AMENDMENT NO. 2
TO
CONVERTIBLE NOTE AGREEMENT
AMENDMENT NO. 2 (this "Amendment"), dated as of January 25, 2001,
to the Convertible Note Agreement, dated as of July 31, 2000, and amended
as of September 21, 2001 (as so amended, 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 (g):
" (h) Subject to the terms and conditions hereof, at any time
during the Term F Commitment Period, the Lender may, in its
discretion, purchase from the Borrowers, in one or more tranches,
the Term F Securities. The Lender shall notify the Borrowers of
its desire to purchase the Term F Securities by delivery to Parent
of a written notice (the "Term F Notice") informing the Borrowers
that the Lender is exercising its ability to purchase such
securities from the Borrowers. The Term F Notice shall set forth
(i) the aggregate principal amount of Term F 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 F Commitment Period). On the date
specified in the Term F Notice, the Lender shall purchase from the
Borrowers, and the Borrowers shall sell to the Lender, the Term F
Securities for an aggregate purchase price equal to the principal
amount of Term F Notes.
As used in this Agreement, "Term F Securities" means,
collectively, (i) the convertible promissory notes of the
Borrowers, substantially in the form as attached hereto as Exhibit
A-3, in aggregate principal amount not to exceed $6,000,000 (each,
a "Term F Note" and collectively, the "Term F 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 F 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 Term F Trading Price (as defined below), and (y) the number of
shares of Common Stock that would be issuable upon conversion of
the Term F 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 F Securities (the "Term F 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 F Notes purchased on such date in
accordance with the provisions of Article 2 hereof multiplied by
(y) .20 (the "Term F Warrants").
(i) The purchase price for each purchase described in
subsection (h) of this Section 1.1 shall be allocated among the
Term F Securities at the time of each purchase by the Lender
provided that such allocation shall be reasonably acceptable to
Parent. 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(i)."
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:
"Borrowers shall utilize the proceeds of the sale of Term F
Securities 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 second
sentence of such paragraph:
"The Borrowers shall pay to Sunrise Advisors, LLC in cash on the
Amendment No. 2 Effective Date a transaction fee (the "Amendment
No. 2 Transaction Fee") equal to 2% of the maximum amount of Term
F Notes available for purchase by the Lenders. This amount shall
be in addition to any amount payable to Lender on the Amendment
No. 2 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 F Notice, the Borrowers shall fail to
sell to the Lenders the Term F Securities or shall otherwise fail
to comply with the terms of Section 1.1(h), then the Conversion
Price in effect immediately prior to the delivery of the Term F
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 F Notes at the then-current
Conversion Price, had such Term F 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 Section after Section 3.5:
"3.6. Conditions to the Purchase of the Term F Securities
The obligation of the Lender to purchase the Term F
Securities and to perform any obligations hereunder on the
Amendment No. 2 Effective Date shall be subject to the
satisfaction of, or waiver by the Lender of, the following
conditions on or before the Amendment No. 2 Effective Date:
(a) 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 December 3, 2001, and there shall not
be any material inaccuracy in the financial statements as of, and
for the period ended, September 30, 2001, as included in the
Parent's most recent annual report on Form 10K.
(b) 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.
(c) 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 F Securities.
(d) Delivery of Term F Securities. The Borrowers shall
have delivered to the Lender certificates evidencing (i) the Term
F Notes, (ii) the Term F Shares and (iii) the Term F Warrants.
(e) Payment of Fees. Borrowers shall have paid the Fees
payable pursuant to Section 1.5 hereof.
The acceptance by the Borrower Representative of the
proceeds of the sale of the Term F 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 3.6 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) Amendment No. 2 Effective Date. Annex A of the
Agreement is hereby amended by inserting the following additional
definition after the definition of "Amendment Effective Date":
"'Amendment No. 2 Effective Date' shall mean the date of
execution of Amendment No. 2 to the Agreement."
(b) Notes. The definition of "Notes" in Annex A of the
Agreement is hereby amended by inserting the following at the end of such
definition:
"and the Term F Notes."
(c) Securities. The definition of "Securities" in Annex A
of the Agreement is hereby amended by inserting the following at the end of
such definition:
"and the Term F Securities."
(d) Term F Commitment Period; Term F Notes; Term F
Securities; Term F Shares; Term F Trading Price; Term F Warrants. Annex A
of the Agreement is hereby amended by inserting the following additional
definitions after the definition of "Term E Commitment Period":
"'Term F Commitment Period' shall mean the
period beginning on the Amendment No. 2
Effective Date and ending 180 days thereafter.
'Term F Notes' shall have the meaning ascribed
thereto in Section 1.1(h) of the Agreement.
'Term F Securities' shall have the meaning
ascribed thereto in Section 1.1(h) of the
Agreement.
'Term F Shares' shall have the meaning ascribed
thereto in Section 1.1(h) of the Agreement.
'Term F 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 December 17, 2001 and (ii)
the average closing trading price of the Common
Stock for the ten trading days immediately prior
to the Amendment No. 2 Effective Date.
'Term F Warrants' shall have the meaning
ascribed thereto in Section 1.1(h) of the
Agreement."
(e) Warrants. The definition of "Warrants" in Annex A of
the Agreement is hereby amended by inserting the following before the word
"collectively" in the last line of such definition:
"and the Term F Warrants"
SECTION 3. 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 4. 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 5. 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 6. 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 7. 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 8. 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 Xxxxxx
-------------------------
Name: Xxxxxx X. Xxxxxx
Title: Principal
