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 26, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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
- ------------- ----------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
1155 Elm Street, Manchester, New Hampshire 03101
- ------------------------------------------ -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (603) 627-3500
--------------
Securities registered under Section 12(b) of the Act: None
----
Securities registered under Section 12(g) of the Act:
Common Stock, par value $.01 per share
- --------------------------------------
(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 30, 1999, the aggregate market value of the 5,357,388
outstanding shares of voting stock held by non-affiliates of the
registrant was $13,438,470.
As of December 30, 1999, 6,051,963 shares of the Registrant's Common Stock,
par value $.01 per share, were issued and outstanding.
Documents Incorporated by Reference
-----------------------------------
None.
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PART I
Item 1. Business
---------
This report contains forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934
that reflect the Company's current view with respect to future
events and financial performance. When used in this report, the
words "anticipates", "believes", "expects", "intends", "plans",
"future", and similar expressions identify forward-looking
statements. The future events described in these statements
involve risks and uncertainties, among them risks and
uncertainties related to the market acceptance of the Company's
products and continuing development of its products, general
market conditions and competition. Actual results could differ
materially from those projected in the forward-looking statements
as a result of factors set forth throughout this document. In
particular, there can be no assurance that the strategic
initiatives detailed below will be achieved within the times
currently contemplated by management, if at all. In addition,
there can be no assurance that the realizable values shown for
the discontinued operations will be achieved. Further, much of the
Company's future growth is dependent on the successful launch of
MPSI's E-Technician product. There is no assurance that the product
will succeed even after introduction to the market. The Company
undertakes no obligation to revise or publicly release the results
of any revision to these forward-looking statements, whether as a
result of new information, future events, or otherwise. Readers
should be advised to read this Form 10-K in its entirety and
other reports or documents the Company files from time to time with
the Securities and Exchange Commission, particularly the Quarterly
Reports on Form 10-Q and any Current Reports on Form 8-K, copies
of which may be obtained from the Company or from the Securities
and Exchange Commission at its website at www.sec.gov.
General
- -------
Beginning in April, 1999, the Board of Directors instructed
management to explore various strategic alternatives for the
Company that could maximize stockholder value. As a result,
management reviewed various strategic alternatives to strengthen the
Company's financial position and to position the Company for future growth.
These alternatives included the sales and/or retention of the Company's
operating businesses in various combinations. Management reported on
the various alternatives to the Board at numerous board meetings
and ultimately the Board of Directors approved certain strategic
initiatives to enhance stockholder value. The Board authorized a series
of initiatives designed to reposition the Company as a provider of
vehicle diagnostic equipment and software solutions. Accordingly, the
Company plans to divest and exit its handheld computer and terminals
business, its power conversion business and its electromechanical
instrument business. The Company's strategic goal is to continue and
expand its leadership position in the development, manufacture and
marketing of diagnostic and repair equipment and software for the
automotive, heavy-duty vehicle, construction and agricultural equipment
market, through its wholly-owned subsidiary, WPI Micro Processor
Systems, Inc. ("MPSI"). Accordingly, the Company's non-core
businesses are reflected as "discontinued operations" throughout
this annual report. The Company currently estimates that by the end
of the third quarter of its current fiscal year, it will have exited
its non-core businesses.
References to "MPSI" in this report shall include only the
Company's Vehicle Diagnostic Equipment and Software business and are
identified as "continuing operations". References to "Company" or "WPI"
shall include both continuing operations and discontinued operations.
Historically, WPI Group, Inc. ("WPI" or the "Company") has
designed, manufactured and marketed 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 produces
three distinct product lines: Vehicle Diagnostic Equipment and
Software; Rugged Handheld Computers; and Rugged Handheld
Terminals. Each of the handheld products is 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. The handheld products are used in a variety of
applications such as vehicle monitoring and maintenance, utility
field service and factory automation. Because the Company plans
to exit and divest the handheld computer and terminal business,
2
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the Company has internally reorganized the businesses that
formerly comprised the Information Solutions Group and the
handheld computer and terminals businesses are now reflected as
discontinued operations.
The Industrial Technology Group segment 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). On December 23, 1999
the Company sold the Industrial Power Conversion Systems (WPI
Power Systems) and the Electronic Ballasts (WPI Electronics)
businesses to a private group of investors. The Company intends to
Divest the Precision Solenoids and the Precision Electromechanical
Instruments businesses. Accordingly, each are reflected as discontinued
operations in the financial statements.
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.
Products
MPSI - Continuing Operations
WPI's vehicle diagnostic group, MPSI, offers diagnostic hardware
and software ranging from application cartridges with
connectivity and diagnostic support for particular vehicles to
complete solutions for in-field diagnosis of vehicle failures and
tracking services with the ability to monitor the function of
critical vehicle components. In 1988, MPSI introduced the Prolink
scan tool for the diagnostic and repair equipment for the auto
and heavy-duty vehicle markets. This product has been extremely
successful and has been, over its ten year history, the tool of
choice with more OEM endorsements than any other tool of its type
in the industry. MPSI has continuously updated the Prolink using
the latest developments in hardware and software technology to
enhance the tool and keep the design current. Today, over 120,000
Prolinks have been sold, mainly for use in the heavy-duty vehicle
market although many are employed in the automotive sector as
well. From this base business, MPSI has continued to expand its
product offerings and today provides a broad range of test
capability for heavy-duty vehicles. Application coverage
includes hardware and software to test many types of electronic
control modules ("ECMs") for engines, transmissions, braking
systems, instrument clusters, passenger safety systems, as well
as others. In addition to the specific test devices, MPSI's
other product offerings include exhaust emission analyzers, smoke
meters and various handheld electronic system testers.
In 1998, MPSI introduced two new products that have significant
strategic importance for the Company and the heavy-duty vehicle
service industry. These products are known as the "PDM",
(parallel data module) and the "SDM" (serial data module). These
devices can be connected to either the computer's parallel or
serial data port and the vehicle's electronic systems. Using
MPSI's unique software, which combines proprietary OEM data with
MPSI's own in-house software, the vehicle's on-board systems can
be thoroughly analyzed. The data is then presented to the
service technician to facilitate the repair or adjustment of the
vehicle.
MPSI's newest product, known as E-Technician, is a remote
diagnostic platform. The E-Technician web-based diagnostic
platform monitors more than 550 data points on a vehicle's
electronic data bus via the Internet. It also allows remote
monitoring of a vehicle's sensors and provides real-time analysis
for maintenance and repair technicians. The Company believes
that E-Technician will play an essential role in future vehicle
service and maintenance, bringing advanced business value to
transport logistic operations across many industries. With E-
Technician, companies will perform diagnostic services remotely,
including the reprogramming of on-board computers to enter new
calibration data and also the reading of fault codes. E-
Technician will also link to other business applications, such as
trip and maintenance scheduling and to applications measuring
vehicle and fleet profitability. E-Technician is scheduled for
launch in June 2000. The Company has numerous demonstration
units currently in place.
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Customers
MPSI - Continuing Operations
For Fiscal 1999, a distributor with exclusive rights to sell
certain MPSI product represented approximately 51% of MPSI's net
sales. Another customer represented approximately 16% of MPSI's
net sales for fiscal 1999. For Fiscal 1998 and 1997, a
distributor with exclusive rights to sell certain MPSI product
represented approximately 60% of MPSI's net sales in each of
those years.
Company - Including Continuing and Discontinuing Operations
For Fiscal 1999, 1 customer represented 10% or more of WPI's net
sales. 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.
Sales and Marketing
MPSI - Continuing Operations
Sales of vehicle diagnostic equipment and software is carried out
by a group of 34 sales and marketing employees, most of which are
located in the United States. MPSI's products are distributed
through a number of traditional channels as well as through
MPSI's own direct telemarketing operation. In addition, MPSI
sells its products through a number of independent distributors
located in North America. MPSI's automotive products are sold
through several independent warehouse distributors and through
MPSI's catalog. MPSI offers a full range of pre- and post-sales
support. Pre-sales support is primarily provided by sales
engineers located in the field. Post-sales support is primarily
provided through the MPSI hot line. Together, these
organizations ensure the successful application of MPSI's
technology and the satisfaction of its clients.
Company - Including Continuing and Discontinuing Operations
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.
Manufacturing and Raw Materials
Each of WPI's businesses (both continuing and the discontinued
operations)manufacture nearly 100% of their products. WPI
businesses generally operate their manufacturing facilities one
shift per day, five days per week. WPI's businesses use many
different raw materials in their manufacturing processes. However,
none of WPI's businesses are dependent on any one or several
raw materials used in their manufacturing. WPI's businesses have
multiple sources for each raw material used in the manufacture of
their products and are not dependent on any one or group of its
vendors for their 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.
MPSI - Continuing Operations
As of September 26, 1999, MPSI had a backlog of approximately
$500,000, compared with a total backlog of approximately $1.2
million at September 27, 1998. Management believes that most of
MPSI's backlog at September 26, 1999 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,
MPSI does not believe that the level of its backlog is a
meaningful predictor of its future results.
4
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Company - Including Continuing and Discontinued Operations
As of September 26, 1999, WPI had a backlog of approximately
$20.3 million, compared with a total backlog of approximately
$23.6 million at September 27, 1998. Management believes that
most of WPI's backlog at September 26, 1999 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
MPSI - Continuing Operations
In its twenty year history MPSI has established widespread
recognition for new product innovation and has introduced a
number of first to market products which have not only
contributed significantly to sales but have also helped shape the
vehicle diagnostic and repair industry in North America. In
addition, MPSI develops both hardware and software products based
on existing product offerings and technology for specific
customer needs. MPSI's current new product development is
focused on the development of its E-Technician vehicle diagnostic
platform and internet-based diagnostic service. MPSI charged to
operations approximately $1.4 million, $1.5 million and
$1.9 million for new product development in Fiscal 1997, 1998
and 1999, respectively. Expenditures on new product development
represented approximately 12%, 10% and 16% of net revenues in Fiscal
1997, 1998 and 1999, respectively.
Company - Including Continuing and Discontinued Operations
WPI believes that its commitment to product development is a
critical element of its strategy aimed at exploiting niche
markets for each group's products. WPI's product development
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 $4.0 million, $5.1 million
and $6.0 million for new product development in Fiscal 1997, 1998
and 1999, respectively. Expenditures on product development
represented approximately 6%, 5% and 7% of net revenues in Fiscal
1997, 1998 and 1999, respectively.
Patents and Proprietary Information
WPI (including continuing and discontinued operations) have a number of
United States and foreign patents on certain products. WPI's
businesses also rely on trade secrets, in-house expertise and
technological advancement to maintain their competitive
positions.
WPI does not believe patent protection to be significant to any
of its current businesses. 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, each of WPI's businesses 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.
5
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MPSI - Continuing Operations
Currently, MPSI'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.
At the present time, management does not believe that there are any
products which are not competitive with E-Technician. There can be no
assurance, however, that products competitive with E-Technician are
in the process of development or will not be introduced in the future.
However, management believes that MPSI has a number of key strengths
that give it an advantage over companies wishing to introduce a
product competitive with E-Technician. These strengths include access
to and understanding of non-proprietary and proprietary original
equipment manufacturer data streams, an in-depth knowledge and expertise
in on-board/off-board communication protocols, an in-depth knowledge and
expertise in the diagnosis and reprogramming of electronic control units,
and well-established links with other key players in the heavy-duty
diagnostic industry which management believes will assist in the
deployment and market penetration of E-Technician.
Competition - Discontinued Operations
Handheld Computers and Terminals
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.
Industrial Power Conversion Systems
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.
Electronic Ballasts
WPI has some competition in the market for ballasts in endoscopes,
multimedia projectors and fiber optic light sources incorporating
metal halide and xenon arc lamps. 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.
On December 23, 1999, the Company sold the Industrial Power Conversion
Systems and the Electronic Ballast businesses to a group of private
investors.
Precision Solenoids
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.
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Precision Electromechanical Instruments
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
MPSI - Continuing Operations
As of December 30, 1999 MPSI employed approximately 75 people, 17
of whom work in manufacturing, 25 of whom work in sales and
marketing, 26 of whom work in engineering and product
development, and 7 of whom work in administration. None of MPSI's
employees is represented by a union, and management believes that
MPSI's employee relations are good.
Company - Including Continuing and Discontinued Operations
As of December 30, 1999, WPI employed approximately 765 people,
531 of whom work in manufacturing, 68 of whom work in
administration, 62 of whom work in product development and 104 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
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Properties
The Company currently owns property located in Cwmbran, United
Kingdom. The Cwmbran property is comprised of approximately
26,000 square feet of facilities which was formerly used to support the
production of handheld terminals. The facility is now leased to a
third party and is currently for sale as it is no longer needed to
support operations. 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 and Germany 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.
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.
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Item 3. Legal Proceedings
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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
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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.
1999 1998
Fiscal Quarter High Low High Low
- -------------------------------------------------------
First $7 7/8 $4 $15 1/8 $6 7/8
Second $4 5/8 $3 7/16 $10 1/4 $7 1/8
Third $4 1/8 $3 $10 1/2 $6 3/4
Fourth $4 1/8 $2 13/16 $ 9 1/4 $4 3/4
The number of shareholders of record on December 30, 1999, was
approximately 3,975. 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. In addition, the Company is
prohibited from paying cash dividends pursuant to the terms of
its credit facility with its lenders.
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Item 6. Selected Financial Data
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<TABLE>
<CAPTION>
Financial Highlights
<S> <C> <C> <C> <C> <C>
Year Ended September September September September September
26, 27, 28, 29, 24,
(in thousands, 1999 1998 1997 1996 1995
except per share ---------- --------- --------- --------- ---------
data)
Statement of
Income Data:
Net Sales $ 12,289 $ 14,514 $ 11,364 $ 8,661 $ -
Gross Profit 7,427 8,075 6,136 4,147 -
Operating income
(loss) from
continuing operations (3,367) (12) 4 (1,521) -
Loss from continuing
operations (3,975) (165) (48) (908) -
Income (loss) from
discontinued operations,
net of income taxes (29,230) 2,651 1,164 3,429 1,155
Cumulative effect of
change in accounting
principle (2,822) - - - -
Net income (loss) (36,027) 2,486 1,116 2,521 1,155
---------- -------- --------- ---------- ---------
Diluted income (loss)
per share:
Continuing operations $ (0.66) $ (0.03) $ (0.01) $ (0.15) $ -
Discontinued operations (4.83) 0.43 0.19 0.57 0.20
Accounting change (0.47) - - - -
Net income (loss) $ (5.96) $ 0.40 $ 0.18 $ 0.42 $ 0.20
---------- -------- --------- --------- ---------
Adjusted Weighted
Average Shares 6,044 6,195 6,163 6,001 5,823
Balance Sheet Data:
Working Capital
(deficit) $ 11,837 $ 21,327 $ 16,967 $ 12,156 $ 6,626
Total Assets 64,557 110,123 78,501 50,675 22,380
Long-Term Debt - 62,639 42,000 18,650 1,123
Stockholders'
Equity (deficit) (10,974) 25,243 21,813 20,549 17,311
========== ========= ========= ========== =========
</TABLE>
Item 7. Management's Discussion and Analysis of Financial
- ---------------------------------------------------------
Condition and Results of Operations
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RESULTS OF OPERATIONS
FISCAL 1999 COMPARED TO FISCAL 1998
Net sales decreased 15.3% to $12.3 million in 1999 from $14.5 million in
1998. The decrease was due primarily to decrease in sales by MPSI to its
principal distributor. During 1999, sales to the primary distributor
decreased from $8.8 million in 1998 to $6.3 million in 1999.
Gross profit in 1999 decreased 8.0% to $7.4 million from $8.1 million in
1998. As a percentage of sales, gross profit increased to 60.4% from
55.6% in 1998. The decline in gross profit was the result of the decrease
in sales during 1999. The increase in gross profit as a percentage of
sales was due primarily to change in product mix.
Research and new product development expenses increased 37.3% to $2.1 million
in 1999 from $1.5 million in 1998. As a percentage of sales, research and new
product development expenses increased to 16.8% in 1999 from 10.4% in 1998.
The increase was due in part to the change in the Company's accounting
method for deferred product enhancement costs.
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Selling, general and administration expenses increased 24.9% to $8.2 million
in 1999 compared to $6.6 million in 1998. As a percentage of sales, selling,
general and administration expenses increased to 66.9% from 45.3% in 1998.
The increase in selling, general and administration expense was due primarily
to increased corporate expenses.
The Company's operating loss in 1999 of $3.4 million compared to $12 thousand
in 1998. The increase in the Company's operating loss was due primarily to
lower sales and high operating expenses as discussed above.
Other income (expense) increased to ($.6 million) in 1999 from ($.2 million)
in 1998. The increase was due primarily to an increase in interest expense
on debt.
The Company's loss from discontinued operations in 1999 was $8.8 million
compared to income from discontinued operations of $2.7 million in 1998.
The loss was the result of the increased costs and operating expenses as
a result of the acquisition of Instruments in August 1998, lower sales in
the Company's rugged handheld computer and terminal, power conversions and
electronic ballasts businesses and higher interest expense from additional
borrowings and higher interest rates.
FISCAL 1998 COMPARED TO FISCAL 1997
Net sales increased 27.5% to $14.5 million in 1998 from $11.4
million in 1997. The increase was due to increased sales by MPSI
to its principal distributor. Sales to the principal distributor
increased from $6.9 million in 1997 to $8.8 million in 1998. In
addition, 1998 include sales of diagnostic hardware and software
products to Deere & Company totaling $1.1 million as a result of a
development agreement with Deere for its construction and
agricultural equipment.
The Company's gross profit in 1998 increased 31.6% to $8.1 million
from $6.1 million in 1997. As a percentage of sales, gross profit
increased to 55.6% in 1998 from 54.0% in 1997. The increase was due
primarily to increased sales and change in product mix.
Research and new product development expenses increased 16.7% to
$1.5 million in 1998 from $1.3 million. As a percentage of sales,
research and new product development expenses decreased to 10.4% in
1998 from 11.4% in 1997.
Selling, general and administration expenses increased 35.9% to
$6.6 million in 1998 compared to $4.8 million in 1997. As a
percentage of sales, selling, general and administration expenses
increased to 45.3% from 42.6% in 1997. The increase was primarily
the result of higher corporate and general administration expenses
in 1998 in comparison to 1997.
The Company's operating loss in 1998 was $12 thousand compared to
$4 thousand operating income in 1997.
Other income (expense) increased to ($.2 million) in 1998 from
($.1 million) in 1997. The increase was due primarily to an
increase in interest expense on debt.
The Company's income from discontinued operations in 1998 was $2.7
million compared to $1.2 million in 1997. The increase was primarily
the result of a full year of rugged handheld computer operations in
1998 following the June 1997 acquisition of Husky Computers.
LIQUIDITY AND CAPITAL RESOURCES
As of September 26, 1999, the Company had a working capital
(deficit) of ($11.8) million million versus $21.3 million
at September 27, 1998. Net cash provided by operating activities
totaled $1.2 million in 1999 and $5.6 million in 1998.
As of September 26, 1999, the Company had no material commitments
for capital expenditures.
In August 1998, the Company entered into a $75 million credit facility
with a syndication of banks, consisting of a $20 million revolving line
of credit which was to expire on September 30, 2003 and term notes
totaling $55 million payable in varying quarterly installments commencing
on December 31, 1998 and through September 30, 2004. The credit facility
agreement contain 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 and amend certain
terms of the agreement.
As of March 28, 1999 and June 27, 1999 the Company was not in compliance
with two of the financial covenants contained in the credit agreement. The
Company reached an agreement with the banks to waive the event of non-
compliance as of March 28, 1999 and June 27, 1999 up to and until October 1,
1999 and to amend certain terms of the agreement. In relevant part, the
terms of the amendment increases the interest accrued on all borrowings by
2% per annum and limits the revolving credit borrowings to $14.8 million,
10
<PAGE>
the amount of the Company's current revolving credit borrowings. In
addition to the payment of a fee to amend the agreement, the Company agreed
to issue to the banks warrants to purchase 124,000 shares of the Company's
common stock at $2.75 per share. The warrants are exercisable after one
year for a period of ten years.
As of October 1, 1999 the Company was not in compliance with terms of the
credit agreement as amended. Accordingly, the aggregate bank debt totaling
$67,356,000 is callable by the bank and has been classified as current in
the consolidated balance sheet as of September 26, 1999.
The Company is negotiating a forbearance agreement with the banks.
The terms of the forbearance agreement provides all outstanding
borrowings are due and payable, limits the revolving credit borrowings to
$12.5 million, all borrowings bear interest at prime, payment of a $250,000
fee to the bank group, consummation of the sale of the rugged handheld
computers and terminals business, execute a letter of intent with a potential
purchaser of the instruments and solenoids business and an action plan to
reduce the Company's expenses. The forbearance period is the earlier of
March 31, 2000 or any default under terms of the agreement.
During its fiscal 1999, the Company has adopted and is in the process of
implementing a restructuring plan intended to focus on its MPSI business
unit (the provider of vehicle diagnostic systems).
In connection therewith:
1. The Company decided to divest itself of its Industrial Technology
Group segment. In December 1999, the Company completed the sale of
its industrial power conversion systems and electronic ballasts
businesses (WPI Power Systems and WPI Electronics) to a private
group of investors for approximately $9.3 million in cash plus the
assumption of certain liabilities. The Company is also in the
process of seeking a buyer for its instruments and solenoids
businesses (WPI Instruments and WPI Magnetec). Substantially all
of the proceeds from the completed sale were applied to the
outstanding bank debt.
2. The Company is in the process of negotiating the sale of its rugged
handheld computer and terminal business units (WPI Husky Technology
and WPI Oyster Termiflex/MicroPalm) and expects this transaction to
be concluded sometime in the first calendar quarter of 2000. Also
during its fiscal 1999, the Company decided to terminate the software
development operations of its expert systems business (WPI
DecisionKey).
The Company's intention is to utilize the cash generated from the divestitures
of its businesses to repay a significant portion of the existing bank debt.
Thereafter, the Company intends to refinance the remaining debt to provide
sufficient liquidity to satisfy its continuing working capital requirements.
There is no assurance the Company will be successful in divesting its
businesses or that the funding will be available to execute the plan.
If the Company is unable to successfully complete the divestiture
transactions, renegotiate its bank agreements, or obtain additional financing,
the cash from operations may not be sufficient to cover short-term or
long-term liquidity requirements.
INFLATION
The Company does not believe that inflation has had a significant
impact on its results of operations in the last three years.
11
<PAGE>
YEAR 2000
WPI 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 was 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 evaluated hardware and systems software.
WPI completed its evaluation of its main internal operating
systems and business application software. As a result of this
evaluation, WPI implemented the necessary changes and tested
its internal systems to achieve Year 2000 compliance in this
area. As of the date of this report, WPI has experienced no
material issues or problems relating to Year 2000 readiness of
its internal systems.
The external agents section included 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 completed. The Company had received assurances from these
parties that they are "Y2K Ready." As of the date of this
report, WPI has experienced no material issues or problems
relating to Year 2000 readiness of its external agents.
The product issues section included 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 products have been completed.
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.
12
<PAGE>
Item 8. Financial Statements and Supplementary Data
-------------------------------------------
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 26, 1999 and September 27, 1998, and the related
consolidated statements of income, stockholders' equity (deficit)
and cash flows for each of the three years in the period ended
September 26, 1999. 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 26, 1999 and September 27, 1998, and the results of
their operations and their cash flows for each of the three years
in the period ended September 26, 1999, in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed
in Note 1 to the financial statements, the Company has a net working
capital deficit that raises substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these
matters are also described in Note 1. The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
Arthur Andersen LLP
Boston, Massachusetts
January 24, 2000
13
<PAGE>
<TABLE>
WPI GROUP, INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
September 26, 1999 and September 27, 1998 1999 1998
- -----------------------------------------------------------------------------
ASSETS
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 1,086,708 $ 159,518
Accounts receivable - net of allowance
for doubtful accounts of $171,000 and
$1,283,000 in 1999 and 1998,
respectively 2,027,808 21,123,792
Accounts receivable - other 101,135 270,611
Inventories 461,893 14,188,286
Prepaid expenses and other current
assets 238,550 1,562,048
Refundable income taxes 220,205 620,578
Prepaid income taxes 2,655,419 2,551,616
Net assets of discontinued operations 54,200,000 -
------------ ------------
Total current assets 60,557,718 40,476,449
------------ ------------
Property, Plant and Equipment, at cost,
less accumulated depreciation 1,668,473 15,514,291
Other Assets 1,896,868 54,132,417
------------ ------------
$ 64,557,059 $110,123,157
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Current portion of long-term debt $ 69,155,487 $ 3,715,748
Accounts payable 1,499,103 7,776,470
Accrued expenses 2,173,763 5,985,304
Accrued income taxes - 1,672,166
------------ ------------
Total current liabilities 72,828,353 19,149,688
------------ ------------
Long-Term Debt - 62,638,964
------------ ------------
Deferred Income Taxes 2,702,987 3,091,995
------------ ------------
Commitments
Stockholders' Equity (Deficit)
Common stock, $.01 par value;
authorized 20,000,000 shares;
issued and outstanding 6,050,398
and 6,028,204 shares in 1999 and
1998, respectively 60,504 60,282
Additional paid-in capital 14,574,134 14,169,771
Retained earnings (deficit) (25,608,919) 10,418,044
Cumulative foreign currency translation
adjustments - 594,413
------------ ------------
Total stockholders' equity (deficit) (10,974,281) 25,242,510
------------ ------------
$ 64,557,059 $110,123,157
============ ============
</TABLE>
See notes to consolidated financial statements.
14
<PAGE>
<TABLE>
WPI GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Restated to Report Husky and Industrial Technology Companies as
Discontinued Operations
<CAPTION>
For the years ended September 26, 1999, September 27, 1998
- ----------------------------------------------------------
and September 28, 1997
- ----------------------
1999 1998 1997
------------- ------------ -------------
<S> <C> <C> <C>
Continuing Operations
Net Sales $ 12,228,976 $ 14,513,904 $ 11,363,820
Cost of Sales 4,801,990 6,438,888 5,227,677
------------- ------------ -------------
Gross Profit 7,426,986 8,075,016 6,136,143
------------- ------------ -------------
Operating Expenses
Research and new product
development 2,067,352 1,506,001 1,290,844
Selling, general and
administration 8,216,789 6,581,082 4,841,512
Restructuring costs 510,000 - -
------------- ------------ -------------
Total operating expenses 10,794,141 8,087,083 6,132,356
------------- ------------ -------------
Operating income (loss) (3,367,155) (12,067) 3,787
Other Income (Expense)
Interest expense (620,213) (234,896) (105,128)
Other income 12,373 595 20,005
------------- ------------ -------------
Loss before provision
for income taxes (3,974,995) (246,368) (81,336)
Provision (benefit)for
Income Taxes - (81,090) (33,234)
------------- ------------ -------------
Loss from continuing
operations $ (3,974,995) $ (165,278) $ (48,102)
Discontinued Operations
Income (loss)from discontinued
operations (net of applicable
income taxes of $-,
$1,306,000 and $887,000 in 1999,
1998 and 1997,
respectively (8,849,821) 2,651,760 1,163,863
Estimated loss on disposal of
discontinued operations (20,380,000) - -
------------- ------------ -------------
Income (loss) from discontinued
operations (29,229,821) 2,651,760 1,163,863
------------- ------------ -------------
Income (loss) before cumulative
effect of change in accounting
principal (33,204,816) 2,486,482 1,115,761
Cumulative effect of change
in accounting principle, net of
applicable income
taxes of $1,000,000 (2,822,147) - -
------------- ------------ -------------
Net income (loss) $(36,026,963) $ 2,486,482 $ 1,115,761
============ ============ =============
Earnings (Loss) Per Share -
Continuing Operations
(see Note 2) $ (0.66) $ (0.03) $ (0.01)
============= ============ =============
</TABLE>
See notes to consolidated financial statements.
15
<PAGE>
<TABLE>
WPI GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<CAPTION>
For the years ended September 26, 1999 September 27, 1998 and September 28,1997
1997
<S> <C> <C> <C> <C> <S> <C> <C> <S> <C> <S>
Foreign
Common Stock Additional Retained Currency
$.01 Par Value Paid-in Earnings Translation Comprehensive
Shares Amount Capital (Deficit) Adjustment Total Income
Balance ------ ------ ---------- ----------- ----------- -----
September 29, 1996 5,947,922 $59,479 $13,658,604 $ 6,815,801 $ 14,762 $20,548,646 $ -
Employeee stock purchase 2,865 29 23,488 - - 23,517 -
plan
Stock bonus plan 4,525 45 34,186 - - 34,231 -
Exercise of stock 41,425 414 117,262 - - 117,676 -
options
Income tax benefit from - - 89,000 - - 89,000 -
stock options exercised
Non-employee
compensation stock options - - 70,000 - - 70,000 -
Foreign currency - - - - (185,976) (185,976) (185,976)
translation
Net income - - - 1,115,761 - 1,115,761 1,115,761
- ----------------------------------------------------------------------------------------------------------------------------
Comprehensive income $ 929,785
---------------
Balance
September 28, 1997 5,996,737 $59,967 $13,992,540 $ 7,931,562 $(171,214) $21,812,855 -
Employee stock purchase 7,582 76 50,226 - - 50,302 -
plan
Stock bonus plan 3,135 31 25,744 - - 25,775 -
Exercise of stock 20,750 208 79,261 - - 79,469 -
options
Income tax benefit from - - 22,000 - - 22,000 -
stock options exercised
Foreign currency - - - - 765,627 765,627 765,627
translation
Net Income - - - 2,486,482 - 2,486,482 2,486,482
- -----------------------------------------------------------------------------------------------------------------------------
Comprehensive income $ 3,252,109
----------------
Balance
September 27, 1998 6,028,204 $60,282 $14,169,771 $10,418,044 $ 594,413 $25,242,510 $ -
Employee stock purchase 6,803 68 27,317 - - 27,385 -
plan
Stock bonus plan 2,225 22 9,990 - - 10,012 -
Exercise of stock 13,166 132 28,388 - - 28,520 -
options
Non-employee
compensation stock - - 337,768 - - 337,768 -
options and warrants
Income tax benefit from
stock options exercised - - 900 - - 900 -
Foreign currency - - - - (594,413) (594,413) (594,413)
translation
Net (loss) - - - (36,026,963) - (36,026,963) (36,026,963)
- ---------------------------------------------------------------------------------------------------------------------------
Comprehensive loss $(36,621,376)
---------------
Balance
September 26, 1999 6,050,398 $60,504 $14,574,134 $(25,608,919) $ - (10,974,281)
===========================================================================================================================
</TABLE>
See notes to consolidated financial statements.
16
<PAGE>
<TABLE>
WPI GROUP, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
For the years ended September 26, 1999, September 27, 1998 and
September 28, 1997
<S> <C> <C> <C>
1999 1998 1997
Cash Flows From Operating Activities
Net Income (loss) $(36,026,963) $ 2,486,482 $ 1,115,761
------------ ----------- -----------
Adjustments to reconcile net income
to net cash
provided by operating activities:
Depreciation and amortization 5,352,969 5,424,802 3,409,364
Loss from disposal of
discontinued operations 20,380,000 - -
Cumulative effective of change in
accounting principle 2,822,147 - -
Write-off of software development - 1,312,283 -
costs
Write-off of property and equipment 523,531 - -
Non-cash interest expense 1,221,371 - -
Deferred income taxes 236,052 (1,173,110) 860,307
Non-cash compensation 46,000 25,775 104,231
Changes in current assets and
liabilities, net of effects of
acquisitions:
Accounts receivable 3,525,293 (5,982,700) 4,266,396
Inventories (3,149,380) 825,685 1,733,357
Other current assets 577,773 940,689 (1,216,626)
Accounts payable 5,518,563 66,926 (500,407)
Accrued expenses 824,623 632,823 (1,357,394)
Accrued income taxes (616,223) 1,016,789 (1,018,724)
------------ ----------- -----------
Total adjustments 37,262,719 3,089,962 6,280,504
------------ ----------- -----------
Net cash provided by operating 1,235,756 5,576,444 7,396,265
activities ------------ ----------- -----------
Cash Flows From Financing Activities
Proceeds from debt 3,266,523 62,893,343 23,350,000
Payments of debt (465,748) (42,270,664) (20,000)
Proceeds from exercise of stock 28,520 79,469 117,676
options
Issuance of common stock 37,397 50,302 23,517
Tax benefit on exercise of non-
statutory options 900 22,000 89,000
------------ ----------- -----------
Net cash provided by financing
activities 2,867,592 20,774,450 23,560,193
------------ ----------- -----------
Cash Flows From Investing Activities
Additions to property, plant and (2,934,982) (1,934,052) (3,912,522)
equipment
Proceeds from sales of property,
plant and equipment - 1,462,894 -
Additions to other assets (67,000) (2,611,857) (2,911,010)
Acquisitions, net of cash acquired - (23,495,000) (22,039,007)
Payments of accrued acquisition
costs (720,140) (362,152) (1,435,973)
------------ ----------- -----------
Net cash used in investing
activities (3,722,122) (26,940,167) (30,298,512)
------------ ----------- -----------
Effect of Foreign Currency
Translation on Cash 9,576 69,992 (185,976)
------------ ----------- -----------
Net Increase (Decrease) in Cash and 390,802 (519,281) 471,970
Cash Equivalents
Cash and Cash Equivalents, Beginning
of Year 159,518 678,799 206,829
------------ ----------- -----------
Cash and Cash Equivalents, End of
Year $ 550,320 $ 159,518 $ 678,799
------------ ----------- -----------
Supplemental Disclosure of Cash Flow
Information
Income taxes paid $ 340,558 $ 68,839 $ 2,644,700
Interest paid 5,831,090 3,599,679 1,906,915
------------ ----------- -----------
Supplemental Disclosure of Non-Cash
Investing Activities
Summary of entities acquired:
Fair value of assets acquired $ - $ 28,478,663 $ 27,754,666
Cash paid - (23,495,000) (21,811,753)
------------ ------------ ------------
Liabilities assumed $ - $ 4,983,663 $ 5,942,913
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
17
<PAGE>
1. Business and Discontinued Operations
------------------------------------
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 segments, the Industrial Technology
Group (consisting of WPI Electronics, WPI Power Systems, WPI
Instruments and WPI Magnetec) and the Information Solutions Group
(consisting of WPI Oyster Termiflex/MicroPalm, WPI DecisionKey,
WPI Husky Technology and WPI Micro Processor Systems, Inc. ("MPSI")).
The Industrial Technology Grup segment provides highly engineered
electromechanical and electronic equipment, electromechanical devices
and precision electromechanical instruments. The Information Solutions
Group segment is a provider of rugged handheld computers and terminals,
as well as vehicle diagnostic systems.
Discontinued Operations - During its fiscal 1999, the Company has adopted
and is in the process of implementing a restructuring plan intended to
focus on its MPSI business unit (the provider of vehicle diagnostic systems).
In connection therewith:
1. The Company decided to divest itself of its Industrial Technology
Group segment. In December 1999, the Company completed the sale of
its industrial power conversion systems and electronic ballasts
businesses (WPI Power Systems and WPI Electronics) to a private
group of investors for approximately $9.3 million in cash plus the
assumption of certain liabilities. The Company is also in the
process of seeking a buyer for its instruments and solenoids
businesses (WPI Instruments and WPI Magnetec). Substantially all
of the proceeds from the completed sale were applied to the
outstanding bank debt.
2. The Company is in the process of negotiating the sale of its rugged
handheld computer and terminal business units (WPI Husky Technology
and WPI Oyster Termiflex/MicroPalm) and expects this transaction to
be concluded sometime in the first calendar quarter of 2000. Also
during its fiscal 1999, the Company decided to terminate the software
development operations of its expert systems business (WPI
DecisionKey).
As a result of these actions, the Company's remaining and continuing
operations consist solely of MPSI, its vehicle diagnostic systems
business. All other businesses are presented as discontinued operations
in the statements of operations in accordance with Accounting Principles
Board Opinion No. 30. Accordingly, the sales, costs and expenses of these
discontinued operations have been excluded from the respective captions
in the consolidated statements of operations for all years presented and
have been reported as income (loss) from discontinued operations, net of
applicable income taxes.
The net assets of the discontinued operations have been classified as such
on the accompanying balance sheet as of September 26, 1999 as assets held
for sale.
The Company has recorded an estimated loss on disposal of discontinued
operations of approximately $20.4 million which includes an estimated
loss on the sale of its Industrial Technology Group of $16.0 million,
an estimated loss on the sale of its rugged handheld computer and terminal
business operations of $1.8 million and approximately $2.6 million estimated
loss on future results of operations through the estimated date of
disposal (including $3.0 million of allocated interest expense).
The amount the Company will ultimately realize could differ materially
in the near term from the amounts assumed in arriving at the loss
anticipated on disposal of the discontinued operations.
18
<PAGE>
<TABLE>
Summary operating results of the discontinued operations is as follows:
<CAPTION>
1999 1998 1997
------------- ------------ ------------
<S> <C> <C> <C>
Sales $ 79,779,825 $ 80,382,052 $ 51,119,568
Costs and Operating Expenses 80,846,942 72,945,412 47,799,429
------------- ------------ ------------
Operating income (loss) from
discontinued operations (1,067,117) 7,436,640 3,320,139
Interest expense allocation
(based on relative net
assets) and other
income expenses (7,782,704) (3,478,790) (1,268,042)
------------- ------------ ------------
Income (loss) from discontinued
operations before income
taxes (8,849,821) 3,957,850 2,052,097
Provision for income taxes - 1,306,090 888,234
------------- ------------ ------------
Income (loss) from discontinued
operations $ (8,849,821) $ 2,651,760 $ 1,163,863
============= ============ ============
</TABLE>
Going Concern - As described in Note 4, the Company was not in compliance
with the covenants of its credit facility at September 26, 1999. The default
has not been waived by the bank syndicate and, as a result, the Company has
no additional availability under its line of credit, the aggregate borrowings
of $67,356,000 are callable by the bank. The Company is presently in the
process of negotiating a forbearance agreement with its bank group. The
proposed terms of the forbearance agreement are more fully described in
Note 4. As a result, the amounts oustanding under the bank agreements have
been classified as current in the accompanying financial statements.
As discussed above, the Company has adopted a broad plan to divest of its
Industrial Technology Group and rugged handheld computers and terminals
businesses and focus on its MPSI business. The Company's intention is
to utilize the cash generated from the divestitures of its businesses
to repay a significant portion of the existing bank debt. Thereafter,
the Company intends to refinance the remaining debt to provide sufficient
liquidity to satisfy its continuing working capital requirements.
The Company's continuation as a going concern is dependent upon its ability
to generate sufficient cash flow to meet its obligations on a timely basis,
successfully complete the divestiture of its businesses, to comply with
terms of the forbearance agreement which is currently being negotiated and to
obtain additional financing or refinancing as may be required. The Company
can make no assurances it will be successful in these efforts.
If the Company is unsuccessful, it would be unable to meet its remaining
short-term liquidity requirements, including debt service, normal working
capital and other cash requirements, which would have a material adverse
effect on the Company's on-going operations and would adversely affect the
solvency of the Company.
These factors among others may raise substantial doubt about the Company's
abiity to continue as a going concern. The financial statements do not
include any adjustment that might result from the outcome of this uncertainty.
2. Summary of Significant Accounting Policies
------------------------------------------
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.
19
<PAGE>
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 basis. 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>
1999 1998
----------- -----------
<S> <C> <C>
Raw materials $ 315,071 $ 7,684,405
Work in process 27,340 4,758,535
Finished goods 119,482 1,745,346
----------- -----------
$ 461,893 $14,188,286
=========== ===========
</TABLE>
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.
20
<PAGE>
The components of property, plant and equipment and their
estimated useful lives are as follows:
<TABLE>
<CAPTION>
Useful Life 1999 1998
----------- ----------- -----------
<S> <C> <C> <C>
Land and land
improvements 15 $ - $ 372,160
Buildings and
improvements 39 308,700 6,561,575
Machinery and
equipment 7 106,847 4,957,801
Tooling and dies 3 - 7 173,356 2,101,954
Office equipment 5 - 7 2,144,605 5,616,943
Equipment under
capital leases 5 - 652,685
Demonstration
equipment 3 - 516,933
Construction in
progress - $ - $ 383,381
----------- -----------
2,733,503 21,163,432
Less: accumulated
depreciation (1,065,035) (5,649,141)
----------- -----------
$ 1,668,473 $15,514,291
=========== ===========
</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 and write-down for
planned disposal) was approximately $1,871,372 and $48,799,000
at the end of 1999 and 1998, respectively. Amortization included in
continuing operations amounted to approximately $170,000 in 1999,
1998 and 1997.
Change in Accounting Principle - 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 were amortized on a
straight-line basis over the estimated economic useful lives of
the related products which presently did not exceed five years.
Periodically, the Company evaluated 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; customers' evaluation of the state of the
technology; and estimated stage of the life cycle of the product.
As of September 26, 1999 the costs and accumulated amortization for
deffered product enhancement costs was approximately $5,849,000 and
$1,919,000, respectively. The amortization of these costs included
in continuing operations cost of sales and amounted to
approximately $91,000 and $13,000 for 1998 and 1997, respectively.
As of September 28, 1998,in accordance with the Statement of Position
98-5 "Reporting on the Costs of Start-Up Activities," the Company changed
its method of accounting for deferred product enhancement costs to expense
costs as incurred. As a result, the Company recognized a cumulative affect
in accounting principle of $2,822,000, net of taxes of $1,000,000.
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. This change is included in income from discontinued
operation for 1998.
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
21
<PAGE>
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.
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
621,000 shares, 144,000 shares and 18,000 shares of common
stock were outstanding during 1999, 1998 and 1997, 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
anti-dilutive.
<TABLE>
The computations of basic and diluted earnings (loss) per common
share for 1999, 1998 and 1997 is as follows:
1999 1998 1997
------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Earnings (loss) per share - basic
Continuing operations $ (0.66) $ (0.03)$ (0.01)
Discontinued operations (4.83) 0.44 0.20
Effect of accounting change (0.47) - -
------------ ------------ -----------
Net income (loss) $ (5.96) $ 0.41 $ 0.19
------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Earnings (loss) per share - diluted
Continuing operations $ (0.66) $ (0.03)$ (0.01)
Discontinued operations (4.83) 0.43 0.19
Effect of accounting change (0.47) - -
------------ ------------ -----------
Net income (loss) $ (5.96) $ 0.40 $ 0.18
------------ ------------ -----------
Weighted Average Common Shares 6,043,634 6,015,192 5,972,310
Effective of Dilutive Options - 179,574 190,668
------------ ------------ -----------
Adjusted Weighted Average Common Shares 6,043,634 6,194,766 6,162,978
============ ============ ===========
</TABLE>
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. The foreign currency translation as of September 26, 1999
has been included in the net assets of discontinued operations.
Foreign currency gains and losses arising from
transactions are reflected in net income.
During 1999, 1998 and 1997, the Company recognized net foreign
exchange gains (losses) of approximately $33,000, ($247,000) and
($61,000) primarily resulting from intercompany transactions with
foreign subsidiaries. The foreign exchange loss has been recorded
in the consolidated statements of income in discontinued operations.
As of September 26, 1999, the Company has not entered into any
foreign currency contracts to hedge this exposure.
Recent Accounting Pronouncements - 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
22
<PAGE>
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 2001. 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.
3. Other Assets
------------
<TABLE>
Other assets consist of:
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Goodwill and other intangibles $ 2,552,215 $52,235,359
Deferred product
enhancement costs - 5,848,962
Debt issuance costs - 1,196,500
Security deposits 25,496 89,896
----------- -----------
2,577,711 59,370,717
Less: accumulated
amortization (680,843) (5,238,300)
----------- -----------
$ 1,896,868 $54,132,417
=========== ===========
</TABLE>
4. Notes Payable and Long-Term Debt
--------------------------------
In August 1998, the Company entered into a $75 million credit facility
with a syndication of banks, consisting of a $20 million revolving line
of credit which was to expire on September 30, 2003 and term notes
totaling $55 million payable in varying quarterly installments commencing
on December 31, 1998 and through September 30, 2004. The credit facility
agreement contain 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 and amend certain terms of the
agreement.
As of March 28, 1999 and June 27, 1999 the Company was not in compliance
with two of the financial covenants contained in the credit agreement.
The Company reached agreement with the banks to waive the event of
non-compliance as of March 28, 1999 and June 27, 1999 up to and until
October 1, 1999 and to amend certain terms of the agreement. In relevant
part, the terms of the amendment increases the interest accrued on all
borrowings by 2% per annum and limits the revolving credit borrowings to
$14.8 million, the amount of the Company's current credit borrowings. In
addition to the payment of a fee to amend the agreement, the Company agreed
to issue to the banks warrants to purchase 124,000 shares of the Company's
common stock at $2.75 per share. The warrants are exercisable after one
year for a period of ten years. The Company recorded interest expense of
$292,000 related to these warrants during 1999.
As of October 1, 1999 the Company was not in compliance with the terms of the
credit agreement, as amended. Accordingly, the aggregate bank debt totaling
$67,356,000 is callable by the bank has been classified as current in the
consolidated balance sheet as of September 26, 1999. In addition the Company
wrote off $930,000 of deferred finance fees previously capitalized which
is included in interest expense.
The Company is negotiating a forbearance agreement with the banks. In
relevant part, the terms of the forbearance agreement provides that all
outstanding borrowings are due and payable, the revolving credit
borrowings are limited to $12.5 million, all borrowings bear interest at
prime plus 3.5%, payment of a $250,000 fee is to be paid to the bank group,
the sale of the rugged handheld computers and terminals business to be
completed by March 31, 2000, a letter of intent with a potential purchaser
of the instruments and solenoids business and an action plan to reduce the
Company's expenses be completed by January 7, 2000. The forbearance period
is the earlier of March 31, 2000 or any default under terms of the agreement.
23
<PAGE>
Based on its present financial condition, the Company anticipates the need
to continue to negotiate with its banks on further extension of the
forbearance period and other terms, or refinance its credit facility. There
is no assurance that the Company will obtain an extension, waiver or be able
to refinance its credit facility. If the Company is unable to obtain an
extension or waiver or is unable to refinance the credit facility, the
Company could be in non-compliance with the terms of the credit agreement.
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, 1999, the outstanding balance was
$1,599,121. As a result of a default under the terms of the notes
subsequent to September 26, 1999, the outstanding balance of
$1,599,121 has been classified as current.
On August 6, 1998, the Company issued a $200,000 promissory
note in connection with the acquisition 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.
5. Accrued Expenses
----------------
<TABLE>
Accrued expenses consist of:
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Interest $1,446,893 $ 395,193
Payroll and related
amounts 406,643 1,760,902
Warranty 120,000 1,477,538
Acquisition related 151,945 872,085
Deferred revenue 7,810 471,760
Other 40,472 648,169
Leases - 359,657
---------- ----------
$2,173,763 $5,985,304
========== ==========
</TABLE>
6. Income Taxes
------------
<TABLE>
The components of federal and state income taxes provision are as follows:
<CAPTION>
1999 1998 1997
----------- ----------- ----------
<S> <C> <C> <C> <S>
Current
Federal $ - $ (78,000) $ (32,000)
State - (3,000) (1,000)
----------- ---------- ----------
- (81,000) (33,000)
----------- ---------- ----------
Deferred
Federal - - -
State - - -
----------- ---------- ----------
- (81,000) (33,000)
----------- ---------- ----------
$ - $1,225,000 $ 855,000
=========== ========== ==========
</TABLE>
24
<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>
1999 1998 1997
------------ ---------- ---------
<S> <C> <C> <C>
Income tax at 34% of income
before provision for income taxes $(1,351,000) $ (84,000) $ (28,000)
State income tax
provision (benefit)
(net of effect of federal tax) (184,000) (4,000) (1,000)
Change in valuation allowance 1,535,000 - -
Other - 7,000 (4,000)
------------ ---------- ---------
$ - $ (81,000) $ (33,000)
============ ========== =========
</TABLE>
<TABLE>
The approximate income tax effect of temporary differences
comprising the deferred tax assets and liabilities are as
follows:
<CAPTION>
1999 1998
------------- -------------
<S> <C> <C> <C>
Deferred tax assets and valuation
allowance
Goodwill $ 7,440,000 $ -
Software development costs 1,410,000 453,000
Inventory related 344,000 353,000
Bad debt reserve 365,000 424,000
Warranty reserve 178,000 200,000
Payroll related 106,000 115,000
Tax loss carryforwards 2,786,000 805,000
Other 282,000 202,000
Valuation allowance (10,226,000) -
------------- -------------
2,655,000 2,552,000
------------- -------------
Deferred tax liabilities
Fixed asset differences 654,000 1,402,000
DISC deferral 996,000 1,116,000
Goodwill 791,000 490,000
Deferred enhancement costs 315,000 164,000
Other (53,000) (80,000)
------------- -------------
2,703,000 3,092,000
------------- -------------
Net deferred liabilities $ 48,000 $ 540,000
============= =============
</TABLE>
For income tax purposes, the Company had available, at September 26,
1999, net operating loss ("NOL") carryforwards for regular income tax
purposes of approximately $6,966,000.
7. 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.
25
<PAGE>
<TABLE>
A summary of stock option activity for each of the three years in
the period ended September 26, 1999, is as follows:
<CAPTION>
Shares Under Weighted-Average
Option Exercise Price
------------ ----------------
<S> <C> <C> <C> <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
------------ ----------------
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
Exercised (2,500) 2.88
Terminated (133,666) 7.96
Granted 206,700 5.09
------------ ----------------
Outstanding, September 26, 1999 837,480 $6.37
============ ================
</TABLE>
<TABLE>
The following is a summary of options outstanding and exercisable
at September 26, 1999:
<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 9/26/99 Contractual Life Exercise Price at 9/26/99 Exercise Price
- --------------- ---------- ---------------- -------------- ---------- --------------
$2.25 to $4.50 176,500 6.85 years $ 3.11 131,000 $ 2.94
$4.51 to $6.50 410,480 4.21 5.59 274,614 6.18
$6.51 to $9.00 149,000 8.46 8.13 45,833 8.07
$9.01 to $11.13 101,500 8.10 11.13 53,833 11.13
------- -------
837,480 7.65 6.37 505,280 6.00
======= =======
</TABLE>
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 (loss)and
net income (loss) per share would have been increased (decreased) to the
pro forma amounts listed below:
<TABLE>
<CAPTION>
1999 1998 1997
------------- ------------- ----------
<S> <C> <C> <C> <C>
Pro forma net income (loss) $ (4,456,989) $ (689,675) $ (289,639)
from continuing operations
Pro forma diluted net income
(loss) per shar e $ (0.74) $ (0.11) $ (0.05)
</TABLE>
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 $2.35,
$4.68 and $3.39 for options granted during 1999, 1998 and 1997,
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 1999, 1998 and
1997, respectively; risk-free interest rates ranging from 4.0%
to 6.3%, expected dividend yield of 0% for the periods, expected
options lives of 5 years and expected volatilities ranging from
46.7% to 49.2%.
26
<PAGE>
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 6,803, 7,582 and 2,865 in 1999, 1998 and 1997, 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 2,225, 3,135 and 4,525 in 1999,
1998 and 1997, respectively. The compensation expense related to
these awards is not significant.
8. Employee Benefits
-----------------
A) WPI 401k Plan
The Company has 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 1999,
the Company matched 50% of the first 4% of employees' contributions.
The Company's expense included in continuing operations relating to
this plan amounted to approximately $128,000, $83,000 and $57,000
in 1999, 1998 and 1997, respectively. The Company
B) WPI Group UK Money Purchase Pension Plan
The Company has a 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 $331,000, $358,000 and $135,000, in 1999, 1998
and 1997, respectively, which is included in discontinued
operations.
9. Significant Customers
---------------------
For Fiscal 1999, a distributor with exclusive rights to sell
certain MPSI product represented approximately 51% of MPSI's net
sales. Another customer represented approximately 16% of MPSI's
net sales for fiscal 1999. For Fiscal 1998 and 1997, a
distributor with exclusive rights to sell certain MPSI product
represented approximately 60% of MPSI's net sales in each of
those years.
27
<PAGE>
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.
As of September 26, 1999, the aggregate future minimum lease
commitments under operating and capital leases obligations are as
follows:
<TABLE>
<CAPTION>
Operating
Fiscal Year Leases
----------- ----------
<S> <C> <C>
2000 $ 249,000
2001 135,000
2002 122,000
2003 122,000
2004 82,000
----------
Total minimum lease
payments $ 710,000
==========
</TABLE>
Total rental expense included in continuing operations charged to
operations for 1999, 1998 and 1997 totaled approximately $332,000,
$317,000 and $316,000,respectively.
The Company is currently leasing a building from a entity in which one
of its executive officers is a party. The total rent in connection with
the lease arrangement of $594,000, $74,000 and $0 in 1999, 1998 and 1997,
respectively, is included in discontinued operations.
Subsequent to year end, the Company entered into a severance agreement
with a former executive officer which provides for payments of $250,000
per year for a five year period commencing January 1, 2000 which will be
charged to operations during the Company's first quarter of fiscal 2000.
11. Restructuring Costs
-------------------
During 1999, the Company entered into a severance agreement with a former
executive. In connection with the agreement, the Company recorded a
restructuring charge of $510,000, consisting primarily of the continuation
of payroll and benefits subsequent to termination. During 1999, the
Company utilized approximately $360,000 of the charges.
12. Business Segment and Geographical Information
---------------------------------------------
The Company operates in one industry: vehicle diagnostic equipment and
software.
28
<PAGE>
13. Selected Quarterly Financial Information (Unaudited)
----------------------------------------------------
<TABLE>
Selected quarterly financial information for the years ended
September 26, 1999 and September 27, 1998 is as follows:
(in thousands, except earnings per share)
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- -------- ------- --------
<S> <C> <C> <C> <C>
1999
- ----
Net sales $ 3,110 $ 3,278 $ 2,169 $ 3,222
Gross profit 1,993 2,055 1,516 1,863
Loss from continuing
operations (283) (612) (1,553) (1,527)
Loss from
discontinued operations (275) (905) (1,695) (26,354)
Change in accounting
principle (2,822) - - -
Net income (loss) (3,380) (1,517) (3,248) (27,881)
Earnings (loss)
per share - basic & diluted
Continuing operations (0.05) (0.10) (0.26) (0.25)
Discontinued operations (0.04) (0.15) (0.28) (4.36)
Change in accounting
principle (0.47) - - -
Net loss (0.56) (0.25) (0.54) (4.61)
1998
- ----
<S> <C> <C> <C> <C>
Net sales $ 2,983 $ 3,765 $ 4,154 $ 3,661
Gross profit 1,477 2,131 2,421 2,046
Income (loss) from continuing
operations (40) 137 182 (445)
Income (loss) from
discontinued operations 952 915 1,186 (401)
Net income (loss) 912 1,052 1,368 (846)
Earnings (loss)
per share - basic
Continuing operations (0.01) 0.02 0.03 (0.07)
Discontinued operations 0.16 0.16 0.20 (0.07)
Net income (loss) 0.15 0.18 0.23 (0.14)
<S> <C> <C> <C> <C>
Earnings (loss)
per share - diluted
Continuing operations (0.01) 0.02 0.03 (0.07)
Discontinued operations 0.16 0.15 0.19 (0.07)
Net loss 0.15 0.17 0.22 (0.14)
</TABLE>
Item 9. Changes In and Disagreements with Accountants on
-------------------------------------------------------
Accounting and Financial Disclosure
- -----------------------------------
None
29
<PAGE>
Part III
<TABLE>
Item 10. Directors and Executive Officers of the Registrant
--------------------------------------------------
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
<CAPTION>
Officer or
Name Age Director Since Position with the Company
- ----- --- --------------- -------------------------
<S> <C> <C> <S>
John Allard 34 1998 Director, President
and Chief Executive Officer
Stephen Carlotti 57 1997 Director
Michael Foster 64 1988 Director
Paul Giovacchini 42 1990 Director, Nonexecutive
Vice Chairman
Irving Gutin 67 1994 Director
Karen Hebert 39 1995 Vice President,
Human Resources
John Powers 42 1997 Vice President and
Chief Financial Officer
James Risher 57 1999 Director
Steven Shulman 58 1997 Director, Nonexecutive
Chairman
Bernard Tenenbaum 44 1994 Director
Michael Tule 38 1996 Vice President,
General Counsel and
Secretary
</TABLE>
John Allard has been a Director of the Company since August 1998,
and President and Chief Executive Officer of the Company since
December, 1999. From February 1999 to December 1999, Mr. Allard
served as President and Chief Operating Officer of the Company.
From August 1998 to February 1999, Mr. Allard served as Senior
Vice President, Business Development. From December 1992 to
August 1998, Mr. Allard served as President, Chief Executive
Officer and Director of Allard Nazarian Group, Inc. which
included Jewell Electrical Instruments, a manufacturer of
avionics components, subsystems, and panel meters, and Granite
State Manufacturing, a contract manufacturing service. From
December 1992 to December 1996, Mr. Allard also served as a
Director of The Aerospace Displays Systems Group located in
Hatfield, Pennsylvania.
Stephen Carlotti has been a director of WPI since September 1997.
He has been a partner of the law firm of Hinckley, Allen & Snyder
since 1992. From February 1996 to November 1996, he served as a
Vice Chairman of AMTROL, Inc. He has been a director of Fleet
National Bank since 1986.
Michael Foster has been a director of the Company since 1988.
From October 1988 to December 1999, he was Chairman of the Board
of Directors and Chief Executive Officer of the Company. Mr.
Foster led the management buy-out of the Company from Walker
Magnetics Group, Inc. in October 1988. Since 1997, he has been a
director of Foilmark, Inc., a Massachusetts-based manufacturer of
metallic foils and foil stamping machinery.
Paul Giovacchini has been a Director of the Company since
September 1990 and Nonexecutive Vice Chairman of the Company
since December 1999. Mr. Giovacchini has been a Senior
Investment Manager for Signal Capital Corporation, a
Massachusetts-based investment firm, since August 1990. Since
30
<PAGE>
1995, Mr. Giovacchini has also been a partner of Seacoast Capital
Partners, L.P., a federal licensee under the Small Business
Investment Act of 1958.
Irving Gutin has been a Director of the Company since February
1994. Mr. Gutin has been Senior Vice President of Tyco
International (U.S.), Inc., formerly Tyco International, Ltd. a
New Hampshire-based international manufacturer of fire protection
and flow control products, electronic and electrical components
and packaging materials since 1988.
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.
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.
James Risher has been a Director of the Company since April,
1999. Mr. Risher is currently Chairman of Bluestar Battery
Systems International, a manufacturer of batteries, automotive
electric and battery-related products. Prior to this, he was
Chairman of Exide Electronics Group, Inc. a manufacturer of
uninterruptible power supplies based in Raleigh, N.C. He also
served as Exide President and CEO. Prior to his twelve years in
executive management at Exide, Mr. Risher spent nearly 20 years
as a senior manager in computer sales and marketing. He is a
member of American Business Conference Board of Directors, the
University of North Carolina Board of Visitors, the North
Carolina Symphony Board of Trustees and a Regional Board Member
of the First Union Bank.
Steven Shulman has been a Director of WPI since September 1997
and Nonexecutive Chairman since December 1999. He has been
Managing Director of Latona Associates since 1995 and a principal
of the Hampton Group, an investment banking firm, since 1984. He
has served as a director of Beacon Capital Partners since 1995,
Ermanco Incorporated since 1987 and Corinthian Directories, Inc.
since 1995. He has been a director and Chairman and CEO of
Terrace Food Group, Inc. since 1997. In addition, he serves as
Vice Chairman of the Board of Stevens Institute of Technology.
Bernard Tenenbaum has been a Director of the Company since July
1994. Since April 1997, Mr. Tenenbaum has been President of the
Children's Leisure Products Group of The Jordan Company, a
leveraged buyout firm based in New York. From 1993 to 1997, Mr.
Tenenbaum was Vice President, Corporate Development, of Russ
Berrie & Company, a New Jersey-based gift company. He was also
President and CEO of R.B.T. Company, a division of Russ Berrie &
Company. From 1988 to 1992, he was a Founding Director and
Professor of Entrepreneurial Studies at the George Rothman
Institute of Entrepreneurial Studies, Fairleigh Dickinson
University.
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.
31
<PAGE>
Item 11. Executive Compensation
----------------------
EXECUTIVE COMPENSATION
The following table sets forth information concerning the
compensation for services in all capacities to the Company for
the fiscal years ended September 26, 1999, September 27, 1998 and
September 28, 1997 of those persons who were at September 26,
1999 (i) the Chief Executive Officer and (ii) each of the four
most highly compensated executive officers of the Company other
than the Chief Executive Officer, (with the Chief Executive
Officer, collectively, the "Named Officers").
<TABLE>
Summary Compensation Table
<CAPTION>
<S> <C> <C> <C> <S> <C> <C>
Annual Long Term Compensation
Name and Principal Compensation (1) Securities Underlying All Other
Position Year Salary Bonus Options Compensation($)
- -------- ---- ------ ----- ------- ---------------
Michael Foster (2) 1999 509,648 - 186,000 73,651
Chairman and CEO
1998 400,036 - - 23,855
1997 325,000 - 48,000 25,028
John Allard 1999 272,921 - 25,000 9,234
President and COO
1998 - - 20,000 -
1997 - - - -
Timothy Jones (3) 1999 174,342 - 7,200 17,333
Vice President
Information 1998 175,032 - 15,000 11,367
Solutions
1997 150,020 - 20,000 11,616
Richard Longo (4) 1999 178,398 - 3,000 7,686
Vice President
Industrial 1998 - - 5,000 -
Technology
1997 - - - -
John Powers 1999 168,222 - 7,200 10,803
Vice President and
CFO 1998 132,522 - 5,000 10,848
1997 - - 5,000 -
</TABLE>
(1) Excludes perquisites and other personal benefits, the
aggregate annual amount of which was less than the
lesser of $50,000 or 10% of the total of annual salary
and bonus reported.
(2) Mr. Foster retired as Chairman and Chief Executive
Officer as of January 1, 2000.
(3) Mr. Jones resigned his position with the Company as of
September 29, 1999.
(4) Mr. Longo resigned his position with the Company as of
December 22, 1999.
32
<PAGE>
Option Grants in Last Fiscal Year (Individual Grants)
<TABLE>
The following table contains information concerning the grant of
stock options under the Company's 1995 Stock Option Plan and the
1997 Equity Incentive Plan to the Named Officers during the
Company's last fiscal year.
<CAPTION>
Number of % of Total
Securities Options Granted
Underlying to Employees Exercise Expiration Grant Date
Name Options In Fiscal 1999 Price ($) Date Present Value
(4)
- ---- ------- -------------- --------- ----- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Michael Foster (7) 60,000 (1) 37.9% $5.50 10/19/08 $ 151,800
Chairman, CEO
John Allard 25,000 (2) 9.5% $3.562 03/22/09 $ 43,250
President, COO
Timothy Jones (5) 7,200 (3) 2.7% $5.50 10/19/08 $ 18,216
Vice President
Information Solutions
Richard Longo (6) 1,500 (3) 0.5% $5.50 10/19/08 $ 3,750
Vice President
Industrial Technology
John Powers 7,200 (3) 2.7% $5.50 10/19/08 $ 18,216
Vice President, CFO
</TABLE>
(1) Options granted under the WPI Group, Inc. 1997 Equity
Incentive Plan at an exercise price equal to the fair market
value of the Company's Common Stock on the date of grant.
The options granted to Mr. Foster are fully vested.
(2) Options granted under the WPI Group, Inc. 1997 Equity
Incentive Plan at an exercise price equal to the fair market
value of the Company's common stock on the date of grant.
The options vest in 1/3 increments on 03/23/00, 03/23/01 and
03/23/02.
(3) Options granted under the WPI Group, Inc. 1997 Equity
Incentive Plan at an exercise price equal to the fair market
value on the date of grant. The options vest in 1/3
increments on 10/1/99, 10/1/00 and 10/1/01.
(4) The weighted average fair value of options granted to
the named officers was $2.53. The values were estimated on
the date of grant using the Black-Sholes option pricing
model with the following weighted average assumptions used:
Risk free interest rates ranging from 4.03% to 5.10%, expected
dividend yield of 0%, expected option lives of 5 years
and expected volatilities ranging from 46.82% to 48.38%.
(5) Mr. Jones resigned his position with the Company as of
September 29, 1999.
(6) Mr. Longo resigned his position with the Company as of
December 22, 1999.
(7) Mr. Foster retired as Chairman and CEO as of January 1, 2000.
33
<PAGE>
Option Exercises And Fiscal Year End Values
<TABLE>
The following table contains information with respect to
aggregate stock options exercised by the Named Officers during
fiscal 1999 as well as unexercised options to purchase the
Company's Common Stock granted through September 26, 1999 under
the Company's 1995 Stock Option Plan or 1997 Equity Incentive
Plan to the Named Officers and held by them at that date.
Aggregated Options/SAR Exercises In Last Fiscal Year And Fiscal
Year End Option Value
<CAPTION>
<S> <C> <S> <C> <S> <C> <S>
Number of Unexercised Value of Unexercised In-the-Money
Shares Options at September 26, 1999 Options at September 26, 1999
Value Value Common Stock Common Stock
Name On Exercise Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------ ----------- ------------- ----------- -------------
Michael Foster - - 317,280 - $ - $ -
John Allard - - 6,667 38,333 - -
Timothy Jones - - 30,000 17,200 - -
Richard Longo - - 1,667 4,833 - -
John Powers - - 6,667 10,533 - -
Michael Tule - - 9,000 9,200 - -
</TABLE>
(1) Based on the difference between the exercise price of each
grant and the closing price of the Company's Common Stock as
quoted on the NASDAQ/NMS on September 27, 1999, which was
$3.375.
The foregoing options were granted under either the 1995 Stock
Option Plan (the "1995 Plan") or the 1997 Equity Incentive Plan
(the "1997 Plan"). Both plans are administered by the Stock
Option/Compensation Committee, which consists of not less than
three outside directors. The Committee determines the key
employees to whom, and the time or times at which, options will
be granted, the number of shares subject to each option and the
terms upon which each option may be granted. An aggregate of
550,000 shares of common stock are reserved for issuance under
the 1995 Plan and an aggregate of 750,000 shares of common stock
are reserved for issuance under the 1997 Plan. Since the
adoption of the 1995 Plan on June 6, 1995, options for a total of
550,000 shares of common stock (or all of the shares reserved for
issuance) have been granted to selected officers and key
employees of the Company. Since the adoption of the 1997 Plan on
June 10, 1997, options for a total of 434,200 shares of common
stock have been granted to selected officers and key employees of
the Company.
Change In Control Plan and Severance Agreements
The Board of Directors has adopted a Change in Control Plan
covering nine officers and key employees, including the Named
Executive Officers. The provisions of the Change in Control Plan
become effective only upon the occurrence of an event
constituting a change in control of the Company. Under the
Change in Control Plan, a "Change in Control" shall be deemed to
have occurred if any of the following events occur: (i) any
"person" (as such term is defined in Section 13 and 14 under the
Exchange Act) except for Michael Foster, directly or indirectly,
is or becomes the "beneficial owner" (as such term is defined in
Rule 13d-3 under the Exchange Act) of 25% or more of the
Company's Common Stock; (ii) any change occurs in the composition
of WPI's Board of Directors resulting in a majority of the
present directors not constituting a majority two years from such
date, provided that directors who were elected by or on the
recommendation of such present majority shall be excluded; or
(iii) any other event that would be required to be reported under
Item 1 of Form 8-K pursuant to Section 13 or Section 15(d) of the
Exchange Act. A change in control shall not be deemed to have
occurred if such change in control results from a distressed sale
of WPI due to the Company's material default with respect to any
applicable debt covenants with its lender.
The Change in Control Plan provides that if, within one (1) year
after a change of control of WPI, a Named Executive Officer is
discharged without Cause (as defined below) or has resigned for
reasons relating to a diminution of responsibilities,
compensation or benefits or relocation of place of employment,
WPI shall pay to such individual a lump sum severance benefit.
For purposes of the Change in Control Plan, "Cause" shall mean
conviction of certain crimes, willful misconduct or conduct that
caused WPI to suffer a substantial loss or damage. Currently,
each Named Executive Officer would receive between nine and
34
<PAGE>
eighteen months of base salary, plus bonus, depending upon the
Named Executive Officer's years of service and status with the
Company. At the discretion of the Board of Directors, the
vesting of options may be accelerated in the event of a Change in
Control. A Named Executive Officer may resign at any time and
for any reason within one year of a Change in Control and receive
the base salary component only of the lump sum benefit.
In addition to being covered by the Change In Control Plan, Mr.
Allard has a Severance Agreement with the Company which provides,
in relevant part, that if the Company terminates his employment
for any reason other than cause, or in connection with a change-
in-control, the Company will continue to pay him at his then
present salary rate for a period of twelve months.
Mr. Foster has a severance agreement with the Company which
provides, in relevant part, for severance of $250,000 per year
for the next five years, effective January 1, 2000. The
agreement also provides for the full vesting of options held by
Mr. Foster. The expiration and option exercise prices remain
unchanged.
35
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and
------------------------------------------------------
Management
----------
<TABLE>
MANAGEMENT AND PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding
beneficial ownership of the Common Stock as of December 30, 1999
by (i) each person who is known by the Company to beneficially
own more than 5% of the outstanding shares of Common Stock; (ii)
each of the Company's directors; and (iii) all directors and
officers of the Company as a group:
<CAPTION>
Number of Shares Percentage
Name and Address Beneficially Owned Beneficially Owned
- ---------------- ------------------ ------------------
<S> <C> <C> <C>
Michael Foster (1) 816,271 13.49%
1155 Elm Street
Manchester, NH 03101
John Allard (2) 57,067 *
1155 Elm Street
Manchester, NH 03101
Stephen Carlotti (3) 7,501 *
1500 Fleet Center
Providence, RI 02903
Paul Giovacchini (4) 9,167 *
55 Ferncroft Road
Danvers, MA 01923
Irving Gutin (5) 22,661 *
One Tyco Park
Exeter, NH 03833-1108
Steven Shulman (6) 24,001 *
Liberty Lane
Hampton, NH 03842
Bernard Tenenbaum (7) 12,662 *
767 5th Avenue, 48th
Floor
New York, NY 10053
Dimensional Fund 442,300 7.3%
Advisors (8)
1299 Ocean Avenue,
11th Floor
Santa Monica, CA
90401
Hathaway & 352,100 5.81%
Associates, Ltd. (9)
119 Rowayton Avenue
Rowayton, CT 06853
Gerald R. Allard (10) 451,500 7.464%
520 South Collier
Boulevard
Chalet Number 301
Marco Island, FL 33937
All executive 990,650 16.37%
officers and directors
as a group (11)
(12 persons)
</TABLE>
36
<PAGE>
* Less than one percent
(1) Includes 207,614 shares of the Company's common stock which Mr.
Foster has the right to acquire within 60 days of the date
hereof pursuant to the exercise of stock options.
(2) Includes 6,667 shares of the Company's common stock which Mr.
Allard has the right to acquire within 60 days of the date
hereof pursuant to the exercise of stock options.
(3) Includes 7,501 shares of the Company's common stock which Mr.
Carlotti has the right to acquire pursuant to exercise of stock
options.
(4) Includes 9,167 shares of the Company's common stock which Mr.
Giovacchini has the right to acquire pursuant to the exercise of
stock options.
(5) Includes 8,958 shares of the Company's common stock which Mr.
Gutin has the right to acquire pursuant to the exercise of stock
options.
(6) Includes 7,501 shares of the Company's common stock which Mr.
Shulman has the right to acquire pursuant to the exercise of
stock options.
(7) Includes 9,167 shares of the Company's common stock which Mr.
Tenenbaum has the right to acquire pursuant to the exercise of
stock options.
(8) According to a Schedule 13G filed with the Securities and
Exchange Commission (the "Commission") on February 12, 1999,
Dimensional Fund Advisers, a Commission-registered investment
adviser with its principal place of business at 1299 Ocean
Avenue, 11th Floor, Santa Monica, California 90401, has sole
voting and dispositive power with respect to the 442,300 shares
of Common Stock.
(9) According to a Schedule 13G filed with the Commission for the
period ending September 30, 1998, Hathaway & Associates, Ltd., a
Commission-registered investment adviser located at 119 Rowayton
Avenue, Rowayton, Connecticut 06853, has sole voting and
dispositive power with respect to the 352,100 shares of Common
Stock.
(10) According to a Schedule 13D filed with the Commission on January
4, 2000, Gerald R. Allard, a private investor with an address of
520 South Collier Boulevard, Chalet Number 301, Marco Island,
Florida 33937, has sole voting and dispositive power with
respect to the 451,500 shares of Common Stock.
(11) Includes 296,075 shares of the Company's Common Stock which
certain officers and directors have a right to acquire within 60
days of the date hereof pursuant to the exercise of stock
options which are deemed to be outstanding for the purpose of
computing the percentage ownership of officers and directors as
a group.
Item 13. Certain Relationships and Related Transactions
----------------------------------------------
Certain Relationships and Related Transactions
The Company is currently leasing and occupying a building at 850
Perimeter Road, Manchester, New Hampshire (the "Perimeter Road
Facility") from 850 Perimeter Road Associates NA, LLC, a New
Hampshire limited liability company in which Mr. Allard is a
member. The current yearly base rental for the Perimeter Road
facility, which houses the operations of WPI Instruments, Inc.,
is $402,408. The lease term expires on December 31, 2002, and may
be renewed by the Company for an extended term to December 31,
2007. In management's opinion, the lease rate for this facility
is not in excess of the range of fair market rentals in the
relevant area.
Hinckley, Allen & Snyder, a law firm of which Stephen Carlotti, a
director, is a member, provided legal services to the Company
during its 1999 fiscal year.
37
<PAGE>
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 Reference is made to the Index of
Financial Statements under Item 8 of Part II hereof.
(2) Financial Statement 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 ntoes thereto. The auditors' report of Arthur Andersen
LLP with respect to the Financial Statement Schedule is
located on page 39 of this Report.
(2) 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 26, 1999:
None.
38
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO WPI GROUP, INC.
We have audited, in accordance with generally accepted auditing
standards, the consolidated balance sheets as of September 26,
1999 and September 27, 1998 and the related statements of
operations, stockholders' equity and cash flows for each of the
three years in the period ended September 26, 1999 of WPI Group,
Inc. included in this Form 10-K, and have issued our report
thereon dated January 24, 2000. 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
January 24, 2000
39
<PAGE>
<TABLE>
SCHEDULE II
WPI GROUP, INC.
VALUATION AND QUALIFYING ACCOUNTS
For the years ended September 26, 1999, September 27, 1998 and
September 28, 1997.
<CAPTION>
Additions
-----------------------------------------------------
<S> <C> <C> <C> <C> <S> <C> <S> <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
--------- --------- ------------ -------------- ---------- -------------
1999
Allowance for doubtful accounts $1,283,000 $ 164,668 $ - $ - $ 904,959 (1)$ 542,709
Acquisition reserves 872,000 - - - 720,140 (2) 151,945
1998
Allowance for doubtful accounts $1,237,000 $ 49,164 $ 75,728 $ 6,170 $ 85,062 (1) $1,283,000
Aquisition 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
(1) Accounts deemed uncollectible, net of recoveries
(2) Acquisition costs paid/charges incurred
</TABLE>
40
<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 25, 2000 By:/s/Steve Shulman
----------------
Steven Shulman
Nonexecutive 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/John Allard Director, President and January 25, 2000
- -------------- Chief Executive Officer
John Allard (Principal Executive Officer)
/s/ John Powers Vice President and January 25, 2000
- --------------- Chief Financial Officer
John Powers (Principal Financial and Accounting Officer)
/s/ Stephen Carlotti Director January 25, 2000
- ---------------------
Stephen Carlotti
/s/Michael Foster Director January 25, 2000
- -----------------
Michael Foster
/s/Paul Giovacchini Director, January 25, 2000
- ------------------- Nonexecutive Vice Chairman
Paul Giovacchini
/s/Irving Gutin Director January 25, 2000
- ---------------
Irving Gutin
/s/ James Risher Director January 25, 2000
- ----------------
James Risher
/s/ Steven Shulman Director, January 25, 2000
- ------------------ Nonexecutive Chairman
Steven Shulman
/s/Bernard Tenenbaum Director January 25, 2000
- --------------------
Bernard Tenenbaum
41
<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 No. Description Of Paper 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.
10.8 Inertial Products Purchase Agreement
dated July 30, 1998 by and among Allard-
Nazarian Group, Inc. and Lucas
Automation and Control Engineering, Inc.
previously filed and incorporated by
reference to Exhibit 10.8 in
Registrant's report on Form 10-K dated
September 27, 1998.
42
<PAGE>
Page No.
Exhibit No. Description Of Paper Filing
- ----------- ------------ ----------------
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. 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.
10.14 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.
10.15 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.
10.16 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.
10.17 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.
10.18 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. previously filed and
incorporated by reference to Exhibit
10.43 of the Registrant's report on Form
10-K dated September 27, 1998.
10.19 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.
43
<PAGE>
Page No.
Exhibit No. Description Of Paper Filing
- ----------- ------------ ----------------
10.20 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.
10.21 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.
10.22 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.
10.23 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.
10.24 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.
10.25 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.
10.26 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.
10.27 Credit Agreement dated August 3, 1998 by
and among Fleet Bank-NH and the
Registrant previously filed and
incorporated by reference to Exhibit
10.26 in Registrant's report on Form 10-
K dated September 27, 1998.
10.28 First Amendment dated October 30, 1998
to Credit Agreement dated August 3, 1998
previously filed and incorporated by
reference to Exhibit 10.27 in
Registrant's report on Form 10-K dated
September 27, 1998.
10.29 Second Amendment dated December 27, 1998
to Credit Agreement dated August 3, 1998
previously filed and incorporated by
reference to Exhibit 10.41 of the
Registrant's report on Form 10-K dated
September 27, 1998.
10.30 Revolving Noted dated October 30, 1998
in the principal amount of $3,333,333.33
previously filed and incorporated by
reference to Exhibit 10.28 of the
Registrant's report on Form 10-K dated
September 27, 1998.
10.31 Revolving Noted dated October 30, 1998
in the principal amount of $4,000,000
previously filed and incorporated by
reference to Exhibit 10.29 of the
Registrant's report on Form 10-K dated
September 27, 1998.
44
<PAGE>
Page No.
Exhibit No. Description Of Paper Filing
- ----------- ------------ ----------------
10.32 Revolving Noted dated October 30, 1998
in the principal amount of $2,666,666.67
previously filed and incorporated by
reference to Exhibit 10.30 of the
Registrant's report on Form 10-K dated
September 27, 1998.
10.33 Revolving Noted dated October 30, 1998
in the principal amount of $4,000,000
previously filed and incorporated by
reference to Exhibit 10.31 of the
Registrant's report on Form 10-K dated
September 27, 1998.
10.34 Revolving Noted dated October 30, 1998
in the principal amount of $6,000,000
previously filed and incorporated by
reference to Exhibit 10.32 of the
Registrant's report on Form 10-K dated
September 27, 1998.
10.35 Term A Note dated October 30, 1998 in
the principal amount of $5,000,000
previously filed and incorporated by
reference to Exhibit 10.33 of the
Registrant's report on Form 10-K dated
September 27, 1998.
10.36 Term A Note dated October 30, 1998 in
the principal amount of $6,000,000
previously filed and incorporated by
reference to Exhibit 10.34 of the
Registrant's report on Form 10-K dated
September 27, 1998.
10.37 Term A Note dated October 30, 1998 in
the principal amount of $4,000,000
previously filed and incorporated by
reference to Exhibit 10.35 of the
Registrant's report on Form 10-K dated
September 27, 1998.
10.38 Term A Note dated October 30, 1998 in
the principal amount of $6,000,000
previously filed and incorporated by
reference to Exhibit 10.36 of the
Registrant's report on Form 10-K dated
September 27, 1998.
10.39 Term A Note dated October 30, 1998 in
the principal amount of $9,000,000
previously filed and incorporated by
reference to Exhibit 10.37 of the
Registrant's report on Form 10-K dated
September 27, 1998.
10.40 Term B Note dated October 30, 1998 in
the principal amount of $4,166,666.67
previously filed and incorporated by
reference to Exhibit 10.38 of the
Registrant's report on Form 10-K dated
September 27, 1998.
10.41 Term B Note dated October 30, 1998 in
the principal amount of $5,000,000
previously filed and incorporated by
reference to Exhibit 10.39 of the
Registrant's report on Form 10-K dated
September 27, 1998.
10.42 Term B Note dated October 30, 1998 in
the principal amount of $15,833,333.33
previously filed and incorporated by
reference to Exhibit 10.40 of the
Registrant's report on Form 10-K dated
September 27, 1998.
45
<PAGE>
Page No.
Exhibit No. Description Of Paper Filing
- ----------- ------------ ----------------
10.43 Waiver dated as of December 27, 1998
previously filed and incorporated by
reference to Exhibit 10.42 of the
Registrant's report on Form 10-K dated
September 27, 1998.
10.44 Asset Purchase Agreement, dated December
22, 1999 among Warner Power, LLC and
Warner Power Conversion, LLC and WPI
Power Systems, Inc. and WPI Electronics,
Inc. and WPI Group, Inc., previously
filed and incorporated by reference to
Exhibit 10.24 of Registrant's Report on
Form 8-K, dated January 4, 2000.
10.45 Non-Competition Agreement, dated
December 22, 1999 among WPI Group, Inc.
and WPI Electronics, Inc. and WPI Poster
Systems, Inc. and Warner Power, LLC,
previously filed and incorporated by
reference to Exhibit 10.24 of
Registrant's Report on Form 8-K, dated
January 4, 2000.
10.46 Purchase and Sale Agreement, dated
December 22, 1999 among WPI Group, Inc.
and 40 Depot Street, LLC, previously
filed and incorporated by reference to
Exhibit 10.24 of Registrant's Report on
Form 8-K, dated January 4, 2000.
10.47 Terminal Products Manufacturing
Agreement, dated December 22, 1999 among
Warner Power, LLC and WPI Group, Inc and
WPI Oyster Termiflex, Inc., previously
filed and incorporated by reference to
Exhibit 10.24 of Registrant's Report on
Form 8-K, dated January 4, 2000.
10.48 Services Agreement, dated December 22,
1999 among WPI Group, Inc. and Warner
Power, LLC and Warner Power Conversion,
LLC previously filed and incorporated by
reference to Registrant's Report on Form
8-K, dated January 4, 2000.
* 10.49 Third Amendment to Credit Agreement
dated as of August 16, 1999.
* 10.50 Limited Waiver dated as of August 16,
1999.
* 10.51 Common Stock Purchase Warrant dated as
of August 16, 1999 for 20,670 shares
of WPI Group, Inc. Common Stock to FSC
Corp.
* 10.52 Common Stock Purchase Warrant dated as
of August 16, 1999 for 24,800 shares of
WPI Group, Inc. Common Stock to Bank of
NH.
* 10.53 Common Stock Purchase Warrant dated as
of August 16, 1999 for 37,200 shares of
WPI Group, Inc. Common Stock to Fleet
Bank - NH.
* 10.54 Common Stock Purchase Warrant dated as
of August 16, 1999 for 16,530 shares of
WPI Group, Inc. Common Stock to Key
Bank.
* 10.55 Common Stock Purchase Warrant dated as
of August 16, 1999 for 24,800 shares of
WPI Group, Inc. Common Stock to
Sovereign Bank.
* 10.56 Registration Rights Agreement dated as
of August 16, 1999.
* 21 List of subsidiaries of the Registrant
as of September 26, 1999.
* 23 Consent of Arthur Andersen LLP.
46
<PAGE>
Page No.
Exhibit No. Description Of Paper Filing
- ----------- ------------ ----------------
* 27 Financial Data Schedule.
47
<PAGE>
EXHIBIT 10.49
THIRD AMENDMENT TO CREDIT AGREEMENT
THIS THIRD AMENDMENT (this "Third Amendment"), dated as of
August 16, 1999, 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 Third Amendment.
SECTION 2. Amendment to Credit Agreement. Effective on
the Third 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
<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 LIBOR
Margin per annum; and (iv) with respect to the Swing Line Loan,
the Index Rate plus the Applicable Revolver Index Margin per
annum.
Commencing on the Third Amendment Effective Date
(hereinafter defined), the Applicable Margins shall be as
follows:
Applicable Revolver Index Margin 3.50%
Applicable Revolver LIBOR Margin 4.75%
Applicable Term Loan A Index Margin 3.50%
Applicable Term Loan A LIBOR Margin 4.75%
Applicable Term Loan B Index Margin 4.00%
Applicable Term Loan B LIBOR Margin 5.25%
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'
Total Debt to EBITDA Ratio, 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 first Fiscal Quarter during which Borrowers achieve a
Total Debt to EBITDA Ratio of less than 3.75:1.0. Upon Borrowers
achieving Total Debt to EBITDA Ratio of less than 3.75:1.0,
adjustments in Applicable Margins will be determined by reference
to the following grids:
If the Total Debt to Level of
EBITDA Applicable Margins:
Ratio is:
3 3.75 Level I
3 3.5, but < 3.75 Level II
3 3.0, but < 3.5 Level III
3 2.5, but < 3.0 Level IV
< 2.5 Level V
2
<PAGE>
Applicable Margins
------------------
Level Level Level Level Level
I II III IV V
----- ----- ----- ----- -----
Applicable Revolver 3.50% 1.25% .875% 0.50% 0.25%
Index Margin
Applicable Revolver LIBOR 4.75% 2.50% 2.125% 1.75% 1.50%
Margin
Applicable Term Loan A 3.50% 1.25% .875% 0.50% 0.25%
Index Margin
Applicable Term Loan A 4.75% 2.50% 2.125% 1.75% 1.50%
LIBOR Margin
Applicable Term Loan B 4.0% 1.75% 1.375% 1.25% 1.0%
Index Margin
Applicable Term Loan B 5.25% 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 during which Borrowers' achieve a Total Debt to EBITDA
Ratio of less than 3.75:1.0 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 an amount equal to Fourteen
Million Eight Hundred Thousand Dollars
($14,800,000.00).
3
<PAGE>
SECTION 2.3. Amendment to Definition of "Borrowing Base"
set forth in Annex A to Credit Agreement (Definitions). The
definition of "Borrowing Base" set forth in Annex A to Credit
Agreement hereby amended to read in its entirety as follows:
"Borrowing Base" shall mean, as of any date of
determination by Agent, from time to time, an amount
equal to the sum of: (a) seventy-five percent (75%) of
Eligible Accounts, less any Reserves established by
Agent at such time, (b) twenty-five percent (25%) of
the value of Eligible Inventory, valued on a first-in,
first out basis (at the lower of cost or market) less
any Reserves established by Agent at such time, and (c)
one million nine hundred thousand dollars
($1,900,000.00) (the "Over Formula Amount"), which Over
Formula Amount shall be subject to step down as
follows: $1,000,000.00 on August 21, 1999; $750,000.00
on September 11, 1999; and $-0- on September 18, 1999.
SECTION 2.4. Amendment to Annex C (Section 4.1 (a) of
Credit Agreement) (Financial Statements and Projections -
Reporting). Paragraphs (l) and (m) are added to Annex C to the
Credit Agreement to read in their entirety as follows:
(l) Monthly Financials. To Agent and Lenders, monthly
financial statements for the Borrowers, prepared on
both a consolidated and individual business unit basis,
by the fifteenth day of the month following the
reported month, certified by the Chief Financial
Officer of Borrower Representative, including (i)
unaudited balance sheets as of the close of the
reported month and the related statements of income and
cash flow for that portion of the Fiscal Year ending as
of the close of such month, and (ii) unaudited
statements of income and cash flow for such month.
(m) Weekly Cash Flow Projections. To Agent and
Lenders, weekly in conjunction with delivery to the
Agent of the weekly Borrowing Base Certificate, rolling
thirteen (13) week cash flow projections prepared by
the Chief Financial Officer of Borrower Representative
in form and detail reasonably satisfactory to Agent.
SECTION 2.5. Amendment to Annex D (Section 4.1 (b) of
Credit Agreement) (Collateral Reports). The Borrowing Base
Certificate, including supporting detail and accompanying
documentation, required pursuant to Paragraph (a)(i) of Annex D
to the Credit Agreement, shall be delivered weekly by the
Wednesday following the reported week rather than on a quarterly
basis.
SECTION 3. Financial Consultant to Lenders. Borrowers
shall reimburse the Agent for all out of pocket expenses and fees
incurred by the Agent in the retention by Agent's legal counsel
of a financial consultant to review the operations, performances
and asset values of the various business units within the
4
<PAGE>
Borrowers, as well as Borrowers' financial projections. In
addition, Borrowers shall cooperate with such consultant in
conducting its review, to include without limitation access to
the facilities, books and records of the Borrowers and the
individual business units and the opportunity to interview
officers and key employees of the Borrowers.
SECTION 4. Detachable Warrants. In consideration of the
Lenders' limited waiver of Borrowers' default in complying with
their covenants respecting the (a) Total Debt to EBITDA Ratio for
the twelve month periods ended March 28, 1999 and June 27, 1999,
and (b) Minimum Fixed Charge Coverage Ratio for the twelve month
period ended June 27, 1999, as set forth in the limited waiver
executed this date as between the Agent and the Borrowers, in
form attached hereto as Exhibit A (the "Limited Waiver"), and
the accommodations afforded the Borrowers pursuant to this Third
Amendment, WPI Group, Inc. shall grant to the Lenders detachable
warrants to purchase in the aggregate 124,000 shares of its
common stock at an exercise price of $2.75 per share, such
warrants (the "Warrants") to be (a) exercisable at any time on or
after the first anniversary of the Third Amendment Effective Date
and prior to 5:00 p.m. Manchester, New Hampshire time on the
tenth anniversary of such date, (b) in form attached hereto as
Exhibit B, and (c) subject to certain registration rights set
forth in the registration rights agreement to be executed by the
Company and the Lenders, in the form attached hereto as Exhibit C
(the "Registration Rights Agreement").
SECTION 5. Effective Date. This Third Amendment shall
become effective as of the date first above written (the "Third
Amendment Effective Date") when each of the conditions precedent
set forth in this Section 5 have been satisfied and thereafter
shall be known, and may be referred to, as the "Third Amendment
to Credit Agreement".
SECTION 5.1. Execution of Counterparts. The Agent shall
have received executed counterparts of this Third Amendment duly
executed on behalf of the Borrowers and each of the Lenders.
SECTION 5.2. 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 Third Amendment by each of the Borrowers, and,
in the case of WPI Group, Inc., issuance of the Warrants and
execution and delivery of the Registration Rights Agreement,
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 5.3. Limited Waiver. All conditions set forth in
the Limited Waiver of near or even date, which must be satisfied
for such Limited Waiver to take effect, shall have been
satisfied.
5
<PAGE>
SECTION 5.4. Detachable Warrants; Registration Rights
Agreement. The Warrants, together with the Registration Rights
Agreement, shall have been executed and delivered by WPI Group,
Inc. to the Agent, on behalf of the Lenders.
SECTION 5.5. Amendment Fee. In consideration for the
accommodations afforded the Borrowers pursuant to the Limited
Waiver and this Third Amendment, and in addition to the
restructuring fee payable to the Agent for its own account
pursuant to a separate letter agreement, Borrowers shall have
paid to the Agent a fee of $50,000 for the pro rata accounts of
each of the Lenders.
SECTION 6. Expenses. The Borrowers agree to pay all out-of-
pocket expenses incurred by the Agent in connection with the
preparation of this Third Amendment, including, but not limited
to, the reasonable fees and disbursements of counsel to the
Agent.
SECTION 7. 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 Third 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 8. Document Pursuant to Credit Agreement. This
Third Amendment is a Loan Document executed pursuant to the
Credit Agreement and shall be governed in accordance with the
terms thereof.
SECTION 9. Successors and Assigns. This Third Amendment
shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns.
SECTION 10. 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 11. Release of Claims. In consideration for the
accommodations afforded the Borrowers pursuant to this Third
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 the
Agent's or Lenders' respective officers, directors, employees,
agents, representatives, affiliates, successors and assigns,
6
<PAGE>
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 12. Governing Law. THIS THIRD AMENDMENT SHALL BE
DEEMED TO BE A CONTRACT MADE UNDER AND BE GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF NEW HAMPSHIRE.
SECTION 13. Counterparts. This Third 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 PAGE FOLLOWS]
7
<PAGE>
IN WITNESS WHEREOF, the Borrowers, the Agent and the Lenders
have caused this Third 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/ Timothy Whitab 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/Curtis W. Little, Jr. By:/s/Mark L. Young
- ------------------------ -----------------
Witness Mark L. Young
Senior Vice President
OTHER LENDERS:
BANK OF NEW HAMPSHIRE
By:/s/David D. McGraw
- ------------------------ ------------------
Witness David D. McGraw
Vice President
SOVEREIGN BANK
By:/s/Stephen P. Kanarian
- ------------------------- ----------------------
Witness Stephen P. Kanarian
Senior Vice President
BANKBOSTON, N.A.
By:/s/Thomas D. Opie
- -------------------------- ------------------
Witness Thomas D. Opie
Vice President
KEY CORPORATE CAPITAL INC.
By:/s/Alexander Strazzella
- -------------------------- -----------------------
Witness Alexander Strazzella
Vice President
9
<PAGE>
EXHIBIT A
LIMITED WAIVER
LIMITED WAIVER executed August 16, 1999, effective as of
March 28, 1999, (the "Limited Waiver") 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 (a)
the "Total Debt to EBITDA Ratio" covenant for the twelve month
periods ended March 28, 1999 and June 27, 1999, and (b) the
"Minimum Fixed Charge Coverage Ratio" covenant for the twelve
month period ended June 27, 1999, which covenants are set forth
in Annex E (Section 6.10) of the Credit Agreement, be waived up
to and until October 1, 1999 . The Borrowers acknowledge that
failure to comply with such covenants for the foregoing twelve
month periods constitutes Events of Default under the Credit
Agreement (the "Specified Defaults"), and that such Specified
Defaults are continuing and have not been previously waived. The
Agent, on behalf of itself and the Lenders, has agreed to grant
such limited 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. Limited Waiver. Upon satisfaction of the
conditions set forth in Section 4 below, the Lenders hereby waive
up to and until October 1, 1999 compliance with the "Total Debt
to EBITDA Ratio" and "Minimum Fixed Charge Coverage Ratio"
covenants set forth in Annex E (Section 6.10) of the Credit
Agreement for the twelve month periods ended March 28, 1999 and
June 27, 1999 in the case of the "Total Debt to EBITDA Ratio",
and for the twelve month period ended June 27, 1999 in the case
of the "Minimum Fixed Charge Coverage Ratio". Such waiver is
expressly limited to compliance with such covenants on March 28,
1999 and June 27, 1999 (the latter date only in the case of the
"Minimum Fixed Charge Coverage Ratio"), and for the respective
twelve month periods then ended; subject to the limited waiver
set forth herein, such covenant , and all other covenants set
forth in the Credit Agreement, shall remain unchanged, binding
upon Borrowers and in full force and effect, subject to the
provisions of the Third Amendment dated as of August 16, 1999 to
the Credit Agreement (the "Third Amendment"). From and after
October 1, 1999, the Specified Defaults shall be Events of
Default for all purposes of the Credit Agreement and the other
Loan Documents. The Agent and the Lenders expressly reserve all
rights and remedies available to them (i) from and after October
1, 1999 as a result of the Specified Defaults and (ii) as a
result of any Events of Default other than the Specified
Defaults.
<PAGE>
Section 2. Default Rate. Commencing March 28, 1999, and
continuing until the Third Amendment Effective Date (as defined
in the Third Amendment), interest shall be accrued on the Loans
at the Default Rate as provided in Section 1.4(d) of the Credit
Agreement.
Section 3. Third Amendment. The Borrowers and Lenders
shall execute the Third Amendment amending the interest rate on
the Loans, the Maximum Amount, the Borrowing Base and certain
financial reporting requirements contained in Annex C and Annex
D to the Credit Agreement, as well as providing for the issuance
of certain stock warrants to the Lenders by WPI Group, Inc. and
reimbursement of the fees of a financial consultant to be
retained by legal counsel to the Agent in consideration for this
Limited Waiver and the accommodations afforded the Borrowers
pursuant to the Third Amendment.
Section 4. Conditions of Effectiveness. This Limited
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 Limited Waiver, duly executed by
the Borrowers;
(b) accrued interest on the Loans at the Default Rate for
the period commencing March 28, 1999 and ending on the Third
Amendment Effective Date shall have been paid to the Agent; and
(c) the Agent, the Lenders and the Borrowers shall have
duly executed and delivered the Third Amendment, and the
Borrowers shall have satisfied all of the conditions imposed upon
them for such Third Amendment to become effective.
Section 5. Counterparts. This Limited 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 the limited
waiver herein of the Specified Defaults, the Credit Agreement, as
amended by the Third Amendment, 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 Limited Waiver.
Section 8. Headings. The headings of this Limited 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.
2
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed and
delivered this Limited 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.
- ------------------------------ By:------------------------
Witness John W. Powers, 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
- ------------------------------- By:-------------------------
Witness Mark L. Young
Senior Vice President
<PAGE>
EXHIBIT B
THIS WARRANT AND THE UNDERLYING SHARES OF COMMON STOCK ISSUABLE
UPON ITS EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS,
AND MAY NOT BE SOLD OR TRANSFERRED WITHOUT COMPLIANCE WITH THE
REGISTRATION OR QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL
AND STATE SECURITIES LAWS OR APPLICABLE EXEMPTIONS THEREFROM.
THE SECURITIES REPRESENTED BY THIS WARRANT ARE SUBJECT TO A
REGISTRATION RIGHTS AGREEMENT DATED AS OF AUGUST 16, 1999 (THE
"REGISTRATION AGREEMENT"). COPIES OF THE REGISTRATION AGREEMENT
ARE ON FILE AT THE OFFICE OF THE SECRETARY OF THE COMPANY.
No. Right to Purchase
Shares of Common Stock
of
WPI GROUP, INC.
WPI GROUP, INC.
COMMON STOCK PURCHASE WARRANT
August 16, 1999
WPI GROUP, INC., a New Hampshire corporation (the
"Company"), hereby certifies that, for value received,-------------
or its assigns, as a Lender under the Credit Agreement dated as
of August 3, 1998, as amended to date, (the "Credit Agreement")
among the Company, certain of its subsidiaries, Fleet Bank - NH,
as Agent for Lenders identified therein, and such Lenders, is
entitled, subject to the terms set forth below, to purchase from
the Company at any time or from time to time after August 16,
2000 (subject to acceleration as hereinafter provided) (the
"Initial Exerciseability Date") and before 5:00 p.m., Manchester,
New Hampshire time, on August 16, 2009,---------- fully paid and
nonassessable shares of Common Stock, par value $0.01 per share,
of the Company, at a purchase price per share of $2.75 (such
purchase price per share as adjusted from time to time as herein
provided is referred to herein as the "Purchase Price"). The
number and character of such shares of Common Stock and the
Purchase Price are subject to adjustment as provided herein.
This Warrant is one of the Warrants evidencing the right to
purchase shares of Common Stock of the Company issued pursuant to
a certain Third Amendment dated as of August 16, 1999 to the
Credit Agreement (the Credit Agreement, as amended by such Third
Amendment, the "Agreement"), and subject to the Registration
Agreement, a copy of which agreement is on file at the principal
office of the Company, and the holder of this Warrant shall be
entitled to all of the benefits and bound by all of the
applicable obligations of the Registration Agreement, as provided
therein. This Warrant is detachable from the obligations
incurred by the Company pursuant to the Credit Agreement, and
shall survive the satisfaction of such obligations.
<PAGE>
As used herein the following terms, unless the context
otherwise requires, have the following respective meanings:
(a) The term "Company" shall include WPI Group, Inc.,
and any corporation which shall succeed to, or assume the
obligations of, the Company hereunder.
(b) The term "Common Stock" includes (i) the Company's
Common Stock, par value $0.01 per share, as authorized on
the date of the Agreement, (ii) any other capital stock of
any class or classes (however designated) of the Company,
authorized on or after such date, the holders of which shall
have the right, without limitation as to amount per share,
either to all or to a share of the balance of current
dividends and liquidating distributions after the payment of
dividends and distributions on any shares entitled to
preference in the payment thereof, and the holders of which
shall ordinarily, in the absence of contingencies, be
entitled to vote for the election of a majority of directors
of the Company (even though the right so to vote may have
been suspended by the happening of such a contingency) and
(iii) any other securities into which or for which any of
the securities described in (i) or (ii) above may be
converted or exchanged pursuant to a plan of
recapitalization, reorganization, merger, sale of assets or
otherwise.
(c) The term "Other Securities" refers to any stock
(other than Common Stock) and other securities of the
Company or any other person (corporate or otherwise) which
the holders of the Warrants at any time shall be entitled to
receive, or shall have received, on the exercise of the
Warrants, in lieu of or in addition to Common Stock, or
which at any time shall be issuable or shall have been
issued in exchange for or in replacement of Common Stock or
Other Securities pursuant to Section 5 or otherwise.
(d)The term "Warrant" means this Common Stock Purchase
Warrant.
1. Exercise of Warrant.
1.1 Full Exercise. This Warrant may be exercised at any time
before its expiration in full by the holder hereof by surrender
of this Warrant, with the form of subscription at the end hereof
duly executed by such holder, to the Company at its principal
office, accompanied by payment, in cash or by certified or
official bank check payable to the order of the Company, in the
amount obtained by multiplying the number of shares of Common
Stock for which this Warrant is then exercisable by the Purchase
Price then in effect.
1.2 Partial Exercise. This Warrant may be exercised at any time
before its expiration in part (in lots of 100 shares or, if this
Warrant is then exercisable for a lesser amount, in such lesser
amount) by surrender of this Warrant and payment of the Purchase
Price then in effect in the manner and at the place provided in
subsection 1.1, except that the amount payable by the holder on
such partial exercise shall be the amount obtained by multiplying
(a) the number of shares of Common Stock designated by the holder
in the subscription at the end hereof by (b) the Purchase Price
then in effect. On any such partial exercise the Company at its
2
<PAGE>
expense will forthwith issue and deliver to or upon the order of
the holder hereof a new Warrant or Warrants of like tenor, in the
name of the holder hereof or as such holder (upon payment by such
holder of any applicable transfer taxes) may request, calling in
the aggregate on the face or faces thereof for the number of
shares of Common Stock for which such Warrant or Warrants may
still be exercised.
1.3 Company Acknowledgment. The Company will, at the time of
the exercise of this Warrant, upon the request of the holder
hereof acknowledge in writing its continuing obligation to afford
to such holder any rights to which such holder shall continue to
be entitled after such exercise in accordance with the provisions
of this Warrant. If the holder shall fail to make any such
request, such failure shall not affect the continuing obligation
of the Company to afford to such holder any such rights.
1.4 Trustee for Warrant Holders. In the event that a bank or
trust company shall have been appointed as trustee for the
holders of the Warrants pursuant to subsection 4.2, such bank or
trust company shall have all the powers and duties of a warrant
agent appointed pursuant to Section 13 and shall accept, in its
own name for the account of the Company or such successor person
as may be entitled thereto, all amounts otherwise payable to the
Company or such successor, as the case may be, on exercise of
this Warrant pursuant to this Section 1.
1.5 Net Issue Election. The holder may elect to receive,
without the payment by the holder of any additional
consideration, shares equal to the value of this Warrant or any
portion hereof by the surrender of this Warrant or such portion
to the Company, with the net issue election notice annexed hereto
duly executed, at the office of the Company. Thereupon, the
Company shall issue to the holder such number of fully paid and
nonassessable shares of Common Stock as is computed using the
following formula:
X = Y (A-B)
A
where X =the number of shares to be issued to the holder
pursuant to this Section 1.5.
Y = the number of shares covered by this Warrant in
respect of which the net issue election is made
pursuant to this Section 1.5.
A = the fair market value of one share of Common
Stock, as determined in accordance with the provisions
of this Section 1.5.
B = the Purchase Price in effect under this Warrant at
the time the net issue election is made pursuant to
this Section 1.5.
For purposes of this Section 1.5, the "fair market value" per
share of the Company's Common Stock shall mean:
3
<PAGE>
(a) If the Common Stock is traded on a national
securities exchange or admitted to unlisted trading
privileges on such an exchange, or is listed on the National
Market (the "National Market") of the National Association
of Securities Dealers Automated Quotations System (the
"NASDAQ"), the fair market value shall be the last reported
sale price of the Common Stock on such exchange or on the
National Market on the last business day before the
effective date of exercise of the net issue election or if
no such sale is made on such day, the mean of the closing
bid and asked prices for such day on such exchange or on the
National Market;
(b) If the Common Stock is not so listed or admitted
to unlisted trading privileges, the fair market value shall
be the mean of the last bid and asked prices reported on the
last business day before the date of the election (1) by the
NASDAQ or (2) if reports are unavailable under clause (a)
above by the National Quotation Bureau Incorporated; and
(c) If the Common Stock is not so listed or admitted
to unlisted trading privileges and bid and ask prices are
not reported, the fair market value shall be the price per
share which the Company could obtain from a willing buyer
for shares sold by the Company from authorized but unissued
shares, as such price shall be determined by mutual
agreement of the Company and the holder of this Warrant. If
the holder of this Warrant and the Company are unable to
agree on such fair market value, the holder of this Warrant
shall select a pool of three independent and nationally-
recognized investment banking firms from which the Company
shall select one such firm to appraise the fair market value
of the Warrant and to perform the computations involved.
The determination of such investment banking firm shall be
binding upon the Company, the holder of this Warrant and any
other holder of Warrants or Warrant Shares in connection
with any transaction occurring at the time of such
determination. All expenses of such investment banking firm
shall be borne by the Company. In all cases, the
determination of fair market value shall be made without
consideration of the lack of a liquid public market for the
Common Stock and without consideration of any "control
premium" or any discount for holding less than a majority or
controlling interest of the outstanding Common Stock.
1.6 Acceleration of Exercisability. Notwithstanding
the Initial Exercise DateExercisability Date, the Warrant shall
become exercisable on any earlier date that notices are sent to
holders of shares of Common Stock as contemplated in Section 8
with respect to any of the events set forth in subsection 4.1,
and the holder of this Warrant shall be entitled to receive any
such notice as provided in Section 8.
2. Delivery of Stock Certificates, etc. on Exercise. As soon
as practicable after the exercise of this Warrant in full or in
part, and in any event within ten (10) days thereafter, the
Company at its expense (including the payment by it of any
applicable issue taxes) will cause to be issued in the name of
and delivered to the holder hereof, or as such holder (upon
payment by such holder of any applicable transfer taxes) may
direct, a certificate or certificates for the number of fully
paid and nonassessable shares of Common Stock (or Other
Securities) to which such holder shall be entitled on such
exercise, plus, in lieu of any fractional share to which such
holder would otherwise be entitled, cash equal to such fraction
multiplied by the then current market value of one full share,
4
<PAGE>
together with any other stock or other securities and property
(including cash, where applicable) to which such holder is
entitled upon such exercise pursuant to Section 1 or otherwise.
3. Adjustment for Dividends in Other Stock, Property, etc.;
Reclassification, etc. In case at any time or from time to time,
the holders of Common Stock (or Other Securities) in their
capacity as such shall have received, or (on or after the record
date fixed for the determination of shareholders eligible to
receive) shall have become entitled to receive, without payment
therefor,
(a) other or additional stock or other securities or property
(other than cash) by way of dividend, or
(b) any cash (excluding cash dividends payable solely out of
earnings or earned surplus of the Company), or
(c) other or additional stock or other securities or property
(including cash) by way of spin-off, split-up, reclassification,
recapitalization, combination of shares or similar corporate
rearrangement,
other than additional shares of Common Stock (or Other
Securities) issued as a stock dividend or in a stock-split
(adjustments in respect of which are provided for in Section 5),
then and in each such case the holder of this Warrant, on the
exercise hereof as provided in Section 1, shall be entitled to
receive the amount of stock and other securities and property
(including cash in the cases referred to in subdivisions (b) and
(c) of this Section 3) which such holder would hold on the date
of such exercise if on the date hereof he had been the holder of
record of the number of shares of Common Stock called for on the
face of this Warrant and had thereafter, during the period from
the date hereof to and including the date of such exercise,
retained such shares and all such other or additional stock and
other securities and property (including cash in the cases
referred to in subdivisions (b) and (c) of this Section 3)
receivable by him as aforesaid during such period, giving effect
to all adjustments called for during such period by Sections 4
and 5.
4. Adjustment for Reorganization, Consolidation, Merger, etc.
4.1 Reorganization, Consolidation, Merger, etc. In case at any
time or from time to time, the Company shall (a) effect a capital
reorganization or reclassification of its capital stock, (b)
consolidate with or merge into any other person, or (c) transfer
all or substantially all of its properties or assets to any other
corporation or other business entity under any plan or
arrangement contemplating the dissolution of the Company, then,
in each such case, the holder of this Warrant, on the exercise
hereof as provided in Section 1 at any time after the
consummation of such reorganization, consolidation or merger or
the effective date of such dissolution, as the case may be, shall
receive, in lieu of the Common Stock (or Other Securities)
issuable on such exercise prior to such consummation or such
effective date, the stock and other securities and property
(including cash) to which such holder would have been entitled
upon such consummation or in connection with such dissolution, as
the case may be, if such holder had so exercised this Warrant,
immediately prior thereto, all subject to further adjustment
5
<PAGE>
thereafter as provided in Sections 3 and 5. The Company will not
effect any such consolidation, merger or sale unless, prior to
the consummation thereof, the successor corporation (if other
than the Company) resulting from such consolidation or merger or
the corporation purchasing such assets shall assume by written
instrument mailed or delivered to the holder of this Warrant at
the last address of such holder appearing on the books of the
Company, the obligation to delivery to such holder such shares of
stock, securities or assets as, in accordance with the foregoing
provisions, such holder may be entitled to purchase.
4.2 Dissolution. In the event of any dissolution of the Company
following the transfer of all or substantially all of its
properties or assets, the Company, prior to such dissolution,
shall at its expense deliver or cause to be delivered the stock
and other securities and property (including cash, where
applicable) receivable by the holders of the Warrants after the
effective date of such dissolution pursuant to this Section 4 to
a bank or trust company having its principal office in
Manchester, New Hampshire or Boston, Massachusetts, as trustee
for the holder or holders of the Warrants.
4.3 Continuation of Terms. Upon any reorganization,
consolidation, merger or transfer (and any dissolution following
any transfer) referred to in this Section 4, this Warrant shall
continue in full force and effect, subject to expiration in
accordance with Section 18 hereof, and the terms hereof shall be
applicable to the shares of stock and other securities and
property receivable on the exercise of this Warrant after the
consummation of such reorganization, consolidation or merger or
the effective date of dissolution following any such transfer, as
the case may be, and shall be binding upon the issuer of any such
stock or other securities, including, in the case of any such
transfer, the person acquiring all or substantially all of the
properties or assets of the Company, whether or not such person
shall have expressly assumed the terms of this Warrant as
provided in Section 6.
5. Anti-Dilution Adjustment.
5.1 General. The Purchase Price shall be subject to adjustment
from time to time as hereinafter provided. Upon each adjustment
of the Purchase Price, the holder of this Warrant shall
thereafter be entitled to purchase, at the Purchase Price
resulting from such adjustment, the number of shares obtained by
multiplying the Purchase Price in effect immediately prior to
such adjustment by the number of shares purchasable pursuant
hereto immediately prior to such adjustment and dividing the
product thereof by the Purchase Price resulting from such
adjustment.
5.2 Purchase Price Adjustments. If and whenever after the date
hereof the Company shall issue or sell any shares of its Common
Stock (except (i) upon exercise of one or more of the Warrants or
(ii) shares of Common Stock issued to employees, officers,
directors of the Company upon the exercise of options granted
under the Company's Employee Stock Option/Purchase Plans
(hereinafter defined) not to exceed in the aggregate 1,200,000
shares of Common Stock) for a consideration per share less than
the Purchase Price in effect immediately prior to the time of
6
<PAGE>
such issue or sale, or shall be deemed under the provisions of
this Section 5 to have effected any such issuance or sale, then,
forthwith upon such issue or sale, the Purchase Price shall be
reduced to the price (calculated to the nearest $0.0001) obtained
by multiplying the Purchase Price in effect immediately prior to
the time of such issue or sale by a fraction, the numerator of
which shall be the sum of (i) the number of shares of Common
Stock outstanding immediately prior to such issue or sale
multiplied by the Purchase Price immediately prior to such issue
or sale plus (ii) the consideration received by the Company upon
such issue or sale, and the denominator of which shall be the
product of (iii) the total number of shares of Common Stock
outstanding immediately after such issue or sale, multiplied by
(iv) the Purchase Price immediately prior to such issue or sale.
As used herein, "Employee Stock Option/Purchase Plans" consist of
the Company's 1997 Equity Incentive Plan, 1995 Stock Option Plan,
Employee Stock Purchase Plan, Employee Bonus Award Plan, and non
qualified options granted to certain Directors of the Company.
Notwithstanding the foregoing, no adjustment of the Purchase
Price shall be made in an amount less than $0.0001 per share, but
any such lesser adjustment shall be carried forward and shall be
made at the time of and together with the next subsequent
adjustment which together with any adjustments so carried forward
shall amount to $0.0001 per share or more.
5.3 Option Grants. In the event that at any time, other than
the issuance of options pursuant to the Company's Employee Stock
Option Plan, the Company shall in any manner grant (directly, by
assumption in a merger or otherwise) any rights to subscribe for
or to purchase, or any options for the purchase of, Common Stock
or any stock or securities convertible into or exchangeable for
Common Stock (such rights or options being herein called
"Options" and such convertible or exchangeable stock or
securities being herein called "Convertible Securities"), whether
or not such Options or the right to convert or exchange any such
Convertible Securities are immediately exercisable, and the price
per share for which Common Stock is issuable upon the exercise of
such Options or upon conversion or exchange of such Convertible
Securities (determined by dividing (i) the total amount, if any,
received or receivable by the Company as consideration for the
granting of such Options, plus the minimum aggregate amount of
additional consideration payable to the Company upon the exercise
of all such Options, plus, in the case of any such Options which
relate to Convertible Securities, the minimum aggregate amount of
additional consideration, if any, payable upon the issue or sale
of such Convertible Securities and upon the conversion or
exchange thereof, by (ii) the total number of shares of Common
Stock issuable upon the exercise of such Options or upon the
conversion or exchange of all such Convertible Securities
issuable upon the exercise of such Options) shall be less than
the Purchase Price in effect immediately prior to the time of the
granting of such Options, then the total number of shares of
Common Stock issuable upon the exercise of such Options or upon
conversion or exchange of the total amount of such Convertible
Securities issuable upon the exercise of such Options shall (as
of the date of granting such Options) be deemed to be outstanding
and to have been issued for such price per share. Except as
otherwise provided in subsection 5.5, no further adjustment of
the Purchase Price shall be made upon the actual issue of such
Common Stock or of such Convertible Securities upon exercise of
such Options or upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities.
7
<PAGE>
5.4 Convertible Security Grants. In the event that the Company
shall in any manner issue (directly, by assumption in a merger or
otherwise) or sell any Convertible Securities (other than
pursuant to the exercise of Options to purchase such Convertible
Securities covered by subsection 5.3), whether or not the rights
to exchange or convert thereunder are immediately exercisable,
and the price per share for which Common Stock is issuable upon
such conversion or exchange (determined by dividing (i) the total
amount received or receivable by the Company as consideration for
the issue or sale of such Convertible Securities, plus the
minimum aggregate amount of additional consideration, if any,
payable to the Company upon the conversion or exchange thereof,
by (ii) the total maximum number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible
Securities) shall be less than the Purchase Price in effect
immediately prior to the time of such issue or sale, then the
total maximum number of shares of Common Stock issuable upon
conversion or exchange of all such Convertible Securities shall
(as of the date of the issue or sale of such Convertible
Securities) be deemed to be outstanding and to have been issued
for such price per share, provided that, except as otherwise
provided in subsection 5.5, no further adjustment of the Purchase
Price shall be made upon the actual issue of such Common Stock
upon conversion or exchange of such Convertible Securities.
5.5 Effect of Alteration to Option or Convertible Security
Terms. In connection with any change in, or the expiration or
termination of, the purchase rights under any Option or the
conversion or exchange rights under any Convertible Securities,
the following provisions shall apply:
(A) If the purchase price provided for in any
Option referred to in subsection 5.3, the additional
consideration, if any, payable upon the conversion or
exchange of any Convertible Securities referred to in
subsection 5.3 or 5.4, or the rate at which any Convertible
Securities referred to in subsection 5.3 or 5.4 are
convertible into or exchangeable for Common Stock shall
change at any time (other than under or by reason of
provisions designed to protect against dilution), then the
Purchase Price in effect at the time of such change shall
forthwith be increased or decreased to the Purchase Price
which would be in effect immediately after such change if
(a) the adjustments which were made upon the issuance of such
Options or Convertible Securities had been made upon the
basis of (and taking into account the total consideration
received for) (i) the issuance at that time of the Common
Stock, if any, delivered upon the exercise of any such
Options or upon the conversion or exchange of any such
Convertible Securities before such change, and (ii) the
issuance at that time of all such Options or Convertible
Securities, with terms and provisions reflecting such change,
which are still outstanding after such change, and (b) the
Purchase Price as adjusted pursuant to clause (a) preceding
had been used as the basis for the adjustments required
hereunder in connection with all other issues or sales of
Common Stock, Options or Convertible Securities by the
Company subsequent to the issuance of such Options or
Convertible Securities.
8
<PAGE>
(B) On the partial or complete expiration of any
Options or termination of any right to convert or exchange
Convertible Securities, the Purchase Price then in effect
hereunder shall forthwith be increased or decreased to the
Purchase Price which would be in effect at the time of such
expiration or termination if (a) the adjustments which were
made upon the issuance of such Options or Convertible
Securities had been made upon the basis of (and taking into
account the total consideration received for) (i) the
issuance at that time of the Common Stock, if any, delivered
upon the exercise of such Options or upon the conversion or
exchange of such Convertible Securities before such
expiration or termination, and (ii) the issuance at that time
of only those such Options or Convertible Securities which
remain outstanding after such expiration or termination, and
(b) the Purchase Price as adjusted pursuant to clause (a)
preceding had been used as the basis for adjustments required
hereunder in connection with all other issues or sales of
Common Stock, Options or Convertible Securities by the
Company subsequent to the issuance of such Options or
Convertible Securities.
(C) If the purchase price provided for in any
Option referred to in subsection 5.3 or the rate at which any
Convertible Securities referred to in subsection 5.3 or 5.4
are convertible into or exchangeable for Common Stock shall
be reduced at any time under or by reason ofr provisions with
respect thereto designed to protect against dilution, and the
event causing such reduction is one that did not also require
an adjustment in the Purchase Price under other provisions of
this Section 5, then in case of the delivery of shares of
Common Stock upon the exercise of any such Option or upon
conversion or exchange of any such Convertible Securities,
the Purchase Price then in effect hereunder shall forthwith
be adjusted to such amount as would have obtained if such
Option or Convertible Securities had never been issued and if
the adjustments made upon the issuance of such Option or
Convertible Securities had been made upon the basis of the
issuance of (and taking into account the total consideration
received for) the shares of Common Stock delivered as
aforesaid (provided that the Purchase Price used in such
determination shall be the Purchase Price on the date of
issue of such shares); provided that no such adjustment shall
be made unless the Purchase Price then in effect would be
reduced thereby.
5.6 Dividends of Common Stock, Options or Convertible
Securities. In the event that the Company shall declare a
dividend or make any other distribution upon any stock of the
Company payable in Common Stock, Options or Convertible
Securities, any Common Stock, Options or Convertible Securities,
as the case may be, issuable in payment of such dividend or
distribution shall be deemed to have been issued or sold without
consideration.
5.7 Dilution in Case of Other Securities. In case any Other
Securities shall be issued or sold by the Company, or shall
become subject to issue upon the conversion or exchange of any
stock (or Other Securities) of the Company (or any other issuer
of Other Securities or any other person referred to in Section 4)
or to subscription, purchase or other acquisition pursuant to any
rights or options granted by the Company (or such other issuer or
person), for a consideration per share such as to dilute the
purchase rights evidenced by this Warrant, the computations,
adjustments and readjustments provided for in this Section 5 with
9
<PAGE>
respect to the Purchase Price and the number of shares of Common
Stock issuable upon exercise of this Warrant shall be made as
nearly as possible in the manner so provided and applied to
determine the amount of Other Securities from time to time
receivable on the exercise of the Warrants, so as to protect the
holders of the Warrants against the effect of such dilution.
5.8 Stock Splits and Reverse Splits. In the event that the
Company shall at any time subdivide its outstanding shares of
Common Stock into a greater number of shares, the Purchase Price
in effect immediately prior to such subdivision shall be
proportionately reduced and the number of Warrant Shares
purchasable pursuant to this Warrant immediately prior to such
subdivision shall be proportionately increased, and conversely,
in the event that the outstanding shares of Common Stock of the
Company shall at any time be combined into a smaller number of
shares, the Purchase Price in effect immediately prior to such
combination shall be proportionately increased and the number of
Warrant Shares purchasable upon the exercise of this Warrant
immediately prior to such combination shall be proportionately
reduced. Except as provided in this subsection 5.8 no adjustment
in the Purchase Price and no change in the number of Warrant
Shares purchasable shall be made under this Section 5 as a result
of or by reason of any such subdivision or combination.
5.9 Determination of Consideration Received. For purposes of
this Section 5, the amount of consideration received by the
Company in connection with the issuance or sale of Common Stock,
Options or Convertible Securities shall be determined in
accordance with the following:
(A) In the event that shares of Common Stock,
Options or Convertible Securities shall be issued or sold for
cash, the consideration received therefor shall be deemed to
be the amount payable to the Company therefor, without
deduction therefrom of any expenses incurred or any
underwriting commissions or concessions or discounts paid or
allowed by the Company in connection therewith.
(B) In the event that any shares of Common Stock,
Options or Convertible Securities shall be issued or sold for
a consideration other than cash, the amount of the
consideration other than cash payable to the Company shall be
deemed to be the fair value of such consideration as
reasonably determined by the Board of Directors of the
Company, without deduction of any expenses incurred or any
underwriting commissions or concessions or discounts paid or
allowed by the Company in connection therewith.
(C) The amount of consideration deemed to be
received by the Company pursuant to the foregoing provisions
of this subsection 5.9 upon any issuance and/or sale,
pursuant to an established compensation plan of the Company,
to directors, officers or employees of the Company in
connection with their employment, of shares of Common Stock,
Options or Convertible Securities, shall be increased by the
amount of any tax benefit realized by the Company as a result
of such issuance and/or sale, the amount of such tax benefit
being the amount by which the federal and/or state income or
other tax liability of the Company shall be reduced by reason
of any deduction or credit in respect of such issuance and/or
sale.
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<PAGE>
(D) In the event that any shares of Common Stock,
Options or Convertible Securities shall be issued in
connection with any merger in which the Company is the
surviving corporation, the amount of consideration therefor
shall be deemed to be the fair value as reasonably determined
by the Board of Directors of the Company of such portion of
the assets and business of the non-surviving corporation as
such Board shall determine to be attributable to such Common
Stock, Options or Convertible Securities, as the case may be.
(E) In the event that any Common Stock, Options
and/or Convertible Securities shall be issued in connection
with the issue and sale of other securities or property of
the Company, together comprising one integral transaction in
which no specific consideration is allocated to such Common
Stock, Options or Convertible Securities by the parties
thereto, such Common Stock, Options and/or Convertible
Securities shall be deemed to have been issued without
consideration.
5.10 Record Date as Date of Issue or Sale. In the event that at
any time the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them (i) to receive a
dividend or other distribution payable in Common Stock, Options
or Convertible Securities, or (ii) to subscribe for or purchase
Common Stock, Options or Convertible Securities, then such record
date shall be deemed to be the date of the issue or sale of the
shares of Common Stock deemed to have been issued or sold upon
the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
5.11 Treasury Stock. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or
held by or for the account of the Company, and the disposition of
any such shares (other than their cancellation without
reissuance) shall be considered an issue or sale of Common Stock
for the purposes of this Section 5.
6. No Dilution or Impairment. The Company will not, by
amendment of its Articles of Incorporation or through any
reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of
any of the terms of the Warrants, but will at all times in good
faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in
order to protect the rights of the holders of the Warrants
against dilution or other impairment. Without limiting the
generality of the foregoing, the Company (a) will not increase
the par value or stated value of any shares of stock receivable
on the exercise of the Warrants above the amount payable therefor
on such exercise, (b) will take all such action as may be
necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable shares of stock on
the exercise of all Warrants from time to time outstanding,
(c) will not issue any capital stock of any class which is
preferred as to dividends or as to the distribution of assets
upon voluntary or involuntary dissolution, liquidation or winding
up, unless the rights of the holders thereof shall be limited to
a fixed sum or percentage of par value in respect of
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<PAGE>
participation in dividends and in any such distribution of assets
or such stock shall be non voting and not be convertible into
shares of Common Stock or other voting stock, and (d) will not
transfer all or substantially all of its properties and assets to
any other person (corporate or otherwise), or consolidate with or
merge into any other person or permit any such person to
consolidate with or merge into the Company (if the Company is not
the surviving person), unless such other person shall expressly
assume in writing and become bound by all the terms of the
Warrants.
7. Accountants' Certificate as to Adjustments. In each case of
any adjustment or readjustment in the shares of Common Stock (or
Other Securities) issuable on the exercise of the Warrants, the
Company's chief financial officer will compute, or if requested
by the holders of Warrants to purchase over 50% of the shares of
Common Stock which may be purchased upon exercise of the Warrants
the Company at its expense will promptly cause independent
certified public accountants of recognized standing selected by
the Company at its expense to compute, such adjustment or
readjustment in accordance with the terms of the Warrants and
prepare a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such
adjustment or readjustment is based, including a statement of (a)
the consideration received or receivable by the Company for any
additional shares of Common Stock (or Other Securities) issued or
sold or deemed to have been issued or sold, (b) the number of
shares of Common Stock (or Other Securities) outstanding or
deemed to be outstanding, and (c) the Purchase Price and the
number of shares of Common Stock to be received upon exercise of
this Warrant, in effect immediately prior to such issue or sale
and as adjusted and readjusted as provided in this Warrant. The
Company will forthwith mail a copy of each such certificate to
each holder of a Warrant, and will, on the written request at any
time of any holder of a Warrant (such request shall not be made
more than once in any Fiscal Quarter), furnish to such holder a
like certificate setting forth the Purchase Price at the time in
effect and showing how it was calculated.
8. Notices of Record Date, etc. In the event of
(a) any taking by the Company of a record of the holders of any
class of securities for the purpose of determining the holders
thereof who are entitled to receive any dividend or other
distribution, or any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right or any
declaration of a cash dividend on the Common Stock, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the
Company or any transfer of all or substantially all the assets of
the Company to or consolidation or merger of the Company with or
into any other person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company, or
(d) any proposed issue or grant by the Company of any shares of
12
<PAGE>
stock of any class or any other securities, or any right or
option to subscribe for, purchase or otherwise acquire any shares
of stock of any class or any other securities (other than the
issue of Common Stock on the exercise of the Warrants),
then and in each such event the Company will mail or cause to be
mailed to each holder of a Warrant a notice specifying (i) the
date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and stating the amount and
character of such dividend, distribution or right, (ii) the date
on which any such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution,
liquidation or winding-up is to take place, and the time, if any
is to be fixed, as of which the holders of record of Common Stock
(or Other Securities) shall be entitled to exchange their shares
of Common Stock (or Other Securities) for securities or other
property deliverable on such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution,
liquidation or winding-up, and (iii) the amount and character of
any stock or other securities, or rights or options with respect
thereto, proposed to be issued or granted, the date of such
proposed issue or grant and the persons or class of persons to
whom such proposed issue or grant is to be offered or made. Such
notice shall be mailed at least twenty (20) days prior to the
date specified in such notice on which any such action is to be
taken, except with respect to the grant of options under the
Company's Employee Stock Option/Purchase Plans in which case such
notice shall be given not later than the date of grant.
9. Reservation of Stock, etc. Issuable on Exercise of Warrants.
The Company will at all times reserve and keep available, solely
for issuance and delivery on the exercise of the Warrants, all
shares of Common Stock (or Other Securities) from time to time
issuable on the exercise of the Warrants.
10. Representations and Warranties of the Company. This Warrant
is issued and delivered by the Company on the basis of the
following:
(a) Authorization and Delivery. This Warrant has been duly
authorized and executed by the Company and when delivered will be
the valid and binding obligation of the Company enforceable in
accordance with its terms;
(b) Warrant Shares. The shares of Common Stock to be
issued pursuant to this Warrant have been duly authorized and
reserved for issuance by the Company and, when issued and paid
for in accordance with the terms hereof, will be validly issued,
fully paid and nonassessable;
(c) Rights and Privileges. The rights, preferences,
privileges and restrictions granted to or imposed upon such
shares of Common Stock and the holders thereof are as set forth
herein and in the Company's Articles of Incorporation.
(d) No Inconsistency. The execution and delivery of this
Warrant are not, and the issuance of the shares of Common Stock
upon exercise of this Warrant in accordance with the terms hereof
will not be, inconsistent with the Company's Articles of
Incorporation or by-laws, do not and will not contravene any law,
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<PAGE>
governmental rule or regulation, judgment or order applicable to
the Company, and do not and will not contravene any provision of,
or constitute a default under, any indenture, mortgage, contract
or other instrument of which the Company is a party or by which
it is bound or require the consent or approval of, the giving of
notice to, the registration with the taking of any action in
respect of or by, any Federal, state or local government
authority or agency or other person.
11. Exchange of Warrants. On surrender for exchange of any
Warrant, properly endorsed, to the Company, the Company at its
expense will issue and deliver to or on the order of the holder
thereof a new Warrant or Warrants of like tenor, in the name of
such holder or as such holder (on payment by such holder of any
applicable transfer taxes) may direct, calling in the aggregate
on the face or faces thereof for the number of shares of Common
Stock called for on the face or faces of the Warrant or Warrants
so surrendered.
12. Replacement of Warrants. On receipt of evidence
reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of any Warrant and, in the case of any
such loss, theft or destruction of any Warrant, on delivery of an
indemnity agreement or security reasonably satisfactory in form
and amount to the Company or, in the case of any such mutilation,
on surrender and cancellation of such Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a new Warrant
of like tenor.
13. Warrant Agent. The Company may, by written notice to
each holder of a Warrant, appoint an agent having an office in
Boston, Massachusetts for the purpose of issuing Common Stock (or
Other Securities) on the exercise of the Warrants pursuant to
Section 1, exchanging Warrants pursuant to Section 11, and
replacing Warrants pursuant to Section 12, or any of the
foregoing, and thereafter any such issuance, exchange or
replacement, as the case may be, shall be made at such office by
such agent.
14. Remedies. The Company stipulates that the remedies at
law of the holder of this Warrant in the event of any default or
threatened default by the Company in the performance of or
compliance with any of the terms of this Warrant are not and will
not be adequate, and that such terms may be specifically enforced
by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any
of the terms hereof or otherwise.
15. Negotiability, etc. This Warrant is issued upon the
following terms, to all of which each holder or owner hereof by
the taking hereof consents and agrees:
(a) title to this Warrant may be transferred by
endorsement (by the holder hereof executing the form of
assignment at the end hereof) and delivery in the same
manner as in the case of a negotiable instrument
transferable by endorsement and delivery; and
(b) any person in possession of this Warrant properly
endorsed for transfer to such person (including endorsed in
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<PAGE>
blank) is authorized to represent himself as absolute owner
hereof and is empowered to transfer absolute title hereto by
endorsement and delivery hereof to a bona fide purchaser
hereof for value; each prior taker or owner waives and
renounces all of his equities or rights in this Warrant in
favor of each such bona fide purchaser, and each such bona
fide purchaser shall acquire absolute title hereto and to
all rights represented hereby. Nothing in this
paragraph (b) shall create any liability on the part of the
Company beyond any liability or responsibility it has under
law.
16. Notices, etc. All notices and other communications
from the Company to the holder of this Warrant shall be mailed by
first class registered or certified mail, postage prepaid, at
such address as may have been furnished to the Company in writing
by such holder or, until any such holder furnishes to the Company
an address, then to, and at the address of, the last holder of
this Warrant who has so furnished an address to the Company.
17. Miscellaneous. This Warrant and any term hereof may be
changed, waived, discharged or terminated only by an instrument
in writing signed by the party against which enforcement of such
change, waiver, discharge or termination is sought. This Warrant
shall be construed and enforced in accordance with and governed
by the laws of the Commonwealth of Massachusetts. The headings
in this Warrant are for purposes of reference only, and shall not
limit or otherwise affect any of the terms hereof. This Warrant
is being executed as an instrument under seal. The invalidity or
unenforceability of any provision hereof shall in no way affect
the validity or enforceability of any other provision.
18. Expiration. The right to exercise this Warrant shall
expire at 5:00 p.m., Manchester, New Hampshire time, on
July , 2009. Notwithstanding the foregoing, this Warrant
shall automatically be deemed to be exercised in full pursuant to
the provisions of Section 1.5 hereof, without any further action
on behalf of the holder, immediately prior to the time this
Warrant would otherwise expire pursuant to the preceding
sentence.
[SIGNATURE PAGE FOLLOWS]
15
IN WITNESS WHEREOF, the Company has executed this Warrant
under seal as of the date first written above.
WPI GROUP, INC.
By:
----------------------
Name:
Title:
[Corporate Seal]
Attest:
By:
--------------------------
Name:
Title:
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
WPI GROUP, INC.
The undersigned, the holder of the within Warrant, hereby
irrevocably elects to exercise this Warrant for, and to purchase
thereunder, ........ shares of Common Stock of WPI GROUP, INC.
and herewith makes payment of $........ therefor, and requests
that the certificates for such shares be issued in the name of,
and delivered to .............., federal taxpayer identification
number ............, whose address is ...................
Dated:
------------------------------
(Signature must conform to
name of holder as specified on the
face of the Warrant)
------------------------------
(Address)
Signed in the presence of:
- ----------------------------
--------------------------------
FORM OF ASSIGNMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns,
and transfers unto .................., federal taxpayer
identification number ..........., whose address is ............,
the right represented by the within Warrant to purchase
............. shares of Common Stock of WPI GROUP, INC. to which
the within Warrant relates, and appoints
.......................... Attorney to transfer such right on the
books of WPI GROUP, INC. with full power of substitution in the
premises.
Dated:
------------------------------
(Signature must conform to
name of holder as specified on the
face of the Warrant)
-------------------------------
(Address)
Signed in the presence of:
- -----------------------------
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<PAGE>
EXHIBIT C
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement") dated as of
August , 1999, by and between WPI GROUP, INC., a New
Hampshire corporation, (the "Company") and the LENDERS or their
assigns (the "Lenders") who are parties to the Credit Agreement
dated as of August 3, 1998, as amended to date, including without
limitation the Third Amendment of even date, (the "Credit
Agreement") among the Company and certain of its subsidiaries,
Fleet Bank - NH, for itself as a Lender, and as Agent for the
other Lenders, and the other Lenders (the Lenders and their
assigns are herein collectively referred to as the "Holders" and
each Lender and its assigns a "Holder");
WHEREAS, the Holders are acquiring from the Company warrants
to purchase up to one hundred twenty-four thousand
(124,000) shares of the Company's common stock, par value
$.01 per share, pursuant to the Third Amendment to the Credit
Agreement referenced above (the "Third Amendment") by and between
the Company and the Holders; and
WHEREAS, it is a condition precedent to the effectiveness of
the Third Amendment that the Company enter into an agreement with
the Holders granting to the Holders certain securities
registration rights with respect to the shares of common stock
purchasable with the warrants.
NOW, THEREFORE, in consideration of the premises, as an
inducement to the Holders to effectuate the Third Amendment, and
for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company hereby
covenants and agrees with the Holders as follows:
1. Certain Definitions. As used in this Agreement, the
following terms shall have the following respective meanings:
"Commission" shall mean the United States Securities
and Exchange Commission, or any other federal agency at the time
administering the Securities Act.
"Common Stock" shall mean (i) the Company's Common
Stock, par value $.01 per share, as authorized on the date of
this Agreement, (ii) any other capital stock of any class or
classes (however designated) of the Company, authorized on or
after the date hereof, the holders of which shall have the right,
without limitation as to amount per share, either to all or to a
share of the balance of current dividends and liquidating
distributions after the payment of dividends and distributions on
any shares entitled to preference in the payment thereof, and the
holders of which shall ordinarily, in the absence of
contingencies, be entitled to vote for the election of a majority
of directors of the Company, and (iii) any other securities into
which or for which any of the securities described in (i) or (ii)
above may be converted or exchanged pursuant to a plan of
recapitalization, reorganization, merger, sale of assets or
otherwise.
<PAGE>
"Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended, or any similar federal statute, and the
rules and regulations of the Commission thereunder, all as the
same shall be in effect at the time.
"Person" shall mean an individual, a corporation, a
partnership, a limited liability company, a joint venture, a
trust, an unincorporated organization, a government and any
agency or political subdivision thereof.
"Registrable Securities" shall mean the Warrant Shares
or any other securities of the Company issued and issuable upon
exercise of the Warrants.
"Registration Expenses" shall mean the expenses so des
cribed in Section 5.
"Securities Act" shall mean the Securities Act of 1933,
as amended, or any similar federal statute, and the rules and
regulations of the Commission thereunder, all as the same shall
be in effect at the time.
"Warrants" shall mean and include the Company's Common
Stock Purchase Warrants issued pursuant to the Third Amendment.
"Warrant Shares" shall mean shares of Common Stock
issued and issuable upon exercise of the Warrants.
2. Demand Registration.
(a) At any time after the Warrant becomes exercisable,
the holders of at least fifty percent (50%) of the Registrable
Securities may request the Company to register under the
Securities Act all or any portion of the Registrable Securities
held by such requesting holders in the manner specified in such
request, and upon receipt of such request the Company shall
promptly deliver notice of such request to all Persons holding
Registrable Securities who shall then have thirty (30) days to
notify the Company in writing of their desire to be included in
such registration. The Company will use its best efforts to
expeditiously effect the registration of all Registrable
Securities whose holders request participation in such
registration under the Securities Act, but only to the extent
provided for in the following provisions of this Agreement;
provided, however, that the Company shall not be required to
effect registration pursuant to a request under this Section 2
more than one (1) time for the holders of the Registrable
Securities as a group, and may register the Registrable
Securities on Form S-3 under the Securities Act if available.
Notwithstanding anything to the contrary contained herein, no
request may be made under this Section 2 within 180 days after
the effective date of a registration statement filed by the
Company covering a firm commitment underwritten public offering
in which the holders of Registrable Securities shall have been
entitled to join pursuant to Section 3 or 12 and in which there
shall have been effectively registered all Registrable Securities
as to which registration shall have been requested.
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<PAGE>
(b) Whenever a requested registration pursuant to
Section 2(a) above is for an underwritten offering, only
Registrable Securities which are to be included in the
underwriting may be included in the registration, and, if the
managing underwriter of such offering determines in good faith
that the number of Registrable Securities so included which are
to be sold by the holders of the Registrable Securities should be
limited due to market conditions and/or the necessity of
including in such underwriting or registration securities to be
sold for the account of the Company, the holders of Registrable
Securities to be included in such underwriting and registration
shall share pro rata in the number of such Registrable Securities
being underwritten and registered for their account, such sharing
to be based on the number of all Registrable Securities held by
such holders, respectively; provided, that in no event shall the
holders of Registrable Securities that requested such
registration pursuant to Section 2(a) above have the number of
their Registrable Securities to be included in such underwriting
and registration reduced or limited (including pursuant to
Section 3 hereof) until the number of securities whose holders
have a contractual, incidental "piggy back" right to include such
securities in the registration statement as to which inclusion
has been requested pursuant to such right have been reduced to
zero (0). Notwithstanding the foregoing, in the event that the
underwriter or underwriters cut back the number of Registrable
Securities required to be included by the Holders in such demand
registration by more than 20%, then such registration will not be
deemed to be a demand registration for purposes of this Section
2. Whenever a requested registration pursuant to Section 2(a)
above is for an underwritten public offering, the Company,
subject to the approval of the holders of a majority of the
Registrable Securities to be sold in such offering (which
approval will not be unreasonably withheld or delayed), may
designate the managing underwriter(s) of such offering. The
Company may not cause any other registration of securities for
sale for its own account (other than a registration effected
solely to implement an employee benefit plan or a transaction to
which Rule 145 of the Commission is applicable) to become
effective less than ninety (90) days after the effective date of
any registration required pursuant to this Section 2.
(c) If at the time of any request to register
Registrable Securities pursuant to Section 2(a) above the Company
is preparing or within thirty (30) days thereafter commences to
prepare a registration statement for a public offering (other
than a registration effected solely to implement an employee
benefit plan or a transaction to which Rule 145 of the Commission
is applicable) which in fact is filed and becomes effective
within ninety (90) days after the request, or is engaged in any
activity which, in the good faith determination of the Company's
board of directors, would be adversely affected by the requested
registration to the material detriment of the Company, then the
Company may at its option direct that such request be delayed for
a period not in excess of four (4) months from the effective date
of such offering or the date of commencement of such other
activity, as the case may be, such right to delay a request to be
exercised by the Company not more than once in any two (2) year
period. Nothing in this Section 2(c) shall preclude a holder of
Registrable Securities from enjoying registration rights which it
might otherwise possess under Section 3 hereof.
3. Piggyback Registration. If the Company, at any time
proposes to register any of its securities under the Securities
Act (including pursuant to a demand of any stockholder of the
Company exercising registration rights) for sale to the public
(except with respect to registration statements on Form S-4 or S-
3
<PAGE>
8 or another form not available for registering the Registrable
Securities for sale to the public), each such time it will give
written notice to all holders of the outstanding Registrable
Securities, including each holder who has the right to acquire
Registrable Securities, of its intention to do so. Upon the
written request of any of such holders of the Registrable
Securities given within twenty (20) days after receipt by such
holder of such notice, the Company will, subject to the limits
contained in this Section 3, use its best efforts to cause all
such Registrable Securities of said requesting holders to be
registered under the Securities Act and qualified for sale under
any state blue sky law, all to the extent requisite to permit
such sale or other disposition by such holder of the Registrable
Securities so registered; provided, however, that if the Company
is advised in writing in good faith by any managing underwriter
of the Company's securities being offered in a public offering
pursuant to such registration statement that the amount to be
sold by Persons other than the Company (collectively, "Selling
Stockholders") is greater than the amount which can be offered
without adversely affecting the offering, the Company may reduce
the amount offered for the accounts of Selling Stockholders
(including holders of shares of Registrable Securities) pursuant
to a contractual, incidental "piggy back" right to include such
securities in a registration statement to a number deemed
satisfactory by such managing underwriter; provided, further,
that no reduction shall be made in the amount of Registrable
Securities offered for the accounts of the holders of Registrable
Securities unless such reduction is imposed pro rata with respect
to (i) all securities whose holders have a contractual,
incidental "piggy back" right to include such securities in the
registration statement as to which inclusion has been requested
pursuant to such right and (ii) any executive officer of the
Company; and provided, further, that there is first excluded from
such registration statement all shares of Common Stock sought to
be included therein by (i) any holder thereof, other than any
executive officer of the Company, not having any such
contractual, incidental registration rights, and (ii) any holder
thereof having contractual, incidental registration rights
subordinated and junior to the rights of the holders of
Registrable Securities. Notwithstanding the foregoing
provisions, the Company may withdraw any registration statement
referred to in this Section 3 without thereby incurring any
liability to the holders of Registrable Securities.
4. Registration Procedures. If and whenever the Company
is required by the provisions of this Agreement to use its best
efforts to effect the registration of any of its securities under
the Securities Act, the Company will, as expeditiously as
possible:
(i) prepare and file with the Commission a
registration statement with respect to such securities and use
its best efforts to cause such registration statement to become
and remain effective; provided, however, that notwithstanding any
other provision of this Agreement, the Company shall not in any
event be required to use its best efforts to maintain the
effectiveness of any such registration statement for a period in
excess of six (6) months;
(ii) prepare and file with the Commission such
amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to
keep such registration statement effective and to comply with the
provisions of the Securities Act with respect to the sale or
4
<PAGE>
other disposition of all securities covered by such registration
statement whenever the seller or sellers of such securities shall
desire to sell or otherwise dispose of the same, but only to the
extent provided in this Agreement;
(iii) furnish to each seller such number of copies
of a prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such
other documents as such seller may reasonably request in order to
facilitate the public sale or other disposition of the securities
owned by such seller;
(iv) use every reasonable effort to register or qualify
the securities covered by such registration statement under such
other securities or state blue sky laws of such jurisdictions as
each seller shall reasonably request, and do any and all other
acts and things which may be necessary under such securities or
blue sky laws to enable such seller to consummate the public sale
or other disposition in such jurisdictions of the securities
owned by such seller, except that the Company shall not for any
such purpose be required to qualify to do business as a foreign
corporation in any jurisdiction wherein it is not so qualified;
(v) before filing the registration statement or
prospectus or amendments or supplements thereto, furnish to one
counsel selected by the holders of Registrable Securities copies
of such documents proposed to be filed which shall be subject to
the reasonable review of such counsel;
(vi) furnish to each prospective seller a signed
counterpart, addressed to the prospective seller, of (A) an
opinion of counsel for the Company, dated the effective date of
the registration statement, and (B) a "comfort" letter signed by
the independent public accountants who have certified the
Company's financial statements included in the registration
statement, covering substantially the same matters with respect
to the registration statement (and the prospectus included
therein) and (in the case of the accountants' letter) with
respect to events subsequent to the date of the financial
statements, as are customarily covered (at the time of such
registration) in opinions of the Company's counsel and in
accountants' letters delivered to the underwriters in
underwritten public offerings of securities, subject to any
requirement by the accountants for representation letters from
the selling holders of Registrable Securities; and
(vii) use its best efforts to list the Registrable
Securities covered by such registration statement with any
securities exchange on which the Common Stock of the Company is
then listed.
5. Expenses. All expenses incurred in effecting the
registrations provided for in Sections 2, 3 and 12, including,
without limitation, all registration and filing fees, printing
expenses, fees and disbursements of counsel for the Company and
fees of one counsel for all of the selling holders of Registrable
Securities (up to $25,000 per registration), underwriting
expenses (other than fees, commissions, discounts and transfer
taxes relating to the Registrable Securities), expenses of any
audits incident to or required by any such registration and
expenses of complying with the securities or blue sky laws of any
jurisdictions pursuant to Section 4(iv) hereof (all of such
expenses referred to as "Registration Expenses"), shall be paid
by the Company; provided, that if an offering pursuant to any
5
<PAGE>
registration commenced pursuant to Section 2 above is abandoned
by the selling shareholders (other than by reason of adverse
information pertaining to the Company's business affairs or
financial position or the underwriters cut back the number of
Registrable Securities by more than 20% in a demand registration
as provided in Section 2), as opposed to stock market conditions,
unknown to the sellers prior to the commencement of such
registration proceedings, in which event the Company shall bear
all Registration Expenses), such selling shareholders shall bear
pro rata any costs incurred by the Company in conjunction with
such registration. In either event, the number of registrations
to which the holders of Registrable Securities are entitled
pursuant to Section 2 shall not be reduced thereby.
6. Termination of Registration Rights. All registration
rights granted under this Agreement shall terminate and be of no
further force and effect five (5) years after the date the
Warrant becomes exercisable . In addition, a Holder's
registration rights shall expire if (i) such Holder (together
with its affiliates and other Holders) holds less than 1% of the
Company's outstanding Common Stock (treating all shares of
convertible securities on an as converted basis) or (ii) all
Registrable Securities held by and issued to such Holder may be
sold under Rule 144 during any ninety (90) day period.
7. Furnishing Information. It shall be a condition
precedent to the obligations of the Company to take any action
pursuant to Section 2 or 3 that the selling holders shall furnish
to the Company such information regarding themselves, the
Registrable Securities held by them and the intended method of
disposition of such securities as shall be required to effect the
registration of their Registrable Securities.
8. Indemnification. (a) The Company shall indemnify and
hold harmless the seller of such securities, each underwriter (as
defined in the Securities Act), and each other Person who
participates in the offering of such securities and each other
Person, if any, who controls (within the meaning of the
Securities Act) such seller, underwriter or participating Person
(individually and collectively the "Company - Indemnified
Person") against any losses, claims, damages or liabilities
(collectively the "liability"), joint or several, to which such
Company - Indemnified Person may become subject under the
Securities Act or any other statute or at common law, insofar as
such liability (or action in respect thereof) arises out of or is
based upon (i) any untrue statement or alleged untrue statement
of any material fact contained, on the effective date thereof, in
any registration statement under which such securities were
registered under the Securities Act, any preliminary prospectus
or final prospectus contained therein, or any amendment or
supplement thereto, or (ii) any omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading. Except
as otherwise provided in Section 8(d), the Company shall
reimburse each such Company - Indemnified Person in connection
6
<PAGE>
with investigating or defending any such liability; provided,
however, that the Company shall not be liable to any Company -
Indemnified Person in any such case to the extent that any such
liability arises out of or is based upon any untrue statement or
alleged untrue statement or omission or alleged omission made in
such registration statement, preliminary or final prospectus, or
amendment or supplement thereto in reliance upon and in
conformity with information furnished in writing to the Company
by such Person specifically for use therein; and provided
further, that the Company shall not be required to indemnify any
Person against any liability arising from any untrue or
misleading statement or omission contained in any preliminary
prospectus if such deficiency is corrected in the final
prospectus or for any liability which arises out of the failure
of any Person to deliver a prospectus as required by the
Securities Act regardless of any investigation made by or on
behalf of such Company - Indemnified Person and shall survive
transfer of such securities by such seller.
(b) Each holder of any Registrable Securities shall,
by acceptance thereof, indemnify and hold harmless each other
holder of any Registrable Securities, the Company, its directors
and officers, each underwriter and each other Person, if any, who
controls the Company or such underwriter (individually and
collectively the "Holder - Indemnified Person"), against any
liability, joint or several, to which any such Holder -
Indemnified Person may become subject under the Securities Act or
any other statute or at common law, insofar as such liability (or
actions in respect thereof) arises out of or is based upon
(i) any untrue statement or alleged untrue statement of any
material fact contained, on the effective date thereof, in any
registration statement under which securities were registered
under the Securities Act at the request of such holder, any
preliminary prospectus or final prospectus contained therein, or
any amendment or supplement thereto, or (ii) any omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, in the case of (i) and (ii) to the extent, but only
to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in such
registration statement, preliminary or final prospectus,
amendment or supplement thereto in reliance upon and in
conformity with information furnished in writing to the Company
by such holder specifically for use therein. Such holder shall
reimburse any Holder - Indemnified Person for any legal fees
incurred in investigating or defending any such liability;
provided, however, that such holder's obligation's hereunder
shall be limited to an amount equal to the net proceeds to such
holder of the Registrable Securities sold in any such
registration; and provided further, that no holder of Registrable
Securities shall be required to indemnify any Person against any
liability arising from any untrue or misleading statement or
omission contained in any preliminary prospectus if such
deficiency is corrected in the final prospectus or for any
liability which arises out of the failure of any Person to
deliver a prospectus as required by the Securities Act.
(c) Indemnification similar to that specified in
Sections 8(a) and (b) above shall be given by the Company and
each holder of any Registrable Securities (with such
modifications as may be appropriate) with respect to any required
registration or other qualification of the Registrable Securities
under any federal or state law or regulation of governmental
authority other than the Securities Act.
(d) In the event the Company, any holder or any other
Person receives a complaint, claim or other notice of any
liability or action, giving rise to a claim for indemnification
under Sections 8(a), (b) or (c) above, the Person claiming
indemnification under such paragraphs (the "indemnified Person")
shall promptly notify the Person against whom indemnification is
sought (the "indemnifying Person") of such complaint, notice,
claim or action, and such indemnifying Person shall have the
right to investigate and defend any such loss, claim, damage,
liability or action. The indemnified Person shall have the right
to employ separate counsel in any such action and to participate
7
<PAGE>
in the defense thereof but the fees and expenses of such counsel
shall not be at the expense of the indemnifying Person, ,
provided, however, that an indemnified Person shall have the
right to retain its own counsel, with the fees and expenses to be
paid by the indemnifying Person, if (a) the indemnifying Person
fails promptly to defend or (b) representation of such
indemnified Person by the counsel retained by the indemnifying
Person would be inappropriate due to actual or reasonably likely
differing interests between such indemnified Person and any other
party presented by such counsel in such proceeding. In no event
shall an indemnifying Person be obligated to indemnify any Person
for any settlement of any claim or action effected without the
indemnifying Person's prior written consent.
9. Rule 144 Reporting. With a view to making
available to the Holders the benefits of certain rules and
regulations of the SEC which may permit the sale of the
Registrable Securities to the public without registration, the
Company shall:
(a) Make and keep public information available, as
those terms and understood and defined in SEC Rule 144 or
any similar or analogous rule promulgated under the
Securities Act;
(b) File with the SEC, in a timely manner, all reports
and other documents required of the Company under the
Securities Act and the Exchange Act;
(c) So long as a Holder owns any Registrable
Securities, furnish to such Holder forthwith upon request:
a written statement by the Company as to its compliance with
the reporting requirements of said Rule 144 of the
Securities Act, and of the Exchange Act (at any time after
it has become subject to such reporting requirements); a
copy of the most recent annual or quarterly report of the
Company; and such other reports and documents as a Holder
may reasonably request in availing itself of any rule or
regulation of the SEC allowing it to sell any such
securities without registration.
10. Consent to be Bound. Each subsequent holder of
Warrants or Registrable Securities must consent in writing to be
bound by the terms and conditions of this Agreement in order to
acquire the rights granted pursuant to this Agreement.
11. Amendments. The provisions of this Agreement may be
amended, and the Company may take any action herein prohibited or
omit to perform any act herein required to be performed by it,
only if the Company has obtained the written consent of the
holders of a majority of the Registrable Securities.
12. Form S-3. The Company shall use its best efforts to
qualify and remain qualified to register securities on Form S-3
under the Securities Act. The holders of the Registrable
Securities shall have the right to request any number of
registrations on Form S-3, but not more than one (1) registration
on Form S-3 in any six-month period (such requests shall be in
writing and shall state the number of shares of Registrable
Securities desired to be registered). The Company shall not be
required to effect a registration pursuant to this Section 12 if,
in the good faith judgment of the Company, such registration will
8
<PAGE>
hinder or interfere with a concurrent or proposed security
issuance of, or acquisition by, the Company or if the holder or
holders requesting registration propose to dispose of Registrable
Securities having an aggregate disposition price (before
deduction of underwriting discounts and expenses of sale) of less
than $500,000. This Section shall not be interpreted to restrict
the Company from acquiring its own shares or to require the
Company to sell its own shares. The Company shall give notice to
all holders of the Registrable Securities of the receipt of a
request for registration pursuant to this Section 12 and shall
provide a reasonable opportunity for other holders to participate
in the registration. Subject to the foregoing, the Company will
use its best efforts, in each case, to effect promptly the
registration of all shares of the Registrable Securities on
Form S-3 to the extent requested by the holder or holders thereof
for purposes of disposition.
13. Assignability of Registration Rights. Subject to
Section 10 hereof, the registration rights set forth in this
Agreement are assignable to each assignee as to each Warrant or
each share of Registrable Securities conveyed in accordance
herewith who agrees in writing to be bound by the terms and
conditions of this Agreement. The term "seller" as used in this
Agreement refers to a holder of the Registrable Securities
selling such shares.
14. Rights Which May Be Granted to Subsequent Investors.
The Company shall not grant subsequent registration rights to
third parties superior to the registration rights granted
pursuant to this Agreement so long as any of the registration
rights under this Agreement remain in effect.
15. Damages. The Company recognizes and agrees that each
holder of Registrable Securities will not have an adequate remedy
if the Company fails to comply with the terms and provisions of
this Agreement and that damages will not be readily
ascertainable, and the Company expressly agrees that, in the
event of such failure, it shall not oppose an application by any
holder of Registrable Securities or any other Person entitled to
the benefits of this Agreement requiring specific performance of
any and all provisions hereof or enjoining the Company from
continuing to commit any such breach of this Agreement.
16. Representations and Warranties of the Company. The
Company represents and warrants to the Holders as follows:
(a) The execution, delivery and performance of this
Agreement by the Company have been duly authorized by all requi
site corporate action and will not violate any provision of law,
any order of any court or other agency of government, the
Articles of Incorporation or Bylaws of the Company or any
provision of any indenture, agreement or other instrument to
which it or any or its properties or assets is bound, conflict
with, result in a breach of or constitute (with due notice or
lapse of time or both) a default under any such indenture,
agreement or other instrument or result in the creation or
imposition of any lien, charge or encumbrance of any nature
whatsoever upon any of the properties or assets of the Company.
9
(b) This Agreement has been duly and validly executed
and delivered by the Company and constitutes the legal, valid and
binding obligation of the Company, enforceable in accordance with
its terms.
17. Miscellaneous.
(a) All notices, requests, demands and other
communications provided for hereunder shall be in writing and
mailed (by first class registered or certified mail, postage
prepaid), telegraphed, sent by express overnight courier service
or electronic facsimile transmission (with a copy by mail), or
delivered to the applicable party at its address provided in the
Credit Agreement (if to any holder of Warrants or Registrable
Securities who is not a party to the Credit Agreement, at such
holder's address for notice as set forth in the books and records
of the Company), or, as to each of the foregoing, at such other
address as shall be designated by such Person in a written notice
to the other parties complying as to delivery with the terms of
this subsection (a). All such notices, requests, demands and
other communications shall, when mailed, telegraphed or sent,
respectively, be effective (i) three (3) days after being
deposited in the mails or (ii) one (1) day after being delivered
to the telegraph company, deposited with the express overnight
courier service or sent by electronic facsimile transmission,
respectively, addressed as aforesaid.
(b) This Agreement shall be governed by and construed
in accordance with the laws of the State of New Hampshire.
(c) This Agreement may be executed in two or more coun
terparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
(d) If any provision of this Agreement shall be held
to be illegal, invalid or unenforceable, such illegality,
invalidity or unenforceability shall attach only to such
provision and shall not in any manner affect or render illegal,
invalid or unenforceable any other provision of this Agreement,
and this Agreement shall be carried out as if any such illegal,
invalid or unenforceable provision were not contained herein.
[SIGNATURE PAGE FOLLOWS]
10
IN WITNESS WHEREOF, the parties hereto have caused this
Registration Rights Agreement to be duly executed as of the date
first set forth above.
WPI GROUP, INC.
- ------------------------- By: ------------------------
Witness John W. Powers
Vice President/Chief
Financial Officer
LENDERS:
FLEET BANK-NH
- ------------------------- By: -----------------------
Witness Mark L. Young
Senior Vice President
BANK OF NEW HAMPSHIRE
- ------------------------- By: ------------------------
Witness David D. McGraw
Vice President
SOVEREIGN BANK
- ------------------------- By: -------------------------
Witness Stephen P. Kanarian
Senior Vice President
FSC CORP., as Assignee of
BankBoston, N.A.
- ------------------------- By: -------------------------
Witness Mary J. Reilly
KEY CORPORATE CAPITAL INC.
- ------------------------- By: -------------------------
Witness Alexander Strazzella
Vice President
11
<PAGE>
EXHIBIT 10.50
LIMITED WAIVER
LIMITED WAIVER executed August 16, 1999, effective as of
March 28, 1999, (the "Limited Waiver") 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 (a)
the "Total Debt to EBITDA Ratio" covenant for the twelve month
periods ended March 28, 1999 and June 27, 1999, and (b) the
"Minimum Fixed Charge Coverage Ratio" covenant for the twelve
month period ended June 27, 1999, which covenants are set forth
in Annex E (Section 6.10) of the Credit Agreement, be waived up
to and until October 1, 1999 . The Borrowers acknowledge that
failure to comply with such covenants for the foregoing twelve
month periods constitutes Events of Default under the Credit
Agreement (the "Specified Defaults"), and that such Specified
Defaults are continuing and have not been previously waived. The
Agent, on behalf of itself and the Lenders, has agreed to grant
such limited 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. Limited Waiver. Upon satisfaction of the
conditions set forth in Section 4 below, the Lenders hereby waive
up to and until October 1, 1999 compliance with the "Total Debt
to EBITDA Ratio" and "Minimum Fixed Charge Coverage Ratio"
covenants set forth in Annex E (Section 6.10) of the Credit
Agreement for the twelve month periods ended March 28, 1999 and
June 27, 1999 in the case of the "Total Debt to EBITDA Ratio",
and for the twelve month period ended June 27, 1999 in the case
of the "Minimum Fixed Charge Coverage Ratio". Such waiver is
expressly limited to compliance with such covenants on March 28,
1999 and June 27, 1999 (the latter date only in the case of the
"Minimum Fixed Charge Coverage Ratio"), and for the respective
twelve month periods then ended; subject to the limited waiver
set forth herein, such covenant , and all other covenants set
forth in the Credit Agreement, shall remain unchanged, binding
upon Borrowers and in full force and effect, subject to the
provisions of the Third Amendment dated as of August 16, 1999 to
the Credit Agreement (the "Third Amendment"). From and after
October 1, 1999, the Specified Defaults shall be Events of
Default for all purposes of the Credit Agreement and the other
Loan Documents. The Agent and the Lenders expressly reserve all
rights and remedies available to them (i) from and after October
1, 1999 as a result of the Specified Defaults and (ii) as a
result of any Events of Default other than the Specified
Defaults.
<PAGE>
Section 2. Default Rate. Commencing March 28, 1999, and
continuing until the Third Amendment Effective Date (as defined
in the Third Amendment), interest shall be accrued on the Loans
at the Default Rate as provided in Section 1.4(d) of the Credit
Agreement.
Section 3. Third Amendment. The Borrowers and Lenders
shall execute the Third Amendment amending the interest rate on
the Loans, the Maximum Amount, the Borrowing Base and certain
financial reporting requirements contained in Annex C and Annex
D to the Credit Agreement, as well as providing for the issuance
of certain stock warrants to the Lenders by WPI Group, Inc. and
reimbursement of the fees of a financial consultant to be
retained by legal counsel to the Agent in consideration for this
Limited Waiver and the accommodations afforded the Borrowers
pursuant to the Third Amendment.
Section 4. Conditions of Effectiveness. This Limited
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 Limited Waiver, duly executed by
the Borrowers;
(b) accrued interest on the Loans at the Default Rate for
the period commencing March 28, 1999 and ending on the Third
Amendment Effective Date shall have been paid to the Agent; and
(c) the Agent, the Lenders and the Borrowers shall have
duly executed and delivered the Third Amendment, and the
Borrowers shall have satisfied all of the conditions imposed upon
them for such Third Amendment to become effective.
Section 5. Counterparts. This Limited 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 the limited
waiver herein of the Specified Defaults, the Credit Agreement, as
amended by the Third Amendment, 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 Limited Waiver.
Section 8. Headings. The headings of this Limited 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.
2
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed and
delivered this Limited 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/Timothy Whitab 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
THE AGENT:
FLEET BANK - NH, as Agent for
the Lenders
/s/Curtis W. Little, Jr. By:/s/ Mark L. Young
- ------------------------ --------------------
Witness Mark L. Young
Senior Vice President
3
<PAGE>
EXHIBIT 10.51
THIS WARRANT AND THE UNDERLYING SHARES OF COMMON STOCK ISSUABLE
UPON ITS EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS,
AND MAY NOT BE SOLD OR TRANSFERRED WITHOUT COMPLIANCE WITH THE
REGISTRATION OR QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL
AND STATE SECURITIES LAWS OR APPLICABLE EXEMPTIONS THEREFROM.
THE SECURITIES REPRESENTED BY THIS WARRANT ARE SUBJECT TO A
REGISTRATION RIGHTS AGREEMENT DATED AS OF AUGUST 16, 1999 (THE
"REGISTRATION AGREEMENT"). COPIES OF THE REGISTRATION AGREEMENT
ARE ON FILE AT THE OFFICE OF THE SECRETARY OF THE COMPANY.
No. W-2 Right to Purchase 20,670
Shares of Common Stock
of
WPI GROUP, INC.
WPI GROUP, INC.
COMMON STOCK PURCHASE WARRANT
August 16, 1999
WPI GROUP, INC., a New Hampshire corporation (the
"Company"), hereby certifies that, for value received, FSC CORP.
or its assigns, as assignee of BankBoston, N.A., a Lender under
the Credit Agreement dated as of August 3, 1998, as amended to
date, (the "Credit Agreement") among the Company, certain of its
subsidiaries, Fleet Bank - NH, as Agent for Lenders identified
therein, and such Lenders, is entitled, subject to the terms set
forth below, to purchase from the Company at any time or from
time to time after August 16, 2000 (subject to acceleration as
hereinafter provided) (the "Initial Exerciseability Date") and
before 5:00 p.m., Manchester, New Hampshire time, on August 16,
2009, 20,670 fully paid and nonassessable shares of Common Stock,
par value $0.01 per share, of the Company, at a purchase price
per share of $2.75 (such purchase price per share as adjusted
from time to time as herein provided is referred to herein as the
"Purchase Price"). The number and character of such shares of
Common Stock and the Purchase Price are subject to adjustment as
provided herein.
This Warrant is one of the Warrants evidencing the right to
purchase shares of Common Stock of the Company issued pursuant to
a certain Third Amendment dated as of August 16, 1999 to the
Credit Agreement (the Credit Agreement, as amended by such Third
Amendment, the "Agreement"), and subject to the Registration
Agreement, a copy of which agreement is on file at the principal
office of the Company, and the holder of this Warrant shall be
entitled to all of the benefits and bound by all of the
applicable obligations of the Registration Agreement, as provided
therein. This Warrant is detachable from the obligations
incurred by the Company pursuant to the Credit Agreement, and
shall survive the satisfaction of such obligations.
<PAGE>
As used herein the following terms, unless the context
otherwise requires, have the following respective meanings:
(a) The term "Company" shall include WPI Group, Inc.,
and any corporation which shall succeed to, or assume the
obligations of, the Company hereunder.
(b) The term "Common Stock" includes (i) the Company's
Common Stock, par value $0.01 per share, as authorized on
the date of the Agreement, (ii) any other capital stock of
any class or classes (however designated) of the Company,
authorized on or after such date, the holders of which shall
have the right, without limitation as to amount per share,
either to all or to a share of the balance of current
dividends and liquidating distributions after the payment of
dividends and distributions on any shares entitled to
preference in the payment thereof, and the holders of which
shall ordinarily, in the absence of contingencies, be
entitled to vote for the election of a majority of directors
of the Company (even though the right so to vote may have
been suspended by the happening of such a contingency) and
(iii) any other securities into which or for which any of
the securities described in (i) or (ii) above may be
converted or exchanged pursuant to a plan of
recapitalization, reorganization, merger, sale of assets or
otherwise.
(c) The term "Other Securities" refers to any stock
(other than Common Stock) and other securities of the
Company or any other person (corporate or otherwise) which
the holders of the Warrants at any time shall be entitled to
receive, or shall have received, on the exercise of the
Warrants, in lieu of or in addition to Common Stock, or
which at any time shall be issuable or shall have been
issued in exchange for or in replacement of Common Stock or
Other Securities pursuant to Section 5 or otherwise.
(d)The term "Warrant" means this Common Stock Purchase
Warrant.
1. Exercise of Warrant.
1.1 Full Exercise. This Warrant may be exercised at any time
before its expiration in full by the holder hereof by surrender
of this Warrant, with the form of subscription at the end hereof
duly executed by such holder, to the Company at its principal
office, accompanied by payment, in cash or by certified or
official bank check payable to the order of the Company, in the
amount obtained by multiplying the number of shares of Common
Stock for which this Warrant is then exercisable by the Purchase
Price then in effect.
1.2 Partial Exercise. This Warrant may be exercised at any time
before its expiration in part (in lots of 100 shares or, if this
Warrant is then exercisable for a lesser amount, in such lesser
amount) by surrender of this Warrant and payment of the Purchase
Price then in effect in the manner and at the place provided in
subsection 1.1, except that the amount payable by the holder on
such partial exercise shall be the amount obtained by multiplying
(a) the number of shares of Common Stock designated by the holder
in the subscription at the end hereof by (b) the Purchase Price
2
<PAGE>
then in effect. On any such partial exercise the Company at its
expense will forthwith issue and deliver to or upon the order of
the holder hereof a new Warrant or Warrants of like tenor, in the
name of the holder hereof or as such holder (upon payment by such
holder of any applicable transfer taxes) may request, calling in
the aggregate on the face or faces thereof for the number of
shares of Common Stock for which such Warrant or Warrants may
still be exercised.
1.3 Company Acknowledgment. The Company will, at the time of
the exercise of this Warrant, upon the request of the holder
hereof acknowledge in writing its continuing obligation to afford
to such holder any rights to which such holder shall continue to
be entitled after such exercise in accordance with the provisions
of this Warrant. If the holder shall fail to make any such
request, such failure shall not affect the continuing obligation
of the Company to afford to such holder any such rights.
1.4 Trustee for Warrant Holders. In the event that a bank or
trust company shall have been appointed as trustee for the
holders of the Warrants pursuant to subsection 4.2, such bank or
trust company shall have all the powers and duties of a warrant
agent appointed pursuant to Section 13 and shall accept, in its
own name for the account of the Company or such successor person
as may be entitled thereto, all amounts otherwise payable to the
Company or such successor, as the case may be, on exercise of
this Warrant pursuant to this Section 1.
1.5 Net Issue Election. The holder may elect to receive,
without the payment by the holder of any additional
consideration, shares equal to the value of this Warrant or any
portion hereof by the surrender of this Warrant or such portion
to the Company, with the net issue election notice annexed hereto
duly executed, at the office of the Company. Thereupon, the
Company shall issue to the holder such number of fully paid and
nonassessable shares of Common Stock as is computed using the
following formula:
X = Y (A-B)
A
where X = the number of shares to be issued to the holder
pursuant to this Section 1.5.
Y = the number of shares covered by this Warrant in
respect of which the net issue election is made
pursuant to this Section 1.5.
A = the fair market value of one share of Common
Stock, as determined in accordance with the provisions
of this Section 1.5.
B = the Purchase Price in effect under this Warrant at
the time the net issue election is made pursuant to
this Section 1.5.
For purposes of this Section 1.5, the "fair market value" per
share of the Company's Common Stock shall mean:
3
<PAGE>
(a) If the Common Stock is traded on a national
securities exchange or admitted to unlisted trading
privileges on such an exchange, or is listed on the National
Market (the "National Market") of the National Association
of Securities Dealers Automated Quotations System (the
"NASDAQ"), the fair market value shall be the last reported
sale price of the Common Stock on such exchange or on the
National Market on the last business day before the
effective date of exercise of the net issue election or if
no such sale is made on such day, the mean of the closing
bid and asked prices for such day on such exchange or on the
National Market;
(b) If the Common Stock is not so listed or admitted
to unlisted trading privileges, the fair market value shall
be the mean of the last bid and asked prices reported on the
last business day before the date of the election (1) by the
NASDAQ or (2) if reports are unavailable under clause (a)
above by the National Quotation Bureau Incorporated; and
(c) If the Common Stock is not so listed or admitted
to unlisted trading privileges and bid and ask prices are
not reported, the fair market value shall be the price per
share which the Company could obtain from a willing buyer
for shares sold by the Company from authorized but unissued
shares, as such price shall be determined by mutual
agreement of the Company and the holder of this Warrant. If
the holder of this Warrant and the Company are unable to
agree on such fair market value, the holder of this Warrant
shall select a pool of three independent and nationally-
recognized investment banking firms from which the Company
shall select one such firm to appraise the fair market value
of the Warrant and to perform the computations involved.
The determination of such investment banking firm shall be
binding upon the Company, the holder of this Warrant and any
other holder of Warrants or Warrant Shares in connection
with any transaction occurring at the time of such
determination. All expenses of such investment banking firm
shall be borne by the Company. In all cases, the
determination of fair market value shall be made without
consideration of the lack of a liquid public market for the
Common Stock and without consideration of any "control
premium" or any discount for holding less than a majority or
controlling interest of the outstanding Common Stock.
1.6 Acceleration of Exercisability. Notwithstanding
the Initial Exercise DateExercisability Date, the Warrant shall
become exercisable on any earlier date that notices are sent to
holders of shares of Common Stock as contemplated in Section 8
with respect to any of the events set forth in subsection 4.1,
and the holder of this Warrant shall be entitled to receive any
such notice as provided in Section 8.
2. Delivery of Stock Certificates, etc. on Exercise. As soon
as practicable after the exercise of this Warrant in full or in
part, and in any event within ten (10) days thereafter, the
Company at its expense (including the payment by it of any
applicable issue taxes) will cause to be issued in the name of
and delivered to the holder hereof, or as such holder (upon
payment by such holder of any applicable transfer taxes) may
direct, a certificate or certificates for the number of fully
paid and nonassessable shares of Common Stock (or Other
Securities) to which such holder shall be entitled on such
exercise, plus, in lieu of any fractional share to which such
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holder would otherwise be entitled, cash equal to such fraction
multiplied by the then current market value of one full share,
together with any other stock or other securities and property
(including cash, where applicable) to which such holder is
entitled upon such exercise pursuant to Section 1 or otherwise.
3. Adjustment for Dividends in Other Stock, Property, etc.;
Reclassification, etc. In case at any time or from time to time,
the holders of Common Stock (or Other Securities) in their
capacity as such shall have received, or (on or after the record
date fixed for the determination of shareholders eligible to
receive) shall have become entitled to receive, without payment
therefor,
(a) other or additional stock or other securities or property
(other than cash) by way of dividend, or
(b) any cash (excluding cash dividends payable solely out of
earnings or earned surplus of the Company), or
(c) other or additional stock or other securities or property
(including cash) by way of spin-off, split-up, reclassification,
recapitalization, combination of shares or similar corporate
rearrangement,
other than additional shares of Common Stock (or Other
Securities) issued as a stock dividend or in a stock-split
(adjustments in respect of which are provided for in Section 5),
then and in each such case the holder of this Warrant, on the
exercise hereof as provided in Section 1, shall be entitled to
receive the amount of stock and other securities and property
(including cash in the cases referred to in subdivisions (b) and
(c) of this Section 3) which such holder would hold on the date
of such exercise if on the date hereof he had been the holder of
record of the number of shares of Common Stock called for on the
face of this Warrant and had thereafter, during the period from
the date hereof to and including the date of such exercise,
retained such shares and all such other or additional stock and
other securities and property (including cash in the cases
referred to in subdivisions (b) and (c) of this Section 3)
receivable by him as aforesaid during such period, giving effect
to all adjustments called for during such period by Sections 4
and 5.
4. Adjustment for Reorganization, Consolidation, Merger, etc.
4.1 Reorganization, Consolidation, Merger, etc. In case at any
time or from time to time, the Company shall (a) effect a capital
reorganization or reclassification of its capital stock, (b)
consolidate with or merge into any other person, or (c) transfer
all or substantially all of its properties or assets to any other
corporation or other business entity under any plan or
arrangement contemplating the dissolution of the Company, then,
in each such case, the holder of this Warrant, on the exercise
hereof as provided in Section 1 at any time after the
consummation of such reorganization, consolidation or merger or
the effective date of such dissolution, as the case may be, shall
receive, in lieu of the Common Stock (or Other Securities)
issuable on such exercise prior to such consummation or such
effective date, the stock and other securities and property
(including cash) to which such holder would have been entitled
upon such consummation or in connection with such dissolution, as
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the case may be, if such holder had so exercised this Warrant,
immediately prior thereto, all subject to further adjustment
thereafter as provided in Sections 3 and 5. The Company will not
effect any such consolidation, merger or sale unless, prior to
the consummation thereof, the successor corporation (if other
than the Company) resulting from such consolidation or merger or
the corporation purchasing such assets shall assume by written
instrument mailed or delivered to the holder of this Warrant at
the last address of such holder appearing on the books of the
Company, the obligation to delivery to such holder such shares of
stock, securities or assets as, in accordance with the foregoing
provisions, such holder may be entitled to purchase.
4.2 Dissolution. In the event of any dissolution of the Company
following the transfer of all or substantially all of its
properties or assets, the Company, prior to such dissolution,
shall at its expense deliver or cause to be delivered the stock
and other securities and property (including cash, where
applicable) receivable by the holders of the Warrants after the
effective date of such dissolution pursuant to this Section 4 to
a bank or trust company having its principal office in
Manchester, New Hampshire or Boston, Massachusetts, as trustee
for the holder or holders of the Warrants.
4.3 Continuation of Terms. Upon any reorganization,
consolidation, merger or transfer (and any dissolution following
any transfer) referred to in this Section 4, this Warrant shall
continue in full force and effect, subject to expiration in
accordance with Section 18 hereof, and the terms hereof shall be
applicable to the shares of stock and other securities and
property receivable on the exercise of this Warrant after the
consummation of such reorganization, consolidation or merger or
the effective date of dissolution following any such transfer, as
the case may be, and shall be binding upon the issuer of any such
stock or other securities, including, in the case of any such
transfer, the person acquiring all or substantially all of the
properties or assets of the Company, whether or not such person
shall have expressly assumed the terms of this Warrant as
provided in Section 6.
5. Anti-Dilution Adjustment.
5.1 General. The Purchase Price shall be subject to adjustment
from time to time as hereinafter provided. Upon each adjustment
of the Purchase Price, the holder of this Warrant shall
thereafter be entitled to purchase, at the Purchase Price
resulting from such adjustment, the number of shares obtained by
multiplying the Purchase Price in effect immediately prior to
such adjustment by the number of shares purchasable pursuant
hereto immediately prior to such adjustment and dividing the
product thereof by the Purchase Price resulting from such
adjustment.
5.2 Purchase Price Adjustments. If and whenever after the date
hereof the Company shall issue or sell any shares of its Common
Stock (except (i) upon exercise of one or more of the Warrants or
(ii) shares of Common Stock issued to employees, officers,
directors of the Company upon the exercise of options granted
under the Company's Employee Stock Option/Purchase Plans
(hereinafter defined) not to exceed in the aggregate 1,200,000
shares of Common Stock) for a consideration per share less than
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the Purchase Price in effect immediately prior to the time of
such issue or sale, or shall be deemed under the provisions of
this Section 5 to have effected any such issuance or sale, then,
forthwith upon such issue or sale, the Purchase Price shall be
reduced to the price (calculated to the nearest $0.0001) obtained
by multiplying the Purchase Price in effect immediately prior to
the time of such issue or sale by a fraction, the numerator of
which shall be the sum of (i) the number of shares of Common
Stock outstanding immediately prior to such issue or sale
multiplied by the Purchase Price immediately prior to such issue
or sale plus (ii) the consideration received by the Company upon
such issue or sale, and the denominator of which shall be the
product of (iii) the total number of shares of Common Stock
outstanding immediately after such issue or sale, multiplied by
(iv) the Purchase Price immediately prior to such issue or sale.
As used herein, "Employee Stock Option/Purchase Plans" consist of
the Company's 1997 Equity Incentive Plan, 1995 Stock Option Plan,
Employee Stock Purchase Plan, Employee Bonus Award Plan, and non
qualified options granted to certain Directors of the Company.
Notwithstanding the foregoing, no adjustment of the Purchase
Price shall be made in an amount less than $0.0001 per share, but
any such lesser adjustment shall be carried forward and shall be
made at the time of and together with the next subsequent
adjustment which together with any adjustments so carried forward
shall amount to $0.0001 per share or more.
5.3 Option Grants. In the event that at any time, other than
the issuance of options pursuant to the Company's Employee Stock
Option Plan, the Company shall in any manner grant (directly, by
assumption in a merger or otherwise) any rights to subscribe for
or to purchase, or any options for the purchase of, Common Stock
or any stock or securities convertible into or exchangeable for
Common Stock (such rights or options being herein called
"Options" and such convertible or exchangeable stock or
securities being herein called "Convertible Securities"), whether
or not such Options or the right to convert or exchange any such
Convertible Securities are immediately exercisable, and the price
per share for which Common Stock is issuable upon the exercise of
such Options or upon conversion or exchange of such Convertible
Securities (determined by dividing (i) the total amount, if any,
received or receivable by the Company as consideration for the
granting of such Options, plus the minimum aggregate amount of
additional consideration payable to the Company upon the exercise
of all such Options, plus, in the case of any such Options which
relate to Convertible Securities, the minimum aggregate amount of
additional consideration, if any, payable upon the issue or sale
of such Convertible Securities and upon the conversion or
exchange thereof, by (ii) the total number of shares of Common
Stock issuable upon the exercise of such Options or upon the
conversion or exchange of all such Convertible Securities
issuable upon the exercise of such Options) shall be less than
the Purchase Price in effect immediately prior to the time of the
granting of such Options, then the total number of shares of
Common Stock issuable upon the exercise of such Options or upon
conversion or exchange of the total amount of such Convertible
Securities issuable upon the exercise of such Options shall (as
of the date of granting such Options) be deemed to be outstanding
and to have been issued for such price per share. Except as
otherwise provided in subsection 5.5, no further adjustment of
the Purchase Price shall be made upon the actual issue of such
Common Stock or of such Convertible Securities upon exercise of
such Options or upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities.
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5.4 Convertible Security Grants. In the event that the Company
shall in any manner issue (directly, by assumption in a merger or
otherwise) or sell any Convertible Securities (other than
pursuant to the exercise of Options to purchase such Convertible
Securities covered by subsection 5.3), whether or not the rights
to exchange or convert thereunder are immediately exercisable,
and the price per share for which Common Stock is issuable upon
such conversion or exchange (determined by dividing (i) the total
amount received or receivable by the Company as consideration for
the issue or sale of such Convertible Securities, plus the
minimum aggregate amount of additional consideration, if any,
payable to the Company upon the conversion or exchange thereof,
by (ii) the total maximum number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible
Securities) shall be less than the Purchase Price in effect
immediately prior to the time of such issue or sale, then the
total maximum number of shares of Common Stock issuable upon
conversion or exchange of all such Convertible Securities shall
(as of the date of the issue or sale of such Convertible
Securities) be deemed to be outstanding and to have been issued
for such price per share, provided that, except as otherwise
provided in subsection 5.5, no further adjustment of the Purchase
Price shall be made upon the actual issue of such Common Stock
upon conversion or exchange of such Convertible Securities.
5.5 Effect of Alteration to Option or Convertible Security
Terms. In connection with any change in, or the expiration or
termination of, the purchase rights under any Option or the
conversion or exchange rights under any Convertible Securities,
the following provisions shall apply:
(A) If the purchase price provided for in any
Option referred to in subsection 5.3, the additional
consideration, if any, payable upon the conversion or
exchange of any Convertible Securities referred to in
subsection 5.3 or 5.4, or the rate at which any Convertible
Securities referred to in subsection 5.3 or 5.4 are
convertible into or exchangeable for Common Stock shall
change at any time (other than under or by reason of
provisions designed to protect against dilution), then the
Purchase Price in effect at the time of such change shall
forthwith be increased or decreased to the Purchase Price
which would be in effect immediately after such change if
(a) the adjustments which were made upon the issuance of such
Options or Convertible Securities had been made upon the
basis of (and taking into account the total consideration
received for) (i) the issuance at that time of the Common
Stock, if any, delivered upon the exercise of any such
Options or upon the conversion or exchange of any such
Convertible Securities before such change, and (ii) the
issuance at that time of all such Options or Convertible
Securities, with terms and provisions reflecting such change,
which are still outstanding after such change, and (b) the
Purchase Price as adjusted pursuant to clause (a) preceding
had been used as the basis for the adjustments required
hereunder in connection with all other issues or sales of
Common Stock, Options or Convertible Securities by the
Company subsequent to the issuance of such Options or
Convertible Securities.
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(B) On the partial or complete expiration of any
Options or termination of any right to convert or exchange
Convertible Securities, the Purchase Price then in effect
hereunder shall forthwith be increased or decreased to the
Purchase Price which would be in effect at the time of such
expiration or termination if (a) the adjustments which were
made upon the issuance of such Options or Convertible
Securities had been made upon the basis of (and taking into
account the total consideration received for) (i) the
issuance at that time of the Common Stock, if any, delivered
upon the exercise of such Options or upon the conversion or
exchange of such Convertible Securities before such
expiration or termination, and (ii) the issuance at that time
of only those such Options or Convertible Securities which
remain outstanding after such expiration or termination, and
(b) the Purchase Price as adjusted pursuant to clause (a)
preceding had been used as the basis for adjustments required
hereunder in connection with all other issues or sales of
Common Stock, Options or Convertible Securities by the
Company subsequent to the issuance of such Options or
Convertible Securities.
(C) If the purchase price provided for in any
Option referred to in subsection 5.3 or the rate at which any
Convertible Securities referred to in subsection 5.3 or 5.4
are convertible into or exchangeable for Common Stock shall
be reduced at any time under or by reason ofr provisions with
respect thereto designed to protect against dilution, and the
event causing such reduction is one that did not also require
an adjustment in the Purchase Price under other provisions of
this Section 5, then in case of the delivery of shares of
Common Stock upon the exercise of any such Option or upon
conversion or exchange of any such Convertible Securities,
the Purchase Price then in effect hereunder shall forthwith
be adjusted to such amount as would have obtained if such
Option or Convertible Securities had never been issued and if
the adjustments made upon the issuance of such Option or
Convertible Securities had been made upon the basis of the
issuance of (and taking into account the total consideration
received for) the shares of Common Stock delivered as
aforesaid (provided that the Purchase Price used in such
determination shall be the Purchase Price on the date of
issue of such shares); provided that no such adjustment shall
be made unless the Purchase Price then in effect would be
reduced thereby.
5.6 Dividends of Common Stock, Options or Convertible
Securities. In the event that the Company shall declare a
dividend or make any other distribution upon any stock of the
Company payable in Common Stock, Options or Convertible
Securities, any Common Stock, Options or Convertible Securities,
as the case may be, issuable in payment of such dividend or
distribution shall be deemed to have been issued or sold without
consideration.
5.7 Dilution in Case of Other Securities. In case any Other
Securities shall be issued or sold by the Company, or shall
become subject to issue upon the conversion or exchange of any
stock (or Other Securities) of the Company (or any other issuer
of Other Securities or any other person referred to in Section 4)
or to subscription, purchase or other acquisition pursuant to any
rights or options granted by the Company (or such other issuer or
person), for a consideration per share such as to dilute the
purchase rights evidenced by this Warrant, the computations,
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adjustments and readjustments provided for in this Section 5 with
respect to the Purchase Price and the number of shares of Common
Stock issuable upon exercise of this Warrant shall be made as
nearly as possible in the manner so provided and applied to
determine the amount of Other Securities from time to time
receivable on the exercise of the Warrants, so as to protect the
holders of the Warrants against the effect of such dilution.
5.8 Stock Splits and Reverse Splits. In the event that the
Company shall at any time subdivide its outstanding shares of
Common Stock into a greater number of shares, the Purchase Price
in effect immediately prior to such subdivision shall be
proportionately reduced and the number of Warrant Shares
purchasable pursuant to this Warrant immediately prior to such
subdivision shall be proportionately increased, and conversely,
in the event that the outstanding shares of Common Stock of the
Company shall at any time be combined into a smaller number of
shares, the Purchase Price in effect immediately prior to such
combination shall be proportionately increased and the number of
Warrant Shares purchasable upon the exercise of this Warrant
immediately prior to such combination shall be proportionately
reduced. Except as provided in this subsection 5.8 no adjustment
in the Purchase Price and no change in the number of Warrant
Shares purchasable shall be made under this Section 5 as a result
of or by reason of any such subdivision or combination.
5.9 Determination of Consideration Received. For purposes of
this Section 5, the amount of consideration received by the
Company in connection with the issuance or sale of Common Stock,
Options or Convertible Securities shall be determined in
accordance with the following:
(A) In the event that shares of Common Stock,
Options or Convertible Securities shall be issued or sold for
cash, the consideration received therefor shall be deemed to
be the amount payable to the Company therefor, without
deduction therefrom of any expenses incurred or any
underwriting commissions or concessions or discounts paid or
allowed by the Company in connection therewith.
(B) In the event that any shares of Common Stock,
Options or Convertible Securities shall be issued or sold for
a consideration other than cash, the amount of the
consideration other than cash payable to the Company shall be
deemed to be the fair value of such consideration as
reasonably determined by the Board of Directors of the
Company, without deduction of any expenses incurred or any
underwriting commissions or concessions or discounts paid or
allowed by the Company in connection therewith.
(C) The amount of consideration deemed to be
received by the Company pursuant to the foregoing provisions
of this subsection 5.9 upon any issuance and/or sale,
pursuant to an established compensation plan of the Company,
to directors, officers or employees of the Company in
connection with their employment, of shares of Common Stock,
Options or Convertible Securities, shall be increased by the
amount of any tax benefit realized by the Company as a result
of such issuance and/or sale, the amount of such tax benefit
being the amount by which the federal and/or state income or
other tax liability of the Company shall be reduced by reason
of any deduction or credit in respect of such issuance and/or
sale.
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(D) In the event that any shares of Common Stock,
Options or Convertible Securities shall be issued in
connection with any merger in which the Company is the
surviving corporation, the amount of consideration therefor
shall be deemed to be the fair value as reasonably determined
by the Board of Directors of the Company of such portion of
the assets and business of the non-surviving corporation as
such Board shall determine to be attributable to such Common
Stock, Options or Convertible Securities, as the case may be.
(E) In the event that any Common Stock, Options
and/or Convertible Securities shall be issued in connection
with the issue and sale of other securities or property of
the Company, together comprising one integral transaction in
which no specific consideration is allocated to such Common
Stock, Options or Convertible Securities by the parties
thereto, such Common Stock, Options and/or Convertible
Securities shall be deemed to have been issued without
consideration.
5.10 Record Date as Date of Issue or Sale. In the event that at
any time the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them (i) to receive a
dividend or other distribution payable in Common Stock, Options
or Convertible Securities, or (ii) to subscribe for or purchase
Common Stock, Options or Convertible Securities, then such record
date shall be deemed to be the date of the issue or sale of the
shares of Common Stock deemed to have been issued or sold upon
the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
5.11 Treasury Stock. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or
held by or for the account of the Company, and the disposition of
any such shares (other than their cancellation without
reissuance) shall be considered an issue or sale of Common Stock
for the purposes of this Section 5.
6. No Dilution or Impairment. The Company will not, by
amendment of its Articles of Incorporation or through any
reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of
any of the terms of the Warrants, but will at all times in good
faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in
order to protect the rights of the holders of the Warrants
against dilution or other impairment. Without limiting the
generality of the foregoing, the Company (a) will not increase
the par value or stated value of any shares of stock receivable
on the exercise of the Warrants above the amount payable therefor
on such exercise, (b) will take all such action as may be
necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable shares of stock on
the exercise of all Warrants from time to time outstanding,
(c) will not issue any capital stock of any class which is
preferred as to dividends or as to the distribution of assets
upon voluntary or involuntary dissolution, liquidation or winding
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up, unless the rights of the holders thereof shall be limited to
a fixed sum or percentage of par value in respect of
participation in dividends and in any such distribution of assets
or such stock shall be non voting and not be convertible into
shares of Common Stock or other voting stock, and (d) will not
transfer all or substantially all of its properties and assets to
any other person (corporate or otherwise), or consolidate with or
merge into any other person or permit any such person to
consolidate with or merge into the Company (if the Company is not
the surviving person), unless such other person shall expressly
assume in writing and become bound by all the terms of the
Warrants.
7. Accountants' Certificate as to Adjustments. In each case of
any adjustment or readjustment in the shares of Common Stock (or
Other Securities) issuable on the exercise of the Warrants, the
Company's chief financial officer will compute, or if requested
by the holders of Warrants to purchase over 50% of the shares of
Common Stock which may be purchased upon exercise of the Warrants
the Company at its expense will promptly cause independent
certified public accountants of recognized standing selected by
the Company at its expense to compute, such adjustment or
readjustment in accordance with the terms of the Warrants and
prepare a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such
adjustment or readjustment is based, including a statement of (a)
the consideration received or receivable by the Company for any
additional shares of Common Stock (or Other Securities) issued or
sold or deemed to have been issued or sold, (b) the number of
shares of Common Stock (or Other Securities) outstanding or
deemed to be outstanding, and (c) the Purchase Price and the
number of shares of Common Stock to be received upon exercise of
this Warrant, in effect immediately prior to such issue or sale
and as adjusted and readjusted as provided in this Warrant. The
Company will forthwith mail a copy of each such certificate to
each holder of a Warrant, and will, on the written request at any
time of any holder of a Warrant (such request shall not be made
more than once in any Fiscal Quarter), furnish to such holder a
like certificate setting forth the Purchase Price at the time in
effect and showing how it was calculated.
8. Notices of Record Date, etc. In the event of
(a) any taking by the Company of a record of the holders of any
class of securities for the purpose of determining the holders
thereof who are entitled to receive any dividend or other
distribution, or any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right or any
declaration of a cash dividend on the Common Stock, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the
Company or any transfer of all or substantially all the assets of
the Company to or consolidation or merger of the Company with or
into any other person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company, or
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(d) any proposed issue or grant by the Company of any shares of
stock of any class or any other securities, or any right or
option to subscribe for, purchase or otherwise acquire any shares
of stock of any class or any other securities (other than the
issue of Common Stock on the exercise of the Warrants),
then and in each such event the Company will mail or cause to be
mailed to each holder of a Warrant a notice specifying (i) the
date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and stating the amount and
character of such dividend, distribution or right, (ii) the date
on which any such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution,
liquidation or winding-up is to take place, and the time, if any
is to be fixed, as of which the holders of record of Common Stock
(or Other Securities) shall be entitled to exchange their shares
of Common Stock (or Other Securities) for securities or other
property deliverable on such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution,
liquidation or winding-up, and (iii) the amount and character of
any stock or other securities, or rights or options with respect
thereto, proposed to be issued or granted, the date of such
proposed issue or grant and the persons or class of persons to
whom such proposed issue or grant is to be offered or made. Such
notice shall be mailed at least twenty (20) days prior to the
date specified in such notice on which any such action is to be
taken, except with respect to the grant of options under the
Company's Employee Stock Option/Purchase Plans in which case such
notice shall be given not later than the date of grant.
9. Reservation of Stock, etc. Issuable on Exercise of Warrants.
The Company will at all times reserve and keep available, solely
for issuance and delivery on the exercise of the Warrants, all
shares of Common Stock (or Other Securities) from time to time
issuable on the exercise of the Warrants.
10. Representations and Warranties of the Company. This Warrant
is issued and delivered by the Company on the basis of the
following:
(a) Authorization and Delivery. This Warrant has been duly
authorized and executed by the Company and when delivered will be
the valid and binding obligation of the Company enforceable in
accordance with its terms;
(b) Warrant Shares. The shares of Common Stock to be
issued pursuant to this Warrant have been duly authorized and
reserved for issuance by the Company and, when issued and paid
for in accordance with the terms hereof, will be validly issued,
fully paid and nonassessable;
(c) Rights and Privileges. The rights, preferences,
privileges and restrictions granted to or imposed upon such
shares of Common Stock and the holders thereof are as set forth
herein and in the Company's Articles of Incorporation.
(d) No Inconsistency. The execution and delivery of this
Warrant are not, and the issuance of the shares of Common Stock
upon exercise of this Warrant in accordance with the terms hereof
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will not be, inconsistent with the Company's Articles of
Incorporation or by-laws, do not and will not contravene any law,
governmental rule or regulation, judgment or order applicable to
the Company, and do not and will not contravene any provision of,
or constitute a default under, any indenture, mortgage, contract
or other instrument of which the Company is a party or by which
it is bound or require the consent or approval of, the giving of
notice to, the registration with the taking of any action in
respect of or by, any Federal, state or local government
authority or agency or other person.
11. Exchange of Warrants. On surrender for exchange of any
Warrant, properly endorsed, to the Company, the Company at its
expense will issue and deliver to or on the order of the holder
thereof a new Warrant or Warrants of like tenor, in the name of
such holder or as such holder (on payment by such holder of any
applicable transfer taxes) may direct, calling in the aggregate
on the face or faces thereof for the number of shares of Common
Stock called for on the face or faces of the Warrant or Warrants
so surrendered.
12. Replacement of Warrants. On receipt of evidence
reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of any Warrant and, in the case of any
such loss, theft or destruction of any Warrant, on delivery of an
indemnity agreement or security reasonably satisfactory in form
and amount to the Company or, in the case of any such mutilation,
on surrender and cancellation of such Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a new Warrant
of like tenor.
13. Warrant Agent. The Company may, by written notice to
each holder of a Warrant, appoint an agent having an office in
Boston, Massachusetts for the purpose of issuing Common Stock (or
Other Securities) on the exercise of the Warrants pursuant to
Section 1, exchanging Warrants pursuant to Section 11, and
replacing Warrants pursuant to Section 12, or any of the
foregoing, and thereafter any such issuance, exchange or
replacement, as the case may be, shall be made at such office by
such agent.
14. Remedies. The Company stipulates that the remedies at
law of the holder of this Warrant in the event of any default or
threatened default by the Company in the performance of or
compliance with any of the terms of this Warrant are not and will
not be adequate, and that such terms may be specifically enforced
by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any
of the terms hereof or otherwise.
15. Negotiability, etc. This Warrant is issued upon the
following terms, to all of which each holder or owner hereof by
the taking hereof consents and agrees:
(a) title to this Warrant may be transferred by
endorsement (by the holder hereof executing the form of
assignment at the end hereof) and delivery in the same
manner as in the case of a negotiable instrument
transferable by endorsement and delivery; and
14
<PAGE>
(b) any person in possession of this Warrant properly
endorsed for transfer to such person (including endorsed in
blank) is authorized to represent himself as absolute owner
hereof and is empowered to transfer absolute title hereto by
endorsement and delivery hereof to a bona fide purchaser
hereof for value; each prior taker or owner waives and
renounces all of his equities or rights in this Warrant in
favor of each such bona fide purchaser, and each such bona
fide purchaser shall acquire absolute title hereto and to
all rights represented hereby. Nothing in this
paragraph (b) shall create any liability on the part of the
Company beyond any liability or responsibility it has under
law.
16. Notices, etc. All notices and other communications
from the Company to the holder of this Warrant shall be mailed by
first class registered or certified mail, postage prepaid, at
such address as may have been furnished to the Company in writing
by such holder or, until any such holder furnishes to the Company
an address, then to, and at the address of, the last holder of
this Warrant who has so furnished an address to the Company.
17. Miscellaneous. This Warrant and any term hereof may be
changed, waived, discharged or terminated only by an instrument
in writing signed by the party against which enforcement of such
change, waiver, discharge or termination is sought. This Warrant
shall be construed and enforced in accordance with and governed
by the laws of the Commonwealth of Massachusetts. The headings
in this Warrant are for purposes of reference only, and shall not
limit or otherwise affect any of the terms hereof. This Warrant
is being executed as an instrument under seal. The invalidity or
unenforceability of any provision hereof shall in no way affect
the validity or enforceability of any other provision.
18. Expiration. The right to exercise this Warrant shall
expire at 5:00 p.m., Manchester, New Hampshire time, on
July, 2009. Notwithstanding the foregoing, this Warrant
shall automatically be deemed to be exercised in full pursuant to
the provisions of Section 1.5 hereof, without any further action
on behalf of the holder, immediately prior to the time this
Warrant would otherwise expire pursuant to the preceding
sentence.
[SIGNATURE PAGE FOLLOWS]
15
IN WITNESS WHEREOF, the Company has executed this Warrant
under seal as of the date first written above.
WPI GROUP, INC.
By:/s/John W. Powers
------------------
John W. Powers
Vice President/Chief Financial
Officer
[Corporate Seal]
Attest:
By:/s/Michael Tule
----------------------
Name:Michael Tule
Title:Secretary
16
<PAGE>
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
WPI GROUP, INC.
The undersigned, the holder of the within Warrant, hereby
irrevocably elects to exercise this Warrant for, and to purchase
thereunder, ........ shares of Common Stock of WPI GROUP, INC.
and herewith makes payment of $........ therefor, and requests
that the certificates for such shares be issued in the name of,
and delivered to .............., federal taxpayer identification
number ............, whose address is ...................
Dated:
-----------------------------
(Signature must conform to name
of holder as specified on the
face of the Warrant)
------------------------------
(Address)
Signed in the presence of:
- ----------------------------
----------------------------------------
FORM OF ASSIGNMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns,
and transfers unto .................., federal taxpayer
identification number ..........., whose address is ............,
the right represented by the within Warrant to purchase
............. shares of Common Stock of WPI GROUP, INC. to which
the within Warrant relates, and appoints
.......................... Attorney to transfer such right on the
books of WPI GROUP, INC. with full power of substitution in the
premises.
Dated:
------------------------------
(Signature must conform to name
of holder as specified on the
face of the Warrant)
-------------------------------
(Address)
Signed in the presence of:
- --------------------------------
17
<PAGE>
EXHIBIT 10.52
THIS WARRANT AND THE UNDERLYING SHARES OF COMMON STOCK ISSUABLE
UPON ITS EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS,
AND MAY NOT BE SOLD OR TRANSFERRED WITHOUT COMPLIANCE WITH THE
REGISTRATION OR QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL
AND STATE SECURITIES LAWS OR APPLICABLE EXEMPTIONS THEREFROM.
THE SECURITIES REPRESENTED BY THIS WARRANT ARE SUBJECT TO A
REGISTRATION RIGHTS AGREEMENT DATED AS OF AUGUST 16, 1999 (THE
"REGISTRATION AGREEMENT"). COPIES OF THE REGISTRATION AGREEMENT
ARE ON FILE AT THE OFFICE OF THE SECRETARY OF THE COMPANY.
No. W- 4 Right to Purchase 24,800
Shares of Common Stock
of
WPI GROUP, INC.
WPI GROUP, INC.
COMMON STOCK PURCHASE WARRANT
August 16, 1999
WPI GROUP, INC., a New Hampshire corporation (the
"Company"), hereby certifies that, for value received, BANK OF
NEW HAMPSHIRE, or its assigns, as a Lender under the Credit
Agreement dated as of August 3, 1998, as amended to date, (the
"Credit Agreement") among the Company, certain of its
subsidiaries, Fleet Bank - NH, as Agent for Lenders identified
therein, and such Lenders, is entitled, subject to the terms set
forth below, to purchase from the Company at any time or from
time to time after August 16, 2000 (subject to acceleration as
hereinafter provided) (the "Initial Exerciseability Date") and
before 5:00 p.m., Manchester, New Hampshire time, on August 16,
2009, 24,800 fully paid and nonassessable shares of Common Stock,
par value $0.01 per share, of the Company, at a purchase price
per share of $2.75 (such purchase price per share as adjusted
from time to time as herein provided is referred to herein as the
"Purchase Price"). The number and character of such shares of
Common Stock and the Purchase Price are subject to adjustment as
provided herein.
This Warrant is one of the Warrants evidencing the right to
purchase shares of Common Stock of the Company issued pursuant to
a certain Third Amendment dated as of August 16, 1999 to the
Credit Agreement (the Credit Agreement, as amended by such Third
Amendment, the "Agreement"), and subject to the Registration
Agreement, a copy of which agreement is on file at the principal
office of the Company, and the holder of this Warrant shall be
entitled to all of the benefits and bound by all of the
applicable obligations of the Registration Agreement, as provided
therein. This Warrant is detachable from the obligations
incurred by the Company pursuant to the Credit Agreement, and
shall survive the satisfaction of such obligations.
<PAGE>
As used herein the following terms, unless the context
otherwise requires, have the following respective meanings:
(a) The term "Company" shall include WPI Group, Inc.,
and any corporation which shall succeed to, or assume the
obligations of, the Company hereunder.
(b) The term "Common Stock" includes (i) the Company's
Common Stock, par value $0.01 per share, as authorized on
the date of the Agreement, (ii) any other capital stock of
any class or classes (however designated) of the Company,
authorized on or after such date, the holders of which shall
have the right, without limitation as to amount per share,
either to all or to a share of the balance of current
dividends and liquidating distributions after the payment of
dividends and distributions on any shares entitled to
preference in the payment thereof, and the holders of which
shall ordinarily, in the absence of contingencies, be
entitled to vote for the election of a majority of directors
of the Company (even though the right so to vote may have
been suspended by the happening of such a contingency) and
(iii) any other securities into which or for which any of
the securities described in (i) or (ii) above may be
converted or exchanged pursuant to a plan of
recapitalization, reorganization, merger, sale of assets or
otherwise.
(c) The term "Other Securities" refers to any stock
(other than Common Stock) and other securities of the
Company or any other person (corporate or otherwise) which
the holders of the Warrants at any time shall be entitled to
receive, or shall have received, on the exercise of the
Warrants, in lieu of or in addition to Common Stock, or
which at any time shall be issuable or shall have been
issued in exchange for or in replacement of Common Stock or
Other Securities pursuant to Section 5 or otherwise.
(d)The term "Warrant" means this Common Stock Purchase
Warrant.
1. Exercise of Warrant.
1.1 Full Exercise. This Warrant may be exercised at any time
before its expiration in full by the holder hereof by surrender
of this Warrant, with the form of subscription at the end hereof
duly executed by such holder, to the Company at its principal
office, accompanied by payment, in cash or by certified or
official bank check payable to the order of the Company, in the
amount obtained by multiplying the number of shares of Common
Stock for which this Warrant is then exercisable by the Purchase
Price then in effect.
1.2 Partial Exercise. This Warrant may be exercised at any time
before its expiration in part (in lots of 100 shares or, if this
Warrant is then exercisable for a lesser amount, in such lesser
amount) by surrender of this Warrant and payment of the Purchase
Price then in effect in the manner and at the place provided in
subsection 1.1, except that the amount payable by the holder on
such partial exercise shall be the amount obtained by multiplying
(a) the number of shares of Common Stock designated by the holder
in the subscription at the end hereof by (b) the Purchase Price
2
<PAGE>
then in effect. On any such partial exercise the Company at its
expense will forthwith issue and deliver to or upon the order of
the holder hereof a new Warrant or Warrants of like tenor, in the
name of the holder hereof or as such holder (upon payment by such
holder of any applicable transfer taxes) may request, calling in
the aggregate on the face or faces thereof for the number of
shares of Common Stock for which such Warrant or Warrants may
still be exercised.
1.3 Company Acknowledgment. The Company will, at the time of
the exercise of this Warrant, upon the request of the holder
hereof acknowledge in writing its continuing obligation to afford
to such holder any rights to which such holder shall continue to
be entitled after such exercise in accordance with the provisions
of this Warrant. If the holder shall fail to make any such
request, such failure shall not affect the continuing obligation
of the Company to afford to such holder any such rights.
1.4 Trustee for Warrant Holders. In the event that a bank or
trust company shall have been appointed as trustee for the
holders of the Warrants pursuant to subsection 4.2, such bank or
trust company shall have all the powers and duties of a warrant
agent appointed pursuant to Section 13 and shall accept, in its
own name for the account of the Company or such successor person
as may be entitled thereto, all amounts otherwise payable to the
Company or such successor, as the case may be, on exercise of
this Warrant pursuant to this Section 1.
1.5 Net Issue Election. The holder may elect to receive,
without the payment by the holder of any additional
consideration, shares equal to the value of this Warrant or any
portion hereof by the surrender of this Warrant or such portion
to the Company, with the net issue election notice annexed hereto
duly executed, at the office of the Company. Thereupon, the
Company shall issue to the holder such number of fully paid and
nonassessable shares of Common Stock as is computed using the
following formula:
X = Y (A-B)
A
where X = the number of shares to be issued to the holder
pursuant to this Section 1.5.
Y = the number of shares covered by this Warrant in
respect of which the net issue election is made
pursuant to this Section 1.5.
A = the fair market value of one share of Common
Stock, as determined in accordance with the provisions
of this Section 1.5.
B = the Purchase Price in effect under this Warrant at
the time the net issue election is made pursuant to
this Section 1.5.
For purposes of this Section 1.5, the "fair market value" per
share of the Company's Common Stock shall mean:
3
<PAGE>
(a) If the Common Stock is traded on a national
securities exchange or admitted to unlisted trading
privileges on such an exchange, or is listed on the National
Market (the "National Market") of the National Association
of Securities Dealers Automated Quotations System (the
"NASDAQ"), the fair market value shall be the last reported
sale price of the Common Stock on such exchange or on the
National Market on the last business day before the
effective date of exercise of the net issue election or if
no such sale is made on such day, the mean of the closing
bid and asked prices for such day on such exchange or on the
National Market;
(b) If the Common Stock is not so listed or admitted
to unlisted trading privileges, the fair market value shall
be the mean of the last bid and asked prices reported on the
last business day before the date of the election (1) by the
NASDAQ or (2) if reports are unavailable under clause (a)
above by the National Quotation Bureau Incorporated; and
(c) If the Common Stock is not so listed or admitted
to unlisted trading privileges and bid and ask prices are
not reported, the fair market value shall be the price per
share which the Company could obtain from a willing buyer
for shares sold by the Company from authorized but unissued
shares, as such price shall be determined by mutual
agreement of the Company and the holder of this Warrant. If
the holder of this Warrant and the Company are unable to
agree on such fair market value, the holder of this Warrant
shall select a pool of three independent and nationally-
recognized investment banking firms from which the Company
shall select one such firm to appraise the fair market value
of the Warrant and to perform the computations involved.
The determination of such investment banking firm shall be
binding upon the Company, the holder of this Warrant and any
other holder of Warrants or Warrant Shares in connection
with any transaction occurring at the time of such
determination. All expenses of such investment banking firm
shall be borne by the Company. In all cases, the
determination of fair market value shall be made without
consideration of the lack of a liquid public market for the
Common Stock and without consideration of any "control
premium" or any discount for holding less than a majority or
controlling interest of the outstanding Common Stock.
1.6 Acceleration of Exercisability. Notwithstanding
the Initial Exercise DateExercisability Date, the Warrant shall
become exercisable on any earlier date that notices are sent to
holders of shares of Common Stock as contemplated in Section 8
with respect to any of the events set forth in subsection 4.1,
and the holder of this Warrant shall be entitled to receive any
such notice as provided in Section 8.
2. Delivery of Stock Certificates, etc. on Exercise. As soon
as practicable after the exercise of this Warrant in full or in
part, and in any event within ten (10) days thereafter, the
Company at its expense (including the payment by it of any
applicable issue taxes) will cause to be issued in the name of
and delivered to the holder hereof, or as such holder (upon
payment by such holder of any applicable transfer taxes) may
direct, a certificate or certificates for the number of fully
paid and nonassessable shares of Common Stock (or Other
Securities) to which such holder shall be entitled on such
exercise, plus, in lieu of any fractional share to which such
4
<PAGE>
holder would otherwise be entitled, cash equal to such fraction
multiplied by the then current market value of one full share,
together with any other stock or other securities and property
(including cash, where applicable) to which such holder is
entitled upon such exercise pursuant to Section 1 or otherwise.
3. Adjustment for Dividends in Other Stock, Property, etc.;
Reclassification, etc. In case at any time or from time to time,
the holders of Common Stock (or Other Securities) in their
capacity as such shall have received, or (on or after the record
date fixed for the determination of shareholders eligible to
receive) shall have become entitled to receive, without payment
therefor,
(a) other or additional stock or other securities or property
(other than cash) by way of dividend, or
(b) any cash (excluding cash dividends payable solely out of
earnings or earned surplus of the Company), or
(c) other or additional stock or other securities or property
(including cash) by way of spin-off, split-up, reclassification,
recapitalization, combination of shares or similar corporate
rearrangement,
other than additional shares of Common Stock (or Other
Securities) issued as a stock dividend or in a stock-split
(adjustments in respect of which are provided for in Section 5),
then and in each such case the holder of this Warrant, on the
exercise hereof as provided in Section 1, shall be entitled to
receive the amount of stock and other securities and property
(including cash in the cases referred to in subdivisions (b) and
(c) of this Section 3) which such holder would hold on the date
of such exercise if on the date hereof he had been the holder of
record of the number of shares of Common Stock called for on the
face of this Warrant and had thereafter, during the period from
the date hereof to and including the date of such exercise,
retained such shares and all such other or additional stock and
other securities and property (including cash in the cases
referred to in subdivisions (b) and (c) of this Section 3)
receivable by him as aforesaid during such period, giving effect
to all adjustments called for during such period by Sections 4
and 5.
4. Adjustment for Reorganization, Consolidation, Merger, etc.
4.1 Reorganization, Consolidation, Merger, etc. In case at any
time or from time to time, the Company shall (a) effect a capital
reorganization or reclassification of its capital stock, (b)
consolidate with or merge into any other person, or (c) transfer
all or substantially all of its properties or assets to any other
corporation or other business entity under any plan or
arrangement contemplating the dissolution of the Company, then,
in each such case, the holder of this Warrant, on the exercise
hereof as provided in Section 1 at any time after the
consummation of such reorganization, consolidation or merger or
the effective date of such dissolution, as the case may be, shall
receive, in lieu of the Common Stock (or Other Securities)
issuable on such exercise prior to such consummation or such
effective date, the stock and other securities and property
(including cash) to which such holder would have been entitled
5
<PAGE>
upon such consummation or in connection with such dissolution, as
the case may be, if such holder had so exercised this Warrant,
immediately prior thereto, all subject to further adjustment
thereafter as provided in Sections 3 and 5. The Company will not
effect any such consolidation, merger or sale unless, prior to
the consummation thereof, the successor corporation (if other
than the Company) resulting from such consolidation or merger or
the corporation purchasing such assets shall assume by written
instrument mailed or delivered to the holder of this Warrant at
the last address of such holder appearing on the books of the
Company, the obligation to delivery to such holder such shares of
stock, securities or assets as, in accordance with the foregoing
provisions, such holder may be entitled to purchase.
4.2 Dissolution. In the event of any dissolution of the Company
following the transfer of all or substantially all of its
properties or assets, the Company, prior to such dissolution,
shall at its expense deliver or cause to be delivered the stock
and other securities and property (including cash, where
applicable) receivable by the holders of the Warrants after the
effective date of such dissolution pursuant to this Section 4 to
a bank or trust company having its principal office in
Manchester, New Hampshire or Boston, Massachusetts, as trustee
for the holder or holders of the Warrants.
4.3 Continuation of Terms. Upon any reorganization,
consolidation, merger or transfer (and any dissolution following
any transfer) referred to in this Section 4, this Warrant shall
continue in full force and effect, subject to expiration in
accordance with Section 18 hereof, and the terms hereof shall be
applicable to the shares of stock and other securities and
property receivable on the exercise of this Warrant after the
consummation of such reorganization, consolidation or merger or
the effective date of dissolution following any such transfer, as
the case may be, and shall be binding upon the issuer of any such
stock or other securities, including, in the case of any such
transfer, the person acquiring all or substantially all of the
properties or assets of the Company, whether or not such person
shall have expressly assumed the terms of this Warrant as
provided in Section 6.
5. Anti-Dilution Adjustment.
5.1 General. The Purchase Price shall be subject to adjustment
from time to time as hereinafter provided. Upon each adjustment
of the Purchase Price, the holder of this Warrant shall
thereafter be entitled to purchase, at the Purchase Price
resulting from such adjustment, the number of shares obtained by
multiplying the Purchase Price in effect immediately prior to
such adjustment by the number of shares purchasable pursuant
hereto immediately prior to such adjustment and dividing the
product thereof by the Purchase Price resulting from such
adjustment.
5.2 Purchase Price Adjustments. If and whenever after the date
hereof the Company shall issue or sell any shares of its Common
Stock (except (i) upon exercise of one or more of the Warrants or
(ii) shares of Common Stock issued to employees, officers,
directors of the Company upon the exercise of options granted
under the Company's Employee Stock Option/Purchase Plans
(hereinafter defined) not to exceed in the aggregate 1,200,000
6
<PAGE>
shares of Common Stock) for a consideration per share less than
the Purchase Price in effect immediately prior to the time of
such issue or sale, or shall be deemed under the provisions of
this Section 5 to have effected any such issuance or sale, then,
forthwith upon such issue or sale, the Purchase Price shall be
reduced to the price (calculated to the nearest $0.0001) obtained
by multiplying the Purchase Price in effect immediately prior to
the time of such issue or sale by a fraction, the numerator of
which shall be the sum of (i) the number of shares of Common
Stock outstanding immediately prior to such issue or sale
multiplied by the Purchase Price immediately prior to such issue
or sale plus (ii) the consideration received by the Company upon
such issue or sale, and the denominator of which shall be the
product of (iii) the total number of shares of Common Stock
outstanding immediately after such issue or sale, multiplied by
(iv) the Purchase Price immediately prior to such issue or sale.
As used herein, "Employee Stock Option/Purchase Plans" consist of
the Company's 1997 Equity Incentive Plan, 1995 Stock Option Plan,
Employee Stock Purchase Plan, Employee Bonus Award Plan, and non
qualified options granted to certain Directors of the Company.
Notwithstanding the foregoing, no adjustment of the Purchase
Price shall be made in an amount less than $0.0001 per share, but
any such lesser adjustment shall be carried forward and shall be
made at the time of and together with the next subsequent
adjustment which together with any adjustments so carried forward
shall amount to $0.0001 per share or more.
5.3 Option Grants. In the event that at any time, other than
the issuance of options pursuant to the Company's Employee Stock
Option Plan, the Company shall in any manner grant (directly, by
assumption in a merger or otherwise) any rights to subscribe for
or to purchase, or any options for the purchase of, Common Stock
or any stock or securities convertible into or exchangeable for
Common Stock (such rights or options being herein called
"Options" and such convertible or exchangeable stock or
securities being herein called "Convertible Securities"), whether
or not such Options or the right to convert or exchange any such
Convertible Securities are immediately exercisable, and the price
per share for which Common Stock is issuable upon the exercise of
such Options or upon conversion or exchange of such Convertible
Securities (determined by dividing (i) the total amount, if any,
received or receivable by the Company as consideration for the
granting of such Options, plus the minimum aggregate amount of
additional consideration payable to the Company upon the exercise
of all such Options, plus, in the case of any such Options which
relate to Convertible Securities, the minimum aggregate amount of
additional consideration, if any, payable upon the issue or sale
of such Convertible Securities and upon the conversion or
exchange thereof, by (ii) the total number of shares of Common
Stock issuable upon the exercise of such Options or upon the
conversion or exchange of all such Convertible Securities
issuable upon the exercise of such Options) shall be less than
the Purchase Price in effect immediately prior to the time of the
granting of such Options, then the total number of shares of
Common Stock issuable upon the exercise of such Options or upon
conversion or exchange of the total amount of such Convertible
Securities issuable upon the exercise of such Options shall (as
of the date of granting such Options) be deemed to be outstanding
and to have been issued for such price per share. Except as
otherwise provided in subsection 5.5, no further adjustment of
the Purchase Price shall be made upon the actual issue of such
Common Stock or of such Convertible Securities upon exercise of
such Options or upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities.
7
<PAGE>
5.4 Convertible Security Grants. In the event that the Company
shall in any manner issue (directly, by assumption in a merger or
otherwise) or sell any Convertible Securities (other than
pursuant to the exercise of Options to purchase such Convertible
Securities covered by subsection 5.3), whether or not the rights
to exchange or convert thereunder are immediately exercisable,
and the price per share for which Common Stock is issuable upon
such conversion or exchange (determined by dividing (i) the total
amount received or receivable by the Company as consideration for
the issue or sale of such Convertible Securities, plus the
minimum aggregate amount of additional consideration, if any,
payable to the Company upon the conversion or exchange thereof,
by (ii) the total maximum number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible
Securities) shall be less than the Purchase Price in effect
immediately prior to the time of such issue or sale, then the
total maximum number of shares of Common Stock issuable upon
conversion or exchange of all such Convertible Securities shall
(as of the date of the issue or sale of such Convertible
Securities) be deemed to be outstanding and to have been issued
for such price per share, provided that, except as otherwise
provided in subsection 5.5, no further adjustment of the Purchase
Price shall be made upon the actual issue of such Common Stock
upon conversion or exchange of such Convertible Securities.
5.5 Effect of Alteration to Option or Convertible Security
Terms. In connection with any change in, or the expiration or
termination of, the purchase rights under any Option or the
conversion or exchange rights under any Convertible Securities,
the following provisions shall apply:
(A) If the purchase price provided for in any
Option referred to in subsection 5.3, the additional
consideration, if any, payable upon the conversion or
exchange of any Convertible Securities referred to in
subsection 5.3 or 5.4, or the rate at which any Convertible
Securities referred to in subsection 5.3 or 5.4 are
convertible into or exchangeable for Common Stock shall
change at any time (other than under or by reason of
provisions designed to protect against dilution), then the
Purchase Price in effect at the time of such change shall
forthwith be increased or decreased to the Purchase Price
which would be in effect immediately after such change if
(a) the adjustments which were made upon the issuance of such
Options or Convertible Securities had been made upon the
basis of (and taking into account the total consideration
received for) (i) the issuance at that time of the Common
Stock, if any, delivered upon the exercise of any such
Options or upon the conversion or exchange of any such
Convertible Securities before such change, and (ii) the
issuance at that time of all such Options or Convertible
Securities, with terms and provisions reflecting such change,
which are still outstanding after such change, and (b) the
Purchase Price as adjusted pursuant to clause (a) preceding
had been used as the basis for the adjustments required
hereunder in connection with all other issues or sales of
Common Stock, Options or Convertible Securities by the
Company subsequent to the issuance of such Options or
Convertible Securities.
8
<PAGE>
(B) On the partial or complete expiration of any
Options or termination of any right to convert or exchange
Convertible Securities, the Purchase Price then in effect
hereunder shall forthwith be increased or decreased to the
Purchase Price which would be in effect at the time of such
expiration or termination if (a) the adjustments which were
made upon the issuance of such Options or Convertible
Securities had been made upon the basis of (and taking into
account the total consideration received for) (i) the
issuance at that time of the Common Stock, if any, delivered
upon the exercise of such Options or upon the conversion or
exchange of such Convertible Securities before such
expiration or termination, and (ii) the issuance at that time
of only those such Options or Convertible Securities which
remain outstanding after such expiration or termination, and
(b) the Purchase Price as adjusted pursuant to clause (a)
preceding had been used as the basis for adjustments required
hereunder in connection with all other issues or sales of
Common Stock, Options or Convertible Securities by the
Company subsequent to the issuance of such Options or
Convertible Securities.
(C) If the purchase price provided for in any
Option referred to in subsection 5.3 or the rate at which any
Convertible Securities referred to in subsection 5.3 or 5.4
are convertible into or exchangeable for Common Stock shall
be reduced at any time under or by reason ofr provisions with
respect thereto designed to protect against dilution, and the
event causing such reduction is one that did not also require
an adjustment in the Purchase Price under other provisions of
this Section 5, then in case of the delivery of shares of
Common Stock upon the exercise of any such Option or upon
conversion or exchange of any such Convertible Securities,
the Purchase Price then in effect hereunder shall forthwith
be adjusted to such amount as would have obtained if such
Option or Convertible Securities had never been issued and if
the adjustments made upon the issuance of such Option or
Convertible Securities had been made upon the basis of the
issuance of (and taking into account the total consideration
received for) the shares of Common Stock delivered as
aforesaid (provided that the Purchase Price used in such
determination shall be the Purchase Price on the date of
issue of such shares); provided that no such adjustment shall
be made unless the Purchase Price then in effect would be
reduced thereby.
5.6 Dividends of Common Stock, Options or Convertible
Securities. In the event that the Company shall declare a
dividend or make any other distribution upon any stock of the
Company payable in Common Stock, Options or Convertible
Securities, any Common Stock, Options or Convertible Securities,
as the case may be, issuable in payment of such dividend or
distribution shall be deemed to have been issued or sold without
consideration.
5.7 Dilution in Case of Other Securities. In case any Other
Securities shall be issued or sold by the Company, or shall
become subject to issue upon the conversion or exchange of any
stock (or Other Securities) of the Company (or any other issuer
of Other Securities or any other person referred to in Section 4)
or to subscription, purchase or other acquisition pursuant to any
rights or options granted by the Company (or such other issuer or
person), for a consideration per share such as to dilute the
purchase rights evidenced by this Warrant, the computations,
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<PAGE>
adjustments and readjustments provided for in this Section 5 with
respect to the Purchase Price and the number of shares of Common
Stock issuable upon exercise of this Warrant shall be made as
nearly as possible in the manner so provided and applied to
determine the amount of Other Securities from time to time
receivable on the exercise of the Warrants, so as to protect the
holders of the Warrants against the effect of such dilution.
5.8 Stock Splits and Reverse Splits. In the event that the
Company shall at any time subdivide its outstanding shares of
Common Stock into a greater number of shares, the Purchase Price
in effect immediately prior to such subdivision shall be
proportionately reduced and the number of Warrant Shares
purchasable pursuant to this Warrant immediately prior to such
subdivision shall be proportionately increased, and conversely,
in the event that the outstanding shares of Common Stock of the
Company shall at any time be combined into a smaller number of
shares, the Purchase Price in effect immediately prior to such
combination shall be proportionately increased and the number of
Warrant Shares purchasable upon the exercise of this Warrant
immediately prior to such combination shall be proportionately
reduced. Except as provided in this subsection 5.8 no adjustment
in the Purchase Price and no change in the number of Warrant
Shares purchasable shall be made under this Section 5 as a result
of or by reason of any such subdivision or combination.
5.9 Determination of Consideration Received. For purposes of
this Section 5, the amount of consideration received by the
Company in connection with the issuance or sale of Common Stock,
Options or Convertible Securities shall be determined in
accordance with the following:
(A) In the event that shares of Common Stock,
Options or Convertible Securities shall be issued or sold for
cash, the consideration received therefor shall be deemed to
be the amount payable to the Company therefor, without
deduction therefrom of any expenses incurred or any
underwriting commissions or concessions or discounts paid or
allowed by the Company in connection therewith.
(B) In the event that any shares of Common Stock,
Options or Convertible Securities shall be issued or sold for
a consideration other than cash, the amount of the
consideration other than cash payable to the Company shall be
deemed to be the fair value of such consideration as
reasonably determined by the Board of Directors of the
Company, without deduction of any expenses incurred or any
underwriting commissions or concessions or discounts paid or
allowed by the Company in connection therewith.
(C) The amount of consideration deemed to be
received by the Company pursuant to the foregoing provisions
of this subsection 5.9 upon any issuance and/or sale,
pursuant to an established compensation plan of the Company,
to directors, officers or employees of the Company in
connection with their employment, of shares of Common Stock,
Options or Convertible Securities, shall be increased by the
amount of any tax benefit realized by the Company as a result
of such issuance and/or sale, the amount of such tax benefit
being the amount by which the federal and/or state income or
other tax liability of the Company shall be reduced by reason
of any deduction or credit in respect of such issuance and/or
sale.
10
<PAGE>
(D) In the event that any shares of Common Stock,
Options or Convertible Securities shall be issued in
connection with any merger in which the Company is the
surviving corporation, the amount of consideration therefor
shall be deemed to be the fair value as reasonably determined
by the Board of Directors of the Company of such portion of
the assets and business of the non-surviving corporation as
such Board shall determine to be attributable to such Common
Stock, Options or Convertible Securities, as the case may be.
(E) In the event that any Common Stock, Options
and/or Convertible Securities shall be issued in connection
with the issue and sale of other securities or property of
the Company, together comprising one integral transaction in
which no specific consideration is allocated to such Common
Stock, Options or Convertible Securities by the parties
thereto, such Common Stock, Options and/or Convertible
Securities shall be deemed to have been issued without
consideration.
5.10 Record Date as Date of Issue or Sale. In the event that at
any time the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them (i) to receive a
dividend or other distribution payable in Common Stock, Options
or Convertible Securities, or (ii) to subscribe for or purchase
Common Stock, Options or Convertible Securities, then such record
date shall be deemed to be the date of the issue or sale of the
shares of Common Stock deemed to have been issued or sold upon
the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
5.11 Treasury Stock. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or
held by or for the account of the Company, and the disposition of
any such shares (other than their cancellation without
reissuance) shall be considered an issue or sale of Common Stock
for the purposes of this Section 5.
6. No Dilution or Impairment. The Company will not, by
amendment of its Articles of Incorporation or through any
reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of
any of the terms of the Warrants, but will at all times in good
faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in
order to protect the rights of the holders of the Warrants
against dilution or other impairment. Without limiting the
generality of the foregoing, the Company (a) will not increase
the par value or stated value of any shares of stock receivable
on the exercise of the Warrants above the amount payable therefor
on such exercise, (b) will take all such action as may be
necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable shares of stock on
the exercise of all Warrants from time to time outstanding,
(c) will not issue any capital stock of any class which is
preferred as to dividends or as to the distribution of assets
upon voluntary or involuntary dissolution, liquidation or winding
11
<PAGE>
up, unless the rights of the holders thereof shall be limited to
a fixed sum or percentage of par value in respect of
participation in dividends and in any such distribution of assets
or such stock shall be non voting and not be convertible into
shares of Common Stock or other voting stock, and (d) will not
transfer all or substantially all of its properties and assets to
any other person (corporate or otherwise), or consolidate with or
merge into any other person or permit any such person to
consolidate with or merge into the Company (if the Company is not
the surviving person), unless such other person shall expressly
assume in writing and become bound by all the terms of the
Warrants.
7. Accountants' Certificate as to Adjustments. In each case of
any adjustment or readjustment in the shares of Common Stock (or
Other Securities) issuable on the exercise of the Warrants, the
Company's chief financial officer will compute, or if requested
by the holders of Warrants to purchase over 50% of the shares of
Common Stock which may be purchased upon exercise of the Warrants
the Company at its expense will promptly cause independent
certified public accountants of recognized standing selected by
the Company at its expense to compute, such adjustment or
readjustment in accordance with the terms of the Warrants and
prepare a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such
adjustment or readjustment is based, including a statement of (a)
the consideration received or receivable by the Company for any
additional shares of Common Stock (or Other Securities) issued or
sold or deemed to have been issued or sold, (b) the number of
shares of Common Stock (or Other Securities) outstanding or
deemed to be outstanding, and (c) the Purchase Price and the
number of shares of Common Stock to be received upon exercise of
this Warrant, in effect immediately prior to such issue or sale
and as adjusted and readjusted as provided in this Warrant. The
Company will forthwith mail a copy of each such certificate to
each holder of a Warrant, and will, on the written request at any
time of any holder of a Warrant (such request shall not be made
more than once in any Fiscal Quarter), furnish to such holder a
like certificate setting forth the Purchase Price at the time in
effect and showing how it was calculated.
8. Notices of Record Date, etc. In the event of
(a) any taking by the Company of a record of the holders of any
class of securities for the purpose of determining the holders
thereof who are entitled to receive any dividend or other
distribution, or any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right or any
declaration of a cash dividend on the Common Stock, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the
Company or any transfer of all or substantially all the assets of
the Company to or consolidation or merger of the Company with or
into any other person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company, or
12
<PAGE>
(d) any proposed issue or grant by the Company of any shares of
stock of any class or any other securities, or any right or
option to subscribe for, purchase or otherwise acquire any shares
of stock of any class or any other securities (other than the
issue of Common Stock on the exercise of the Warrants),
then and in each such event the Company will mail or cause to be
mailed to each holder of a Warrant a notice specifying (i) the
date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and stating the amount and
character of such dividend, distribution or right, (ii) the date
on which any such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution,
liquidation or winding-up is to take place, and the time, if any
is to be fixed, as of which the holders of record of Common Stock
(or Other Securities) shall be entitled to exchange their shares
of Common Stock (or Other Securities) for securities or other
property deliverable on such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution,
liquidation or winding-up, and (iii) the amount and character of
any stock or other securities, or rights or options with respect
thereto, proposed to be issued or granted, the date of such
proposed issue or grant and the persons or class of persons to
whom such proposed issue or grant is to be offered or made. Such
notice shall be mailed at least twenty (20) days prior to the
date specified in such notice on which any such action is to be
taken, except with respect to the grant of options under the
Company's Employee Stock Option/Purchase Plans in which case such
notice shall be given not later than the date of grant.
9. Reservation of Stock, etc. Issuable on Exercise of Warrants.
The Company will at all times reserve and keep available, solely
for issuance and delivery on the exercise of the Warrants, all
shares of Common Stock (or Other Securities) from time to time
issuable on the exercise of the Warrants.
10. Representations and Warranties of the Company. This Warrant
is issued and delivered by the Company on the basis of the
following:
(a) Authorization and Delivery. This Warrant has been duly
authorized and executed by the Company and when delivered will be
the valid and binding obligation of the Company enforceable in
accordance with its terms;
(b) Warrant Shares. The shares of Common Stock to be
issued pursuant to this Warrant have been duly authorized and
reserved for issuance by the Company and, when issued and paid
for in accordance with the terms hereof, will be validly issued,
fully paid and nonassessable;
(c) Rights and Privileges. The rights, preferences,
privileges and restrictions granted to or imposed upon such
shares of Common Stock and the holders thereof are as set forth
herein and in the Company's Articles of Incorporation.
(d) No Inconsistency. The execution and delivery of this
Warrant are not, and the issuance of the shares of Common Stock
upon exercise of this Warrant in accordance with the terms hereof
13
<PAGE>
will not be, inconsistent with the Company's Articles of
Incorporation or by-laws, do not and will not contravene any law,
governmental rule or regulation, judgment or order applicable to
the Company, and do not and will not contravene any provision of,
or constitute a default under, any indenture, mortgage, contract
or other instrument of which the Company is a party or by which
it is bound or require the consent or approval of, the giving of
notice to, the registration with the taking of any action in
respect of or by, any Federal, state or local government
authority or agency or other person.
11. Exchange of Warrants. On surrender for exchange of any
Warrant, properly endorsed, to the Company, the Company at its
expense will issue and deliver to or on the order of the holder
thereof a new Warrant or Warrants of like tenor, in the name of
such holder or as such holder (on payment by such holder of any
applicable transfer taxes) may direct, calling in the aggregate
on the face or faces thereof for the number of shares of Common
Stock called for on the face or faces of the Warrant or Warrants
so surrendered.
12. Replacement of Warrants. On receipt of evidence
reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of any Warrant and, in the case of any
such loss, theft or destruction of any Warrant, on delivery of an
indemnity agreement or security reasonably satisfactory in form
and amount to the Company or, in the case of any such mutilation,
on surrender and cancellation of such Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a new Warrant
of like tenor.
13. Warrant Agent. The Company may, by written notice to
each holder of a Warrant, appoint an agent having an office in
Boston, Massachusetts for the purpose of issuing Common Stock (or
Other Securities) on the exercise of the Warrants pursuant to
Section 1, exchanging Warrants pursuant to Section 11, and
replacing Warrants pursuant to Section 12, or any of the
foregoing, and thereafter any such issuance, exchange or
replacement, as the case may be, shall be made at such office by
such agent.
14. Remedies. The Company stipulates that the remedies at
law of the holder of this Warrant in the event of any default or
threatened default by the Company in the performance of or
compliance with any of the terms of this Warrant are not and will
not be adequate, and that such terms may be specifically enforced
by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any
of the terms hereof or otherwise.
15. Negotiability, etc. This Warrant is issued upon the
following terms, to all of which each holder or owner hereof by
the taking hereof consents and agrees:
(a) title to this Warrant may be transferred by
endorsement (by the holder hereof executing the form of
assignment at the end hereof) and delivery in the same
manner as in the case of a negotiable instrument
transferable by endorsement and delivery; and
14
<PAGE>
(b) any person in possession of this Warrant properly
endorsed for transfer to such person (including endorsed in
blank) is authorized to represent himself as absolute owner
hereof and is empowered to transfer absolute title hereto by
endorsement and delivery hereof to a bona fide purchaser
hereof for value; each prior taker or owner waives and
renounces all of his equities or rights in this Warrant in
favor of each such bona fide purchaser, and each such bona
fide purchaser shall acquire absolute title hereto and to
all rights represented hereby. Nothing in this
paragraph (b) shall create any liability on the part of the
Company beyond any liability or responsibility it has under
law.
16. Notices, etc. All notices and other communications
from the Company to the holder of this Warrant shall be mailed by
first class registered or certified mail, postage prepaid, at
such address as may have been furnished to the Company in writing
by such holder or, until any such holder furnishes to the Company
an address, then to, and at the address of, the last holder of
this Warrant who has so furnished an address to the Company.
17. Miscellaneous. This Warrant and any term hereof may be
changed, waived, discharged or terminated only by an instrument
in writing signed by the party against which enforcement of such
change, waiver, discharge or termination is sought. This Warrant
shall be construed and enforced in accordance with and governed
by the laws of the Commonwealth of Massachusetts. The headings
in this Warrant are for purposes of reference only, and shall not
limit or otherwise affect any of the terms hereof. This Warrant
is being executed as an instrument under seal. The invalidity or
unenforceability of any provision hereof shall in no way affect
the validity or enforceability of any other provision.
18. Expiration. The right to exercise this Warrant shall
expire at 5:00 p.m., Manchester, New Hampshire time, on
July_____, 2009. Notwithstanding the foregoing, this Warrant
shall automatically be deemed to be exercised in full pursuant to
the provisions of Section 1.5 hereof, without any further action
on behalf of the holder, immediately prior to the time this
Warrant would otherwise expire pursuant to the preceding
sentence.
[SIGNATURE PAGE FOLLOWS]
15
<PAGE>
IN WITNESS WHEREOF, the Company has executed this Warrant
under seal as of the date first written above.
WPI GROUP, INC.
By:/s/John W. Powers
------------------------
John W. Powers
Vice President/Chief
Financial Officer
[Corporate Seal]
Attest:
By:/s/Michael Tule
------------------------
Name:Michael Tule
Title:Secretary
16
<PAGE>
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
WPI GROUP, INC.
The undersigned, the holder of the within Warrant, hereby
irrevocably elects to exercise this Warrant for, and to purchase
thereunder, ........ shares of Common Stock of WPI GROUP, INC.
and herewith makes payment of $........ therefor, and requests
that the certificates for such shares be issued in the name of,
and delivered to .............., federal taxpayer identification
number ............, whose address is ...................
Dated:
-------------------------------
(Signature must conform to name
of holder as specified on the
face of the Warrant)
--------------------------------
(Address)
Signed in the presence of:
- -------------------------------
-------------------------------------
FORM OF ASSIGNMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns,
and transfers unto .................., federal taxpayer
identification number ..........., whose address is ............,
the right represented by the within Warrant to purchase
............. shares of Common Stock of WPI GROUP, INC. to which
the within Warrant relates, and appoints
.......................... Attorney to transfer such right on the
books of WPI GROUP, INC. with full power of substitution in the
premises.
Dated:
----------------------------------
(Signature must conform to name
of holder as specified on the
face of the Warrant)
-----------------------------------
(Address)
Signed in the presence of:
- ------------------------------
17
<PAGE>
EXHIBIT 10.53
THIS WARRANT AND THE UNDERLYING SHARES OF COMMON STOCK ISSUABLE
UPON ITS EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS,
AND MAY NOT BE SOLD OR TRANSFERRED WITHOUT COMPLIANCE WITH THE
REGISTRATION OR QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL
AND STATE SECURITIES LAWS OR APPLICABLE EXEMPTIONS THEREFROM.
THE SECURITIES REPRESENTED BY THIS WARRANT ARE SUBJECT TO A
REGISTRATION RIGHTS AGREEMENT DATED AS OF AUGUST 16, 1999 (THE
"REGISTRATION AGREEMENT"). COPIES OF THE REGISTRATION AGREEMENT
ARE ON FILE AT THE OFFICE OF THE SECRETARY OF THE COMPANY.
No. W - 1 Right to Purchase 37,200
Shares of Common Stock
of
WPI GROUP, INC.
WPI GROUP, INC.
COMMON STOCK PURCHASE WARRANT
August 16, 1999
WPI GROUP, INC., a New Hampshire corporation (the
"Company"), hereby certifies that, for value received, FLEET BANK
- - NH, or its assigns, as a Lender under the Credit Agreement
dated as of August 3, 1998, as amended to date, (the "Credit
Agreement") among the Company, certain of its subsidiaries, Fleet
Bank - NH, as Agent for Lenders identified therein, and such
Lenders, is entitled, subject to the terms set forth below, to
purchase from the Company at any time or from time to time after
August 16, 2000 (subject to acceleration as hereinafter provided)
(the "Initial Exerciseability Date") and before 5:00 p.m.,
Manchester, New Hampshire time, on August 16, 2009, 37,200 fully
paid and nonassessable shares of Common Stock, par value $0.01
per share, of the Company, at a purchase price per share of $2.75
(such purchase price per share as adjusted from time to time as
herein provided is referred to herein as the "Purchase Price").
The number and character of such shares of Common Stock and the
Purchase Price are subject to adjustment as provided herein.
This Warrant is one of the Warrants evidencing the right to
purchase shares of Common Stock of the Company issued pursuant to
a certain Third Amendment dated as of August 16, 1999 to the
Credit Agreement (the Credit Agreement, as amended by such Third
Amendment, the "Agreement"), and subject to the Registration
Agreement, a copy of which agreement is on file at the principal
office of the Company, and the holder of this Warrant shall be
entitled to all of the benefits and bound by all of the
applicable obligations of the Registration Agreement, as provided
therein. This Warrant is detachable from the obligations
incurred by the Company pursuant to the Credit Agreement, and
shall survive the satisfaction of such obligations.
<PAGE>
As used herein the following terms, unless the context
otherwise requires, have the following respective meanings:
(a) The term "Company" shall include WPI Group, Inc.,
and any corporation which shall succeed to, or assume the
obligations of, the Company hereunder.
(b) The term "Common Stock" includes (i) the Company's
Common Stock, par value $0.01 per share, as authorized on
the date of the Agreement, (ii) any other capital stock of
any class or classes (however designated) of the Company,
authorized on or after such date, the holders of which shall
have the right, without limitation as to amount per share,
either to all or to a share of the balance of current
dividends and liquidating distributions after the payment of
dividends and distributions on any shares entitled to
preference in the payment thereof, and the holders of which
shall ordinarily, in the absence of contingencies, be
entitled to vote for the election of a majority of directors
of the Company (even though the right so to vote may have
been suspended by the happening of such a contingency) and
(iii) any other securities into which or for which any of
the securities described in (i) or (ii) above may be
converted or exchanged pursuant to a plan of
recapitalization, reorganization, merger, sale of assets or
otherwise.
(c) The term "Other Securities" refers to any stock
(other than Common Stock) and other securities of the
Company or any other person (corporate or otherwise) which
the holders of the Warrants at any time shall be entitled to
receive, or shall have received, on the exercise of the
Warrants, in lieu of or in addition to Common Stock, or
which at any time shall be issuable or shall have been
issued in exchange for or in replacement of Common Stock or
Other Securities pursuant to Section 5 or otherwise.
(d)The term "Warrant" means this Common Stock Purchase
Warrant.
1. Exercise of Warrant.
1.1 Full Exercise. This Warrant may be exercised at any time
before its expiration in full by the holder hereof by surrender
of this Warrant, with the form of subscription at the end hereof
duly executed by such holder, to the Company at its principal
office, accompanied by payment, in cash or by certified or
official bank check payable to the order of the Company, in the
amount obtained by multiplying the number of shares of Common
Stock for which this Warrant is then exercisable by the Purchase
Price then in effect.
1.2 Partial Exercise. This Warrant may be exercised at any time
before its expiration in part (in lots of 100 shares or, if this
Warrant is then exercisable for a lesser amount, in such lesser
amount) by surrender of this Warrant and payment of the Purchase
Price then in effect in the manner and at the place provided in
subsection 1.1, except that the amount payable by the holder on
such partial exercise shall be the amount obtained by multiplying
(a) the number of shares of Common Stock designated by the holder
in the subscription at the end hereof by (b) the Purchase Price
2
<PAGE>
then in effect. On any such partial exercise the Company at its
expense will forthwith issue and deliver to or upon the order of
the holder hereof a new Warrant or Warrants of like tenor, in the
name of the holder hereof or as such holder (upon payment by such
holder of any applicable transfer taxes) may request, calling in
the aggregate on the face or faces thereof for the number of
shares of Common Stock for which such Warrant or Warrants may
still be exercised.
1.3 Company Acknowledgment. The Company will, at the time of
the exercise of this Warrant, upon the request of the holder
hereof acknowledge in writing its continuing obligation to afford
to such holder any rights to which such holder shall continue to
be entitled after such exercise in accordance with the provisions
of this Warrant. If the holder shall fail to make any such
request, such failure shall not affect the continuing obligation
of the Company to afford to such holder any such rights.
1.4 Trustee for Warrant Holders. In the event that a bank or
trust company shall have been appointed as trustee for the
holders of the Warrants pursuant to subsection 4.2, such bank or
trust company shall have all the powers and duties of a warrant
agent appointed pursuant to Section 13 and shall accept, in its
own name for the account of the Company or such successor person
as may be entitled thereto, all amounts otherwise payable to the
Company or such successor, as the case may be, on exercise of
this Warrant pursuant to this Section 1.
1.5 Net Issue Election. The holder may elect to receive,
without the payment by the holder of any additional
consideration, shares equal to the value of this Warrant or any
portion hereof by the surrender of this Warrant or such portion
to the Company, with the net issue election notice annexed hereto
duly executed, at the office of the Company. Thereupon, the
Company shall issue to the holder such number of fully paid and
nonassessable shares of Common Stock as is computed using the
following formula:
X = Y (A-B)
A
where X = the number of shares to be issued to the holder
pursuant to this Section 1.5.
Y = the number of shares covered by this Warrant in
respect of which the net issue election is made
pursuant to this Section 1.5.
A = the fair market value of one share of Common
Stock, as determined in accordance with the provisions
of this Section 1.5.
B = the Purchase Price in effect under this Warrant at
the time the net issue election is made pursuant to
this Section 1.5.
For purposes of this Section 1.5, the "fair market value" per
share of the Company's Common Stock shall mean:
3
<PAGE>
(a) If the Common Stock is traded on a national
securities exchange or admitted to unlisted trading
privileges on such an exchange, or is listed on the National
Market (the "National Market") of the National Association
of Securities Dealers Automated Quotations System (the
"NASDAQ"), the fair market value shall be the last reported
sale price of the Common Stock on such exchange or on the
National Market on the last business day before the
effective date of exercise of the net issue election or if
no such sale is made on such day, the mean of the closing
bid and asked prices for such day on such exchange or on the
National Market;
(b) If the Common Stock is not so listed or admitted
to unlisted trading privileges, the fair market value shall
be the mean of the last bid and asked prices reported on the
last business day before the date of the election (1) by the
NASDAQ or (2) if reports are unavailable under clause (a)
above by the National Quotation Bureau Incorporated; and
(c) If the Common Stock is not so listed or admitted
to unlisted trading privileges and bid and ask prices are
not reported, the fair market value shall be the price per
share which the Company could obtain from a willing buyer
for shares sold by the Company from authorized but unissued
shares, as such price shall be determined by mutual
agreement of the Company and the holder of this Warrant. If
the holder of this Warrant and the Company are unable to
agree on such fair market value, the holder of this Warrant
shall select a pool of three independent and nationally-
recognized investment banking firms from which the Company
shall select one such firm to appraise the fair market value
of the Warrant and to perform the computations involved.
The determination of such investment banking firm shall be
binding upon the Company, the holder of this Warrant and any
other holder of Warrants or Warrant Shares in connection
with any transaction occurring at the time of such
determination. All expenses of such investment banking firm
shall be borne by the Company. In all cases, the
determination of fair market value shall be made without
consideration of the lack of a liquid public market for the
Common Stock and without consideration of any "control
premium" or any discount for holding less than a majority or
controlling interest of the outstanding Common Stock.
1.6 Acceleration of Exercisability. Notwithstanding
the Initial Exercise DateExercisability Date, the Warrant shall
become exercisable on any earlier date that notices are sent to
holders of shares of Common Stock as contemplated in Section 8
with respect to any of the events set forth in subsection 4.1,
and the holder of this Warrant shall be entitled to receive any
such notice as provided in Section 8.
2. Delivery of Stock Certificates, etc. on Exercise. As soon
as practicable after the exercise of this Warrant in full or in
part, and in any event within ten (10) days thereafter, the
Company at its expense (including the payment by it of any
applicable issue taxes) will cause to be issued in the name of
and delivered to the holder hereof, or as such holder (upon
payment by such holder of any applicable transfer taxes) may
direct, a certificate or certificates for the number of fully
paid and nonassessable shares of Common Stock (or Other
Securities) to which such holder shall be entitled on such
exercise, plus, in lieu of any fractional share to which such
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holder would otherwise be entitled, cash equal to such fraction
multiplied by the then current market value of one full share,
together with any other stock or other securities and property
(including cash, where applicable) to which such holder is
entitled upon such exercise pursuant to Section 1 or otherwise.
3. Adjustment for Dividends in Other Stock, Property, etc.;
Reclassification, etc. In case at any time or from time to time,
the holders of Common Stock (or Other Securities) in their
capacity as such shall have received, or (on or after the record
date fixed for the determination of shareholders eligible to
receive) shall have become entitled to receive, without payment
therefor,
(a) other or additional stock or other securities or property
(other than cash) by way of dividend, or
(b) any cash (excluding cash dividends payable solely out of
earnings or earned surplus of the Company), or
(c) other or additional stock or other securities or property
(including cash) by way of spin-off, split-up, reclassification,
recapitalization, combination of shares or similar corporate
rearrangement,
other than additional shares of Common Stock (or Other
Securities) issued as a stock dividend or in a stock-split
(adjustments in respect of which are provided for in Section 5),
then and in each such case the holder of this Warrant, on the
exercise hereof as provided in Section 1, shall be entitled to
receive the amount of stock and other securities and property
(including cash in the cases referred to in subdivisions (b) and
(c) of this Section 3) which such holder would hold on the date
of such exercise if on the date hereof he had been the holder of
record of the number of shares of Common Stock called for on the
face of this Warrant and had thereafter, during the period from
the date hereof to and including the date of such exercise,
retained such shares and all such other or additional stock and
other securities and property (including cash in the cases
referred to in subdivisions (b) and (c) of this Section 3)
receivable by him as aforesaid during such period, giving effect
to all adjustments called for during such period by Sections 4
and 5.
4. Adjustment for Reorganization, Consolidation, Merger, etc.
4.1 Reorganization, Consolidation, Merger, etc. In case at any
time or from time to time, the Company shall (a) effect a capital
reorganization or reclassification of its capital stock, (b)
consolidate with or merge into any other person, or (c) transfer
all or substantially all of its properties or assets to any other
corporation or other business entity under any plan or
arrangement contemplating the dissolution of the Company, then,
in each such case, the holder of this Warrant, on the exercise
hereof as provided in Section 1 at any time after the
consummation of such reorganization, consolidation or merger or
the effective date of such dissolution, as the case may be, shall
receive, in lieu of the Common Stock (or Other Securities)
issuable on such exercise prior to such consummation or such
effective date, the stock and other securities and property
(including cash) to which such holder would have been entitled
upon such consummation or in connection with such dissolution, as
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the case may be, if such holder had so exercised this Warrant,
immediately prior thereto, all subject to further adjustment
thereafter as provided in Sections 3 and 5. The Company will not
effect any such consolidation, merger or sale unless, prior to
the consummation thereof, the successor corporation (if other
than the Company) resulting from such consolidation or merger or
the corporation purchasing such assets shall assume by written
instrument mailed or delivered to the holder of this Warrant at
the last address of such holder appearing on the books of the
Company, the obligation to delivery to such holder such shares of
stock, securities or assets as, in accordance with the foregoing
provisions, such holder may be entitled to purchase.
4.2 Dissolution. In the event of any dissolution of the Company
following the transfer of all or substantially all of its
properties or assets, the Company, prior to such dissolution,
shall at its expense deliver or cause to be delivered the stock
and other securities and property (including cash, where
applicable) receivable by the holders of the Warrants after the
effective date of such dissolution pursuant to this Section 4 to
a bank or trust company having its principal office in
Manchester, New Hampshire or Boston, Massachusetts, as trustee
for the holder or holders of the Warrants.
4.3 Continuation of Terms. Upon any reorganization,
consolidation, merger or transfer (and any dissolution following
any transfer) referred to in this Section 4, this Warrant shall
continue in full force and effect, subject to expiration in
accordance with Section 18 hereof, and the terms hereof shall be
applicable to the shares of stock and other securities and
property receivable on the exercise of this Warrant after the
consummation of such reorganization, consolidation or merger or
the effective date of dissolution following any such transfer, as
the case may be, and shall be binding upon the issuer of any such
stock or other securities, including, in the case of any such
transfer, the person acquiring all or substantially all of the
properties or assets of the Company, whether or not such person
shall have expressly assumed the terms of this Warrant as
provided in Section 6.
5. Anti-Dilution Adjustment.
5.1 General. The Purchase Price shall be subject to adjustment
from time to time as hereinafter provided. Upon each adjustment
of the Purchase Price, the holder of this Warrant shall
thereafter be entitled to purchase, at the Purchase Price
resulting from such adjustment, the number of shares obtained by
multiplying the Purchase Price in effect immediately prior to
such adjustment by the number of shares purchasable pursuant
hereto immediately prior to such adjustment and dividing the
product thereof by the Purchase Price resulting from such
adjustment.
5.2 Purchase Price Adjustments. If and whenever after the date
hereof the Company shall issue or sell any shares of its Common
Stock (except (i) upon exercise of one or more of the Warrants or
(ii) shares of Common Stock issued to employees, officers,
directors of the Company upon the exercise of options granted
under the Company's Employee Stock Option/Purchase Plans
(hereinafter defined) not to exceed in the aggregate 1,200,000
shares of Common Stock) for a consideration per share less than
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the Purchase Price in effect immediately prior to the time of
such issue or sale, or shall be deemed under the provisions of
this Section 5 to have effected any such issuance or sale, then,
forthwith upon such issue or sale, the Purchase Price shall be
reduced to the price (calculated to the nearest $0.0001) obtained
by multiplying the Purchase Price in effect immediately prior to
the time of such issue or sale by a fraction, the numerator of
which shall be the sum of (i) the number of shares of Common
Stock outstanding immediately prior to such issue or sale
multiplied by the Purchase Price immediately prior to such issue
or sale plus (ii) the consideration received by the Company upon
such issue or sale, and the denominator of which shall be the
product of (iii) the total number of shares of Common Stock
outstanding immediately after such issue or sale, multiplied by
(iv) the Purchase Price immediately prior to such issue or sale.
As used herein, "Employee Stock Option/Purchase Plans" consist of
the Company's 1997 Equity Incentive Plan, 1995 Stock Option Plan,
Employee Stock Purchase Plan, Employee Bonus Award Plan, and non
qualified options granted to certain Directors of the Company.
Notwithstanding the foregoing, no adjustment of the Purchase
Price shall be made in an amount less than $0.0001 per share, but
any such lesser adjustment shall be carried forward and shall be
made at the time of and together with the next subsequent
adjustment which together with any adjustments so carried forward
shall amount to $0.0001 per share or more.
5.3 Option Grants. In the event that at any time, other than
the issuance of options pursuant to the Company's Employee Stock
Option Plan, the Company shall in any manner grant (directly, by
assumption in a merger or otherwise) any rights to subscribe for
or to purchase, or any options for the purchase of, Common Stock
or any stock or securities convertible into or exchangeable for
Common Stock (such rights or options being herein called
"Options" and such convertible or exchangeable stock or
securities being herein called "Convertible Securities"), whether
or not such Options or the right to convert or exchange any such
Convertible Securities are immediately exercisable, and the price
per share for which Common Stock is issuable upon the exercise of
such Options or upon conversion or exchange of such Convertible
Securities (determined by dividing (i) the total amount, if any,
received or receivable by the Company as consideration for the
granting of such Options, plus the minimum aggregate amount of
additional consideration payable to the Company upon the exercise
of all such Options, plus, in the case of any such Options which
relate to Convertible Securities, the minimum aggregate amount of
additional consideration, if any, payable upon the issue or sale
of such Convertible Securities and upon the conversion or
exchange thereof, by (ii) the total number of shares of Common
Stock issuable upon the exercise of such Options or upon the
conversion or exchange of all such Convertible Securities
issuable upon the exercise of such Options) shall be less than
the Purchase Price in effect immediately prior to the time of the
granting of such Options, then the total number of shares of
Common Stock issuable upon the exercise of such Options or upon
conversion or exchange of the total amount of such Convertible
Securities issuable upon the exercise of such Options shall (as
of the date of granting such Options) be deemed to be outstanding
and to have been issued for such price per share. Except as
otherwise provided in subsection 5.5, no further adjustment of
the Purchase Price shall be made upon the actual issue of such
Common Stock or of such Convertible Securities upon exercise of
such Options or upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities.
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5.4 Convertible Security Grants. In the event that the Company
shall in any manner issue (directly, by assumption in a merger or
otherwise) or sell any Convertible Securities (other than
pursuant to the exercise of Options to purchase such Convertible
Securities covered by subsection 5.3), whether or not the rights
to exchange or convert thereunder are immediately exercisable,
and the price per share for which Common Stock is issuable upon
such conversion or exchange (determined by dividing (i) the total
amount received or receivable by the Company as consideration for
the issue or sale of such Convertible Securities, plus the
minimum aggregate amount of additional consideration, if any,
payable to the Company upon the conversion or exchange thereof,
by (ii) the total maximum number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible
Securities) shall be less than the Purchase Price in effect
immediately prior to the time of such issue or sale, then the
total maximum number of shares of Common Stock issuable upon
conversion or exchange of all such Convertible Securities shall
(as of the date of the issue or sale of such Convertible
Securities) be deemed to be outstanding and to have been issued
for such price per share, provided that, except as otherwise
provided in subsection 5.5, no further adjustment of the Purchase
Price shall be made upon the actual issue of such Common Stock
upon conversion or exchange of such Convertible Securities.
5.5 Effect of Alteration to Option or Convertible Security
Terms. In connection with any change in, or the expiration or
termination of, the purchase rights under any Option or the
conversion or exchange rights under any Convertible Securities,
the following provisions shall apply:
(A) If the purchase price provided for in any
Option referred to in subsection 5.3, the additional
consideration, if any, payable upon the conversion or
exchange of any Convertible Securities referred to in
subsection 5.3 or 5.4, or the rate at which any Convertible
Securities referred to in subsection 5.3 or 5.4 are
convertible into or exchangeable for Common Stock shall
change at any time (other than under or by reason of
provisions designed to protect against dilution), then the
Purchase Price in effect at the time of such change shall
forthwith be increased or decreased to the Purchase Price
which would be in effect immediately after such change if
(a) the adjustments which were made upon the issuance of such
Options or Convertible Securities had been made upon the
basis of (and taking into account the total consideration
received for) (i) the issuance at that time of the Common
Stock, if any, delivered upon the exercise of any such
Options or upon the conversion or exchange of any such
Convertible Securities before such change, and (ii) the
issuance at that time of all such Options or Convertible
Securities, with terms and provisions reflecting such change,
which are still outstanding after such change, and (b) the
Purchase Price as adjusted pursuant to clause (a) preceding
had been used as the basis for the adjustments required
hereunder in connection with all other issues or sales of
Common Stock, Options or Convertible Securities by the
Company subsequent to the issuance of such Options or
Convertible Securities.
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(B) On the partial or complete expiration of any
Options or termination of any right to convert or exchange
Convertible Securities, the Purchase Price then in effect
hereunder shall forthwith be increased or decreased to the
Purchase Price which would be in effect at the time of such
expiration or termination if (a) the adjustments which were
made upon the issuance of such Options or Convertible
Securities had been made upon the basis of (and taking into
account the total consideration received for) (i) the
issuance at that time of the Common Stock, if any, delivered
upon the exercise of such Options or upon the conversion or
exchange of such Convertible Securities before such
expiration or termination, and (ii) the issuance at that time
of only those such Options or Convertible Securities which
remain outstanding after such expiration or termination, and
(b) the Purchase Price as adjusted pursuant to clause (a)
preceding had been used as the basis for adjustments required
hereunder in connection with all other issues or sales of
Common Stock, Options or Convertible Securities by the
Company subsequent to the issuance of such Options or
Convertible Securities.
(C) If the purchase price provided for in any
Option referred to in subsection 5.3 or the rate at which any
Convertible Securities referred to in subsection 5.3 or 5.4
are convertible into or exchangeable for Common Stock shall
be reduced at any time under or by reason ofr provisions with
respect thereto designed to protect against dilution, and the
event causing such reduction is one that did not also require
an adjustment in the Purchase Price under other provisions of
this Section 5, then in case of the delivery of shares of
Common Stock upon the exercise of any such Option or upon
conversion or exchange of any such Convertible Securities,
the Purchase Price then in effect hereunder shall forthwith
be adjusted to such amount as would have obtained if such
Option or Convertible Securities had never been issued and if
the adjustments made upon the issuance of such Option or
Convertible Securities had been made upon the basis of the
issuance of (and taking into account the total consideration
received for) the shares of Common Stock delivered as
aforesaid (provided that the Purchase Price used in such
determination shall be the Purchase Price on the date of
issue of such shares); provided that no such adjustment shall
be made unless the Purchase Price then in effect would be
reduced thereby.
5.6 Dividends of Common Stock, Options or Convertible
Securities. In the event that the Company shall declare a
dividend or make any other distribution upon any stock of the
Company payable in Common Stock, Options or Convertible
Securities, any Common Stock, Options or Convertible Securities,
as the case may be, issuable in payment of such dividend or
distribution shall be deemed to have been issued or sold without
consideration.
5.7 Dilution in Case of Other Securities. In case any Other
Securities shall be issued or sold by the Company, or shall
become subject to issue upon the conversion or exchange of any
stock (or Other Securities) of the Company (or any other issuer
of Other Securities or any other person referred to in Section 4)
or to subscription, purchase or other acquisition pursuant to any
rights or options granted by the Company (or such other issuer or
person), for a consideration per share such as to dilute the
purchase rights evidenced by this Warrant, the computations,
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adjustments and readjustments provided for in this Section 5 with
respect to the Purchase Price and the number of shares of Common
Stock issuable upon exercise of this Warrant shall be made as
nearly as possible in the manner so provided and applied to
determine the amount of Other Securities from time to time
receivable on the exercise of the Warrants, so as to protect the
holders of the Warrants against the effect of such dilution.
5.8 Stock Splits and Reverse Splits. In the event that the
Company shall at any time subdivide its outstanding shares of
Common Stock into a greater number of shares, the Purchase Price
in effect immediately prior to such subdivision shall be
proportionately reduced and the number of Warrant Shares
purchasable pursuant to this Warrant immediately prior to such
subdivision shall be proportionately increased, and conversely,
in the event that the outstanding shares of Common Stock of the
Company shall at any time be combined into a smaller number of
shares, the Purchase Price in effect immediately prior to such
combination shall be proportionately increased and the number of
Warrant Shares purchasable upon the exercise of this Warrant
immediately prior to such combination shall be proportionately
reduced. Except as provided in this subsection 5.8 no adjustment
in the Purchase Price and no change in the number of Warrant
Shares purchasable shall be made under this Section 5 as a result
of or by reason of any such subdivision or combination.
5.9 Determination of Consideration Received. For purposes of
this Section 5, the amount of consideration received by the
Company in connection with the issuance or sale of Common Stock,
Options or Convertible Securities shall be determined in
accordance with the following:
(A) In the event that shares of Common Stock,
Options or Convertible Securities shall be issued or sold for
cash, the consideration received therefor shall be deemed to
be the amount payable to the Company therefor, without
deduction therefrom of any expenses incurred or any
underwriting commissions or concessions or discounts paid or
allowed by the Company in connection therewith.
(B) In the event that any shares of Common Stock,
Options or Convertible Securities shall be issued or sold for
a consideration other than cash, the amount of the
consideration other than cash payable to the Company shall be
deemed to be the fair value of such consideration as
reasonably determined by the Board of Directors of the
Company, without deduction of any expenses incurred or any
underwriting commissions or concessions or discounts paid or
allowed by the Company in connection therewith.
(C) The amount of consideration deemed to be
received by the Company pursuant to the foregoing provisions
of this subsection 5.9 upon any issuance and/or sale,
pursuant to an established compensation plan of the Company,
to directors, officers or employees of the Company in
connection with their employment, of shares of Common Stock,
Options or Convertible Securities, shall be increased by the
amount of any tax benefit realized by the Company as a result
of such issuance and/or sale, the amount of such tax benefit
being the amount by which the federal and/or state income or
other tax liability of the Company shall be reduced by reason
of any deduction or credit in respect of such issuance and/or
sale.
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(D) In the event that any shares of Common Stock,
Options or Convertible Securities shall be issued in
connection with any merger in which the Company is the
surviving corporation, the amount of consideration therefor
shall be deemed to be the fair value as reasonably determined
by the Board of Directors of the Company of such portion of
the assets and business of the non-surviving corporation as
such Board shall determine to be attributable to such Common
Stock, Options or Convertible Securities, as the case may be.
(E) In the event that any Common Stock, Options
and/or Convertible Securities shall be issued in connection
with the issue and sale of other securities or property of
the Company, together comprising one integral transaction in
which no specific consideration is allocated to such Common
Stock, Options or Convertible Securities by the parties
thereto, such Common Stock, Options and/or Convertible
Securities shall be deemed to have been issued without
consideration.
5.10 Record Date as Date of Issue or Sale. In the event that at
any time the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them (i) to receive a
dividend or other distribution payable in Common Stock, Options
or Convertible Securities, or (ii) to subscribe for or purchase
Common Stock, Options or Convertible Securities, then such record
date shall be deemed to be the date of the issue or sale of the
shares of Common Stock deemed to have been issued or sold upon
the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
5.11 Treasury Stock. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or
held by or for the account of the Company, and the disposition of
any such shares (other than their cancellation without
reissuance) shall be considered an issue or sale of Common Stock
for the purposes of this Section 5.
6. No Dilution or Impairment. The Company will not, by
amendment of its Articles of Incorporation or through any
reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of
any of the terms of the Warrants, but will at all times in good
faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in
order to protect the rights of the holders of the Warrants
against dilution or other impairment. Without limiting the
generality of the foregoing, the Company (a) will not increase
the par value or stated value of any shares of stock receivable
on the exercise of the Warrants above the amount payable therefor
on such exercise, (b) will take all such action as may be
necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable shares of stock on
the exercise of all Warrants from time to time outstanding,
(c) will not issue any capital stock of any class which is
preferred as to dividends or as to the distribution of assets
upon voluntary or involuntary dissolution, liquidation or winding
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up, unless the rights of the holders thereof shall be limited to
a fixed sum or percentage of par value in respect of
participation in dividends and in any such distribution of assets
or such stock shall be non voting and not be convertible into
shares of Common Stock or other voting stock, and (d) will not
transfer all or substantially all of its properties and assets to
any other person (corporate or otherwise), or consolidate with or
merge into any other person or permit any such person to
consolidate with or merge into the Company (if the Company is not
the surviving person), unless such other person shall expressly
assume in writing and become bound by all the terms of the
Warrants.
7. Accountants' Certificate as to Adjustments. In each case of
any adjustment or readjustment in the shares of Common Stock (or
Other Securities) issuable on the exercise of the Warrants, the
Company's chief financial officer will compute, or if requested
by the holders of Warrants to purchase over 50% of the shares of
Common Stock which may be purchased upon exercise of the Warrants
the Company at its expense will promptly cause independent
certified public accountants of recognized standing selected by
the Company at its expense to compute, such adjustment or
readjustment in accordance with the terms of the Warrants and
prepare a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such
adjustment or readjustment is based, including a statement of (a)
the consideration received or receivable by the Company for any
additional shares of Common Stock (or Other Securities) issued or
sold or deemed to have been issued or sold, (b) the number of
shares of Common Stock (or Other Securities) outstanding or
deemed to be outstanding, and (c) the Purchase Price and the
number of shares of Common Stock to be received upon exercise of
this Warrant, in effect immediately prior to such issue or sale
and as adjusted and readjusted as provided in this Warrant. The
Company will forthwith mail a copy of each such certificate to
each holder of a Warrant, and will, on the written request at any
time of any holder of a Warrant (such request shall not be made
more than once in any Fiscal Quarter), furnish to such holder a
like certificate setting forth the Purchase Price at the time in
effect and showing how it was calculated.
8. Notices of Record Date, etc. In the event of
(a) any taking by the Company of a record of the holders of any
class of securities for the purpose of determining the holders
thereof who are entitled to receive any dividend or other
distribution, or any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right or any
declaration of a cash dividend on the Common Stock, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the
Company or any transfer of all or substantially all the assets of
the Company to or consolidation or merger of the Company with or
into any other person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company, or
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(d) any proposed issue or grant by the Company of any shares of
stock of any class or any other securities, or any right or
option to subscribe for, purchase or otherwise acquire any shares
of stock of any class or any other securities (other than the
issue of Common Stock on the exercise of the Warrants),
then and in each such event the Company will mail or cause to be
mailed to each holder of a Warrant a notice specifying (i) the
date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and stating the amount and
character of such dividend, distribution or right, (ii) the date
on which any such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution,
liquidation or winding-up is to take place, and the time, if any
is to be fixed, as of which the holders of record of Common Stock
(or Other Securities) shall be entitled to exchange their shares
of Common Stock (or Other Securities) for securities or other
property deliverable on such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution,
liquidation or winding-up, and (iii) the amount and character of
any stock or other securities, or rights or options with respect
thereto, proposed to be issued or granted, the date of such
proposed issue or grant and the persons or class of persons to
whom such proposed issue or grant is to be offered or made. Such
notice shall be mailed at least twenty (20) days prior to the
date specified in such notice on which any such action is to be
taken, except with respect to the grant of options under the
Company's Employee Stock Option/Purchase Plans in which case such
notice shall be given not later than the date of grant.
9. Reservation of Stock, etc. Issuable on Exercise of Warrants.
The Company will at all times reserve and keep available, solely
for issuance and delivery on the exercise of the Warrants, all
shares of Common Stock (or Other Securities) from time to time
issuable on the exercise of the Warrants.
10. Representations and Warranties of the Company. This Warrant
is issued and delivered by the Company on the basis of the
following:
(a) Authorization and Delivery. This Warrant has been duly
authorized and executed by the Company and when delivered will be
the valid and binding obligation of the Company enforceable in
accordance with its terms;
(b) Warrant Shares. The shares of Common Stock to be
issued pursuant to this Warrant have been duly authorized and
reserved for issuance by the Company and, when issued and paid
for in accordance with the terms hereof, will be validly issued,
fully paid and nonassessable;
(c) Rights and Privileges. The rights, preferences,
privileges and restrictions granted to or imposed upon such
shares of Common Stock and the holders thereof are as set forth
herein and in the Company's Articles of Incorporation.
(d) No Inconsistency. The execution and delivery of this
Warrant are not, and the issuance of the shares of Common Stock
upon exercise of this Warrant in accordance with the terms hereof
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will not be, inconsistent with the Company's Articles of
Incorporation or by-laws, do not and will not contravene any law,
governmental rule or regulation, judgment or order applicable to
the Company, and do not and will not contravene any provision of,
or constitute a default under, any indenture, mortgage, contract
or other instrument of which the Company is a party or by which
it is bound or require the consent or approval of, the giving of
notice to, the registration with the taking of any action in
respect of or by, any Federal, state or local government
authority or agency or other person.
11. Exchange of Warrants. On surrender for exchange of any
Warrant, properly endorsed, to the Company, the Company at its
expense will issue and deliver to or on the order of the holder
thereof a new Warrant or Warrants of like tenor, in the name of
such holder or as such holder (on payment by such holder of any
applicable transfer taxes) may direct, calling in the aggregate
on the face or faces thereof for the number of shares of Common
Stock called for on the face or faces of the Warrant or Warrants
so surrendered.
12. Replacement of Warrants. On receipt of evidence
reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of any Warrant and, in the case of any
such loss, theft or destruction of any Warrant, on delivery of an
indemnity agreement or security reasonably satisfactory in form
and amount to the Company or, in the case of any such mutilation,
on surrender and cancellation of such Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a new Warrant
of like tenor.
13. Warrant Agent. The Company may, by written notice to
each holder of a Warrant, appoint an agent having an office in
Boston, Massachusetts for the purpose of issuing Common Stock (or
Other Securities) on the exercise of the Warrants pursuant to
Section 1, exchanging Warrants pursuant to Section 11, and
replacing Warrants pursuant to Section 12, or any of the
foregoing, and thereafter any such issuance, exchange or
replacement, as the case may be, shall be made at such office by
such agent.
14. Remedies. The Company stipulates that the remedies at
law of the holder of this Warrant in the event of any default or
threatened default by the Company in the performance of or
compliance with any of the terms of this Warrant are not and will
not be adequate, and that such terms may be specifically enforced
by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any
of the terms hereof or otherwise.
15. Negotiability, etc. This Warrant is issued upon the
following terms, to all of which each holder or owner hereof by
the taking hereof consents and agrees:
(a) title to this Warrant may be transferred by
endorsement (by the holder hereof executing the form of
assignment at the end hereof) and delivery in the same
manner as in the case of a negotiable instrument
transferable by endorsement and delivery; and
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<PAGE>
(b) any person in possession of this Warrant properly
endorsed for transfer to such person (including endorsed in
blank) is authorized to represent himself as absolute owner
hereof and is empowered to transfer absolute title hereto by
endorsement and delivery hereof to a bona fide purchaser
hereof for value; each prior taker or owner waives and
renounces all of his equities or rights in this Warrant in
favor of each such bona fide purchaser, and each such bona
fide purchaser shall acquire absolute title hereto and to
all rights represented hereby. Nothing in this
paragraph (b) shall create any liability on the part of the
Company beyond any liability or responsibility it has under
law.
16. Notices, etc. All notices and other communications
from the Company to the holder of this Warrant shall be mailed by
first class registered or certified mail, postage prepaid, at
such address as may have been furnished to the Company in writing
by such holder or, until any such holder furnishes to the Company
an address, then to, and at the address of, the last holder of
this Warrant who has so furnished an address to the Company.
17. Miscellaneous. This Warrant and any term hereof may be
changed, waived, discharged or terminated only by an instrument
in writing signed by the party against which enforcement of such
change, waiver, discharge or termination is sought. This Warrant
shall be construed and enforced in accordance with and governed
by the laws of the Commonwealth of Massachusetts. The headings
in this Warrant are for purposes of reference only, and shall not
limit or otherwise affect any of the terms hereof. This Warrant
is being executed as an instrument under seal. The invalidity or
unenforceability of any provision hereof shall in no way affect
the validity or enforceability of any other provision.
18. Expiration. The right to exercise this Warrant shall
expire at 5:00 p.m., Manchester, New Hampshire time, on
July_____, 2009. Notwithstanding the foregoing, this Warrant
shall automatically be deemed to be exercised in full pursuant to
the provisions of Section 1.5 hereof, without any further action
on behalf of the holder, immediately prior to the time this
Warrant would otherwise expire pursuant to the preceding
sentence.
[SIGNATURE PAGE FOLLOWS]
15
<PAGE>
IN WITNESS WHEREOF, the Company has executed this Warrant
under seal as of the date first written above.
WPI GROUP, INC.
By:/s/John W. Powers
-------------------------
John W. Powers
Vice President/Chief
Financial Officer
[Corporate Seal]
Attest:
By:/s/Michael Tule
----------------------
Name:Michael Tule
Title:Secretary
16
<PAGE>
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
WPI GROUP, INC.
The undersigned, the holder of the within Warrant, hereby
irrevocably elects to exercise this Warrant for, and to purchase
thereunder, ........ shares of Common Stock of WPI GROUP, INC.
and herewith makes payment of $........ therefor, and requests
that the certificates for such shares be issued in the name of,
and delivered to .............., federal taxpayer identification
number ............, whose address is ...................
Dated:
---------------------------------
(Signature must conform to name
of holder as specified on the
face of the Warrant)
----------------------------------
(Address)
Signed in the presence of:
- ---------------------------------
----------------------------------------
FORM OF ASSIGNMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns,
and transfers unto .................., federal taxpayer
identification number ..........., whose address is ............,
the right represented by the within Warrant to purchase
............. shares of Common Stock of WPI GROUP, INC. to which
the within Warrant relates, and appoints
.......................... Attorney to transfer such right on the
books of WPI GROUP, INC. with full power of substitution in the
premises.
Dated:
------------------------------------
(Signature must conform to name
of holder as specified on the
face of the Warrant)
-------------------------------------
(Address)
Signed in the presence of:
- --------------------------------
17
<PAGE>
EXHIBIT 10.54
THIS WARRANT AND THE UNDERLYING SHARES OF COMMON STOCK ISSUABLE
UPON ITS EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS,
AND MAY NOT BE SOLD OR TRANSFERRED WITHOUT COMPLIANCE WITH THE
REGISTRATION OR QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL
AND STATE SECURITIES LAWS OR APPLICABLE EXEMPTIONS THEREFROM.
THE SECURITIES REPRESENTED BY THIS WARRANT ARE SUBJECT TO A
REGISTRATION RIGHTS AGREEMENT DATED AS OF AUGUST 16, 1999 (THE
"REGISTRATION AGREEMENT"). COPIES OF THE REGISTRATION AGREEMENT
ARE ON FILE AT THE OFFICE OF THE SECRETARY OF THE COMPANY.
No. W - 3 Right to Purchase 16,530
Shares of Common Stock
of
WPI GROUP, INC.
WPI GROUP, INC.
COMMON STOCK PURCHASE WARRANT
August 16, 1999
WPI GROUP, INC., a New Hampshire corporation (the
"Company"), hereby certifies that, for value received, KEY
CORPORATE CAPITAL INC., or its assigns, as a Lender under the
Credit Agreement dated as of August 3, 1998, as amended to date,
(the "Credit Agreement") among the Company, certain of its
subsidiaries, Fleet Bank - NH, as Agent for Lenders identified
therein, and such Lenders, is entitled, subject to the terms set
forth below, to purchase from the Company at any time or from
time to time after August 16, 2000 (subject to acceleration as
hereinafter provided) (the "Initial Exerciseability Date") and
before 5:00 p.m., Manchester, New Hampshire time, on August 16,
2009, 16,530 fully paid and nonassessable shares of Common Stock,
par value $0.01 per share, of the Company, at a purchase price
per share of $2.75 (such purchase price per share as adjusted
from time to time as herein provided is referred to herein as the
"Purchase Price"). The number and character of such shares of
Common Stock and the Purchase Price are subject to adjustment as
provided herein.
This Warrant is one of the Warrants evidencing the right to
purchase shares of Common Stock of the Company issued pursuant to
a certain Third Amendment dated as of August 16, 1999 to the
Credit Agreement (the Credit Agreement, as amended by such Third
Amendment, the "Agreement"), and subject to the Registration
Agreement, a copy of which agreement is on file at the principal
office of the Company, and the holder of this Warrant shall be
entitled to all of the benefits and bound by all of the
applicable obligations of the Registration Agreement, as provided
therein. This Warrant is detachable from the obligations
incurred by the Company pursuant to the Credit Agreement, and
shall survive the satisfaction of such obligations.
<PAGE>
As used herein the following terms, unless the context
otherwise requires, have the following respective meanings:
(a) The term "Company" shall include WPI Group, Inc.,
and any corporation which shall succeed to, or assume the
obligations of, the Company hereunder.
(b) The term "Common Stock" includes (i) the Company's
Common Stock, par value $0.01 per share, as authorized on
the date of the Agreement, (ii) any other capital stock of
any class or classes (however designated) of the Company,
authorized on or after such date, the holders of which shall
have the right, without limitation as to amount per share,
either to all or to a share of the balance of current
dividends and liquidating distributions after the payment of
dividends and distributions on any shares entitled to
preference in the payment thereof, and the holders of which
shall ordinarily, in the absence of contingencies, be
entitled to vote for the election of a majority of directors
of the Company (even though the right so to vote may have
been suspended by the happening of such a contingency) and
(iii) any other securities into which or for which any of
the securities described in (i) or (ii) above may be
converted or exchanged pursuant to a plan of
recapitalization, reorganization, merger, sale of assets or
otherwise.
(c) The term "Other Securities" refers to any stock
(other than Common Stock) and other securities of the
Company or any other person (corporate or otherwise) which
the holders of the Warrants at any time shall be entitled to
receive, or shall have received, on the exercise of the
Warrants, in lieu of or in addition to Common Stock, or
which at any time shall be issuable or shall have been
issued in exchange for or in replacement of Common Stock or
Other Securities pursuant to Section 5 or otherwise.
(d)The term "Warrant" means this Common Stock Purchase
Warrant.
1. Exercise of Warrant.
1.1 Full Exercise. This Warrant may be exercised at any time
before its expiration in full by the holder hereof by surrender
of this Warrant, with the form of subscription at the end hereof
duly executed by such holder, to the Company at its principal
office, accompanied by payment, in cash or by certified or
official bank check payable to the order of the Company, in the
amount obtained by multiplying the number of shares of Common
Stock for which this Warrant is then exercisable by the Purchase
Price then in effect.
1.2 Partial Exercise. This Warrant may be exercised at any time
before its expiration in part (in lots of 100 shares or, if this
Warrant is then exercisable for a lesser amount, in such lesser
amount) by surrender of this Warrant and payment of the Purchase
Price then in effect in the manner and at the place provided in
subsection 1.1, except that the amount payable by the holder on
such partial exercise shall be the amount obtained by multiplying
(a) the number of shares of Common Stock designated by the holder
in the subscription at the end hereof by (b) the Purchase Price
2
<PAGE>
then in effect. On any such partial exercise the Company at its
expense will forthwith issue and deliver to or upon the order of
the holder hereof a new Warrant or Warrants of like tenor, in the
name of the holder hereof or as such holder (upon payment by such
holder of any applicable transfer taxes) may request, calling in
the aggregate on the face or faces thereof for the number of
shares of Common Stock for which such Warrant or Warrants may
still be exercised.
1.3 Company Acknowledgment. The Company will, at the time of
the exercise of this Warrant, upon the request of the holder
hereof acknowledge in writing its continuing obligation to afford
to such holder any rights to which such holder shall continue to
be entitled after such exercise in accordance with the provisions
of this Warrant. If the holder shall fail to make any such
request, such failure shall not affect the continuing obligation
of the Company to afford to such holder any such rights.
1.4 Trustee for Warrant Holders. In the event that a bank or
trust company shall have been appointed as trustee for the
holders of the Warrants pursuant to subsection 4.2, such bank or
trust company shall have all the powers and duties of a warrant
agent appointed pursuant to Section 13 and shall accept, in its
own name for the account of the Company or such successor person
as may be entitled thereto, all amounts otherwise payable to the
Company or such successor, as the case may be, on exercise of
this Warrant pursuant to this Section 1.
1.5 Net Issue Election. The holder may elect to receive,
without the payment by the holder of any additional
consideration, shares equal to the value of this Warrant or any
portion hereof by the surrender of this Warrant or such portion
to the Company, with the net issue election notice annexed hereto
duly executed, at the office of the Company. Thereupon, the
Company shall issue to the holder such number of fully paid and
nonassessable shares of Common Stock as is computed using the
following formula:
X = Y (A-B)
A
where X = the number of shares to be issued to the holder
pursuant to this Section 1.5.
Y = the number of shares covered by this Warrant in
respect of which the net issue election is made
pursuant to this Section 1.5.
A = the fair market value of one share of Common
Stock, as determined in accordance with the provisions
of this Section 1.5.
B = the Purchase Price in effect under this Warrant at
the time the net issue election is made pursuant to
this Section 1.5.
For purposes of this Section 1.5, the "fair market value" per
share of the Company's Common Stock shall mean:
3
<PAGE>
(a) If the Common Stock is traded on a national
securities exchange or admitted to unlisted trading
privileges on such an exchange, or is listed on the National
Market (the "National Market") of the National Association
of Securities Dealers Automated Quotations System (the
"NASDAQ"), the fair market value shall be the last reported
sale price of the Common Stock on such exchange or on the
National Market on the last business day before the
effective date of exercise of the net issue election or if
no such sale is made on such day, the mean of the closing
bid and asked prices for such day on such exchange or on the
National Market;
(b) If the Common Stock is not so listed or admitted
to unlisted trading privileges, the fair market value shall
be the mean of the last bid and asked prices reported on the
last business day before the date of the election (1) by the
NASDAQ or (2) if reports are unavailable under clause (a)
above by the National Quotation Bureau Incorporated; and
(c) If the Common Stock is not so listed or admitted
to unlisted trading privileges and bid and ask prices are
not reported, the fair market value shall be the price per
share which the Company could obtain from a willing buyer
for shares sold by the Company from authorized but unissued
shares, as such price shall be determined by mutual
agreement of the Company and the holder of this Warrant. If
the holder of this Warrant and the Company are unable to
agree on such fair market value, the holder of this Warrant
shall select a pool of three independent and nationally-
recognized investment banking firms from which the Company
shall select one such firm to appraise the fair market value
of the Warrant and to perform the computations involved.
The determination of such investment banking firm shall be
binding upon the Company, the holder of this Warrant and any
other holder of Warrants or Warrant Shares in connection
with any transaction occurring at the time of such
determination. All expenses of such investment banking firm
shall be borne by the Company. In all cases, the
determination of fair market value shall be made without
consideration of the lack of a liquid public market for the
Common Stock and without consideration of any "control
premium" or any discount for holding less than a majority or
controlling interest of the outstanding Common Stock.
1.6 Acceleration of Exercisability. Notwithstanding
the Initial Exercise DateExercisability Date, the Warrant shall
become exercisable on any earlier date that notices are sent to
holders of shares of Common Stock as contemplated in Section 8
with respect to any of the events set forth in subsection 4.1,
and the holder of this Warrant shall be entitled to receive any
such notice as provided in Section 8.
2. Delivery of Stock Certificates, etc. on Exercise. As soon
as practicable after the exercise of this Warrant in full or in
part, and in any event within ten (10) days thereafter, the
Company at its expense (including the payment by it of any
applicable issue taxes) will cause to be issued in the name of
and delivered to the holder hereof, or as such holder (upon
payment by such holder of any applicable transfer taxes) may
direct, a certificate or certificates for the number of fully
paid and nonassessable shares of Common Stock (or Other
Securities) to which such holder shall be entitled on such
exercise, plus, in lieu of any fractional share to which such
4
<PAGE>
holder would otherwise be entitled, cash equal to such fraction
multiplied by the then current market value of one full share,
together with any other stock or other securities and property
(including cash, where applicable) to which such holder is
entitled upon such exercise pursuant to Section 1 or otherwise.
3. Adjustment for Dividends in Other Stock, Property, etc.;
Reclassification, etc. In case at any time or from time to time,
the holders of Common Stock (or Other Securities) in their
capacity as such shall have received, or (on or after the record
date fixed for the determination of shareholders eligible to
receive) shall have become entitled to receive, without payment
therefor,
(a) other or additional stock or other securities or property
(other than cash) by way of dividend, or
(b) any cash (excluding cash dividends payable solely out of
earnings or earned surplus of the Company), or
(c) other or additional stock or other securities or property
(including cash) by way of spin-off, split-up, reclassification,
recapitalization, combination of shares or similar corporate
rearrangement,
other than additional shares of Common Stock (or Other
Securities) issued as a stock dividend or in a stock-split
(adjustments in respect of which are provided for in Section 5),
then and in each such case the holder of this Warrant, on the
exercise hereof as provided in Section 1, shall be entitled to
receive the amount of stock and other securities and property
(including cash in the cases referred to in subdivisions (b) and
(c) of this Section 3) which such holder would hold on the date
of such exercise if on the date hereof he had been the holder of
record of the number of shares of Common Stock called for on the
face of this Warrant and had thereafter, during the period from
the date hereof to and including the date of such exercise,
retained such shares and all such other or additional stock and
other securities and property (including cash in the cases
referred to in subdivisions (b) and (c) of this Section 3)
receivable by him as aforesaid during such period, giving effect
to all adjustments called for during such period by Sections 4
and 5.
4. Adjustment for Reorganization, Consolidation, Merger, etc.
4.1 Reorganization, Consolidation, Merger, etc. In case at any
time or from time to time, the Company shall (a) effect a capital
reorganization or reclassification of its capital stock, (b)
consolidate with or merge into any other person, or (c) transfer
all or substantially all of its properties or assets to any other
corporation or other business entity under any plan or
arrangement contemplating the dissolution of the Company, then,
in each such case, the holder of this Warrant, on the exercise
hereof as provided in Section 1 at any time after the
consummation of such reorganization, consolidation or merger or
the effective date of such dissolution, as the case may be, shall
receive, in lieu of the Common Stock (or Other Securities)
issuable on such exercise prior to such consummation or such
effective date, the stock and other securities and property
(including cash) to which such holder would have been entitled
upon such consummation or in connection with such dissolution, as
5
<PAGE>
the case may be, if such holder had so exercised this Warrant,
immediately prior thereto, all subject to further adjustment
thereafter as provided in Sections 3 and 5. The Company will not
effect any such consolidation, merger or sale unless, prior to
the consummation thereof, the successor corporation (if other
than the Company) resulting from such consolidation or merger or
the corporation purchasing such assets shall assume by written
instrument mailed or delivered to the holder of this Warrant at
the last address of such holder appearing on the books of the
Company, the obligation to delivery to such holder such shares of
stock, securities or assets as, in accordance with the foregoing
provisions, such holder may be entitled to purchase.
4.2 Dissolution. In the event of any dissolution of the Company
following the transfer of all or substantially all of its
properties or assets, the Company, prior to such dissolution,
shall at its expense deliver or cause to be delivered the stock
and other securities and property (including cash, where
applicable) receivable by the holders of the Warrants after the
effective date of such dissolution pursuant to this Section 4 to
a bank or trust company having its principal office in
Manchester, New Hampshire or Boston, Massachusetts, as trustee
for the holder or holders of the Warrants.
4.3 Continuation of Terms. Upon any reorganization,
consolidation, merger or transfer (and any dissolution following
any transfer) referred to in this Section 4, this Warrant shall
continue in full force and effect, subject to expiration in
accordance with Section 18 hereof, and the terms hereof shall be
applicable to the shares of stock and other securities and
property receivable on the exercise of this Warrant after the
consummation of such reorganization, consolidation or merger or
the effective date of dissolution following any such transfer, as
the case may be, and shall be binding upon the issuer of any such
stock or other securities, including, in the case of any such
transfer, the person acquiring all or substantially all of the
properties or assets of the Company, whether or not such person
shall have expressly assumed the terms of this Warrant as
provided in Section 6.
5. Anti-Dilution Adjustment.
5.1 General. The Purchase Price shall be subject to adjustment
from time to time as hereinafter provided. Upon each adjustment
of the Purchase Price, the holder of this Warrant shall
thereafter be entitled to purchase, at the Purchase Price
resulting from such adjustment, the number of shares obtained by
multiplying the Purchase Price in effect immediately prior to
such adjustment by the number of shares purchasable pursuant
hereto immediately prior to such adjustment and dividing the
product thereof by the Purchase Price resulting from such
adjustment.
5.2 Purchase Price Adjustments. If and whenever after the date
hereof the Company shall issue or sell any shares of its Common
Stock (except (i) upon exercise of one or more of the Warrants or
(ii) shares of Common Stock issued to employees, officers,
directors of the Company upon the exercise of options granted
under the Company's Employee Stock Option/Purchase Plans
(hereinafter defined) not to exceed in the aggregate 1,200,000
6
<PAGE>
shares of Common Stock) for a consideration per share less than
the Purchase Price in effect immediately prior to the time of
such issue or sale, or shall be deemed under the provisions of
this Section 5 to have effected any such issuance or sale, then,
forthwith upon such issue or sale, the Purchase Price shall be
reduced to the price (calculated to the nearest $0.0001) obtained
by multiplying the Purchase Price in effect immediately prior to
the time of such issue or sale by a fraction, the numerator of
which shall be the sum of (i) the number of shares of Common
Stock outstanding immediately prior to such issue or sale
multiplied by the Purchase Price immediately prior to such issue
or sale plus (ii) the consideration received by the Company upon
such issue or sale, and the denominator of which shall be the
product of (iii) the total number of shares of Common Stock
outstanding immediately after such issue or sale, multiplied by
(iv) the Purchase Price immediately prior to such issue or sale.
As used herein, "Employee Stock Option/Purchase Plans" consist of
the Company's 1997 Equity Incentive Plan, 1995 Stock Option Plan,
Employee Stock Purchase Plan, Employee Bonus Award Plan, and non
qualified options granted to certain Directors of the Company.
Notwithstanding the foregoing, no adjustment of the Purchase
Price shall be made in an amount less than $0.0001 per share, but
any such lesser adjustment shall be carried forward and shall be
made at the time of and together with the next subsequent
adjustment which together with any adjustments so carried forward
shall amount to $0.0001 per share or more.
5.3 Option Grants. In the event that at any time, other than
the issuance of options pursuant to the Company's Employee Stock
Option Plan, the Company shall in any manner grant (directly, by
assumption in a merger or otherwise) any rights to subscribe for
or to purchase, or any options for the purchase of, Common Stock
or any stock or securities convertible into or exchangeable for
Common Stock (such rights or options being herein called
"Options" and such convertible or exchangeable stock or
securities being herein called "Convertible Securities"), whether
or not such Options or the right to convert or exchange any such
Convertible Securities are immediately exercisable, and the price
per share for which Common Stock is issuable upon the exercise of
such Options or upon conversion or exchange of such Convertible
Securities (determined by dividing (i) the total amount, if any,
received or receivable by the Company as consideration for the
granting of such Options, plus the minimum aggregate amount of
additional consideration payable to the Company upon the exercise
of all such Options, plus, in the case of any such Options which
relate to Convertible Securities, the minimum aggregate amount of
additional consideration, if any, payable upon the issue or sale
of such Convertible Securities and upon the conversion or
exchange thereof, by (ii) the total number of shares of Common
Stock issuable upon the exercise of such Options or upon the
conversion or exchange of all such Convertible Securities
issuable upon the exercise of such Options) shall be less than
the Purchase Price in effect immediately prior to the time of the
granting of such Options, then the total number of shares of
Common Stock issuable upon the exercise of such Options or upon
conversion or exchange of the total amount of such Convertible
Securities issuable upon the exercise of such Options shall (as
of the date of granting such Options) be deemed to be outstanding
and to have been issued for such price per share. Except as
otherwise provided in subsection 5.5, no further adjustment of
the Purchase Price shall be made upon the actual issue of such
Common Stock or of such Convertible Securities upon exercise of
such Options or upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities.
7
<PAGE>
5.4 Convertible Security Grants. In the event that the Company
shall in any manner issue (directly, by assumption in a merger or
otherwise) or sell any Convertible Securities (other than
pursuant to the exercise of Options to purchase such Convertible
Securities covered by subsection 5.3), whether or not the rights
to exchange or convert thereunder are immediately exercisable,
and the price per share for which Common Stock is issuable upon
such conversion or exchange (determined by dividing (i) the total
amount received or receivable by the Company as consideration for
the issue or sale of such Convertible Securities, plus the
minimum aggregate amount of additional consideration, if any,
payable to the Company upon the conversion or exchange thereof,
by (ii) the total maximum number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible
Securities) shall be less than the Purchase Price in effect
immediately prior to the time of such issue or sale, then the
total maximum number of shares of Common Stock issuable upon
conversion or exchange of all such Convertible Securities shall
(as of the date of the issue or sale of such Convertible
Securities) be deemed to be outstanding and to have been issued
for such price per share, provided that, except as otherwise
provided in subsection 5.5, no further adjustment of the Purchase
Price shall be made upon the actual issue of such Common Stock
upon conversion or exchange of such Convertible Securities.
5.5 Effect of Alteration to Option or Convertible Security
Terms. In connection with any change in, or the expiration or
termination of, the purchase rights under any Option or the
conversion or exchange rights under any Convertible Securities,
the following provisions shall apply:
(A) If the purchase price provided for in any
Option referred to in subsection 5.3, the additional
consideration, if any, payable upon the conversion or
exchange of any Convertible Securities referred to in
subsection 5.3 or 5.4, or the rate at which any Convertible
Securities referred to in subsection 5.3 or 5.4 are
convertible into or exchangeable for Common Stock shall
change at any time (other than under or by reason of
provisions designed to protect against dilution), then the
Purchase Price in effect at the time of such change shall
forthwith be increased or decreased to the Purchase Price
which would be in effect immediately after such change if
(a) the adjustments which were made upon the issuance of such
Options or Convertible Securities had been made upon the
basis of (and taking into account the total consideration
received for) (i) the issuance at that time of the Common
Stock, if any, delivered upon the exercise of any such
Options or upon the conversion or exchange of any such
Convertible Securities before such change, and (ii) the
issuance at that time of all such Options or Convertible
Securities, with terms and provisions reflecting such change,
which are still outstanding after such change, and (b) the
Purchase Price as adjusted pursuant to clause (a) preceding
had been used as the basis for the adjustments required
hereunder in connection with all other issues or sales of
Common Stock, Options or Convertible Securities by the
Company subsequent to the issuance of such Options or
Convertible Securities.
8
<PAGE>
(B) On the partial or complete expiration of any
Options or termination of any right to convert or exchange
Convertible Securities, the Purchase Price then in effect
hereunder shall forthwith be increased or decreased to the
Purchase Price which would be in effect at the time of such
expiration or termination if (a) the adjustments which were
made upon the issuance of such Options or Convertible
Securities had been made upon the basis of (and taking into
account the total consideration received for) (i) the
issuance at that time of the Common Stock, if any, delivered
upon the exercise of such Options or upon the conversion or
exchange of such Convertible Securities before such
expiration or termination, and (ii) the issuance at that time
of only those such Options or Convertible Securities which
remain outstanding after such expiration or termination, and
(b) the Purchase Price as adjusted pursuant to clause (a)
preceding had been used as the basis for adjustments required
hereunder in connection with all other issues or sales of
Common Stock, Options or Convertible Securities by the
Company subsequent to the issuance of such Options or
Convertible Securities.
(C) If the purchase price provided for in any
Option referred to in subsection 5.3 or the rate at which any
Convertible Securities referred to in subsection 5.3 or 5.4
are convertible into or exchangeable for Common Stock shall
be reduced at any time under or by reason ofr provisions with
respect thereto designed to protect against dilution, and the
event causing such reduction is one that did not also require
an adjustment in the Purchase Price under other provisions of
this Section 5, then in case of the delivery of shares of
Common Stock upon the exercise of any such Option or upon
conversion or exchange of any such Convertible Securities,
the Purchase Price then in effect hereunder shall forthwith
be adjusted to such amount as would have obtained if such
Option or Convertible Securities had never been issued and if
the adjustments made upon the issuance of such Option or
Convertible Securities had been made upon the basis of the
issuance of (and taking into account the total consideration
received for) the shares of Common Stock delivered as
aforesaid (provided that the Purchase Price used in such
determination shall be the Purchase Price on the date of
issue of such shares); provided that no such adjustment shall
be made unless the Purchase Price then in effect would be
reduced thereby.
5.6 Dividends of Common Stock, Options or Convertible
Securities. In the event that the Company shall declare a
dividend or make any other distribution upon any stock of the
Company payable in Common Stock, Options or Convertible
Securities, any Common Stock, Options or Convertible Securities,
as the case may be, issuable in payment of such dividend or
distribution shall be deemed to have been issued or sold without
consideration.
5.7 Dilution in Case of Other Securities. In case any Other
Securities shall be issued or sold by the Company, or shall
become subject to issue upon the conversion or exchange of any
stock (or Other Securities) of the Company (or any other issuer
of Other Securities or any other person referred to in Section 4)
or to subscription, purchase or other acquisition pursuant to any
rights or options granted by the Company (or such other issuer or
person), for a consideration per share such as to dilute the
purchase rights evidenced by this Warrant, the computations,
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<PAGE>
adjustments and readjustments provided for in this Section 5 with
respect to the Purchase Price and the number of shares of Common
Stock issuable upon exercise of this Warrant shall be made as
nearly as possible in the manner so provided and applied to
determine the amount of Other Securities from time to time
receivable on the exercise of the Warrants, so as to protect the
holders of the Warrants against the effect of such dilution.
5.8 Stock Splits and Reverse Splits. In the event that the
Company shall at any time subdivide its outstanding shares of
Common Stock into a greater number of shares, the Purchase Price
in effect immediately prior to such subdivision shall be
proportionately reduced and the number of Warrant Shares
purchasable pursuant to this Warrant immediately prior to such
subdivision shall be proportionately increased, and conversely,
in the event that the outstanding shares of Common Stock of the
Company shall at any time be combined into a smaller number of
shares, the Purchase Price in effect immediately prior to such
combination shall be proportionately increased and the number of
Warrant Shares purchasable upon the exercise of this Warrant
immediately prior to such combination shall be proportionately
reduced. Except as provided in this subsection 5.8 no adjustment
in the Purchase Price and no change in the number of Warrant
Shares purchasable shall be made under this Section 5 as a result
of or by reason of any such subdivision or combination.
5.9 Determination of Consideration Received. For purposes of
this Section 5, the amount of consideration received by the
Company in connection with the issuance or sale of Common Stock,
Options or Convertible Securities shall be determined in
accordance with the following:
(A) In the event that shares of Common Stock,
Options or Convertible Securities shall be issued or sold for
cash, the consideration received therefor shall be deemed to
be the amount payable to the Company therefor, without
deduction therefrom of any expenses incurred or any
underwriting commissions or concessions or discounts paid or
allowed by the Company in connection therewith.
(B) In the event that any shares of Common Stock,
Options or Convertible Securities shall be issued or sold for
a consideration other than cash, the amount of the
consideration other than cash payable to the Company shall be
deemed to be the fair value of such consideration as
reasonably determined by the Board of Directors of the
Company, without deduction of any expenses incurred or any
underwriting commissions or concessions or discounts paid or
allowed by the Company in connection therewith.
(C) The amount of consideration deemed to be
received by the Company pursuant to the foregoing provisions
of this subsection 5.9 upon any issuance and/or sale,
pursuant to an established compensation plan of the Company,
to directors, officers or employees of the Company in
connection with their employment, of shares of Common Stock,
Options or Convertible Securities, shall be increased by the
amount of any tax benefit realized by the Company as a result
of such issuance and/or sale, the amount of such tax benefit
being the amount by which the federal and/or state income or
other tax liability of the Company shall be reduced by reason
10
<PAGE>
of any deduction or credit in respect of such issuance and/or
sale.
(D) In the event that any shares of Common Stock,
Options or Convertible Securities shall be issued in
connection with any merger in which the Company is the
surviving corporation, the amount of consideration therefor
shall be deemed to be the fair value as reasonably determined
by the Board of Directors of the Company of such portion of
the assets and business of the non-surviving corporation as
such Board shall determine to be attributable to such Common
Stock, Options or Convertible Securities, as the case may be.
(E) In the event that any Common Stock, Options
and/or Convertible Securities shall be issued in connection
with the issue and sale of other securities or property of
the Company, together comprising one integral transaction in
which no specific consideration is allocated to such Common
Stock, Options or Convertible Securities by the parties
thereto, such Common Stock, Options and/or Convertible
Securities shall be deemed to have been issued without
consideration.
5.10 Record Date as Date of Issue or Sale. In the event that at
any time the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them (i) to receive a
dividend or other distribution payable in Common Stock, Options
or Convertible Securities, or (ii) to subscribe for or purchase
Common Stock, Options or Convertible Securities, then such record
date shall be deemed to be the date of the issue or sale of the
shares of Common Stock deemed to have been issued or sold upon
the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
5.11 Treasury Stock. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or
held by or for the account of the Company, and the disposition of
any such shares (other than their cancellation without
reissuance) shall be considered an issue or sale of Common Stock
for the purposes of this Section 5.
6. No Dilution or Impairment. The Company will not, by
amendment of its Articles of Incorporation or through any
reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of
any of the terms of the Warrants, but will at all times in good
faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in
order to protect the rights of the holders of the Warrants
against dilution or other impairment. Without limiting the
generality of the foregoing, the Company (a) will not increase
the par value or stated value of any shares of stock receivable
on the exercise of the Warrants above the amount payable therefor
on such exercise, (b) will take all such action as may be
necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable shares of stock on
the exercise of all Warrants from time to time outstanding,
(c) will not issue any capital stock of any class which is
preferred as to dividends or as to the distribution of assets
upon voluntary or involuntary dissolution, liquidation or winding
11
<PAGE>
up, unless the rights of the holders thereof shall be limited to
a fixed sum or percentage of par value in respect of
participation in dividends and in any such distribution of assets
or such stock shall be non voting and not be convertible into
shares of Common Stock or other voting stock, and (d) will not
transfer all or substantially all of its properties and assets to
any other person (corporate or otherwise), or consolidate with or
merge into any other person or permit any such person to
consolidate with or merge into the Company (if the Company is not
the surviving person), unless such other person shall expressly
assume in writing and become bound by all the terms of the
Warrants.
7. Accountants' Certificate as to Adjustments. In each case of
any adjustment or readjustment in the shares of Common Stock (or
Other Securities) issuable on the exercise of the Warrants, the
Company's chief financial officer will compute, or if requested
by the holders of Warrants to purchase over 50% of the shares of
Common Stock which may be purchased upon exercise of the Warrants
the Company at its expense will promptly cause independent
certified public accountants of recognized standing selected by
the Company at its expense to compute, such adjustment or
readjustment in accordance with the terms of the Warrants and
prepare a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such
adjustment or readjustment is based, including a statement of (a)
the consideration received or receivable by the Company for any
additional shares of Common Stock (or Other Securities) issued or
sold or deemed to have been issued or sold, (b) the number of
shares of Common Stock (or Other Securities) outstanding or
deemed to be outstanding, and (c) the Purchase Price and the
number of shares of Common Stock to be received upon exercise of
this Warrant, in effect immediately prior to such issue or sale
and as adjusted and readjusted as provided in this Warrant. The
Company will forthwith mail a copy of each such certificate to
each holder of a Warrant, and will, on the written request at any
time of any holder of a Warrant (such request shall not be made
more than once in any Fiscal Quarter), furnish to such holder a
like certificate setting forth the Purchase Price at the time in
effect and showing how it was calculated.
8. Notices of Record Date, etc. In the event of
(a) any taking by the Company of a record of the holders of any
class of securities for the purpose of determining the holders
thereof who are entitled to receive any dividend or other
distribution, or any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right or any
declaration of a cash dividend on the Common Stock, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the
Company or any transfer of all or substantially all the assets of
the Company to or consolidation or merger of the Company with or
into any other person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company, or
12
<PAGE>
(d) any proposed issue or grant by the Company of any shares of
stock of any class or any other securities, or any right or
option to subscribe for, purchase or otherwise acquire any shares
of stock of any class or any other securities (other than the
issue of Common Stock on the exercise of the Warrants),
then and in each such event the Company will mail or cause to be
mailed to each holder of a Warrant a notice specifying (i) the
date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and stating the amount and
character of such dividend, distribution or right, (ii) the date
on which any such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution,
liquidation or winding-up is to take place, and the time, if any
is to be fixed, as of which the holders of record of Common Stock
(or Other Securities) shall be entitled to exchange their shares
of Common Stock (or Other Securities) for securities or other
property deliverable on such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution,
liquidation or winding-up, and (iii) the amount and character of
any stock or other securities, or rights or options with respect
thereto, proposed to be issued or granted, the date of such
proposed issue or grant and the persons or class of persons to
whom such proposed issue or grant is to be offered or made. Such
notice shall be mailed at least twenty (20) days prior to the
date specified in such notice on which any such action is to be
taken, except with respect to the grant of options under the
Company's Employee Stock Option/Purchase Plans in which case such
notice shall be given not later than the date of grant.
9. Reservation of Stock, etc. Issuable on Exercise of Warrants.
The Company will at all times reserve and keep available, solely
for issuance and delivery on the exercise of the Warrants, all
shares of Common Stock (or Other Securities) from time to time
issuable on the exercise of the Warrants.
10. Representations and Warranties of the Company. This Warrant
is issued and delivered by the Company on the basis of the
following:
(a) Authorization and Delivery. This Warrant has been duly
authorized and executed by the Company and when delivered will be
the valid and binding obligation of the Company enforceable in
accordance with its terms;
(b) Warrant Shares. The shares of Common Stock to be
issued pursuant to this Warrant have been duly authorized and
reserved for issuance by the Company and, when issued and paid
for in accordance with the terms hereof, will be validly issued,
fully paid and nonassessable;
(c) Rights and Privileges. The rights, preferences,
privileges and restrictions granted to or imposed upon such
shares of Common Stock and the holders thereof are as set forth
herein and in the Company's Articles of Incorporation.
(d) No Inconsistency. The execution and delivery of this
Warrant are not, and the issuance of the shares of Common Stock
upon exercise of this Warrant in accordance with the terms hereof
will not be, inconsistent with the Company's Articles of
13
<PAGE>
Incorporation or by-laws, do not and will not contravene any law,
governmental rule or regulation, judgment or order applicable to
the Company, and do not and will not contravene any provision of,
or constitute a default under, any indenture, mortgage, contract
or other instrument of which the Company is a party or by which
it is bound or require the consent or approval of, the giving of
notice to, the registration with the taking of any action in
respect of or by, any Federal, state or local government
authority or agency or other person.
11. Exchange of Warrants. On surrender for exchange of any
Warrant, properly endorsed, to the Company, the Company at its
expense will issue and deliver to or on the order of the holder
thereof a new Warrant or Warrants of like tenor, in the name of
such holder or as such holder (on payment by such holder of any
applicable transfer taxes) may direct, calling in the aggregate
on the face or faces thereof for the number of shares of Common
Stock called for on the face or faces of the Warrant or Warrants
so surrendered.
12. Replacement of Warrants. On receipt of evidence
reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of any Warrant and, in the case of any
such loss, theft or destruction of any Warrant, on delivery of an
indemnity agreement or security reasonably satisfactory in form
and amount to the Company or, in the case of any such mutilation,
on surrender and cancellation of such Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a new Warrant
of like tenor.
13. Warrant Agent. The Company may, by written notice to
each holder of a Warrant, appoint an agent having an office in
Boston, Massachusetts for the purpose of issuing Common Stock (or
Other Securities) on the exercise of the Warrants pursuant to
Section 1, exchanging Warrants pursuant to Section 11, and
replacing Warrants pursuant to Section 12, or any of the
foregoing, and thereafter any such issuance, exchange or
replacement, as the case may be, shall be made at such office by
such agent.
14. Remedies. The Company stipulates that the remedies at
law of the holder of this Warrant in the event of any default or
threatened default by the Company in the performance of or
compliance with any of the terms of this Warrant are not and will
not be adequate, and that such terms may be specifically enforced
by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any
of the terms hereof or otherwise.
15. Negotiability, etc. This Warrant is issued upon the
following terms, to all of which each holder or owner hereof by
the taking hereof consents and agrees:
(a) title to this Warrant may be transferred by
endorsement (by the holder hereof executing the form of
assignment at the end hereof) and delivery in the same
manner as in the case of a negotiable instrument
transferable by endorsement and delivery; and
14
<PAGE>
(b) any person in possession of this Warrant properly
endorsed for transfer to such person (including endorsed in
blank) is authorized to represent himself as absolute owner
hereof and is empowered to transfer absolute title hereto by
endorsement and delivery hereof to a bona fide purchaser
hereof for value; each prior taker or owner waives and
renounces all of his equities or rights in this Warrant in
favor of each such bona fide purchaser, and each such bona
fide purchaser shall acquire absolute title hereto and to
all rights represented hereby. Nothing in this
paragraph (b) shall create any liability on the part of the
Company beyond any liability or responsibility it has under
law.
16. Notices, etc. All notices and other communications
from the Company to the holder of this Warrant shall be mailed by
first class registered or certified mail, postage prepaid, at
such address as may have been furnished to the Company in writing
by such holder or, until any such holder furnishes to the Company
an address, then to, and at the address of, the last holder of
this Warrant who has so furnished an address to the Company.
17. Miscellaneous. This Warrant and any term hereof may be
changed, waived, discharged or terminated only by an instrument
in writing signed by the party against which enforcement of such
change, waiver, discharge or termination is sought. This Warrant
shall be construed and enforced in accordance with and governed
by the laws of the Commonwealth of Massachusetts. The headings
in this Warrant are for purposes of reference only, and shall not
limit or otherwise affect any of the terms hereof. This Warrant
is being executed as an instrument under seal. The invalidity or
unenforceability of any provision hereof shall in no way affect
the validity or enforceability of any other provision.
18. Expiration. The right to exercise this Warrant shall
expire at 5:00 p.m., Manchester, New Hampshire time, on
July_____, 2009. Notwithstanding the foregoing, this Warrant
shall automatically be deemed to be exercised in full pursuant to
the provisions of Section 1.5 hereof, without any further action
on behalf of the holder, immediately prior to the time this
Warrant would otherwise expire pursuant to the preceding
sentence.
[SIGNATURE PAGE FOLLOWS]
15
<PAGE>
IN WITNESS WHEREOF, the Company has executed this Warrant
under seal as of the date first written above.
WPI GROUP, INC.
By:/s/John W. Powers
--------------------------
John W. Powers
Vice President/Chief
Financial Officer
[Corporate Seal]
Attest:
By:/s/Michael Tule
-----------------------
Name:Michael Tule
Title:Secretary
16
<PAGE>
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
WPI GROUP, INC.
The undersigned, the holder of the within Warrant, hereby
irrevocably elects to exercise this Warrant for, and to purchase
thereunder, ........ shares of Common Stock of WPI GROUP, INC.
and herewith makes payment of $........ therefor, and requests
that the certificates for such shares be issued in the name of,
and delivered to .............., federal taxpayer identification
number ............, whose address is ...................
Dated:
--------------------------------
(Signature must conform to name
of holder as specified on the
face of the Warrant)
-------------------------------
(Address)
Signed in the presence of:
- ---------------------------------
-------------------------------------
FORM OF ASSIGNMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns,
and transfers unto .................., federal taxpayer
identification number ..........., whose address is ............,
the right represented by the within Warrant to purchase
............. shares of Common Stock of WPI GROUP, INC. to which
the within Warrant relates, and appoints
.......................... Attorney to transfer such right on the
books of WPI GROUP, INC. with full power of substitution in the
premises.
Dated:
---------------------------------
(Signature must conform to name
of holder as specified on the
face of the Warrant)
---------------------------------
(Address)
Signed in the presence of:
- -----------------------------------
17
<PAGE>
EXHIBIT 10.55
THIS WARRANT AND THE UNDERLYING SHARES OF COMMON STOCK ISSUABLE
UPON ITS EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS,
AND MAY NOT BE SOLD OR TRANSFERRED WITHOUT COMPLIANCE WITH THE
REGISTRATION OR QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL
AND STATE SECURITIES LAWS OR APPLICABLE EXEMPTIONS THEREFROM.
THE SECURITIES REPRESENTED BY THIS WARRANT ARE SUBJECT TO A
REGISTRATION RIGHTS AGREEMENT DATED AS OF AUGUST 16, 1999 (THE
"REGISTRATION AGREEMENT"). COPIES OF THE REGISTRATION AGREEMENT
ARE ON FILE AT THE OFFICE OF THE SECRETARY OF THE COMPANY.
No. W- 5 Right to Purchase 24,800
Shares of Common Stock
of
WPI GROUP, INC.
WPI GROUP, INC.
COMMON STOCK PURCHASE WARRANT
August 16, 1999
WPI GROUP, INC., a New Hampshire corporation (the
"Company"), hereby certifies that, for value received, SOVEREIGN
BANK, or its assigns, as a Lender under the Credit Agreement
dated as of August 3, 1998, as amended to date, (the "Credit
Agreement") among the Company, certain of its subsidiaries, Fleet
Bank - NH, as Agent for Lenders identified therein, and such
Lenders, is entitled, subject to the terms set forth below, to
purchase from the Company at any time or from time to time after
August 16, 2000 (subject to acceleration as hereinafter provided)
(the "Initial Exerciseability Date") and before 5:00 p.m.,
Manchester, New Hampshire time, on August 16, 2009, 24,800 fully
paid and nonassessable shares of Common Stock, par value $0.01
per share, of the Company, at a purchase price per share of $2.75
(such purchase price per share as adjusted from time to time as
herein provided is referred to herein as the "Purchase Price").
The number and character of such shares of Common Stock and the
Purchase Price are subject to adjustment as provided herein.
This Warrant is one of the Warrants evidencing the right to
purchase shares of Common Stock of the Company issued pursuant to
a certain Third Amendment dated as of August 16, 1999 to the
Credit Agreement (the Credit Agreement, as amended by such Third
Amendment, the "Agreement"), and subject to the Registration
Agreement, a copy of which agreement is on file at the principal
office of the Company, and the holder of this Warrant shall be
entitled to all of the benefits and bound by all of the
applicable obligations of the Registration Agreement, as provided
therein. This Warrant is detachable from the obligations
incurred by the Company pursuant to the Credit Agreement, and
shall survive the satisfaction of such obligations.
<PAGE>
As used herein the following terms, unless the context
otherwise requires, have the following respective meanings:
(a) The term "Company" shall include WPI Group, Inc.,
and any corporation which shall succeed to, or assume the
obligations of, the Company hereunder.
(b) The term "Common Stock" includes (i) the Company's
Common Stock, par value $0.01 per share, as authorized on
the date of the Agreement, (ii) any other capital stock of
any class or classes (however designated) of the Company,
authorized on or after such date, the holders of which shall
have the right, without limitation as to amount per share,
either to all or to a share of the balance of current
dividends and liquidating distributions after the payment of
dividends and distributions on any shares entitled to
preference in the payment thereof, and the holders of which
shall ordinarily, in the absence of contingencies, be
entitled to vote for the election of a majority of directors
of the Company (even though the right so to vote may have
been suspended by the happening of such a contingency) and
(iii) any other securities into which or for which any of
the securities described in (i) or (ii) above may be
converted or exchanged pursuant to a plan of
recapitalization, reorganization, merger, sale of assets or
otherwise.
(c) The term "Other Securities" refers to any stock
(other than Common Stock) and other securities of the
Company or any other person (corporate or otherwise) which
the holders of the Warrants at any time shall be entitled to
receive, or shall have received, on the exercise of the
Warrants, in lieu of or in addition to Common Stock, or
which at any time shall be issuable or shall have been
issued in exchange for or in replacement of Common Stock or
Other Securities pursuant to Section 5 or otherwise.
(d)The term "Warrant" means this Common Stock Purchase
Warrant.
1. Exercise of Warrant.
1.1 Full Exercise. This Warrant may be exercised at any time
before its expiration in full by the holder hereof by surrender
of this Warrant, with the form of subscription at the end hereof
duly executed by such holder, to the Company at its principal
office, accompanied by payment, in cash or by certified or
official bank check payable to the order of the Company, in the
amount obtained by multiplying the number of shares of Common
Stock for which this Warrant is then exercisable by the Purchase
Price then in effect.
1.2 Partial Exercise. This Warrant may be exercised at any time
before its expiration in part (in lots of 100 shares or, if this
Warrant is then exercisable for a lesser amount, in such lesser
amount) by surrender of this Warrant and payment of the Purchase
Price then in effect in the manner and at the place provided in
subsection 1.1, except that the amount payable by the holder on
such partial exercise shall be the amount obtained by multiplying
(a) the number of shares of Common Stock designated by the holder
in the subscription at the end hereof by (b) the Purchase Price
2
<PAGE>
then in effect. On any such partial exercise the Company at its
expense will forthwith issue and deliver to or upon the order of
the holder hereof a new Warrant or Warrants of like tenor, in the
name of the holder hereof or as such holder (upon payment by such
holder of any applicable transfer taxes) may request, calling in
the aggregate on the face or faces thereof for the number of
shares of Common Stock for which such Warrant or Warrants may
still be exercised.
1.3 Company Acknowledgment. The Company will, at the time of
the exercise of this Warrant, upon the request of the holder
hereof acknowledge in writing its continuing obligation to afford
to such holder any rights to which such holder shall continue to
be entitled after such exercise in accordance with the provisions
of this Warrant. If the holder shall fail to make any such
request, such failure shall not affect the continuing obligation
of the Company to afford to such holder any such rights.
1.4 Trustee for Warrant Holders. In the event that a bank or
trust company shall have been appointed as trustee for the
holders of the Warrants pursuant to subsection 4.2, such bank or
trust company shall have all the powers and duties of a warrant
agent appointed pursuant to Section 13 and shall accept, in its
own name for the account of the Company or such successor person
as may be entitled thereto, all amounts otherwise payable to the
Company or such successor, as the case may be, on exercise of
this Warrant pursuant to this Section 1.
1.5 Net Issue Election. The holder may elect to receive,
without the payment by the holder of any additional
consideration, shares equal to the value of this Warrant or any
portion hereof by the surrender of this Warrant or such portion
to the Company, with the net issue election notice annexed hereto
duly executed, at the office of the Company. Thereupon, the
Company shall issue to the holder such number of fully paid and
nonassessable shares of Common Stock as is computed using the
following formula:
X = Y (A-B)
A
where X = the number of shares to be issued to the holder
pursuant to this Section 1.5.
Y = the number of shares covered by this Warrant in
respect of which the net issue election is made
pursuant to this Section 1.5.
A = the fair market value of one share of Common
Stock, as determined in accordance with the provisions
of this Section 1.5.
B = the Purchase Price in effect under this Warrant at
the time the net issue election is made pursuant to
this Section 1.5.
For purposes of this Section 1.5, the "fair market value" per
share of the Company's Common Stock shall mean:
3
<PAGE>
(a) If the Common Stock is traded on a national
securities exchange or admitted to unlisted trading
privileges on such an exchange, or is listed on the National
Market (the "National Market") of the National Association
of Securities Dealers Automated Quotations System (the
"NASDAQ"), the fair market value shall be the last reported
sale price of the Common Stock on such exchange or on the
National Market on the last business day before the
effective date of exercise of the net issue election or if
no such sale is made on such day, the mean of the closing
bid and asked prices for such day on such exchange or on the
National Market;
(b) If the Common Stock is not so listed or admitted
to unlisted trading privileges, the fair market value shall
be the mean of the last bid and asked prices reported on the
last business day before the date of the election (1) by the
NASDAQ or (2) if reports are unavailable under clause (a)
above by the National Quotation Bureau Incorporated; and
(c) If the Common Stock is not so listed or admitted
to unlisted trading privileges and bid and ask prices are
not reported, the fair market value shall be the price per
share which the Company could obtain from a willing buyer
for shares sold by the Company from authorized but unissued
shares, as such price shall be determined by mutual
agreement of the Company and the holder of this Warrant. If
the holder of this Warrant and the Company are unable to
agree on such fair market value, the holder of this Warrant
shall select a pool of three independent and nationally-
recognized investment banking firms from which the Company
shall select one such firm to appraise the fair market value
of the Warrant and to perform the computations involved.
The determination of such investment banking firm shall be
binding upon the Company, the holder of this Warrant and any
other holder of Warrants or Warrant Shares in connection
with any transaction occurring at the time of such
determination. All expenses of such investment banking firm
shall be borne by the Company. In all cases, the
determination of fair market value shall be made without
consideration of the lack of a liquid public market for the
Common Stock and without consideration of any "control
premium" or any discount for holding less than a majority or
controlling interest of the outstanding Common Stock.
1.6 Acceleration of Exercisability. Notwithstanding
the Initial Exercise DateExercisability Date, the Warrant shall
become exercisable on any earlier date that notices are sent to
holders of shares of Common Stock as contemplated in Section 8
with respect to any of the events set forth in subsection 4.1,
and the holder of this Warrant shall be entitled to receive any
such notice as provided in Section 8.
2. Delivery of Stock Certificates, etc. on Exercise. As soon
as practicable after the exercise of this Warrant in full or in
part, and in any event within ten (10) days thereafter, the
Company at its expense (including the payment by it of any
applicable issue taxes) will cause to be issued in the name of
and delivered to the holder hereof, or as such holder (upon
payment by such holder of any applicable transfer taxes) may
direct, a certificate or certificates for the number of fully
paid and nonassessable shares of Common Stock (or Other
Securities) to which such holder shall be entitled on such
4
<PAGE>
exercise, plus, in lieu of any fractional share to which such
holder would otherwise be entitled, cash equal to such fraction
multiplied by the then current market value of one full share,
together with any other stock or other securities and property
(including cash, where applicable) to which such holder is
entitled upon such exercise pursuant to Section 1 or otherwise.
3. Adjustment for Dividends in Other Stock, Property, etc.;
Reclassification, etc. In case at any time or from time to time,
the holders of Common Stock (or Other Securities) in their
capacity as such shall have received, or (on or after the record
date fixed for the determination of shareholders eligible to
receive) shall have become entitled to receive, without payment
therefor,
(a) other or additional stock or other securities or property
(other than cash) by way of dividend, or
(b) any cash (excluding cash dividends payable solely out of
earnings or earned surplus of the Company), or
(c) other or additional stock or other securities or property
(including cash) by way of spin-off, split-up, reclassification,
recapitalization, combination of shares or similar corporate
rearrangement,
other than additional shares of Common Stock (or Other
Securities) issued as a stock dividend or in a stock-split
(adjustments in respect of which are provided for in Section 5),
then and in each such case the holder of this Warrant, on the
exercise hereof as provided in Section 1, shall be entitled to
receive the amount of stock and other securities and property
(including cash in the cases referred to in subdivisions (b) and
(c) of this Section 3) which such holder would hold on the date
of such exercise if on the date hereof he had been the holder of
record of the number of shares of Common Stock called for on the
face of this Warrant and had thereafter, during the period from
the date hereof to and including the date of such exercise,
retained such shares and all such other or additional stock and
other securities and property (including cash in the cases
referred to in subdivisions (b) and (c) of this Section 3)
receivable by him as aforesaid during such period, giving effect
to all adjustments called for during such period by Sections 4
and 5.
4. Adjustment for Reorganization, Consolidation, Merger, etc.
4.1 Reorganization, Consolidation, Merger, etc. In case at any
time or from time to time, the Company shall (a) effect a capital
reorganization or reclassification of its capital stock, (b)
consolidate with or merge into any other person, or (c) transfer
all or substantially all of its properties or assets to any other
corporation or other business entity under any plan or
arrangement contemplating the dissolution of the Company, then,
in each such case, the holder of this Warrant, on the exercise
hereof as provided in Section 1 at any time after the
consummation of such reorganization, consolidation or merger or
the effective date of such dissolution, as the case may be, shall
receive, in lieu of the Common Stock (or Other Securities)
issuable on such exercise prior to such consummation or such
effective date, the stock and other securities and property
(including cash) to which such holder would have been entitled
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upon such consummation or in connection with such dissolution, as
the case may be, if such holder had so exercised this Warrant,
immediately prior thereto, all subject to further adjustment
thereafter as provided in Sections 3 and 5. The Company will not
effect any such consolidation, merger or sale unless, prior to
the consummation thereof, the successor corporation (if other
than the Company) resulting from such consolidation or merger or
the corporation purchasing such assets shall assume by written
instrument mailed or delivered to the holder of this Warrant at
the last address of such holder appearing on the books of the
Company, the obligation to delivery to such holder such shares of
stock, securities or assets as, in accordance with the foregoing
provisions, such holder may be entitled to purchase.
4.2 Dissolution. In the event of any dissolution of the Company
following the transfer of all or substantially all of its
properties or assets, the Company, prior to such dissolution,
shall at its expense deliver or cause to be delivered the stock
and other securities and property (including cash, where
applicable) receivable by the holders of the Warrants after the
effective date of such dissolution pursuant to this Section 4 to
a bank or trust company having its principal office in
Manchester, New Hampshire or Boston, Massachusetts, as trustee
for the holder or holders of the Warrants.
4.3 Continuation of Terms. Upon any reorganization,
consolidation, merger or transfer (and any dissolution following
any transfer) referred to in this Section 4, this Warrant shall
continue in full force and effect, subject to expiration in
accordance with Section 18 hereof, and the terms hereof shall be
applicable to the shares of stock and other securities and
property receivable on the exercise of this Warrant after the
consummation of such reorganization, consolidation or merger or
the effective date of dissolution following any such transfer, as
the case may be, and shall be binding upon the issuer of any such
stock or other securities, including, in the case of any such
transfer, the person acquiring all or substantially all of the
properties or assets of the Company, whether or not such person
shall have expressly assumed the terms of this Warrant as
provided in Section 6.
5. Anti-Dilution Adjustment.
5.1 General. The Purchase Price shall be subject to adjustment
from time to time as hereinafter provided. Upon each adjustment
of the Purchase Price, the holder of this Warrant shall
thereafter be entitled to purchase, at the Purchase Price
resulting from such adjustment, the number of shares obtained by
multiplying the Purchase Price in effect immediately prior to
such adjustment by the number of shares purchasable pursuant
hereto immediately prior to such adjustment and dividing the
product thereof by the Purchase Price resulting from such
adjustment.
5.2 Purchase Price Adjustments. If and whenever after the date
hereof the Company shall issue or sell any shares of its Common
Stock (except (i) upon exercise of one or more of the Warrants or
(ii) shares of Common Stock issued to employees, officers,
directors of the Company upon the exercise of options granted
under the Company's Employee Stock Option/Purchase Plans
(hereinafter defined) not to exceed in the aggregate 1,200,000
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shares of Common Stock) for a consideration per share less than
the Purchase Price in effect immediately prior to the time of
such issue or sale, or shall be deemed under the provisions of
this Section 5 to have effected any such issuance or sale, then,
forthwith upon such issue or sale, the Purchase Price shall be
reduced to the price (calculated to the nearest $0.0001) obtained
by multiplying the Purchase Price in effect immediately prior to
the time of such issue or sale by a fraction, the numerator of
which shall be the sum of (i) the number of shares of Common
Stock outstanding immediately prior to such issue or sale
multiplied by the Purchase Price immediately prior to such issue
or sale plus (ii) the consideration received by the Company upon
such issue or sale, and the denominator of which shall be the
product of (iii) the total number of shares of Common Stock
outstanding immediately after such issue or sale, multiplied by
(iv) the Purchase Price immediately prior to such issue or sale.
As used herein, "Employee Stock Option/Purchase Plans" consist of
the Company's 1997 Equity Incentive Plan, 1995 Stock Option Plan,
Employee Stock Purchase Plan, Employee Bonus Award Plan, and non
qualified options granted to certain Directors of the Company.
Notwithstanding the foregoing, no adjustment of the Purchase
Price shall be made in an amount less than $0.0001 per share, but
any such lesser adjustment shall be carried forward and shall be
made at the time of and together with the next subsequent
adjustment which together with any adjustments so carried forward
shall amount to $0.0001 per share or more.
5.3 Option Grants. In the event that at any time, other than
the issuance of options pursuant to the Company's Employee Stock
Option Plan, the Company shall in any manner grant (directly, by
assumption in a merger or otherwise) any rights to subscribe for
or to purchase, or any options for the purchase of, Common Stock
or any stock or securities convertible into or exchangeable for
Common Stock (such rights or options being herein called
"Options" and such convertible or exchangeable stock or
securities being herein called "Convertible Securities"), whether
or not such Options or the right to convert or exchange any such
Convertible Securities are immediately exercisable, and the price
per share for which Common Stock is issuable upon the exercise of
such Options or upon conversion or exchange of such Convertible
Securities (determined by dividing (i) the total amount, if any,
received or receivable by the Company as consideration for the
granting of such Options, plus the minimum aggregate amount of
additional consideration payable to the Company upon the exercise
of all such Options, plus, in the case of any such Options which
relate to Convertible Securities, the minimum aggregate amount of
additional consideration, if any, payable upon the issue or sale
of such Convertible Securities and upon the conversion or
exchange thereof, by (ii) the total number of shares of Common
Stock issuable upon the exercise of such Options or upon the
conversion or exchange of all such Convertible Securities
issuable upon the exercise of such Options) shall be less than
the Purchase Price in effect immediately prior to the time of the
granting of such Options, then the total number of shares of
Common Stock issuable upon the exercise of such Options or upon
conversion or exchange of the total amount of such Convertible
Securities issuable upon the exercise of such Options shall (as
of the date of granting such Options) be deemed to be outstanding
and to have been issued for such price per share. Except as
otherwise provided in subsection 5.5, no further adjustment of
the Purchase Price shall be made upon the actual issue of such
Common Stock or of such Convertible Securities upon exercise of
such Options or upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities.
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<PAGE>
5.4 Convertible Security Grants. In the event that the Company
shall in any manner issue (directly, by assumption in a merger or
otherwise) or sell any Convertible Securities (other than
pursuant to the exercise of Options to purchase such Convertible
Securities covered by subsection 5.3), whether or not the rights
to exchange or convert thereunder are immediately exercisable,
and the price per share for which Common Stock is issuable upon
such conversion or exchange (determined by dividing (i) the total
amount received or receivable by the Company as consideration for
the issue or sale of such Convertible Securities, plus the
minimum aggregate amount of additional consideration, if any,
payable to the Company upon the conversion or exchange thereof,
by (ii) the total maximum number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible
Securities) shall be less than the Purchase Price in effect
immediately prior to the time of such issue or sale, then the
total maximum number of shares of Common Stock issuable upon
conversion or exchange of all such Convertible Securities shall
(as of the date of the issue or sale of such Convertible
Securities) be deemed to be outstanding and to have been issued
for such price per share, provided that, except as otherwise
provided in subsection 5.5, no further adjustment of the Purchase
Price shall be made upon the actual issue of such Common Stock
upon conversion or exchange of such Convertible Securities.
5.5 Effect of Alteration to Option or Convertible Security
Terms. In connection with any change in, or the expiration or
termination of, the purchase rights under any Option or the
conversion or exchange rights under any Convertible Securities,
the following provisions shall apply:
(A) If the purchase price provided for in any
Option referred to in subsection 5.3, the additional
consideration, if any, payable upon the conversion or
exchange of any Convertible Securities referred to in
subsection 5.3 or 5.4, or the rate at which any Convertible
Securities referred to in subsection 5.3 or 5.4 are
convertible into or exchangeable for Common Stock shall
change at any time (other than under or by reason of
provisions designed to protect against dilution), then the
Purchase Price in effect at the time of such change shall
forthwith be increased or decreased to the Purchase Price
which would be in effect immediately after such change if
(a) the adjustments which were made upon the issuance of such
Options or Convertible Securities had been made upon the
basis of (and taking into account the total consideration
received for) (i) the issuance at that time of the Common
Stock, if any, delivered upon the exercise of any such
Options or upon the conversion or exchange of any such
Convertible Securities before such change, and (ii) the
issuance at that time of all such Options or Convertible
Securities, with terms and provisions reflecting such change,
which are still outstanding after such change, and (b) the
Purchase Price as adjusted pursuant to clause (a) preceding
had been used as the basis for the adjustments required
hereunder in connection with all other issues or sales of
Common Stock, Options or Convertible Securities by the
Company subsequent to the issuance of such Options or
Convertible Securities.
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(B) On the partial or complete expiration of any
Options or termination of any right to convert or exchange
Convertible Securities, the Purchase Price then in effect
hereunder shall forthwith be increased or decreased to the
Purchase Price which would be in effect at the time of such
expiration or termination if (a) the adjustments which were
made upon the issuance of such Options or Convertible
Securities had been made upon the basis of (and taking into
account the total consideration received for) (i) the
issuance at that time of the Common Stock, if any, delivered
upon the exercise of such Options or upon the conversion or
exchange of such Convertible Securities before such
expiration or termination, and (ii) the issuance at that time
of only those such Options or Convertible Securities which
remain outstanding after such expiration or termination, and
(b) the Purchase Price as adjusted pursuant to clause (a)
preceding had been used as the basis for adjustments required
hereunder in connection with all other issues or sales of
Common Stock, Options or Convertible Securities by the
Company subsequent to the issuance of such Options or
Convertible Securities.
(C) If the purchase price provided for in any
Option referred to in subsection 5.3 or the rate at which any
Convertible Securities referred to in subsection 5.3 or 5.4
are convertible into or exchangeable for Common Stock shall
be reduced at any time under or by reason ofr provisions with
respect thereto designed to protect against dilution, and the
event causing such reduction is one that did not also require
an adjustment in the Purchase Price under other provisions of
this Section 5, then in case of the delivery of shares of
Common Stock upon the exercise of any such Option or upon
conversion or exchange of any such Convertible Securities,
the Purchase Price then in effect hereunder shall forthwith
be adjusted to such amount as would have obtained if such
Option or Convertible Securities had never been issued and if
the adjustments made upon the issuance of such Option or
Convertible Securities had been made upon the basis of the
issuance of (and taking into account the total consideration
received for) the shares of Common Stock delivered as
aforesaid (provided that the Purchase Price used in such
determination shall be the Purchase Price on the date of
issue of such shares); provided that no such adjustment shall
be made unless the Purchase Price then in effect would be
reduced thereby.
5.6 Dividends of Common Stock, Options or Convertible
Securities. In the event that the Company shall declare a
dividend or make any other distribution upon any stock of the
Company payable in Common Stock, Options or Convertible
Securities, any Common Stock, Options or Convertible Securities,
as the case may be, issuable in payment of such dividend or
distribution shall be deemed to have been issued or sold without
consideration.
5.7 Dilution in Case of Other Securities. In case any Other
Securities shall be issued or sold by the Company, or shall
become subject to issue upon the conversion or exchange of any
stock (or Other Securities) of the Company (or any other issuer
of Other Securities or any other person referred to in Section 4)
or to subscription, purchase or other acquisition pursuant to any
rights or options granted by the Company (or such other issuer or
person), for a consideration per share such as to dilute the
purchase rights evidenced by this Warrant, the computations,
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adjustments and readjustments provided for in this Section 5 with
respect to the Purchase Price and the number of shares of Common
Stock issuable upon exercise of this Warrant shall be made as
nearly as possible in the manner so provided and applied to
determine the amount of Other Securities from time to time
receivable on the exercise of the Warrants, so as to protect the
holders of the Warrants against the effect of such dilution.
5.8 Stock Splits and Reverse Splits. In the event that the
Company shall at any time subdivide its outstanding shares of
Common Stock into a greater number of shares, the Purchase Price
in effect immediately prior to such subdivision shall be
proportionately reduced and the number of Warrant Shares
purchasable pursuant to this Warrant immediately prior to such
subdivision shall be proportionately increased, and conversely,
in the event that the outstanding shares of Common Stock of the
Company shall at any time be combined into a smaller number of
shares, the Purchase Price in effect immediately prior to such
combination shall be proportionately increased and the number of
Warrant Shares purchasable upon the exercise of this Warrant
immediately prior to such combination shall be proportionately
reduced. Except as provided in this subsection 5.8 no adjustment
in the Purchase Price and no change in the number of Warrant
Shares purchasable shall be made under this Section 5 as a result
of or by reason of any such subdivision or combination.
5.9 Determination of Consideration Received. For purposes of
this Section 5, the amount of consideration received by the
Company in connection with the issuance or sale of Common Stock,
Options or Convertible Securities shall be determined in
accordance with the following:
(A) In the event that shares of Common Stock,
Options or Convertible Securities shall be issued or sold for
cash, the consideration received therefor shall be deemed to
be the amount payable to the Company therefor, without
deduction therefrom of any expenses incurred or any
underwriting commissions or concessions or discounts paid or
allowed by the Company in connection therewith.
(B) In the event that any shares of Common Stock,
Options or Convertible Securities shall be issued or sold for
a consideration other than cash, the amount of the
consideration other than cash payable to the Company shall be
deemed to be the fair value of such consideration as
reasonably determined by the Board of Directors of the
Company, without deduction of any expenses incurred or any
underwriting commissions or concessions or discounts paid or
allowed by the Company in connection therewith.
(C) The amount of consideration deemed to be
received by the Company pursuant to the foregoing provisions
of this subsection 5.9 upon any issuance and/or sale,
pursuant to an established compensation plan of the Company,
to directors, officers or employees of the Company in
connection with their employment, of shares of Common Stock,
Options or Convertible Securities, shall be increased by the
amount of any tax benefit realized by the Company as a result
of such issuance and/or sale, the amount of such tax benefit
being the amount by which the federal and/or state income or
other tax liability of the Company shall be reduced by reason
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<PAGE>
of any deduction or credit in respect of such issuance and/or
sale.
(D) In the event that any shares of Common Stock,
Options or Convertible Securities shall be issued in
connection with any merger in which the Company is the
surviving corporation, the amount of consideration therefor
shall be deemed to be the fair value as reasonably determined
by the Board of Directors of the Company of such portion of
the assets and business of the non-surviving corporation as
such Board shall determine to be attributable to such Common
Stock, Options or Convertible Securities, as the case may be.
(E) In the event that any Common Stock, Options
and/or Convertible Securities shall be issued in connection
with the issue and sale of other securities or property of
the Company, together comprising one integral transaction in
which no specific consideration is allocated to such Common
Stock, Options or Convertible Securities by the parties
thereto, such Common Stock, Options and/or Convertible
Securities shall be deemed to have been issued without
consideration.
5.10 Record Date as Date of Issue or Sale. In the event that at
any time the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them (i) to receive a
dividend or other distribution payable in Common Stock, Options
or Convertible Securities, or (ii) to subscribe for or purchase
Common Stock, Options or Convertible Securities, then such record
date shall be deemed to be the date of the issue or sale of the
shares of Common Stock deemed to have been issued or sold upon
the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
5.11 Treasury Stock. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or
held by or for the account of the Company, and the disposition of
any such shares (other than their cancellation without
reissuance) shall be considered an issue or sale of Common Stock
for the purposes of this Section 5.
6. No Dilution or Impairment. The Company will not, by
amendment of its Articles of Incorporation or through any
reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of
any of the terms of the Warrants, but will at all times in good
faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in
order to protect the rights of the holders of the Warrants
against dilution or other impairment. Without limiting the
generality of the foregoing, the Company (a) will not increase
the par value or stated value of any shares of stock receivable
on the exercise of the Warrants above the amount payable therefor
on such exercise, (b) will take all such action as may be
necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable shares of stock on
the exercise of all Warrants from time to time outstanding,
(c) will not issue any capital stock of any class which is
preferred as to dividends or as to the distribution of assets
upon voluntary or involuntary dissolution, liquidation or winding
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<PAGE>
up, unless the rights of the holders thereof shall be limited to
a fixed sum or percentage of par value in respect of
participation in dividends and in any such distribution of assets
or such stock shall be non voting and not be convertible into
shares of Common Stock or other voting stock, and (d) will not
transfer all or substantially all of its properties and assets to
any other person (corporate or otherwise), or consolidate with or
merge into any other person or permit any such person to
consolidate with or merge into the Company (if the Company is not
the surviving person), unless such other person shall expressly
assume in writing and become bound by all the terms of the
Warrants.
7. Accountants' Certificate as to Adjustments. In each case of
any adjustment or readjustment in the shares of Common Stock (or
Other Securities) issuable on the exercise of the Warrants, the
Company's chief financial officer will compute, or if requested
by the holders of Warrants to purchase over 50% of the shares of
Common Stock which may be purchased upon exercise of the Warrants
the Company at its expense will promptly cause independent
certified public accountants of recognized standing selected by
the Company at its expense to compute, such adjustment or
readjustment in accordance with the terms of the Warrants and
prepare a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such
adjustment or readjustment is based, including a statement of (a)
the consideration received or receivable by the Company for any
additional shares of Common Stock (or Other Securities) issued or
sold or deemed to have been issued or sold, (b) the number of
shares of Common Stock (or Other Securities) outstanding or
deemed to be outstanding, and (c) the Purchase Price and the
number of shares of Common Stock to be received upon exercise of
this Warrant, in effect immediately prior to such issue or sale
and as adjusted and readjusted as provided in this Warrant. The
Company will forthwith mail a copy of each such certificate to
each holder of a Warrant, and will, on the written request at any
time of any holder of a Warrant (such request shall not be made
more than once in any Fiscal Quarter), furnish to such holder a
like certificate setting forth the Purchase Price at the time in
effect and showing how it was calculated.
8. Notices of Record Date, etc. In the event of
(a) any taking by the Company of a record of the holders of any
class of securities for the purpose of determining the holders
thereof who are entitled to receive any dividend or other
distribution, or any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right or any
declaration of a cash dividend on the Common Stock, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the
Company or any transfer of all or substantially all the assets of
the Company to or consolidation or merger of the Company with or
into any other person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company, or
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(d) any proposed issue or grant by the Company of any shares of
stock of any class or any other securities, or any right or
option to subscribe for, purchase or otherwise acquire any shares
of stock of any class or any other securities (other than the
issue of Common Stock on the exercise of the Warrants),
then and in each such event the Company will mail or cause to be
mailed to each holder of a Warrant a notice specifying (i) the
date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and stating the amount and
character of such dividend, distribution or right, (ii) the date
on which any such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution,
liquidation or winding-up is to take place, and the time, if any
is to be fixed, as of which the holders of record of Common Stock
(or Other Securities) shall be entitled to exchange their shares
of Common Stock (or Other Securities) for securities or other
property deliverable on such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution,
liquidation or winding-up, and (iii) the amount and character of
any stock or other securities, or rights or options with respect
thereto, proposed to be issued or granted, the date of such
proposed issue or grant and the persons or class of persons to
whom such proposed issue or grant is to be offered or made. Such
notice shall be mailed at least twenty (20) days prior to the
date specified in such notice on which any such action is to be
taken, except with respect to the grant of options under the
Company's Employee Stock Option/Purchase Plans in which case such
notice shall be given not later than the date of grant.
9. Reservation of Stock, etc. Issuable on Exercise of Warrants.
The Company will at all times reserve and keep available, solely
for issuance and delivery on the exercise of the Warrants, all
shares of Common Stock (or Other Securities) from time to time
issuable on the exercise of the Warrants.
10. Representations and Warranties of the Company. This Warrant
is issued and delivered by the Company on the basis of the
following:
(a) Authorization and Delivery. This Warrant has been duly
authorized and executed by the Company and when delivered will be
the valid and binding obligation of the Company enforceable in
accordance with its terms;
(b) Warrant Shares. The shares of Common Stock to be
issued pursuant to this Warrant have been duly authorized and
reserved for issuance by the Company and, when issued and paid
for in accordance with the terms hereof, will be validly issued,
fully paid and nonassessable;
(c) Rights and Privileges. The rights, preferences,
privileges and restrictions granted to or imposed upon such
shares of Common Stock and the holders thereof are as set forth
herein and in the Company's Articles of Incorporation.
(d) No Inconsistency. The execution and delivery of this
Warrant are not, and the issuance of the shares of Common Stock
upon exercise of this Warrant in accordance with the terms hereof
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will not be, inconsistent with the Company's Articles of
Incorporation or by-laws, do not and will not contravene any law,
governmental rule or regulation, judgment or order applicable to
the Company, and do not and will not contravene any provision of,
or constitute a default under, any indenture, mortgage, contract
or other instrument of which the Company is a party or by which
it is bound or require the consent or approval of, the giving of
notice to, the registration with the taking of any action in
respect of or by, any Federal, state or local government
authority or agency or other person.
11. Exchange of Warrants. On surrender for exchange of any
Warrant, properly endorsed, to the Company, the Company at its
expense will issue and deliver to or on the order of the holder
thereof a new Warrant or Warrants of like tenor, in the name of
such holder or as such holder (on payment by such holder of any
applicable transfer taxes) may direct, calling in the aggregate
on the face or faces thereof for the number of shares of Common
Stock called for on the face or faces of the Warrant or Warrants
so surrendered.
12. Replacement of Warrants. On receipt of evidence
reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of any Warrant and, in the case of any
such loss, theft or destruction of any Warrant, on delivery of an
indemnity agreement or security reasonably satisfactory in form
and amount to the Company or, in the case of any such mutilation,
on surrender and cancellation of such Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a new Warrant
of like tenor.
13. Warrant Agent. The Company may, by written notice to
each holder of a Warrant, appoint an agent having an office in
Boston, Massachusetts for the purpose of issuing Common Stock (or
Other Securities) on the exercise of the Warrants pursuant to
Section 1, exchanging Warrants pursuant to Section 11, and
replacing Warrants pursuant to Section 12, or any of the
foregoing, and thereafter any such issuance, exchange or
replacement, as the case may be, shall be made at such office by
such agent.
14. Remedies. The Company stipulates that the remedies at
law of the holder of this Warrant in the event of any default or
threatened default by the Company in the performance of or
compliance with any of the terms of this Warrant are not and will
not be adequate, and that such terms may be specifically enforced
by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any
of the terms hereof or otherwise.
15. Negotiability, etc. This Warrant is issued upon the
following terms, to all of which each holder or owner hereof by
the taking hereof consents and agrees:
(a) title to this Warrant may be transferred by
endorsement (by the holder hereof executing the form of
assignment at the end hereof) and delivery in the same
manner as in the case of a negotiable instrument
transferable by endorsement and delivery; and
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(b) any person in possession of this Warrant properly
endorsed for transfer to such person (including endorsed in
blank) is authorized to represent himself as absolute owner
hereof and is empowered to transfer absolute title hereto by
endorsement and delivery hereof to a bona fide purchaser
hereof for value; each prior taker or owner waives and
renounces all of his equities or rights in this Warrant in
favor of each such bona fide purchaser, and each such bona
fide purchaser shall acquire absolute title hereto and to
all rights represented hereby. Nothing in this
paragraph (b) shall create any liability on the part of the
Company beyond any liability or responsibility it has under
law.
16. Notices, etc. All notices and other communications
from the Company to the holder of this Warrant shall be mailed by
first class registered or certified mail, postage prepaid, at
such address as may have been furnished to the Company in writing
by such holder or, until any such holder furnishes to the Company
an address, then to, and at the address of, the last holder of
this Warrant who has so furnished an address to the Company.
17. Miscellaneous. This Warrant and any term hereof may be
changed, waived, discharged or terminated only by an instrument
in writing signed by the party against which enforcement of such
change, waiver, discharge or termination is sought. This Warrant
shall be construed and enforced in accordance with and governed
by the laws of the Commonwealth of Massachusetts. The headings
in this Warrant are for purposes of reference only, and shall not
limit or otherwise affect any of the terms hereof. This Warrant
is being executed as an instrument under seal. The invalidity or
unenforceability of any provision hereof shall in no way affect
the validity or enforceability of any other provision.
18. Expiration. The right to exercise this Warrant shall
expire at 5:00 p.m., Manchester, New Hampshire time, on
July_____, 2009. Notwithstanding the foregoing, this Warrant
shall automatically be deemed to be exercised in full pursuant to
the provisions of Section 1.5 hereof, without any further action
on behalf of the holder, immediately prior to the time this
Warrant would otherwise expire pursuant to the preceding
sentence.
[SIGNATURE PAGE FOLLOWS]
15
IN WITNESS WHEREOF, the Company has executed this Warrant
under seal as of the date first written above.
WPI GROUP, INC.
By:/s/John W. Powers
-------------------------
John W. Powers
Vice President/Chief
Financial Officer
[Corporate Seal]
Attest:
By:/s/Michael Tule
---------------------
Name:Michael Tule
Title:Secretary
16
<PAGE>
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
WPI GROUP, INC.
The undersigned, the holder of the within Warrant, hereby
irrevocably elects to exercise this Warrant for, and to purchase
thereunder, ........ shares of Common Stock of WPI GROUP, INC.
and herewith makes payment of $........ therefor, and requests
that the certificates for such shares be issued in the name of,
and delivered to .............., federal taxpayer identification
number ............, whose address is ...................
Dated:
-------------------------------
(Signature must conform to name
of holder as specified on the
face of the Warrant)
--------------------------------
(Address)
Signed in the presence of:
- -----------------------------
-------------------------
FORM OF ASSIGNMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns,
and transfers unto .................., federal taxpayer
identification number ..........., whose address is ............,
the right represented by the within Warrant to purchase
............. shares of Common Stock of WPI GROUP, INC. to which
the within Warrant relates, and appoints
.......................... Attorney to transfer such right on the
books of WPI GROUP, INC. with full power of substitution in the
premises.
Dated:
--------------------------------
(Signature must conform to name
of holder as specified on the
face of the Warrant)
--------------------------------
(Address)
Signed in the presence of:
- ---------------------------------
17
<PAGE>
EXHIBIT 10.56
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement") dated as of
August 16, 1999, by and between WPI GROUP, INC., a New Hampshire
corporation, (the "Company") and the LENDERS or their assigns
(the "Lenders") who are parties to the Credit Agreement dated as
of August 3, 1998, as amended to date, including without
limitation the Third Amendment of even date, (the "Credit
Agreement") among the Company and certain of its subsidiaries,
Fleet Bank - NH, for itself as a Lender, and as Agent for the
other Lenders, and the other Lenders (the Lenders and their
assigns are herein collectively referred to as the "Holders" and
each Lender and its assigns a "Holder");
WHEREAS, the Holders are acquiring from the Company warrants
to purchase up to one hundred twenty-four thousand
(124,000) shares of the Company's common stock, par value
$.01 per share, pursuant to the Third Amendment to the Credit
Agreement referenced above (the "Third Amendment") by and between
the Company and the Holders; and
WHEREAS, it is a condition precedent to the effectiveness of
the Third Amendment that the Company enter into an agreement with
the Holders granting to the Holders certain securities
registration rights with respect to the shares of common stock
purchasable with the warrants.
NOW, THEREFORE, in consideration of the premises, as an
inducement to the Holders to effectuate the Third Amendment, and
for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company hereby
covenants and agrees with the Holders as follows:
1. Certain Definitions. As used in this Agreement, the
following terms shall have the following respective meanings:
"Commission" shall mean the United States Securities
and Exchange Commission, or any other federal agency at the time
administering the Securities Act.
"Common Stock" shall mean (i) the Company's Common
Stock, par value $.01 per share, as authorized on the date of
this Agreement, (ii) any other capital stock of any class or
classes (however designated) of the Company, authorized on or
after the date hereof, the holders of which shall have the right,
without limitation as to amount per share, either to all or to a
share of the balance of current dividends and liquidating
distributions after the payment of dividends and distributions on
any shares entitled to preference in the payment thereof, and the
holders of which shall ordinarily, in the absence of
contingencies, be entitled to vote for the election of a majority
of directors of the Company, and (iii) any other securities into
which or for which any of the securities described in (i) or (ii)
above may be converted or exchanged pursuant to a plan of
recapitalization, reorganization, merger, sale of assets or
otherwise.
<PAGE>
"Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended, or any similar federal statute, and the
rules and regulations of the Commission thereunder, all as the
same shall be in effect at the time.
"Person" shall mean an individual, a corporation, a
partnership, a limited liability company, a joint venture, a
trust, an unincorporated organization, a government and any
agency or political subdivision thereof.
"Registrable Securities" shall mean the Warrant Shares
or any other securities of the Company issued and issuable upon
exercise of the Warrants.
"Registration Expenses" shall mean the expenses so des
cribed in Section 5.
"Securities Act" shall mean the Securities Act of 1933,
as amended, or any similar federal statute, and the rules and
regulations of the Commission thereunder, all as the same shall
be in effect at the time.
"Warrants" shall mean and include the Company's Common
Stock Purchase Warrants issued pursuant to the Third Amendment.
"Warrant Shares" shall mean shares of Common Stock
issued and issuable upon exercise of the Warrants.
2. Demand Registration.
(a) At any time after the Warrant becomes exercisable,
the holders of at least fifty percent (50%) of the Registrable
Securities may request the Company to register under the
Securities Act all or any portion of the Registrable Securities
held by such requesting holders in the manner specified in such
request, and upon receipt of such request the Company shall
promptly deliver notice of such request to all Persons holding
Registrable Securities who shall then have thirty (30) days to
notify the Company in writing of their desire to be included in
such registration. The Company will use its best efforts to
expeditiously effect the registration of all Registrable
Securities whose holders request participation in such
registration under the Securities Act, but only to the extent
provided for in the following provisions of this Agreement;
provided, however, that the Company shall not be required to
effect registration pursuant to a request under this Section 2
more than one (1) time for the holders of the Registrable
Securities as a group, and may register the Registrable
Securities on Form S-3 under the Securities Act if available.
Notwithstanding anything to the contrary contained herein, no
request may be made under this Section 2 within 180 days after
the effective date of a registration statement filed by the
Company covering a firm commitment underwritten public offering
in which the holders of Registrable Securities shall have been
entitled to join pursuant to Section 3 or 12 and in which there
shall have been effectively registered all Registrable Securities
as to which registration shall have been requested.
2
<PAGE>
(b) Whenever a requested registration pursuant to
Section 2(a) above is for an underwritten offering, only
Registrable Securities which are to be included in the
underwriting may be included in the registration, and, if the
managing underwriter of such offering determines in good faith
that the number of Registrable Securities so included which are
to be sold by the holders of the Registrable Securities should be
limited due to market conditions and/or the necessity of
including in such underwriting or registration securities to be
sold for the account of the Company, the holders of Registrable
Securities to be included in such underwriting and registration
shall share pro rata in the number of such Registrable Securities
being underwritten and registered for their account, such sharing
to be based on the number of all Registrable Securities held by
such holders, respectively; provided, that in no event shall the
holders of Registrable Securities that requested such
registration pursuant to Section 2(a) above have the number of
their Registrable Securities to be included in such underwriting
and registration reduced or limited (including pursuant to
Section 3 hereof) until the number of securities whose holders
have a contractual, incidental "piggy back" right to include such
securities in the registration statement as to which inclusion
has been requested pursuant to such right have been reduced to
zero (0). Notwithstanding the foregoing, in the event that the
underwriter or underwriters cut back the number of Registrable
Securities required to be included by the Holders in such demand
registration by more than 20%, then such registration will not be
deemed to be a demand registration for purposes of this Section
2. Whenever a requested registration pursuant to Section 2(a)
above is for an underwritten public offering, the Company,
subject to the approval of the holders of a majority of the
Registrable Securities to be sold in such offering (which
approval will not be unreasonably withheld or delayed), may
designate the managing underwriter(s) of such offering. The
Company may not cause any other registration of securities for
sale for its own account (other than a registration effected
solely to implement an employee benefit plan or a transaction to
which Rule 145 of the Commission is applicable) to become
effective less than ninety (90) days after the effective date of
any registration required pursuant to this Section 2.
(c) If at the time of any request to register
Registrable Securities pursuant to Section 2(a) above the Company
is preparing or within thirty (30) days thereafter commences to
prepare a registration statement for a public offering (other
than a registration effected solely to implement an employee
benefit plan or a transaction to which Rule 145 of the Commission
is applicable) which in fact is filed and becomes effective
within ninety (90) days after the request, or is engaged in any
activity which, in the good faith determination of the Company's
board of directors, would be adversely affected by the requested
registration to the material detriment of the Company, then the
Company may at its option direct that such request be delayed for
a period not in excess of four (4) months from the effective date
of such offering or the date of commencement of such other
activity, as the case may be, such right to delay a request to be
exercised by the Company not more than once in any two (2) year
period. Nothing in this Section 2(c) shall preclude a holder of
Registrable Securities from enjoying registration rights which it
might otherwise possess under Section 3 hereof.
3. Piggyback Registration. If the Company, at any time
proposes to register any of its securities under the Securities
Act (including pursuant to a demand of any stockholder of the
Company exercising registration rights) for sale to the public
(except with respect to registration statements on Form S-4 or S-
3
<PAGE>
8 or another form not available for registering the Registrable
Securities for sale to the public), each such time it will give
written notice to all holders of the outstanding Registrable
Securities, including each holder who has the right to acquire
Registrable Securities, of its intention to do so. Upon the
written request of any of such holders of the Registrable
Securities given within twenty (20) days after receipt by such
holder of such notice, the Company will, subject to the limits
contained in this Section 3, use its best efforts to cause all
such Registrable Securities of said requesting holders to be
registered under the Securities Act and qualified for sale under
any state blue sky law, all to the extent requisite to permit
such sale or other disposition by such holder of the Registrable
Securities so registered; provided, however, that if the Company
is advised in writing in good faith by any managing underwriter
of the Company's securities being offered in a public offering
pursuant to such registration statement that the amount to be
sold by Persons other than the Company (collectively, "Selling
Stockholders") is greater than the amount which can be offered
without adversely affecting the offering, the Company may reduce
the amount offered for the accounts of Selling Stockholders
(including holders of shares of Registrable Securities) pursuant
to a contractual, incidental "piggy back" right to include such
securities in a registration statement to a number deemed
satisfactory by such managing underwriter; provided, further,
that no reduction shall be made in the amount of Registrable
Securities offered for the accounts of the holders of Registrable
Securities unless such reduction is imposed pro rata with respect
to (i) all securities whose holders have a contractual,
incidental "piggy back" right to include such securities in the
registration statement as to which inclusion has been requested
pursuant to such right and (ii) any executive officer of the
Company; and provided, further, that there is first excluded from
such registration statement all shares of Common Stock sought to
be included therein by (i) any holder thereof, other than any
executive officer of the Company, not having any such
contractual, incidental registration rights, and (ii) any holder
thereof having contractual, incidental registration rights
subordinated and junior to the rights of the holders of
Registrable Securities. Notwithstanding the foregoing
provisions, the Company may withdraw any registration statement
referred to in this Section 3 without thereby incurring any
liability to the holders of Registrable Securities.
4. Registration Procedures. If and whenever the Company
is required by the provisions of this Agreement to use its best
efforts to effect the registration of any of its securities under
the Securities Act, the Company will, as expeditiously as
possible:
(i) prepare and file with the Commission a
registration statement with respect to such securities and use
its best efforts to cause such registration statement to become
and remain effective; provided, however, that notwithstanding any
other provision of this Agreement, the Company shall not in any
event be required to use its best efforts to maintain the
effectiveness of any such registration statement for a period in
excess of six (6) months;
(ii) prepare and file with the Commission such
amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to
keep such registration statement effective and to comply with the
provisions of the Securities Act with respect to the sale or
other disposition of all securities covered by such registration
4
<PAGE>
statement whenever the seller or sellers of such securities shall
desire to sell or otherwise dispose of the same, but only to the
extent provided in this Agreement;
(iii) furnish to each seller such number of copies
of a prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such
other documents as such seller may reasonably request in order to
facilitate the public sale or other disposition of the securities
owned by such seller;
(iv) use every reasonable effort to register or qualify
the securities covered by such registration statement under such
other securities or state blue sky laws of such jurisdictions as
each seller shall reasonably request, and do any and all other
acts and things which may be necessary under such securities or
blue sky laws to enable such seller to consummate the public sale
or other disposition in such jurisdictions of the securities
owned by such seller, except that the Company shall not for any
such purpose be required to qualify to do business as a foreign
corporation in any jurisdiction wherein it is not so qualified;
(v) before filing the registration statement or
prospectus or amendments or supplements thereto, furnish to one
counsel selected by the holders of Registrable Securities copies
of such documents proposed to be filed which shall be subject to
the reasonable review of such counsel;
(vi) furnish to each prospective seller a signed
counterpart, addressed to the prospective seller, of (A) an
opinion of counsel for the Company, dated the effective date of
the registration statement, and (B) a "comfort" letter signed by
the independent public accountants who have certified the
Company's financial statements included in the registration
statement, covering substantially the same matters with respect
to the registration statement (and the prospectus included
therein) and (in the case of the accountants' letter) with
respect to events subsequent to the date of the financial
statements, as are customarily covered (at the time of such
registration) in opinions of the Company's counsel and in
accountants' letters delivered to the underwriters in
underwritten public offerings of securities, subject to any
requirement by the accountants for representation letters from
the selling holders of Registrable Securities; and
(vii) use its best efforts to list the Registrable
Securities covered by such registration statement with any
securities exchange on which the Common Stock of the Company is
then listed.
5. Expenses. All expenses incurred in effecting the
registrations provided for in Sections 2, 3 and 12, including,
without limitation, all registration and filing fees, printing
expenses, fees and disbursements of counsel for the Company and
fees of one counsel for all of the selling holders of Registrable
Securities (up to $25,000 per registration), underwriting
expenses (other than fees, commissions, discounts and transfer
taxes relating to the Registrable Securities), expenses of any
audits incident to or required by any such registration and
expenses of complying with the securities or blue sky laws of any
jurisdictions pursuant to Section 4(iv) hereof (all of such
expenses referred to as "Registration Expenses"), shall be paid
by the Company; provided, that if an offering pursuant to any
registration commenced pursuant to Section 2 above is abandoned
5
<PAGE>
by the selling shareholders (other than by reason of adverse
information pertaining to the Company's business affairs or
financial position or the underwriters cut back the number of
Registrable Securities by more than 20% in a demand registration
as provided in Section 2), as opposed to stock market conditions,
unknown to the sellers prior to the commencement of such
registration proceedings, in which event the Company shall bear
all Registration Expenses), such selling shareholders shall bear
pro rata any costs incurred by the Company in conjunction with
such registration. In either event, the number of registrations
to which the holders of Registrable Securities are entitled
pursuant to Section 2 shall not be reduced thereby.
6. Termination of Registration Rights. All registration
rights granted under this Agreement shall terminate and be of no
further force and effect five (5) years after the date the
Warrant becomes exercisable . In addition, a Holder's
registration rights shall expire if (i) such Holder (together
with its affiliates and other Holders) holds less than 1% of the
Company's outstanding Common Stock (treating all shares of
convertible securities on an as converted basis) or (ii) all
Registrable Securities held by and issued to such Holder may be
sold under Rule 144 during any ninety (90) day period.
7. Furnishing Information. It shall be a condition
precedent to the obligations of the Company to take any action
pursuant to Section 2 or 3 that the selling holders shall furnish
to the Company such information regarding themselves, the
Registrable Securities held by them and the intended method of
disposition of such securities as shall be required to effect the
registration of their Registrable Securities.
8. Indemnification. (a) The Company shall indemnify and
hold harmless the seller of such securities, each underwriter (as
defined in the Securities Act), and each other Person who
participates in the offering of such securities and each other
Person, if any, who controls (within the meaning of the
Securities Act) such seller, underwriter or participating Person
(individually and collectively the "Company - Indemnified
Person") against any losses, claims, damages or liabilities
(collectively the "liability"), joint or several, to which such
Company - Indemnified Person may become subject under the
Securities Act or any other statute or at common law, insofar as
such liability (or action in respect thereof) arises out of or is
based upon (i) any untrue statement or alleged untrue statement
of any material fact contained, on the effective date thereof, in
any registration statement under which such securities were
registered under the Securities Act, any preliminary prospectus
or final prospectus contained therein, or any amendment or
supplement thereto, or (ii) any omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading. Except
as otherwise provided in Section 8(d), the Company shall
reimburse each such Company - Indemnified Person in connection
with investigating or defending any such liability; provided,
however, that the Company shall not be liable to any Company -
Indemnified Person in any such case to the extent that any such
liability arises out of or is based upon any untrue statement or
alleged untrue statement or omission or alleged omission made in
such registration statement, preliminary or final prospectus, or
amendment or supplement thereto in reliance upon and in
conformity with information furnished in writing to the Company
by such Person specifically for use therein; and provided
further, that the Company shall not be required to indemnify any
6
<PAGE>
Person against any liability arising from any untrue or
misleading statement or omission contained in any preliminary
prospectus if such deficiency is corrected in the final
prospectus or for any liability which arises out of the failure
of any Person to deliver a prospectus as required by the
Securities Act regardless of any investigation made by or on
behalf of such Company - Indemnified Person and shall survive
transfer of such securities by such seller.
(b) Each holder of any Registrable Securities shall,
by acceptance thereof, indemnify and hold harmless each other
holder of any Registrable Securities, the Company, its directors
and officers, each underwriter and each other Person, if any, who
controls the Company or such underwriter (individually and
collectively the "Holder - Indemnified Person"), against any
liability, joint or several, to which any such Holder -
Indemnified Person may become subject under the Securities Act or
any other statute or at common law, insofar as such liability (or
actions in respect thereof) arises out of or is based upon
(i) any untrue statement or alleged untrue statement of any
material fact contained, on the effective date thereof, in any
registration statement under which securities were registered
under the Securities Act at the request of such holder, any
preliminary prospectus or final prospectus contained therein, or
any amendment or supplement thereto, or (ii) any omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, in the case of (i) and (ii) to the extent, but only
to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in such
registration statement, preliminary or final prospectus,
amendment or supplement thereto in reliance upon and in
conformity with information furnished in writing to the Company
by such holder specifically for use therein. Such holder shall
reimburse any Holder - Indemnified Person for any legal fees
incurred in investigating or defending any such liability;
provided, however, that such holder's obligation's hereunder
shall be limited to an amount equal to the net proceeds to such
holder of the Registrable Securities sold in any such
registration; and provided further, that no holder of Registrable
Securities shall be required to indemnify any Person against any
liability arising from any untrue or misleading statement or
omission contained in any preliminary prospectus if such
deficiency is corrected in the final prospectus or for any
liability which arises out of the failure of any Person to
deliver a prospectus as required by the Securities Act.
(c) Indemnification similar to that specified in
Sections 8(a) and (b) above shall be given by the Company and
each holder of any Registrable Securities (with such
modifications as may be appropriate) with respect to any required
registration or other qualification of the Registrable Securities
under any federal or state law or regulation of governmental
authority other than the Securities Act.
(d) In the event the Company, any holder or any other
Person receives a complaint, claim or other notice of any
liability or action, giving rise to a claim for indemnification
under Sections 8(a), (b) or (c) above, the Person claiming
indemnification under such paragraphs (the "indemnified Person")
shall promptly notify the Person against whom indemnification is
sought (the "indemnifying Person") of such complaint, notice,
claim or action, and such indemnifying Person shall have the
right to investigate and defend any such loss, claim, damage,
liability or action. The indemnified Person shall have the right
to employ separate counsel in any such action and to participate
in the defense thereof but the fees and expenses of such counsel
7
<PAGE>
shall not be at the expense of the indemnifying Person,
provided, however, that an indemnified Person shall have the
right to retain its own counsel, with the fees and expenses to be
paid by the indemnifying Person, if (a) the indemnifying Person
fails promptly to defend or (b) representation of such
indemnified Person by the counsel retained by the indemnifying
Person would be inappropriate due to actual or reasonably likely
differing interests between such indemnified Person and any other
party presented by such counsel in such proceeding. In no event
shall an indemnifying Person be obligated to indemnify any Person
for any settlement of any claim or action effected without the
indemnifying Person's prior written consent.
9. Rule 144 Reporting. With a view to making
available to the Holders the benefits of certain rules and
regulations of the SEC which may permit the sale of the
Registrable Securities to the public without registration, the
Company shall:
(a) Make and keep public information available, as
those terms and understood and defined in SEC Rule 144 or
any similar or analogous rule promulgated under the
Securities Act;
(b) File with the SEC, in a timely manner, all reports
and other documents required of the Company under the
Securities Act and the Exchange Act;
(c) So long as a Holder owns any Registrable
Securities, furnish to such Holder forthwith upon request:
a written statement by the Company as to its compliance with
the reporting requirements of said Rule 144 of the
Securities Act, and of the Exchange Act (at any time after
it has become subject to such reporting requirements); a
copy of the most recent annual or quarterly report of the
Company; and such other reports and documents as a Holder
may reasonably request in availing itself of any rule or
regulation of the SEC allowing it to sell any such
securities without registration.
10. Consent to be Bound. Each subsequent holder of
Warrants or Registrable Securities must consent in writing to be
bound by the terms and conditions of this Agreement in order to
acquire the rights granted pursuant to this Agreement.
11. Amendments. The provisions of this Agreement may be
amended, and the Company may take any action herein prohibited or
omit to perform any act herein required to be performed by it,
only if the Company has obtained the written consent of the
holders of a majority of the Registrable Securities.
12. Form S-3. The Company shall use its best efforts to
qualify and remain qualified to register securities on Form S-3
under the Securities Act. The holders of the Registrable
Securities shall have the right to request any number of
registrations on Form S-3, but not more than one (1) registration
on Form S-3 in any six-month period (such requests shall be in
writing and shall state the number of shares of Registrable
Securities desired to be registered). The Company shall not be
required to effect a registration pursuant to this Section 12 if,
8
<PAGE>
in the good faith judgment of the Company, such registration will
hinder or interfere with a concurrent or proposed security
issuance of, or acquisition by, the Company or if the holder or
holders requesting registration propose to dispose of Registrable
Securities having an aggregate disposition price (before
deduction of underwriting discounts and expenses of sale) of less
than $500,000. This Section shall not be interpreted to restrict
the Company from acquiring its own shares or to require the
Company to sell its own shares. The Company shall give notice to
all holders of the Registrable Securities of the receipt of a
request for registration pursuant to this Section 12 and shall
provide a reasonable opportunity for other holders to participate
in the registration. Subject to the foregoing, the Company will
use its best efforts, in each case, to effect promptly the
registration of all shares of the Registrable Securities on
Form S-3 to the extent requested by the holder or holders thereof
for purposes of disposition.
13. Assignability of Registration Rights. Subject to
Section 10 hereof, the registration rights set forth in this
Agreement are assignable to each assignee as to each Warrant or
each share of Registrable Securities conveyed in accordance
herewith who agrees in writing to be bound by the terms and
conditions of this Agreement. The term "seller" as used in this
Agreement refers to a holder of the Registrable Securities
selling such shares.
14. Rights Which May Be Granted to Subsequent Investors.
The Company shall not grant subsequent registration rights to
third parties superior to the registration rights granted
pursuant to this Agreement so long as any of the registration
rights under this Agreement remain in effect.
15. Damages. The Company recognizes and agrees that each
holder of Registrable Securities will not have an adequate remedy
if the Company fails to comply with the terms and provisions of
this Agreement and that damages will not be readily
ascertainable, and the Company expressly agrees that, in the
event of such failure, it shall not oppose an application by any
holder of Registrable Securities or any other Person entitled to
the benefits of this Agreement requiring specific performance of
any and all provisions hereof or enjoining the Company from
continuing to commit any such breach of this Agreement.
16. Representations and Warranties of the Company. The
Company represents and warrants to the Holders as follows:
(a) The execution, delivery and performance of this
Agreement by the Company have been duly authorized by all requi
site corporate action and will not violate any provision of law,
any order of any court or other agency of government, the
Articles of Incorporation or Bylaws of the Company or any
provision of any indenture, agreement or other instrument to
which it or any or its properties or assets is bound, conflict
with, result in a breach of or constitute (with due notice or
lapse of time or both) a default under any such indenture,
agreement or other instrument or result in the creation or
imposition of any lien, charge or encumbrance of any nature
whatsoever upon any of the properties or assets of the Company.
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<PAGE>
(b) This Agreement has been duly and validly executed
and delivered by the Company and constitutes the legal, valid and
binding obligation of the Company, enforceable in accordance with
its terms.
17. Miscellaneous.
(a) All notices, requests, demands and other
communications provided for hereunder shall be in writing and
mailed (by first class registered or certified mail, postage
prepaid), telegraphed, sent by express overnight courier service
or electronic facsimile transmission (with a copy by mail), or
delivered to the applicable party at its address provided in the
Credit Agreement (if to any holder of Warrants or Registrable
Securities who is not a party to the Credit Agreement, at such
holder's address for notice as set forth in the books and records
of the Company), or, as to each of the foregoing, at such other
address as shall be designated by such Person in a written notice
to the other parties complying as to delivery with the terms of
this subsection (a). All such notices, requests, demands and
other communications shall, when mailed, telegraphed or sent,
respectively, be effective (i) three (3) days after being
deposited in the mails or (ii) one (1) day after being delivered
to the telegraph company, deposited with the express overnight
courier service or sent by electronic facsimile transmission,
respectively, addressed as aforesaid.
(b) This Agreement shall be governed by and construed
in accordance with the laws of the State of New Hampshire.
(c) This Agreement may be executed in two or more coun
terparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
(d) If any provision of this Agreement shall be held
to be illegal, invalid or unenforceable, such illegality,
invalidity or unenforceability shall attach only to such
provision and shall not in any manner affect or render illegal,
invalid or unenforceable any other provision of this Agreement,
and this Agreement shall be carried out as if any such illegal,
invalid or unenforceable provision were not contained herein.
[SIGNATURE PAGE FOLLOWS]
10
IN WITNESS WHEREOF, the parties hereto have caused this
Registration Rights Agreement to be duly executed as of the date
first set forth above.
WPI GROUP, INC.
By:/s/John W. Powers
- -------------------- ----------------------
Witness John W. Powers
Vice President/Chief
Financial Officer
LENDERS:
FLEET BANK-NH
By:/s/Mark L. Young
- -------------------- ----------------------
Witness Mark L. Young
Senior Vice President
BANK OF NEW HAMPSHIRE
By:/s/David D. McGraw
- -------------------- ---------------------
Witness David D. McGraw
Vice President
SOVEREIGN BANK
By:/s/Stephn P. Kanarian
- --------------------- ----------------------
Witness Stephen P. Kanarian
Senior Vice President
FSC CORP., as Assignee of
BankBoston, N.A.
By:/s/Mary J. Reilly
- ----------------------- -----------------------
Witness Mary J. Reilly
KEY CORPORATE CAPITAL INC.
By:/s/Alexander Strazzella
- ----------------------- ------------------------
Witness Alexander Strazzella
Vice President
11
<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 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 24, 2000
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 Technology, Inc. Florida
WPI Husky Technology Limited England and Wales
WPI Husky Technology GmbH Germany
<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 26, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-26-1999
<PERIOD-END> SEP-26-1999
<CASH> 1,086,708
<SECURITIES> 0
<RECEIVABLES> 2,198,808
<ALLOWANCES> 171,000
<INVENTORY> 461,893
<CURRENT-ASSETS> 60,991,718
<PP&E> 2,733,508
<DEPRECIATION> 1,065,035
<TOTAL-ASSETS> 64,557,059
<CURRENT-LIABILITIES> 72,828,353
<BONDS> 0
0
0
<COMMON> 60,504
<OTHER-SE> (11,034,785)
<TOTAL-LIABILITY-AND-EQUITY> 64,557,059
<SALES> 12,288,976
<TOTAL-REVENUES> 12,288,976
<CGS> 4,801,990
<TOTAL-COSTS> 4,801,990
<OTHER-EXPENSES> 10,794,141
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 620,213
<INCOME-PRETAX> (3,974,995)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,974,995)
<DISCONTINUED> (29,229,821)
<EXTRAORDINARY> 0
<CHANGES> (2,822,147)
<NET-INCOME> (36,026,963)
<EPS-BASIC> (5.96)
<EPS-DILUTED> (5.96)
</TABLE>
