 49,164 $ 75,728 $ 6,170 $ 85,062 (1) $1,283,000
Acquisition reserves 286,226 - 948,011 - 362,152 (2) 872,085
1997
Allowance for doubtful accounts $ 244,300 $1,026,119 $ 77,544 $ - $ 110,963 (1) $1,237,000
Acquisition reserves 622,763 - 1,099,436 - 1,435,973 (2) 286,226
1996
Allowance for doubtful accounts $ 217,000 $ 2,788 $ 146,300 $ - $ 121,788 (1) $ 244,300
Acquistion reserves 232,555 - 1,482,500 - 1,092,292 (2) 622,763
</TABLE>
(1) Accounts deemed uncollectible, net of recoveries
(2) Acquistion costs paid/charges incurred
- 14 -
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf of the undersigned,
thereunto duly authorized.
WPI GROUP, INC.
January 7, 1999 By:/s/Michael Foster
-----------------
Chairman
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the Registrant in the capacities and on the
dates indicated.
Signature Title Date
- - ---------- ----- -----
/s/Michael Foster Director, Chairman January 7, 1999
- - ----------------- and Chief Executive Officer
Michael Foster (Principal Executive Officer)
/s/Dennis Deegan Director, President and January 7, 1999
- - ---------------- Chief Operating Officer
Dennis Deegan
/s/ John Powers Vice President and January 7, 1999
- - --------------- Chief Financial Officer
John Powers (Principal Financial and
Accounting Officer)
/s/ John Allard Director, Senior Vice January 7, 1999
- - --------------- President,Business Development
/s/ Stephen Carlotti Director January 7, 1999
- - --------------------
Stephen Carlotti
/s/Peter Danforth Director January 7, 1999
- - -----------------
Peter Danforth
/s/Paul Giovacchini Director January 7, 1999
- - -------------------
Paul Giovacchini
/s/Irving Gutin Director January 7, 1999
- - ---------------
Irving Gutin
/s/Steven Shulman Director January 7, 1999
- - -----------------
Steven Shulman
/s/Bernard Tenenbaum Director January 7, 1999
- - --------------------
Bernard Tenenbaum
- 15 -
<PAGE>
EXHIBIT INDEX
Certain of the following exhibits, designated with an
asterisk (*) are filed herewith. The exhibits not designated have
been previously filed with the Commission and are incorporated
herein by reference to the documents indicated following the
descriptions of such exhibits.
Page No.
Exhibit Of Paper
No. Description Filing
------- ----------- --------
3.1 Amended and Restated Articles of
Incorporation of the Company are
incorporated by reference to Exhibit 3.1
to the Registrant's Report on Form 10-
KSB for the year ended September 29,
1996.
3.2 Bylaws of the Company are incorporated
by reference to Exhibit 3.2 of the
Registrant's Registration Statement on
Form S-4 filed with the Commission on
February 22, 1994, Registration No. 33-
75656.
10.1 Asset Purchase Agreement, dated
September 28, 1993 among WPI Group, Inc.
and Magnetec Corporation and Tridex
Corporation, previously filed and
incorporated by reference to
Registrant's report on Form 10-KSB for
the year ended September 26, 1993.
10.2 Agreement and Plan of Merger, dated as
of January 27, 1994, by and between WPI
Group, Inc. and Termiflex Corporation,
previously filed and incorporated by
reference to Exhibit 28.11 of
Registrant's report on Form 8-K filed on
September 30, 1994.
10.3 Agreement and Plan of Merger, dated
August 31, 1994, by and between WPI
Group, Inc. and Micro Palm Computers,
Inc., previously filed and incorporated
by reference to Exhibit 28.11 of
Registrant's report on Form 8-K filed on
September 30, 1994.
10.4 Stock Purchase Agreement, dated November
7, 1995 between WPI Group, Inc. and IVHS
Technologies, Inc., previously filed and
incorporated by reference to Exhibit
28.13 of Registrant's report on Form 8-
K, dated November 10, 1995.
10.5 Share Purchase Agreement dated July 16,
1996 by and between WPI Group (U.K.) and
D.R. Watkins and others, previously
filed and incorporated by reference to
Exhibit 28.15 in Registrant's Report on
Form 8-K, dated July 16, 1996.
10.6 Agreement for the sale and purchase of
the share capital of Husky Computers
Limited, Husky Computers, Inc. and Husky
Computers GmbH, previously filed and
incorporated by reference to Exhibit
4.12 in Registrant's report on Form 8-K
dated June 25, 1997.
10.7 Asset Purchase Agreement dated as of July
31, 1998 by and among WPI Instruments, Inc.,
Allard-Nazarian Group, Inc., Modutec, Inc.,
A.M. Instruments, Inc., and others, previously
filed and incorporated by reference to Exhibit
10.24 in Registrant's report on Form 8-K
dated August 3, 1998.
- 16 -
<PAGE>
Page No.
Exhibit Of Paper
No. Description Filing
------- ----------- --------
* 10.8 Inertial Products Purchase Agreement dated
July 30, 1998 by and among Allard-Nazarian
Group, Inc. and Lucas Automation and Control
Engineering, Inc.
10.9 Walker Power, Inc. Employee Stock
Purchase Plan and Bonus Award Plan
adopted May 7, 1992, previously filed
and incorporated by reference to Exhibit
28.1 of Registrant's Registration on
Form S-8 filed on June 1, 1992,
Registration No. 33-48285.
10.10 Termiflex Corporation 1981 Employee
Incentive Stock Option Plan,
previously filed and incorporated by
reference to Exhibit 10.1 of the
Termiflex Registration Statement No. 2-
85910-B on Form S-8.
10.11 The 1992 Stock Option Plan for Directors
of Micro Palm Computers, Inc.,
previously filed and incorporated by
reference to Exhibit 99.4 of the
Registrant's Registration Statement on
Form S-8 filed February 28, 1996,
Registration No. 333-1696.
10.12 WPI Group, Inc. Change in Control Plan
adopted December 15, 1995, previously
filed and incorporated by reference to
Exhibit 10.8 to the Registrant's Report
on Form 10-KSB for the year ended
September 29, 1996.
10.13 WPI Group, Inc. 1997 Employee Stock
Purchase Plan and Bonus Award Plan, each
adopted on February 12, 1997, previously
filed and incorporated by reference to
Exhibit 99 to the Registrant's
Registration on Form S-8 filed June 3,
1997 Registration No. 333-28335.
10.14 WPI Group, Inc. 1997 Equity Incentive
Plan, adopted June 10, 1997, as amended
on December 12, 1997, previously filed
and incorporated by reference to Exhibit
A of the Registrant's Proxy Statement
dated January 9, 1998.
10.15 Noncompetition agreement, dated January
17, 1994, by and between WPI Group, Inc.
and William E. Fletcher, previously
filed and incorporated by reference to
Exhibit 10.7 of the Registrant's report
on Form 10-KSB for the year ended
September 25, 1996.
10.16 Lease agreement, dated October 7, 1994,
by and between WPI Group, Inc. and State
Mutual Life Assurance Company of
America, previously filed and
incorporated by reference to Exhibit
10.9 of the Registrant's report on Form
10-KSB for the year ended September 24,
1995.
10.17 WPI Group, Inc. 1995 Stock Option Plan,
adopted June 6, 1995, previously filed
and incorporated by reference to Exhibit
10.10 of Registrant's report on Form 10-
KSB for the year ended September 24,
1995.
10.18 Commercial Loan Agreement, dated October
24, 1995, previously filed and
incorporated by reference to Exhibit 4.9
of the Registrant's Report on Form 10-
KSB for the year ended September 24,
1995.
- 17 -
<PAGE>
Page No.
Exhibit Of Paper
No. Description Filing
------- ----------- --------
10.19 First Amendment dated March 20, 1996 to
Commercial Loan Agreement dated October
24, 1995, previously filed and
incorporated by reference to Exhibit 4.4
of the Registrant's Report on Form 10-
KSB for the year ended September 29,
1996.
10.20 Second Amendment dated July 12, 1996 to
Commercial Loan Agreement dated October
24, 1995, previously filed and
incorporated by reference to Exhibit 4.6
of the Registrant's Report on Form 10-
KSB for the year ended September 29,
1996.
10.21 Third Amendment dated February 27, 1997
to Commercial Loan Agreement dated
October 24, 1995 is incorporated by
reference to Registrant's report on Form
10-Q for the period ended March 30,
1997.
10.22 Revolving Line of Credit Promissory Note
dated February 27, 1997, replacement to
Revolving Line of Credit Promissory Note
dated July 12, 1996, previously filed
and incorporated by reference to Exhibit
4.1 of the Registrant's Report on Form 8-
K for the period ended March 30, 1997.
10.23 Fourth Amendment dated June 20, 1997 to
Commercial Loan Agreement dated October
24, 1997, previously filed and
incorporated by reference to Exhibit
4.13 in Registrant's Report on Form 8-K
dated June 25, 1996.
10.24 Promissory Note dated June 20, 1997,
previously filed and incorporated by
reference to Exhibit 4.14 in
Registrant's Report on Form 8-K dated
June 25, 1997.
10.25 Stock Pledge and Security Agreement
dated June 20, 1997, previously filed
and incorporated by reference to Exhibit
4.15 in Registrant's Report on Form 8-K
dated June 25, 1997.
* 10.26 Credit Agreement dated August 3, 1998 by
and among Fleet Bank - NH and the Registrant.
* 10.27 First Amendment dated October 30, 1998 to
Credit Agreement dated August 3, 1998.
* 10.28 Revolving Note dated October 30, 1998 in the
principal amount of $3,333,333.33.
* 10.29 Revolving Note dated October 30, 1998 in the
principal amount of $4,000,000.
* 10.30 Revolving Note dated October 30, 1998 in the
principal amount of $2,666,666.67.
* 10.31 Revolving Note dated October 30, 1998 in the
principal amount of $4,000,000.
* 10.32 Revolving Noted dated October 30, 1998 in the
principal amount of $6,000,000.
- 18 -
<PAGE>
Page No.
Exhibit Of Paper
No. Description Filing
------- ----------- --------
* 10.33 Term A Note dated October 30, 1998 in the
principal amount of $5,000,000.
* 10.34 Term A Note dated October 30, 1998 in the
principal amount of $6,000,000.
* 10.35 Term A Note dated October 30, 1998 in the
principal amount of $4,000,000.
* 10.36 Term A Note dated October 30, 1998 in the
principal amount of $6,000,000.
* 10.37 Term A Note dated October 30, 1998 in the
principal amount of $9,000,000.
* 10.38 Term B Note dated October 30, 1998 in the
principal amount of $4,166,666.67.
* 10.39 Term B Note dated October 30, 1998 in the
principal amount of $5,000,000.
* 10.40 Term B Note dated October 30, 1998 in the
principal amount of $15,833,333.33.
* 10.41 Second Amendment to Credit Agreement dated
as of December 27, 1998.
* 10.42 Waiver dated as of December 27, 1998.
* 10.43 Lease Agreement dated September 10, 1986
as amended on September 10, 1986, September
1, 1991 and January 1, 1998 by and between
850 Perimeter Rd/NA, LLC (formerly, NA Realty)
and WPI Instruments, Inc.
* 13 Portions of the 1998 Annual Report.
* 21 List of subsidiaries of the Registrant
as of September 27, 1998.
* 23 Consent of Arthur Andersen LLP
* 27 Financial Data Schedule
- 18 -
<PAGE>
Exhibit 10.8
Inertial Products Purchase Agreement No. 9829
THIS PURCHASE AGREEMENT (the "Agreement") is made by and
between Lucas Automation & Control Engineering, Inc. trading as
Lucas Control Systems, a corporation incorporated under the laws
of the Commonwealth of Virginia, with its principal place of
business at 1000 Lucas Way, Hampton, Virginia, 23666,
(hereinafter referred to as "LCS"), and Allard Nazarian Group,
Inc., a corporation incorporated under the laws of the State of
New Hampshire, with a place of business at 124 Joliette Street,
Manchester, New Hampshire 03102, (hereinafter referred to as
"ANG").
RECITALS:
LCS in engaged, at its facility at 1000 Lucas Way, Hampton,
Virginia, in the design, manufacture, assembly and sale of
Schaevitz-branded inertial sensor products (the "Inertial
Operation").
Upon the terms and subject to the conditions set forth in
this Agreement, LCS desires to sell to ANG and ANG desires to
purchase from LCS various assets associated with LCS's Inertial
Operation;
Therefore, in consideration of the mutual promises and
mutual covenants contained in this Agreement and other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, LCS and ANG agree as follows:
1. Purchase of Assets
1.1 Purchase and Sale of Assets - LCS will sell, convey,
transfer assign and deliver to ANG, and ANG will buy and acquire
from LCS, all of LCS's right, title and interest in and to the
Assets as defined in Section 1.2
1.2 Definition of Assets - For purposes of this Agreement,
and except as provided in Section 1.4 below, the "Assets" means
and includes the assets, properties and rights of LCS which, as
of the Transfer Date, LCS owns or has a right to use and are used
exclusively in the Inertial Operation. No real property or
leaseholds of any real property are included in this Agreement.
The Assets include but are not limited to the following:
1.2.1 Tangible Personal Property - All machinery,
equipment, tools, fixtures and other tangible personal property
listed in Schedule 1.2.1(a) (the "Equipment"). The Equipment
does not include any customer or supplier owned tooling or
equipment listed in Schedule 1.2.1 (b).
1.2.2 Inventories - All inventories (specifically
relating to the Inertial Operation) of raw materials, operating
supplies, packaging materials, component parts, replacement and
spare parts, work in process and finished goods (the
"Inventories") as listed in Schedule 1.2.2.
1.2.3 Purchase Contracts and Supplier List - All of
LCS's rights in and to contracts made or orders given by LCS (the
"Purchase Contracts"), and a list of suppliers relating to the
purchase of materials, utilities, chemicals, parts, supplies and
commodities for use in the Inertial Operation, all as listed in
Schedule 1.2.3.
1.2.4 Sales Contracts - All of LCS's rights in and
to contracts made or orders given to LCS (the "Sales Contracts")
listed in Schedule 1.2.4 for the sale of products manufactured or
services delivered by the Inertial Operation (the "Products").
- 19 -
<PAGE>
1.2.5 Other Contracts - All of LCS's rights in and
to those contracts, licenses, manufacturer's representative
agreements, distributor agreements, or other agreements listed in
Schedule 1.2.5 to which LCS is a party and entered into for the
benefit of the Inertial Operation (the "Other Contracts," and all
the Purchase Contracts, Sales Contracts and Other Contracts are
hereinafter collectively referred to as the "Assigned
Contracts").
1.2.6 Personal Property Leases - LCS shall assign
to ANG all leases for machinery, equipment and other tangible
personal property leased from third persons and used exclusively
in the Inertial Operation and listed in Schedule 1.2.6 (the
"Personal Property Leases").
1.2.7 Books and Records - Except as provided in
Section 1.4.3, books and records, files and other documents
(including such items recorded on computer storage media) used
exclusively in the ongoing operation of the Inertial Operation
and access to all other books, records, files and other documents
which may be necessary to such ongoing operations for the purpose
of copying such materials on reasonable notice to LCS by ANG.
1.2.8 Intellectual Property Rights - All the
following intellectual property rights exclusively used in the
Inertial Operation (the "Intellectual Property Rights"),
including that listed in Schedule 1.2.8.
1.2.8.1 Computer Data - Computer date used in
the Inertial Operation, including software and rights related
thereto to the extent such computer data can be assigned by LCS
without incurring additional cost or expense.
1.2.8.2 Trade Secrets - The trade secrets of or
pertaining to the Inertial Operation, customer lists and customer
requirements, specifications, plans, designs, research data,
proprietary know-how, processes, drawings, blueprints, flow
sheets, equipment and parts lists and descriptions and related
instructions and manuals used in the Inertial Operation, and the
licenses, agreements, and other contracts and commitments
relating to any of the foregoing.
1.3 Consents to Assignments - This Agreement will not be
deemed an assignment or transfer, or an attempted assignment or
transfer for any rights or privilege if such assignment or
transfer would constitute a breach or violation of any contract,
lease, permit or license under state, federal or local law. To
the extent that any consent, approval or waiver is required for
LCS's transfer of any right or interest to ANG in respect of any
Assets, LCS will use its best efforts to obtain such consent,
approval and/or waiver and ANG agrees to co-operate with LCS and
provide information and/or documentation as may be reasonably
necessary to obtain such consent, approval and/or waiver. If an
attempted assignment or transfer of any right or privilege will
constitute a breach or violation of any contract, and if the
parties have been unable to obtain consent to such assignment or
transfer, LCS agrees that it will at ANG's request cooperate in
any arrangement which ANG may reasonably request to provide ANG
the benefits under such contract. Cooperation may include
without limitation an arrangement between ANG and LCS pursuant to
which LCS shall nominally perform an order or contract as an
agent for ANG or ANG shall serve as a subcontractor of LCS, and
in any event, ANG shall retain the economic benefits or
detriments of the order or contract.
1.4 Excluded Assets - Other provisions hereof
notwithstanding, LCS will not sell to ANG and LCS will retain as
its own property each and all of the following assets, properties
and rights related to the Inertial Operation as of the Transfer
Date, which hereby are excluded from the Assets:
1.4.1 Accounts Receivable - All accounts receivable
as of the date hereof, including intercompany receivables, and
all other trade amounts which third parties owe to LCS in
connection with the Inertial Operation, whether arising from the
sale of products or services provided or otherwise.
1.4.2 Goodwill, Name and Trademark - The names and
expressions "Lucas", "Varity", "LucasVariety", "Lucas Control
Systems", "Schaevitz", "Lucas Schaevitz", and any variations
thereof, whether used as a tradename, trademark or otherwise,
along with any other tradenames or assumed names of LCS, provided
that for a period of up to thirty (30) days after the Transfer
Date, ANG may continue to use all existing sales and marketing
brochures and other promotional materials, notwithstanding the
fact that they contain the LucasVarity trade names, as long as
ANG prominently identifies on any such material or document by
way of a stamp, sticker or other imprint, the fact that it is no
- 20 -
<PAGE>
longer affiliated with LCS, LucasVarity, or their affiliates.
Thereafter, all such materials and documents shall be destroyed
or returned to LCS and ANG shall not continue to use any
invoices, order forms, business cards or letterhead displaying
the LucasVarity trade names.
1.4.3 Corporate and Inertial Operation Records -
All corporate documents and records, including, without
limitation, minute books, stock records, certificates, all tax
records and any records relating to any asset retained by LCS and
any liability or obligation of LCS, which ANG is not required to
assume hereunder (the "Books and Records").
1.4.4 Benefit Plans - Any and all pension and other
employee benefit plans, including, without limitation, all plan
documents, trust agreements and insurance policies relating
thereto, and all papers, documents and records relating thereto,
and all assets thereof.
2. Consideration for Assets
2.1 Purchase Price - Upon the terms and subject to the
conditions of this Agreement, in consideration for the Assets,
ANG will pay to LCS the sum of Three Million Two Hundred Thousand
Dollars ($3,200,000.00) in United States currency (the "Purchase
Price").
2.2 Payment of Purchase Price - The Purchase Price shall be
paid as follows:
2.2.1 Earnest Money - Both parties agree that,
prior to execution of this Agreement, ANG had deposited with LCS,
and LCS had received the sum of Seventy-Five Thousand Dollars
($75,000.00) in earnest money to be credited to the Purchase
Price upon Transfer.
2.2.2 Payment at Transfer - At the Transfer Date,
the sum of Two Million Nine-Hundred Twenty-Five Thousand Dollars
($2,925,000.00) ("Initial Cash Payment") shall be paid by ANG to
LCS by wire transfer of immediately available funds to the
account of LCS at:
CITIBANK, NA
NEW YORK, NEW YORK
ABA/Routing #021-000-089
Credit to: Lucas Control Systems
Account No. 4064-5436
2.2.3 Promissory Note - On the Transfer Date, for
the sale of certain Inventory and assets pursuant to this
Agreement, ANG will enter into a Promissory Note Agreement with
LCS in the amount of Two Hundred Thousand Dollars ($200,000.00)
with the Principal amount, and accrued interest thereon, payable
at Twenty-Four (24) months from date of Transfer. Interest on
the Principal will be payable monthly at a rate of Nine Percent
(9%) for the Twenty-Four (24) months from date of Transfer. Such
Promissory Note shall be in the form as set forth in Exhibit
2.2.3.
2.3 Purchase Price Allocation - LCS and ANG agree that the
Purchase Price shall be allocated among the Assets, tangible and
intangible on the basis of an allocation (the "Allocation")
determined by ANG. The Allocation shall, on delivery, become
part of this Agreement for all purposes. LCS and ANG agree to
report, pursuant to Section 1060 of the Internal Revenue Code and
the regulations promulgated thereunder, if and when required, the
Allocation of the Purchase Price, as adjusted, among the Assets
in a manner entirely consistent with such Allocation in the
preparation and filing of all tax returns (including IRS Form
8594).
2.4 Retained Liabilities - ANG shall not assume or be
liable for any liabilities or obligations of LCS, whenever
arising and whether primary or secondary, direct or indirect,
absolute or contingent, contractual, tortious or otherwise, other
than those specifically identified or described in this Agreement
(all such liabilities and obligations of LCS other than those
specifically assumed by ANG identified or described in this
Agreement are hereinafter collectively referred to as the
"Retained Liabilities").
2.4.1 Benefit Plans - Without limiting the
generality of the foregoing, ANG shall not assume or be liable
for any obligation or liability now or hereafter arising under,
or in connection with, or in respect of the "Benefit Plans" or
any other plan, fund or program which LCS has at any time
directly or indirectly maintained, or to which LCS has at any
time contributed, including any "employee pension benefit plan"
(as such terms are defined in Article 3[2] of the federal
Employee Retirement Income Security Act of 1974 (ERISA)).
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2.4.2 Incentive Compensation Plan - ANG shall not
assume or be liable for any obligation or liability now or
hereafter arising under, or in connection with, or in respect of
any incentive compensation plan which LCS maintained or provided
as part of the Inertial Operation including, without limitation,
any bonus plans, stay-on incentives, or EVA participation plans.
3. Effective Date and Transfer
3.1 Effective Date of Agreement - Subject to the
satisfaction of the terms and conditions of this Agreement, the
parties, at the offices of LCS's counsel, have executed this
Agreement as of 30 July, 1998 which shall be the "Effective
Date".
3.2 Transfer and Transfer Date - Subject to the
satisfaction of the terms and conditions of this Agreement, the
transactions herein contemplated and required by this Agreement
will only be completed and closed by LCS and ANG upon receipt in
full by LCS from ANG of the sum of Three Million Dollars
($3,000,000.00), inclusive of the Seventy-Five Thousand Dollars
($75,000.00) Earnest Money already received by LCS (the
"Transfer") with the actual date of such Transfer to be know as
the "Transfer Date". The parties agree that the Transfer Date
will be no later than 10 August, 1998.
3.2.1 In the event the Transfer does not take place
on or before the Transfer Date because of a material adverse
change in the Assets or Inertial Operation, through no fault of
ANG, this Agreement is null and void and ANG agrees that (a) LCS
shall return to ANG any Earnest Money deposit pertaining to this
Agreement, and (b) LCS retains all legal title to, and
unencumbered ownership of, the Assets.
3.2.2 In the event the Transfer does not take place
on or before the Transfer Date because of fault of ANG and there
being no material adverse change in the Assets or Inertial
Operation, this Agreement is null and void and ANG agrees that
(a) LCS shall retain any Earnest Money deposit pertaining to this
Agreement, and (b) LCS retains all legal title to, and
unencumbered ownership of, the Assets.
3.3 Conditional Transfer - The parties specifically agree
that no transfer, conveyance, assignment, or sale of Assets, as
contemplated under this Agreement, take place on the Effective
Date of Agreement. The parties specifically agree that all
transfer, conveyance, assignment or sale of Assets, as
contemplated under this Agreement, will only take place in the
event of the Transfer.
3.4 Due Diligence - As a condition of the Transfer, ANG
shall have completed its normal due diligence to its
satisfaction, including: (a) a detailed review of the Inertial
Operation operations, (b) review of all contracts, orders and
arrangements pursuant to which the Inertial Operation operates,
(c) consent be obtained from any and all third parties whose
consent is necessary for the transfer of any material asset,
tangible or intangible, of the Inertial Operation or the
assignment of any material contractual rights of the Inertial
Operation, (d) compliance with any and all regulatory
requirements or consents, (e) ANG being satisfied with
information that comes to its attention as a result of its review
of the books and records, contracts, commitments, and of
environmental matters of the Inertial Operation, (f) there shall
have been no material adverse change in the business, assets,
operations, working capital or financial condition of the
Inertial Operation from the information furnished to ANG until
the Transfer, (g) there shall be no transactions outside of the
ordinary course of business, and (h) ANG's Board of Director
approval.
3.5 ANG's Obligations - On the Transfer Date, in addition
to any other documents specifically required to be delivered or
acts required to be performed by ANG pursuant to this Agreement,
ANG will deliver to LCS, at ANG's expense, in proper form for
recording (if recording thereof is required):
3.5.1 by wire transfer the portion of the Purchase
Price to LCS's bank account set forth in Section 2.2.2;
3.5.2 a certificate of goods standing under the
laws of the State of New Hampshire;
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3.5.3 all other documents and agreements required
hereunder to be delivered by ANG as a condition to Transfer.
3.6 LCS's Obligations - On the Transfer Date, in addition
to any other documents specifically required to be delivered or
acts required to be performed by LCS pursuant to this agreement,
LCS will deliver to ANG, at LCS's expense, in proper form for
recording (if recording is required):
3.6.1 a fully executed Bill of Sale for the
Equipment and Inventories in the form appended as Exhibit 3.6.1;
3.6.2 a fully executed Assignment in the form
appended as Exhibit 3.6.2 conveying and assigning to ANG all of
LCS's right, title and interest in an to the assigned contracts
and personal property leases;
3.6.3 executed Assignment(s) of the Intellectual
Property Rights in the form appended as Exhibit 3.6.3;
3.6.4 a certificate of good standing under the laws
of the Commonwealth of Virginia;
3.6.5 evidence satisfactory to ANG of the material
consents, approvals and waivers required for the consummation of
the transactions contemplated hereby, as set forth in Schedule
4.1.19 attached;
3.6.6 all other documents and agreements required
to be delivered by LCS as a condition to Transfer.
3.7 Additional Obligations - The parties agree to the
following:
3.7.1 Transfer Taxes - All transfer or sales taxes
payable to the State of New Hampshire as a result of the
consummation of the transactions contemplated and required by
this Agreement shall be paid by ANG. All transfer or sales taxes
payable to the Commonwealth of Virginia as a result of the
consummation of the transactions contemplated and required by
this Agreement shall be paid by LCS.
3.7.2 Expenses - Each party will be solely
responsible for any and all of their respective costs, fees and
expenses, including without limitation, expenses of legal
counsel, brokers, accountants and other advisors, incurred at any
time in connection with consummating this transaction.
3.8 Distributor Arrangement - It is agreed that LCS will be
a distributor for ANG of the Inertial Operation's low volume
products per the attached agreement (Schedule 3.8) for a period
of two (2) years from the date of Transfer. Renewal at the end
of the two (2) year period of the distributor agreement would be
by mutual agreement of the parties.
3.9 Transition Plan - LCS will provide ANG with thirty (30)
days of free rent and utilities attributable to the Inertial
Operation product line directly post-Closing with respect tot he
facility currently housing the Inertial Operation product line
(located at 1000 Lucas Way, Hampton, Virginia). After the
initial thirty (30) day period, LCS will charge ANG Five Thousand
Dollars ($5,000.00) for each subsequent thirty day period for
which ANG occupies the current facility and charge ANG for any
additional services requested such as ISIT and clerical support.
It is anticipated that the transition period (during which ANG
shall have the right to use such current facility) will be two
(2) months with one (1) month successive extensions as mutually
agreed between the parties based on U.S. Government contract
novation requirements - the one month extensions, if necessary,
are limited to the extent that the total transition period
(including free rent or rent-paying portions) will not exceed six
(6) months. During the time of such occupancy, ANG must have
adequate insurance to cover all risk of loss or damage to
personnel or ANG assets or equipment located in the current
facility.
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4. Representations and Warranties
4.1 Representations and Warranties of LCS - LCS hereby
makes the following representations and warranties to ANG as of
the date hereof:
4.1.1 Corporate Organization - LCS is a corporation
duly organized and validly existing and in good standing under
the laws of the Commonwealth of Virginia.
4.1.2 Authority - LCS has full power and authority
(corporate and other) to execute, deliver and perform this
Agreement and the transactions contemplated hereby, and the
execution, delivery and performance of this Agreement has been
duly authorized and approved by all necessary corporate action,
and this Agreement constitutes a valid and binding agreement of
LCS.
4.1.3 No Conflict - LCS's execution and delivery of
this Agreement and performance of its obligations hereunder (a)
are not in violation or breach of, and will not conflict with or
constitute a default under, any of the terms of the certificate
of incorporation or by-laws or other governing documents of LCS
or any note, debt instrument, security agreement, lease, deed of
trust or mortgage, or any other contract, agreement or commitment
binding upon LCS or affecting any of the Assets, and (b) will not
conflict with or violate any applicable law, rule, regulation,
judgment, order or decree of any government, governmental
instrumentality or court having jurisdiction over LCS, or any of
the Assets.
4.1.4 Title to the Assets - LCS has and will
transfer to ANG good and marketable title to the Assets, free
and clear of all mortgages, leases, agreements, restrictions,
security interests, pledges, liens or encumbrances of any kind,
or any conditional sale agreement or other title retention
agreement.
4.1.5 Conduct of the Inertial Operation - The
Assets constitute all material assets used in the Inertial
Operation as presently conducted, and such Assets are sufficient
to carry on the Inertial Operation as presently conducted.
4.1.6 Valid Contracts and Leases - Each of the
Assigned Contracts and Personal Property Leases is, and will
continue to be following consummation of the transactions
contemplated by this Agreement, legal, valid, binding,
enforceable, and in full force and effect. Neither LCS nor any
other party is in default under any of the foregoing, and LCS has
not assigned any of its rights thereunder to any person or
entity. LCS has delivered to ANG true and complete copies of the
Assigned Contracts and Personal Property Leases.
4.1.7 Financial Statements - The financial
statements as set forth in Schedule 4.1.7 have been prepared in
accordance with generally accepted accounting principles applied
on a consistent basis throughout the periods covered thereby,
present fairly the financial condition of the Inertial Operation
as of such dates and the results of operations of the Inertial
Operation for such periods, are correct and complete, and are
consistent with the books and records of the Inertial Operation
(which are correct and complete).
4.1.8 Events Subsequent to Most Recent Fiscal Year
- - - Since 31 January, 1998, there has not been any material adverse
change in the Inertial Operation or in any of the information
given to ANG by LCS to perform ANG's Due Diligence.
4.1.9 Legal Compliance - LCS has complied with all
laws, rules, and regulations of federal, state, local and foreign
governments (and all agencies thereof) applicable to the Inertial
Operation, and no action, suit, proceeding, hearing,
investigation, charge, or complaint has been filed or commenced
against LCS alleging any failure to comply therewith.
4.1.10 Taxes - LCS has filed all tax returns and
paid all taxes due and owing by it, and acknowledges
responsibility for all such returns and taxes, and all accrued
taxes not yet due and owing, through Transfer.
4.1.11 Intellectual Property - LCS has validly
obtained and duly owns the Intellectual Property Rights, which
comprise the rights to all intellectual property necessary for
the conduct of the Inertial Operation. All licenses,
sublicenses, agreements or permissions creating any such rights
are legal, valid, binding, enforceable, and in full force and
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effect, and will continue to be so on identical terms following
the consummation of the transactions contemplated by this
Agreement, except as otherwise expressly agreed by the Parties.
LCS has not assigned or transferred any of the Intellectual
Property Rights, whether by way of license, sublicense, agreement
or otherwise, and has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any
intellectual property rights of third parties, and will not do so
as a result of the continued operation of the Inertial Operation
as presently conducted. None of the stockholders, directors or
officers (or employees with responsibility for intellectual
property matters) of LCS has ever received any charge, complaint,
claim, demand, or notice alleging any such interference,
infringement, misappropriation or violation. To the knowledge of
any director or officer (or employee with responsibility for
intellectual property matters) of LCS, no third party has
interfered with, infringed upon, misappropriated, or otherwise
come into conflict with any Intellectual Property Rights.
4.1.12 Tangible Assets - LCS owns or leases all of
the Equipment, as set forth in Schedule 1.2.1(a), which
constitutes all of the machinery, equipment, tools, fixtures and
other tangible personal property necessary for the conduct of
Inertial Operation. Each such tangible asset is free form
defects, has been maintained in accordance with normal industry
practice, is in good operating condition and repair (subject to
normal wear and tear), and is suitable for the purposes for which
it is presently used.
4.1.13 Inventory - The Inventories, as set forth in
Schedule 1.2.2, consist of all raw materials, operating supplies,
component parts, replacement and spare parts, work in process and
finished goods used in or related to the Inertial Operation, all
of which is merchantable and fit for the purposes for which it
was procured or manufactured, and none of which is damaged or
defective.
4.1.14 Litigation - LCS is not subject to any
outstanding injunction, judgment, decree, order, ruling or
charge, and is neither a party to any action, suite, proceeding,
hearing, or investigation of, in or before any court or quasi-
judicial or administrative agency of any federal, state, local or
foreign jurisdiction, or before any arbitrator, which could
result in any material adverse change in the business, financial
condition, operations, results of operations, or future business
prospects of the Inertial Operation, except as disclosed in
Schedule 4.1.14.
4.1.15 Environmental, Health and Safety Matters -
LCS has complied with, and is in compliance with, all
environmental, health and safety requirements under federal,
state and local laws and regulations, and has not received any
written or oral notice, report, or other information regarding
any actual or alleged violation of such requirements, or any
liabilities or potential liabilities thereunder. LCS has obtained
and complied with, and is in compliance with, all permits,
licenses, and other authorizations that are required pursuant to
such laws and regulations for the operation of its facilities and
the Inertial Operation.
4.1.16 Virginia Bulk Sales Act - The transfer of the
Assets by LCS to ANG pursuant to this Agreement will not
constitute a bulk sale under the laws of the Commonwealth of
Virginia.
4.1.17 Notification of Facility Closure - The
transfer of the Assets by LCS to ANG, and the subsequent removal
of the Assets from LCS's facility at 1000 Lucas Way, Hampton,
Virginia, will not trigger application of any law, rule or
regulation (such as the federal WARN Act or similar state law)
requiring advance notification to the employees of LCS who are
employed in the Inertial Operation.
4.1.18 Labor and Employment Matters - No employee of
LCS whose services are or have been used in the Inertial
Operation (an "Employee") is covered by a collective bargaining
agreement. LCS has not made any promise or representation to any
Employee with respect to continued employment in the Inertial
Operation following the Transfer.
4.1.19 Material Consents - No material consents,
approvals or waivers from any third party or governmental agency,
or otherwise, are required in order to transfer the Assets
pursuant to this Agreement, except for such consents, approvals
and waivers set forth in Schedule 4.1.19 attached.
4.1.20 Advisor Fees - W. Y. Campbell Company has
been retained by LCS as its advisor in the sale of the Assets.
The payment of any commission or any other fee due to W. Y.
Campbell & Company upon consummation of the transaction
contemplated by this Agreement shall be the sole responsibility
of LCS. LCS further represents and warrants that no other
broker, advisor or finder has been involved with this
transaction.
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4.1.21 Projections - All projections and proforma
financial and other information used in or to compile any
projections or business plans provided by LCS are based on good
faith estimates and assumptions by the management of LCS, it
being recognized by ANG that projections to future events are not
to be viewed as fact and that actual results during the periods
covered by any such projections will differ from the projected
results, and the differences may be material.
4.1.22 Accuracy of Statements - To the best
knowledge of LCS, no representations or warranty made by LCS in
this Agreement or any schedule or other agreement to be furnished
to ANG pursuant to this Agreement contains any untrue statements
of a material fact or omits to state a material fact necessary to
make the statements not misleading.
4.2 Representations and Warranties of ANG - ANG hereby
makes the following representations and warranties to LCS as of
the date hereof:
4.2.1 Corporation Organization - ANG is a
corporation duly organized, validly existing and in good standing
under the laws of the State of New Hampshire.
4.2.2 Authority - ANG has full power and authority
(corporate and other) to execute, deliver and perform this
Agreement and the transaction contemplated hereby, and the
execution, delivery and performance of this Agreement has been
duly authorized and approved by all necessary corporate action,
and this Agreement constitutes a valid and binding Agreement of
ANG.
4.2.3 No Conflict - ANG's execution and delivery of
this Agreement and performance of its obligations hereunder (a)
are not in violation or breach of, and will not conflict with or
constitute a default under, any of the terms of the certificate
of incorporation or by-laws or other governing documents of ANG
or any note, debt instrument, security agreement, lease, deed of
trust or mortgage, or any other contract, agreement or commitment
binding upon ANG or affecting any of the Assets, and (b) will not
conflict with or violate any applicable law, rule, regulation,
judgment, order or decree of any government, governmental
instrumentality or court having jurisdiction over ANG, or any of
the Assets.
4.2.4 Broker's Fees - No investment banker, broker,
finder or other intermediary has been retained by or is
authorized to act on behalf of ANG who might be entitled to any
fee or commission upon consummation of the transaction
contemplated by this Agreement.
4.2.5 ANG's Capacity - ANG has the financial and
other capacity necessary to satisfy its obligations under this
Agreement, and any other documents and instruments to be executed
and delivered pursuant hereto and to consummate the transactions
contemplated hereby.
4.2.6 Accuracy of Statements - To the best
knowledge of ANG, no representations or warranty made by ANG in
this Agreement or any schedule or agreement to be furnished
herewith contains or will contain any untrue statement of a
material fact or omits or will omit a material fact necessary to
make the statements not misleading. The representations and
warranties of ANG shall be deemed to be made as of the Transfer
Date.
4.2.7 Reliance - ANG has conducted an independent
inquiry of the Inertial Operation. ANG has relied on the results
of such inquiry (for which LCS does not bear any responsibility)
and the representations and warranties of LCS contained in this
Section, including the Schedules relating thereto. The
representations and warranties of LCS contained herein constitute
the sole and exclusive representations and warranties of LCS to
ANG in connection with this Agreement and the transactions
contemplated hereby and ANG acknowledges that all other
representations and warranties are specifically disclaimed and
may not be relied upon or serve as a basis for a claim against
LCS.
5. Covenants
5.1 Confidentiality - Both LCS and ANG shall use all
reasonable efforts to preserve the confidentiality of all
proprietary or confidential information obtained with respect to
the other party hereto or the Inertial Operation; provided that
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this Section 5.1 shall not apply to any information to the extent
that (a) the disclosure of such information to a third party is
reasonably required in connection with the fulfillment of a
party's obligations under this Agreement, and such third party
shall enter into an agreement to keep such information
confidential, (b) such information shall become generally known
to the public through no violation of Sections 5.2 of this
Agreement, (c) such information was known to the disclosing party
prior to its receipt from the other party to this Agreement;
provided, however, that LCS will not disclose such information
after the Transfer on such basis, (d) the disclosure of such
information is required by a court of competent jurisdiction or
by law, or (e) any disclosures that ANG may elect to make after
the Transfer about the Assets.
5.2 Public Disclosure - Before the Transfer neither party
will make any public release of information or otherwise
communicate with any third party regarding the matters
contemplated herein without the prior written consent of the
other party, which consent shall not be unreasonably withheld;
provided, however, that either party may make disclosures to the
extent necessary to obtain the consents and approvals needed to
consummate the Purchase or as otherwise required by law.
5.3 Injunctive Relief - LCS and ANG acknowledge and agree
that the remedy at law for any breach of any of their respective
obligations under Sections 5.1 and 5.2 hereof would be
inadequate, and agree and consent that temporary and permanent
injunctive relief may be granted in a proceeding which may be
brought to enforce any provision of Sections 5.1 and 5.2 without
the necessity of proof of actual damage.
5.4 Third Party Consents - Prior to the Transfer both LCS
and ANG shall use all reasonable efforts to obtain the
agreements, authorizations, consents, orders and approvals of
federal, state and local regulatory bodies and officials, courts
and other third parties that may be or become necessary for the
performance of their respective obligations pursuant to this
Agreement and the consummation of the transactions contemplated
by this Agreement and shall cooperate fully with each other in
seeking promptly to obtain such agreements, authorizations,
consents, orders and approvals as may be necessary for the
performance of their respective obligations pursuant to this
Agreement. Neither LCS nor ANG shall take any action that is
likely to have the effect of delaying, impairing or impeding the
receipt of any required agreements or approvals and shall use all
reasonable efforts to secure such agreements or approvals as
promptly as possible.
5.5 Cooperation and Reasonable Access - LCS and ANG shall
fully cooperate with one another and shall provide to each other
any assistance reasonably required to complete the transactions
contemplated by this Agreement. LCS will permit representatives
of ANG to have reasonable access to all premises, properties,
books, records (including tax records), contracts, and documents
of or pertaining to the Inertial Operation for a period no longer
than sixty (60) days after Transfer.
5.6 Ordinary Course - From the Effective Date until the
Transfer Date, LCS will not engage in any practice, take any
action, or enter into any transaction outside the ordinary course
of business with respect to the Inertial Operation, or conduct
the Inertial Operation in such manner as to cause a material
adverse change in the Inertial Operation, or the financial
condition, operations, results of operations, or future business
prospects of LCS.
5.7 Further Action - ANG and LCS shall execute such other
documents and take such further action, at or after the Transfer,
as may be reasonably required or desirable to carry out the
provisions of this Agreement and the transactions contemplated by
this Agreement. Upon the terms an subject to the conditions of
this Agreement, ANG and LCS shall take, or cause to be taken, all
actions and to do, or cause to be done, all other things
necessary, proper or advisable to consummate and make effective
as promptly as practicable the transactions contemplated by this
Agreement, to satisfy the conditions to this Agreement and to
obtain in a timely manner all necessary waivers, consents and
approvals and to effect all necessary registrations and filings
(including such transfer documents as may be necessary to
complete the transfer of Assets to ANG).
5.8 Product Returns and Adjustments - ANG shall assume all
obligations under written or implied warranties to repair or
replace defective products which were sold by LCS prior to the
date hereof up to the agreed amount of Twenty Thousand Dollars
($20,000.00). If ANG incurs direct material and labor costs in
excess of such agreed amount, ANG's right of reimbursement shall
be subject to the indemnification procedures set forth in Section
6. ANG shall have all obligations under written or implied
warranties to repair or replace defective products which are sold
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after the date hereof, right of reimbursement shall be subject to
the indemnification procedures set forth in Section 6. ANG shall
have all obligations under written or implied warranties to
repair or replace defective products which are sold after the
date hereof, and ANG shall indemnify and hold LCS harmless with
respect thereto under the indemnification procedures set forth in
Section 6.
5.9 Products Liability - LCS shall retain all liability
including personal injury and property damage (whether based on
"strict liability" laws or otherwise), arising out of or in
connection with any products manufactured by LCS prior to or
after the Transfer Date, and LCS shall indemnify and hold ANG
harmless with respect thereto. ANG shall have all liability
including personal injury and property damage (whether based on
"strict liability" or otherwise), arising out of or in connection
with any products manufactured by ANG after the Transfer Date,
and ANG shall indemnify and hold LCS harmless with respect
thereto.
5.10 LCS Non-Solicitation - With the exception of LCS acting
as a distributor for ANG under a Distributor Agreement, LCS
agrees, for a period of three (3) years following the Transfer
Date, not to solicit any third-party customers of ANG who
purchased Schaevitz-branded inertial product line applications
from LCS. LCS shall be restricted from soliciting the business
of such third party customers only for the sale of products that
are in direct competition with the products ("Competing
Products") defined in Section 5.11.1 below.
5.11 LCS Non-Compete - With the exception of LCS acting as a
distributor for ANG under a Distribution Agreement, for a period
of three (3) years following the Transfer Date, LCS agrees not to
sell within Mexico, Canada or the United States (such 3 countries
to be known as "North America") products which directly compete
with the Competing Products, however, both parties that LCS is
not prevented from selling such Competing Products within
territories outside of North America.
5.11.1 Competing Products consist of accelerometers
and inclinometers utilizing a mechanical pivot and jewel torquer
in their construction.
5.11.1.1 Competing Products do not consist of packaged
and un-packaged silicon based accelerometers and inclinometers as
currently manufactured by the LCS affiliated company, Lucas
NovaSensor, Inc., or as may be manufactured by Lucas NovaSensor,
Inc. in the future. These products will only be sold in
quantities in excess of 1000 units per year and are not aimed at
the markets currently served by the inertial products being
purchased by ANG.
5.12 Injunctive Relief - LCS acknowledges and agrees that
the restrictions contained in Sections 5.10 and 5.11 are
reasonable in scope and that any breach of such sections will
cause irreparable injury to ANG. Upon any breach or threatened
breach of such Sections, ANG shall be entitled to injunctive
relief, specific performance or other equitable relief, provided,
however, that this shall not limit any other remedies to which
ANG may in such instance be entitled, including the right to seek
monetary damages.
5.13 Non-solicitation of Employees - For a term of two (2)
years after Transfer, LCS hereby agrees not to solicit for
employment any current employees of LCS who are offered and
accept employment by ANG.
6. Damages and Indemnification
6.1 Indemnity by LCS - LCS shall defend, indemnify, and
hold harmless ANG and ANG's affiliates, and their respective
directors, officers, employees, shareholders, representatives,
and agents, against and with respect to any and all losses,
costs, damages, assessments, administrative fines or penalties,
liabilities, obligations, claims or expenses (including
reasonable professional fees and similar expenses) (collectively,
the "Losses") from, resulting by reason of or arising in
connection with (a) any and all liabilities of LCS of any nature,
whether accrued, absolute, contingent or otherwise, (b) any
inaccuracy in or breach of any of the representations, covenants,
warranties or agreements made or to be performed by LCS pursuant
to this Agreement or under any of the other certificates,
agreements or other documents delivered by LCS in connection
herewith or any breach thereof arising from a claim asserted by a
third party, or (c) the conduct of the Inertial Operation prior
to the Transfer Date. Without limiting the generality of the
foregoing, LCS shall defend, indemnify and hold harmless ANG from
and against the Retained Liabilities and any and all liabilities
imposed upon ANG resulting from LCS's non-compliance with any
applicable bulk sales law or employee notification requirement.
6.2 Indemnity by ANG - ANG shall defend, indemnify, and
hold harmless LCS and LCS's affiliates, and their respective
directors, officers, employees, shareholders, representatives,
and agents, against and with respect to any and all losses,
costs, damages, assessments, administrative fines or penalties,
liabilities, obligations, claims or expenses, (including
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reasonable professional fees and similar expenses) (collectively,
the "Losses") from, resulting by reason of or arising in
connection with (a) any inaccuracy in or breach of any of the
representations, covenants, warranties or agreements made or
other documents delivered by ANG in connection herewith or any
breach thereof arising from a claim asserted by a third party,
(b) any claim or demand made or liability asserted against LCS
due to ANG's failure or alleged failure to pay, perform or
discharge any obligations of ANG under this Agreement, or (c) the
conduct of the Inertial Operation after the Transfer Date.
6.3 Indemnification Notice - The party seeking
indemnification under this Section 6 agrees to give prompt notice
to the party against whom indemnity may be sought (the
"Indemnifying Party") of the assertion of any claim or the
commencement of any suit, action or proceeding in respect of
which indemnity may be sought under this Section; provided,
however, that in the event such notice is not given or is delayed
and the Indemnifying Party is not prejudiced thereby, the
Indemnified Party's rights hereunder shall not be affected. The
Indemnifying Party shall have the right at its own expense, to
control the defense and the Indemnifying Party shall not settle
the matter without the consent of the Indemnified Party, which
consent shall not be unreasonably withheld. The Indemnified Party
shall have the right to participate in such defense by notice to
the Indemnifying Party. If upon the Indemnifying Party's
consent, the Indemnified Party assumes such defense, the
Indemnified Party shall not settle the matter without the consent
of the Indemnifying Party, which consent shall not be
unreasonably withheld.
6.4 Indemnification Threshold - The Indemnifying Party
shall not have any obligation to the Indemnified Party under
Sections 6.1 and 6.2 unless the aggregate cumulative total of all
losses incurred by the Indemnified Party exceeds Fifty Thousand
Dollars ($50,000.00), whereupon the Indemnified Party shall be
entitled to indemnification for such Losses, but only to the
extent that the aggregate cumulative total of such Losses exceeds
Fifty Thousand Dollars ($50,000.00).
7. Miscellaneous
7.1 Assignment - This Agreement shall not be assignable by
either party, except upon written consent of the other party.
7.2 Notices - All notices, approvals or other notifications
required or permitted to be sent by one party to other party
hereunder shall be in writing and shall be deemed served upon the
other party if delivered by recognized overnight courier service,
or sent by registered or certified mail, postage prepaid,
addressed to such other party at the address set forth below, or,
the last address of such party as shall have been communicated to
the other party:
If to LCS: Lucas Automation & Control
Engineering, Inc.
1000 Lucas Way
Hampton, Virginia 23666
Attention: Robert Davies
with a copy to: Dr. Neal H. Seymour, Esquire
Lucas Control Systems
1000 Lucas Way
Hampton, VA 23666
If to ANG: Allard Nazarian Group, Inc.
124 Joliette Street
Manchester, NH 03102
Attention: John R. Allard
with a copy to: Richard A. Samuels, Esquire
McLane, Graf, Raulerson & Middleton,
P.A.
900 Elm Street
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<PAGE>
P.O. Box 326
Manchester, NH 03105-0326
7.3 Survival of Representations and Warranties - The
representations and warranties contained herein or in any
schedule or other document attached hereto shall be deemed
representations and warranties of the party by whom or on whose
behalf the same are delivered and all representations and
warranties made by such party to this Agreement shall survive
the Transfer for a period not to exceed one (1) year with the
exception of Sections 4.1.4, 4.1.6, 4.1.8, 4.1.11, 4.1.12,
4.1.15, and 4.1.19 which shall survive the Transfer for a period
not to exceed two (2) years.
7.4 Severability - If, for any reason, any provision of
this Agreement shall be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any of the other provisions of
this Agreement, but this Agreement shall be construed as if such
invalid, illegal or unenforceable provision had never been
contained herein.
7.5 Governing Law - This Agreement shall be construed and
enforced in accordance with and governed by the laws of the
Commonwealth of Virginia, except where the laws of some other
jurisdictions mandatorily apply.
7.6 Entire Agreement - This Agreement together with the
Exhibits and Schedules hereto, embodies the entire agreement and
understanding between the parties hereto and supersede all prior
agreements and understandings relating to the subject matter
hereof.
7.7 Waiver - Neither this Agreement nor any terms hereof
may be changed, waived, discharged or terminated orally, but only
by an instrument in writing signed by the party against which
enforcement of such change, waiver, modification, discharge or
termination is sought. No waiver of any right or remedy in
respect of any occurrence or event on any other occasion unless
specifically provided for in writing executed by the party to be
so bound.
7.8 Headings - The headings in this Agreement are for
purposes of reference only, and shall not limit or otherwise
affect the meaning thereof.
7.9 Execution - This Agreement may be executed
simultaneously in several counterparts, each of which shall be
deemed an original, but all of which together shall constitute
one and the same instrument.
7.10 Interpretation and Agreement Preparation - The parties
hereto agree that this Agreement is the product of negotiations
between sophisticated parties and individuals, all of whom were
represented by counsel, and each of whom had an opportunity to
participate in, and did participate in, the drafting of each
provision hereof. Accordingly, ambiguities in this Agreement, if
any, shall not be construed strictly or in favor of or against
any party hereto but rather shall be given a fair and reasonable
construction.
7.11 Consents - Whenever the terms of this Agreement require
the consent of a party be provided, unless this Agreement
stipulates otherwise, such consent shall not be unreasonably
withheld.
7.12 Arbitration - Any dispute arising out of this Agreement
or the transactions contemplated hereby shall be settled by
arbitration before a single arbitrator in accordance with the
Commercial Arbitration Rules of the American Arbitration
Association in the Washington, D.C. metropolitan area and
judgment upon the award rendered by the arbitrator may be entered
in any court having jurisdiction thereof. The parties
acknowledge that time is of the essence in connection with
resolving any dispute and that the parties will cooperate with
each other to promptly arbitrate any such matters. The
arbitrator shall award the prevailing party all costs, attorney
fees, and other out-of-pocket expenses relating to the dispute
incurred by such party.
7.13 Successors and Assigns - Subject to Section 7.1 hereof,
this Agreement shall be binding upon and inure to the benefit of
the successors and permitted assigns of each of the parties.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year last below
written.
WITNESS: Lucas Automation & Control
Engineering, Inc.
By: /s/ Robert J. Davies
--------------------
Name: Robert J. Davies
Title: President
Date: Date: 07/30/98
WITNESS: Allard Nazarian Group, Inc.
By: /s/ John R. Allard
-------------------
Name: John R. Allard
Title: Chief Executive Officer
Date: Date: 07/30/98
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<PAGE>
Exhibit 10.26
CREDIT AGREEMENT
Dated as of August 3, 1998
among
WPI GROUP, INC., WPI ELECTRONICS, INC.
WPI MAGNETEC, INC., WPI MICRO PALM, INC.,
WPI POWER SYSTEMS, INC., WPI OYSTER TERMIFLEX, INC.
WPI MICRO PROCESSOR SYSTEMS, INC.,
WPI DECISIONKEY, INC., WPI UK HOLDING, INC.
WPI UK HOLDING, II, INC., WPI OYSTER TERMINALS, INC.,
WPI HUSKY COMPUTERS, INC., AND WPI INSTRUMENTS,, INC.
as Borrowers,
THE LENDERS SIGNATORY HERETO
FROM TIME TO TIME,
as Lenders,
and
FLEET BANK - NH
as Agent and Lender
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<PAGE>
TABLE OF CONTENTS
1. AMOUNT AND TERMS OF CREDIT 2
1.1 CREDIT FACILITIES 2
1.2 PREPAYMENTS 7
1.3 USE OF PROCEEDS 9
1.4 INTEREST AND APPLICABLE MARGINS 9
1.5 ELIGIBLE ACCOUNTS 12
1.6 ELIGIBLE INVENTORY 14
1.7 CASH MANAGEMENT SYSTEMS 15
1.8 FEES 15
1.9 RECEIPT OF PAYMENTS 15
1.10 APPLICATION AND ALLOCATION OF PAYMENTS 16
1.11 LOAN ACCOUNT AND ACCOUNTING 16
1.12 INDEMNITY 17
1.13 ACCESS 18
1.14 TAXES 18
1.15 CAPITAL ADEQUACY; INCREASED COSTS: ILLEGALLY 19
1.16 SINGLE LOAN 20
2. CONDITIONS PRECEDENT 21
2.1 CONDITIONS TO THE INITIAL LOANS 21
2.2 FURTHER CONDITIONS TO EACH LOAN 21
3. REPRESENTATIONS AND WARRANTIES 22
3.1 CORPORATE EXISTENCE; COMPLIANCE WITH LAW 22
3.2 EXECUTIVE OFFICES; FEIN 23
3.3 CORPORATE POWER, AUTHORIZATION, ENFORCEABLE
OBLIGATIONS 23
3.4 FINANCIAL STATEMENTS AND PROJECTIONS 23
3.5 MATERIAL ADVERSE EFFECT 24
3.6 OWNERSHIP OF PROPERTY: LIENS 25
3.7 LABOR MATTERS 25
3.8 VENTURES, SUBSIDIARIES AND AFFILIATES: OUTSTANDING
STOCK AND INDEBTEDNESS 26
3.9 GOVERNMENTAL REGULATION 26
3.10 MARGIN REGULATIONS 26
3.11 TAXES 26
3.12 ERISA 27
3.13 NO LITIGATION 28
3.14 BROKERS 28
3.15 INTELLECTUAL PROPERTY 28
3.16 FULL DISCLOSURE 28
3.17 ENVIRONMENTAL MATTERS 29
3.18 INSURANCE 29
3.19 DEPOSIT AND DISBURSEMENT ACCOUNTS 30
3.20 GOVERNMENT CONTRACTS 30
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<PAGE>
3.21 CUSTOMER AND TRADE RELATIONS 30
3.22 AGREEMENTS AND OTHER DOCUMENTS 30
3.23 SOLVENCY 30
3.24 ACQUISITION AGREEMENT 31
4. FINANCIAL SATEMENTS AND INFORMATION 31
4.1 REPORTS AND NOTICES 31
4.2 COMMUNICATION WITH ACCOUNTANTS 31
5. AFFIRMATIVE COVENANTS 32
5.1 MAINTENANCE OF EXISTENCE AND CONDUCT OF BUSINESS 32
5.2 PAYMENT OF OBLIGATIONS 32
5.3 BOOKS AND RECORDS 33
5.4 INSURANCE: DAMAGE TO OR DESTRUCTION OF COLLATERAL 33
5.5 COMPLIANCE WITH LAWS 34
5.6 SUPPLEMENTAL DISCLOSURE 34
5.7 INTELLECTUAL PROPERTY 35
5.8 ENVIRONMENTAL MATTERS 35
5.9 LANDLORDS' AGREEMENTS, MORTGAGEE AGREEMENTS AND
BAILEE LETTERS 36
5.10 FURTHER ASSURANCES 36
5.11 YEAR 2000 36
6. NEGATIVE COVENANTS 37
6.1 MERGERS, SUBSIDIARIES, ETC. 37
6.2 INVESTMENTS: LOANS AND ADVANCES 37
6.3 INDEBTEDNESS 38
6.4 EMPLOYEE LOANS AND AFFILIATE TRANSACTIONS 38
6.5 CAPITAL STRUCTURE AND BUSINESS 39
6.6 GUARANTEED INDEBTEDNESS 39
6.7 LIENS 39
6.8 SALE OF STOCK AND ASSETS 40
6.9 ERISA 40
6.10 FINANCIAL COVENANTS 40
6.11 HAZARDOUS MATERIALS 40
6.12 SALE-LEASEBACKS 40
6.13 CANCELLATION OF INDEBTEDNESS 41
6.14 RESTRICTED PAYMENTS 41
6.15 CHANGE OF CORPORATE NAME OR LOCATION; CHAGE OF
FISCAL YEAR 41
6.16 NO IMPAIRMENT OF INTERCOMPANY TRANSFERS 41
6.17 NO SPECULATIVE TRANSACTIONS 41
6.18 LEASES 42
7. TERM 42
7.1 TERMINATION 42
7.2 SURVIVAL OF OBLIGATIONS UPON TERMINATION OF
FINANCING ARRANGEMENTS 42
8. EVENTS OF DEFAULT: RIGHTS AND REMEDIES 42
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<PAGE>
8.1 EVENTS OF DEFAULT 42
8.2 REMEDIES 44
8.3 WAIVERS BY BORROWERS 45
9. ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT 45
9.1 ASSIGNMENT AND PARTICIPATIONS 45
9.2 APPOINTMENT OF AGENT 47
9.3 AGENT'S RELANCE, ETC. 48
9.4 FLEET BANK - NH AND AFFILIATES 48
9.5 LENDER CREDIT DECISION 49
9.6 INDEMNIFICATION 49
9.7 SUCCESSOR AGENT 49
9.8 SETOFF AND SHARING OF PAYMENTS 50
9.9 ADVANCES; PAYMENTS; NON-FUNDING LENDERS;
INFORMATION; ACTIONS IN CONCERT 51
10. SUCCESSORS AND ASSIGNS 53
10.1 SUCCESSORS AND ASSIGNS 53
11. MISCELLANEOUS 53
11.1 COMPLETE AGREEMENT: MODIFICATION OF AGREEMENT 53
11.2 AMENDMENTS AND WAIVERS 53
11.3 FEES AND EXPENSES 55
11.4 NO WAIVER 57
11.5 REMEDIES 57
11.6 SEVERABILITY 57
11.7 CONFLICT OF TERMS 57
11.8 CONFIDENTIALITY 57
11.9 GOVERNING LAW 58
11.10 NOTICES 59
11.11 SECTION TITLES 59
11.12 COUNTERPARTS 59
11.13 WAIVER OF JURY TRIAL 59
11.14 REINSTATEMENT 60
11.15 ADVICE OF COUNSEL 60
11.16 NO STRICT CONSTRUCTION 60
11.17. JOINT AND SEVERAL OBLIGATIONS 61
12. INTEREST RATE HEDGING 61
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<PAGE>
THIS CREDIT AGREEMENT, dated as of August 3, 1998, is among
WPI GROUP, INC. (the "Parent"), and its wholly owned subsidiaries
WPI Electronics, Inc. ("WPI EI"), WPI MAGNETEC, INC. ("WPI MI"),
WPI MICRO PALM, INC. ("WPI Palm"), WPI POWER SYSTEMS, INC. ("WPI
Power") , WPI OYSTER TERMIFLEX, INC. ("WPI TI"), WPI MICRO
PROCESSOR SYSTEMS, INC. ("WPI Processor"), WPI DECISIONKEY, INC
("WPI DK"), WPI UK HOLDING, INC. ("WPI UK"), WPI UK HOLDING II,
Inc. ("WPI UK II"), WPI OYSTER TERMINALS, INC. ("WPI OTI"), WPI
INSTRUMENTS, INC. ("WPI INSTRUMENTS"), each a New Hampshire
corporation (WPI EI, WPI MI, WPI Palm, WPI Power, WPI TI, WPI
Processor, WPI DK, WPI UK, WPI UKII, WPI OTI, and WPI INSTRUMENTS
collectively, the "NH Subsidiaries") and WPI HUSKY COMPUTERS,
INC., a Florida corporation ("Husky"), all such corporations
having their chief executive offices at 1155 Elm Street,
Manchester, New Hampshire 03101 (the Parent, the NH Subsidiaries
and Husky are hereinafter referred to individually as a
"Borrower" and collectively as the "Borrowers"), and FLEET BANK -
NH, a bank organized under the laws of the State of New Hampshire
with a principal place of business at Mail Stop NHNA E02A, 1155
Elm Street, Manchester, New Hampshire, 03101, for itself, as
Lender, and as Agent for Lenders, and the other Lenders signatory
hereto from time to time.
RECITALS
WHEREAS, the Borrowers, other than WPI INSTRUMENTS, (the
"Existing Borrowers") and Agent are parties to an Amended and
Restated Commercial Loan Agreement dated as of December 26, 1997
(the "Current Credit Agreement") pursuant to which the Agent
provided to the Existing Borrowers a revolving loan commitment of
$30,000,000 and a term loan of $15,000,000 (the "Current Credit
Facilities");
WHEREAS, the Existing Borrowers desire that the Current
Credit Facilities be replaced and superseded by the Commitments
set forth herein;
WHEREAS, (a) the Borrowers desire that the Lenders extend
(i) a revolving credit facility to Borrowers of up to Twenty
Million Dollars ($20,000,000) to refinance borrowings under the
revolving line of credit included in the Current Credit
Facilities and to continue to provide working capital financing
to the Borrowers and (ii) two (2) term loans (identified herein
as Term Loans A and B) in the amounts of Thirty Million Dollars
($30,000.000) and Twenty Five Million Dollars ($25,000,000),
respectively, to refinance the term loan included in the Current
Credit Facilities, fund a portion of the acquisition cost of the
assets of WPI Instruments (the "Acquisition") incurred pursuant
to the Purchase and Sale Agreement dated as of July 31, 1998 (the
"Acquisition Agreement") between Parent and Allard-Nazarian
Group, Inc., Modutec, Inc. and A&M Instrument, Inc.
(collectively, the "Seller"), and support capital expenditures
and future acquisitions, and (b) Lenders are willing to make
certain loans and other extensions of credit to Borrowers of up
to such amount upon the terms and conditions set forth herein;
WHEREAS, Borrowers desire to secure all of their obligations
under the Loan Documents by (a) granting to Agent, for the
benefit of Agent and Lenders, a security interest in and mortgage
or other lien upon all of their existing and after-acquired
assets (including real estate), (b) pledge to the Agent, for the
benefit of the Agent and Lenders, all of the capital stock of the
Borrowers, other than the capital stock of the Parent which is
publicly owned, and 65% of the Parent's foreign subsidiaries,
namely WPI Group (U.K.), a private unlimited company organized
under the laws of England and Wales ("WPI G-UK"), WPI Oyster-
Termiflex Limited, a corporation organized under the laws of
England and Wales ("WPI OTL"), WPI Husky Computers Limited, a
corporation organized under the laws of the United Kingdom ("WPI
HCL") and Modutec (Barbados) Limited, a corporation organized
under the laws of Barbados ("MBL") ( WPI G-UK, WPI OTL, WPI HCL
and MBL are referred to collectively as the "Foreign
Subsidiaries") and (c) pledge to the Agent, for the benefit of
Agent and the Lenders, the intercompany demand notes made payable
by any of the Foreign Subsidiaries to any Borrower o by any
Borrower to any other Borrower; and
WHEREAS, capitalized terms used in this Agreement shall have
the meanings ascribed to them in Annex A. All Annexes,
Disclosure Schedules, Exhibits and other attachments
(collectively, "Appendices") hereto, or expressly identified to
this Agreement, are incorporated herein by reference, and taken
together, shall constitute but a single agreement. These
Recitals shall be construed as part of the Agreement;
NOW THEREFORE, in consideration of the premises and the
mutual covenants contained herein, and for other good and
valuable consideration, the parties hereto agree as follows:
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<PAGE>
1. AMOUNT AND TERMS OF CREDIT
1.1. Credit Facilities.
(a) Revolving Credit Facility. (i) Subject to the terms and
conditions hereof, each Revolving Lender agrees to make available
from time to time until the Commitment Termination Date its Pro
Rata Share of advances (each, a "Revolving Credit Advance"). The
Pro Rata Share of the Revolving Loan of any Revolving Lender
shall not at any time exceed its separate Revolving Loan
Commitment. The obligations of each Revolving Lender hereunder
shall be several and not joint. The aggregate amount of Revolving
Credit Advances outstanding shall not exceed at any time the
lesser of (A) the Maximum Amount and (B) the Borrowing Base, in
each case less the amount of the Swing Line Loan outstanding at
such time ("Borrowing Availability"). Until the Commitment
Termination Date, Borrowers may from time to time borrow, repay
and reborrow under this Section 1.1 (a). Each Revolving Credit
Advance shall be made either pursuant (a) to the Agent's Cash
Management System (Index Rate Loans only) or (b) on notice by
Borrower Representative on behalf of the Borrowers to the
representative of Agent identified on Schedule 1.1 at the address
specified thereon. Those notices must be given no later than (1)
12:00 p.m. (Manchester, New Hampshire time) on the Business Day
of the proposed Revolving Credit Advance, in the case of an Index
Rate Loan, or (2) 11:00 a.m. (Manchester, New Hampshire time) on
the date which is two (2) Business Days prior to the proposed
Revolving Credit Advance, in the case of a LIBOR Loan. Each such
notice (a "Notice of Revolving Credit Advance") must be given in
writing (by telecopy or overnight courier) substantially in the
form of Exhibit 1.1 (a)(i), and shall include the information
required in such Exhibit and such other information as may be
required by Agent. If any Borrower desires to have the Revolving
Credit Advances bear interest by reference to a LIBOR Rate,
Borrower Representative must comply with Section 1.4(e).
(ii) The Borrowers shall execute and deliver to each
Revolving Lender a note to evidence the Revolving Loan Commitment
of that Revolving Lender. Each note shall be in the principal amount of
the Revolving Loan Commitment of the applicable Revolving Lender,
dated the Closing Date and substantially in the form of Exhibit
l.l(a)(ii) (each a "Revolving Note" and, collectively, the
"Revolving Notes"). Each Revolving Note shall represent the joint
and several obligation of each Borrower to pay the amount of each
Revolving Lender's Revolving Loan Commitment or, if less, the
applicable Revolving Lender's Pro Rata Share of the aggregate
unpaid principal amount of all Revolving Credit Advances to such
Borrower together with interest thereon as prescribed in Section
1.4. The entire unpaid balance of the aggregate Revolving Loan
and all other non-contingent Obligations shall be immediately due
and payable in full in immediately available funds on the
Commitment Termination Date.
(b) Term Loan A. (i) Subject to the terms and conditions
hereof, each Term A Lender agrees to make a term loan on the
Closing Date to the Borrowers in the original principal amount of
its Term Loan A Commitment (the "Term Loan A"). The obligations
of each Term A Lender hereunder shall be several and not joint.
Term Loan A shall be evidenced by promissory notes substantially
in the form of Exhibit 1.1 (b)(i) (each a "Term A Note" and
collectively the "Term A Notes"), and the Borrowers shall execute
and deliver a separate Term A Note to each Term A Lender in the
original amount of each Lender's Term Loan A Commitment. Each
Term A Note shall represent the joint and several obligation of
the Borrowers to pay the applicable Term A Lender's Term Loan A
Commitment, together with interest thereon as prescribed in
Section 1.4. Notwithstanding the foregoing, Term Loan A shall
constitute a re-finance of the existing term loan to the Existing
Borrowers under the Current Credit Facilities having a principal
balance of $15,000,000 as of the Closing Date, and the Term A
Lenders shall only be required to advance additional funds in
respect of the Term Loan A Commitment in the aggregate amount of
$15,000,000.
(ii) (A) The Borrowers shall repay the principal amount of
the Term Loan A in twenty (20) consecutive quarterly installments
due on the last day of December, March, June and September of
each year, commencing December 31, 1998, as follows:
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<PAGE>
Payment Date Scheduled Installment
Amount
12/31/98, 3/31/99, 6/30/99, and $750,000.00 each
9/30/99
12/31/99, 3/31/00, 6/30/00 and $1,125,000.00 each
9/30/00
12/31/00, 3/31/01, 6/30/01 and $1,500,000.00 each
9/30/01
12/31/01, 3/31/02, 6/30/02 and $1,875,000.00 each
9/30/02
12/31/02, 3/31/03, 6/30/03, and $2,250,000.00 each
9/30/03
(iii) Notwithstanding the foregoing clause (ii), the
aggregate outstanding principal balance of Term Loan A shall be
due and payable in full in immediately available funds on the
Commitment Termination Date, if not sooner paid in full.
(iv) Each payment of principal with respect to the Term
Loan A shall be paid to Agent for the ratable benefit of each
Term A Lender making or holding Term Loan A, ratably in
proportion to each such Term A Lender's respective Term Loan A
Commitment.
(c) Term Loan B. (i) Subject to the terms and conditions
hereof, each Term B Lender agrees to make a term loan on the
Closing Date to the Borrowers in the original principal amount of
its Term Loan B Commitment (the "Term Loan B"). The obligations
of each Term B Lender hereunder shall be several and not joint.
Term Loan B shall be evidenced by promissory notes substantially
in the form of Exhibit 1.1 (c)(i) (each a "Term B Note" and
collectively the "Term B Notes"), and the Borrowers shall execute
and deliver a separate Term B Note to each Term B Lender in the
original amount of each Lender's Term Loan B Commitment. Each
Term B Note shall represent the joint and several obligation of
the Borrowers to pay the applicable Term B Lender's Term Loan B
Commitment, together with interest thereon as prescribed in
Section 1.4.
(ii) The Borrowers shall repay the principal amount of the
Term Loan B in twenty-four (24) consecutive quarterly
installments, due on the last day of December, March, June, and
September of each year commencing on December 31, 1998 (each such
date a "Term Loan B Payment Date"), as follows:
Payment Date Scheduled Installment Amount
12/31/98 and each Term Loan B $62,500.00
Payment Date thereafter up to and
including 9/30/03
12/31/03 and each Term Loan B $5,937,500.00
Payment Date thereafter up to and
including 9/30/04
(iii) Notwithstanding the foregoing clause (ii), the
aggregate outstanding principal balance of Term Loan B shall be
due and payable in full in immediately available funds on the
Commitment Termination Date, if not sooner paid in full.
(iv) Each payment of principal with respect to Term Loan B
shall be paid to Agent for the ratable benefit of each Term
Lender making or holding Term Loan B ratably in proportion to
each Term B Lender's respective Term Loan B Commitment.
(d) Swing Line Facility. (i) Agent shall notify the Swing
Line Lender upon Agent's receipt of any Notice of Revolving
Credit Advance. Subject to the terms and conditions hereof, the
Swing Line Lender may, in its discretion, make available from
time to time until the Commitment Termination Date advances
(each, a "Swing Line Advance") in accordance with any such notice
or pursuant to Agent's Cash Management System. The aggregate
amount of Swing Line Advances outstanding shall not exceed the
lesser of (A) the Swing Line Commitment and (B) the Borrowing
Base less the outstanding balance of the Revolving Loan at such
time ("Swing Line Availability"). Until the Commitment
Termination Date, Borrowers may from time to time borrow, repay
and reborrow under this Section 1.1 (d). Each Swing Line Advance
shall be made pursuant to a Notice of Revolving Credit Advance
delivered to Agent by Borrower Representative on behalf of the
applicable Borrower in accordance with Section 1.1 (a). Those
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<PAGE>
notices must be given no later than 12:00 p.m. (Manchester, New
Hampshire time) on the Business Day of the proposed Swing Line
Advance. Notwithstanding any other provision of this Agreement
or the other Loan Documents, the Swing Line Loan shall constitute
an Index Rate Loan. Borrowers shall repay the aggregate
outstanding principal amount of the Swing Line Loan upon demand
therefor by Agent.
(ii) The Borrowers shall execute and deliver to the Swing
Line Lender a promissory note to evidence the Swing Line
Commitment. Such note shall be in the principal amount of the
Swing Line Commitment of the Swing Line Lender, dated the Closing
Date and substantially in the form of Exhibit 1.1 (d)(ii) (the
"Swing Line Note"). The Swing Line Note shall represent the joint
and several obligation of the Borrowers to pay the amount of the
Swing Line Commitment or, if less, the aggregate unpaid principal
amount of all Swing Line Advances together with interest thereon
as prescribed in Section 1.4. The entire unpaid balance of the
Swing Line Loan and all other non-contingent Obligations shall be
immediately due and payable in full in immediately available
funds on the Commitment Termination Date if not sooner paid in
full.
(iii) Refunding of Swing Line Loans. The Swing Line Lender,
at any time and from time to time in its sole and absolute
discretion, shall on behalf of the Borrowers (and each Borrower
hereby irrevocably authorizes the Swing Line Lender to so act on
its behalf) request each Revolving Lender (including the Swing
Line Lender) to make a Revolving Credit Advance to the Borrowers
(which shall be an Index Rate Loan) in an amount equal to such
Revolving Lender's Pro Rata Share of the principal amount of the
Swing Line Loan (the "Refunded Swing Line Loan") outstanding on
the date such notice is given. Unless any of the events described
in Sections 8.1 (h) or 8.1 (i) shall have occurred (in which
event the procedures of Section 1.1 (d)(iv) shall apply), and
regardless of whether the conditions precedent set forth in this
Agreement to the making of a Revolving Credit Advance are then
satisfied, each Revolving Lender shall disburse directly to
Agent, such Revolving Lender's Pro Rata Share of a Revolving
Credit Advance on behalf of the Swing Line Lender, prior to 2:00
p.m. (Manchester, New Hampshire time), in immediately available
funds on the Business Day next succeeding the date such notice is
given. The proceeds of such Revolving Credit Advances shall be
immediately paid to the Swing Line Lender and applied to repay
the Refunded Swing Line Loan of the applicable Borrower.
(iv) Participation in Swing Line Loans. If, prior to
refunding a Swing Line Loan with a Revolving Credit Advance
pursuant to Section l.l(d)(iii), one of the events described in
Sections 8.1(h) or 8.1(i) shall have occurred, then, subject to
the provisions of Section 1.1 (d)(v) below, each Revolving Lender
will, on the date such Revolving Credit Advance was to have been
made, purchase from the Swing Line Lender an undivided
participation interest in the Swing Line Loan in an amount equal
to its Pro Rata Share of such Swing Line Loan. Upon request, each
Revolving Lender will promptly transfer to the Swing Line Lender,
in immediately available funds, the amount of its participation
and upon receipt thereof the Swing Line Lender will deliver to
such Revolving Lender a certificate evidencing such
participation, dated the date of receipt of such funds and in
such amount.
(v) Revolving Lenders' Obligations Unconditional. Each
Revolving Lender's obligation to make Revolving Credit Advances
in accordance with Section 1.1 (d)(iii) and to purchase
participating interests in accordance with Section 1.1 (d)(iv)
shall be absolute and unconditional and shall not be affected by
any circumstance, including (A) any setoff, counterclaim,
recoupment, defense or other right which such Revolving Lender
may have against the Swing Line Lender, any Borrower or any other
Person for any reason whatsoever; (B) the occurrence or
continuance of any Default or Event of Default; (C) any inability
of any Borrower to satisfy the conditions precedent to borrowing
set forth in this Agreement on the date upon which such
participating interest is to be purchased, or (D) any other
circumstance, happening or event whatsoever, whether or not
similar to any of the foregoing. If any Revolving Lender does not
make available to Agent or the Swing Line Lender, as applicable,
the amount required pursuant to Section 1.1 (d)(iii) or 1.1
(d)(iv), as the case may be, the Swing Line Lender shall be
entitled to recover such amount on demand from such Revolving
Lender, together with interest thereon for each day from the date
of nonpayment until such amount is paid in full at the Federal
Funds Rate for the first two Business Days and at the Index Rate
thereafter.
(e) Reliance on Notices: Appointment of Borrower
Representative. Agent shall be entitled to rely upon, and shall
be fully protected in relying upon, any Notice of Revolving
Credit Advance, Notice of Conversion/Continuation or similar
notice believed by Agent to be genuine. Agent may assume that
each Person executing and delivering such a notice was duly
authorized, unless the responsible individual acting thereon for
Agent has actual knowledge to the contrary. Each Borrower hereby
designates Parent as its representative and agent on its behalf
for the purposes of issuing Notices of Revolving Credit Advances.
Notices of Swing Line Advances and Notices of
Conversion/Continuation, giving instructions with respect to the
disbursement of the proceeds of the Loans, selecting interest
rate options, requesting Letters of Credit, giving and receiving
all other notices and consents hereunder or under any of the
other Loan Documents and taking all other actions (including in
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respect of compliance with covenants) on behalf of any Borrower
or Borrowers under the Loan Documents. Borrower Representative
hereby accepts such appointment. Agent and each Lender may regard
any notice or other communication pursuant to any Loan Document
from Borrower Representative as a notice or communication from
all Borrowers, and may give any notice or communication required
or permitted to be given to any Borrower or Borrowers hereunder
to Borrower Representative on behalf of such Borrower or
Borrowers. Each Borrower agrees that each notice, election,
representation and warranty, covenant, agreement and undertaking
made on its behalf by Borrower Representative shall be deemed for
all purposes to have been made by such Borrower and shall be
binding upon and enforceable against such Borrower to the same
extent as if the same had been made directly by such Borrower.
1.2. Prepayments.
(a) Voluntary Prepayments. Borrowers may at any time on at
least five (5) days' prior written notice by Borrower
Representative to Agent voluntarily prepay all or part of the
Term Loans; provided that any such prepayments or reductions
shall be in a minimum amount of $1,000,000 and integral multiples
of $250,000 in excess of such amount. In addition, Borrowers may
at any time on at least ten (10) days' prior written notice by
Borrower Representative to Agent terminate the Revolving Loan
Commitment; provided that upon such termination, all Loans and
other Obligations shall be immediately due and payable in full.
Any such voluntary prepayment and any such termination of the
Revolving Loan Commitment must be accompanied by the payment of
any LIBOR funding breakage costs in accordance with Section
1.12(b). Upon any such prepayment and termination of the
Revolving Loan Commitment, each Borrower's right to request
Revolving Credit Advances, or request Swing Line Advances, shall
simultaneously be terminated. Any partial prepayments of the Term
Loans shall be applied to prepay the scheduled installments of
the Term Loans, ratably, in inverse order of maturity.
(b) Mandatory Prepayments. (i) If at any time the
outstanding balance of the aggregate Revolving Loan exceeds the
lesser of (A) the Maximum Amount and (B) the Borrowing Base,
less, in each case, the aggregate outstanding Swing Line Loan at
such time, Borrowers shall immediately repay the aggregate
outstanding Revolving Credit Advances to the extent required to
eliminate such excess.
(ii) Immediately upon receipt by any Borrower of proceeds of
any asset disposition(including condemnation proceeds, but
excluding proceeds of asset dispositions permitted by Section 6.8
(a), (b), and (c)), Borrowers shall prepay the Loans within three
(3) Business Days of receipt of such proceeds in an amount equal
to such proceeds, net of (A) commissions and other reasonable and
customary transaction costs, fees and expenses properly
attributable to such transaction and payable by Borrowers in
connection therewith (in each case, paid to non-Affiliates), (B)
transfer taxes, (C) amounts payable to holders of senior Liens
(to the extent such Liens constitute Permitted Encumbrances
hereunder), if any, and (D) an appropriate reserve for income
taxes in accordance with GAAP in connection therewith. Any such
prepayment shall be applied in accordance with clause (c) below.
(iii) If Parent issues Stock, no later that the Business Day
following the date of receipt of proceeds thereof, Parent shall
prepay the Loans in an amount equal to the proceeds thereof, net
of underwriting discounts and commissions and other reasonable
costs, fees and expenses paid to Non-Affiliates in connection
therewith, but only to the extent such net proceeds, together
with the proceeds from any other issuances of Stock during the
then current Fiscal Year, exceed $1,000,000.
(iv) Until the Termination Date, Borrowers shall prepay the
Obligations on the earlier of the date which is three (3)
Business Days after (A) the date on which Borrowers' annual
audited Financial Statements for the immediately preceding Fiscal
Year commencing with Fiscal Year 1999 are delivered pursuant to
Annex C or (B) the date on which such annual audited Financial
Statements were required to be delivered pursuant to Annex C,
each such prepayment to be in an amount equal to seventy-five
percent (75%) of Excess Cash Flow for the immediately preceding
Fiscal Year. Each such prepayment shall be accompanied by a
certificate signed by Borrower Representative's chief financial
officer certifying the calculation of Excess Cash Flow, and
setting forth the resulting prepayment, and the method of
allocation to each Borrower's Obligations and accompanied by
reasonable supporting detail, which certificate shall be in form
and substance satisfactory to Agent.
(c) Application of Certain Mandatory Prepayments. Any
prepayments made by Borrowers pursuant to clauses (b)(ii),
(b)(iii), or (b)(iv) above shall be applied as follows: first, to
Fees and reimbursable expenses of Agent then due and payable
pursuant to any of the Loan Documents; second, to interest then
due and payable on the Term Loans; third, to prepay the scheduled
installments of the Borrowers' Term Loans, ratably in inverse
order of maturity, until such Term Loans shall have been prepaid
in full, provided that if the prepayment is made pursuant to
clause (b)(ii) any Term Loan B Lender may elect to allocate his
portion of the prepayment entirely to Term Loan A; fourth, to
interest then due and payable on such Borrower's Swing Line Loan;
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fifth, to the principal balance of the Swing Line Loan
outstanding to such Borrower until the same shall have been
repaid in full; sixth, to interest then due and payable on
Revolving Credit Advances made to such Borrower; and seventh, to
the principal balance of Revolving Credit Advances outstanding to
such Borrower until the same shall have been paid in full.
Neither the Revolving Loan Commitment nor the Swing Line
Commitment shall be permanently reduced by the amount of any such
prepayment.
(d) Application of Prepayments from Insurance Proceeds.
Prepayments from insurance proceeds in accordance with Section
5.4(c) shall be applied as follows: insurance proceeds from
casualties or losses to cash or Inventory shall be applied first
to the Swing Line Loans and second to the Revolving Credit
Advances; insurance proceeds from casualties or losses to
Equipment, Fixtures and Real Estate shall be applied ratably to
scheduled installments of the Term Loans in inverse order of
maturity. Neither the Revolving Loan Commitment nor the Swing
Line Loan Commitment shall be permanently reduced by the amount
of any such prepayments. If the precise amount of insurance
proceeds allocable to Inventory as compared to Equipment,
Fixtures and Real Estate are not otherwise determined, the
allocation and application of those proceeds shall be determined
by Agent, subject to the approval of Requisite Lenders.
(e) Nothing in this Section 1.2 shall be construed to
constitute Agent's or any Lender's consent to any transaction
referred to in clauses (b)(ii) and (b)(iii) above which is not
permitted by other provisions of this Agreement or the other Loan
Documents.
1.3. Use of Proceeds.
Borrowers shall utilize the proceeds of the Term Loans, the
Revolving Loan and the Swing Line Advances solely for the
Acquisition (and to pay any related transaction expenses), to
refinance the Current Credit Facilities, and for the financing of
Borrowers' ordinary working capital needs and future acquisitions
(but excluding in any event the making of any Restricted Payment
not specifically permitted by Section 6. 14). Disclosure Schedule
(1.3) contains a description of Borrowers' sources and uses of
funds as of the Closing Date, including Loans to be made or
incurred on that date.
1.4. Interest and Applicable Margins.
(a) Borrowers shall pay interest to Agent, for the ratable
benefit of Lenders in accordance with the various Loans being
made by each Lender, in arrears on each applicable Interest
Payment Date, at the following rates: (i) with respect to the
Revolving Credit Advances, the Index Rate plus the Applicable
Revolver Index Margin per annum or, at the election of Borrower
Representative, the applicable LIBOR Rate plus the Applicable
Revolver LIBOR Margin per annum, based on the aggregate Revolving
Credit Advances outstanding from time to time; (ii) with respect
to Term Loan A, the Index Rate plus the Applicable Term Loan A
Index Margin per annum or, at the election of Borrower
Representative, the applicable LIBOR Rate plus the Applicable
Term Loan A LIBOR Margin per annum; (iii) with respect to Term
Loan B. the Index Rate plus the Applicable Term Loan B Index
Margin per annum or, at the election of Borrower Representative,
the applicable LIBOR Rate plus the Applicable Term Loan B Margin;
and (iv) with respect to the Swing Line Loan, the Index Rate plus
the Applicable Revolver Index Margin per annum.
As of the Closing Date, the Applicable Margins shall be as
follows:
Applicable Revolver Index Margin 1.25%
Applicable Revolver LIBOR Margin 2.50%
Applicable Term Loan A Index Margin 1.25%
Applicable Term Loan A LIBOR Margin 2.50%
Applicable Term Loan B Index Margin 1.75%
Applicable Term Loan B LIBOR Margin 3.00%
Applicable Unused Line Fee Margin 0.50%
The Applicable Margins will be adjusted (up or down)
prospectively on a quarterly basis as determined by Borrowers'
Ratio of Total Debt to EBITDA, commencing with the first day of
the first calendar month that occurs more than five (5) days
after delivery of Borrowers' unaudited Financial Statements to
Lenders for the Fiscal Quarter ending March 31, 1999.
Adjustments in Applicable Margins will be determined by reference
to the following grids:
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Total Debt/If EBITDA Level of
Ratio is: Applicable Margins:
4.0 Level I
3.5, but < 4.0 Level II
3.0, but < 3.5 Level III
2.5, but < 3.0 Level IV
< 2.5 Level V
Applicable Margins
Level Level Level Level Level
I II III IV V
Applicable Revolver 1.25% 1.00% 0.75% 0.50% 0.25%
Index Margin
Applicable Revolver LIBOR 2.50% 2.25% 2.0% 1.75% 1.50%
Margin
Applicable Term Loan A 1.25% 1.00% 0.75% 0.50% 0.25%
Index Margin
Applicable Term Loan A 2.50% 2.25% 2.0% 1.75% 1.50%
LIBOR Margin
Applicable Term Loan B 1.75% 1.50% 1.25% 1.25% 1.0%
Index Margin
Applicable Term Loan B 3.0% 2.75% 2.50% 2.50% 2.25%
LIBOR Margin
Applicable Unused Line Fee 0.50% 0.50% 0.50% 0.375% 0.375%
Margin
All adjustments in the Applicable Margins after the Fiscal
Quarter ending March 31, 1999 will be implemented quarterly on a
prospective basis, for each calendar month commencing at least
five (5) days after the date of delivery to Lenders of the
quarterly unaudited or annual audited (as applicable) Financial
Statements of Borrowers evidencing the need for an adjustment.
Concurrently with the delivery of those Financial Statements,
Borrower Representative shall deliver to Agent and Lenders a
certificate, signed by its chief financial officer, setting forth
in reasonable detail the basis for the continuance of, or any
change in, the Applicable Margins. Failure to timely deliver
such Financial Statements shall, in addition to any other remedy
provided for in this Agreement, result in an increase in the
Applicable Margins to the highest level set forth in the
foregoing grid, until the first day of the first calendar month
following the delivery of those Financial Statements
demonstrating that such an increase is not required. If a Default
or Event of Default shall have occurred or be continuing at the
time any reduction in the Applicable Margins is to be
implemented, that reduction shall be deferred until the first day
of the first calendar month following the date on which such
Default or Event of Default is waived or cured.
(b) If any payment on any Loan becomes due and payable on a
day other than a Business Day, the maturity thereof will be
extended to the next succeeding Business Day (except as set forth
in the definition of LIBOR Period) and, with respect to payments
of principal, interest thereon shall be payable at the then
applicable rate during such extension.
(c) All computations of Fees calculated on a per annum basis
and interest shall be made by Agent on the basis of a three
hundred and sixty-five (365) day year (three hundred sixty (360)
day year in the case of LIBOR Loans), in each case for the
actual number of days occurring in the period for which such
interest and Fees are payable. The Index Rate shall be determined
each day based upon the Index Rate as in effect each day. Each
determination by Agent of an interest rate hereunder shall be
conclusive, absent manifest error.
(d) So long as any Event of Default shall have occurred and
be continuing, and at the election of Agent (or upon the written
request of Requisite Lenders) confirmed by written notice from
Agent to Borrower Representative, the interest rates applicable
to the Loans shall be increased by two percentage points (2%) per
annum above the rates of interest or the rate of such Fees
otherwise applicable hereunder ("Default Rate"), and all
outstanding Obligations shall bear interest at the Default Rate
applicable to such Obligations. Interest at the Default Rate
shall accrue from the initial date of such Event of Default until
that Event of Default is cured or waived and shall be payable
upon demand. Borrowers shall pay, upon billing therefor, a "Late
Charge" equal to five percent (5%) of the amount of any payment
of principal, other than principal due at the Commitment
Termination Date, interest, or both, which is not paid within ten
(10) days of the due date thereof. Late charges are: (i)
payable in addition to, and not in limitation of, the Default
Rate, (ii) intended to compensate Bank for administrative and
processing costs incident to late payments, (iii) are not
interest, and (iv) shall not be subject to refund or rebate or
credited against any other amount due.
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(e) So long as no Default or Event of Default shall have
occurred and be continuing, and subject to the additional
conditions precedent set forth in Section 2.2, Borrower
Representative shall have the option to (i) request that any
Revolving Credit Advances be made as a LIBOR Loan, (ii) convert
at any time all or any part of outstanding Loans (other than the
Swing Line Loan) from Index Rate Loans to LIBOR Loans, (iii)
convert any LIBOR Loan to an Index Rate Loan, subject to payment
of LIBOR breakage costs in accordance with Section 1.12(b) if
such conversion is made prior to the expiration of the LIBOR
Period applicable thereto, or (iv) continue all or any portion of
any Loan (other than the Swing Line Loan) as a LIBOR Loan upon
the expiration of the applicable LIBOR Period and the succeeding
LIBOR Period of that continued Loan shall commence on the last
day of the LIBOR Period of the Loan to be continued. Any Loan to
be made or continued as, or converted into, a LIBOR Loan must be
in a minimum amount of $1,000,000 and integral multiples of
$500,000 in excess of such amount. Any such election must be made
by 11:00 a.m. (Manchester, New Hampshire time) on the second
(2nd) Business Day prior to (1) the date of any proposed Advance
which is to bear interest at the LIBOR Rate, (2) the end of each
LIBOR Period with respect to any LIBOR Loans to be continued as
such, or (3) the date on which Borrower Representative wishes to
convert any Index Rate Loan to a LIBOR Loan for a LIBOR Period
designated by Borrower Representative in such election. If no
election is received with respect to a LIBOR Loan by 11:00 a.m.
(Manchester, New Hampshire time) on the second (2nd) Business Day
prior to the end of the LIBOR Period with respect thereto (or if
a Default or an Event of Default shall have occurred and be
continuing or if the additional conditions precedent set forth in
Section 2.2 shall not have been satisfied), that LIBOR Loan shall
be converted to an Index Rate Loan at the end of its LIBOR
Period. Borrower Representative must make such election by notice
to Agent in writing, by telecopy or overnight courier. In the
case of any conversion or continuation, such election must be
made pursuant to a written notice (a "Notice of
Conversion/Continuation") in the form of Exhibit 1.4(e).
(f) Notwithstanding anything to the contrary set forth in
this Section 1.4, if a court of competent jurisdiction determines
in a final order that the rate of interest payable hereunder
exceeds the highest rate of interest permissible under law (the
"Maximum Lawful Rate"), then so long as the Maximum Lawful Rate
would be so exceeded, the rate of interest payable hereunder
shall be equal to the Maximum Lawful Rate; provided, however,
that if at any time thereafter the rate of interest payable
hereunder is less than the Maximum Lawful Rate, Borrowers shall
continue to pay interest hereunder at the Maximum Lawful Rate
until such time as the total interest received by Agent, on
behalf of Lenders, is equal to the total interest which would
have been received had the interest rate payable hereunder been
(but for the operation of this paragraph) the interest rate
payable since the Closing Date as otherwise provided in this
Agreement. Thereafter, interest hereunder shall be paid at the
rate(s) of interest and in the manner provided in Sections 1.4(a)
through (e) above, unless and until the rate of interest again
exceeds the Maximum Lawful Rate, and at that time this paragraph
shall again apply. In no event shall the total interest received
by any Lender pursuant to the terms hereof exceed the amount
which such Lender could lawfully have received had the interest
due hereunder been calculated for the full term hereof at the
Maximum Lawful Rate. If the Maximum Lawful Rate is calculated
pursuant to this paragraph, such interest shall be calculated at
a daily rate equal to the Maximum Lawful Rate divided by the
number of days in the year in which such calculation is made. If,
notwithstanding the provisions of this Section 1.4(f), a court of
competent jurisdiction shall finally determine that a Lender has
received interest hereunder in excess of the Maximum Lawful Rate,
Agent shall, to the extent permitted by applicable law, promptly
apply such excess in the order specified in Section 1.10 and
thereafter shall refund any excess to Borrowers or as a court of
competent jurisdiction may otherwise order.
1.5. Eligible Accounts.
Based on the most recent Borrowing Base Certificate
delivered by the Borrowers to Agent and on other information
available to Agent, Agent shall in its reasonable credit judgment
determine which Accounts shall be "Eligible Accounts" for
purposes of this Agreement. In determining whether a particular
Account of any Borrower (as used in this Section as well as in
Section 1.6, the term "Borrower" shall include Foreign
Subsidiaries) constitutes an Eligible Account, Agent shall not
include any such Account to which any of the exclusionary
criteria set forth below applies. Agent reserves the right, at
any time and from time to time after the Closing Date, to adjust
any such criteria, to establish new criteria in its reasonable
credit judgment with respect to circumstances arising after the
Closing Date (to the extent practicable under the circumstances,
Agent shall provide prior notice to Borrowers of any such
adjustment). Eligible Accounts shall not include any Account of
any Borrower:
(a) which does not arise from the sale of goods or the
performance of services by such Borrower in the ordinary course
of its business;
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(b) upon which (i) such Borrower's right to receive payment
is not absolute or is contingent upon the fulfillment of any
condition whatsoever or (ii) such Borrower is not able to bring
suit or otherwise enforce its remedies against the Account Debtor
through judicial process or binding arbitration;
(c) to the extent any defense, counterclaim, credit, setoff
or dispute is asserted as to such Account or if the Account
represents a progress billing consisting of an invoice for goods
sold or used or services rendered pursuant to a contract under
which the Account Debtor's obligation to pay that invoice is
subject to such Borrower's completion of further performance
under such contract;
(d) that is not a true and correct statement of bona fide
indebtedness or obligations incurred in the amount of the Account
for merchandise sold to or services rendered and accepted by the
applicable Account Debtor;
(e) with respect to which an electronic or paper invoice,
acceptable to Agent in form and substance, has not been sent to
the applicable Account Debtor;
(f) that (i) is not owned by such Borrower or (ii) is
subject to any right, claim, security interest or other interest
of any other Person, other than Liens in favor of Agent, on
behalf of itself and Lenders;
(g) that arises from a sale to any director, officer, other
employee or Affiliate of any Borrower, or to any entity (other
than a public company or an affiliate of a public company) which
has any common officer or director with any Borrower;
(h) that is the obligation of an Account Debtor that is the
United States government or a political subdivision thereof, or
any state or municipality or department, agency or
instrumentality thereof unless Agent, in its sole discretion, has
agreed to the contrary in writing and such Borrower, if necessary
or desirable, has complied with the Federal Assignment of Claims
Act of 1940, and any amendments thereto, or any applicable state
statute or municipal ordinance of similar purpose and effect,
with respect to such obligation;
(i) to the extent such Borrower or any Subsidiary thereof is
liable for goods sold or services rendered by the applicable
Account Debtor to such Borrower or any Subsidiary thereof but
only to the extent of the potential offset;
(j) that arises with respect to goods which are delivered on
a bill and hold, cash-on-delivery basis or placed on consignment,
guaranteed sale or other terms by reason of which the payment by
the Account Debtor is or may be conditional;
(k) that is in default; provided, that, without limiting the
generality of the foregoing, an Account shall be deemed in
default upon the occurrence of any of the following:
(i) it is not paid within the earlier of: sixty (60) days
following its due date;
(ii) if any Account Debtor obligated upon such Account
suspends business, makes a general assignment for the benefit of
creditors or fails to pay its debts generally as they come due;
or
(iii) if any petition is filed by or against any Account
Debtor obligated upon such Account under any bankruptcy law or
any other federal, state or foreign (including any provincial)
receivership, insolvency relief or other law or laws for the
relief of debtors;
(l) which is the obligation of an Account Debtor if the
applicable Borrower has placed that Account Debtor on a
cash-on-delivery status or fifty percent (50%) or more of the
dollar amount of all Accounts owing by that Account Debtor are
ineligible under the other criteria set forth in this Section
1.5;
(m) as to which any of the representations or warranties
pertaining to Accounts set forth in this Agreement or the
Security Agreement is untrue; or
(n) to the extent such Account is evidenced by a judgment,
Instrument or Chattel Paper.
1.6. Eligible Inventory.
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Based on the most recent Borrowing Base Certificate
delivered by the Borrowers to Agent and on other information
available to Agent, Agent shall in its reasonable credit judgment
determine which Inventory of each Borrower shall be "Eligible
Inventory" for purposes of this Agreement. In determining whether
any particular Inventory of any Borrower constitutes Eligible
Inventory, Agent shall not include any such Inventory to which
any of the exclusionary criteria set forth below applies. Agent
reserves the right, at any time and from time to time after the
Closing Date, to adjust any such criteria, to establish new
criteria in its reasonable credit judgment with respect to
circumstances arising after the Closing Date (to the extent
practicable under the circumstances, Agent shall provide prior
notice to Borrowers of any such adjustment), subject to the
approval in the case of adjustments or new criteria which have
the effect of making more credit available. Eligible Inventory
shall not include any Inventory of any Borrower:
(a) that is not owned by such Borrower free and clear of all
Liens and rights of any other Person (including the rights of a
purchaser that has made progress payments and the rights of a
surety that has issued a bond to assure such Borrower's
performance with respect to that Inventory), except the Liens in
favor of Agent, on behalf of itself and Lenders and Permitted
Encumbrances in favor of landlords and bailees to the extent
permitted in Section 5.9 and subject to Reserves;
(b) that is covered by a negotiable document of title,
unless such document has been delivered to Agent;
(c) that in Agent's reasonable determination, is obsolete,
unsalable, shopworn, seconds, damaged or unfit for sale;
(d) that consists of goods which have been returned by the
buyer;
(e) that is not of a type held for sale in the ordinary
course of such Borrower's business;
(f) as to which any of the representations or warranties
pertaining to Inventory set forth in this Agreement or the
Security Agreement is untrue;
(g) that consists of Hazardous Materials or goods that can
be transported or sold only with licenses that are not readily
available; or
(h) that is not covered by casualty insurance acceptable to
Agent.
1.7. Cash Management Systems.
Borrowers confirm their election to continue to use the cash
management systems currently in place with Agent (the "Cash
Management Systems").
1.8. Fees.
(a) Borrowers shall pay to Fleet Bank - NH, individually,
the Fees specified in that certain fee letter dated July 30, 1998
among Borrowers and Fleet Bank - NH (the "Fleet Fee Letter"), at
the times specified for payment therein.
(b) As additional compensation for the Revolving Lenders,
Borrowers agree to pay to Agent, for the ratable benefit of such
Lenders, in arrears, on the first Business Day of each month
prior to the Commitment Termination Date and on the Commitment
Termination Date, a fee for Borrowers' non-use of available funds
in an amount equal to the Applicable Unused Line Fee Margin per
annum (calculated on the basis of a 360 day year for actual days
elapsed) of the difference between (x) the Maximum Amount (as it
may be reduced from time to time) and (y) the average for the
period of the daily closing balances of the aggregate Revolving
Loan and the Swing Line Loan outstanding during the period for
which such fee is due.
1.9. Receipt of Payments.
Borrowers shall make each payment under this Agreement not
later than 2:00 p.m. (Manchester, New Hampshire time) on the day
when due in immediately available funds in Dollars to the Agent
unless Agent has automatically debited such payments against
Borrower's account(s) with Agent. For purposes of computing
interest and Fees and determining Borrowing Availability or Net
Borrowing Availability as of any date, all payments shall be
deemed received on the day of receipt of immediately available
funds therefor in the Collection Account prior to 2:00 p.m.
Manchester, New Hampshire time. Payments received after 2:00 p.m.
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Manchester, New Hampshire time on any Business Day shall be
deemed to have been received on the following Business Day.
1.10. Application and Allocation of Payments.
(a) So long as no Default or Event of Default shall have
occurred and be continuing, (i) payments consisting of proceeds
of Accounts received in the ordinary course of business shall be
applied to the Swing Line Loan and the Revolving Loan; (ii)
payments matching specific scheduled payments then due shall be
applied to those scheduled payments; (iii) voluntary prepayments
shall be applied as determined by Borrower Representative,
subject to the provisions of Section 1.2(a); and (iv) mandatory
prepayments shall be applied as set forth in Section 1.2(c). As
to each other payment, and as to all payments made when a Default
or Event of Default shall have occurred and be continuing or
following the Commitment Termination Date, each Borrower hereby
irrevocably waives the right to direct the application of any and
all payments received from or on behalf of such Borrower, and
each Borrower hereby irrevocably agrees that Agent shall have the
continuing exclusive right to apply any and all such payments
against the Obligations of Borrowers as Agent may deem advisable
notwithstanding any previous entry by Agent in the Loan Account
or any other books and records. In the absence of a specific
determination by Agent with respect thereto, payments shall be
applied to amounts then due and payable in the following order:
(1) to Fees and Agent's expenses reimbursable hereunder; (2) to
interest on the Swing Line Loan; (3) to principal payments on the
Swing Line Loan; (4) to interest on the other Loans, ratably in
proportion to the interest accrued as to each Loan; (5) to
principal payments on the other Loans ratably to the aggregate,
combined principal balance of the other Loans; and (6) to all
other Obligations including expenses of Lenders to the extent
reimbursable under Section 11.3.
(b) Agent is authorized to, and at its sole election may,
charge to the Revolving Loan balance on behalf of each Borrower
and cause to be paid all Fees, expenses, Charges, costs
(including insurance premiums in accordance with Section 5.4(a))
and interest and principal, other than principal of the Revolving
Loan, owing by Borrowers under this Agreement or any of the other
Loan Documents if and to the extent Borrowers fail to promptly
pay any such amounts as and when due, even if such charges would
cause the balance of the aggregate Revolving Loan and the Swing
Line Loan to exceed Borrowing Availability or would cause the
balance of the Revolving Loan and the Swing Loan of any Borrower
to exceed such Borrower's separate Borrowing Base. At Agent's
option and to the extent permitted by law, any charges so made
shall constitute part of the Revolving Loan hereunder.
1.11. Loan Account and Accounting.
Agent shall maintain a loan account (the "Loan Account") on
its books to record: all Advances and the Term Loans, all
payments made by Borrowers, and all other debits and credits as
provided in this Agreement with respect to the Loans or any other
Obligations. All entries in the Loan Account shall be made in
accordance with Agent's customary accounting practices as in
effect from time to time. The balance in the Loan Account, as
recorded on Agent's most recent printout or other written
statement, shall, absent manifest error, be presumptive evidence
of the amounts due and owing to Agent and Lenders by each
Borrower; provided that any failure to so record or any error in
so recording shall not limit or otherwise affect any Borrower's
duty to pay the Obligations. Agent shall render to Borrower
Representative a monthly accounting of transactions with respect
to the Loans setting forth the balance of the Loan Account as to
each Borrower. Unless Borrower Representative notifies Agent in
writing of any objection to any such accounting (specifically
describing the basis for such objection), within thirty (30) days
after the date thereof, each and every such accounting shall
(absent manifest error) be deemed final, binding and conclusive
upon Borrowers in all respects as to all matters reflected
therein. Only those items expressly objected to in such notice
shall be deemed to be disputed by Borrowers.
1.12. Indemnity.
(a) Each Borrower shall jointly and severally indemnify and
hold harmless each of Agent, Lenders and their respective
Affiliates, and each such Person's respective officers,
directors, employees, attorneys, agents and representatives
(each, an "Indemnified Person"), from and against any and all
suits, actions, proceedings, claims, damages, losses, liabilities
and expenses (including reasonable attorneys' fees and
disbursements and other costs of investigation or defense,
including those incurred upon any appeal) which may be instituted
or asserted against or incurred by any such Indemnified Person as
the result of credit having been extended, suspended or
terminated under this Agreement and the other Loan Documents and
the administration of such credit, and in connection with or
arising out of the transactions contemplated hereunder and
thereunder and any actions or failures to act in connection
therewith, including any and all Environmental Liabilities and
legal costs and expenses arising out of or incurred in connection
with disputes between or among any parties to any of the Loan
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Documents (collectively, "Indemnified Liabilities"); provided,
that no such Borrower shall be liable for any indemnification to
an Indemnified Person to the extent that any such suit, action,
proceeding, claim, damage, loss, liability or expense results
from that Indemnified Person's gross negligence or willful
misconduct. NO INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE
TO ANY OTHER PARTY TO ANY LOAN DOCUMENT, ANY SUCCESSOR, ASSIGNEE
OR THIRD PARTY BENEFICIARY OF SUCH PERSON OR ANY OTHER PERSON
ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT,
PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED
AS A RESULT OF CREDIT HAVING BEEN EXTENDED, SUSPENDED OR
TERMINATED UNDER ANY LOAN DOCUMENT OR AS A RESULT OF ANY OTHER
TRANSACTION CONTEMPLATED HEREUNDER OR THEREUNDER.
(b) To induce Lenders to provide the LIBOR Rate option on
the terms provided herein, if (i) any LIBOR Loans are repaid in
whole or in part prior to the last day of any applicable LIBOR
Period (whether that repayment is made pursuant to any provision
of this Agreement or any other Loan Document or is the result of
acceleration, by operation of law or otherwise); (ii) any
Borrower shall default in payment when due of the principal
amount of or interest on any LIBOR Loan; (iii) any Borrower shall
default in making any borrowing of, conversion into or
continuation of LIBOR Loans after Borrower Representative has
given notice requesting the same in accordance herewith; or (iv)
any Borrower shall fail to make any prepayment of a LIBOR Loan
after Borrower Representative has given a notice thereof in
accordance herewith, Borrowers shall jointly and severally
indemnify and hold harmless each Lender from and against all
losses, costs and expenses resulting from or arising from any of
the foregoing. Such indemnification shall include any loss
(including loss of margin) or expense arising from the
reemployment of funds obtained by it or from fees payable to
terminate deposits from which such funds were obtained. For the
purpose of calculating amounts payable to a Lender under this
subsection, each Lender shall be deemed to have actually funded
its relevant LIBOR Loan through the purchase of a deposit bearing
interest at the LIBOR Rate in an amount equal to the amount of
that LIBOR Loan and having a maturity comparable to the relevant
Interest Period; provided, however, that each Lender may fund
each of its LIBOR Loans in any manner it sees fit, and the
foregoing assumption shall be utilized only for the calculation
of amounts payable under this subsection. This covenant shall
survive the termination of this Agreement and the payment of the
Notes and all other amounts payable hereunder. As promptly as
practicable under the circumstances, each Lender shall provide
Borrower Representative with its written calculation of all
amounts payable pursuant to this Section 1.12(b), and such
calculation shall be binding on the parties hereto unless
Borrower Representative shall object in writing within ten (10)
Business Days of receipt thereof, specifying the basis for such
objection in detail.
1.13. Access.
Each Borrower shall, during normal business hours, from time
to time upon three (3) Business Days' prior notice as frequently
as Agent determines to be appropriate: (a) provide Agent and any
of its officers, employees and agents access to its properties,
facilities, advisors and employees (including officers) of each
Borrower and to the Collateral, (b) permit Agent, and any of its
officers, employees and agents, to inspect, audit and make
extracts from any Borrower's books and records, and (c) permit
Agent, and its officers, employees and agents, to inspect,
review, evaluate and make test verifications and counts of the
Accounts, Inventory and other Collateral of any Borrower. If a
Default or Event of Default shall have occurred and be
continuing, each such Borrower shall provide such access to Agent
and to each Lender at all times and without advance notice.
Furthermore, so long as any Event of Default shall have occurred
and be continuing, Borrowers shall provide Agent and each Lender
with access to their suppliers and customers. Each Borrower shall
make available to Agent and its counsel, as quickly as is
possible under the circumstances, originals or copies of all
books and records which Agent may request. Each Borrower shall
deliver any document or instrument necessary for Agent, as it may
from time to time request, to obtain records from any service
bureau or other Person which maintains records for such Borrower,
and shall maintain duplicate records or supporting documentation
on media, including computer tapes and discs owned by such
Borrower consistent with past practices. Agent will give Lenders
at least ten (10) days' prior written notice of regularly
scheduled audits. Representatives of other Lenders may accompany
Agent's representatives on regularly scheduled audits at no
charge to Borrowers.
1.14. Taxes.
(a) Any and all payments by each Borrower hereunder or under
the Notes shall be made, in accordance with this Section 1. 14,
free and clear of and without deduction for any and all present
or future Taxes. If any Borrower shall be required by law to
deduct any Taxes from or in respect of any sum payable hereunder
or under the Notes, (i) the sum payable shall be increased as
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much as shall be necessary so that after making all required
deductions (including deductions applicable to additional sums
payable under this Section 1. 14) Agent or Lenders, as
applicable, receive an amount equal to the sum they would have
received had no such deductions been made, (ii) such Borrower
shall make such deductions, and (iii) such Borrower shall pay the
full amount deducted to the relevant taxing or other authority in
accordance with applicable law. Within thirty (30) days after the
date of any payment of Taxes, Borrower Representative shall
furnish to Agent the original or a certified copy of a receipt
evidencing payment thereof.
(b) Each Borrower shall jointly and severally indemnify and,
within ten (10) days of demand therefor, pay Agent and each
Lender for the full amount of Taxes (including any Taxes imposed
by any jurisdiction on amounts payable under this Section 1. 14)
paid by Agent or such Lender, as appropriate, and any liability
(including penalties, interest and expenses) arising therefrom or
with respect thereto, whether or not such Taxes were correctly or
legally asserted.
1.15. Capital Adequacy: Increased Costs: Illegality.
(a) If any Lender shall have determined that the adoption
after the date hereof of any law, treaty, governmental (or
quasi-governmental) rule, regulation, guideline or order
regarding capital adequacy, reserve requirements or similar
requirements or compliance by any Lender with any request or
directive regarding capital adequacy, reserve requirements or
similar requirements (whether or not having the force of law)
from any central bank or other Governmental Authority increases
or would have the effect of increasing the amount of capital,
reserves or other funds required to be maintained by such Lender
and thereby reducing the rate of return on such Lender's capital
as a consequence of its obligations hereunder, then Borrowers
shall from time to time upon demand by such Lender (with a copy
of such demand to Agent) pay to Agent, for the account of such
Lender, additional amounts sufficient to compensate such Lender
for such reduction. A certificate as to the amount of that
reduction and showing the basis of the computation thereof
submitted by such Lender to Borrower Representative and to Agent
shall, absent manifest error, be final, conclusive and binding
for all purposes.
(b) If, due to the introduction of or any change in any law
or regulation (or any change in the interpretation thereof),
there shall be any increase in the cost to any Lender of agreeing
to make or making, funding or maintaining any Loan, then
Borrowers shall from time to time, upon demand by such Lender
(with a copy of such demand to Agent), pay to Agent for the
account of such Lender additional amounts sufficient to
compensate such Lender for such increased cost. A certificate as
to the amount of such increased cost, submitted to Borrower
Representative and to Agent by such Lender, shall be conclusive
and binding on Borrowers for all purposes, absent manifest error.
Each Lender agrees that, as promptly as practicable after it
becomes aware of any circumstances referred to above which would
result in any such increased cost, the affected Lender shall, to
the extent not inconsistent with such Lender's internal policies
of general application, use reasonable commercial efforts to
minimize costs and expenses incurred by it and payable to it by
Borrowers pursuant to this Section 1.15(b).
(c) Notwithstanding anything to the contrary contained
herein, if the introduction of or any change in any law or
regulation (or any change in the interpretation thereof) shall
make it unlawful, or any central bank or other Governmental
Authority shall assert that it is unlawful, for any Lender to
agree to make or to make or to continue to fund or maintain any
LIBOR Loan, then, unless that Lender is able to make or to
continue to fund or to maintain such LIBOR Loan at another branch
or office of that Lender without, in that Lender's opinion,
adversely affecting it or its Loans or the income obtained
therefrom, on notice thereof and demand therefor by such Lender
to Borrower Representative through Agent, (i) the obligation of
such Lender to agree to make or to make or to continue to fund or
maintain LIBOR Loans shall terminate and (ii) each Borrower shall
forthwith prepay in full all outstanding LIBOR Loans owing by
such Borrower to such Lender, together with interest accrued
thereon, unless Borrower Representative on behalf-of such
Borrower, within five (5) Business Days after the delivery of
such notice and demand, converts all such Loans into a Loan
bearing interest based on the Index Rate.
(d) Replacement of Lender in Respect of Increased Costs.
Within fifteen (15) days after receipt by Borrower Representative
of written notice and demand from any Lender (an "Affected
Lender") for payment of additional amounts or increased costs as
provided in Section 1.14(a). 1.15(a) or 1.15(b), Borrower
Representative may, at its option, notify Agent and such Affected
Lender of its intention to replace the Affected Lender. So long
as no Default or Event of Default shall have occurred and be
continuing, Borrower Representative, with the consent of Agent
(which may not be unreasonably withheld or delayed), may obtain,
at Borrowers' expense, a replacement Lender ("Replacement
Lender") for the Affected Lender, which Replacement Lender must
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be satisfactory to Agent. If Borrowers obtain a Replacement
Lender within ninety (90) days following notice of their
intention to do so, the Affected Lender must sell and assign its
Loans and Commitments to such Replacement Lender for an amount
equal to the principal balance of all Loans held by the Affected
Lender and all accrued interest and Fees with respect thereto
through the date of such sale, provided that Borrowers shall have
reimbursed such Affected Lender for the additional amounts or
increased costs that it is entitled to receive under this
Agreement through the date of such sale and assignment.
Notwithstanding the foregoing, Borrowers shall not have the
right to obtain a Replacement Lender if the Affected Lender
rescinds its demand for increased costs or additional amounts
within fifteen (15) days following its receipt of Borrowers'
notice of intention to replace such Affected Lender. Furthermore,
if Borrowers give a notice of intention to replace and do not so
replace such Affected Lender within ninety (90) days thereafter,
Borrowers' rights under this Section 1.15(d) shall terminate and
Borrowers shall promptly pay all increased costs or additional
amounts demanded by such Affected Lender pursuant to Sections
1.14(a), 1.15(a) and 1.15(b).
1.16. Single Loan.
All Loans to the Borrowers and all of the other Obligations
of Borrowers arising under this Agreement and the other Loan
Documents shall constitute one general joint and several
obligation of the Borrowers secured, until the Termination Date,
by all of the Collateral.
2. CONDITIONS PRECEDENT
2.1. Conditions to the Initial Loans.
No Lender shall be obligated to make any Loan on the Closing
Date, or to take, fulfill, or perform any other action hereunder,
until the following conditions have been satisfied or provided
for in a manner satisfactory to Agent, or waived in writing by
Agent and Lenders:
(a) Credit Agreement: Loan Documents. This Agreement or
counterparts hereof shall have been duly executed by, and
delivered to, Borrowers, Agent and Lenders; and Agent shall have
received such documents, instruments, agreements and legal
opinions as Agent shall reasonably request in connection with the
transactions contemplated by this Agreement and the other Loan
Documents, including all those listed in the Closing Checklist
attached hereto as Annex B, each in form and substance
satisfactory to Agent.
(b) Approvals. Agent shall have received (i) satisfactory
evidence that the Borrowers have obtained all required consents
and approvals of all Persons including all requisite Governmental
Authorities, to the execution, delivery and performance of this
Agreement and the other Loan Documents and the consummation of
the Related Transactions or (ii) an officer's certificate in form
and substance satisfactory to Agent affirming that no such
consents or approvals are required.
(c) Opening Availability. The Eligible Accounts and Eligible
Inventory of the Borrowers supporting the initial Revolving
Credit Advance and the amount of the Reserves to be established
on the Closing Date shall be sufficient in value, as determined
by Agent, to provide Borrowers, collectively, with Net Borrowing
Availability, after giving effect to the initial Revolving Credit
Advance and the consummation of the Related Transactions (on a
pro forma basis, with trade payables being paid currently, and
expenses and liabilities being paid in the ordinary course of
business and without acceleration of sales) of at least
$5,000,000.
(d) Payment of Fees. Borrowers shall have paid the Fees
required to be paid on the Closing Date (including the Fees
specified in the Fleet Bank Fee Letter), and shall have
reimbursed Agent for all fees, costs and expenses of closing
presented as of the Closing Date.
(e) Consummation of Acquisition. Agent shall have received
fully executed copies of the Acquisition Agreement and each of
the other Acquisition Documents, each of which shall be in form
and substance satisfactory to Agent and its counsel. The
Acquisition shall have been consummated in accordance with the
terms of the Acquisition Agreement and the other Acquisition
Documents but for the payment of the cash purchase price payable
on the Closing Date pursuant to the Acquisition Agreement. The
aggregate consideration for the Acquisition shall not exceed
$22,750,000.
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2.2. Further Conditions to Each Loan.
Except as otherwise expressly provided herein, no Lender
shall be obligated to fund any Loan, or convert or continue any
Loan as a LIBOR Loan, if, as of the date thereof:
(a) Any representation or warranty by any Borrower contained
herein or in any of the other Loan Documents shall be untrue or
incorrect in any material respect as of such date, except to the
extent that such representation or warranty expressly relates to
an earlier date and except for changes therein expressly
permitted or expressly contemplated by this Agreement; or
(b) Any event or circumstance having a Material Adverse
Effect shall have occurred since the date hereof; or
(c) (i) Any Event of Default shall have occurred and be
continuing or would result after giving effect to any Loan, or
(ii) a Default shall have occurred and be continuing or would
result after giving effect to any Loan, and Agent or Requisite
Revolving Lenders shall have determined not to make any Loan so
long as that Default is continuing; or
(d) After giving effect to any Advance, (i) the outstanding
principal amount of the aggregate Revolving Loan would exceed the
lesser of the Borrowing Base and the Maximum Amount, less, in
each case, the then outstanding principal amount of the Swing
Line Loan, or (ii) the outstanding principal amount of the
Revolving Loan would exceed the Borrowing Base less the
outstanding principal amount of the Swing Line Loan; or
(e) After giving effect to any Swing Line Advance, (i) the
outstanding principal amount of the Swing Line Loan would exceed
Swing Line Availability, or (ii) the Outstanding principal amount
of the Swing Line Loan would exceed the Borrowing Base less the
outstanding principal amount of the Revolving Loan.
The request and acceptance by the Borrower Representative of the
proceeds of any Loan, or the conversion or continuation of any
Loan into, or as, a LIBOR Loan, as the case may be, shall be
deemed to constitute, as of the date of such request or
acceptance, (i) a representation and warranty by Borrowers that
the conditions in this Section 2.2 have been satisfied and (ii) a
reaffirmation by Borrowers of the granting and continuance of
Agent's Liens, on behalf of itself and Lenders, pursuant to the
Collateral Documents.
3. REPRESENTATIONS AND WARRANTIES
To induce Lenders to make the Loans, the Borrowers executing
this Agreement, jointly and severally, make the following
representations and warranties to Agent and each Lender with
respect to all Borrowers, each and all of which shall survive the
execution and delivery of this Agreement. In the case of WPI
Instruments, the representations shall be deemed to apply to WPI
Instruments and the business acquired from Seller.
3.1. Corporate Existence; Compliance with Law.
Each Borrower (a) is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction
of incorporation; (b) is duly qualified to conduct business and
is in good standing in each other jurisdiction where its
ownership or lease of property or the conduct of its business
requires such qualification except where the failure to be so
qualified would not have a Material Adverse Effect; (c) has the
requisite corporate power and authority and the legal right to
own, pledge, mortgage or otherwise encumber and operate its
properties, to lease the property it operates under lease and to
conduct its business as now, heretofore and proposed to be
conducted; (d) subject to specific representations set forth
herein regarding Environmental Laws, has all licenses, permits,
consents or approvals from or by, and has made all filings with,
and has given all notices to, all Governmental Authorities having
jurisdiction, to the extent required for such ownership,
operation and conduct; (e) is in compliance with its charter and
by-laws; and (f) subject to specific representations set forth
herein regarding ERISA, Environmental Laws, tax and other laws,
is in compliance with all applicable provisions of law, except
where the failure to comply, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse
Effect.
3.2. Executive Offices; FEIN.
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As of the Closing Date, the current location of each
Borrower's chief executive office and principal place of business
is set forth in Disclosure Schedule (3.2), and none of such
locations have changed within the twelve (12) months preceding
the Closing Date. In addition, Disclosure Schedule (3.2) lists
the federal employer identification number of each Borrower.
3.3. Corporate Power. Authorization. Enforceable
Obligations.
The execution, delivery and performance by each Borrower of
the Loan Documents to which it is a party and the creation of all
Liens provided for therein: (a) are within such Person's
corporate or partnership power; (b) have been duly authorized by
all necessary or proper corporate, shareholder and other action;
(c) do not contravene any provision of such Person's charter,
bylaws or partnership agreement; (d) do not violate any law or
regulation, or any order or decree of any court or Governmental
Authority; (e) do not conflict with or result in the breach or
termination of, constitute a default under or accelerate or
permit the acceleration of any performance required by, any
indenture, instrument, mortgage, deed of trust, or any material
lease or other agreement to which such Person is a party or by
which such Person or any of its property is bound; (f) do not
result in the creation or imposition of any Lien upon any of the
property of such Person other than those in favor of Agent, on
behalf of itself and Lenders, pursuant to the Loan Documents; and
(g) do not require the consent or approval of any Governmental
Authority or any other Person, except those referred to in
Section 2.1 (c), all of which will have been duly obtained, made
or complied with prior to the Closing Date. On or prior to the
Closing Date, each of the Loan Documents shall have been duly
executed and delivered by each Borrower and each such Loan
Document shall then constitute a legal, valid and binding
obligation enforceable in accordance with its terms.
3.4. Financial Statements and Projections.
Except for the Projections, all Financial Statements
concerning Borrowers which are referenced below have been
prepared in accordance with GAAP consistently applied throughout
the periods covered (except as disclosed therein and except, with
respect to unaudited Financial Statements, for the absence of
footnotes and normal year-end audit adjustments) and present
fairly in all material respects the financial position of the
Persons covered thereby as at the dates thereof and the results
of their operations and cash flows for the periods then ended.
(a) The following Financial Statements attached hereto as
Disclosure Schedule (3.4(A)) have been delivered on the date
hereof:
(i) The audited consolidated balance sheets of the
Existing Borrowers as of September 30, 1997 and the related
statements of income and cash flows of the Existing Borrowers for
their fiscal year then ended.
(ii) The unaudited balance sheet at June 30, 1998 of
the Existing Borrowers and the related statement(s) of income and
cash flows of the Existing Borrowers for the period then ended.
(b) Projections. The Projections delivered on the date
hereof and attached hereto as Disclosure Schedule (3.4(B)) have
been prepared by Borrowers in light of the past operations of
their businesses, but including future payments of known
contingent liabilities, and reflect projections for the fiscal
year ending September 30, 1999 beginning on the first day of the
month immediately following the Closing Date on a month by month
basis for the first year and on a year by year basis thereafter.
The Projections are based upon estimates and assumptions stated
therein, all of which Borrowers believe to be reasonable and fair
in light of current conditions and current facts known to
Borrowers and, as of the Closing Date, reflect Borrowers' good
faith and reasonable estimates of the future financial
performance of Borrowers and of the other information p ejected
therein for the period set forth therein.
3.5. Material Adverse Effect.
Between the date of the most recent financial statements of
the Existing Borrowers delivered to the Agent (the "Financial
Statement Date") and the Closing Date, (a) no Existing Borrower
has incurred any obligations, contingent or non-contingent
liabilities, liabilities for Charges, long-term leases or unusual
forward or long-term commitments which are not reflected in the
Pro Forma and which, alone or in the aggregate, could reasonably
be expected to have a Material Adverse Effect, (b) no contract,
lease or other agreement or instrument has been entered into by
any Existing Borrower or has become binding upon any Existing
Borrower's assets and no law or regulation applicable to any
Borrower has been adopted which has had or could reasonably be
expected to have a Material Adverse Effect, and (c) no Borrower
is in default and to the best of Existing Borrowers' knowledge no
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third party is in default under any material contract, lease or
other agreement or instrument, which alone or in the aggregate
could reasonably be expected to have a Material Adverse Effect.
Between the Financial Statement Date and the Closing Date no
event has occurred, which alone or together with other events,
could reasonably be expected to have a Material Adverse Effect.
3.6. Ownership of Property: Liens.
As of the Closing Date, the real estate ("Real Estate")
listed on Disclosure Schedule (3.6) constitutes all of the real
property owned, leased, subleased, or used by any Borrower. Each
Borrower owns good and marketable fee simple title to all of its
owned real estate, and valid and marketable leasehold interests
in all of its leased Real Estate, all as described on Disclosure
Schedule (3.6), and copies of all such leases or a summary of
terms thereof satisfactory to Agent have been delivered to Agent.
Disclosure Schedule (3.6) further describes any Real Estate with
respect to which any Borrower is a lessor, sublessor or assignor
as of the Closing Date. Each Borrower also has good and
marketable title to, or valid leasehold interests in, all of its
personal properties and assets. As of the Closing Date, none of
the properties and assets of any Borrower are subject to any
Liens other than Permitted Encumbrances, and there are no facts,
circumstances or conditions known to any Borrower that may result
in any Liens (including Liens arising under Environmental Laws)
other than Permitted Encumbrances. Each Borrower has received all
deeds, assignments, waivers, consents, non-disturbance and
recognition or similar agreements, bills of sale and other
documents, and has duly effected all recordings, filings and
other actions necessary to establish, protect and perfect such
Borrower's right, title and interest in and to all such Real
Estate and other properties and assets. Disclosure Schedule (3.6)
also describes any purchase options, rights of first refusal or
other similar contractual rights pertaining to any Real Estate.
As of the Closing Date, no portion of any Borrower's Real Estate
has suffered any material damage by fire or other casualty loss
which has not heretofore been repaired and restored in all
material respects to its original condition or otherwise
remedied. As of the Closing Date, all material permits required
to have been issued to enable the Real Estate to be lawfully
occupied and used for all of the purposes for which they are
currently occupied and used have been lawfully issued and are in
full force and effect.
3.7. Labor Matters.
As of the Closing Date (a) no strikes or other material
labor disputes against any Borrower are pending or, to any
Borrower's knowledge, threatened; (b) hours worked by and payment
made to employees of each Borrower comply with the Fair Labor
Standards Act and each other federal, state, local or foreign law
applicable to such matter; (c) all payments due from any Borrower
for employee health and welfare insurance have been paid or
accrued as a liability on the books of such Borrower; (d) except
as set forth in Disclosure Schedule (3.7), no Borrower is a party
to or bound by any collective bargaining agreement, management
agreement, consulting agreement or any employment agreement (and
true and complete copies of any agreements described on
Disclosure Schedule (3.7) have been delivered to Agent); (e)
there is no organizing activity involving any Borrower pending
or, to any Borrower's knowledge, threatened by any labor union or
group of employees; (f) there are no representation proceedings
pending or, to any Borrower's knowledge, threatened with the
National Labor Relations Board, and no labor organization or
group of employees of any Borrower has made a pending demand for
recognition; and (g) except as set forth in Disclosure Schedule
(3.7), there are no complaints or charges against any Borrower
pending or, to the knowledge of any Borrower, threatened to be
filed with any Governmental Authority or arbitrator based on,
arising out of, in connection with, or otherwise relating to the
employment or termination of employment by any Borrower of any
individual.
3.8. Ventures. Subsidiaries and Affiliates: Outstanding
Stock and Indebtedness.
Except as set forth in Disclosure Schedule (3.8), no
Borrower has any Subsidiaries, is engaged in any joint venture or
partnership with any other Person, or is an Affiliate of any
Person other than the other Borrowers. All of the issued and
outstanding Stock of each Borrower that is a corporation is owned
by each of the stockholders and in the amounts set forth on
Disclosure Schedule (3.8). Except as set forth on Disclosure
Schedule (3.8), there are no outstanding rights to purchase,
options, warrants or similar rights or agreements pursuant to
which any Borrower may be required to issue, sell, repurchase or
redeem any of its Stock or other equity securities, or interests
or any Stock or other equity securities of its Subsidiaries. As
of the Closing Date, the Borrowers have no Indebtedness or
Guaranteed Indebtedness except as set forth in Section 6.3 and
Disclosure Schedule (6.3).
3.9. Government Regulation.
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No Borrower is an "investment company" or an "affiliated
person" of, or "promoter" or "principal underwriter" for, an
"investment company," as such terms are defined in the Investment
Company Act of 1940, as amended. No Borrower is subject to
regulation under the Public Utility Holding Company Act of 1935,
as amended, the Federal Power Act, as amended, or any other
federal or state statute that restricts or limits its ability to
incur Indebtedness or to perform its obligations hereunder. The
making of the Loans by Lenders to Borrowers, the application of
the proceeds thereof and repayment thereof and the consummation
of the Acquisition will not violate any provision of any such
statute or any rule, regulation or order issued by the Securities
and Exchange Commission.
3. 10. Margin Regulations.
No Borrower is engaged, nor will it engage, principally or
as one of its important activities, in the business of extending
credit for the purpose of "purchasing" or "carrying" any "margin
security" as such terms are defined in Regulation U or G of the
Federal Reserve Board as now and from time to time hereafter in
effect (such securities being referred to herein as "Margin
Stock"). No Borrower owns any Margin Stock, and none of the
proceeds of the Loans or other extensions of credit under this
Agreement will be used, directly or indirectly, for the purpose
of purchasing or carrying any Margin Stock, for the purpose of
reducing or retiring any Indebtedness which was originally
incurred to purchase or carry any Margin Stock or for any other
purpose which might cause any of the Loans or other extensions of
credit under this Agreement to be considered a "purpose credit"
within the meaning of Regulation G, T, U or X of the Federal
Reserve Board. No Borrower will take or permit to be taken any
action which might cause any Loan Document to violate any
regulation of the Federal Reserve Board.
3.11. Taxes.
All tax returns, reports and statements, including
information returns, required by any Governmental Authority to be
filed by any Borrower have been filed with the appropriate
Governmental Authority and all Charges have been paid prior to
the date on which any fine, penalty, interest or late charge may
be added thereto for nonpayment thereof (or any such fine,
penalty, interest, late charge or loss has been paid), excluding
Charges or other amounts being contested in accordance with
Section 5.2(b). Proper and accurate amounts have been withheld by
each Borrower from its respective employees for all periods in
full and complete compliance with all applicable federal, state,
local and foreign law and such withholdings have been timely paid
to the respective Governmental Authorities. Disclosure Schedule
(3.11 ) sets forth as of the Closing Date those taxable years for
which any Borrower's tax returns are currently being audited by
the IRS or any other applicable Governmental Authority and any
assessments or threatened assessments in connection with such
audit, or otherwise currently outstanding. Except as described on
Disclosure Schedule (3.11), no Borrower has executed or filed
with the IRS or any other Governmental Authority any agreement or
other document extending, or having the effect of extending, the
period for assessment or collection of any Charges. None of the
Borrowers and their respective predecessors are liable for any
Charges: (a) under any agreement (including any tax sharing
agreements) or (b) to each Borrower's knowledge, as a transferee.
As of the Closing Date, no Borrower has agreed or been requested
to make any adjustment under IRC Section 481(a), by reason of a
change in accounting method or otherwise, which would have a
Material Adverse Effect.
3.12. ERISA.
(a) Disclosure Schedule (3.12) lists and separately
identifies all Title IV Plans, Multiemployer Plans, ESOPs and
Retiree Welfare Plans. Copies of all such listed Plans, together
with a copy of the latest form 5500 for each such Plan, have been
delivered to Agent. Each Qualified Plan has been determined by
the IRS to qualify under Section 401 of the IRC, and the trusts
created thereunder have been determined to be exempt from tax
under the provisions of Section 501 of the IRC, and nothing has
occurred which would cause the loss of such qualification or
tax-exempt status. Each Plan is in compliance with the applicable
provisions of ERISA and the IRC, including the filing of reports
required under the IRC or ERISA. No Borrower or ERISA Affiliate
has failed to make any contribution or pay any amount due as
required by either Section 4~12 of the IRC or Section 302 of
ERISA or the terms of any such Plan. No Borrower or ERISA
Affiliate has engaged in a prohibited transaction, as defined in
Section 4975 of the IRC, in connection with any Plan, which would
subject any Borrower to a material tax on prohibited transactions
imposed by Section 4975 of the IRC.
(b) Except as set forth in Disclosure Schedule (3.12): (i)
no Title IV Plan has any Unfunded Pension Liability; (ii) no
ERISA Event or event described in Section 4062(e) of ERISA with
respect to any Title IV Plan has occurred or is reasonably
expected to occur; (iii) there are no pending, or to the
knowledge of any Borrower, threatened claims (other than claims
for benefits in the normal course), sanctions, actions or
lawsuits, asserted or instituted against any Plan or any Person
as fiduciary or sponsor of any Plan; (iv) no Borrower or ERISA
Affiliate has incurred or reasonably expects to incur any
liability as a result of a complete or partial withdrawal from a
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Multiemployer Plan; (v) within the last five years no Title IV
Plan with Unfunded Pension Liabilities has been transferred
outside of the "controlled group" (within the meaning of Section
4001 (a)(14) of ERISA) of any Borrower or ERISA Affiliate; and
(vi) no liability under any Title IV Plan has been satisfied with
the purchase of a contract from an insurance company that is not
rated AAA by the Standard & Poor's Corporation or the equivalent
by another nationally recognized rating agency.
3.13. No Litigation.
No action, claim, lawsuit, demand, investigation or
proceeding is now pending or, to the knowledge of any Borrower,
threatened against any Borrower, before any Governmental
Authority or before any arbitrator or panel of arbitrators
(collectively, "Litigation"), (a) which challenges any Borrower's
right or power to enter into or perform any of its obligations
under the Loan Documents to which it is a party, or the validity
or enforceability of any Loan Document or any action taken
thereunder, or (b) which has a reasonable risk of being
determined adversely to any Borrower and which, if so determined,
could reasonably be expected to have a Material Adverse Effect.
Except as set forth on Disclosure Schedule (3. 13), as of the
Closing Date there is no Litigation pending or threatened which
seeks damages in excess of $100,000 or injunctive relief or
alleges criminal misconduct of any Borrower.
3.14. Brokers.
Except as set forth on Disclosure Schedule (3.14), no broker
or finder acting on behalf of any Borrower brought about the
obtaining, making or closing of the Loans or the Related
Transactions, and no Borrower has any obligation to any Person in
respect of any finder's or brokerage fees in connection
therewith.
3.15. Intellectual Property.
As of the Closing Date, each Borrower owns or has rights to
use all Intellectual Property necessary to continue to conduct
its business as now or heretofore conducted by it or proposed to
be conducted by it, and each Patent, Trademark, Copyright and
License is listed, together with application or registration
numbers, as applicable, in Disclosure Schedule (3. 15) hereto.
Each Borrower conducts its business and affairs without
infringement of or interference with any Intellectual Property of
any other Person.
3.16. Full Disclosure.
No information contained in this Agreement, any of the other Loan
Documents, any Projections, Financial Statements or Collateral
Reports or other reports from time to time delivered hereunder or
any written statement furnished by or on behalf of any Borrower
to Agent or any Lender pursuant to the terms of this Agreement
contains or will contain any untrue statement of a material fact
or omits or will omit to state a material fact necessary to make
the statements contained herein or therein not misleading in
light of the circumstances under which they were made. The Liens
granted to Agent, on behalf of itself and Lenders, pursuant to
the Collateral Documents will at all times be fully perfected
first priority Liens in and to the Collateral described therein,
subject, as to priority, only to Permitted Encumbrances with
respect to the Collateral other than Accounts.
3.17. Environmental Matters.
(a) Except as set forth in Disclosure Schedule (3 17), as of
the Closing Date: (i) the Real Estate is free of contamination
from any Hazardous Material except for such contamination that
would not result in Environmental Liabilities which could
reasonably be expected to have a Material Adverse Effect; (ii) no
Borrower has caused or suffered to occur any Release of Hazardous
Materials on, at, in, under, above, to, from or about any of its
Real Estate, except for such Releases as would not result in
Environmental Liabilities which could reasonably be expected to
have a Material Adverse Effect; (iii) the Borrowers are and have
been in compliance with all Environmental Laws, except for such
noncompliance which would not result in Environmental Liabilities
which could reasonably be expected to have a Material Adverse
Effect; (iv) the Borrowers have obtained, and are in compliance
with, all Environmental Permits required by Environmental Laws
for the operations of their respective businesses as presently
conducted or as proposed to be conducted, except where the
failure to so obtain or comply with such Environmental Permits
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would not result in Environmental Liabilities which could
reasonably be expected to have a Material Adverse Effect, and all
such Environmental Permits are valid, uncontested and in good
standing; (v) no Borrower is involved in operations or knows of
any facts, circumstances or conditions, including any Releases of
Hazardous Materials, that are likely to result in any
Environmental Liabilities of such Borrower which could reasonably
be expected to have a Material Adverse Effect, and no Borrower
has permitted any current or former tenant or occupant of the
Real Estate to engage in any such operations; (vi) there is no
Litigation arising under or related to any Environmental Laws,
Environmental Permits or Hazardous Material which seeks damages,
penalties, fines, costs or expenses in excess of $25,000 or
injunctive relief, or which alleges criminal misconduct by any
Borrower; (vii) no notice has been received by any Borrower
identifying it as a "potentially responsible party" or requesting
information under CERCLA or analogous state statutes, and to the
knowledge of the Borrowers, there are no facts, circumstances or
conditions that may result in any Borrower being identified as a
"potentially responsible party" under CERCLA or analogous state
statutes; and (viii) the Borrowers have provided to Agent copies
of all existing environmental reports and audits in their
possession pertaining to actual or potential Environmental
Liabilities, in each case relating to any Real Estate.
(b) Each Borrower hereby acknowledges and agrees that Agent
(i) is not now, and has not ever been, in control of any of the
Real Estate or any Borrower's affairs, and (ii) does not have the
capacity through the provisions of the Loan Documents or
otherwise to influence any Borrower's conduct with respect to the
ownership, operation or management of any of its Real Estate or
compliance with Environmental Laws or Environmental Permits.
3.18. Insurance.
Disclosure Schedule (3. 18) lists all insurance policies of
any nature maintained, as of the Closing Date, for current
occurrences by each Borrower, as well as a summary of the terms
of each such policy.
3. 19. Deposit and Disbursement Accounts.
Disclosure Schedule (3.19) lists all banks and other
financial institutions at which any Borrower maintains deposits
and/or other accounts as of the Closing Date, including any
Disbursement Accounts, and such Schedule correctly identifies the
name, address and telephone number of each depository, the name
in which the account is held, a description of the purpose of the
account, and the complete account number.
3.20. Government Contracts.
Except as set forth in Disclosure Schedule (3.20), as of the
Closing Date, no Borrower is a party to any contract or agreement
with any Governmental Authority and no Borrower's Accounts are
subject to the Federal Assignment of Claims Act of 1940, as
amended (31 U.S.C. Section 3727), or any similar state or local
law.
3.21. Customer and Trade Relations.
Except as set forth in Disclosure Schedule (3.21), as of the
Closing Date, there exists no actual or, to the knowledge of any
Borrower, threatened termination or cancellation of, or any
material adverse modification or change in: the business
relationship of any Borrower with any customer or group of
customers whose purchases during the preceding twelve (12) months
caused them to be ranked among the ten largest customers of such
Borrower; or the business relationship of any Borrower with any
supplier material to its operations.
3.22. Agreements and Other Documents.
As of the Closing Date, each Borrower has provided to Agent
or its counsel, on behalf of Lenders, accurate and complete
copies (or summaries) of all of the following agreements or
documents to which any it is subject and each of which are listed
on Disclosure Schedule (3.22): supply agreements and purchase
agreements not terminable by such Borrower within sixty (60) days
following written notice issued by such Borrower and involving
transactions in excess of $1,000,000 per annum; any lease of
Equipment having a remaining term of one year or longer and
requiring aggregate rental and other payments in excess of
$500,000 per annum; licenses and permits held by the Borrowers,
the absence of which could be reasonably likely to have a
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Material Adverse Effect; instruments or documents evidencing
Indebtedness of such Borrower and any security interest granted
by such Borrower with respect thereto; and instruments and
agreements evidencing the issuance of any equity securities,
warrants, rights or options to purchase equity securities of such
Borrower.
3.23. Solvency.
Both before and after giving effect to (a) the Loans to be
made or extended on the Closing Date or such other date as Loans
requested hereunder are made or extended, (b) the disbursement of
the proceeds of such Loans pursuant to the instructions of
Borrower Representative, (c) the Acquisition, the Refinancing and
the consummation of the other Related Transactions and (d) the
payment and accrual of all transaction costs in connection with
the foregoing, each Borrower is Solvent.
3.24. Acquisition Agreement.
As of the Closing Date, Borrowers have delivered to Agent a
complete and correct copy of the Acquisition Agreement (including
all schedules, exhibits, amendments, supplements, modifications,
assignments and all other documents delivered pursuant thereto or
in connection therewith). No Borrower and no other Person party
thereto is in default in the performance or compliance with any
provisions thereof, and the Acquisition Agreement complies with,
and the Acquisition has been consummated in accordance with, all
applicable laws. The Acquisition Agreement is in full force and
effect as of the Closing Date, and has not been terminated,
rescinded or withdrawn. All requisite approvals by Governmental
Authorities having jurisdiction over Seller, any Borrower and
other Persons referenced therein, with respect to the
transactions contemplated by the Acquisition Agreement, have been
obtained, and no such approvals impose any conditions to the
consummation of the transactions contemplated by the Acquisition
Agreement or to the conduct by any Borrower of its business
thereafter. To the best of each Borrower's knowledge, none of the
Seller's representations or warranties in the Acquisition
Agreement contain any untrue statement of a material fact or omit
any fact necessary to make the statements therein not misleading.
Each of the representations and warranties given by each
applicable Borrower in the Acquisition Agreement is true and
correct in all material respects. Notwithstanding anything
contained in the Acquisition Agreement to the contrary, such
representations and warranties of the Borrowers are incorporated
into this Agreement by this Section 3.24 and shall, solely for
purposes of this Agreement and the benefit of Agent and Lenders,
survive the consummation of the Acquisition.
4. FINANCIAL STATEMENTS AND INFORMATION
4.1. Reports and Notices.
(a) Each Borrower hereby agrees that from and after the
Closing Date and until the Termination Date, it shall deliver to
Agent and/or Lenders, as required, the Financial Statements,
notices, Projections and other information at the times, to the
Persons and in the manner set forth in Annex C.
(b) Each Borrower executing this Agreement hereby agrees
that from and after the Closing Date and until the Termination
Date, it shall deliver to Agent and/or Lenders, as required, the
various Collateral Reports (including Borrowing Base Certificates
in the form of Exhibit 4.1(b)) at the times, to the Persons and
in the manner set forth in Annex D.
4.2. Communication with Accountants.
Each Borrower executing this Agreement authorizes Agent and,
so long as a Default or Event of Default shall have occurred and
be continuing, each Lender, to communicate directly with its
independent certified public accountants, and authorizes and
shall instruct those accountants and advisors to disclose and
make available to Agent and each Lender any and all Financial
Statements and other supporting financial documents, schedules
and information relating to any Borrower (including copies of any
issued management letters) with respect to the business,
financial condition and other affairs of any Borrower in a manner
consistent with the policies of such accountants and advisors.
5. AFFIRMATIVE COVENANTS
Each Borrower jointly and severally agrees as to all
Borrowers that from and after the date hereof and until the
Termination Date:
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5.1. Maintenance of Existence and Conduct of Business.
Each Borrower shall: do or cause to be done all things
necessary to preserve and keep in full force and effect its
corporate existence and its rights and franchises; continue to
conduct its business substantially as now conducted or as
otherwise permitted hereunder; at all times maintain, preserve
and protect all of its assets and properties used or useful in
the conduct of its business, and keep the same in good repair,
working order and condition in all material respects (taking into
consideration ordinary wear and tear) and from time to time make,
or cause to be made, all necessary or appropriate repairs,
replacements and improvements thereto consistent with industry
practices; and transact business only in such corporate and trade
names as are set forth in Disclosure Schedule (5.1).
5.2. Payment of Obligations.
(a) Subject to Section 5.2(b), each Borrower shall pay and
discharge or cause to be paid and discharged promptly all Charges
payable by it, including (A) Charges imposed upon it, its income
and profits, or any of its property (real, personal or mixed) and
all Charges with respect to tax, social security and unemployment
withholding with respect to its employees, and (B) lawful claims
for labor, materials, supplies and services or otherwise, before
any thereof shall become past due.
(b) Each Borrower may in good faith contest, by appropriate
proceedings, the validity or amount of any Charges or claims
described in Section 5.2(a); provided, that (i) at the time of
commencement of any such contest no Default or Event of Default
shall have occurred and be continuing, (ii) adequate reserves
with respect to such contest are maintained on the books of such
Borrower, in accordance with GAAP, (iii) such contest is
maintained and prosecuted continuously and with diligence and
operates to suspend collection or enforcement of such Charges or
claims or any Lien in respect thereof, (iv) none of the
Collateral becomes subject to forfeiture or loss as a result of
such contest, (v) no Lien shall be imposed to secure payment of
such Charges or claims other than Permitted Encumbrances, (vi)
such Borrower shall promptly pay or discharge such contested
Charges or claims and all additional charges, interest, penalties
and expenses, if any, and shall deliver to Agent evidence
acceptable to Agent of such compliance, payment or discharge, if
such contest is terminated or discontinued adversely to such
Borrower or the conditions set forth in this Section 5.2(b) are
no longer met, and (vii) Agent has not advised Borrowers in
writing that Agent reasonably believes that nonpayment or
nondischarge thereof could have or result in a Material Adverse
Effect.
5.3. Books and Records.
Each Borrower shall keep adequate books and records with
respect to its business activities in which proper entries,
reflecting all financial transactions, are made in accordance
with GAAP and on a basis consistent with the Financial Statements
attached as Disclosure Schedule (3.4(A)).
5.4. Insurance: Damage to or Destruction of Collateral.
(a) The Borrowers shall, at their sole cost and expense,
maintain the policies of insurance described on Disclosure
Schedule (3. 18) as in effect on the date hereof in form and with
insurers acceptable to Agent. If any Borrower at any time or
times hereafter shall fail to obtain or maintain any of the
policies of insurance required above or to pay all premiums
relating thereto, Agent may at any time or times thereafter
obtain and maintain such policies of insurance and pay such
premiums and take any other action with respect thereto which
Agent deems advisable. Agent shall have no obligation to obtain
insurance for any Borrower or pay any premiums therefor. By doing
so, Agent shall not be deemed to have waived any Default or Event
of Default arising from any Borrower's failure to maintain such
insurance or pay any premiums therefor. All sums so disbursed,
including attorneys' fees, court costs and other charges related
thereto, shall be payable on demand by Borrowers to Agent and
shall be additional Obligations hereunder secured by the
Collateral.
(b) Agent reserves the right at any time upon any change in
any Borrower's risk profile (including any change in the product
mix maintained by any Borrower or any laws affecting the
potential liability of such Borrower) to require additional forms
and limits of insurance to, in Agent's opinion, adequately
protect both Agent's and Lender's interests in all or any portion
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of the Collateral and to ensure that each Borrower is protected
by insurance in amounts and with coverage customary for its
industry. If requested by Agent, each Borrower shall deliver to
Agent from time to time a report of a reputable insurance broker,
satisfactory to Agent, with respect to its insurance policies.
(c) Each Borrower shall deliver to Agent, in form and
substance satisfactory to Agent, endorsements to (i) all "All
Risk" and business interruption insurance naming Agent, on behalf
of itself and Lenders, as loss payee, and (ii) all general
liability and other liability policies naming Agent, on behalf of
itself and Lenders, as additional insured. Each Borrower
irrevocably makes, constitutes and appoints Agent (and all
officers, employees or agents designated by Agent), so long as
any Default or Event of Default shall have occurred and be
continuing, as such Borrower's true and lawful agent and
attorney-in-fact for the purpose of making, settling and
adjusting claims under such "All Risk" policies of insurance,
endorsing the name of such Borrower on any check or other item of
payment for the proceeds of such "All Risk" policies of insurance
and for making all determinations and decisions with respect to
such "All Risk" policies of insurance. Agent shall have no duty
to exercise any rights or powers granted to it pursuant to the
foregoing power-of-attorney. Borrower Representative shall
promptly notify Agent of any loss, damage, or destruction to the
Collateral in the amount of $500,000 or more, whether or not
covered by insurance. After deducting from such proceeds the
expenses, if any, incurred by Agent in the collection or handling
thereof, Agent may, at its option, apply such proceeds to the
reduction of the Obligations in accordance with Section 1.3(d),
or permit or require the applicable Borrower to use such money,
or any part thereof, to replace, repair, restore or rebuild the
Collateral in a diligent and expeditious manner with materials
and workmanship of substantially the same quality as existed
before the loss, damage or destruction. Notwithstanding the
foregoing, (a) if the casualty giving rise to such insurance
proceeds would not reasonably be expected to have a Material
Adverse Effect and such insurance proceeds do not exceed
$500,000.00 in the aggregate, Agent shall permit the applicable
Borrower to replace, restore, repair or rebuild the property, and
(b) if the casualty giving rise to such insurance proceeds would
not reasonably be expected to have a Material Adverse Effect and
such insurance proceeds exceed $500,000.00 in the aggregate,
Agent shall permit the applicable Borrower to replace, restore,
repair or rebuild the property, provided that if such Borrower
shall not have completed such replacement, restoration, repair or
rebuilding within 360 days of such casualty, Agent may apply such
insurance proceeds to the Obligations in accordance with Section
1.3(d). All insurance proceeds which are to be made available to
any Borrower to replace, repair, restore or rebuild the
Collateral shall be applied by Agent to reduce the outstanding
principal balance of the Revolving Loan of such Borrower (which
application shall not result in a permanent reduction of the
Revolving Loan Commitment) and upon such application, Agent shall
establish a Reserve against the separate Borrowing Base of the
affected Borrower in an amount equal to the amount of such
proceeds so applied or a cash collateral account subject to a
Control Letter. Thereafter, such funds shall be made available to
that Borrower to provide funds to replace, repair, restore or
rebuild the Collateral as follows: (i) Borrower Representative
shall request a Revolving Credit Advance or a release from such
cash collateral account be made to such Borrower in the amount
requested to be released; (ii) so long as the conditions set
forth in Section 2.2 have been met, Revolving Lenders shall make
such Revolving Credit Advance or release from such cash
collateral account; and (iii) the Reserve established with
respect to such insurance proceeds shall be reduced by the amount
of such Revolving Credit Advance. To the extent not used to
replace, repair, restore or rebuild the Collateral, such
insurance proceeds shall be applied in accordance with Section
1.2(d).
5.5. Compliance with Laws.
Each Borrower shall comply with all federal, state, local
and foreign laws and regulations applicable to it, including
without limitation those relating to licensing, ERISA and labor
matters, except to the extent that the failure to comply,
individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
5.6. Supplemental Disclosure.
From time to time as may be requested by Agent (which
request will not be made more frequently than once each year
absent the occurrence and continuance of a Default or an Event of
Default), the Borrowers shall supplement each Disclosure Schedule
hereto, or any representation herein or in any other Loan
Document, with respect to any matter hereafter arising which, if
existing or occurring at the date of this Agreement, would have
been required to be set forth or described in such Disclosure
Schedule or as an exception to such representation or which is
necessary to correct any information in such Disclosure Schedule
or representation which has been rendered inaccurate thereby
(and, in the case of any supplements to any Disclosure Schedule,
such Disclosure Schedule shall be appropriately marked to show the
changes made therein);provided that (a) no such supplement to any
such Disclosure Schedule or representation shall be or be deemed a
waiver of any Default or Event of Default resulting from the matters
disclosed therein, except as consented to by Agent and Requisite Lenders
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in writing; and (b) no supplement shall be required as to
representations and warranties that relate solely to the Closing
Date.
5.7. Intellectual Property.
Each Borrower will conduct its business and affairs without
infringement of or interference with any Intellectual Property of
any other Person which could reasonably be expected to have a
Material Adverse Effect.
5.8. Environmental Matters.
Each Borrower shall and shall cause each Person within its
control to: (a) conduct its operations and keep and maintain its
Real Estate in compliance with all Environmental Laws and
Environmental Permits other than noncompliance which could not
reasonably be expected to have a Material Adverse Effect; (b)
implement any and all investigation, remediation, removal and
response actions which are necessary to comply with Environmental
Laws and Environmental Permits pertaining to the presence,
generation, treatment, storage, use, disposal, transportation or
Release of any Hazardous Material on, at, in, under, above, to,
from or about any of its Real Estate; (c) notify Agent promptly
after such Borrower becomes aware of any violation of
Environmental Laws or Environmental Permits or any Release on,
at, in, under, above, to, from or about any Real Estate which is
reasonably likely to result in Environmental Liabilities in
excess of $500,000; and (d) promptly forward to Agent a copy of
any order, notice, request for information or any communication
or report received by such Borrower in connection with any such
violation or Release or any other matter relating to any
Environmental Laws or Environmental Permits that could reasonably
be expected to result in Environmental Liabilities in excess of
$1,000,000 in each case whether or not the Environmental
Protection Agency or any Governmental Authority has taken or
threatened any action in connection with any such violation or
Release. If Agent at any time has a reasonable basis to believe
that there may be a violation of any Environmental Laws or
Environmental Permits by any Borrower or any Environmental
Liability arising thereunder, or a Release of Hazardous Materials
on, at, in, under, above, to, from or about any of its Real
Estate, which, in each case, could reasonably be expected to have
a Material Adverse Effect, then each Borrower shall, upon Agent's
written request (i) cause the performance of such environmental
audits including subsurface sampling of soil and groundwater, and
preparation of such environmental reports, at Borrowers' expense,
as Agent may from time to time reasonably request, which shall be
conducted by reputable environmental consulting firms reasonably
acceptable to Agent and shall be in form and substance acceptable
to Agent, and (ii) permit Agent or its representatives to have
access to all Real Estate for the purpose of conducting such
environmental audits and testing as Agent deems reasonably
appropriate, including subsurface sampling of soil and
groundwater. Borrowers shall reimburse Agent for the costs of
such audits and tests and the same will constitute a part of the
Obligations secured hereunder.
5.9. Landlords' Agreements. Mortgagee Agreements and Bailee
Letters.
Each Borrower shall use its best efforts to obtain a
landlord's agreement, mortgagee agreement or bailee letter, as
applicable, from the lessor of each leased property or mortgagee
of owned property or with respect to any warehouse, processor or
converter facility or other location where Collateral is located,
which agreement or letter shall contain a waiver or subordination
of all Liens or claims that the landlord, mortgagee or bailee may
assert against the Inventory or Collateral at that location, and
shall otherwise be satisfactory in form and substance to Agent.
With respect to such locations or warehouse space leased or owned
as of the Closing Date, if Agent has not received a landlord or
mortgagee agreement or bailee letter as of the Closing Date, any
Borrower's Eligible Inventory at that location shall, in Agent's
discretion, be excluded from such Borrower's Borrowing Base or be
subject to such Reserves as may be established by Agent in its
reasonable credit judgment; provided, that any such exclusion
from such Borrower's Borrowing Base, and any such additional
Reserve, shall be canceled upon Agent's receipt of an acceptable
landlord or mortgagee agreement or bailee letter. After the
Closing Date, no real property or warehouse space shall be leased
or acquired by any Borrower and no Inventory shall be shipped to
a processor or converter under arrangements established after the
Closing Date without the prior written consent of Agent, unless
and until a satisfactory landlord or mortgagee agreement or
bailee letter, as appropriate, shall first have been obtained
with respect to such location. Each Borrower shall timely and
fully pay and perform its obligations under all leases and other
agreements with respect to each leased location or public
warehouse where any Collateral is or may be located. If any
Borrower obtains an ownership interest in any real property
following the Closing Date, such Borrower shall execute and
deliver all documents and instruments necessary to grant Agent a
fully perfected first priority security interest in such real
property.
5. 10. Further Assurances.
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Each Borrower agrees that it shall and shall cause each
other Borrower to, at such Borrower's expense and upon request of
Agent, duly execute and deliver, or cause to be duly executed and
delivered, to Agent such further instruments and do and cause to
be done such further acts as may be necessary or proper in the
reasonable opinion of Agent to carry out more effectively the
provisions and purposes of this Agreement or any other Loan
Document.
5.11. Year 2000.
Each Borrower will take all action necessary to assure that
all its computer based systems (including embedded systems) are
able to effectively process data including dates prior to, on and
after January 1, 2000. At the request of Agent or any Lender,
each Borrower shall provide Agent and the requesting Lender(s)
with assurances reasonably acceptable to the Agent or Lender(s)
of such Borrower's year 2000 capability.
6. NEGATIVE COVENANTS
Each Borrower jointly and severally agrees as to all
Borrowers that, without the prior written consent of Agent and
the Requisite Lenders, from and after the date hereof until the
Termination Date:
6.1. Mergers, Subsidiaries, Etc.
No Borrower shall directly or indirectly, by operation of
law or otherwise, (a) form or acquire any Subsidiary, or (b)
merge with, consolidate with, acquire all or substantially all of
the assets or capital stock of, or otherwise combine with or
acquire, any Person.
6.2. Investments: Loans and Advances.
Except as otherwise expressly permitted by this Section 6,
no Borrower shall make or permit to exist any investment in, or
make, accrue or permit to exist loans or advances of money to,
any Person, through the direct or indirect lending of money,
holding of securities or otherwise, except that (a) Borrowers may
hold investments comprised of notes payable, or stock or other
securities issued by Account Debtors to any Borrower pursuant to
negotiated agreements with respect to settlement of such Account
Debtor's Accounts in the ordinary course of business, so long as
the aggregate amount of such Accounts so settled by Borrowers
does not exceed $250,000; and (b) provided that no Event of
Default shall have occurred and be continuing and that Agent, for
itself and the benefit of Lenders, has a first priority perfected
security interest therein pursuant to a Control Letter, and (x)
that if there are outstanding Revolving Credit Advances, the
amount of such investments does not exceed $1,000,000 in the
aggregate or such investments shall be limited to overnight
repurchase obligations (described below) or (y) that if there are
no outstanding Revolving Credit Advances (in which case the
amount of such investments is not subject to any limitation),
Borrowers may make and own investments in (i) marketable direct
obligations issued or unconditionally guaranteed by the United
States of America or any agency thereof maturing within one year
from the date of acquisition thereof, (ii) commercial paper
maturing no more than one year from the date of creation thereof
and currently having the highest rating obtainable from either
Standard & Poor's Ratings Group or Moody's Investors Service,
Inc., (iii) certificates of deposit maturing no more than one
year from the date of creation thereof or overnight repurchase
obligations issued by commercial banks incorporated under the
laws of the United States of America, each having combined
capital, surplus and undivided profits of not less than
$200,000,000 and having a senior unsecured rating of "A" or
better by a nationally recognized rating agency, provided that
the aggregate amount invested in such certificates of deposit
shall not at any time exceed $500,000 for any one such
certificate of deposit and $1,000,000 for any one such bank, (iv)
time deposits, maturing no more than thirty (30) days from the
date of creation thereof with commercial banks or savings and
loan associations each having membership either in the Federal
Deposit Insurance Corporation or in the Federal Savings and Loan
Insurance Corporation and in amounts not exceeding the maximum
amounts of insurance thereunder, and (v) any other type of
investment not exceeding $1,000,000 in the aggregate at any time
outstanding.
6.3. Indebtedness.
(a) No Borrower shall create, incur, assume or permit to
exist any Indebtedness, except (without duplication) (i)
Indebtedness secured by purchase money security interests
permitted in clause (c) of Section 6.7, (ii) the Loans and the
other Obligations, (iii) deferred taxes, (iv) unfunded pension
fund and other employee benefit plan obligations and liabilities
to the extent they are permitted to remain unfunded under
applicable law, (v) existing Indebtedness described in Disclosure
Schedule (6.3) and refinancings thereof or amendments or
modifications thereto which do not have the effect of increasing
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the principal amount thereof or changing the amortization thereof
(other than to extend the same) and which are otherwise on terms
and conditions no less favorable to any Borrower, Agent or any
Lender, as reasonably determined by Agent, than the terms of the
Indebtedness being refinanced, amended or modified, (vi)
Indebtedness consisting of intercompany loans and advances made
by any Borrower to any other Borrower or Foreign Subsidiary,
provided that (A) each obligor of such loans or advances shall
have executed and delivered to the Borrower making such loan or
advances, on the Closing Date, a demand note (collectively, the
"Intercompany Notes") to evidence any such intercompany
Indebtedness owing at any time by such obligor to such Borrower,
which Intercompany Notes shall be in form and substance
satisfactory to Agent and shall be pledged and delivered to Agent
pursuant to the applicable Pledge Agreement or Security Agreement
as additional collateral security for the Obligations; (B) each
Borrower shall record all intercompany transactions on its books
and records in a manner satisfactory to Agent; (C) at the time
any such intercompany loan or advance is made by any Borrower to
any other Borrower and after giving effect thereto, each such
Borrower shall be Solvent; and (D) no Default or Event of Default
would occur and be continuing after giving effect to any such
proposed intercompany loan.
(b) No Borrower shall, directly or indirectly, voluntarily
purchase, redeem, defease or prepay any principal of, premium, if
any, interest or other amount payable in respect of any
Indebtedness, other than (i) the Obligations, (ii) Indebtedness
secured by a Permitted Encumbrance if the asset securing such
Indebtedness has been sold or otherwise disposed of in accordance
with Sections 6.8(b), or (iii) other Indebtedness not in excess
of $500,000.
6.4. Employee Loans and Affiliate Transactions.
(a) Except as otherwise expressly permitted in this Section
6 with respect to Affiliates, no Borrower shall enter into or be
a party to any transaction with any other Borrower or any
Affiliate thereof except (i) transfers of equipment and sales of
inventory between Borrowers in the ordinary course of business;
provided that such assets are physically moved to the premises of
the transferee and each Borrower continues to be Solvent after
giving effect to any such transfer; and (ii) other transactions
in the ordinary course of and pursuant to the reasonable
requirements of such Borrower's business (but expressly excluding
any Restricted Payments except as expressly permitted in Section
6.14) and, in each case, upon fair and reasonable terms that are
no less favorable to such Borrower than would be obtained in a
comparable arm's length transaction with a Person not an
Affiliate of such Borrower. In addition, if any such transaction
or series of related transactions involves payments in excess of
$1,000,000 in the aggregate, the terms of these transactions must
be disclosed in advance to Agent and Lenders. All such
transactions existing as of the date hereof are described on
Disclosure Schedule (6 4(a)).
(b) No Borrower shall enter into any lending or borrowing
transaction with any employees of any Borrower, except loans to
their respective employees on an arms-length basis in the
ordinary course of business consistent with past practices for
travel expenses, relocation costs and similar purposes up to a
maximum of $100,000 to any employee and up to a maximum of
$500,000 in the aggregate at any one time outstanding.
6.5. Capital Structure and Business.
No Borrower shall (a) make any changes in any of its
business objectives, purposes or operations which could in any
way adversely affect the repayment of the Loans or any of the
other Obligations or could reasonably be expected to result in a
Material Adverse Effect, (b) make any change in its capital
structure as described on Disclosure Schedule (3.8), including
the issuance of any shares of Stock, warrants or other securities
convertible into Stock or any revision of the terms of its
outstanding Stock, except that Parent may issue shares to
Borrowers' employees upon exercise of options or pursuant to
Parent's employee stock option plan, or (c) amend its charter or
bylaws in a manner which would adversely affect Agent or Lenders
or such Borrower's duty or ability to repay the Obligations. No
Borrower shall engage in any business other than the businesses
currently engaged in by it or businesses reasonably related
thereto.
6.6. Guaranteed Indebtedness.
No Borrower shall create, incur, assume or permit to exist
any Guaranteed Indebtedness except (a) by endorsement of
instruments or items of payment for deposit to the general
account of any Borrower, and (b) for Guaranteed Indebtedness
incurred for the benefit of any other Borrower if the primary
obligation is expressly permitted by this Agreement.
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6.7. Liens.
No Borrower shall create, incur, assume or permit to exist
any Lien on or with respect to its Accounts or any of its other
properties or assets (whether now owned or hereafter acquired)
except for (a) Permitted Encumbrances; (b) Liens in existence on
the date hereof and summarized on Disclosure Schedule (6.7); (c)
Liens created after the date hereof by conditional sale or other
title retention agreements (including Capital Leases) or in
connection with purchase money Indebtedness with respect to
Equipment and Fixtures acquired by any Borrower in the ordinary
course of business, involving the incurrence of an aggregate
amount of purchase money Indebtedness and Capital Lease
Obligations of not more than $500,000 outstanding at any one time
for all such Liens (provided that such Liens attach only to the
assets subject to such purchase money debt and such Indebtedness
is incurred within twenty (20) days following such purchase and
does not exceed 100% of the purchase price of the subject
assets). In addition, no Borrower shall become a party to any
agreement, note, indenture or instrument, or take any other
action, which would prohibit the creation of a Lien on any of its
properties or other assets in favor of Agent, on behalf of itself
and Lenders, as additional collateral for the Obligations, except
operating leases, Capital Leases or Licenses which prohibit Liens
upon the assets that are subject thereto.
6.8. Sale of Stock and Assets.
No Borrower shall sell, transfer, convey, assign or
otherwise dispose of any of its properties or other assets,
including the capital Stock of any of its Subsidiaries and any of
their Accounts, other than (a) the sale of Inventory in the
ordinary course of business, (b) the sale, transfer, conveyance
or other disposition by a Borrower of Equipment or Fixtures that
are obsolete or no longer used or useful in such Borrower's
business and having a value not exceeding $100,000 in an, single
transaction or $500,000 in the aggregate in any Fiscal Year, and
(c) other Equipment and Fixtures having a value not exceeding
$250,000 in an, single transaction or $1,000,000 in the aggregate
in any Fiscal Year. With respect to any disposition of assets or
other properties permitted pursuant to clause (b) and clause (c)
above, Agent agrees on reasonable prior written notice to release
its Lien on such assets or other properties in order to permit
the applicable Borrower to effect such disposition and shall
execute and deliver to Borrowers, at Borrowers' expense,
appropriate UCC-3 termination statements and other releases as
reasonably requested by Borrowers.
6.9. ERISA.
No Borrower shall, or shall cause or permit any ERISA
Affiliate to, cause or permit to occur an event which could
result in the imposition of a Lien under Section 412 of the IRC
or Section 302 or 4068 of ERISA.
6.10. Financial Covenants.
Borrowers shall not breach or fail to comply with any of the
Financial Covenants (the "Financial Covenants") set forth in
Annex E.
6.11. Hazardous Materials.
No Borrower shall cause or permit a Release of any Hazardous
Material on, at, in, under, above, to, from or about any of the
Real Estate where such Release would violate, or form the basis
for Environmental Liabilities under, any Environmental Laws or
Environmental Permits, other than such violations or
Environmental Liabilities which could not reasonably be expected
to have a Material Adverse Effect.
6.12. Sale-Leasebacks.
No Borrower shall engage in any sale-leaseback, synthetic
lease or similar transaction involving any of its assets.
6. 13. Cancellation of Indebtedness.
No Borrower shall cancel any claim or debt owing to it,
except for reasonable consideration negotiated on an arms-length
basis and in the ordinary course of its business consistent with
past practices.
6.14. Restricted Payments.
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No Borrower shall make any Restricted Payment, except (a)
intercompany loans and advances between Borrowers to the extent
permitted by Section 6.3 above; (b) dividends and distributions
by a Borrower to such Borrower as owns all of its capital stock;
and (c) employee loans permitted under Section 6.4(b) above.
6. 15. Change of Corporate Name or Location; Change of
Fiscal Year.
No Borrower shall (a) change its corporate name, or (b)
change its chief executive office, principal place of business,
corporate offices or warehouses or locations at which Collateral
is held or stored, or the location of its records concerning the
Collateral, in any case without at least thirty (30) days prior
written notice to Agent and after Agent's written acknowledgment
that any reasonable action requested by Agent in connection
therewith, including to continue the perfection of any Liens in
favor of Agent, on behalf of Lenders, in any Collateral, has been
completed or taken, and provided that any such new location shall
be in the continental United States. Without limiting the
foregoing, no Borrower shall change its name, identity or
corporate structure in any manner which might make any financing
or continuation statement filed in connection herewith seriously
misleading within the meaning of Section 9-402(7) of the Code or
any other then applicable provision of the Code except upon prior
written notice to Agent and Lenders and after Agent's written
acknowledgment that any reasonable action requested by Agent in
connection therewith, including to continue the perfection of any
Liens in favor of Agent, on behalf of Lenders, in any Collateral,
has been completed or taken. No Borrower shall change its Fiscal
Year.
6. 16. No Impairment of Intercompany Transfers.
No Borrower shall directly or indirectly enter into or
become bound by any agreement, instrument, indenture or other
obligation (other than this Agreement and the other Loan
Documents) which could directly or indirectly restrict, prohibit
or require the consent of
any Person with respect to the payment of dividends or
distributions or the making or repayment of intercompany loans by
a Subsidiary of any Borrower to any Borrower or between
Borrowers.
6. 17. No Speculative Transactions.
No Borrower shall engage in any transaction involving
commodity options, futures contracts or similar transactions,
except solely to hedge against fluctuations in the prices of
commodities owned or purchased by it and the values of foreign
currencies receivable or payable by it and interest swaps, caps
or collars.
6.18. Leases.
No Borrower shall enter into any operating lease for
Equipment or Real Estate, if the aggregate of all such operating
lease payments payable in any year for Borrowers on a
consolidated basis would exceed $500,000.
7. TERM
7.1. Termination.
The financing arrangements contemplated hereby shall be in
effect until the Commitment Termination Date, and the Loans and
all other Obligations shall be automatically due and payable in
full on such date.
7.2. Survival of Obligations Upon Termination of Financing
Arrangements.
Except as otherwise expressly provided for in the Loan
Documents, no termination or cancellation (regardless of cause or
procedure) of any financing arrangement under this Agreement
shall in any way affect or impair the obligations, duties and
liabilities of the Borrowers or the rights of Agent and Lenders
relating to any unpaid portion of the Loans or any other
Obligations, due or not due, liquidated, contingent or
unliquidated or any transaction or event occurring prior to such
termination, or any transaction or event, the performance of
which is required after the Commitment Termination Date. Except
as otherwise expressly provided herein or in any other Loan
Document, all undertakings, agreements, covenants, warranties and
representations of or binding upon the Borrowers, and all rights
of Agent and each Lender, all as contained in the Loan Documents,
shall not terminate or expire, but rather shall survive any such
termination or cancellation and shall continue in full force and
effect until the Termination Date; provided however, that in all
events the provisions of Section 11, the payment obligations
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under Sections 1.14 and 1.15, and the indemnities contained in
the Loan Documents shall survive the Termination Date.
8. EVENTS OF DEFAULT: RIGHTS AND REMEDIES
8.1. Events of Default.
The occurrence of any one or more of the following events
(regardless of the reason therefor) shall constitute an "Event of
Default" hereunder:
(a) Any Borrower (i) fails to make any payment of principal
of, or interest on, or Fees owing in respect of, the Loans or any
of the other Obligations when due and payable, whether by
acceleration or otherwise, or (ii) fails to pay or reimburse
Agent or Lenders for any expense reimbursable hereunder or under
any other Loan Document within ten (10) days following Agent's
demand for such reimbursement or payment of expenses.
(b) Any Borrower shall fail or neglect to perform, keep or
observe any of the provisions of Sections 1.4, 1.8, 5.4 or 6, or
any of the provisions set forth in Annexes A or E, respectively.
(c) Any Borrower shall fail or neglect to perform, keep or
observe any of the provisions of Section 4 or any provisions set
forth in Annexes C or D, respectively, and the same shall remain
unremedied for three (3) Business Days or more.
(d) Any Borrower shall fail or neglect to perform, keep or
observe any other provision of this Agreement or of any of the
other Loan Documents (other than any provision embodied in or
covered by any other clause of this Section 8.1) and the some
shall remain unremedied for thirty (30) days or more.
(e) A default or breach shall occur under any other
agreement, document or instrument to which any Borrower is a
party which is not cured within any applicable grace period, and
such default or breach (i) involves the failure to make any
payment when due in respect of any Indebtedness (other than the
Obligations) of any Borrower in excess of $100,000 in the
aggregate, or (ii) causes, or permits any holder of such
Indebtedness or a trustee to cause, Indebtedness or a portion
thereof in excess of $200,000 in the aggregate to become due
prior to its stated maturity or prior to its regularly scheduled
dates of payment, regardless of whether such default is waived,
or such right is exercised, by such holder or trustee.
(f) Any information contained in any Borrowing Base
Certificate is untrue or incorrect in any respect, or any
representation or warranty herein or in any Loan Document or in
any written statement, report, financial statement or certificate
(other than a Borrowing Base Certificate) made or delivered to
Agent or any Lender by any Borrower is untrue or incorrect in any
material respect as of the date when made or deemed made.
(g) Assets of any Borrower with a fair market value of
$200,000 or more shall be attached, seized, levied upon or
subjected to a writ or distress warrant, or come within the
possession of any receiver, trustee, custodian or assignee for
the benefit of creditors of any Borrower and such condition
continues for thirty (30) days or more.
(h) A case or proceeding shall have been commenced against
any Borrower seeking a decree or order in respect of any Borrower
(i) under Title 11 of the United States Code, as now constituted
or hereafter amended or any other applicable federal, state or
foreign bankruptcy or other similar law, (ii) appointing a
custodian, receiver, liquidator, assignee, trustee or
sequestrator (or similar official) for any Borrower or of any
substantial part of any such Person's assets, or (iii) ordering
the winding up or liquidation of the affairs of any Borrower, and
such case or proceeding shall remain undismissed or unstayed for
sixty (60) days or more or such court shall enter a decree or
order granting the relief sought in such case or proceeding.
(i) Any Borrower (i) shall file a petition seeking relief
under Title 11 of the United States Code, as now constituted or
hereafter amended, or any other applicable federal, state or
foreign bankruptcy or other similar law, (ii) shall fail to
contest in a timely and appropriate manner or shall consent to
the institution of proceedings thereunder or to the filing of any
such petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee or
sequestrator (or similar official) of any Borrower or of any
substantial part of any such Person's assets, (iii) shall make an
assignment for the benefit of creditors, (iv) shall take any
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corporate action in furtherance of any of the foregoing; or (v)
shall admit in writing its inability to, oar shall be generally
unable to, pay its debts as such debts become due.
(j) A final judgment or judgments for the payment of money
in excess of $100,000 in the aggregate at any time outstanding
shall be rendered against any Borrower and the same shall not,
within thirty (30) days after the entry thereof, have been
discharged or execution thereof stayed or bonded pending appeal,
or shall not have been discharged prior to the expiration of any
such stay.
(k) Any material provision of any Loan Document shall for
any reason cease to be valid, binding and enforceable in
accordance with its terms (or any Borrower shall challenge the
enforceability of any Loan Document or shall assert in writing,
or engage in any action or inaction based on any such assertion,
that any provision of any of the Loan Documents has ceased to be
or otherwise is not valid, binding and enforceable in accordance
with its terms), or any security interest created under any Loan
Document shall cease to be a valid and perfected first priority
security interest or Lien (except as otherwise permitted herein
or therein) in any of the Collateral purported to be covered
thereby.
(l) Any Change of Control shall occur.
(m) Any event shall occur, whether or not insured or
insurable, as a result of which revenue-producing activities
cease or are substantially curtailed at any facility of Borrowers
generating more than 25% of Borrowers' consolidated revenues for
the Fiscal Year preceding such event and such cessation or
curtailment continues for more than thirty (30) days.
8.2. Remedies.
(a) If any Event of Default shall have occurred and be
continuing or if a Default shall have occurred and be continuing
and Agent or Requisite Revolving Lenders shall have determined
not to make any Advances so long as that specific Default is
continuing, Agent may (and at the written request of the
Requisite Revolving Lenders shall), without notice, suspend this
facility with respect to further Advances whereupon any further
Advances shall be made or extended in Agent's sole discretion (or
in the sole discretion of the Requisite Revolving Lenders, if
such suspension occurred at their direction) so long as such
Default or Event of Default is continuing. If any Default or
Event of Default shall have occurred and be continuing, Agent may
(and at the written request of Requisite Lenders shall), without
notice except as otherwise expressly provided herein, increase
the rate of interest applicable to the Loans to the Default Rate.
(b) If any Event of Default shall have occurred and be
continuing, Agent may (and at the written request of the
Requisite Lenders shall), without notice, (i) terminate this
facility with respect to further Advances; (ii) declare all or
any portion of the Obligations, including all or any portion of
any Loan to be forthwith due and payable, all without
presentment, demand, protest or further notice of any kind, all
of which are expressly waived by Borrowers and each other
Borrower; and (iii) exercise any rights and remedies provided to
Agent under the Loan Documents and/or at law or equity, including
all remedies provided under the Code; provided, however, that
upon the occurrence of an Event of Default specified in Sections
8.1(g), (h) or (i), all of the Obligations, including the
aggregate Revolving Loan, shall become immediately due and
payable without declaration, notice or demand by any Person.
8.3. Waivers by Borrowers.
Except as otherwise provided for in this Agreement or by
applicable law, each Borrower waives: (a) presentment, demand and
protest and notice of presentment, dishonor, notice of intent to
accelerate, notice of acceleration, protest, default, nonpayment,
maturity, release, compromise, settlement, extension or renewal
of any or all commercial paper, accounts, contract rights,
documents, instruments, chattel paper and guaranties at any time
held by Agent on which any Borrower may in any way be liable, and
hereby ratifies and confirms whatever Agent may do in this
regard, (b) all rights to notice and a hearing prior to Agent's
taking possession or control of, or to Agent's replevy,
attachment or levy upon, the Collateral or any bond or security
which might be required by any court prior to allowing Agent to
exercise any of its remedies, and (c) the benefit of all
valuation, appraisal, marshaling and exemption laws.
9. ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT
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9.1. Assignment and Participations.
(a) The Borrowers signatory hereto consent to any Lender's
assignment of, and/or sale of participations in, at any time or
times, the Loan Documents, Loans, and any Commitment or of any
portion thereof or interest therein, including any Lender's
rights, title, interests, remedies, powers or duties thereunder,
whether evidenced by a writing or not. Any assignment by a Lender
shall (i) require the consent of Agent (which shall not be
unreasonably withheld or delayed) and the consent of Borrowers
(which shall not be unreasonably withheld or delayed), except
that the consent of Borrowers shall not be required for an
assignment by a Lender to an affiliate (i.e., an entity
controlling, controlled by or under common control with the
assigning Lender) or during the existence and continuance of a
Default or an Event of Default, and the execution of an
assignment agreement (an "Assignment Agreement") substantially in
the from attached hereto as Exhibit 9.1 (a) and otherwise in form
and substance satisfactory to, and acknowledged by, Agent; (ii)
be conditioned on such assignee Lender representing to the
assigning Lender and Agent that it is purchasing the applicable
Loans to be assigned to it for its own account, for investment
purposes and not with a view to the distribution thereof; (iii)
if a partial assignment, be in an amount at least equal to
$5,000,000 and, after giving effect to any such partial
assignment, the assigning Lender shall have retained Commitments
in an amount at least equal to $5,000,000; and (iv) include a
payment to Agent of an assignment fee of $3,500.00. In the case
of an assignment by a Lender under this Section 9.1, the assignee
shall have, to the extent of such assignment, the same rights,
benefits and obligations as it would if it were a Lender
hereunder. The assigning Lender shall be relieved of its
obligations hereunder with respect to its Commitments or assigned
portion thereof from and after the date of such assignment. Each
Borrower hereby acknowledges and agrees that any assignment will
give rise to a direct obligation of Borrowers to the assignee and
that the assignee shall be considered to be a "Lender". In all
instances, each Lender's liability to make Loans hereunder shall
be several and not joint and shall be limited to such Lender's
Pro Rata Share of the applicable Commitment. In the event Agent
or any Lender assigns or otherwise transfers all or any part of a
Note, Agent or any such Lender shall so notify Borrowers and
Borrowers shall, upon the request of Agent or such Lender,
execute new Notes in exchange for the Notes being assigned.
Notwithstanding the foregoing provisions of this Section 9.1 (a),
any Lender may at any time pledge or assign all or any portion of
such Lender's rights under this Agreement and the other Loan
Documents to a Federal Reserve Bank; provided, however, that no
such pledge or assignment shall release such Lender from such
Lender's obligations hereunder or under any other Loan Document.
(b) Any participation by a Lender of all or any part of its
Commitments shall be made with the understanding that all amounts
payable by Borrowers hereunder shall be determined as if that
Lender had not sold such participation, and that the holder of
any such participation shall not be entitled to require such
Lender to take or omit to take any action hereunder except
actions directly affecting (i) any reduction in the principal
amount of, or interest rate or Fees payable with respect to, any
Loan in which such holder participates, (ii) any extension of the
scheduled amortization of the principal amount of any Loan in
which such holder participates or the final maturity date
thereof, and (iii) any release of all or substantially all of the
Collateral (other than in accordance with the terms of this
Agreement, the Collateral Documents or the other Loan Documents).
Solely for purposes of Sections 1.12, 1.14, 1.15 and 9.8, each
Borrower acknowledges and agrees that a participation shall give
rise to a direct obligation of Borrowers to the participant and
the participant shall be considered to be a "Lender". Except as
set forth in the preceding sentence no Borrower shall have any
obligation or duty to any participant. Neither Agent nor any
Lender (other than the Lender selling a participation) shall have
any duty to any participant and may continue to deal solely with
the Lender selling a participation as if no such sale had
occurred.
(c) Except as expressly provided in this Section 9.1, no
Lender shall, as between Borrowers and that Lender, or Agent and
that Lender, be relieved of any of its obligations hereunder as a
result of any sale, assignment, transfer or negotiation of, or
granting of participation in, all or any part of the Loans, the
Notes or other Obligations owed to such Lender.
(d) Each Borrower shall assist any Lender permitted to sell
assignments or participations under this Section 9.1 as
reasonably required to enable the assigning or selling Lender to
effect any such assignment or participation, including the
execution and delivery of any and all agreements, notes and other
documents and instruments as shall be requested and, if requested
by Agent, the preparation of informational materials for, and the
participation of management in meetings with, potential assignees
or participants. Each Borrower shall certify the correctness,
completeness and accuracy of all descriptions of the Borrowers
and their affairs contained in any selling materials provided by
them and all other information provided by them and included in
such materials, except that any Projections delivered by
Borrowers shall only be certified by Borrowers as having been
prepared by Borrowers in compliance with the representations
contained in Section 3.4(c).
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(e) A Lender may furnish any information concerning
Borrowers in the possession of such Lender from time to time to
assignees and participants (including prospective assignees and
participants). Each Lender shall obtain from assignees or
participants confidentiality covenants substantially equivalent
to those contained in Section 11.8.
(f) So long as no Event of Default shall have occurred and
be continuing, no Lender shall assign or sell participations in
any portion of its Loans or Commitments to a potential Lender or
participant, if, as of the date of the proposed assignment or
sale, the assignee Lender or participant would be subject to
capital adequacy or similar requirements under Section 1.14(a),
increased costs under Section 1.15(b), or an inability to fund
LIBOR Loans under Section 1.15(c).
9.2. Appointment of Agent.
Fleet Bank - NH is hereby appointed to act on behalf of all
Lenders as Agent under this Agreement and the other Loan
Documents. The provisions of this Section 9.2 are solely for the
benefit of Agent and Lenders and no Borrower nor any other Person
shall have any rights as a third party beneficiary of any of the
provisions hereof. In performing its functions and duties under
this Agreement and the other Loan Documents, Agent shall act
solely as an agent of Lenders and does not assume and shall not
be deemed to have assumed any obligation toward or relationship
of agency or trust with or for any Borrower or any other Person.
Agent shall have no duties or responsibilities except for those
expressly set forth in this Agreement and the other Loan
Documents. The duties of Agent shall be mechanical and
administrative in nature and Agent shall not have, or be deemed
to have, by reason of this Agreement, any other Loan Document or
otherwise a fiduciary relationship in respect of any Lender.
Neither Agent nor any of its Affiliates nor any of their
respective of ricers, directors, employees, agents or
representatives shall be liable to any Lender for any action
taken or omitted to be taken by it hereunder or under any other
Loan Document, or in connection herewith or therewith, except for
damages solely caused by its or their own gross negligence or
willful misconduct as finally determined by a court of competent
jurisdiction.
If Agent shall request instructions from Requisite Lenders,
Requisite Revolving Lenders, or all affected Lenders with respect
to any act or action (including failure to act) in connection
with this Agreement or any other Loan Document, then Agent shall
be entitled to refrain from such act or taking such action unless
and until Agent shall have received instructions from Requisite
Lenders, Requisite Revolving Lenders, or all affected Lenders, as
the case may be, and Agent shall not incur liability to any
Person by reason of so refraining. Agent shall be fully justified
in failing or refusing to take any action hereunder or under any
other Loan Document (a) if such action would, in the opinion of
Agent, be contrary to law or the terms of this Agreement or any
other Loan Document, (b) if such action would, in the opinion of
Agent, expose Agent to Environmental Liabilities or (c) if Agent
shall not first be indemnified to its satisfaction against any
and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action. Without
limiting the foregoing, no Lender shall have any right of action
whatsoever against Agent as a result of Agent acting or
refraining from acting hereunder or under any other Loan Document
in accordance with the instructions of Requisite Lenders,
Requisite Revolving Lenders, or all affected Lenders, as
applicable.
9.3. Agent's Reliance. Etc.
Neither Agent nor any of its Affiliates nor any of their
respective directors, officers, agents or employees shall be
liable for any action taken or omitted to be taken by it or them
under or in connection with this Agreement or the other Loan
Documents, except for damages caused by its or their own gross
negligence or willful misconduct. Without limitation of the
generality of the foregoing, Agent: (a) may treat the payee of
any Note as the holder thereof until Agent receives written
notice of the assignment or transfer thereof signed by such payee
and in form satisfactory to Agent; (b) may consult with legal
counsel, independent public accountants and other experts
selected by it and shall not be liable for any action taken or
omitted to be taken in good faith by it in accordance with the
advice of such counsel, accountants or experts; (c) makes no
warranty or representation to any Lender and shall not be
responsible to any Lender for any statements, warranties or
representations made in or in connection with this Agreement or
the other Loan Documents; (d) shall not have any duty to
ascertain or to inquire as to the performance or observance of
any of the terms, covenants or conditions of this Agreement or
the other Loan Documents on the part of any Borrower or to
inspect the Collateral (including the books and records) of any
Borrower; (e) shall not be responsible to any Lender for the due
execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or the other Loan
Documents or any other instrument or document furnished pursuant
hereto or thereto; and (f) shall incur no liability under or in
respect of this Agreement or the other Loan Documents by acting
upon any notice, consent, certificate or other instrument or
writing (which may be by telecopy, telegram, cable or telex)
believed by it to be genuine and signed or sent by the proper
party or parties.
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9.4. Fleet Bank - NH and Affiliates.
With respect to its Commitments hereunder, Fleet Bank - NH
shall have the same rights and powers under this Agreement and
the other Loan Documents as any other Lender and may exercise the
same as though it were not Agent; and the term "Lender" or
"Lenders" shall, unless otherwise expressly indicated, include
Fleet Bank - NH in its individual capacity. Fleet Bank - NH and
its Affiliates may lend money to, invest in, and generally engage
in any kind of business with, any Borrower, any of their
Affiliates and any Person who may do business with or own
securities of any Borrower or any such Affiliate, all as if Fleet
Bank - NH were not Agent and without any duty to account therefor
to Lenders. Fleet Bank - NH and its Affiliates may accept fees
and other consideration from any Borrower for services in
connection with this Agreement or otherwise without having to
account for the same to Lenders. Each Lender acknowledges the
potential conflict of interest between Fleet Bank - NH as a
Lender holding disproportionate interests in the Loans and Fleet
Bank - NH as Agent.
9.5. Lender Credit Decision.
Each Lender acknowledges that it has, independently and
without reliance upon Agent or any other Lender and based on the
Financial Statements referred to in Section 3.4(a) and such other
documents and information as it has deemed appropriate, made its
own credit and financial analysis of the Borrowers and its own
decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance
upon Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action
under this Agreement. Each Lender acknowledges the potential
conflict of interest of each other Lender as a result of Lenders
holding disproportionate interests in the Loans, and expressly
consents to, and waives any claim based upon, such conflict of
interest.
9.6. Indemnification.
Lenders agree to indemnify Agent (to the extent not
reimbursed by the Borrowers and without limiting the obligations
of the Borrowers hereunder), ratably according to their
respective Pro Rata Shares, from and against any and all
liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by, or
asserted against Agent in any way relating to or arising out of
this Agreement or any other Loan Document or any action taken or
omitted by Agent in connection therewith; provided, however, that
no Lender shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from Agent's
gross negligence or willful misconduct. Without limiting the
foregoing, each Lender agrees to reimburse Agent promptly upon
demand for its ratable share of any out-of-pocket expenses
(including counsel fees) incurred by Agent in connection with the
preparation, execution, delivery, administration, modification,
amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of
rights or responsibilities under, this Agreement and each other
Loan Document, to the extent that Agent is not reimbursed for
such expenses by the Borrowers.
9.7. Successor Agent.
Agent may resign at any time by giving not less than thirty
(30) days' prior written notice thereof to Lenders and Borrower
Representative. Upon any such resignation, the Requisite Lenders
shall have the right to appoint a successor Agent. If no
successor Agent shall have been so appointed by the Requisite
Lenders and shall have accepted such appointment within thirty
(30) days after the resigning Agent's giving notice of
resignation, then the resigning Agent may, on behalf of Lenders,
appoint a successor Agent, which shall be a Lender, if a Lender
is willing to accept such appointment, or otherwise shall be a
commercial bank or financial institution or a subsidiary of a
commercial bank or financial institution if such commercial bank
or financial institution is organized under the laws of the
United States of America or of any State thereof and has a
combined capital and surplus of at least $1,000,000,000. If no
successor Agent has been appointed pursuant to the foregoing, by
the 30th day after the date such notice of resignation was given
by the resigning Agent, such resignation shall become effective
and the Requisite Lenders shall thereafter perform all the duties
of Agent hereunder until such time, if any, as the Requisite
Lenders appoint a successor Agent as provided above. Any
successor Agent appointed by Requisite Lenders hereunder shall be
subject to the approval of Borrower Representative, such approval
not to be unreasonably withheld or delayed; provided that such
approval shall not be required if a Default or an Event of
Default shall have occurred and be continuing. Upon the
acceptance of any appointment as Agent hereunder by a successor
Agent, such successor Agent shall succeed to and become vested
with all the rights, powers, privileges and duties of the
resigning Agent. Upon the earlier of the acceptance of any
appointment as Agent hereunder by a successor Agent or the
effective date of the resigning Agent's resignation, the
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resigning Agent shall be discharged from its duties and
obligations under this Agreement and the other Loan Documents,
except that any indemnity rights or other rights in favor of such
resigning Agent shall continue. After any resigning Agent's
resignation hereunder, the provisions of this Section 9 shall
inure to its benefit as to any actions taken or omitted to be
taken by it while it was Agent under this Agreement and the other
Loan Documents. Agent may be removed at the written direction of
the holders (other than Agent) of two-thirds or more of the
Commitments (excluding Agent's Commitment); provided that in so
doing, such Lenders shall be deemed to have waived and released
any and all claims they may have against Agent.
9.8. Setoff and Sharing of Payments.
In addition to any rights now or hereafter granted under
applicable law and not by way of limitation of any such rights,
upon the occurrence and during the continuance of any Event of
Default, each Lender and each holder of any Note is hereby
authorized at any time or from time to time, without notice to
any Borrower or to any other Person, any such notice being hereby
expressly waived, to set off and to appropriate and to apply any
and all balances held by it at any of its offices for the account
of any Borrower (regardless of whether such balances are then due
to such Borrower) and any other properties or assets any time
held or owing by that Lender or that holder to or for the credit
or for the account of any Borrower against and on account of any
of the Obligations which are not paid when due. Any Lender or
holder of any Note exercising a right to set off or otherwise
receiving any payment on account of the Obligations in excess of
its Pro Rata Share thereof shall purchase for cash (and the other
Lenders or holders shall sell) such participations in each such
other Lender's or holder's Pro Rata Share of the Obligations as
would be necessary to cause such Lender to share the amount so
set off or otherwise received with each other Lender or holder in
accordance with their respective Pro Rata Shares. Each Lender's
obligation under this Section 9.8 shall be in addition to and not
limitation of its obligations to purchase a participation in an
amount equal to its Pro Rata Share of the Swing Line Loans under
Section 1.1. Each Borrower agrees, to the fullest extent
permitted by law, that (a) any Lender or holder may exercise its
right to set off with respect to amounts in excess of its Pro
Rata Share of the Obligations and may sell participations in such
amount so set off to other Lenders and holders and (b) any Lender
or holders so purchasing a participation in the Loans made or
other Obligations held by other Lenders or holders may exercise
all rights of set-off, bankers' lien, counterclaim or similar
rights with respect to such participation as fully as if such
Lender or holder were a direct holder of the Loans and the other
Obligations in the amount of such participation. Notwithstanding
the foregoing, if all or any portion of the set-off amount or
payment otherwise received is thereafter recovered from the
Lender that has exercised the right of set-off, the purchase of
participations by that Lender shall be rescinded and the purchase
price restored without interest.
9.9. Advances; Payments; Non-Funding Lenders; Information:
Actions in Concert.
(a) Advances: Payments. (i) Revolving Lenders shall refund
or participate in the Swing Line Loan in accordance with clauses
(iii) and (iv) of Section 1.1 (d). If the Swing Line Lender
declines to make a Swing Line Loan or if Swing Line Availability
is zero, Agent shall notify Revolving Lenders, promptly after
receipt of a Notice of Revolving Credit Advance and in any event
prior to 12:00 noon (Manchester, New Hampshire time) on the date
such Notice of Revolving Advance is received, by telecopy,
telephone or other similar form of transmission. Each Revolving
Lender shall make the amount of such Lender's Pro Rata Share of
each Revolving Credit Advance available to Agent in same day
funds by wire transfer to Agent's account as set forth in Annex F
not later than 2:00 p.m. (Manchester, New Hampshire time) on the
requested funding date, in the case of an Index Rate Loan and not
later than 10:00 a.m. (Manchester, New Hampshire time) on the
requested funding date in the case of a LIBOR Loan. After receipt
of such wire transfers (or, in the Agent's sole discretion,
before receipt of such wire transfers), subject to the terms
hereof, Agent shall make the requested Revolving Credit Advance
to the Borrower designated by Borrower Representative in the
Notice of Revolving Credit Advance. All payments by each
Revolving Lender shall be made without setoff, counterclaim or
deduction of any kind.
(ii) On the second (2nd) Business Day of each calendar
week or more frequently as aggregate cumulative payments in
excess of $750,000.00 are received with respect to the Loans
(other than the Swing Line Loan) (each, a "Settlement Date"),
Agent will advise each Lender by telephone or telecopy of the
amount of such Lender's Pro Rata Share of principal, interest and
Fees paid for the benefit of Lenders with respect to each
applicable Loan. Provided that such Lender has made all payments
required to be made by it and has purchased all participations
required to be purchased by it under this Agreement and the other
Loan Documents as of such Settlement Date, Agent will pay to each
Lender such Lender's Pro Rata Share of principal, interest and
Fees paid by Borrowers since the previous Settlement Date for the
benefit of that Lender on the Loans held by it. Such payments
shall be made by wire transfer to such Lender's account (as
specified by such Lender in Annex F or the applicable Assignment
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Agreement) not later than 1:00 p.m. (Manchester, New Hampshire
time) on the next Business Day following each Settlement Date.
(b) Availability of Lender's Pro Rata Share. Agent may
assume that each Revolving Lender will make its Pro Rata Share of
each Revolving Credit Advance available to Agent on each funding
date. If such Pro Rata Share is not, in fact, paid to Agent by
such Revolving Lender when due, Agent will be entitled to recover
such amount on demand from such Revolving Lender without set-off,
counterclaim or deduction of any kind. If any Revolving Lender
fails to pay the amount of its Pro Rata Share forthwith upon
Agent's demand, Agent shall promptly notify Borrower
Representative and Borrowers shall immediately repay such amount
to Agent. Nothing in this Section 9.9(b) or elsewhere in this
Agreement or the other Loan Documents shall be deemed to require
Agent to advance funds on behalf of any Revolving Lender or to
relieve any Revolving Lender from its obligation to fulfill its
Commitments hereunder or to prejudice any rights that Borrowers
may have against any Revolving Lender as a result of any default
by such Revolving Lender hereunder. To the extent that Agent
advances funds to any Borrower on behalf of any Revolving Lender
and is not reimbursed therefor on the same Business Day as such
Advance is made, Agent shall be entitled to retain for its
account all interest accrued on such Advance until reimbursed by
the applicable Revolving Lender.
(c) Return of Payments.(i) If Agent pays an amount to a
Lender under this Agreement in the belief or expectation that a
related payment has been or will be received by Agent from
Borrowers and such related payment is not received by Agent, then
Agent will be entitled to recover such amount from such Lender on
demand without set-off, counterclaim or deduction of any kind.
(ii) If Agent determines at any time that any amount
received by Agent under this Agreement must be returned to any
Borrower or paid to any other Person pursuant to any insolvency
law or otherwise, then, notwithstanding any other term or
condition of this Agreement or any other Loan Document, Agent
will not be required to distribute any portion thereof to any
Lender. In addition, each Lender will repay to Agent on demand
any portion of such amount that Agent has distributed to such
Lender, together with interest at such rate, if any, as Agent is
required to pay to any Borrower or such other Person, without
set-off, counterclaim or deduction of any kind.
(d) Non-Funding Lenders. The failure of any Revolving Lender
(such Revolving Lender, a "Non-Funding Lender") to make any
Revolving Credit Advance or to purchase any participation in any
Swing Line Loan to be made or purchased by it on the date
specified therefor shall not relieve any other Revolving Lender
(each such other Revolving Lender, an "Other Lender") of its
obligations to make such Advance or purchase such participation
on such date, but neither any Other Lender nor Agent shall be
responsible for the failure of any Non-Funding Lender to make an
Advance to be made, or to purchase a participation to be
purchased, by such Non-Funding Lender. Notwithstanding anything
set forth herein to the contrary, a Non-Funding Lender shall not
have any voting or consent rights under or with respect to any
Loan Document or constitute a "Lender" or a "Revolving Lender"
(or be included in the calculation of "Requisite Lenders",
"Requisite Revolving Lenders" hereunder) for any voting or
consent rights under or with respect to any Loan Document.
(e) Dissemination of Information. Agent will use reasonable
efforts to provide Lenders with any notice of Default or Event of
Default received by Agent from, or delivered by Agent to, any
Borrower, with notice of any Event of Default of which Agent has
actually become aware and with notice of any action taken by
Agent following any Event of Default; provided, however, that
Agent shall not be liable to any Lender for any failure to do so,
except to the extent that such failure is attributable solely to
Agent's gross negligence or willful misconduct as finally
determined by a court of competent jurisdiction. Lenders
acknowledge that Borrowers are required to provide Financial
Statements and Collateral Reports to Lenders in accordance with
Annexes C and D hereto and agree that Agent shall have no duty to
provide the same to Lenders.
(f) Actions in Concert. Anything in this Agreement to the
contrary notwithstanding, each Lender hereby agrees with each
other Lender that no Lender shall take any action to protect or
enforce its rights arising out of this Agreement or the Notes
(including exercising any rights of set-off) without first
obtaining the prior written consent of Agent and Requisite
Lenders, it being the intent of Lenders that any such action to
protect or enforce rights under this Agreement and the Notes
shall be taken in concert and at the direction or with the
consent of Agent.
10. SUCCESSORS AND ASSIGNS
10.1. Successors and Assigns.
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This Agreement and the other Loan Documents shall be binding
on and shall inure to the benefit of each Borrower, Agent,
Lenders and their respective successors and assigns (including,
in the case of any Borrower, a debtor-in-possession on behalf of
such Borrower), except as otherwise provided herein or therein.
No Borrower may assign, transfer, hypothecate or otherwise convey
its rights, benefits, obligations or duties hereunder or under
any of the other Loan Documents without the prior express written
consent of Agent and Requisite Lenders. Any such purported
assignment, transfer, hypothecation or other conveyance by any
Borrower without the prior express written consent of Agent and
Requisite Lenders shall be void. The terms and provisions of this
Agreement are for the purpose of defining the relative rights and
obligations of each Borrower, Agent and Lenders with respect to
the transactions contemplated hereby and no Person shall be a
third party beneficiary of any of the terms and provisions of
this Agreement or any of the other Loan Documents.
11. MISCELLANEOUS
11.1. Complete Agreement: Modification of Agreement.
The Loan Documents constitute the complete agreement between
the parties with respect to the subject matter thereof and may
not be modified, altered or amended except as set forth in
Section 11.2 below. Any letter of interest, commitment letter,
and/or fee letter (other than the Fleet Fee Letter) between any
Borrower and Agent or any Lender or any of their respective
affiliates, predating this Agreement and relating to a financing
of substantially similar form, purpose or effect shall be
superseded by this Agreement.
11.2. Amendments and Waivers.
(a) Except for actions expressly permitted to be taken by
Agent, no amendment, modification, termination or waiver of any
provision of this Agreement or any of the Notes, or any consent
to any departure by any Borrower therefrom, shall in any event be
effective unless the same shall be in writing and signed by Agent
and Borrowers, and by Requisite Lenders, Requisite Revolving
Lenders, or all affected Lenders, as applicable. Except as set
forth in clauses (b) and (c) below, all such amendments,
modifications, terminations or waivers requiring the consent of
any Lenders shall require the written consent of Requisite
Lenders.
(b) No amendment, modification, termination or waiver of or
consent with respect to any provision of this Agreement which
waives compliance with the conditions precedent set forth in
Section 2.2 to the making of any Loan shall be effective unless
the same shall be in writing and signed by Agent, Requisite
Revolving Lenders and Borrowers. Notwithstanding anything
contained in this Agreement to the contrary, no waiver or consent
with respect to any Default (if in connection therewith Agent or
Requisite Revolving Lenders, as the case may be, have exercised
its or their right to suspend the making or incurrence of further
Advances pursuant to Section 8.2(a)) or any Event of Default
shall be effective for purposes of the conditions precedent to
the making of Loans set forth in Section 2.2 unless the same
shall be in writing and signed by Agent, Requisite Revolving
Lenders and Borrowers.
(c) No amendment, modification, termination or waiver shall,
unless in writing and signed by Agent and each Lender directly
affected thereby, do any of the following: (i) increase the
principal amount of any Lender's Commitment (which action shall
be deemed to directly affect all Lenders); (ii) reduce the
principal of, rate of interest on or Fees payable with respect to
any Loan of any affected Lender; (iii) extend any scheduled
payment date or final maturity date of the principal amount of
any Loan of any affected Lender; (iv) waive, forgive, defer,
extend or postpone any payment of interest or Fees as to any
affected Lender; (v) except as otherwise permitted herein or in
the other Loan Documents, permit any Borrower to sell or
otherwise dispose of any Collateral with a value exceeding
$500,000 in the aggregate (which action shall be deemed to
directly affect all Lenders); (vi) change the percentage of the
Commitments or of the aggregate unpaid principal amount of the
Loans which shall be required for Lenders or any of them to take
any action hereunder; and (vii) amend or waive this Section 11.2
or the definitions of the terms "Requisite Lenders", or
"Requisite Revolving Lenders" insofar as such definitions affect
the substance of this Section 11.2. Furthermore, no amendment,
modification, termination or waiver affecting the rights or
duties of Agent under this Agreement or any other Loan Document
shall be effective unless in writing and signed by Agent, in
addition to Lenders required hereinabove to take such action.
Each amendment, modification, termination or waiver shall be
effective only in the specific instance and for the specific
purpose for which it was given. No amendment, modification,
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termination or waiver shall be required for Agent to take
additional Collateral pursuant to any Loan Document. No
amendment, modification, termination or waiver of any provision
of any Note shall be effective without the written concurrence of
the holder of that Note. No notice to or demand on any Borrower
in any case shall entitle such Borrower or any other Borrower to
any other or further notice or demand in similar or other
circumstances. Any amendment, modification, termination, waiver
or consent effected in accordance with this Section 11.2 shall be
binding upon each holder of the Notes at the time outstanding and
each future holder of the Notes.
(d) If, in connection with any proposed amendment,
modification, waiver or termination (a "Proposed Change"):
(i) requiring the consent of all affected Lenders, the
consent of Requisite Lenders is obtained, but the consent of
other Lenders whose consent is required is not obtained (any such
Lender whose consent is not obtained as described this clause (i)
and in clauses (ii), (iii) and (iv) below being referred to as a
"Non-Consenting Lender"), or
(ii) requiring the consent of Requisite Revolving Lenders is
obtained, or
(iii) requiring the consent of Requisite Revolving Lenders,
but the consent of Requisite Revolving Lenders is not obtained,
then, so long as Agent is not a Non-Consenting Lender, at
Borrower Representative's request, Agent or a Person acceptable
to Agent shall have the right with Agent's consent and in Agent's
sole discretion (but shall have no obligation) to purchase from
such Non-Consenting Lenders, and such Non-Consenting Lenders
agree that they shall, upon Agent's request, sell and assign to
Agent or such Person, all of the Commitments of such
Non-Consenting Lender for an amount equal to the principal
balance of all Loans held by the Non-Consenting Lender and all
accrued interest and Fees with respect thereto through the date
of sale, such purchase and sale to be consummated pursuant to an
executed Assignment Agreement.
(e) Upon indefeasible payment in full in cash and
performance of all of the Obligations (other than indemnification
Obligations under Section 1.13), termination of the Commitments
and a release of all claims against Agent and Lenders, and so
long as no suits, actions, proceedings, or claims are pending or
threatened against any Indemnified Person asserting any damages,
losses or liabilities that are Indemnified Liabilities, Agent
shall deliver to Borrowers termination statements, mortgage
releases and other documents necessary or appropriate to evidence
the termination of the Liens securing payment of the Obligations.
11.3. Fees and Expenses.
Borrowers shall reimburse Agent for all out-of-pocket
expenses incurred in connection with the preparation of the Loan
Documents (including the reasonable fees and expenses of all of
its loan counsel, advisors, consultants and auditors retained in
connection with the Loan Documents and the Related Transactions
and advice in connection therewith). Borrowers shall reimburse
Agent (and, with respect to clauses (c), (d) and (e) below, all
Lenders) for all fees, costs and expenses, including the
reasonable fees, costs and expenses of counsel or other advisors
(including environmental and management consultants and
appraisers) for advice, assistance, or other representation in
connection with:
(a) the forwarding to Borrowers or any other Person on
behalf of Borrowers by Agent of the proceeds of the Loans;
(b) any amendment, modification or waiver of, or consent
with respect to, any of the Loan Documents or Related
Transactions Documents or advice in connection with the
administration of the Loans made pursuant hereto or its rights
hereunder or thereunder;
(c) any litigation, contest, dispute, suit, proceeding or
action (whether instituted by Agent, any Lender, any Borrower or
any other Person) in any way relating to the Collateral, any of
the Loan Documents or any other agreement to be executed or
delivered in connection therewith or herewith, whether as party,
witness, or otherwise, including any litigation, contest,
dispute, suit, case, proceeding or action, and any appeal or
review thereof, in connection with a case commenced by or against
any or all of the Borrowers or any other Person that may be
obligated to Agent by virtue of the Loan Documents; including any
such litigation, contest, dispute, suit, proceeding or action
arising in connection with any work-out or restructuring of the
Loans during the pendency of one or more Events of Default;
provided that in the case of reimbursement of counsel for Lenders
other than Agent, such reimbursement shall be limited to one
counsel for all such Lenders;
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(d) any attempt to enforce any remedies of Agent against any
or all of the Borrowers or any other Person that may be obligated
to Agent or any Lender by virtue of any of the Loan Documents;
including any such attempt to enforce any such remedies in the
course of any work-out or restructuring of the Loans during the
pendency of one or more Events of Default; provided that in the
case of reimbursement of counsel for Lenders other than Agent,
such reimbursement shall be limited to one counsel for all such
Lenders;
(e) any work-out or restructuring of the Loans during the
pendency of one or more Events of Default;
(f) efforts to (i) monitor the Loans or any of the other
Obligations, (ii) evaluate, observe or assess any of the
Borrowers or their respective affairs, and (iii) verify, protect,
evaluate, assess, appraise, collect, sell, liquidate or otherwise
dispose of any of the Collateral, provided that with respect to
field audits or other access reviews pursuant to Section 1.13
conducted while there are no outstanding Events of Default,
Borrowers shall only be obligated to reimburse Agent for expenses
incurred with respect to one such field audit per Fiscal Year;
including all attorneys' and other professional and service
providers' fees arising from such services, including those in
connection with any appellate proceedings; and all expenses,
costs, charges and other fees incurred by such counsel and others
in any way or respect arising in connection with or relating to
any of the events or actions described in this Section 11.3 shall
be payable, on demand, by Borrowers to Agent. Without limiting
the generality of the foregoing, such expenses, costs, charges
and fees may include: fees, costs and expenses of accountants,
environmental advisors, appraisers, field auditors, management
and other consultants and paralegals; court costs and expenses;
photocopying and duplication expenses; court reporter fees, costs
and expenses; long distance telephone charges; air express
charges; telegram or telecopy charges; secretarial overtime
charges; and expenses for travel, lodging and food paid or
incurred in connection with the performance of such legal or
other advisory services.
11.4. No Waiver.
Agent's or any Lender's failure, at any time or times, to
require strict performance by the Borrowers of any provision of
this Agreement and any of the other Loan Documents shall not
waive, affect or diminish any right of Agent or such Lender
thereafter to demand strict compliance and performance therewith.
Any suspension or waiver of an Event of Default shall not
suspend, waive or affect any other Event of Default whether the
same is prior or subsequent thereto and whether the same or of a
different type. Subject to the provisions of Section 11.2, none
of the undertakings, agreements, warranties, covenants and
representations of any Borrower contained in this Agreement or
any of the other Loan Documents and no Default or Event of
Default by any Borrower shall be deemed to have been suspended or
waived by Agent or any Lender, unless such waiver or suspension
is by an instrument in writing signed by an officer of or other
authorized employee of Agent and the applicable required Lenders,
and directed to Borrowers specifying such suspension or waiver.
11.5. Remedies.
Agent's and Lenders' rights and remedies under this
Agreement shall be cumulative and nonexclusive of any other
rights and remedies which Agent or any Lender may have under any
other agreement, including the other Loan Documents, by operation
of law or otherwise. Recourse to the Collateral shall not be
required.
11.6. Severability.
Wherever possible, each provision of this Agreement and the
other Loan Documents shall be interpreted in such a manner as to
be effective and valid under applicable law, but if any provision
of this Agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this
Agreement.
11.7. Conflict of Terms.
Except as otherwise provided in this Agreement or any of the
other Loan Documents by specific reference to the applicable
provisions of this Agreement, if any provision contained in this
Agreement is in conflict with, or inconsistent with, any
provision in any of the other Loan Documents, the provision
contained in this Agreement shall govern and control.
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11.8. Confidentiality.
Agent and each Lender agree to use commercially reasonable
efforts (equivalent to the efforts Agent or such Lender applies
to maintaining the confidentiality of its own confidential
information) to maintain as confidential all confidential
information provided to them by the Borrowers and designated as
confidential for a period of two (2) years following receipt
thereof, except that Agent and any Lender may disclose such
information (a) to Persons employed or engaged by Agent or such
Lender in evaluating, approving, structuring or administering the
Loans and the Commitments; (b) to any bona fide assignee or
participant or potential assignee or participant that has agreed
to comply with the covenant contained in this Section 11.8 (and
any such bona fide assignee or participant or potential assignee
or participant may disclose such information to Persons employed
or engaged by them as described in clause (a) above); (c) as
required or requested by any Governmental Authority or reasonably
believed by Agent or such Lender to be compelled by any court
decree, subpoena or legal or administrative order or process; (d)
as, in the opinion of Agent's or such Lender's counsel, required
by law; (e) in connection with the exercise of any right or
remedy under the Loan Documents or in connection with any
Litigation to which Agent or such Lender is a party; or (f) which
ceases to be confidential through no fault of Agent or such
Lender.
11.9. GOVERNING LAW.
EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF THE LOAN
DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, THE LOAN DOCUMENTS AND
THE OBLIGATIONS SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW HAMPSHIRE
APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE AND ANY
APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. EACH BORROWER
HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS
LOCATED IN HILLSBOROUGH COUNTY, CITY OF MANCHESTER, NEW HAMPSHIRE
SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY
CLAIMS OR DISPUTES BETWEEN THE BORROWERS, AGENT AND LENDERS
PERTAINING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS
OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
ANY OF THE OTHER LOAN DOCUMENTS, PROVIDED, THAT AGENT, LENDERS
AND THE BORROWERS ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS
MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF HILLSBOROUGH
COUNTY, CITY OF MANCHESTER, NEW HAMPSHIRE AND, PROVIDED, FURTHER
NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE
AGENT FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY
OTHER JURISDICTION TO REALIZE ON THE COLLATERAL OR ANY OTHER
SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER
COURT ORDER IN FAVOR OF AGENT. EACH BORROWER EXPRESSLY SUBMITS
AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR
SUIT COMMENCED IN ANY SUCH COURT, AND EACH BORROWER HEREBY WAIVES
ANY OBJECTION WHICH SUCH BORROWER MAY HAVE BASED UPON LACK OF
PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND
HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF
AS IS DEEMED APPROPRIATE BY SUCH COURT. EACH BORROWER HEREBY
WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER
PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE
OF SUCH SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH BORROWER AT THE
ADDRESS SET FORTH IN ANNEX G OF THIS AGREEMENT AND THAT SERVICE
SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF SUCH
BORROWER'S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT
IN THE U.S. MAILS, PROPER POSTAGE PREPAID.
11.10. Notices.
Except as otherwise provided herein, whenever it is provided
herein that any notice, demand, request, consent, approval,
declaration or other communication shall or may be given to or
served upon any of the parties by any other parties, or whenever
any of the parties desires to give or serve upon any other
parties any communication with respect to this Agreement, each
such notice, demand, request, consent, approval, declaration or
other communication shall be in writing and shall be deemed to
have been validly served, given or delivered (a) upon the earlier
of actual receipt and three (3) Business Days after deposit in
the United States Mail, registered or certified mail, return
receipt requested, with proper postage prepaid, (b) upon
transmission, when sent by telecopy or other similar facsimile
transmission (with such telecopy or facsimile promptly confirmed
by delivery of a copy by personal delivery or United States Mail
as otherwise provided in this Section 11. 10), (c) one (1)
Business Day after deposit with a reputable overnight courier
with all charges prepaid or (d) when delivered, if hand-delivered
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by messenger, all of which shall be addressed to the party to be
notified and sent to the address or facsimile number indicated on
Annex G or to such other address (or facsimile number) as may be
substituted by notice given as herein provided. The giving of any
notice required hereunder may be waived in writing by the party
entitled to receive such notice. Failure or delay in delivering
copies of any notice, demand, request, consent, approval,
declaration or other communication to any Person (other than
Borrower Representative or Agent) designated on Annex G to
receive copies shall in no way adversely affect the effectiveness
of such notice, demand, request, consent, approval, declaration
or other communication.
11.11. Section Titles.
The Section titles and Table of Contents contained in this
Agreement are and shall be without substantive meaning or content
of any kind whatsoever and are not a part of the agreement
between the parties hereto.
11.12. Counterparts.
This Agreement may be executed in any number of separate
counterparts, each of which shall collectively and separately
constitute one agreement.
11.13. WAIVER OF JURY TRIAL.
BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX
FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED
BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH
APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN
ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE
RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO
ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL
SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO
RESOLVE ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR
OTHERWISE, AMONG AGENT, LENDERS AND ANY BORROWER ARISING OUT OF,
CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED AMONG THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY
OF THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS RELATED THERETO.
11.14. Reinstatement.
This Agreement shall remain in full force and effect and
continue to be effective should any petition be filed by or
against any Borrower for liquidation or reorganization, should
any Borrower become insolvent or make an assignment for the
benefit of any creditor or creditors or should a receiver or
trustee be appointed for all or any significant part of any
Borrower's assets, and shall continue to be effective or to be
reinstated, as the case may be, if at any time payment and
performance of the Obligations, or any part thereof, is, pursuant
to applicable law, rescinded or reduced in amount, or must
otherwise be restored or returned by any obligee of the
Obligations, whether as a "voidable preference," "fraudulent
conveyance," or otherwise, all as though such payment or
performance had not been made. In the event that any payment, or
any part thereof, is rescinded, reduced, restored or returned,
the Obligations shall be reinstated and deemed reduced only by
such amount paid and not so rescinded, reduced, restored or
returned.
11.15. Advice of Counsel.
Each of the parties represents to each other party hereto
that it has discussed this Agreement and, specifically, the
provisions of Sections 11.9 and 11.13, with its counsel.
11.16. No Strict Construction.
The parties hereto have participated jointly in the
negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties
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hereto and no presumption or burden of proof shall arise favoring
or disfavoring any party by virtue of the authorship of any
provisions of this Agreement.
11.17. Joint and Several Obligations.
The Revolving Loans, the Term Loans and the other
Obligations shall constitute the joint and several obligations of
the Borrowers.
12. INTEREST RATE HEDGING
As a condition of the Agent and the Lenders committing to
make the Loans and entering into the Agreement, the Borrowers
covenant and agree to enter into an interest rate hedging
agreement or instrument ("Interest Rate Protection Agreement")
within ninety (90) days of the Closing Date, such Interest Rate
Protection Agreement to have a weighted average duration of at
least two (2) years and cover at least 50% of the aggregate
amount of the Commitments. The Interest Rate Protection
Agreement shall provide an interest rate which shall not exceed
2% per annum over the Treasury rate in effect on the date of the
Interest Rate Protection Agreement. In the event the Interest
Rate Protection Agreement is with a Lender (including affiliates
of Lender which are owned by the same holding company), the
obligations of the Borrowers under such agreement shall be
secured pari passu with the Loans and other Obligations.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, this Agreement has been duly executed as
of the date first written above.
BORROWERS:
WPI GROUP, INC.,
WPI POWER SYSTEMS, INC.,
WPI MAGNETEC, INC.,
WPI ELECTRONICS, INC.,
WPI OYSTER TERMIFLEX, INC.,
WPI MICRO PALM, INC.,
WPI MICRO PROCESSOR SYSTEMS, INC.,
WPI DECISIONKEY, INC.,
WPI UK HOLDING, INC.,
WPI UK HOLDING II, INC.,
WPI OYSTER TERMINALS, INC.,
WPI HUSKY COMPUTERS, INC., and
WPI INSTRUMENTS, INC.
/s/ Mark L. Young By: /s/ Michael Foster
- - ----------------- ------------------
Witness Michael Foster, for, on behalf of,
and as Duly Authorized Officer or Agent
of each of the above-named corporations
AGENT AND LENDERS:
FLEET BANK - NH
/s/ Curtis Little By: /s/ Mark L. Young
- - ----------------- -----------------
Witness Mark L. Young
Senior Vice President
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Exhibit 10.27
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT (this "First Amendment"), dated as of
October 30, 1998, to the Credit Agreement, dated as of August 3,
1998 ( the "Credit Agreement"), among WPI Group, Inc., WPI
Electronics, Inc., WPI Magnetec, Inc., WPI Micro Palm, Inc., WPI
Power Systems, Inc., WPI Oyster Termiflex, Inc., WPI Micro
Processor Systems, Inc., WPI Decisionkey, Inc., WPI UK Holding,
Inc., WPI UK Holding, II, Inc., WPI Oyster Terminals, Inc., WPI
Husky Computers, Inc., and WPI Instruments, Inc., (collectively,
the "Borrowers"), the various financial institutions parties
hereto (collectively, the "Lenders") and Fleet Bank - NH, for
itself, as Lender, and as Agent for Lenders pursuant to the
Credit Agreement (the "Agent").
WITNESSETH:
WHEREAS, the Borrowers, the Lenders and the Agent are
parties to the Credit Agreement, pursuant to which the Lenders
made certain Loans to the Borrowers; and
WHEREAS, the Borrowers, the Lenders and the Agent have
agreed that certain amendments be made to the Credit Agreement,
as further set forth below;
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein contained, the Borrowers, the Lenders
and the Agent hereby agree as follows:
SECTION 1. Definitions. Unless otherwise defined or the
context otherwise requires, terms for which meanings are provided
in the Credit Agreement shall have such meanings when used in
this First Amendment.
SECTION 2. Amendment to Credit Agreement. Effective on
the First Amendment Effective Date, the Credit Agreement is
hereby amended in accordance with this Section 2. Except as
expressly so amended, the Credit Agreement shall continue in full
force and effect in accordance with its terms.
SECTION 2.1. Amendment to Section 1.1 (Credit Facilities).
Clause (i) of Paragraph (d) of Section 1.1 of the Credit
Agreement captioned "Swing Line Facility" is hereby amended by
changing the second sentence of such clause to read in its
entirety as follows:
Subject to the terms and conditions hereof, including
without limitation the conditions set forth in Section 2.2,
the Swing Line Lender may, in its discretion, make available
from time to time until the Commitment Termination Date
advances (each, a "Swing Line Advance") in accordance with
any such notice or pursuant to Agent's Cash Management
System.
SECTION 2.2. Amendment to Section 1.2 (Prepayments).
Paragraph (c) of Section 1.2 of the Credit Agreement captioned
"Application of Certain Mandatory Prepayments" is hereby amended
to read in its entirety as follows:
(c) Application of Certain Mandatory Prepayments. Any
prepayments made by Borrowers pursuant to clauses (b)(ii),
(b)(iii), or (b)(iv) above shall be applied as follows:
first, to Fees and reimbursable expenses of Agent and the
Lenders then due and payable pursuant to any of the Loan
Documents; second, to interest then due and payable on the
Term Loans; third, to prepay the scheduled installments of
the Borrowers' Term Loans, initially to Index Rate Loans and
then to LIBOR Loans, ratably in inverse order of maturity,
until such Term Loans shall have been prepaid in full,
provided that if the prepayment is made pursuant to clause
(b)(ii) any Term Loan B Lender may elect to allocate his
portion of the prepayment entirely to Term Loan A; fourth,
to interest then due and payable on such Borrower's Swing
Line Loan; fifth, to the principal balance of the Swing Line
Loan outstanding to such Borrower until the same shall have
been repaid in full; sixth, to interest then due and payable
on Revolving Credit Advances made to such Borrower; and
seventh, to the principal balance of Revolving Credit
Advances outstanding to such Borrower, initially to Index
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Rate Loans and then to LIBOR Loans, until the same shall
have been paid in full. Neither the Revolving Loan
Commitment nor the Swing Line Commitment shall be
permanently reduced by the amount of any such prepayment.
SECTION 2.3. Amendment to Section 1.4 (Interest and
Applicable Margins). The first grid of Section 1.4 of the Credit
Agreement is hereby amended to read in its entirety as follows:
If Total Debt/ EBITDA Level of
Ratio is: Applicable Margins:
4.0 Level I
3.5, but < 4.0 Level II
3.0, but < 3.5 Level III
2.5, but < 3.0 Level IV
< 2.5 Level V
SECTION 2.4. Amendment to Section 1.5 (Eligible Accounts).
Clause (i) of Paragraph (k) of Section 1.5 of the Credit
Agreement is hereby amended to read in its entirety as follows:
(i) it is not paid within sixty (60) days following its
due date;
SECTION 2.5. Amendment to Section 8.2 (Remedies). The
"proviso" phrase at the end of Paragraph (b) of Section 8.2 of
the Credit Agreement is hereby amended to read in its entirety as
follows:
provided, however, that upon the occurrence of an Event of
Default specified in Sections 8.1(g), (h) or (i), all of the
Obligations, including the aggregate Revolving Loan, shall
become immediately due and payable without declaration,
notice or demand by any Person, and the Commitments shall be
automatically terminated.
SECTION 2.6. Amendment to Section 11.2 (Amendments and
Waivers). Paragraph (c) of Section 11.2 of the Credit Agreement
is hereby amended to read in its entirety as follows:
(c) No amendment, modification, termination or waiver shall,
unless in writing and signed by Agent and each Lender
directly affected thereby, do any of the following: (i)
increase the principal amount of any Lender's Commitment,
including without limitation the Swing Line Commitment,
(which action shall be deemed to directly affect all
Lenders); (ii) reduce the principal of, rate of interest on
or Fees payable with respect to any Loan of any affected
Lender; (iii) extend any scheduled payment date or final
maturity date of the principal amount of any Loan of any
affected Lender; (iv) waive, forgive, defer, extend or
postpone any payment of interest or Fees as to any affected
Lender; (v) except as otherwise permitted herein or in the
other Loan Documents, permit any Borrower to sell or
otherwise dispose of any Collateral with a value exceeding
$500,000 in the aggregate (which action shall be deemed to
directly affect all Lenders); (vi) change the percentage of
the Commitments or of the aggregate unpaid principal amount
of the Loans which shall be required for Lenders or any of
them to take any action hereunder; (vii) amend or waive this
Section 11.2 or the definitions of the terms "Requisite
Lenders", or "Requisite Revolving Lenders" insofar as such
definitions affect the substance of this Section 11.2.;
(viii) release any Borrower from any of its Obligations; and
(ix) change the formula for calculating the Borrowing Base.
Furthermore, no amendment, modification, termination or
waiver affecting the rights or duties of Agent under this
Agreement or any other Loan Document shall be effective
unless in writing and signed by Agent, in addition to
Lenders required hereinabove to take such action. Each
amendment, modification, termination or waiver shall be
effective only in the specific instance and for the specific
purpose for which it was given. No amendment, modification,
termination or waiver shall be required for Agent to take
additional Collateral pursuant to any Loan Document. No
amendment, modification, termination or waiver of any
provision of any Note shall be effective without the written
concurrence of the holder of that Note. No notice to or
demand on any Borrower in any case shall entitle such
Borrower or any other Borrower to any other or further
notice or demand in similar or other circumstances. Any
amendment, modification, termination, waiver or consent
effected in accordance with this Section 11.2 shall be
binding upon each holder of the Notes at the time
outstanding and each future holder of the Notes.
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<PAGE>
SECTION 2.7. Amendment to Annex A (Definitions). The
definition of "Commitments" set forth in Annex A to the Credit
Agreement is hereby amended to read in its entirety as follows:
"Commitments" shall mean (a) as to any Lender, the aggregate
of such Lender's Revolving Loan Commitment (including
without duplication the Swing Line Lender's Swing Line
Commitment), Term Loan A Commitment and the Term Loan B
Commitment as set forth on Annex H to the Agreement, as such
Annex H may be amended from time to time, or in the most
recent Assignment Agreement executed by such Lender, and (b)
as to all Lenders, the aggregate of all Lenders' Revolving
Loan Commitments (including without duplication the Swing
Line Lender's Swing Line Commitment), Term Loan A
Commitments and Term Loan B Commitments, which aggregate
commitment shall be Seventy-Five Million Dollars
($75,000,000) on the Closing Date, as such amount may be
adjusted or amortized from time to time in accordance with
the Agreement.
SECTION 2.8. Amendment to Annex A (Definitions). The
definition of "Current Liabilities" set forth in Annex A to the
Credit Agreement is hereby amended to read in its entirety as
follows:
"Current Liabilities" shall mean, with respect to any
Person, all liabilities which should, in accordance with
GAAP, be classified as current liabilities, and in any event
shall include all Indebtedness payable on demand or within
one year from any date of determination without any option
on the part of the obligor to extend or renew beyond such
year, all accruals for federal or other taxes based on or
measured by income and payable within such year, and the
current portion of long-term debt required to be paid within
one year, specifically including, in the case of Borrowers,
the aggregate outstanding principal balances of the
Revolving Loan and the Swing Line Loan.
SECTION 2.9. Amendment to Annex A (Definitions). The
definition of "Total Debt to EBITDA Ratio" set forth in Annex A
to the Credit Agreement is hereby amended to read in its entirety
as follows:
"Total Debt to EBITDA Ratio" shall mean, with respect
to the Borrowers as of any date of determination, the ratio
of (a) Borrowers' Total Debt on a consolidated basis to (b)
consolidated EBITDA of Borrowers determined as of the last
day of each Fiscal Quarter for the four Fiscal Quarters then
ended.
SECTION 2.10. Amendment to Annex E (Financial Covenants).
Paragraph (b) of Section 6.10 of Annex E to the Credit Agreement
captioned "Minimum Fixed Charge Coverage Ratio" is hereby amended
to read in its entirety as follows:
(b) Minimum Fixed Charge Coverage Ratio. Borrowers shall
have on a consolidated basis at the end of each Fiscal
Quarter/Year set forth below, a Fixed Charge Coverage Ratio
for the 12-month period then ended of not less than the
following (rounded to the nearest tenth):
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Fiscal Quarter/Year Ratio
Ending
9/30/98 1.10:1.0
12/31/98 1.15:1.0
3/31/99 1.15:1.0
6/30/99 1.15:1.0
9/30/99 1.15:1.0
12/31/99 1.20:1.0
3/31/00 1.20:1.0
6/30/00 1.20:1.0
9/30/00 1.20:1.0
12/31/00 1.20:1.0
3/31/01 1.20:1.0
6/30/01 1.20:1.0
9/30/01 1.25:1.0
12/31/01 1.25:1.0
3/31/02 1.25:1.0
6/30/02 1.25:1.0
9/30/02 1.25:1.0
12/31/02 1.25:1.0
3/31/03 1.25:1.0
6/30/03 1.25:1.0
9/30/03 1.25:1.0
12/31/03 1.05:1.0
3/31/04 1.05:1.0
6/30/04 1.05:1.0
9/30/04 1.05:1.0
SECTION 2.11. Amendment to Annex H (Loan Commitments).
Annex H to the Credit Agreement setting forth each Lender's
respective Loan Commitments is hereby replaced with the Annex H
attached to this First Amendment.
SECTION 3. Effective Date. This First Amendment shall
become effective as of the date first above written (the "First
Amendment Effective Date") when each of the conditions precedent
set forth in this Section 3 have been satisfied and thereafter
shall be known, and may be referred to, as the "First Amendment
to Credit Agreement".
SECTION 3.1. Execution of Counterparts. The Agent shall
have received executed counterparts of this First Amendment duly
executed on behalf of the Borrowers and each of the Lenders.
SECTION 4. Expenses. The Borrowers agree to pay all out-or-
pocket expenses incurred by the Agent in connection with the
preparation of this First Amendment, including, but not limited
to, the reasonable fees and disbursements of counsel to the
Agent.
SECTION 5. Credit Agreement. Except as expressly amended
hereby, the Credit Agreement shall continue in full force and
effect in accordance with the provisions thereof on the date
hereof. From and after the date on which this First Amendment
becomes effective, the terms "Agreement", "this Agreement",
"Credit Agreement", "herein", "hereinafter", "hereto", and words
of similar import used in the Credit Agreement or any Loan
Document shall, unless the context otherwise requires, mean and
refer to the Credit Agreement as amended hereby.
SECTION 6. Document Pursuant to Credit Agreement. This
First Amendment is a Loan Document executed pursuant to the
Credit Agreement and shall be governed in accordance with the
terms thereof.
SECTION 7. Successors and Assigns. This First Amendment
shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns.
- 81 -
<PAGE>
SECTION 8. Full Force and Effect. Except as expressly
amended hereby, all of the representations, warranties, terms,
covenants, and conditions of the Credit Agreement and each other
Loan Document shall remain unchanged and shall remain in full
force and effect in accordance with their respective terms. The
amendments set forth herein shall be limited precisely as
provided for herein to the provisions expressly amended herein
and shall not be deemed to be an amendment of, consent to or
modification of any other term or provision of the Credit
Agreement or of any term or provision of any other Loan Document
or of any transaction or further or future action on the part of
the Borrowers which would require the consent of the Lenders or
the Agent under the Credit Agreement.
SECTION 9. Governing Law. THIS FIRST AMENDMENT SHALL BE
DEEMED TO BE A CONTRACT MADE UNDER AND BE GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF NEW HAMPSHIRE.
SECTION 10. Counterparts. This First Amendment may be
executed in any number of counterparts by the parties hereto,
each of which counterparts when so executed shall be an original,
but all the counterparts shall together constitute one and the
same agreement.
[SIGNATURE PAGES FOLLOW]
- 82 -
<PAGE>
IN WITNESS WHEREOF, the Borrowers, the Agent and the Lenders
have caused this First Amendment to be executed by their
respective officers thereunto duly authorized as of the day and
year first above written.
BORROWERS:
WPI GROUP, INC.,
WPI POWER SYSTEMS, INC.,
WPI MAGNETEC, INC.,
WPI ELECTRONICS, INC.,
WPI OYSTER TERMIFLEX, INC.,
WPI MICRO PALM, INC.,
WPI MICRO PROCESSOR
SYSTEMS, INC.,
WPI DECISIONKEY, INC.,
WPI UK HOLDING, INC.,
WPI UK HOLDING II, INC.,
WPI OYSTER TERMINALS, INC.,
HUSKY COMPUTERS, INC., and
WPI INSTRUMENTS, INC.
/s/ Mark L. Young By:/s/ John W. Powers
- - ----------------- ------------------
Witness John W. Powers, for, on
behalf of, and as Duly
Authorized Officer or Agent
of each of the above-named
entities
AGENT:
FLEET BANK-NH, as Agent and as a
Lender
/s/ John W. Powers By: /s/ Mark L. Young
- - ------------------ -----------------
Witness Mark L. Young
Senior Vice President
- 83 -
<PAGE>
LENDERS:
BANK OF NEW HAMPSHIRE
/s/ Joni L. Woods By: /s/ David D. McGraw
- - ----------------- -------------------
Witness David D. McGraw
Vice President
SOVEREIGN BANK
/s/ Patrick Newton By: /s/ Stephen P. Kanarian
- - ------------------- -----------------------
Witness Stephen P. Kanarian
Senior Vice President
BANKBOSTON, N.A.
By: /s/ Michael J. Bowe
- - ------------------- --------------------
Witness Michael J. Bowe
Vice President
KEY CORPORATE CAPITAL INC.
By: /s/ Alexander Strazella
- - ------------------- -----------------------
Witness Alexander Strazzella
Vice President
- 84 -
<PAGE>
ANNEX H
to
CREDIT AGREEMENT
(amended as of October 30, 1998)
1. Revolving Loan Commitment $20,000,000.00
a. Fleet Bank - NH (including
$1,000,000 Million Swing Line Commitment)$2,666,666.67
b. Bank of New Hampshire $4,000,000.00
c. Sovereign Bank $6,000,000.00
d. BankBoston, N.A. $3,333,333.33
e. Key Corporate Capital Inc. $4,000,000.00
2. Term Loan A Commitment $30,000,000.00
a. Fleet Bank - NH $ 4,000,000.00
b. Bank of New Hampshire $ 6,000,000.00
c. Sovereign Bank $ 9,000,000.00
d. BankBoston, N.A. $ 5,000,000.00
e. Key Corporate Capital Inc. $ 6,000,000.00
3. Term Loan B Commitment $25,000,000.00
a. Fleet Bank - NH $15,833,333.33
b. Bank of New Hampshire $ 5,000,000.00
c. BankBoston, N.A. $ 4,166,666.67
- 85 -
<PAGE>
Exhibit 10.28
REVOLVING NOTE
$3,333,333.33 Manchester, New Hampshire
October 30, 1998
FOR VALUE RECEIVED, each of the undersigned (each
individually a "Borrower" and collectively, the "Borrowers")
HEREBY JOINTLY AND SEVERALLY PROMISES TO PAY to the order of
BANKBOSTON, N.A. ("Lender") at the offices of FLEET BANK - NH, a
New Hampshire bank, as Agent for Lenders ("Agent"), at its
address at 1155 Elm Street, Manchester, New Hampshire 03101, or
at such other place as Agent may designate from time to time in
writing, in lawful money of the United States of America and in
immediately available funds, the amount of THREE MILLION THREE
HUNDRED THIRTY-THREE THOUSAND THREE HUNDRED THIRTY-THREE AND
33/100 DOLLARS ($3,333,333.33) or, if less, the aggregate unpaid
amount of all Revolving Credit Advances made to the Borrowers
under the Credit Agreement (as hereinafter defined) by Lender.
All capitalized terms used but not otherwise defined herein have
the meanings given to them in the Credit Agreement or in Annex A
thereto.
This Revolving Note is one of the Revolving Notes
issued pursuant to that certain Credit Agreement dated as of
August 3, 1998 by and among the Borrowers, Agent, Lender and the
other Persons signatory thereto from time to time as Lenders
(including all annexes, exhibits and schedules thereto, and as
from time to time amended, restated, supplemented or otherwise
modified, the "Credit Agreement"), and is entitled to the benefit
and security of the Credit Agreement, the Security Agreement and
all of the other Loan Documents referred to therein. Reference is
hereby made to the Credit Agreement for a statement of all of the
terms and conditions under which the Loans evidenced hereby are
made and are to be repaid. The date and amount of each Revolving
Credit Advance made by Lender to the Borrowers, the rates of
interest applicable thereto and each payment made on account of
the principal thereof, shall be recorded by Agent on its books;
provided that the failure of Agent to make any such recordation
shall not affect the obligations of each Borrower to make a
payment when due of any amount owing under the Credit Agreement
or this Note in respect of the Revolving Credit Advances made by
Lender to the Borrowers.
This Revolving Note, together with each of the other
Revolving Notes of even date herewith executed by Borrowers (the
"Other Notes"), is issued in substitution for the Revolving Note
issued by the Borrowers on August 3, 1998 to Fleet Bank - NH (the
"Prior Note"). The principal balance outstanding under the Prior
Note shall continue in all respects to be outstanding hereunder
and under each of the Other Notes, and this Revolving Note shall
not be deemed to evidence a novation or payment and refunding of
that outstanding principal balance.
The principal amount of the indebtedness evidenced
hereby shall be payable in the amounts and on the dates specified
in the Credit Agreement, the terms of which are hereby
incorporated herein by reference. Interest hereon shall be paid
until such principal amount is paid in full at such interest
rates and at such times, and pursuant to such calculations, as
are specified in the Credit Agreement.
If any payment on this Revolving Note becomes due and
payable on a day other than a Business Day, the maturity thereof
shall be extended to the next succeeding Business Day and, with
respect to payments of principal, interest thereon shall be
payable at the then applicable rate during such extension.
Upon and after the occurrence of any Event of Default,
this Revolving Note may, as provided in the Credit Agreement, and
without demand, notice or legal process of any kind, be declared,
and immediately shall become, due and payable.
Time is of the essence of this Revolving Note. Demand,
presentment, protest and notice of nonpayment and protest are
hereby waived by each Borrower.
- 86 -
<PAGE>
Except as provided in the Credit Agreement, this
Revolving Note may not be assigned by Lender to any Person.
THIS REVOLVING NOTE SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW HAMPSHIRE
APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE.
WPI GROUP, INC.,
WPI POWER SYSTEMS, INC.,
WPI MAGNETEC, INC.,
WPI ELECTRONICS, INC.,
WPI OYSTER TERMIFLEX, INC.,
WPI MICRO PALM, INC.,
WPI MICRO PROCESSOR
SYSTEMS, INC.,
WPI DECISIONKEY, INC.,
WPI UK HOLDING, INC.,
WPI UK HOLDING II, INC.,
WPI OYSTER TERMINALS, INC.,
HUSKY COMPUTERS, INC., and
WPI INSTRUMENTS, INC.
/s/ Mark L. Young By: /s/ John W. Powers
----------------- ------------------
Witness John W. Powers, for, on behalf
of, and as Duly Authorized Officer
or Agent of each f the above-named
entities
- 87 -
<PAGE>
Exhibit 10.29
REVOLVING NOTE
$4,000,000.00 Manchester, New Hampshire
October 30, 1998
FOR VALUE RECEIVED, each of the undersigned (each
individually a "Borrower" and collectively, the "Borrowers")
HEREBY JOINTLY AND SEVERALLY PROMISES TO PAY to the order of BANK
OF NEW HAMPSHIRE ("Lender") at the offices of FLEET BANK - NH, a
New Hampshire bank, as Agent for Lenders ("Agent"), at its
address at 1155 Elm Street, Manchester, New Hampshire 03101, or
at such other place as Agent may designate from time to time in
writing, in lawful money of the United States of America and in
immediately available funds, the amount of FOUR MILLION AND
00/100 DOLLARS ($4,000,000.00) or, if less, the aggregate unpaid
amount of all Revolving Credit Advances made to the Borrowers
under the Credit Agreement (as hereinafter defined) by Lender.
All capitalized terms used but not otherwise defined herein have
the meanings given to them in the Credit Agreement or in Annex A
thereto.
This Revolving Note is one of the Revolving Notes
issued pursuant to that certain Credit Agreement dated as of
August 3, 1998 by and among the Borrowers, Agent, Lender and the
other Persons signatory thereto from time to time as Lenders
(including all annexes, exhibits and schedules thereto, and as
from time to time amended, restated, supplemented or otherwise
modified, the "Credit Agreement"), and is entitled to the benefit
and security of the Credit Agreement, the Security Agreement and
all of the other Loan Documents referred to therein. Reference is
hereby made to the Credit Agreement for a statement of all of the
terms and conditions under which the Loans evidenced hereby are
made and are to be repaid. The date and amount of each Revolving
Credit Advance made by Lender to the Borrowers, the rates of
interest applicable thereto and each payment made on account of
the principal thereof, shall be recorded by Agent on its books;
provided that the failure of Agent to make any such recordation
shall not affect the obligations of each Borrower to make a
payment when due of any amount owing under the Credit Agreement
or this Note in respect of the Revolving Credit Advances made by
Lender to the Borrowers.
This Revolving Note, together with each of the other
Revolving Notes of even date herewith executed by Borrowers (the
"Other Notes"), is issued in substitution for the Revolving Note
issued by the Borrowers on August 3, 1998 to Fleet Bank - NH (the
"Prior Note"). The principal balance outstanding under the Prior
Note shall continue in all respects to be outstanding hereunder
and under each of the Other Notes, and this Revolving Note shall
not be deemed to evidence a novation or payment and refunding of
that outstanding principal balance.
The principal amount of the indebtedness evidenced
hereby shall be payable in the amounts and on the dates specified
in the Credit Agreement, the terms of which are hereby
incorporated herein by reference. Interest hereon shall be paid
until such principal amount is paid in full at such interest
rates and at such times, and pursuant to such calculations, as
are specified in the Credit Agreement.
If any payment on this Revolving Note becomes due and
payable on a day other than a Business Day, the maturity thereof
shall be extended to the next succeeding Business Day and, with
respect to payments of principal, interest thereon shall be
payable at the then applicable rate during such extension.
Upon and after the occurrence of any Event of Default,
this Revolving Note may, as provided in the Credit Agreement, and
without demand, notice or legal process of any kind, be declared,
and immediately shall become, due and payable.
Time is of the essence of this Revolving Note. Demand,
presentment, protest and notice of nonpayment and protest are
hereby waived by each Borrower.
Except as provided in the Credit Agreement, this
Revolving Note may not be assigned by Lender to any Person.
- 88 -
<PAGE>
THIS REVOLVING NOTE SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW HAMPSHIRE
APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE.
WPI GROUP, INC.,
WPI POWER SYSTEMS, INC.,
WPI MAGNETEC, INC.,
WPI ELECTRONICS, INC.,
WPI OYSTER TERMIFLEX, INC.,
WPI MICRO PALM, INC.,
WPI MICRO PROCESSOR
SYSTEMS, INC.,
WPI DECISIONKEY, INC.,
WPI UK HOLDING, INC.,
WPI UK HOLDING II, INC.,
WPI OYSTER TERMINALS, INC.,
HUSKY COMPUTERS, INC., and
WPI INSTRUMENTS, INC.
/s/ Mark L. Young By: /s/ John W. Powers
----------------- ------------------
Witness John W. Powers, for, on
behalf of, and as Duly
Authorized Officer or Agent
of each of the above-named
entities
- 89 -
<PAGE>
Exhibit 10.30
REVOLVING NOTE
$2,666,666.67 Manchester, New Hampshire
October 30, 1998
FOR VALUE RECEIVED, each of the undersigned (each
individually a "Borrower" and collectively, the "Borrowers")
HEREBY JOINTLY AND SEVERALLY PROMISES TO PAY to the order of
FLEET BANK - NH ("Lender") at the offices of FLEET BANK - NH, a
New Hampshire bank, as Agent for Lenders ("Agent"), at its
address at 1155 Elm Street, Manchester, New Hampshire 03101, or
at such other place as Agent may designate from time to time in
writing, in lawful money of the United States of America and in
immediately available funds, the amount of TWO MILLION SIX
HUNDRED SIXTY-SIX THOUSAND SIX HUNDRED SIXTY-SIX AND 67/100
DOLLARS ($2,666,666.67) or, if less, the aggregate unpaid amount
of all Revolving Credit Advances made to the Borrowers under the
Credit Agreement (as hereinafter defined) by Lender. All
capitalized terms used but not otherwise defined herein have the
meanings given to them in the Credit Agreement or in Annex A
thereto.
This Revolving Note is one of the Revolving Notes
issued pursuant to that certain Credit Agreement dated as of
August 3, 1998 by and among the Borrowers, Agent, Lender and the
other Persons signatory thereto from time to time as Lenders
(including all annexes, exhibits and schedules thereto, and as
from time to time amended, restated, supplemented or otherwise
modified, the "Credit Agreement"), and is entitled to the benefit
and security of the Credit Agreement, the Security Agreement and
all of the other Loan Documents referred to therein. Reference is
hereby made to the Credit Agreement for a statement of all of the
terms and conditions under which the Loans evidenced hereby are
made and are to be repaid. The date and amount of each Revolving
Credit Advance made by Lender to the Borrowers, the rates of
interest applicable thereto and each payment made on account of
the principal thereof, shall be recorded by Agent on its books;
provided that the failure of Agent to make any such recordation
shall not affect the obligations of each Borrower to make a
payment when due of any amount owing under the Credit Agreement
or this Note in respect of the Revolving Credit Advances made by
Lender to the Borrowers.
This Revolving Note, together with each of the other
Revolving Notes of even date herewith executed by Borrowers (the
"Other Notes"), is issued in substitution for the Revolving Note
issued by the Borrowers on August 3, 1998 to Fleet Bank - NH (the
"Prior Note"). The principal balance outstanding under the Prior
Note shall continue in all respects to be outstanding hereunder
and under each of the Other Notes, and this Revolving Note shall
not be deemed to evidence a novation or payment and refunding of
that outstanding principal balance.
The principal amount of the indebtedness evidenced
hereby shall be payable in the amounts and on the dates specified
in the Credit Agreement, the terms of which are hereby
incorporated herein by reference. Interest hereon shall be paid
until such principal amount is paid in full at such interest
rates and at such times, and pursuant to such calculations, as
are specified in the Credit Agreement.
If any payment on this Revolving Note becomes due and
payable on a day other than a Business Day, the maturity thereof
shall be extended to the next succeeding Business Day and, with
respect to payments of principal, interest thereon shall be
payable at the then applicable rate during such extension.
Upon and after the occurrence of any Event of Default,
this Revolving Note may, as provided in the Credit Agreement, and
without demand, notice or legal process of any kind, be declared,
and immediately shall become, due and payable.
Time is of the essence of this Revolving Note. Demand,
presentment, protest and notice of nonpayment and protest are
hereby waived by each Borrower.
- 90 -
<PAGE>
Except as provided in the Credit Agreement, this
Revolving Note may not be assigned by Lender to any Person.
THIS REVOLVING NOTE SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW HAMPSHIRE
APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE.
WPI GROUP, INC.,
WPI POWER SYSTEMS, INC.,
WPI MAGNETEC, INC.,
WPI ELECTRONICS, INC.,
WPI OYSTER TERMIFLEX, INC.,
WPI MICRO PALM, INC.,
WPI MICRO PROCESSOR
SYSTEMS, INC.,
WPI DECISIONKEY, INC.,
WPI UK HOLDING, INC.,
WPI UK HOLDING II, INC.,
WPI OYSTER TERMINALS, INC.,
HUSKY COMPUTERS, INC., and
WPI INSTRUMENTS, INC.
/s/ Mark L. Young By: /s/ John W. Powers
----------------- ------------------
Witness John W. Powers, for, on behalf
of, and as Duly Authorized Officer
or Agent of each of the above-named
entities
- 91 -
<PAGE>
Exhibit 10.31
REVOLVING NOTE
$4,000,000.00 Manchester, New Hampshire
October 30, 1998
FOR VALUE RECEIVED, each of the undersigned (each
individually a "Borrower" and collectively, the "Borrowers")
HEREBY JOINTLY AND SEVERALLY PROMISES TO PAY to the order of KEY
CORPORATE CAPITAL INC. ("Lender") at the offices of FLEET BANK -
NH, a New Hampshire bank, as Agent for Lenders ("Agent"), at its
address at 1155 Elm Street, Manchester, New Hampshire 03101, or
at such other place as Agent may designate from time to time in
writing, in lawful money of the United States of America and in
immediately available funds, the amount of FOUR MILLION AND
NO/100 DOLLARS ($4,000,000.00) or, if less, the aggregate unpaid
amount of all Revolving Credit Advances made to the Borrowers
under the Credit Agreement (as hereinafter defined) by Lender.
All capitalized terms used but not otherwise defined herein have
the meanings given to them in the Credit Agreement or in Annex A
thereto.
This Revolving Note is one of the Revolving Notes
issued pursuant to that certain Credit Agreement dated as of
August 3, 1998 by and among the Borrowers, Agent, Lender and the
other Persons signatory thereto from time to time as Lenders
(including all annexes, exhibits and schedules thereto, and as
from time to time amended, restated, supplemented or otherwise
modified, the "Credit Agreement"), and is entitled to the benefit
and security of the Credit Agreement, the Security Agreement and
all of the other Loan Documents referred to therein. Reference
is hereby made to the Credit Agreement for a statement of all of
the terms and conditions under which the Loans evidenced hereby
are made and are to be repaid. The date and amount of each
Revolving Credit Advance made by Lender to the Borrowers, the
rates of interest applicable thereto and each payment made on
account of the principal thereof, shall be recorded by Agent on
its books; provided that the failure of Agent to make any such
recordation shall not affect the obligations of each Borrower to
make a payment when due of any amount owing under the Credit
Agreement or this Note in respect of the Revolving Credit
Advances made by Lender to the Borrowers.
This Revolving Note, together with each of the other
Revolving Notes of even date herewith executed by Borrowers (the
"Other Notes"), is issued in substitution for the Revolving Note
issued by the Borrowers on August 3, 1998 to Fleet Bank - NH (the
"Prior Note"). The principal balance outstanding under the Prior
Note shall continue in all respects to be outstanding hereunder
and under each of the Other Notes, and this Revolving Note shall
not be deemed to evidence a novation or payment and refunding of
that outstanding principal balance.
The principal amount of the indebtedness evidenced
hereby shall be payable in the amounts and on the dates specified
in the Credit Agreement, the terms of which are hereby
incorporated herein by reference. Interest hereon shall be paid
until such principal amount is paid in full at such interest
rates and at such times, and pursuant to such calculations, as
are specified in the Credit Agreement.
If any payment on this Revolving Note becomes due and
payable on a day other than a Business Day, the maturity thereof
shall be extended to the next succeeding Business Day and, with
respect to payments of principal, interest thereon shall be
payable at the then applicable rate during such extension.
Upon and after the occurrence of any Event of Default,
this Revolving Note may, as provided in the Credit Agreement, and
without demand, notice or legal process of any kind, be declared,
and immediately shall become, due and payable.
Time is of the essence of this Revolving Note. Demand,
presentment, protest and notice of nonpayment and protest are
hereby waived by each Borrower.
- 92 -
<PAGE>
Except as provided in the Credit Agreement, this
Revolving Note may not be assigned by Lender to any Person.
THIS REVOLVING NOTE SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW HAMPSHIRE
APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE.
WPI GROUP, INC.,
WPI POWER SYSTEMS, INC.,
WPI MAGNETEC, INC.,
WPI ELECTRONICS, INC.,
WPI OYSTER TERMIFLEX, INC.,
WPI MICRO PALM, INC.,
WPI MICRO PROCESSOR
SYSTEMS, INC.,
WPI DECISIONKEY, INC.,
WPI UK HOLDING, INC.,
WPI UK HOLDING II, INC.,
WPI OYSTER TERMINALS, INC.,
HUSKY COMPUTERS, INC., and
WPI INSTRUMENTS, INC.
/s/ Mark L. Young By: /s/ John W. Powers
----------------- ------------------
Witness John W. Powers, for, on behalf
of, and as Duly Authorized Officer
or Agent of each of the above-named
entities
- 93 -
<PAGE>
Exhibit 10.32
REVOLVING NOTE
$6,000,000.00 Manchester, New Hampshire
October 30, 1998
FOR VALUE RECEIVED, each of the undersigned (each
individually a "Borrower" and collectively, the "Borrowers")
HEREBY JOINTLY AND SEVERALLY PROMISES TO PAY to the order of
SOVEREIGN BANK ("Lender") at the offices of FLEET BANK - NH, a
New Hampshire bank, as Agent for Lenders ("Agent"), at its
address at 1155 Elm Street, Manchester, New Hampshire 03101, or
at such other place as Agent may designate from time to time in
writing, in lawful money of the United States of America and in
immediately available funds, the amount of SIX MILLION AND NO/100
DOLLARS ($6,000,000.00) or, if less, the aggregate unpaid amount
of all Revolving Credit Advances made to the Borrowers under the
Credit Agreement (as hereinafter defined) by Lender. All
capitalized terms used but not otherwise defined herein have the
meanings given to them in the Credit Agreement or in Annex A
thereto.
This Revolving Note is one of the Revolving Notes
issued pursuant to that certain Credit Agreement dated as of
August 3, 1998 by and among the Borrowers, Agent, Lender and the
other Persons signatory thereto from time to time as Lenders
(including all annexes, exhibits and schedules thereto, and as
from time to time amended, restated, supplemented or otherwise
modified, the "Credit Agreement"), and is entitled to the benefit
and security of the Credit Agreement, the Security Agreement and
all of the other Loan Documents referred to therein. Reference is
hereby made to the Credit Agreement for a statement of all of the
terms and conditions under which the Loans evidenced hereby are
made and are to be repaid. The date and amount of each Revolving
Credit Advance made by Lender to the Borrowers, the rates of
interest applicable thereto and each payment made on account of
the principal thereof, shall be recorded by Agent on its books;
provided that the failure of Agent to make any such recordation
shall not affect the obligations of each Borrower to make a
payment when due of any amount owing under the Credit Agreement
or this Note in respect of the Revolving Credit Advances made by
Lender to the Borrowers.
This Revolving Note, together with each of the other
Revolving Notes of even date herewith executed by Borrowers (the
"Other Notes"), is issued in substitution for the Revolving Note
issued by the Borrowers on August 3, 1998 to Fleet Bank - NH (the
"Prior Note"). The principal balance outstanding under the Prior
Note shall continue in all respects to be outstanding hereunder
and under each of the Other Notes, and this Revolving Note shall
not be deemed to evidence a novation or payment and refunding of
that outstanding principal balance.
The principal amount of the indebtedness evidenced
hereby shall be payable in the amounts and on the dates specified
in the Credit Agreement, the terms of which are hereby
incorporated herein by reference. Interest hereon shall be paid
until such principal amount is paid in full at such interest
rates and at such times, and pursuant to such calculations, as
are specified in the Credit Agreement.
If any payment on this Revolving Note becomes due and
payable on a day other than a Business Day, the maturity thereof
shall be extended to the next succeeding Business Day and, with
respect to payments of principal, interest thereon shall be
payable at the then applicable rate during such extension.
Upon and after the occurrence of any Event of Default,
this Revolving Note may, as provided in the Credit Agreement, and
without demand, notice or legal process of any kind, be declared,
and immediately shall become, due and payable.
Time is of the essence of this Revolving Note. Demand,
presentment, protest and notice of nonpayment and protest are
hereby waived by each Borrower.
- 94 -
<PAGE>
Except as provided in the Credit Agreement, this
Revolving Note may not be assigned by Lender to any Person.
THIS REVOLVING NOTE SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW HAMPSHIRE
APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE.
WPI GROUP, INC.,
WPI POWER SYSTEMS, INC.,
WPI MAGNETEC, INC.,
WPI ELECTRONICS, INC.,
WPI OYSTER TERMIFLEX, INC.,
WPI MICRO PALM, INC.,
WPI MICRO PROCESSOR
SYSTEMS, INC.,
WPI DECISIONKEY, INC.,
WPI UK HOLDING, INC.,
WPI UK HOLDING II, INC.,
WPI OYSTER TERMINALS, INC.,
HUSKY COMPUTERS, INC., and
WPI INSTRUMENTS, INC.
/s/ Mark L. Young By: /s/ John W. Powers
----------------- ------------------
Witness John W. Powers, for, on
behalf of, and as Duly
Authorized Officer or
Agent of each of the
above-named entities
- 95 -
<PAGE>
Exhibit 10.33
TERM A NOTE
$5,000,000.00 Manchester, New Hampshire
October 30, 1998
FOR VALUE RECEIVED, each of the undersigned (each
individually a "Borrower" and collectively, the "Borrowers")
HEREBY JOINTLY AND SEVERALLY PROMISES TO PAY to the order of
BANKBOSTON, N.A. ("Lender") at the offices of FLEET BANK - NH, a
New Hampshire bank, as Agent for Lenders ("Agent") at its address
at 1155 Elm Street, Manchester, New Hampshire 03101 or at such
other place as Agent may designate from time to time in writing,
in lawful money of the United States of America and in
immediately available funds, the amount of FIVE MILLION AND
NO/100 DOLLARS ($5,000,000.00). All capitalized terms used but
not otherwise defined herein have the meanings given to them in
the Credit Agreement (as hereinafter defined) or in Annex A
thereto.
This Term A Note is one of the Term A Notes issued
pursuant to that certain Credit Agreement dated as of August 3,
1998 by and among the Borrowers, Agent, Lender and the other
Persons signatory thereto from time to time as Lenders (including
all annexes, exhibits and schedules thereto and as from time to
time amended, restated, supplemented or otherwise modified, the
"Credit Agreement"), and is entitled to the benefit and security
of the Credit Agreement, the Security Agreement and all of the
other Loan Documents referred to therein. Reference is hereby
made to the Credit Agreement for a statement of all of the terms
and conditions under which the Loans evidenced hereby are made
and are to be repaid. The principal balance of the Term Loan A,
the rates of interest applicable thereto and the date and amount
of each payment made on account of the principal thereof, shall
be recorded by Agent on its books; provided that the failure of
Agent to make any such recordation shall not affect the
obligations of each Borrower to make a payment when due of any
amount owing under the Credit Agreement or this Term A Note.
This Term A Note, together with each of the other Term
A Notes of even date herewith executed by Borrowers (the "Other
Notes"), is issued in substitution for the Term A Note issued by
the Borrowers to Fleet Bank - NH on August 3, 1998 (the "Prior
Note"). The principal balance outstanding under the Prior Note
shall continue in all respects to be outstanding hereunder and
under each of the Other Notes, and this Term A Note shall not be
deemed to evidence a novation or payment and refunding of that
outstanding principal balance.
The principal amount of the indebtedness evidenced
hereby shall be payable in the amounts and on the dates specified
in the Credit Agreement.
Interest on the principal amount of the indebtedness
evidenced hereby shall be paid until such principal amount is
paid in full at such interest rates and at such times, and
pursuant to such calculations, as are specified in the Credit
Agreement. The terms of the Credit Agreement are hereby
incorporated herein by reference.
If any payment on this Term A Note becomes due and
payable on a day other than a Business Day, the maturity thereof
shall be extended to the next succeeding Business Day and, with
respect to payments of principal, interest thereon shall be
payable at the then applicable rate during such extension.
Upon and after the occurrence of any Event of Default,
this Term A Note may, as provided in the Credit Agreement, and
without demand, notice or legal process of any kind, be declared,
and immediately shall become, due and payable.
Time is of the essence of this Term A Note. Demand,
presentment, protest and notice of nonpayment and protest are
hereby waived by each Borrower.
- 96 -
<PAGE>
Except as provided in the Credit Agreement, this Term
A Note may not be assigned by Lender to any Person.
THIS TERM A NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW HAMPSHIRE APPLICABLE
TO CONTRACTS MADE AND PERFORMED IN THAT STATE.
WPI GROUP, INC.,
WPI POWER SYSTEMS, INC.,
WPI MAGNETEC, INC.,
WPI ELECTRONICS, INC.,
WPI OYSTER TERMIFLEX, INC.,
WPI MICRO PALM, INC.,
WPI MICRO PROCESSOR
SYSTEMS, INC.,
WPI DECISIONKEY, INC.,
WPI UK HOLDING, INC.,
WPI UK HOLDING II, INC.,
WPI OYSTER TERMINALS, INC.,
HUSKY COMPUTERS, INC., and
WPI INSTRUMENTS, INC.
/s/ Mark L. Young By: /s/ John W. Powers
----------------- ------------------
Witness John W. Powers, for, on
behalf of, and as Duly
Authorized Officer or Agent
of each of the above-named
entities
- 97 -
<PAGE>
Exhibit 10.34
TERM A NOTE
$6,000,000.00 Manchester, New Hampshire
October 30, 1998
FOR VALUE RECEIVED, each of the undersigned (each
individually a "Borrower" and collectively, the "Borrowers")
HEREBY JOINTLY AND SEVERALLY PROMISES TO PAY to the order of BANK
OF NEW HAMPSHIRE ("Lender") at the offices of FLEET BANK - NH, a
New Hampshire bank, as Agent for Lenders ("Agent") at its address
at 1155 Elm Street, Manchester, New Hampshire 03101 or at such
other place as Agent may designate from time to time in writing,
in lawful money of the United States of America and in
immediately available funds, the amount of SIX MILLION AND NO/100
DOLLARS ($6,000,000.00). All capitalized terms used but not
otherwise defined herein have the meanings given to them in the
Credit Agreement (as hereinafter defined) or in Annex A thereto.
This Term A Note is one of the Term A Notes issued
pursuant to that certain Credit Agreement dated as of August 3,
1998 by and among the Borrowers, Agent, Lender and the other
Persons signatory thereto from time to time as Lenders (including
all annexes, exhibits and schedules thereto and as from time to
time amended, restated, supplemented or otherwise modified, the
"Credit Agreement"), and is entitled to the benefit and security
of the Credit Agreement, the Security Agreement and all of the
other Loan Documents referred to therein. Reference is hereby
made to the Credit Agreement for a statement of all of the terms
and conditions under which the Loans evidenced hereby are made
and are to be repaid. The principal balance of the Term Loan A,
the rates of interest applicable thereto and the date and amount
of each payment made on account of the principal thereof, shall
be recorded by Agent on its books; provided that the failure of
Agent to make any such recordation shall not affect the
obligations of each Borrower to make a payment when due of any
amount owing under the Credit Agreement or this Term A Note.
This Term A Note, together with each of the other Term
A Notes of even date herewith executed by Borrowers (the "Other
Notes"), is issued in substitution for the Term A Note issued by
the Borrowers to Fleet Bank - NH on August 3, 1998 (the "Prior
Note"). The principal balance outstanding under the Prior Note
shall continue in all respects to be outstanding hereunder and
under each of the Other Notes, and this Term A Note shall not be
deemed to evidence a novation or payment and refunding of that
outstanding principal balance.
The principal amount of the indebtedness evidenced
hereby shall be payable in the amounts and on the dates specified
in the Credit Agreement.
Interest on the principal amount of the indebtedness
evidenced hereby shall be paid until such principal amount is
paid in full at such interest rates and at such times, and
pursuant to such calculations, as are specified in the Credit
Agreement. The terms of the Credit Agreement are hereby
incorporated herein by reference.
If any payment on this Term A Note becomes due and
payable on a day other than a Business Day, the maturity thereof
shall be extended to the next succeeding Business Day and, with
respect to payments of principal, interest thereon shall be
payable at the then applicable rate during such extension.
Upon and after the occurrence of any Event of Default,
this Term A Note may, as provided in the Credit Agreement, and
without demand, notice or legal process of any kind, be declared,
and immediately shall become, due and payable.
- 98 -
<PAGE>
Time is of the essence of this Term A Note. Demand,
presentment, protest and notice of nonpayment and protest are
hereby waived by each Borrower.
Except as provided in the Credit Agreement, this Term
A Note may not be assigned by Lender to any Person.
THIS TERM A NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW HAMPSHIRE APPLICABLE
TO CONTRACTS MADE AND PERFORMED IN THAT STATE.
WPI GROUP, INC.,
WPI POWER SYSTEMS, INC.,
WPI MAGNETEC, INC.,
WPI ELECTRONICS, INC.,
WPI OYSTER TERMIFLEX, INC.,
WPI MICRO PALM, INC.,
WPI MICRO PROCESSOR
SYSTEMS, INC.,
WPI DECISIONKEY, INC.,
WPI UK HOLDING, INC.,
WPI UK HOLDING II, INC.,
WPI OYSTER TERMINALS, INC.,
HUSKY COMPUTERS, INC., and
WPI INSTRUMENTS, INC.
/s/ Mark L. Young By: /s/ John W. Powers
----------------- -------------------
Witness John W. Powers, for, on
behalf of, and as Duly
Authorized Officer or Agent
of each of the above-named
entities
- 99 -
<PAGE>
Exhibit 10.35
TERM A NOTE
$4,000,000.00 Manchester, New Hampshire
October 30, 1998
FOR VALUE RECEIVED, each of the undersigned (each
individually a "Borrower" and collectively, the "Borrowers")
HEREBY JOINTLY AND SEVERALLY PROMISES TO PAY to the order of
FLEET BANK - NH ("Lender") at the offices of FLEET BANK - NH, a
New Hampshire bank, as Agent for Lenders ("Agent") at its address
at 1155 Elm Street, Manchester, New Hampshire 03101 or at such
other place as Agent may designate from time to time in writing,
in lawful money of the United States of America and in
immediately available funds, the amount of FOUR MILLION AND
NO/100 DOLLARS ($4,000,000.00). All capitalized terms used but
not otherwise defined herein have the meanings given to them in
the Credit Agreement (as hereinafter defined) or in Annex A
thereto.
This Term A Note is one of the Term A Notes issued
pursuant to that certain Credit Agreement dated as of August 3,
1998 by and among the Borrowers, Agent, Lender and the other
Persons signatory thereto from time to time as Lenders (including
all annexes, exhibits and schedules thereto and as from time to
time amended, restated, supplemented or otherwise modified, the
"Credit Agreement"), and is entitled to the benefit and security
of the Credit Agreement, the Security Agreement and all of the
other Loan Documents referred to therein. Reference is hereby
made to the Credit Agreement for a statement of all of the terms
and conditions under which the Loans evidenced hereby are made
and are to be repaid. The principal balance of the Term Loan A,
the rates of interest applicable thereto and the date and amount
of each payment made on account of the principal thereof, shall
be recorded by Agent on its books; provided that the failure of
Agent to make any such recordation shall not affect the
obligations of each Borrower to make a payment when due of any
amount owing under the Credit Agreement or this Term A Note.
This Term A Note, together with each of the other Term
A Notes of even date herewith executed by Borrowers (the "Other
Notes"), is issued in substitution for the Term A Note issued by
the Borrowers to Fleet Bank - NH on August 3, 1998 (the "Prior
Note"). The principal balance outstanding under the Prior Note
shall continue in all respects to be outstanding hereunder and
under each of the Other Notes, and this Term A Note shall not be
deemed to evidence a novation or payment and refunding of that
outstanding principal balance.
The principal amount of the indebtedness evidenced
hereby shall be payable in the amounts and on the dates specified
in the Credit Agreement.
Interest on the principal amount of the indebtedness
evidenced hereby shall be paid until such principal amount is
paid in full at such interest rates and at such times, and
pursuant to such calculations, as are specified in the Credit
Agreement. The terms of the Credit Agreement are hereby
incorporated herein by reference.
If any payment on this Term A Note becomes due and
payable on a day other than a Business Day, the maturity thereof
shall be extended to the next succeeding Business Day and, with
respect to payments of principal, interest thereon shall be
payable at the then applicable rate during such extension.
Upon and after the occurrence of any Event of Default,
this Term A Note may, as provided in the Credit Agreement, and
without demand, notice or legal process of any kind, be declared,
and immediately shall become, due and payable.
- 100 -
<PAGE>
Time is of the essence of this Term A Note. Demand,
presentment, protest and notice of nonpayment and protest are
hereby waived by each Borrower.
Except as provided in the Credit Agreement, this Term
A Note may not be assigned by Lender to any Person.
THIS TERM A NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW HAMPSHIRE APPLICABLE
TO CONTRACTS MADE AND PERFORMED IN THAT STATE.
WPI GROUP, INC.,
WPI POWER SYSTEMS, INC.,
WPI MAGNETEC, INC.,
WPI ELECTRONICS, INC.,
WPI OYSTER TERMIFLEX, INC.,
WPI MICRO PALM, INC.,
WPI MICRO PROCESSOR
SYSTEMS, INC.,
WPI DECISIONKEY, INC.,
WPI UK HOLDING, INC.,
WPI UK HOLDING II, INC.,
WPI OYSTER TERMINALS, INC.,
HUSKY COMPUTERS, INC., and
WPI INSTRUMENTS, INC.
/s/ Mark L. Young By: /s/ John W. Powers
----------------- ------------------
Witness John W. Powers, for, on
behalf of, and as Duly
Authorized Officer or
Agent of each of the
above-named entities
- 101 -
<PAGE>
Exhibit 10.36
TERM A NOTE
$6,000,000.00 Manchester, New Hampshire
October 30, 1998
FOR VALUE RECEIVED, each of the undersigned (each
individually a "Borrower" and collectively, the "Borrowers")
HEREBY JOINTLY AND SEVERALLY PROMISES TO PAY to the order of KEY
CORPORATE CAPITAL INC. ("Lender") at the offices of FLEET BANK -
NH, a New Hampshire bank, as Agent for Lenders ("Agent") at its
address at 1155 Elm Street, Manchester, New Hampshire 03101 or at
such other place as Agent may designate from time to time in
writing, in lawful money of the United States of America and in
immediately available funds, the amount of SIX MILLION AND NO/100
DOLLARS ($6,000,000.00). All capitalized terms used but not
otherwise defined herein have the meanings given to them in the
Credit Agreement (as hereinafter defined) or in Annex A thereto.
This Term A Note is one of the Term A Notes issued
pursuant to that certain Credit Agreement dated as of August 3,
1998 by and among the Borrowers, Agent, Lender and the other
Persons signatory thereto from time to time as Lenders (including
all annexes, exhibits and schedules thereto and as from time to
time amended, restated, supplemented or otherwise modified, the
"Credit Agreement"), and is entitled to the benefit and security
of the Credit Agreement, the Security Agreement and all of the
other Loan Documents referred to therein. Reference is hereby
made to the Credit Agreement for a statement of all of the terms
and conditions under which the Loans evidenced hereby are made
and are to be repaid. The principal balance of the Term Loan A,
the rates of interest applicable thereto and the date and amount
of each payment made on account of the principal thereof, shall
be recorded by Agent on its books; provided that the failure of
Agent to make any such recordation shall not affect the
obligations of each Borrower to make a payment when due of any
amount owing under the Credit Agreement or this Term A Note.
This Term A Note, together with each of the other Term
A Notes of even date herewith executed by Borrowers (the "Other
Notes"), is issued in substitution for the Term A Note issued by
the Borrowers to Fleet Bank - NH on August 3, 1998 (the "Prior
Note"). The principal balance outstanding under the Prior Note
shall continue in all respects to be outstanding hereunder and
under each of the Other Notes, and this Term A Note shall not be
deemed to evidence a novation or payment and refunding of that
outstanding principal balance.
The principal amount of the indebtedness evidenced
hereby shall be payable in the amounts and on the dates specified
in the Credit Agreement.
Interest on the principal amount of the indebtedness
evidenced hereby shall be paid until such principal amount is
paid in full at such interest rates and at such times, and
pursuant to such calculations, as are specified in the Credit
Agreement. The terms of the Credit Agreement are hereby
incorporated herein by reference.
If any payment on this Term A Note becomes due and
payable on a day other than a Business Day, the maturity thereof
shall be extended to the next succeeding Business Day and, with
respect to payments of principal, interest thereon shall be
payable at the then applicable rate during such extension.
- 102 -
<PAGE>
Upon and after the occurrence of any Event of Default,
this Term A Note may, as provided in the Credit Agreement, and
without demand, notice or legal process of any kind, be declared,
and immediately shall become, due and payable.
Time is of the essence of this Term A Note. Demand,
presentment, protest and notice of nonpayment and protest are
hereby waived by each Borrower.
Except as provided in the Credit Agreement, this Term
A Note may not be assigned by Lender to any Person.
THIS TERM A NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW HAMPSHIRE APPLICABLE
TO CONTRACTS MADE AND PERFORMED IN THAT STATE.
WPI GROUP, INC.,
WPI POWER SYSTEMS, INC.,
WPI MAGNETEC, INC.,
WPI ELECTRONICS, INC.,
WPI OYSTER TERMIFLEX, INC.,
WPI MICRO PALM, INC.,
WPI MICRO PROCESSOR
SYSTEMS, INC.,
WPI DECISIONKEY, INC.,
WPI UK HOLDING, INC.,
WPI UK HOLDING II, INC.,
WPI OYSTER TERMINALS, INC.,
HUSKY COMPUTERS, INC., and
WPI INSTRUMENTS, INC.
/s/ Mark L. Young By: /s/ John W. Powers
----------------- ------------------
Witness John W. Powers, for, on
behalf of, and as Duly
Authorized Officer or Agent
of each of the above-named
entities
- 103 -
<PAGE>
Exhibit 10.37
TERM A NOTE
$9,000,000.00 Manchester, New Hampshire
October 30, 1998
FOR VALUE RECEIVED, each of the undersigned (each
individually a "Borrower" and collectively, the "Borrowers")
HEREBY JOINTLY AND SEVERALLY PROMISES TO PAY to the order of
SOVEREIGN BANK ("Lender") at the offices of FLEET BANK - NH, a
New Hampshire bank, as Agent for Lenders ("Agent") at its address
at 1155 Elm Street, Manchester, New Hampshire 03101 or at such
other place as Agent may designate from time to time in writing,
in lawful money of the United States of America and in
immediately available funds, the amount of NINE MILLION AND
NO/100 DOLLARS ($9,000,000.00). All capitalized terms used but
not otherwise defined herein have the meanings given to them in
the Credit Agreement (as hereinafter defined) or in Annex A
thereto.
This Term A Note is one of the Term A Notes issued
pursuant to that certain Credit Agreement dated as of August 3,
1998 by and among the Borrowers, Agent, Lender and the other
Persons signatory thereto from time to time as Lenders (including
all annexes, exhibits and schedules thereto and as from time to
time amended, restated, supplemented or otherwise modified, the
"Credit Agreement"), and is entitled to the benefit and security
of the Credit Agreement, the Security Agreement and all of the
other Loan Documents referred to therein. Reference is hereby
made to the Credit Agreement for a statement of all of the terms
and conditions under which the Loans evidenced hereby are made
and are to be repaid. The principal balance of the Term Loan A,
the rates of interest applicable thereto and the date and amount
of each payment made on account of the principal thereof, shall
be recorded by Agent on its books; provided that the failure of
Agent to make any such recordation shall not affect the
obligations of each Borrower to make a payment when due of any
amount owing under the Credit Agreement or this Term A Note.
This Term A Note, together with each of the other Term
A Notes of even date herewith executed by Borrowers (the "Other
Notes"), is issued in substitution for the Term A Note issued by
the Borrowers to Fleet Bank - NH on August 3, 1998 (the "Prior
Note"). The principal balance outstanding under the Prior Note
shall continue in all respects to be outstanding hereunder and
under each of the Other Notes, and this Term A Note shall not be
deemed to evidence a novation or payment and refunding of that
outstanding principal balance.
The principal amount of the indebtedness evidenced
hereby shall be payable in the amounts and on the dates specified
in the Credit Agreement.
Interest on the principal amount of the indebtedness
evidenced hereby shall be paid until such principal amount is
paid in full at such interest rates and at such times, and
pursuant to such calculations, as are specified in the Credit
Agreement. The terms of the Credit Agreement are hereby
incorporated herein by reference.
If any payment on this Term A Note becomes due and
payable on a day other than a Business Day, the maturity thereof
shall be extended to the next succeeding Business Day and, with
respect to payments of principal, interest thereon shall be
payable at the then applicable rate during such extension.
- 104 -
<PAGE>
Upon and after the occurrence of any Event of Default,
this Term A Note may, as provided in the Credit Agreement, and
without demand, notice or legal process of any kind, be declared,
and immediately shall become, due and payable.
Time is of the essence of this Term A Note. Demand,
presentment, protest and notice of nonpayment and protest are
hereby waived by each Borrower.
Except as provided in the Credit Agreement, this Term
A Note may not be assigned by Lender to any Person.
THIS TERM A NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW HAMPSHIRE APPLICABLE
TO CONTRACTS MADE AND PERFORMED IN THAT STATE.
WPI GROUP, INC.,
WPI POWER SYSTEMS, INC.,
WPI MAGNETEC, INC.,
WPI ELECTRONICS, INC.,
WPI OYSTER TERMIFLEX, INC.,
WPI MICRO PALM, INC.,
WPI MICRO PROCESSOR
SYSTEMS, INC.,
WPI DECISIONKEY, INC.,
WPI UK HOLDING, INC.,
WPI UK HOLDING II, INC.,
WPI OYSTER TERMINALS, INC.,
HUSKY COMPUTERS, INC., and
WPI INSTRUMENTS, INC.
/s/ Mark L. Young By: /s/ John W. Powers
----------------- ------------------
Witness John W. Powers, for, on
behalf of, and as Duly
Authorized Officer or Agent
of each of the above-named
entities
- 105 -
<PAGE>
Exhibit 10.38
TERM B NOTE
$4,166,666.67 Manchester, New Hampshire
October 30, 1998
FOR VALUE RECEIVED, each of the undersigned (each
individually a "Borrower" and collectively, the "Borrowers")
HEREBY JOINTLY AND SEVERALLY PROMISES TO PAY to the order of BA
NKBOSTON, N.A. ("Lender") at the offices of FLEET BANK - NH, a
New Hampshire bank, as Agent for Lenders ("Agent") at its address
at 1155 Elm Street, Manchester, New Hampshire or at such other
place as Agent may designate from time to time in writing, in
lawful money of the United States of America and in immediately
available funds, the amount of FOUR MILLION ONE HUNDRED SIXTY-SIX
THOUSAND SIX HUNDRED SIXTY-SIX AND 67/100 DOLLARS
($4,166,666.67). All capitalized terms used but not otherwise
defined herein have the meanings given to them in the Credit
Agreement (as hereinafter defined) or in Annex A thereto.
This Term B Note is one of the Term B Notes issued
pursuant to that certain Credit Agreement dated as of August 3,
1998 by and among the Borrowers, Agent, Lender and the other
Persons signatory thereto from time to time as Lenders (including
all annexes, exhibits and schedules thereto and as from time to
time amended, restated, supplemented or otherwise modified, the
"Credit Agreement"), and is entitled to the benefit and security
of the Credit Agreement, the Security Agreement and all of the
other Loan Documents referred to therein. Reference is hereby
made to the Credit Agreement for a statement of all of the terms
and conditions under which the Loans evidenced hereby are made
and are to be repaid. The principal balance of the Term Loan B.
the rates of interest applicable thereto and the date and amount
of each payment made on account of the principal thereof, shall
be recorded by Agent on its books; provided that the failure of
Agent to make any such recordation shall not affect the
obligations of each Borrower to make a payment when due of any
amount owing under the Credit Agreement or this Term B Note.
This Term B Note, together with each of the other Term
B Notes of even date herewith executed by Borrowers (the "Other
Notes"), is issued in substitution for the Term B Note issued by
the Borrowers to Fleet Bank - NH on August 3, 1998 (the "Prior
Note"). The principal balance outstanding under the Prior Note
shall continue in all respects to be outstanding hereunder and
under each of the Other Notes, and this Term B Note shall not be
deemed to evidence a novation or payment and refunding of that
outstanding principal balance.
The principal amount of the indebtedness evidenced
hereby shall be payable in the amounts and on the dates specified
in the Credit Agreement.
Interest on the principal amount of the indebtedness
evidenced hereby shall be paid until such principal amount is
paid in full at such interest rates and at such times, and
pursuant to such calculations, as are specified in the Credit
Agreement. The terms of the Credit Agreement are hereby
incorporated herein by reference.
- 106 -
<PAGE>
If any payment on this Term B Note becomes due and
payable on a day other than a Business Day, the maturity thereof
shall be extended to the next succeeding Business Day and, with
respect to payments of principal, interest thereon shall be
payable at the then applicable rate during such extension.
Upon and after the occurrence of any Event of Default,
this Term B Note may, as provided in the Credit Agreement, and
without demand, notice or legal process of any kind, be declared,
and immediately shall become, due and payable.
Time is of the essence of this Term B Note. Demand,
presentment, protest and notice of nonpayment and protest are
hereby waived by each Borrower.
Except as provided in the Credit Agreement, this Term
B Note may not be assigned by Lender to any Person.
THIS TERM B NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW HAMPSHIRE APPLICABLE
TO CONTRACTS MADE AND PERFORMED IN THAT STATE.
WPI GROUP, INC.,
WPI POWER SYSTEMS, INC.,
WPI MAGNETEC, INC.,
WPI ELECTRONICS, INC.,
WPI OYSTER TERMIFLEX, INC.,
WPI MICRO PALM, INC.,
WPI MICRO PROCESSOR
SYSTEMS, INC.,
WPI DECISIONKEY, INC.,
WPI UK HOLDING, INC.,
WPI UK HOLDING II, INC.,
WPI OYSTER TERMINALS, INC.,
HUSKY COMPUTERS, INC., and
WPI INSTRUMENTS, INC.
/s/ Mark L. Young By: /s/ John W. Powers
----------------- -------------------
Witness John W. Powers, for, on
behalf of, and as Duly
Authorized Officer or Agent
of each of the above-named
entities
- 107 -
<PAGE>
Exhibit 10.39
TERM B NOTE
$5,000,000.00 Manchester, New Hampshire
October 30, 1998
FOR VALUE RECEIVED, each of the undersigned (each
individually a "Borrower" and collectively, the "Borrowers")
HEREBY JOINTLY AND SEVERALLY PROMISES TO PAY to the order of BANK
OF NEW HAMPSHIRE ("Lender") at the offices of FLEET BANK - NH, a
New Hampshire bank, as Agent for Lenders ("Agent") at its address
at 1155 Elm Street, Manchester, New Hampshire or at such other
place as Agent may designate from time to time in writing, in
lawful money of the United States of America and in immediately
available funds, the amount of FIVE MILLION AND 00/100 DOLLARS
($5,000,000.00). All capitalized terms used but not otherwise
defined herein have the meanings given to them in the Credit
Agreement (as hereinafter defined) or in Annex A thereto.
This Term B Note is one of the Term B Notes issued
pursuant to that certain Credit Agreement dated as of August 3,
1998 by and among the Borrowers, Agent, Lender and the other
Persons signatory thereto from time to time as Lenders (including
all annexes, exhibits and schedules thereto and as from time to
time amended, restated, supplemented or otherwise modified, the
"Credit Agreement"), and is entitled to the benefit and security
of the Credit Agreement, the Security Agreement and all of the
other Loan Documents referred to therein. Reference is hereby
made to the Credit Agreement for a statement of all of the terms
and conditions under which the Loans evidenced hereby are made
and are to be repaid. The principal balance of the Term Loan B.
the rates of interest applicable thereto and the date and amount
of each payment made on account of the principal thereof, shall
be recorded by Agent on its books; provided that the failure of
Agent to make any such recordation shall not affect the
obligations of each Borrower to make a payment when due of any
amount owing under the Credit Agreement or this Term B Note.
This Term B Note, together with each of the other Term
B Notes of even date herewith executed by Borrowers (the "Other
Notes"), is issued in substitution for the Term B Note issued by
the Borrowers to Fleet Bank - NH on August 3, 1998 (the "Prior
Note"). The principal balance outstanding under the Prior Note
shall continue in all respects to be outstanding hereunder and
under each of the Other Notes, and this Term B Note shall not be
deemed to evidence a novation or payment and refunding of that
outstanding principal balance.
The principal amount of the indebtedness evidenced
hereby shall be payable in the amounts and on the dates specified
in the Credit Agreement.
- 108 -
<PAGE>
Interest on the principal amount of the indebtedness
evidenced hereby shall be paid until such principal amount is
paid in full at such interest rates and at such times, and
pursuant to such calculations, as are specified in the Credit
Agreement. The terms of the Credit Agreement are hereby
incorporated herein by reference.
If any payment on this Term B Note becomes due and
payable on a day other than a Business Day, the maturity thereof
shall be extended to the next succeeding Business Day and, with
respect to payments of principal, interest thereon shall be
payable at the then applicable rate during such extension.
Upon and after the occurrence of any Event of Default,
this Term B Note may, as provided in the Credit Agreement, and
without demand, notice or legal process of any kind, be declared,
and immediately shall become, due and payable.
Time is of the essence of this Term B Note. Demand,
presentment, protest and notice of nonpayment and protest are
hereby waived by each Borrower.
Except as provided in the Credit Agreement, this Term
B Note may not be assigned by Lender to any Person.
THIS TERM B NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW HAMPSHIRE APPLICABLE
TO CONTRACTS MADE AND PERFORMED IN THAT STATE.
WPI GROUP, INC.,
WPI POWER SYSTEMS, INC.,
WPI MAGNETEC, INC.,
WPI ELECTRONICS, INC.,
WPI OYSTER TERMIFLEX, INC.,
WPI MICRO PALM, INC.,
WPI MICRO PROCESSOR
SYSTEMS, INC.,
WPI DECISIONKEY, INC.,
WPI UK HOLDING, INC.,
WPI UK HOLDING II, INC.,
WPI OYSTER TERMINALS, INC.,
HUSKY COMPUTERS, INC., and
WPI INSTRUMENTS, INC.
/s/ Mark L. Young By: /s/ John W. Powers
----------------- ------------------
Witness John W. Powers, for, on
behalf of, and as Duly
Authorized Officer or Agent
of each of the above-named
entities
- 109 -
<PAGE>
Exhibit 10.40
TERM B NOTE
$15,833,333.33 Manchester, New Hampshire
October 30, 1998
FOR VALUE RECEIVED, each of the undersigned (each
individually a "Borrower" and collectively, the "Borrowers")
HEREBY JOINTLY AND SEVERALLY PROMISES TO PAY to the order of
FLEET BANK - NH ("Lender") at the offices of FLEET BANK - NH, a
New Hampshire bank, as Agent for Lenders ("Agent") at its address
at 1155 Elm Street, Manchester, New Hampshire or at such other
place as Agent may designate from time to time in writing, in
lawful money of the United States of America and in immediately
available funds, the amount of FIFTEEN MILLION EIGHT HUNDRED
THIRTY-THREE THOUSAND THREE HUNDRED THIRTY-THREE AND 33/100
DOLLARS ($15,833,333.33). All capitalized terms used but not
otherwise defined herein have the meanings given to them in the
Credit Agreement (as hereinafter defined) or in Annex A thereto.
This Term B Note is one of the Term B Notes issued
pursuant to that certain Credit Agreement dated as of August 3,
1998 by and among the Borrowers, Agent, Lender and the other
Persons signatory thereto from time to time as Lenders (including
all annexes, exhibits and schedules thereto and as from time to
time amended, restated, supplemented or otherwise modified, the
"Credit Agreement"), and is entitled to the benefit and security
of the Credit Agreement, the Security Agreement and all of the
other Loan Documents referred to therein. Reference is hereby
made to the Credit Agreement for a statement of all of the terms
and conditions under which the Loans evidenced hereby are made
and are to be repaid. The principal balance of the Term Loan B.
the rates of interest applicable thereto and the date and amount
of each payment made on account of the principal thereof, shall
be recorded by Agent on its books; provided that the failure of
Agent to make any such recordation shall not affect the
obligations of each Borrower to make a payment when due of any
amount owing under the Credit Agreement or this Term B Note.
This Term B Note, together with each of the other Term
B Notes of even date herewith executed by Borrowers (the "Other
Notes"), is issued in substitution for the Term B Note issued by
the Borrowers to Fleet Bank - NH on August 3, 1998 (the "Prior
Note"). The principal balance outstanding under the Prior Note
shall continue in all respects to be outstanding hereunder and
under each of the Other Notes, and this Term B Note shall not be
deemed to evidence a novation or payment and refunding of that
outstanding principal balance.
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<PAGE>
The principal amount of the indebtedness evidenced
hereby shall be payable in the amounts and on the dates specified
in the Credit Agreement.
Interest on the principal amount of the indebtedness
evidenced hereby shall be paid until such principal amount is
paid in full at such interest rates and at such times, and
pursuant to such calculations, as are specified in the Credit
Agreement. The terms of the Credit Agreement are hereby
incorporated herein by reference.
If any payment on this Term B Note becomes due and
payable on a day other than a Business Day, the maturity thereof
shall be extended to the next succeeding Business Day and, with
respect to payments of principal, interest thereon shall be
payable at the then applicable rate during such extension.
Upon and after the occurrence of any Event of Default,
this Term B Note may, as provided in the Credit Agreement, and
without demand, notice or legal process of any kind, be declared,
and immediately shall become, due and payable.
Time is of the essence of this Term B Note. Demand,
presentment, protest and notice of nonpayment and protest are
hereby waived by each Borrower.
Except as provided in the Credit Agreement, this Term
B Note may not be assigned by Lender to any Person.
THIS TERM B NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW HAMPSHIRE APPLICABLE
TO CONTRACTS MADE AND PERFORMED IN THAT STATE.
WPI GROUP, INC.,
WPI POWER SYSTEMS, INC.,
WPI MAGNETEC, INC.,
WPI ELECTRONICS, INC.,
WPI OYSTER TERMIFLEX, INC.,
WPI MICRO PALM, INC.,
WPI MICRO PROCESSOR
SYSTEMS, INC.,
WPI DECISIONKEY, INC.,
WPI UK HOLDING, INC.,
WPI UK HOLDING II, INC.,
WPI OYSTER TERMINALS, INC.,
HUSKY COMPUTERS, INC., and
WPI INSTRUMENTS, INC.
/s/ Mark L. Young By: /s/ John W. Powers
----------------- ------------------
Witness John W. Powers, for, on
behalf of, and as Duly
Authorized Officer or Agent
of each of the above-named
entities
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<PAGE>
Exhibit 10.41
SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT (this "Second Amendment"), dated as of
December __, 1998, to the Credit Agreement, dated as of August 3,
1998, as amended to date ( the "Credit Agreement"), among WPI
Group, Inc., WPI Electronics, Inc., WPI Magnetec, Inc., WPI Micro
Palm, Inc., WPI Power Systems, Inc., WPI Oyster Termiflex, Inc.,
WPI Micro Processor Systems, Inc., WPI Decisionkey, Inc., WPI UK
Holding, Inc., WPI UK Holding, II, Inc., WPI Oyster Terminals,
Inc., WPI Husky Computers, Inc., and WPI Instruments, Inc.,
(collectively, the "Borrowers"), the various financial
institutions parties hereto (collectively, the "Lenders") and
Fleet Bank - NH, for itself, as Lender, and as Agent for Lenders
pursuant to the Credit Agreement (the "Agent").
WITNESSETH:
WHEREAS, the Borrowers, the Lenders and the Agent are
parties to the Credit Agreement, pursuant to which the Lenders
made certain Loans to the Borrowers; and
WHEREAS, the Borrowers, the Lenders and the Agent have
agreed that certain amendments be made to the Credit Agreement,
as further set forth below;
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein contained, the Borrowers, the Lenders
and the Agent hereby agree as follows:
SECTION 1. Definitions. Unless otherwise defined or the
context otherwise requires, terms for which meanings are provided
in the Credit Agreement shall have such meanings when used in
this Second Amendment.
SECTION 2. Amendment to Credit Agreement. Effective on
the Second Amendment Effective Date, the Credit Agreement is
hereby amended in accordance with this Section 2. Except as
expressly so amended, the Credit Agreement shall continue in full
force and effect in accordance with its terms.
SECTION 2.1. Amendment to Section 1.4 (Interest and
Applicable Margins). Paragraph (a) of Section 1.4 of the Credit
Agreement captioned "Interest and Applicable Margins" is hereby
amended to read in its entirety as follows:
1.4. Interest and Applicable Margins.
(a) Borrowers shall pay interest to Agent, for the ratable
benefit of Lenders in accordance with the various Loans being
made by each Lender, in arrears on each applicable Interest
Payment Date, at the following rates: (i) with respect to the
Revolving Credit Advances, the Index Rate plus the Applicable
Revolver Index Margin per annum or, at the election of Borrower
Representative, the applicable LIBOR Rate plus the Applicable
Revolver LIBOR Margin per annum, based on the aggregate Revolving
Credit Advances outstanding from time to time; (ii) with respect
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<PAGE>
to Term Loan A, the Index Rate plus the Applicable Term Loan A
Index Margin per annum or, at the election of Borrower
Representative, the applicable LIBOR Rate plus the Applicable
Term Loan A LIBOR Margin per annum; (iii) with respect to Term
Loan B. the Index Rate plus the Applicable Term Loan B Index
Margin per annum or, at the election of Borrower Representative,
the applicable LIBOR Rate plus the Applicable Term Loan B Margin;
and (iv) with respect to the Swing Line Loan, the Index Rate plus
the Applicable Revolver Index Margin per annum.
Commencing on December _____, 1998 the Applicable Margins
shall be as follows:
Applicable Revolver Index Margin 2.25%
Applicable Revolver LIBOR Margin 3.50%
Applicable Term Loan A Index Margin 2.25%
Applicable Term Loan A LIBOR Margin 3.50%
Applicable Term Loan B Index Margin 2.75%
Applicable Term Loan B LIBOR Margin 4.00%
Applicable Unused Line Fee Margin 0.75%
The Applicable Margins will be adjusted (up or down)
prospectively on a quarterly basis as determined by Borrowers'
Ratio of Total Debt to EBITDA, commencing with the first day of
the first calendar month that occurs more than five (5) days
after delivery of Borrowers' unaudited Financial Statements to
Lenders for the Fiscal Quarter ending March 28, 1999.
Adjustments in Applicable Margins will be determined by reference
to the following grids:
If theTotal Debt to Level of
EBITDA Applicable Margins:
Ratio is:
4.0 Level I
3.5, but < 4.0 Level II
3.0, but < 3.5 Level III
2.5, but < 3.0 Level IV
< 2.5 Level V
Applicable Margins
Level Level Level Level Level
I II III IV V
Applicable Revolver 1.50% 1.25% .875% 0.50% 0.25%
Index Margin
Applicable Revolver LIBOR 2.75% 2.50% 2.125% 1.75% 1.50%
Margin
Applicable Term Loan A 1.50% 1.25% .875% 0.50% 0.25%
Index Margin
<PAGE>
Applicable Term Loan A 2.75% 2.50% 2.125% 1.75% 1.50%
LIBOR Margin
Applicable Term Loan B 2.0% 1.75% 1.375% 1.25% 1.0%
Index Margin
Applicable Term Loan B 3.25% 3.0% 2.625% 2.50% 2.25%
LIBOR Margin
Applicable Unused Line Fee 0.50% 0.50% 0.50% 0.375% 0.375%
Margin
All adjustments in the Applicable Margins after the Fiscal
Quarter ending March 28, 1999 will be implemented quarterly on a
prospective basis, for each calendar month commencing at least
five (5) days after the date of delivery to Lenders of the
quarterly unaudited or annual audited (as applicable) Financial
Statements of Borrowers evidencing the need for an adjustment.
Concurrently with the delivery of those Financial Statements,
Borrower Representative shall deliver to Agent and Lenders a
certificate, signed by its chief financial officer, setting forth
in reasonable detail the basis for the continuance of, or any
change in, the Applicable Margins. Failure to timely deliver
such Financial Statements shall, in addition to any other remedy
provided for in this Agreement, result in an increase in the
Applicable Margins to the highest level set forth in the
foregoing grid, until the first day of the first calendar month
following the delivery of those Financial Statements
demonstrating that such an increase is not required. If a Default
or Event of Default shall have occurred or be continuing at the
time any reduction in the Applicable Margins is to be
implemented, that reduction shall be deferred until the first day
of the first calendar month following the date on which such
Default or Event of Default is waived or cured.
SECTION 2.2. Amendment to Definition of "Maximum Amount"
set forth in Annex A to Credit Agreement (Definitions). The
definition of "Maximum Amount" set forth in Annex A to Credit
Agreement hereby amended to read in its entirety as follows:
"Maximum Amount" shall mean, at any particular time, an
amount equal to the Revolving Loan Commitment of all
Lenders, provided that until completion of a fiscal
quarter in which the Borrowers on a consolidated basis
shall have a Total Debt to EBITDA Ratio for the twelve
(12) month period then ended of 4.50:1.0 or less, and
the Agent shall have conducted field audit examinations
of the Borrowers with results satisfactory to the
Agent, the Maximum Amount shall be Fifteen Million
Dollars ($15,000,000.00) (notwithstanding the foregoing
proviso, the Maximum Amount for purposes of calculating
the fee for non-use of available funds pursuant to
Section 1.8(b) shall mean the Revolving Loan Commitment
for all Lenders).
SECTION 2.3. Amendment of Total Debt to EBITDA Ratio set
forth in Annex E to Credit Agreement (Financial Covenants).
Section (d) of Annex E (Section 6.10) to Credit Agreement is
amended by changing the maximum Total Debt to EBITDA Ratio
permitted for the twelve (12) month period ending (i) December
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<PAGE>
27, 1998 from "4.50:1.0" to "5.0:1.0" and (ii) March 28, 1999
from "4.50:1.0" to 4.75:1.0." Furthermore, for purposes of
calculating the Total Debt to EBITDA Ratio for the twelve month
periods ending December 27, 1998, March 28, 1999, and June 27,
1999, EBITDA for the fiscal quarter ending September 27, 1998
shall be deemed to be $2,759,500.
SECTION 3. Effective Date. This Second Amendment shall
become effective as of the date first above written (the "Second
Amendment Effective Date") when each of the conditions precedent
set forth in this Section 3 have been satisfied and thereafter
shall be known, and may be referred to, as the "Second Amendment
to Credit Agreement".
SECTION 3.1. Execution of Counterparts. The Agent shall
have received executed counterparts of this Second Amendment duly
executed on behalf of the Borrowers and each of the Lenders.
SECTION 3.2. Certified Board Resolutions. The Agent shall
have received copies of resolutions duly adopted by the Boards of
Directors of each of the Borrowers authorizing the execution and
delivery of this Second Amendment by each of the Borrowers, which
copies shall have been certified by the Secretaries of each of
the Borrowers as true and accurate, and the resolutions shall
have been certified by such Secretaries as duly adopted,
unamended and in full force and effect.
SECTION 3.3. Waiver. All conditions set forth in the
Waiver of near or even date between the Agent and the Borrowers,
a copy of which is attached hereto as Exhibit A, which must be
satisfied for such Waiver to take effect, shall have been
satisfied.
SECTION 4. Expenses. The Borrowers agree to pay all out-or-
pocket expenses incurred by the Agent in connection with the
preparation of this Second Amendment, including, but not limited
to, the reasonable fees and disbursements of counsel to the
Agent.
SECTION 5. Credit Agreement. Except as expressly amended
hereby, the Credit Agreement shall continue in full force and
effect in accordance with the provisions thereof on the date
hereof. From and after the date on which this Second Amendment
becomes effective, the terms "Agreement", "this Agreement",
"Credit Agreement", "herein", "hereinafter", "hereto", and words
of similar import used in the Credit Agreement or any Loan
Document shall, unless the context otherwise requires, mean and
refer to the Credit Agreement as amended hereby.
SECTION 6. Document Pursuant to Credit Agreement. This
Second Amendment is a Loan Document executed pursuant to the
Credit Agreement and shall be governed in accordance with the
terms thereof.
SECTION 7. Successors and Assigns. This Second Amendment
shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns.
<PAGE>
SECTION 8. Full Force and Effect. Except as expressly
amended hereby, all of the representations, warranties, terms,
covenants, and conditions of the Credit Agreement and each other
Loan Document shall remain unchanged and shall remain in full
force and effect in accordance with their respective terms. The
amendments set forth herein shall be limited precisely as
provided for herein to the provisions expressly amended herein
and shall not be deemed to be an amendment of, consent to or
modification of any other term or provision of the Credit
Agreement or of any term or provision of any other Loan Document
or of any transaction or further or future action on the part of
the Borrowers which would require the consent of the Lenders or
the Agent under the Credit Agreement.
SECTION 9. Release of Claims. In consideration for the
accommodations afforded the Borrowers pursuant to this Second
Amendment, the Borrowers waive and release any and all claims,
actions and causes of action of every name and description, known
or unknown, in law or in equity, which any of them has or may
have against the Agent, any of the Lenders and/or any of their
respective officers, directors, employees, agents,
representatives, affiliates, successors and assigns, individually
and/or collectively, from the beginning of time to this date,
arising out of or otherwise relating to the Credit Agreement, the
Loan Documents, the Obligations, the transactions contemplated in
the Credit Agreement, and/or the negotiation, servicing or
funding (or failure to fund) of the Loans.
SECTION 10. Governing Law. THIS SECOND AMENDMENT SHALL BE
DEEMED TO BE A CONTRACT MADE UNDER AND BE GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF NEW HAMPSHIRE.
SECTION 11. Counterparts. This Second Amendment may be
executed in any number of counterparts by the parties hereto,
each of which counterparts when so executed shall be an original,
but all the counterparts shall together constitute one and the
same agreement.
[SIGNATURE PAGES FOLLOW]
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<PAGE>
IN WITNESS WHEREOF, the Borrowers, the Agent and the Lenders
have caused this Second Amendment to be executed by their
respective officers thereunto duly authorized as of the day and
year first above written.
BORROWERS:
WPI GROUP, INC.,
WPI POWER SYSTEMS, INC.,
WPI MAGNETEC, INC.,
WPI ELECTRONICS, INC.,
WPI OYSTER TERMIFLEX, INC.,
WPI MICRO PALM, INC.,
WPI MICRO PROCESSOR
SYSTEMS, INC.,
WPI DECISIONKEY, INC.,
WPI UK HOLDING, INC.,
WPI UK HOLDING II, INC.,
WPI OYSTER TERMINALS, INC.,
HUSKY COMPUTERS, INC., and
WPI INSTRUMENTS, INC.
/s/ Mark L. Young By: /s/ Dennis M. Deegan
- - ---------------- --------------------
Witness
Dennis M. Deegan, for, on
behalf of, and as Duly
Authorized Officer or
Agent of each of the
above-named entities
AGENT:
FLEET BANK-NH, as Agent and as a
Lender
/s/ Michael Tule By: /s/ Mark L. Young
- - ------------------ ---------------------
Witness Mark L. Young
Senior Vice President
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<PAGE>
OTHER LENDERS:
BANK OF NEW HAMPSHIRE
- - -------------------- By: --------------------
Witness David D. McGraw
Vice President
SOVEREIGN BANK
- - --------------------- By: --------------------
Witness Joseph Becker
Vice President
BANKBOSTON, N.A.
- - --------------------- By: ---------------------
Witness Randall L. Kutch
Director
KEY CORPORATE CAPITAL INC.
- - --------------------- By: -----------------------
Witness Alexander Strazzella
Vice President
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<PAGE>
Exhibit 10.42
WAIVER
WAIVER dated as of December 27, 1998, to the Credit
Agreement, dated as of August 3, 1998, as amended to date (the
"Credit Agreement"), among WPI Group, Inc., WPI Electronics,
Inc., WPI Magnetec, Inc., WPI Micro Palm, Inc., WPI Power
Systems, Inc., WPI Oyster Termiflex, Inc., WPI Micro Processor
Systems, Inc., WPI Decisionkey, Inc., WPI UK Holding, Inc., WPI
UK Holding, II, Inc., WPI Oyster Terminals, Inc., WPI Husky
Computers, Inc., and WPI Instruments, Inc., (collectively, the
"Borrowers"), the various financial institutions parties thereto
(collectively, the "Lenders") and Fleet Bank - NH, for itself, as
Lender, and as Agent for Lenders pursuant to the Credit Agreement
(the "Agent").
The Borrowers have requested that their compliance with the
"Total Debt to EBITDA Ratio" covenant set forth in Annex E
(Section 6.10) of the Credit Agreement be waived for the fiscal
year ended September 27, 1998. The Agent, on behalf of itself
and the Lenders, has agreed to grant such waiver, but only on the
specific terms and conditions set forth herein. Accordingly, the
Borrowers and the Agent, on behalf of itself and the Lenders,
hereby agree as follows:
Section 1. Waiver. Upon satisfaction of the conditions set
forth in Section 4 below, the Lenders hereby waive compliance
with the "Total Debt to EBITDA Ratio" covenant set forth in Annex
E (Section 6.10) of the Credit Agreement for the fiscal year
ended September 27, 1998. Such waiver is expressly limited to
compliance with such covenant on September 27, 1998, and for the
fiscal year then ended; such covenant in all other instances, and
all other covenants set forth in the Credit Agreement, shall
remain unchanged, binding upon Borrowers and in full force and
effect.
Section 2. Default Rate. Commencing September 28, 1998, and
continuing until Borrowers' compliance with the Total Debt to
EBITDA Ratio covenant referenced above, interest shall be accrued
on the Loans at the Default Rate as provided in Section 1.4(d) of
the Credit Agreement.
Section 3. Amendment. The Borrowers and Lenders shall
execute a Second Amendment to Credit Agreement of near or even
date herewith (the "Second Amendment") amending the Borrowers'
Total Debt to EBITDA Ratio covenant for the fiscal quarter ending
December 27, 1998, and amending both the Applicable Margins for
calculating the interest rates for the Loans (set forth in
Section 1.4 of the Credit Agreement and defined therein) as
determined by Borrowers' Total Debt to EBITDA Ratio and the
Maximum Amount.
Section 4. Conditions of Effectiveness. This Waiver shall
become effective, as of the date set forth above, upon
satisfaction of the following pre-conditions:
(a) the Agent shall have received executed counterparts (by
facsimile or otherwise) of this Waiver, duly executed by the
Borrowers and the Lenders;
(b) the Borrowers shall have paid the Agent a waiver fee of
$25,000.00;
<PAGE>
(c) accrued interest on the Loans at the Default Rate for
the period commencing September 28, 1998 and ending December 28,
1998 shall have been paid to the Agent; and
(d) the Agent, the Lenders and the Borrowers shall have
duly executed and delivered the Second Amendment.
Section 5. Counterparts. This Waiver may be executed in
two or more counterparts, each of which shall constitute an
original, but all of which when taken together shall constitute
but one instrument.
Section 6. Full Force and Effect. Except for Borrowers'
compliance with the Total Debt to EBITDA Ratio covenant expressly
waived hereby for the fiscal year ending September 27, 1998, the
Credit Agreement shall continue in full force and effect in
accordance with the provisions thereof.
Section 7. Expenses. The Borrowers shall pay all out-of-
pocket expenses incurred by the Agent in connection with the
preparation of this Waiver.
Section 8. Headings. The headings of this Waiver are for
the purposes of reference only and shall not limit or otherwise
affect the meaning hereof.
Section 9. Capitalized Terms. Unless otherwise specified,
capitalized terms used herein shall have the respective meanings
assigned thereto in the Credit Agreement.
[SIGNATURE PAGE FOLLOWS]
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<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed and
delivered this Waiver as of the date first above written.
THE BORROWERS:
WPI GROUP, INC.,
WPI POWER SYSTEMS, INC.,
WPI MAGNETEC, INC.,
WPI ELECTRONICS, INC.,
WPI OYSTER TERMIFLEX, INC.,
WPI MICRO PALM, INC.,
WPI MICRO PROCESSOR
SYSTEMS, INC.,
WPI DECISIONKEY, INC.,
WPI UK HOLDING, INC.,
WPI UK HOLDING II, INC.,
WPI OYSTER TERMINALS, INC.,
HUSKY COMPUTERS, INC., and
WPI INSTRUMENTS, INC.
/s/ Mark L. Young By: /s/ Dennis M. Deegan
-------------------------- ----------------------
Witness Dennis M. Deegan, for,
on behalf of, and
as Duly Authorized Officer
or Agent of each of the
above-named entities
THE AGENT:
FLEET BANK - NH, as Agent for
the Lenders
/s/ Michael Tule By: /s/ Mark L. Young
----------------- ------------------
Witness Mark L. Young
Senior Vice President
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<PAGE>
Exhibit 10.43
LEASE
THIS LEASE is made as of September 10, 1986, as amended on
September 10, 1986, October 1, 1986, November 10, 1991 and
September 1996 by and between 850 Perimeter Rd/NA, a New
Hampshire Limited Liability Company with its principal office at
124 Joliette Street, Manchester, New Hampshire, 03102, formerly,
NA Realty, a New Hampshire general partnership ("Landlord"), and
WPI Instruments, Inc., a New Hampshire corporation with an
address of 1155 Elm Street, Manchester, New Hampshire 03101
("Tenant").
W I T N E S S E T H:
WHEREAS, Tenant desires to lease from Landlord, and Landlord
has agreed to lease to the Tenant, certain land and the buildings
owned by the Landlord in Manchester, New Hampshire, more
particularly described in Exhibit A attached hereto and made a
part hereof;
NOW THEREFORE, in consideration of the mutual promises
hereinafter set forth and for other good and valuable
consideration, the receipt whereof is hereby acknowledged,
Landlord and Tenant hereby agree as follows:
1. Definitions.
The following terms shall have the meanings set forth in
this Article 1 unless the context otherwise requires:
1.1 "Commencement Date" shall mean September 10, 1986 or
when used in connection with the Second Period or the Third
Period, September 1 of the first year of such Period.
1.2 "Demised Premises" shall mean the land, buildings and
all improvements thereon in Manchester, New Hampshire, described
in Exhibit A attached hereto and made a part hereof.
1.3 "Government Authorities" shall mean all federal, state,
municipal and local governments, and all departments,
commissions, boards, bureaus and offices thereof, having or
claiming jurisdiction over the Demised Premises.
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<PAGE>
1.4 "Imposition" shall have the meaning set forth in
Section 6.1.
1.5 "Landlord" shall mean, at any given time, only the
owner of the Demised Premises; provided, however, that for the
purposes of Article 19 of this Lease, the term "Landlord" shall
mean, at any given time, the then owner of the aforementioned
interest and each prior owner thereof.
1.6 "Lease" shall refer to this Lease.
1.7 "Person" shall mean and include an individual,
corporation, partnership, trust, unincorporated association and
any government entity.
1.8 "Rent" shall have the meaning set forth in Section 4.2.
1.9 "Second Period" shall have the meaning set forth in
Section 4.
1.10 As used herein, "sublease" shall have the meaning set
forth in Section 14.1.
1.11 "Tenant" shall mean, at any given time, the Tenant
name herein and its legal representatives, successors and
permitted assigns as Tenant under this Lease.
1.12 "Tenant Alterations" shall have the meaning set forth
in Section 12.2.
1.13 "Term" shall have the meaning set forth in Section 4.
1.14 "Third Period" shall have the meaning set forth in
Section 4.
2. Demised Premises.
Landlord, for and in consideration of the rents hereinafter
reserved by Landlord and the covenants and agreements hereinafter
contained on the part of Tenant, its legal representatives,
successors and assigns, to be paid, kept and performed, does
hereby lease, rent, let and demise to Tenant, and Tenant does
hereby take and hire from Landlord, upon and subject to the terms
and conditions hereinafter expressed, the Demised Premises.
TOGETHER with all right and interest, if any, of Landlord in
and to the land lying in the streets and roads in front of and
adjoining set parcels of land, and in and to any easement
appurtenant to said parcels of land, but in no limitation or
termination of any such right or interest shall affect this Lease
or any of Tenant's obligations hereunder except to the extent
otherwise provided in this Lease.
Tenant has inspected the Demised Premises and has found them
to be in good repair and accepts the Demised Premises in its
present condition.
SUBJECT, however, to the following:
2.1 Any state of facts an accurate survey or inspection of
said parcel of lands may show.
2.2 Present and future building restrictions and
regulations, zoning laws, special conditional use permits,
ordinances, resolutions, and regulations of all laws, ordinances,
resolutions, regulations, certificates of occupancy, and orders
of Governmental Authorities.
2.3 The condition and state of repair the Demised Premises
may be in at the date hereof.
2.4 Any and all public utility company easements.
3. Term.
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<PAGE>
TO HAVE AND TO HOLD the Demised Premises unto Tenant, its
legal representatives, successors, and assigns, for one five year
term (the "Term" ) beginning on the Commencement Date hereof and
ending at 11:59 p.m. on the 31st day of August, 1991, unless
sooner terminated as hereinafter provided. Tenant shall have the
option to renew the lease for a "Second Period" and a "Third
Period" as those terms are defined in Section 4.
4. Rent.
The amount of rent due under this Lease (the "Rent") shall
be $360,000 per year (the "Base Rent") for the period commencing
on the Commencement Date and ending on August 31, 19991 (the
"Base Period") which shall be paid at the rate of $30,000 per
month; provided that if the tenant exercises the renewal options
set forth in Section 3, the Base Rent shall be adjusted on
September 1, 1991 and ending August 31, 1996 (the "Second
Period") and further adjusted on September 1, 1996 for the period
commencing September 1, 1996 and ending August 31, 2001 (the
"Third Period"), such adjustments more fully set forth in Section
24 herof.
5. Rent to be Net.
It is the purpose and intent of Landlord and Tenant that the
Rent shall be absolutely net to Landlord and shall be paid
without any abatement, deduction or setoff.
6. Payment of Taxes, Assessments, Etc.
6.1 Tenant shall pay or cause to be paid, before the same
become delinquent, all taxes, assessments (including but not
limited to, all assessments for public improvement or benefit),
water and sewer rents, rates and charges for public utilities,
excises, levies, license and permit fees and other governmental
charges of any kind and nature whatsoever, which at any time
during the term of this lease may have been or may be assessed,
levied, confirmed, imposed upon, or grown or become due or
payable out of or in respect of, or become a lien on the Demised
Premises (all such charges described in this Section 6.1 being
hereinafter referred to as "Impositions", and any of the same
being hereinafter referred to as an "Imposition").
6.2 Tenant, upon request of Landlord, shall furnish to
Landlord prior to the date on which any Imposition would become
delinquent, official receipt of the appropriate taxing authority,
or other evidence satisfactory to Landlord, evidencing the
payment thereof.
6.3 Tenant shall have the right to contest the amount or
validity, in whole or in part, of any Imposition, or to seek a
reduction in the valuation of the Demised Premises as assessed
for real estate or personal property tax purposes by appropriate
proceedings diligently conducted in good faith so long as neither
the Demised Premises not any part thereof would by reason of such
postponement or deferment be in imminent danger of being
forfeited or lost.
6.4 Landlord shall not be required to join in any
proceeding referred to in Sections 6.3 or 6.4 unless in Tenant's
reasonable opinion, the provisions of any law, rule or regulation
at the time in effect shall require that such a proceeding be
brought by and/or in the name of the Landlord, in which event
Landlord shall, upon written request, join in such proceedings or
permit the same to be brought by Tenant in Landlord's name, upon
compliance by Tenant with such requirements as Landlord may
reasonably impose. Tenant covenants that Landlord shall not
suffer or sustain any costs or expenses (including, but not
limited to, counsel fees) or any liabilities in connection with
Landlords' participation in any proceedings relating to the
Demised Premises. Tenant shall be entitled to any refund of any
Imposition and penalties and interest thereon received by
Landlord which shall have been paid by Landlord and previously
reimbursed in full by Tenant.
7. Repairs and Maintenance.
7.1 Throughout the Term, Tenant, at its sole cost and
expense, shall take good care of the Demised Premises, all
alleyways and passageways and all sidewalks, curbs and vaults
adjoining the Demised Premises, and shall at all times keep the
same in good order and condition, ordinary wear and tear and
casualty (subject to the provisions of Article 10 hereof)
excepted. Tenant shall not do or suffer any waste or damage,
disfigurement or injury to the Property or the Personal Property.
Tenant shall make all necessary repairs thereto, interior and
exterior, structural and non-structural, ordinary and
extraordinary.
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7.2 Landlord shall not be required to furnish any services
or facilities or to make any repairs in or about the Demised
Premises, Tenant hereby assuming the full and sole responsibility
for all repairs to, and for any condition, operation, maintenance
and management of, the Demised Premises as at the date hereof and
during the Term.
8. Compliance with Laws, Ordinances, Etc.
8.1 Throughout the Term, Tenant, at its own sole cost and
expense, shall promptly comply with all present and future laws,
ordinances, orders, rules, regulations and requirements of all
Governmental Authorities, and all orders, rules and regulations
of the National and Local Boards of Fire Underwriters or any
other body or bodies exercising similar functions, which may be
applicable to the Demised Premises and as to which compliance is
required. Tenant also shall comply with all covenants and
representations regarding the use of the Demised Premises
contained in mortgage deeds of even or near date herewith between
Landlord and Casco Northern Bank, N.A.
8.2 Tenant shall have the right to contest in good faith
any such law, ordinance, rule, regulation or order referred to in
Section 8.1 above and, during such contest, Tenant shall have the
right if otherwise permitted by law to defer compliance with such
provision.
8.3 Tenant shall, at Tenant's own sole cost and expense,
observe and comply with the requirements of the policies of
public liability, fire and all other insurance at any time in
force with respect to the Demised Premises, and Tenant shall, in
the event of any violation or attempted violation of the
provisions of this Section or Section 8.1 by any subtenant or
other occupant of the Demised Premises, take steps, immediately
upon knowledge of such violation or attempted violation, to
remedy or prevent the same, as the case may be.
9. Insurance.
9.1 Tenant, at its sole cost and expense, shall throughout
the entire Term, keep the Demised Premises insured against loss
or damage by fire, windstorm, tornado and hail, and against loss
or damage by such other, further and additional risks as now are
or hereafter may be embraced by the standard extended coverage
forms, or endorsements, in each case to the full insurable value
without any coinsurance. Such insurance shall be in an amount
with companies reasonably satisfactory to Landlord and with such
coverages as shall be reasonably required by Landlord and in any
event such insurance shall comply with the terms and conditions
of any mortgage covering the Demised Premises.
9.2 All insurance provided for in this Article 9 shall be
effected under valid and enforceable policies, in such forms and,
where not expressly provided for above, in such amounts as are
reasonable for the type of property, issued by financially sound
and responsible insurance companies which are authorized to do
business in the jurisdiction in which the Property is located,
have a Best's rating of "A". On or before the Commencement Date,
and thereafter prior to the expiration dates of the expiring
policies theretofore furnished pursuant to this Article 9,
certificates of the insurers in form reasonably satisfactory to
Landlord as to such insurance, shall be delivered by Tenant to
Landlord.
9.3 All policies of insurance provided for or contemplated
by this Article 9 shall name Landlord and Tenant as additional
insureds, as their respective interests may appear, and shall
provide for at least ten (10) days written notice of cancellation
to Landlord and Landlord shall be furnished with the original
policies of insurance.
9.4 Losses under each policy of insurance provided for or
contemplated by this Article shall be adjusted with the insurers
and/or underwriters by Tenant. All costs and expenses of
Landlord or Tenant of collecting or recovering any insurance
proceeds under such policies, including, but not limited to, any
and all fees of attorneys, appraisers and adjusters, shall be
deducted from such insurance proceeds before being applied as
provided herein.
10. Damage or Destruction by Fire or Other Casualty.
10.1 Tenant shall give immediate notice to Landlord of any
damage or loss by fire or other casualty which equals or exceeds
$50,000.
10.2 If by reason of any casualty, any sums which are
applicable to the Demised Premises are paid under any insurance
policy mentioned in Article 9 hereof, such sums shall be paid
over to Tenant, and Tenant shall hold the same, to be used either
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for the payment of the costs of restoring, repairing or
rebuilding the Demised Premises or for demolishing the Demised
Premises.
10.3 If any of the Demised Premises is so damaged, the
Landlord shall, within 15 days of such damage, decide whether to
repair the Demised Premises or to terminate this Lease. If
Landlord elects to repair, Landlord shall commence such repairs
within 30 days after making such election and diligently pursue
such repairs to completion and, in any event, within 90 days
after such damage; provided, however, that if such damage occurs
within twelve months of the end of any Term of this Lease, Tenant
shall have the right to terminate this Lease by giving written
notice to the Landlord within thirty days of the occurrence of
the damage. Notwithstanding the foregoing, Tenant may terminate
this Lease upon 15 days notice to Landlord if such damage
materially interferes with the business or operations of Tenant.
If Landlord or Tenant decides to exercise its option to terminate
this Lease pursuant to the terms of this Section 10.3, Tenant
shall be relieved of all obligations hereunder, and rent and
other charges shall be apportioned as of the date of such damage.
11. Tenant Alterations.
11.1 Tenant shall have the right, upon the consent of
Landlord which shall not be unreasonably withheld, at any time
and from time to time during the term of this Lease to make, at
its own sole, cost and expense, Tenant Alterations.
11.2 The term "Tenant Alterations", as used in this Lease,
shall mean the following and shall apply with like effect to any
single instance of the following:
11.2.1 All future demolitions of the whole or any
part of any building or improvements now or hereafter erected
upon the Demised Premises;
11.2.2 All excavations at any time made or to be
made in, on or about the Demised Premises; and
11.2.3 All repairs, replacements, renewals,
alterations, changes, additional, betterments, improvements,
restorations and rebuildings made in, on or about the Demised
Premises.
12. Discharge of Liens.
12.1 Tenant shall not create or permit to be created or to
remain, and shall discharge or bond any lien, encumbrance or
charge levied on account of any imposition or any mechanic's,
laborer's or materialman'e lien upon the Demised Premises.
12.2 Nothing contained in this Lease shall be deemed or
construed in any way as constituting the consent or request of
Landlord, express or implied by inference or otherwise, to any
contract, subcontractor, laborer, materialman, architect or
engineer for the performance of any labor or the furnishing of
any materials or services for or in connection with the Demised
Premises or any part thereof. Notice is hereby given that the
Landlord shall not be liable for any laborer or materials or
services furnished or to be furnished to Tenant upon credit, and
that not mechanic's or other lien for any such labor, materials
or services shall attach to or affect the fee or reversionary or
other estate or interest of Landlord in the Demised Premises or
in this Lease.
13. Subleases and Assignment of Subleases.
13.1 Tenant may, with Landlord's consent, which consent
shall not be unreasonably withheld, sublease all, or
substantially all, the Demised Premises or assign this Lease and
its rights hereunder, provided, however, that Landlord's consent
shall not be required to an assignment of this Lease to (a) any
purchaser of all or substantially all of the Tenant's business
being conducted at the Demised Premises, or (b) Casco Northern
Bank N.A. or any other primary lender to Tenant (the "Bank"). As
used in this Section, the term "sublease" shall include licenses,
concession agreements, management agreements, operating
agreements and all other forms of agreements, however
denominated, affecting the occupancy or use of the Demised
Premises or any portion thereof, and all renewals, modifications,
amendments and other agreements affecting the same, and any
sublease shall be subordinate to the rights of Landlord as
contained in this Lease Agreement.
14. Entry on Property by Landlord, Etc.
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14.1 Tenant shall permit Landlord and its authorized
representatives and designees to enter the Demised Premises at
all reasonable times upon three (3) days prior notice (either
oral or written) for the purpose of (i) inspecting the same and
(ii) making any repairs thereto and performing any work therein
that may be necessary by reason of Tenant's failure to make any
such repairs or perform any such work or to commence the same for
fifteen (15) days after notice from Landlord (or without notice
in case of emergency). Nothing herein contained shall be
construed as imposing any duty upon Landlord to do any such work,
and the performance thereof by Landlord shall not constitute a
waiver of Tenant's default in failing to perform the same.
Landlord shall also be subject to Tenant's security measures
whenever Landlord enters the Demised Premises.
15. Condemnation.
15.1 If at any time during the term of this Lease, 25% or
more of the square feet of real estate or 10% or more of the
square feet of structure located on the Demised Premises shall be
taken by any lawful power or authority by the exercise of the
right of condemnation or eminent domain, this Lease and the term
hereof shall terminate and expire on the date of such taking, and
the Rent and all other sums and charges required to be paid by
Tenant hereunder shall be apportioned and paid to the date of
such taking. Tenant shall not be entitled to, and Tenant agrees
not to, make or file any claim for, nor shall Tenant share in any
award for, the value of the unexpired term of this Lease, or any
other rights in connection with the land; provided, that Landlord
shall support any claims made by Tenant against any condemning
authority for damages, relocation costs, or associated expenses,
but this shall not bind the Landlord to any financial liability
for such claims.
15.2 If, at any time during the term of this Lease less than
25% in volume based upon total square feet of the Demised
Premises or less than 10% of the square feet of the structure
located on the Demised Premises shall be taken, and if Tenant
shall determine that such taking will not result in a permanent
or material interference of its business (in which case the
taking shall be treated under Section 15.1 above) then this Lease
and the terms hereof shall continue in full force and effect
without reduction, abatement or effect of any nature whatsoever
upon said terms or the liability of Tenant to pay in full the
rent or any other sums or charges payable by Tenant hereunder,
except as hereinafter provided. In the event of any such partial
taking, Landlord shall give prompt notice thereof to Tenant and,
if the damage or loss cause by such taking is reasonably
susceptible to restoration, Landlord shall proceed, with
reasonable diligence to perform any necessary repairs and
restorations and any necessary or desirable alterations or
replacements. All awards payable as a result of any such taking
shall be paid to Landlord for distribution to the extent
available in the following order, provided that there shall first
be deducted therefrom all reasonable fees and expenses or
collection, including, but not limited to, reasonable attorneys'
and experts' fees:
15.2.1 If such taking was susceptible to
restoration, Landlord shall receive the entire amount and shall
use such portion of the funds as are reasonably necessary to make
any such necessary repairs, restoration, alterations and
replacements.
15.2.2 If such taking was not susceptible to
restoration or, in the event that the taking was susceptible to
restoration and excess funds remained after such restoration
and/or repairs, then all such funds received shall be paid to
Landlord and in such event, the monthly payments of rent shall
abate by an amount equal to the product of 12.5% times the
proceeds retained by Landlord divided by 12.
16. Landlord's Mortgages, Landlord's Right to Sell or Assign
Rents.
16.1 Landlord shall have the right to mortgage its interest
in the Demised Premises.
16.2 Nothing contained in this Lease shall be deemed in any
way to limit, restrict or otherwise affect Landlord's right to
assign from time to time the whole or any portion of the Rent or
other sums and charges at any time paid or payable hereunder by
Tenant to Landlord, to a transferee designated by Landlord in a
notice to Tenant, and in any such case Tenant shall pay the Rent
and the other sums and charges payable by Tenant to Landlord, or
the portion thereof so assigned, subject to the terms of this
Lease, to Landlord's said designee at the address mentioned in
such notice.
17. Estoppel Certificates.
17.1 Tenant agrees at any time and from time to time, upon
not less than ten (10) days' prior notice by Landlord, to
execute, acknowledge and deliver, without charge, to Landlord, or
to any person designated by Landlord, a statement in writing
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certifying that this Lease is unmodified (or if there have been
modifications, identifying the same by date thereof and
specifying the nature thereof), that Tenant has not received any
notice of default or notice of termination of this Lease (or if
Tenant has received such a notice, that it has been revoked, if
such be the case), that to the knowledge of Tenant no Event of
Default exits hereunder (or if any such Event of Default does
exist, specifying the same and stating that the same has been
cured, if such be the case), that Tenant to its knowledge has not
claims or offsets against Landlord hereunder (or if Tenant has
any such claims, specifying the same), and the dates to which the
Rent and other sums and charges payable by Tenant have been paid.
17.2 Landlord agrees at any time and from time to time, upon
not less than ten (10) days' prior written notice by Tenant, to
execute, acknowledge and deliver, without charge, to Tenant, or
to any person designated by Tenant, a statement in writing
stating that this Lease is unmodified (or if there be
modifications, identifying the same by the date thereof, and
specifying the nature thereof), that no notice of default or
notice of termination of this Lease has been served on Tenant (or
if Landlord has served such notice, that the same has been
revoked, if such be the case), that to Landlord's knowledge no
Event of Default does exist, and the date to which the Net Rent
has been paid by Tenant.
18. Events of Default.
18.1 If any one or more of the following events (herein
sometimes called "Event of Default") shall happen:
18.1.1 If Tenant fails to pay any installment of
Rent or other sums due under this Lease or any part thereof when
and as the same shall have become due and payable and such
default shall continue for a period of ten (10) days after
written notice of such failure is received by Tenant; or
18.1.2 If default shall be made by Tenant, in the
performance of or compliance with any of the covenants,
agreements, terms or conditions contained in this Lease and such
default shall continue for a period of thirty (30) days after
notice thereof from Landlord to Tenant, or, in the case of a
default or contingency which cannot with due diligence be cured
within such period of thirty (30) days, Tenant fails to proceed
with all due diligence within such period of thirty (30) days to
cure the same and thereafter to prosecute the curing of such
default with all due diligence (it being intended that in
connection with a default not susceptible of being cured with due
diligence within thirty (30) days that the time to Tenant within
which to cure the same shall be extended for such period as may
be necessary to complete the curing thereof with all due
diligence); or
18.1.3 If Tenant shall file a voluntary petition in
bankruptcy or shall be adjudicated a bankrupt or insolvent or
shall file any petition or answer seeking any reorganization,
arrangement, recapitalization, readjustment, liquidation,
dissolution or similar relief under any present or future Federal
Bankruptcy Act or any other present or future applicable Federal,
state or other statute of law, or shall seek or consent to or
acquiesce in the appointment of any trustee, receiver or
liquidator of Tenant or of all or any substantial part of its
properties or of the Demised Premises, or shall make an
assignment for the benefit of creditors, or shall admit in
writing its or their inability to pay its debts generally as they
become due; or
18.1.4 If within sixty (60) days after the
commencement of any proceedings against Tenant seeking any
reorganization, arrangement, recapitalization, readjustment,
liquidation, dissolution or similar relief under the present or
any future Federal Bankruptcy Act or any other present or future
applicable Federal, state or other statute or law, such
proceedings shall not have been dismissed, or if, within sixty
(60) days after the appointment, without the consent or
acquiescence of Tenant, of any trustee, receiver or liquidator of
Tenant, or of all or any substantial part of its properties or of
the Demised Premises, such appointment shall not have been
vacabted or stayed on appeal or otherwise, within sixty (60) days
after the expiration of any such stay such appointment shall not
have been vacated;
then and in any such event, Landlord at any time thereafter (but
prior to the curing of all such Events of Default) may give
notice to Tenant specifying such Event of Default or Events of
Default and stating that his lease and the term herby demised
shall expire and terminate on the date specified in such notice,
and on the date specified in such notice this lease and the term
hereof shall expire and terminate with the same force and effect
as though the date so specified were the date herein originally
fixed as the expiration date of the term of this lease and all
rights of Tenant under this lease shall expire and terminate and
Tenant shall remain liable hereinafter provided.
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18.2 Upon any expiration or termination of this Lease
pursuant to Section 18.1 of this Article, or any termination by
or resulting from summary proceedings or otherwise, Tenant shall
quit and peaceably surrender the Demised Premises to Landlord,
without any payment therefor by Landlord. Landlord, in addition
to all other remedies herein reserved to it, upon or at any time
after such expiration or termination, may, without further
notice, enter upon and re-enter the Demised Premises and possess
and re-possess itself thereof by force, summary proceedings,
ejectment or otherwise, and may dispossess Tenant and remove
Tenant and all other persons and property from the Demised
Premises, and may have, hold and enjoy the Demised Premises and
the right to receive all rental income of and from the same, and
Tenant shall have no further right, title and interest therein of
any kind whatsoever.
18.3 At any time or from time to time after such expiration
or termination pursuant to Section 18.1 or any termination by or
resulting from summary proceedings or otherwise, Landlord may re-
let the Demised Premises or any part thereof, in the name of
Landlord or otherwise, for such term or terms (which may be
greater or less than the period which would otherwise have
constituted the balance of the term of this Lease) and on such
commercially reasonable conditions (which may include concessions
or free rent) as Landlord, in good faith, may determine, and may
collect and receive, the rent therefor, Landlord shall in no way
be responsible or liable for any failure to re-let the Demised
Premises or any part thereof or for any failure to collect any
rent due upon any such re-letting.
18.4 No termination by law or resulting from summary
proceedings or otherwise shall relieve Tenant of its liability
and obligations under this Lease, and any such liability and
obligations shall survive any such expiration or termination. In
the event of any such expiration or termination, whether or not
the Demised Premises or any part thereof shall have been re-let,
Tenant shall pay to Landlord the Rent and other sums and charges
to be paid by Tenant up to the time of such expiration or
termination of this Lease, and thereafter Tenant, until the end
of what would have been the term of this Lease in the absence of
such expiration or termination shall be liable to Landlord for,
and shall pay to Landlord, as and for damages for Tenant's
default, the equivalent of the amount of the Rent and such other
sums and charges which would be payable under this Lease by
Tenant if the Lease were still in effect, less the net proceeds,
if any, of any re-letting effected pursuant to the provisions of
Section 18.3, after deducting all of Landlord's expenses in
connection with such re-letting. In the event Landlord is unable
to re-let the Demised Premises after reasonable efforts then no
sum shall be deducted from those sums payable under this Lease.
18.5 No failure by Landlord to insist upon the strict
performance of any covenant, agreement, term of condition of this
Lease or to exercise any right or remedy consequent upon a breach
thereof, and no acceptance of full or partial rent during the
continuance of any breach, shall constitute a waiver of any such
breach or such covenant, agreement, term of condition. No
covenant, agreement, term or condition of this Lease to be
performed or complied with by either party, and no breach
thereof, shall be waived, altered or modified except by a written
instrument executed by the other party. No waiver of any breach
shall affect or alter this Lease, but each and every covenant,
agreement, term and condition of this Lease shall continue in
full force and effect with respect to any other then existing or
subsequent breach thereof.
18.6 Each right and remedy of Landlord provided for in this
Lease shall be cumulative and shall be in addition to every other
right or remedy provided for in this Lease or now hereafter
existing at law or in equity or by statute or otherwise, and the
exercise or beginning of the exercise by Landlord of any one or
more of the rights or remedies provided for in this Lease or now
or hereafter existing at law or in equity or by statute or
otherwise shall not preclude the simultaneous or later exercise
by Landlord or any or all other rights or remedies provided for
in this Lease now or hereafter existing at law or in equity or by
statute or otherwise.
19. Notices.
All notices, requests, demands, consents, approvals, and
either communications which may or are required to be served or
given hereunder (for the purposes of this Article collectively
called "Notices") shall be in writing and shall be sent by
registered or certified mail, return receipt requested, postage
prepaid, addressed to the party to receive such Notice at his or
its address set forth below:
If to Landlord, to
N/A Realty
c/o Gerald R. Allard
Box 779
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Manchester, New Hampshire 03105
If to Tenant to
JEI Acquisition Corp.
Grenier Field
Manchester, NH 03108
Attention: David Healey
with a copy to:
Richard M.C. Glenn, III, Esq.
Edwards & Angell
2700 Hospital Trust Tower
Providence, RI 02903
Either party may, by Notice given aforesaid, change its address
for all subsequent Notices, except that neither party may require
Notices to it to be sent to more than two addresses. Except
where otherwise expressly provided to the contrary elsewhere in
this Lease, Notices shall be deemed given when mailed in the
manner aforesaid.
20. Subordination; Attornment.
20.1 Landlord agrees that Landlord's right under this Lease
are expressly subordinate to the rights of the Bank and Jewel
Electrical Instruments, Inc. under any security agreement or
other document, now or hereinafter executed, in and to any of
Tenant's assets located on or about the Demised Premises,
including, without limitation, machinery, equipment, inventories,
and accounts receivable. Landlord further agrees that if so
requested by Tenant, Landlord shall execute, acknowledge and
deliver any and all instruments requested by the Bank and Jewel
Electrical Instruments, Inc. or Tenant in order to evidence such
subordination. Landlord hereby appoints Tenant as its attorney-
in-fact to execute such documents to carry out the intent of this
Section 20.1.
20.2 In the event that Bank shall exercise its rights under
any security agreement or other documents to control the Demised
Premises, Tenant hereby agrees to attorn to Bank and its
successors and assigns.
21. Claims by Landlord Against Prior Owners.
21.1 In any case in which Tenant shall be obligated under
any provisions of this Lease to pay any loss, cost, damage,
liability or expense for which Landlord may have any claim, right
or cause of action against a prior owner of the Demised Premises,
Tenant shall be subrogated to the rights of Landlord against such
prior owner of the Demised Premises. Landlord agrees to execute
such documents as are necessary to evidence this subrogation and
are necessary to carry out the intent of this Section 21.1.
22. Property of Tenant.
Landlord agrees that all machinery, equipment and movable
fixtures now or hereafter located on the Demised Premises is, and
at all times shall remain, the property of Tenant. Tenant shall
have the right upon termination of this lease for any reason, to
enter upon the Demised Premises and remove such machinery,
equipment, and movable fixtures.
23. Quiet Enjoyment.
Landlord covenants that Tenant, upon paying the Rent and all
other sums and charges herein provided for and observing and
keeping all covenants, agreements and conditions of this Lease on
its part to be observed and kept, shall quietly have and enjoy
the Demised Premises during the term of this Lease, without
hindrance or molestation by anyone claiming by, through or under
Landlord, subject, however, to the exceptions, reservations and
conditions of this Lease.
24. Adjustments to Base Rent.
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The rental during each of the Second Period and the Third
Period shall be at the greater of (a) the fair market rental then
in effect on equivalent properties, of equivalent size, in
equivalent areas, provided that this paragraph shall not be
considered when determining the fair market rental, or (b) the
amount derived by multiplying the Base Rent for the Base Term or,
if applicable, for the Second Period, by the Consumer Price Index
for Urban Wage Earners and Clerical Workers - Revised, 196 = 100"
for the Boston Massachusetts Area as published by the Bureau of
Labor Statistics of the United States Department of Labor ("CPI")
for the calendar month which includes the Commencement Date for
the Base Term, or if applicable, the Second Period, and dividing
the product by the CPI for the calendar month which includes the
Commencement Date for the Second Period or the Third Period, as
the case may be, adjusted, however, to reflect any changes in the
basis of computing such Index which may have been made by said
Bureau of Labor Statistics between said monthly periods, and
provided further, that in no event shall the amount of Base Rent
be increased pursuant to this clause (b) less than three percent
(3%) nor more than a maximum of six percent (6%) compounded per
year. In no event shall the amount of the rental during the
Second Period or Third Period, as the case may be, be less than
during the five year period preceding that period.
25. This Lease may be terminated by Landlord at any time during
the term hereof upon nine (9) months prior written notice;
provided that in the event of such termination, Landlord shall
pay all costs associated with the relocation of Tenant's business
to any location within a fifty (50) mile radius of Manchester,
New Hampshire, such expenses to include, without limitation, all
moving, building, and site preparation and renovation expenses
incurred by Tenant so that Tenant will be able to carry on its
business in the new location.
26. Oral Change or Termination.
Any agreement hereafter made shall be ineffective to change,
modify or discharge this Lease in whole or in part unless such
agreement is in writing and signed by the party against whom
enforcement of the change, modification or discharge is sought.
This Lease cannot be changed or terminated orally.
27. Successors and Assigns.
The covenants, conditions and agreements in this Lease shall
bind and inure to the benefit of Landlord and Tenant and, except
as otherwise provided in this Lease, their respective legal
representatives, successors and permitted assigns.
IN WITNESS WHEREOF, the parties hereto have duly executed
this instrument as of the day and year first above written.
ALLARD NAZARIAN GROUP, INC.
/s/ Carlo Carluccio By:/s/ John R. Allard
- - ------------------- -------------------
Witness John R. Allard,
Chief Executive Officer
WPI INSTRUMENTS, INC.
/s/Michael Tule By:/s/ Michael Foster
- - --------------- ------------------
Witness Michael Foster,
Chief Executive Officer
850 PERIMETER RD/NA, LLC
/s/ Carlo Carluccio By:/s/ John R. Allard
- - ------------------ -------------------
Witness John R. Allard, Managing
Director
- 127 -
<PAGE>
EXHIBIT A
FEE SIMPLE PARCEL
A certain lot or parcel of land with buildings thereon,
located in Manchester, County of Hillsborough, and State of New
Hampshire, more particularly bounded and described as follows, to
wit:
Beginning at a point on the northerly line of a
taxiway ten (10) feet south forty-two degrees
seventeen minutes zero seconds West (S 42-17-00 W)
from the southwesterly corner of the Municipal
Hangar so called; thence running
1) South forty-two degrees seventeen minutes zero
seconds West (S 42-17-00 W) along the northerly
edge of said taxiway, five hundred thirteen and
eight hundredths, (513.08) feet to a point; thence
running
2) South fifty-eight degrees forty-four minutes
zero seconds West (S 58-44-00 W) along the
northerly edge of said taxiway, three hundred two
and ninety hundredths (302.90) feet to a point at
the easterly corner of land now or formerly of
Sanders Associates; thence running
3) North forty degrees fifty-two minutes thirty-
two seconds West (N 40-52-32 W) five hundred and
nine and sixty hundredths (509.60) feet by said
Sanders Associates land to an iron pin; thence
running
4) North eighty-five degrees twenty one minutes
fifty-eight seconds West (N 85-21-58 W) three
hundred forty and ninety-eight hundredths (340.98)
feet by said Sanders Associates land to a point on
the easterly line of the former Perimeter Road;
thence running
5) North seven degrees forty minutes two seconds
East (N 7-40-02 E) by the easterly line of the
former Perimeter Road two hundred seventeen and
six hundredths (217.06) feet to a point; thence
running
6) North twenty-one degrees fifty-seven minutes
twelve seconds East (N 21-57-12 E) by the easterly
line of the former Perimeter Road sixty-nine and
sixty-five hundredths (69.65) feet to an iron pin;
thence running
7) North sixty-six degrees twenty-six minutes
zero seconds East (N 66-26-00 E) eighty-two and
ninety hundredths (82.90) feet to a point on the
southerly side of the existing Perimeter Road;
thence running
- 128 -
<PAGE>
8) North eighty-eight degrees fifteen minutes
zero seconds East (N 88-15-00 E) two hundred
thirty-two and forty hundredths (232.40) feet to a
point on the southerly side of said Perimeter
Road; thence running
9) North sixty-eight degrees fifty-five minutes
zero seconds East (N 68-55-00 E) four hundred
forty-seven and ten hundredths (447.10) feet to a
point on the southerly side of said Perimeter
Road; thence running
10) South seventy-two degrees forty-four minutes
zero seconds East (S 72-44-00 E) one hundred forty
five and sixty hundredths (145.60) feet to a point
on the westerly side of Barrett Street; then
running
11) South thirty-four degrees nineteen minutes
zero seconds East (S 34-19-00 E) three hundred
twenty-three and thirty-one hundredths (323.31)
feet to an angle point in Barrett Street; thence
running
12) North fifty degrees three minutes twenty
seconds East (N 50-03-20 E) eighty-four and fifty-
four hundredths (84.54) feet to a point on the
southeasterly side of Barrett Street; thence
running
13) South forty-seven degrees forty-two minutes
ten seconds East (S 47-42-10 E) one hundred forty-
nine and ninety-two hundredths (149.92) feet to
the point of beginning.
Meaning and intending to convey that tract shown on a plan
entitled "Plan of Land, Jewell Electrical Instruments, Inc.,
Perimeter Road, Grenier Field, Manchester, N.H. Scale 1" = 50',
dated September 1986 prepared by John J. Gillis, P.E., L.L. S.,
Manchester, New Hampshire and recorded as Plan No. at
Hillsborough County Registry of Deeds.
EXCLUSION
Excluding, however, from the foregoing, approximately five (5)
acres of real estate and improvements thereon situated on the
westerly portion of said parcel which excluded portion shall be
more definitely described on a survey to be performed prior to
November 30, 1986 and to be agreed upon by the landlord and
tenant, which survey will be recorded.
- 129 -
<PAGE>
SCHEDULE B
FEE SIMPLE PARCEL
A certain lot or parcel of land with buildings thereon,
located in Manchester, County of Hillsborough, and State of New
Hampshire, more particularly bounded and described as follows, to
wit:
Beginning at a point on the northerly line of a
taxiway ten (10) feet south forty-two degrees
seventeen minutes zero seconds West (S 42-17-00 W)
from the southwesterly corner of the Municipal
Hangar so called; thence running
1) South forty-two degrees seventeen minutes zero
seconds West (S 42-17-00 W) along the northerly
edge of said taxiway, five hundred thirteen and
eight hundredths, (513.08) feet to a point; thence
running
2) South fifty-eight degrees forty-four minutes
zero seconds West (S 58-44-00 W) along the
northerly edge of said taxiway, three hundred two
and ninety hundredths (302.90) feet to a point at
the easterly corner of land now or formerly of
Sanders Associates; thence running
3) North forty degrees fifty-two minutes thirty-
two seconds West (N 40-52-32 W) five hundred and
nine and sixty hundredths (509.60) feet by said
Sanders Associates land to an iron pin; thence
running
4) North eighty-five degrees twenty one minutes
fifty-eight seconds West (N 85-21-58 W) three
hundred forty and ninety-eight hundredths (340.98)
feet by said Sanders Associates land to a point on
the easterly line of the former Perimeter Road;
thence running
5) North seven degrees forty minutes two seconds
East (N 7-40-02 E) by the easterly line of the
former Perimeter Road two hundred seventeen and
six hundredths (217.06) feet to a point; thence
running
6) North twenty-one degrees fifty-seven minutes
twelve seconds East (N 21-57-12 E) by the easterly
line of the former Perimeter Road sixty-nine and
sixty-five hundredths (69.65) feet to an iron pin;
thence running
7) North sixty-six degrees twenty-six minutes
zero seconds East (N 66-26-00 E) eighty-two and
ninety hundredths (82.90) feet to a point on the
southerly side of the existing Perimeter Road;
thence running
8) North eighty-eight degrees fifteen minutes
zero seconds East (N 88-15-00 E) two hundred
thirty-two and forty hundredths (232.40) feet to a
point on the southerly side of said Perimeter
Road; thence running
9) North sixty-eight degrees fifty-five minutes
zero seconds East (N 68-55-00 E) four hundred
forty-seven and ten hundredths (447.10) feet to a
point on the southerly side of said Perimeter
Road; thence running
10) South seventy-two degrees forty-four minutes
zero seconds East (S 72-44-00 E) one hundred forty
five and sixty hundredths (145.60) feet to a point
on the westerly side of Barrett Street; then
running
- 130 -
<PAGE>
11) South thirty-four degrees nineteen minutes
zero seconds East (S 34-19-00 E) three hundred
twenty-three and thirty-one hundredths (323.31)
feet to an angle point in Barrett Street; thence
running
12) North fifty degrees three minutes twenty
seconds East (N 50-03-20 E) eighty-four and fifty-
four hundredths (84.54) feet to a point on the
southeasterly side of Barrett Street; thence
running
13) South forty-seven degrees forty-two minutes
ten seconds East (S 47-42-10 E) one hundred forty-
nine and ninety-two hundredths (149.92) feet to
the point of beginning.
Meaning and intending to convey that tract shown on a plan
entitled "Plan of Land, Jewell Electrical Instruments, Inc.,
Perimeter Road, Grenier Field, Manchester, N.H. Scale 1" = 50',
dated September 1986 prepared by John J. Gillis, P.E., L.L. S.,
Manchester, New Hampshire and recorded as Plan No. at
Hillsborough County Registry of Deeds.
NA REALTY
By: /s/ Gerald R. Allard
---------------------
Its General Partner
By: /s/ Younes Nazarian
--------------------
Its General Partner
- 131 -
<PAGE>
SCHEDULE C
LEASEHOLD PARCEL
A certain tract of land known as Lot 20 as shown on a plan
of Greater Manchester Industrial Airpark by Manchester Industrial
Council dated March, 1966, revised May, 1968, with property lines
as shown on plan of George C. Benjamin, P.E., dated May 16, 1968,
and more particularly described as follows:
Beginning at the southwest corner of the premises, at a
steel pin on the northerly line
of Perimeter Road:
thence North 83 degrees 39' 20" East, along the northerly
line of Perimeter Road, 196.00
feet to a steel pin;
thence South 85 degrees 58' 40" East, along the northerly
line of Perimeter Road, 108.00 feet to
an oak stake;
thence North 4 degrees 01' 20" East, 219.00 feet to an oak
stake;
thence North 85 degrees 58' 40" West, 108.00 feet to an oak
stake;
thence South 59 degrees 26' 50" West, 344.06 feet to a
point;
thence South 6 degrees 20' 40" East, 60.00 feet to the point
of beginning.
Said lot being shown as Lot No. 20 on a plan titled: "Lot
#20, Perimeter Road, Greater Manchester Industrial Airpark, City
of Manchester, N.H." , by George C. Benjamin, P.E., and dated May
16, 1968.
Parcel II: Also a certain tract of land situate on the
northerly side of Perimeter Road, in Manchester, County of
Hillsborough, State of New Hampshire, bounded and described as
follows:
Beginning at a steel pin at the northerly edge of Perimeter
Road at the southeastern corner of this tract and the
southwestern corner of Lot 20; thence North 6 degrees 20' 40" West,
sixty and no one-hundredths (60.00) feet to a point; thence South
59 degrees 26' 50" West, seventy three and seventeen one hundredths
(73.17) feet to a point; thence South 83 degrees 39' 20" West, forty-
three and twenty six one hundredths (43.26) feet to a point;
thence South 6 degrees 20' 40" East, thirty and non one-hundredths
(30.00) feet to a point on the northerly edge of Perimeter Road;
thence North 83 degrees 39' 20" East, one hundred tend and no one-
hundredths (110.00) feet along the northerly edge of Perimeter
Road to the point of beginning. Being Lot 20A
Parcel III: Also a certain tract of land situate on the
northerly side of Perimeter Road, in Manchester, in said County
of Hillsborough, bounded and described as follows:
Beginning at a stake on the northerly side of Perimeter Road
at the southermost corner of the premises at other land leased to
Concord college; thence by said land leased to Concord College
north three degrees fifty-three minutes and ten seconds east (N
3 degrees 53' 10" E)
two hundred nineteen and sixty-one one-hundredths (219.61)
feet to a stake on the northease corner of aforementioned land;
thence by said land leased to Concord College, north eighty-six
degrees, six minutes and ten seconds west (N 86 degrees 06' 10" W) one
hundred eight and thirty-three one-hundredths (108.33) feet to a
stake at land of the City of Manchester; thence north eighty-six
degrees, six minutes and zero seconds east (N 86 degrees 06' 00" E) one
hundred forty-four and fifty-three on hundredths (144.53) feet
along land of the City of Manchester to a stake; thence south
twelve degrees ten minutes and forty-five seconds west (S 12 degrees 10'
45" W) two hundred forty-one and seventy-four one-hundredths
(241.74) feet along said land of the City of Manchester to the
point of beginning.
Being a parcel of land containing four thousand eight
hundred nine-one (4,891) square feet and referred to on a plan
entitled "Proposed Lease Area Concord Commercial College,
Manchester, N.H.", Scale one inch (1") equals twenty feet (20'),
by Thomas F. Moran, Surveyor, and dated April 1970.
Office Building on Leasehold Parcel
- 132 -
<PAGE>
A certain building situate on Lot 20 as shown on a plan of
"Greater Manchester Industrial Airpark by Manchester Industrial
Council, dated March, 1966, revised May, 1968 with property lines
as shown on plan of George C. Benjamin P.E.", dated May 16, 1968.
Said building was conveyed to Jewell Electrical by
Foreclosure Deed of The Manchester Bank dated June 27, 1974 and
recorded in Volume 2363, Page 501 of the Hillsborough County
Registry of Deeds.
Said building is situate on leasehold property, the fee of
which is held by the City of Manchester, and is subject to the
terms and conditions of the lease recorded in Volume 2050 Page
427 Hillsborough including Section III (a) which provides that:
"Upon the expiration or the termination of this lease, the
buildings and improvements shall revert to the then owner of the
premises."
NA REALTY
By: /s/ Gerald R. Allard
--------------------
Its General Partner
By: /s/ Younes Nazarian
--------------------
Its General Partner
- 133 -
<PAGE>
LANDLORD'S CONSENT, WAIVER AND ESTOPPEL
THIS AGREEMENT is made and entered into this 17th day of
September, 1986, by and between The City of Manchester, a
municipal corporation, acting by and through its Airport
Authority with a mailing address of Manchester Airport Authority,
Ammon Drive, Manchester Airport, Manchester, NH 03103
(hereinafter, "Landlord") in favor of Casco Northern Bank, N.A.,
a national banking association with its principal place of
business in Portland, Maine and a mailing address of P.O. Box
678, Portland, Maine 04104, Attn: Commercial Loan Dept.
(hereinafter, "Bank").
W I T N E S S E T H:
WHEREAS, the City of Manchester, New Hampshire, acting by
and through the Manchester Airport Authority, has executed a
certain Lease dated July 17, 1968 and recorded in the
Hillsborough County Registry of Deeds at Book 2050, Page 427, and
certain subsequent amendments thereto dated August 1968, August
1969, September 11, 1969 and May 1, 1970 (hereinafter
collectively called the "Lease) between itself as lessor and
Computer Environment Corporation, as lessee, which Lease runs for
a period of thirty (30) years commencing July 1, 1969, and
includes two five-year renewal options;
WHEREAS, the property covered under said Lease
("Premises"), including the buildings and improvements thereon,
was mortgaged to the Manchester Bank, a New Hampshire banking
corporation, having a principal place of business in Manchester,
New Hampshire;
WHEREAS, the Manchester Bank, by foreclosure deed, conveyed
to Jewell Electrical Instruments, Inc., the real estate described
in the said mortgage;
WHEREAS, the Manchester Bank assigned all of its right,
title and interest in the Lease to Jewell Electrical Instruments,
Inc., by Assignment of Lease dated June 27, 1974 and recorded in
the Hillsborough County Registry of Deeds at Book 2363, Page 512;
WHEREAS, Jewell Electrical Instruments, Inc. has assigned
all of its right, title and interest in and to the Lease to NA
Realty, a New Hampshire general partnership having a place of
business at 124 Joliette Street, Manchester, New Hampshire
("Lessee");
WHEREAS, contemporaneously herewith, Lessee and Bank have
entered into certain financing transactions pursuant to which,
among other things, Lessee has collaterally assigned to Bank its
leasehold interest in the Premises pursuant to the terms of one
or more Leasehold Mortgages (together, "Leasehold Mortgages") and
has conveyed to Bank one or more mortgages on the building,
fixtures and improvements located on the Premises (together with
the Leasehold Mortgages, "Mortgages") to secure any and all debts
and obligations of Lessee to Bank now existing or hereafter
arising; and
WHEREAS, in order to induce Bank to provide such financial
accommodations, Lessee has requested Landlord to enter into this
Agreement;
NOW THEREFORE, for one dollar and other good and valuable
consideration, the receipt and sufficiency whereof is hereby
acknowledged, and in consideration of the foregoing, Landlord
hereby represents and agrees as follows:
1. Landlord hereby consents to the execution and
recordation of the Mortgages by Lessee in favor of Bank, and
hereby waives any default otherwise arising under the terms of
the Lease pertaining to such Mortgage.
- 134 -
<PAGE>
2. Landlord represents and warrants that it has consented
to the assignment of the Lease to Lessee and that Lessee
currently enjoys all rights, powers and privileges of the lessee
under the Lease.
3. Landlord hereby waives in favor of Bank any lien,
claim, right, title, or interest, including but not limited to,
any landlord's lien or right to distress for rent, which the
Landlord may have or hereafter acquire as to any personal
property collateral now or hereafter granted by Lessee to Bank
("Collateral"), whether presently or hereafter situated or
installed or affixed to any of the Premises.
4. The Landlord further agrees that the Collateral shall
at all times be deemed personal property and not real property or
in any way part of the Premises.
5. Landlord hereby consents to the removal of any of the
Collateral from the Premises and to the sale of the Collateral on
or off the Premises, at any time prior to the termination of the
Lease, and Lessee and Bank may have access to the Premises for
the purposes of such removal and sale.
6. Landlord hereby covenants and agrees not to amend,
modify, alter or terminate (except in the event of default by
Lessee) the Lease or any term or provisions thereof without the
prior written consent of Bank, which consent shall not be
unreasonably withheld. Landlord further covenants and agrees to
provide Bank with no less than thirty (30) days prior written
notice of any termination of, or exercise of any other remedy
under, the Lease, and to provide Bank with opportunity to cure
any defaults under the Lease prior to the termination of, or
exercise of any other remedy under, the Lease. Moreover, in the
event of any termination of the Lease, Banks shall have forty-
five (45) days after such termination within which to remove the
Collateral from the Premises or to sell the Collateral (including
by auction sale) on the Premises. (Bank shall have no
obligation, however, to remove the Collateral.) Bank may have
access to the Premises for the purposes of such removal and sale.
Bank shall not be required to pay any rent or other charge during
or with respect to said forty-five day period. By accepting this
Agreement, Bank does not undertake any duties or obligations with
respect to the Collateral or the Premises.
7. A true and correct copy of the Lease is attached hereto
as Exhibit A. There are no modifications, amendments or
supplements to the Lease except as so attached.
8. The Lease is in full force and effect, and the Lease
has been duly executed by and is a binding obligation of Landlord
as set forth therein.
9. The Lease is not in default, and Lessee (or Lessee's
predecessors) has performed the obligations required to be
performed by Lessee under the terms thereof to the date hereof.
- 135 -
<PAGE>
10. This Agreement shall be binding upon and shall inure to
the benefit of Landlord and Bank, and their respective permitted
successors and assigns.
11. This Agreement is governed by and shall be construed in
accordance with the internal laws of the State of New Hampshire.
12. This Agreement contains the entire agreement between
Landlord and Bank with respect to the matters discussed herein.
This Agreement may not be altered or amended except by an
agreement in writing, signed by Bank and Landlord.
IN WITNESS WHEREOF, Landlord has duly executed this
Agreement as of the date first above written.
MANCHESTER AIRPORT AUTHORITY
By: /s/ Duly Authorized
Representative
Seen and Agreed:
NA REALTY /s/ Janice A Redding
--------------------
Notary Public
By: /s/ Gerald R. Allard
---------------------
Gerald R. Allard
General Partner
By:/s/ Younes Nazarian
-------------------
Younes Nazarian
General Partner
Accepted:
CASCO NORTHERN BANK, N.A.
By: /s/ Vice President
- 136 -
<PAGE>
Exhibit 13
CORPORATE INFORMATION
CORPORATE OFFICERS
Michael Foster
Chairman and Chief Executive Officer
Dennis Deegan
President and Chief Operating Officer
John Allard
Senior Vice President, Business Development
John Powers
Vice President and Chief Financial Officer
Karen Hebert
Vice President, Human Resources
Timothy Jones
Vice President, Information Solutions Group
Richard Longo
Vice President, Industrial Technology Group
Michael Tule
Vice President, General Counsel and Secretary
INFORMATION SOLUTIONS GROUP
WPI DecisionKey, Inc. WPI Husky Computers, Inc.
Manchester, NH Clearwater, FL
WPI Husky Computers, Ltd. WPI Husky Computers GmbH
Rungis Cedex, France Lohmar, Germany
WPI Husky Computers, Ltd. WPI Husky Computers, Ltd.
Lidkoping, Sweden Coventry, U.K.
WPI Micro Processor Systems, Inc. WPI Oyster Termiflex, Inc.
Sterling Heights, MI Manchester, NH
WPI Oyster Termiflex, Ltd.
Cwmbran, U.K.
INDUSTRIAL TECHNOLOGY GROUP
WPI Electronics, Inc. WPI Instruments, Inc.
Warner, NH Manchester, NH
WPI Magnetec, Inc. WPI Power Systems, Inc.
Warner, NH Warner, NH
WPI Modutec (Barbados) Limited
Barbados, West Indies
- 137 -
<PAGE>
BOARD OF DIRECTORS
Michael Foster
Chairman and Chief Executive Officer
WPI Group, Inc.
Dennis Deegan
President and Chief Operating Officer
WPI Group, Inc.
John Allard
Senior Vice President, Business Development
WPI Group, Inc.
Stephen Carlotti
Partner
Hinckley, Allen & Snyder
Peter Danforth
General Partner
Kearsarge Ventures, Ltd.
Paul Giovacchini
Senior Investment Manager
Seacoast Capital Corporation
Irving Gutin
Senior Vice President
Tyco International (U.S.), Inc.
Steven Shulman
Managing Director
Latona Associates, Inc.
Bernard Tenenbaum
President
Children's Leisure Products Group
The Jordan Company
AUDITORS
Arthur Andersen LLP
225 Franklin Street
Boston, MA 02110
- 138 -
<PAGE>
SHAREHOLDER INFORMATION
TRANSFER AGENT AND REGISTRAR
State Street Bank & Trust Company
c/o EquiServe
PO Box 8200
Boston, MA 02266-8200
Telephone: 1-800-426-5523
INVESTOR RELATIONS CONTACT
Michele M. Normandin
Investor Relations
WPI Group, Inc.
1155 Elm Street
Manchester, NH 03101
Telephone: (603) 627-3500
FORM 10-K
A copy of the Company's annual report to the Securities and
Exchange Commission on Form 10-K, exclusive of Exhibits, is
available without charge upon written request to Michele Normandin,
Investor Relations, WPI Group, Inc.,1155 Elm Street, Manchester, NH 03101,
Telephone (603) 627-3500 FAX (603) 627-3150
ANNUAL MEETING
The 1999 Annual Meeting of Shareholders is scheduled for February 9, 1999,
10:00 a.m. at the WPI Group, Inc. Corporate Headquarters, 1155
Elm Street, Manchester, NH 03101.
- 139 -
<PAGE>
<TABLE>
STOCK PROFILE AND ACTIVITY
The Company's common stock is traded on the NASDAQ National
Market System under the symbol WPIC. Set forth below for each
quarter of its last 2 fiscal years indicated are the high and
low sale prices for WPI Group, Inc.common stock.
<CAPTION>
1998 1997
Fiscal Quarter High Low High Low
- - -------------- ---- --- ---- ---
<S> <C> <C> <C> <C> <C> <C> <C><C>
First $15 1/8 $ 6 7/8 $ 8 1/4 $6 1/8
Second $10 1/4 $ 7 1/8 $10 1/2 $6 5/8
Third $10 1/2 $ 6 3/4 $ 9 $6 1/8
Fourth $ 9 1/4 $ 4 3/4 $12 5/8 $8 1/8
</TABLE>
The number of shareholders of record on December 7, 1998, was
approximately 3,500. No dividends have been paid on the common stock
to date, and the Company does not expect to pay cash dividends in the
foreseeable future.
- 140 -
<PAGE>
WPI GROUP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This review should be read in conjunction with the consolidated
financial statements and related notes beginning on page
21 of this Annual Report. In addition to historical information, this
Annual Report contains forward-looking statements that involve risks
and uncertainties that could cause actual results to differ
materially. Factors that might cause or contribute to such
differences include, but are not limited to, those discussed in the
section entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations." Readers should carefully
review the risks described in other documents the Company files from
time to time with the Securities and Exchange Commission, including
the Quarterly Reports on Form 10-Q to be filed by the Company in
1999. Readers are cautioned not to place undue reliance on the
forward-looking statements, which speak only as of the date of this
Annual Report. The Company undertakes no obligation to publicly
release any revisions to the forward-looking statements or reflect
events or circumstances after the date of this document.
RESULTS OF OPERATIONS
FISCAL 1998 COMPARED TO FISCAL 1997
Net sales increased 52% to $94.9 million in 1998 from $62.5
million in 1997. The increase was due primarily to a full
year of sales from WPI Husky Computers, Ltd. in 1998 and the
addition of WPI Instruments, Inc. sales following the August 3,
1998 acquisition.
Gross profit in 1998 increased 58% to $39.4 million from
$24.9 million in 1997. As a percentage of sales, gross profit
grew to 42% from 40% in 1997. The increase was due primarily to
the change in product mix.
Research and new product development expenses increased 28% to
$5.1 million in 1998 from $4.0 million in 1997. As a
percentage of sales, research and new product development
expenses decreased to 5% in 1998 from 6% in 1997.
Selling, general and administration expenses increased 51% to
$25.5 million in 1998 compared to $16.9 million in 1997. As
a percentage of sales, selling, general and administration
expenses were 27% in 1998 and 1997.
The Company recognized a $1.3 million impairment loss related to
the write-off of capitalized sotware development costs in 1998.
Operating income increased $7.4 million from $3.3 million in 1997.
The increase in operating income was primarily the result of higher
net sales and higher gross profit margins, and reduced operating
expense as a percentage of net sales.
Other income (expense) increased to ($3.7 million) in 1998
from ($1.4 million) in 1997. The increase was due primarily to
an increase in interest expense on debt related to the
acquisition of Husky Computers in 1997 and ANG Instruments in
1998.
Income before provision for income taxes increased to $3.7
million in 1998 compared to $2.0 million in 1997. The increase
was primarily due to the inclusion of a full year of Husky Computers
in 1998.
The Company's consolidated income tax rates, as a percentage of
pre-tax income, were 33% and 43% for 1998 and 1997, respectively.
The decrease in 1998 was a result of the tax treatment of foreign
income and foreign tax credits, recognized thereon.
FISCAL 1997 COMPARED TO FISCAL 1996
Net sales increased 32% to $62.5 million in 1997 from $47.5
million in 1996. The increase was due primarily to the inclusion
of a full year of sales from WPI Oyster Terminals, Ltd., the
addition of Husky Computers, Ltd.'s sales following the June 20,
1997 acquisition and internal growth.
Gross profit in 1997 increased 39% to $24.9 million from $17.9
million in 1996. As a percentage of sales, gross profit grew to
40% from 38% in 1996. The increase was due primarily to the
change in product mix.
Research and new product development expenses increased 36% to
$4.0 million in 1997 from $2.9 million in 1996. As a percentage
of sales, research and new product development expenses were 6%
in both years. The increase was due primarily to the
acquisitions discussed above and additions to engineering staff
for the development of new products that support internal growth.
- 141 -
<PAGE>
Selling, general and administration expenses increased 57% to
$16.9 million in 1997, compared to $10.8 million in 1996. As a
percentage of sales, selling, general and administration expenses
increased to 27% from 23% in 1996. The increase was primarily due
to expenses incurred in connection with the acquisition of Husky
Computers, Ltd., expenses incurred in the realignment of WPI's
Information Solutions Group and certain other expenses, including
the increase in reserves related to litigation concerning the
collection of two outstanding receivables.
Operating income decreased 21% to $3.3 million from $4.2 million
in 1996. The decrease in operating income was primarily due to
an increase in expenses incurred in connection with the
acquisition of Husky Computers, Ltd., expenses incurred in the
realignment of WPI's Information Solutions Group and certain
other expenses, including the increase in reserves related to
litigation concerning the collection of two outstanding
receivables.
Other income (expense) increased to ($1.4 million) in 1997, from
($.4 million) in 1996. The increase was due primarily to an
increase in interest expense on debt related to the acquisitions
discussed above. Other income consists primarily of income from
the surrender of a lease by the lessee related to a building
acquired in 1997.
Income before provision for income taxes decreased to $2.0
million in 1997, compared to $3.7 million in 1996. The decrease
was primarily due to the acquisition, restructuring and other
expenses discussed above.
The Company's consolidated income tax rates, as a percentage of
pre-tax income, were 43% and 33% for 1997 and 1996, respectively.
The increase in 1997 was a result of higher foreign income and
nondeductible goodwill.
LIQUIDITY AND CAPITAL RESOURCES
As of September 27, 1998, the Company had working capital of
$21.3 million versus $17.0 million at September 28, 1997. Net
cash provided by operating activities totaled $5.6 million in 1998
and $7.4 million in 1997.
As of September 27, 1998, the Company had no material commitments
for capital expenditures.
The Company has a $75 million credit facility with a
syndication of banks, consisting of a $20 million revolving line
of credit which expires on September 30, 2003, and term notes totaling $55
million payable in varying quarterly installments commencing on
December 31, 1998, through September 30, 2004. At September 27, 1998,
the Company's borrowing under the credit facility totaled $64.1
million. The agreement contains certain restrictive covenants, including
financial covenants, one of which the Company was not in compliance
with at September 27, 1998. In December 1998, the Company reached
an agreement with the banks to waive the event of non-compliance under
the existing agreement as of September 27, 1998, and amend future
financial covenants. In addition, the amendment provides the Company's
revolving credit facility borrowings cannot exceed $15,000,000 and
interest on all borrowings is increased by 1% per annum during the
Company's fiscal quarter ending March 28, 1999. Based on current forecasts,
the Company believes it will be in compliance with the covenants as amended
throughout 1999.
The Company believes that its existing sources of liquidity and
anticipated cash flow from operations will satisfy the Company's
working capital and capital expenditure requirements for the
foreseeable future.
INFLATION
The Company does not believe that inflation has had a significant
impact on its results of operations in the last three years.
YEAR 2000
WPI has established its Year 2000 Project in order to evaluate
the issue of computer software and embedded computer chips that
are not able to distinguish between the year 1900 and the year
2000. WPI' s Year 2000 Project is divided into three major
sections: (1) IT systems (which examine operating systems and
business applications software); (2) External agents (which
examine third party suppliers and customers); and (3) Product
issues (which involve Year 2000 issues inherent in products
sold by WPI).
The IT systems section evaluates hardware and systems software.
WPI has substantially completed its evaluation of its main
internal operating systems and business application software. As
a result of this evaluation, WPI has begun the process of
implementing the necessary changes and testing its internal
systems to achieve Year 2000 compliance in this area. This
process is currently on schedule. WPI estimates that if this process
stays on schedule, IT systems are expected to be Year 2000 compliant by
mid 1999.
- 142 -
<PAGE>
The external agents section includes the process of identifying
and prioritizing critical suppliers and customers at the direct
interface level, and communicating with them about their plans
and progress in addressing the year 2000 problem. Year 2000
compliance issues at critical suppliers create risks for WPI,
since their inability to operate effectively could impact our
business. Evaluations of the most critical third parties have
been initiated and should be completed by mid 1999. These
evaluations will be followed by corrective actions and the
development of contingency plans, if considered necessary.
The product issues section includes the process of identifying
any product sold by WPI which may not be Year 2000 compliant,
determining a corrective course of action and disseminating
information about Year 2000 compliance to customers. Although
most of WPI's products that have integrated software
or embedded microprocessors are Year 2000 compliant,
there can be no assurances that all of WPI's products
are currently Year 2000 compliant. Detailed evaluations
of certain products have been initiated, and completion
of this phase of the Company's Year 2000 Project should
occur by mid 1999. These evaluations will be followed by
corrective actions and the development of contingency plans,
if considered necessary.
Total costs associated with required IT systems modifications to
become Year 2000 compliant and product issues are not expected to
have a material effect on the consolidated results of operations,
cash flows or financial position of WPI.
The failure to correct a material Year 2000 problem could result
in an interruption in, or a failure of, certain normal business
activities or operations. Due to the general uncertainty inherent
in the Year 2000 problem, resulting in part from the uncertainty of
the Year 2000 readiness of third party suppliers and customers,
WPI is unable to determine at this, time whether the consequences
of Year 2000 failure will have a material impact on WPI's results
of operations, liquidity or financial condition. However,
management believes that WPI's Year 2000 Project will
significantly reduce WPI's level of risk regarding the Year 2000
problem.
- 143 -
<PAGE>
WPI GROUP, INC. AND SUBSIDIARIES
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO WPI GROUP, INC.:
We have audited the accompanying consolidated balance sheets of
WPI Group, Inc. (a New Hampshire corporation) and subsidiaries as
of September 27, 1998 and September 28, 1997, and the related
consolidated statements of income, stockholders' equity and cash
flows for each of the three years in the period ended September
27, 1998. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of WPI Group, Inc. and subsidiaries as of
September 27, 1998 and September 28, 1997, and the results of
their operations and their cash flows for each of the three years
in the period ended September 27, 1998, in conformity with
generally accepted accounting principles.
Arthur Andersen LLP
Boston, Massachusetts
December 10, 1998
(except with respect to the
matter discussed in Note 3, as to
which the date is December 27, 1998).
- 144 -
<PAGE>
WPI GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 27, 1998
1. Business and Summary of Significant Accounting Policies
-------------------------------------------------------
Business - WPI Group, Inc. (the "Company") designs, manufactures
and markets high, valued-added information and industrial
technology products used for a wide range of applications.
The Company operates through two business units: The Information
Solutions Group and the Industrial Technology Group. The
Information Solutions Group consists of WPI Termiflex/Micro Palm,
WPI Oyster Terminals, WPI Micro Processor Systems (MPSI), WPI
DecisionKey and WPI Husky Computers - providers of computers,
terminals, software and information-related services. The
Industrial Technology Group consists of WPI Electronics, WPI
Instruments, WPI Magnetec and WPI Power Systems - all providers of
highly engineered electrical and electronic equipment, electromechanical
devices and precision electromechanical instruments.
Basis of Consolidation - The consolidated financial statements
include the accounts of the Company and its wholly owned
subsidiaries. All significant intercompany balances and
transactions have been eliminated.
Fiscal Year-end - The Company operates on a 52- to 53- week
fiscal year ending on the last Sunday in September.
Revenue Recognition - Sales are recorded when products are
shipped or when services are performed. The Company provides for
estimated warranty costs at the time of shipment. Arrangements to
deliver software or software systems which require significant
production, modification or customization are accounted for on a
percentage of completion. Revenue is recognized in the
proportion that the cost of milestones achieved bear to the total
estimated costs of the project at completion. Losses, if any,
are provided for in the period in which the loss is determined.
Management Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from
those estimates.
Cash and Cash Equivalents - For the purposes of the consolidated
statements of cash flows, the Company considers all highly liquid
investments purchased with a maturity of three months or less to
be cash equivalents.
Fair Value of Financial Instruments - The carrying amounts
reported on the consolidated balance sheet for cash, receivables,
payables, accrued expenses and debt approximate fair value.
Concentration of Credit Risk - The Company's exposure to
concentrations of credit risk relates primarily to trade accounts
receivable. Such exposure is limited due to the large number of
customers and their industry and geographic dispersion. The
Company controls credit risk by performing ongoing credit
evaluations of its customers' financial condition.
Management is not aware of any specific concentrations that
could cause a severe impact to its operations.
Inventories - Inventories are stated at the lower of cost
(principally first-in, first-out method) or market and include
materials, labor and manufacturing overhead.
<TABLE>
Inventories consist of:
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Raw materials $ 7,684,405 $6,229,097
Work in process 4,758,535 2,192,096
Finished goods 1,745,346 1,474,659
----------- ----------
$14,188,286 $9,895,852
=========== ==========
</TABLE>
- 145 -
<PAGE>
Property, Plant and Equipment - Property, plant and equipment are
recorded at cost. Expenditures for maintenance, repairs and
renewals are charged to expense as incurred, whereas major
betterments are capitalized as additions to property, plant and
equipment. The provision for depreciation and amortization has
been calculated using the straight-line method over the assets
estimated useful lives.
<TABLE>
The components of property, plant and equipment and their
estimated useful lives are as follows:
<CAPTION>
Useful Life 1998 1997
----------- ---- ----
<S> <C> <C> <C> <C> <S>
Construction in progress - $ 383,381 $ 106,578
Land and land improvements 15 372,160 575,702
Buildings and improvements 39 6,526,335 6,245,060
Machinery and equipment 7 6,804,733 5,760,280
Tooling and dies 3 - 7 2,171,373 2,002,894
Office equipment 5 - 7 4,260,030 3,023,844
Equipment under capital leases 5 645,420 643,176
------------ -----------
21,163,432 18,357,534
Less: accumulated depreciation (5,649,141) (2,606,683)
------------ -----------
$ 15,514,291 $15,750,851
============ ===========
</TABLE>
Goodwill and Other Intangibles - The excess of the purchase price
over the fair value of net assets acquired in an acquisition is
included in other assets in the accompanying consolidated balance
sheets and is being amortized over 5 to 25 years on a composite
straight-line basis. The Company periodically evaluates the
existence of goodwill impairment on the basis of whether the goodwill
is fully recoverable from projected undiscounted net cash flows of the
related business unit. Goodwill and other intangibles (net of accumulated
amortization) was approximately $48,799,000 and $30,914,000 at the end of
1998 and 1997, respectively. Amortization amounted to approximately
$1,521,000, $971,000 and $526,000 for 1998, 1997 and 1996, respectively.
Deferred Product Enhancement Costs - Deferred product enhancement
costs represent incremental direct costs specifically identified
with the adaptation and enhancement of existing commercial
products to meet the needs of specifically identified customers
or markets. Such costs are amortized on a straight-line basis
over the estimated economic useful lives of the related products
which presently do not exceed five years. Periodically, the Company
evaluates each product on a number of factors, including but not
limited to: customer and/or market projections of ongoing business;
projected units for the following year, when available; our customers'
evaluation of the state of the technology; and estimated stage of
the life cycle of the product. The Company also reviews sales
during the previous year and the future gross margin analysis
projections of the product. The amortization of these costs are
included in cost of sales and amounted to approximately
$976,000, $640,000 and $394,000 for 1998, 1997 and 1996,
respectively. The table set forth below details the costs and
accumulated amortization for deferred product enhancement costs:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Deferred product enhancement costs $ 5,848,962 $ 4,066,491
Less: accumulated amortization (1,918,818) (1,174,601)
----------- ------------
$ 3,930,144 $ 2,891,890
=========== ============
</TABLE>
Software Development Costs - In accordance with Statement of Financial
Accounting Standards (SFAS) No. 86, "Accounting for the Costs of
Computer Software to Be Sold, Leased or Otherwise Marketed," the
Company capitalizes certain software development costs. Capitalization
of software development costs begins upon the establishment of
technological feasibility and ceases when the product is ready for
release. Research and development costs incurred prior to the
establishment of technological feasibility are charged to research
and new product development expense. Amortization of
capitalized software development costs begins when the product is
available for release to customers. Amortization is provided on a
product-by-product basis, using the greater of the anticipated
future revenue stream or straight-line method over the economic life
of the product, initially estimated at two years.
During the fourth quarter of 1998, the Company performed a review of
these costs and recorded a charge of approximately $1,312,000 to
write-off all previously capitalized software development costs.
- 146 -
<PAGE>
Long-Lived Assets - In accordance with SFAS No. 121, "Accounting
for the Impairment of Long-Lived Assets and Long-Lived Assets to be
Disposed of," the Company evaluates the recoverability of its carrying
value of the Company's long-lived assets and certain intangible assets
based on estimated undiscounted cash flows to be generated from each of
such assets compared to the original estimates used in measuring the
assets. To the extent impairment is identified, the Company reduces
the carrying value of such impaired assets. To date, the Company
has not had any such impairments.
Income Taxes - In accordance with SFAS No. 109, "Accounting for
Income Taxes," the Company recognizes deferred income taxes
based on the expected future tax consequences of differences
between the financial statement basis and tax basis of assets and
liabilities calculated using enacted tax rates in effect for the
year in which the differences are expected to reverse.
Earnings Per Share - The Company has adopted SFAS No. 128,
"Earnings Per Share." This statement modifies disclosure
requirements for companies required to report earnings per share
(EPS) to include presentations of Basic EPS (which includes no
dilution of common stock equivalents) and, if applicable,
Diluted EPS (which reflects the potential dilution of common stock
equivalents). All earnings per share amounts for all periods have
been presented and, where appropriate, restated to conform to the
SFAS No. 128 requirements. Options to purchase approximately
144,000, 18,000 and 21,000 shares of common stock were outstanding
during 1998, 1997 and 1996, respectively, but were not included
in the computation of diluted earnings per share because the
exercise price was greater than the average market price of the
common shares and, therefore, the effect would be antidilutive.
Foreign Currency Translation - Assets and liabilities of the
Company's foreign operations are translated at year-end exchange
rates. Net sales and expenses are translated at the average
rates prevailing during the year. Balance sheet translation gains
and losses are reflected as a separate component of stockholders'
equity. Foreign currency gains and losses arising from
transactions are reflected in net income.
During the year ended September 27, 1998, the Company recognized net
foreign exhange losses of approximately $247,000, primarily resulting
from intercompany transactions with foreign subsidiaries. The foreign
exchange loss has been recorded in the consolidated statements of income.
As of September 27, 1998, the Company has not entered into any foreign
currency contracts to hedge this exposure.
Recent Accounting Pronouncements - In 1997, the Financial Accounting
Standards Board issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information." SFAS No. 131 establishes
standards for the way public business enterprises report
information in annual statements and interim financial reports regarding
operating segments, products and services, geographic areas, and
major customers. SFAS No. 131 is effective for the Company's fiscal year
ending September 1999 financial statements and interim financial
statements thereafter. The Company is currently evaluating the impact
of SFAS No. 131 on its financial statement disclosures.
In 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." The
statement establishes accounting and reporting standards for derivative
instruments and hedging activities. SFAS No. 133 requires the Company
to recognize all derivatives on the balance sheet at fair value.
Derivatives that are not hedges must be adjusted to fair value through
income. If a derivative is a hedge, the accounting treatment of changes
in fair value is based on the nature of the hedge. SFAS No. 133 is
effective for the Company's fiscal year ending September 2000. The
Company is currently evaluating the impact of SFAS No. 133 on its
financial statements and related disclosures.
Reclassifications - Certain prior year amounts have been
reclassified to conform with current year presentation.
<TABLE>
2. Other Assets
Other assets consist of:
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Goodwill and other intangibles $52,325,255 $33,084,163
Deferred product enhancement costs 5,848,962 4,066,491
Debt issuance cost 1,196,500 -
Software development costs - 923,772
----------- ------------
59,370,717 38,074,426
Less: accumulated amortization (5,238,300) (3,270,540)
----------- ------------
$54,132,417 $34,803,886
=========== ============
</TABLE>
3. Long-Term Debt
The Company has a $75,000,000 secured credit facility with a syndication
of banks. The credit agreement consists of three components.
The first is a $20,000,000 revolving credit facility which expires on
September 30, 2003, at which time all revolving credit facility
borrowings are due and payable. Under terms of the credit agreement,
availability on the revolving credit facility is limited to 75% and 25%
of eligible accounts receivable and inventories, respectively. Borrowing
on the revolving credit facility aggregated $9,089,843 at September 27,
1998. The second component is a $30,000,000 term loan which
expires on September 30, 2003 and is payable in quarterly installments
ranging from $750,000 to $2,250,000. The third component is a
$25,000,000 term loan which expires on September 30, 2004, and is
payable in equal quarterly installments ranging from $62,500 for the
first five years to $5,937,000 during the sixth year. As of September 27,
1998, aggregate borrowings under the bank credit agreement total
$64,089,843.
- 147 -
<PAGE>
Interest on the revolving credit facility and $30,000,000 term loan
borrowing is payable monthly at LIBOR (5.625% at September 27, 1998)
plus 2.5% or prime rate (8.25% at September 27, 1998) plus 1.25%
through March 31, 1999. Interest on the $25,000,000 term loan borrowing
is payable monthly at LIBOR plus 3% or prime rate plus 1.75% through
March 31, 1999. After March 31, 1999 interest rates are subject to
modification based on a ratio of total debt to earnings before interest,
taxes, depreciation and amortization (EBITDA). In the event of default,
the interest rates on all borrowings are increased by 2% per annum.
The Company is required to pay an annual commitment fee equal to 0.5%
on the unused revolving credit facility and an annual agency fee.
The agreement contains certain restrictive covenants, including
the Company's ability to incur additional indebtedness and pay dividends.
In addition, the agreement specifies financial covenants related to
maximum annual capital expenditures, minimum quarterly interest and
principal coverage ratio, minimum levels of net worth and maximum total
debt to EBITDA ratio. As of September 27, 1998, the Company was not in
compliance with the total debt to EBITDA ratio required under the terms
of the agreement. In December 1998, the Company reached an agreement
with the banks to waive the event of non-compliance under the existing
agreement as of September 27, 1998, and amend future financial covenants.
In addition, the amendment provides the Company's revolving credit
facility borrowings cannot exceed $15,000,000 and interest on all
borrowings is increased by 1% per annum during the Company's fiscal
quarter ending March 28, 1999. Based on current forecasts, the Company
believes it will be in compliance with the covenants as amended
throughout 1999.
On August 3, 1998, the company issued $2,750,000 in promissory notes in
connection with the acquisition of certain assets and technology of ANG
Instruments. The notes were recorded at a 8.25% discount rate which
represents a net present value of $2,335,533. Principal and interest
payments totaling $51,563 are payable monthly over the four years
commencing September 1, 1998. At September 27, 1998, the outstanding
balance was $2,064,869.
On August 6, 1998, the Company issued a $200,000 promissory note in
connection with the acqusition of the Lucas sensor product line. The note
bears interest at a rate of 9% per annum. The note and related interest
are due and payable on July 31, 2000.
The scheduled maturities of notes payable outstanding as of September 27,
1998, are as follows: 1999-$3,715,748; 2000-$5,455,659; 2001-$6,798,990;
2002-$8,294,472; 2003-$18,339,843 and 2004-$23,750,000.
4. Accrued Expenses
<TABLE>
Accrued expenses consist of:
<CAPTION>
1998 1997
---- ----
<S> <C> <C> <C>
Payroll and related amounts $1,760,902 $ 906,075
Warranty 1,477,538 1,032,066
Acquisition related 872,085 286,226
Deferred revenue 471,760 326,896
Leases 359,657 576,499
Interest 395,193 359,801
Other 648,169 551,414
---------- -----------
$5,985,304 $ 4,038,977
========== ===========
</TABLE>
- 148 -
<PAGE>
5. Income Taxes
<TABLE>
The components of federal and state income taxes are as follows:
<CAPTION>
1998 1997 1996
---- ---- ----
<S><S> <C> <C> <C>
Current
Federal $ 457,000 $ - $ 900,000
State 137,000 - 156,000
Foreign 1,871,000 22,000 124,000
----------- -------- ----------
2,465,000 22,000 1,180,000
=========== ======== ==========
<S> <C> <C> <C>
Deferred
Federal (1,153,000) 263,000 41,000
State (87,000) 36,000 6,000
Foreign - 534,000 -
----------- --------- ----------
(1,240,000) 833,000 47,000
----------- --------- ----------
$1,225,000 $ 855,000 $1,227,000
=========== ========= ==========
</TABLE>
- 149 -
<PAGE>
<TABLE>
A reconciliation of income taxes at the federal statutory rate of
34% to income taxes at the Company's effective tax rate is as
follows:
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C> <C>
Income tax at 34% of income
before provision for
income taxes $ 1,262,000 $ 670,000 $ 1,274,000
State income tax provision
(benefit)
(net of effect of
federal tax) (112,000) 61,000 173,000
Goodwill amortization 464,000 247,000 88,000
Impact of foreign income
transcactions and
rate differentials (214,000) 170,000 -
Net foreign tax credit (206,000) - -
Other 31,000 (293,000) (308,000)
----------- ----------- ------------
$ 1,225,000 $ 855,000 $ 1,227,000
=========== =========== ============
</TABLE>
<TABLE>
The approximate income tax effect of temporary differences
comprising the deferred tax assets and liabilities are as
follows:
<CAPTION>
1998 1997
---- ----
<S> <C> <C> <C>
Prepaid
Software development costs $ 453,000 $ -
Inventory related 353,000 248,000
Bad debt reserve 424,000 436,000
Warranty reserve 200,000 203,000
Payroll related 115,000 172,000
Foreign net operating
loss carryforwards 805,000 805,000
Other 202,000 134,000
---------- ----------
$2,552,000 $1,998,000
========== ==========
<S> <C> <C>
Deferred
Fixed asset differences $1,402,000 $1,618,000
DISC deferral 1,116,000 731,000
Goodwill 490,000 480,000
Deferred enhancement costs 164,000 548,000
Deferred software
development - 255,000
Other (80,000) 77,000
---------- ----------
$3,092,000 $3,709,000
========== ==========
</TABLE>
The Company has recognized deferred tax assets associated with
approximately $2,150,000 of foreign net operating losses which
are subject to adjustement.
The Company's subsidiary, WPI Micro Palm, Inc., which was
acquired on September 23, 1994, had net operating loss
carryforwards of approximately $2,874,000, the utilization of
which is limited to approximately $126,000 annually as a result
of the acquisition. The Company has not recorded any deferred
tax assets for these net operating loss carryforwards because
their future utilization is uncertain. The realization of these
net operating loss carryforwards are accounted for as a reduction
of goodwill.
- 150 -
<PAGE>
6. Common Stock
A) Stock Option Plans
The Company has stock option plans for selected officers, key
employees and directors. Under these plans, options may be
granted at a price equal to at least the fair market value at the
date of the grant. Options granted under the plans are
exercisable at various dates as specified in the underlying
option agreement. The options automatically expire upon
termination of employment with the Company.
<TABLE>
A summary of stock option activity for each of the three years in
the period ended September 27, 1998, is as follows:
<CAPTION>
Shares Under Weighted-Average
Option Exercise Price
------------ ----------------
<S> <C> <C>
Outstanding, September 24,1995 365,400 $ 2.68
Exercised (218,017) 1.99
Terminated (22,167) 2.84
Granted 189,730 4.18
------------- -----------------
<S> <C> <C>
Outstanding, September 29,1996 314,946 4.02
Exercised (41,750) 2.87
Terminated (19,500) 7.07
Granted 276,000 6.66
------------ -----------------
<S> <C> <C>
Outstanding, September 28,1997 529,696 5.38
Exercised (20,750) 3.83
Terminated (38,000) 7.36
Granted 296,000 9.60
------------ -----------------
Outstanding, September 27,1998 766,946 $ 6.95
============ =================
</TABLE>
<TABLE>
The following is a summary of options outstanding and exercisable
at September 27, 1998:
<CAPTION>
<C> <S><C> <C> <C> <S> <C> <C> <C> <S> <S>
Options Outstanding Options Exercisable
------------------- -------------------
Number Weighted Average Number
Range of Outstanding Remaining Weighted Average Exercisable Weighted Average
Exercise Prices at 9/27/98 Contractual Life Exercise Price at 9/27/98 Exercise Price
- - --------------- ---------- ---------------- --------------- ----------- ----------------
$2.00 to $ 4.50 146,166 6.5 years $ 2.87 146,166 $ 2.87
$4.51 to $ 6.50 288,780 7.8 6.24 173,291 6.18
$6.51 to $ 9.00 194,500 9.3 8.13 25,500 7.84
$9.01 to $11.13 137,500 9.1 11.13 - -
------- -------
766,946 8.1 6.95 344,957 4.90
======= =======
</TABLE>
<TABLE>
In 1995, the Financial Accounting Standards Board issued SFAS No.
123, "Accounting for Stock-Based Compensation," which sets forth
a fair value based method of recognizing stock- based
compensation expense. As permitted by SFAS No. 123, the Company
has elected to continue to apply APB No. 25 to account for its
stock- based compensation plans. Had compensation for the stock
option plans been determined using the fair value at the grant
dates for awards under those plans, consistent with the
guidelines of SFAS No. 123, the Company's net income and earnings
per share would have been reduced to the pro forma amounts listed
below:
<CAPTION>
1998 1997 1996
---- ----- ----
<S> <C> <C> <C>
Pro forma net income $1,962,085 $ 874,224 $ 2,469,803
Pro forma diluted earnings per share 0.32 0.14 0.41
</TABLE>
- 151 -
<PAGE>
Consistent with SFAS No. 123, pro forma net income and earnings per
share have not been calculated for options granted prior to
September 24, 1995. Pro forma compensation cost may not be
representative of that to be expected in future years.
The weighted average fair value of options granted was $4.68, $3.39 and
$1.43 for for options granted during 1998, 1997 and 1996, respectively.
The values were estimated on the date of grant using the
Black-Sholes option pricing model with the following weighted
average assumptions used for grants in 1998,1997 and 1996
respectively; risk-free interest rates ranging from 5.38% to
6.64%, expected dividend yield of 0% for the periods, expected
options lives of 5 years and expected volatilities ranging from
43.1% to 49.5%.
B) WPI Employee Stock Purchase Plan
The Company's Employee Stock Purchase Plan (the "Purchase Plan")
was adopted by the Board of Directors on June 1, 1997.The Purchase
Plan is a qualified stock purchase plan under the Internal Revenue
Code covering all employees of the Company, except employees who
are owners of 5% of the Company's stock. Eligible employees can
purchase shares on a quarterly basis on December 15, March 15,
June 15 and September 15. The minimum purchase amount is 10 shares
per quarter to a maximum of 400 shares per year. The purchase price
of the shares is 93% of the average of the closing prices of the
common stock during the period of 5 trading days ending on
the purchase date. An aggregate of 30,000 shares were reserved
for issuance under the Purchase Plan. Shares purchased under
the Company's Purchase Plan were 7,582, 2,865 and 4,085 in 1998, 1997
and 1996, respectively.
C) WPI Stock Bonus Award Plan
The Company's Stock Bonus Award Plan (the "Bonus Plan")was adopted
by the Board of Directors on June 1, 1997. All employees of the Company,
except employees who are owners of 5% or more of the Company's stock,
are eligible to participate in the Bonus Plan. The Bonus Plan allows
for the award of shares of the Company's common stock. Awards under
the Bonus Plan are made at the discretion of the Chief Executive Officer
to employees who have demonstrated outstanding performance and commitment
in their employment with the Company. An aggregate of 20,000 shares were
reserved for issuance under the Bonus Plan. Shares awarded under the
Company's Bonus Plan were 3,135, 4,525 and 5,170 in 1998, 1997 and 1996,
respectively. The compensation expense related to these awards is not
significant.
7. Employee Benefits
A) Post Retirement Benefits
The Company has no obligation for post-retirement benefits.
B) WPI 401k Plan
In 1990, the Company established a Profit-Sharing 401(k) Plan for
the benefit of eligible United States employees, whereby the
Company matches a portion of the employees' contributions to the
plan. During 1998, the Company matched 50% of the first 4% of
employees' contributions. The Company's expense relating to
this plan amounted to approximately $246,000, $213,000 and $150,000
in 1998, 1997 and 1996, respectively.
C) WPI Group UK Money Purchase Pension Plan
The Company has defined contribution pension schemes for the majority
of its full-time employees located in the United Kingdom. The Company's
expense relating to the schemes amounted to approximately $358,000, $135,000,
and $6,000 in 1998,1997 and 1996, respectively.
8. Significant Customers
The Company markets its products to customers in diversified
industries in the United States and Europe. For the year ended
September 27, 1998, no one customer accounted for 10% of
total Company sales. For the year ended September 28, 1997, one
customer accounted for 11% of total Company sales. For the year
ended September 29, 1996, two customers accounted for 11% and 10%
respectively, of total Company sales.
- 152 -
<PAGE>
9. Acquisitions
In August, 1998, the Company acquired certain assets and technology
of ANG Instruments, a manufacturer of avionics components
and subsystems, inertial sensors and panel meters, as well as
a sensor product line from Lucas Control Systems. The purchase price
consisted of approximately $23.5 million in cash, notes payable
of approximately $2.5 million plus assumed liabilities and expenses
totaling an additional $2.5 million. The acquisition was accounted
for using the purchase method. Accordingly, the purchase price was
allocated to tangible assets acquired based on their estimated fair
value of $9.1 million and goodwill and other intangibles of $19.4
million which is being amortized on a straight-line basis over a
composite life of 25 years.
The Company's balance sheet at September 27, 1998, includes
estimates of the fair value of assets and liabilities acquired,
based upon preliminary studies. Resolution of any contingencies
that exist at acquisition date may result in adjustments to
goodwill, if appropriate, and are not expected to be material.
In June 1997, a subsidiary of the Company acquired all the outstanding
capital stock of Husky Computers Ltd., a manufacturer of handheld
computers. In July 1996, a subsidiary of the Company acquired all
the outstanding capital stock of Oyster Terminals, Ltd., a manufacturer
of handheld programmable terminals. In November 1995, the Company
acquired all the outstanding capital stock of Micro Processor Systems,
Inc. (MPSI) a developer and marketer of electronic test and diagnostic
hardware and software for heavy- and light-duty vehicles. Each of
the acquisitions were accounted for using the purchase method.
<TABLE>
The following summarized, unaudited pro forma results of
operations for the years ended September 27, 1998, September 28,
1997 and September 29, 1996, assume the acquisitions of ANG
Instruments Group, Husky Computers, Ltd., Oyster Terminals, Ltd.,
and MPSI, occurred as of the beginning of the respective periods
(dollars in thousands except per share amounts):
<CAPTION>
Pro forma: (unaudited) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net sales $109,320 $ 106,602 $ 87,721
Net income (loss) 1,466 (1,621) 1,414
Earnings (loss) per share
Basic 0.24 (0.27) 0.24
Diluted 0.24 (0.26) 0.24
</TABLE>
The unaudited pro forma results are not necessarily indicative of
either actual results of operations that would have occurred had
the acquisitions been made at the beginning of the periods shown
or future results.
10. Commitments
The Company leases certain buildings, office space, machinery and
equipment, and vehicles under various lease agreements which
expire at various dates over the next five years.
<TABLE>
As of September 27, 1998, the aggregate future minimum lease
commitments under operating and capital leases obligations are as
follows:
<CAPTION>
Operating Capital
Fiscal Year Leases Leases
----------- --------- -------
<C> <C> <C>
1999 $1,555,000 $ 234,000
2000 1,309,000 123,000
2001 1,106,000 2,000
2002 1,011,000 -
2003 628,000 -
---------- ----------
Total minimum lease payments $5,609,000 $ 359,000
==========
Less amount representing
interest (10,000)
----------
Present value of total
minimum lease payments $ 349,000
==========
</TABLE>
- 153 -
<PAGE>
Total rent expense charged to operations for 1998, 1997 and 1996
totaled approximately $1,733,000, $634,000 and $110,000,
respectively.
11. Restructuring Costs
In the fourth quarter of 1997, the Company incurred certain
restructuring costs totaling approximately $726,000 as a result
of the realignment of certain handheld terminal product lines of
the Information Solutions Group. The costs were incurred in
connection with the consolidation of manufacturing facilities,
reduction in the number of employees and merger of sales offices.
This restructuring of the operations was completed within the
quarter.
On January 30, 1998, the Company completed the sale of its production
and sales facility located in Merrimack, NH. Net proceeds from the
sale of the facility totaled approximately $1,463,000.
12. Other, Net
During 1997, the Company recognized income of approximately
$512,000 in connection with the surrender of a lease by the
lessee related to a building acquired in 1997.
On December 29, 1995, the Company had a fire at its Warner, NH
facility. The Company has recorded a gain of approximately
$111,000 and $364,000 in 1997 and 1996, respectively, related to
insurance recoveries, which is included in other income, net. In
addition to the insurance recoveries related to the property
damage and related expenses, including those associated with
expedited construction under winter conditions, the Company was
reimbursed in 1996 by the insurance carrier for business
interruption costs of approximately $1,200,000 that have been
offset in cost of sales.
- 154 -
<PAGE>
13. Business Segment and Geographical Information
The Company's business segments are:
- Information Solutions: rugged, handheld passive and
programmable terminals and computers, vehicle diagnostic
information systems, and decision support software.
- Industrial Technology: power systems, electronics,
solenoids, avionic components, inertial sensors and
panel meters.
<TABLE>
Business Segment
Information
(in thousands)
<CAPTION>
<S> <C> <C> <C> <C>
September 27, September 28, September 29,
1998 1997 1996
------------- ------------- -------------
Net Sales:
Information Solutions $69,536 $35,546 $20,427
Industrial Technology 25,360 26,937 27,071
------------- ------------- --------------
94,896 62,483 47,498
------------- ------------- --------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Operating Income:
Information Solutions 10,574 2,840 3,413
Industrial Technology 2,878 3,839 4,160
Corporate (a) (6,027) (3,355) (3,378)
-------------- ------------- --------------
7,425 3,324 4,195
-------------- ------------- --------------
<S> <C> <C> <C>
Identifiable Assets:
Information Solutions 33,126 30,593 15,966
Industrial Technology 22,181 12,209 13,348
Corporate (b) 54,816 35,699 21,361
-------------- ------------- --------------
110,123 78,501 50,675
-------------- ------------- --------------
<S> <C> <C> <C>
Capital Expenditures:
Information Solutions 1,432 3,054 399
Industrial Technology 367 635 1,818
Corporate 135 224 115
-------------- ------------- --------------
1,934 3,913 2,332
-------------- ------------- --------------
<S> <C> <C> <C>
Depreciation and Amortization:
Information Solutions 2,677 1,447 579
Industrial Technology 1,099 871 859
Corporate 1,648 1,091 549
-------------- ------------- --------------
$ 5,424 $ 3,409 $ 1,987
-------------- ------------- --------------
</TABLE>
<TABLE>
Geographical Segment Information (from point of manufacture)
(in thousands)
<CAPTION>
<S> <C> <C> <C> <C>
September 27 September 28, September 29,
1998 1997 1996
------------ ------------- -------------
Net Sales:
United States (c) $ 58,682 $ 50,917 $ 46,042
Europe 36,214 11,566 1,456
------------ ------------- --------------
94,896 62,483 47,498
------------ ------------- --------------
<S> <C> <C> <C>
Operating Income:
United States 5,660 4,521 6,990
Europe 7,792 2,158 583
Corporate (a) (6,027) (3,355) (3,378)
------------ ------------- --------------
7,425 3,324 4,195
------------ ------------- --------------
<S> <C> <C> <C>
Identifiable Assets:
United States 35,035 25,943 26,167
Europe 20,272 16,859 3,147
Corporate (b) 54,816 35,699 21,361
------------ ------------- --------------
$ 110,123 $ 78,501 $ 50,675
------------ ------------- --------------
</TABLE>
- 155 -
<PAGE>
(a) Includes corporate expenses and amortization of goodwill.
(b) Primarily cash, prepaid and refundable income taxes,
corporate prepaid expenses, other assets, property and
equipment at the Company's corporate offices.
(c) Includes export sales of $5,856,$6,510 and $7,449 in 1998, 1997,
and 1996, respectively.
<TABLE>
14. Selected Quarterly Financial Information (Unaudited)
Selected quarterly financial information for the years ended
September 27, 1998 and September 28, 1997 is as follows:
(in thousands, except earnings per share)
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C>
1998
Net sales $21,844 $23,254 $24,397 $25,401
Gross profit 8,799 9,661 10,522 10,403
Net income (loss) 912 1,052 1,368 (846)
Earnings (loss)
per share
Basic 0.15 0.18 0.23 (0.14)
Diluted 0.15 0.17 0.22 (0.14)
<S> <C> <C> <C> <C>
1997
Net sales $14,109 $14,222 $15,562 $18,590
Gross profit 5,580 5,703 6,168 7,481
Net income (loss) 776 862 1,007 (1,529)
Earnings (loss)
per share
Basic 0.13 0.14 0.17 (0.26)
Diluted 0.13 0.14 0.16 (0.25)
</TABLE>
- 156 -
<PAGE>
<TABLE>
WPI GROUP, INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
September 27, 1998 and September 28, 1997 1998 1997
- - ----------------------------------------- ---- ----
<S> <C> <C> <C> <C><S>
ASSETS
Current Assets
Cash and cash equivalents $ 159,518 $ 678,799
Accounts receivable - net of allowance
for doubtful accounts
of $1,283,000 and $1,237,000 in
1998 and 1997, respectively 21,123,792 12,173,012
Accounts receivable - other 270,611 249,393
Inventories 14,188,286 9,895,852
Prepaid expenses and other current assets 1,562,048 1,134,125
Prepaid income taxes 2,551,616 1,998,160
Refundable income taxes 620,578 1,816,897
------------ -----------
Total current assets 40,476,449 27,946,238
------------ -----------
Property, Plant and Equipment, at cost,
less accumulated depreciation 15,514,291 15,750,851
Other Assets 54,132,417 34,803,886
------------ ------------
$110,123,157 $78,500,975
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt $ 3,715,748 $ -
Accounts payable 7,776,470 6,336,756
Accrued expenses 5,985,304 4,038,977
Accrued income taxes 1,672,166 603,473
------------ -----------
Total current liabilities 19,149,688 10,979,206
------------ -----------
Long-Term Debt 62,638,964 42,000,000
------------ -----------
Deferred Income Taxes 3,091,995 3,708,914
------------ -----------
Commitments
Stockholders' Equity
Common stock, $.01 par value;
authorized 20,000,000
shares; issued and
outstanding 6,028,204 and
5,996,737 shares in 1998 and
1997, respectively 60,282 59,967
Additional paid-in capital 14,169,771 13,992,540
Retained earnings 10,418,044 7,931,562
Cumulative foreign currency translation
adjustments 594,413 (171,214)
------------ -----------
Total stockholders' equity 25,242,510 21,812,855
------------ -----------
$110,123,157 $78,500,975
============ ===========
</TABLE>
See notes to consolidated financial statements.
- 157 -
<PAGE>
<TABLE>
WPI GROUP, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended September 27, 1998, September 28, 1997 and
September 29, 1996
<CAPTION>
1998 1997 1996
<S> <C> <C> <C><C> <C> <S>
Cash Flows From Operating Activities
Net Income $ 2,486,482 $ 1,115,761 $ 2,521,190
------------ ------------ ------------
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 5,424,802 3,409,364 1,986,612
Write-off of software development costs 1,312,283 - -
Deferred income taxes (1,173,110) 860,307 514,498
Non-cash compensation 25,775 104,231 19,126
Changes in current assets and
liabilities, net of effects of
acquisitions:
Accounts receivable (6,008,180) 2,896,916 (3,888,310)
Accounts receivable - other 25,480 1,369,480 (1,464,498)
Inventories 825,685 1,733,357 178,270
Prepaid expenses and other current assets (260,962) 52,521 32,267
Refundable income taxes 1,201,651 (1,269,147) (446,657)
Accounts payable 66,926 (500,407) 1,280,236
Accrued expenses 632,823 (1,357,394) 850,561
Accrued income taxes 1,016,789 (1,018,724) 569,033
------------ ------------ -----------
Total adjustments 3,089,962 6,280,504 (368,862)
------------ ----------- -----------
Net cash provided by operating 5,576,444 7,396,265 2,152,328
activities ------------ ----------- -----------
Cash Flows From Financing Activities
Proceeds from long-term debt 62,893,343 23,350,000 15,607,225
Payments of long-term debt (42,270,664) (20,000) (3,190,000)
Proceeds from exercise of stock
options 79,469 117,676 498,976
Issuance of common stock 50,302 23,517 25,457
Tax benefit on exercise of non-
statutory options 22,000 89,000 158,000
------------ ----------- -----------
Net cash provided by
financing activities 20,774,450 23,560,193 13,099,658
------------ ----------- -----------
Cash Flows From Investing Activities
Additions to property, plant and
equipment (1,934,052) (3,912,522) (2,332,051)
Proceeds from sales of property,
plant and equipment 1,462,894 - -
Additions to other assets (2,611,857) (2,911,010) (671,025)
Acquisitions, net of cash acquired (23,495,000) (22,039,007) (10,994,215)
Payments of accrued acquisition
costs (362,152) (1,435,973) (1,092,292)
------------ ----------- -----------
Net cash used in investing (26,940,167) (30,298,512) (15,089,583)
activities ------------ ------------ -----------
Effect of Foreign Currency
Translation on Cash 69,992 (185,976) 14,762
------------ ------------ -----------
Net Increase (Decrease) in Cash and
Cash Equivalents (519,281) 471,970 177,165
Cash and Cash Equivalents,
Beginning of Year 678,799 206,829 29,664
------------ ------------ -----------
Cash and Cash Equivalents,
End of Year $ 159,518 $ 678,799 $ 206,829
============ ============ ===========
Supplemental Disclosure of Cash Flow
Information
Income taxes paid (refunded) $ 68,839 $ 2,644,700 $ 439,081
Interest paid 3,599,679 1,906,915 688,585
------------ ------------ -----------
Supplemental Disclosure of Non-Cash
Investing Activities
Summary of entities acquired:
Fair value of assets acquired $ 28,478,663 $ 27,754,666 $ 21,858,037
Cash paid (23,495,000) (21,811,753) (11,475,317)
------------ ------------ ------------
Liabilities assumed $ 4,983,663 $ 5,942,913 $ 10,382,720
============ ============ ============
See notes to consolidated financial statements.
</TABLE>
- 158 -
<PAGE>
<TABLE>
WPI GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the years ended September 27, 1998 September 28, 1997 and
September 29, 1996
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <S> <C>
Common Stock Additional Foreign Currency
$.01 Par Value Paid-in Retained Translation
Shares Amount Capital Earnings Adjustment Total
----------------- ----------- --------- ---------------- -----
Balance
September 24, 1995 5,687,850 $ 56,878 $12,959,646 $4,294,611 $ - $ 17,311,135
Employee stock purchase plan 4,085 41 25,416 - - 25,457
Stock bonus plan 5,170 52 19,074 - - 19,126
Exercise of stock
options and warrants 250,817 2,508 496,468 - - 498,976
Income tax benefit from
stock options exercised - - 158,000 - - 158,000
Foreign currency translation - - - - 14,762 14,762
Net income - - - 2,521,190 - 2,521,190
--------- ------- ---------- ---------- -------- ------------
Balance
September 29, 1996 5,947,922 $ 59,479 $13,658,604 $ 6,815,801 $ 14,762 $ 20,548,646
Employee stock purchase plan 2,865 29 23,488 - - 23,517
Stock bonus plan 4,525 45 34,186 - - 34,231
Exercise of stock options 41,425 414 117,262 - - 117,676
Income tax benefit from
stock options exercised - - 89,000 - - 89,000
Non-employee compensation
stock options - - 70,000 - - 70,000
Foreign currency translation - - - - (185,976) (185,976)
Net Income - - - 1,115,761 - $ 1,115,761
--------- --------- ----------- ----------- --------- ------------
Balance
September 28, 1997 5,996,737 $ 59,967 $13,992,540 $ 7,931,562 $(171,214) $ 21,812,855
Employee stock purchase plan 7,582 76 50,226 - - 50,302
Stock bonus plan 3,135 31 25,744 - - 25,775
Exercise of stock options 20,750 208 79,261 - - 79,469
Income tax benefit from
stock options exercised - - 22,000 - - 22,000
Foreign currency translation - - - - 765,627 765,627
Net income - - - 2,486,482 - 2,486,482
--------- --------- ----------- ----------- --------- ------------
Balance
September 27, 1998 6,028,204 $ 60,282 $14,169,771 $10,418,044 $594,413 $ 25,242,510
</TABLE>
See notes to consolidated financial statements.
- 159 -
<PAGE>
<TABLE>
WPI GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the years ended September 27, 1998, September 28, 1997
and September 29, 1996
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net Sales $ 94,895,956 $ 62,483,388 $ 47,498,058
Cost of Sales 55,511,062 37,551,545 29,580,058
------------ ------------ ------------
Gross Profit 39,384,894 24,931,843 17,918,000
------------ ------------ ------------
Operating Expenses
Research and new product
development 5,132,322 4,005,281 2,939,984
Selling, general and
administration 25,515,716 16,877,096 10,783,030
Write-off of software
development costs 1,312,283 - -
Restructuring costs - 725,540 -
------------ ------------ ------------
Total operating expenses 31,960,321 21,607,917 13,723,014
------------ ------------ ------------
Operating Income 7,424,573 3,323,926 4,194,986
Other Income (Expense)
Interest expense (3,564,289) (2,016,210) (694,370)
Foreign currency exchange loss (246,941) (60,560) -
Other, net 98,139 723,605 247,574
------------ ------------- ------------
Income Before Provision for
Income Taxes 3,711,482 1,970,761 3,748,190
Provision for Income Taxes 1,225,000 855,000 1,227,000
------------ ------------- -----------
Net Income $ 2,486,482 $ 1,115,761 $ 2,521,190
Earnings Per Share:
Basic $ 0.41 $ 0.19 $ 0.43
Diluted $ 0.40 $ 0.18 $ 0.42
------------ ------------ ------------
Weighted Average Common Shares 6,015,192 5,972,310 5,805,515
Effect of Dilutive Options 179,574 190,668 192,333
------------ ------------ ------------
Adjusted Weighted Average
Common Shares 6,194,766 6,162,978 5,997,848
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
- 160 -
Exhibit 21
Subsidiaries of the Registrant Place of Incorporation
- - ------------------------------ ----------------------
WPI Electronics, Inc. New Hampshire
WPI Instruments, Inc. New Hampshire
WPI Magnetec, Inc. New Hampshire
WPI Power Systems, Inc. New Hampshire
WPI Oyster Termiflex, Inc. New Hampshire
WPI Termiflex International Sales, Inc. Massachusetts
WPI DecisionKey, Inc. New Hampshire
WPI Micro Palm, Inc. New Hampshire
WPI Micro Processor Systems, Inc. New Hampshire
WPI Oyster Termiflex Limited England and Wales
WPI Oyster Terminals, Inc. New Hampshire
WPI UK Holding, Inc. New Hampshire
WPI UK Holding II, Inc. New Hampshire
WPI Group (U.K.) England and Wales
WPI Group International Sales Limited Barbados
WPI Husky Computers, Inc. Florida
WPI Husky Computers Limited England and Wales
WPI Husky Computers GmbH Germany
- 161 -
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our report incorporated by reference in
this form 10-K incorporated by reference into the Company's
previously filed Registration Statements (File Nos. 33-48285, 33-
88012, 33-80912, 33-85137, 333-28335 and 333-1696).
ARTHUR ANDERSEN LLP
Boston, Massachusetts
January 5, 1999
- 162 -
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE FINANCIAL STATEMENTS OF WPI GROUP, INC. FOR THE TWELVE
MONTHS ENDED SEPTEMBER 27, 1998 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-27-1998
<PERIOD-END> SEP-27-1998
<CASH> 159,518
<SECURITIES> 0
<RECEIVABLES> 22,406,792
<ALLOWANCES> 1,283,000
<INVENTORY> 14,188,286
<CURRENT-ASSETS> 40,476,449
<PP&E> 21,163,432
<DEPRECIATION> 5,649,141
<TOTAL-ASSETS> 110,123,157
<CURRENT-LIABILITIES> 19,149,688
<BONDS> 0
0
0
<COMMON> 60,282
<OTHER-SE> 25,182,228
<TOTAL-LIABILITY-AND-EQUITY> 110,123,157
<SALES> 94,895,956
<TOTAL-REVENUES> 94,895,956
<CGS> 55,511,062
<TOTAL-COSTS> 55,511,062
<OTHER-EXPENSES> 32,109,123
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,564,289
<INCOME-PRETAX> 3,711,482
<INCOME-TAX> 1,225,000
<INCOME-CONTINUING> 2,486,482
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,486,482
<EPS-PRIMARY> .41
<EPS-DILUTED> .40
</TABLE>
