AMENDMENT NO. 1
TO
CONVERTIBLE NOTE AGREEMENT
AMENDMENT NO. 1 (this "Amendment"), dated as of September 21,
2001, to the Convertible Note Agreement, dated as of July 31, 2000 (the
"Agreement"), is by and among NEXIQ TECHNOLOGIES, INC. (f/k/a WPI Group,
Inc.), a New Hampshire corporation (the "Parent"), and each of its wholly
owned subsidiaries, WPI ELECTRONICS, INC., WPI AIRPORT II, INC. (f/k/a WPI
Magnetec, Inc.), WPI MICRO PALM, INC., WPI POWER SYSTEMS, INC., WPI
TERMIFLEX, INC., f/k/a 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., AND WPI AIRPORT I, INC. (f/k/a WPI
Instruments, Inc.), each a New Hampshire corporation, WPI HUSKY TECHNOLOGY,
INC., f/k/a WPI Husky Computers, Inc, a Florida corporation and DIVERSIFIED
SOFTWARE INDUSTRIES, INC., an Iowa corporation (collectively, the
"Subsidiary Borrowers"), all such corporations having their chief executive
offices at 0000 Xxx Xxxxxx, Xxxxxxxxxx, Xxx Xxxxxxxxx 00000 (the Parent and
Subsidiary Borrowers are hereinafter referred to individually as a
"Borrower" and collectively as the "Borrowers"), and SUNRISE CAPITAL
PARTNERS, L.P., a Delaware limited partnership (the "Lender").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Borrowers and the Lender are parties to the
Agreement, pursuant to which the Lenders have purchased from the Borrowers
(i) certain convertible promissory notes, (ii) certain shares of common
stock of Parent, and (iii) certain warrants representing the right to
purchase shares of Parent's common stock; and
WHEREAS, the Borrowers and the Lender desire to amend the
Agreement to provide for the purchase by the Lenders of certain additional
securities as described herein.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the Borrowers and the Lender hereby agree as
follows:
SECTION 1 Definitions. Capitalized terms used herein but not
otherwise defined herein shall have the meanings ascribed thereto in the
Agreement.
SECTION 2 Amendments to Agreement. Upon execution of this
Amendment, the Agreement is hereby amended as follows:
SECTION 2.1 Purchase and Sale of Securities. Section 1.1
of the Agreement is hereby amended by inserting the following additional
subsections after subsection (d):
" (e) Subject to the terms and conditions hereof, on the Amendment
Effective Date, the Lender shall purchase from the Borrowers, and
the Borrowers shall sell to the Lenders, the Term D Securities for
an aggregate purchase price of $5,000,000.
As used in this Agreement, "Term D Securities" means,
collectively, (i) the convertible promissory notes of the
Borrowers, substantially in the form as attached hereto as Exhibit
A-1, in aggregate principal amount of $5,000,000 (each, a "Term D
Note" and collectively, the "Term D Notes"); (ii) a number of
shares of Common Stock equal to the difference, if positive,
between (x) the number of shares of Common Stock that would be
issuable upon conversion of the Term D Notes in accordance with
the provisions of Section 2.1(a) hereof, if the Conversion Price,
for purposes of this clause (x), were equal to the Trading Price
(as defined below), and (y) the number of shares of Common Stock
that would be issuable on the Amendment Effective Date upon
conversion of the Term D Notes in accordance with the provisions
of Section 2.1(a) hereof (the "Term D Shares"); and (iii) Common
Stock Purchase Warrants, in substantially the form as attached
hereto as Exhibit E, representing the right to purchase in the
aggregate the number of shares of Common Stock equal to (x) the
number of shares of Common Stock that would be issuable upon
conversion of the Term D Notes in accordance with the provisions
of Article 2 hereof multiplied by (y) .20 (the "Term D Warrants").
(f) Subject to the terms and conditions hereof, at any
time during the Term E Commitment Period, the Lender may, in its
discretion, purchase from the Borrowers, in one or more tranches,
the Term E Securities. The Lender shall notify the Borrowers of
its desire to purchase the Term E Securities by delivery to Parent
of a written notice (the "Term E Notice") informing the Borrowers
that the Lender is exercising its ability to purchase such
securities from the Borrowers. The Term E Notice shall set forth
(i) the aggregate principal amount of Term E Notes (as defined
below) that Lender wishes to purchase, and (ii) the date of the
purchase (which date shall not be more than five (5) days after
the termination of the Term E Commitment Period). On the date
specified in the Term E Notice, the Lender shall purchase from
the Borrowers, and the Borrowers shall sell to the Lender, the
Term E Securities for an aggregate purchase price equal to the
principal amount of Term E Notes.
As used in this Agreement, "Term E Securities" means,
collectively, (i) the convertible promissory notes of the
Borrowers, substantially in the form as attached hereto as Exhibit
A-2, in aggregate principal amount not to exceed $3,000,000 (each,
a "Term E Note" and collectively, the "Term E Notes"); (ii) a
number of shares of Common Stock equal to the difference, if
positive, between (x) the number of shares of Common Stock that
would be issuable upon conversion of the Term E Notes in
accordance with the provi sions of Section 2.1(a) hereof, if the
Conversion Price, for purposes of this clause (x), were equal to
the Trading Price (as defined below), and (y) the number of shares
of Common Stock that would be issuable upon conversion of the Term
E Notes in accordance with the provisions of Section 2.1(a) hereof
using the Conversion Price in effect on the date of purchase of
such Term E Securities (the "Term E Shares"); and (iii) Common
Stock Purchase Warrants, in substantially the form as attached
hereto as Exhibit E, representing the right to purchase in the
aggregate the number of shares of Common Stock equal to (x) the
number of shares of Common Stock that would be issuable upon
conversion of the Term E Notes purchased on such date in
accordance with the provisions of Article 2 hereof multiplied by
(y) .20 (the "Term E Warrants").
(g) The purchase price for each purchase described in
subsections (e) and (f) of this Section 1.1 shall be allocated
among the Term D Securities and Term E Securities in accordance
with Annex G. The Borrowers and the Lender shall notify one
another and provide one another reasonable assistance in the event
of an examination or audit or other proceeding regarding the
allocation agreed to pursuant to this Section 1.1(g)."
SECTION 2.2 Use of Proceeds. Section 1.3 of the Agreement
is hereby amended by inserting the following sentence at the end of such
section:
"Notwithstanding the foregoing, Borrowers shall utilize the
proceeds of the sale of Term D Securities and Term E Securities:
(i) to partially repay Borrowers' outstanding obligations under
the Existing Senior Credit Facility, in the amount of $1.25
million; (ii) to repay in full all amounts owing under the Bridge
Facility; and (iii) to the extent a portion of such proceeds
remain after the application of (i) and (ii), for the financing of
working capital needs and general corporate purposes."
SECTION 2.3 Fees. Section 1.5(b) of the Convertible Note
Agreement is hereby amended by inserting the following after the first
sentence of such paragraph:
"The Borrowers shall pay to Sunrise Advisors, LLC in cash on the
Amendment Effective Date a transaction fee (the "Amendment
Transaction Fee") equal to 2% of the maximum amount of Term D
Notes and Term E Notes available for purchase by the Lenders. This
amount shall be in addition to any amount payable to Lender on the
Amendment Effective Date pursuant to paragraph (a) of this Section
1.5."
SECTION 2.4. Adjustments to Conversion Price. Section
2.3(b) of the Agreement is hereby amended by inserting the following at the
end of such paragraph:
"If, upon receipt of a Term E Notice, the Borrowers shall fail to
sell to the Lenders the Term E Securities or shall otherwise fail
to comply with the terms of Section 1.1(f), then the Conversion
Price in effect immediately prior to the delivery of the Term E
Notice shall be adjusted to a price equal to: (A) the total
principal amount of all loans outstanding divided by (B) the sum
of (x) the number of shares of Common Stock issuable upon
conversion of all outstanding Notes at the then-current Conversion
Price, plus (y) the number of shares of Common Stock that would be
issuable upon conversion of the Term E Notes at the then-current
Conversion Price, had such Term E Notes been sold to the Lender."
SECTION 2.5. Conditions to the Purchase of Securities.
Article 3 of the Agreement is hereby amended by inserting the following
additional Sections after Section 3.3:
"3.4. Conditions to the Purchase of the Term D Securities
The obligation of the Lender to purchase the Term D
Securities and to perform any obligations hereunder on the
Amendment Effective Date shall be subject to the satisfaction of,
or waiver by the Lender of, the following conditions on or before
the Amendment Effective Date:
(a) Second Forbearance Agreement. The Lenders shall have
received a fully executed copy of the Second Forbearance
Agreement, by and between the Borrowers and the Requisite Lenders
(as such term is defined in the Existing Credit Facility).
(b) Operating Plan and Budget. The Lender shall have
completed a review of the Borrowers' operating plan and budget for
the fiscal year 2002, the results of which are satisfactory to the
Lender in its sole discretion.
(c) Material Adverse Effect. There shall not have
occurred Material Adverse Effect on any of the Borrowers, or any
event reasonably likely to result in a Material Adverse Effect on
any of the Borrowers, since June 30, 2001, and there shall not be
any material inaccuracy in the financial statements as of, and for
the period ended, such date included in the Parent's most recent
quarterly report on Form 10-Q.
(d) Representations and Warranties. Each of the
representations and warranties of the Borrowers contained in this
Agreement that is qualified as to Material Adverse Effect shall be
true and correct, and each of the representations and warranties
of the Borrowers contained in this Agreement that is not so
qualified shall be true and correct in all material respects, at
and as of such date except to the extent that such representations
and warranties relate solely to an earlier date, in which case
such representations and warranties shall be true and correct in
all material respects as of such earlier date as if made at and as
of such date.
(e) Compliance with the Terms and Conditions of this
Agreement; No Default. Each of the Borrowers shall have duly and
properly performed and complied with all of the agreements,
covenants and obligations set forth herein that are required to be
performed or complied with by such Borrower on or before such
date, and no Default or Event of Default shall have occurred and
be continuing on such date or would result after giving effect to
the sale of the Term D Securities.
(f) Delivery of Term D Securities. The Borrowers shall
have delivered to the Lender certificates evidencing (i) the Term
D Notes, (ii) the Term D Shares and (iii) the Term D Warrants.
(g) Payment of Fees. Borrowers shall have paid the Fees
payable pursuant to Section 1.5 hereof.
(h) Participation Agreements. Participation Agreements,
in substantially the form as attached hereto as Exhibit I, shall
have been executed and delivered by the parties identified on
Annex D hereof on a pro rata basis with previous transactions
consummated pursuant to the Agreement.
(i) Officer's Certificate. The Borrowers shall have
delivered to the Lender a certificate executed by (a) the Chairman
of the Board or the President or one of the Vice Presidents of the
Parent and (b) the Treasurer or one of the Assistant Treasurers of
the Parent, in substantially the form as annexed hereto as Exhibit
F, certifying on behalf of each of the Borrowers that the
conditions specified in this Section 3.4 have been fulfilled.
(j) Secretary's Certificate. Lender shall have received a
certificate from the Borrowers, signed by the Secretary or
Assistant Secretary of each such Borrower, certifying (i) the
resolutions duly adopted by the Boards of Directors of each
Borrower approving the execution by the Borrowers of this
Amendment, and the performance by the Borrowers of their
respective obligations hereunder, and (ii) that the copies of the
Articles of Incorporation and bylaws of each such Borrower
provided to the Lender as of the Closing Date have not been
amended and remain in full force and effect as of the Amendment
Effective Date, except as set forth on such certificate.
(k) Opinion of Counsel. The Lender shall have received an
opinion of counsel to the Borrowers, dated as of the Securities
Purchase Date, substantially in the form of Exhibit K hereto.
The acceptance by the Borrower Representative of the
proceeds of the sale of the Term D Securities shall be deemed to
constitute, as of the date of such request or acceptance, a
reaffirmation by the Borrowers of the granting and continuance of
the Lender's Liens pursuant to the Collateral Documents.
3.5 Conditions to the Purchase of the Term E Securities
The obligation of the Lender to purchase the Term E
Securities and to perform any obligations shall be subject to the
satisfaction of, or waiver by the Lender of, the following
conditions:
(a) Representations and Warranties. Each of the
representations and warranties of the Borrowers contained in this
Agreement that is qualified as to Material Adverse Effect shall be
true and correct, and each of the representations and warranties
of the Borrowers contained in this Agreement that is not so
qualified shall be true and correct in all material respects, at
and as of such date except to the extent that such representations
and warranties relate solely to an earlier date, in which case
such representations and warranties shall be true and correct in
all material respects as of such earlier date as if made at and as
of such date.
(b) Compliance with the Terms and Conditions of this
Agreement; No Default. Each of the Borrowers shall have duly and
properly performed and complied with all of the agreements,
covenants and obligations set forth herein that are required to be
performed or complied with by such Borrower on or before such
date, and no Default or Event of Default shall have occurred and
be continuing on such date or would result after giving effect to
the sale of the Term E Securities.
(c) No Material Adverse Effect. There shall not have
occurred a Material Adverse Effect on any of the Borrowers, or any
event reasonably likely to result in a Material Adverse Effect on
any of the Borrowers, since June 30, 2001, and there shall not be
any material inaccuracy in the financial statements as of, and for
the period ended, such date included in the Parent's most recent
quarterly report on Form 10-Q.
(d) Sale of Term D Securities. The Term D Securities
shall have been purchased by the Lender.
(e) Delivery of Term E Securities. The Borrowers shall
have delivered to the Lender certificates evidencing (i) the Term
E Notes, (ii) the Term E Shares and (iii) the Term E Warrants.
(f) Payment of Fees. Borrowers shall have paid the Fees
payable pursuant to Section 1.5 hereof.
(g) Participation Agreements. Participation Agreements,
in substantially the form as attached hereto as Exhibit I, shall
have been executed and delivered by the parties identified on
Annex D hereof on a pro rata basis with previous transactions
consummated pursuant to the Agreement.
The acceptance by the Borrower Representative of the
proceeds of the sale of the Term E Securities shall be deemed to
constitute, as of the date of such request or acceptance, (i) a
representation and warranty by Borrowers that the conditions in
this Section 3.5 have been satisfied and (ii) a reaffirmation by
the Borrowers of the granting and continuance of the Lender's
Liens pursuant to the Collateral Documents."
SECTION 2.6. Amendment to Annex A (Definitions). Annex A
of the Agreement is hereby amended as follows:
(a) Agreement. The definition of "Agreement" in
Annex A of the Agreement is hereby amended by inserting the following at
the end of such definition:
", as it may be amended from time to time."
(b) Amendment Effective Date. Annex A of the
Agreement is hereby amended by inserting the following additional
definition after the definition of "Agreement":
"'Amendment Effective Date' shall mean the date
of execution of Amendment No. 1 to the
Agreement."
(c) Bridge Facility. Annex A of the Agreement is
hereby amended by inserting the following additional definition after the
definition of "Borrowers":
"'Bridge Facility' shall mean the borrowing
availability established by the Lenders in
favor of the Borrowers pursuant to that certain
Revolving Promissory Note, dated as of August
24, 2001."
(d) Fees. The definition of "Fees" in Annex A of
the Agreement is hereby amended by inserting the following at the end of
such definition:
"and the Second Sunrise Commitment Letter."
(e) Notes. The definition of "Notes" in Annex A
of the Agreement is hereby amended by inserting the following at the end of
such definition:
", the Term D Notes, the Term E Notes."
(f) Second Sunrise Commitment Letter. Annex A of
the Agreement is hereby amended by inserting the following additional
definition after the definition of "SEC":
"'Second Sunrise Commitment Letter' shall mean
that certain letter agreement, dated August 15,
2001, among Parent and the Lender."
(g) Securities. The definition of "Securities"
in Annex A of the Agreement is hereby amended by inserting the following at
the end of such definition:
", the Term D Securities, the Term E Securities."
(h) Term E Commitment Period. Annex A of the
Agreement is hereby amended by inserting the following additional
definition after the definition of "Term C Warrants":
"Term E Commitment Period" shall mean the period
beginning on the Amendment Effective Date and
ending 180 days thereafter."
(i) Trading Price. Annex A of the Agreement is
hereby amended by inserting the following additional definition after the
definition of "Total Debt to EBITDA Ratio":
"'Trading Price' shall mean 90% of the lesser of
(i) the average closing trading price of the
Common Stock for the ten trading days
immediately prior to August 15, 2001 and (ii)
the average closing trading price of the Common
Stock for the ten trading days immediately prior
to the Amendment Effective Date."
(j) Warrants. The definition of "Warrants" in
Annex A of the Agreement is hereby deleted and replaced by the following:
"'Warrants' shall mean the Term A Warrants, the
Term B Warrants, the Term C Warrants, the Term D
Warrants and the Term E Warrants, collectively."
SECTION 3. Joinder. (a) By execution hereof, Diversified Software
Industries, Inc. ("DSI"), a wholly-owned subsidiary of Parent, hereby
agrees to become bound by the terms, conditions and other provisions of the
Agreement with all attendant rights, duties and obligations stated therein,
with the same force and effect as if originally named as a Borrower therein
and as if such party executed the Agreement on the date thereof.
(b) DSI hereby represents and warrants that it has the
corporate or limited liability power, as the case may be, to execute and
deliver this Amendment and all corporate action required to be taken by it
for the due and proper authorization, execution, delivery and performance
of this Amendment and the consummation of the transactions contemplated
hereby has been duly and validly taken; this Amendment has been duly
authorized, executed and delivered by it.
SECTION 4. Agreement. Except as expressly amended hereby, the
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 Amendment becomes effective, the terms "Agreement," "this Agreement,"
"herein," "hereinafter," "hereto," and words of similar import used in the
Agreement shall, unless the context otherwise requires, mean and refer to
the Agreement as amended hereby.
SECTION 5. Expenses. Without limiting the provisions of Section
12.3 of the Agreement, the Borrowers shall reimburse Lender for all
out-of-pocket expenses incurred in connection with the preparation of this
Amendment and the Note Documents (including the reasonable fees and
expenses of all of its counsel, advisors, consultants and auditors retained
in connection herewith and the transactions contemplated hereby).
SECTION 6. Successors and Assigns. This Amendment shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns.
SECTION 7. Full Force and Effect. Except as expressly amended
hereby, all of the representations, warranties, terms, covenants, and
conditions of the Agreement and each other Note 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 Agreement or of any term or provision
of any other Note Document or of any transaction or further or future
action on the part of the Borrowers which would require the consent of the
Lenders under the Agreement.
SECTION 8. Governing Law. THIS AMENDMENT SHALL BE DEEMED TO BE A
CONTRACT MADE UNDER AND TO BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF
NEW YORK.
SECTION 9. Counterparts. This 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]
IN WITNESS WHEREOF, this Fist Amendment has been duly executed as
of the date first written above.
BORROWERS:
NEXIQ TECHNOLOGIES, INC.,
WPI POWER SYSTEMS, INC.,
WPI AIRPORT II, INC.,
WPI ELECTRONICS, INC.,
WPI TERMIFLEX, INC.,
WPI MICRO PALM, INC.,
WPI MICRO PROCESSOR SYSTEMS, INC.,
WPI DECISIONKEY, INC.,
WPI UK HOLDING, INC.,
WPI UK HOLDING II, INC.,
WPI OYSTER TERMINALS, INC.,
WPI HUSKY TECHNOLOGY, INC., and
WPI AIRPORT I, INC.
DIVERSIFIED SOFTWARE INDUSTRIES, INC.
By: /s/ Xxxx Xxxxxx
--------------------------
Name: Xxxx Xxxxxx
Title: Chief Executive Officer
THE LENDER:
SUNRISE CAPITAL PARTNERS, L.P.
By: Sunrise Advisors, LLC,
its General Partner
By: /s/ Xxxxxx X. Xxxxxx
----------------------
Name: Xxxxxx X. Xxxxxx
Title: Principal
