-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GachBtH+zcp8fTLNtqQ8fWG2muaAzBWL7SPIItSVoLICjIimas25Hh9D1gkXxXW2 1jY3LnMg2S9ilauyc+mK4w== 0001007594-98-000002.txt : 19980112 0001007594-98-000002.hdr.sgml : 19980112 ACCESSION NUMBER: 0001007594-98-000002 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 24 CONFORMED PERIOD OF REPORT: 19971231 ITEM INFORMATION: FILED AS OF DATE: 19980109 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PCD INC CENTRAL INDEX KEY: 0001007594 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC CONNECTORS [3678] IRS NUMBER: 042604950 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-27744 FILM NUMBER: 98504086 BUSINESS ADDRESS: STREET 1: TWO TECHNOLOGY DR STREET 2: CENTENNIAL PARK CITY: PEABODY STATE: MA ZIP: 01960 BUSINESS PHONE: 5085328800 MAIL ADDRESS: STREET 1: 2 TECHNOLOGY DRIVE CITY: PEABODY STATE: MA ZIP: 01960 8-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report: JANUARY 9, 1998 PCD INC. (Exact name of registrant as specified in its charter) MASSACHUSETTS 0-27744 04-2604950 (Sate or other jurisdiction (Commission (IRS Employer of incorporation) file number) Identification No.) 2 TECHNOLOGY DRIVE, CENTENNIAL PARK, PEABODY, MA 01960-7977 (Address of principal executive offices) (ZIP Code) Registrant's telephone number, including area code: (978) 532- 8800 ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS. On December 26, 1997, PCD Inc. ("PCD") acquired from UL America, Inc. all of the outstanding capital stock of Wells Electronics, Inc. ("Wells") pursuant to a Share Purchase Agreement dated as of November 17, 1997 (the "Share Purchase Agreement") for an aggregate purchase price of $130,000,000 (subject to adjustment as provided in the Share Purchase Agreement). The sources of funds used for the purchase price were: (i) $83 million from a loan to PCD under a Loan Agreement with Fleet National Bank as agent for itself and certain other financial institutions; (ii) $25 million from a loan to PCD under a Subordinated Debenture and Warrant Purchase Agreement with Emerson Electric Co.; and (iii) $22 million from PCD's cash reserves. Wells, a manufacturer of burn-in and test sockets for the global semi-conductor industry, is headquartered in South Bend, Indiana and has manufacturing facilities located in Swatara, Pennsylvania and sales offices in San Jose, California, Northhampton, England and Seoul, Korea. Wells also operates two principal subsidiaries in Yokohama, Japan and Singapore. In determining the amount of consideration to be paid for the stock of Wells, PCD considered, among other things, the following factors with respect to Wells: historical and projected financial results, the quality and performance of management, and the projected financial performance of Wells and PCD on a combined basis. Before December 26, 1997, there was no material relationship between PCD and Wells or any of their respective officers, directors or stockholders, other than the Share Purchase Agreement and related agreements. ITEM 5. OTHER EVENTS. On December 26, 1997, PCD entered into a Loan Agreement (the "Loan Agreement") with Fleet National Bank, as agent for itself and certain other financial institutions. The Loan Agreement provides for a $30,000,000 Secured Term Loan A, a $40,000,000 Secured Term Loan B and a $20,000,000 Secured Revolving Credit Loan to PCD. The loans to PCD under the Loan Agreement are secured by a pledge of all of the assets of PCD, including the stock and assets of all subsidiaries of PCD (including Wells and its subsidiaries). On December 26, 1997, PCD entered into a Subordinated Debenture and Warrant Purchase Agreement (the "Purchase Agreement") with Emerson Electric Co. ("Emerson"). Pursuant to the Purchase Agreement, PCD has issued to Emerson a $25,000,000 Subordinated Debenture (the "Debenture") and a Common Stock Purchase Warrant (the "Warrant") for the purchase of up to 525,000 shares of common stock of PCD at an exercise price of $1.00 per share. The unpaid principal and accrued interest under the Debenture is convertible into common stock of PCD upon the occurrence of certain events of default thereunder, at a conversion price equal to the lesser of $17.00 per share or 70% of the average daily closing price of PCD common stock for the 90 days preceding such default as reported by The Nasdaq Stock Market, Inc. Both the shares issuable upon such a conversion of the Debenture and upon exercise of the Warrant are subject to certain registration rights granted pursuant to a Registration Rights Agreement of even date with the Purchase Agreement. ITEM 7 FINANCIAL STATEMENTS AND EXHIBITS (a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED It is impracticable at this time to provide the financial statements of Wells for the periods specified in Rule 3-05(b) of Regulation S-X. These financial statements will be filed by amendment hereto within 60 days of the date this Report on Form 8-K is required to be filed. (b) PRO FORMA FINANCIAL INFORMATION It is impracticable at this time to provide the pro forma information required by Article 11 of Regulation S-X. This pro forma information will be filed by amendment hereto within 60 days of the date this Report on Form 8-K is required to be filed. (c) EXHIBITS EXHIBIT NUMBER 2.1 Share Purchase Agreement among UL America, Inc., Wells Electronics, Inc. and PCD Inc. dated as of November 17, 1997. 2.2 Undertaking to Furnish Copies of Omitted Schedules to Share Purchase Agreement dated as of November 17, 1997. 10.1 Loan Agreement between PCD Inc. and Fleet National Bank dated as of December 26, 1997. 10.2 Unlimited Guaranty from Wells Electronics, Inc. to Fleet National Bank dated as of December 26, 1997. 10.3 Security Agreement between PCD Inc. and Fleet National Bank dated as of December 26, 1997. 10.4 Security Agreement between Wells Electronics, Inc. and Fleet National Bank dated as of December 26, 1997. 10.5 Stock Pledge Agreement between PCD Inc. and Fleet National bank dated as of December 26, 1997. 10.6 Stock Pledge Agreement between Wells Electronics, Inc. and Fleet National Bank dated as of December 26, 1997. 10.7 Conditional Patent Assignment from PCD Inc. to Fleet National Bank dated as of December 26, 1997. 10.8 Conditional Patent Assignment from Wells Electronics, Inc. to Fleet National Bank dated as of December 26, 1997. 10.9 Conditional Patent Assignment from Wells Japan Kabushiki Kaisha to Fleet National Bank dated as of December 26, 1997. 10.10 Conditional Trademark Collateral Assignment from PCD Inc. to Fleet National Bank dated December 26, 1997. 10.11 Conditional Trademark Collateral Assignment from Wells Electronics, Inc. to Fleet National Bank dated as of December 26, 1997. 10.12 Collateral Assignment of Contracts, Leases, Licenses and Permits from PCD Inc. to Fleet National Bank dated as of December 26, 1997. 10.13 Collateral Assignment of Contracts, Leases, Licenses and Permits from Wells Electronics, Inc. to Fleet National Bank dated as of December 26, 1997. 10.14 Undertaking to Furnish Copies of Omitted Exhibits and Schedules to Loan Agreement and Related Documents dated as of December 26, 1997. 10.15 Subordinated Debenture and Warrant Purchase Agreement between PCD Inc. and Emerson Electric Co. dated as of December 26, 1997. 10.16 Subordinated Debenture issued to Emerson Electric Co. dated December 26, 1997. 10.17 Common Stock Purchase Warrant issued to Emerson Electric Co. dated December 26, 1997. 10.18 Registration Rights Agreement between PCD Inc. and Emerson Electric Co. dated as of December 26, 1997. 10.19 Subordination Agreement among PCD Inc., Emerson Electric Co. and Fleet National Bank dated as of December 26, 1997. 10.20 Undertaking to Furnish Copies of Omitted Exhibits to Subordinated Debenture and Warrant Purchase Agreement dated as of December 26, 1997. 99.1 Press Release of PCD Inc. dated December 29, 1997. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. PCD INC. -------- Registrant DATED: January 9, 1998 By: /s/ John L. Dwight, Jr. ----------------------- John L. Dwight, Jr. Chairman of the Board, President and Chief Executive Officer EX-1 2 EXHIBIT 2.1 SHARE PURCHASE AGREEMENT DATED AS OF NOVEMBER 17, 1997 BY AND AMONG UL AMERICA, INC., WELLS ELECTRONICS, INC. AND PCD INC. APPENDICES Appendix A - Certain Definitions Appendix B - Documents to Be Delivered by Seller at the Closing Appendix C - Documents to Be Delivered by Buyer at the Closing SCHEDULES Schedule 3.2(A) - Incorporation, Subsidiaries, Branches Schedule 3.2(B) - Financial Statements Schedule 3.2(C) - Undisclosed Liabilities Schedule 3.2(D) - Taxes Schedule 3.2(E) - Real Property Schedule 3.2(F) - Tangible Personal Property Schedule 3.2(G) - Intellectual Property Schedule 3.2(H) - Litigation Schedule 3.2(I) - Contracts Schedule 3.2(J) - Employees and Employee Benefits Schedule 3.2(K) - Compliance With Environmental Laws Schedule 3.2(L) - Compliance With Other Laws Schedule 3.2(N) - Insurance Schedule 4.4(J) - Powers of Attorney SHARE PURCHASE AGREEMENTS SHARE PURCHASE AGREEMENT (this "Purchase Agreement"), dated as of November 17, 1997, by and among UL AMERICA, INC. ("Seller"), a Delaware corporation, Wells Electronics, Inc. (the "Company"), an Indiana Corporation, and PCD Inc. ("Buyer"), a Massachusetts corporation. RECITALS A. The Company is engaged in the business (the "Business") of developing, designing, manufacturing, selling, and servicing burn-in/test sockets and plastic carriers (the "Products") for the global semiconductor industry; B. Seller owns all of the issued and outstanding common stock of the Company (the "Shares"); C. Buyer desires to purchase from Seller, and Seller desires to sell to Buyer, all of the Shares on and subject to the terms and conditions contained in this Purchase Agreement; and D. Siebe PLC has agreed to guaranty the obligations of Seller and the Company hereunder. TERMS AND CONDITIONS In consideration of the matters recited above and for other good and valuable consideration, and intending to be legally bound by this Purchase Agreement, Buyer, the Company and Seller hereby agree as follows: ARTICLE I GENERAL PROVISIONS 1.1 DEFINITIONS. Appendix A sets forth the definitions of certain terms used in this Purchase Agreement. Those terms shall have the meanings set forth in Appendix A where used in this Purchase Agreement and identified with initial capital letters. 1.2 OTHER DEFINITIONS AND MEANINGS; INTERPRETATION. For purposes of this Purchase Agreement, the term "parties" means Buyer, the Company and Seller (except where the context otherwise requires); and the term "person" includes any natural person, firm, association, partnership, corporation, limited liability company or partnership, governmental agency, or other entity other than the parties. The Table of Contents and the headings of the Articles and Sections of this Purchase Agreement have been included in this Purchase Agreement for convenience of reference only and shall not be deemed to affect the meaning of the operative provisions of this Purchase Agreement. All dollar amounts referred to in this Purchase Agreement are in United States Dollars. ARTICLE II PURCHASE AND SALE 2.1 TRANSACTION. On and subject to the terms and conditions of this Purchase Agreement (A) At the Closing, Buyer will purchase from Seller, and Seller will sell, transfer, and assign to Buyer, all of the Shares; and (B) Buyer will pay Seller the Purchase Price as provided in Section 2.2. 2.2 PURCHASE PRICE. For the purposes of this purchase agreement, the term "purchase price" means one hundred and thirty million dollars ($130,000,000) plus or minus the amount of the adjustment 2.3 ADJUSTMENT. (A) Preparation of Closing Balance Sheet. Within 40 days after the Closing Date, Buyer will prepare, in cooperation with Seller, and deliver to the Seller a draft consolidated balance sheet (the "Draft Closing Date Balance Sheet") for the Company as of the close of business on the Closing Date. The Draft Closing Date Balance Sheet (as well as the Closing Date Balance Sheet referred to below) will be prepared (except as specified in Section 2.3(F)) in accordance with U.K. GAAP applied on a basis consistent with and subject to those used in the preparation of the financial statements included in Schedule 3.2(B), it being understood and agreed that there shall be no significant changes in the reserves, except for changes occurring in the ordinary course of business, it being understood and agreed that the computation of reserves will be on a basis consistent with the September 30, 1997 balance sheet, a copy of which is annexed hereto; and it being further understood that the application of the accounting principles, practices and procedures specified in the Siebe Financial Controller Manual, attached hereto as a part of Schedule 3.2(B), shall not result in any material differences from the results under U.K. GAAP (B) Informal Negotiations; Dispute Resolution. If the Seller believes that the Draft Closing Date Balance Sheet has not been prepared as required, it will deliver a detailed statement describing its objections to Buyer within 30 days after receiving the Draft Closing Date Balance Sheet. Buyer and Seller will use reasonable efforts to resolve amicably any such objections themselves. If the parties do not obtain a final resolution within 30 days after Buyer has received the statement of objections, however, Buyer and Seller will select an accounting firm - 2 - mutually acceptable to them to resolve any remaining objections (after excluding their respective regular outside accounting firms). If the parties are unable to mutually select such accounting firm within 15 days after the expiration of the 30 day period specified in the immediately preceding sentence, the accounting firm shall be selected by the President of the American Arbitration Association. The determination of any accounting firm so selected will be made within 30 days following the selection of such firm, will be set forth in writing and will be conclusive and binding upon the parties. Buyer will revise the Draft Closing Date Balance Sheet as appropriate to reflect the resolution of any objections thereto pursuant to this Section 2.3(B). The "Closing Date Balance Sheet" shall mean the Draft Closing Date Balance Sheet together with any revisions thereto pursuant to this Section 2.3(B). (C) Fees and Expenses. In the event the parties submit any unresolved objections to an accounting firm for resolution as provided in Section 2.3(B) above, the Buyer and Seller will share responsibility for the fees and expenses of the accounting firm as follows: (1) if the accounting firm resolves substantially all of the remaining objections in favor of the Buyer, Seller will be responsible for all of the fees and expenses of the accounting firm; (2) if the accounting firm resolves substantially all of the remaining objections in favor of Seller, Buyer will be responsible for all of the fees and expenses of the accounting firm; and (3) if the accounting firm resolves certain substantial objections in favor of Buyer and other substantial objections in favor of Seller, the fees and expenses of the accounting firm will be borne by the Buyer and Seller in such proportion as the accounting firm deems equitable. (D) Access. Buyer will make the work papers and back-up materials used in preparing the Draft Closing Date Balance Sheet, and the books, records, and financial staff of the Company, available to the Seller and its accountants and other representatives at reasonable times and upon reasonable notice at any time during (1) the preparation by Buyer of the Draft Closing Date Balance Sheet, (2) the review by the Seller of the Draft Closing Date Balance Sheet, and (3) the resolution by the parties of any objections thereto. (E) Base-Line Net Worth. The "Base-Line Net Worth" will be an amount equal to Twenty Two Million Fifty Eight Thousand Dollars ($22,058,000). (F) Determination of Closing Net Worth. The "Closing Net Worth" will be an amount equal to the aggregate book value of the Company's assets minus the - 3 - aggregate book amount of the Company's liabilities as of the Closing, as shown on the Closing Date Balance Sheet. It is understood and agreed (i) that the liabilities shown on the Closing Date Balance Sheet will reflect, based on U.K. GAAP principles, any unpaid liabilities of the Company or any Company Subsidiary for bonuses or other incentive payments, sales commissions, unfunded pension obligations (including without limitation the Japanese and Korean retirement allowances) and unfunded disability obligations allocable with respect to periods ending on or prior to the Closing Date and (ii) that there shall be no proration or allocation to periods after the Closing Date with respect to any bonuses payable, including bonuses payable by reason of the sale of the Company, to the following six individuals: Richard J. Mullin, James E. Miner, Bruce B. Myers, Rick Jones, Charles B. Dodson and James B. Putt. Notwithstanding the foregoing, the Seller in lieu of recording such liability on the Closing Date Balance Sheet may retain the obligation to make payment of such amounts, in which case, it shall execute an assumption of liability and retainer agreement in customary form reasonably satisfactory to the Buyer. (G) Amount of the Adjustment. If the Closing Net Worth is equal to the Base-Line Net Worth, then the Adjustment will equal zero. If the Closing Net Worth is more than the Base-Line Net Worth, then the Adjustment will be a positive amount equal to the amount by which the Closing Net Worth is more than the Base-Line Net Worth. If the Closing Net Worth is less than the Base-Line Net Worth, then the Adjustment will be a negative amount equal to the amount by which the Closing Net Worth is less than the Base- Line Net Worth, provided that the Seller and its affiliates will not contribute assets to the Company for the purpose of causing the Closing Net Worth to exceed the Base-Line Net Worth (or contribute assets which are not cash or cash equivalents without the prior written consent of the Buyer as to the identity and valuation of such assets); and provided further that except as permitted pursuant to Section 4.4(J), the Seller will not remove assets used or held for use in the conduct of the Business. The Purchase Price will finally be determined on the date the amount of the Adjustment is finally determined, provided that the positive amount of such Adjustment will not be greater than $2,750,000 plus any cash or cash equivalents left in the Business as of the Closing Date if the Closing occurs on or before December 31, 1997, and if the Closing occurs after December 31, 1997, then the positive adjustment will not be greater than the sum of $2,750,000 (and said cash or cash equivalents) and any net income of the Business from January 1, 1998 to the date of the Closing. 2.4 PAYMENT OF PURCHASE PRICE. Buyer has paid and will pay the Purchase Price as follows: (A) Payment at Closing. At the Closing, Buyer will pay Seller One Hundred Thirty Million Dollars($130,000,000). - 4 - (B) Payment of the Adjustment. If the Adjustment is a positive amount, then Buyer will pay Seller the amount of the Adjustment, together with interest thereon at the Prime Rate compounded monthly for the period from the Closing Date through and including the date on which the Adjustment is paid, within five (5) business days after the final determination of the Adjustment pursuant to Section 2.3(G). 2.5 REFUND OF THE ADJUSTMENT. If the Adjustment is a negative amount, then Seller will refund to Buyer the amount of the Adjustment, together with interest thereon compounded monthly at the Prime Rate for the period from the Closing Date through and including the date on which the Adjustment is paid, within five (5) business days after the final determination of the Adjustment pursuant to Section 2.3(G). 2.6 METHOD OF PAYMENT. All payments under this Purchase Agreement shall be made by delivery to the payee as follows: (A) Directed Payments. If a party which is entitled to a payment under this Purchase Agreement provides the other party three (3) days' advance written designation of a bank and account number into which the payee wishes payment to be made, then the payer will make such payment by wire transfer (in immediately available funds) to the designated account of the payee. (B) Other Payments. In all other cases, the party obligated to make a payment under this Purchase Agreement will do so by making such payment by wire transfer (in immediately available funds) to the designated account of the payee. ARTICLE III REPRESENTATIONS AND WARRANTIES 3.1 SELLER'S GENERAL REPRESENTATIONS AND WARRANTIES. Seller and the Company, jointly and severally, hereby represent and warrant to Buyer that the following are true and correct: (A) Organization and Existence. Seller is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware. Guarantor is a corporation duly organized, validly existing, and in good standing under the laws of the United Kingdom. (B) Power and Authority. The Seller has all necessary corporate power and authority to enter into this Purchase Agreement, to carry out its obligations hereunder and to consummate the transactions contemplated hereby, and the Guarantor has all necessary corporate power and authority to execute, deliver and perform the Guaranty. This Purchase Agreement constitutes the valid and legally - 5 - binding obligation of Seller, enforceable in accordance with its terms and conditions, subject to the effect of any applicable bankruptcy, reorganization, insolvency, moratorium or similar laws affecting creditor's rights generally and subject, as to enforceability, to the effect of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). (C) No Conflict. Neither the execution and the delivery by Seller of this Purchase Agreement or the Guarantor of the Guaranty, nor the consummation of the transactions contemplated hereby or thereby, will (i) violate or conflict with the Certificate of Incorporation or By-laws (or equivalent constitutional documents) of Guarantor, the Company or Seller, (b) conflict with or violate any law or governmental order applicable to Guarantor, the Company or Seller, or (c) result in any breach of, or constitute a default (or event which with the giving of notice or lapse of time, or both, would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of any agreement to which the Company is a party, or result in the creation of any encumbrance on the Shares or on any of the assets or properties of the Company, except, in the case of clause (c), as would not, individually or in the aggregate, have a material adverse effect on the Business Condition or have a material adverse effect on the ability of Seller to consummate the transactions contemplated by this Purchase Agreement. (D) Capitalization. The entire authorized capital stock of the Company consists of 13,500 shares of common stock, of which 7,825 shares are issued and outstanding and no shares are held in treasury. All of the Shares have been validly issued, are fully paid, and are nonassessable. There are no restrictions of any kind on Seller's right, power, or authority to sell, transfer, and assign all of the Shares to Buyer as provided in this Purchase Agreement and no such restrictions will exist before the Closing. Neither Seller nor the Company has granted to, and there are not outstanding in favor of, any person any option, warrant, or other right of any kind to acquire any of the Shares or any other equity securities of the Company and no such rights will be granted to or outstanding in favor of any person before the Closing. (E) Brokers. With the sole exception of Morgan Stanley, neither Seller nor the Company has engaged and neither is directly or indirectly obligated to any person acting as a broker or finder, or a person acting in a similar capacity, in connection with the transactions contemplated by this Purchase Agreement. 3.2 REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY. Seller and the Company, jointly and severally, hereby represent and warrant to Buyer that, except as set forth in the disclosure schedules delivered by Seller to Buyer in connection herewith (the "Disclosure Schedules"), the following are true and correct: - 6 - (A) Incorporation, Subsidiaries, Branches. Attached at Schedule 3.2(A) is a true and complete copy of the Company's Articles of Incorporation and Code of By-laws, as last amended and/or restated, a chart showing all companies (the "Company Subsidiaries") in which the Company has a direct or indirect equity ownership interest and the percentage ownership interest in each such company, and a chart showing all jurisdictions in which the Company or any Company Subsidiary operates a branch. The Company is an Indiana corporation with full corporate power and authority to own its properties and conduct the Business as the same has been and is being conducted and is qualified to do business and is in good standing in each jurisdiction in which the nature of its activities and/or ownership of property requires it to be qualified to do business. Only two of the Company Subsidiaries are actively engaged in the conduct of the Business, namely, Wells Japan Kabushiki Kaisha (nee: Wells Japan Co., Ltd.) ("Wells Japan"), a Japanese limited stock company (kabushiki kaisha), and Wells Electronics Asia Pte. Limited ("Wells Singapore"), a Singapore limited liability company. Each of the Company Subsidiaries has the full corporate power and authority to own its respective properties and conduct the Business as the same has been and is being conducted by them. Each of the Company Subsidiaries is qualified to do business and in good standing in each jurisdiction in which the nature of their respective activities and/or ownership of property requires them to be so qualified, except where failure to be so qualified and in good standing would not have a material adverse effect on the Business Condition. Neither Seller, the Company nor any of the Company Subsidiaries has granted to, and there are not outstanding in favor of any person, any option, warrant, or other right of any kind to acquire any equity securities of the Company Subsidiaries and no such rights will be granted to or outstanding in favor of any person before the Closing. (B) Financial Statements. Attached hereto as Schedule 3.2(B) are the following financial statements of the Company and the Company Subsidiaries: consolidated statements of income and cash flow for the periods from May 29, 1994 to June 3, 1995, from June 4, 1995 to June 1, 1996, from May 3, 1996 to April 5, 1997, and from April 6, 1997 to September 30, 1997 and consolidated balance sheets as of June 3, 1995, June 1, 1996, April 5, 1997 and September 30, 1997. The financial statements contained in Schedule 3.2(B) have been prepared in accordance with U.K. GAAP applied on a consistent basis and fairly present, in all material respects, the financial position and results of operations of the Company as of the dates and for the periods therein set forth, subject in the case of the September 30, 1997 financial statements only to normal year-end adjustments (which are not expected to be material and adverse in the aggregate), and subject in all cases to the Company's standard financial accounting principles, practices and procedures as described in Schedule 3.2(B) (applied on a consistent basis except as described in any footnotes thereto); provided, that the application of the principles, practices and procedures set forth in the Siebe Financial - 7 - Controller Manual, attached hereto as a part of Schedule 3.2(B), shall not result in any material differences from the results under U.K. GAAP. (C) Undisclosed Liabilities. The Company has no liabilities or obligations of any nature (whether accrued, absolute or contingent) which are required under U.K. GAAP to be reflected in the September 30, 1997 financial statements of the Company except (i) as reflected in Schedule 3.2(B) and the financial statements attached thereto and (ii) for liabilities and obligations incurred in the ordinary course of business since the date of the most recent balance sheet, none of which, individually or in the aggregate, shall constitute a Material Event. (D) Taxes. All federal, state, local and foreign tax returns required to be filed with respect to the Company and the Company Subsidiaries have been filed in a timely manner, and all taxes (whether or not shown thereon) have been paid, except where the failure to so file or pay, individually or in the aggregate, would not have a material adverse effect on the Business Condition. The Company and the Company Subsidiaries are not currently the beneficiary of any extension of time within which to file such returns. No deficiencies for any taxes in respect of the Company or any of the Company Subsidiaries have been asserted in writing against the Company or any of the Company Subsidiaries which remain unpaid and which individually or in the aggregate have a material adverse effect on the Business Condition. No waivers of statutes of limitation are in effect in respect of foreign, federal or state income taxes of the Company or the Company Subsidiaries. Neither the Company nor any of the Company Subsidiaries has received from the Internal Revenue Service or from the tax authorities of any state, county, local or other jurisdiction (foreign or domestic) any written notice of underpayment of income taxes which has not been paid or reflected on the Closing Date Balance Sheet. No audits relating to taxes are presently being conducted and neither the Company nor Seller has received written notice of any such future audits. All taxes of any kind which are required to be paid by the Company or the Company Subsidiaries for all periods ending on or prior to the Closing Date have been paid or will be provided for in the Closing Date Balance Sheet, except for taxes due to the actions of Buyer. (E) Real Property. Schedule 3.2(E) sets forth a list of real properties owned by the Company, a list of all real properties leased to the Company by other persons, and a list of all real properties owned or leased by the Company that are leased or subleased to other persons by the Company. The Company or one of the Company Subsidiaries Owns all of the real properties listed as "owned" on Schedule 3.2(E). The leases under which the real property listed as "leased" on Schedule 3.2(E) are leased are valid and subsisting, and neither the Company nor any of the Company Subsidiaries is in Default under any lease of any such real - 8 - properties in any manner materially adverse to the Business Condition. The Company has furnished true and complete copies of each such lease to Buyer. (F) Tangible Personal Property. Schedule 3.2(F) sets forth for the Company and each Company Subsidiary (1) a list as of September 30, 1997, of all machinery and equipment owned by the Company or such Company Subsidiary having a book value of more than $30,000; (2) a list as of September 30, 1997, of all furniture, office equipment, and similar items owned by the Company or such Company Subsidiary having a book value of more than $5,000; (3) a list as of September 30, 1997, of all cars, trucks, and other vehicles owned by the Company or such Company Subsidiary having a book value of more than $5,000; and (4) a list as of September 30, 1997, of all items of tangible personal property leased by the Company or such Company Subsidiary having a capitalized book value of more than $5,000. The Company or one of the Company Subsidiaries Owns all tangible personal property listed as "owned". The leases under which the tangible personal property listed as "leased" on Schedule 3.2(F) are valid and subsisting, and neither the Company nor any of the Company Subsidiaries is in Default under any lease of any such tangible property in any manner materially adverse to the Business Condition. The Company has furnished to Buyer true and complete copies of each such lease. Each of the Company and the Company Subsidiaries currently owns, leases or otherwise is entitled to use, under valid and subsisting agreements (copies of which are listed on Schedule 3.2(F) and have been furnished to Buyer), all assets, real or personal, which are used or held by the Company or any Company Subsidiary for use in the operation of the Business; no such agreement will or may be terminated by any party thereto by reason of the transaction described in this Purchase Agreement; all such assets are sufficient to permit the operation of the Business as currently operated; and no such assets are owned, leased or otherwise furnished to the Company or any Company Subsidiary by the Seller, Siebe, or any affiliate of the Seller or Siebe. (G) Intellectual Property. The Company Owns or has valid and subsisting licenses to all Intellectual Property used or necessary in connection with the Business as presently conducted or planned to be conducted. Schedule 3.2(G) sets forth a list as of September 30, 1997 of (1) all patents (domestic and foreign) owned by the Company or any Company Subsidiary (specifying for each the country of issuance, expiration date, patent number, inventor, and title of patent); (2) all pending patent applications (domestic and foreign) owned by the Company or any Company Subsidiary (specifying for each the country of application, application date, application number, inventor, and title of invention); (3) all trademarks (domestic and foreign) owned by the Company or any Company Subsidiary (specifying for each the country of registration, renewal date, registration number, mark registered, and goods covered); (4) all trademark applications (domestic and foreign) owned by the - 9 - Company or any Company Subsidiary (specifying for each the country of application, application date, application number, mark to which registration relates, and goods covered); and (5) all material Intellectual Property owned by other persons which is used in the conduct of the Business by the Company or any Company Subsidiary under license, technology, or other similar agreements. The Company or a Company Subsidiary Owns all of the Intellectual Property listed as "owned" on Schedule 3.2(G). The license, technology, or similar agreements to employ the Intellectual Property listed as "licensed" on Schedule 3.2(G) are valid and subsisting agreements, and the Company has furnished true and complete copies of each such agreement to Buyer. Neither the Company nor any of the Company Subsidiaries is in Default under any licenses or other agreements listed on Schedule 3.2(G) in any manner materially adverse to the Business Condition. Neither the Company nor any of the Company Subsidiaries has granted any rights or interest to any person in connection with any of the Intellectual Property described in Schedule 3.2(G). Except as set forth on Schedule 3.2(H), there is no pending or, to the Company's or Seller's Knowledge, threatened litigation by or before any governmental authority alleging any infringement or other violation by any other person or entity of the Intellectual Property; and there is not now, and there has not been during the past five years, any asserted claim of infringement or other violation of any other intellectual property right of any person or entity outside the Company resulting from the conduct of the Company, and neither the Company nor Seller has any Knowledge that any such infringement or violation exists or will be alleged. All of the individuals set forth on Schedule 3.2(G) have signed the "Agreement Re: Inventions and Other Confidential Matters," the form of which has been previously delivered to Buyer. (H) Litigation. Schedule 3.2(H) contains a description of all litigation at law or in equity pending as of September 30, 1997 against the Company or relating to the Company's conduct of the Business and a description of all writs, injunctions, orders, and decrees of courts, agencies, and other governmental authorities, domestic or foreign, to which the Company is subject. There exists no litigation, proceedings, actions, claims, or investigations at law or in equity pending or to the Company's or Seller's Knowledge threatened against the Company or a Company Subsidiary that is, in the Company's or Seller's management's judgment, likely to be materially adverse to the Business Condition, and neither the Company nor a Company Subsidiary is subject to any writ, injunction, order, or decree of any court, agency, or other governmental authority materially adversely affecting the Business. (I) Contracts. Schedule 3.2(I) sets forth (1) a list as of September 30, 1997 of each outstanding order, contract, or commitment for the purchase by the Company or any Company Subsidiary of capital and tooling involving a financial commitment of $30,000 or more; (2) a list as of - 10 - September 30, 1997 of each outstanding order, contract, or commitment for the purchase by the Company or any Company Subsidiary of products, supplies, and services involving a financial commitment of $30,000 or more; and (3) a list as of September 30, 1997 of each outstanding order, contract, or commitment for the sale by the Company or any Company Subsidiary of products or services involving projected revenues of $30,000 or more. Each of the contracts, commitments, and other obligations listed on Schedule 3.2(I) is a valid and binding obligation of the Company or a Company Subsidiary and the other party or parties thereto. True and correct copies of each such order, contract or commitment have been furnished by the Seller to Buyer. Neither the Company nor any of the Company Subsidiaries nor any other party thereto has terminated, canceled, or substantially modified any contract, commitment, or other obligation identified in Schedule 3.2(I) in any manner materially adverse to the Business Condition, and neither the Company nor any of the Company Subsidiaries is in Default under any contract, commitment, or other obligation identified in Schedule 3.2(I) in any manner materially adverse to the Business Condition; and none of such contracts for which Seller has not provided Buyer a complete English translation contains any substantial restriction on the operations of the Business, or contains a right of termination, cancellation or modification by reason of the consummation of this Purchase Agreement which would be materially adverse to the Business Condition. (J) Employees and Employee Benefits. Schedule 3.2(J) sets forth (1) a list of the ten (10) highest paid employees of the Company and the Company Subsidiaries during the fiscal year ended March 31, 1997 together with the dollar amount paid to each such employee during such year; and (2) a list of the ten (10) highest paid employees of the Company and the Company Subsidiaries as of September 30, 1997 together with the base salary rate and bonus or other incentive compensation of each such employee as of that date. Also attached at Schedule 3.2(J) are true and complete copies of the summary plan descriptions of all pension, retirement, profit-sharing, deferred compensation, employee stock option or stock purchase, bonus, incentive compensation, and other employee pension plans or arrangements currently maintained by the Company or the Company Subsidiaries (collectively, "Benefit Plans"); and true and complete copies of summary plan descriptions of all employee health, dental, vision, life insurance, long-term and short-term disability, vacation, tuition reimbursement, and severance plans and other employee welfare plans or arrangements (collectively, "Welfare Plans") currently maintained by the Company or the Company Subsidiaries. Except as set forth on Schedule 3.2(J), neither the Company nor any of the Company Subsidiaries are parties to any employment, consulting, collective bargaining or severance agreements or arrangements ("Employment Agreements"), neither the Company nor any of the Company Subsidiaries have any Benefit Plans or Welfare Plans relating and applicable to the Company or any Company Subsidiary, its Business or its employees. Each such Benefit Plan and Welfare Plan - 11 - which is subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA") has been maintained and operated in substantial compliance with ERISA. None of the Benefit Plans is a so-called "defined benefit plan" or "multiemployer plan," as defined in ERISA. True and complete copies of each Benefit Plan, Welfare Plan and Employment Agreement have been furnished by the Seller to Buyer. (K) Compliance With Environmental, Health and Safety Laws. (i) Each of the Company and the Company Subsidiaries is currently in compliance in all material respects with all Environmental, Health and Safety Laws. (ii) Without limiting the generality of the foregoing, each of the Company, the Company Subsidiaries and their respective affiliates currently maintains, and is in compliance with, all permits, licenses and other authorizations that are required pursuant to Environmental, Health and Safety Laws for the occupation of its facilities and the operation of its business; a list of all such permits, licenses and other authorizations is set forth on the attached Schedule 3.2(K). (iii) None of the Company or the Company Subsidiaries, or their respective predecessors or affiliates has received, to the Knowledge of the Company's Chief Executive Officer, any written or oral notice, report or other information regarding any actual or alleged violation of Environmental, Health and Safety Laws, or any liabilities or potential liabilities (whether accrued, absolute, contingent, unliquidated or otherwise), including any investigatory, remedial or corrective obligations, relating to any of them or its facilities arising under Environmental, Health and Safety Laws. (iv) None of the Company, the Company Subsidiaries, or their respective predecessors or affiliates, has treated, stored, disposed of, arranged for or permitted the disposal of, transported, handled, or released any substance, including without limitation any hazardous substance, or owned or operated any property or facility (and no such property or facility is contaminated by any such substance) in a manner that has given or would give rise to liabilities, including any liability for response costs, corrective action costs, personal injury, property damage or natural resources damages, pursuant to the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), - 12 - the Solid Waste Disposal Act, as amended ("SWDA") or any other Environmental, Health and Safety Laws. (v) Neither this Purchase Agreement nor the consummation of the transaction that is the subject of this Purchase Agreement would reasonably be expected to, after consultation with counsel, result, in any obligations for site investigation or cleanup, or notification to or consent of government agencies or third parties, pursuant to any of the so-called "transaction- triggered" or "responsible property transfer" Environmental, Health and Safety Laws. (vi) None of the Company, the Company Subsidiaries, or any of their respective predecessors or affiliates has, has, either expressly or by operation of law, assumed or undertaken any liability of any other person under any Environmental, Health and Safety Laws, including without limitation any obligation for corrective or remedial action. (vii) No facts, events or conditions relating to the current, or to the knowledge of the Company and the Company Subsidiaries, former facilities, properties or operations of the Company, the Company Subsidiaries, or any of their respective predecessors or affiliates would reasonably be expected to, after consultation with counsel, give rise to any investigatory, remedial or corrective obligations pursuant to Environmental, Health and Safety Laws, or would reasonably be expected to, after consultation with counsel, give rise to any other liabilities (whether accrued, absolute, contingent, unliquidated or otherwise) pursuant to Environmental, Health and Safety Laws, including without limitation any obligations or liabilities relating to onsite or offsite releases or threatened releases of hazardous materials, substances or wastes, personal injury, property damage or natural resources damage. (L) Compliance With Other Laws. Schedule 3.2(L) sets forth (1) a list of all material permits, approvals and qualifications of any government or governmental unit, agency, board, body, or instrumentality issued to or applied for by the Company and used by the Company in its conduct of its Business; (2) a description of all written claims that the Company has received during the calendar years from 1990 through 1997, inclusive, from any government or governmental unit, agency, board, body, or instrumentality alleging - 13 - noncompliance by the Company with any laws, rules, regulations, ordinances, orders or decrees (other than Environmental Laws) in connection with Company's conduct of the Business. Insofar as is material to the Business Condition, the Company and the Company Subsidiaries are in substantial compliance with all statutes, ordinances, regulations, and other governmental requirements applicable to the conduct of the Business. (M) Absence of Certain Changes or Events Subsidiaries Since September 30, 1997, the Company and each of the Company Subsidiaries has operated in the ordinary course of business and there has not been (i) any material damage, destruction or other casualty loss with respect to property owned or leased by the Company or any of the Company Subsidiaries, whether or not covered by insurance, or any strike, work stoppage or slowdown or other labor trouble involving the Company or any of the Company Subsidiaries; or (ii) any Material Event. (N) Insurance. Schedule 3.2(N) sets forth the following information with respect to each insurance policy (including policies providing property, casualty, liability, and workers' compensation coverage and bond and surety arrangements) to which any of the Company and the Company Subsidiaries has been a party, a named insured, or otherwise the beneficiary of coverage at any time within the past 1 year: (i) the name address, and telephone number of the agent; (ii) the name of the insurer, the name of the policyholder, and the name of each covered insured; (iii) the policy number and the period of coverage; (iv) the scope (including an indication of whether the coverage was on a claims made, occurrence, or other basis) and amount (including a description of how deductibles and ceilings are calculated and operate) of coverage; and (v) a description of any retroactive premium adjustments or other loss-sharing arrangements. With respect to each such insurance policy: (a) the policy is legal, valid, binding, enforceable, and in full force and effect; (b) the policy will continue to be legal, valid, binding, enforceable, and in full force and effect on identical terms following the consummation and the transactions contemplated hereby; (c) neither any of the Company and the Company Subsidiaries nor any other party to the policy is in breach or default (including with respect to the payment of premiums or the giving of notices), and no event has occurred which, with notice or the lapse of time, would constitute such a breach or default, - 14 - or permit termination, modification, or acceleration, under the policy; and (d) no party to the policy has repudiated any provision thereof. Schedule 3.2(N) describes any self-insurance arrangements affecting any of the Company and the Company Subsidiaries. 3.3 DISCLAIMER. EXCEPT AS SET FORTH IN SECTION 3.1 AND SECTION 3.2, SELLER AND THE COMPANY AND THEIR AFFILIATES MAKE NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED CONCERNING THE BUSINESS OR ITS ASSETS (INCLUDING THOSE REFERRED TO IN SECTION 2- 312 OF THE INDIANA UNIFORM COMMERCIAL CODE OR IN ANY STATUTE APPLICABLE TO REAL PROPERTY). 3.4 BUYER'S REPRESENTATIONS AND WARRANTIES. Buyer hereby represents and warrants to Seller the following: (A) Organization and Existence. Buyer is a corporation duly organized, validly existing, and in good standing under the laws of the Commonwealth of Massachusetts. (B) Power and Authority. Buyer has all necessary corporate power and authority to enter into this Purchase Agreement, to carry out its obligations hereunder and to consummate the transactions contemplated hereby. This Purchase Agreement constitutes the valid and legally binding obligation of Buyer, enforceable in accordance with its terms and conditions, subject to the effect of any applicable bankruptcy, reorganization, insolvency, moratorium or similar laws affecting creditors' rights generally and subject, as to enforceability, to the effect of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). (C) No Conflict. Neither the execution and the delivery of this Purchase Agreement, nor the consummation of the transactions contemplated hereby, will (i) violate or conflict with the Articles of Organization or By-laws of Buyer, (b) conflict with or violate any law or governmental order applicable to Buyer, or (c) result in any breach of, or constitute a default (or event which with the giving of notice or lapse of time, or both, would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of any agreement to which Buyer is a party, or result in the creation of any encumbrance on any of the assets or properties of Buyer, except, in the case of clause (c), as would not, individually or in the aggregate, have a material adverse effect on the Business Condition or have a material adverse effect on the ability of Buyer to consummate the transactions contemplated by this Purchase Agreement. (D) Brokers. Buyer has not engaged and is not directly or indirectly obligated to any person acting as a broker or finder, or a person acting in a similar capacity - 15 - in connection with the transactions contemplated by this Purchase Agreement. (E) Buyer's Net Worth. Buyer currently has and will maintain through Closing a net worth of at least $33 Million Dollars ($33,000,000) and at Closing will have sufficient funds to pay the Purchase Price in full. (F) Purchase for Investment. Buyer is purchasing the Shares for investment and not with a view to any public resale or other distribution thereof, except in compliance with applicable securities laws. ARTICLE IV ACTIONS BEFORE CLOSING 4.1 GENERAL. Each of the parties will use its reasonable best efforts to take all action and to do all things necessary, proper, or advisable in order to consummate promptly and make effective the transactions contemplated by this Purchase Agreement (including satisfaction, but not waiver, of the closing conditions set forth in Article V below). 4.2 ACCESS TO RECORDS. Seller hereby covenants to Buyer that the Company will afford duly authorized representatives of Buyer full access during normal business hours and in a manner so as not to interfere with the normal business operations of the Company, to all of the assets, properties, books, and non- privileged records of the Company and of the Business and will permit such representatives to make abstracts from, or take copies of, such books, records, or other documentation, or to obtain temporary possession of any thereof as may be reasonably required by Buyer. Buyer will not use any of such information except in connection with this Purchase Agreement, and, if the Purchase Agreement is terminated for any reason whatsoever will return to Seller all tangible embodiments (and all copies) of such information in its possession and control. 4.3 INTERIM CONDUCT OF THE BUSINESS. Seller and the Company hereby covenant to Buyer that, from today until the Closing, the Company will (i) conduct the Business only in the ordinary and usual course (it being understood and agreed that the Company and each Company Subsidiary will make reasonable efforts to ship products in accordance with (and to arrive via shipping methods normally used by the Company or such Company Subsidiary no sooner than) reasonably requested customer delivery dates), subject to Buyer's approval of certain transactions pursuant to Section 4.4., except as Buyer may otherwise approve (which approval shall not be unreasonably withheld) or as may otherwise be required or permitted under this Purchase Agreement, (ii) use its reasonable efforts to preserve the goodwill of customers and others having business relations with the Company or the Company Subsidiaries, (iii) maintain the properties of the - 16 - Company and the Company Subsidiaries in substantially the same working order and condition as such properties are in as of today's date, reasonable wear and tear excepted, (iv) keep in force at no less than their present limits all existing policies of insurance or comparable replacements thereof insuring the Company, the Company Subsidiaries and their respective properties, and (v) promptly advise Buyer in writing of any matters arising or of which the Company becomes aware after today's date that, if existing or known on today's date, would be required to be set forth or described in this Purchase Agreement or the Schedules hereto. 4.4 BUYER'S APPROVAL OF CERTAIN TRANSACTIONS. Seller and the Company hereby covenant to Buyer that, except as may otherwise be required under this Purchase Agreement, from today until the Closing, the Company will not do, or permit any Company Subsidiary to do, any of the following without the prior approval of Buyer, which approval shall not be unreasonably withheld: (A) Incur or permit the incurrence of any debt for borrowed money or incur any obligation or other liability, except in the ordinary course of business; (B) Purchase or dispose of any real property or real property interest or, except in the ordinary course of business, any personal property; (C) Enter into any lease of real or personal property or any renewals thereof involving a term of more than one (1) year or rental obligation exceeding Thirty Thousand Dollars ($30,000) per annum in any single case; (D) Permit to be incurred any Encumbrances on any of the assets or properties of the Company or any Company Subsidiary, except in the ordinary course of business; (E) Except for normal merit or cost-of-living increases in accordance with the Company's past practices, increase the rate of compensation for any of the employees of the Company or any Company Subsidiary or otherwise enter into or alter any employment, consulting, or managerial services agreement primarily affecting the Company or any Company Subsidiary; (F) Commence, enter into, or alter any pension, retirement, profit-sharing, employee stock option or stock purchase, bonus, deferred compensation, incentive compensation, life insurance, health insurance, fringe benefit, severance, or other employee benefit plan or arrangement affecting employees of the Company, any Company Subsidiary or the Business, or grant any option or other right to acquire any of the capital stock of the Company or any Company Subsidiary, or issue or retire any shares of capital stock of the Company or any Company Subsidiary; - 17 - (G) Make any single new commitment or increase any single previous commitment for capital expenditures in an amount of more than Thirty Thousand Dollars ($30,000); (H) Accelerate or delay the sale of Products except as may be necessary in the ordinary course of business; (I) Sell, assign, transfer, license, or convey any of the Intellectual Property; or (J) Except as specified on Schedule 4.4(J), make any changes in the banking or similar authorizations of the Company or any Company Subsidiary; make any payments or distributions of any property (other than normal sales of inventory for fair value in the ordinary course of business) to any affiliate of the Company; or grant any powers of attorney; except that nothing herein shall restrict the Company and Seller from continuing their current cash management policies and distributing the cash, cash equivalents and, to the extent appropriate to adjust Closing Net Worth so that it does not exceed the Base Line Net Worth, accounts receivable of the Company and the Company Subsidiaries to the Seller and its affiliates; provided that such distributions shall not cause the Closing Date Balance Sheet to be materially less than the Base-Line Net Worth or the cash balances of the Company or any Company Subsidiary to be insufficient to cover outstanding checks or other orders for payment drawn on the Company's accounts or those of any Company Subsidiary; and provided further that if accounts receivable are so distributed to the Seller and its affiliates, Seller and its affiliates shall communicate with the obligors of such accounts receivable after the Closing only through the Company or any Company subsidiary, as agent for the Seller. 4.5 CONSENTS TO ASSIGNMENT. Seller hereby covenants to Buyer that from the date hereof until the Closing, Seller will use its reasonable efforts to cause the Company to obtain the consents or approvals (or effective waivers thereof) of all other persons whose consents or approvals are required for the continuation of the Company's rights under material contracts, leases, licenses and permits. 4.6 COORDINATION OF PUBLIC ANNOUNCEMENTS. From today until the Closing, the parties will cooperate in the planning, preparation, and publication of any and all public announcements concerning this Purchase Agreement and the transactions contemplated by this Purchase Agreement. 4.7 HART-SCOTT-RODINO NOTIFICATION. Seller hereby covenants to Buyer, and Buyer hereby covenants to Seller, that the parties each will (i) promptly proceed with the filing of any required notification and report forms that it may be required to file with the Federal Trade Commission and the Antitrust Division of the United States Department of Justice under the Hart-Scott- Rodino Act, and will make any further filings and take any - 18 - further actions pursuant thereto that may be necessary, proper, or advisable in connection therewith, and (ii) use its best efforts to avoid the entry of, and to have vacated, eliminated or terminated, any decree, order, proceeding, judgment, investigation or impediment that would restrain, prevent or delay the Closing. 4.8 OTHER REGULATORY APPROVALS. Seller hereby covenants to Buyer, and Buyer hereby covenants to Seller, that immediately after the execution and delivery of this Purchase Agreement the parties will promptly proceed with the preparation and filing of any required filings necessary in order to obtain the approval or authorization of those governmental agencies or instrumentalities whose approval or authorization is necessary in order to consummate the transactions contemplated by this Purchase Agreement. 4.9 SECTION 338 ELECTION BY SELLER. Seller will join with Buyer in making an election under Section 338(h)(10) of the Code (and any corresponding elections under state, local, or foreign tax law) with respect to the purchase and sale of the Shares hereunder. Seller will pay any tax attributable to the making of such election and will indemnify Buyer, the Company and the Company Subsidiaries against any adverse consequences arising out of any failure to pay such tax. Seller will also pay any state, local, or foreign tax (and indemnify Buyer, the Company and the Company Subsidiaries against any adverse consequences arising out of any failure to pay such tax) attributable to an election under state, local, or foreign law corresponding to the election available under Section 338(g) of the Code (or which results from the making of an election under Section 338(g) of the Code) with respect to the purchase and sale of the Shares hereunder. The Purchase Price (and other relevant items) shall be allocated among the assets of the Company and its Subsidiaries (in accordance with the regulations under Section 338 of the Code) as Buyer and Seller shall agree, and the parties shall prepare all relevant tax returns and reports consistent with such allocation. 4.10 EMPLOYEE AGREEMENTS. The Company will use its best efforts (but without incurring any additional costs or expenses) to get the following employees to sign the Agreement re Inventions and Other Confidential Matters referred to in the last sentence of Section 3.2(G): Tsutomu Kobayashi; Sales Manager of Wells Japan; Engineering Manager of Wells Japan; Charles Dodson; Wells Asia Staff; Wells Europe Staff; James Blossom; John Hartstein; Paul Schultz; Troy Pavy; Thomas Slone; Patty Snow; Timothy Corcoran; Tom Lyzinski; Allan Silverman. ARTICLE V CONDITIONS 5.1 CONDITIONS TO BUYER'S OBLIGATIONS. The obligation of Buyer to consummate the transactions contemplated by this Purchase Agreement is subject to the satisfaction of the following conditions at or before the Closing: - 19 - (A) The representations and warranties of Seller and the Company contained in Section 3.1 of this Purchase Agreement shall be true and correct as of the date of this Purchase Agreement and as of the Closing Date (except with respect to the effect of transactions contemplated or permitted by this Purchase Agreement and except to the extent that such failure shall not have a material adverse effect on the Business Condition) and the representations and warranties of Seller and the Company contained in Section 3.2 of this Purchase Agreement shall be true and correct as of the date of this Purchase Agreement and as of the Closing Date (except with respect to the effect of transactions contemplated or permitted by this Purchase Agreement and with respect to the effect of the passage of time upon dated material set forth in the Schedules (but only to the extent that such effect upon the Schedules does not constitute a material adverse effect on the Company or the Company Subsidiaries) and except to the extent that such failure shall not have a material adverse effect on the Business Condition); (B) Seller and the Company shall have performed and complied in all material respects with all agreements and covenants required by this Purchase Agreement to be performed or satisfied by Seller and/or the Company, and Seller and the Company shall have delivered to Buyer all documents, certificates, and instruments required to be delivered by Seller and/or the Company under the terms of this Purchase Agreement, including, without limitation, the documents referred to on Appendix B; (C) All corporate and other proceedings or actions required to be taken by Seller or the Company in connection with the transactions contemplated by this Purchase Agreement shall have been taken; (D) All material governmental approvals and authorizations necessary for consummation of the transactions contemplated by this Purchase Agreement shall have been duly issued or granted except for any failure which would not have a material adverse effect on the Business Condition, and the waiting period (and any extensions thereof) under the Hart-Scott-Rodino Act shall have expired or otherwise been terminated; (E) There shall not have been issued and in effect any injunction or similar legal order prohibiting or restraining consummation of any of the transactions contemplated in this Purchase Agreement; (F) Since today's date, there shall not have been any change or changes in the Business Condition which individually or in the aggregate constitute a Material Event; (G) Buyer shall have received an opinion of counsel for the Seller and the Company in customary from reasonably acceptable to Buyer; - 20 - (H) To the extent that any of the financial statements or information referred to in Section 7.5 is available on or before the Closing Date, the Seller shall have delivered the same to Buyer; (I) Buyer shall have received the resignations of the directors of the Company; and (J) To the extent that any of the financial books and records of the Company or any Company Subsidiary are in the possession of anyone other than the Company or a Company Subsidiary, such books and records shall have been delivered to the Company or such Company Subsidiary. 5.2 CONDITIONS TO SELLER'S OBLIGATIONS. The obligation of Seller to consummate the transactions contemplated by this Purchase Agreement is subject to the satisfaction of the following conditions at or before the Closing: (A) The representations and warranties of Buyer contained in Section 3.4 shall be true and correct as of the date of this Purchase Agreement and as of the Closing Date (except with respect to the effect of transactions contemplated or permitted by this Purchase Agreement and except to the extent that such failure shall not have a material adverse effect on the Business Condition); (B) Buyer shall have performed and complied with all agreements and covenants required by this Purchase Agreement to be performed or satisfied by Buyer, and Buyer shall have delivered all documents, certificates, and instruments required to be delivered by Buyer under the terms of this Purchase Agreement, including, without limitation, the documents referred to on Appendix C; (C) Buyer shall have taken all corporate and other proceedings to be taken by it in connection with the transactions contemplated by this Purchase Agreement; (D) All material governmental approvals and authorizations necessary for consummation of the transactions contemplated by this Purchase Agreement shall have been duly issued or granted except for any failure which would not have a material adverse effect on the Business Condition, and the waiting period (and any extensions thereof) under the Hart-Scott-Rodino Act shall have expired or otherwise been terminated; and (E) There shall not have been issued and in effect any injunction or similar legal order prohibiting or restraining consummation of any of the transactions contemplated in this Purchase Agreement. - 21 - ARTICLE VI CLOSING 6.1 THE CLOSING. For purposes of this Purchase Agreement, the term "Closing" means the time at which the transactions contemplated by this Purchase Agreement will be consummated after satisfaction or waiver of the conditions set forth in Article V of this Purchase Agreement. 6.2 TIME, DATE, AND PLACE OF CLOSING. The Closing will occur at 10:00 a.m. (New York City time) on the later of December 26, 1997 or the fifth business day after satisfaction of the conditions set forth in Section 5.1(D) of this Purchase Agreement, or such other date as the parties may agree in writing (the "Closing Date"). The Closing will take place at the New York office of Fried, Frank, Harris, Shriver & Jacobson, or at such other place as the parties may agree in writing. The Closing will be deemed to have occurred as of 11:59 p.m. on the Closing Date. 6.3 BUYER'S OBLIGATIONS. At the Closing, Buyer will deliver to Seller the following: (A) The documents, certificates, and other items referred to in Section 5.2(B); and (B) The amount specified in Section 2.4(A). 6.4 SELLER'S OBLIGATIONS. At the Closing, Seller will deliver to Buyer the following: (A) The documents, certificates, and other items referred to in Section 5.1(B); and (B) Certificates representing the Shares, duly endorsed in blank, with signature guaranteed. ARTICLE VII ACTIONS AFTER CLOSING 7.1 FURTHER CONVEYANCES. After the Closing, Seller will, without further cost or expense to Buyer, execute and deliver to Buyer (or cause to be executed and delivered to Buyer), such additional instruments of conveyance, and Seller will take, and will cause its attorneys, accountants and other advisers to take, such other and further actions as Buyer may reasonably request and which are ordinarily provided by a Seller, more completely to sell, transfer, and assign to Buyer and vest in Buyer Ownership of the Shares and to transition the Company to Buyer's attorneys, accountants and other advisers. - 22 - 7.2 ACCESS TO FORMER BUSINESS RECORDS. For a period of seven (7) years after the Closing, Buyer will afford duly authorized representatives of Seller free and full access to pre- Closing books and records of the Company and will permit such representatives, at Seller's expense, to make abstracts from, or to take copies of any of such records, or, at reasonable times and for reasonable periods, to obtain temporary possession of any thereof as may be reasonably required by Seller. During such period, Buyer will cooperate with Seller, and cause employees of the Company to cooperate with Seller, in furnishing information, evidence, testimony, and other assistance in connection with any action, proceeding, or investigation relating to the Company's conduct of the Business before the Closing. 7.3 ACCESS TO FORMER EMPLOYEES. After the Closing, Buyer will make available to Seller, at reasonable times and for reasonable periods, employees of the Company whom Seller may reasonably need in order to defend or prosecute any legal or administrative action to which Seller is a party. Seller will pay or reimburse the Company for all reasonable expenses which may be incurred by such employees in connection therewith, including, without limitation, all travel, lodging, and meal expenses, and Seller will compensate the Company for the number of whole business days spent by each such employee in providing such services at the rate of one hundred percent (100%) of the average daily gross pay per business day (excluding the value of employee benefits) of such employee during the calendar month in which such services are performed. 7.4 DISPUTE RESOLUTION. If the parties ever have a dispute involving their respective rights and obligations under this Purchase Agreement (other than with respect to the final determination of the amount of the Adjustment), or the breach thereof, then the parties will resolve such dispute as follows: (A) Dispute Notice. Either Buyer or Seller may at any time deliver to the other a written dispute notice setting forth a brief description of the issues for which such notice initiates the dispute resolution mechanism set forth in this Section 7.4. Such dispute notice shall also specify the provision or provisions of this Purchase Agreement and the facts or circumstances that are the subject matter of the dispute. (B) Informal Negotiations. During the sixty (60) day period following delivery of a dispute notice described in Section 7.4(A), the parties will cause their representatives to meet and seek to resolve the disputed items cordially through informal negotiations. (C) Dispute Resolution Proceedings. If representatives of the parties are unable to resolve disputed items through the informal negotiations described in Section 7.4(B), then within thirty (30) days after the - 23 - informal negotiation period the parties will refer the disputed issues to a dispute resolution panel for final resolution as follows: (1) Designation of Representatives. Within seven (7) days after such informal negotiation period, Buyer and Seller will each designate one representative to serve on the dispute resolution panel. (If either party fails or refuses to designate a representative, then the other party will be entitled to have a representative appointed, for such party by the American Arbitration Association.) (2) Selection of Neutral. Within thirty (30) days after they have been designated, the designated representatives will meet and select a neutral person (the "Neutral") to serve as the third member of the dispute resolution panel. If the designated representatives of parties cannot agree on a Neutral, then either representative may request the American Arbitration Association to select the Neutral. (3) Procedures and Process. At the time the matter is referred to the dispute resolution panel, Buyer and Seller will jointly establish the procedures, including timing, scope of discovery, if any, and confidentiality of evidence and the proceedings, to be followed with respect to the presentation of the parties' respective positions and the process by which the dispute resolution panel will reach and render its decision on the disputed issues. Such procedures and processes will assure that - (a) Each party will have the right to submit evidence to the dispute resolution panel, (b) Each party will have the right to present a written statement concerning that party's position with respect to the disputed item, (c) Before reaching a decision concerning the disputed item, the dispute resolution panel will convene a hearing at which both parties may be represented, and (d) The parties and the dispute resolution panel will use their respective reasonable best efforts to resolve any dispute within 90 days following the date of selection of the Neutral. If Buyer and Seller cannot agree on such procedures and processes, then the Neutral will establish such procedures and process which will, in all events, be consistent with the foregoing. - 24 - (4) Decision. The dispute resolution panel will act by majority vote. The dispute resolution panel will base its decision on applicable provisions of this Purchase Agreement or, if the provisions of this Purchase Agreement do not resolve the matter, on general principles of substantive Delaware law. (The dispute resolution panel may, if it so desires, seek the opinion of an attorney licensed to practice law in the State of Delaware on any matter of substantive Delaware law on which the panel desires clarification.) (D) Equitable Relief. Notwithstanding any other provision of this Section 7.4, either party may seek from a court of competent jurisdiction interim injunctive relief in order to maintain the status quo or protect such party's rights under this Purchase Agreement pending resolution of a dispute pursuant to this Section 7.4. (E) Binding Effect. The decisions of the dispute resolution panel under this Section 7.4 will be binding on both Seller and Buyer and will be neither appealable, contestable, or subject to collateral attack by Seller or Buyer. 7.5 FINANCIAL STATEMENTS. (A) As soon as reasonably practicable, but in no event later than 25 days following the Closing Date, the Seller shall cause to be prepared by its independent accounting firm, and shall deliverto Buyer, the following consolidated audited financial statements for the Company and the Company Subsidiaries: statements of income and cash flow for the periods from May 29, 1994 to June 3, 1995, from June 4, 1995 to May 2, 1996 and from May 3, 1996 to May 3, 1997 and consolidated balance sheets as of May 2, 1996 and May 3, 1997. Seller shall use its best efforts to cause its independent accounting firm to permit Buyer's independent accounting firm to review the work papers and other preparatory materials used in connection with the preparation of the financial statements referred to in this Section 7.5(A). (B) As soon as reasonably practicable, but in no event later than 40 days following the Closing Date (assuming full cooperation from the Buyer and the Company), the Seller shall cause to be prepared by its independent accounting firm, and shall deliver to Buyer, the following financial statements and other information for the Company and the Company Subsidiaries: (i) audited statements of income and cash flow for the periods from May 4, 1997 through the Closing Date and an audited balance sheet as of the Closing Date; (ii) net sales and net income for the years ended May 31, 1993 and May 31, 1994, total assets as of May 31, 1993, May 31, 1994 and May 31, 1995 and such other selected financial data as defined in Regulation S-K (or any - 25 - successor provision or regulation promulgated by the Securities and Exchange Commission) for such periods as Buyer shall reasonably request; and (iii) statement of post-closing adjustments to the Company's books and records made in connection with the purchase of Unitech by Siebe plc. (C) For a period of one year following the Closing Date, the Seller shall use its best efforts to cause to be prepared by its independent accounting firm, and shall deliver to Buyer, such other financial information for the Company and the Company Subsidiaries as Buyer shall reasonably request. For such period, Seller shall use its best efforts to cause its independent accounting firm to cooperate with Buyer and Buyer's independent accounting firm in the preparation and certification of financial statements and other information regarding the Company and the Company Subsidiaries in connection with a public offering of Buyer's securities, including, without limitation, the provision of "comfort" letters customarily requested by the underwriters of such an offering. Buyer shall bear the fees and costs incurred in connection with the services provided by such accounting firm pursuant to this Section 7.5(C). (D) All financial statements and information furnished pursuant to this Section 7.5 shall be prepared on a consolidated basis from the books and records of the Company and the Company Subsidiaries. The financial statements shall be prepared in accordance with U.S. GAAP and Regulation S-X (or any successor provision or regulation promulgated by the Securities and Exchange Commission) applied on a consistent basis throughout the periods covered thereby and, in the case of the financial statements referred to in Section 7.5 (A), shall be certified by such independent accounting firm. 7.6 TAX RETURNS. Buyer shall cause the Company (and its Subsidiaries) to consent to join, for all taxable periods of the Company ending on or before the Closing Date for which the Company (or such Subsidiary) is eligible to do so, in any consolidated or combined income tax returns with Seller. Buyer shall, and shall cause the Company and its Subsidiaries to, cooperate with Seller in the preparation of the portions of such income tax returns pertaining to the Company and its Subsidiaries, including, without limitation, by promptly providing Seller with all information regarding the Company and its Subsidiaries reasonably requested by Seller to enable Seller to prepare and file such income tax returns. All taxes of any kind payable by reason of the operations or activities of the Company on or prior to the Closing Date shall be paid by Seller, unless set forth as liabilities on the Closing Date Balance Sheet, in which case they shall be paid by Buyer. - 26 - ARTICLE VIII INDEMNIFICATION 8.1 INDEMNIFICATION OF SELLER. Subject to the limitations set forth in Section 8.4, Section 8.5 and Section 8.6, Buyer will indemnify and defend (in the case of third party claims) Seller, and hold Seller harmless, from and against the actual amount of any and all liabilities, damages, claims, losses, out of pocket costs and expenses (including reasonable attorneys' fees) arising out of or resulting from - (A) Any misrepresentation or breach of warranty by Buyer for which notice is given by Seller within the period specified in Section 8.6; or (B) Nonperformance by Buyer of any obligations to be performed on the part of Buyer under this Purchase Agreement. 8.2 INDEMNIFICATION OF BUYER. Subject to the limitations set forth in Section 8.4, Section 8.5 and Section 8.6, Seller will indemnify and defend (in the case of third party claims) Buyer, and hold Buyer and the Company harmless, from and against the actual amount of any and all liabilities, damages, claims, losses, out of pocket costs and expenses (including reasonable attorneys' fees) arising out of or resulting from - (A) Any misrepresentation or breach of warranty or covenant by Seller or the Company for which notice is given by Buyer within the period specified in Section 8.6; or (B) Nonperformance by Seller or the Company of any obligation to be performed on the part of Seller under this Purchase Agreement. 8.3 CLAIMS. If either party desires to make a claim against the other under Section 8.1 or 8.2 which does not involve a claim by any person other than the parties, then such party shall make such claim by promptly delivering written notice to the other. If either Buyer or Seller (the "Claimant") desires to make a claim against the other (the "Indemnitor") under Section 8.1 or 8.2 which involves a claim by a person other than the parties, then such claim will be made in the following manner and be subject to the following terms and conditions: (A) Notice. The Claimant will give prompt notice to the Indemnitor of any demand, claim, or threat of litigation or the actual institution of any action, suit, or proceeding (collectively, a "Claim") at any time served on or instituted against the Claimant with respect to which the Claimant believes it would have a right of indemnification under Section 8.1 or 8.2. In providing such notice, the Claimant shall only state the existence of such Claim and shall not admit or deny the validity of the facts or circumstances out of which such Claim arose. Solely for purposes of determining whether the Claimant is entitled to - 27 - indemnification under Section 8.1 or 8.2, the alleged facts or circumstances on which such Claim is based shall be treated as if they were true pending final resolution of the facts and circumstances out of which such Claim arose. (B) Responsibility for Defense. Within thirty (30) days after receipt of any such notice, but not less than five (5) working days before the time the Claimant is required to respond to a Claim, the Indemnitor will, by giving written notice to the Claimant, have the right to assume responsibility for the defense of the Claim in the name of the Claimant or otherwise as the Indemnitor may elect; provided that the Indemnitor also agrees that it does or might have responsibility to indemnify the Claimant with respect to such Claim. Otherwise, the Claimant will have responsibility for the defense of the Claim. Subject to the provisions of subsections 8.3(C) and (D) below, the party having responsibility for defense of a Claim (the "Defending Party") will have the full authority to defend, cure, adjust, compromise, or settle such Claim or appeal any judgment or ruling of a court or other tribunal in connection with such Claim in its own name and/or in the name of the other party. (C) Right to Participate. Notwithstanding a Defending Party's responsibility for the defense of a Claim, the other party shall have the right to participate, at its own expense and with its own counsel, in the defense of a Claim and the Defending Party will consult with the other party from time to time on matters relating to the defense of such Claim. The Defending Party will provide the other party with copies of all pleadings and material correspondence relating to such Claim. (D) Settlement. A Defending Party will provide the other party with timely written notice of any proposed adjustment, compromise, or other settlement, including equitable or injunctive relief, of a Claim which the Defending Party intends to propose or accept. If the other party fails to provide the Defending Party with timely written notice of objection to such settlement, then the Defending Party shall have the authority to propose or accept such settlement and enter into any agreement, in its own name and/or in the name of the other party, giving legal effect to all aspects of such settlement. If the other party objects to such settlement, then the Defending Party may, if it so elects, tender the defense to the other party by paying to such other party the amount of money proposed to be paid in settlement of the Claim, in which case the Defending Party shall have no further liability to the other party under this Purchase Agreement with respect to such Claim and the other party shall have full authority for the future defense of such Claim and full responsibility for any and all liabilities, obligations, costs, and expenses resulting therefrom. - 28 - 8.4 DISPUTED RESPONSIBILITY. If, after receiving a written indemnification notice under Section 8.3(A), the party receiving such notice disputes - (A) The fact that such party in fact made a misrepresentation or breach a warranty under this Purchase Agreement giving rise to the claim to which the notice relates or that any such misrepresentation or breach in fact gave rise to the liabilities, damages, claims, costs, or expenses for which the other party seeks indemnification under this Article VIII; or (B) The fact that such party in fact failed to perform any obligation to be performed on the part of that party under this Purchase Agreement giving rise to the claim to which the notice relates or that any such failure in fact gave rise to the liabilities, damages, claims, costs, or expenses for which the other party seeks indemnification under this Article VIII; then such party will have the right to initiate the dispute resolution mechanism set forth in Section 7.4, in which case the dispute will be finally resolved as provided in Section 7.4. In such case, however, pending final resolution of the disputed item, the parties will proceed as if the party receiving the indemnification notice had in fact made a misrepresentation, breached a warranty, or failed to perform an obligation to be performed on the part of that party under this Purchase Agreement and as if such act or failure in fact gave rise to the liabilities, damages, claims, costs, or expenses for which the other party seeks indemnification under this Article VIII. If the disputed item is resolved in whole or in part in favor of the party receiving the indemnification notice, then such party will be entitled to an equitable reimbursement from the other party of any amounts expended or incurred in carrying out the receiving party's indemnification obligations under this Article VIII. 8.5 DOLLAR LIMITATION ON INDEMNIFICATION. Notwithstanding the provisions of Sections 8.1(A) and 8.2(A) but subject to Section 8.7, neither Seller nor Buyer will be obligated to indemnify, defend, or hold the other party harmless from or against any liability, damage, claim, cost, or expense (including attorneys' fees) arising out of a misrepresentation or breach of warranty by such party pursuant to Section 8.1(A) or 8.2(A) unless and to the extent (A) a given claim (or claims, to the extent such claims relate to the same facts or circumstances) exceeds $25,000 and (B) the amount by which all claims in excess of such amount exceeds $2,000,000. In no event will the parties have liability for consequential or punitive damages. In all events, in determining the damages for any particular loss suffered, the amount of the indemnity will be net of any tax benefits and recoveries from insurance or otherwise received by the indemnitee. 8.6 TIME LIMITATIONS ON INDEMNIFICATION. Notwithstanding the provisions of Section 8.1 (A) and 8.2(A) but subject to Section 8.7, neither party will have any liability to the other arising out of a breach of any representation or warranty - 29 - contained in Article III of this Purchase Agreement, and any cause of action based thereupon shall expire and terminate, unless the party claiming that such breach occurred delivers to the other party written notice and a reasonably full explanation of the alleged breach on or before 5:00 p.m. (Eastern Standard Time) on March 31, 1999, except for claims relating to Section 3.2(D), which shall survive until the relevant statute of limitations (including any extension thereof by Seller or the Company) has run, and claims relating to Section 3.2(K), for which such notice must be given prior to the fourth annual anniversary of the Closing. 8.7 EXCLUSIVE REMEDY. Seller and Buyer acknowledge and agree that, absent fraud, the foregoing indemnification provisions shall be the sole and exclusive remedy of Seller and Buyer with respect to any inaccuracy or breach of any representation, warranty or covenant made by Seller or Buyer in this Purchase Agreement. The parties agree that no indemnity shall be paid with respect to a liability that is shown on the Closing Date Balance Sheet. ARTICLE IX AMENDMENT, WAIVER, TERMINATION, AND CANCELLATION 9.1 AMENDMENT. The parties may amend this Purchase Agreement at any time before the Closing, but only by written instrument executed by both parties. 9.2 WAIVER. Either party may at any time waive compliance by the other with any covenants or conditions contained in this Purchase Agreement but only by written instrument executed by the party waiving such compliance. No such waiver, however, shall be deemed to constitute the waiver of any such covenant or condition in any other circumstance or the waiver of any other covenant or condition. 9.3 TERMINATION. The parties may terminate this Purchase Agreement at any time before the Closing, but only by written instrument signed by both parties. This Purchase Agreement will terminate automatically, and without further action by any party, if the Closing has not occurred by January 31, 1998, unless the parties otherwise extend this Purchase Agreement by a written instrument executed by the parties. Termination of this Purchase Agreement pursuant to the preceding sentence will be without prejudice to any claim either party may have at law or in equity against the other party for any misrepresentation or breach of warranty or covenant by under this Purchase Agreement which arose at or before the termination under such sentence. - 30 - ARTICLE X MISCELLANEOUS 10.1 COOPERATION. Each of Buyer and Seller will cooperate with the other party, at the other party's request and expense, in furnishing information, testimony, and other assistance in connection with any actions, proceedings, arrangements, and disputes with other persons or governmental inquiries or investigations involving Seller's conduct of the Company's business or the transactions contemplated by this Purchase Agreement. 10.2 SEVERABILITY. If any provision of this Purchase Agreement shall finally be determined to be unlawful, then such provision will be deemed to be severed from this Purchase Agreement and replaced by a lawful provision which carries out, as closely as possible, the intention of the parties and preserves the economic bargain contemplated by this Purchase Agreement and, in such case, each and every other provision of this Purchase Agreement will remain in full force and effect. 10.3 COSTS AND EXPENSES. Each party will bear its own expenses incurred in connection with this Purchase Agreement and the transactions contemplated by this Purchase Agreement, whether or not the transactions are consummated, it being understood and agreed that the expenses of the Seller shall be deemed to include the expenses of any broker referred to in Section 3.1(E), the fees and expenses of the attorneys, accountants and other advisers of the Seller and the Company in connection with the transactions contemplated by this Purchase Agreement, and the amount of any severance or similar payments required to be made by the Company following the Closing Date by reason of termination of employment at or prior to the Closing Date (and such payments in respect of employees whom Buyer advises Seller at or prior to the Closing that Buyer does not wish to retain) pursuant to severance or similar agreements by which the Company is bound on the Closing Date. 10.4 NOTICES. All notices, requests and other communications under this Purchase Agreement shall be in writing and shall be deemed to have been duly given at the time of receipt if delivered by hand or communicated by electronic transmission (with confirmation by mail or courier), or, if sent by courier, two (2) days after delivery to an international courier service with guaranteed two-day delivery, addressed or communicated as follows: - 31 - If to Buyer, to: PCD Inc. 2 Technology Drive Peabody, Massachusetts 01960-7977 Attention: Chairman of the Board Telefax: (978) 532-6800 With a copy to: Hill & Barlow, a Professional Corporation One International Place Boston, Massachusetts 02110 Attention: Thomas C. Chase Telefax: (617) 428-3500 If to Seller, to: UL America, Inc. c/o Siebe Inc. 33 Commercial Street Foxboro, Massachusetts 02035 Attention: Vice President Finance Telefax: (508) 543-2735 With copies to: Siebe plc Saxon House 2-4 Victoria Street, Windsor Berkshire SL4 1EN England Attention: Secretary Telefax: 44.1753.622.030 - 32 - Fried, Frank, Harris, Shriver & Jacobson One New York Plaza New York, New York 10004 Attention: Sanford Krieger Telefax: (212) 859-4000 Either party may change its notice address above to a different address by giving the other party written notice of such change. 10.5 ASSIGNMENT. This Purchase Agreement will be binding upon and inure to the benefit of the successors of each of the parties hereto, but shall not be assignable by either party without the prior written consent of the other. 10.6 NO THIRD PARTIES. Neither this Purchase Agreement nor any provisions set forth in this Purchase Agreement is intended to, or shall, create any rights in or confer any benefits upon any person other than the parties to this Purchase Agreement and their respective successors and permitted assigns. 10.7 INCORPORATION BY REFERENCE. The Appendices and Schedules to this Purchase Agreement constitute integral parts of this Purchase Agreement and are hereby incorporated into this Purchase Agreement by this reference. 10.8 GOVERNING LAW. This Purchase Agreement will be governed by and construed in accordance with the internal substantive laws of the State of Delaware. 10.9 COUNTERPARTS. More than one counterpart of this Purchase Agreement may be executed by the parties hereto, and each fully executed counterpart shall be deemed an original without production of the others. 10.10 COMPLETE AGREEMENT. This Purchase Agreement sets forth the entire understanding of the parties hereto with respect to the subject matter of this Purchase Agreement and supersedes all prior letters of intent, agreements, covenants, arrangements, communications, representations, or warranties, whether oral or written, by any officer, employee, or representative of either party relating thereto. 10.11 POST-CLOSING COVENANTS. For a period of five years after the Closing Date, neither Seller nor any parent, subsidiary or other affiliate of Seller, including, without limitation, Siebe plc, shall: (A) directly or indirectly engage in any Competitive Business (as defined below); - 33 - (B) directly or indirectly induce or attempt to induce any employee, consultant, independent contractor, supplier, customer, or licensor of the Company or any Company Subsidiary to terminate his or her employment or other relationship with the Company or any Company Subsidiary; or (C) except as otherwise permitted pursuant to Sections 7.2 and 7.3 hereof, use for its own benefit or disclose to or use for the benefit of any person or entity other than the Buyer or any subsidiary or other affiliate of Buyer, including without limitation, the Company, any information not already lawfully available to the public concerning any Buyer Intellectual Property (as defined below). For purposes of this Section 10.11, (i) "Competitive Business" shall mean any business or activity which is competitive with the development, design, manufacture, sale, or servicing of burn-in/test sockets and plastic carriers as such business is as of the Closing Date conducted or proposed to be conducted by the Company or the Company Subsidiaries; and (ii) "Buyer Intellectual Property" shall mean the Company's rights as of the Closing consisting of, conferred by or otherwise relating to any of the following: (v) patents and patent applications (including all renewals, extensions or modifications thereof); (w) trade secrets (including, without limitation, know-how, inventions, computerized data and information, computer programs, business records, files and data, discoveries, formulae, production outlines, product designs, mask works, manufacturing information, processes and techniques, testing and quality control processes and techniques, drawings and customer lists); (x) trademarks, service marks, and applications therefor; (y) copyrights; and (z) trade names. Notwithstanding the foregoing, nothing herein shall be deemed to affect the ability of the Seller or its affiliates to (a) acquire up to 10% of any class of securities of any issuer that is traded on a recognized stock exchange or (b) to acquire securities or assets of any entity if the revenues derived by such entity from a Competitive Business constitutes less than 50% of the consolidated revenues of such entity, and the Seller and its affiliates (i) seek in good faith to dispose of such Competitive Business for fair value as promptly as practicable after such acquisition and (ii) do not disclose any Buyer Intellectual Property to such Competitive Business. - 34 - IN WITNESS WHEREOF, the duly authorized officers or representatives of the parties hereto have duly executed this Purchase Agreement as of the date first written above. UL AMERICA, INC. By:/S/ JOSHUA A. HAUSER Name: Joshua A. Hauser Title: President WELLS ELECTRONICS, INC. By:/S/ RICHARD J. MULLIN Name: Richard J. Mullin Title: President PCD INC. By:/S/ JOHN L. DWIGHT, JR. Name: John L. Dwight, Jr. Title: Chairman of the Board - 35 - GUARANTY The undersigned hereby (i) joins the representations and warranties applicable to Guarantor under Section 3.1 of the foregoing Purchase Agreement, (ii) agrees to be bound by the provisions of Section 10.11 of the foregoing Purchase Agreement and (iii) unconditionally guaranties the full and punctual performance by the Seller and/or the Company of all of the obligations and liabilities of the Seller and/or the Company under or in respect of the foregoing Purchase Agreement. The obligations of the undersigned under this Guaranty are primary, and no recourse need be had by Buyer against the Seller or the Company before proceeding against the undersigned. The undersigned hereby waives presentment, protest, demand or notice of any kind, and all other suretyship defenses, and consents that no extension or other indulgence granted to the Seller or the Company, and no discharge or release of the Seller or the Company or any other party primarily liable under the Purchase Agreement, shall discharge or affect the liability of the undersigned. The undersigned hereby submits to the jurisdiction of the courts of the Commonwealth of Massachusetts and the United States District Court for the District of Massachusetts, in each case sitting in Boston, Massachusetts, in any action or proceeding arising out of or relating to this Guaranty. The undersigned hereby waives any objection it may have to venue to any such action or proceeding and to the defense of an inconvenient forum with respect thereto. The undersigned consents to service of process in the manner provided for notices in the foregoing Purchase Agreement. SIEBE PLC By:/S/ COLIN P. BONSEY Name: Colin P. Bonsey Title: Director of Planning - 36 - APPENDIX A CERTAIN DEFINITIONS The following terms have the meanings set forth below where used in the Purchase Agreement and identified with initial capital letters. TERM DEFINITION Buyer As defined in the Preamble to the Purchase Agreement. Adjustment As determined under Section 2.3 of the Purchase Agreement. Base-Line Net Worth As defined in Section 2.3(E) of the Purchase Agreement. Business As defined in Recital A to the Purchase Agreement. Business Condition The financial and operating condition of the Company and the Company Subsidiaries taken as a whole. Chief Executive Officer Richard J. Mullin Claim As defined in Section 8.3(A) of the Purchase Agreement. Claimant As defined in Section 8.3 of the Purchase Agreement. Closing As defined in Section 6.1 of the Purchase Agreement. Closing Date As defined in Section 6.2 of the Purchase Agreement. Closing Date Balance Sheet As defined in Section 2.3(B) of the Purchase Agreement. Closing Net Worth As defined in Section 2.3(F) of the Purchase Agreement. Company Wells Electronics, Inc. Company Subsidiaries As defined in Section 3.2(B) of the Purchase Agreement. - 1 - APPENDIX A DOCUMENTS TO BE DELIVERED BY SELLER AT CLOSING (continued) Default An occurrence which constitutes a breach or default under a contract, order, or other commitment, after the expiration of any grace period provided without cure. Defending Party As defined in Section 8.3(B) of the Purchase Agreement. Draft Closing Date Balance As defined in Section 2.3 of the Sheet Purchase Agreement. Encumbrance Any encumbrance or lien, including, without limitation, any mortgage, judgment lien, materialman's lien, mechanic's lien, security interest, encroachment, easement, or other restriction, in each case having an adverse effect on possession, use, or enjoyment of the thing or right so encumbered. Environmental, Health and All applicable federal, state, Safety Laws local and foreign statutes, regulations, By-laws rules and ordinances, judicial and administrative orders, contractual obligations and common laws concerning human health and safety, or pollution or protection of the environment, including without limitation all those relating to (a) personal injury or property damage arising from actual, alleged or potential environmental contamination, or (b) the presence, use, production, generation, handling, transportation, treatment, storage, disposal, distribution, labeling, testing, processing, discharge, release, threatened release, control, or cleanup of any Hazardous Materials each as amended and as in effect as of the date hereof. Guarantor Siebe plc Hart-Scott-Rodino Act The Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations thereunder, as amended. - 2 - APPENDIX A DOCUMENTS TO BE DELIVERED BY SELLER AT CLOSING (continued) Hazardous Materials Any material or condition defined as "hazardous" under an Environmental, Health and Safety Law, including without limitation, the following: (1) Asbestos; (2) "[H]azardous substances," "pollutants" or Comprehensive Environmental Response, Compensation and Liability Act; (3) "[H]"azardous air pollutants" under Section 112(b) of the Clean Air Act; (4) "[I]mminently hazardous chemical substances" under Section 7 of the Toxic Substances Control Act; and (5) "[H]"azardous waste" under Section 1004(5) of the Solid Waste Disposal Act or under Section 6003(5) of the Resource Recovery and Conservation Act. Indemnitor As defined in Section 8.3 of the Purchase Agreement. Intellectual Property Rights consisting of, conferred by, or otherwise relating to - (1) Patents and patent applications (including all renewals, extensions, or modifications thereof); (2) Trade secrets, including without limitation, know-how, inventions, computerized data and information, computer programs, business records, files and data, discoveries, formulate, production outlines, product designs, mask works, manufacturing information, processes and techniques, testing and quality control processes and techniques, drawings and customer lists; - 3 - APPENDIX A DOCUMENTS TO BE DELIVERED BY SELLER AT CLOSING (continued) (3) Trademarks, service marks, and applications therefor; (4) Copyrights; and (5) Trade names. Knowledge Means actual knowledge, without independent investigation. Material Event Any event, condition, circumstance, or occurrence which has had a material and adverse effect on the Company and the company Subsidiaries, taken as a whole. Morgan Stanley Morgan Stanley & Co., Incorporated Neutral As defined in Section 7.4(C)(2) of the Purchase Agreement. Owns or Ownership Such ownership as confers upon the party or person having a good and marketable title to and control over the thing or right owned, free and clear of any and all Encumbrances except Permitted encumbrances. Prime Rate The per annum rate of interest published as such from time to time in the Money Rates column of The Wall Street Journal (Eastern Edition). For all purposes of this Purchase Agreement, interest at the Prime Rate shall be calculated on the basis of the actual number of days elapsed in the relevant period over a year of 365 or 366 days, as the case may be. Products As defined in Recital A to the Purchase Agreement. Purchase Price As defined in Section 2.2 of the Purchase Agreement. Purchase Agreement As defined in the Preamble to the Purchase Agreement. Seller As defined in the Preamble to the Purchase Agreement. - 4 - APPENDIX A DOCUMENTS TO BE DELIVERED BY SELLER AT CLOSING (continued) Shares As defined in Recital B to the Purchase Agreement. U.K. GAAP United Kingdom generally accepted accounting principles as in effect on the date hereof. U.S. GAAP United States generally accepted accounting principles as in effect on the date hereof. Wells Japan As defined in Section 3.2(A) of the Purchase Agreement. Wells Singapore As defined in Section 3.2(A) of the Purchase Agreement. - 5 - APPENDIX B DOCUMENTS TO BE DELIVERED BY SELLER AT THE CLOSING 1. Certificate as to the good standing of Seller (as of the date not earlier than ten (10) days prior to the Closing) in the State of Delaware. 2. A certificate signed by the Secretary or an Assistant Secretary of Seller verifying the authorization of the execution, delivery, and performance of the Purchase Agreement by Seller and the consummation of the transactions contemplated by the Purchase Agreement. 3. A certificate signed by the Secretary or an Assistant Secretary of Seller dated as of the Closing Date as to the incumbency and signatures of officers of Seller. 4. A certificate signed by the President or any Vice President and the Secretary or any Assistant Secretary of Seller dated as of the Closing Date confirming that all of the representations and warranties of Seller contained in Sections 3.1 and 3.2 of the Purchase Agreement were true, accurate, and complete as of the date of the Purchase Agreement and as of the Closing Date (as if such representations and warranties had been made anew as of the Closing except with respect to the effect of transactions contemplated or permitted by the Purchase Agreement). 5. A certificate signed by the President or any Vice President and the Secretary or any Assistant Secretary of the Company dated as of the Closing Date confirming that all of the representations and warranties of the Company contained in Sections 3.1 and 3.2 of the Purchase Agreement were true, accurate, and complete as of the date of the Purchase Agreement and as of the Closing Date (as if such representations and warranties had been made anew as of the Closing except with respect to the effect of transactions contemplated or permitted by this Purchase Agreement and with respect to the effect of the passage of time and ordinary course conduct of business upon dated material in the Disclosure Schedules) (but only to the extent that such effect upon the Schedules do not constitute a material adverse effect on the Company or the Company Subsidiaries)). 6. Certificate as to the good standing of the Company (as of the date not earlier than ten (10) days prior to the Closing Date) in the State of Indiana. 7. Evidence of Section 338 election. 8. Opinion of counsel. 9. Resignations. 10. Section 7.5 financial statements, if available - 1 - APPENDIX B DOCUMENTS TO BE DELIVERED BY SELLER AT THE CLOSING (continued) 11. Evidence of Section 4.10 Agreements, if obtained. - 2 - APPENDIX C DOCUMENTS TO BE DELIVERED BY BUYER AT THE CLOSING 1. Certificate as to the good standing of Buyer (as of the date not earlier than ten (10) days prior to the Closing) in the Commonwealth of Massachusetts. 2. A certificate signed by the Clerk or an Assistant Clerk of Buyer verifying the authorization of the execution, delivery, and performance of the Purchase Agreement by Buyer and the consummation of the transactions contemplated by the Purchase Agreement. 3. A certificate signed by the Clerk or an Assistant Clerk of Buyer dated as of the Closing Date as to the incumbency and signatures of officers of Buyer. 4. A certificate signed by the President or any Vice President and the Clerk or any Assistant Clerk of Buyer dated as of the Closing Date confirming that all of the representations and warranties of Buyer contained in Section 3.3 of the Purchase Agreement were true, accurate, and complete as of the date of the Purchase Agreement and as of the Closing Date (as if such representations and warranties had been made anew as of the Closing Date except with respect to the effect of transactions contemplated or permitted by the Purchase Agreement). - 1 - TABLE OF CONTENTS PREAMBLE. . . . . . . . .. . . . . . . . . . . . . . . . . . .1 RECITALS. . . . . . . . . . . . . . . . . . . . . . . . . . . 1 TERMS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . 1 ARTICLE I GENERAL PROVISIONS. . . . . . . . . . . . . . . . .1 1.1 Definitions. . . . . . . . . . . . . . . . . . . . .1 1.2 Other Definitions And Meanings; Interpretation. . . 1 ARTICLE II PURCHASE AND SALE. . . . . . . . . . . . . . . . .2 2.1 Transaction. . . . . . . . . . . . . . . . . . . . .2 2.2 Purchase Price. . . . . . . . . . . . . . . . . . . 2 2.3 Adjustment. . . . . . . . . . . . . . . . . . . . . 2 (A) Preparation of Closing Balance Sheet. . . .. 2 (B) Informal Negotiations; Dispute Resolution. . 2 (C) Fees and Expenses. . . . . . . . . . . . . . 3 (D) Access. . . . . . . . . . . . . . . . . . . .3 (E) Base-Line Net Worth. . . . . . . . . . . . . 3 (F) Determination of Closing Net Worth. . . . . .3 (G) Amount of the Adjustment. . . . . . . . . . .4 2.4 Payment of Purchase Price. . . . . . . . . . . . . .4 (A) Payment at Closing. . . . . . . . . . . . . .4 (B) Payment of the Adjustment. . . . . . . . . . 5 2.5 Refund of the Adjustment. . . . . . . . . . . . . . 5 2.6 Method of Payment. . . . . . . . . . . . . . . . . .5 (A) Directed Payments. . . . . . . . . . . . . . 5 (B) Other Payments. . . . . . . . . . . . . . . .5 ARTICLE III REPRESENTATIONS AND WARRANTIES. . . . . . . . . .5 3.1 Seller's General Representations and Warranties. . .5 (A) Organization and Existence. . . . . . . . . .5 (B) Power and Authority. . . . . . . . . . . . . 5 (C) No Conflict. . . . . . . . . . . . . . . . . 6 (D) Capitalization. . . . . . . . . . . . . . . .6 - i - (E) Brokers. . . . . . . . . . . . . . . . . . . 6 3.2 Representations and Warranties Concerning the Company. . . . . . . . . . . . . . . . . . . .6 (A) Incorporation, Subsidiaries, Branches. . . . 7 (B) Financial Statements. . . . . . . . . . . . .7 (C) Undisclosed Liabilities. . . . . . . . . . . 8 (D) Taxes. . . . . . . . . . . . . . . . . . . . 8 (E) Real Property. . . . . . . . . . . . . . . . 8 (F) Tangible Personal Property. . . . . . . . . 9 (G) Intellectual Property. . . . . . . . . . . . 9 (H) Litigation. . . . . . . . . . . . . . . . . 10 (I) Contracts. . . . . . . . . . . . . . . . . .10 (J) Employees and Employee Benefits. . . . . . .11 (K) Compliance With Environmental, Health and Safety Laws. . . . . . . . . . . . . .12 (L) Compliance With Other Laws. . . . . . . . . 13 (M) Absence of Certain Changes or Events. . . . 14 (N) Insurance. . . . . . . . . . . . . . . . . .14 3.3 Disclaimer. . . . . . . . . . . . . . . . . . . . .15 3.4 Buyer's Representations and Warranties. . . . . . .15 (A) Organization and Existence. . . . . . . . . 15 (B) Power and Authority. . . . . . . . . . . . .15 (C) No Conflict. . . . . . . . . . . . . . . . .15 (D) Brokers. . . . . . . . . . . . . . . . . . .15 (E) Buyer's Net Worth. . . . . . . . . . . . . .16 (F) Purchase for Investment. . . . . . . . . . .16 ARTICLE IV ACTIONS BEFORE CLOSING. . . . . . . . . . . . . .16 4.1 General. . . . . . . . . . . . . . . . . . . . . . 16 4.2 Access to Records. . . . . . . . . . . . . . . . . 16 4.3 Interim Conduct of the Business. . . . . . . . . . 16 4.4 Buyer's Approval of Certain Transactions. . . . . .17 4.5 Consents to Assignment. . . . . . . . . . . . . . .18 4.6 Coordination of Public Announcements. . . . . . . .18 4.7 Hart-Scott-Rodino Notification. . . . . . . . . . .18 4.8 Other Regulatory Approvals. . . . . . . . . . . . .19 4.9 Section 338 Election by Seller. . . . . . . . . . .19 4.10 Employee Agreements. . . . . . . . . . . . . . . . 19 ARTICLE V CONDITIONS. . . . . . . . . . . . . . . . . . . . 19 5.1 Conditions to Buyer's Obligations. . . . . . . . . 19 - ii - 5.2 Conditions to Seller's Obligations. . . . . . . . .21 ARTICLE VI CLOSING. . . . . . . . . . . . . . . . . . . . . 22 6.1 The Closing. . . . . . . . . . . . . . . . . . . . 22 6.2 Time, Date, and Place Of Closing. . . . . . . . . .22 6.3 Buyer's Obligations. . . . . . . . . . . . . . . . 22 6.4 Seller's Obligations. . . . . . . . . . . . . . . .22 ARTICLE VII ACTIONS AFTER CLOSING. . . . . . . . . . . . . .22 7.1 Further Conveyances. . . . . . . . . . . . . . . . 22 7.2 Access to Former Business Records. . . . . . . . . 23 7.3 Access to Former Employees. . . . . . . . . . . . .23 7.4 Dispute Resolution. . . . . . . . . . . . . . . . .23 (A) Dispute Notice. . . . . . . . . . . . . . . 23 (B) Informal Negotiations. . . . . . . . . . . .23 (C) Dispute Resolution Proceedings. . . . . . . 23 (1) Designation of Representatives. . . .24 (2) Selection of Neutral. . . . . . . . .24 (3) Procedures and Process. . . . . . . .24 (4) Decision. . . . . . . . . . . . . . .25 (D) Equitable Relief. . . . . . . . . . . . . . 25 (E) Binding Effect. . . . . . . . . . . . . . . 25 7.5 Financial Statements. . . . . . . . . . . . . . . .25 7.6 Tax Returns. . . . . . . . . . . . . . . . . . . . 26 ARTICLE VIII INDEMNIFICATION. . . . . . . . . . . . . . . . 27 8.1 Indemnification of Seller. . . . . . . . . . . . . 27 8.2 Indemnification of Buyer. . . . . . . . . . . . . .27 8.3 Claims. . . . . . . . . . . . . . . . . . . . . . .27 (A) Notice. . . . . . . . . . . . . . . . . . . 27 (B) Responsibility for Defense. . . . . . . . . 28 (C) Right to Participate. . . . . . . . . . . . 28 (D) Settlement. . . . . . . . . . . . . . . . . 28 8.4 Disputed Responsibility. . . . . . . . . . . . . . 29 8.5 Dollar Limitation on Indemnification. . . . . . . .29 8.6 Time Limitations on Indemnification. . . . . . . . 29 8.7 Exclusive Remedy. . . . . . . . . . . . . . . . . .30 ARTICLE IX AMENDMENT, WAIVER, TERMINATION, AND CANCELLATION. . . . . . . . . . . . . . . . . . . . . . 30 - iii - 9.1 Amendment. . . . . . . . . . . . . . . . . . . . . 30 9.2 Waiver. . . . . . . . . . . . . . . . . . . . . . 30 9.3 Termination. . . . . . . . . . . . . . . . . . . . 30 ARTICLE X MISCELLANEOUS. . . . . . . . . . . . . . . . . . 31 10.1 Cooperation. . . . . . . . . . . . . . . . . . . . 31 10.2 Severability. . . . . . . . . . . . . . . . . . . .31 10.3 Costs and Expenses. . . . . . . . . . . . . . . . .31 10.4 Notices. . . . . . . . . . . . . . . . . . . . . . 31 10.5 Assignment. . . . . . . . . . . . . . . . . . . . .33 10.6 No Third Parties. . . . . . . . . . . . . . . . . .33 10.7 Incorporation By Reference. . . . . . . . . . . . .33 10.8 Governing Law. . . . . . . . . . . . . . . . . . . 33 10.9 Counterparts. . . . . . . . . . . . . . . . . . . .33 10.10 Complete Agreement. . . . . . . . . . . . . . . . .33 10.11 Post-Closing Covenants. . . . . . . . . . . . . . .33 - iv - EX-2 3 EXHIBIT 2.2 Undertaking to Furnish Copies of Omitted Schedules to Share Purchase Agreement dated as of November 17, 1997. PCD Inc. (the "Registrant") is not filing as exhibits to its Current Report on Form 8-K dated January 9, 1998, copies of the schedules to the Share Purchase Agreement dated as of November 17, 1997 among UL America, Inc., Wells Electronics, Inc. and the Registrant, which Agreement is filed as Exhibit 2.1 thereto. The Registrant undertakes to furnish to the Securities and Exchange Commission, upon request, copies of such omitted schedules. Dated: January 9, 1998 PCD INC. (Registrant) By: /s/ John L. Dwight, Jr. ------------------------- John L. Dwight, Jr. Chairman of the Board, President and Chief Executive Officer EX-3 4 EXHIBIT 10.1 LOAN AGREEMENT BY AND AMONG PCD INC. AND FLEET NATIONAL BANK, AS COLLATERAL AGENT, ADMINISTRATIVE AGENT AND A LENDER AND THE OTHER FINANCIAL INSTITUTIONS NOW OR HEREAFTER PARTIES HERETO $30,000,000 SECURED TERM LOAN A AND $40,000,000 SECURED TERM LOAN B AND $20,000,000 SECURED REVOLVING CREDIT LOAN DECEMBER 26, 1997 INDEX TO LOAN AGREEMENT PAGE ARTICLE 1. DEFINITIONS AND ACCOUNTING AND OTHER TERMS . . . . . . . . . . . 1 Section 1.1. Certain Defined Terms. . . . . . . . . . . . . . . . . . . . . 1 Section 1.2. Accounting Terms. . . . . . . . . . . . . . . . . . . . . 17 Section 1.3. Other Terms. . . . . . . . . . . . . . . . . . . . . . . .17 ARTICLE 2. AMOUNT AND TERMS OF THE LOANS . . . . . . . . . . . . . . . . . .17 Section 2.1. The Loans. . . . . . . . . . . . . . . . . . . . . . . . .17 Section 2.1.0. The Revolving Credit Loans . . . . . . . . . . . . 17 Section 2.1.1. Term Loan A . . . . . . . . . . . . . . . . . . . .19 Section 2.1.2. Term Loan B . . . . . . . . . . . . . . . . . . . .20 Section 2.2. Interest and Fees on the Loans. . . . . . . . . . . . . . 20 Section 2.2.1. Interest. . . . . . . . . . . . . . . . . . . . . 20 Section 2.2.2. Fees . . . . . . . . . . . . . . . . . . . . . . . 21 Section 2.2.3. Increased Costs - Capital . . . . . . . . . . . . .22 Section 2.3. Notations . . . . . . . . . . . . . . . . . . . . . . . . 23 Section 2.4. Computation of Interest . . . . . . . . . . . . . . . . . 24 Section 2.5. Time of Payments and Prepayments in Immediately Available Funds . . . . . . . . . . . . . . . . . . . . . . . . . . .24 Section 2.5.1. Time . . . . . . . . . . . . . . . . . . . . . . . 24 Section 2.5.2. Setoff, etc . . . . . . . . . . . . . . . . . . . .25 Section 2.5.3. Unconditional Obligations and No Deductions . . . .25 Section 2.6. Prepayment and Certain Payments . . . . . . . . . . . . .28 Section 2.6.1. Mandatory Payments . . . . . . . . . . . . . . . .28 Section 2.6.2. Voluntary Prepayments . . . . . . . . . . . . . . 29 Section 2.6.3. Prepayment of Libor Loans . . . . . . . . . . . . 30 Section 2.6.4. Permanent Reduction of Commitment . . . . . . . ..30 Section 2.7. Payment on Non-Business Days . . . . . . . . . . . . . . .30 Section 2.8. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . 30 Section 2.9. Special Libor Loan Provisions . . . . . . . . . . . . . . 30 Section 2.9.1. Requests . . . . . . . . . . . . . . . . . . . . . 30 Section 2.9.2. Libor Loans Unavailable . . . . . . . . . . . . . .31 Section 2.9.3. Libor Lending Unlawful . . . . . . . . . . . . . . 32 Section 2.9.4. Additional Costs on Libor Loans . . . . . . . . . .32 Section 2.9.5. Libor Funding Losses . . . . . . . . . . . . . . . 33 Section 2.9.6. Banking Practices . . . . . . . . . . . . . . . . .34 Section 2.9.7. Borrower's Options on Unavailability or Increased Cost of Libor Loans . . . . . . . . . . . . . . . . . . . . . . 35 Section 2.9.8. Assumptions Concerning Funding of Libor Loans . . .35 Section 2.10. Interest Rate Protection . . . . . . . . . . . . . . . . 36 ARTICLE 3. CONDITIONS OF LENDING . . . . . . . . . . . . . . . . . . . . . .36 Section 3.1. Conditions Precedent to the Commitment and to all Loans . 36 Section 3.1.1. The Commitment and Initial Loans . . . . . . . . . 36 Section 3.1.2. The Commitment and the Loans . . . . . . . . . . . 40 ARTICLE 4. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . 41 Section 4.1. Representations and Warranties of the Borrower . . . . . .41 Section 4.1.1. Organization and Existence . . . . . . . . . . . . 41 Section 4.1.2. Authorization and Absence of Defaults . . . . . . .41 Section 4.1.3. Acquisition of Consents . . . . . . . . . . . . . .41 Section 4.1.4. Validity and Enforceability . . . . . . . . . . . .42 - i - Section 4.1.5. Financial Information . . . . . . . . . . . . . . .42 Section 4.1.6. No Litigation . . . . . . . . . . . . . . . . . . .43 Section 4.1.7. Regulation U . . . . . . . . . . . . . . . . . . . 43 Section 4.1.8. Absence of Adverse Agreements . . . . . . . . . . .43 Section 4.1.9. Taxes . . . . . . . . . . . . . . . . . . . . . . .43 Section 4.1.10. ERISA . . . . . . . . . . . . . . . . . . . . . . 44 Section 4.1.11. Ownership of Properties . . . . . . . . . . . . .44 Section 4.1.12. Accuracy of Representations and Warranties . . . .45 Section 4.1.13. No Investment Company . . . . . . . . . . . . . . 45 Section 4.1.14. Solvency, etc . . . . . . . . . . . . . . . . . . 45 Section 4.1.15. Approvals . . . . . . . . . . . . . . . . . . . . 46 Section 4.1.16. Ownership Interests . . . . . . . . . . . . . . . 46 Section 4.1.17. Licenses, Registrations, Compliance with Laws, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Section 4.1.18. Principal Place of Business; Books and Records . .46 Section 4.1.19. Subsidiaries . . . . . . . . . . . . . . . . . . .46 Section 4.1.20. Copyright . . . . . . . . . . . . . . . . . . . . 46 Section 4.1.21. Environmental Compliance . . . . . . . . . . . . .47 Section 4.1.22. Material Agreements, etc . . . . . . . . . . . . .47 Section 4.1.23. Patents, Trademarks and Other Property Rights . . 47 Section 4.1.24. Related Transaction Documents . . . . . . . . . . 48 Section 4.1.25. Material Adverse Effect . . . . . . . . . . . . . 48 ARTICLE 5. COVENANTS OF THE BORROWER . . . . . . . . . . . . . . . . . . . .48 Section 5.1. Affirmative Covenants of the Borrower Other than Reporting Requirements . . . . . . . . . . . . . . . . . . . . . . . 48 Section 5.1.1. Payment of Taxes, etc . . . . . . . . . . . . . . 48 Section 5.1.2. Maintenance of Insurance . . . . . . . . . . .. . .49 Section 5.1.3. Preservation of Existence, etc . . . . . . . .. . .50 Section 5.1.4. Compliance with Laws, etc . . . . . . . . . . . . 50 Section 5.1.5. Visitation Rights . . . . . . . . . . . . . . . . 50 Section 5.1.6. Keeping of Records and Books of Account . . . . . 50 Section 5.1.7. Maintenance of Properties, etc . . . . . . . .. . .50 Section 5.1.8. Post-Closing Items . . . . . . . . . . . . .. . .50 Section 5.1.9. Other Documents, etc . . . . . . . . . . . . .. . .50 Section 5.1.10. Minimum Fixed Charge Coverage Ratio . . . . .. . .51 Section 5.1.11. Minimum Quick Ratio . . . . . . . . . . . . .. . .51 Section 5.1.12. Maximum Ratio of Total Senior Debt to EBITDA . . 52 Section 5.1.12A. Maximum Ratio of Total Indebtedness for Borrowed Money to EBITDA . . . . . . . . . . . . . . . . .. . .52 Section 5.1.13. Officer's Certificates and Requests . . . . .. . .53 Section 5.1.14. Depository . . . . . . . . . . . . . . . . . . . 53 Section 5.1.15. Chief Executive Officer . . . . . . . . . . .. . .53 Section 5.1.16. Notice of Purchase of Real Estate and Leases . . 53 Section 5.1.17. Additional Assurances . . . . . . . . . . . .. . .54 Section 5.1.18. Appraisals . . . . . . . . . . . . . . . . . . . 54 Section 5.1.19. Environmental Compliance . . . . . . . . . . . . 54 Section 5.1.20. Remediation . . . . . . . . . . . . . . . . .. . .54 Section 5.1.21. Site Assessments . . . . . . . . . . . . . . . . 54 Section 5.1.22. Indemnity . . . . . . . . . . . . . . . . . .. . .55 Section 5.1.23. Trademarks, Copyrights, etc . . . . . . . . .. . .55 Section 5.1.24. Minimum Interest Coverage Ratio . . . . . . .. . .55 Section 5.2. Negative Covenants of the Borrower . . . . . . .. . .56 Section 5.2.1. Liens, etc . . . . . . . . . . . . . . . . . .. . .56 Section 5.2.2. Assumptions, Guaranties, etc. of Indebtedness of Other Persons . . . . . . . . . . . . . . . . . . . . . . . . .57 Section 5.2.3. Acquisitions, Dissolution, etc . . . . . . . . . .58 Section 5.2.4. Change in Nature of Business . . . . . . . . . . .58 - ii - Section 5.2.5. Ownership . . . . . . . . . . . . . . . . . . . . 56 Section 5.2.6. Sale and Leaseback . . . . . . . . . . . . . . . . 57 Section 5.2.7. Sale of Accounts, etc . . . . . . . . . . . . . . .57 Section 5.2.8. Indebtedness . . . . . . . . . . . . . . . . . . . 57 Section 5.2.9. Other Agreements . . . . . . . . . . . . . . . . . 58 Section 5.2.10. Prepayments of Indebtedness . . . . . . . . . . . 58 Section 5.2.11. Dividends, Payments and Distributions . . . . . . 58 Section 5.2.12. Investments in or to Other Persons . . . . . . . .58 Section 5.2.13. Transactions with Affiliates . . . . . . . . . . .59 Section 5.2.14. Change of Fiscal Year, Accounting Policies . . . .59 Section 5.2.15. Subordination of Claims . . . . . . . . . . . . 59 Section 5.2.16. Compliance with ERISA . . . . . . . . . . . . . . 59 Section 5.2.17. Capital Expenditures . . . . . . . . . . . . . . .59 Section 5.2.18. Hazardous Waste . . . . . . . . . . . . . . . . . 60 Section 5.2.19 Other Restrictions on Liens . . . . . . . . . . . 60 Section 5.2.20 Limitation on Creation of Subsidiaries, etc. . . . 60 Section 5.3. Reporting Requirements . . . . . . . . . . . . . . . . . .60 ARTICLE 6. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . .62 Section 6.1. Events of Default . . . . . . . . . . . . . . . . . . . .62 ARTICLE 7. REMEDIES OF LENDERS . . . . . . . . . . . . . . . . . . . . . . .64 ARTICLE 8. AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65 Section 8.1. Appointment . . . . . . . . . . . . . . . . . . . . . . . 65 Section 8.2. Powers; General Immunity . . . . . . . . . . . . . . . . .65 Section 8.2.1. Duties Specified . . . . . . . . . . . . . . . . . 65 Section 8.2.2. No Responsibility For Certain Matters . . . . . . .66 Section 8.2.3. Exculpatory Provisions . . . . . . . . . . . . . . 66 Section 8.2.4. Agent Entitled to Act as Lender . . . . . . . . . .67 Section 8.3. Representations and Warranties; No Responsibility for Appraisal of Creditworthiness . . . . . . . . . . . . . . . . . . . .67 Section 8.4. Right to Indemnity . . . . . . . . . . . . . . . . . 67 Section 8.5. Payee of Note Treated as Owner . . . . . . . . . . . 67 Section 8.6. Resignation by Agent . . . . . . . . . . . . . . . . 68 Section 8.7. Successor Agent . . . . . . . . . . . . . . . . . . .68 ARTICLE 9. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . .69 Section 9.1. Consent to Jurisdiction and Service of Process . . . . . .69 Section 9.2. Rights and Remedies Cumulative . . . . . . . . . . . . . .69 Section 9.3. Delay or Omission not Waiver . . . . . . . . . . . . . . .70 Section 9.4. Waiver of Stay or Extension Laws . . . . . . . . . . . . .70 Section 9.5. Amendments, etc . . . . . . . . . . . . . . . . . . . . . 70 Section 9.6. Addresses for Notices, etc . . . . . . . . . . . . . . . .71 Section 9.7. Costs, Expenses and Taxes . . . . . . . . . . . . . . . . 72 Section 9.8. Participations . . . . . . . . . . . . . . . . . . . . . .72 Section 9.9. Binding Effect; Assignment . . . . . . . . . . . . . . . .72 Section 9.10. Actual Knowledge . . . . . . . . . . . . . . . . . . . . 73 Section 9.11. Substitutions and Assignments . . . . . . . . . . . . . .73 Section 9.12. Payments Pro Rata . . . . . . . . . . . . . . . . . . . .75 Section 9.13. Indemnification . . . . . . . . . . . . . . . . . . . . .75 Section 9.14. Governing Law . . . . . . . . . . . . . . . . . . . . . .77 Section 9.15. Severability of Provisions . . . . . . . . . . . . . . . 77 Section 9.16. Headings . . . . . . . . . . . . . . . . . . . . . . . . 77 Section 9.17. Counterparts . . . . . . . . . . . . . . . . . . . . . . 77 - iii - SCHEDULE OF EXHIBITS EXHIBIT 1.1 - EQUITY INVESTMENTS, OWNERSHIP INTERESTS AND SUBSIDIARIES EXHIBIT 1.2 - RELATED TRANSACTION DOCUMENTS EXHIBIT 1.4 - FORM OF INTEREST RATE ELECTION EXHIBIT 1.5 - FORM OF REVOLVING CREDIT NOTE EXHIBIT 1.6 - FORM OF TERM NOTE - TERM NOTE A EXHIBIT 1.7 - FORM OF TERM NOTE - TERM NOTE B EXHIBIT 1.8 - PERMITTED ENCUMBRANCES EXHIBIT 1.9 - PRO RATA SHARES EXHIBIT 1.10 - FORM OF REQUEST EXHIBIT 1.12 - PROJECTIONS EXHIBIT 3.1.1.8 - PERMITTED INDEBTEDNESS AND CAPITALIZED LEASES EXHIBIT 3.1.1.10 - FORM OF COMPLIANCE CERTIFICATE EXHIBIT 4.1.1 - FOREIGN QUALIFICATIONS EXHIBIT 4.1.2 - AUTHORIZATIONS EXHIBIT 4.1.3 - CONSENTS EXHIBIT 4.1.6 - LITIGATION EXHIBIT 4.1.8 - ADVERSE AGREEMENTS EXHIBIT 4.1.9 - TAXES EXHIBIT 4.1.11 - REAL PROPERTY EXHIBIT 4.1.17 - GOVERNMENTAL PERMITS EXHIBIT 4.1.20 - COPYRIGHTS EXHIBIT 4.1.21 - HAZARDOUS WASTE EXHIBIT 4.1.22 - MATERIAL CONTRACTS EXHIBIT 4.1.23 - INTELLECTUAL PROPERTY EXHIBIT 5.2.2 - GUARANTIES EXHIBIT 5.2.13 - TRANSACTIONS WITH AFFILIATES EXHIBIT 9.11.1 - FORM OF SUBSTITUTION AGREEMENT - iv - LOAN AGREEMENT PCD INC., a Massachusetts corporation with a principal place of business at 2 Technology Drive, Peabody, Massachusetts 01960 (the "Borrower"), FLEET NATIONAL BANK, a national banking association organized under the laws of the United States and having an office at One Federal Street, Boston, Massachusetts 02110 (hereinafter sometimes the "Agent" as collateral agent and administrative agent for itself, sometimes "Fleet" and sometimes a "Lender") and each of the other Lenders who now and/or hereafter become parties to this Agreement pursuant to the terms of SECTION 9.11 hereof, and such Lenders, Fleet State Street Bank and Trust Company, a Massachusetts trust company, having an office at 225 Franklin Street, Boston, Massachusetts 02110 (hereinafter "State Street" and sometimes a "Lender"), Imperial Bank, a California bank corporation, having an office at 2015 Manhattan Beach Boulevard, Redondo Beach, California 90278 (hereinafter "Imperial" and sometimes a "Lender", and Eastern Bank, a Massachusetts state-chartered savings bank, having an address at 53 State Street, 13th Floor, Boston, Massachusetts 02109 (hereinafter "Eastern" and sometimes a "Lender") as Lenders, hereby agree as follows: ARTICLE 1. DEFINITIONS AND ACCOUNTING AND OTHER TERMS SECTION 1.1. CERTAIN DEFINED TERMS. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "ADJUSTED LIBOR RATE" means, with respect to any Libor Loan to be made by the Lenders for the Interest Period applicable to such Libor Loan, the rate per annum (rounded upward, if necessary, to the nearest 1/32 of one percent) as determined on the basis of the offered rates for deposits in Dollars, for a period of time comparable to such Libor Loan which appears on the Telerate page 3750 as of 11:00 a.m. London time on the day that is two Business Days preceding the first day of such Libor Loan; provided, however, if the rate described above does not appear on the Telerate System on any applicable Interest Adjustment Date, the Adjusted Libor Rate shall be the average of four (4) such rates (rounded upwards as described above, if necessary) for deposits in Dollars for a period substantially equal to the Interest Period on the Reuters Page "LIBO" (or such other page as may replace the LIBO Page on that service for the purpose of displaying such rates), as of 11:00 a.m. (London Time), on the day that is two Business Days prior to the beginning of such Interest Period. If both the Telerate and Reuters system are unavailable, then the rate for that date will be determined on the basis of the offered rates for deposits in Dollars for a period of time comparable to such Libor Loan Interest Period which are offered to each Reference Lender by four first-class banks in the London interbank market at approximately 11:00 a.m. London time, on the day that is two Business Days preceding the first day of such Libor Loan as selected by the Lender. The principal London office of each of the four first-class London banks will be - 1 - requested to provide a quotation of its Dollar deposit offered rate. If at least two such quotations are provided, the rate for that date will be the arithmetic mean of the quotations. If fewer than two quotations are provided as requested, the rate for that date will be determined on the basis of the rates quoted for loans in Dollars to leading European banks for a period of time comparable to such Libor Loan Interest Period offered by major banks in New York City at approximately 11:00 a.m. New York City time, on the day that its two Business Days preceding the first day of such Libor Loan. In the event that the Reference Lenders are unable to obtain any such quotation as provided above, it will be deemed that the Adjusted Libor Rate pursuant to a Libor Loan cannot be determined. In the event that the Board of Governors of the Federal Reserve System shall impose a "Reserve Percentage" with respect to Libor deposits of any Reference Lender then, to the extent that the rate determined in the foregoing paragraph does not include a provision for such Reserve Percentage, for any period during which such Reserve Percentage shall apply, the Adjusted Libor Rate shall be equal to the amount determined above divided by an amount equal to 1 minus the Reserve Percentage. If any Reference Lender fails to provide its offered quotation to the Agent, the Adjusted Libor Rate shall be determined on the basis of the offered quotation of the other Reference Lender. The Adjusted Libor Rate shall be adjusted automatically on and as of the effective date of any change in the Libor Rate Reserve Percentage. "ADVANCE" and "ADVANCES" means the funding by any Lender of all or a portion of the Loans in accordance with this Agreement. "AFFILIATE" means singly and collectively, any Person (other than a Subsidiary) which, directly or indirectly, is in control of, is controlled by, or is under common control with, the Borrower. For purposes of this definition, a Person shall be deemed to be "controlled by" the Borrower if the Borrower possesses, directly or indirectly, power either to (i) vote 10% or more of the securities having ordinary voting power for the election of directors of such Person or (ii) direct or cause the direction of the management and policies of such Person whether by contract or otherwise, and the legal representative, successor or assign of any such Person. "AGENT" means Fleet or any other Person which is at the time in question serving as the collateral agent and the administrative agent under the terms of Article 8 hereof and the other Financing Documents. "AGREEMENT" means this loan agreement, as the same may from time to time be amended. "A.M." means a time from and including 12 o'clock midnight to and excluding 12 o'clock noon on any Business Day using Eastern Standard (Daylight Savings) time. "APPLICABLE MARGIN" means, with respect to the Revolving Credit Loan and Term Loan A only, for each Libor Loan, two and three quarters percent (2.75%) per annum and for each Prime Rate Loan, one and one half percent (1.50%) per annum, provided, however, that if, at any time on or after the receipt by the Agent of the quarterly financial statements for the Borrower's March 31, 1998 fiscal quarter and each subsequent Borrower fiscal - 2 - quarter provided to the Agent by the Borrower pursuant to SECTION 5.3.3 hereof, the ratio of (a) total Senior Debt on a consolidated basis as of the last day of the most recently ended fiscal quarter of the Borrower to (b) EBITDA, is within the ratios set forth below and if and so long as no Event of Default or Default exists, the Applicable Margin shall, subject to the last sentence of this definition, equal the rate set forth below opposite the applicable ratio:
Applicable Margin Applicable Margin Ratio Libor Loan Prime Rate Loan ----- ---------- --------------- Less than 3.00:1 and greater 2.50% 1.25% than or equal to 2.75:1 Less than 2.75:1 and greater 2.25% 1.00% than or equal to 2.50:1 Less than 2.50:1 and greater 2.00% 0.75% than or equal to 2.00:1 Less than 2.00:1 and greater 1.75% 0.50% than or equal to 1.50:1 Less than 1.50:1 1.50% 0.25%
and, with respect to Term Loan B only, for each Libor Loan, three and one quarter percent (3.25%) per annum, and for each Prime Rate Loan, two percent (2.00%) per annum, provided, however, that if, at any time on or after the receipt by the Agent of the quarterly financial statements for the Borrower's March 31, 1998 fiscal quarter and each subsequent Borrower fiscal quarter provided to the Agent by the Borrower pursuant to SECTION 5.3.3 hereof, the ratio of (a) total Senior Debt on a consolidated basis as of the last day of the most recently ended fiscal quarter of the Borrower to (b) EBITDA, is within the ratios set forth below and if and so long as no Event of Default or Default exists, the Applicable Margin shall, subject to the last sentence of this definition, equal the rate set forth below opposite the applicable ratio:
Applicable Margin Applicable Margin Ratio Libor Loan Prime Rate Loan ----- ---------- --------------- Less than 3.00:1 and greater 3.00% 1.75% than or equal to 2.75:1 Less than 2.75:1 and greater 2.75% 1.50% than or equal to 2.50:1 Less than 2.50:1 and greater 2.50% 1.25% than or equal to 2.00:1 - 3 - Less than 2.00:1 and greater 2.25% 1.00% than or equal to 1.50:1 Less than 1.50:1 2.00% 0.75%
Any change in the Applicable Margin required pursuant to the foregoing shall become effective on the fifth Business Day after the Agent receives the Borrower's financial statement for the Borrower's fiscal quarter in question and a request for a rate reduction if applicable; provided, however, that each of the above-referenced interest rates shall remain in effect only so long as Borrower qualifies therefor and provided further, however, that interest rate reductions shall become final only on the basis of Borrower's annual audited financial statements and in the event that such annual audited financial statements establish that the Borrower was not entitled to a rate reduction which was previously granted, the Borrower shall, upon written demand by the Agent, repay to the Agent for the account of each Lender an amount equal to the excess of interest at the rate which should have been charged based on such annual audited financial statements and the rate actually charged on the basis of Borrower's quarterly financial statement(s) (provided that in the event of a dispute as to the appropriate fiscal quarter as to which any adjustment should be allocated, the decision of the independent accountants of the Borrower shall be made in accordance with GAAP and shall be binding upon the Agent, the Lenders and the Borrower absent manifest error); and provided further, however, that in the event that Borrower fails to provide any financial statement on a timely basis in accordance with SECTION 5.3.3, any interest rate increase payable as a result thereof shall be retroactively effective to the date on which the financial statement in question should have been received by the Agent in accordance with SECTION 5.3.3, and the Borrower shall pay any amount due as a result thereof upon written demand from the Agent. The Agent shall send the Borrower written acknowledgment of each change in the Applicable Margin in accordance with the Agent's customary procedures as in effect from time to time, but the failure to send such acknowledgment shall have no effect on the effectiveness or applicability of the foregoing provisions of this definition or Borrower's obligations with respect to payment and calculation of interest on Libor Loans. "AUTHORIZED REPRESENTATIVE" means such senior personnel of the Borrower as shall be duly authorized and designated in writing by the Borrower to execute documents, instruments and agreements on its behalf and to perform the functions of Authorized Representative under any of the Financing Documents. "BORROWED MONEY" means any obligation to repay funded Indebtedness, any Indebtedness evidenced by notes, bonds, debentures, guaranties or similar obligations including without limitation the Loans and any obligation to pay money under a conditional sale or other title retention agreement, the net aggregate rentals payable under any Capitalized Lease Obligation, any reimbursement obligation for any letter of credit and any obligations in respect of banker's and other acceptances or similar obligations. "BORROWER" has the meaning assigned in the first paragraph of this Agreement. "BUDGET" has the meaning assigned to such term in SECTION 5.3.7. - 4 - "BUSINESS CONDITION" means the financial condition, business, property, assets, liabilities and/or operations of a Person. "BUSINESS DAY" means (i) for all purposes other than as covered by clause (ii) below, any day on which banks in Boston, Massachusetts or New York, New York are not authorized or required by applicable law to close; and (ii) with respect to all notices and determinations in connection with, and payments of principal and interest on, Libor Loans, any day which is a Business Day described in clause (i) and which is also a day for trading by and between banks in Dollar deposits in the London interbank market. "CAPITAL EXPENDITURES" means all expenditures paid or incurred by the Borrower or any Subsidiary in respect of (i) the acquisition, construction, improvement or replacement of land, buildings, machinery, equipment, any other fixed assets or leaseholds and (ii) to the extent related to and not included in (i) above, materials, contract labor and direct labor, which expenditures have been or should be, in accordance with GAAP, capitalized on the books of the Borrower or such Subsidiary. Where a fixed asset is acquired by a lease which is required to be capitalized pursuant to Statement of Financial Accounting Standards number 13 or any successor thereto, the amount required to be capitalized in accordance therewith shall be considered to be an expenditure in the year such asset is first leased. "CAPITALIZED LEASE OBLIGATIONS" means all lease obligations which have been or should be, in accordance with GAAP, capitalized on the books of the lessee. "CASH EQUIVALENT INVESTMENTS" means any Investment in (i) direct obligations of the United States or any agency, authority or instrumentality thereof, or obligations guaranteed by the United States or any agency, authority or instrumentality thereof, whether or not supported by the full faith and credit of, a right to borrow from or the ability to be purchased by the United States; (ii) commercial paper rated in the highest grade by a nationally recognized statistical rating agency or which, if not rated, is issued or guaranteed by any issuer with outstanding long-term debt rated A or better by any nationally recognized statistical rating agency; (iii) demand and time deposits with, and certificates of deposit and bankers acceptances issued by, any office of the Agent, any Lender or any other bank or trust company which is organized under the laws of the United States or any state thereof and has capital, surplus and undivided profits aggregating at least $500,000,000, the outstanding long-term debt of which or of the holding company of which it is a subsidiary is rated A or better by any nationally recognized statistical rating agency; (iv) any short-term note which has a rating of MIG-2 or better by Moody's Investors Service Inc. or a comparable rating from any other nationally recognized statistical rating agency; (v) any municipal bond or other governmental obligation (including without limitation any industrial revenue bond or project note) which is rated A or better by any nationally recognized statistical rating agency; (vi) any other obligation of any issuer, the outstanding long-term debt of which is rated A or better by any nationally recognized statistical rating agency; (vii) any repurchase agreement with any financial institution described in clause (iii) above, relating to any of the foregoing instruments and fully collateralized by such instruments; (viii) shares of any open-end diversified investment company that has - 5 - its assets invested only in investments of the types described in clause (i) through (vii) above at the time of purchase and which maintains a constant net asset value per share; and (ix) shares of any open-end diversified investment company registered under the Investment Company Act of 1940, as amended, which maintains a constant net asset value per share in accordance with regulations of the Securities & Exchange Commission, has aggregate net assets of not less than $50,000,000 on the date of purchase and either derives at least 95% of its gross income from interest on or gains from the sale of investments of the type described in clauses (i) through (vii), above or has at least 85% of the weighted average value of its assets invested in investments of such types; provided that the purchase of any shares in any particular investment company shall be limited to an aggregate amount owned at any one time of $500,000. Each Cash Equivalent Investment shall have a maturity of less than one year at the time of purchase; provided that the maturity of any repurchase agreement shall be deemed to be the repurchase date and not the maturity of the subject security and that the maturity of any variable or floating rate note subject to prepayment at the option of the holder shall be the period remaining (including any notice period remaining) before the holder is entitled to prepayment. "CHANGE OF CONTROL" means, at any time; (i) any change in the ownership of the Borrower such that the Subordinated Creditor owns less than 15% of the equity interests in the Borrower on a fully-diluted basis or; (ii) any "person" or "group" (each as used in Sections 13(d)(3) and 14(d)(2) of the Securities Exchange Act of 1934, as amended from time to time) either (A) becomes the "beneficial owner" (as defined in Rule 13d-3 of the Securities Exchange Act of 1934, as amended from time to time), directly or indirectly, of voting capital stock of the Borrower (or securities convertible into or exchangeable for such voting capital stock) representing 50.1% or more of the combined voting power of all voting capital stock of the Borrower (on a fully diluted basis) or (B) otherwise has the ability, directly or indirectly, to elect a majority of the board of directors of the Borrower; or (iii) during any period of up to 24 consecutive months, commencing on the Closing Date, individuals who at the beginning of such 24-month period were directors of the Borrower shall cease for any reason (other than (A) the death, disability or retirement of a director or (B) the death, disability or retirement of an officer of the Borrower that is serving as a director at such time so long as another officer of the Borrower replaces such Person as a director) to constitute a majority of the board of directors of the Borrower; or (iv) any Person or two or more Persons acting in concert shall have acquired by contract or otherwise, or shall have entered into a contract or arrangement that, upon consummation thereof, will result in its or their acquisition of the power to exercise, directly or indirectly, a controlling influence on the management or policies of the Borrower; (v) the common stock of the Borrower shall no longer be available for purchase and sale on a national securities exchange or on the NASDAQ System or any similar successor organization. - 6 - "CLOSING DATE" means the date on which all of the conditions precedent set forth in SECTION 3.1 of this Agreement have been satisfied and the Loans are funded in accordance with this Agreement. "CODE" means the Internal Revenue Code of 1986, as amended from time to time. "COMMITMENT" means the Lenders' several commitments to make or maintain the Loans as set forth IN SECTION 2.1 hereof in the maximum outstanding amount of each Lender's Pro Rata Share of $90,000,000 less the reductions set forth in SECTION 2.1 and less any reductions and prepayments or repayments of the Term Loans as set forth in SECTION 2.6. "COMMONLY CONTROLLED ENTITY" means a Person, whether or not incorporated, which is under common control with the Borrower within the meaning of section 414(b) or (c) of the Code. "CURRENT LIABILITIES" means all liabilities of the Borrower and the Subsidiaries which would, in accordance with GAAP on a consolidated basis, be classified as current liabilities of corporations conducting a business the same as or similar to that of the Borrower and any Subsidiaries, including without limitation, the capitalized amount of Capitalized Lease Obligations and fixed prepayments of, and sinking fund payments and reserves with respect to, Indebtedness, in each case required to be made within one year from the date of determination. "DEFAULT" means an event or condition which with the giving of notice or lapse of time or both would become an Event of Default. "DISCHARGED RIGHTS AND OBLIGATIONS" shall have the meaning assigned to such term in SECTION 9.11.4. "DOLLARS" and the sign "$" mean lawful money of the United States of America. "EBITDA" means, for any fiscal period, Net Income (without taking into account any non-cash, non-recurring charge taken by the Borrower on or before December 31, 1997 on account of in- process research and development) PLUS, to the extent accounted for in Net Income, Interest Expense, taxes, depreciation and amortization, for such period determined on an accrual and consolidated basis in accordance with GAAP. EBITDA shall be calculated (excluding however, the calculation of EBITDA for the purpose of determining "Excess Cash Flow", in which case, the calculation of EBITDA in the definition of "Excess Cash Flow" shall govern) as follows: for the fiscal quarter of the Borrower ending on March 31, 1998, EBITDA for the Borrower fiscal quarter then ending multiplied by four (4), for the fiscal quarter of the Borrower ending on June 30, 1998, EBITDA for the Borrower fiscal quarter then ending plus EBITDA for the Borrower fiscal quarter immediately preceding such quarter, multiplied by two (2), for the fiscal quarter of the Borrower ending on September 30, 1998, EBITDA for the Borrower fiscal quarter then ending plus EBITDA for the two (2) Borrower fiscal quarters immediately preceding such quarter, multiplied by one and one-third (1.33) and, - 7 - thereafter, for the rolling four Borrower fiscal quarter period consisting of the Borrower fiscal quarter then ending and the three immediately preceding Borrower fiscal quarters. "EFFECTIVE PRIME" means for any Interest Period, the Prime Rate in effect on the first day of such Interest Period, plus the Applicable Margin for Prime Rate Loans from time to time in effect. "ERISA" means the Employee Retirement Income Security Act of 1974 as amended from time to time. "EVENTS OF DEFAULT" has the meaning assigned to that term in SECTION 6.1 of this Agreement. "EXCESS CASH FLOW" means, for any fiscal year of the Borrower, the sum of EBITDA for each Borrower fiscal quarter in such fiscal year, (y) MINUS the sum of (i) an amount equal to the sum of payments included in Total Debt Service paid during each fiscal quarter in such fiscal year, (ii) to the extent not included in Total Debt Service, all Capital Expenditures permitted under SECTION 5.2.17 and paid during each Borrower fiscal quarter in such fiscal year, and (iii) taxes payable during each Borrower fiscal quarter in such fiscal year and (z) PLUS decreases and MINUS increases in working capital. "EXHIBIT" means, when followed by a letter, the exhibit attached to this Agreement bearing that letter and by such reference fully incorporated in this Agreement. "EXTRAORDINARY RECEIPTS" means any proceeds that the Borrower or any Subsidiary receives not in the ordinary course of their respective businesses, including without limitation, from (i) subject to SECTION 5.1.2, any casualty insurance policies maintained by the Borrower and/or any Subsidiary (other than the proceeds of business interruption insurance to the extent such proceeds constitute compensation for lost earnings and such proceeds are less than $3,000,000), (ii) tax refunds, (iii) pension plan reversions, (iv) condemnation awards (and payments in lieu thereof), (v) indemnity payments or (vi) any extraordinary gains realized by the Borrower and/or any Subsidiary. "FEDERAL FUNDS RATE" means, for any day, the rate per annum plus one-half of one percent (.50%) (rounded upward, if necessary, to the nearest 1/16th of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York, PROVIDED that (i) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next succeeding Business Day as so published, and (ii) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate quoted to the Agent on such day on such transactions as determined by the Agent in its discretion exercised in good faith. "FEE LETTER" means that certain fee letter dated October 31, 1997 between the Borrower and the Agent regarding certain fees payable by the Borrower. - 8 - "FINANCING DOCUMENTS" means, collectively, this Agreement, each Note, the Security Documents, the Fee Letter, the Post-Closing Letter, any agreement with any Lender providing any interest rate protection arrangement and each other agreement, instrument or document now or hereafter executed in connection herewith or therewith. "FIXED CHARGE COVERAGE RATIO" means the ratio of (i) EBITDA MINUS all Capital Expenditures permitted under SECTION 5.2.17 and paid during each Borrower fiscal quarter during the period in question, and taxes payable during each Borrower fiscal quarter during the period in question to (ii) Total Debt Service. "FOREIGN SUBSIDIARY" shall mean each Subsidiary of the Borrower that is incorporated under the laws of any jurisdiction other than the United States of America or any state thereof. "GAAP" means generally accepted accounting principles in effect from time to time in the United States of America. "HAZARDOUS MATERIAL" shall mean any substance or material defined or designated as a hazardous or toxic waste, hazardous or toxic material, hazardous or toxic substance, or other similar term, by any United States federal, state or local environmental statute, regulation or ordinance. "INDEBTEDNESS" means, without duplication for any Person, (i) all indebtedness or other obligations of said Person for Borrowed Money or for the deferred purchase price of property or services, including, without limitation, all reimbursement obligations of said Person with respect to standby and/or documentary letters of credit (ii) all indebtedness or other obligations of any other Person ("Other Person") for Borrowed Money or for the deferred purchase price of property or services, the payment or collection of which said Person has guaranteed (except by reason of endorsement for deposit or collection in the ordinary course of business) or in respect of which said Person is liable, contingently or otherwise, including, without limitation, liable by way of agreement to purchase or lease, to provide funds for payment, to supply funds to purchase, sell or lease property or services primarily to assure a creditor of such Other Person against loss or otherwise to invest in or make a loan to the Other Person, or otherwise to assure a creditor of such Other Person against loss, (iii) all indebtedness or other obligations of any Person for Borrowed Money or for the deferred purchase price of property or services secured by (or for which the holder of such indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in any property owned by said Person, whether or not said Person has assumed or become liable for the payment of such indebtedness or obligations, (iv) Capitalized Lease Obligations of said Person and (v) to the extent not included in any of (i) through (iv) above, obligations of such Person under contracts pursuant to which such Person has agreed to purchase interest rate protection or swap interest rate obligations. "INTEREST ADJUSTMENT DATE" means (i) as to any Prime Rate Loan to be converted to a Libor Loan the Business Day elected by the Borrower in its applicable Interest Rate Election, but being not less than three (3) Business Days after the receipt by the Agent before 12:00 o'clock P.M. on a Business Day of an Interest - 9 - Rate Election electing the Libor Rate as the interest rate on such Loan; and (ii) as to any Libor Loan, the last Business Day of the Interest Period pertaining to such Libor Loan. "INTEREST EXPENSE" means, with respect to any fiscal quarter, the aggregate amount required to be accrued by the Borrower and any Subsidiaries in such fiscal quarter for interest, fees, charges and expenses, however characterized, on its Indebtedness, including, without limitation, all such interest, fees, charges and expenses required to be accrued with respect to Indebtedness under the Financing Documents, all determined in accordance with GAAP. "INTEREST PERIOD" means: With respect to each Libor Loan: (i) initially, the period commencing on the date of such Libor Loan and ending one, two, three or six months thereafter as the Borrower may elect in the applicable Interest Rate Election and subject to SECTION 2.9; and (ii) thereafter, each period commencing on the last day of the immediately preceding Interest Period applicable to such Libor Loan and ending one, two, three or six months thereafter as the Borrower may elect in the applicable Interest Rate Election and subject to SECTION 2.9; PROVIDED THAT clauses (i) and (ii) of this definition are subject to the following: (A) any Interest Period (other than an Interest Period determined pursuant to clause (C) below) which would otherwise end on a day which is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in another calendar month, in which case such Interest Period shall end on the immediately preceding Business Day; (B) any Interest Period which begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (C) below, end on the last Business Day of a calendar month; and (C) for Term Loan A, no Interest Period shall end after the Term Loan A Repayment Date, for Term Loan B, no Interest Period shall end after the Term Loan B Repayment Date and for the Revolving Credit Loan, no Interest Period shall end after the Revolving Credit Repayment Date; and (D) with respect to all Libor Loans, no more than six (6) Interest Periods may be in effect at any time. "INTEREST RATE ELECTION" means the Borrower's irrevocable telecopied or telephonic notice of election, which shall be promptly confirmed by a written notice of election that the - 10 - Effective Prime or the Libor Rate shall apply to all or any portion of the Loans, which shall, subject to this Agreement, be effective on the next Interest Adjustment Date, such telecopied or telephonic notice and written confirmation thereof to be in the form of EXHIBIT 1.4 and to be received by the Agent prior to 12:00 o'clock P.M. on a Business Day and at least three (3) Business Days prior to an Interest Adjustment Date in the case of a Libor Loan, and by 12:00 p.m. on an Interest Adjustment Date in the case of a Prime Rate Loan (or four (4) Business Days in the case of an Interest Rate Election as to which the consent of the Lenders is required), each such Interest Rate Election, subject to the terms of this Agreement to apply to the Advance or the Loan referred to in such Interest Rate Election or to effect a change in the interest rate on the applicable portion of the Loans then outstanding, as applicable, with respect to which such Interest Rate Election was made, such change to occur on the Interest Adjustment Date next succeeding receipt of such Interest Rate Election by the Agent. Any Interest Rate Election received by the Agent after 12 o'clock P.M. on a Business Day shall be deemed, for all purposes of this Agreement to have been received prior to 12 o'clock P.M. on the next succeeding Business Day. "INVESTMENT" means any investment in any Person whether by means of a purchase of capital stock, notes, bonds, debentures or other evidences of Indebtedness and/or by means of a capital or partnership contribution, loan, deposit, advance or other means. "LENDER" means Fleet, State Street, Imperial, Eastern or any financial institution which hereafter becomes a party hereto pursuant to the terms of SECTION 9.11, each in their individual capacity, and "Lenders" means Fleet, State Street, Imperial, Eastern and each of such financial institutions. "LETTER OF CREDIT" means an irrevocable stand-by or commercial letter of credit issued by the Agent for the account of the Borrower pursuant to a Letter of Credit Agreement subject to and in accordance with this Agreement. "LETTER OF CREDIT AGREEMENT" means an application and agreement for stand-by or commercial letter of credit in such form as may at any time be customarily required by the Agent for its issuance of stand-by or commercial letters of credit. "LIBOR LOAN" means any portion of any Loan bearing interest at the Libor Rate. "LIBOR RATE" means, for any Interest Period, the Adjusted Libor Rate in effect on the first day of such Interest Period (subject to adjustment as provided in the definition of Adjusted Libor Rate) plus the Applicable Margin for Libor Loans from time to time in effect. "LIEN" means any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other) or other security agreement or preferential arrangement of any kind or nature whatsoever (including without limitation any conditional sale or other title retention agreement and any Capitalized Lease Obligation) having substantially the same economic effect as any of the foregoing and the filing of any - 11 - financing statement under the applicable Uniform Commercial Code or comparable law of any jurisdiction in respect of any of the foregoing. "LOANS" and "LOAN" means at any time the outstanding principal amount of Indebtedness owed to the Lenders or to any lender, as the context may require pursuant to this Agreement. "MAJORITY LENDERS" means Lenders holding an aggregate Pro Rata Share of the outstanding principal balance of the Loans in an amount equal to or in excess of 50.1% of the total outstanding principal balance of the Loans and if there is no outstanding principal balance of the Loans, Lenders having at least 50.1% of the Commitment. "MATERIAL ADVERSE EFFECT" means material adverse effect on (i) the ability of the Borrower or any Subsidiary to fulfill their obligations under any of the Financing Documents, (ii) the Business Condition of the Borrower or any Subsidiary or (iii) the ability of the Borrower to consummate the Related Transactions. "MATERIAL AGREEMENTS" means (i) any agreements, obligations or other instruments by which the Borrower or any Subsidiary may be bound having a face value of $100,000 or more, or creating an obligation on the part of any party thereto in excess of $100,000, (ii) any agreements, obligations or other instruments by which the Borrower or any Subsidiary may be bound which are reasonably necessary to the conduct of their respective businesses, except where any of the foregoing could be substituted for on terms at least as favorable or (iii) any agreements, obligations or other instruments by which the Borrower or any Subsidiary may be bound, the absence of which would be reasonably likely to result in a Material Adverse Effect. "MULTIEMPLOYER PLAN" means a multiemployer plan as defined in Section 4001(a)(3) of ERISA. "NET INCOME" means, for any fiscal period, the net after tax income (loss) of the Borrower and any Subsidiaries for such period determined on an accrual and consolidated basis in accordance with GAAP. "NOTE" means any promissory note of the Borrower payable to the order of a Lender and substantially in the form of EXHIBIT 1.5 or EXHIBIT 1.6 and evidencing all or a portion of the Loan and "Notes" means all of the Notes, collectively. "OBLIGATIONS" mean any and all Indebtedness, obligations and liabilities of the Borrower and/or any Subsidiaries under any of the Financing Documents to any one or more of the Lenders and/or the Agent of every kind and description, absolute or contingent, due or to become due, whether for payment or performance, now existing or hereafter arising, including, without limitation, all Loans, interest, taxes, fees, charges, and expenses under the Financing Documents and attorneys' fees chargeable to the Borrower and/or any Subsidiaries or incurred by any of the Lenders and/or the Agent under any of the Financing Documents. - 12 - "OFFICER'S CERTIFICATE" means a certificate signed by an Authorized Representative and delivered to the Agent on behalf of the Lenders. "PBGC" means the Pension Benefit Guaranty Corporation established pursuant to subtitle A of Title IV of ERISA. "P.M." means a time from and including 12 o'clock noon on any Business Day to the end of such Business Day using Eastern Standard (Daylight Savings) time. "PERMITTED ENCUMBRANCES" means each Lien granted pursuant to any of the Security Documents, those Liens, security interests and defects in title permitted under SECTION 5.2.1 and those Liens listed on EXHIBIT 1.8 hereto. "PERSON" means an individual, corporation, partnership, limited liability company, joint venture, trust, or unincorporated organization, or a government or any agency or political subdivision thereof. "PLAN" means an employee benefit plan as defined in Section 3(3) of ERISA maintained for employees of the Borrower or any Commonly Controlled Entity. "POST-CLOSING LETTER" means that certain letter agreement between the Borrower and the Agent dated the Closing Date and listing certain post-closing actions to be completed by the Borrower. "PREMISES" has the meaning assigned to such term in SECTION 4.1.21.1. "PRIME RATE" means the higher of (i) the floating rate of interest per annum designated from time to time by the Agent as being its "prime rate" of interest, such interest rate to be adjusted on the effective date of any change thereof by the Agent, it being understood that such rate of interest may not be the lowest rate of interest from time to time charged by the Agent and (ii) the Federal Funds Rate, such interest rate to be adjusted on the effective date of any change thereof by the Federal Reserve Bank of New York. "PRIME RATE LOAN(S)" means any portion of the Loans bearing interest at Effective Prime. "PROJECTIONS" means the Borrower's written projections of Borrower's 3-year future performance on a consolidated basis delivered to the Agent prior to the Closing and attached to this Agreement as EXHIBIT 1.12. "PRO RATA SHARE" means (i) with respect to the Commitment, each Lender's percentage share of the Commitment as set forth immediately opposite such Lender's name on EXHIBIT 1.9, and (ii) with respect to the Loans, each Lender's percentage share of the aggregate outstanding principal balance of the Loans and "Pro Rata Shares" means such percentage shares of the Lenders. - 13 - "REFERENCE LENDER(S)" means the Agent unless the Agent resigns said responsibility, at which time and thereafter such term means one or two Lenders selected by the Agent in its discretion from time to time as a reference lender for purposes of determining the Adjusted Libor Rate. "RELATED TRANSACTIONS" means the purchase by the Borrower of all of the outstanding capital stock of Wells pursuant to the Related Transaction Documents and the extension by the Subordinated Creditor of the Subordinated Debt to the Borrower. "RELATED TRANSACTION DOCUMENTS" means the documents listed on EXHIBIT 1.2. "REPORTABLE EVENT" shall have the meaning assigned to that term in Section 4043 of ERISA for which the requirement of 30 days' notice to the PBGC has not been waived by the PBGC. "REQUEST" means a written request for the Loans in the form of EXHIBIT 1.10, received by the Agent on behalf of the Lenders from the Borrower in accordance with this Agreement, specifying the date on which the Borrower desires such Loans and the disbursement instructions of the Borrower with respect thereto. "REVOLVING CREDIT LOAN" means the revolving credit loans to be made by the Lenders to the Borrower from time to time in the maximum outstanding principal amount of the Revolving Credit Loan Commitment, all subject and pursuant to SECTION 2.1.0. "REVOLVING CREDIT LOAN COMMITMENT" means the Lenders' several commitments to make Revolving Credit Loans to the Borrower in accordance with SECTION 2.1.0 and this Agreement and in the maximum outstanding amount of each Lender's Pro Rata Share of $20,000,000, as such amount may be reduced pursuant to SECTION 2.6.4. "REVOLVING CREDIT NOTE" means each revolving credit note of the Borrower, payable to the order of a Lender in the form of EXHIBIT 1.5 hereto evidencing the Indebtedness of the Borrower to such Lender with respect to the Revolving Credit Loan. "REVOLVING CREDIT REPAYMENT DATE" means the earlier to occur of (i) December 31, 2003 and (ii) such earlier date on which the Revolving Credit Loan becomes due and payable pursuant to the terms hereof. "SECTION" means, when followed by a number, the section or subsection of this Agreement bearing that number. "SECURED DOMESTIC SUBSIDIARY" means any Subsidiary incorporated under the laws of the United States of America or any state thereof that has provided or granted or caused to be provided or granted to the Agent a first priority perfected Lien on its assets, together with its guaranty of the Obligations and a pledge by its parent entity of 100% of its ownership interests in such Subsidiary, all in form and substance acceptable to the Agent. - 14 - "SECURITY DOCUMENTS" means any and all documents, instruments and agreements now or hereafter providing security for the Loans and any other Indebtedness of the Borrower or any Subsidiary to any of the Lenders and/or the Agent, including without limitation the following documents, instruments and agreements between the Agent and the Borrower or any Subsidiary: any mortgages on and collateral assignments of real property interests (fee, leasehold and easement) of the Borrower and any Subsidiary granting Liens thereon; landlord lien waivers and consents as may be reasonably requested by the Agent; security agreements granting first Liens on all Borrower's and any Subsidiary's fixtures and tangible and intangible personal property; collateral assignments of Borrower's and any Subsidiary's contracts, licenses, permits, easements and leases; collateral assignments of Borrower's and any Subsidiary's copyrights; conditional assignments of Borrower's and any Subsidiary's trademarks; any Subordination Agreement; any guaranty by a Subsidiary; any pledge of the capital stock of any Subsidiary; casualty and liability insurance policies providing coverage to the Agent for the benefit of the Lenders, UCC-1 financing statements or similar filings perfecting the above-referenced security interests, pledges and assignments, all as executed, delivered to and accepted by the Agent on or prior to the Closing Date or subsequent to the Closing Date as may be required by this Agreement, as any of the foregoing may be amended in writing by the Agent and any other party or parties thereto. "SELLING LENDER" shall have the meaning assigned to such term in SECTION 9.11.1. "SENIOR DEBT" means Indebtedness for Borrowed Money of the Borrower and its Subsidiaries, less the Subordinated Debt. "SINGLE EMPLOYER PLAN" means any Plan as defined in Section 4001(a)(15) of ERISA. "SUBORDINATED CREDITOR" means Emerson Electric Co., a Missouri corporation. "SUBORDINATED DEBT" means $25,000,000 of Indebtedness owing to the Subordinated Creditor and subordinated to the Obligations pursuant to the Subordination Agreement. "SUBORDINATION AGREEMENT" means that certain agreement between the Borrower, the Agent and the Subordinated Creditor providing for subordination of the Subordinated Debt to the Obligations on terms acceptable to the Agent. "SUBSIDIARY" means any corporation or entity other than the Borrower of which more than 50% of the outstanding capital stock or voting interests or rights having ordinary voting power to elect a majority of the board of directors or other managers of such entity (irrespective of whether or not at the time capital stock or voting interests or rights of any other class or classes of such Person shall or might have voting power upon the occurrence of any contingency) is at the time directly or indirectly owned by the Borrower or by the Borrower and/or one or more Subsidiaries or the management of which corporation or entity is under control of the Borrower and/or any other Subsidiary, directly or indirectly through one or more Persons and any other Person which, under GAAP, should at any time for financial reporting purposes be consolidated or combined with the Borrower and/or any other Subsidiary. - 15 - "SUBSTITUTED LENDER" has the meaning set forth in SECTION 9.11 hereof. "SUBSTITUTION AGREEMENT" has the meaning assigned to such term in SECTION 9.11.1. "TERM LOANS" means, collectively, Term Loan A and Term Loan B. "TERM LOAN A" means the term loan in the aggregate principal amount of $30,000,000 to be made or maintained by the Lenders pursuant to SECTION 2.1.1 hereof. "TERM LOAN B" means the term loan in the aggregate principal amount of $40,000,000 to be made or maintained by the Lenders pursuant to SECTION 2.1.2 hereof. "TERM NOTE A" means a term note of the Borrower payable to the order of a Lender in the form of EXHIBIT 1.6 hereto evidencing the Indebtedness of the Borrower to such Lender with respect to Term Loan A. "TERM NOTE B" means a term note of the Borrower payable to the order of a Lender in the form of EXHIBIT 1.7 hereto evidencing the Indebtedness of the Borrower to such Lender with respect to Term Loan B. "TERM LOAN A REPAYMENT DATE" means the earlier to occur of (i) December 31, 2003 and (ii) such earlier date on which the Term Loan A becomes due and payable pursuant to the terms hereof. "TERM LOAN B REPAYMENT DATE" means the earlier to occur of (i) December 31, 2004 and (ii) such earlier date on which the Term Loan B becomes due and payable pursuant to the terms hereof. "TOTAL DEBT SERVICE" means, at any date of determination, the sum of (i) Interest Expense and (ii) scheduled and mandatory principal payments for the fiscal period in question due on account of any Indebtedness of the Borrower, but excluding any mandatory payments of principal required pursuant to SECTIONS 2.6.1.2, 2.6.1.3, 2.6.1.4 and 2.6.1.5. "UNUSED FEES" has the meaning assigned to such term in SECTION 2.2.2. "WELLS" means Wells Electronics, Inc., an Indiana corporation. "WELLS JAPAN" means Wells Japan Kabushiki Kaisha, a Japanese limited stock company, having its principal place of business at Paleana Building 2-2-15, Shin-Yokahama, Kohuku-Ku, Yokahama, Japan. "WELLS SINGAPORE" means Wells Electronics Asia Pte. Limited, a Singapore limited liability company, having its principal place of business at Blk 2 Joo Chiat #05-1135, Joo Chiat Complex, Singapore. - 16 - SECTION 1.2. ACCOUNTING TERMS. All accounting terms not specifically defined herein shall be construed in accordance with GAAP, calculations of amounts for the purposes of calculating any financial covenants or ratios hereunder shall be made in accordance with GAAP applied on a basis consistent with those used in the Borrower's financial statements referred to in SECTION 4.1.5 (other than departures therefrom not material in their impact), and all financial data submitted pursuant to this Agreement shall be prepared in accordance with GAAP (except, in the case of unaudited financial statements, the absence of footnotes and that such statements are subject to changes resulting from year-end adjustments made in accordance with GAAP). SECTION 1.3. OTHER TERMS. References to "Articles", "Sections", "subsections" and "Exhibits" shall be to Sections, subsections and Exhibits and of this Agreement unless otherwise specifically provided. In this Agreement, "hereof," "herein," "hereto," "hereunder" and the like mean and refer to this Agreement as a whole and not merely to the specific section, paragraph or clause in which the respective word appears; words importing any gender include the other genders; references to "writing" include printing, typing, lithography and other means of reproducing words in a tangible visible form; the words "including," "includes" and "include" shall be deemed to be followed by the words "without limitation"; references to agreements and other contractual instruments shall be deemed to include subsequent amendments, assignments, and other modifications thereto, but only to the extent such amendments, assignments and other modifications are not prohibited by the terms of this Agreement or any other Financing Document; references to Persons include their respective permitted successors and assigns or, in the case of governmental Persons, Persons succeeding to the relevant functions of such Persons; and all references to statutes and related regulations shall include any amendments of same and any successor statutes and regulations. ARTICLE 2. AMOUNT AND TERMS OF THE LOANS SECTION 2.1. THE LOANS. SECTION 2.1.0. THE REVOLVING CREDIT LOANS. Each of the Lenders severally agrees, subject to the terms and conditions of this Agreement, to make Advances of Revolving Credit Loans to the Borrower in a minimum aggregate amount of Advances from the Lenders pursuant to any Request of $500,000 and an integral multiple of $100,000 thereafter from time to time after receipt by the Agent from time to time before the Revolving Credit Repayment Date of, and at the times provided for in, a Request and an Interest Rate Election from the Borrower in accordance with this Agreement, during the period commencing on the Closing Date and ending on the Business Day immediately preceding the Revolving Credit Repayment Date, in an aggregate principal amount at any one time outstanding not to exceed the lesser of (i) such Lender's Pro Rata Share of the Revolving Credit Loan Commitment less (ii) in each case, such Lender's Pro Rata Share of the aggregate amount of the outstanding stated amount of any Letter of Credit or Letter of Credit Agreement, and any unreimbursed amounts thereunder. - 17 - Promptly after receipt of a Request and Interest Rate Election, Agent shall notify each Lender by telephone, telex or telecopy of the proposed borrowing. Subject to the immediately preceding paragraph, each Lender agrees that after its receipt of notification from Agent of Agent's receipt of a Request and Interest Rate Election, such Lender shall send its Pro Rata Share (or such portion thereof as may be necessary to provide Agent with such Pro Rata Share in Dollars and in immediately available funds, without consideration or use of any contra accounts of any Lender) of the requested Loan by wire transfer to Agent so that Agent receives such Pro Rata Share in Dollars and in immediately available funds not later than 12:00 P.M. (Boston, Massachusetts time) on the first day of the Interest Period for any such requested Libor Loan and on the Business Day for such Advance set forth in Borrower's Request for any such requested Prime Rate Loan, and Agent shall advance funds to the Borrower by depositing such funds in Borrower's account with the Agent upon Agent's receipt of such Pro Rata Shares in the amount of the Pro Rata Shares of such Loan in Agent's possession. Unless Agent shall have been notified by any Lender (which notice may be telephonic if confirmed promptly in writing) prior to the first day of the Interest Period in respect of any Loan which such Lender is obligated to make under this Agreement, that such Lender does not intend to make available to Agent such Lender's Pro Rata Share of such Loan on such date, Agent may assume that such Lender has made such amount available to Agent on such date and Agent in its sole discretion may, but shall not be obligated to, make available to the Borrower a corresponding amount on such date. If such corresponding amount is not in fact made available to Agent by such Lender, Agent shall be entitled to recover such corresponding amount from such Lender promptly upon demand by Agent together with interest thereon, for each day from such date until the date such amount is paid to Agent, at the Federal Funds Rate for three (3) Business Days and thereafter at the interest rate on the Loan in question. If such Lender does not pay such corresponding amount forthwith upon Agent's demand therefor, Agent shall promptly notify the Borrower and the Borrower shall promptly pay such corresponding amount to Agent. Nothing contained in this Section shall be deemed to relieve any Lender from its obligation to fulfill its obligations hereunder or to prejudice any rights which the Borrower may have against any Lender as a result of any default by such Lender hereunder. Throughout the term of the Revolving Credit Loans, $5,000,000 of the Revolving Credit Loan Commitment and principal amount of the Revolving Credit Loans may, in the Agent's discretion, be made available to the Borrower prior to the Revolving Credit Repayment Date by issuance of Letters of Credit having an expiration date prior to the earlier to occur of (a) the first anniversary date of the date of issuance of any such Letter of Credit or (b) three (3) Business Days prior to the Revolving Credit Repayment Date, reasonably promptly after submission by the Borrower to the Agent of a Letter of Credit Agreement, duly completed and executed by the Borrower and otherwise in form and substance satisfactory to the Agent. The Borrower shall pay upon demand by the Agent such fees and costs as the Agent may from time to time establish for issuance, transfer, amendment and negotiation of each Letter of Credit and shall pay to the Agent for the Lenders' accounts equal to their respective Pro Rata Shares upon issuance of any Letter of Credit an annual Letter of Credit fee in an amount equal to the product of (i) the stated amount of each Letter of Credit multiplied by (ii) the Applicable Margin then in effect with respect to any Revolving Credit Loan which is a Libor Loan. In the event that - 18 - the Borrower shall fail to reimburse the Agent under any Letter of Credit or Letter of Credit Agreement, and any outstanding Indebtedness of the Borrower relating thereto, the Agent shall promptly notify each Lender of the unreimbursed amount together with accrued interest thereon, and each Lender agrees to purchase, and it shall be deemed to have purchased, a participation in such Letter of Credit or Letter of Credit Agreement and such indebtedness in an amount equal to its Pro Rata Share of the unpaid amount together with unpaid interest thereon. Upon one (1) Business Day's notice from the Agent, each Lender shall deliver to the Agent an amount equal to its respective participation in same day funds, at the place and on the date and by the time notified by the Agent. The obligation of each Lender to deliver to the Agent an amount equal to its respective participation pursuant to the foregoing sentence shall be absolute and unconditional and such remittance shall be made notwithstanding the occurrence or continuation of an Event of Default or the failure to satisfy any condition set forth in Article III of this Agreement. SECTION 2.1.1. TERM LOAN A. On the Closing Date, each of the Lenders severally agrees, subject to the terms and conditions of this Agreement, to make the Term Loan A to the Borrower in the amount of its respective Pro Rata Share of $30,000,000. Borrower shall pay on the last day of each calendar quarter ending on or in between the dates set forth below the amount of the Term Loan A set forth immediately opposite such dates below:
REPAYMENT QUARTERLY DATES PAYMENT AMOUNT ===== ============== January 1, 1998 through December 31, 1998 $1,075,000 January 1, 1999 through December 31, 1999 $1,125,000 January 1, 2000 through December 31, 2000 $1,200,000 January 1, 2001 through December 31, 2001 $1,250,000 January 1, 2002 through December 31, 2002 $1,350,000 January 1, 2003 through September 30, 2003 $1,500,000 Term Loan A Repayment Date Then Remaining Outstanding Balance of Term Loan A
- 19 - SECTION 2.1.2. TERM LOAN B. On the Closing Date, each of the Lenders severally agrees, subject to the terms and conditions of this Agreement, to make the Term Loan B to the Borrower in the amount of its respective Pro Rata Share of $40,000,000. Borrower shall pay on the last day of each calendar quarter ending on or in between the dates set forth below the amount of the Term Loan B set forth immediately opposite such dates below:
REPAYMENT QUARTERLY DATES PAYMENT AMOUNT ===== ============== January 1, 1998 through December 31, 2003 $100,000 January 1, 2004 through September 30, 2004 $9,400,000 Term Loan B Repayment Date Then Remaining Outstanding Balance of Term Loan B
SECTION 2.2. INTEREST AND FEES ON THE LOANS. SECTION 2.2.1. INTEREST. Interest shall accrue and be paid currently on the Loans at Effective Prime or the Libor Rate for each of the Loans' Interest Periods in accordance with the Borrower's Interest Rate Elections for the Loans subject to and in accordance with the terms and conditions of this Agreement and the Note(s); provided that if a Default or an Event of Default exists and is continuing, no Interest Rate Election electing the Libor Rate shall be effective and any Loan or portion thereof with respect to which any such Interest Rate Election would otherwise have been effective shall bear interest at Effective Prime plus, so long as an Event of Default exists and is continuing, two percent (2%); all of the foregoing being applicable until such Default or Event of Default is cured or waived and an Interest Rate Election electing the Libor Rate for such Loan or portion thereof which is effective in accordance with this Agreement is submitted to the Agent; and provided further that the Borrower shall submit Interest Rate Elections so that on any date on which under SECTION 2.1.1 a regularly scheduled payment of principal of the Term Loans is to be made, at least the amount of the Term Loans to be so repaid is bearing interest at Effective Prime and/or such payment date is an Interest Adjustment Date for outstanding Libor Loans in such amount of the Term Loans. Upon the occurrence and during the continuance of any Event of Default, each Prime Rate Loan shall bear interest, payable on demand, at a floating interest rate per annum equal to two percent (2.0%) above Effective Prime and each Libor Loan shall bear interest at the Libor Rate plus two percent (2.0%). The Borrower shall pay such interest to the Agent for the pro rata account of each Lender in arrears on the Loans (including without limitation Libor Loans) outstanding from time to time after the Closing Date, such payments to be made, with respect to Libor Loans with Interest Periods of three months or less on each Interest Adjustment Date for such Loans, and with respect to Libor Loans with Interest Periods of more than three months and with respect to Prime Rate Loans, quarterly on the last Business Day of each calendar quarter of each year commencing December 31, 1997. In the event no Interest Rate - 20 - Election has been made by the Borrower with respect to any Loan or Advance (or an Interest Rate Election shall have expired without an effective substitute Interest Rate Election), Effective Prime shall be the rate applicable to such Loan or Advance. All provisions of each Note and any other agreements between the Borrower and the Lenders are expressly subject to the condition that in no event, whether by reason of acceleration of maturity of the Indebtedness evidenced by any Note or otherwise, shall the amount paid or agreed to be paid to the Lenders which is deemed interest under applicable law exceed the maximum permitted rate of interest under applicable law (the "Maximum Permitted Rate"), which shall mean the law in effect on the date of this Agreement, except that if there is a change in such law which results in a higher Maximum Permitted Rate, then each Note shall be governed by such amended law from and after its effective date. In the event that fulfillment of any provision of any Note, or this Agreement or any document, instrument or agreement providing security for any Note results in the rate of interest charged under any Note being in excess of the Maximum Permitted Rate, the obligation to be fulfilled shall automatically be reduced to eliminate such excess. If, notwithstanding the foregoing, any Lender receives an amount which under applicable law would cause the interest rate under any Note to exceed the Maximum Permitted Rate, the portion thereof which would be excessive shall automatically be deemed a prepayment of and be applied to the unpaid principal balance of such Note to the extent of then outstanding Prime Rate Loans and not a payment of interest and to the extent said excessive portion exceeds the outstanding principal amount of Prime Rate Loans, said excessive portion shall be repaid to the Borrower. SECTION 2.2.2. FEES. On the last Business Day of each March, June, September and December commencing December 31, 1997 and continuing through the Revolving Credit Repayment Date, the Borrower shall pay to the Agent for the pro rata account of each Lender, a fee in an amount equal to .50% per annum of the amount, if any, by which the average actual daily amount of the Revolving Credit Loan Commitment for the quarterly period just ended (or in the case of the first such payment, the period from the Closing Date to the date such payment is due) exceeds the sum of (x) the average of the actual daily (on the basis of a year of 360 days, for the actual number of days elapsed) outstanding principal balances of the Revolving Credit Loans PLUS (y) the average of the actual daily aggregate amount of the outstanding stated amount of any Letter of Credit or Letter of Credit Agreement, and any unreimbursed amounts thereunder; provided, however, that if at any time after the receipt by the Agent of the quarterly financial statements for the Borrower's March 31, 1998 fiscal quarter and each subsequent Borrower fiscal quarter provided to the Agent by the Borrower pursuant to SECTION 5.3.3 hereof, the ratio of (a) total Senior Debt on a consolidated basis as of the last day of the most recently ended fiscal quarter of the Borrower to (b) EBITDA, (i) is less than 2.5:1.0 and greater than or equal to 2.0:1.0 and if and so long as no Event of Default or Default exists and is continuing, the Borrower shall pay to the Agent for the pro rata account of each Lender a fee in an amount equal to .45% per annum of the amount, if any, by which the average actual daily amount of the Revolving Credit Loan Commitment for the quarterly period just ended (or in the case of the first such payment, the period from the Closing Date to the date such payment is due) exceeds the sum of (x) the average of the actual daily (on the basis of a year of 360 days, for the actual number of days elapsed) outstanding principal balance of the Revolving Credit Loans PLUS (y) the average of the actual daily aggregate amount of the outstanding stated amount of any - 21 - Letter of Credit or Letter of Credit Agreement, and any unreimbursed amounts thereunder; (ii) is less than 2.0:1.0 and greater than or equal to 1.5:1.0 and if and so long as no Event of Default or Default exists and is continuing, the Borrower shall pay to the Agent for the pro rata account of each Lender a fee in an amount equal to .40% per annum of the amount, if any, by which the average actual daily amount of the Revolving Credit Loan Commitment for the quarterly period just ended (or in the case of the first such payment, the period from the Closing Date to the date such payment is due) exceeds the sum of (x) the average of the actual daily (on the basis of a year of 360 days, for the actual number of days elapsed) outstanding principal balance of the Revolving Credit Loans PLUS (y) the average of the actual daily aggregate amount of the outstanding stated amount of any Letter of Credit or Letter of Credit Agreement, and any unreimbursed amounts thereunder or (iii) is less than 1.5:1.0 and if and so long as no Event of Default or Default exists and is continuing, the Borrower shall pay to the Agent for the pro rata account of each Lender a fee in an amount equal to .35% per annum of the amount, if any, by which the average actual daily amount of the Revolving Credit Loan Commitment for the quarterly period just ended (or in the case of the first such payment, the period from the Closing Date to the date such payment is due) exceeds the sum of (x) the average of the actual daily (on the basis of a year of 360 days, for the actual number of days elapsed) outstanding principal balance of the Revolving Credit Loans PLUS (y) the aggregate amount of the outstanding stated amount of any Letter of Credit or Letter of Credit Agreement, and any unreimbursed amounts thereunder (the "Unused Fees"). In addition, the Borrower shall pay to the Agent for its own account certain fees as specified in the Fee Letter. SECTION 2.2.3. INCREASED COSTS - CAPITAL. If, after the date hereof, any Lender shall have reasonably determined that the adoption after the date hereof of any applicable law, governmental rule, regulation or order regarding capital adequacy of banks or bank holding companies, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by such Lender or such Lender's holding company with any policy, guideline, directive or request regarding capital adequacy (whether or not having the force of law and whether or not failure to comply therewith would be unlawful) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on the capital of such Lender or such Lender's holding company as a consequence of the obligations hereunder of such Lender to a level below that which such Lender could have achieved but for such adoption, change or compliance (taking into consideration the policies of such Lender or such Lender's holding company with respect to capital adequacy immediately before such adoption, change or compliance and assuming that the capital of such Lender or such Lender's holding company was fully utilized prior to such adoption, change or compliance) by an amount reasonably deemed by such Lender to be material, then such Lender shall notify the Agent and the Borrower thereof and the Borrower shall pay to the Agent for the account of such Lender from time to time as specified by such Lender such additional amounts as shall be sufficient to compensate such Lender for such reduced return, each such payment to be made by the Borrower within five (5) Business Days after each demand by such Lender; provided that the liability of the Borrower to pay such costs shall only accrue with respect to costs accruing from and after the 180th day prior to the date of each such demand. A certificate in reasonable detail of one of the officers of such Lender describing the event giving rise to - 22 - such reduction and setting forth the amount to be paid to such Lender hereunder and a computation of such amount shall accompany any such demand and shall, in the absence of manifest error, be conclusive. In determining such amount, such Lender shall act reasonably and will use any reasonable averaging and attribution methods. If the Borrower shall, as a result of the requirements of this SECTION 2.2.3 above, be required to pay any Lender the additional costs referred to above and the Borrower, in its sole discretion, shall deem such additional amounts to be material, the Borrower shall have the right to substitute another bank satisfactory to the Agent for such Lender which has certified the additional costs to the Borrower, and the Agent shall use reasonable efforts at no cost to the Agent to assist the Borrower to locate such substitute bank. Any such substitution shall take place in accordance with SECTION 9.11 and shall otherwise be on terms and conditions reasonably satisfactory to the Agent, and until such time as such substitution shall be consummated, the Borrower shall continue to pay such additional costs. Upon any such substitution, the Borrower shall pay or cause to be paid to the Lender that is being replaced, all principal, interest (to the date of such substitution) and other amounts owing hereunder to such Lender and such Lender will be released from liability hereunder. SECTION 2.3. NOTATIONS. At the time of (i) the making of each Advance evidenced by any Note, (ii) each change in the interest rate under any Note effected as a result of an Interest Rate Election; and (iii) each payment or prepayment of any Note, each Lender may enter upon its records an appropriate notation evidencing (a) such Lender's Pro Rata Share of the Loans and (b) the interest rate and Interest Adjustment Date applicable thereto or (c) such payment or prepayment (voluntary or involuntary) of principal and (d) in the case of payments or prepayments (voluntary or involuntary) of principal, the portion of the applicable Loan which was paid or prepaid. No failure to make any such notation shall affect the Borrower's unconditional obligations to repay the Loans and all interest, fees and other sums due in connection with this Agreement and/or any Note in full, nor shall any such failure, standing alone, constitute grounds for disproving a payment of principal by the Borrower. However, in the absence of manifest error, such notations and each Lender's records containing such notations shall constitute presumptive evidence of the facts stated therein, including, without limitation, the outstanding amount of such Lender's Pro Rata Share of the Loans and all amounts due and owing to such Lender at any time. Any such notations and such Lender's records containing such notations may be introduced in evidence in any judicial or administrative proceeding relating to this Agreement, the Loans or any Note. SECTION 2.4. COMPUTATION OF INTEREST. Interest due under this Agreement and any Note shall be computed on the basis of a year of 360 days for the actual number of days elapsed. SECTION 2.5. TIME OF PAYMENTS AND PREPAYMENTS IN IMMEDIATELY AVAILABLE FUNDS. SECTION 2.5.1. TIME. All payments and prepayments of principal, fees, interest and any other amounts owed from time to time under this Agreement and/or under each Note shall be made to the Agent for the pro rata account of each Lender at the address referred to in SECTION 9.6 in Dollars and in immediately available funds prior to 12:00 o'clock P.M. on the Business Day that such payment is due, provided that the Borrower hereby authorizes and instructs the Agent to charge against the Borrower's accounts with the Agent on each date on which a - 23 - payment is due hereunder and/or under any Note and on any subsequent date if and to the extent any such payment is not made when due an amount up to the principal, interest and fees due and payable to the Lenders, the Agent or any Lender hereunder and/or under any Note and such charge shall be deemed payment hereunder and under the Note(s) in question to the extent that immediately available funds are then in such accounts. The Agent shall use reasonable efforts in accordance with the Agent's customary procedures to give subsequent notice of any such charge to the Borrower, but the failure to give such notice shall not affect the validity of any such charge. To the extent that immediately available funds are then in such accounts, the failure of the Agent to charge any such account or the failure of the Agent to charge any such account prior to 12 o'clock P.M. shall not be basis for an Event of Default under SECTION 6.1.1 and any amount due on the Loans on such date shall be deemed paid; provided that the Agent shall have the right to charge any such account on any subsequent date for such unpaid payment and an Event of Default shall exist if sufficient immediately available funds are not in such accounts on the date the Agent so charges such account after the expiration of any applicable cure period. In the event of any charge against the Borrower's accounts by the Agent pursuant to the immediately preceding sentence, the Agent shall use reasonable efforts to provide notice to the Borrower of such charge in accordance with the Agent's customary procedures, but the failure to provide such notice shall not in any way be a basis for any liability of the Agent nor shall such failure adversely affect the validity and effectiveness of any such action by the Agent. Any such payment or prepayment which is received by the Agent in Dollars and in immediately available funds after 12 o'clock P.M. on a Business Day shall be deemed received for all purposes of this Agreement on the next succeeding Business Day unless the failure by Agent to receive such funds prior to 12 o'clock P.M. is due to Agent's failure to charge the account of Borrower prior to 12 o'clock P.M., except that solely for the purpose of determining whether a Default or Event of Default has occurred under SECTION 6.1.1, any such payment or prepayment, if received by the Agent prior to the close of the Agent's business on a Business Day, shall be deemed received on such Business Day. All payments of principal, interest, fees and any other amounts which are owing to any or all of the Lenders or the Agent hereunder and/or under any of the Notes that are received by the Agent in immediately available Dollars prior to 12:00 o'clock P.M. on any Business Day shall, to the extent owing to the Lenders other than the Agent, be sent by wire transfer by the Agent to any such other Lenders (in each case, without deduction for any claim, defense or offset of any type) before 3:00 o'clock P.M. on the same Business Day. Each such wire transfer shall be addressed to each Lender in accordance with the wire instructions set forth in EXHIBIT 1.9 hereto. The amount of each payment wired by the Agent to each such Lender shall be such amount as shall be necessary to provide such Lender with its Pro Rata Share of such payment (without consideration or use of any contra accounts of any Lender), or with such other amount as may be owing to such Lender in accordance with this Agreement (in each case, without deduction for any claim, defense or offset of any type). Each such wire transfer shall be sent by the Agent only after the Agent has received immediately available Dollars from or on behalf of the Borrower and each such wire transfer shall provide each Lender receiving same with immediately available Dollars on receipt by such Lender. Any such payments of immediately available Dollars received by the Agent after 12:00 o'clock P.M. and before 3:00 o'clock P.M. on any Business Day shall be forwarded in the same manner by the Agent to such Lender(s) as soon as practicable on said Business Day, and if any such payments of immediately available Dollars are received by the Agent after 3:00 o'clock P.M. on a Business Day, the Agent shall so forward same to such - 24 - Lender(s) before 10:00 o'clock A.M. on the immediately succeeding Business Day. SECTION 2.5.2. SETOFF, ETC. Regardless of the adequacy of any collateral for any of the Obligations, upon the occurrence and during the continuance of any Event of Default, each Lender is hereby authorized at any time and from time to time, without notice to the Borrower (any such notice being expressly waived by the Borrower), to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and any other Indebtedness at any time owing by such Lender to or for the credit or the account of the Borrower against any and all of the Obligations of the Borrower irrespective of whether or not such Lender shall have made any demand under this Agreement or any Note and although such obligations may be unmatured. Each such Lender agrees to promptly notify the Borrower and the Agent after any such setoff and application; provided that the failure to give such notice shall not affect the validity of such setoff and application. Promptly following any notice of setoff received by the Agent from a Lender pursuant to the foregoing, the Agent shall notify each other Lender thereof. The rights of each Lender under this SECTION 2.5.2 are in addition to all other rights and remedies (including, without limitation, other rights of setoff) which such Lender may have and are subject to SECTION 9.12. SECTION 2.5.3. UNCONDITIONAL OBLIGATIONS AND NO DEDUCTIONS. SECTION 2.5.3.1. The Borrower's obligation to make all payments provided for in this Agreement and the other Financing Documents shall be unconditional. Each such payment shall be made without deduction for any claim, defense or offset of any type and regardless of whether any claims, defenses or offsets of any type exist. SECTION 2.5.3.2. (a) Any and all payments by the Borrower to or for the account of any Lender or the Agent hereunder or under any other Financing Document shall be made free and clear of and without deduction for any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Lender and the Agent, taxes imposed on its income, and franchise taxes imposed on it, by the jurisdiction under the laws of which such Lender (or its applicable lending office) or the Agent (as the case may be) is organized or any political subdivision thereof, other than to the extent such income or franchise tax is imposed solely as a result of the activities of the Agent or a Lender pursuant to or in respect of this Agreement or any of the other Financing Documents (all such non-excluded taxes, duties, levies, imposts, deductions, charges, withholdings, and liabilities being hereinafter referred to as "Taxes"). If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable under this Agreement or any other Financing Document to any Lender or the Agent,(i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this SECTION 2.5.3.2) such Lender or the Agent receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions, (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with - 25 - applicable law, and (iv) the Borrower shall furnish to the Agent, at its address referred to in SECTION 9.6 hereof, the original or a certified copy of a receipt evidencing payment thereof. (b) In addition, the Borrower agrees to pay any and all present or future stamp or documentary taxes and any other excise or property taxes or charges or similar levies which arise from any payment made under this Agreement or any other Financing Document or from the execution or delivery of, or otherwise with respect to, this Agreement or any other Loan Document (hereinafter referred to as "Other Taxes"). (c) The Borrower agrees to indemnify each Lender and the Agent for the full amount of Taxes and Other Taxes (including, without limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable under this SECTION 2.5.3.2) paid by such Lender or the Agent (as the case may be) and any liability (including penalties, interest, and expenses) arising therefrom or with respect thereto. (d) Each Lender organized under the laws of a jurisdiction outside the United States, on or prior to the date of its execution and delivery of this Agreement in the case of each Lender listed on the signature pages hereof and on or prior to the date on which it becomes a Lender in the case of each other Lender, and from time to time thereafter if requested in writing by the Borrower or the Agent (but only so long as such Lender remains lawfully able to do so), shall provide the Borrower and the Agent with (i) a properly completed Internal Revenue Service Form 1001 or 4224, as appropriate, or any successor form prescribed by the Internal Revenue Service, certifying that such Lender is entitled to benefits under an income tax treaty to which the United States is a party which reduces the rate of withholding tax on payments of interest or certifying that the income receivable pursuant to this Agreement is effectively connected with the conduct of a trade or business in the United States, (ii) a properly completed Internal Revenue Service Form W-8 or W-9, as appropriate, or any successor form prescribed by the Internal Revenue Service, certifying that such Lender is exempt from United States backup withholding, and (iii) any other form or certificate required by any taxing authority (including any certificate required by Sections 871(h) and 881(c) of the Internal Revenue Code), certifying that such Lender is entitled to an exemption from or a reduced rate of tax on payments pursuant to this Agreement or any of the other Financing Documents. (e) For any period with respect to which a Lender has failed to provide the Borrower and the Agent with the appropriate form pursuant to SECTION 2.5.3.2(d) hereof (unless such failure is due to a change in treaty, law, or regulation occurring subsequent to the date on which a form originally was required to be provided), such Lender shall not be entitled to indemnification under SECTION 2.5.3.2(A) OR 2.5.3.2(B) hereof with respect to Taxes imposed by the United States; provided, however, that should a Lender, which is otherwise exempt from or subject to a reduced rate of withholding tax, become subject to Taxes because of its failure to deliver a form required hereunder, the Borrower shall take such steps as such Lender shall reasonably request and at such Lender's cost to assist such Lender to recover such Taxes. (f) If the Borrower is required to pay additional amounts to or for the account of any Lender pursuant to this SECTION 2.5.3.2, then such Lender will agree to use reasonable efforts to - 26 - change the jurisdiction of its applicable lending office so as to eliminate or reduce any such additional payment which may thereafter accrue if such change, in the judgment of such Lender, is not otherwise disadvantageous to such Lender. Alternatively, in the event of such an additional cost, the Borrower shall have the right to substitute another bank satisfactory to the Agent, and the Agent and such Lender shall use reasonable efforts at no cost to the Agent and such Lender to assist the Borrower to locate and effect the substitution in favor of such substitute bank. Any such substitution shall take place in accordance with SECTION 9.11 and shall otherwise be on terms and conditions reasonably satisfactory to the Agent, and until such time as such substitution shall be consummated, the Borrower shall continue to pay such additional costs. Upon any such substitution, the Borrower shall pay or cause to be paid to the Lender that is being replaced, all principal, interest (to the date of such substitution) and other amounts owing hereunder to such Lender and such Lender will be released from liability hereunder. (g) Within thirty (30) days after the date of any payment of Taxes, the Borrower shall furnish to the Agent the original or a certified copy of a receipt evidencing such payment. (h) Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower contained in this SECTION 2.5.3.2 shall survive until the first anniversary of the Repayment Date. (i) If the Borrower makes any additional payment to any Lender pursuant to this SECTION 2.5.3.2 in respect of any Taxes, and such Lender determines that it has received (i) a refund of such Taxes, or (ii) a credit against, relief or remission for, or a reduction in the amount of, any tax or other governmental charge as a result of any deduction or credit for any Taxes with respect to which it has received payments under this SECTION 2.5.3.2, such Lender shall, to the extent that it can do so without prejudice to the retention of such refund, credit, relief, remission or reduction, pay to the Borrower such amount as shall be reasonably determined by such Lender to be solely attributable to the deduction or withholding of such Taxes. If such Lender later determines that it was not entitled to such refund, credit, relief, remission or reduction to the full extent of any payment made pursuant to the first sentence of this SECTION 2.5.3.2(i), the Borrower shall upon demand of such Lender promptly repay the amount of such overpayment. Nothing in this SECTION 2.5.3.2(i) shall be construed as requiring such Lender to conduct its business or to arrange or alter in any respect its tax or financial affairs so that it is entitled to receive such a refund, credit or reduction or as allowing any Person to inspect any records, including tax returns, of such Lender. SECTION 2.6. PREPAYMENT AND CERTAIN PAYMENTS. SECTION 2.6.1. MANDATORY PAYMENTS. SECTION 2.6.1.1. In addition to each other principal payment required hereunder, the outstanding principal balances of Term Loan A shall be repaid on the Term Loan A Repayment Date, the outstanding principal balances of Term Loan B shall be repaid on the Term Loan B Repayment Date and the outstanding principal balances of the Revolving Credit Loans shall be repaid on the Revolving Credit Repayment Date. - 27 - SECTION 2.6.1.2. On or before the 90th day after the end of each fiscal year of the Borrower commencing with the fiscal year ending December 31, 1998, the Borrower shall prepay to the Agent for the accounts of the Lenders in accordance with their Pro Rata Shares an amount of the outstanding principal balances of the Term Loans equal to (i) 75% of the amount, if any, of Excess Cash Flow for such fiscal year (provided that such amount shall be reduced to 50% of the amount, if any, of Excess Cash Flow for such fiscal year if, based upon the financial statements for the Borrower's fiscal year end delivered to the Agent pursuant to SECTION 5.3.2, the ratio of (a) total Senior Debt on a consolidated basis as of the last day of the most recently ended fiscal quarter of the Borrower to (b) EBITDA, is less than 2.25:1.0) LESS (ii) voluntary prepayments of the Term Loans made during such fiscal year. Such prepayments shall be in addition to any and all other mandatory and voluntary prepayments required or permitted hereunder and shall be applied to the principal installments of the Term Loans in accordance with SECTION 2.6.1.6. SECTION 2.6.1.3. In the event that the Borrower or any Subsidiary is entitled to receive any Extraordinary Receipts, the Borrower upon receipt of such proceeds shall make a prepayment of the Term Loans for the accounts of the Lenders in accordance with their Pro Rata Shares. All such payments shall be applied to the principal installments of the Term Loans in accordance with SECTION 2.6.1.6. SECTION 2.6.1.4. In the event that the Borrower and/or any Subsidiary sells, assigns or otherwise transfers title to any asset other than in the ordinary course of its business for net cash proceeds in the aggregate since the Closing Date in excess of $500,000, the Borrower and/or such Subsidiary shall remit 100% of the net cash proceeds of such sale, assignment or other transfer to the Agent for the accounts of the Lenders in accordance with their Pro Rata Shares to be applied to the principal installments of the Term Loans in accordance with SECTION 2.6.1.6 within 10 Business Days of the date of Borrower's or any Subsidiary's receipt of such net cash proceeds; provided, however, that Borrower may sell any of its equipment which is obsolete, worn-out or no longer used or useful in Borrower's or any Subsidiary's business and Borrower or any Subsidiaries may use the proceeds of such sale to purchase other equipment which is useful or necessary in the operation of Borrower's or any Subsidiary's business and that Borrower or any Subsidiaries may also sell inventory in the ordinary course of its business. SECTION 2.6.1.5. In the event that the Borrower and/or any Subsidiary sells or issues any class of the Borrower's or any Subsidiary's equity securities, the Borrower and/or such Subsidiary upon receipt of the net aggregate cash consideration from the sale or issuance of any such equity shall prepay the amount of such net cash proceeds to the Agent for the accounts of the Lenders in accordance with their Pro Rata Shares to be applied to the principal installments of the Term Loans in accordance with SECTION 2.6.1.6 within 10 Business Days of the date of Borrower's or any Subsidiary's receipt of such net cash proceeds. Notwithstanding the foregoing, at any time after the Closing Date, and if and so long as no Event of Default or Default exists and is continuing, the Borrower may apply any net cash proceeds from the sale or issuance of any class of the Borrower's or any Subsidiary's equity securities to reduce the then-outstanding balance of the Subordinated Debt. - 28 - SECTION 2.6.1.6. Any amounts repaid by the Borrower and/or any Subsidiary under this SECTION 2.6.1 shall be applied to the principal installments of the Term Loans under SECTIONS 2.1.1 and 2.1.2 in accordance with the following: pro- rata between Term Loan A and Term Loan B, such amounts then to be applied on a pro-rata basis to the respective amounts of the remaining payments to reduce the remaining quarterly payments thereof; provided, however, that so long as any amounts of Term Loan A remain outstanding, any Lender of Term Loan B may elect to refuse its pro-rata share of such amounts allocable to Term Loan B and its share shall then be applied on a pro-rata basis to the respective amounts of the remaining quarterly payments of Term Loan A. In the event that any payment or prepayment of a Libor Loan under this SECTION 2.6.1 is received on a date other than the last day of an Interest Period, such payment or prepayment shall be held by the Agent in a separate, interest bearing account (as reasonably selected by the Agent and which amounts may bear interest in an amount less than the Interest Rate then applicable to such amounts) and be pledged to the Agent as collateral for the Obligations of the Borrower arising in connection with the Financing Documents until the last day of the then current Interest Period, at which time the Agent shall apply such payment or prepayment, for the account of the Lenders in accordance with their Pro Rata Shares, to the outstanding Libor Loans, for which such day is an Interest Adjustment Date. SECTION 2.6.2. VOLUNTARY PREPAYMENTS. All or any portion of the unpaid principal balance of the Loans (other than portions of any Loans constituting Libor Loans) may be prepaid at any time, without premium or penalty, by giving the Agent at least 3 days' prior written notice of such prepayment and by a payment to the Agent for the accounts of the Lenders in accordance with their Pro Rata Shares of such prepayment in immediately available Dollars by the Borrower; provided that each such partial payment or prepayment of principal of the Loans shall be in a principal amount of at least $500,000 or an integral multiple of $100,000 in excess thereof and provided further that each such prepayment of the Term Loans shall be applied to the principal installments of the Term Loans in the manner set forth in SECTION 2.6.1.6. SECTION 2.6.3. PREPAYMENT OF LIBOR LOANS. Notwithstanding anything to the contrary contained in any Note or in any other agreement executed in connection herewith or therewith, the Borrower shall be permitted to prepay any portion of the Loans constituting Libor Loans only in accordance with SECTION 2.9 hereof. SECTION 2.6.4. PERMANENT REDUCTION OF COMMITMENT. At the Borrower's option the Commitment and the Revolving Credit Loan Commitment may be permanently and irrevocably reduced in whole or in part by an amount of at least $500,000 and to the extent in excess thereof in integral multiples of $100,000 at any time; provided that (i) the Borrower gives the Agent written notice of the exercise of such option at least three (3) Business Days prior to the effective date thereof, (ii) the aggregate outstanding balance of the Loans, if any, does not exceed the Commitment and the aggregate outstanding balance of the Revolving Credit Loans together with the aggregate amount of the outstanding stated amount of any Letter of Credit or Letter of Credit Agreement, and any unreimbursed amounts thereunder, if any, does not exceed the Revolving Credit Loan Commitment, both as so reduced in any such case on the effective date of such reduction and (iii) the Borrower is not, and after giving effect - 29 - to such reduction, would not be in violation of SECTION 2.6.3. Any such reduction shall concurrently reduce the Dollar amount of each Lender's Pro Rata Share of the Commitment and the Revolving Credit Loan Commitment. SECTION 2.7. PAYMENT ON NON-BUSINESS DAYS. Whenever any payment to be made hereunder or under any Note shall be stated to be due on a day other than a Business Day, such payment may be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of fees, if any, and interest under this Agreement and under such Note. SECTION 2.8. USE OF PROCEEDS. The Borrower shall use the proceeds of the Term Loans to purchase all of the outstanding capital stock of Wells and to pay costs incurred by the Borrower in connection with the closing of the Loans, including without limitation, the costs incurred in connection with the Related Transactions and shall use the proceeds of the Revolving Credit Loans to purchase such capital stock, pay such costs, for Borrower's working capital needs and for Investments permitted by SECTION 5.2.12. SECTION 2.9. SPECIAL LIBOR LOAN PROVISIONS. The Libor Loans shall be subject to and governed by the following terms and conditions: SECTION 2.9.1. REQUESTS. Each Request accompanied by an Interest Rate Election selecting the Libor Rate must be received by the Agent in accordance with the definition of Interest Rate Election. SECTION 2.9.2. LIBOR LOANS UNAVAILABLE. Notwithstanding any other provision of this Agreement, if, prior to or on the date on which all or any portion of the Loans is to be made as or converted into a Libor Loan, any of the Lenders (or the Agent with respect to (ii) below) shall reasonably determine (which determination shall be conclusive and binding on the Borrower), that (i) Dollar deposits in the relevant amounts and for the relevant Interest Period are not offered to such Lender in the London interbank market, (ii) by reason of circumstances affecting the London interbank market, adequate and reasonable means do not exist for ascertaining the Adjusted Libor Rate, or (iii) the Adjusted Libor Rate shall no longer represent the effective cost to such Lender for Dollar deposits in the London interbank market for reasons other than the fact, standing alone, that the Adjusted Libor Rate is based on an averaging of rates determined by the Agent and that such Lender's rate may exceed such average, such Lender may elect not to accept any Interest Rate Election electing a Libor Loan and such Lender shall notify the Agent by telephone or telex thereof, stating the reasons therefor, not later than the close of business on the second Business Day prior to the date on which such Libor Loan is to be made. The Agent shall promptly give notice of such determination and the reason - 30 - therefor to the Borrower, and all or such portion of the Loans, as the case may be, which are subject to any of SECTION 2.9.2 (i), (ii) through (iii) as a result of such Lender's determination shall be made as or converted into, as the case may be, Prime Rate Loans and such Lender shall have no further obligation to make Libor Loans, until further written notice to the contrary is given by the Agent to the Borrower. If such circumstances subsequently change so that such Lender shall no longer be so affected, such Lender's obligation to make or maintain its Pro Rata Share of all or any portion of the Loans as Libor Loans shall be reinstated when such Lender obtains actual knowledge of such change of circumstances and promptly after obtaining such actual knowledge such Lender shall forward written notice thereof to the Agent. After receipt of such notice, the Agent shall promptly forward written notice thereof to the Borrower. Upon or after receipt by the Borrower of such written notice, the Borrower may submit an Interest Rate Election in accordance with this Agreement electing an Interest Period ending no later than the Interest Adjustment Date for the then current Interest Period for the other Lenders' Pro Rata Shares of Libor Loans and electing the Libor Rate for such Lenders' or Lender's Pro Rata Share(s) of the Loans as to which such Lender's or Lenders' obligation(s) to make or maintain its or their Pro Rata Share(s) of the Loans as Libor Loans was suspended and such Pro Rata Share(s) shall be converted to Libor Loans in accordance with this Agreement. During any period throughout which any of the Lenders has or have no obligation to make or maintain its or their Pro Rata Share(s) of the Loans as Libor Loans, no Interest Rate Elections electing the Libor Rate shall be effective with regard to the Loans to the extent of the Pro Rata Share(s) of such Lender(s), but shall be effective as to the other Lenders. SECTION 2.9.3. LIBOR LENDING UNLAWFUL. In the event that any change in applicable laws or regulations (including the introduction of any new applicable law or regulation) or in the interpretation thereof (whether or not having the force of law) by any governmental or other regulatory authority charged with the administration thereof, shall make it unlawful for any of the Lenders to make or continue to maintain its Pro Rata Share of all or any portion of the Loans as Libor Loans, each such Lender shall promptly notify the Agent by telephone or telex thereof, and of the reasons therefor, and the obligation of such Lender to make or maintain its Pro Rata Share of the Loans or such portion thereof as Libor Loans shall, upon the happening of such event, terminate and the Agent shall, by telephonic notice to the Borrower, declare that such obligation has so terminated with respect to such Lender, and such Pro Rata Share of the Loans or any portion thereof to the extent then maintained as Libor Loans, shall, on the last day on which such Lender can lawfully continue to maintain such Pro Rata Share of the Loans or any portion thereof as Libor Loans, automatically convert into Prime Rate Loans without additional cost to the Borrower. If circumstances subsequently change so that such Lender shall no longer be so affected, such Lender's obligation to make or maintain its Pro Rata Share of all or any portion of the Loans as Libor Loans shall be reinstated when such Lender obtains actual knowledge of such change of circumstances, and promptly after obtaining such actual knowledge such Lender shall forward written notice thereof to the Agent. After receipt of such notice, the Agent shall promptly forward written notice thereof the Borrower. Upon or after receipt by the Borrower of such written notice, the Borrower may submit an Interest Rate Election in accordance with this Agreement electing an Interest Period ending no later than the Interest Adjustment Date for the then current Interest Period for the other Lenders' Pro Rata Shares of Libor Loans and electing the Libor Rate for such Lenders' or Lender's Pro Rata - 31 - Share(s) of the Loans as to which such Lender's or Lenders' obligation(s) to make or maintain its or their Pro Rata Share(s) of the Loans as Libor Loans was suspended and such Pro Rata Share(s) shall be converted to Libor Loans in accordance with this Agreement. During any period throughout which any of the Lenders has or have no obligation to make or maintain its or their Pro Rata Share(s) of the Loans as Libor Loans, no Interest Rate Elections electing the Libor Rate shall be effective with regard to the Loans to the extent of the Pro Rata Share(s) of such Lender(s), but shall be effective as to the other Lenders. SECTION 2.9.4. ADDITIONAL COSTS ON LIBOR LOANS. The Borrower further agrees to pay to the Agent for the account of the applicable Lender or Lenders such amounts as will compensate any of the Lenders for any increase in the cost to such Lender of making or maintaining (or of its obligation to make or maintain) all or any portion of its Pro Rata Share of the Loans as Libor Loans and for any reduction in the amount of any sum receivable by such Lender under this Agreement in respect of making or maintaining all or any portion of such Lender's Pro Rata Share of the Loans as Libor Loans, in either case, from time to time by reason of: (i) any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, such Lender, under or pursuant to any law, treaty, rule, regulation (including, without limitation, any Regulations of the Board of Governors of the Federal Reserve System) or requirement in effect on or after the date hereof, any interpretation thereof by any governmental authority charged with administration thereof or by any central bank or other fiscal or monetary authority or other authority, or any requirement imposed by any central bank or such other authority whether or not having the force of law; or (ii) any change in (including the introduction of any new) applicable law, treaty, rule, regulation or requirement or in the interpretation thereof by any official authority, or the imposition of any requirement of any central bank, whether or not having the force of law, which shall subject such Lender to any tax (other than taxes on net income imposed on such Lender), levy, impost, charge, fee, duty, deduction or withholding of any kind whatsoever or change the taxation of such Lender with respect to making or maintaining all or any portion of its Pro Rata Share of the Loans as Libor Loans and the interest thereon (other than any change which affects, and to the extent that it affects, the taxation of net income of such Lender); provided, that with respect to any withholding the foregoing shall not apply to any withholding tax described in sections 1441, 1442 or 3406 of the Code, or any succeeding provision of any legislation that amends, supplements or replaces any such section, or to any tax, levy, impost, duty, charge, fee, deduction or withholding that results from any noncompliance by a Lender with any federal, state or foreign law or from any failure by a Lender to file or furnish any report, return, statement or form the filing or furnishing of which would not have an adverse effect on such Lender and would eliminate such tax, impost, duty, deduction or withholding; In any such event, such Lender shall promptly notify the Agent thereof, and of the reasons therefor, and the Agent shall promptly notify the Borrower thereof in writing stating the - 32 - reasons provided to the Agent by such Lender therefor and the additional amounts required to fully compensate such Lender for such increased or new cost or reduced amount as reasonably determined by such Lender. Such additional amounts shall be payable on each date on which interest is to be paid hereunder or, if there is no outstanding principal amount under any of the Notes, within 10 Business Days after the Borrower's receipt of said notice. Such Lender's certificate as to any such increased or new cost or reduced amount (including calculations, in reasonable detail, showing how such Lender computed such cost or reduction) shall be submitted by the Agent to the Borrower and shall, in the absence of manifest error, be conclusive. In determining any such amount, the Lender(s) may use any reasonable averaging and attribution methods. Notwithstanding anything to the contrary set forth above, the Borrower shall not be obligated to pay any amounts pursuant to this SECTION 2.9.4 as a result of any requirement or change referenced above with respect to any period prior to the one hundred and eightieth (180th) day prior to the date on which the Borrower is first notified thereof (other than any amounts which relate to any such requirement or change which is adopted with retroactive effect in which case the Borrower shall be obligated to pay all such amounts accrued from the date as of which such requirement or change is retroactively effective) unless the failure to give such notice within such one hundred and eighty (180) day period resulted from reasonable circumstances beyond such Lender's reasonable control. SECTION 2.9.5. LIBOR FUNDING LOSSES. In the event that any payment or prepayment of a Libor Loan is received on a date other than the last day of an Interest Period, such payment or prepayment shall be held by the Agent in a separate account and be pledged to the Agent as collateral for the obligations of the Borrower arising in connection with this Agreement, the Notes and the other Financing Documents until the end of the then current Interest Period, at which time the Agent shall apply such payment or prepayment, for the accounts of the Lenders in accordance with their Pro Rata Shares, to the outstanding Libor Loans. Notwithstanding the foregoing, in the event any of the Lenders shall incur any loss or expense (including, without limitation, any loss or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund or maintain all or any portion of the Loans as Libor Loans) as a result of: (i) payment or prepayment by the Borrower of all or any portion of any Libor Loan on a date other than the Interest Adjustment Date for such Libor Loan, for any reason; provided, however that this clause shall not be deemed to grant the Borrower any right to convert a Libor Loan to a Prime Rate Loan prior to the end of any Interest Period or to imply such right; (ii) conversion of all or any portion of any Libor Loan on a day other than the last day of an Interest Period applicable to such Loan to a Prime Rate Loan for any reason including, without limitation, acceleration of the Loans upon or after an Event of Default, any Interest Rate Election or any other cause whether voluntary or involuntary and whether or not referred to or described in this Agreement, other than any such conversion resulting solely from application of SECTIONS 2.9.2 or 2.9.3 by any Lender; or - 33 - (iii) any failure by the Borrower to borrow the Loans as Libor Loans on the date specified in any Interest Rate Election selecting the Libor Rate, other than any such failure resulting solely from application of SECTIONS 2.9.2 or 2.9.3 by any Lender; such Lender shall promptly notify the Agent thereof, and of the reasons therefor. Upon the request of the Agent, the Borrower shall pay directly to the Agent for the account of such Lender such amount as will (in the reasonable determination of such Lender, which shall be correct in the absence of manifest error) reimburse such Lender for such loss or expense. Each Lender shall furnish to the Borrower, upon written request from the Borrower received by the Agent, a written statement setting forth the computation of any such amounts payable to such Lender under this SECTION 2.9.5. SECTION 2.9.6. BANKING PRACTICES. Each Lender agrees that upon the occurrence of any of the events described in SECTIONS 2.2.3 and/or 2.9.2, 2.9.4 or 2.9.5, such Lender will exercise all reasonable efforts to take such reasonable actions at no expense to such Lender (other than reasonable expenses which are covered by the Borrower's advance deposit of funds with such Lender for such purpose, or if such Lender agrees, which the Borrower has agreed to pay or reimburse to such Lender in full upon demand), in accordance with such Lender's usual banking practices in such situations and subject to any statutory or regulatory requirements applicable to such Lender, as such Lender may take without the consent or participation of any other Person to, in the case of an event described in SECTIONS 2.2.3 and/or 2.9.4 or 2.9.5, mitigate the cost of such events to the Borrower and, in the case of an event described in SECTIONS 2.9.2(i), (ii) or (iii), to seek Dollar deposits in any other interbank Libor market in which such Lender regularly participates and in which the applicable determination(s) described in SECTIONS 2.9.2(i), (ii) or (iii), as the case may be, does not apply. SECTION 2.9.7. BORROWER'S OPTIONS ON UNAVAILABILITY OR INCREASED COST OF LIBOR LOANS. In the event of any conversion of all or any portion of any Lender's Pro Rata Share of any Libor Loans to a Prime Rate Loan for reasons beyond the Borrower's control or in the event that any Lender's Pro Rata Share of all or any portion of the Libor Loans becomes subject, under SECTIONS 2.9.4 or 2.9.5, to additional costs, the Borrower shall have the option, subject to the other terms and conditions of this Agreement, to convert such Lender's Pro Rata Share to a Prime Rate Loan by making Interest Rate Elections for Interest Periods which (i) end on the Interest Adjustment Date for such Libor Loan or (ii) end on Business Days occurring prior to such Interest Adjustment Date, in which case, at the end of the last of such Interest Periods any such Libor Rate Loan shall automatically convert to a Prime Rate Loan and the Borrower shall have no further right to make an Interest Rate Election with respect to such Prime Rate Loan other than an Interest Rate Election which is effective on the Interest Adjustment Date for such Libor Loan. The Borrower's options set forth in this SECTION 2.9.7 may be exercised, if and only if the Borrower pays, concurrently with delivery to the Agent of each such Interest Rate Election and thereafter in accordance with SECTIONS 2.9.4, 2.9.5 and 2.9.6 all amounts provided for therein to the Agent in accordance with this Agreement. If the Borrower shall, as a result of the requirements of SECTION 2.9.4 above, be required to pay any Lender the additional costs referred to therein, but not be required to pay - 34 - such additional costs to the other Lender or Lenders and the Borrower, in its sole discretion, shall deem such additional amounts to be material or in the event that Libor Loans from a Lender are unavailable to the Borrower as a result solely of the provisions of SECTIONS 2.9.2, 2.9.3 or 2.9.4, but are available from the other Lender or Lenders, the Borrower shall have the right to substitute another bank satisfactory to the Agent for such Lender which is entitled to such additional costs or which is relieved from making Libor Loans and the Agent shall use reasonable efforts (with all reasonable costs of such efforts by the Agent to be borne by the Borrower) to assist the Borrower to locate such substitute bank. Any such substitution shall take place in accordance with SECTION 9.11 and otherwise be on terms and conditions reasonably satisfactory to the Agent, and until such time as such substitution shall be consummated, the Borrower shall continue to pay such additional costs and comply with the above-referenced Sections. Upon any such substitution, the Borrower shall pay or cause to be paid to the Lender that is being replaced, all principal, interest (to the date of such substitution) and other amounts owing hereunder to such Lender and such Lender will be released from liability hereunder. SECTION 2.9.8. ASSUMPTIONS CONCERNING FUNDING OF LIBOR LOANS. The calculation of all amounts payable to the Lenders under this SECTION 2.9 shall be made as though each Lender actually funded its relevant Libor Loans through the purchase of a deposit in the London interbank market bearing interest at the Libor Rate in an amount equal to that Libor Loan and having a maturity comparable to the relevant Interest Period and through the transfer of such deposit from an offshore office of such Lender to a domestic office of such Lender in the United States of America; provided, however, that each Lender may fund each of its Libor Loans in any manner it sees fit and the foregoing assumption shall be utilized solely for the calculation of amounts payable under this SECTION 2.9. SECTION 2.10. INTEREST RATE PROTECTION. On or before March 31, 1998, the Borrower shall enter into an interest rate protection arrangement covering not less than the sum of (y) one half of the then outstanding total Indebtedness for Borrowed Money (including, without limitation, the Subordinated Debt) MINUS (z) the then outstanding Subordinated Debt. Such interest rate protection arrangement may consist of any one or a combination of the following: (i) the purchase of an interest rate swap arrangement from a financial institution reasonably acceptable to the Majority Lenders covering such Loans effectively converting the Borrower's interest payment obligations with respect to such portion of the Term Loans to a fixed rate per annum then prevailing in the market, for a term expiring not earlier than March 31, 2001 or (ii) the purchase of an interest rate cap from a financial institution reasonably acceptable to the Majority Lenders covering such Loans at a cap rate per annum equal to the highest Libor Rate then in effect for the Loans, plus one and one-half percent (1.5%) for a term expiring not earlier than March 31, 2001. The other terms and conditions of any such interest rate swap or interest rate cap shall be reasonably satisfactory to the Majority Lenders. ARTICLE 3. CONDITIONS OF LENDING SECTION 3.1. CONDITIONS PRECEDENT TO THE COMMITMENT AND TO ALL LOANS. - 35 - SECTION 3.1.1. THE COMMITMENT AND INITIAL LOANS. The Commitment and the obligation of the Lenders to make the initial Advances of the Loans and/or to issue any Letter of Credit or Letter of Credit Agreement are subject to performance by the Borrower of all of its obligations under this Agreement and to the satisfaction of the conditions precedent that all legal matters incident to the transactions contemplated hereby or incidental to the Loans shall be reasonably satisfactory to counsel for the Agent and that the Lenders shall have received on or before the Closing Date all of the following, each dated the Closing Date or another date acceptable to the Lenders and each to be in form and substance reasonably satisfactory to the Agent or if any of the following is not a deliverable, the satisfaction of such condition in form and substance reasonably satisfactory to the Agent: SECTION 3.1.1.1. The Financing Documents, including, without limitation, those hereinafter set forth and the Borrower's and any Subsidiary's certificate of incorporation or other organizational documents, bylaws and each agreement or instrument relating thereto, which such materials shall be reasonably satisfactory to the Lenders. SECTION 3.1.1.2. Certificate of the secretary, clerk or similar officer, as applicable of the Borrower and each Subsidiary certifying as to the resolutions of the shareholders or board of directors of the Borrower and each Subsidiary authorizing and approving each of the Financing Documents to which the Borrower and each Subsidiary is a party and other matters contemplated hereby and certifying as to the names and signatures of the Authorized Representative(s) of the Borrower and each Subsidiary authorized to sign each Financing Document to be executed and delivered by or on behalf of the Borrower and each Subsidiary. The Agent and the Lenders may conclusively rely on each such certificate until the Agent shall receive a further certificate canceling or amending the prior certificate and submitting the signatures of the Authorized Representative(s) named in such further certificate. SECTION 3.1.1.3. Favorable opinions of Hill & Barlow, counsel for the Borrower, Brown & Bain, Baker & Daniels, Stone, LaFaver & Stone and Blakemore & Mitsuki, special local counsel for the Borrower, all in form and substance reasonably satisfactory to the Agent. SECTION 3.1.1.4. An Officer's Certificate stating that: SECTION 3.1.1.4.1. The representations and warranties contained in SECTION 4.1 and/or contained in any of the other Financing Documents are correct on and as of the Closing Date as though made on and as of such date; and SECTION 3.1.1.4.2. No Default or Event of Default has occurred and is continuing, or would result from the making of the Loans. SECTION 3.1.1.5. Certificates of good standing or legal existence of the secretaries of state (or equivalent officials) of the states (or jurisdictions) of organization and - 36 - qualification of and covering the Borrower and any Subsidiaries dated reasonably near the Closing Date. SECTION 3.1.1.6. Evidence that (i) the ownership interests in the Borrower and the Subsidiaries are as set forth in EXHIBIT 1.1 and that such equity interests are owned free of any Liens or charge, other than the Permitted Encumbrances and (ii) that except for receipt and application of certain proceeds of the Loans, the Related Transactions have been completed in accordance with the Related Transaction Documents, without any waiver or amendment of any term or condition contained therein without the prior written approval of the Lenders, and in compliance with any applicable laws and necessary governmental authority approvals. SECTION 3.1.1.7. A Request and an Interest Rate Election. SECTION 3.1.1.8. All documents, instruments and agreements necessary to terminate, cancel and discharge the documents, instruments and agreements evidencing or securing any and all existing Indebtedness of the Borrower and any Subsidiary and Liens securing such Indebtedness other than those listed in EXHIBIT 3.1.1.8. SECTION 3.1.1.9. Payment to the Agent and the Lenders of the fees specified in this Agreement or in the Fee Letter as being payable on the Closing Date and all reasonable out-of-pocket costs and expenses incurred by the Agent and Fleet in connection with the transactions contemplated hereby, including, but not limited to, reasonable outside legal expenses and any accounting fees, auditing fees, appraisal fees, and other fees associated with any independent analyses of the Borrower and any Subsidiary and evidence that all other reasonable fees and costs payable by the Borrower in connection with the transactions contemplated by the Financing Documents and completed on the Closing Date have been paid in full. SECTION 3.1.1.10. An Officer's Certificate in the form of EXHIBIT 3.1.1.10, duly completed and reflecting, INTER ALIA, compliance by the Borrower as of the opening of business on the first Business Day after the Closing Date but based on the Borrower's financial information as of the last day of the Borrower's most recent fiscal quarter, adjusted to give effect to the Loans made on the Closing Date and completion of the Related Transactions to be completed on or prior to the Closing Date, with the financial covenants provided for herein. SECTION 3.1.1.11. Such other information about the Borrower and/or its Business Condition as the Lenders may reasonably request. SECTION 3.1.1.12. True copies of, and/or true copies of any revisions to, the financial statements, the Projections, the pro forma Closing Date financial statements giving effect to the Loans, the Subordinated Debt to be received on or prior to the Closing Date and completion of the other Related Transactions to be completed on or prior to the Closing Date, and other information provided pursuant to SECTION 4.1.5 and certification by the Borrower of the Projections. - 37 - SECTION 3.1.1.13. Certificates of fire, business interruption, liability and extended coverage insurance policies, each such policy to name the Agent as mortgagee and loss payee and, on all liability policies, as additional insured. SECTION 3.1.1.14. True descriptions of any pending or threatened litigation against or by Borrower or any Subsidiary. SECTION 3.1.1.15. Evidence that all necessary material third party consents to the Related Transactions and the Loans have been obtained and remain in effect without the imposition of any conditions or terms not reasonably acceptable to the Lenders, all required filings with any governmental authority have been duly completed and any applicable waiting periods shall have expired without any adverse action being taken by any competent authority, including, without limitation, filings with the Federal Trade Commission and waiting periods under the Clayton Act and Section 803.10(b) of the pre-merger notification requirements under the Hart Scott Rodino Anti-Trust Improvements Act of 1976. SECTION 3.1.1.16. The financial statements described in SECTION 4.1.5 together with the Borrower's pro forma Closing Date balance sheet. Such financial statements shall be accompanied by an Officer's Certificate of the chief financial officer of the Borrower to the effect that (i) the representations of the Borrower set forth in SECTION 4.1.14 are accurate as of the Closing Date and (ii) that no Material Adverse Effect has occurred since the date of the Borrower's most recent audited financial statements delivered to the Lenders except as set forth or reflected in the financial statements described in SECTION 4.1.5 or otherwise disclosed in writing and acceptable to the Agent. SECTION 3.1.1.17. True copies of the Related Transaction Documents and all documents, instruments and agreements relating to the Borrower's capital structure. SECTION 3.1.1.18. The fact that the representations and warranties of the Borrower contained in Article 4, INFRA, and in each of the other Financing Documents are true and correct in all material respects on and as of the Closing Date except as altered hereafter by actions not prohibited hereunder. The Borrower's delivery of each Note to the Lenders and of each Request to the Agent shall be deemed to be a representation and warranty by the Borrower as of the date thereof to such effect. SECTION 3.1.1.19. That there has been no enactment of any law or regulation by any governmental authority which would make it (i) unlawful, (ii) prevent, (iii) restrain or (iv) impose conditions which the Lenders determine to be adverse, in any respect as to the foregoing, to the making of the Loans and/or the completion of the Related Transactions. SECTION 3.1.1.20. The Security Documents, after the completion of any required filings or recordations, will grant to the Agent perfected, first priority security interests or mortgages, as the case may be, with respect to the collateral identified therein and the Agent shall received the favorable opinions of counsel referred to in SECTION 3.1.1.3 above with respect to such perfection. The Agent shall also have received such searches, landlord consents, access agreements and/or title - 38 - insurance commitments as reasonably requested by the Agent, all in form and substance reasonably satisfactory to the Agent and/or its counsel. Without limiting the generality of the foregoing, the Agent shall be reasonably satisfied with the terms and conditions of all real property leases in which the Borrower and any Subsidiary has a leasehold interest, including the terms of such leaseholds and the assumability of the lessee's obligations thereunder upon the transfer of or foreclosure upon of the Borrower's or any Subsidiary's leasehold interest. SECTION 3.1.1.21. No Material Adverse Effect has occurred and there shall exist no action, suit, investigation, litigation or proceeding pending or threatened in any court or before any arbitrator or governmental or regulatory agency or authority that could reasonably be expected to result in a Material Adverse Effect. SECTION 3.1.1.22. All information and materials supplied to the Agent prior to the date hereof shall be true and correct in all material aspects; and no additional information shall have come to the attention of the Agent or the Lenders that is inconsistent in any material respect with the information and materials supplied to the Agent prior to the date hereof or that could reasonably be expected to have a Material Adverse Effect. SECTION 3.1.1.23. The Agent shall be satisfied with the results of its discussions with selected customers and suppliers of Wells. SECTION 3.1.1.24. The Agent shall be satisfied with the results of its due diligence examination of Wells, including without limitation, discussions with Wells' management, visits to Wells' facilities and review of other business and financial information about Wells as may be requested from time to time by the Agent. SECTION 3.1.1.25. The Agent shall have received an environmental assessment report, in form and substance satisfactory to the Agent, from an environmental consulting firm acceptable to the Agent, which report shall identify existing and potential environmental concerns, and shall quantify related costs and liabilities, associated with any manufacturing facilities of the Borrower and any of the Subsidiaries, and the Agent shall be satisfied with the nature and amount of any such matters and with the Borrower's plans with respect thereto. SECTION 3.1.2. THE COMMITMENT AND THE LOANS The Commitment and the obligation of each Lender to make or maintain its Pro Rata Share of any Advance or Loan and/or to issue any Letter of Credit or Letter of Credit Agreement are subject to performance by the Borrower of all its obligations under this Agreement and to the satisfaction of the following further conditions precedent: (a) The fact that, immediately prior to and upon the making of each Loan, no Event of Default or Default shall have occurred and be continuing; (b) The fact that the representations and warranties of the Borrower contained in Article 4, INFRA and in each of the - 39 - other Financing Documents, are true and correct in all material respects on and as of the date of each Advance or Loan except as altered hereafter by actions consented to or not prohibited hereunder. The Borrower's delivery of the Notes to the Lenders and of each Request to the Agent shall be deemed to be a representation and warranty by the Borrower as of the date of such Advance or Loan as to the facts specified in SECTIONS 3.1.2(a) and (b); (c) Receipt by Agent on or prior to the Business Day specified in the definition of Interest Rate Election of a written Request stating the amount requested for the Loan or Advance in question and an Interest Rate Election for such Loan or Advance, all signed by a duly authorized officer of the Borrower on behalf of the Borrower; (d) That there exists no law or regulation by any governmental authority having jurisdiction over the Agent or any of the Lenders which would make it unlawful in any respect for such Lender to make its Pro Rata Share of the Loan or Advance, including, without limitation, Regulations U, T, G and X of the Board of Governors of the Federal Reserve System; and (e) No Material Adverse Effect has occurred. ARTICLE 4. REPRESENTATIONS AND WARRANTIES SECTION 4.1. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. The Borrower represents and warrants to the Agent and the Lenders that, after giving effect to the Loans and the application of the proceeds thereof (which representations and warranties shall survive the making of the Loans) as follows: SECTION 4.1.1. ORGANIZATION AND EXISTENCE. The Borrower and any Subsidiary is a corporation, duly organized, validly existing and in good standing under the laws of the state (or applicable jurisdiction) of its incorporation or organization and is duly qualified to do business in all jurisdictions in which such qualification is required, all as noted on EXHIBIT 4.1.1, except where failure to so qualify would not have a Material Adverse Effect, and has all requisite power and authority to conduct its business, to own its properties and to execute and deliver, and to perform all of its obligations under the Financing Documents. SECTION 4.1.2. AUTHORIZATION AND ABSENCE OF DEFAULTS. Except as described on EXHIBIT 4.1.2, the execution, delivery to the Agent and/or the Lenders and performance by the Borrower and any Subsidiary of the Financing Documents and Related Transaction Documents have been duly authorized by all necessary corporate and governmental action and do not and will not (i) require any consent or approval of the shareholders or board of directors of the Borrower or any Subsidiary which has not been obtained, (ii) violate any provision of any law, rule, regulation (including, without limitation, Regulations U and X of the board of governors of the federal reserve system), order, writ, judgment, injunction, decree, determination or award presently in effect - 40 - having applicability to the Borrower and/or any Subsidiary and/or the articles of organization or by-laws, as applicable, of the Borrower and/or any Subsidiary, (iii) result in a material breach of or constitute a material default under any indenture or loan or credit agreement or any other agreement, lease or instrument to which the Borrower and/or any Subsidiary is or are a party or parties or by which it or they or its or their properties may be bound or affected; or (iv) result in, or require, the creation or imposition of any Lien on any of the Borrower's and/or any Subsidiary's respective properties or revenues other than Liens granted to the Agent by any of the Financing Documents securing the Obligations. The Borrower and any Subsidiary are in compliance with any such applicable law, rule, regulation, order, writ, judgment, injunction, decree, determination or award or any such indenture, other agreement, lease or instrument, except where the failure to be in compliance does not have a Material Adverse Effect. SECTION 4.1.3. ACQUISITION OF CONSENTS. Except as noted on EXHIBIT 4.1.3, no authorization, consent, approval, license, exemption of or filing or registration with any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, other than those which have been obtained, is or will be necessary to the valid execution and delivery to the Agent and/or the Lenders or performance by the Borrower or any Subsidiary of any Financing Documents and each of the foregoing which has been obtained is in full force and effect. SECTION 4.1.4. VALIDITY AND ENFORCEABILITY. Each of the Financing Documents when delivered hereunder will constitute the legal, valid and binding obligations of each of the Borrower and any Subsidiary which is or are a party thereto enforceable against the Borrower, and any Subsidiary which is or are a party thereto in accordance with their respective terms except as the enforceability thereof may be limited by the effect of general principles of equity and bankruptcy and similar laws affecting the rights and remedies of creditors generally. SECTION 4.1.5. FINANCIAL INFORMATION. The following information with respect to the Borrower and its Subsidiaries has heretofore been furnished to the Agent: SECTION 4.1.5.1. Audited annual financial statements of the Borrower for the periods ended December 31, 1995 and December 31, 1996 and the following consolidated financial statements of Wells and Subsidiaries of Wells: consolidated statements of income and cash flow for the periods from May 29, 1994 to June 3, 1995, from June 4, 1995 to June 1, 1996, from May 3, 1996 to April 5, 1997, and from April 6, 1997 to September 30,1997 and consolidated balance sheets as of June 3,1995, June 1, 1996, April 5, 1997 and September 30, 1997; SECTION 4.1.5.2. Interim, consolidated balance sheets of the Borrower and any Subsidiaries (excluding, however, Wells and its Subsidiaries) as of the end of the most recent fiscal quarter prior to the Closing for which such statements are available and the related statements of income and cash flows and shareholders' equity, such balance sheets and statements to be prepared and certified by an Authorized Representative in an Officer's Certificate as having been prepared in accordance with GAAP except for footnotes and year-end adjustments, and to be in form reasonably satisfactory to the Agent; - 41 - SECTION 4.1.5.3. The Projections; and SECTION 4.1.5.4. The pro forma financial statements of the Borrower as of the Closing Date provided pursuant to SECTION 3.1.1.12. Each of the financial statements referred to above in SECTION 4.1.5.1 was prepared in accordance with GAAP (subject, in the case of interim statements, to the absence of footnotes and normal year-end adjustments) applied on a consistent basis, except as stated therein. To the best of the Borrower's knowledge, each of the financial statements referred to above in SECTIONS 4.1.5.1 and 4.1.5.4 fairly presents the financial condition or pro forma financial condition, as the case may be, of the Person being reported on at such dates and is complete and correct in all material respects and no Material Adverse Effect has occurred since the date thereof. The Projections were prepared by the Borrower in good faith and are based on reasonable assumptions, it being recognized that projections as to future results are not assertions of fact and that actual results for the periods cited therein may differ from the results projected therein. SECTION 4.1.6. NO LITIGATION. There are no actions, suits or proceedings pending or, to the knowledge of the Borrower, threatened against or affecting the Borrower and/or any Subsidiary or any of their properties before any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, which if determined adversely to the Borrower and/or any Subsidiary would draw into question the legal existence of the Borrower and/or any such Subsidiary and/or the validity, authorization and/or enforceability of any of the Financing Documents and/or any provision thereof and/or could have a Material Adverse Effect except those matters, if any, described on EXHIBIT 4.1.6 none of which, in Borrower's good faith opinion, will (i) have such Material Adverse Effect or (ii) draw into question (a) the legal existence of the Borrower and/or any such Subsidiary or (b) the validity, authorization and/or enforceability of any of the Financing Documents and/or any provision thereof. SECTION 4.1.7. REGULATION U. The Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying "margin stock" within the meaning of Regulation U of the Board of Governors of the Federal Reserve System (12 CFR Part 221), does not own and has no present intention of acquiring any such margin stock or a "margin security" within the meaning of Regulation G of the Board of Governors of the Federal Reserve System (12 CFR, Part 207). None of the proceeds of the Loans will be used directly or indirectly by the Borrower for the purpose of purchasing or carrying, or for the purpose of reducing or retiring any Indebtedness which was originally incurred to purchase or carry, any such margin security or margin stock or for any other purpose which might constitute the transaction contemplated hereby a "purpose credit" within the meaning of said Regulation G or Regulation U, or cause this Agreement to violate any other regulation of the Board of Governors of the Federal Reserve System or the Securities and Exchange Act of 1934, as amended, or any rules or regulations promulgated under either said statute. - 42 - SECTION 4.1.8. ABSENCE OF ADVERSE AGREEMENTS. Neither the Borrower nor any Subsidiary is a party to any indenture, loan or credit agreement or any lease or other agreement or instrument or subject to any corporate or partnership restriction which would have a Material Adverse Effect. SECTION 4.1.9. TAXES. The Borrower and each Subsidiary has filed all tax returns (federal, state and local) required to be filed and paid all taxes shown thereon to be due, including interest and penalties, except for those taxes, if any, which are being contested in good faith and by appropriate proceedings, and for which proper reserve or other provision has been made in accordance with GAAP and except where any failure to file or pay would not have a Material Adverse Effect on the Borrower or any Subsidiary and except as described in EXHIBIT 4.1.9. SECTION 4.1.10. ERISA. Borrower and any Commonly Controlled Entity do not maintain or contribute to any Plan which is not in substantial compliance with ERISA, or any Single Employer Plan which has incurred any accumulated funding deficiency within the meaning of sections 412 and 418 of the Code or which has applied for or obtained a waiver from the Internal Revenue Service of any minimum funding requirement under section 412 of the Code. Borrower and any Commonly Controlled Entity have not incurred any liability to the PBGC in connection with any Plan covering any employees of Borrower or any Commonly Controlled Entity in amount exceeding Fifty Thousand Dollars ($50,000) in the aggregate or ceased operations at any facility or withdrawn from any Plan in a manner which could subject any of them to liability under sections 4062(e), 4063 or 4064 of ERISA in amount exceeding Fifty Thousand Dollars ($50,000) in the aggregate, and know of no facts or circumstance which might give rise to any liability of Borrower or any Commonly Controlled Entity to the PBGC under Title IV of ERISA in amount exceeding Fifty Thousand Dollars ($50,000) in the aggregate. Borrower and any Commonly Controlled Entity have not incurred any withdrawal liability in amount exceeding Fifty Thousand Dollars ($50,000) in the aggregate (including but not limited to any contingent or secondary withdrawal liability) within the meaning of sections 4201 and 4202 of ERISA, to any Multiemployer Plan, and no event has occurred, and there exists no condition or set of circumstances known to the Borrower, which presents a risk of the occurrence of any withdrawal from or the partition, termination, reorganization or insolvency of any Multiemployer Plan which could result in any liability to a Multiemployer Plan in amount exceeding Fifty Thousand Dollars ($50,000) in the aggregate. Except for payments for which the minimum funding requirement has been waived under section 412 of the Code, full payment has been made of all amounts which Borrower and any Commonly Controlled Entity are required to have paid as contributions to any Plan under applicable law or under any plan or any agreement relating to any Plan to which Borrower or any Commonly Controlled Entity is a party. Borrower and each Commonly Controlled Entity have made adequate provision for reserves to meet contributions that have not been made because they are not yet due under the terms of any Plan or related agreements. Neither Borrower nor any Commonly Controlled Entity has any knowledge, nor do any of them have any reason to believe, that any Reportable Event which could result in a liability or - 43 - liabilities of Fifty Thousand Dollars ($50,000) or more in the aggregate has occurred with respect to any Plan. SECTION 4.1.11. OWNERSHIP OF PROPERTIES. SECTION 4.1.11.1. Except for Permitted Encumbrances, Borrower and any Subsidiary has good title to all of its properties and assets free and clear of all restrictions and Liens of any kind other than those which could not have a Material Adverse Effect or a material adverse effect on the validity, authorization and/or enforceability of the Financing Documents and/or any provision thereof. SECTION 4.1.11.2. EXHIBIT 4.1.11 accurately and completely lists the location of all real property owned or leased by Borrower or any Subsidiary. Borrower and each Subsidiary enjoys quiet possession under all material leases of real property to which it is a party as a lessee, and all of such leases are valid, subsisting and, to Borrower's knowledge, in full force and effect. SECTION 4.1.11.3. To Borrower's knowledge, except as specified in EXHIBIT 4.1.11, none of the real property occupied by Borrower or any Subsidiary is located within any federal, state or municipal flood plain zone. SECTION 4.1.11.4. Except as set forth in EXHIBIT 4.1.11, all of the material properties used in the conduct of the Borrower's and each Subsidiary's business (i) are in good repair, working order and condition (reasonable wear and tear excepted) and reasonably suitable for use in the operation of Borrower's, and each Subsidiary's business; and (ii) to Borrower's knowledge are currently operated and maintained, in all material respects, in accordance with the requirements of applicable governmental authorities. SECTION 4.1.12. ACCURACY OF REPRESENTATIONS AND WARRANTIES. None of Borrower's representations or warranties set forth in this Agreement or in any document or certificate furnished pursuant to this Agreement or in connection with the transactions contemplated hereby contains any untrue statement of a material fact or omits to state a material fact necessary to make any statement of fact contained herein or therein, in light of the circumstances under which it was made, not misleading; except that unless provided otherwise any such document or certificate which is dated speaks as of the date stated and not the present. SECTION 4.1.13. NO INVESTMENT COMPANY. Neither the Borrower nor any Subsidiary is an "investment company" or a company "controlled" by an "investment company" as such terms are defined in the Investment Company Act of 1940, as amended, which is required to register thereunder. SECTION 4.1.14. SOLVENCY, ETC. After giving effect to the consummation of each Loan outstanding and to be made under this Agreement as of the time this representation and warranty is given, the Borrower (a) will be able to pay its debts as they become due, (b) will have funds and capital sufficient to carry on its business and all businesses in which it is about to - 44 - engage, and (c) will own property in the aggregate having a value both at fair valuation and at fair saleable value in the ordinary course of the Borrower's business greater than the amount required to pay its Indebtedness, including for this purpose unliquidated and disputed claims. The Borrower will not be rendered insolvent by the execution and delivery of this Agreement and the consummation of any transactions contemplated herein. SECTION 4.1.15. APPROVALS. Except as set forth in EXHIBIT 4.1.3, all approvals required from all Persons including without limitation all governmental authorities with respect to the Financing Documents have been obtained. SECTION 4.1.16. OWNERSHIP INTERESTS. The schedule of ownership interests in the Borrower and any Subsidiaries set forth in EXHIBIT 1.1 is true, accurate and complete and the Investments to be made for all ownership interests disclosed therein have in fact been fully paid in immediately available Dollars after giving effect to the closing of the Related Transactions. SECTION 4.1.17. LICENSES, REGISTRATIONS, COMPLIANCE WITH LAWS, ETC. Except as set forth on EXHIBIT 4.1.17, the Borrower and each Subsidiary maintains in full force and effect all permits, governmental licenses, registrations and approvals, material to carrying out of Borrower's and each of the Subsidiaries' businesses as presently conducted and as required by law or the rules and regulations of any federal, foreign governmental, state, county or local association, corporation or governmental agency, body, instrumentality or commission having jurisdiction over the Borrower or any of the Subsidiaries, including but not limited to the United States Environmental Protection Agency, the United States Department of Labor, the United States Occupational Safety and Health Administration, the United States Equal Employment Opportunity Commission, the Federal Trade Commission and the United States Department of Justice and analogous and related state and foreign agencies. All existing authorizations, licenses and permits are in full force and effect, are duly issued in the name of, or validly assigned to the Borrower or a Subsidiary and the Borrower or a Subsidiary has full power and authority to operate thereunder. There is no material violation or material failure of compliance or, to Borrower's knowledge, allegation of such violation or failure of compliance on the part of the Borrower or any Subsidiary with any of the foregoing permits, licenses, registrations, approvals, rules or regulations and there is no action, proceeding or investigation pending or to the knowledge of the Borrower threatened nor has the Borrower or any Subsidiary received any notice of such which might result in the termination or suspension of any such permit, license, registration or approval which in any case could have a Material Adverse Effect. SECTION 4.1.18. PRINCIPAL PLACE OF BUSINESS; BOOKS AND RECORDS. The Borrower's chief executive offices are located at Borrower's addresses set forth in SECTION 9.6. All of the Borrower's books and records are kept at one or more of its addresses set forth in SECTION 9.6. SECTION 4.1.19. SUBSIDIARIES. The Borrower has only the Subsidiaries identified on EXHIBIT 1.1. SECTION 4.1.20. COPYRIGHT. Except as set forth in EXHIBIT 4.1.20 the Borrower has not violated any of the provisions of the Copyright Revision Act of 1976, 17 U.S.C. 101, - 45 - ET SEQ. The Borrower has taken all actions reasonably necessary to assert and protect its ownership interest in any copyrights used by the Borrower and any Subsidiary in the conduct of their respective business(es). EXHIBIT 4.1.20 accurately and completely sets forth all copyrights held by the Borrower or any of the Subsidiaries and contains exceptions to the representations contained in this SECTION 4.1.20. No inquiries regarding any such filings have been received by the Copyright Office. The Borrower has not allocated revenues in any manner inconsistent with the rules and regulations of the Copyright Office. SECTION 4.1.21. ENVIRONMENTAL COMPLIANCE. Neither the Borrower nor, to the knowledge of the Borrower, any other Person: SECTION 4.1.21.1. other than as disclosed on EXHIBIT 4.1.21, or in respect of Hazardous Material used or disposed of in compliance with law, has ever caused, permitted, or suffered to exist any Hazardous Material to be spilled, placed, held, located or disposed of on, under, or about, any of the facilities owned, leased or used by the Borrower (the "Premises"), or from the Premises into the atmosphere, any body of water, any wetlands, or on any other real property, nor to Borrower's knowledge does any Hazardous Material exist on, under or about the Premises; SECTION 4.1.21.2. has any knowledge that any of the Premises has ever been used (whether by the Borrower or, to the knowledge of the Borrower, by any other Person) as a treatment, storage or disposal (whether permanent or temporary) site for any Hazardous Waste as defined in 42 U.S.C.A. 6901, ET SEQ. (the Resource Recovery and Conservation Act); and SECTION 4.1.21.3. has any knowledge of any notice of violation, Lien or other notice issued by any governmental agency with respect to the environmental condition of the Premises or any other property occupied by the Borrower, or any other property which was included in the property description of the Premises or such other real property within the preceding three years except as disclosed to the Agent. SECTION 4.1.22. MATERIAL AGREEMENTS, ETC. EXHIBIT 4.1.22 attached hereto accurately and completely lists all Material Agreements to which the Borrower or any of the Subsidiaries are a party including without limitation all software licenses, and all material construction, engineering, consulting, employment, management, operating and related agreements, if any, which are presently in effect. All of the Material Agreements to which Borrower or any Subsidiary is a party, are legally valid, binding, and, to Borrower's knowledge, in full force and effect and neither the Borrower, any of the Subsidiaries nor, to Borrower's knowledge, any other parties thereto are in material default thereunder. SECTION 4.1.23. PATENTS, TRADEMARKS AND OTHER PROPERTY RIGHTS. EXHIBIT 4.1.23 attached hereto contains a complete and accurate schedule of all registered trademarks, registered copyrights and patents of the Borrower and/or any of the Subsidiaries, and pending applications therefor, and all other intellectual property in which the Borrower and/or any of the Subsidiaries has any rights other than "off-the shelf" software which is generally available to the general public at retail. - 46 - Except as set forth in EXHIBIT 4.1.23, the Borrower and any Subsidiaries own, possess, or have licenses to use all the patents, trademarks, service marks, trade names, copyrights and non-governmental licenses, and all rights with respect to the foregoing, necessary for the conduct of their respective businesses as now conducted, without, to the Borrower's knowledge any conflict with the rights of others with respect thereto. SECTION 4.1.24. RELATED TRANSACTION DOCUMENTS. The Borrower has, prior to the date hereof, delivered to the Lenders true copies of the Related Transaction Documents, and each and every amendment or modification thereto and, except for receipt and application of certain proceeds of the Loans, the Related Transactions have been completed in accordance with the Related Transaction Documents, without any waiver or amendment of any term or condition contained therein without the prior written approval of the Lenders, and in compliance with any applicable laws and necessary governmental authority approvals. . SECTION 4.1.25. MATERIAL ADVERSE EFFECT. No Material Adverse Effect has occurred and there exists no action, suit, investigation, litigation or proceeding pending or threatened in any court or before any arbitrator or governmental or regulatory agency or authority that could reasonably be expected to result in a Material Adverse Effect. SECTION 4.1.26. TRANSACTIONS WITH AFFILIATES. Except as set forth on EXHIBIT 5.2(3), or except as contemplated by the Related Transaction Documents and this Agreement, the Borrower and each Subsidiary have not engaged in any transaction or entered into any agreement with an Affiliate, except transactions which are in the ordinary course upon fair and reasonable terms and no less favorable to the Borrower or the Subsidiary than 5.1.10 could be obtained on an arm's length basis. ARTICLE 5. COVENANTS OF THE BORROWER SECTION 5.1. AFFIRMATIVE COVENANTS OF THE BORROWER OTHER THAN REPORTING REQUIREMENTS. From the date hereof and thereafter for so long as there is Indebtedness of the Borrower to any Lender and/or the Agent under any of the Financing Documents or any part of the Commitment is in effect, the Borrower will, with respect to itself and, unless noted otherwise below, with respect to each of its Subsidiaries, ensure that each Subsidiary will, unless the Majority Lenders shall otherwise consent in writing: SECTION 5.1.1. PAYMENT OF TAXES, ETC. Pay and discharge all taxes and assessments and governmental charges or levies imposed upon it or upon its income or profits, or upon any properties belonging to it, prior to the date on which penalties attach thereto, and all lawful claims for the same which, if unpaid, might become a Lien upon any of its properties, provided that (unless and until foreclosure, restraint, sale or any similar proceeding is pending and is not stayed, discharged or bonded within 30 days after commencement) the Borrower shall not be required to pay any such tax, assessment, charge, levy or claim which is being contested in good faith and by proper - 47 - proceedings and for which proper reserve or other provision has been made in accordance with GAAP, unless failure to pay could result in a Material Adverse Effect. SECTION 5.1.2. MAINTENANCE OF INSURANCE. Maintain insurance in accordance with the Security Documents including, without limitation, casualty, liability and business interruption insurance reasonably acceptable to the Majority Lenders and, to the extent not covered by any of the Security Documents, with responsible and reputable insurance companies or associations in such amounts and covering such risks as is usually carried by companies engaged in similar businesses and owning similar properties and in accordance with the requirements of any governmental agency having jurisdiction over the Borrower and/or any Subsidiary. The Borrower shall provide the Lenders with such evidence as the Agent may request from time to time as to the maintenance of all such insurance. In the event that the Borrower or any Subsidiary shall be entitled to receive any proceeds from any casualty insurance policies maintained by any of them on account of any interest of the Borrower and/or any Subsidiary in any property, which proceeds are in an aggregate amount in excess of $250,000 with respect to any occurrence or related series of occurrences in any 12-month period, such proceeds shall be received by the Agent and, to the extent that such proceeds result from a casualty to property of the Borrower and/or any Subsidiary, so long as no Default or Event of Default exists and is continuing and the Borrower elects to repair, replace or restore such property, such proceeds shall be released to the Borrower subject to reasonable procedures and conditions established by the Agent to the extent necessary to so repair, replace or restore such property within 3 months (or as soon as reasonably practicable if such restoration, replacement or repair is not susceptible to being completed within 3 months) from the date of receipt of such proceeds by the Agent and failing such application of said proceeds to so repair, replace or restore such property as provided above, such amounts shall be Extraordinary Receipts. Furthermore, with respect to all such amounts referenced in the immediately preceding sentence, the Agent shall have the right and is hereby constituted and appointed the true and lawful attorney irrevocable of the Borrower and each Subsidiary, in the name and stead of Borrower and each Subsidiary, but in the uncontrolled discretion of said attorney, (i) to adjust, sue for, compromise and collect any amounts due under such insurance policies in the event of loss and (ii) to give releases for any and all amounts received in settlement of losses under such policies; and the same shall, subject to SECTION 2.6.1.3 of this Agreement, at the option of the Agent, be applied, after first deducting the costs of collection, on account of any Indebtedness the payment of which is secured by any of the Financing Documents, whether or not then due, or, notwithstanding the claims of any subsequent lienor, be used or paid over to the Borrower in accordance with reasonable procedures established by the Agent for use in repairing or replacing any damaged or destroyed collateral under any of the Security Documents. SECTION 5.1.3. PRESERVATION OF EXISTENCE, ETC. Preserve and maintain in full force and effect its legal existence, and all material rights, franchises and privileges in the jurisdiction of its organization, preserve and maintain all material licenses, governmental approvals, trademarks, patents, trade secrets, copyrights and trade names owned or possessed by it and which are necessary or, in the reasonable business judgment of the Borrower, desirable in view of its business and operations or the ownership of its properties and qualify or remain qualified as a foreign corporation in each jurisdiction in which such qualification is necessary or, in its reasonable - 48 - business judgment, desirable in view of its business and operations and ownership of its properties except where the failure to so qualify will not have a Material Adverse Effect. SECTION 5.1.4. COMPLIANCE WITH LAWS, ETC. Comply with the requirements of all present and future applicable laws, rules, regulations and orders of any governmental authority having jurisdiction over it and/or its business including, without limitation, regulations of the United States Copyright Office, except where the failure to comply would not have a Material Adverse Effect. SECTION 5.1.5. VISITATION RIGHTS. Permit, during normal business hours and upon the giving of reasonable notice, the Agent, the Lenders and any agents or representatives thereof, to examine and make copies of (at Borrower's cost and expense) and abstracts from the records and books of account of, and visit the properties of the Borrower and any Subsidiary to discuss the affairs, finances and accounts of the Borrower or any Subsidiary with any of their partners, officers or management level employees and/or any independent certified public accountant of the Borrower and/or any Subsidiary. SECTION 5.1.6. KEEPING OF RECORDS AND BOOKS OF ACCOUNT. Keep adequate records and books of account, in which complete entries will be made in accordance with GAAP and with applicable requirements of any governmental authority having jurisdiction over the Borrower and/or any Subsidiary in question, reflecting all financial transactions. SECTION 5.1.7. MAINTENANCE OF PROPERTIES, ETC. Maintain and preserve all of its properties necessary or useful in the proper conduct of its business, in good working order and condition, ordinary wear and tear excepted, and in accordance with each of the Security Documents. SECTION 5.1.8. POST-CLOSING ITEMS. Complete in a timely fashion all actions required in the Post-Closing Letter. SECTION 5.1.9. OTHER DOCUMENTS, ETC. Except as otherwise required by this Agreement, pay, perform and fulfill all of its obligations and covenants under each material document, instrument or agreement to which it is a party including, without limitation, the Related Transaction Documents; provided that so long as the Borrower or any Subsidiary is contesting any claimed default by it or them under any of the foregoing by proper proceedings conducted in good faith and for which any proper reserve or other provision in accordance with and to the extent required by GAAP has been made, such default shall not be deemed a violation of this covenant. SECTION 5.1.10. MINIMUM FIXED CHARGE COVERAGE RATIO. Maintain at the end of each fiscal quarter of the Borrower in each period set forth below a Fixed Charge Coverage Ratio of not less than the ratio set forth below opposite such period, such ratio to be measured (i) at each Borrower fiscal quarter end on or prior to December 31, 1998 for the period commencing as of January 1, 1998 and ending on such fiscal quarter end and (ii) at - 49 - each Borrower fiscal quarter end thereafter for the rolling four Borrower fiscal quarter period consisting of the Borrower fiscal quarter then ending and the three immediately preceding Borrower fiscal quarters:
BORROWER FISCAL QUARTER(S) ENDING RATIO ================================= ===== March 31, 1998 1.05:1.00 June 30, 1998 1.05:1.00 September 30, 1998 1.10:1.00 December 31, 1998 1.15:1.00 March 31, 1999 1.15:1.00 June 30, 1999 1.15:1.00 September 30, 1999 1.20:1.00 December 31, 1999 1.20:1.00 March 31, 2000 1.20:1.00 June 30, 2000 1.20:1.00 September 30, 2000 1.20:1.00 December 31, 2000 and thereafter 1.25:1.00
SECTION 5.1.11. MINIMUM QUICK RATIO. Maintain at the end of each fiscal quarter of the Borrower in each period set forth below a ratio of (i) the sum of (w) cash on hand or on deposit in any bank or trust company which has not suspended business, (x) Cash Equivalent Investments (without duplication with (w)), (y) net outstanding amount of accounts receivable, less allowances for doubtful accounts and (z) unused borrowing availability under the Revolving Credit Loan to (ii) the sum of (x) Current Liabilities minus (y) the outstanding amount of the Revolving Credit Loan (only to the extent included in Current Liabilities) minus (z) current maturities of Indebtedness of not less than the ratio set forth below opposite such period:
BORROWER FISCAL QUARTER(S) ENDING RATIO ================================= ===== March 31, 1998 through December 31, 1998 1.35:1.00 March 31, 1999 through December 31, 1999 1.50:1.00 March 31, 2000 through December 31, 2000 1.75:1.00 March 31, 2001 and thereafter 2.00:1.00
Each item described in clauses (i) and (ii) of this SECTION 5.1.11 shall be calculated as of the last day of the Borrower fiscal quarter and include only the item(s) in question of the Borrower and its Subsidiaries on a consolidated basis. SECTION 5.1.12. MAXIMUM RATIO OF TOTAL SENIOR DEBT TO EBITDA. Maintain at the end of each fiscal quarter of the Borrower in each period set forth below a ratio of (i) total - 50 - Senior Debt on a consolidated basis as of the last day of such fiscal quarter to (ii) EBITDA, of not greater than the ratio set forth below opposite such period:
BORROWER FISCAL QUARTER(S) ENDING RATIO ================================= ===== March 31, 1998 3.50:1.00 June 30, 1998 3.50:1.00 September 30, 1998 3.25:1.00 December 31, 1998 3.00:1.00 March 31, 1999 2.75:1.00 June 30, 1999 2.50:1.00 September 30, 1999 2.25:1.00 December 31, 1999 2.00:1.00 March 31, 2000 2.00:1.00 June 30, 2000 1.75:1.00 September 30, 2000 1.75:1.00 December 31, 2000 1.50:1.00 March 31, 2001 1.50:1.00 June 30, 2001 1.50:1.00 September 30, 2001 1.50:1.00 December 31, 2001 and thereafter 1.00:1.00
SECTION 5.1.12A. MAXIMUM RATIO OF TOTAL INDEBTEDNESS FOR BORROWED MONEY TO EBITDA. Maintain at the end of each fiscal quarter of the Borrower in each period set forth below a ratio of (i) total Indebtedness for Borrowed Money of the Borrower and its Subsidiaries on a consolidated basis as of the last day of such fiscal quarter to (ii) EBITDA, of not greater than the ratio set forth below opposite such period:
BORROWER FISCAL QUARTER(S) ENDING RATIO ================================= ===== March 31, 1998 4.50:1.00 June 30, 1998 4.25:1.00 September 30, 1998 4.00:1.00 December 31, 1998 3.75:1.00 March 31, 1999 3.50:1.00 June 30, 1999 3.25:1.00 September 30, 1999 3.00:1.00 December 31, 1999 2.75:1.00 March 31, 2000 2.75:1.00 June 30, 2000 2.75:1.00 - 51 - September 30, 2000 2.75:1.00 December 31, 2000 2.50:1.00 March 31, 2001 2.50:1.00 June 30, 2001 2.50:1.00 September 30, 2001 2.50:1.00 December 31, 2001 and thereafter 2.00:1.00
PROVIDED, HOWEVER, that notwithstanding the above, from and after the repayment by the Borrower of any of the Subordinated Debt, the above ratios shall be deleted and the ratios set forth in SECTION 5.1.12 above shall be substituted therefore and shall thereafter be the ratios of the Total Indebtedness for Borrowed Money to EBITDA required for compliance with this SECTION 5.1.12A. SECTION 5.1.13. OFFICER'S CERTIFICATES AND REQUESTS. Provide each Officer's Certificate required under this Agreement and each Request so that the statements contained therein are accurate and complete in all material respects. SECTION 5.1.14. DEPOSITORY. Use the Agent as a principal depository of Borrower's funds. SECTION 5.1.15. CHIEF EXECUTIVE OFFICER. Maintain John L. Dwight, Jr. as chief executive officer of the Borrower and as the Person with principal executive, operating and management responsibility for the Borrower's business or obtain a replacement of comparable experience and training in the Borrower's industry reasonably satisfactory to the Majority Lenders within 120 days of his ceasing to act in such capacity. SECTION 5.1.16. NOTICE OF PURCHASE OF REAL ESTATE AND LEASES. Promptly notify the Agent in the event that the Borrower shall purchase any real estate or enter into any lease of real estate or of equipment material to the operation of the Borrower's business, supply the Agent with a copy of the related purchase agreement or of such lease, as the case may be, and if requested by the Agent, execute and deliver, or cause to be executed and delivered, to the Agent for the benefit of the Lenders a deed of trust, mortgage, assignment or other document, together with landlord consents, in the case of leased property, reasonably satisfactory in form and substance to the Agent, granting a valid first Lien (subject to any Liens permitted under SECTION 5.2.1 hereof) on such real property or leasehold as security for the Financing Documents, all subject to the limitations of SECTION 5.2.17. SECTION 5.1.17. ADDITIONAL ASSURANCES. From time to time hereafter, execute and deliver or cause to be executed and delivered, such additional instruments, certificates and documents, and take all such actions, as the Agent shall reasonably request for the purpose of implementing or effectuating the provisions of the Financing Documents, and upon the exercise by the Agent of any power, right, privilege or remedy pursuant to the Financing Documents which requires any consent, approval, registration, qualification or authorization - 52 - of any governmental authority or instrumentality, exercise and deliver all applications, certifications, instruments and other documents and papers that the Agent may be so required to obtain. SECTION 5.1.18. APPRAISALS. Permit the Agent and its agents, at any time and in the sole discretion of the Agent or at the request of the Majority Lenders, to conduct appraisals of the Borrower's business, the cost of which shall be borne by the Borrower. Prior to the occurrence of a Default or an Event of Default, Agent agrees to limit any such examinations to no more than one (1) such examination in any calendar year. SECTION 5.1.19. ENVIRONMENTAL COMPLIANCE. Comply strictly and in all material respects with the requirements of all federal, state, and local environmental laws; notify the Lenders promptly in the event of any spill of Hazardous Material materially affecting the Premises occupied by the Borrower from time to time; forward to the Lenders promptly any written notices relating to such matters received from any governmental agency; and pay promptly when due any uncontested fine or assessment against the Premises. SECTION 5.1.20. REMEDIATION. Immediately contain and remove any Hazardous Material found on the Premises in compliance with applicable laws and at the Borrower's expense, subject however, to the right of the Agent, at the Agent's option but at the Borrower's expense, to have an environmental engineer or other representative review the work being done. SECTION 5.1.21. SITE ASSESSMENTS. Promptly upon the request of the Agent, based upon the Agent's reasonable belief that a material Hazardous Waste or other environmental problem exists with respect to any Premises, provide the Agent with a Phase I environmental site assessment report and, if Agent finds a reasonable basis for further assessment in such Phase I assessment, a Phase II environmental site assessment report, or an update of any existing report, all in scope, form and content and performed by such company as may be reasonably satisfactory to the Agent. SECTION 5.1.22. INDEMNITY. Indemnify, defend, and hold the Agent and the Lenders, their agents or employees and each Person, if any, who controls any of the Agent or the Lenders within the meaning of Section 15 of the Securities Act of 1933, as amended, and each and all and any of them (the "Indemnified Parties") harmless from and against any claim, cost, damage (including without limitation consequential damages), expense (including without limitation reasonable attorneys' fees and expenses), loss, liability, or judgment now or hereafter arising as a result of any claim for environmental cleanup costs, any resulting damage to the environment and any other environmental claims against the Borrower, any Subsidiary, and/or the Indemnified Parties transactions contemplated by this Agreement, or any of the Premises. The provisions of this Section shall continue in effect and shall survive (among other events), until the applicable statute of limitations has expired, any termination of this Agreement, foreclosure, a deed in lieu transaction, payment and satisfaction of the Obligations of Borrower, and release of any collateral for the Loans. SECTION 5.1.23. TRADEMARKS, COPYRIGHTS, ETC. Concurrently with the acquisition of any trademark, tradename, copyright, patent or service mark collaterally assign and grant a - 53 - first priority perfected Lien thereon to the Agent pursuant to documents in form and substance reasonably satisfactory to the Agent. SECTION 5.1.24. MINIMUM INTEREST COVERAGE RATIO. Maintain at the end of each fiscal quarter of the Borrower in each period set forth below a ratio of (i) EBITDA to (ii) Interest Expense of not less than the ratio set forth below opposite such period such ratio to be measured (i) at each Borrower fiscal quarter end on or prior to December 31, 1998 for the period commencing as of January 1, 1998 and ending on such fiscal quarter end and (ii) at each Borrower fiscal quarter end thereafter for the rolling four Borrower fiscal quarter period consisting of the Borrower fiscal quarter then ending and the three immediately preceding Borrower fiscal quarters:
BORROWER FISCAL QUARTER(S) ENDING RATIO ================================= ===== March 31, 1998 2.00:1.00 June 30, 1998 2.25:1.00 September 30, 1998 2.50:1.00 December 31, 1998 2.75:1.00 March 31, 1999 3.00:1.00 June 30, 1999 3.00:1.00 September 30, 1999 3.00:1.00 December 31, 1999 3.00:1.00 March 31, 2000 3.00:1.00 June 30, 2000 3.00:1.00 September 30, 2000 3.00:1.00 December 31, 2000 3.25:1.00 March 31, 2001 3.25:1.00 June 30, 2001 3.25:1.00 September 30, 2001 3.25:1.00 December 31, 2001 3.50:1.00 March 31, 2002 3.50:1.00 June 30, 2002 3.50:1.00 September 30, 2002 3.50:1.00 December 31, 2002 3.75:1.00 March 31, 2003 3.75:1.00 June 30, 2003 3.75:1.00 September 30, 2003 3.75:1.00 December 31, 2003 4.00:1.00 March 31, 2004 4.00:1.00 - 54 - June 30, 2004 4.00:1.00 September 30, 2004 4.00:1.00 December 31, 2004 4.25:1.00
SECTION 5.2. NEGATIVE COVENANTS OF THE BORROWER. From the date hereof and thereafter for so long as there is Indebtedness of the Borrower to any Lender and/or the Agent under any of the Financing Documents or any part of the Commitment is in effect, the Borrower will not, with respect to itself and, unless noted otherwise below, with respect to each of the Subsidiaries, will ensure that each such Subsidiary will not, without the prior written consent of the Majority Lenders: SECTION 5.2.1. LIENS, ETC. Create, incur, assume or suffer to exist any Lien of any nature, upon or with respect to any of its properties, now owned or hereafter acquired, or assign as collateral or otherwise convey as collateral, any right to receive income, except that the foregoing restrictions shall not apply to any Liens: SECTION 5.2.1.1. For taxes, assessments or governmental charges or levies on property if the same shall not at the time be delinquent or thereafter can be paid without penalty or interest, or (if foreclosure, distraint, sale or other similar proceedings shall not have been commenced or if commenced not stayed, bonded or discharged within 30 days after commencement) are being contested in good faith and by appropriate proceedings diligently conducted and for which proper reserve or other provision has been made in accordance with and to the extent required by GAAP; SECTION 5.2.1.2. Imposed by law, such as landlords', carriers', warehousemen's and mechanics' liens, bankers' set off rights and other similar Liens arising in the ordinary course of business for sums not yet due or being contested in good faith and by appropriate proceedings diligently conducted and for which proper reserve or other provision has been made in accordance with and to the extent required by GAAP; SECTION 5.2.1.3. Arising in the ordinary course of business out of pledges or deposits under worker's compensation laws, unemployment insurance, old age pensions, or other social security or retirement benefits, or similar legislation; SECTION 5.2.1.4. Arising from or upon any judgment or award, provided that such judgment or award is being contested in good faith by proper appeal proceedings and only so long as execution thereon shall be stayed; SECTION 5.2.1.5. Those set forth on EXHIBIT 1.8; SECTION 5.2.1.6. Those now or hereafter granted pursuant to the Security Documents or otherwise now or hereafter granted to the Agent for the benefit of the Lenders as collateral for the Loans and/or Borrower's other Obligations arising in connection with or under any of the Financing Documents; - 55 - SECTION 5.2.1.7. Deposits to secure the performance of bids, trade contracts (other than for Borrowed Money), leases, statutory obligations, surety bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of the Borrower's or any Subsidiary's business; SECTION 5.2.1.8. Easements, rights of way, restrictions and other similar encumbrances incurred in the ordinary course of business which, in the aggregate, are not substantial in amount, and which do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of business by any Borrower or any Subsidiary; SECTION 5.2.1.9. Liens securing Indebtedness permitted to exist under SECTION 5.2.8.3; provided that the Lien securing any such Indebtedness is limited to the item of property purchased or leased in each case; SECTION 5.2.1.10. UCC-1 financing statements filed solely for notice or precautionary purposes by lessors under operating leases which do not secure Indebtedness and which are limited to the items of equipment leased pursuant to the lease in question; and SECTION 5.2.2. ASSUMPTIONS, GUARANTIES, ETC. OF INDEBTEDNESS OF OTHER PERSONS. Assume, guarantee, endorse or otherwise become directly or contingently liable in connection with any obligation or Indebtedness of any other Person, except: SECTION 5.2.2.1. Guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; SECTION 5.2.2.2. Assumptions, guaranties, endorsements and contingent liabilities within the definition of Indebtedness and permitted by SECTION 5.2.8; and SECTION 5.2.2.3. Those set forth on EXHIBIT 5.2.2. SECTION 5.2.3. ACQUISITIONS, DISSOLUTION, ETC. Acquire, in one or a series of transactions, all or any substantial portion of the assets or ownership interests in another Person, or dissolve, liquidate, wind up, merge or consolidate or combine with another Person or sell, assign, lease or otherwise dispose of (whether in one transaction or in a series of transactions) any material assets, whether now owned or hereafter acquired, or any of the Borrower's or any Subsidiary's interests in real property other than assets which are replaced within 30 days of any asset sale, assignment, lease or disposition with assets of like kind, usefulness and value. SECTION 5.2.4. CHANGE IN NATURE OF BUSINESS. Make any material change in the nature of its business. SECTION 5.2.5. OWNERSHIP. Cause or permit the occurrence of any Change of Control. - 56 - SECTION 5.2.6. SALE AND LEASEBACK. Enter into any sale and leaseback arrangement with any lender or investor, or enter into any leases except in the normal course of business at reasonable rents comparable to those paid for similar leasehold interests in the area. SECTION 5.2.7. SALE OF ACCOUNTS, ETC. Sell, assign, discount or dispose in any way of any accounts receivable, promissory notes or trade acceptances held by the Borrower or any Subsidiary, with or without recourse, except in the ordinary course of the Borrower's or any Subsidiary's business. SECTION 5.2.8. INDEBTEDNESS. Incur, create, become or be liable directly or indirectly in any manner with respect to or permit to exist any Indebtedness except: SECTION 5.2.8.1. Indebtedness under the Financing Documents; SECTION 5.2.8.2. Indebtedness with respect to trade payable obligations and other normal accruals and customer deposits in the ordinary course of business not yet due and payable in accordance with customary trade terms or with respect to which the Borrower or any Subsidiary is contesting in good faith the amount or validity thereof by appropriate proceedings and then only to the extent such person has set aside on its books adequate reserves therefor in accordance with and to the extent required by GAAP; SECTION 5.2.8.3. Indebtedness with respect to Capitalized Lease Obligations and purchase money Indebtedness with respect to real or personal property in an aggregate amount outstanding at any time not to exceed $1,000,000; provided that the amount of any purchase money Indebtedness does not exceed 90% of the lesser of the cost or fair market value of the asset purchased with the proceeds of such Indebtedness; SECTION 5.2.8.4. Unsecured Indebtedness in an aggregate amount outstanding at any time not to exceed $250,000; SECTION 5.2.8.5. Indebtedness listed on EXHIBIT 3.1.1.8; SECTION 5.2.8.6. Indebtedness owing by the Borrower to any Subsidiary or by any Secured Domestic Subsidiary to the Borrower or any other Secured Domestic Subsidiary; provided, however, that any Indebtedness owing by the Borrower to any Affiliate shall only be permitted upon subordination terms and conditions reasonably acceptable to the Agent. SECTION 5.2.8.7. Indebtedness permitted by SECTION 5.2.2. SECTION 5.2.8.8. Indebtedness outstanding as a refinancing of Indebtedness permitted under another clause of this SECTION 5.2.8 other than SECTIONS 5.2.8.2 or 5.2.8.8; provided that such Indebtedness as refinanced continues to qualify as permitted Indebtedness under the clause of this SECTION 5.2.8 under which the refinanced Indebtedness was permitted under this SECTION 5.2.8. - 57 - SECTION 5.2.8.9. The Subordinated Debt. SECTION 5.2.8.10. Indebtedness owing by Wells Japan to the Borrower or any Subsidiary not to exceed $1,500,000 in the aggregate outstanding at any one time (after taking into account and reduced by the amount of any Investments in Wells Japan under SECTION 5.2.12(VI) hereof. SECTION 5.2.8.11. Indebtedness owing by Wells Singapore to the Borrower or any Subsidiary not to exceed $500,000 in the aggregate outstanding at any one time (after taking into account and reduced by the amount of any Investments in Wells Singapore under SECTION 5.2.12(VII) hereof SECTION 5.2.9. OTHER AGREEMENTS. In a manner materially adverse to the Agent or any of the Lenders, amend any of the terms or conditions of any of the Related Transaction Documents, its certificate of incorporation or bylaws (or comparable applicable charter and governance document), the Subordination Agreement or any subordination agreement or any indenture, agreement, document, note or other instrument evidencing, securing or relating to any other Indebtedness permitted under SECTION 5.2.8. SECTION 5.2.10. PREPAYMENTS OF INDEBTEDNESS. Except as provided in SECTION 2.6.1.5 hereof, make (or give any notice in respect thereof) any voluntary or optional payment or prepayment or redemption or acquisition for value of or exchange of any Indebtedness other than the Loans. SECTION 5.2.11. DIVIDENDS, PAYMENTS AND DISTRIBUTIONS. Other than dividends or distributions declared or paid by any Subsidiary to the Borrower, declare or pay any dividends, management fees or like fees or make any other distribution of cash or property or both (other than compensation for services rendered to the Borrower and/or any Subsidiary) or use any of its assets for payment, purchase, conversion, redemption, retention, acquisition or retirement of any beneficial interest in the Borrower or set aside or reserve assets for sinking or like funds for any of the foregoing purposes, make any other distribution by reduction of capital or otherwise in respect of any beneficial interest in the Borrower or permit any Subsidiary which is not a wholly-owned Subsidiary so to do. SECTION 5.2.12. INVESTMENTS IN OR TO OTHER PERSONS. Make or commit to make any Investment in or to any other Person (including, without limitation, any Subsidiary) other than (i) advances to employees for business expenses not to exceed $50,000 in the aggregate outstanding for any one employee and not to exceed $250,000 in the aggregate outstanding at any one time to all such employees, (ii) other employee loans not to exceed $100,000 in the aggregate outstanding at any one time to all such employees, (iii) Cash Equivalent Investments, (iv) Investments in accounts, contract rights and chattel paper (as defined in the Uniform Commercial Code) and notes receivable, arising or acquired in the ordinary course of business, (v) Investments in Secured Domestic Subsidiaries, (vi) Investments in Wells Japan not to exceed $1,500,000 in the aggregate outstanding at any one time, (vii) Investments in Wells Singapore not to exceed $500,000 - 58 - in the aggregate outstanding at any one time, and (viii) Investments described on EXHIBIT 5.2.2. SECTION 5.2.13. TRANSACTIONS WITH AFFILIATES. Except as contemplated by the Related Transaction Documents and this Agreement, engage in any transaction or enter into any agreement with an Affiliate, or in the case of Affiliates or Subsidiaries, with the Borrower or another Affiliate or Subsidiary, except transactions which are in the ordinary course, upon fair and reasonable terms and no less favorable to the Borrower than could be obtained on an arm's length basis except as set forth on EXHIBIT 5.2.13. SECTION 5.2.14. CHANGE OF FISCAL YEAR; ACCOUNTING POLICIES. Change its accounting policies, reporting practices or its fiscal year from that which was in effect on the Closing Date. SECTION 5.2.15. SUBORDINATION OF CLAIMS. Subordinate any present or future claim against or obligation of another Person, except as ordered in a bankruptcy or similar creditors' remedy proceeding of such other Person. SECTION 5.2.16. COMPLIANCE WITH ERISA. With respect to Borrower and any Commonly Controlled Entity (a) withdraw from or cease to have an obligation to contribute to, any Multiemployer Plan, (b) engage in any "prohibited transaction" (as defined in Section 4975 of the Code) involving any Plan, (c) except for any deficiency caused by a waiver of the minimum funding requirement under sections 412 and/or 418 of the Code, as described above, incur or suffer to exist any material "accumulated funding deficiency" (as defined in section 302 of ERISA and section 412 of the Code) of the Borrower or any Commonly Controlled Entity, whether or not waived, involving any Single Employer Plan, (d) incur or suffer to exist any Reportable Event or the appointment of a trustee or institution of proceedings for appointment of a trustee for any Single Employer Plan if, in the case of a Reportable Event, such event continues unremedied for ten (10) days after notice of such Reportable Event pursuant to sections 4043(a), (c) or (d) of ERISA is given, if in the reasonable opinion of the Majority Lenders any of the foregoing is likely to result in a material liability of the Borrower or any Commonly Controlled Entity, (e) permit the assets held under any Plan to be insufficient to protect all accrued benefits, (f) allow or suffer to exist any event or condition, which presents a material risk of incurring a material liability of the Borrower or any Commonly Controlled Entity to PBGC by reason of termination of any such Plan or (g) cause or permit any Plan maintained by Borrower and/or any Commonly Controlled Entity to be out of compliance with ERISA. For purposes of this SECTION 5.2.16 "material liability" shall be deemed to mean any liability of Fifty Thousand Dollars ($50,000) or more in the aggregate. SECTION 5.2.17. CAPITAL EXPENDITURES. Incur Capital Expenditures (i) during 1998 in excess of $8,700,000, (ii) during 1999 in excess of $9,500,000, (iii) during 2000 in excess of $9,500,000, (iv) during 2001 in excess of $11,000,000, (v) during 2002 in excess of $12,000,000, (vi) during 2003 in excess of $13,000,000, and (vii) during 2004 in excess of $14,000,000. - 59 - Subject to the foregoing, the Borrower shall make its Capital Expenditures substantially in accordance with and for the purposes outlined in the Budget for the Borrower fiscal year in question. SECTION 5.2.18. HAZARDOUS WASTE. Become involved, or permit, to the extent reasonably possible after the exercise by the Borrower of reasonable due diligence and preventive efforts, any tenant of its real property to become involved, in any operations at such real property generating, storing, disposing, or handling Hazardous Material or any other activity that could lead to the imposition on the Borrower or the Agent or any Lender, or any such real property of any material liability or Lien under any environmental laws. SECTION 5.2.19. OTHER RESTRICTIONS ON LIENS. Enter into any agreement or otherwise agree to or grant any restriction substantially similar to the provisions of SECTION 5.2.1 hereof or which would otherwise have the effect of prohibiting, restricting, impeding or interfering with the creation subsequent to the Closing Date of Liens to secure the Obligations. SECTION 5.2.20. LIMITATION ON CREATION OF SUBSIDIARIES, ETC. Establish, create or acquire any Subsidiary or become the general partner in any general partnership, except for (i) any such Subsidiary which becomes a Secured Domestic Subsidiary or (ii) any Subsidiaries which do not become Secured Domestic Subsidiaries so long as the assets owned or held by any such Subsidiaries in the aggregate do not exceed five percent (5%) of the total assets of the Borrower. SECTION 5.3. REPORTING REQUIREMENTS. From the date hereof and thereafter for so long as the Borrower is indebted to any Lender and/or the Agent under any of the Financing Documents, the Borrower will, unless the Majority Lenders shall otherwise consent in writing, furnish or cause to be furnished to the Agent for distribution to the Lenders: SECTION 5.3.1. As soon as possible and in any event upon acquiring knowledge of an Event of Default or Default, continuing on the date of such statement, the written statement of an Authorized Representative setting forth details of such Event of Default or Default and the actions which the Borrower has taken and proposes to take with respect thereto; SECTION 5.3.2. As soon as practicable after the end of each Borrower fiscal year and in any event within 90 days after the end of each such fiscal year, consolidated and consolidating balance sheets of the Borrower and any Subsidiaries as at the end of such year, and the related statements of income and cash flows or shareholders' equity of the Borrower and any Subsidiaries setting forth in each case the corresponding figures for the preceding fiscal year, such statements to be certified by a firm of independent certified public accountants selected by Borrower and reasonably acceptable to the Majority Lenders, to be accompanied by a true copy of said auditors' management letter, if one was provided to the Borrower, and to contain a statement to the effect that such accountants have examined SECTIONS 5.1.10 through 5.1.13 and 5.2.17 and that no Default or Event of Default exists on account of Borrower's failure to have been in compliance therewith on the date of such statement; - 60 - SECTION 5.3.3. As soon as is practicable after the end of each fiscal quarter of each Borrower fiscal year and in any event within 45 days thereafter, consolidated balance sheets of the Borrower and any Subsidiaries as of the end of such period and the related statements of income and cash flows and shareholders' equity of the Borrower and any Subsidiaries, subject to changes resulting from year-end adjustments, together, subject to SECTION 5.3.7, with a comparison to the Budget for the applicable period, such balance sheets and statements to be prepared and certified by an Authorized Representative in an Officer's Certificate as having been prepared in accordance with GAAP except for footnotes and year-end adjustments, and to be in form reasonably satisfactory to the Agent; SECTION 5.3.4. Simultaneously with the furnishing of each of the year-end consolidated and consolidating financial statements of the Borrower and any Subsidiaries to be delivered pursuant to SECTION 5.3.2 and each of the consolidated quarterly statements of the Borrower and the Subsidiaries to be delivered pursuant to SECTION 5.3.3 an Officer's Certificate of an Authorized Representative which shall contain a statement in the form of EXHIBIT 3.1.1.10 to the effect that no Event of Default or Default has occurred, without having been waived in writing, or if there shall have been an Event of Default not previously waived in writing pursuant to the provisions hereof, or a Default, such Officer's Certificate shall disclose the nature thereof and the actions the Borrower has taken and prepare to take with respect thereto. Each such Officer's Certificate shall also contain a calculation of and certify to the accuracy of the amounts required to be calculated in the financial covenants of the Borrower contained in this Agreement and described in EXHIBIT 3.1.1.10; SECTION 5.3.5. Promptly after the commencement thereof, notice of all material actions, suits and proceedings before any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, affecting the Borrower and/or any Subsidiary; SECTION 5.3.6. As soon as is practicable after the Closing Date, (i) and in any event within 35 days thereafter, the following consolidated financial statements of Wells and Subsidiaries of Wells: statements of income and cash flow for the periods from May 29, 1994 to June 3, 1995, from June 4, 1995 to May 2, 1996, and from May 3, 1996 to May 3, 1997 and consolidated balance sheets as of May 2, 1996 and May 3, 1997; and (ii) in any event within 50 days thereafter, the following consolidated financial statements of Wells and Subsidiaries of Wells: audited statements of income and cash flow for the periods from May 4, 1997 through the Closing Date and an audited balance sheet as of the Closing Date, net sales and net income for the years ended May 31, 1993 and May 31, 1994, total assets as of May 31, 1993, May 31, 1994 and May 31, 1995 and such other selected financial data as defined in Regulation S-K (or any successor provision or regulation promulgated by the Securities and Exchange Commission) for such periods as the Borrower shall have reasonably requested. SECTION 5.3.7. On or before February 15 of each year, an updated proposed budget, prepared on a quarterly basis, and updated financial projections for the Borrower and any Subsidiaries on a consolidated basis (together, the "Budget") for such fiscal year, setting forth in detail reasonably satisfactory - 61 - to the Agent the projected results of operations of the Borrower and any Subsidiaries on a consolidated quarterly basis, detailed Capital Expenditures plan and stating underlying assumptions and accompanied by a written statement of an Authorized Representative certifying as to the approval of such Budget by Borrower's board of directors. SECTION 5.3.8. Such other information respecting the Business Condition of the Borrower or any Subsidiaries as the Agent or any Lender may from time to time reasonably request; SECTION 5.3.9. Written notice of the fact and of the details of any filing with the Securities and Exchange Commission of a Schedule 13(d) disclosure statement, given promptly after the Borrower acquires knowledge thereof; provided, however, that this clause shall not be deemed to constitute or imply any consent to any such sale or transfer; SECTION 5.3.10. Prompt written notice of loss of any key personnel or any Material Adverse Effect and an explanation thereof and of the actions the Borrower and/or such Subsidiary propose to take with respect thereto; and SECTION 5.3.11. Written notice of the following events, as soon as possible and in any event within 15 days after the Borrower knows or has reason to know thereof: (i) the occurrence or expected occurrence of any Reportable Event with respect to any Plan, or (ii) the institution of proceedings or the taking or expected taking of any other action by PBGC or the Borrower or any Commonly Controlled Entity to terminate, withdraw or partially withdraw from any Plan and, with respect to any Multiemployer Plan, the Reorganization (as defined in Section 4241 of ERISA) or Insolvency (as defined in Section 4245 of ERISA) of such Multiemployer Plan and in addition to such notice, deliver to the Agent whichever of the following may be applicable: (a) an Officer's Certificate setting forth details as to such Reportable Event and the action that the Borrower or Commonly Controlled Entity proposes to take with respect thereto, together with a copy of any notice of such Reportable Event that may be required to be filed with PBGC, or b) any notice delivered by PBGC evidencing its intent to institute such proceedings or any notice to PBGC that such Plan is to be terminated, as the case may be. ARTICLE 6. EVENTS OF DEFAULT SECTION 6.1. EVENTS OF DEFAULT. The Borrower shall be in default under each of the Financing Documents, upon the occurrence of any one or more of the following events ("Events of Default"): SECTION 6.1.1. If the Borrower shall fail to make due and punctual payment of any principal, fees, interest and/or other amounts payable under this Agreement as provided in any Note and/or in this Agreement when the same is due and payable except that it shall not be an Event of Default if any interest, fees and/or other amounts (excluding principal) is paid within 5 - 62 - Business Days after it is due and payable, whether at the due date thereof or at a date fixed for prepayment or if the Borrower shall fail to make any such payment of fees, interest, principal and/or any other amount under this Agreement and/or under any Note on the date when such payment becomes due and payable by acceleration; SECTION 6.1.2. If the Borrower or any Subsidiary shall make an assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall admit in writing its inability to pay its debts as they become due or shall file a voluntary petition in bankruptcy, or shall file any petition or answer seeking any reorganization, arrangement, composition, adjustment, liquidation, dissolution or similar relief under the present or any future federal bankruptcy laws or other applicable federal, state or other statute, law or regulation, or shall seek or consent to or acquiesce in the appointment of any trustee, receiver or liquidator of it or of all or any substantial part of its properties, or if partnership or corporate action shall be taken for the purpose of effecting any of the foregoing; or SECTION 6.1.3. To the extent not described in SECTION 6.1.2, (i) if the Borrower or any Subsidiary shall be the subject of a bankruptcy proceeding, or (ii) if any proceeding against any of them seeking any reorganization, arrangement, composition, adjustment, liquidation, dissolution, or similar relief under the present or any future federal bankruptcy law or other applicable federal, foreign, state or other statute, law or regulation shall be commenced, or (iii) if any trustee, receiver or liquidator of any of them or of all or any substantial part of any or all of their properties shall be appointed without their consent or acquiescence; provided that in any of the cases described above in this SECTION 6.1.3, such proceeding or appointment shall not be an Event of Default if the Borrower or the Subsidiary in question shall cause such proceeding or appointment to be discharged, vacated, dismissed or stayed within sixty (60) days after commencement thereof; or SECTION 6.1.4. If final judgment or judgments aggregating more than $500,000 shall be rendered against the Borrower or any Subsidiary and shall remain undischarged, unstayed or unpaid for an aggregate of thirty (30) days (whether or not consecutive) after entry thereof; or SECTION 6.1.5. If the Borrower or any Subsidiary shall default (after giving effect to any applicable grace period) in the due and punctual payment of the principal of or interest on any Indebtedness exceeding in the aggregate $500,000 (other than the Loans), or if any default shall have occurred and be continuing after any applicable grace period under any mortgage, note or other agreement evidencing, securing or providing for the creation of such Indebtedness, which results in the acceleration of such Indebtedness or which permits, or with the giving of notice would permit, any holder or holders of any such Indebtedness to accelerate the stated maturity thereof; or SECTION 6.1.6. If there shall be a default in the performance of the Borrower's obligations under SECTION 5.1.3 (insofar as such Section requires the preservation of the corporate existence of the Borrower or any Subsidiary), any of SECTIONS 5.1.2, 5.1.10 through 5.1.13 or SECTION 5.2 of this - 63 - Agreement or under any covenant, representation or warranty contained in any of the Security Documents for which no cure period is provided in such Security Document; or SECTION 6.1.7. If there shall be any Default in the performance of any covenant or condition contained in this Agreement or in any of the other Financing Documents to be observed or performed pursuant to the terms hereof or any Financing Document, as the case may be, or to the extent such Default would have a Material Adverse Effect, by the Borrower under any of the Related Transaction Documents, other than a covenant or condition referred to in any other subsection of this SECTION 6.1 and such Default shall continue unremedied or unwaived, (i) in the case of any covenant or condition contained in SECTION 5.3, for fifteen (15) Business Days, or (ii) in the case of any other covenant or condition for which no other grace period is provided, for thirty (30) days, or (iii) in the case of any other covenant or condition for which another grace period is provided, for such grace period, or (iv) if any of the representations and warranties made or deemed made by the Borrower to the Agent and/or any Lender pursuant to any of the Financing Documents proves to have been false or misleading in any material respect when made and such falseness or misleading representation or warranty would be reasonably likely to have a material adverse effect on the Agent or any Lender or their rights and remedies or a Material Adverse Effect; or SECTION 6.1.8. If there shall be any attachment of any deposits or other property of the Borrower and/or any Subsidiary in the possession of any Lender or any attachment of any other property of the Borrower and/or any Subsidiary in an amount exceeding $500,000, which shall not be discharged, vacated or stayed within thirty (30) days of the date of such attachment; or SECTION 6.1.9. Any certification of the financial statements, furnished to the Agent pursuant to SECTION 5.3.2, shall contain any qualification; provided, however, that such qualifications will not be deemed an Event of Default if in each case (i) such certification shall state that the examination of the financial statements covered thereby was conducted in accordance with generally accepted auditing standards, including but not limited to all such tests of the accounting records as are considered necessary in the circumstances by the independent certified public accountants preparing such statements, (ii) such financial statements were prepared in accordance with GAAP and (iii) such qualification does not involve the "going concern" status of the entity being reported upon. ARTICLE 7. REMEDIES OF LENDERS Upon the occurrence and during the continuance of any one or more of the Events of Default, the Agent, at the request of the Majority Lenders, shall, by written notice to the Borrower, declare the obligation of the Lenders to make or maintain the Loans to be terminated, whereupon the same and the Commitment shall forthwith terminate, and the Agent, at the request of the Majority Lenders, shall, by notice to the Borrower, declare the entire unpaid principal amount of each Note and all fees and interest accrued and unpaid thereon and/or under this Agreement, - 64 - and/or any of the other Financing Documents and any and all other Indebtedness under this Agreement, each Note and/or any of the other Financing Documents to the Agent and/or any of the Lenders and/or to any holder of all or any portion of each Note to be forthwith due and payable, whereupon each Note, and all such accrued fees and interest and other such Indebtedness shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower; provided, however, that upon the occurrence of an Event of Default under SECTIONS 6.1.2 or 6.1.3, all of the unpaid principal amount of each Note, all fees and interest accrued and unpaid thereon and/or under this Agreement and/or under any of the other Financing Documents and any and all other such Indebtedness of the Borrower to any of the Lenders and/or to any such holder shall thereupon be due and payable in full without any need for the Agent and/or any Lender to make any such declaration or take any action and the Lenders' obligations to make the Loans shall simultaneously terminate. The Agent shall, in accordance with the votes of the Majority Lenders, exercise all remedies on behalf of and for the account of each Lender and on behalf of its respective Pro Rata Share of the Loans, its Note and Indebtedness of the Borrower owing to it or any of the foregoing, including, without limitation, all remedies available under or as a result of this Agreement, the Notes or any of the other Financing Documents or any other document, instrument or agreement now or hereafter securing any Note without any such exercise being deemed to modify in any way the fact that each Lender shall be deemed a separate creditor of the Borrower to the extent of its Note and Pro Rata Share of the Loans and any other amounts payable to such Lender under this Agreement and/or any of the other Financing Documents and the Agent shall be deemed a separate creditor of the Borrower to the extent of any amounts owed by the Borrower to the Agent. ARTICLE 8. AGENT SECTION 8.1. APPOINTMENT. The Agent is hereby appointed as administrative and collateral agent hereunder and each Lender hereby authorizes the Agent to act under the Financing Documents as its Agent hereunder and thereunder, respectively. The Agent agrees to act as such upon the express conditions and the Lenders contained in this Article 8. The provisions of this Article 8 are solely for the benefit of the Agent, and, except as expressly provided in SECTION 8.6, neither the Borrower nor any third party shall have any rights as a third party beneficiary of any of the provisions hereof. In performing its functions and duties under this Agreement and the other Financing Documents to which the Agent is a party, the Agent shall act solely as Agent of the Lenders and does not assume nor shall the Agent be deemed to have assumed any obligation towards or relationship of agency or trust with or for the Borrower, any Affiliate or any Subsidiary. SECTION 8.2. POWERS; GENERAL IMMUNITY. SECTION 8.2.1. DUTIES SPECIFIED. Each Lender irrevocably authorizes the Agent to take such action on such Lender's behalf, including, without limitation, to execute and deliver the Financing Documents to which the Agent is a party and - 65 - to exercise such powers hereunder and under the Financing Documents and other instruments and agreements referred to herein as are specifically delegated to the Agent by the terms hereof and thereof, together with such powers as are reasonably incidental thereto. The Agent shall have only those duties and responsibilities which are expressly specified in this Agreement or in any of the Financing Documents and may perform such duties by or through its agents or employees. The duties of the Agent shall be mechanical and administrative in nature; and the Agent shall not have by reason of this Agreement or any of the Financing Documents a fiduciary relationship in respect of any Lender; and nothing in this Agreement or any of the Security Documents, expressed or implied, is intended to or shall be so construed as to impose upon the Agent any obligations in respect of this Agreement or any of the Financing Documents or the other instruments and agreements referred to herein except as expressly set forth herein or therein. Without limiting any of the other provisions of this Article 8, the Agent agrees to exercise the same degree of care hereunder in its capacity as Agent for the Lenders as the Agent does to protect its own interest as a Lender. SECTION 8.2.2. NO RESPONSIBILITY FOR CERTAIN MATTERS. The Agent shall not be responsible to any Lender for the execution, effectiveness, genuineness, validity, enforceability, collectibility or sufficiency of any of the Financing Documents or any other document, instrument or agreement now or hereafter executed in connection herewith or therewith, or for any representations, warranties, recitals or statements made herein or therein or made in any written or oral statement or in any financial or other statements, instruments, reports, certificates or any other documents in connection herewith or therewith by or on behalf of the Borrower, and/or any Subsidiary to the Agent or any Lender, or be required to ascertain or inquire as to the performance or observance of any of the terms, conditions, provisions, covenants or agreements contained herein or therein or as to the use of the proceeds of the Loans or of the existence or possible existence of any Default or Event of Default. SECTION 8.2.3. EXCULPATORY PROVISIONS. Neither the Agent nor any of its officers, directors, employees or agents shall be liable to any Lender for any action taken or omitted hereunder or under any of the Financing Documents, or in connection herewith or therewith unless caused by its or their gross negligence or willful misconduct. If the Agent shall request instructions from Lenders with respect to any action (including the failure to take an action) in connection with any of the Financing Documents, the Agent shall be entitled to refrain from taking such action unless and until the Agent, shall have received instructions from the Majority Lenders (or all of the Lenders if the action requires their consent). Without prejudice to the generality of the foregoing, (i) the Agent shall be entitled to rely, and shall be fully protected in relying, upon any communication, instrument or document believed by it to be genuine and correct and to have been signed or sent by the proper person or persons, and shall be entitled to rely and shall be protected in relying on opinions and judgments of attorneys (who may be attorneys for the Borrower and/or any Subsidiary), accountants, experts and other professional advisors selected by it; and (ii) no Lender shall have any right of action whatsoever against the Agent as a result of the Agent acting or (where so instructed) refraining from acting under any of the Financing Documents or the other instruments and agreements referred to herein in accordance with the instructions of the Majority Lenders (or all of the Lenders if the action requires their consent). The Agent shall be entitled to refrain from exercising any power, discretion or authority vested in it under any of the Financing Documents or the other instruments and agreements - 66 - referred to herein unless and until it has obtained the instructions of the Majority Lenders (or all of the Lenders if the action requires their consent). SECTION 8.2.4. AGENT ENTITLED TO ACT AS LENDER. The agency hereby created shall in no way impair or affect any of the rights and powers of, or impose any duties or obligations upon, Fleet in its individual capacity as a Lender hereunder. With respect to its participation in the Loans and the Commitment, Fleet shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not performing the duties and functions delegated to it hereunder, and the term "Lender" or "Lenders" or any similar term shall, unless the context clearly otherwise indicates, include Fleet in its individual capacity. The Agent and its affiliates may accept deposits from, lend money to and generally engage in any kind of banking, trust, financial advisory or other business with the Borrower, or any Affiliate or Subsidiary as if it were not performing the duties specified herein, and may accept fees and other consideration from the Borrower and/or any of such other Persons for services in connection with this Agreement and otherwise without having to account for the same to Lenders. SECTION 8.3. REPRESENTATIONS AND WARRANTIES; NO RESPONSIBILITY FOR APPRAISAL OF CREDITWORTHINESS. Each Lender represents and warrants that it has made its own independent investigation of the financial condition and affairs of the Borrower and any Subsidiaries of any of them in connection with the making of the Loans hereunder and has made and shall continue to make its own appraisal of the creditworthiness of the Borrower and the Subsidiaries. The Agent shall not have any duty or responsibility, either initially or on a continuing basis, to make any such investigation or any such appraisal on behalf of Lenders or to provide any Lender with any credit or other information with respect thereto whether coming into its possession before the making of any Loan or any time or times thereafter (except for information received by the Agent under SECTION 5.3 hereof which the Agent will promptly forward to the Lenders), and the Agent shall further not have any responsibility with respect to the accuracy of or the completeness of the information provided to any of the Lenders. SECTION 8.4. RIGHT TO INDEMNITY. Each Lender severally agrees to indemnify the Agent proportionately to its Pro Rata Share of the Loans, to the extent the Agent shall not have been reimbursed by or on behalf of the Borrower, for and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including, without limitation, counsel fees and disbursements) or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against the Agent in performing its duties hereunder or in any way relating to or arising out of this Agreement and/or any of the other Financing Documents; PROVIDED that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Agent's gross negligence or willful misconduct. If any indemnity furnished to the Agent for any purpose shall, in the opinion of the Agent, be insufficient or become impaired, the Agent may call for additional indemnity and cease, or not commence, to do the acts indemnified against until such additional indemnity is furnished. SECTION 8.5. PAYEE OF NOTE TREATED AS OWNER. The Agent may deem and treat the payee of any Note as the owner thereof for all purposes hereof unless and until a written notice of the - 67 - assignment or transfer thereof shall have been filed with the Agent. Any request, authority or consent of any person or entity who, at the time of making such request or giving such authority or consent, is the holder of any Note shall be conclusive and binding on any subsequent holder, transferee or assignee of that Note or of any Note or Notes issued in exchange for such Note. SECTION 8.6. RESIGNATION BY AGENT. SECTION 8.6.1. The Agent may resign from the performance of all its functions and duties under the Financing Documents at any time by giving 30 days' prior written notice to the Borrower and each of the Lenders. Such resignation shall take effect upon the acceptance by a successor Agent, of appointment pursuant to SECTIONS 8.6.2 and 8.6.3 below or as otherwise provided below. SECTION 8.6.2. Upon any such notice of resignation, the Majority Lenders shall appoint a successor Agent, who shall be a Lender and, so long as no Default or Event of Default exists and is continuing, who shall be reasonably satisfactory to the Borrower and in any event shall be an incorporated bank or trust company with a combined surplus and undivided capital of at least Five Hundred Million Dollars ($500,000,000). SECTION 8.6.3. If a successor Agent shall not have been so appointed within said 30 day period, the resigning Agent, with the consent of the Borrower, which shall not be unreasonably withheld or delayed, shall then appoint a successor Agent, who shall be a Lender and who shall serve as the Agent, until such time, if any, as the Majority Lenders, and so long as no Default or Event of Default exists and is continuing, with the consent of the Borrower, which shall not be unreasonably withheld or delayed, appoint a successor Agent as provided above. SECTION 8.6.4. If no successor Agent has been appointed pursuant to SECTIONS 8.6.2 or 8.6.3 by the 40th day after the date such notice of resignation was given by the resigning Agent, the resigning Agent's resignation shall become effective and the Majority Lenders shall thereafter perform all the duties of the resigning Agent under the Financing Documents including without limitation directing the Borrower on how to submit Requests and Interest Rate Elections and otherwise on administration of the Agent's duties under the Financing Documents and the Borrower shall comply therewith so long as such directions do not have a Material Adverse Effect on the Borrower or any Subsidiary until such time, if any, as the Majority Lenders, and so long as no Default or Event of Default exists and is continuing, with the consent of the Borrower, which shall not be unreasonably withheld or delayed, appoint a successor Agent, as provided above. SECTION 8.7. SUCCESSOR AGENT. Upon the acceptance of any appointment as the Agent hereunder by a successor Agent, that successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent and the retiring Agent, shall be discharged from its duties and obligations as the Agent under the Financing Documents. After any retiring Agent's resignation hereunder as the Agent the provisions of this Article 8 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was the Agent under the Financing Documents. - 68 - ARTICLE 9. MISCELLANEOUS SECTION 9.1. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. SECTION 9.1.1. Except to the extent prohibited by applicable law, the Borrower irrevocably: SECTION 9.1.1.1. agrees that any suit, action, or other legal proceeding arising out of any of the Financing Documents or any of the Loans may be brought in the courts of record of The Commonwealth of Massachusetts or any other state(s) in which any of the Borrower's assets are located or the courts of the United States located in The Commonwealth of Massachusetts or any other state(s) in which any of the Borrower's assets are located; SECTION 9.1.1.2. consents to the jurisdiction of each such court in any such suit, action or proceeding; and SECTION 9.1.1.3. waives any objection which it may have to the laying of venue of such suit, action or proceeding in any of such courts. For such time as any of the Indebtedness of the Borrower to any Lender and/or the Agent shall be unpaid in whole or in part and/or the Commitment is in effect, the Borrower irrevocably designates the registered agent or agent for service of process of the Borrower as reflected in the records of the Secretary of State of The Commonwealth of Massachusetts as its registered agent, and, in the absence thereof, the Secretary of State of The Commonwealth of Massachusetts as its agent to accept and acknowledge on its behalf service of any and all process in any such suit, action or proceeding brought in any such court and agrees and consents that any such service of process upon such agent and written notice of such service to the Borrower by registered or certified mail shall be taken and held to be valid personal service upon the Borrower regardless of where the Borrower shall then be doing business and that any such service of process shall be of the same force and validity as if service were made upon it according to the laws governing the validity and requirements of such service in each such state and waives any claim of lack of personal service or other error by reason of any such service. Any notice, process, pleadings or other papers served upon the aforesaid designated agent shall, within three (3) Business Days after such service, be sent by the method provided therefor under SECTION 9.6 to the Borrower at its address set forth in this Agreement. EACH OF THE PARTIES HERETO HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF ANY DISPUTE BETWEEN THE BORROWER AND THE AGENT AND/OR THE LENDERS WITH RESPECT TO THE FINANCING DOCUMENTS AND/OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREBY. SECTION 9.2. RIGHTS AND REMEDIES CUMULATIVE. No right or remedy conferred upon or reserved to the Agent and/or the Lenders in any of the Financing Documents is intended to be - 69 - exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given under any of the Financing Documents or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy under any of the Financing Documents, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. SECTION 9.3. DELAY OR OMISSION NOT WAIVER. No delay in exercising or failure to exercise by the Agent and/or the Lenders of any right or remedy accruing upon any Default or Event of Default shall impair any such right or remedy or constitute a waiver of any such Default or Event of Default or an acquiescence therein. Every right and remedy given by any of the Financing Documents or by law to the Agent and/or any of the Lenders may be exercised from time to time, and as often as may be deemed expedient, by the Agent and/or any of the Lenders. SECTION 9.4. WAIVER OF STAY OR EXTENSION LAWS. The Borrower covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of any of the Financing Documents; and the Borrower (to the extent that it may lawfully do so) hereby expressly waives all benefit and advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Agent and/or any of the Lenders, but will suffer and permit the execution of every such power as though no such law had been enacted, except to the extent the Agent or any Lender is guilty of willful misconduct or gross negligence. SECTION 9.5. AMENDMENTS, ETC. No amendment, modification, termination, or waiver of any provision of any of the Financing Documents nor consent to any departure by the Borrower therefrom shall in any event be effective unless the same shall be in a written notice given to the Borrower by the Agent and consented to in writing by the Majority Lenders (or by the Agent acting alone if any specific provision of this Agreement provides that the Agent, acting alone, may grant such amendment, modification, termination, waiver or departure) and the Agent shall give any such notice if the Majority Lenders so consent or direct the Agent to do so; provided, however, that any such amendment, modification, termination, waiver or consent shall require a written notice given to the Borrower by the Agent and consented to in writing by all of the Lenders if the effect thereof is to (i) change any of the provisions affecting the interest rate on the Loans, (ii) extend or modify the Commitment, (iii) discharge or release the Borrower from its obligation to repay all principal due under the Loans or release any collateral or guaranty for the Loans, (iv) change any Lender's Pro Rata Share of the Commitment or the Loans, (v) modify this SECTION 9.5, (vi) change the definition of Majority Lenders, (vii) extend any scheduled due date for payment of principal, interest or fees or (viii) permit the Borrower to assign any of its rights under or interest in this Agreement, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. Any amendment or modification of this Agreement must be signed by the Borrower, the Agent and at least all of the Lenders consenting thereto who shall then hold the Pro Rata Shares of the Loans required for such amendment or modification under this SECTION 9.5 and the Agent shall sign any such amendment if such Lenders so consent or direct the Agent to do so provided that any Lender dissenting therefrom shall be - 70 - given an opportunity to sign any such amendment or modification. Any amendment of any of the Security Documents must be signed by each of the parties thereto. No notice to or demand on the Borrower and no consent, waiver or departure from the terms of this Agreement granted by the Agent and/or the Lenders in any case shall entitle the Borrower to any other or further notice or demand in similar or other circumstances. SECTION 9.6. ADDRESSES FOR NOTICES, ETC. All notices, requests, demands and other communications provided for hereunder (other than those which, under the terms of this Agreement, may be given by telephone, which shall be effective when received verbally) shall be in writing (including telecopied communication) and mailed (provided that in the case of items referred to in the next-to-last sentence of SECTION 9.1 and the items set forth below as requiring a copy to legal counsel for the Borrower, the Agent or a Lender, such items shall be mailed by overnight courier for delivery the next Business Day), telecopied or delivered to the applicable party at the addresses indicated below: If to the Borrower: PCD Inc. 2 Technology Drive Peabody, Massachusetts 01960-7977 Attention: John L. Dwight, Jr. Telecopy: (978) 532-6800 With a copy to (if given pursuant to any of SECTIONS 5.3.1, 5.3.5, 5.3.9, 5.3.10 and 5.3.11): Hill & Barlow One International Place Boston, Massachusetts 02110-2607 Attention: Thomas C. Chase, Esquire Telecopy: (617) 428-3500 If to Fleet National Bank as the Agent and/or a Lender: Fleet National Bank Mailstop: MA/OF/D07 One Federal Street Boston, Massachusetts 02110 Attention: Thomas W. Davies, Senior Vice President Telecopy: (617) 346-1633 With a copy to (if given pursuant to any of SECTIONS 5.3.1, 5.3.5, 5.3.9, 5.3.10 and 5.3.11) Hinckley, Allen & Snyder 28 State Street Boston, Massachusetts 02109 - 71 - Attention: Malcolm Farmer III, Esquire Telecopy: (617) 345-9020 If to any other Lender, to the address set forth on EXHIBIT 1.9. or, as to each party, at such other address as shall be designated by such party in a written notice to each other party complying as to the delivery with the terms of this Section. All such notices, requests, demands and other communications shall be effective when received. Requests, certificates, other items provided pursuant to SECTION 5.3 and other routine mailings or notices need not be accompanied by a copy to legal counsel for the Lenders or the Borrower. SECTION 9.7. COSTS, EXPENSES AND TAXES. The Borrower agrees to pay on demand the reasonable fees and out-of-pocket expenses of Messrs. Hinckley, Allen & Snyder, counsel for the Agent and of any local counsel retained by the Agent in connection with the preparation, execution, delivery and administration (excluding expenses of any Lender's sale of a participation in or sale or assignment of all or a portion of such Lender's Commitment or Loans other than any such sale pursuant to SECTIONS 2.2.3 or 2.9.7) of the Financing Documents and the Loans. The Borrower agrees to pay on demand all reasonable costs and expenses (including without limitation reasonable attorneys' fees) incurred by the Agent and/or any Lender, upon or after the occurrence and during the continuance of any Default or Event of Default, if any, in connection with the enforcement of any of the Financing Documents and any amendments, waivers, or consents with respect thereto. In addition, the Borrower shall pay on demand any and all stamp and other taxes and fees payable or determined to be payable in connection with the execution and delivery of the Financing Documents, and agrees to save the Lenders and the Agent harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay such taxes or fees, except those resulting from the Lenders' or Agent's gross negligence or willful misconduct. SECTION 9.8. PARTICIPATIONS. Subject to compliance with the proviso in the first sentence of SECTION 9.11, any Lender may sell participations in all or part of the Loans made by it and/or its Pro Rata Share of the Commitment or any other interest herein to a financial institution having at least $500,000,000 of assets, in which event the participant shall not have any rights under any of the Financing Documents (the participant's rights against such Lender in respect of that participation to be those set forth in the Agreement executed by such Lender in favor of the participant relating thereto) and all amounts payable by the Borrower hereunder or thereunder shall be determined as if such Lender had not sold such participation. Such Lender may furnish any information concerning the Borrower and any Subsidiary in the possession of such Lender from time to time to participants (including prospective participants); provided that such Lender and any participant comply with the proviso in SECTION 9.11.7 as if any such participant was a Substituted Lender. SECTION 9.9. BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit of the Borrower, the Agent and the Lenders and their respective successors and assigns, except that the Borrower shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of the Agent and the Lenders. This - 72 - Agreement and all covenants, representations and warranties made herein and/or in any of the other Financing Documents shall survive the making of the Loans, the execution and delivery of the Financing Documents and shall continue in effect so long as any amounts payable under or in connection with any of the Financing Documents or any other Indebtedness of the Borrower to the Agent and/or any Lender remains unpaid or the Commitment remains outstanding; provided, however, that SECTIONS 2.2.3 and 9.7 shall, except to the extent agreed to in a pay-off letter by the Agent and the Lenders in their complete discretion, survive and remain in full force and effect for 90 days following repayment in full of all amounts payable under or in connection with all of the Financing Documents and any other such Indebtedness. SECTION 9.10. ACTUAL KNOWLEDGE. For purposes of this Agreement, neither the Agent nor any Lender shall be deemed to have actual knowledge of any fact or state of facts unless the senior loan officer or any other officer responsible for the Borrower's account established pursuant to this Agreement at the Agent or such Lender, shall, in fact, have actual knowledge of such fact or state of facts or unless written notice of such fact shall have been received by the Agent or such Lender in accordance with SECTION 9.6. SECTION 9.11. SUBSTITUTIONS AND ASSIGNMENTS. Upon the request of any Lender, the Agent and such Lender may assign all or any portion of its Pro Rata Share of the Commitment and the Loans, without the prior consent of the Borrower, to (i) a Federal Reserve Bank, (ii) an Affiliate and (iii) another Lender, and in all other instances only with the prior consent of the Borrower, which consent shall not be unreasonably withheld, conditioned or delayed, and may, subject to the terms and conditions hereinafter set forth, take the actions set forth below to substitute one or more financial institutions having at least $500,000,000 in assets (a "Substituted Lender") as a Lender or Lenders hereunder having an amount of the Loans as specified in the relevant Substitution Agreement executed in connection therewith; provided that no Lender, Selling Lender or Substituted Lender shall have a Pro Rata Share of the Commitment and the Loans in the aggregate of less than $5,000,000 and Fleet and/or its Affiliates shall retain for their own account at least 15% of the Commitment. SECTION 9.11.1. In connection with any such substitution the Substituted Lender and the Agent shall enter into a Substitution Agreement in the form of EXHIBIT 9.11.1 hereto (a "Substitution Agreement") pursuant to which such Substituted Lender shall be substituted for the Lender requesting the substitution in question (any such Lender being hereinafter referred to as a "Selling Lender") to the extent of the reduction in the Selling Lender's portion of the Loans specified therein. In addition, such Substituted Lender shall assume such of the obligations of each Selling Lender under the Financing Documents as may be specified in such Substitution Agreement and this Agreement shall be amended by execution and delivery of each Substitution Agreement to include such Substituted Lender as a Lender for all purposes under the Financing Documents and to substitute for the then existing EXHIBIT 1.9 to this Agreement a new EXHIBIT 1.9 in the form of Schedule A to such Substitution Agreement setting forth the portion of the Loans belonging to each Lender following execution thereof. Each Lender and the Borrower shall countersign and accept delivery of each Substitution Agreement. Each Lender shall be responsible for the payment of its legal fees, if any, in connection with any such substitution and assignment. - 73 - SECTION 9.11.2. Without prejudice to any other provision of this Agreement, each Substituted Lender shall, by its execution of a Substitution Agreement, agree that neither the Agent nor any Lender is any way responsible for or makes any representation or warranty as to: (a) the accuracy and/or completeness of any information supplied to such Substituted Lender in connection therewith, (b) the financial condition, creditworthiness, affairs, status or nature of the Borrower and/or any of the Subsidiaries or the observance by the Borrower, or any other party of any of its obligations under this Agreement or any of the other Financing Documents or (c) the legality, validity, effectiveness, adequacy or enforceability of any of the Financing Documents. SECTION 9.11.3. The Agent shall be entitled to rely on any Substitution Agreement delivered to it pursuant to this SECTION 9.11 which is complete and regular on its face as to its contents and appears to be signed on behalf of the Substituted Lender which is a party thereto, and the Agent shall have no liability or responsibility to any party as a consequence of relying thereon and acting in accordance with and countersigning any such Substitution Agreement. The effective date of each Substitution Agreement shall be the date specified as such therein and each Lender prior to such effective date shall, for all purposes hereunder, be deemed to have and possess all of their respective rights and obligations hereunder up to 12:00 o'clock Noon on the effective date thereof. SECTION 9.11.4. Upon delivery to the Agent of any Substitution Agreement pursuant to and in accordance with this SECTION 9.11 and acceptance thereof by the Agent (which delivery shall be evidenced and accepted exclusively and conclusively by the Agent's countersignature thereon pursuant to the terms hereof without which such Substitution Agreement shall be ineffective): (i) except as provided hereunder and in SECTION 9.11.5, the respective rights of each Selling Lender and the Borrower against each other under the Financing Documents with respect to the portion of the Loans being assigned or delegated shall be terminated and each Selling Lender and the Borrower shall each be released from all further obligations to the other hereunder with respect thereto (all such rights and obligations to be so terminated or released being referred to in this SECTION 9.11 as "Discharged Rights and Obligations"); and (ii) the Borrower and the Substituted Lender shall each acquire rights against each other and assume obligations towards each other which differ from the Discharged Rights and Obligations only in so far as the Borrower and the Substituted Lender have assumed and/or acquired the same in place of the Selling Lender in question; and (iii) the Agent, the Substituted Lender and the other Lenders shall acquire the same rights and assume the same obligations between themselves as they would have acquired and assumed had such Substituted Lender been an original party to this Agreement as a Lender possessing the Discharged Rights and Obligations acquired and/or assumed by it in consequence of the delivery of such Substitution Agreement to the Agent. SECTION 9.11.5. Discharged Rights and Obligations shall not include, and there shall be no termination or release pursuant to this SECTION 9.11 of (i) any rights or obligations arising pursuant to any of the Financing Documents in respect of the period or in respect of payments hereunder made during the period prior to the effective date of the relevant Substitution Agreement or, (ii) any rights or obligations relating to the - 74 - payment of any amount which has fallen due and not been paid hereunder prior to such effective date or rights or obligations for the payment of interest, damages or other amounts becoming due hereunder as a result of such nonpayment. SECTION 9.11.6. With respect to any substitution of a Substituted Lender taking place after the Closing Date, the Borrower shall issue to such Substituted Lender and to such Selling Lender, new Notes reflecting the inclusion of such Substituted Lender as a Lender and the reduction in the respective Loans of such Selling Lender, such new Notes to be issued against receipt by the Borrower of the existing Notes of such Lender. The Selling Lender or the Substituted Lender shall pay to the Agent for its own account an assignment fee in the amount of $2,500 for each assignment hereunder, which shall be payable at or before the effective date of the assignment. SECTION 9.11.7. Each Lender may furnish to any financial institution having at least $500,000,000 in assets which such Lender proposes to make a Substituted Lender or to a Substituted Lender any information concerning such Lender, the Borrower and any Subsidiary in the possession of that Lender from time to time; provided that any Lender providing any confidential information about the Borrower and/or any Subsidiary to any such financial institution shall first obtain such financial institution's agreement to keep confidential any such confidential information. SECTION 9.12. PAYMENTS PRO RATA. The Agent agrees that promptly after its receipt of each payment from or on behalf of the Borrower in respect of any obligations of the Borrower hereunder it shall distribute such payment to the Lenders pro rata based upon their respective Pro Rata Shares, if any, of the obligations with respect to which such payment was received. Each of the Lenders agrees that, if it should receive any amount hereunder (whether by voluntary payment, by realization upon security, by the exercise of the right of setoff under SECTION 2.5.2 or otherwise or banker's lien, by counterclaim or cross action, by the enforcement of any right under the Financing Documents, or otherwise), which is applicable to the payment of the Obligations of a sum which with respect to the related sum or sums received by other Lenders is in a greater proportion than the total amount of such Obligation then owed and due to such Lender bears to the total amount of such Obligation then owed and due to all of the Lenders immediately prior to such receipt, except for any amounts received pursuant to SECTION 2.2.3, then such Lender receiving such excess payment shall purchase for cash without recourse or warranty from the other Lenders an interest in the Obligations of the Borrower to such Lenders in such amount as shall result in a proportional participation by all the Lenders in such amount; provided further, however, that if all or any portion of such excess amount is thereafter recovered from such Lender, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest. SECTION 9.13. INDEMNIFICATION. The Borrower irrevocably agrees to and does hereby indemnify and hold harmless Agent and each of the Lenders, their agents or employees and each Person, if any, who controls any of the Agent and the Lenders within the meaning of Section 15 of the Securities Act of 1933, as amended, and each and all and any of them (the "Indemnified Parties"), against any and all losses, claims, actions, causes of action, - 75 - damages or liabilities (including any amount paid in settlement of any action, commenced or threatened and any amount described in SECTION 8.4) (collectively, the "Damages"), joint or several, to which they, or any of them, may become subject under statutory law or at common law, and to reimburse the Indemnified Parties for any legal or other out-of-pocket expenses reasonably incurred by it or them in connection with investigating, preparing for or defending against any of the Indemnified Parties, insofar as such losses, claims, damages, liabilities or actions arise out of or are related to any act or omission of the Borrower and/or any Subsidiary with respect to (i) the Related Transaction, as it may be modified from time to time by any of the parties thereto, (ii) this Agreement, any of the Notes, any of the Financing Documents, any of the Loans and/or any use made or proposed to be made with the proceeds of said Loans, (iii) any acquisition or proposed acquisition or any other similar business combination or proposed business combination by the Borrower and/or any of its Subsidiaries and/or its Affiliates (whether by acquisition or exchange of capital stock or other securities or by acquisition of all or substantially all of the assets of any Person), (iv) any offering of securities by the Borrower and/or any Subsidiary after the date hereof and/or in connection with the Securities and Exchange Act of 1933 or (v) any failure to comply with any applicable federal, state or foreign governmental law, rule, regulation, order or decree, including without limitation, any Damages which arise out of or are based upon any untrue statement or alleged untrue statement of a material fact with respect to matters relative to any of the foregoing contained in any document distributed in connection therewith, or the omission or alleged omission to state in any of the foregoing a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, but excluding any Damages to the extent arising from or due to, as determined in a final nonappealable judgment by a court of competent jurisdiction, the gross negligence or willful misconduct of any of the Indemnified Parties; provided, however, that notwithstanding the foregoing, no Indemnified Party shall have any liability (whether direct or indirect, in contract or tort of otherwise) to the Borrower or any Subsidiaries or to their respective security holders or creditors except for direct (as opposed to consequential damages) determined in a final nonappealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party's gross negligence or willful misconduct. In the case of an investigation, litigation or proceeding to which the indemnity described in this paragraph applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by the Borrower or any Subsidiaries or to their respective security holders or creditors or an Indemnified Party or an Indemnified Party is otherwise a party thereto and whether or not the Related Transaction and the transactions contemplated by the Financing Documents are consummated. Promptly upon receipt of notice of the commencement of any action, or information as to any threatened action against any of the Indemnified Parties in respect of which indemnity or reimbursement may be sought from the Borrower on account of the agreement contained in this SECTION 9.13, notice shall be given to the Borrower in writing of the commencement or threatening thereof, together with a copy of all papers served, but the omission so to notify the Borrower of any such action shall not release the Borrower from any liability which it may have to such Indemnified Parties unless, and only to the extent that, such omission materially prejudiced Borrower's ability to defend against such action. - 76 - In case any such action shall be brought against any of the Indemnified Parties, the Borrower shall be entitled to participate in (and, to the extent that it shall wish, to select counsel and to direct) the defense thereof at its own expense. Any of the Indemnified Parties shall have the right to employ its or their own counsel in any case, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless the employment of such counsel shall have been authorized in writing by the Borrower in connection with the defense of such action or the Borrower shall not have employed counsel to have charge of the defense of such action or such Indemnified Party shall have received an opinion from an independent counsel that there may be defenses available to it which are different from or additional to those available to the Borrower (in which case the Borrower shall not have the right to direct the defense of such action on behalf of such Indemnified Party), in any of which events the same shall be borne by the Borrower. If any Indemnified Party settles any claim or action with respect to which the Borrower has agreed to indemnify such Indemnified Party pursuant to the terms hereof, the Borrower shall have no liability pursuant to this SECTION 9.13 to such Indemnified Party with respect to such claim or action unless the Borrower shall have consented in writing to the terms of such settlement. The provisions of SECTION 9.13 shall be effective only to the fullest extent permitted by law. The provisions of this SECTION 9.13 shall continue in effect and shall survive (among other events), until the applicable statute of limitations has expired, any termination of this Agreement, foreclosure, a deed in lieu transaction, payment and satisfaction of the Obligations of Borrower, and release of any collateral for the Loans. SECTION 9.14. GOVERNING LAW. This Agreement and each Note shall be governed by, and construed in accordance with, the laws of The Commonwealth of Massachusetts without regard to such state's conflict of laws rules. SECTION 9.15. SEVERABILITY OF PROVISIONS. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. SECTION 9.16. HEADINGS. Article and Section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose. SECTION 9.17. COUNTERPARTS. This Agreement may be executed and delivered in any number of counterparts each of which shall be deemed an original, and this Agreement shall be effective when at least one counterpart hereof has been executed by each of the parties hereto. [SIGNATURES APPEAR ON NEXT PAGE] - 77 - IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as a sealed instrument by their respective officers thereunto duly authorized, as of December 26, 1997. In the presence of: PCD INC. /s/ Dennis Townley By: /s/ John L. Dwight, Jr. - --------------------- ------------------------ Dennis Townley John L. Dwight, Jr. Chairman of the Board In the presence of: FLEET NATIONAL BANK, as Agent for the Lenders and as a Lender /s/ Laurie C. Wilkins By: /s/ Thomas W. Davies - ---------------------- ------------------------ Laurie C. Wilkins Thomas W. Davies Senior Vice President STATE STREET BANK AND TRUST COMPANY, as a Lender By: /s/ Bruce S. Daniels ------------------------ Bruce S. Daniels Vice President IMPERIAL BANK, as a Lender By: /s/ Roy Liu ------------------------ Roy Liu FVP EASTERN BANK, as a Lender By: /s/ John P. Farmer ------------------------ John P. Farmer Vice President - 78 - EX-4 5 EXHIBIT 10.2 UNLIMITED GUARANTY THIS UNLIMITED GUARANTY, dated as of December 26, 1997 by WELLS ELECTRONICS, INC., an Indiana corporation having its principal place of business at 52940 Olive Road, South Bend, Indiana (the "Guarantor"), in favor of FLEET NATIONAL BANK, a national banking association organized under the laws of the United States having an office at One Federal Street, Boston, Massachusetts 02110 ("Agent"), as Agent for itself and each of the other Lenders who now are or hereafter become parties to the hereinafter defined Loan Agreement. Capitalized terms used but not otherwise defined herein shall have the meanings assigned thereto in the Loan Agreement (as such term is defined below). RECITALS WHEREAS, Agent, the other Lenders, and PCD INC., a Massachusetts corporation, having a principal place of business at 2 Technology Drive, Peabody, Massachusetts 01960-7977 ( the "Principal Debtor") have this day entered into that certain Loan Agreement (as the same may be amended from time to time, the "Loan Agreement") pursuant to the terms of which the Lenders have agreed to make Loans to Principal Debtor up to a maximum aggregate principal amount of $90,000,000.00; and WHEREAS, Principal Debtor owns 100% of the issued and outstanding capital stock of the Guarantor and the Guarantor deems it to the Guarantor's financial advantage and benefit to execute this Guaranty. NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Guarantor agrees as follows: 1. GUARANTY OF PAYMENT AND PERFORMANCE. The Guarantor hereby guarantees to the Lenders and Agent the full and punctual payment when due (whether at maturity, by acceleration or otherwise) and the performance of all liabilities, agreements and other obligations of Principal Debtor to the Lenders and/or Agent, whether direct or indirect, absolute or contingent, due or to become due, secured or unsecured, now existing or hereafter arising or acquired (whether by way of discount, letter of credit, lease, loan, overdraft or otherwise), (collectively, the "Obligations"). This Unlimited Guaranty is an absolute, unconditional and continuing guaranty of the full and punctual payment and performance of the Obligations and not of their collectibility only and is in no way conditioned upon any requirement that the Lenders and/or Agent first attempt to collect any of the Obligations from Principal Debtor or resort to any security or other means of obtaining their payment. Should Principal Debtor default in the payment or performance of any of the Obligations, or in the event that Principal Debtor, any of the Guarantors or any one or more of any other guarantors of any of the Obligations shall (a) apply for or consent to the appointment of a receiver, trustee or liquidator of its or any of its or their property, (b) admit in writing its or their inability to pay or fail generally to pay its or their debts as they mature, (c) make a general assignment for the benefit of creditors, (d) be adjudicated a bankrupt or (e) file a voluntary petition in bankruptcy or a petition or an answer seeking reorganization or an arrangement with creditors or to take advantage of any bankruptcy, reorganization, arrangement, insolvency, readjustment of debts, dissolution or liquidation statute, or an answer admitting the material allegations of a petition filed against it or any of them in a proceeding under any such law (collectively, a "Bankruptcy Event"), the obligations of the Guarantor hereunder shall become immediately due and payable to the Agent and/or the Lenders, without demand or notice of any nature, all of which are expressly waived by the Guarantor. Payments by the Guarantor hereunder may be required by Agent and/or the Lenders on any number of occasions. 2. GUARANTOR AGREEMENT TO PAY. The Guarantor further agrees, as the principal obligor and not as a guarantor only, to pay to Agent, for the benefit of the Lenders, on demand, all costs and expenses (including court costs and reasonable legal fees and expenses) incurred or expended by the Lenders and/or Agent in connection with the Obligations, this Unlimited Guaranty and the enforcement thereof, together with interest on amounts recoverable under this Unlimited Guaranty from the time such amounts become due until payment, at the rate per annum equal to Effective Prime plus two percent (2%), provided that if such interest exceeds the maximum amount permitted to be paid under applicable law, then such interest shall be reduced to such maximum permitted amount. 3. UNLIMITED GUARANTY. The liability of the Guarantor hereunder shall be unlimited. 4. WAIVERS BY GUARANTOR; AGENT'S AND/OR LENDERS' FREEDOM TO ACT. The Guarantor agrees that the Obligations shall be paid and performed strictly in accordance with their respective terms regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of the Lenders and/or Agent with respect thereto. The Guarantor waives presentment, demand, protest, notice of acceptance, notice of Obligations incurred and all other notices of any kind, all defenses which may be available by virtue of any valuation, stay, moratorium law or other similar law now or hereafter in effect, any right to require the marshaling of assets of Principal Debtor, and all suretyship defenses generally. Without limiting the generality of the foregoing, the Guarantor agrees to the provisions of any instrument evidencing, securing or otherwise executed in connection with any Obligation and agrees that the obligations of the Guarantor hereunder shall not be released or discharged, in whole or in part, or otherwise affected by the following: (a) the failure of the Lenders and/or Agent to assert any claim or demand or to enforce any right or remedy against Principal Debtor; (b) any extensions or renewals of any Obligation; (c) any rescissions, waivers, amendments or modifications of any of the terms or provisions of any agreement evidencing, securing or otherwise executed in connection with any Obligation; (d) the substitution or release of any entity primarily or secondarily liable for any Obligation; (e) the adequacy of any rights the Lenders and/or Agent may have against any collateral or other means of obtaining repayment of the Obligations; (f) the impairment of any collateral securing the Obligations, including without limitation the failure to perfect or preserve any rights the Lenders and/or Agent might have in such collateral or the substitution, exchange, surrender, release, loss or destruction of any such collateral; or (g) any other act or omission which might in any manner or to any extent - 2 - vary the risk of the Guarantor or otherwise operate as a release or discharge of the Guarantor, all of which may be done without notice to the Guarantor. 5. UNENFORCEABILITY OF OBLIGATIONS, GAINS TO PRINCIPAL DEBTOR. If for any reason Principal Debtor has no legal existence or is under no legal obligation to discharge any of the Obligations, or if any of the Obligations have become irrecoverable from Principal Debtor by operation of law or for any other reason, this Unlimited Guaranty shall nevertheless be binding on the Guarantor to the same extent as if the Guarantor at all times had been the principal obligor on all such Obligations. In the event that acceleration of the time for payment of the Obligations is stayed upon the occurrence of a Bankruptcy Event, or for any other reason, all such amounts otherwise subject to acceleration under the terms of any agreement, document or instrument evidencing, securing or otherwise executed in connection with any Obligation shall be immediately due and payable by the Guarantor. 6. SUBROGATION AND SUBORDINATION. Until the payment and performance in full of all Obligations and any and all obligations of Principal Debtor to any affiliate of the Lenders and/or Agent (and the expiration of any applicable preference periods under the Federal Bankruptcy Code without there having occurred any reorganization of Principal Debtor in connection with a Bankruptcy Event), the Guarantor shall not exercise any rights against Principal Debtor arising as a result of payment by the Guarantor hereunder, by way of subrogation or otherwise, and shall not prove any claim in competition with the Agent and/or the Lenders or their respective affiliates in respect of any payment hereunder in bankruptcy or insolvency proceedings of any nature; the Guarantor shall not claim any set-off or counterclaim against Principal Debtor in respect of any liability of the Guarantor to Principal Debtor; and the Guarantor waives any benefit of and any right to participate in any collateral which may be held by the Lenders, Agent and/or any affiliate thereof. The payment of any amounts due with respect to any indebtedness of Principal Debtor now or hereafter held by the Guarantor is hereby subordinated to the prior payment in full of the Obligations and may be payable only in accordance with the Loan Agreement. The Guarantor agrees that after the occurrence of any default, including without limitation an Event of Default or a Guaranty Event of Default (as such term is defined in Section 11 below), in the payment or performance of the Obligations, the Guarantor shall not demand, sue for or otherwise attempt to collect any such indebtedness of Principal Debtor to the Guarantor until the Obligations shall have been paid in full. If, notwithstanding the foregoing sentence, the Guarantor shall collect, enforce or receive any amounts in respect of such indebtedness, such amounts shall be collected, enforced and received by the Guarantor as trustee for Agent, and be paid over to Agent for the benefit of the Lenders, on account of the Obligations without affecting in any manner the liability of the Guarantor under the other provisions of this Unlimited Guaranty. In the event the Guarantor is or becomes an "insider" (as defined from time to time in Section 101 of the Federal Bankruptcy Code) with respect to Principal Debtor, any and all rights of the Guarantor (a) of reimbursement, indemnification, and exoneration against Principal Debtor, (b) of contribution against Principal Debtor (if the Unlimited Guaranty is secured) and/or any other guarantor and (c) of subrogation to the rights of the Lenders and/or Agent or any similar rights under any of the Financing Documents, whether such rights arise under an express or implied contract or operation of law, are hereby expressly waived, it being the intention of the parties hereto that the Guarantor shall not be deemed a "creditor" (as defined in Section 101 of - 3 - the Federal Bankruptcy Code) of Principal Debtor by reason of the existence of this Unlimited Guaranty, this waiver being given to induce the Agent and the Lenders to enter into the Loan Agreement. 7. SECURITY; SET-OFF. The Guarantor grants to Agent, for the benefit of the Lenders, as security for the full and punctual payment and performance of the Guarantor's obligations hereunder, a continuing lien on and security interest in all securities or other property belonging to the Guarantor now or hereafter held by Agent and in all deposits, general or special time or demand, provisional or final and other sums credited by or due from the Lenders and/or Agent to the Guarantor, regardless of the adequacy of any collateral or their means of obtaining repayment of the Obligations. Agent, for the benefit of the Lenders, is hereby authorized at any time and from time to time after an Event of Default or a Guaranty Event of Default has occurred and is continuing, without notice to the Guarantor (any such notice being expressly waived by the Guarantor and to the fullest extent permitted by law), to set off and apply such deposits and other sums against the obligations of the Guarantor under this Unlimited Guaranty whether or not Agent has made any demand under this Unlimited Guaranty and although such obligations may be contingent or unmatured. 8. FINANCIAL RECORDS - INSPECTION. The Guarantor shall (a) maintain or cause to be maintained full, complete, accurate and adequate records and books of account; (b) permit Agent and its duly authorized agents, attorneys and accountants to inspect, examine and copy its records and books of account at all reasonable times and, prior to the occurrence of an Event of Default, prior notice; (c) provide to Agent within ninety (90) days after each calendar or fiscal year end, as the case may be, the Guarantor's financial statements certified by a firm of independent certified public accountants selected by the Guarantor and reasonably acceptable to Agent to be true and correct, in such form and detail as may be reasonably requested by Agent; and (d) promptly deliver to Agent such other information with respect to the financial statements of the Guarantor as Agent may from time to time reasonably require. 9. FURTHER ASSURANCES. The Guarantor agrees that it shall, from time to time at the request of Agent, provide to Agent a true, accurate and current financial statement in a form reasonably requested by Agent, and shall provide such other information relating to the business and affairs of the Guarantor as Agent may reasonably request. The Guarantor covenants and agrees with Agent that during such time as this Unlimited Guaranty is in effect, the Guarantor shall not make or permit any substantial diminution in its net worth and shall not sell, mortgage or pledge any material portion of its real or personal property (except transfers to Principal Debtor, mortgages and pledges to Agent as security for this Unlimited Guaranty, except for sales and mortgages which are not fraudulent conveyances under applicable state law and except for sales and mortgages in the ordinary course of Guarantor's business) without having first obtained Agent's written consent therefor. In the event of any breach of said covenants and agreements, all Obligations, regardless of their terms, shall at Agent's election be deemed for the purposes of this Unlimited Guaranty to have become matured, and, at Agent's election, the Guarantor shall promptly pay to Agent, for the benefit of the Lenders, the entire amount of the Obligations, and Agent may take any action deemed necessary or advisable to enforce this Unlimited Guaranty. The Guarantor also agrees, upon demand after any change in the condition of affairs (financial or otherwise) of the Guarantor - 4 - deemed by Agent to be adverse and material, to secure the payment and performance of its obligations hereunder by delivering, assigning or transferring to Agent or granting Agent a security interest in additional collateral of a value and character satisfactory to Agent, and authorizes Agent to file any financing statement deemed by Agent to be necessary or desirable to perfect any security interest granted by the Guarantor to Agent, and as agent for the Guarantor, to sign the name of the Guarantor thereto. The Guarantor also agrees to do all such things and execute all such documents, including financing statements, as Agent may consider necessary or desirable to give full effect to this Unlimited Guaranty and to perfect and preserve the rights and powers of Agent hereunder. 10. TERMINATION. This Unlimited Guaranty shall remain in full force and effect until the repayment and performance in full of all of the Obligations (and the expiration of any applicable preference periods under the Federal Bankruptcy Code without there having occurred any Bankruptcy Event) and the expiration or termination of any obligations of the Lenders and/or the Agent to advance funds to Principal Debtor. 11. DEFAULTS. The occurrence of any one or more of the following events shall constitute a "Guaranty Event of Default" under the provisions of this Unlimited Guaranty (individually, a "Guaranty Event of Default" and collectively, the "Guaranty Events of Default"): (a) The failure of the Guarantor to pay any of the Obligations as and when due and payable in accordance with the provisions of this Unlimited Guaranty. (b) Any representation or warranty made in this Unlimited Guaranty or in any report, statement, schedule, certificate, opinion (including any opinion of counsel for the Guarantor), financial statement or other document furnished in connection with this Unlimited Guaranty, shall prove to have been false or misleading when made (or, if applicable, when reaffirmed) in any material respect. (c) The failure of the Guarantor to perform, observe or comply with any covenant, condition or agreement contained in this Unlimited Guaranty, which default shall remain unremedied for thirty 30) days after written notice thereof to the Guarantor by Agent. (d) A default shall occur under any of the other Financing Documents and such default is not cured within any applicable grace period provided therein. (e) The Guarantor shall cause or suffer a Bankruptcy Event to occur to the Guarantor. (f) The Guarantor shall fail to cause the dismissal or discharge of any Bankruptcy event brought against the Guarantor within forty five (45) days of the origination of such Bankruptcy Event. (g) Unless adequately insured in the opinion of Agent, the entry of a final judgment for the payment of money involving more than $100,000 against the Guarantor, and the failure by the - 5 - Guarantor to discharge the same, or cause it to be discharged, within thirty (30) days from the date of the order, decree or process under which or pursuant to which such judgment was entered, or to secure a stay of execution pending appeal of such judgment. (h) If Agent in its sole discretion determines in good faith that a material adverse change has occurred in the financial condition of the Guarantor. (i) The dissolution, liquidation or termination of existence of the Guarantor, or the sale of assets of the Guarantor out of the ordinary course of its business. (j) If the Guarantor transfers any of the Guarantor's material assets, and/or a material portion of its assets, without Agent's prior written consent. (k) Any execution or attachment shall be levied against any collateral for this Unlimited Guaranty, or any part thereof, and such execution or attachment shall not be set aside, discharged or stayed within thirty (30) days after the same shall have been levied. 12. NET WORTH REQUIREMENT. Notwithstanding any provision contained in this Unlimited Guaranty or any security agreement, mortgage or other agreement securing this Unlimited Guaranty (collectively, the "Guaranty Documents") to the contrary, in the event of any Bankruptcy Event involving either the Guarantor or Principal Debtor or in the event of any challenge to the full enforceability of all or any of the Guaranty Documents or the Financing Documents by any creditor of the Guarantor or Principal Debtor, respectively, or a trustee, receiver or debtor-in- possession of, for or in respect of the Guarantor or Principal Debtor, respectively, the liability of the Guarantor under the Guaranty Documents shall be limited to the lesser of the following amounts minus, in either case, One Dollar ($1): (a) the lowest amount which would render Guarantor's undertakings under the Guaranty Documents a fraudulent conveyance under the laws of The Commonwealth of Massachusetts or other similar or analogous law or statute of the state having jurisdiction over the subject matter; or (b) the lowest amount which would render Guarantor's undertakings under the Guaranty Documents a fraudulent transfer under Section 548 of the Bankruptcy Code of 1978, as amended. This provision shall control every other provision of the Guaranty Documents except, however, this provision shall not be construed to prohibit a valuation of the assets securing this Unlimited Guaranty for an amount exceeding (i) or (ii) above, minus One Dollar ($1), at a date subsequent to the date hereof, with the amount of this Unlimited Guaranty under such circumstances to increase with the value of such assets. In no event shall this Section 12 be construed to increase Guarantor's liability beyond the liability set forth in Sections 1 and 2 hereof. 13. SUCCESSORS AND ASSIGNS. This Unlimited Guaranty shall be binding upon the Guarantor, its successors and assigns, and - 6 - shall inure to the benefit of and be enforceable by Agent, its successors, transferees and assigns. Without limiting the generality of the foregoing sentence, the Lenders and/or Agent or any of them may assign or otherwise transfer any agreement or any note held by them evidencing, securing or otherwise executed in connection with the Obligations, or sell participations in any interest therein, to any other person or entity, and such other person or entity shall thereupon become vested, to the extent set forth in the agreement evidencing such assignment, transfer or participation, with all the rights in respect thereof granted to selling party herein. 14. NEGATIVE COVENANTS OF THE GUARANTOR. Except where any of the following could have a Material Adverse Effect or except as otherwise permitted under the Loan Agreement, the Guarantor shall not (i) amend its articles of organization or by-laws or change its officers or directors, (ii) issue any additional capital stock or other securities of the Guarantor or grant warrants, options or rights to purchase or acquire any capital stock of other securities of the Guarantor or change in any manner the equity ownership of the Guarantor, or (iii) merge or consolidate with any other corporation or acquire all or substantially all of the stock, business or assets of any other Person of sell, assign or transfer substantially all of the Guarantor's assets to any Person, or enter into any agreement to take any of the actions described in clauses (i) through (iii) above. The Guarantor shall not create, incur, assume or suffer to exist any Lien of any nature, upon or with respect to any of its properties, now owned or hereafter acquired, or assign as collateral or otherwise convey as collateral, any right to receive income, except that the foregoing restrictions shall not apply to any Liens (i) reflected as Permitted Encumbrances as of the date hereof, (ii) for the security interests granted or to be granted to Agent under the Loan Agreement dated December 26, 1997, (iii) for liens for current taxes not yet delinquent, (iv) imposed by law and incurred in the ordinary course of business for obligations not past due to carriers, warehousemen, laborers, materialmen and the like, (v) in respect of pledges for deposits under workers' compensation laws or similar legislation or (vi) for minor defects in title, none of which, individually or in the aggregate, materially interferes with the use of such property, the Guarantor has good and marketable title to its property and assets free and clear of all mortgages, liens, claims, and encumbrances. With respect to the property and assets it leases, the Guarantor is in compliance with such leases and holds a valid leasehold interest free of any liens, claims, or encumbrances, subject to clauses (i)-(vi) above. 15. AMENDMENTS AND WAIVERS. No amendment or waiver of any provision of this Unlimited Guaranty nor consent to any departure by the Guarantor therefrom shall be effective unless the same shall be in writing and signed by Agent. No failure on the part of Agent to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. 16. NOTICES. Any notice or other communication required or permitted hereunder will be in writing and will be given (i) by delivery in person, (ii) by certified mail, return receipt requested, (iii) by commercial overnight courier, or (iv) by facsimile transmission (telecopy) (with telephone confirmation of receipt), as follows: - 7 - (a) If to the Agent and a Lender, to - Fleet National Bank One Federal Street Boston, Massachusetts 02110 Attn: Thomas W. Davies, Senior Vice President Telecopy: (617) 346-1633 with a copy to - Hinckley, Allen & Snyder 28 State Street Boston, Massachusetts 02109-1775 Attn: Malcolm Farmer III, Esq. Telecopy: (617) 345-9020 (b) If to the Guarantor, to - Wells Electronics, Inc. 52940 Olive Road South Bend, Indiana 46628 Attn: Richard J. Mullin, President Telecopy: with a copy to - Hill & Barlow One International Place Boston, Massachusetts 02110-2607 Attn: Dennis W. Townley, Esq. Telecopy: (617) 428-3500 Any such notice or other communication will be considered to have been given (i) on the date of delivery in person, (ii) on the fifth day after mailing by certified mail, provided that receipt of delivery is confirmed in writing, (iii) on the first Business Day following delivery to a commercial overnight courier, or (iv) on the day of facsimile transmission (telecopy) provided that the giver of the notice obtains telephone confirmation of receipt. 17. GOVERNING LAW; CONSENT TO JURISDICTION. This Unlimited Guaranty is intended to take effect as a sealed instrument and shall be governed by, and construed in accordance with, the laws of The Commonwealth of Massachusetts. The Guarantor agrees that any suit for the enforcement of this Unlimited Guaranty may be brought in the courts of The Commonwealth of Massachusetts or any Federal Court sitting therein and consents to the non-exclusive jurisdiction of such court and to service of process in any such suit being made upon the Guarantor by mail at the address specified in Section 16 hereof. The Guarantor hereby waives any - 8 - objection that it may now or hereafter have to the venue of any such suit or any such court or that such suit was brought in an inconvenient court. EACH OF AGENT AND THE GUARANTOR HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS GUARANTY, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS. EXCEPT AS PROHIBITED BY LAW, AGENT AND THE GUARANTOR EACH HEREBY WAIVES ANY RIGHT WHICH IT MAY HAVE TO CLAIM OR RECOVER IN ANY LITIGATION REFERRED TO IN THE PRECEDING SENTENCE ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES. AGENT AND THE GUARANTOR EACH (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (B) ACKNOWLEDGES THAT SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS CONTAINED HEREIN. 18. MISCELLANEOUS. This Unlimited Guaranty constitutes the entire agreement of the Guarantor with respect to the matters set forth herein. The rights and remedies herein provided are cumulative and not exclusive of any remedies provided by law or any other agreement, and this Unlimited Guaranty shall be in addition to any other guaranty of the Obligations. The invalidity or unenforceability of any one or more sections of this Unlimited Guaranty shall not affect the validity or enforceability of its remaining provisions. Captions are for the ease of reference only and shall not affect the meaning of the relevant provisions. The meanings of all defined terms used in this Unlimited Guaranty shall be equally applicable to the singular and plural forms of the terms defined. [SIGNATURES APPEAR ON NEXT PAGE] - 9 - IN WITNESS WHEREOF, the Guarantor has caused this Unlimited Guaranty to be executed and delivered as of the date appearing on page one. WELLS ELECTRONICS, INC. By: /s/ Mary L. Mandarino ------------------------- Mary L. Mandarino Treasurer EX-5 6 EXHIBIT 10.3 SECURITY AGREEMENT THIS AGREEMENT made as of December 26, 1997, by and between PCD INC., a Massachusetts corporation, having its principal place of business at 2 Technology Drive, Centennial Park, Peabody, Massachusetts 01960-7977 ("Debtor") and FLEET NATIONAL BANK, a national banking association organized under the laws of the United States having an office at One Federal Street, Boston, Massachusetts 02110 ("Secured Party"), as Agent for itself and each of the other Lenders who are now or hereafter become parties to the hereinafter defined Loan Agreement. Capitalized terms used but not expressly defined herein shall have the meanings assigned thereto in said Loan Agreement. SECTION 1. RECITALS. (a) Secured Party and Debtor have this day entered into that certain Loan Agreement (as the same may be amended from time to time, the "Loan Agreement") pursuant to the terms of which Secured Party has agreed to make loans to Debtor as set forth therein. SECTION 2. THE SECURITY INTERESTS. (a) In order to secure (i) payment and performance of all of the obligations of Debtor under the Loan Agreement and under the Notes, (ii) the performance of all of the obligations of Debtor to Secured Party contained herein, and (iii) the payment of all other future advances and other obligations of Debtor to Secured Party and/or the Lenders, including, without limitation, any future loans and advances made to Debtor by Secured Party and/or the Lenders prior to, during or following any (a) application by Debtor for or consent by Debtor to the appointment of a receiver, trustee or liquidator of Debtor's property, (b) admission by Debtor in writing of its inability to pay or failure generally to pay its respective debts as they mature, (c) general assignment by Debtor for the benefit of creditors, (d) adjudication of Debtor as bankrupt or (e) filing by Debtor of a voluntary petition in bankruptcy or a petition or an answer seeking reorganization or an arrangement with creditors or to take advantage of any bankruptcy, reorganization, arrangement, insolvency, readjustment of debts, dissolution or liquidation statute, or an answer admitting the material allegations of a petition filed against it in a proceeding under any such law (any of the foregoing shall hereinafter be referred to as a "Bankruptcy Event"), any interest accruing under the Notes and/or the Loan Agreement after the commencement of a Bankruptcy Event to the extent permitted by applicable law, and any and all other indebtedness, liabilities and obligations of Debtor to Secured Party and/or the Lenders of every kind and description, direct, indirect or contingent, now or hereafter existing, due or to become due (all of the foregoing being hereinafter called the "Obligations"), Debtor hereby grants to Secured Party for its benefit a continuing security interest in the following described fixtures and personal property (hereinafter collectively called the "Collateral"): All fixtures and all tangible and intangible personal property of Debtor, whether now owned or hereafter acquired by Debtor, or in which Debtor may now have or hereafter acquire an interest, including, without limitation, (a) all equipment (including all machinery, tools and furniture), inventory and goods (each as defined in the Uniform Commercial Code, if so defined therein); (b) all accounts, accounts receivable, other receivables, contract rights, chattel paper, and general intangibles (including, without limitation, trademarks, trademark registrations, trademark registration applications, servicemarks, servicemark registrations, servicemark registration applications, goodwill, tradenames, trade secrets, patents, patent applications, leases, licenses, permits, copyrights, copyright registrations, copyright registration applications, moral rights, any other proprietary rights, exclusionary rights or intellectual property and any renewals and extensions associated with any of the foregoing, as each of the foregoing may be secured under the laws now or hereafter in force and effect in the United States of America or any other jurisdiction) of Debtor (each as defined in the Uniform Commercial Code, if so defined therein); (c) all instruments, documents of title, policies and certificates of insurance, securities, bank deposits, deposit accounts, checking accounts and cash of Debtor; (d) all accessions, additions or improvements to, all replacements, substitutions and parts for, and all proceeds and products of, all of the foregoing and (e) all books, records and documents relating to any of the foregoing. (b) All Collateral consisting of accounts receivable, contract rights, instruments, chattel paper and general intangibles (each as defined in the Uniform Commercial Code) of Debtor arising from the sale, delivery or provision of goods and/or services, including, without limitation, all documents, notes, drafts and acceptances, now owned by Debtor as well as any and all thereof that may be hereafter acquired by Debtor and in and to all returned or repossessed goods arising from or relating to any contract rights, accounts or other proceeds of any sale or other disposition of inventory, are sometimes hereinafter collectively called the "Customer Receivables". (c) The security interests granted pursuant to this SECTION 2 (the "Security Interests") are granted as security only and shall not subject Secured Party to, or transfer or in any way affect or modify, any obligation or liability of Debtor under any of the Collateral or any transaction which gave rise thereto. SECTION 3. DELIVERY OF PLEDGED SECURITIES, CHATTEL PAPER AND DATABASE. All securities including, without limitation, shares of stock and negotiable promissory notes, of Debtor, whether now owned or hereafter acquired by Debtor, shall be delivered to Secured Party by Debtor simultaneously with the delivery hereof or, with respect to after acquired securities, promptly after the same have been acquired by Debtor (which securities are hereinafter called the "Pledged Securities") shall be in suitable form for transfer by delivery, or shall be accompanied by duly executed undated instruments of transfer or assignments in blank, all in form and substance satisfactory to Secured Party. EXHIBIT A attached hereto and made a part hereof sets forth a complete description of all securities owned by Debtor on the date hereof. Secured Party may at any time or from time to time, at its sole discretion, require Debtor to cause any chattel paper included in the Customer Receivables to be delivered to Secured Party or any successor agent or representative designated by it for the purpose of causing a legend referring to the Security Interests to be placed on such chattel paper and upon any ledgers or other records concerning the Customer Receivables. SECTION 4. FILING; FURTHER ASSURANCES. Debtor will, at its expense, execute, deliver, file and record (in such manner and form as Secured Party may reasonably require), or permit 2 Secured Party to file and record, any financing statements, any carbon, photographic or other reproduction of a financing statement or this Security Agreement (which shall be sufficient as a financing statement hereunder), any specific assignments or other paper that may be reasonably necessary or desirable, or that Secured Party may reasonably request, in order to create, preserve, perfect or validate any Security Interest or to enable Secured Party to exercise and enforce its rights hereunder with respect to any of the Collateral. Debtor hereby irrevocably appoints Secured Party as Debtor's attorney-in-fact to execute in the name and behalf of Debtor such additional financing statements as Secured Party may reasonably request. SECTION 5. REPRESENTATIONS AND WARRANTIES OF DEBTOR. Debtor hereby represents and warrants to Secured Party that (a) Debtor is, or to the extent that certain of the Collateral is to be acquired after the date hereof, will be, the owner of the Collateral free from any adverse Lien except as permitted under the Loan Agreement; (b) except for such financing statements identified on EXHIBIT C hereto and such financing statements relating to Liens against Debtor specifically described in and permitted by the Loan Agreement, no financing statement covering the Collateral is on file in any public office, other than the financing statements filed pursuant to this Security Agreement; (c) all additional information, representations and warranties contained in EXHIBIT B attached hereto and made a part hereof are true, accurate and complete in all material respects on the date hereof; and (d) there are no restrictions upon the voting rights or the transfer of all or any of the Pledged Securities (other than as may appear on the face of any certificate evidencing any of the Pledged Securities or as may be imposed by any state or local agency or government) and Debtor has the right to vote, pledge, grant the Security Interest in and otherwise transfer the Pledged Securities free of any encumbrances (other than applicable restrictions imposed by any state or local agency or government or Federal or state securities laws or regulations). SECTION 6. COVENANTS OF DEBTOR. Debtor hereby covenants and agrees with Secured Party that Debtor (a) will defend the Collateral against all claims and demands of all persons at any time claiming any interest therein other than that of Secured Party; (b) will provide Secured Party with prompt written notice of (i) any change in the office where Debtor maintains its books and records pertaining to the Customer Receivables, and (ii) the movement or location of Collateral to or at any address other than as set forth in EXHIBIT B attached hereto; (c) will promptly pay any and all taxes, assessments and governmental charges upon the Collateral prior to the date penalties attach thereto except to the extent permitted under the Loan Agreement; (d) will immediately notify Secured Party of any event causing a substantial loss or diminution in the value of all or any material part of the Collateral and the amount or an estimate of the amount of such loss or diminution; (e) will have and maintain insurance at all times in accordance with the provisions of the Loan Agreement; (f) except in the ordinary course of business or as otherwise permitted under the Loan Agreement, will not sell or offer to sell or otherwise assign, transfer or dispose of the Collateral or any interest therein, without the prior written consent of Secured Party; (g) will keep the Collateral free from any adverse Lien (other than Liens permitted under the Loan Agreement) and in good order and repair, reasonable wear and tear excepted, and will not waste or destroy the Collateral or any part thereof; and (h) will not use the Collateral in violation of the Loan Agreement or this Agreement. 3 SECTION 7. RECORDS RELATING TO COLLATERAL. Debtor will keep its records concerning the Collateral, including the Customer Receivables and all chattel paper included in the Customer Receivables, at the location(s) set forth in EXHIBIT B attached hereto or at such other place or places of business of which Secured Party shall have been notified in writing no less than ten (10) days in advance. Debtor will hold and preserve such records and chattel paper and will, to the extent provided in the Loan Agreement, (a) permit representatives of Secured Party at any time during normal business hours to examine and inspect the Collateral and to make abstracts from such records and chattel paper, and (b) furnish to Secured Party such information and reports regarding the Collateral as Secured Party may from time to time reasonably request. SECTION 8. RECORD OWNERSHIP OF PLEDGED SECURITIES. Debtor will promptly give to Secured Party copies of any notices or other communications received by Debtor with respect to Pledged Securities registered in the name of Debtor. Upon the occurrence of an Event of Default, Secured Party may cause any or all of the Pledged Securities to be transferred of record into the name of Secured Party (or a designee of Secured Party). SECTION 9. RIGHT TO RECEIVE DISTRIBUTIONS ON PLEDGED SECURITIES. Unless an Event of Default shall have occurred and be continuing, Debtor shall be entitled, from time to time, to collect and receive for its own use all dividends, interest and other payments and distributions made upon or with respect to the Pledged Securities, except: (i) dividends of stock; (ii) dividends payable in securities or other property (except cash dividends); (iii) other securities issued with respect to or in lieu of the Pledged Securities (whether upon conversion of the convertible securities included therein or through stock split, spin-off, split-off, reclassification, merger, consolidation, sale of assets, combination of shares or otherwise). All of the foregoing, together with all new, substituted or additional shares of capital stock, warrants, options or other rights, or other securities issued in addition to or in respect of all or any of the Pledged Securities shall be delivered to Secured Party hereunder as required by SECTION 3 hereof, to be held as Collateral pursuant to the terms hereof in the same manner as the Pledged Securities delivered to Secured Party on the date hereof. SECTION 10. RIGHT TO VOTE PLEDGED SECURITIES. Unless an Event of Default shall have occurred and be continuing, Debtor shall have the right, from time to time, to vote and to give consents, ratifications and waivers with respect to the Pledged Securities and to exercise conversion rights with respect to the convertible securities included therein, and Secured Party shall, upon receiving a written request from Debtor accompanied by a certificate signed by Debtor's principal financial officer stating that no Event of Default has occurred, deliver to Debtor or as specified in such request such proxies, powers of attorney, consents, ratifications and waivers in respect of any Pledged Securities which are registered in Secured Party's name, and make 4 such arrangements with respect to the conversion of convertible securities as shall be specified in Debtor's request, such arrangements to be in form and substance reasonably satisfactory to Secured Party. If an Event of Default shall have occurred and be continuing, and provided Secured Party elects to exercise the rights hereinafter set forth by notice to Debtor of such election, Secured Party shall have the right, to the extent permitted by law, and Debtor shall take all such action as may be necessary or reasonably appropriate to give effect to such right, to vote and to give consents, ratifications and waivers and take any other action with respect to all the Pledged Securities with the same force and effect as if Secured Party were the absolute and sole owner thereof. SECTION 11. GENERAL AUTHORITY. Debtor hereby irrevocably appoints Secured Party Debtor's lawful attorney (which appointment shall be deemed a power coupled with an interest) with full power of substitution, in the name of Debtor, for the sole use and benefit of Secured Party, its successors and assigns, but at Debtor's expense, to exercise, all or any of the following powers with respect to all or any of the Collateral during the existence and continuance of any Event of Default: (i) to demand, sue for, collect, receive and give acquittance for any and all monies due or to become due; (ii) to receive, take, endorse, assign and deliver all checks, notes, drafts, securities, documents and other negotiable and non-negotiable instruments and chattel paper taken or received by Secured Party; (iii) to settle, compromise, compound, prosecute or defend any action or proceeding with respect thereto; (iv) to sell, transfer, assign or otherwise deal in or with the same or the proceeds or avails thereof or the related goods securing the Customer Receivables, as fully and effectually as if Secured Party were the absolute owner thereof; (v) to extend the time of payment of any or all thereof and to make any allowance and other adjustments with reference thereto; (vi) to discharge any taxes or Liens at any time placed thereon; and (vii) to execute any document or form, in the name of Debtor, which may be necessary or desirable in connection with any sale of Pledged Securities by Secured Party, including without limitation Form 144 promulgated by the Securities and Exchange Commission; 5 provided, that Secured Party shall give Debtor not less than ten (10) days' prior written notice of the time and place of any sale or other intended disposition of any of the Collateral. SECTION 12. EVENTS OF DEFAULT. Debtor shall be in default under this Security Agreement upon the occurrence of any Event of Default under the Loan Agreement. SECTION 13. REMEDIES UPON EVENT OF DEFAULT. If any Event of Default shall have occurred and be continuing, Secured Party may exercise all the rights and remedies of a secured party under the Uniform Commercial Code. Secured Party may require Debtor to assemble all or any part of the Collateral and make it available to Secured Party at a place to be designated by Secured Party which is reasonably convenient. Secured Party shall give Debtor ten (10) days' written notice of its intention to make any public or private sale or sale at a broker's board or on a securities exchange of the Collateral. At any such sale the Collateral may be sold in one lot as an entirety or in separate parcels, as Secured Party may determine. Secured Party shall not be obligated to make any such sale pursuant to any such notice. To the extent permitted by law, Secured Party may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for the sale, and such sale may be made at any time or place to which the same may be adjourned. Secured Party, instead of exercising the power of sale herein conferred upon it, may proceed by a suit or suits at law or in equity to foreclose the Security Interests and sell the Collateral, or any portion thereof, under a judgment or decree of a court or courts of competent jurisdiction. SECTION 14. APPLICATION OF COLLATERAL AND PROCEEDS. The proceeds of any sale of, or other realization upon, all or any part of the Collateral shall be applied in the following order of priorities: (a) first, to pay the expenses of such sale or other realization, including reasonable attorneys' fees, and all expenses, liabilities and advances incurred or made by Secured Party in connection therewith, and any other unreimbursed expenses for which Secured Party may be reimbursed pursuant to SECTION 15; (b) second, to the payment of the Obligations in such order of priority as Secured Party, in its sole discretion, shall determine; and (c) finally, to pay to Debtor, or its successors or assigns, or as a court of competent jurisdiction may direct, any surplus then remaining from such proceeds. SECTION 15. EXPENSES; SECURED PARTY'S LIEN. Debtor will forthwith upon demand pay to Secured Party: (a) the amount of any taxes which Secured Party may have been required to pay by reason of the Security Interests (including any applicable transfer and personal property taxes but excluding taxes in respect of Secured Party's income and profits) or to free any of the Collateral from any Lien thereon and (b) the amount of any and all reasonable costs and expenses, including the reasonable fees and disbursements of its counsel and of any agents not regularly in its employ, which Secured Party may incur in connection with (i) the collection or other disposition of any of the Collateral, (ii) the exercise by Secured Party of any of the powers conferred upon it hereunder, (iii) any default on Debtor's part hereunder or (iv) any Bankruptcy Event. 6 SECTION 16. TERMINATION OF SECURITY INTERESTS; RELEASE OF COLLATERAL. Upon the repayment and performance in full of all the Obligations and the expiration or termination of any obligations of Secured Party to advance funds to Debtor, or upon the sale of any Collateral which is permitted under the Loan Agreement or as otherwise consented to in writing by Secured Party, the Security Interests on such sold Collateral shall terminate and all rights to the Collateral shall revert to Debtor or such other party as may be entitled thereto. Upon any such termination of the Security Interests or release of Collateral, Secured Party will execute and deliver to Debtor such documents as Debtor shall reasonably request to evidence the termination of the Security Interests or the release of such Collateral, as the case may be. Notwithstanding the foregoing, this Security Agreement shall be reinstated if at any time any payment made or value received with respect to an Obligation is rescinded, invalidated, declared to be fraudulent or preferential, or set aside or is required to be repaid to a trustee, receiver or any other party under any case or proceeding, voluntary or involuntary, for the distribution, division or application of all or part of the assets of Debtor or the proceeds thereof, whether such case or proceeding be for the liquidation, dissolution or winding up of Debtor or their respective businesses, a receivership, insolvency or bankruptcy case or proceeding, an assignment for the benefit of creditors or a proceeding by or against Debtor for relief under the federal Bankruptcy Code or any other bankruptcy, reorganization or insolvency law or any other law relating to the relief of debtors, readjustment of indebtedness, reorganization, arrangement, composition or extension or marshalling of assets or otherwise, all as though such payment had not been made or value received. SECTION 17. NOTICES. All notices, requests, demands and other communications provided for hereunder shall be in writing and mailed or telefaxed or delivered to the applicable party in the manner set forth in SECTION 9.6 of the Loan Agreement. SECTION 18. MISCELLANEOUS. (a) No failure on the part of Secured Party to exercise, and no delay in exercising, and no course of dealing with respect to, any right, power or remedy under this Security Agreement shall operate as a waiver thereof; nor shall any single or partial exercise by Secured Party of any right, power or remedy under this Security Agreement preclude any other right, power or remedy. The remedies in this Security Agreement are cumulative and are not exclusive of any other remedies provided by law. Neither this Security Agreement nor any provision hereof may be changed, waived, discharged or terminated orally but only by a statement in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought. (b) This Security Agreement shall be construed in accordance with and governed by the laws of The Commonwealth of Massachusetts, except as otherwise required by mandatory provisions of law. (c) This Security Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same Security Agreement. SECTION 19. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. 7 (a) Except to the extent prohibited by applicable law, Debtor irrevocably: (i) agrees that any suit, action, or other legal proceeding arising out of this Security Agreement or any of the Loans may be brought in the courts of record of The Commonwealth of Massachusetts or any other state(s) in which any of the Collateral is located or the courts of the United States located in The Commonwealth of Massachusetts or any other state(s) in which any of the Collateral is located; (ii) consents to the jurisdiction of each such court in any such suit, action or proceeding; and (iii) waives any objection which it may have to the laying of venue of such suit, action or proceeding in any of such courts. For such time as any of the Obligations of Debtor to Secured Party shall be unpaid in whole or in part and/or the Commitment is in effect, Debtor irrevocably designates the registered agent or agent for service of process of the Debtor as reflected on the records of the Secretary of State of The Commonwealth of Massachusetts as its registered agent, and, in the absence thereof, the Secretary of State of The Commonwealth of Massachusetts, as its agent to accept and acknowledge on its behalf service of any and all process in any such suit, action or proceeding brought in any such court and agrees and consents that any such service of process upon such agent and written notice of such service to Debtor by registered or certified mail shall be taken and held to be valid personal service upon Debtor regardless of where Debtor shall then be doing business and that any such service of process shall be of the same force and validity as if service were made upon it according to the laws governing the validity and requirements of such service in each such state and waives any claim of lack of personal service or other error by reason of any such service. Any notice, process, pleadings or other papers served upon the aforesaid designated agent shall, within three (3) Business Days after such service, be sent by the method provided therefor under SECTION 9.6 of the Loan Agreement to the Debtor at its address set forth in the Loan Agreement. EACH OF THE PARTIES HERETO HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF ANY DISPUTE BETWEEN THE DEBTOR AND SECURED PARTY WITH RESPECT TO THE FINANCING DOCUMENTS AND/OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREBY. SECTION 20. SEPARABILITY. If any provision hereof is invalid or unenforceable in any jurisdiction, the other provisions hereof shall remain in full force and effect in such jurisdiction and shall be liberally construed in favor of Secured Party. [SIGNATURES APPEAR ON NEXT PAGE] 8 IN WITNESS WHEREOF, this Security Agreement has been executed by the parties hereto all as of the day and year first above written. PCD INC. By: /S/ John L. Dwight, Jr. -------------------------- John L. Dwight, Jr. Chairman of the Board FLEET NATIONAL BANK, as Agent for itself and the other Lenders By: /S/ Thomas W. Davies -------------------------- Thomas W. Davies Senior Vice President 9 EX-6 7 EXHIBIT 10.4 SECURITY AGREEMENT THIS AGREEMENT made as of December 26, 1997, by and between WELLS ELECTRONICS, INC., an Indiana corporation, with a principal place of business at 52940 Olive Road, South Bend, Indiana ("Debtor") and FLEET NATIONAL BANK, a national banking association organized under the laws of the United States having an office at One Federal Street, Boston, Massachusetts 02110 ("Secured Party"), as Agent for itself and each of the other Lenders who are now or hereafter become parties to the hereinafter defined Loan Agreement. Capitalized terms used but not expressly defined herein shall have the meanings assigned thereto in said Loan Agreement. SECTION 1. RECITALS. (a) Pursuant to the terms of that certain Loan Agreement dated as of the date hereof between PCD Inc., a Massachusetts corporation (the "Principal Debtor"), Secured Party and the Lenders (as the same may be amended from time to time, the "Loan Agreement"), Secured Party and the Lenders have agreed to make loans to Principal Debtor in an aggregate principal amount not to exceed $90,000,000.00, as evidenced by that certain Term Note A, Term Note B and Revolving Credit Note of Principal Debtor dated as of the date hereof; and (b) Principal Debtor owns 100% of the issued and outstanding capital stock of Debtor; and (c) Debtor has, as of the date hereof, executed and delivered to Secured Party that certain Unlimited Guaranty pursuant to which Debtor has guaranteed payment and performance of all of the Obligations of Principal Debtor (as such term is defined in the Loan Agreement) (the "Guaranty"); and (d) Debtor has concurrently granted to Secured Party a security interest in all of Debtor's assets to secure its obligations to Secured Party and/or the Lenders under the Guaranty. SECTION 2. THE SECURITY INTERESTS. (a) In order to secure (i) payment and performance of all of the obligations of Principal Debtor under the Loan Agreement and under the Notes, (ii) the performance of all of the obligations of Debtor to Secured Party contained herein, and (iii) the payment of all other future advances and other obligations of Principal Debtor or Debtor to Secured Party and/or the Lenders, including, without limitation, any future loans and advances made to Principal Debtor or Debtor by Secured Party and/or the Lenders prior to, during or following any (a) application by Principal Debtor or Debtor for or consent by Principal Debtor or Debtor to the appointment of a receiver, trustee or liquidator of Principal Debtor's or Debtor's property, (b) admission by Principal Debtor or Debtor in writing of its inability to pay or failure generally to pay its respective debts as they mature, (c) general assignment by Principal Debtor or Debtor for the benefit of creditors, (d) adjudication of Principal Debtor or Debtor as bankrupt or (e) filing by Principal Debtor or Debtor of a voluntary petition in bankruptcy or a petition or an answer seeking reorganization or an arrangement with creditors or to take advantage of any bankruptcy, reorganization, arrangement, insolvency, readjustment of debts, dissolution or liquidation statute, or an answer admitting the material allegations of a petition filed against it in a proceeding under any such law (any of the foregoing shall hereinafter be referred to as a "Bankruptcy Event"), any interest accruing under the Notes and/or the Loan Agreement after the commencement of a Bankruptcy Event to the extent permitted by applicable law, and any and all other indebtedness, liabilities and obligations of Principal Debtor or Debtor to Secured Party and/or the Lenders of every kind and description, direct, indirect or contingent, now or hereafter existing, due or to become due (all of the foregoing being hereinafter called the "Obligations"), Debtor hereby grants to Secured Party for its benefit a continuing security interest in the following described fixtures and personal property (hereinafter collectively called the "Collateral"): All fixtures and all tangible and intangible personal property of Debtor, whether now owned or hereafter acquired by Debtor, or in which Debtor may now have or hereafter acquire an interest, including, without limitation, (a) all equipment (including all machinery, tools and furniture), inventory and goods (each as defined in the Uniform Commercial Code, if so defined therein); (b) all accounts, accounts receivable, other receivables, contract rights, chattel paper, and general intangibles (including, without limitation, trademarks, trademark registrations, trademark registration applications, servicemarks, servicemark registrations, servicemark registration applications, goodwill, tradenames, trade secrets, patents, patent applications, leases, licenses, permits, copyrights, copyright registrations, copyright registration applications, moral rights, any other proprietary rights, exclusionary rights or intellectual property and any renewals and extensions associated with any of the foregoing, as each of the foregoing may be secured under the laws now or hereafter in force and effect in the United States of America or any other jurisdiction) of Debtor (each as defined in the Uniform Commercial Code, if so defined therein); (c) all instruments, documents of title, policies and certificates of insurance, securities, bank deposits, deposit accounts, checking accounts and cash of Debtor; (d) all accessions, additions or improvements to, all replacements, substitutions and parts for, and all proceeds and products of, all of the foregoing and (e) all books, records and documents relating to any of the foregoing. (b) All Collateral consisting of accounts receivable, contract rights, instruments, chattel paper and general intangibles (each as defined in the Uniform Commercial Code) of Debtor arising from the sale, delivery or provision of goods and/or services, including, without limitation, all documents, notes, drafts and acceptances, now owned by Debtor as well as any and all thereof that may be hereafter acquired by Debtor and in and to all returned or repossessed goods arising from or relating to any contract rights, accounts or other proceeds of any sale or other disposition of inventory, are sometimes hereinafter collectively called the "Customer Receivables". (c) The security interests granted pursuant to this SECTION 2 (the "Security Interests") are granted as security only and shall not subject Secured Party to, or transfer or in any way affect or modify, any obligation or liability of Debtor under any of the Collateral or any transaction which gave rise thereto. 2 SECTION 3. DELIVERY OF PLEDGED SECURITIES, CHATTEL PAPER AND DATABASE. All securities including, without limitation, shares of stock and negotiable promissory notes, of Debtor, whether now owned or hereafter acquired by Debtor, shall be delivered to Secured Party by Debtor simultaneously with the delivery hereof or, with respect to after acquired securities, promptly after the same have been acquired by Debtor (which securities are hereinafter called the "Pledged Securities") shall be in suitable form for transfer by delivery, or shall be accompanied by duly executed undated instruments of transfer or assignments in blank, all in form and substance satisfactory to Secured Party. EXHIBIT A attached hereto and made a part hereof sets forth a complete description of all securities owned by Debtor on the date hereof. Secured Party may at any time or from time to time, at its sole discretion, require Debtor to cause any chattel paper included in the Customer Receivables to be delivered to Secured Party or any successor agent or representative designated by it for the purpose of causing a legend referring to the Security Interests to be placed on such chattel paper and upon any ledgers or other records concerning the Customer Receivables. SECTION 4. FILING; FURTHER ASSURANCES. Debtor will, at its expense, execute, deliver, file and record (in such manner and form as Secured Party may reasonably require), or permit Secured Party to file and record, any financing statements, any carbon, photographic or other reproduction of a financing statement or this Security Agreement (which shall be sufficient as a financing statement hereunder), any specific assignments or other paper that may be reasonably necessary or desirable, or that Secured Party may reasonably request, in order to create, preserve, perfect or validate any Security Interest or to enable Secured Party to exercise and enforce its rights hereunder with respect to any of the Collateral. Debtor hereby irrevocably appoints Secured Party as Debtor's attorney-in-fact to execute in the name and behalf of Debtor such additional financing statements as Secured Party may reasonably request. SECTION 5. REPRESENTATIONS AND WARRANTIES OF DEBTOR. Debtor hereby represents and warrants to Secured Party that (a) Debtor is, or to the extent that certain of the Collateral is to be acquired after the date hereof, will be, the owner of the Collateral free from any adverse Lien except as permitted under the Loan Agreement; (b) except for such financing statements identified on EXHIBIT C hereto and such financing statements relating to Liens against Debtor specifically described in and permitted by the Loan Agreement, no financing statement covering the Collateral is on file in any public office, other than the financing statements filed pursuant to this Security Agreement; (c) all additional information, representations and warranties contained in EXHIBIT B attached hereto and made a part hereof are true, accurate and complete in all material respects on the date hereof; and (d) there are no restrictions upon the voting rights or the transfer of all or any of the Pledged Securities (other than as may appear on the face of any certificate evidencing any of the Pledged Securities or as may be imposed by any state or local agency or government) and Debtor has the right to vote, pledge, grant the Security Interest in and otherwise transfer the Pledged Securities free of any encumbrances (other than applicable restrictions imposed by any state or local agency or government or Federal or state securities laws or regulations). SECTION 6. COVENANTS OF DEBTOR. Debtor hereby covenants and agrees with Secured Party that Debtor (a) will defend the Collateral against all claims and demands of all persons at any 3 time claiming any interest therein other than that of Secured Party; (b) will provide Secured Party with prompt written notice of (i) any change in the office where Debtor maintains its books and records pertaining to the Customer Receivables, and (ii) the movement or location of Collateral to or at any address other than as set forth in EXHIBIT B attached hereto; (c) will promptly pay any and all taxes, assessments and governmental charges upon the Collateral prior to the date penalties attach thereto except to the extent permitted under the Loan Agreement; (d) will immediately notify Secured Party of any event causing a substantial loss or diminution in the value of all or any material part of the Collateral and the amount or an estimate of the amount of such loss or diminution; (e) will have and maintain insurance at all times in accordance with the provisions of the Loan Agreement; (f) except in the ordinary course of business or as otherwise permitted under the Loan Agreement, will not sell or offer to sell or otherwise assign, transfer or dispose of the Collateral or any interest therein, without the prior written consent of Secured Party; (g) will keep the Collateral free from any adverse Lien (other than Liens permitted under the Loan Agreement) and in good order and repair, reasonable wear and tear excepted, and will not waste or destroy the Collateral or any part thereof; and (h) will not use the Collateral in violation of the Loan Agreement or this Agreement. SECTION 7. RECORDS RELATING TO COLLATERAL. Debtor will keep its records concerning the Collateral, including the Customer Receivables and all chattel paper included in the Customer Receivables, at the location(s) set forth in EXHIBIT B attached hereto or at such other place or places of business of which Secured Party shall have been notified in writing no less than ten (10) days in advance. Debtor will hold and preserve such records and chattel paper and will, to the extent provided in the Loan Agreement, (a) permit representatives of Secured Party at any time during normal business hours to examine and inspect the Collateral and to make abstracts from such records and chattel paper, and (b) furnish to Secured Party such information and reports regarding the Collateral as Secured Party may from time to time reasonably request. SECTION 8. RECORD OWNERSHIP OF PLEDGED SECURITIES. Debtor will promptly give to Secured Party copies of any notices or other communications received by Debtor with respect to Pledged Securities registered in the name of Debtor. Upon the occurrence of an Event of Default, Secured Party may cause any or all of the Pledged Securities to be transferred of record into the name of Secured Party (or a designee of Secured Party). SECTION 9. RIGHT TO RECEIVE DISTRIBUTIONS ON PLEDGED SECURITIES. Unless an Event of Default shall have occurred and be continuing, Debtor shall be entitled, from time to time, to collect and receive for its own use all dividends, interest and other payments and distributions made upon or with respect to the Pledged Securities, except: (i) dividends of stock; (ii) dividends payable in securities or other property (except cash dividends); (iii) other securities issued with respect to or in lieu of the Pledged Securities (whether upon conversion of the convertible securities included therein or through stock 4 split, spin-off, split-off, reclassification, merger, consolidation, sale of assets, combination of shares or otherwise). All of the foregoing, together with all new, substituted or additional shares of capital stock, warrants, options or other rights, or other securities issued in addition to or in respect of all or any of the Pledged Securities shall be delivered to Secured Party hereunder as required by SECTION 3 hereof, to be held as Collateral pursuant to the terms hereof in the same manner as the Pledged Securities delivered to Secured Party on the date hereof. SECTION 10. RIGHT TO VOTE PLEDGED SECURITIES. Unless an Event of Default shall have occurred and be continuing, Debtor shall have the right, from time to time, to vote and to give consents, ratifications and waivers with respect to the Pledged Securities and to exercise conversion rights with respect to the convertible securities included therein, and Secured Party shall, upon receiving a written request from Debtor accompanied by a certificate signed by Debtor's principal financial officer stating that no Event of Default has occurred, deliver to Debtor or as specified in such request such proxies, powers of attorney, consents, ratifications and waivers in respect of any Pledged Securities which are registered in Secured Party's name, and make such arrangements with respect to the conversion of convertible securities as shall be specified in Debtor's request, such arrangements to be in form and substance reasonably satisfactory to Secured Party. If an Event of Default shall have occurred and be continuing, and provided Secured Party elects to exercise the rights hereinafter set forth by notice to Debtor of such election, Secured Party shall have the right, to the extent permitted by law, and Debtor shall take all such action as may be necessary or reasonably appropriate to give effect to such right, to vote and to give consents, ratifications and waivers and take any other action with respect to all the Pledged Securities with the same force and effect as if Secured Party were the absolute and sole owner thereof. SECTION 11. GENERAL AUTHORITY. Debtor hereby irrevocably appoints Secured Party Debtor's lawful attorney (which appointment shall be deemed a power coupled with an interest) with full power of substitution, in the name of Debtor, for the sole use and benefit of Secured Party, its successors and assigns, but at Debtor's expense, to exercise, all or any of the following powers with respect to all or any of the Collateral during the existence and continuance of any Event of Default: (i) to demand, sue for, collect, receive and give acquittance for any and all monies due or to become due; (ii) to receive, take, endorse, assign and deliver all checks, notes, drafts, securities, documents and other negotiable and non-negotiable instruments and chattel paper taken or received by Secured Party; 5 (iii) to settle, compromise, compound, prosecute or defend any action or proceeding with respect thereto; (iv) to sell, transfer, assign or otherwise deal in or with the same or the proceeds or avails thereof or the related goods securing the Customer Receivables, as fully and effectually as if Secured Party were the absolute owner thereof; (v) to extend the time of payment of any or all thereof and to make any allowance and other adjustments with reference thereto; (vi) to discharge any taxes or Liens at any time placed thereon; and (vii) to execute any document or form, in the name of Debtor, which may be necessary or desirable in connection with any sale of Pledged Securities by Secured Party, including without limitation Form 144 promulgated by the Securities and Exchange Commission; provided, that Secured Party shall give Debtor not less than ten (10) days' prior written notice of the time and place of any sale or other intended disposition of any of the Collateral. SECTION 12. EVENTS OF DEFAULT. Debtor shall be in default under this Security Agreement upon the occurrence of any Event of Default under the Loan Agreement. SECTION 13. REMEDIES UPON EVENT OF DEFAULT. If any Event of Default shall have occurred and be continuing, Secured Party may exercise all the rights and remedies of a secured party under the Uniform Commercial Code. Secured Party may require Debtor to assemble all or any part of the Collateral and make it available to Secured Party at a place to be designated by Secured Party which is reasonably convenient. Secured Party shall give Debtor ten (10) days' written notice of its intention to make any public or private sale or sale at a broker's board or on a securities exchange of the Collateral. At any such sale the Collateral may be sold in one lot as an entirety or in separate parcels, as Secured Party may determine. Secured Party shall not be obligated to make any such sale pursuant to any such notice. To the extent permitted by law, Secured Party may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for the sale, and such sale may be made at any time or place to which the same may be adjourned. Secured Party, instead of exercising the power of sale herein conferred upon it, may proceed by a suit or suits at law or in equity to foreclose the Security Interests and sell the Collateral, or any portion thereof, under a judgment or decree of a court or courts of competent jurisdiction. SECTION 14. APPLICATION OF COLLATERAL AND PROCEEDS. The proceeds of any sale of, or other realization upon, all or any part of the Collateral shall be applied in the following order of priorities: (a) first, to pay the expenses of such sale or other realization, including reasonable attorneys' fees, and all expenses, liabilities and advances incurred or made by Secured Party in connection therewith, and any other unreimbursed expenses for which Secured Party may be reimbursed pursuant to 6 SECTION 15; (b) second, to the payment of the Obligations in such order of priority as Secured Party, in its sole discretion, shall determine; and (c) finally, to pay to Debtor, or its successors or assigns, or as a court of competent jurisdiction may direct, any surplus then remaining from such proceeds. SECTION 15. EXPENSES; SECURED PARTY'S LIEN. Debtor will forthwith upon demand pay to Secured Party: (a) the amount of any taxes which Secured Party may have been required to pay by reason of the Security Interests (including any applicable transfer and personal property taxes but excluding taxes in respect of Secured Party's income and profits) or to free any of the Collateral from any Lien thereon and (b) the amount of any and all reasonable costs and expenses, including the reasonable fees and disbursements of its counsel and of any agents not regularly in its employ, which Secured Party may incur in connection with (i) the collection or other disposition of any of the Collateral, (ii) the exercise by Secured Party of any of the powers conferred upon it hereunder, (iii) any default on Debtor's part hereunder or (iv) any Bankruptcy Event. SECTION 16. TERMINATION OF SECURITY INTERESTS; RELEASE OF COLLATERAL. Upon the repayment and performance in full of all the Obligations and the expiration or termination of any obligations of Secured Party to advance funds to Debtor, or upon the sale of any Collateral which is permitted under the Loan Agreement or as otherwise consented to in writing by Secured Party, the Security Interests on such sold Collateral shall terminate and all rights to the Collateral shall revert to Debtor or such other party as may be entitled thereto. Upon any such termination of the Security Interests or release of Collateral, Secured Party will execute and deliver to Debtor such documents as Debtor shall reasonably request to evidence the termination of the Security Interests or the release of such Collateral, as the case may be. Notwithstanding the foregoing, this Security Agreement shall be reinstated if at any time any payment made or value received with respect to an Obligation is rescinded, invalidated, declared to be fraudulent or preferential, or set aside or is required to be repaid to a trustee, receiver or any other party under any case or proceeding, voluntary or involuntary, for the distribution, division or application of all or part of the assets of Debtor or the proceeds thereof, whether such case or proceeding be for the liquidation, dissolution or winding up of Debtor or their respective businesses, a receivership, insolvency or bankruptcy case or proceeding, an assignment for the benefit of creditors or a proceeding by or against Debtor for relief under the federal Bankruptcy Code or any other bankruptcy, reorganization or insolvency law or any other law relating to the relief of debtors, readjustment of indebtedness, reorganization, arrangement, composition or extension or marshalling of assets or otherwise, all as though such payment had not been made or value received. SECTION 17. NOTICES. All notices, requests, demands and other communications provided for hereunder shall be in writing and mailed or telefaxed or delivered to the applicable party in the manner set forth in SECTION 9.6 of the Loan Agreement. SECTION 18. MISCELLANEOUS. (a) No failure on the part of Secured Party to exercise, and no delay in exercising, and no course of dealing with respect to, any right, power or remedy under this Security Agreement shall operate as a waiver thereof; nor shall any single or partial exercise by Secured Party of any 7 right, power or remedy under this Security Agreement preclude any other right, power or remedy. The remedies in this Security Agreement are cumulative and are not exclusive of any other remedies provided by law. Neither this Security Agreement nor any provision hereof may be changed, waived, discharged or terminated orally but only by a statement in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought. (b) This Security Agreement shall be construed in accordance with and governed by the laws of The Commonwealth of Massachusetts, except as otherwise required by mandatory provisions of law. (c) This Security Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same Security Agreement. SECTION 19. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. (a) Except to the extent prohibited by applicable law, Debtor irrevocably: (i) agrees that any suit, action, or other legal proceeding arising out of this Security Agreement or any of the Loans may be brought in the courts of record of The Commonwealth of Massachusetts or any other state(s) in which any of the Collateral is located or the courts of the United States located in The Commonwealth of Massachusetts or any other state(s) in which any of the Collateral is located; (ii) consents to the jurisdiction of each such court in any such suit, action or proceeding; and (iii) waives any objection which it may have to the laying of venue of such suit, action or proceeding in any of such courts. For such time as any of the Obligations of Debtor to Secured Party shall be unpaid in whole or in part and/or the Commitment is in effect, Debtor irrevocably designates the registered agent or agent for service of process of the Debtor as reflected on the records of the Secretary of State of The Commonwealth of Massachusetts as its registered agent, and, in the absence thereof, the Secretary of State of The Commonwealth of Massachusetts, as its agent to accept and acknowledge on its behalf service of any and all process in any such suit, action or proceeding brought in any such court and agrees and consents that any such service of process upon such agent and written notice of such service to Debtor by registered or certified mail shall be taken and held to be valid personal service upon Debtor regardless of where Debtor shall then be doing business and that any such service of process shall be of the same force and validity as if service were made upon it according to the laws governing the validity and requirements of such service in each such state and waives any claim of lack of personal service or other error by reason of any such service. Any notice, process, pleadings or other papers served upon the aforesaid designated agent shall, within three (3) Business Days after such service, be sent by the method provided therefor under SECTION 9.6 of the 8 Loan Agreement to the Debtor at its address set forth in the Loan Agreement. EACH OF THE PARTIES HERETO HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF ANY DISPUTE BETWEEN THE DEBTOR AND SECURED PARTY WITH RESPECT TO THE FINANCING DOCUMENTS AND/OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREBY. SECTION 20. SEPARABILITY. If any provision hereof is invalid or unenforceable in any jurisdiction, the other provisions hereof shall remain in full force and effect in such jurisdiction and shall be liberally construed in favor of Secured Party. [SIGNATURES APPEAR ON NEXT PAGE] IN WITNESS WHEREOF, this Security Agreement has been executed by the parties hereto all as of the day and year first above written. WELLS ELECTRONICS, INC. By: /S/ Mary L. Mandarino ------------------------ Mary L. Mandarino Treasurer FLEET NATIONAL BANK, as Agent for itself and the other Lenders By: /S/ Thomas W. Davies ------------------------ Thomas W. Davies Senior Vice President 9 EX-7 8 EXHIBIT 10.5 STOCK PLEDGE AGREEMENT THIS STOCK PLEDGE AGREEMENT IS BETWEEN: (1) PCD INC., a Massachusetts corporation having its principal place of business at 2 Technology Drive, Centennial Park, Peabody, Massachusetts 01960-7977 ("Pledgor"); and (2) FLEET NATIONAL BANK, a national banking association organized under the laws of the United States having an office at One Federal Street, Boston, Massachusetts 02110 ("Agent"), as Agent for itself and each of the other Lenders who now are or hereafter become parties to the hereinafter defined Loan Agreement. WHEREAS: (A) Pursuant to the terms of that certain Loan Agreement dated as of the date hereof between Pledgor, Agent and the Lenders (as the same may be amended from time to time, the "Loan Agreement"), Agent and the Lenders have agreed to make loans to Pledgor in an aggregate principal amount not to exceed $90,000,000.00, as evidenced by that certain Term Note A, Term Note B and Revolving Credit Note of Pledgor dated as of the date hereof (the "Notes"); (B) Pledgor legally and beneficially owns, the shares of issued and outstanding stock described on EXHIBIT A attached hereto and incorporated herein as reference; and (C) As a condition precedent to Agent and the Lenders entering into the Loan Agreement and in order to secure the payment and performance in full of all of the Obligations of Pledgor to Agent and the Lenders , Pledgor agrees to pledge to Agent, upon the terms contained in this Agreement: (1) the Initial Pledged Shares (as hereinafter defined); and (2) all (if any) shares of any class of the capital stock of the Pledged Companies (as hereinafter defined) acquired by Pledgor at any time after the date hereof. NOW, THEREFORE, in consideration of these premises, the promises, mutual covenants and agreements herein contained, the parties hereto hereby agree as follows: ARTICLE I INTERPRETATION Section 1.01. PROVISIONS PERTAINING TO DEFINITIONS. For all purposes of this Agreement (except where such interpretations would be inconsistent with the context or the subject matter): (a) the terms specifically defined in SECTION 1.02 of this Agreement shall have the meanings therein assigned to them; (b) the expression "this Agreement" shall mean this Stock Pledge Agreement, as originally executed, or, if varied or supplemented from time to time, as so varied or supplemented; and (c) capitalized terms used in this Agreement and defined in the Loan Agreement and not otherwise defined herein shall have the same meanings herein as in the Loan Agreement. Section 1.02. TERMS DEFINED. Subject to the provisions of Section 1.01 of this Agreement, the following terms shall have the respective meanings set forth below: (a) "Collateral" means, collectively, all of the Pledged Shares, all of the Pledged Share Dividends, and all of the other property, assets, accounts and moneys, and all of the income, proceeds and products of any thereof, in, to, under or in respect of which Agent or any of the nominees, agents or representatives of Agent, by this Agreement or by any agreement or agreements supplemental hereto, shall acquire any rights or interests as security for the payment or performance of all or any part of the Obligations. (b) "Initial Pledged Shares" for (i) Wells, CTI, PCD Control, PCD USVI, respectively, (as hereinafter defined) means, collectively, all of the issued and outstanding shares of every class of the capital stock of Wells, CTI, PCD Control and PCD USVI which are beneficially owned by Pledgor on the date of this Agreement as more particularly described on said EXHIBIT A, the stock certificates for which shall be delivered by Pledgor to Agent in pledge upon the terms contained in this Agreement. (c) "Obligations" means (i) the due and punctual payment in full of the principal, interest and other sums due and to become due from Pledgor to Agent and/or the Lenders, whether now existing or hereafter arising pursuant to the Loan Agreement, the Notes and/or the other Financing Documents, as the same may be amended from time to time; (ii) the due and punctual payment in full at maturity of the principal, interest and any other sums due and to become due from Pledgor to Agent and/or the Lenders at any time and from time to time on account of any and all obligations, indebtedness and liability of Pledgor to Agent and/or the Lenders, whether now existing or hereafter arising, whether direct, indirect, absolute or contingent, whether otherwise guaranteed or secured and whether on open account or evidenced by a note, draft, check, loan agreement, letter of credit application, acceptance agreement, or other instrument or documents; and (iii) the due and punctual performance of and/or compliance with all of the terms, conditions and covenants contained herein and in the Financing Documents to be performed or complied with by Pledgor and the accuracy of Pledgor's representations and warranties contained herein and in the Financing Documents. (d) "Pledged Companies" means collectively Wells Electronics, Inc., an Indiana corporation ("Wells"), CTi Technologies, Inc., a Massachusetts corporation ("CTI"), PCD USVI, Inc., a U.S. Virgin Islands corporation ("PCD USVI"), and PCD Control Systems, Inc., a Massachusetts corporation ("PCD Control"). - 2 - (e) "Pledged Share Dividends" means, collectively, (i) all dividends of every kind whatever which shall become and be due and payable or distributable on or in respect of all or any of the Pledged Shares, (ii) all payments of every kind whatever which shall become and be due and payable or distributable on account of the purchase, redemption, repurchase or other retirement of all or any of the Pledged Shares, and (iii) all other distributions of every kind whatsoever (including, without limitation, all capital distributions) which shall become and be due and payable or distributable on or in respect of all or any of the Pledged Shares; and "Pledged Share Dividend" means any one of the Pledged Share Dividends. (f) "Pledged Shares" means, collectively, (i) all of the Initial Pledged Shares, and (ii) all other shares of any class of the capital stock of any of the Pledged Companies (A) which shall be issued or distributed (by way of stock dividends or otherwise) or sold by any of the Pledged Companies to Pledgor at any time or times after the date of this Agreement, or (B) which shall be purchased or otherwise acquired by or on behalf of Pledgor from any of the Pledged Companies or from any other person or persons at any time or times after the date of this Agreement; and "Pledged Share" means any one of the Pledged Shares. (g) "Loan Documents" means the Financing Documents as the term is defined in the Loan Agreement. ARTICLE II PLEDGE AND ASSIGNMENT BY PLEDGOR Section 2.01. PLEDGE AND ASSIGNMENT. In order to secure the payment and performance in full of all of the Obligations (whether existing on the date of this Agreement or arising at any time or times thereafter), Pledgor, as beneficial owner, hereby pledges, hypothecates and assigns to Agent and hereby grants to Agent, a continuing security interest in, the following: (a) each of the Initial Pledged Shares and all of the stock certificates representing the Initial Pledged Shares; (b) all of the Pledged Shares which shall be issued or distributed or sold to or purchased or otherwise acquired by Pledgor at any time or times after the date of this Agreement and all of the stock certificates representing such Pledged Shares; (c) all of the Pledged Share Dividends; and (d) all of Pledgor's rights, title, interests, claims and remedies and all other benefits whatever now existing or hereafter arising in, to, under or in respect of all of the Initial Pledged Shares, all of the other Pledged Shares, all of the Pledged Share Dividends (subject to SECTION 2.04 of this Agreement) and all of the income and proceeds of any thereof. TO HAVE AND TO HOLD all of the foregoing unto Agent, absolutely and forever, SUBJECT, HOWEVER, to the terms and conditions set forth in this Agreement. Section 2.02. DELIVERY OF STOCK CERTIFICATES REPRESENTING PLEDGED SHARES. (a) All of the stock certificates representing the Initial Pledged Shares have been delivered by Pledgor to Agent in pledge on the date of this Agreement. Each of such stock certificates names Pledgor as the owner of record of the Initial Pledged Shares represented thereby. Each of the Initial Pledged - 3 - Shares has been duly transferred by Pledgor to Agent in pledge pursuant to instruments of transfer which have been duly executed in blank (with signatures guaranteed, if applicable) and delivered to Agent by Pledgor. (b) If (and on each occasion that) any additional Pledged Shares shall, at any time after the date of this Agreement, be issued or distributed or sold to or purchased or otherwise acquired by Pledgor, Pledgor will within seven Business Days of such issuance, distribution, sale, purchase or acquisition (i) cause all of the stock certificates representing such additional Pledged Shares to be delivered to Agent, and (ii) execute in blank (with guarantee of signatures) and deliver to Agent undated instruments of transfer, satisfactory to Agent in form and substance, by which each of such additional Pledged Shares shall be duly transferred by Pledgor to Agent in pledge. Each of such stock certificates will name Pledgor as the owner of record of the additional Pledged Shares represented thereby. Section 2.03. VOTING POWER. (a) Until the occurrence of an Event of Default, Pledgor will be permitted to exercise all voting powers pertaining to any Pledged Shares for any purpose not inconsistent with the terms of this Agreement or any of the other Loan Documents. (b) Pledgor acknowledges and agrees with Agent that, unless Agent otherwise consents, Pledgor shall have no rights whatever to exercise any voting powers pertaining to any Pledged Shares at any time after the occurrence and during the continuance of an Event of Default. Section 2.04. CASH DIVIDENDS. Prior to the occurrence of an Event of Default, Pledgor shall have no right to receive, collect or recover any Pledged Share Dividends except as permitted by the Loan Agreement. Following the occurrence and during the continuance of an Event of Default, Pledgor acknowledges and agrees that Pledgor shall have no right whatever to receive, collect or recover any dividends of any kind at any time. ARTICLE III REPRESENTATIONS Pledgor hereby represents and warrants to Agent as follows: Section 3.01. BENEFICIAL OWNERSHIP OF INITIAL PLEDGED SHARES. Pledgor is the sole beneficial owner of each of the Initial Pledged Shares. None of the Initial Pledged Shares is subject to any Liens except that created by this Agreement. None of the Initial Pledged Shares is subject to any shareholder agreements, voting agreements, voting trusts, trust deeds, irrevocable proxies or any other similar agreements or instruments, except this Agreement. Section 3.02. BINDING EFFECT OF AGREEMENT. This Agreement has been duly executed and delivered to Agent by Pledgor and is in full force and effect. All of the agreements and obligations - 4 - of Pledgor contained in this Agreement constitute legal, valid and binding obligations of Pledgor enforceable against Pledgor in accordance with their respective terms. ARTICLE IV COVENANTS Section 4.01. DEFENSE OF AGENT'S TITLE AND RIGHTS. Pledgor hereby covenants with Agent that Pledgor will defend Agent's right, title and special property in and to all of the Initial Pledged Shares and all of the other Pledged Shares. Pledgor will not sell, assign or otherwise transfer or dispose of any of the Pledged Shares, and it will not create, assume, incur or permit to exist any mortgage, lien, pledge, charge, security interest or other encumbrance of any kind in respect of any of the Pledged Shares; EXCLUDING, HOWEVER, any Liens created on or after the date of this Agreement by Pledgor and securing the payment or performance of all or any part of the Obligations or any indebtedness of Pledgor to Agent, whether existing on the date of this Agreement or arising from time to time hereafter. Section 4.02. LIMITATION ON VOTING POWERS. Pledgor hereby covenants with Agent that Pledgor will not at any time or times cast any vote in respect of any of the Pledged Shares or give any consents, waivers or ratifications in respect of any of the Pledged Shares which would violate or contravene, or which would cause or otherwise authorize Pledgor to violate or contravene any provision of this Agreement or any of the other Loan Documents. ARTICLE V POWER OF ATTORNEY Pledgor hereby absolutely and irrevocably constitutes and appoints Agent Pledgor's true and lawful agent and attorney-in- fact, with full power of substitution, in the name of Pledgor or in the name of Agent or in the name of any of Agent's agents or attorneys, following the occurrence and during the continuance of any Default or Event of Default (a) to execute and do all such assurances, acts and things which Pledgor ought to do under the covenants and provisions contained in this Agreement; (b) to take any and all such action as Agent or any of its agents or attorneys may, in its or their sole and absolute discretion, determine to be necessary or advisable for the purpose of maintaining, preserving or protecting the security constituted by this Agreement or any of the rights, remedies, powers or privileges of Agent under this Agreement; and (c) generally, in the name of Pledgor or in the name of Agent or in the name of any of Agent' agents or attorneys, to exercise all or any of the powers, authorities and discretions conferred on or reserved to Agent by or pursuant to this Agreement, and (without prejudice to the generality of any of the foregoing) to seal and deliver or otherwise perfect any deed, assurance, agreement, instrument or act which Agent or any of Agent's agents or attorneys may deem proper in or for the purpose of exercising any of such powers, authorities or discretions. Pledgor hereby ratifies and confirms, and hereby agrees to ratify and confirm, whatever Agent or any of Agent's agents or attorneys shall do or purport to do in the exercise of the power of attorney granted to Agent pursuant to this Article V, which power of attorney, being given for security, is irrevocable. - 5 - ARTICLE VI TERMS OF THE SECURITY HELD AND RELEASE OF SECURITY Section 6.01. CONTINUING SECURITY. The security created by this Agreement shall be held by Agent, as a continuing security for the payment and performance of all of the Obligations (whether existing on the date of this Agreement or arising from time to time thereafter). This Agreement, all of the rights, remedies, powers and privileges of Agent hereunder and the security created hereby shall be in addition to, and shall not in any way be prejudiced or affected by, any other collateral or any other security now or at any time or times hereafter held by Agent for all or any part of the Obligations. Each and every right, remedy, power and privilege conferred on or reserved to Agent hereunder shall be cumulative and in addition to, and not in limitation of, each and every other right, remedy, power or privilege conferred on or reserved to Agent under this Agreement or under the Loan Documents. All of the rights, remedies, powers and privileges vested in Agent hereunder may be exercised at such time or times and in such order and manner as Agent may, in its sole and absolute discretion, deem expedient. Section 6.02. WAIVERS OF NOTICE; ASSENT. The agreements and obligations of Pledgor to Agent hereunder and the security constituted hereby shall not be, to any extent or in any way or manner whatsoever, satisfied, discharged, impaired, diminished, released or otherwise affected by any of the following, whether or not Pledgor shall have had any notice or knowledge of any thereof: (a) the absorption, consolidation, merger or amalgamation of, or the effectuation of any other change whatsoever in the name, membership, constitution or place of formation of, Pledgor or any of their subsidiaries or Agent; (b) any increase or reduction in the amount of the Notes, the termination of the Notes, or the making of the Loans by Agent or any of the Lenders; (c) any extension or postponement of the time for the payment or performance of all or any part of the Obligations, the acceptance of any partial payment on all or any part of the Obligations, any and all other indulgences whatsoever by Agent or any of the Lenders in respect of all or any part of the Obligations, the taking, addition, substitution or release, in whole or in part, of any security for all or any part of the Obligations, or the addition, substitution or release, in whole or in part, of any person or persons primarily or secondarily liable in respect of all or any part of the Obligations; (d) any action or delay in acting or failure to act on the part of Agent or any of the Lenders under this Agreement, the Loan Documents, or in respect of all or any part of the Obligations, or in respect of all or any collateral other than the Collateral; or (e) any modification or amendment of, or any supplement or addition to, any of the Loan Documents. Pledgor hereby absolutely and irrevocably assents to and waives notice of any and all events, conditions, matters and things hereinbefore specified in clauses (a) to (e), inclusive, of the foregoing sentence of this SECTION 6.02. Section 6.03. NO IMPLIED WAIVERS. No course of dealing between Pledgor and Agent and/or any of the Lenders, and no delay on the part of Agent in exercising any right, remedy, power or privilege hereunder or provided by statute or by law or in equity or otherwise, shall impair, prejudice or constitute a waiver of any such right, remedy, power or privilege or be construed as a waiver of any default or as an acquiescence therein; and any - 6 - single or partial exercise of any such right, remedy, power or privilege shall not preclude any other or further exercise thereof or the exercise of any other rights, remedies, powers or privileges. ARTICLE VII ENFORCEMENT OF THE SECURITY Section 7.01. CONDITIONS OF ENFORCEABILITY OF THE SECURITY. If any Default or Event of Default shall at any time occur, the security constituted by this Agreement shall become immediately enforceable by Agent, without any presentment, demand, protest or other notice of any kind, all of which are hereby expressly and irrevocably waived by Pledgor. Section 7.02. EVIDENCE OF OBLIGATIONS. In any legal proceedings against Pledgor for enforcing any agreements or obligations of Pledgor under this Agreement, a certificate of Agent as to the aggregate amount of all of the Obligations shall be Prima Facie evidence thereof. Section 7.03. MANNER OF ENFORCEMENT OF SECURITY. Agent shall have, in any jurisdiction where enforcement is sought, all of the rights, remedies, powers and privileges conferred on Agent, as secured party, under the Uniform Commercial Code of The Commonwealth of Massachusetts, and, without limiting the generality of the foregoing, Agent shall have the full right and power in respect of the Collateral or any part thereof in Agent's sole and complete discretion to do all and any of the following things: (a) to take possession of the Collateral or any part thereof, wherever the same may be, without legal process and without compliance with any other condition precedent imposed by statute, rule of law or otherwise (all of which Pledgor hereby expressly and irrevocably waives), and to call in, collect, convert into money or otherwise deal with the Collateral or any part thereof with full power to sell (including the power to postpone such sale) the Collateral or any part thereof, either together or in lots, and either by public auction or private contract, and either for a lump sum or for a sum payable by installments or for a sum on account and a mortgage or charge or pledge for the balance, and with full power upon every sale to make any special or other stipulation as to title or evidence thereof or otherwise which Agent shall deem proper, and with full power to buy in or rescind or vary any contract for sale of the Collateral or any part thereof and to resell the same without being responsible for any loss which may be occasioned thereby, and with full power to compromise and effect compositions, and, for the purposes aforesaid or any of them, to execute and do all such assurances and things as Agent may deem appropriate; (b) to settle, adjust, compromise and arrange all accounts, reckonings, controversies, questions, claims and demands whatsoever in relation to all or any part of the Collateral; (c) to cause all or any of the Pledged Shares and all or any other Collateral to be sold, assigned or transferred to Agent or to any other person or persons and to be recorded or registered in the name of Agent or any other person or persons and to exercise or permit the exercise of any powers or rights - 7 - incident to all or any part of the Collateral in such manner as Agent shall deem appropriate, and, in respect of all or any of the Pledged Shares, to exercise or permit the exercise of all rights and powers conferred by statute or otherwise upon a registered holder or owner of record thereof, including, without limitation, the calling or causing to be called of meetings, and proposing or causing to be proposed of resolutions (whether ordinary or special resolutions), including resolutions for winding up and voting at meetings; (d) to execute and do all such contracts, agreements, deeds, documents and things, and to bring, defend and abandon all such actions, suits and proceedings in relation to all or any part of the Collateral as Agent shall deem expedient; (e) to appoint managers, agents, officers and servants for any of the purposes mentioned in the foregoing provisions of this SECTION 7.03 for such periods as Agent shall deem appropriate and to dismiss the same; and (f) generally, to do all such other acts and things as may be considered incidental or conducive to any of the matters or powers mentioned in the foregoing provisions of this SECTION 7.03 and which Agent may or can do lawfully and to use the name of Pledgor for the purposes aforesaid and in any proceedings arising therefrom. Section 7.04. COOPERATION OF PLEDGOR. Pledgor recognizes that the Pledged Shares are not readily marketable and may not be marketable at all if any default in the payment or performance of any of the Obligations shall occur and be continuing. In order, therefore, to enable Agent to use such means as Agent and the Lenders may determine necessary or advisable to realize upon the Collateral from time to time, and in order to induce Agent to make the Loans to Pledgor in reliance upon the Collateral, Pledgor hereby absolutely and irrevocably consents that Agent may use whatever means Agent may reasonably consider necessary or advisable to sell any or all of the Collateral at any time or times after the security constituted by this Agreement shall have become enforceable, including, without limitation, the giving of options to purchase any or all of the Collateral and the giving of credit to any purchaser of the Collateral. Because there is no established market for the Collateral and because it may be unlikely that any person will become or be interested in purchasing the Collateral as a result of the giving of any notice of public sale, Pledgor agrees that any sale of the Collateral may be private and without competitive bidding. Section 7.05. NOTICE OF SALE. Agent will give Pledgor at least five (5) days' prior written notice of the time and place of any public or private sale of all or any part of the Collateral or of the time after which any private sale or any other intended disposition of all or any part of the Collateral is to be made. Pledgor hereby absolutely and irrevocably agrees with Agent that any notice of any public or private sale or other disposition given by Agent to Pledgor in accordance with the preceding sentence of this SECTION 7.05 shall be, and shall for all purposes be deemed to be, reasonable notice. Section 7.06. PROTECTION OF PERSONS DEALING WITH AGENT. No purchaser, mortgagor, mortgagee, Agent, Lender, debtor or other - 8 - person dealing with Agent or with any attorney or agent of Agent shall be concerned to enquire (a) whether the security constituted by this Agreement has become enforceable, (b) whether any power exercised or purported to be exercised hereunder has become exercisable, (c) whether any moneys remain due upon the security of this Agreement, (d) as to the propriety, regularity or purpose of the exercise of any power hereunder, or (e) as to the application of any moneys paid to Agent or to any such attorney or agent. Section 7.07. PROTECTION OF SECURITY. In addition to the rights and powers herein above given, Agent may, whether or not any Default or Event of Default shall have occurred and whether or not the security constituted by this Agreement shall have become enforceable, enter into possession of and hold any part of the Collateral which may at any time appear to Agent in danger of being taken under any process of law by any creditor of Pledgor or to be in jeopardy or otherwise endangered. ARTICLE VIII APPLICATION OF MONEYS IN COLLATERAL All moneys realized by Agent after the security constituted by this Agreement shall have become enforceable as well as all moneys then held or at any time or times thereafter received by Agent as realizations of all or any part of the Collateral shall be held by Agent to apply the same as follows; FIRST: in or towards the payment and discharge of all (if any) debts, damages and liabilities, the payment of which shall be secured by any Liens having priority over the rights of Agent in and to such moneys; SECOND: in or towards the payment of, or (as the case may be) the reimbursement of Agent for or in respect of, all costs, expenses, disbursements and losses which shall have been incurred or sustained by Agent in or about or incidental to the collection of such moneys by Agent or the exercise, protection or enforcement by Agent of all or any of the rights, remedies, powers and privileges of Agent under this Agreement or in respect of the Collateral and in or towards the provision of adequate indemnity to Agent against all taxes or liens which by law shall have, or may have, priority over the rights of Agent in and to such moneys; THIRD: in or towards the payment of all of the Obligations in accordance with the Loan Documents and this Agreement; and FOURTH; to the payment of the surplus (if any) to Pledgor or to such other person or persons as shall be entitled to receive such surplus. - 9 - ARTICLE IX PROVISIONS OF GENERAL APPLICATION Section 9.01. NOTICES. All notices, requests, demands and other communications provided for hereunder shall be in writing and mailed or telefaxed or delivered to the applicable party in the manner set forth in SECTION 9.6 of the Loan Agreement. Section 9.02. INDEMNIFICATION. Without prejudice to any of the other provisions of this Agreement, Pledgor will pay to Agent, on demand by Agent at any time and as often as the occasion therefor may require, any and all reasonable costs, charges, expenses and other sums expended, paid or debited in account by Agent and/or the Lenders, whether by itself or through any attorney, substitute or agent, for any of the purposes referred to in this Agreement or otherwise howsoever in relation to the security over the Collateral or any part thereof created by this Agreement, including (without prejudice to the generality of the foregoing) the reasonable remuneration of any such attorney, substitute or agent and of any other servants or agents employed by Agent for any such purposes and any and all other reasonable costs, charges and expenses (whether in respect of litigation or not) incurred in the maintenance, preservation, protection, realization or enforcement of, or the collection and recovery of any moneys from time to time arising under, such security (or any security collateral or supplemental thereto), or in realizing or exercising any other power, authority or discretion in relation to the Collateral or any part thereof, or otherwise incurred under any provision of this Agreement, to the intent that Agent and/or the Lenders shall be afforded a full and unlimited indemnity in respect thereof, and, until so repaid, such costs, charges expenses and other sums shall be charged on the Collateral (but without prejudice to any other remedy, lien or security available to Agent and/or the Lenders). Section 9.03. FURTHER ASSURANCES. Pledgor hereby further agrees with Agent to execute, acknowledge and deliver any and all such further assurances and other deeds, agreements or instruments, and to take or cause to be taken all such other action, as shall be reasonably requested by Agent from time to time in order to give full effect to this Agreement and to maintain, preserve, safeguard and continue at all times all or any of the rights, remedies, powers and privileges of Agent under this Agreement, all without any cost or expense to Agent. Section 9.04. BINDING EFFECT. This Agreement shall be binding upon Pledgor and its successors and assigns and shall inure to the benefit of Agent and its successors in title and assigns. Section 9.05. SEVERABILITY. In the event that any one or more of the provisions contained in this Agreement shall be invalid, illegal or unenforceable in any respect under any law applicable thereto, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby, and Pledgor hereby agrees with Agent to execute any new agreement, deed or other instrument which is necessary to remedy such invalidity, illegality or unenforceability or to preserve the security constituted by the Collateral. - 10 - Section 9.06. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. (a) Except to the extent prohibited by applicable law, Pledgor irrevocably: (i) agrees that any suit, action, or other legal proceeding arising out of this Stock Pledge Agreement may be brought in the courts of record of The Commonwealth of Massachusetts or any other state(s) in which any of the Collateral is located or in the courts of the United States located in The Commonwealth of Massachusetts or any other state(s) in which any of the Collateral is located; (ii) consents to the jurisdiction of each such court in any such suit, action or proceeding; and (iii) waives any objection which it may have to the laying of venue of such suit, action or proceeding in any of such courts. For such time as any of the Obligations of Pledgor to Agent shall be unpaid in whole or in part and or the Commitment in effect, Pledgor irrevocably designates the registered agent or agent for service of process of the Pledgor as reflected on the records of the Secretary of State of The Commonwealth of Massachusetts as its registered agent, and, in the absence thereof, the Secretary of State of The Commonwealth of Massachusetts, as its agent to accept and acknowledge on its behalf service of any and all process in any such suit, action or proceeding brought in any such court and agrees and consents that any such service of process upon such agent and written notice of such service to Pledgor by registered or certified mail shall be taken and held to be valid personal service upon Pledgor regardless of where Pledgor shall then be doing business and that any such service of process shall be of the same force and validity as if service were made upon it according to the laws governing the validity and requirements of such service in each such state and waives any claim of lack of personal service or other error by reason of any such service. Any notice, process, pleadings or other papers served upon the aforesaid designated agent shall, within three (3) Business Days after such service, be sent by the method provided for in SECTION 9.6 of the Loan Agreement to Pledgor at its address set forth in the Loan Agreement. EACH OF THE PARTIES HERETO HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF ANY DISPUTE BETWEEN PLEDGOR AND AGENT WITH RESPECT TO THE FINANCING DOCUMENTS AND/OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREBY. Section 9.07. SPECIFIC PERFORMANCE, ETC. The rights granted to Agent under this Agreement are of a special, unique, unusual and extraordinary character. The loss of any of such rights cannot reasonably or adequately be compensated by way of damages in any action at law, and any material breach by Pledgor of any of Pledgor's covenants, agreements or obligations under this Agreement will cause Agent irreparable injury and damage. In the event of any such breach, Agent shall be entitled, as a matter of right, to injunctive relief or other equitable relief in any court of competent jurisdiction to prevent the violation or contravention of any of the provisions of this Agreement or to compel compliance with the terms of this Agreement by the Pledgor. Agent is absolutely and irrevocably authorized and - 11 - empowered by Pledgor to demand specific performance of each of the covenants and agreements of Pledgor in this Agreement. Pledgor hereby irrevocably waives any defense based on the adequacy of any remedy at law which might otherwise be asserted by Pledgor as a bar to the remedy of specific performance in any action brought by Agent against Pledgor to enforce any of the covenants or agreements of Pledgor in this Agreement. Section 9.08. GOVERNING LAW. This Agreement is intended to take effect as a sealed instrument. This Agreement will be governed by the laws of The Commonwealth of Massachusetts without reference to its conflicts of laws rules. Section 9.09. TITLES. The title of this Agreement and the titles of sections and subsections, and of exhibits, are for convenience of reference only and will not be considered in the construction or interpretation hereof. Section 9.10. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which will be deemed to be an original but all of which together will constitute one and the same instrument. [SIGNATURES APPEAR ON NEXT PAGE] - 12 - IN WITNESS WHEREOF, this STOCK PLEDGE AGREEMENT has been duly executed by or on behalf of each of the parties hereto as of December 26, 1997. PCD INC. By: /s/ John L. Dwight Jr. ---------------------- John L. Dwight Jr. Chairman of the Board FLEET NATIONAL BANK, as Agent for itself and the other Lenders By: /s/ Thomas W. Davies ------------------------- Thomas W. Davies Senior Vice President EX-8 9 EXHIBIT 10.6 STOCK PLEDGE AGREEMENT THIS STOCK PLEDGE AGREEMENT IS BETWEEN: (1) WELLS ELECTRONICS, INC., an Indiana corporation having its principal place of business at 52940 Olive Road, South Bend, Indiana ("Pledgor"); and (2) FLEET NATIONAL BANK, a national banking association organized under the laws of the United States having an office at One Federal Street, Boston, Massachusetts 02110 ("Agent"), as Agent for itself and each of the other Lenders who now are or hereafter become parties to the hereinafter defined Loan Agreement. WHEREAS: (A) Pursuant to the terms of that certain Loan Agreement dated as of the date hereof between PCD Inc., a Massachusetts corporation (the "Principal Debtor"), Agent and the Lenders (as the same may be amended from time to time, the "Loan Agreement"), Agent and the Lenders have agreed to make loans to Principal Debtor in an aggregate principal amount not to exceed $90,000,000.00, as evidenced by that certain Term Note A, Term Note B and Revolving Credit Note of Principal Debtor dated as of the date hereof (the "Notes"); and (B) Principal Debtor owns 100% of the issued and outstanding capital stock of Pledgor; and (C) Pledgor has, as of the date hereof, executed and delivered to Agent that certain Unlimited Guaranty pursuant to which Pledgor has guaranteed payment and performance of all of the Obligations of Principal Debtor (as such term is defined in the Loan Agreement) (the "Guaranty"); and (D) Pledgor legally and beneficially owns, the shares of issued and outstanding stock described on EXHIBIT A attached hereto and incorporated herein as reference; and (E) As a condition precedent to Agent and the Lenders entering into the Loan Agreement and in order to secure the payment and performance in full of all of the Obligations of Principal Debtor to Agent and the Lenders, Pledgor agrees to pledge to Agent, upon the terms contained in this Agreement: (1) the Initial Pledged Shares (as hereinafter defined); and (2) all (if any) shares of any class of the capital stock of the Pledged Companies (as hereinafter defined) acquired by Pledgor at any time after the date hereof. NOW, THEREFORE, in consideration of these premises, the promises, mutual covenants and agreements herein contained, the parties hereto hereby agree as follows: ARTICLE I INTERPRETATION Section 1.01. PROVISIONS PERTAINING TO DEFINITIONS. For all purposes of this Agreement (except where such interpretations would be inconsistent with the context or the subject matter): (a) the terms specifically defined in SECTION 1.02 of this Agreement shall have the meanings therein assigned to them; (b) the expression "this Agreement" shall mean this Stock Pledge Agreement, as originally executed, or, if varied or supplemented from time to time, as so varied or supplemented; and (c) capitalized terms used in this Agreement and defined in the Loan Agreement and not otherwise defined herein shall have the same meanings herein as in the Loan Agreement. Section 1.02. TERMS DEFINED. Subject to the provisions of Section 1.01 of this Agreement, the following terms shall have the respective meanings set forth below: (a) "Collateral" means, collectively, all of the Pledged Shares, all of the Pledged Share Dividends, and all of the other property, assets, accounts and moneys, and all of the income, proceeds and products of any thereof, in, to, under or in respect of which Agent or any of the nominees, agents or representatives of Agent, by this Agreement or by any agreement or agreements supplemental hereto, shall acquire any rights or interests as security for the payment or performance of all or any part of the Obligations. (b) "Initial Pledged Shares" for (i) Wells International, Robinson Nugent and Bowmar (as hereinafter defined) means, collectively, all of the issued and outstanding shares of every class of the capital stock of Wells International, Robinson Nugent and Bowmar, respectively, which are beneficially owned by Pledgor on the date of this Agreement as more particularly described on EXHIBIT A, and (ii) Wells Japan (as hereinafter defined) means, collectively, the LESSER of (1) all of the issued and outstanding shares of every class of the capital stock of Wells Japan which are beneficially owned by Pledgor on the date of this Agreement, and (2) 66% of all of the issued and outstanding shares of every class of the capital stock of Wells Japan which are beneficially owned by Pledgor on the date of this Agreement as more particularly described on EXHIBIT A, the stock certificates for which shall be delivered by Pledgor to Agent in pledge upon the terms contained in this Agreement. (c) "Loan Documents" means the Financing Documents as the term is defined in the Loan Agreement. - 2 - (d) "Obligations" means (i) the due and punctual payment in full of the principal, interest and other sums due and to become due from Principal Debtor to Agent and/or the Lenders, whether now existing or hereafter arising pursuant to the Loan Agreement, the Notes and/or the other Financing Documents, as the same may be amended from time to time; (ii) the due and punctual payment in full at maturity of the principal, interest and any other sums due and to become due from Principal Debtor to Agent and/or the Lenders at any time and from time to time on account of any and all obligations, indebtedness and liability of Principal Debtor to Agent and/or the Lenders, whether now existing or hereafter arising, whether direct, indirect, absolute or contingent, whether otherwise guaranteed or secured and whether on open account or evidenced by a note, draft, check, loan agreement, letter of credit application, acceptance agreement, or other instrument or documents; and (iii) the due and punctual performance of and/or compliance with all of the terms, conditions and covenants contained herein to be performed or complied with by Pledgor and the accuracy of Pledgor's representations and warranties contained herein and in the Financing Documents. (e) "Pledged Companies" means collectively Wells International Corporation Inc., an Indiana corporation ("Wells International"), Robinson Nugent, Inc. ("Robinson Nugent"), Bowmar Instrument Corp. ("Bowmar") and Wells Japan Kabushiki Kaisha , a Japanese limited stock company ("Wells Japan"). (f) "Pledged Share Dividends" means, collectively, (i) all dividends of every kind whatever which shall become and be due and payable or distributable on or in respect of all or any of the Pledged Shares, (ii) all payments of every kind whatever which shall become and be due and payable or distributable on account of the purchase, redemption, repurchase or other retirement of all or any of the Pledged Shares, and (iii) all other distributions of every kind whatsoever (including, without limitation, all capital distributions) which shall become and be due and payable or distributable on or in respect of all or any of the Pledged Shares; and "Pledged Share Dividend" means any one of the Pledged Share Dividends. (g) "Pledged Shares" means, collectively, (i) all of the Initial Pledged Shares, and (ii) all other shares of any class of the capital stock of any of the Pledged Companies (A) which shall be issued or distributed (by way of stock dividends or otherwise) or sold by any of the Pledged Companies to Pledgor at any time or times after the date of this Agreement, or (B) which shall be purchased or otherwise acquired by or on behalf of Pledgor from any of the Pledged Companies or from any other person or persons at any time or times after the date of this Agreement; and "Pledged Share" means any one of the Pledged Shares. ARTICLE II PLEDGE AND ASSIGNMENT BY PLEDGOR Section 2.01. PLEDGE AND ASSIGNMENT. In order to secure the payment and performance in full of all of the Obligations (whether existing on the date of this Agreement or arising at any time or times thereafter), Pledgor, as beneficial owner, hereby - 3 - pledges, hypothecates and assigns to Agent and hereby grants to Agent, a continuing security interest in, the following: (a) each of the Initial Pledged Shares and all of the stock certificates representing the Initial Pledged Shares; (b) all of the Pledged Shares which shall be issued or distributed or sold to or purchased or otherwise acquired by Pledgor at any time or times after the date of this Agreement and all of the stock certificates representing such Pledged Shares; (c) all of the Pledged Share Dividends; and (d) all of Pledgor's rights, title, interests, claims and remedies and all other benefits whatever now existing or hereafter arising in, to, under or in respect of all of the Initial Pledged Shares, all of the other Pledged Shares, all of the Pledged Share Dividends (subject to SECTION 2.04 of this Agreement) and all of the income and proceeds of any thereof, PROVIDED, HOWEVER, that in no event will Pledgor be required to pledge to Agent, pursuant to the terms hereof, more than 66% of the issued and outstanding capital stock of Wells Singapore and Wells Japan, respectively. TO HAVE AND TO HOLD all of the foregoing unto Agent, absolutely and forever, SUBJECT, HOWEVER, to the terms and conditions set forth in this Agreement. Section 2.02. DELIVERY OF STOCK CERTIFICATES REPRESENTING PLEDGED SHARES. (a) All of the stock certificates representing the Initial Pledged Shares have been delivered by Pledgor to Agent in pledge on the date of this Agreement. Each of such stock certificates names Pledgor as the owner of record of the Initial Pledged Shares represented thereby. Each of the Initial Pledged Shares has been duly transferred by Pledgor to Agent in pledge pursuant to instruments of transfer which have been duly executed in blank (with signatures guaranteed, if applicable) and delivered to Agent by Pledgor. (b) If (and on each occasion that) any additional Pledged Shares shall, at any time after the date of this Agreement, be issued or distributed or sold to or purchased or otherwise acquired by Pledgor, Pledgor will within seven Business Days of such issuance, distribution, sale, purchase or acquisition (i) cause all of the stock certificates representing such additional Pledged Shares to be delivered to Agent, and (ii) execute in blank (with guarantee of signatures) and deliver to Agent undated instruments of transfer, satisfactory to Agent in form and substance, by which each of such additional Pledged Shares shall be duly transferred by Pledgor to Agent in pledge. Each of such stock certificates will name Pledgor as the owner of record of the additional Pledged Shares represented thereby. Section 2.03. VOTING POWER. (a) Until the occurrence of an Event of Default, Pledgor will be permitted to exercise all voting powers pertaining to any Pledged Shares for any purpose not inconsistent with the terms of this Agreement or any of the other Loan Documents. (b) Pledgor acknowledges and agrees with Agent that, unless Agent otherwise consents, Pledgor shall have no rights whatever to exercise any voting powers pertaining to any Pledged Shares at any time after the occurrence and during the continuance of an Event of Default. - 4 - Section 2.04. CASH DIVIDENDS. Prior to the occurrence of an Event of Default, Pledgor shall have no right to receive, collect or recover any Pledged Share Dividends except as permitted by the Loan Agreement. Following the occurrence or during the continuance of an Event of Default, Pledgor acknowledges and agrees that Pledgor shall have no right whatever to receive, collect or recover any dividends of any kind at any time. ARTICLE III REPRESENTATIONS Pledgor hereby represents and warrants to Agent as follows: Section 3.01. BENEFICIAL OWNERSHIP OF INITIAL PLEDGED SHARES. Pledgor is the sole beneficial owner of each of the Initial Pledged Shares. None of the Initial Pledged Shares is subject to any Liens except that created by this Agreement. None of the Initial Pledged Shares is subject to any shareholder agreements, voting agreements, voting trusts, trust deeds, irrevocable proxies or any other similar agreements or instruments, except this Agreement. Section 3.02. BINDING EFFECT OF AGREEMENT. This Agreement has been duly executed and delivered to Agent by Pledgor and is in full force and effect. All of the agreements and obligations of Pledgor contained in this Agreement constitute legal, valid and binding obligations of Pledgor enforceable against Pledgor in accordance with their respective terms. ARTICLE IV COVENANTS Section 4.01. DEFENSE OF AGENT'S TITLE AND RIGHTS. Pledgor hereby covenants with Agent that Pledgor will defend Agent's right, title and special property in and to all of the Initial Pledged Shares and all of the other Pledged Shares. Pledgor will not sell, assign or otherwise transfer or dispose of any of the Pledged Shares, and it will not create, assume, incur or permit to exist any Liens of any kind in respect of any of the Pledged Shares; EXCLUDING, HOWEVER, any mortgages, liens, pledges, charges, security interests and other encumbrances created on or after the date of this Agreement by Pledgor and securing the payment or performance of all or any part of the Obligations or any indebtedness of Pledgor to Agent, whether existing on the date of this Agreement or arising from time to time hereafter. Section 4.02. LIMITATION ON VOTING POWERS. Pledgor hereby covenants with Agent that Pledgor will not at any time or times cast any vote in respect of any of the Pledged Shares or give any consents, waivers or ratifications in respect of any of the Pledged Shares which would violate or contravene, or which would cause or otherwise authorize Pledgor to violate or contravene any provision of this Agreement or any of the other Loan Documents. - 5 - ARTICLE V POWER OF ATTORNEY Pledgor hereby absolutely and irrevocably constitutes and appoints Agent Pledgor's true and lawful agent and attorney-in- fact, with full power of substitution, in the name of Pledgor or in the name of Agent or in the name of any of Agent's agents or attorneys, following the occurrence and during the continuance of any Default or Event of Default (a) to execute and do all such assurances, acts and things which Pledgor ought to do under the covenants and provisions contained in this Agreement; (b) to take any and all such action as Agent or any of its agents or attorneys may, in its or their sole and absolute discretion, determine to be necessary or advisable for the purpose of maintaining, preserving or protecting the security constituted by this Agreement or any of the rights, remedies, powers or privileges of Agent under this Agreement; and (c) generally, in the name of Pledgor or in the name of Agent or in the name of any of Agent' agents or attorneys, to exercise all or any of the powers, authorities and discretions conferred on or reserved to Agent by or pursuant to this Agreement, and (without prejudice to the generality of any of the foregoing) to seal and deliver or otherwise perfect any deed, assurance, agreement, instrument or act which Agent or any of Agent's agents or attorneys may deem proper in or for the purpose of exercising any of such powers, authorities or discretions. Pledgor hereby ratifies and confirms, and hereby agrees to ratify and confirm, whatever Agent or any of Agent's agents or attorneys shall do or purport to do in the exercise of the power of attorney granted to Agent pursuant to this Article V, which power of attorney, being given for security, is irrevocable. ARTICLE VI TERMS OF THE SECURITY HELD AND RELEASE OF SECURITY Section 6.01. CONTINUING SECURITY. The security created by this Agreement shall be held by Agent, as a continuing security for the payment and performance of all of the Obligations (whether existing on the date of this Agreement or arising from time to time thereafter). This Agreement, all of the rights, remedies, powers and privileges of Agent hereunder and the security created hereby shall be in addition to, and shall not in any way be prejudiced or affected by, any other collateral or any other security now or at any time or times hereafter held by Agent for all or any part of the Obligations. Each and every right, remedy, power and privilege conferred on or reserved to Agent hereunder shall be cumulative and in addition to, and not in limitation of, each and every other right, remedy, power or privilege conferred on or reserved to Agent under this Agreement or under the Loan Documents. All of the rights, remedies, powers and privileges vested in Agent hereunder may be exercised at such time or times and in such order and manner as Agent may, in its sole and absolute discretion, deem expedient. Section 6.02. WAIVERS OF NOTICE; ASSENT. The agreements and obligations of Pledgor to Agent hereunder and the security constituted hereby shall not be, to any extent or in any way or manner whatsoever, satisfied, discharged, impaired, diminished, released or otherwise affected by any of the following, whether or not Pledgor shall have had any notice or knowledge of any - 6 - thereof: (a) the absorption, consolidation, merger or amalgamation of, or the effectuation of any other change whatsoever in the name, membership, constitution or place of formation of, Pledgor or any of their subsidiaries or Agent; (b) any increase or reduction in the amount of the Notes, the termination of the Notes, or the making of the Loans by Agent or any of the Lenders; (c) any extension or postponement of the time for the payment or performance of all or any part of the Obligations, the acceptance of any partial payment on all or any part of the Obligations, any and all other indulgences whatsoever by Agent or any of the Lenders in respect of all or any part of the Obligations, the taking, addition, substitution or release, in whole or in part, of any security for all or any part of the Obligations, or the addition, substitution or release, in whole or in part, of any person or persons primarily or secondarily liable in respect of all or any part of the Obligations; (d) any action or delay in acting or failure to act on the part of Agent or any of the Lenders under this Agreement, the Loan Documents, or in respect of all or any part of the Obligations, or in respect of all or any collateral other than the Collateral; or (e) any modification or amendment of, or any supplement or addition to, any of the Loan Documents. Pledgor hereby absolutely and irrevocably assents to and waives notice of any and all events, conditions, matters and things hereinbefore specified in clauses (a) to (e), inclusive, of the foregoing sentence of this SECTION 6.02. Section 6.03. NO IMPLIED WAIVERS. No course of dealing between Pledgor and Agent and/or any of the Lenders, and no delay on the part of Agent in exercising any right, remedy, power or privilege hereunder or provided by statute or by law or in equity or otherwise, shall impair, prejudice or constitute a waiver of any such right, remedy, power or privilege or be construed as a waiver of any default or as an acquiescence therein; and any single or partial exercise of any such right, remedy, power or privilege shall not preclude any other or further exercise thereof or the exercise of any other rights, remedies, powers or privileges. ARTICLE VII ENFORCEMENT OF THE SECURITY Section 7.01. CONDITIONS OF ENFORCEABILITY OF THE SECURITY. If any Default or Event of Default shall at any time occur, the security constituted by this Agreement shall become immediately enforceable by Agent, without any presentment, demand, protest or other notice of any kind, all of which are hereby expressly and irrevocably waived by Pledgor. Section 7.02. EVIDENCE OF OBLIGATIONS. In any legal proceedings against Pledgor for enforcing any agreements or obligations of Pledgor under this Agreement, a certificate of Agent as to the aggregate amount of all of the Obligations shall be PRIMA FACIE evidence thereof. Section 7.03. MANNER OF ENFORCEMENT OF SECURITY. Agent shall have, in any jurisdiction where enforcement is sought, all of the rights, remedies, powers and privileges conferred on Agent, as secured party, under the Uniform Commercial Code of The Commonwealth of Massachusetts, and, without limiting the generality of the foregoing, Agent shall have the full right and - 7 - power in respect of the Collateral or any part thereof in Agent's sole and complete discretion to do all and any of the following things: (a) to take possession of the Collateral or any part thereof, wherever the same may be, without legal process and without compliance with any other condition precedent imposed by statute, rule of law or otherwise (all of which Pledgor hereby expressly and irrevocably waives), and to call in, collect, convert into money or otherwise deal with the Collateral or any part thereof with full power to sell (including the power to postpone such sale) the Collateral or any part thereof, either together or in lots, and either by public auction or private contract, and either for a lump sum or for a sum payable by installments or for a sum on account and a mortgage or charge or pledge for the balance, and with full power upon every sale to make any special or other stipulation as to title or evidence thereof or otherwise which Agent shall deem proper, and with full power to buy in or rescind or vary any contract for sale of the Collateral or any part thereof and to resell the same without being responsible for any loss which may be occasioned thereby, and with full power to compromise and effect compositions, and, for the purposes aforesaid or any of them, to execute and do all such assurances and things as Agent may deem appropriate; (b) to settle, adjust, compromise and arrange all accounts, reckonings, controversies, questions, claims and demands whatsoever in relation to all or any part of the Collateral; (c) to cause all or any of the Pledged Shares and all or any other Collateral to be sold, assigned or transferred to Agent or to any other person or persons and to be recorded or registered in the name of Agent or any other person or persons and to exercise or permit the exercise of any powers or rights incident to all or any part of the Collateral in such manner as Agent shall deem appropriate, and, in respect of all or any of the Pledged Shares, to exercise or permit the exercise of all rights and powers conferred by statute or otherwise upon a registered holder or owner of record thereof, including, without limitation, the calling or causing to be called of meetings, and proposing or causing to be proposed of resolutions (whether ordinary or special resolutions), including resolutions for winding up and voting at meetings; (d) to execute and do all such contracts, agreements, deeds, documents and things, and to bring, defend and abandon all such actions, suits and proceedings in relation to all or any part of the Collateral as Agent shall deem expedient; (e) to appoint managers, agents, officers and servants for any of the purposes mentioned in the foregoing provisions of this SECTION 7.03 for such periods as Agent shall deem appropriate and to dismiss the same; and (f) generally, to do all such other acts and things as may be considered incidental or conducive to any of the matters or powers mentioned in the foregoing provisions of this SECTION 7.03 and which Agent may or can do lawfully and to use the name of Pledgor for the purposes aforesaid and in any proceedings arising therefrom. - 8 - Section 7.04. COOPERATION OF PLEDGOR. Pledgor recognizes that the Pledged Shares are not readily marketable and may not be marketable at all if any default in the payment or performance of any of the Obligations shall occur and be continuing. In order, therefore, to enable Agent to use such means as Agent may determine necessary or advisable to realize upon the Collateral from time to time, and in order to induce Agent and the Lenders to make the Loans to Principal Debtor in reliance upon the Collateral, Pledgor hereby absolutely and irrevocably consents that Agent may use whatever means Agent may reasonably consider necessary or advisable to sell any or all of the Collateral at any time or times after the security constituted by this Agreement shall have become enforceable, including, without limitation, the giving of options to purchase any or all of the Collateral and the giving of credit to any purchaser of the Collateral. Because there is no established market for the Collateral and because it may be unlikely that any person will become or be interested in purchasing the Collateral as a result of the giving of any notice of public sale, Pledgor agrees that any sale of the Collateral may be private and without competitive bidding. Section 7.05. NOTICE OF SALE. Agent will give Pledgor at least five (5) days' prior written notice of the time and place of any public or private sale of all or any part of the Collateral or of the time after which any private sale or any other intended disposition of all or any part of the Collateral is to be made. Pledgor hereby absolutely and irrevocably agrees with Agent that any notice of any public or private sale or other disposition given by Agent to Pledgor in accordance with the preceding sentence of this SECTION 7.05 shall be, and shall for all purposes be deemed to be, reasonable notice. Section 7.06. PROTECTION OF PERSONS DEALING WITH AGENT. No purchaser, mortgagor, mortgagee, Agent, Lender, debtor or other person dealing with Agent or with any attorney or agent of Agent shall be concerned to enquire (a) whether the security constituted by this Agreement has become enforceable, (b) whether any power exercised or purported to be exercised hereunder has become exercisable, (c) whether any moneys remain due upon the security of this Agreement, (d) as to the propriety, regularity or purpose of the exercise of any power hereunder, or (e) as to the application of any moneys paid to Agent or to any such attorney or agent. Section 7.07. PROTECTION OF SECURITY. In addition to the rights and powers hereinabove given, Agent may, whether or not any Default or Event of Default shall have occurred and whether or not the security constituted by this Agreement shall have become enforceable, enter into possession of and hold any part of the Collateral which may at any time appear to Agent in danger of being taken under any process of law by any creditor of Pledgor or to be in jeopardy or otherwise endangered. - 9 - ARTICLE VIII APPLICATION OF MONEYS IN COLLATERAL All moneys realized by Agent after the security constituted by this Agreement shall have become enforceable as well as all moneys then held or at any time or times thereafter received by Agent as realizations of all or any part of the Collateral shall be held by Agent to apply the same as follows; FIRST: in or towards the payment and discharge of all (if any) debts, damages and liabilities, the payment of which shall be secured by any Liens having priority over the rights of Agent in and to such moneys; SECOND: in or towards the payment of, or (as the case may be) the reimbursement of Agent for or in respect of, all costs, expenses, disbursements and losses which shall have been incurred or sustained by Agent in or about or incidental to the collection of such moneys by Agent or the exercise, protection or enforcement by Agent of all or any of the rights, remedies, powers and privileges of Agent under this Agreement or in respect of the Collateral and in or towards the provision of adequate indemnity to Agent against all taxes or liens which by law shall have, or may have, priority over the rights of Agent in and to such moneys; THIRD: in or towards the payment of all of the Obligations in accordance with the Loan Documents and this Agreement; and FOURTH; to the payment of the surplus (if any) to Pledgor or to such other person or persons as shall be entitled to receive such surplus. ARTICLE IX PROVISIONS OF GENERAL APPLICATION Section 9.01. NOTICES. All notices, requests, demands and other communications provided for hereunder shall be in writing and mailed or telefaxed or delivered to the applicable party in the manner set forth in SECTION 9.6 of the Loan Agreement. Section 9.02. INDEMNIFICATION. Without prejudice to any of the other provisions of this Agreement, Pledgor will pay to Agent, on demand by Agent at any time and as often as the occasion therefor may require, any and all reasonable costs, charges, expenses and other sums expended, paid or debited in account by Agent and/or the Lenders, whether by itself or through any attorney, substitute or agent, for any of the purposes referred to in this Agreement or otherwise howsoever in relation to the security over the Collateral or any part thereof created by this Agreement, including (without prejudice to the generality of the foregoing) the reasonable remuneration of any such attorney, substitute or agent and of any other servants or agents employed by Agent for any such purposes and any and all other - 10 - reasonable costs, charges and expenses (whether in respect of litigation or not) incurred in the maintenance, preservation, protection, realization or enforcement of, or the collection and recovery of any moneys from time to time arising under, such security (or any security collateral or supplemental thereto), or in realizing or exercising any other power, authority or discretion in relation to the Collateral or any part thereof, or otherwise incurred under any provision of this Agreement, to the intent that Agent and/or the Lenders shall be afforded a full and unlimited indemnity in respect thereof, and, until so repaid, such costs, charges expenses and other sums shall be charged on the Collateral (but without prejudice to any other remedy, lien or security available to Agent and/or the Lenders). Section 9.03. FURTHER ASSURANCES. Pledgor hereby further agrees with Agent to execute, acknowledge and deliver any and all such further assurances and other deeds, agreements or instruments, and to take or cause to be taken all such other action, as shall be reasonably requested by Agent from time to time in order to give full effect to this Agreement and to maintain, preserve, safeguard and continue at all times all or any of the rights, remedies, powers and privileges of Agent under this Agreement, all without any cost or expense to Agent. Section 9.04. BINDING EFFECT. This Agreement shall be binding upon Pledgor and its successors and assigns and shall inure to the benefit of Agent and its successors in title and assigns. Section 9.05. SEVERABILITY. In the event that any one or more of the provisions contained in this Agreement shall be invalid, illegal or unenforceable in any respect under any law applicable thereto, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby, and Pledgor hereby agrees with Agent to execute any new agreement, deed or other instrument which is necessary to remedy such invalidity, illegality or unenforceability or to preserve the security constituted by the Collateral. Section 9.06. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. (a) Except to the extent prohibited by applicable law, Pledgor irrevocably: (i) agrees that any suit, action, or other legal proceeding arising out of this Stock Pledge Agreement may be brought in the courts of record of The Commonwealth of Massachusetts or any other state(s) in which any of the Collateral is located or in the courts of the United States located in The Commonwealth of Massachusetts or any other state(s) in which any of the Collateral is located; (ii) consents to the jurisdiction of each such court in any such suit, action or proceeding; and (iii) waives any objection which it may have to the laying of venue of such suit, action or proceeding in any of such courts. - 11 - For such time as any of the Obligations of Pledgor to Agent shall be unpaid in whole or in part and or the Commitment in effect, Pledgor irrevocably designates the registered agent or agent for service of process of the Pledgor as reflected on the records of the Secretary of State of the State of Indiana as its registered agent, and, in the absence thereof, the Secretary of State of the State of the State of Indiana, as its agent to accept and acknowledge on its behalf service of any and all process in any such suit, action or proceeding brought in any such court and agrees and consents that any such service of process upon such agent and written notice of such service to Pledgor by registered or certified mail shall be taken and held to be valid personal service upon Pledgor regardless of where Pledgor shall then be doing business and that any such service of process shall be of the same force and validity as if service were made upon it according to the laws governing the validity and requirements of such service in each such state and waives any claim of lack of personal service or other error by reason of any such service. Any notice, process, pleadings or other papers served upon the aforesaid designated agent shall, within three (3) Business Days after such service, be sent by the method provided for in SECTION 9.6 of the Loan Agreement to Pledgor at its address set forth in the Loan Agreement. EACH OF THE PARTIES HERETO HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF ANY DISPUTE BETWEEN PLEDGOR AND AGENT WITH RESPECT TO THE FINANCING DOCUMENTS AND/OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREBY. Section 9.07. SPECIFIC PERFORMANCE, ETC. The rights granted to Agent under this Agreement are of a special, unique, unusual and extraordinary character. The loss of any of such rights cannot reasonably or adequately be compensated by way of damages in any action at law, and any material breach by Pledgor of any of Pledgor's covenants, agreements or obligations under this Agreement will cause Agent irreparable injury and damage. In the event of any such breach, Agent shall be entitled, as a matter of right, to injunctive relief or other equitable relief in any court of competent jurisdiction to prevent the violation or contravention of any of the provisions of this Agreement or to compel compliance with the terms of this Agreement by the Pledgor. Agent is absolutely and irrevocably authorized and empowered by Pledgor to demand specific performance of each of the covenants and agreements of Pledgor in this Agreement. Pledgor hereby irrevocably waives any defense based on the adequacy of any remedy at law which might otherwise be asserted by Pledgor as a bar to the remedy of specific performance in any action brought by Agent against Pledgor to enforce any of the covenants or agreements of Pledgor in this Agreement. Section 9.08. GOVERNING LAW. This Agreement is intended to take effect as a sealed instrument. This Agreement will be governed by the laws of The Commonwealth of Massachusetts without reference to its conflicts of laws rules. Section 9.09. TITLES. The title of this Agreement and the titles of sections and subsections, and of exhibits, are for convenience of reference only and will not be considered in the construction or interpretation hereof. - 12 - Section 9.10. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which will be deemed to be an original but all of which together will constitute one and the same instrument. [SIGNATURES APPEAR ON NEXT PAGE] - 13 - IN WITNESS WHEREOF, this STOCK PLEDGE AGREEMENT has been duly executed by or on behalf of each of the parties hereto as of December 26, 1997. WELLS ELECTRONICS, INC. By: /s/ Mary L. Mandarino ------------------------ Mary L. Mandarino Treasurer FLEET NATIONAL BANK, as Agent for itself and the other Lenders By: /s/ Thomas W. Davies ------------------------ Thomas W. Davies Senior Vice President - 14 - EXHIBIT A Stock Ownership NUMBER OF SHARES NAME OF COMPANY DESCRIPTION OF STOCK OWNED BY PLEDGOR Wells International Common 8,000 Corporation Inc. Wells Japan Kabushiki Kaisha 5,100 Robinson Nugent, Inc. Common 406 Bowmar Instrument Corp. Common 59 - 15 - EX-9 10 EXHIBIT 10.7 CONDITIONAL PATENT ASSIGNMENT THIS CONDITIONAL PATENT ASSIGNMENT dated as of December 26, 1997, by and between PCD INC., a Massachusetts corporation, with a principal place of business at 2 Technology Drive, Centennial Park, Peabody, Massachusetts 01960-7977 ("Assignor") and FLEET NATIONAL BANK, a national banking association organized under the laws of the United States having an office at One Federal Street, Boston, Massachusetts 02110 ("Assignee"), as Agent for itself and each of the other Lenders who are now or hereafter become parties to the hereinafter defined Loan Agreement. WHEREAS, Assignee and Assignor, as Agent for itself and each of the other Lenders who are now or hereafter become parties to the Loan Agreement (as hereinafter defined) have this day entered into a certain Loan Agreement (as the same may be amended from time to time, the "Loan Agreement") pursuant to which Assignee has agreed to make certain loans to Assignor; and WHEREAS, capitalized terms used herein and not otherwise defined herein shall have the meanings set forth in the Loan Agreement; and WHEREAS, pursuant to the terms of a Security Agreement of even date herewith by and between Assignor and Assignee (as amended from time to time, the "Security Agreement"), Assignor has concurrently granted to Assignee a security interest in all of Assignor's assets to secure, INTER ALIA, the payment and performance of the Obligations of Assignor to Assignee and/or the Lenders under the Loan Agreement; and WHEREAS, to evidence and perfect the rights of Assignee as grantee of a security interest that has attached in certain of said assets as described below, Assignor has executed and delivered to Assignee this Conditional Patent Assignment. NOW THEREFORE, FOR GOOD AND VALUABLE CONSIDERATION, THE RECEIPT OF WHICH IS HEREBY ACKNOWLEDGED, AND SUBJECT TO THE CONDITIONS SET FORTH HEREIN, Assignor does hereby conditionally assign, sell, transfer and grant unto Assignee all of Assignor's right, title and interest in, to and under the following, whether presently existing or hereafter arising or acquired: (i) each patent and each registration thereof, and each patent registration application owned by Assignor, including, without limitation, each such patent and patent registration application set forth on SCHEDULE A, attached hereto and incorporated herein by reference; and (ii) all products and proceeds of the foregoing, including, without limitation, any claim or causes of action of Assignor against any third parties for past, present or future infringement of any of the foregoing, with the right to sue and recover the same in the Assignee's own name and for its own use and behoove, including all rights corresponding thereto throughout the world and all re-issues, divisions, continuations, renewals, extensions and continuations-in-part thereof; (all of the foregoing, individually and collectively, the "Patents"). PROVIDED, HOWEVER, THAT ASSIGNOR'S RIGHTS IN THE PATENTS SHALL CONTINUE UNTIL, AND ASSIGNEE SHALL HAVE NO OBLIGATIONS WITH RESPECT TO THE PATENTS UNTIL, AND ASSIGNEE SHALL BE ENTITLED TO EXERCISE ITS RIGHTS AND REMEDIES HEREUNDER IN AND WITH RESPECT TO THE PATENTS ONLY UPON, SATISFACTION OF THE FOLLOWING CONDITIONS SUBSEQUENT: (a) The occurrence and continuation of an Event of Default as defined in the Loan Agreement; or (b) The exercise by Assignee of any or all of its rights or remedies under the Security Agreement in respect of the Patents. 1. Assignor does hereby acknowledge, affirm and represent that: (i) the rights and remedies of Assignee with respect to its interest in the Patents are more fully set forth in the Security Agreement, the terms and provisions of which are incorporated by reference herein as if fully set forth herein. (ii) that nothing in this Conditional Patent Assignment shall be in derogation of the rights and remedies of Assignee in and to the Patents as set forth in the Security Agreement and as shall be available at law or in equity. (iii) SCHEDULE A contains a true and complete record of (a) all patents in which Assignor has any interest and (b) all applications pending for registration of patents in which Assignor has any interest. (iv) the Patents are subsisting and have not been adjudged invalid or unenforceable, in whole or in part. (v) each of the Patents is valid and enforceable. (vi) Assignor is the sole and exclusive owner of the entire and unencumbered right, title and interest in and to each of the Patents, free and clear of any Liens, including, without limitation, licenses, shop rights and covenants by Assignor not to sue third persons. (vii) Assignor has the unqualified right to enter into this Agreement and perform its terms. 2. Assignor covenants that, until all of the Obligations shall have been satisfied in full, it will not enter into any agreement (for example, a license agreement) which is inconsistent with Assignor's obligations under this Assignment, without the Assignee's prior written consent. 2 3. Assignor covenants that if, before the Obligations shall have been satisfied in full, Assignor shall obtain rights to any new patentable inventions or additional registered patents, or additional patent applications or patent for any reissue, division, continuation, renewal, extension, or continuation-in- part of any Patent or any improvement on any Patent, or become entitled to the benefit of any registration applications for patents, the provisions of this Assignment shall automatically apply thereto and Assignor shall give to the Assignee prompt notice thereof in writing. 4. Assignor shall indemnify, defend and hold Assignee, its affiliates and their respective directors, officers, employees and agents ("Assignee's Indemnified Parties") harmless from and against all damages, losses or expenses suffered or paid as a result of any and all claims, demands, suits, causes of action, proceedings, judgments and liabilities, including reasonable attorneys' fees incurred in litigation or otherwise assessed, incurred or sustained by or against Assignee's Indemnified Parties or any of them with respect to or arising out of or in any way connected with this Assignment. 5. The Assignee shall have the right but shall in no way be obligated to bring suit in its name to enforce the Patents and any license thereunder, in which event Assignor shall at the request of the Assignee do any and all lawful acts and execute any and all proper documents required by the Assignee in aid of such enforcement and Assignor shall promptly, upon demand, reimburse and indemnify the Assignee for all costs and expenses incurred by the Assignee in the exercise of its rights under this section. 6. Assignor authorizes the Assignee to modify this Assignment by amending SCHEDULE A to include any future patents or patent applications in which Assignor may acquire an interest. 7. At such time as Assignor shall completely and finally satisfy all of the Obligations, the Assignee shall execute and deliver to Assignor all deeds, assignments and other instruments as may be necessary or proper to re-vest in Assignor full title to the Patents, subject to any disposition thereof which may have been made by the Assignee pursuant to the Security Agreement. [SIGNATURES APPEAR ON NEXT PAGE] 3 IN WITNESS WHEREOF, Assignor has caused this Conditional Patent Assignment to be duly executed by its duly authorized officer as of the date first set forth above. PCD INC. By: /S/ John L. Dwight, Jr. -------------------------- John L. Dwight, Jr. Chairman of the Board FLEET NATIONAL BANK as Agent for itself and the other Lenders By: /S/ Thomas W. Davies -------------------------- Thomas W. Davies Senior Vice President 4 EX-10 11 EXHIBIT 10.8 CONDITIONAL PATENT ASSIGNMENT THIS CONDITIONAL PATENT ASSIGNMENT dated as of December 26, 1997, by and between WELLS ELECTRONICS, INC., an Indiana corporation, with a principal place of business at 52940 Olive Road, South Bend, Indiana ("Assignor") and FLEET NATIONAL BANK, a national banking association organized under the laws of the United States having an office at One Federal Street, Boston, Massachusetts 02110 ("Assignee"), as Agent for itself and each of the other Lenders who are now or hereafter become parties to the hereinafter defined Loan Agreement. WHEREAS, pursuant to the terms of that certain Loan Agreement dated as of the date hereof between PCD Inc., a Massachusetts corporation (the "Principal Debtor"), Assignee and the Lenders (as the same may be amended from time to time, the "Loan Agreement"), Assignee and the Lenders have agreed to make loans to Principal Debtor in an aggregate principal amount not to exceed $90,000,000.00, as evidenced by that certain Term Note A, Term Note B and Revolving Credit Note of Principal Debtor dated as of the date hereof; and WHEREAS, capitalized terms used herein and not otherwise defined herein shall have the meanings set forth in the Loan Agreement; and WHEREAS, Principal Debtor owns 100% of the issued and outstanding capital stock of Assignor; and WHEREAS, Assignor has, as of the date hereof, executed and delivered to Assignee that certain Unlimited Guaranty pursuant to which Assignor has guaranteed payment and performance of all of the Obligations of Principal Debtor (as such term is defined in the Loan Agreement) (the "Guaranty"); and WHEREAS, pursuant to the terms of a Security Agreement of even date herewith by and between Assignor and Assignee (as amended from time to time, the "Security Agreement"), Assignor has concurrently granted to Assignee a security interest in all of Assignor's assets to secure its obligations to Assignee and/or the Lenders under the Guaranty; and WHEREAS, to evidence and perfect the rights of Assignee as grantee of a security interest that has attached in certain of said assets as described below, Assignor has executed and delivered to Assignee this Conditional Patent Assignment. NOW THEREFORE, FOR GOOD AND VALUABLE CONSIDERATION, THE RECEIPT OF WHICH IS HEREBY ACKNOWLEDGED, AND SUBJECT TO THE CONDITIONS SET FORTH HEREIN, Assignor does hereby conditionally assign, sell, transfer and grant unto Assignee all of Assignor's right, title and interest in, to and under the following, whether presently existing or hereafter arising or acquired: (i) each patent and each registration thereof, and each patent registration application owned by Assignor, including, without limitation, each such patent and patent registration application set forth on SCHEDULE A, attached hereto and incorporated herein by reference; and (ii) all products and proceeds of the foregoing, including, without limitation, any claim or causes of action of Assignor against any third parties for past, present or future infringement of any of the foregoing, with the right to sue and recover the same in the Assignee's own name and for its own use and behoove, including all rights corresponding thereto throughout the world and all re-issues, divisions, continuations, renewals, extensions and continuations-in-part thereof; (all of the foregoing, individually and collectively, the "Patents"). PROVIDED, HOWEVER, THAT ASSIGNOR'S RIGHTS IN THE PATENTS SHALL CONTINUE UNTIL, AND ASSIGNEE SHALL HAVE NO OBLIGATIONS WITH RESPECT TO THE PATENTS UNTIL, AND ASSIGNEE SHALL BE ENTITLED TO EXERCISE ITS RIGHTS AND REMEDIES HEREUNDER IN AND WITH RESPECT TO THE PATENTS ONLY UPON, SATISFACTION OF THE FOLLOWING CONDITIONS SUBSEQUENT: (a) The occurrence and continuation of an Event of Default as defined in the Loan Agreement; or (b) The exercise by Assignee of any or all of its rights or remedies under the Security Agreement in respect of the Patents. 1. Assignor does hereby acknowledge, affirm and represent that: (i) the rights and remedies of Assignee with respect to its interest in the Patents are more fully set forth in the Security Agreement, the terms and provisions of which are incorporated by reference herein as if fully set forth herein. (ii) that nothing in this Conditional Patent Assignment shall be in derogation of the rights and remedies of Assignee in and to the Patents as set forth in the Security Agreement and as shall be available at law or in equity. (iii) SCHEDULE A contains a true and complete record of (a) all patents in which Assignor has any interest and (b) all applications pending for registration of patents in which Assignor has any interest. (iv) the Patents are subsisting and have not been adjudged invalid or unenforceable, in whole or in part. (v) each of the Patents is valid and enforceable. 2 (vi) Assignor is the sole and exclusive owner of the entire and unencumbered right, title and interest in and to each of the Patents, free and clear of any Liens, including, without limitation, licenses, shop rights and covenants by Assignor not to sue third persons. (vii) Assignor has the unqualified right to enter into this Agreement and perform its terms. 2. Assignor covenants that, until all of the Obligations shall have been satisfied in full, it will not enter into any agreement (for example, a license agreement) which is inconsistent with Assignor's obligations under this Assignment, without the Assignee's prior written consent. 3. Assignor covenants that if, before the Obligations shall have been satisfied in full, Assignor shall obtain rights to any new patentable inventions or additional registered patents, or additional patent applications or patent for any reissue, division, continuation, renewal, extension, or continuation-in- part of any Patent or any improvement on any Patent, or become entitled to the benefit of any registration applications for patents, the provisions of this Assignment shall automatically apply thereto and Assignor shall give to the Assignee prompt notice thereof in writing. 4. Assignor shall indemnify, defend and hold Assignee, its affiliates and their respective directors, officers, employees and agents ("Assignee's Indemnified Parties") harmless from and against all damages, losses or expenses suffered or paid as a result of any and all claims, demands, suits, causes of action, proceedings, judgments and liabilities, including reasonable attorneys' fees incurred in litigation or otherwise assessed, incurred or sustained by or against Assignee's Indemnified Parties or any of them with respect to or arising out of or in any way connected with this Assignment. 5. The Assignee shall have the right but shall in no way be obligated to bring suit in its name to enforce the Patents and any license thereunder, in which event Assignor shall at the request of the Assignee do any and all lawful acts and execute any and all proper documents required by the Assignee in aid of such enforcement and Assignor shall promptly, upon demand, reimburse and indemnify the Assignee for all costs and expenses incurred by the Assignee in the exercise of its rights under this section. 6. Assignor authorizes the Assignee to modify this Assignment by amending SCHEDULE A to include any future patents or patent applications in which Assignor may acquire an interest. 7. At such time as Assignor shall completely and finally satisfy all of the Obligations, the Assignee shall execute and deliver to Assignor all deeds, assignments and other instruments as may be necessary or proper to re-vest in Assignor full title to the Patents, subject to any disposition thereof which may have been made by the Assignee pursuant to the Security Agreement. [SIGNATURES APPEAR ON NEXT PAGE] 3 IN WITNESS WHEREOF, Assignor has caused this Conditional Patent Assignment to be duly executed by its duly authorized officer as of the date first set forth above. WELLS ELECTRONICS, INC. By: /S/ Mary L. Mandarino -------------------------- Mary L. Mandarino Treasurer FLEET NATIONAL BANK as Agent for itself and the other Lenders By: /S/ Thomas W. Davies -------------------------- Thomas W. Davies Senior Vice President 4 EX-11 12 EXHIBIT 10.9 CONDITIONAL PATENT ASSIGNMENT THIS CONDITIONAL PATENT ASSIGNMENT dated as of December 26, 1997, by and between WELLS JAPAN KABUSHIKI KAISHA, a Japanese limited stock company, having its principal place of business at Paleana Building 2-2-15, Shin-Yokahama, Kohuku-Ku, Yokahama, Japan ("Assignor") and FLEET NATIONAL BANK, a national banking association organized under the laws of the United States having an office at One Federal Street, Boston, Massachusetts 02110 ("Assignee"), as Agent for itself and each of the other Lenders who are now or hereafter become parties to the hereinafter defined Loan Agreement. WHEREAS, pursuant to the terms of that certain Loan Agreement dated as of the date hereof between PCD Inc., a Massachusetts corporation (the "Principal Debtor"), Assignee and the Lenders (as the same may be amended from time to time, the "Loan Agreement"), Assignee and the Lenders have agreed to make loans to Principal Debtor in an aggregate principal amount not to exceed $90,000,000.00, as evidenced by that certain Term Note A, Term Note B and Revolving Credit Note of Principal Debtor dated as of the date hereof; and WHEREAS, capitalized terms used herein and not otherwise defined herein shall have the meanings set forth in the Loan Agreement; and WHEREAS, Principal Debtor indirectly owns 98.1% of the issued and outstanding capital stock of Assignor; and WHEREAS, Assignor has, as of the date hereof, executed and delivered to Assignee that certain Unlimited Guaranty pursuant to which Assignor has guaranteed payment and performance of all of the Obligations of Principal Debtor (as such term is defined in the Loan Agreement) (the "Guaranty"); and WHEREAS, pursuant to the terms of a Security Agreement of even date herewith by and between Assignor and Assignee (as amended from time to time, the "Security Agreement"), Assignor has concurrently granted to Assignee a security interest in all of Assignor's assets to secure its obligations to Assignee and/or the Lenders under the Guaranty; and WHEREAS, to evidence and perfect the rights of Assignee as grantee of a security interest that has attached in certain of said assets as described below, Assignor has executed and delivered to Assignee this Conditional Patent Assignment. NOW THEREFORE, FOR GOOD AND VALUABLE CONSIDERATION, THE RECEIPT OF WHICH IS HEREBY ACKNOWLEDGED, AND SUBJECT TO THE CONDITIONS SET FORTH HEREIN, Assignor does hereby conditionally assign, sell, transfer and grant unto Assignee all of Assignor's right, title and interest in, to and under the following, whether presently existing or hereafter arising or acquired: (i) each patent and each registration thereof, and each patent registration application owned by Assignor, including, without limitation, each such patent and patent registration application set forth on SCHEDULE A, attached hereto and incorporated herein by reference; and (ii) all products and proceeds of the foregoing, including, without limitation, any claim or causes of action of Assignor against any third parties for past, present or future infringement of any of the foregoing, with the right to sue and recover the same in the Assignee's own name and for its own use and behoove, including all rights corresponding thereto throughout the world and all re-issues, divisions, continuations, renewals, extensions and continuations-in-part thereof; (all of the foregoing, individually and collectively, the "Patents"). PROVIDED, HOWEVER, THAT ASSIGNOR'S RIGHTS IN THE PATENTS SHALL CONTINUE UNTIL, AND ASSIGNEE SHALL HAVE NO OBLIGATIONS WITH RESPECT TO THE PATENTS UNTIL, AND ASSIGNEE SHALL BE ENTITLED TO EXERCISE ITS RIGHTS AND REMEDIES HEREUNDER IN AND WITH RESPECT TO THE PATENTS ONLY UPON, SATISFACTION OF THE FOLLOWING CONDITIONS SUBSEQUENT: (a) The occurrence and continuation of an Event of Default as defined in the Loan Agreement; or (b) The exercise by Assignee of any or all of its rights or remedies under the Security Agreement in respect of the Patents. 1. Assignor does hereby acknowledge, affirm and represent that: (i) the rights and remedies of Assignee with respect to its interest in the Patents are more fully set forth in the Security Agreement, the terms and provisions of which are incorporated by reference herein as if fully set forth herein. (ii) that nothing in this Conditional Patent Assignment shall be in derogation of the rights and remedies of Assignee in and to the Patents as set forth in the Security Agreement and as shall be available at law or in equity. (iii) SCHEDULE A contains a true and complete record of (a) all patents in which Assignor has any interest and (b) all applications pending for registration of patents in which Assignor has any interest. (iv) the Patents are subsisting and have not been adjudged invalid or unenforceable, in whole or in part. (v) each of the Patents is valid and enforceable. 2 (vi) Assignor is the sole and exclusive owner of the entire and unencumbered right, title and interest in and to each of the Patents, free and clear of any Liens, including, without limitation, licenses, shop rights and covenants by Assignor not to sue third persons. (vii) Assignor has the unqualified right to enter into this Agreement and perform its terms. 2. Assignor covenants that, until all of the Obligations shall have been satisfied in full, it will not enter into any agreement (for example, a license agreement) which is inconsistent with Assignor's obligations under this Assignment, without the Assignee's prior written consent. 3. Assignor covenants that if, before the Obligations shall have been satisfied in full, Assignor shall obtain rights to any new patentable inventions or additional registered patents, or additional patent applications or patent for any reissue, division, continuation, renewal, extension, or continuation-in- part of any Patent or any improvement on any Patent, or become entitled to the benefit of any registration applications for patents, the provisions of this Assignment shall automatically apply thereto and Assignor shall give to the Assignee prompt notice thereof in writing. 4. Assignor shall indemnify, defend and hold Assignee, its affiliates and their respective directors, officers, employees and agents ("Assignee's Indemnified Parties") harmless from and against all damages, losses or expenses suffered or paid as a result of any and all claims, demands, suits, causes of action, proceedings, judgments and liabilities, including reasonable attorneys' fees incurred in litigation or otherwise assessed, incurred or sustained by or against Assignee's Indemnified Parties or any of them with respect to or arising out of or in any way connected with this Assignment. 5. The Assignee shall have the right but shall in no way be obligated to bring suit in its name to enforce the Patents and any license thereunder, in which event Assignor shall at the request of the Assignee do any and all lawful acts and execute any and all proper documents required by the Assignee in aid of such enforcement and Assignor shall promptly, upon demand, reimburse and indemnify the Assignee for all costs and expenses incurred by the Assignee in the exercise of its rights under this section. 6. Assignor authorizes the Assignee to modify this Assignment by amending SCHEDULE A to include any future patents or patent applications in which Assignor may acquire an interest. 7. At such time as Assignor shall completely and finally satisfy all of the Obligations, the Assignee shall execute and deliver to Assignor all deeds, assignments and other instruments as may be necessary or proper to re-vest in Assignor full title to the Patents, subject to any disposition thereof which may have been made by the Assignee pursuant to the Security Agreement. IN WITNESS WHEREOF, Assignor has caused this Conditional Patent Assignment to be duly executed by its duly authorized officer as of the date first set forth above. 3 WELLS JAPAN KABUSHIKI KAISHA By: /S/ Tsutomu Kobayashi -------------------------- Tsutomu Kobayashi President FLEET NATIONAL BANK as Agent for itself and the other Lenders By: /S/ Thomas W. Davies -------------------------- Thomas W. Davies Senior Vice President 4 EX-12 13 EXHIBIT 10.10 CONDITIONAL TRADEMARK COLLATERAL ASSIGNMENT THIS CONDITIONAL TRADEMARK COLLATERAL ASSIGNMENT dated as of December 26, 1997, by and between PCD INC., a Massachusetts corporation, with a principal place of business at 2 Technology Drive, Centennial Park, Peabody, Massachusetts 01960-7977 ("Assignor") and FLEET NATIONAL BANK, a national banking association organized under the laws of the United States having an office at One Federal Street, Boston, Massachusetts 02110 ("Assignee"), as Agent for itself and each of the other Lenders who are now or hereafter become parties to the hereinafter defined Loan Agreement. WHEREAS, Assignee and Assignor, as Agent for itself and each of the other Lenders who are now or hereafter become parties to the Loan Agreement (as hereinafter defined) have this day entered into a certain Loan Agreement (as the same may be amended from time to time, the "Loan Agreement") pursuant to which Assignee has agreed to make certain loans to Assignor; and WHEREAS, capitalized terms used herein and not otherwise defined herein shall have the meanings set forth in the Loan Agreement; and WHEREAS, pursuant to the terms of a Security Agreement of even date herewith by and between Assignor and Assignee (as amended from time to time, the "Security Agreement"), Assignor has concurrently granted to Assignee a security interest in all of Assignor's assets to secure, INTER ALIA, the payment and performance of the Obligations of Assignor to Assignee and/or the Lenders under the Loan Agreement; and WHEREAS, to evidence and perfect the rights of Assignee as grantee of a security interest that has attached in certain of said assets as described below, Assignor has executed and delivered to Assignee this Conditional Trademark Collateral Assignment. NOW THEREFORE, FOR GOOD AND VALUABLE CONSIDERATION, THE RECEIPT OF WHICH IS HEREBY ACKNOWLEDGED, AND SUBJECT TO THE CONDITIONS SET FORTH HEREIN, Assignor does hereby conditionally collaterally assign and grant unto Assignee all of Assignor's right, title and interest in, to and under the following, whether presently existing or hereafter arising or acquired: (i) each trademark and servicemark (whether registered or unregistered), and each registration thereof, and each trademark and servicemark registration application (whether federal or state, and whether foreign or domestic) owned by Assignor, including, without limitation, each such trademark, servicemark or trademark or servicemark registration application set forth on SCHEDULE A, attached hereto and incorporated herein by reference; (ii) all products and proceeds of the foregoing, including, without limitation, any claim or causes of action of Assignor against any third parties for past, present or future infringement of any of the foregoing, with the right to sue and recover the same in the Assignee's own name and for its own use and behoove; and (iii) the goodwill of Assignor's business symbolized by each of the foregoing; (all of the foregoing, individually and collectively, the "Trademarks"). PROVIDED, HOWEVER, THAT ASSIGNOR'S RIGHTS IN THE TRADEMARKS SHALL CONTINUE UNTIL, AND ASSIGNEE SHALL HAVE NO OBLIGATIONS OR RIGHTS WITH RESPECT TO THE TRADEMARKS UNTIL, AND ASSIGNEE SHALL BE ENTITLED TO EXERCISE ITS RIGHTS AND REMEDIES HEREUNDER IN AND WITH RESPECT TO THE TRADEMARKS ONLY UPON, SATISFACTION OF THE FOLLOWING CONDITIONS SUBSEQUENT: (a) The occurrence and continuation of an Event of Default as defined in the Loan Agreement; or (b) The exercise by Assignee of any or all of its rights or remedies under the Security Agreement in respect of the Trademarks. 1. Assignor does hereby acknowledge, affirm and represent that: (i) the rights and remedies of Assignee with respect to its interest in the Trademarks are more fully set forth in the Security Agreement, the terms and provisions of which are incorporated by reference herein as if fully set forth herein. (ii) that nothing in this Conditional Trademark Collateral Assignment shall be in derogation of the rights and remedies of Assignee in and to the Trademarks as set forth in the Security Agreement and as shall be available at law or in equity. (iii) SCHEDULE A contains a true and complete record of (a) all registered (state, federal and international) trademarks and servicemarks in which Assignor has any interest and (b) all applications pending in the U.S. Patent and Trademark Office or other like office for registration of trademarks and servicemarks in which Assignor has any interest. (iv) the Trademarks are subsisting and have not been adjudged invalid or unenforceable, in whole or in part by a court of competent jurisdiction. (v) each of the registered Trademarks is valid and enforceable. (vi) Assignor is the sole and exclusive owner of the entire and unencumbered right, title and interest in and to each of the registered Trademarks, free and clear of any Liens, including, without limitation, licenses and covenants by Assignor not to sue third persons, except as permitted under the Loan Agreement. 2 2. Assignor covenants that, until all of the Obligations shall have been satisfied in full, it will not enter into any agreement (for example, a license agreement) which is inconsistent with Assignor's obligations under this Assignment, without the Assignee's prior written consent. 3. Assignor covenants that if, before the Obligations shall have been satisfied in full, Assignor shall obtain rights to any additional registered trademarks or servicemarks, or become entitled to the benefit of any registration applications for trademarks or servicemarks, the provisions of this Assignment shall automatically apply thereto and Assignor shall give to the Assignee prompt notice thereof in writing. 4. Assignor shall indemnify, defend and hold Assignee, its affiliates and their respective directors, officers, employees and agents ("Assignee's Indemnified Parties") harmless from and against all damages, losses or expenses suffered or paid as a result of any and all claims, demands, suits, causes of action, proceedings, judgments and liabilities, including reasonable attorneys' fees incurred in litigation or otherwise assessed, incurred or sustained by or against Assignee's Indemnified Parties or any of them with respect to or arising out of or in any way connected with this Assignment. 5. Assignor authorizes the Assignee to modify this Assignment by amending SCHEDULE A to include any future registered trademarks, servicemarks, or trademark or servicemark applications in which Assignor may acquire an interest. 6. At such time as Assignor shall completely and finally satisfy all of the Obligations, the Assignee shall execute and deliver to Assignor all deeds, assignments and other instruments as may be necessary or proper to re-vest in Assignor full title to the Trademarks, subject to any disposition thereof which may have been made by the Assignee pursuant to the Security Agreement. [SIGNATURES APPEAR ON NEXT PAGE] 3 IN WITNESS WHEREOF, Assignor has caused this Conditional Trademark Collateral Assignment to be duly executed by its duly authorized officer as of the date first set forth above. PCD INC. By: /S/ John L. Dwight, Jr. -------------------------- John L. Dwight, Jr. Chairman of the Board FLEET NATIONAL BANK as Agent for itself and the other Lenders By: /S/ Thomas W. Davies -------------------------- Thomas W. Davies Senior Vice President EX-13 14 EXHIBIT 10.11 CONDITIONAL TRADEMARK COLLATERAL ASSIGNMENT THIS CONDITIONAL TRADEMARK COLLATERAL ASSIGNMENT dated as of December 26, 1997, by and between WELLS ELECTRONICS, INC., an Indiana corporation, with a principal place of business at 52940 Olive Road, South Bend, Indiana ("Assignor") and FLEET NATIONAL BANK, a national banking association organized under the laws of the United States having an office at One Federal Street, Boston, Massachusetts 02110 ("Assignee"), as Agent for itself and each of the other Lenders who are now or hereafter become parties to the hereinafter defined Loan Agreement. WHEREAS, pursuant to the terms of that certain Loan Agreement dated as of the date hereof between PCD Inc., a Massachusetts corporation (the "Principal Debtor"), Assignee and the Lenders (as the same may be amended from time to time, the "Loan Agreement"), Assignee and the Lenders have agreed to make loans to Principal Debtor in an aggregate principal amount not to exceed $90,000,000.00, as evidenced by that certain Term Note A, Term Note B and Revolving Credit Note of Principal Debtor dated as of the date hereof; and WHEREAS, capitalized terms used herein and not otherwise defined herein shall have the meanings set forth in the Loan Agreement; and WHEREAS, Principal Debtor owns 100% of the issued and outstanding capital stock of Assignor; and WHEREAS, Assignor has, as of the date hereof, executed and delivered to Assignee that certain Unlimited Guaranty pursuant to which Assignor has guaranteed payment and performance of all of the Obligations of Principal Debtor (as such term is defined in the Loan Agreement) (the "Guaranty"); and WHEREAS, pursuant to the terms of a Security Agreement of even date herewith by and between Assignor and Assignee (as amended from time to time, the "Security Agreement"), Assignor has concurrently granted to Assignee a security interest in all of Assignor's assets to secure its obligations to Assignee and/or the Lenders under the Guaranty; and WHEREAS, to evidence and perfect the rights of Assignee as grantee of a security interest that has attached in certain of said assets as described below, Assignor has executed and delivered to Assignee this Conditional Trademark Collateral Assignment. NOW THEREFORE, FOR GOOD AND VALUABLE CONSIDERATION, THE RECEIPT OF WHICH IS HEREBY ACKNOWLEDGED, AND SUBJECT TO THE CONDITIONS SET FORTH HEREIN, Assignor does hereby conditionally collaterally assign and grant unto Assignee all of Assignor's right, title and interest in, to and under the following, whether presently existing or hereafter arising or acquired: (i) each trademark and servicemark (whether registered or unregistered), and each registration thereof, and each trademark and servicemark registration application (whether federal or state, and whether foreign or domestic) owned by Assignor, including, without limitation, each such trademark, servicemark or trademark or servicemark registration application set forth on SCHEDULE A, attached hereto and incorporated herein by reference; (ii) all products and proceeds of the foregoing, including, without limitation, any claim or causes of action of Assignor against any third parties for past, present or future infringement of any of the foregoing, with the right to sue and recover the same in the Assignee's own name and for its own use and behoove; and (iii) the goodwill of Assignor's business symbolized by each of the foregoing; (all of the foregoing, individually and collectively, the "Trademarks"). PROVIDED, HOWEVER, THAT ASSIGNOR'S RIGHTS IN THE TRADEMARKS SHALL CONTINUE UNTIL, AND ASSIGNEE SHALL HAVE NO OBLIGATIONS OR RIGHTS WITH RESPECT TO THE TRADEMARKS UNTIL, AND ASSIGNEE SHALL BE ENTITLED TO EXERCISE ITS RIGHTS AND REMEDIES HEREUNDER IN AND WITH RESPECT TO THE TRADEMARKS ONLY UPON, SATISFACTION OF THE FOLLOWING CONDITIONS SUBSEQUENT: (a) The occurrence and continuation of an Event of Default as defined in the Loan Agreement; or (b) The exercise by Assignee of any or all of its rights or remedies under the Security Agreement in respect of the Trademarks. 1. Assignor does hereby acknowledge, affirm and represent that: (i) the rights and remedies of Assignee with respect to its interest in the Trademarks are more fully set forth in the Security Agreement, the terms and provisions of which are incorporated by reference herein as if fully set forth herein. (ii) that nothing in this Conditional Trademark Collateral Assignment shall be in derogation of the rights and remedies of Assignee in and to the Trademarks as set forth in the Security Agreement and as shall be available at law or in equity. (iii) SCHEDULE A contains a true and complete record of (a) all registered (state, federal and international) trademarks and servicemarks in which Assignor has any interest and (b) all applications pending in the U.S. Patent and Trademark Office or other like office for registration of trademarks and servicemarks in which Assignor has any interest. (iv) the Trademarks are subsisting and have not been adjudged invalid or unenforceable, in whole or in part by a court of competent jurisdiction. 2 (v) each of the registered Trademarks is valid and enforceable. (vi) Assignor is the sole and exclusive owner of the entire and unencumbered right, title and interest in and to each of the registered Trademarks, free and clear of any Liens, including, without limitation, licenses and covenants by Assignor not to sue third persons, except as permitted under the Loan Agreement. 2. Assignor covenants that, until all of the Obligations shall have been satisfied in full, it will not enter into any agreement (for example, a license agreement) which is inconsistent with Assignor's obligations under this Assignment, without the Assignee's prior written consent. 3. Assignor covenants that if, before the Obligations shall have been satisfied in full, Assignor shall obtain rights to any additional registered trademarks or servicemarks, or become entitled to the benefit of any registration applications for trademarks or servicemarks, the provisions of this Assignment shall automatically apply thereto and Assignor shall give to the Assignee prompt notice thereof in writing. 4. Assignor shall indemnify, defend and hold Assignee, its affiliates and their respective directors, officers, employees and agents ("Assignee's Indemnified Parties") harmless from and against all damages, losses or expenses suffered or paid as a result of any and all claims, demands, suits, causes of action, proceedings, judgments and liabilities, including reasonable attorneys' fees incurred in litigation or otherwise assessed, incurred or sustained by or against Assignee's Indemnified Parties or any of them with respect to or arising out of or in any way connected with this Assignment. 5. Assignor authorizes the Assignee to modify this Assignment by amending SCHEDULE A to include any future registered trademarks, servicemarks, or trademark or servicemark applications in which Assignor may acquire an interest. 6. At such time as Assignor shall completely and finally satisfy all of the Obligations, the Assignee shall execute and deliver to Assignor all deeds, assignments and other instruments as may be necessary or proper to re-vest in Assignor full title to the Trademarks, subject to any disposition thereof which may have been made by the Assignee pursuant to the Security Agreement. [SIGNATURES APPEAR ON NEXT PAGE] 3 IN WITNESS WHEREOF, Assignor has caused this Conditional Trademark Collateral Assignment to be duly executed by its duly authorized officer as of the date first set forth above. WELLS ELECTRONICS, INC. By: /S/ Mary L. Mandarino -------------------------- Mary L. Mandarino Treasurer FLEET NATIONAL BANK as Agent for itself and the other Lenders By: /S/ Thomas W. Davies -------------------------- Thomas W. Davies Senior Vice President 4 EX-14 15 EXHIBIT 10.12 COLLATERAL ASSIGNMENT OF CONTRACTS, LEASES, LICENSES AND PERMITS THIS COLLATERAL ASSIGNMENT OF CONTRACTS, LEASES, LICENSES AND PERMITS made as of December 26, 1997, by and between PCD INC., a Massachusetts corporation, with a principal place of business at 2 Technology Drive, Centennial Park, Peabody, Massachusetts 01960- 7977 ("Assignor") and FLEET NATIONAL BANK, a national banking association organized under the laws of the United States having an office at One Federal Street, Boston, Massachusetts 02110 ("Assignee"), as Agent for itself and each of the other Lenders who are now or hereafter become parties to the hereinafter defined Loan Agreement. WITNESSETH: 1. DEFINITIONS. Each reference in this Assignment to the following capitalized terms shall be deemed to have the following meanings and all other references to a capitalized term shall have the meaning assigned thereto in the Loan Agreement. (a) CONTRACTS, LEASES, LICENSES AND PERMITS: All contracts, leases, licenses and permits of Assignor together with all extensions, renewals, replacements and substitutions therefor. (b) LOAN AGREEMENT: That certain Loan Agreement of even date herewith, by and among Assignor, Assignee and each of the other Lenders who are now or hereafter become parties to the Loan Agreement (as the same may be amended from time to time, the "Loan Agreement") pursuant to which the Lenders have agreed, subject to the terms and conditions thereof, to make loans and credit facilities available to Assignor as more fully described in the Loan Agreement and Assignor has agreed, INTER ALIA, to execute and deliver this Assignment as partial security for such loans. (c) OBLIGATIONS: Payment and performance of all of the Obligations of Assignor under the Loan Agreement and under the Notes, (ii) the performance of all of the obligations of Assignor to Assignee contained herein, and (iii) the payment of all other future advances and other obligations of Assignor to Assignee and/or the other Lenders, including, without limitation, any future loans and advances made to Assignor by Assignee and/or the other Lenders prior to, during or following any bankruptcy, reorganization or insolvency of Assignor (a "Reorganization"), any interest accruing under the Notes and/or the Loan Agreement after the commencement of a Reorganization, and any and all other indebtedness, liabilities and obligations of Assignor to Assignee and/or the other Lenders of every kind and description, direct, indirect or contingent, now or hereafter existing, due or to become due. NOW, THEREFORE, in consideration of the Loan Agreement, the Loans pursuant thereto and other valuable consideration, the receipt of which is hereby acknowledged and as further security for payment and performance of the Obligations, Assignor hereby grants, conveys, transfers, assigns and sets over to Assignee for the benefit of Assignee all of Assignor's rights, title and benefits (but none of its obligations or liabilities) under, in and to each Contract, Lease, License and Permit which may be so granted, conveyed, transferred, assigned or set over without a violation of the terms thereof. TO HAVE AND TO HOLD the same with all of the rights, privileges and appurtenances thereunto belonging unto Assignee (but none of its obligations or liabilities), its successors and assigns until such time as the Obligations have been paid and satisfied in full for the purpose of further and collaterally securing same. Assignor and Assignee agree that the following terms and conditions shall govern this Assignment: 2. ASSIGNOR'S REPRESENTATIONS AND COVENANTS. Assignor, for itself and for its successors and assigns, covenants and warrants as follows: (a) that each existing Contract, Lease, License and Permit is in full force and effect and that there is, to the knowledge of Assignor, no default on the part of any party thereto or grantor thereof; (b) that Assignor is the sole owner of the Contracts, Leases, Licenses and Permits; that each Contract, Lease, License and Permit is free from all Liens other than those created under the Security Documents and those permitted under the Loan Agreement; that Assignor has full power and authority to assign each such Contract, Lease, License Permit in accordance herewith; that Assignor will warrant and defend each such Contract, Lease, License and Permit to Assignee against the lawful claims and demands of all persons, and that Assignor has not sold, assigned, transferred, mortgaged or pledged any such Contract, Lease, License or Permit or any interest therein, to any person, firm or corporation other than Assignee; (c) that Assignor will not assign, pledge or otherwise encumber any such Contract, Lease, License or Permit without the prior written consent of Assignee in each instance and then only subject to and in accordance with any conditions set forth in such written consent; (d) that Assignor will not, without the prior written consent of Assignee in each instance, directly or indirectly amend, modify, cancel, terminate or permit any surrender of any Contract, Lease, License or Permit; (e) that Assignor will not in any way knowingly violate or permit a violation of Assignor's license granted in SECTION 3 hereof; (f) that Assignor will fulfill or cause to be fulfilled in all material respects all of the material terms, covenants and conditions on Assignor's part to be fulfilled under each Contract, Lease, License or Permit; (g) that Assignor will, upon written request by Assignee, while this Assignment remains in force and effect, execute and deliver all such powers of attorney, instruments of 2 pledge or assignment, and such other instruments or documents as Assignee may reasonably request at any time for the purpose of further securing Assignee's rights hereunder; (h) that Assignor will use its best efforts to provide Assignee with written notice of any extension, renewal, amendment or modification of any Contract, Lease, License or Permit within thirty (30) days thereof, and that Assignor will similarly furnish to Assignee, on demand, true copies of all agreements or letters effecting same. 3. LICENSE UNTIL DEFAULT. So long as no Event of Default is continuing, Assignor shall have a license to enjoy each Contract, Lease, License and Permit pursuant to the terms thereof and, to exercise Assignor's rights thereunder. 4. ASSIGNEE'S RIGHTS IN EVENT OF DEFAULT. 4.1 Immediately upon the occurrence of an Event of Default, the license to Assignor under SECTION 3 hereof shall, at the option of Assignee, terminate and in such event Assignee is hereby expressly and irrevocably authorized to assume any or all of Assignor's rights (but none of its obligations or liabilities) with respect to each Contract, Lease, License and Permit by notice in accordance with SECTION 10 hereof to Assignor without further authorization, notice or demand and without the commencement of any action to foreclose any of the Security Documents or to exercise its power of sale and other remedies thereunder. 4.2 Assignor hereby constitutes and appoints Assignee irrevocably, and with full power of substitution and revocation, the true and lawful attorney, for and in the name, place and stead of Assignor, to exercise any and all rights and remedies of Assignor under each Contract, Lease, License and Permit and to perform any of the actions and rights provided by any of the Security Documents upon the occurrence of an Event of Default. Assignor hereby grants unto said attorney full power and authority following the occurrence of an Event of Default to do and perform each and every act whatsoever requisite to be done with respect to any Contract, Lease, License or Permit, as fully to all intents and purposes as Assignor could do if personally present, hereby ratifying and confirming all that said attorney shall lawfully and reasonably do or cause to be done by virtue hereof; PROVIDED, HOWEVER, that any acts or omissions by Assignee after an Event of Default shall be at Assignee's discretion and shall not be or become the basis for any liability of Assignee to any Person. 4.3 Acceptance of this Assignment shall not constitute a satisfaction of all or any part of the Obligations except to the extent of funds actually received and applied by Assignee on account of the same. 4.4 The rights and powers of Assignee hereunder shall continue and remain in full force and effect until all Obligations, including any deficiency resulting from exercise of Assignee's remedies under any of the Security Documents, are paid or satisfied in full. Assignee shall not be liable to Assignor or anyone claiming under or through Assignor by reason of any act or omission by Assignee hereunder. 3 4.5 An Event of Default shall be cured only when Assignor shall have paid and satisfied in full all Obligations and other sums owing and past due and shall have performed all other terms, covenants and conditions, the failure of performance of which terminated the license herein above mentioned, or shall have received a written waiver from Assignee of such Event of Default. 5. INDEMNIFICATION. 5.1 Assignor agrees to indemnify and hold harmless Assignee from and against any and all liability, loss, damage and expense, including reasonable attorneys' fees which Assignee may or shall incur under or in connection with any Contract, Lease, License or Permit or by reason of any of the Obligations or actions taken or omitted by Assignee under any of the Obligations, including, without limitation, any action or omission which Assignee in its discretion may take to protect its interest in any Contract, Lease, License or Permit and from and against any and all claims and demands whatsoever which may be asserted against Assignor and/or Assignee by reason of any of the terms and conditions of any Contract, Lease, License or Permit. 5.2 If Assignee incurs any such actual liability, loss, damage or expense, the amount thereof, plus interest thereon from and after demand by Assignee for payment thereof by Assignor at the rate equal to the lower of (a) 2% in excess of Effective Prime, or (b) the highest rate allowable by law, shall be paid by Assignor to Assignee within three (3) business days after demand therefor. 5.3 Nothing contained herein shall operate or be construed to obligate Assignee to perform any of the terms, covenants or conditions contained in any Contract, Lease, License or Permit, or to take any action to collect any payments or to impose any obligation on Assignee relating to any Contract, Lease, License or Permit. 6. EXERCISE OF REMEDIES. The rights and remedies of Assignee under this Assignment are cumulative and in addition to any other rights and remedies which Assignee shall have under or as a result of any other of the Obligations and may be exercised as often as Assignee deems such exercise to be desirable. Failure of Assignee to avail itself of any of the terms, covenants and conditions of this Assignment for any period of time, or at any time or times, shall not constitute a waiver of any of its rights hereunder. 7. ASSIGNMENT BY ASSIGNEE. Assignee shall have the right to assign Assignor's rights, title and interest in any Contract, Lease, License or Permit, subject to any transfer restrictions contained therein, to any subsequent agent with respect to the Loan Agreement and the Obligations thereunder. 8. TERMINATION. Upon final payment and satisfaction in full of the Obligations, as evidenced by recorded satisfactions or releases of the recorded Security Documents or otherwise as satisfactory to the Assignee, and of any sums which may be payable hereunder, or under any present or future agreement between Assignor Assignee or each of the Lenders, this Assignment shall be of no further force and effect and, in that event, upon Assignor's request and expense, Assignee agrees to execute and deliver to Assignor instruments evidencing the termination of this Assignment. 4 9. APPROVALS. Notwithstanding anything to the contrary contained herein, Assignee will not take any action pursuant to this Assignment which would constitute or result in any assignment of any Contract, Lease, License or Permit if such assignment would require, pursuant to the terms of such Contract, Lease, License or Permit the prior approval of the other party to such Contract, Lease, License or Permit, without first obtaining such approval. During the continuance of an Event of Default, Assignor agrees to take any action which Assignee may reasonably request in order to obtain and enjoy the full rights and benefits granted to Assignee and the Lenders by this Assignment and each other agreement, instrument and document delivered to Assignee or any of the Lenders in connection herewith or in any document evidencing or securing the Collateral, including specifically, at Assignee's own cost and expense, the use of its best efforts to assist in obtaining approval of the other party to such Contract, Lease, License or Permit for any action or transaction contemplated by this Assignment which is then required by such Contract, Lease, License or Permit. 10. NOTICES. All notices, requests, demands and other communications provided for hereunder shall be in writing and mailed or telefaxed or delivered to the applicable party in the manner set forth in SECTION 9.6 of the Loan Agreement. 11. MISCELLANEOUS. 11.1 This Assignment, except as set forth in SECTION 11.2, below, shall be construed and enforced in accordance with and governed by the laws of The Commonwealth of Massachusetts. 11.2 Notwithstanding the foregoing choice of law provision, the procedures governing the enforcement by Assignee of its foreclosure and other remedies against Assignor under any of the Contracts, Leases, Licenses and Permits may, at Assignee's election, be governed by the laws of the state in which the Contracts, Leases, Licenses and Permits in question are located. 11.3 The Assignor irrevocably: (i) agrees that any suit, action, or other legal proceeding arising out of this Assignment may be brought in the courts of record of The Commonwealth of Massachusetts or any other State(s) in which the Contracts, Leases, Licenses and Permits are located or the courts of the United States located in The Commonwealth of Massachusetts or any other State(s) in which any of the Contracts, Leases, Licenses and Permits are located. (ii) consents to the jurisdiction of each such court in any such suit, action or proceeding; and (iii) waives any objection which it may have to the laying of venue of such suit, action or proceeding in any of such courts. For such time as the Obligations shall be unpaid in whole or in part, Assignor irrevocably designates the registered agent or agent for service of process of Assignor as reflected in 5 the records of the Secretary of State of The Commonwealth of Massachusetts as its registered agent, and in the absence thereof, the Secretary of State of The Commonwealth of Massachusetts, as its agent to accept and acknowledge on its behalf service of any and all process in any such suit, action or proceeding brought in any such court and agrees and consents that any such service of process upon such agent and written notice of such service to Assignor by registered or certified mail shall be taken and held to be valid personal service upon Assignor regardless of where Assignor shall then be doing business and that any such service of process shall be of the same force and validity as if service were made upon it according to the laws governing the validity and requirements of such service in such state and waives any claim of lack of personal seizure or other error by reason of any such service. Any notice, process, pleadings or other papers served upon the aforesaid designated agent shall, within three (3) Business Days after such service, be sent by the method provided for in SECTION 9.6 of the Loan Agreement to Assignor at its address set forth in the Loan Agreement. EACH OF THE PARTIES HERETO HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF ANY DISPUTE BETWEEN ASSIGNOR AND ASSIGNEE WITH RESPECT TO THE FINANCING DOCUMENTS AND/OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREBY. 11.3 No amendment, cancellation or discharge of this Assignment shall be valid unless Assignee shall have consented thereto in writing. 11.4 In case any one or more of the provisions contained in this document shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not effect any other provision hereof, and this document shall be construed as if such invalid, illegal or unenforceable provision had never been included. 11.5 The terms, covenants, and conditions contained herein shall inure to the benefit of and shall be binding upon Assignee and Assignor and their respective successors and assigns. 11.6 The relative rights of Assignee and the Lenders are set forth in the Loan Agreement. 6 IN WITNESS WHEREOF, Assignor and Assignee, jointly and severally, have caused this Assignment to be duly executed on their behalf by their respective duly authorized officers on the date first set forth above. PCD INC. By: /S/ John L. Dwight, Jr. ------------------------ John L. Dwight, Jr. Chairman of the Board FLEET NATIONAL BANK, as Agent for itself and the other Lenders By: /S/ Thomas W. Davies ------------------------ Thomas W. Davies Senior Vice President 7 EX-15 16 EXHIBIT 10.13 COLLATERAL ASSIGNMENT OF CONTRACTS, LEASES, LICENSES AND PERMITS THIS COLLATERAL ASSIGNMENT OF CONTRACTS, LEASES, LICENSES AND PERMITS made as of December 26, 1997, by and between WELLS ELECTRONICS, INC., an Indiana corporation having its principal place of business at 52940 Olive Road, South Bend, Indiana ("Assignor") and FLEET NATIONAL BANK, a national banking association organized under the laws of the United States having an office at One Federal Street, Boston, Massachusetts 02110 ("Assignee"), as Agent for itself and each of the other Lenders who are now or hereafter become parties to the hereinafter defined Loan Agreement. WITNESSETH: 1. DEFINITIONS. Each reference in this Assignment to the following capitalized terms shall be deemed to have the following meanings and all other references to a capitalized term shall have the meaning assigned thereto in the Loan Agreement. (a) CONTRACTS, LEASES, LICENSES AND PERMITS: All contracts, leases, licenses and permits of Assignor together with all extensions, renewals, replacements and substitutions therefor. (b) LOAN AGREEMENT: That certain Loan Agreement dated as of the date hereof between PCD Inc., a Massachusetts corporation (the "Principal Debtor"), Assignee and the Lenders (as the same may be amended from time to time, the "Loan Agreement"), pursuant to which Assignee and the Lenders have agreed to make loans to Principal Debtor in an aggregate principal amount not to exceed $90,000,000.00, as evidenced by that certain Term Note A, Term Note B and Revolving Credit Note of Principal Debtor dated as of the date hereof. (c) GUARANTY: That certain Unlimited Guaranty of Assignor dated as of the date hereof in favor of Assignee pursuant to which Assignor has guaranteed the payment and performance of all of the Obligations of Principal Debtor. (d) SECURITY AGREEMENT: That certain Security Agreement dated as of the date hereof by and between Assignor and Assignee, Assignor has concurrently granted to Assignee a security interest in all of Assignor's assets to secure its obligations to Assignee and/or the Lenders under the Guaranty. (e) OBLIGATIONS: Payment and performance of all of the Obligations of Principal Debtor under the Loan Agreement and under the Notes, (ii) the performance of all of the obligations of Assignor to Assignee contained herein, and (iii) the payment of all other future advances and other obligations of Principal Debtor or Assignor to Assignee and/or the other Lenders, including, without limitation, any future loans and advances made to Principal Debtor or Assignor by Assignee and/or the other Lenders prior to, during or following any bankruptcy, reorganization or insolvency of Principal Debtor or Assignor (a "Reorganization"), any interest accruing under the Notes and/or the Loan Agreement after the commencement of a Reorganization, and any and all other indebtedness, liabilities and obligations of Principal Debtor or Assignor to Assignee and/or the other Lenders of every kind and description, direct, indirect or contingent, now or hereafter existing, due or to become due. NOW, THEREFORE, in consideration of the Loan Agreement, the Loans pursuant thereto and other valuable consideration, the receipt of which is hereby acknowledged and as further security for payment and performance of the Obligations, Assignor hereby grants, conveys, transfers, assigns and sets over to Assignee for the benefit of Assignee all of Assignor's rights, title and benefits (but none of its obligations or liabilities) under, in and to each Contract, Lease, License and Permit which may be so granted, conveyed, transferred, assigned or set over without a violation of the terms thereof. TO HAVE AND TO HOLD the same with all of the rights, privileges and appurtenances thereunto belonging unto Assignee (but none of its obligations or liabilities), its successors and assigns until such time as the Obligations have been paid and satisfied in full for the purpose of further and collaterally securing same. Assignor and Assignee agree that the following terms and conditions shall govern this Assignment: 2. ASSIGNOR'S REPRESENTATIONS AND COVENANTS. Assignor, for itself and for its successors and assigns, covenants and warrants as follows: (a) that each existing Contract, Lease, License and Permit is in full force and effect and that there is, to the knowledge of Assignor, no default on the part of any party thereto or grantor thereof; (b) that Assignor is the sole owner of the Contracts, Leases, Licenses and Permits; that each Contract, Lease, License and Permit is free from all Liens other than those created under the Security Documents and those permitted under the Loan Agreement; that Assignor has full power and authority to assign each such Contract, Lease, License Permit in accordance herewith; that Assignor will warrant and defend each such Contract, Lease, License and Permit to Assignee against the lawful claims and demands of all persons, and that Assignor has not sold, assigned, transferred, mortgaged or pledged any such Contract, Lease, License or Permit or any interest therein, to any person, firm or corporation other than Assignee; (c) that Assignor will not assign, pledge or otherwise encumber any such Contract, Lease, License or Permit without the prior written consent of Assignee in each instance and then only subject to and in accordance with any conditions set forth in such written consent; (d) that Assignor will not, without the prior written consent of Assignee in each instance, directly or indirectly amend, modify, cancel, terminate or permit any surrender of any Contract, Lease, License or Permit; 2 (e) that Assignor will not in any way knowingly violate or permit a violation of Assignor's license granted in SECTION 3 hereof; (f) that Assignor will fulfill or cause to be fulfilled in all material respects all of the material terms, covenants and conditions on Assignor's part to be fulfilled under each Contract, Lease, License or Permit; (g) that Assignor will, upon written request by Assignee, while this Assignment remains in force and effect, execute and deliver all such powers of attorney, instruments of pledge or assignment, and such other instruments or documents as Assignee may reasonably request at any time for the purpose of further securing Assignee's rights hereunder; (h) that Assignor will use its best efforts to provide Assignee with written notice of any extension, renewal, amendment or modification of any Contract, Lease, License or Permit within thirty (30) days thereof, and that Assignor will similarly furnish to Assignee, on demand, true copies of all agreements or letters effecting same. 3. LICENSE UNTIL DEFAULT. So long as no Event of Default is continuing, Assignor shall have a license to enjoy each Contract, Lease, License and Permit pursuant to the terms thereof and, to exercise Assignor's rights thereunder. 4. ASSIGNEE'S RIGHTS IN EVENT OF DEFAULT. 4.1 Immediately upon the occurrence of an Event of Default, the license to Assignor under SECTION 3 hereof shall, at the option of Assignee, terminate and in such event Assignee is hereby expressly and irrevocably authorized to assume any or all of Assignor's rights (but none of its obligations or liabilities) with respect to each Contract, Lease, License and Permit by notice in accordance with SECTION 10 hereof to Assignor without further authorization, notice or demand and without the commencement of any action to foreclose any of the Security Documents or to exercise its power of sale and other remedies thereunder. 4.2 Assignor hereby constitutes and appoints Assignee irrevocably, and with full power of substitution and revocation, the true and lawful attorney, for and in the name, place and stead of Assignor, to exercise any and all rights and remedies of Assignor under each Contract, Lease, License and Permit and to perform any of the actions and rights provided by any of the Security Documents upon the occurrence of an Event of Default. Assignor hereby grants unto said attorney full power and authority following the occurrence of an Event of Default to do and perform each and every act whatsoever requisite to be done with respect to any Contract, Lease, License or Permit, as fully to all intents and purposes as Assignor could do if personally present, hereby ratifying and confirming all that said attorney shall lawfully and reasonably do or cause to be done by virtue hereof; PROVIDED, HOWEVER, that any acts or omissions by Assignee after an Event of Default shall be at Assignee's discretion and shall not be or become the basis for any liability of Assignee to any Person. 3 4.3 Acceptance of this Assignment shall not constitute a satisfaction of all or any part of the Obligations except to the extent of funds actually received and applied by Assignee on account of the same. 4.4 The rights and powers of Assignee hereunder shall continue and remain in full force and effect until all Obligations, including any deficiency resulting from exercise of Assignee's remedies under any of the Security Documents, are paid or satisfied in full. Assignee shall not be liable to Assignor or anyone claiming under or through Assignor by reason of any act or omission by Assignee hereunder. 4.5 An Event of Default shall be cured only when Assignor shall have paid and satisfied in full all Obligations and other sums owing and past due and shall have performed all other terms, covenants and conditions, the failure of performance of which terminated the license herein above mentioned, or shall have received a written waiver from Assignee of such Event of Default. 5. INDEMNIFICATION. 5.1 Assignor agrees to indemnify and hold harmless Assignee from and against any and all liability, loss, damage and expense, including reasonable attorneys' fees which Assignee may or shall incur under or in connection with any Contract, Lease, License or Permit or by reason of any of the Obligations or actions taken or omitted by Assignee under any of the Obligations, including, without limitation, any action or omission which Assignee in its discretion may take to protect its interest in any Contract, Lease, License or Permit and from and against any and all claims and demands whatsoever which may be asserted against Assignor and/or Assignee by reason of any of the terms and conditions of any Contract, Lease, License or Permit. 5.2 If Assignee incurs any such actual liability, loss, damage or expense, the amount thereof, plus interest thereon from and after demand by Assignee for payment thereof by Assignor at the rate equal to the lower of (a) 2% in excess of Effective Prime, or (b) the highest rate allowable by law, shall be paid by Assignor to Assignee within three (3) business days after demand therefor. 5.3 Nothing contained herein shall operate or be construed to obligate Assignee to perform any of the terms, covenants or conditions contained in any Contract, Lease, License or Permit, or to take any action to collect any payments or to impose any obligation on Assignee relating to any Contract, Lease, License or Permit. 6. EXERCISE OF REMEDIES. The rights and remedies of Assignee under this Assignment are cumulative and in addition to any other rights and remedies which Assignee shall have under or as a result of any other of the Obligations and may be exercised as often as Assignee deems such exercise to be desirable. Failure of Assignee to avail itself of any of the terms, covenants and conditions of this Assignment for any period of time, or at any time or times, shall not constitute a waiver of any of its rights hereunder. 4 7. ASSIGNMENT BY ASSIGNEE. Assignee shall have the right to assign Assignor's rights, title and interest in any Contract, Lease, License or Permit, subject to any transfer restrictions contained therein, to any subsequent agent with respect to the Loan Agreement and the Obligations thereunder. 8. TERMINATION. Upon final payment and satisfaction in full of the Obligations, as evidenced by recorded satisfactions or releases of the recorded Security Documents or otherwise as satisfactory to the Assignee, and of any sums which may be payable hereunder, or under any present or future agreement between Assignor Assignee or each of the Lenders, this Assignment shall be of no further force and effect and, in that event, upon Assignor's request and expense, Assignee agrees to execute and deliver to Assignor instruments evidencing the termination of this Assignment. 9. APPROVALS. Notwithstanding anything to the contrary contained herein, Assignee will not take any action pursuant to this Assignment which would constitute or result in any assignment of any Contract, Lease, License or Permit if such assignment would require, pursuant to the terms of such Contract, Lease, License or Permit the prior approval of the other party to such Contract, Lease, License or Permit, without first obtaining such approval. During the continuance of an Event of Default, Assignor agrees to take any action which Assignee may reasonably request in order to obtain and enjoy the full rights and benefits granted to Assignee and the Lenders by this Assignment and each other agreement, instrument and document delivered to Assignee or any of the Lenders in connection herewith or in any document evidencing or securing the Collateral, including specifically, at Assignee's own cost and expense, the use of its best efforts to assist in obtaining approval of the other party to such Contract, Lease, License or Permit for any action or transaction contemplated by this Assignment which is then required by such Contract, Lease, License or Permit. 10. NOTICES. All notices, requests, demands and other communications provided for hereunder shall be in writing and mailed or telefaxed or delivered to the applicable party in the manner set forth in SECTION 9.6 of the Loan Agreement. 11. MISCELLANEOUS. 11.1 This Assignment, except as set forth in SECTION 11.2, below, shall be construed and enforced in accordance with and governed by the laws of The Commonwealth of Massachusetts. 11.2 Notwithstanding the foregoing choice of law provision, the procedures governing the enforcement by Assignee of its foreclosure and other remedies against Assignor under any of the Contracts, Leases, Licenses and Permits may, at Assignee's election, be governed by the laws of the state in which the Contracts, Leases, Licenses and Permits in question are located. 11.3 The Assignor irrevocably: (i) agrees that any suit, action, or other legal proceeding arising out of this Assignment may be brought in the courts of record of The Commonwealth of Massachusetts or any other State(s) in which the Contracts, Leases, Licenses and Permits are 5 located or the courts of the United States located in The Commonwealth of Massachusetts or any other State(s) in which any of the Contracts, Leases, Licenses and Permits are located. (ii) consents to the jurisdiction of each such court in any such suit, action or proceeding; and (iii) waives any objection which it may have to the laying of venue of such suit, action or proceeding in any of such courts. For such time as the Obligations shall be unpaid in whole or in part, Assignor irrevocably designates the registered agent or agent for service of process of Assignor as reflected in the records of the Secretary of State of The Commonwealth of Massachusetts as its registered agent, and in the absence thereof, the Secretary of State of The Commonwealth of Massachusetts, as its agent to accept and acknowledge on its behalf service of any and all process in any such suit, action or proceeding brought in any such court and agrees and consents that any such service of process upon such agent and written notice of such service to Assignor by registered or certified mail shall be taken and held to be valid personal service upon Assignor regardless of where Assignor shall then be doing business and that any such service of process shall be of the same force and validity as if service were made upon it according to the laws governing the validity and requirements of such service in such state and waives any claim of lack of personal seizure or other error by reason of any such service. Any notice, process, pleadings or other papers served upon the aforesaid designated agent shall, within three (3) Business Days after such service, be sent by the method provided for in SECTION 9.6 of the Loan Agreement to Assignor at its address set forth in the Loan Agreement. EACH OF THE PARTIES HERETO HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF ANY DISPUTE BETWEEN ASSIGNOR AND ASSIGNEE WITH RESPECT TO THE FINANCING DOCUMENTS AND/OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREBY. 11.3 No amendment, cancellation or discharge of this Assignment shall be valid unless Assignee shall have consented thereto in writing. 11.4 In case any one or more of the provisions contained in this document shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not effect any other provision hereof, and this document shall be construed as if such invalid, illegal or unenforceable provision had never been included. 11.5 The terms, covenants, and conditions contained herein shall inure to the benefit of and shall be binding upon Assignee and Assignor and their respective successors and assigns. 11.6 The relative rights of Assignee and the Lenders are set forth in the Loan Agreement. [THIS SPACE INTENTIONALLY LEFT BLANK] 6 IN WITNESS WHEREOF, Assignor and Assignee, jointly and severally, have caused this Assignment to be duly executed on their behalf by their respective duly authorized officers on the date first set forth above. WELLS ELECTRONICS, INC. By: /S/ Mary L. Mandarino --------------------------- Mary L. Mandarino Treasurer FLEET NATIONAL BANK, as Agent for itself and the other Lenders By: /S/ Thomas W. Davies --------------------------- Thomas W. Davies Senior Vice President 7 EX-16 17 EXHIBIT 10.14 Undertaking to Furnish Copies of Omitted Exhibits and Schedules to Loan Agreement and Related Documents dated as of December 26, 1997. PCD Inc. (the "Registrant") is not filing as exhibits to its Current Report on Form 8-K dated January 9, 1998, copies of the exhibits and schedules to the Loan Agreement between the Registrant and Fleet National Bank dated as of December 26, 1997, which Agreement is filed as Exhibit 10.1 thereto, and the related documents dated as of December 26, 1997, which documents are filed as Exhibits 10.2 through 10.13 thereto. The Registrant undertakes to furnish to the Securities and Exchange Commission, upon request, copies of such omitted exhibits and schedules. Dated: January 9, 1998 PCD INC. (Registrant) By: /s/ John L. Dwight, Jr. ----------------------- John L. Dwight, Jr. Chairman of the Board, President and Chief Executive Officer EX-17 18 EXHIBIT 10.15 PCD INC. SUBORDINATED DEBENTURE AND WARRANT PURCHASE AGREEMENT TABLE OF CONTENTS 1. PURCHASE AND SALE OF SUBORDINATED DEENTURE AND WARRANT . . .1 1.1 Sale and Issuance of Subordinated Debenture . . . . . .1 1.2 Sale and Issuance of Warrant . . . . . . . . . . . . . 1 1.3 Purchase Price . . . . . . . . . . . . . . . . . . . . 1 1.4 Closing . . . . . . . . . . . . . . . . . . . . . . . .2 1.5 Nasdaq Limitation . . . . . . . . . . . . . . . . . . .2 1.6 HSR Limitation . . . . . . . . . . . . . . . . . . . . 2 2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY . .2 2.1 Organization; Good Standing, Qualification . . . . . . 2 2.2 Authorization . . . . . . . . . . . . . . . . . . . . .3 2.3 Valid Issuance of Debenture, Warrant and Common Stock .3 2.4 Governmental Consents . . . . . . . . . . . . . . . . .3 2.5 Capitalization and Voting Rights . . . . . . . . . . . 4 2.6 Subsidiaries . . . . . . . . . . . . . . . . . . . . .5 2.7 Contracts and Other Commitments . . . . . . . . . . . .5 2.8 Related-Party Transactions . . . . . . . . . . . . . . 5 2.9 Permits . . . . . . . . . . . . . . . . . . . . . . . .6 2.10 Compliance With Other Instruments . . . . . . . . . . .6 2.11 Litigation . . . . . . . . . . . . . . . . . . . . . . 6 2.12 Offering . . . . . . . . . . . . . . . . . . . . . . . 6 2.13 Title to Property and Assets; Leases . . . . . . . . . 7 2.14 Financial Statements . . . . . . . . . . . . . . . . . 7 2.15 Changes . . . . . . . . . . . . . . . . . . . . . . . .7 - i - 2.16 Proprietary Rights . . . . . . . . . . . . . . . . . . 9 2.17 Employees; Employee Compensation . . . . . . . . . . . 9 2.18 Tax Returns, Payments, and Elections . . . . . . . . .10 2.19 Insurance . . . . . . . . . . . . . . . . . . . . . . 10 2.20 Environmental, Health and Safety Laws . . . . . . . . 10 2.21 SEC Information . . . . . . . . . . . . . . . . . . .10 2.22 Massachusetts Statutes . . . . . . . . . . . . . . . .11 3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER . . . . . .11 3.1 Authorization . . . . . . . . . . . . . . . . . . . . 11 3.2 Purchase Entirely for Own Account . . . . . . . . . . 11 3.3 Reliance Upon Purchaser's Representations . . . . . . 11 3.4 Receipt of Information . . . . . . . . . . . . . . . .12 3.5 Investment Experience; Accredited Investor . . . . . .12 3.6 Restricted Securities . . . . . . . . . . . . . . . . 12 3.7 Legends . . . . . . . . . . . . . . . . . . . . . . . 13 3.8 Public Sale . . . . . . . . . . . . . . . . . . . . . 13 4. CONDITIONS OF PURCHASER'S OBLIGATIONS AT CLOSING . . . . . 13 4.1 Representations and Warranties . . . . . . . . . . . .13 4.2 Performance . . . . . . . . . . . . . . . . . . . . . 13 4.3 Compliance Certificate . . . . . . . . . . . . . . . .14 4.4 Qualifications . . . . . . . . . . . . . . . . . . . .14 4.5 Proceedings and Documents . . . . . . . . . . . . . . 14 4.6 Nasdaq Letter . . . . . . . . . . . . . . . . . . . .15 4.7 Voting Agreement and Power of Attorney . . . . . . . .15 - ii - 4.8 Opinion of Company Counsel . . . . . . . . . . . . . .15 4.9 Registration Rights Agreement . . . . . . . . . . . . 17 5. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING . . . . 17 5.1 Representations and Warranties . . . . . . . . . . . .17 5.2 Qualifications . . . . . . . . . . . . . . . . . . . .17 6. REGISTRATION RIGHTS . . . . . . . . . . . . . . . . . . . .18 7. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . .18 7.1 Survival OF Warranties . . . . . . . . . . . . . . . .18 7.2 Successors and Assigns . . . . . . . . . . . . . . . .18 7.3 Governing Law . . . . . . . . . . . . . . . . . . . . 18 7.4 Counterparts . . . . . . . . . . . . . . . . . . . . .18 7.5 Headings and Subheadings . . . . . . . . . . . . . . .18 7.6 Notices . . . . . . . . . . . . . . . . . . . . . . . 19 7.7 Amendments and Waivers . . . . . . . . . . . . . . . .19 7.8 Severability . . . . . . . . . . . . . . . . . . . . .19 - iii - PCD INC. SUBORDINATED DEBENTURE AND WARRANT PURCHASE AGREEMENT This Subordinated Debenture and Warrant Purchase Agreement (this "Agreement") is made as of the 26th day of December, 1997, by and between PCD Inc., a Massachusetts corporation (the "Company"), and Emerson Electric Co., a Missouri corporation (the "Purchaser"). The parties hereby agree as follows: 1. PURCHASE AND SALE OF SUBORDINATED DEBENTURE AND WARRANT. 1.1 Sale and Issuance of Subordinated Debenture. Subject to the terms and conditions of this Agreement, the Purchaser agrees to purchase at the Closing and the Company agrees to sell and issue to the Purchaser at the Closing a subordinated debenture due December 31, 2000 in the original principal amount of Twenty-Five Million Dollars ($25,000,000) (the "Debenture"). The Debenture shall be substantially in the form set forth in EXHIBIT A hereto. 1.2 Sale and Issuance of Warrant. Subject to the terms and conditions of this Agreement, the Purchaser agrees to purchase at the Closing and the Company agrees to sell and issue to the Purchaser at the Closing a common stock purchase warrant (the "Warrant") exercisable for 525,000 shares of common stock of the Company, $0.01 par value ("Common Stock"), only as follows: (i) on and after the date hereof, the Warrant shall be exercisable to the extent of 150,000 shares of Common Stock; (ii) if the principal of and accrued interest and costs and expenses under the Debenture have not been paid in full at the close of business on December 31, 1998, the Warrant shall be exercisable to the extent of an additional 225,000 shares of Common Stock; and (iii) if the principal of and accrued interest and costs and expenses under the Debenture have not been paid in full at the close of business on December 31, 1999, the Warrant shall be exercisable to the extent of an additional 150,000 shares of Common Stock. The Warrant shall be substantially in the form set forth in EXHIBIT B hereto. 1.3 Purchase Price. The purchase price for the Debenture shall be $25,000,000. The purchase price for the Warrant shall be $5,250. 1.4 Closing. (a) The purchase and sale of the Debenture and the Warrant shall take place at 10:00 a.m. eastern time on December 26, 1997, or at such other time as the Company and the Purchaser shall mutually agree, either orally or in writing (which time is designated as (the "Closing"). (b) At the Closing, the Company shall deliver to the Purchaser the Debenture and the Warrant against payment of the total purchase price therefor by certified check or wire transfer to the account of the Company. 1.5 Nasdaq Limitation. Notwithstanding any other provision of this Agreement or any provision of the Debenture or the Warrant, until the Company has obtained approval of its stockholders pursuant to the rules of the Nasdaq Stock Market, Inc. ("Nasdaq"), or has obtained a waiver in respect of such rules, the Purchaser and any subsequent holder of either the Debenture or the Warrant shall be permitted to convert into Common Stock an amount of principal or accrued unpaid interest and costs and expenses under the Debenture, or exercise a portion of the Warrant, only to the extent that all such conversions and exercises together result in the issuance of up to and no more than 4.99% of the Common Stock outstanding as of the Closing. 1.6 HSR Limitation. Notwithstanding any other provision of this Agreement, the Purchaser and any subsequent holder of either the Debenture or the Warrant shall be permitted to convert into Common Stock an amount of principal or accrued unpaid interest or costs and expenses under the Debenture, or exercise a portion of the Warrant, only to the extent that the Purchaser and the Company have obtained any required consent, authorization, order, approval, exemption or waiver under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSR"). 2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY. Subject to and except as set forth on a Schedule of Exceptions furnished to the Purchaser, the Company hereby represents and warrants to the Purchaser that: 2.1 Organization; Good Standing, Qualification. The Company is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Massachusetts, has all requisite corporate power and authority to own and operate its properties and assets and to carry on its business as now conducted, to execute and deliver this Agreement, the Debenture and the Warrant, to issue and sell the Debenture, the Warrant and the Common Stock issuable upon conversion or exercise thereof, and to carry out the provisions of this - 2 - Agreement. The Company is duly qualified and is authorized to transact business and is in good standing as a foreign corporation in each jurisdiction in which the failure so to qualify would have a material adverse effect on its business, properties or financial condition. 2.2 Authorization. Except to the extent that stockholder approval is required pursuant to paragraph 1.5 above, all corporate action on the part of the Company, its officers, directors and stockholders necessary for the authorization, execution and delivery of this Agreement, the Debenture and the Warrant, the performance of all obligations of the Company hereunder and thereunder at the Closing and the authorization, reservation for issuance, issuance, sale, and delivery of the Debenture and the Warrant being sold hereunder and the Common Stock issuable upon conversion or exercise thereof has been taken or will be taken before the Closing, and this Agreement, the Debenture and the Warrant, when executed and delivered, will constitute valid and legally binding obligations of the Company, enforceable in accordance with their respective terms except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of general application affecting enforcement of creditors' rights generally, and (ii) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies. The Company covenants to use its best efforts to obtain, on or before June 30, 1998, any stockholder approval of the Debenture and the Warrant required under Nasdaq rules to permit the full conversion or exercise thereof. 2.3 Valid Issuance of Debenture, Warrant and Common Stock. The Debenture and the Warrant being purchased by the Purchaser hereunder, when issued, sold, and delivered in accordance with the terms of this Agreement, will be duly and validly issued. The Common Stock issuable upon conversion of the Debenture and upon exercise of the Warrant has been duly and validly reserved for issuance and, upon issuance in accordance with the terms of the Company's Restated Articles of Organization (the "Restated Articles") will be duly and validly issued, fully paid and nonassessable and will be free of restrictions on transfer other than restrictions on transfer under this Agreement and under applicable state and federal securities laws. 2.4 Governmental Consents. No consent, approval, qualification, order or authorization of, or filing with, any local, state, or federal governmental authority is required on the part of the Company in connection with the Company's valid execution, delivery, or performance of this Agreement, the offer, sale or issuance of the Debenture, the Warrant or the Common Stock issuable upon conversion or exercise thereof, except as may be required under applicable state and federal securities laws and under HSR. - 3 - The Company shall use its best efforts to obtain (and to cooperate with the Purchaser to obtain) any consent, authorization, order or approval of, or any exemption by, any governmental entity and/or any private third party which is required to be obtained or made by such entity or party in connection with this Agreement or the transactions contemplated by this Agreement. The Company specifically agrees to take all actions necessary for the preparation and filing of Notification and Report Forms under HSR, if and when such forms are required under applicable law to be filed with respect to this Agreement or the transactions contemplated by this Agreement. The Company will furnish to the Purchaser such information and assistance as the Purchaser may reasonably request in connection with the preparation of any HSR filings and will provide the Purchaser with copies of all correspondence, filings and communications (or memoranda setting forth the substance thereof) between the Company and any governmental agency or its staff with respect to this Agreement and the transactions contemplated by this Agreement. 2.5 Capitalization and Voting Rights. The authorized capital of the Company consists of: (a) Common Stock. 25,000,000 shares of common stock, par value $0.01 per share ("Common Stock"), of which 6,020,182 shares are issued and outstanding. (b) Preferred Stock. 1,000,000 shares of preferred stock, par value $0.10 per share ("Preferred Stock"), of which no shares are issued and outstanding. The outstanding shares of Common Stock have been duly authorized and validly issued, are fully paid and nonassessable, and were issued in accordance with the registration or qualification provisions of the Securities Act of 1933, as amended (the "Securities Act") and any relevant state securities laws or pursuant to valid exemptions therefrom. Except for currently outstanding options to purchase 674,100 shares of Common Stock granted to employees, directors and consultants pursuant to the Company's 1992 Stock Option Plan, 1996 Stock Plan and 1996 Eligible Directors Stock Plan (collectively, the "Stock Plans"), there are not outstanding any options, warrants, rights (including conversion or preemptive rights and rights of first refusal), proxy or stockholder agreements or agreements of any kind for the purchase or acquisition from the Company of any of its securities. In addition to the aforementioned options, the Company has reserved an additional 321,000 shares of its Common Stock for purchase upon exercise of options to be granted in the future under the Stock Plans. The Company is not a party or subject to any agreement or understanding, and, to the best of the Company's knowledge, there is no agreement or understanding between any persons that affects or relates to the voting or giving of written consents with respect to any security or the voting by a director of the Company. Except as provided in Section 9 of the Company's Stock Purchase Agreement dated April 2, 1985 and as contemplated under Section 6 of this Agreement, the Company is - 4 presently not under any obligation and has not granted any rights to register under the Securities Act any of its presently outstanding securities or any of its securities that may subsequently be issued. 2.6 Subsidiaries. The Company does not own or control, directly or indirectly, any interest in any other corporation, partnership, limited liability company, association, or other business entity, except for the following majority or wholly-owned subsidiaries: CTi Technologies, Inc., a Massachusetts corporation; PCD Control Systems, Inc., a Massachusetts corporation; PCD Securities Corp., a Massachusetts corporation; and PCD USVI, Inc., a U.S. Virgin Islands corporation. On November 17, 1997, the Company entered into an agreement (the "Wells Agreement") to acquire all of the outstanding capital stock of Wells Electronics, Inc., an Indiana corporation ("Wells"). The Company is not a participant in any joint venture, partnership, or similar arrangement. 2.7 Contracts and Other Commitments. The Company does not have and is not bound by any contract, agreement, lease, commitment, or proposed transaction, judgment, order, writ or decree, written or oral, absolute or contingent, other than contracts that were entered into in the ordinary course of business and that are not individually (or, if part of a series of related contracts, when all such contracts are viewed as a whole) material to the conduct of the Company's business. 2.8 Related-Party Transactions. No employee, officer or director of the Company or member of his or her immediate family is indebted to the Company, nor is the Company indebted (or committed to make loans or extend or guarantee credit) to any of them, other than (i) for payment of salary for services rendered, (ii) reimbursement for reasonable expenses incurred on behalf of the Company, and (iii) for other standard employee benefits made generally available to all employees (including stock option agreements outstanding under any stock plan approved by the Board of Directors of the Company). None of such persons has any direct or indirect ownership interest in any firm or corporation with which the Company is affiliated or with which the Company has a business relationship, or any firm or corporation that competes with the Company, except that employees, officers or directors of the Company and members of their immediate families may own stock in publicly traded companies that may compete with the Company. No officer or director, or any member of their immediate families is, directly or indirectly, interested in any material contract with the Company (other than such contracts as relate to any such person's ownership of capital stock or other securities of the Company). - 5 - 2.9 Permits. The Company has all franchises, permits, licenses, and any similar authority necessary for the conduct of its business as now being conducted by it, the lack of which could materially and adversely affect the business, properties or financial condition of the Company, and believes it can obtain, without undue burden or expense, any similar authority for the conduct of its business as presently planned to be conducted. The Company is not in default in any material respect under any of such franchises, permits, licenses or other similar authority. 2.10 Compliance With Other Instruments. The Company is not in violation or default of any provision of its Restated Articles or Bylaws or any provision of any mortgage, indenture, agreement, instrument, or contract to which it is a party or by which it is bound or of any federal or state judgment, order, writ, decree, statute, rule, regulation or restriction applicable to the Company. The execution, delivery, and performance by the Company of this Agreement, the Debenture and the Warrant, and the consummation of the transactions contemplated hereby and thereby, will not result in any such violation or be in conflict with or constitute, with or without the passage of time or giving of notice, either a default under any such provision or an event that results in the creation of any lien, charge, or encumbrance upon any assets of the Company or the suspension, revocation, impairment, forfeiture, or nonrenewal of any permit, license, authorization, or approval applicable to the Company, its business or operations, or any of its assets or properties. 2.11 Litigation. There is no action, suit, proceeding, or investigation pending or, to the best of the Company's knowledge, currently threatened against the Company, nor, to the best of the Company's knowledge, are there any grounds therefor, that (i) questions the validity of this Agreement, the Debenture, the Warrant, or the right of the Company to enter into such agreements, or to consummate the transactions contemplated hereby or thereby, or (ii) could reasonably be expected to have, either individually or in the aggregate, an adverse effect on the assets, business, properties, or financial condition of the Company, or to cause any change in the current equity ownership of the Company. The Company is not a party to or named in or subject to any order, writ, injunction, judgment, or decree of any court, government agency or instrumentality. 2.12 Offering. Subject in part to the accuracy and completeness of the Purchaser's representations set forth in this Agreement, the offer, sale and issuance of the Debenture and the Warrant as contemplated by this Agreement are exempt from the registration requirements of the Securities Act, and neither the Company nor any authorized agent acting on its behalf will take any action hereafter that would cause the loss of such exemption. - 6 - 2.13 Title to Property and Assets; Leases. Except (i) as reflected in the Financial Statements (defined in paragraph 2.14), (ii) for the security interests granted or to be granted to Fleet National Bank under the Company's loan agreement dated December 26, 1997 (the "Fleet Agreement"), (iii) for liens for current taxes not yet delinquent, (iv) for liens imposed by law and incurred in the ordinary course of business for obligations not past due to carriers, warehousemen, laborers, materialmen and the like, (v) for liens in respect of pledges or deposits under workers' compensation laws or similar legislation or (vi) for minor defects in title, none of which, individually or in the aggregate, materially interferes with the use of such property, the Company has good and marketable title to its property and assets free and clear of all mortgages, liens, claims, and encumbrances. With respect to the property and assets it leases, the Company is in compliance with such leases and holds a valid leasehold interest free of any liens, claims, or encumbrances, subject to clauses (i)-(vi) above. 2.14 Financial Statements. The Company has delivered to the Purchaser its audited consolidated financial statements (balance sheets, statements of income and statements of cash flows, including notes thereto) at December 31, 1996 and for the fiscal year then ended and its unaudited financial statements (balance sheets, statements of income and statements of cash flows, including notes thereto) as at, and for the three and nine-month periods ended September 27, 1997 (the "Financial Statements"). The Financial Statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated and with each other, except that unaudited Financial Statements may not contain all footnotes required by generally accepted accounting principles. The Financial Statements fairly present the financial condition and operating results of the Company as of the dates, and for the periods, indicated therein, subject in the case of the unaudited Financial Statements to normal year-end audit adjustments. Except as set forth in the Financial Statements, the Company has no liabilities, contingent or otherwise, other than (i) liabilities incurred in the ordinary course of business after September 27, 1997 and (ii) obligations under contracts and commitments incurred in the ordinary course of business and not required under generally accepted accounting principles to be reflected in the Financial Statements, which, in both cases, individually or in the aggregate, are not material to the financial condition or operating results of the Company. Except as disclosed in the Financial Statements, the Company is not a guarantor or indemnitor of any indebtedness of any other person, firm, or corporation. 2.15 Changes. To the best of the Company's knowledge, since September 27, 1997, except for the execution of the Wells Agreement and the Fleet Agreement and the consummation of the transactions contemplated thereby, there has not been: - 7 - (a) any change in the assets, liabilities, financial condition, or operating results of the Company from that reflected in the Financial Statements, except changes in the ordinary course of business that have not been, in the aggregate, materially adverse; (b) any damage, destruction or loss, whether or not covered by insurance, materially and adversely affecting the business, properties, prospects or financial condition of the Company (as such business is presently conducted and as it is presently proposed to be conducted); (c) any waiver or compromise by the Company of a valuable right or of a material debt owed to it; (d) any satisfaction or discharge of any lien, claim, or encumbrance or payment of any obligation by the Company, except in the ordinary course of business and that is not material to the business, properties, prospects or financial condition of the Company (as such business is presently conducted and as it is presently proposed to be conducted); (e) any material change to a material contract or arrangement by which the Company or any of its assets is bound or subject; (f) any material change in any compensation arrangement or agreement with any employee, officer, director or stockholder; (g) any sale, assignment, or transfer of any patents, trademarks, copyrights, trade secrets or other intangible assets; (h) any resignation or termination of employment of any key officer of the Company; and the Company, to the best of its knowledge, does not know of the impending resignation or termination of employment of any such officer; (i) any mortgage, pledge, transfer of a security interest in, or lien, created by the Company, with respect to any of its material properties or assets, except liens for taxes not yet due or payable; (j) any loans or guarantees made by the Company to or for the benefit of its employees, stockholders, officers, or directors, or any members of their immediate families, other than travel advances and other advances made in the ordinary course of its business; (k) any declaration, setting aside, or payment of any dividend or other distribution of the Company's assets in respect of any of the Company's capital stock, or any direct or indirect redemption, purchase or other acquisition of any of such stock by the Company; - 8 - (l) any other event or condition of any character that might materially and adversely affect the business, properties or financial condition of the Company; or (m) any agreement or commitment by the Company to do any of the things described in this paragraph 2.15. 2.16 Proprietary Rights. The Company owns or possesses all legal rights to all patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses, information, and proprietary rights and processes (collectively, "Intellectual Property") necessary for its business as now conducted and as proposed to be conducted without any conflict with, or infringement of the rights of, others. Except for agreements with its own employees or consultants and license agreements with customers or distributors, there are no outstanding options, licenses, or agreements of any kind relating to the foregoing, nor is the Company bound by or a party to any options, licenses, or agreements of any kind with respect to the Intellectual Property of any other person or entity. Except with respect to the Pfaff litigation described in the Financial Statements, the Company has not received any communications alleging that the Company has violated or, by conducting its business as proposed, would violate any of the Intellectual Property of any other person or entity. The Company does not believe it is or will be necessary to use any inventions of any of its employees (or persons it currently intends to hire) made before their employment by the Company. 2.17 Employees; Employee Compensation. There is no strike, labor dispute or union organization activities pending or threatened between it and its employees. None of the Company's employees (excluding employees of Wells) belongs to any union or collective bargaining unit. The Company has complied in all material respects with all applicable state and federal equal opportunity and other laws related to employment. The Company is not aware that any of its employees is obligated under any contract (including licenses, covenants, or commitments of any nature) or other agreement, or subject to any judgment, decree, or order of any court or administrative agency, that would interfere with the use of such employee's best efforts to promote the interests of the Company or that would conflict with the Company's business as proposed to be conducted. Neither the execution nor delivery of this Agreement, the Debenture or the Warrant, nor the carrying on of the Company's business by the employees of the Company, will, conflict with or result in a breach of the terms, conditions, or provisions of, or constitute a default under, any contract, covenant, or instrument under which any of such employees is now obligated. - 9 - 2.18 Tax Returns, Payments, and Elections. The Company has timely filed all tax returns and reports (federal, state and local) as required by law. These returns and reports are true and correct in all material respects. The Company has paid all taxes and other assessments due, except those contested by it in good faith. The provision for taxes of the Company as shown in the Financial Statements is adequate for taxes due or accrued as of the date thereof. The Company has never had any tax deficiency proposed or assessed against it and has not executed any waiver of any statute of limitations on the assessment or collection of any tax or governmental charge. Since the date of the Financial Statements, the Company has made adequate provisions on its books of account for all taxes, assessments, and governmental charges with respect to its business, properties, and operations for such period. The Company has withheld or collected from each payment made to each of its employees, the amount of all taxes, including, but not limited to, federal income taxes, Federal Insurance Contribution Act taxes and Federal Unemployment Tax Act taxes required to be withheld or collected therefrom and has paid the same to the proper tax receiving officers or authorized depositaries. 2.19 Insurance. The Company has in full force and effect fire and casualty insurance policies, with extended coverage, sufficient in amount (subject to reasonable deductibles) to allow it to replace any of its properties that might be damaged or destroyed. The Company has in full force and effect products liability and errors and omissions insurance in amounts customary for companies similarly situated. 2.20 Environmental, Health and Safety Laws. The Company is not in violation of any applicable statute, law, or regulation relating to the environment or occupational health and safety, and to the best of its knowledge, no material expenditures are or will be required in order to comply with any such existing statute, law or regulation. 2.21 SEC Information. The Company has made available to the Purchaser its Annual Report on Form 10-K and Proxy Statement for the year ended December 31, 1996 and its Quarterly Reports on Form 10-Q for the quarters ended March 29, June 28 and September 27, 1997, in each case as filed with the Securities and Exchange Commission (the "SEC"). Such filings, taken together with information previously furnished by the Company to the Purchaser, did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances in which they were made, not misleading. As used in this paragraph 2.21, "material" means material to the financial condition, business, properties, prospects, rights or operations of the Company together with its subsidiaries, taken as a whole. - 10 - 2.22 Massachusetts Statutes. Chapter 110D of the General Laws of the Commonwealth of Massachusetts does not apply to the Company and the Company will not hereafter take any action which would make such Chapter applicable to the Company. Chapter 110F of the General Laws of the Commonwealth of Massachusetts does not apply to either the acquisition of the Debenture or the Warrant or the acquisition by the Purchaser of the Common Stock issuable upon conversion of the Debenture or the exercise of the Warrant. 3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser hereby represents and warrants to the Company that: 3.1 Authorization. The Purchaser has full power and authority to enter into this Agreement, and that this Agreement, when executed and delivered, will constitute a valid and legally binding obligation of the Purchaser. 3.2 Purchase Entirely for Own Account. This Agreement is made with the Purchaser in reliance upon the Purchaser's representation to the Company, which by the Purchaser's execution of this Agreement the Purchaser hereby confirms, that the Debenture and the Warrant and the Common Stock issuable upon conversion or exercise thereof (collectively, the "Securities") will be acquired for investment for the Purchaser's own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that the Purchaser has no present intention of selling, granting any participation in, or otherwise distributing the same. By executing this Agreement, the Purchaser further represents that such Purchaser does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person, with respect to any of the Securities. 3.3 Reliance Upon Purchaser's Representations. The Purchaser understands that the Debenture is not, and any Common Stock acquired on conversion thereof at the time of issuance will not be, registered under the Securities Act on the ground that the sale provided for in this Agreement and the issuance of securities hereunder is exempt from registration under the Securities Act pursuant to Section 4(2) thereof, and that the Company's reliance on such exemption is predicated on the Purchaser's representations set forth herein. The Purchaser realizes that the basis for the exemption may not be present if, notwithstanding such representations, the Purchaser contemplates acquiring shares of the Debenture for a fixed or determinable period in the future, or for a market rise, or for sale if the market does not rise. The Purchaser has no such intention. - 11 - 3.4 Receipt of Information. The Purchaser believes the Purchaser has received all the information the Purchaser considers necessary or appropriate for deciding whether to purchase the Debenture and the Warrant. The Purchaser further represents that the Purchaser has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Debenture and the Warrant and the business, properties and financial condition of the Company and to obtain additional information (to the extent the Company possessed such information or could acquire it without unreasonable effort or expense) necessary to verify the accuracy of any information furnished to the Purchaser or to which the Purchaser had access. The foregoing, however, does not limit or modify the representations and warranties of the Company in Section 2 of this Agreement or the right of the Purchaser to rely thereon. 3.5 Investment Experience; Accredited Investor. The Purchaser represents that such Purchaser is experienced in evaluating and investing in private placement transactions of securities of companies in a similar stage of development and acknowledges that the Purchaser is able to fend for itself, can bear the economic risk of the Purchaser's investment, and has such knowledge and experience in financial and business matters that the Purchaser is capable of evaluating the merits and risks of the investment in the Debenture. The Purchaser further represents that such Purchaser is a corporation not formed for the specific purpose of acquiring the Debenture and has total assets in excess of Five Million Dollars ($5,000,000). 3.6 Restricted Securities. The Purchaser understands that the Debenture and the Warrant (and any Common Stock issued on conversion or exercise thereof) may not be sold, transferred, or otherwise disposed of without registration under the Securities Act or an exemption therefrom, and that in the absence of an effective registration statement covering the Debenture or the Warrant (or the Common Stock issued on conversion or exercise thereof) or an available exemption from registration under the Securities Act, the Debenture and the Warrant (and any Common Stock issued on conversion or exercise thereof) must be held indefinitely. In particular, the Purchaser is aware that the Debenture and the Warrant (and any Common Stock issued on conversion or exercise thereof) may not be sold pursuant to Rule 144 promulgated under the Securities Act unless all of the conditions of that Rule are met. Among the conditions for use of Rule 144 is the availability of current information to the public about the Company. - 12 - 3.7 Legends. To the extent applicable, each document evidencing the Debenture or the Warrant, or any Common Stock issued upon conversion or exercise thereof, shall be endorsed with the legends substantially in the form set forth below: (a) The following legend under the Securities Act: "THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS. IT MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SUCH ACT AND APPLICABLE LAWS, OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED." (b) Any legend imposed or required by applicable state securities laws. 3.8 Public Sale. The Purchaser agrees not to make any public offering or sale of the Debenture or the Warrant. The Purchaser agrees not to make any public offering or sale of any Common Stock issued upon the conversion or exercise of the Debenture or the Warrant, except in compliance with the Securities Act and the Rules and Regulations promulgated by the Securities and Exchange Commission thereunder. 4. CONDITIONS OF PURCHASER'S OBLIGATIONS AT CLOSING. The obligations of the Purchaser under Section 1 of this Agreement are subject to the fulfillment on or before the Closing of each of the following conditions: 4.1 Representations and Warranties. The representations and warranties of the Company contained in Section 2 shall be true on and as of the Closing with the same effect as though such representations and warranties had been made on and as of the date of the Closing. 4.2 Performance. The Company shall have performed and complied with all agreements, obligations, and conditions contained in this Agreement that are required to be performed or complied with by it on or before the Closing. - 13 - 4.3 Compliance Certificate. The Chairman of the Board of the Company shall deliver to the Purchaser at the Closing a certificate certifying that the conditions specified in paragraphs 4.1, 4.2, 4.4, and 4.5 have been fulfilled. 4.4 Qualifications. All authorizations, approvals, or permits, if any, of any governmental authority or regulatory body of the United States or of any state that are required in advance of the lawful issuance and sale of the Debenture and the Warrant pursuant to this Agreement shall be duly obtained and effective as of the Closing. 4.5 Proceedings and Documents. All corporate and other proceedings in connection with the transactions contemplated at the Closing and all documents incident thereto shall be reasonably satisfactory in form and substance to the Purchaser, which shall have received all such counterpart original and certified or other copies of such documents as it may reasonably request. - 14 - 4.6 Nasdaq Letter. In response to the Company's letter to Nasdaq dated December 18, 1997, a copy of which has been furnished to the Purchaser, the Company shall have obtained from Nasdaq a letter confirming that, if the transactions are structured as described in the Company's letter, (i) neither the National Association of Securities Dealers, Inc. (the "NASD") nor Nasdaq would impose any requirement that such transactions be approved by the Company's stockholders before the closing of such transactions, and (ii) if stockholder approval of the transactions is required at any time, none of the Company's stockholders (including without limitation the Purchaser) would be disqualified by the NASD or Nasdaq from voting to approve the transactions as a whole or any portion thereof, except that in any such vote neither the Purchaser nor any of the Purchaser's affiliates would be permitted to vote any shares of Common Stock acquired upon conversion of principal or interest under the Debenture or upon exercise of the Warrant. 4.7 Voting Agreement and Power of Attorney. The Purchaser shall have received from shareholders owning 1,042,860 or more shares of the Common Stock of the Company issued and outstanding as of the Closing a Voting Agreement and Power of Attorney in the form set forth in EXHIBIT C hereto, and any other related documentation reasonably required by Purchaser, giving the Purchaser the right to vote all of such shareholders' shares in any shareholder vote relating to approval of this Agreement or the transactions contemplated in this Agreement as referred to in Sections 1.5 and 2.2 hereof. 4.8 Opinion of Company Counsel. The Purchaser shall have received from Hill & Barlow, counsel for the Company, an opinion, dated the date of the Closing, in form and substance satisfactory to the Purchaser, to the effect that: (a) The Company is a corporation duly organized, legally existing and in corporate good standing under the laws of the Commonwealth of Massachusetts and has the requisite corporate power to own its property and assets and to conduct its business as it is currently being conducted. (b) (i) Except to the extent that stockholder approval is required pursuant to paragraph 2.2 above, each of this Agreement, the Debenture set forth in EXHIBIT A, the Warrant set forth in EXHIBIT B and the Registration Rights Agreement set forth in EXHIBIT D has been duly and validly authorized, executed and delivered by the Company, each constitutes a valid and binding agreement of the Company and each is enforceable against the Company in accordance with its terms. (ii) The Voting Agreement and Power of Attorney set forth in EXHIBIT C has been duly and validly executed and delivered by each of the shareholders who - 15 - are parties thereto and constitutes a valid and binding agreement of each of such shareholders enforceable against each of such shareholders in accordance with its terms. (c) The capital stock of the Company is as follows: (i) Preferred Stock. 1,000,000 shares of Preferred Stock authorized, of which no shares are issued and outstanding. (ii) Common Stock. 25,000,000 shares of Common Stock authorized, of which 6,020,362 shares have been validly issued and are outstanding, fully paid and nonassessable. (d) The Common Stock issuable upon the conversion of the Debenture and upon exercise of the Warrant purchased under this Agreement has been duly and validly reserved for issuance and, when issued in accordance with the Company's Restated Articles, will be validly issued, fully paid and nonassessable. Except for currently outstanding options to purchase shares of the Common Stock granted to employees, consultants and directors pursuant to the Company's Stock Plans, to the best of counsel's knowledge, there are no preemptive rights or options, warrants, conversion privileges, or other rights (or agreements for any such rights) outstanding to purchase or otherwise obtain any of the Company's securities. (e) The execution, delivery and performance of this Agreement by the Company on or before the Closing and the issuance of the Debenture and the Warrant pursuant thereto do not violate any provision of the Company's Restated Articles or Bylaws, and do not constitute a default under the provisions of any material agreement known to such counsel to which the Company is a party or by which it is bound, and do not violate or contravene (i) any governmental statute, rule or regulation applicable to the Company or (ii) any order, writ, judgment, injunction, decree, determination or award which has been entered against the Company and of which such counsel is aware, the violation or contravention of which would materially and adversely affect the Company, its assets, financial condition or operations. (f) To the best of such counsel's knowledge, after due inquiry, there is no action, proceeding or investigation pending or threatened against the Company before any court or administrative agency that questions the validity of this Agreement, the Debenture or the Warrant or might result, either individually or in the aggregate, in any material adverse change in the assets, financial condition or operations of the Company. (g) All consents, approvals, authorizations, or orders of, and filings, registrations and qualifications with any federal, Massachusetts state or Massachusetts local regulatory authority or governmental body required for the consummation by the Company - 16 - of the transactions contemplated by the Agreement, have been made or obtained. (h) The offer and sale of the Debenture and the Warrant are, and the issuance of the Common Stock upon conversion or exercise thereof would be, exempt from the registration requirements of the Securities Act. (i) The Voting Agreement and Power of Attorney delivered to the Purchaser pursuant to paragraph 4.7 of this Agreement is legal, valid, binding and sufficient under Massachusetts law to confer upon the Purchaser the right to vote the number of shares of the Common Stock of the Company covered thereby in any shareholder vote relating to approval of this Agreement or the transactions contemplated in this Agreement and complies with all applicable federal and Massachusetts securities laws. (j) Chapter 110D of the General Laws of the Commonwealth of Massachusetts does not apply to the Company. Chapter 110F of the General Laws of the Commonwealth of Massachusetts does not apply to either the acquisition of the Debenture or the Warrant or the acquisition by the Purchaser of Common Stock issuable upon conversion of the Debenture or exercise of the Warrant. 4.9 Registration Rights Agreement. The Company and the Purchaser shall have entered into at or prior to the Closing a Registration Rights Agreement in substantially the form set forth in Exhibit D. 5. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING The obligations of the Company to the Purchaser under this Agreement are subject to the fulfillment on or before the Closing of each of the following conditions by the Purchaser. 5.1 Representations and Warranties. The representations and warranties of the Purchaser contained in Section 3 hereof shall be true on and as of the Closing with the same effect as though such representations and warranties had been made on and as of the date of the Closing. 5.2 Qualifications. All authorizations, approvals, or permits, if any, of any governmental authority or regulatory body of the United States or of any state that are required in connection with the lawful issuance and sale of the Debenture pursuant to this Agreement shall be duly obtained and effective as of the Closing. - 17 - 6. REGISTRATION RIGHTS. The Purchaser shall have the registration rights set forth in EXHIBIT D. 7. MISCELLANEOUS. 7.1 Survival of Warranties. The warranties, representations, and covenants of the Company and the Purchaser contained in or made pursuant to this Agreement shall survive the execution and delivery of this Agreement and the Closing for a period of thirty-six (36) months after the Closing. 7.2 Successors and Assigns. The Purchaser's rights pursuant to this Agreement may be transferred or assigned by the Purchaser to any of the Purchaser's affiliates to whom the Debenture or the Warrant is transferred as permitted by the terms thereof. Except as otherwise provided herein, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties (including permitted transferees of the Debenture and the Warrant sold hereunder or any Common Stock issued upon conversion or exercise thereof). Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. 7.3 Governing Law. This Agreement shall be governed by and construed under the laws of The Commonwealth of Massachusetts as applied to agreements among Massachusetts residents entered into and to be performed entirely within Massachusetts. 7.4 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 7.5 Headings and Subheadings The headings and subheadings used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. - 18 - 7.6 Notices. Unless otherwise provided, all notices and other communications required or permitted under this Agreement shall be in writing and shall be mailed by United States first-class mail, postage prepaid, sent by facsimile or delivered personally by hand or by a nationally recognized courier addressed to the party to be notified at the address or facsimile number indicated for such person on the signature page hereof, or at such other address or facsimile number as such party may designate by ten (10) days' advance written notice to the other parties hereto. All such notices and other written communications shall be effective on the date of mailing, confirmed facsimile transfer or delivery. 7.7 Amendments and Waivers. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the Purchaser. Any amendment or waiver effected in accordance with this paragraph shall be binding upon the holder of any securities purchased under this Agreement at the time outstanding (including securities into which such securities have been converted), each future holder of all such securities, and the Company. 7.8 Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms. {REMAINDER OF PAGE INTENTIONALLY LEFT BLANK} - 19 - IN WITNESS WHEREOF, the parties have executed this Agreement under seal as of the date first above written. COMPANY: PCD INC. By: /S/ John L. Dwight, Jr. ----------------------------- John L. Dwight Jr. Chairman of the Board Address: 2 Technology Drive Peabody, Massachusetts 01960 PURCHASER: EMERSON ELECTRIC CO. By: /S/ J.D. Switzer ----------------------------- J.D. Switzer Senior Vice President - Development Address: 8000 West Florissant P.O. Box 4100 St. Louis, Missouri 63136 - 20 - EX-18 19 EXHIBIT 10.16 EXHIBIT A THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS. IT MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SUCH ACT AND APPLICABLE LAWS, OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED. TRANSFER OF THIS DEBENTURE IS NOT VALID EXCEPT TO THE EXTENT THAT SUCH TRANSFER HAS BEEN MADE IN COMPLIANCE WITH THE PROVISIONS REGARDING TRANSFER CONTAINED HEREIN. THIS SUBORDINATED DEBENTURE IS SUBJECT TO A SUBORDINATION AGREEMENT DATED AS OF DECEMBER 26, 1997 BY AND AMONG PCD INC., EMERSON ELECTRIC CO. AND FLEET NATIONAL BANK, AS AGENT FOR ITSELF AND THE OTHER LENDERS PCD INC. SUBORDINATED DEBENTURE $25,000,000 Peabody, Massachusetts December 26, 1997 PCD Inc., a Massachusetts corporation (the "Company"), the principal office of which is located at 2 Technology Drive, Peabody, Massachusetts, for value received hereby promises to pay to Emerson Electric Co., a Missouri corporation, or its permitted assigns, the sum of Twenty- Five Million Dollars ($25,000,000), or such lesser amount as shall then equal the outstanding principal amount hereof and any unpaid accrued interest and Costs and Expenses (as defined below) hereon, as set forth below, on the earlier to occur of (i) December 31, 2000, or (ii) subject to Section 6.5 hereof, when declared due and payable by the Holder (as defined below) upon the occurrence of an Event of Default (as defined below). Payment for all amounts due hereunder shall be made by mail or by wire transfer to the registered address or account of the Holder. This Debenture is issued in connection with the Subordinated Debenture and Warrant Purchase Agreement between the Company and the Holder dated as of December 26, 1997, as the same may from time to time be amended, modified or supplemented (the "Purchase Agreement"). The Holder of this Debenture is subject to certain restrictions set forth in the Purchase Agreement and shall be entitled to certain rights and privileges set forth in the Purchase Agreement. This Debenture is the Debenture referred to as the "Debenture" in the Purchase Agreement. The following is a statement of the rights of the Holder of this Debenture and the conditions to which this Debenture is subject, and to which the Holder hereof, by the acceptance of this Debenture, agrees: 1. DEFINITIONS. As used in this Debenture, the following terms, unless the context otherwise requires, have the following meanings: (i) "Company" includes any corporation which shall succeed to or assume the obligations of the Company under this Debenture with the prior written consent of the Holder. (ii) "Holder," when the context refers to a holder of this Debenture, shall mean any person who shall at the time be the registered holder of this Debenture. (iii) "Insolvency Proceeding" means any case or proceeding (x) under the United States Bankruptcy Code, 11 U.S.C. 101, et seq., or (y) under any other federal law, or under state law, to reorganize, liquidate, appoint a trustee for, a receiver for or an assignee for the benefit of creditors of, the Company, or all or substantially all of the assets of the Company, whether voluntary or involuntary. 2. INTEREST. The Debenture shall bear interest at the rate of ten percent (10%) per annum (the "Interest Rate") on the principal of this Debenture outstanding during the period beginning on the date of issuance of this Debenture and ending on the date when the principal amount of this Debenture has been paid in full or when the Debenture has been fully converted pursuant to Section 6 hereof, whichever is later. Interest shall be paid quarterly in arrears, beginning on March 31, 1998, on the last business day of March, June, September and December of each year during which the Debenture is outstanding, or on such earlier date that the Debenture is paid in full or fully converted pursuant to Section 6 hereof. 3. EVENTS OF DEFAULT. If any of the events specified in this Section 3 shall occur (herein individually referred to as an "Event of Default"), the Holder of the Debenture may, so long as such condition exists and subject to Section 4 and Section 6.5 hereof, declare the entire principal and unpaid accrued interest hereon immediately due and payable, by notice in writing to the Company: (i) The institution by the Company of an Insolvency Proceeding, or the consent by it to the institution of an Insolvency Proceeding or the filing by it of a petition or answer or consent seeking an Insolvency Proceeding, or the taking of corporate action by the Company in furtherance of any such action; or (ii) If, within sixty (60) days after the commencement of an action against the Company (and service of process in connection therewith on the Company) seeking an Insolvency Proceeding, such action shall not have been resolved in favor of the Company or all orders or proceedings thereunder affecting the operations or the - 2 - business of the Company stayed, or if the stay of any such order or proceeding shall thereafter be set aside, or if, within sixty (60) days after the appointment without the consent or acquiescence of the Company of any trustee, receiver or liquidator of the Company or of all or any substantial part of the properties of the Company, such appointment shall not have been vacated; or (iii) Any default of the Company declared in writing under any Senior Indebtedness (as defined below) that gives the holder thereof the right to accelerate such Senior Indebtedness; or (iv) Any declaration in writing that the Company is insolvent, inadequately capitalized, or is unable to pay its debts as they fall due; or (v) Any default in the payment of the principal or interest of this Debenture when due and payable, whether at maturity, by acceleration or otherwise, and such default is not cured by the Company within ten (10) business days; or (vi) Any breach by the Company of any representations or warranties, or failure to comply with any agreement or covenant contained herein or in the Purchase Agreement or the Registration Rights Agreement between the Company and Emerson Electric Co. (the "Registration Rights Agreement") dated as of the date of the Purchase Agreement and (a) such breach (to the extent curable) or failure is not cured by the Company within thirty (30) days after the Holder has given the Company written notice of such breach or failure and (b) such breach or failure has a material adverse effect on the Company's business, properties or financial condition; or (vii) The rendering of a final judgment or judgments (not subject to appeal) against the Company or any of its subsidiaries in an amount in excess of $1 million which remains undischarged or unstayed for a period of 60 (sixty) days after the date on which the right to appeal has expired. 4. SUBORDINATION. The indebtedness evidenced by this Debenture is hereby expressly subordinated, to the extent and in the manner set forth under the terms of a contemporaneous Subordination Agreement among the Company, Emerson Electric Co. and Fleet National Bank as Agent for itself and each of the other Lenders named therein (the "Subordination Agreement"), in right of payment to the prior payment in full of all the Company's Senior Indebtedness, as defined in the Subordination Agreement. By its acceptance of this Debenture, the Holder of this Debenture agrees to be bound by terms of the Subordination Agreement as if such Holder were a party to such Agreement and agrees to execute and deliver such documents as may be reasonably requested from time to time by the Company or the holder of any Senior Indebtedness in order to implement the provisions of this Section 4 or the Subordination Agreement. 5. PREPAYMENT. The Company may at any time prepay in whole or in part the principal sum, plus accrued interest, and Costs and Expenses to date of payment, of this - 3 - Debenture, subject to the following premiums which shall be due and payable (in addition to such principal and interest, Costs and Expenses) at the time of such prepayment: (i) for the period beginning on the date hereof and ending June 30, 1998, an amount equal to 3.25% of the principal sum prepaid; (ii) for the period beginning July 1, 1998 and ending September 30, 1998, an amount equal to 6.5% of the principal sum prepaid; (iii) for the period beginning October 1, 1998 and ending December 31, 1998, an amount equal to 9.75% of the principal sum prepaid; and (iv) for the period beginning January 1, 1999 and thereafter, an amount equal to 0.00% of the principal sum prepaid. 6. CONVERSION. 6.1 CONVERSION UPON EVENT OF DEFAULT. If an Event of Default occurs, the Holder of this Debenture shall have the option, as the Holder's sole and exclusive remedy for any such default while the Senior Indebtedness remains outstanding, at any time before payment in full of the principal balance of this Debenture, to convert some or all of the outstanding principal balance of this Debenture, plus unpaid accrued interest and Costs and Expenses, in accordance with the provisions of Section 6.2 hereof, into fully paid and nonassessable shares of the common stock of the Company, $0.01 par value ("Common Stock"). The number of shares of Common Stock into which this Debenture may be converted shall be determined by dividing the aggregate outstanding principal amount to be converted, together with all accrued but unpaid interest and Costs and Expenses to the date of conversion, by the Conversion Price (as defined below) in effect at the time of such conversion. The Conversion Price shall be equal to the lesser of (a) $17.00 per share, subject to adjustment as hereinafter provided, and (b) 70% of the average daily closing price of the Common Stock (as reported by Nasdaq or, if the Common Stock is not then traded on Nasdaq, such other stock exchange on which the Common Stock is traded) for the 90 calendar day period preceding the date of payment default which gives rise to the conversion right under this Section 6.1. 6.2 CONVERSION PROCEDURE. Before the Holder shall be entitled to convert this Debenture into shares of Common Stock, it shall surrender this Debenture, duly endorsed, at the office of the Company together with written notice pursuant to the Notice of Conversion attached to this Debenture of the election to convert all or some of the same pursuant to Section 6.1, and shall state therein the name or names in which the certificate or certificates for shares of Common Stock is to be issued. At its expense, the Company shall, as soon as practicable thereafter, issue and deliver to such Holder a certificate or certificates for the number of shares of such Common Stock to which the Holder shall be - 4 - entitled upon such conversion (bearing such legends as are required by the Purchase Agreement and applicable state and federal securities laws in the opinion of counsel to the Company), together with any other securities and property to which the Holder is entitled upon such conversion under the terms of this Debenture, including a check payable to the Holder for any cash amounts payable for fractional shares, as described in Section 6.3 below. In addition, if the Holder has converted only part of the Debenture, the Company will issue to the Holder a new debenture for the amount not converted with the same terms as the Debenture. In the event of any conversion of this Debenture into Common Stock pursuant to Section 6.1, such conversion shall be deemed to have been made immediately before the close of business on the date of such surrender of the Debenture to be converted. On and after such deemed conversion date, the Holder entitled to receive the shares of such Common Stock issuable upon such conversion shall be treated for all purposes as the record holder of such shares and shall be bound by the terms of the Purchase Agreement. If the Company is the subject of any of the proceedings described in paragraphs (i) or (ii) of Section 3 of this Debenture, no stay, injunction, restraining order or similar law, rule or order shall be effective as against the Holder for purposes of this Section 6; PROVIDED that if any such stay, injunction, restraining order or similar law, rule or order is effective against the Holder, the Company expressly agrees to waive, modify or release such stay, injunction, restraining order or similar law, rule or order to permit the Holder to effect the conversion provided in this Section 6, and to execute and prosecute all pleadings, memoranda, affidavits, certificates, instruments and other documents necessary or appropriate in the discretion of the Holder to effect such waiver, modification, or release. 6.3 NO FRACTIONAL SHARES. No fractional shares of Common Stock shall be issued upon conversion of all of the outstanding principal balance of this Debenture into Common Stock. In lieu of the Company issuing any fractional shares to the Holder upon the conversion of this Debenture into Common Stock, the Company shall pay to the Holder the amount of outstanding principal that is not so converted, such payment to be in the form as provided above. 6.4 NO FURTHER OBLIGATIONS. Upon conversion of all of the outstanding principal balance of this Debenture, the Company shall be forever released from all its obligations and liabilities under this Debenture. 6.5 REMEDIES. The remedy contained in Section 6.1 of this Debenture shall be the Holder's sole and exclusive remedy for any Event of Default or other default under this Debenture while the Senior Indebtedness remains outstanding, and the Holder hereof expressly acknowledges and agrees that it shall have no right to commence any suit, action, proceeding, or case, including an Insolvency Proceeding, in any court or administrative or arbitral body for any relief or remedy except to enforce the Holder's rights under Section 6.1 while the Senior Indebtedness remains outstanding; PROVIDED, HOWEVER, nothing in this Debenture - 5 - shall preclude the Holder before conversion as provided in Section 6.1 from filing and prosecuting a proof of claim in a Bankruptcy Proceeding consistent with Section 7 of the Subordination Agreement. Upon the occurrence of an Event of Default, if no Senior Indebtedness remains outstanding, the Holder may, so long as such condition exists, declare the entire principal and interest hereon immediately due and payable and, in addition, may pursue any and all other rights and remedies available to it. 6.6 NASDAQ LIMITATION ON CONVERSION. Notwithstanding any other provision of this Debenture, until the Company has obtained approval of its stockholders pursuant to the rules of the Nasdaq Stock Market, Inc., or has obtained a waiver in respect of such rules, as contemplated in Sections 1.5 and 2.2 of the Purchase Agreement, the Holder and any subsequent holder of this Debenture shall be permitted to convert into Common Stock an amount of principal or accrued unpaid interest under the Debenture, or exercise a portion of the warrant issued pursuant to the Purchase Agreement (the "Warrant"), only to the extent that all such conversions and exercises together result in the issuance of up to and no more than 4.99% of the Common Stock outstanding as of the Closing. 6.7 HSR LIMITATION ON CONVERSION. Notwithstanding any other provision of this Debenture, the Holder and any subsequent holder of this Debenture shall be permitted to convert into Common Stock an amount of principal or accrued unpaid interest under the Debenture only to the extent that the Purchaser and the Company have obtained any required consent, authorization, order, approval, exemption or waiver under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSR"). 7. CONVERSION PRICE ADJUSTMENTS. 7.1 RECLASSIFICATION, MERGER, SALE OF ASSETS, ETC. In case of any reclassification, capital reorganization, or change of the outstanding Common Stock of the Company (other than as a result of a subdivision, combination or stock dividend), or in case of any consolidation of the Company with, or merger of the Company into, another corporation or other business organization (other than a consolidation or merger in which the holders of the outstanding voting stock of the Company immediately before the consummation of such transaction shall, immediately after such transaction, hold, as a group, at least a majority of the voting securities of the surviving or successor entity), or in case of any sale or conveyance to another corporation or other business organization of the property of the Company, as an entirety or substantially as an entirety, at any time before the payment or conversion in full ("Full Payment") of the principal and interest under this Debenture, then, as a condition of such reclassification, reorganization, change, consolidation, merger, sale or conveyance, lawful provision shall be made and duly executed documents evidencing the same from the Company or its successor shall be delivered to the Holder of this Debenture, so that the Holder of this - 6 - Debenture shall have the right before Full Payment to convert pursuant to Section 6.1 the outstanding principal and unpaid accrued interest under this Debenture into the kind and amount of shares of stock and other securities and property receivable upon such reclassification, reorganization, change, consolidation, merger, sale or conveyance by a holder of the number of shares of Common Stock of the Company which might have been acquired by the Holder of this Debenture upon full conversion of such principal and interest immediately before such reclassification, reorganization, change, consolidation, merger, sale or conveyance, and in any such case appropriate provisions shall be made with respect to the rights and interest of the Holder of this Debenture to the end that the provisions hereof shall thereafter be applicable in relation to any shares of stock, and other securities and property thereafter deliverable upon conversion pursuant to Section 6.1 of outstanding principal and unpaid accrued interest hereunder. 7.2 SPLIT, SUBDIVISION OR COMBINATION OF SHARES. If the Company shall at any time before Full Payment of this Debenture subdivide its outstanding Common Stock, by split- up or otherwise, or combine its outstanding Common Stock, or issue additional shares of its capital stock in payment of a stock dividend in respect of its Common Stock, the number of shares issuable on the conversion pursuant to Section 6.1 of the outstanding principal and unpaid accrued interest under this Debenture shall forthwith be proportionately increased in the case of a subdivision or stock dividend, or proportionately decreased in the case of a combination, and the Conversion Price (as set forth in clause (a) of the last sentence of Section 6.1) then applicable to shares covered by the outstanding principal and unpaid accrued interest of this Debenture shall forthwith be proportionately decreased in the case of a subdivision or stock dividend, or proportionately increased in the case of a combination. 7.3 ADJUSTMENTS FOR DIVIDENDS IN STOCK OR OTHER SECURITIES OR PROPERTY. If before Full Payment of this Debenture, the holders of the securities as to which conversion rights under this Debenture exist at the time shall receive, or, on or after the record date fixed for the determination of eligible stockholders, shall have become entitled to receive, without payment therefor, other or additional stock or other securities or property (other than cash) of the Company by way of dividend, then and in each case, this Debenture shall represent the right to acquire upon conversion pursuant to Section 6.1 of outstanding principal or unpaid accrued interest, in addition to the number of shares of the security receivable upon full conversion of such principal and interest, and without payment of any additional consideration therefor, the amount of such other or additional stock or other securities or property (other than cash) of the Company that such holder would hold on the date of such conversion had it been the holder of record of the security receivable upon full conversion of outstanding principal or unpaid accrued interest under this Debenture on the record date of such dividend, giving effect to all adjustments called for during such period by the provisions of this Section 7. - 7 - 7.4 NO IMPAIRMENT. The Company will not, by amendment of its Articles of Organization or through any reorganization, transfer of assets, consolidation, merger, dissolution, issuance or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of the terms to be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of this Section 7 and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder against impairment. 7.5 NOTICES OF RECORD DATE, ETC. In the event of: (i) Any taking by the Company of a record of the holders of any class of securities of the Company for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend payable out of earned surplus at the same rate as that of the last such cash dividend theretofore paid) 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 (ii) 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 of the assets of the Company to any other person or any consolidation or merger involving the Company; or (iii) Any voluntary or involuntary dissolution, liquidation or winding up of the Company; the Company will mail to the Holder at least twenty (20) days before the earliest date specified therein, a notice specifying: (a) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and the amount and character of such dividend, distribution or right; and (b) the date on which any such reorganization, reclassification, transfer, consolidation, merger, dissolution, liquidation or winding up is expected to become effective and the record date for determining stockholders entitled to vote thereon. 7.6 RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Company shall at all times reserve and keep available out of its authorized but unissued or treasury shares of Common Stock solely for the purpose of effecting the conversion of the Debenture such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of the Debenture; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of the entire outstanding principal amount, in addition to such other remedies as shall be available to the Holder of this Debenture, the Company will use its best efforts to take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes. - 8 - 8. COVENANT TO PREPAY. Subject to the provisions of the Fleet Agreement and any agreement with respect to the modification, deferral, renewal, refinancing or extension of any Senior Indebtedness, the Company covenants that if it sells Common Stock or any other form of its equity in an amount which results in aggregate net proceeds to the Company equal to or greater than $30 million, the Company shall repay in full the Debenture within thirty (30) days after its receipt of the proceeds from such sale. 9. ASSIGNMENT. Subject to the restrictions on transfer described in Section 11 below, the rights and obligations of the Company and the Holder of this Debenture shall be binding upon and benefit the successors, assigns, heirs, administrators and transferees of the parties; provided however, that, except in connection with a sale of all or substantially all of the Company's assets and a related assumption of the Company's liabilities, the Company will not assign this Debenture without the prior written consent of the Holder, which consent shall not be unreasonably withheld. 10. WAIVER AND AMENDMENT. Any provision of this Debenture may be amended, waived or modified upon the written consent of the Company and the Holder of the Debenture. 11. TRANSFER OF THIS DEBENTURE OR SECURITIES ISSUABLE ON CONVERSION HEREOF. The Holder may not offer, sell or otherwise dispose of this Debenture without the prior written consent of the Company, which consent shall not be unreasonably withheld, except to an affiliate of the Holder (as that term is defined in the Securities Act of 1933, as amended (the "Securities Act")). With respect to any offer, sale or other disposition of this Debenture or Common Stock into which such Debenture may be converted, the Holder will give prior written notice to the Company thereto, describing briefly the manner thereof, together with a written opinion of such Holder's counsel, to the effect that such offer, sale or other distribution may be effected without registration or qualification (under any federal or state law then in effect). Such opinion shall be reasonably satisfactory in form and substance to the Company and the Company's counsel. Promptly upon receiving such notice and opinion, and provided that the Company has determined to consent to such sale or other disposition with respect to the Debenture, the Company, as promptly as practicable, shall notify such Holder that such Holder may sell or otherwise dispose of this Debenture or such Common Stock, all in accordance with the terms of the notice delivered to the Company. If a determination has been made pursuant to this Section 11 that the opinion of counsel for the Holder is not reasonably satisfactory to the Company or the Company's counsel or that the Company will not consent to such sale or other disposition with respect to the Debenture, the Company shall so notify the Holder promptly after such determination has been made. Each Debenture thus transferred and each certificate representing the Common Stock thus transferred shall bear a legend as to the applicable restrictions on transferability in order to ensure compliance with the Securities Act, unless in the opinion of counsel for the Company such legend is not required in order to ensure compliance with the Securities - 9 - Act. The Company may issue stop transfer instructions to its transfer agent in connection with such restrictions. 12. NOTICES. Unless otherwise provided, all notices and other communications required or permitted under this Debenture shall be in writing and shall be mailed by United States first-class mail, postage prepaid, sent by facsimile or delivered personally by hand or by a nationally recognized courier addressed to the party to be notified at the address or facsimile number indicated for such person on the signature page hereof, or at such other address or facsimile number as such party may designate by ten (10) days' advance written notice to the other parties hereto. All such notices and other written communications shall be effective on the date of mailing, confirmed facsimile transfer or delivery. 13. NO STOCKHOLDER RIGHTS. Nothing contained in this Debenture shall be construed as conferring upon the Holder or any other person the right to vote or to consent or to receive notice as a stockholder in respect of meetings of stockholders for the election of directors of the Company or any other matters or any rights whatsoever as a stockholder of the Company, and no dividends or interest shall be payable or accrued in respect of this Debenture or the interest represented hereby or the Common Stock obtainable hereunder until, and only to the extent that, this Debenture shall have been converted. 14. GOVERNING LAW. This Debenture shall be governed by and construed in accordance with the laws of The Commonwealth of Massachusetts, excluding that body of law relating to conflict of laws. 15. HEADINGS; REFERENCES. All headings used herein are used for convenience only and shall not be used to construe or interpret this Debenture. Except where otherwise indicated, all references herein to Sections refer to Sections hereof. 16. COSTS AND EXPENSES. If an Event of Default occurs, the Company agrees to pay (in addition to the outstanding principal amount hereof and unpaid accrued interest hereon) the reasonable costs and expenses of collection and representation, including reasonable attorneys' fees and expenses ("Costs and Expenses"). 17. REGISTRATION RIGHTS AGREEMENT. The Holder, upon conversion of this Debenture, will be entitled to the benefits of the Registration Rights Agreement. {REMAINDER OF PAGE INTENTIONALLY LEFT BLANK} - 10 - IN WITNESS WHEREOF, the Company has caused this Debenture to be executed under seal this 26th day of December, 1997. PCD INC. By: /S/ John L. Dwight, Jr. --------------------------- John L. Dwight, Jr. Chairman of the Board Address: 2 Technology Drive Peabody, Massachusetts 01960 Name of Holder: Emerson Electric Co. Address: 8000 West Florissant P.O. Box 4100 St. Louis, Missouri 63136 - 11 - NOTICE OF CONVERSION (To Be Signed Only Upon Conversion of Debenture Following Payment Default) PCD Inc. 2 Technology Drive Peabody, Massachusetts 01960 Attn: Chairman of the Board The undersigned, the Holder of the foregoing Debenture, hereby surrenders such Debenture for conversion into shares of Common Stock of PCD Inc. equivalent in amount of $______ principal amount of such Debenture plus all unpaid accrued interest and Costs and Expenses through the date of such conversion, and requests that the certificates for such shares be issued in the name of, and delivered to __________________________, whose address is __________________________________. If the principal amount requested for conversion is less than the full outstanding principal amount of the Debenture, the Holder requests that the Company issue to the Holder a new debenture for the amount not converted with the same terms as the Debenture. Dated:__________________________ EMERSON ELECTRIC CO. By: _______________________________ Name: ____________________________ Title: _____________________________ Address: 8000 West Florissant P.O. Box 4100 St. Louis, Missouri 63136 - 12 - EX-19 20 EXHIBIT 10.17 EXHIBIT B THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS. IT MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SUCH ACT AND APPLICABLE LAWS, OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED. TRANSFER OF THIS WARRANT IS NOT VALID EXCEPT TO THE EXTENT THAT SUCH TRANSFER HAS BEEN MADE IN COMPLIANCE WITH THE PROVISIONS REGARDING TRANSFER CONTAINED HEREIN. PCD INC. COMMON STOCK PURCHASE WARRANT Warrant Number 1 Maximum Number of Shares: 525,000 This Warrant is issued to Emerson Electric Co., a Missouri corporation (the "Holder") by PCD Inc., a Massachusetts corporation (the "Company"). For value received and subject to the terms and conditions (a) contained in the Subordinated Debenture and Warrant Purchase Agreement dated as of December 26, 1997 (the "Purchase Agreement"), between the Company and the Holder, pursuant to which this Warrant is issued, and (b) hereinafter set forth, the Holder of this Warrant is entitled upon surrender hereof, with the Notice of Exercise in the form annexed hereto duly executed, at the office of the Company, 2 Technology Drive, Peabody, Massachusetts 01960, or such other office as the Company shall notify to the Holder hereof in writing, to purchase from the Company at an exercise price of One Dollar ($1.00) per share (subject to adjustment as provided below, the "Exercise Price"), up to 525,000 fully paid and non-assessable shares (subject to adjustment as provided below) of common stock, $0.01 par value (the "Common Stock"), of the Company, exercisable as follows: (i) on and after the date hereof, this Warrant shall be exercisable to the extent of 150,000 shares of Common Stock; (ii) if the principal of and accrued interest under the debenture (the "Debenture") issued pursuant to the Purchase Agreement have not been paid in full at the close of business on December 31, 1998, this Warrant shall be exercisable to the extent of an additional 225,000 shares of Common Stock; and (iii) if the principal of and accrued interest under the Debenture have not been paid in full at the close of business on December 31, 1999, this Warrant shall be exercisable to the extent of an additional 150,000 shares of Common Stock. 1. TERM OF WARRANT. Subject to the provisions of Section 13 hereof, this Warrant shall expire at the close of business on the later of (a) December 31, 2000 and (b) thirty (30) days after the date when that certain Subordinated Debenture dated December 26, 1997 issued by the Company to the Holder pursuant to the Purchase Agreement shall have been paid in full or converted in full into Common Stock pursuant to the terms thereof. This Warrant shall be void thereafter. 2. EXERCISE OF WARRANT. (a) The purchase rights represented by this Warrant are exercisable by the Holder in whole or in part, but not for less than 50,000 shares at a time (or such lesser number of shares which may then constitute the maximum number purchasable; such number being subject to adjustment as provided in Section 4 below), at any time, or from time to time, during the term hereof as described in Section 1 above, by the surrender of this Warrant and the Notice of Exercise annexed hereto duly completed and executed on behalf of the Holder, at the office of the Company (or such other office or agency of the Company as it may designate by notice in writing to the Holder at the address of the Holder appearing on the books of the Company), accompanied by payment (in the form specified in the Notice of Exercise) of the purchase price of the shares to be purchased (i) by cash, money order, certified or bank cashier's check, or wire transfer, (ii) by cancellation by the Holder of indebtedness or other obligations of the Company to the Holder, (iii) by surrender to the Company of shares of Common Stock of the Company having an aggregate Fair Market Value equal to the aggregate purchase price, (iv) by reducing the number of shares of Common Stock issuable upon exercise by the number of shares having an aggregate Fair Market Value equal to the aggregate purchase price, or (v) by a combination of (i) through (iv) above. For the purposes of this provision, the "Fair Market Value" of one share of Common Stock shall mean the closing price of the Common Stock as reported on the Nasdaq National Market for the relevant date as provided in paragraph 2(b) below (or, if such date is not a trading date or if no trades took place on such date, then such closing price for the last previous trading date or the last previous date on which a trade occurred, as the case may be); provided that if the Common Stock is no longer traded on the Nasdaq National Market on the relevant date, then the Fair Market Value as of such date shall be such closing price as reported on such other stock exchange on which the Common Stock is traded; provided further that if the Common Stock is no longer traded on the Nasdaq National Market or other stock exchange on the relevant date, then the Fair Market Value as of such date shall be determined by an appraiser mutually agreed upon by the Holder and the Company. (b) This Warrant shall be deemed to have been exercised immediately before the close of business on the date of its surrender for exercise as provided above, and the person entitled to receive the shares of Common Stock issuable upon such exercise shall be treated for all purposes as the holder of record of such shares as of the close of business on such date. As promptly as practicable on or after such date and in any event - 2 - within ten (10) business days thereafter, the Company at its expense shall issue and deliver to the person or persons entitled to receive the same a certificate or certificates for the number of shares issuable upon such exercise. In the event that this Warrant is exercised in part, the Company at its expense will execute and deliver a new Warrant of like tenor exercisable for the remaining number of shares for which this Warrant may then be exercised. (c) Notwithstanding any other provision of this Warrant, until the Company has obtained the approval of its stockholders pursuant to the rules of the Nasdaq Stock Market, Inc., or has obtained a waiver in respect of such rules, as contemplated under the Purchase Agreement, the Holder and any subsequent holder of this Warrant shall be permitted to convert into Common Stock an amount of principal and accrued interest under the Debenture, or exercise a portion of this Warrant, only to the extent that all such conversions and exercises together result in the issuance of up to and no more than 4.99% of the Common Stock outstanding as of the Closing. (d) Notwithstanding any other provision of this Warrant, in accordance with Section 1.6 of the Purchase Agreement, the Holder and any subsequent holder of this Warrant shall be permitted to exercise a portion of this Warrant only to the extent that the Purchaser and the Company have obtained any required consent, authorization, order, approval, exemption or waiver under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. 3. RESERVATION OF STOCK. The Company covenants that it will at all times reserve and keep available a number of its authorized but unissued or treasury shares of its Common Stock, free from all preemptive rights therein, which will be sufficient to permit the exercise of this Warrant. The Company further covenants that such Common Stock as may be issued pursuant to the exercise of this Warrant will, upon issuance, be duly and validly issued, fully paid and non-assessable and free from all taxes, liens and charges with respect to the issue thereof. 4. ADJUSTMENTS. (a) RECLASSIFICATION, MERGER, SALE OF ASSETS, ETC. Subject to the provisions of Section 13 hereof, in case of any reclassification, capital reorganization, or change of the outstanding Common Stock of the Company (other than as a result of a subdivision, combination or stock dividend), or in case of any consolidation of the Company with, or merger of the Company into, another corporation or other business organization (other than a consolidation or merger in which the holders of the outstanding voting stock of the Company immediately before the consummation of such transaction shall, immediately after such transaction, hold, as a group, at least a majority of the voting securities of the surviving or successor entity), or in case of any sale or conveyance to another corporation or other business organization of the property of the Company, as an entirety or substantially as an entirety, at any time before the expiration of this Warrant, then, as a condition of such reclassification, - 3 - reorganization, change, consolidation, merger, sale or conveyance, lawful provision shall be made and duly executed documents evidencing the same from the Company or its successor shall be delivered to the Holder of this Warrant, so that the Holder of this Warrant shall have the right before the expiration of this Warrant to purchase, at a total price not to exceed that payable upon the exercise of the unexercised portion of this Warrant, the kind and amount of shares of stock and other securities and property receivable upon such reclassification, reorganization, change, consolidation, merger, sale or conveyance by a holder of the number of shares of Common Stock of the Company which might have been purchased by the Holder of this Warrant immediately before such reclassification, reorganization, change, consolidation, merger, sale or conveyance, and in any such case appropriate provisions shall be made with respect to the rights and interest of the Holder of this Warrant to the end that the provisions hereof shall thereafter be applicable in relation to any shares of stock, and other securities and property thereafter deliverable upon exercise hereof. (b) SPLIT, SUBDIVISION OR COMBINATION OF SHARES. If the Company shall at any time before the expiration of this Warrant subdivide its outstanding Common Stock, by split-up or otherwise, or combine its outstanding Common Stock, or issue additional shares of its capital stock in payment of a stock dividend in respect of its Common Stock, the number of shares issuable on the exercise of the unexercised portion of this Warrant shall forthwith be proportionately increased in the case of a subdivision or stock dividend, or proportionately decreased in the case of a combination, and the Exercise Price then applicable to shares covered by the unexercised portion of this Warrant shall forthwith be proportionately decreased in the case of a subdivision or stock dividend, or proportionately increased in the case of a combination. (c) ADJUSTMENTS FOR DIVIDENDS IN STOCK OR OTHER SECURITIES OR PROPERTY. If while this Warrant, or any portion thereof, remains outstanding and unexpired, the holders of the securities as to which purchase rights under this Warrant exist at the time shall receive, or, on or after the record date fixed for the determination of eligible stockholders, shall have become entitled to receive, without payment therefor, other or additional stock or other securities or property (other than cash) of the Company by way of dividend, then and in each case, this Warrant shall represent the right to acquire, in addition to the number of shares of the security receivable upon exercise of this Warrant, and without payment of any additional consideration therefor, the amount of such other or additional stock or other securities or property (other than cash) of the Company that such holder would hold on the date of such exercise had it been the holder of record of the security receivable upon exercise of this Warrant on the record date of such dividend, giving effect to all adjustments called for during such period by the provisions of this Section 4. (d) NO IMPAIRMENT. The Company will not, by amendment of its Articles of Organization or through any reorganization, transfer of assets, consolidation, merger, dissolution, issuance or sale of securities or any other voluntary action, avoid or seek to avoid the observance or - 4 - performance of the terms to be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of this Section 4 and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder against impairment. 5. NO FRACTIONAL SHARES. In no event shall any fractional share of Common Stock of the Company be issued upon any exercise of the warrant granted hereunder. If, upon exercise of this Warrant as an entirety, the Holder would, except as provided in this Section 5, be entitled to receive a fractional share of Common Stock, then the Company shall issue a full share with respect to such fractional share. 6. REPLACEMENT OF WARRANT. In case this Warrant shall be mutilated, lost, stolen, or destroyed, the Company may issue a new warrant of like tenor and denomination and deliver the same (a) in exchange and substitution for and upon surrender and cancellation of any mutilated Warrant, or (b) in lieu of any Warrant lost, stolen, or destroyed, upon receipt of evidence satisfactory to the Company of the loss, theft or destruction of such Warrant (including a reasonably detailed affidavit with respect to the circumstances of any loss, theft, or destruction) and of indemnity satisfactory to the Company. 7. RIGHTS OF STOCKHOLDERS. Except as provided in Section 4 above, this Warrant shall not entitle its Holder to any of the rights of a stockholder of the Company. 8. TRANSFER OF WARRANT. (a) WARRANT REGISTER. The Company will maintain a register (the "Warrant Register") containing the name and address of the Holder of this Warrant. The Holder of this Warrant may change its address as shown on the Warrant Register by written notice to the Company requesting such change. Any notice or written communication required or permitted to be given to the Holder may be given by registered mail, or delivered to such Holder at its address as shown on the Warrant Register. (b) WARRANT AGENT. The Company may, by written notice to the Holder, appoint an agent for the purpose of maintaining the Warrant Register referred to in Section 8(a) above, issuing the Common Stock issuable upon the exercise of this Warrant, exchanging this Warrant, replacing this Warrant, or any or all of the foregoing. Thereafter, any such registration, issuance, exchange or replacement, as the case may be, shall be made at the office of such agent. (c) TRANSFERABILITY OF WARRANT. This Warrant may be transferred or assigned in whole or in part by the Holder either to an affiliate (as that term is defined in the Securities Act of 1933, as amended (the "Securities Act") of the Holder or if the Holder has complied with the terms and conditions of (i) the Purchase Agreement, (ii) this Warrant and (iii) all applicable - 5 - federal and state securities laws. Such compliance shall include, without limitation, the delivery of investment representation letters and legal opinions reasonably satisfactory to the Company. Subject to the provisions of this Warrant with respect to compliance with the Securities Act, title to this Warrant may be transferred by endorsement (by the Holder executing the Form of Assignment annexed hereto) and delivery in the same manner as a negotiable instrument transferable by endorsement and delivery. (d) EXCHANGE OF WARRANT UPON A TRANSFER. On surrender of this Warrant for exchange, properly endorsed on the Form of Assignment and subject to the provisions of this Warrant with respect to compliance with the Act and with the limitations on assignments and transfers contained in this Section 8, the Company at its expense shall issue to or on the order of the Holder a new warrant or warrants of like tenor, in the name of the Holder or as the Holder (on payment by the Holder of any applicable transfer taxes) may direct, for the number of shares issuable upon exercise hereof. (e) COMPLIANCE WITH SECURITIES LAWS. (i) The Holder of this Warrant, by acceptance hereof, acknowledges that this Warrant and the shares of Common Stock to be issued upon exercise hereof are being acquired solely for the Holder's own account and not as a nominee for any other party, and for investment, and that the Holder will not offer, sell or otherwise dispose of this Warrant or any shares of Common Stock to be issued upon exercise hereof except under circumstances that will not result in a violation of the Act or any state securities laws. Upon exercise of this Warrant, the Holder shall, if requested by the Company, confirm in writing, in a form satisfactory to the Company, that the shares of Common Stock so purchased are being acquired solely for the Holder's own account and not as a nominee for any other party, for investment, and not with a view toward distribution or resale. (ii) This Warrant and all shares of Common Stock issued upon exercise hereof shall be stamped or imprinted with a legend in substantially the following form (in addition to any legend required by state securities laws): THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS. IT MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SUCH ACT AND APPLICABLE LAWS, OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED. - 6 - 9. CERTIFICATE OF ADJUSTMENT OF WARRANT PRICE. Whenever the Warrant price is adjusted, as herein provided, the Company shall promptly deliver to the Holder of this Warrant a certificate setting forth the Warrant price after such adjustment and setting forth a brief statement of the facts requiring such adjustment, as certified by the Company's independent public accountants. 10. NOTICE OF DIVIDEND OR DISTRIBUTION. If at any time before the expiration or exercise of this Warrant, the Company shall propose to pay any dividend or make any distribution upon its Common Stock or make any subdivision or combination of, or other change in its Common Stock, the Company shall cause notice thereof to be mailed, first class, postage prepaid, to the Holder of this Warrant at least twenty (20) days before the date as of which holders of Common Stock who shall participate in such dividend or distribution are to be determined. Failure to give such notice, or any defect therein, shall not affect the legality or validity of any dividend or distribution. 11. "MARKET STAND OFF" AGREEMENT. The Holder, if requested by the Company or any managing underwriter of the Company's securities, shall agree not to sell or otherwise transfer or dispose of any Common Stock of the Company held by the Holder during the period up to 180 days, as requested by the Company or such underwriter, following the effective date of a registration statement of the Company filed under the Securities Act (except for any Company securities held by the Holder sold pursuant to such registration statement). Such agreement shall be in writing in form satisfactory to the Company and such underwriter. The Company may impose stop-transfer instructions with respect to such Common Stock subject to the foregoing restriction until the end of such period. 12. REGISTRATION RIGHTS AGREEMENT. The Holder, upon exercise of the Warrant, will be entitled to the benefits of the Registration Rights Agreement dated as of the date of the Purchase Agreement, by and between the Company and the Holder. 13. TERMINATION UPON CONSOLIDATION OR MERGER. Notwithstanding any other provision of this Warrant, if the Company is to be consolidated with or acquired by another entity in a merger or other reorganization in which the holders of the outstanding voting stock of the Company immediately before the consummation of such transaction shall immediately after such transaction hold, as a group, less than a majority of the voting securities of the surviving or successor entity, or in the event of a sale of all or substantially all of the Company's assets or otherwise, the Company may upon notice to the Holder provide that this Warrant must be exercised within a specified number of days of the date of such notice, at the end of which period this Warrant shall terminate. 14. GOVERNING LAW. The provisions and terms of this Warrant shall be construed in accordance with the laws of the Commonwealth of Massachusetts. {REMAINDER OF PAGE INTENTIONALLY LEFT BLANK} - 7 - IN WITNESS WHEREOF, the Company has caused this Warrant to be executed under seal this 26th day of December, 1997. PCD INC. By: /S/ John L. Dwight, Jr. --------------------------- John L. Dwight, Jr. Chairman of the Board Address: 2 Technology Drive Peabody, Massachusetts 01960 - 8 - NOTICE OF WARRANT EXERCISE Date _____________________ PCD Inc. 2 Technology Drive Peabody, Massachusetts 01960 (1) The undersigned hereby elects to purchase __________ shares of Common Stock of PCD Inc., pursuant to the provisions of Section 2 of the attached Warrant, and tenders herewith payment of the Exercise Price for such shares in accordance with Section 2(a) of such Warrant, as follows: _____________________ _________________________________________________________________ ______________. (2) In exercising this Warrant, the undersigned hereby confirms and acknowledges that the shares of Common Stock are being acquired solely for the account of the undersigned and not as a nominee for any other party (other than affiliates as permitted under Section 8(c) of the attached Warrant), and for investment, and that the undersigned will not offer, sell or otherwise dispose of any such shares of Common Stock except under circumstances that will not result in a violation of the Securities Act of 1933, as amended or any applicable state securities laws. (3) Please issue a certificate or certificates representing said shares of Common Stock in the name of the undersigned or in such other name as is specified below: __________________________________ Certificate Name (4) Please issue a new Warrant for the unexercised portion of the attached Warrant in the name of the undersigned or in such other name as is specified below. - 9 EMERSON ELECTRIC CO. By:____________________________________ Name:__________________________________ Title:_________________________________ Address: 8000 West Florissant P.O. Box 4100 St. Louis, Missouri 63136 - 10 - FORM OF ASSIGNMENT For value received Emerson Electric Co. hereby sells, assigns and transfers unto _________________________________________________________________ _________________________________________________________________ (Please print or typewrite name and address of Assignee) warrants to purchase _________________________ (___________) shares of the Common Stock of PCD Inc., represented by the within Warrant, and does hereby irrevocably constitute and appoint ________________________________________ Attorney to transfer the within Warrant on the books of the PCD Inc. with full power of substitution on the premises. Dated:_________________________ EMERSON ELECTRIC CO. By:____________________________ Name:__________________________ Title:_________________________ Address: 8000 West Florissant P.O. Box 4100 St. Louis, Missouri 63136 - 11 - EX-20 21 EXHIBIT 10.18 REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement"), dated as of December 26, 1997, is made and entered into by and between PCD Inc., a Massachusetts corporation (the "Company"), and EMERSON ELECTRIC CO., a Missouri corporation ("Emerson" and, together with its permitted assigns under Section 11 hereof, "Holders"). RECITALS A. Emerson is the beneficial owner of 1,918,080 shares of common stock of the Company. B. Concurrently with the execution of this Agreement, the Company and Emerson have entered into the Subordinated Debenture and Warrant Purchase Agreement dated December 26, 1997 (the "Purchase Agreement"), pursuant to which the Company has issued to Emerson (i) the PCD Inc. Subordinated Debenture dated December 26, 1997 (the "Debenture"), which is convertible into a number of additional shares of common stock of the Company determined on the basis of the conversion price thereof, which will be fixed as of the date of conversion, and (ii) the Common Stock Purchase Warrant dated December 26, 1997 (the "Warrant") for the purchase of up to 525,000 additional shares of common stock of the Company. The Warrant is initially exercisable for up to 150,000 shares of common stock of the Company. If the Debenture has not been paid in full on December 31, 1998 and December 31, 1999, the Warrant will become exercisable for up to an additional 225,000 and 150,000 shares of common stock of the Company, respectively. C. The Holder may desire, in the future, to sell to the public some or all of such shares of common stock. D. The Company and Emerson therefore deem it to be in their respective best interests to set forth the rights of the Holder in connection with public offerings and sales of such shares. NOW, THEREFORE, in consideration of the premises and mutual covenants and obligations hereinafter set forth, and intending to be legally bound hereby, the Company and Emerson hereby agree as follows: 1. DEFINITIONS. For purposes of this Agreement: (a) "Common Stock" shall mean the common stock, par value $0.01 per share, of the Company and any other securities into which or for which such common stock has been converted or exchanged pursuant to a plan of recapitalization, reorganization, merger, sale of assets, or otherwise. (b) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. (c) "Form S-3" means such form of registration statement under the Securities Act on the date hereof or any similar registration form under the Securities Act subsequently adopted by the SEC that permits the inclusion or incorporation of substantial information by reference to other documents filed by the Company with the SEC. (d) "Prior Purchase Agreement" means that certain agreement of the Company, dated as of April 2, 1985, entitled "Stock Purchase Agreement and Amended Stock Purchase Agreement Dated March 31, 1983." (e) "Registration Rights Owners" means all beneficiaries, other than the Holders hereunder, of registration rights under Section 9 of the Prior Purchase Agreement and all permitted assigns thereunder. (f) The terms "register," "registered," and "registration," refer to a registration effected by the preparation and filing of a Registration Statement in compliance with the Securities Act, and the declaration or ordering of effectiveness of such Registration Statement by the SEC. (g) "Registrable Securities" shall mean (i) all shares of Common Stock owned by Emerson, whether presently owned or subsequently acquired upon conversion of the Debenture, exercise of the Warrants or otherwise, (ii) all shares of Common Stock owned by a subsequent Holder that were acquired (by Emerson or a subsequent Holder) upon conversion of the Debenture or exercise of the Warrants, and (iii) all shares of Common Stock issued as (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, in exchange for, or in replacement of the shares of Common Stock referred to in (i) and (ii) above. The term "Registrable Securities" excludes, however, any security (i) the sale of which had been effectively registered under the Securities Act and which had been disposed of in accordance with a Registration Statement, (ii) that has been sold by a Holder in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act under Section 4(1) thereof (including, without limitation, transactions pursuant to Rules 144 and 144A) such that the further disposition of such securities by the transferee or assignee is not restricted under the Securities Act, (iii) that have been sold by a Holder in a transaction in which such Holder's rights under this Agreement are not, or cannot be, assigned, or (iv) for which the registration rights provided under this Agreement have expired pursuant to Section 16 of this Agreement. (h) "Registration Expenses" shall mean (i) registration, qualification and filing fees; (ii) fees and expenses of compliance with state securities or blue sky - 2 - laws (including reasonable fees and disbursements of counsel in connection with blue sky qualification of any Registrable Securities being registered); (iii) printing expenses; (iv) internal expenses (including, without limitation, all salaries and expenses of officers and employees performing legal or accounting duties); (v) fees and disbursements of counsel for the Company and customary fees and expenses for independent certified public accountants retained by the Company (including the expenses of any comfort letters or costs associated with the delivery by independent certified public accountants of comfort letters customarily requested by underwriters); (vi) fees and expenses of listing any Registrable Securities on any securities exchange on which the Common Stock is then listed; and (vii) fees and disbursements of underwriters customarily paid by issuers or sellers of securities, but excluding any underwriting fees, discounts or commissions attributable to the sale of any Registrable Securities and any fees and expenses of underwriters' counsel (other than as provided in clause (ii) above). (i) "Registration Statement" shall mean any registration statement or similar document that covers any of the Registrable Securities pursuant to the provisions of this Agreement, including the prospectus or preliminary prospectus included therein, all amendments and supplements to such Registration Statement, including post-effective amendments, all exhibits to such Registration Statement, and all material incorporated by reference in such Registration Statement. (j) "Rule 144" shall mean Rule 144 promulgated under the Securities Act or any successor rule thereto. (k) "Rule 144A" shall mean Rule 144A promulgated under the Securities Act or any successor rule thereto. (l) "SEC" shall mean the Securities and Exchange Commission. (m) "Securities Act" shall mean the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. 2. DEMAND REGISTRATION. (a) If the Company shall receive at any time a written request, in the manner provided in Section 17, from the Holders of Registrable Securities representing at least ten percent (10%) of all Common Stock then outstanding that the Company file a registration statement under the Securities Act covering the registration of any or all of such Holders' Registrable Securities, then the Company shall (i) within 10 days of the receipt thereof, give written notice, in the manner provided in Section 17, of such request to all Holders of outstanding Registrable Securities known to the Company, and (ii) subject to the limitations contained in this Section 2, use its reasonable best efforts to effect, as soon as practicable and in any event within 120 days of the receipt of such request, the registration under the Securities Act, pursuant to the provisions of Section 4 hereof, of all Registrable Securities for which the Company receives a request from the Holders thereof in the manner provided in Section 17 within 20 days of the mailing of such - 3 - notice by the Company. The Company, however, shall not be required to effect a registration pursuant to this Section 2 unless the aggregate number of shares requested to be registered represents at least ten percent (10%) of the Common Stock then outstanding. (b) If the Holder(s) initiating the registration request hereunder (collectively, the "Initiating Holder") intends to distribute the Registrable Securities covered by its request by means of an underwriting, it shall so advise the Company as a part of its request made pursuant to Section 2(a) and the Company shall include such information in the written notice to the Holders referred to in Section 2(a). In such event, the right of any Holder to include its Registrable Securities in such registration shall be conditioned upon such Holder's participation in such underwriting and the inclusion of such Holder's Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to sell securities through such underwriting (together with the Company as provided in Section 5(g) of this Agreement and any other holder of shares of Common Stock permitted to participate in such registration pursuant to this Section 2(b)) shall enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by the Company (provided the same are underwriters of recognized national standing reasonably acceptable to the Initiating Holder), upon the terms and conditions agreed upon between the Company and such underwriter(s). Notwithstanding any other provisions of this Section 2, if the underwriter(s) advise the Initiating Holder in writing that marketing or other factors require a limitation of the number of Registrable Securities to be underwritten, then the Company shall so advise Holders of Registrable Securities that would otherwise be underwritten pursuant hereto, and the number of Registrable Securities that may be included in the underwriting shall be allocated among all Holders thereof, including the Initiating Holder, in proportion (as nearly as practicable) to the number of Registrable Securities which each Holder requested be included in such registration. If the number of Registrable Securities to be underwritten has not been so limited, the Company may include shares of Common Stock for its own account (or for the account of other shareholders) in such registration if the underwriter(s) so agree and to the extent that, in the opinion of such underwriter(s), the inclusion of such additional shares will not adversely affect the offering of the Registrable Securities included in such registration. (c) The Company shall not be obligated to effect a total of more than two registrations pursuant to this Section 2 and shall not be obligated to effect more than one registration in any twelve-month period pursuant to this Section 2. 3. INCIDENTAL REGISTRATION. (a) If (but without any obligation to do so) the Company proposes to register (excluding a registration effected by the Company for shareholders other than the Holders, except this exclusion shall not apply in the case of a firm commitment underwriting) any shares of Common Stock under the Securities Act in connection with the public offering of such shares solely for cash on any form of Registration Statement in which the inclusion - 4 - of Registrable Securities is appropriate (excluding a registration (i) relating solely to the sale of securities to participants in a Company stock plan, (ii) pursuant to a Registration Statement on Form S-4 or Form S-8 (or any successor forms) or any form that does not include substantially the same information, other than information relating to the selling shareholders or their plan of distribution, as would be required to be included in a registration statement covering the sale of Registrable Securities, (iii) in connection with any dividend reinvestment or similar plan, or (iv) for the sole purpose of offering securities to another entity or its security holders in connection with the acquisition of assets or securities of such entity or any similar transaction), the Company shall promptly give each Holder written notice of such registration in the manner provided in Section 17 at least 20 days before the anticipated filing date of any such Registration Statement. The Company may also give notice to any Registration Rights Owners if required by the Prior Purchase Agreement. Upon the written request of any Holder given in the manner provided in Section 17 within 10 days after the mailing of such notice by the Company, the Company shall, pursuant to the provisions of Section 4 hereof, cause to be registered under the Securities Act all of the Registrable Securities that such Holder has so requested to be registered. The Company shall not be required to proceed with, or maintain the effectiveness of, any registration of its securities after giving the notice herein provided, and the right of any Holder to have Registrable Securities included in such Registration Statement shall be conditioned upon participation in any underwriting to the extent provided herein. The Company shall not be required to include any Registrable Securities in such underwriting unless the Holders thereof enter into an underwriting agreement in customary form, and upon terms and conditions agreed upon between the Company and the underwriter(s) (except as to monetary obligations of the Holders not contemplated by Section 9 of this Agreement), with the underwriter(s) selected by the Company. In the event that the underwriter(s) shall advise the Company that marketing or other factors require a limitation of the number of shares to be underwritten, then the Company shall so advise all Holders of Registrable Securities (and all Registration Rights Owners who have given the above-stated notice, if any) that would otherwise be underwritten pursuant hereto. The underwriter(s) may exclude some or all of the Registrable Securities and some or all of the securities owned by Registration Rights Owners from such underwriting and the number of Registrable Securities and securities owned by Registration Rights Owners, if any, that may be included in the underwriting shall be allocated among all Holders and Registration Rights Owners in proportion (as nearly as practicable) to the total number of securities which each Holder requested be included in such registration. Nothing in this Section 3 is intended to diminish the number of securities to be included by the Company in such underwriting. The Company and the underwriter(s) selected by the Company shall make all determinations with respect to the timing, pricing, and other matters related to the offering. 4. REGISTRATION PROCEDURE. Whenever required under this Agreement to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonable practicable: - 5 - (a) Prepare and file with the SEC a new Registration Statement with respect to such Registrable Securities and use its best efforts to cause such registration statement to become effective, and keep such Registration Statement effective for up to 90 days or such shorter period as shall be required to sell all of the Registrable Securities covered by such Registration Statement (except as provided in Section 3); provided, however, that if such Registration Statement is on Form S-3 and related to a distribution by the Holders on a delayed or continuous basis other than by means of an underwriting, the Company shall keep such Registration Statement effective for one year following the initial date of effectiveness thereof; provided further that no Registration Statement need remain in effect after all Registrable Securities covered thereby have been sold. (b) Prepare and file with the SEC such amendments and supplements to such Registration Statement and the prospectus used in connection with such Registration Statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such Registration Statement. (c) Furnish to the Holders of Registrable Securities to be registered, without charge, such number of copies of a prospectus, including a preliminary prospectus, and any amendment or supplement thereto as they may reasonably request and a reasonable number of copies of the then-effective Registration Statement and any post- effective amendment thereto, including financial statements and schedules, all documents incorporated therein by reference and all exhibits (including those incorporated by reference). (d) Promptly after the filing of any document that is to be incorporated by reference into a Registration Statement or prospectus, provide copies of such document to the Holders of Registrable Securities covered thereby and any underwriter. (e) Use its reasonable best efforts to register and qualify the securities covered by such Registration Statement under such other securities or blue sky laws of such jurisdictions as shall be reasonably requested by the Holders; provided, however, that the Company shall not be required to qualify to do business or to file a general consent to service of process in any such states or jurisdictions where it would not otherwise be required to so qualify to do business or consent to service of process or subject itself to taxation in any such jurisdiction. (f) Cooperate with the Holders of Registrable Securities and each underwriter participating in the disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made with the National Association of Securities Dealers, Inc. or any other exchange or automated quotation system on which the Company's Common Stock may be listed. (g) In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the underwriter(s) of such offering, with such terms and conditions as the Company - 6 - and the underwriter(s) may agree. Each Holder participating in such underwriting shall also enter into and perform its obligations under such an agreement. (h) Notify each Holder of Registrable Securities covered by such Registration Statement, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event as a result of which the prospectus included in such Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing. (i) Cause all Registrable Securities covered by the Registration Statement to be listed on each securities exchange or automated quotation system on which shares of the Company's Common Stock are then listed. If any of such shares are not so listed, the Company shall cause such shares to be listed on such securities exchange or automated quotation system as may be reasonably requested by the Holders of a majority of the Registrable Securities being registered. (j) In the case of an underwritten public offering, furnish to the underwriters, at the request of a majority of the Holders requesting registration pursuant to this Agreement, on the date that such Registrable Securities are delivered to the underwriters for sale in connection with a registration pursuant to this Agreement, (A) an opinion of counsel representing the Company for the purposes of such registration, and (B) a letter from independent certified public accountants of the Company, in each case to be dated such date and to be in form and substance as is customarily given by counsel or independent certified public accountants, as the case may be, to underwriters in an underwritten public offering, addressed to the underwriters. (k) Permit a representative of any Holder of Registrable Securities, any underwriter participating in any disposition pursuant to such registration, and any attorney or accountant retained by such Holder or underwriter, to participate, at each such person's own expense, in the preparation of the Registration Statement, and cause the Company's officers, directors and employees to supply all information reasonably requested by any such representative, underwriter, attorney or accountant in connection with such registration; provided, however, that, if requested by the Company, such representatives, underwriters, attorneys or accountants enter into a confidentiality agreement, in form and substance reasonably satisfactory to the Company, prior to the release or disclosure of any such information. Notwithstanding the foregoing, the Company may delay, suspend or withdraw any registration or qualification of Registrable Securities required pursuant to this Agreement for a period not exceeding 180 days if the Company shall in good faith determine that any such registration would adversely affect a public or private offering or contemplated offering of any securities of the Company or any other anticipated or contemplated material corporate event. In addition, the Company shall not be required to register Registrable Securities within - 7 - twelve months after the effective date of a Registration Statement referred to in Section 3 pursuant to which the Holders were afforded the opportunity to register Registrable Securities. 5. HOLDER'S OBLIGATION TO FURNISH INFORMATION. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Agreement with respect to any Registrable Securities that the Holder of such securities furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as shall be required to effect the registration of such Holder's Registrable Securities. Each Holder agrees that, upon receipt of any notice from the Company requesting that the Holder forthwith discontinue disposition of Registrable Securities pursuant to the then current prospectus, the Holder will discontinue such disposition until (i) such Holder is advised in writing by the Company that a new Registration Statement covering the reoffer of Registrable Securities has become effective under the Securities Act, (ii) such Holder receives copies of a supplemental or amended prospectus contemplated by Section 4 hereof, or (iii) until such Holder is advised in writing by the Company that the use of the prospectus may be resumed. The Company shall use its reasonable best efforts to limit the duration of any discontinuance of disposition of Registrable Securities pursuant to this paragraph. 6. REGISTRATION EXPENSES. (a) In the case of the first demand registration requested pursuant to Section 2, the Company shall pay all Registration Expenses; provided, however, that the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Section 2 if the registration request is subsequently withdrawn at the request of the Holders of a majority of the Registrable Securities to be registered (in which case all participating Holders shall bear such expenses), unless the Holders of a majority of Registrable Securities to be registered agree to forfeit their right to one demand registration pursuant to Section 2, as the case may be; provided further, however, that if at the time of such withdrawal, the Holders have learned of a material adverse change in the condition, business, or prospects of the Company from that known to the Holders at the time of their request, then the Holders shall not be required to pay any of such expenses and shall retain their rights pursuant to Section 2. In the case of the second demand registration requested pursuant to Section 2, the Initiating Holder shall pay all Registration Expenses; provided, however, that the Initiating Holder shall not be required to pay for any expenses of any registration proceeding begun pursuant to Section 2 if the registration request is subsequently withdrawn expressly because of a material adverse change in the condition, business, or prospects of the Company that was not known to the Initiating Holder at the time of its request (in which case the Company shall bear all such expenses). (b) In the case of any incidental registration pursuant to Section 3, the requesting Holders shall bear any incremental Registration Expenses, including, without limitation, incremental registration and qualification fees - 8 - and expenses (including underwriter's fees, discounts and commissions), and any incremental costs and disbursements (including legal fees and expenses) that result from the inclusion of the Registrable Securities included in such registration, with such incremental expenses being borne by the requesting Holders on a pro rata basis. 7. EFFECTIVENESS OF REGISTRATION. A registration requested pursuant to Section 2 will not be deemed to have been effected if (i) the registration statement has not been kept effective for the period required under Section 4(a) of this Agreement, (ii) the offering of Registrable Securities pursuant to such registration is interfered with by any stop order, injunction or other order or requirement of the SEC or other governmental agency or court, or (iii) the conditions to the closing of any such registration that is underwritten are not satisfied. 8. DELAY OF REGISTRATION. No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any registration of the Company's securities as the result of any controversy that might arise with respect to the interpretation or implementation of this Agreement. 9. INDEMNIFICATION AND CONTRIBUTION. In the event any Registrable Securities are included in a Registration Statement pursuant to this Agreement: (a) The Company will indemnify and hold harmless each Holder, its directors, officers and employees and each person, if any, who "controls" such Holder (within the meaning of the Securities Act) against all losses, claims, damages, or liabilities, joint or several, or actions in respect thereof to which such Holder or other person entitled to indemnification hereunder may become subject under the Securities Act or otherwise, insofar as such loss, claims, damages, liabilities or actions in respect thereof arise out of, or are based upon, any untrue statement or alleged untrue statement of any material fact contained in such Registration Statement, any related preliminary prospectus, or any related prospectus or any amendment or supplement thereto, or arise out of, or are based upon, the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse such Holder or other person entitled to indemnification hereunder for any legal or other expenses reasonably incurred by it in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company will not be so liable to the extent that any such loss, claim, damage, liability or action arises out of, or is based upon, an untrue statement or alleged untrue statement of a material fact or an omission or alleged omission to state a material fact in such Registration Statement, such preliminary prospectus, or such prospectus, or any such amendment or supplement thereto in reliance upon, and in conformity with, written information furnished to the Company by or on behalf of a Holder or an underwriter specifically for use therein; and provided further that the Company will not be liable, and this indemnification agreement shall not apply, in any such case to the extent that any such loss, claim, damage, liability or action is solely attributable to the failure of such Holder (or underwriter or agent acting on its behalf) to deliver a final prospectus (or amendment or supplement thereto) furnished by the Company that corrects a material - 9 - misstatement or omission contained in the preliminary prospectus (or final prospectus). The Company will also indemnify underwriters, selling brokers, dealer managers and similar securities industry professionals participating in the distribution, their officers and directors and each person who "controls" such persons (within the meaning of the Securities Act) to the same extent as provided above with respect to the indemnification of the Holders, if so requested, except with respect to information furnished in writing specifically for use in any prospectus or Registration Statement by any selling Holders or any such underwriters. (b) With respect to written information furnished to the Company by or on behalf of a Holder specifically for use in a Registration Statement, any related preliminary prospectus, or any related prospectus or any supplement or amendment thereto, such Holder will severally indemnify and hold harmless the Company, and its directors, officers and employees and each person, if any, who "controls" the Company (within the meaning of the Securities Act) against any losses, claims, damages or liabilities, joint or several, or actions in respect thereof, to which the Company or such other person entitled to indemnification hereunder may become subject under the Securities Act, or otherwise, insofar as such losses, claims, damages, liabilities or actions in respect thereof arise out of, or are based upon, any untrue statement or alleged untrue statement in such information furnished by or on behalf of such Holder of any material fact contained in such Registration Statement, such preliminary prospectus, or such prospectus, or any such amendment or supplement thereto, or arise out of, or are based upon, the omission or alleged omission in such information furnished by or on behalf of such Holder to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; and such Holder will reimburse the Company and such other persons for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action, in each case to the extent, but only to the extent, that the same arises out of, or is based upon, an untrue statement or alleged untrue statement in such information furnished by or on behalf of such Holder of a material fact or an omission or alleged omission to state a material fact in such Registration Statement, such preliminary prospectus, or such prospectus or any such amendment or supplement thereto in reliance upon, and in conformity with, such written information; provided, however, that the liability of any Holder hereunder shall be limited to the amount received by such Holder upon the sale of its Registrable Securities pursuant to such Registration Statement, such preliminary prospectus, or such prospectus or any such amendment or supplement thereto. The Company shall be entitled to receive indemnities from underwriters, selling brokers, dealer managers and similar securities industry professionals participating in the distribution, to the same extent as provided above with respect to the information so furnished in writing by such persons specifically for inclusion in any prospectus or Registration Statement. Such Holder will also indemnify underwriters, selling brokers, dealer managers and similar securities industry professionals participating in the distribution, their officers and directors and each person who "controls" such persons (within the meaning of the Securities Act) to the same extent as provided above with respect to the indemnification of the Company, if so requested. - 10 - (c) Promptly after receipt by an indemnified party of notice of any claim or the commencement of any action, the indemnified party will, if a claim in respect thereof is to be made against the indemnifying party, notify the indemnifying party in writing of the claim or the commencement of that action; provided, however, that the failure to notify the indemnifying party will not relieve it from any liability that it may have to the indemnified party except to the extent it was actually damaged or suffered any loss or incurred any additional expense as a result thereof. If any such claim or action is brought against an indemnified party, and it notified the indemnifying party thereof, the indemnifying party will be entitled to assume the defense thereof with counsel selected by the indemnifying party and reasonably satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, (i) the indemnifying party will not be liable to the indemnified party for any legal or other expense subsequently incurred by the indemnified party in connection with the defense thereof, (ii) the indemnifying party will not be liable for the costs and expenses of any settlement of such claim or action unless such settlement was effected with the written consent of the indemnifying party or the indemnified party waived any rights to indemnification hereunder in writing, in which case the indemnified party may effect a settlement without such consent, and (iii) the indemnified party will be obligated to cooperate with the indemnifying party in the investigation of such claim or action; provided, however, that the Holders and their respective controlling persons who may be subject to liability arising out of any claim in respect of which indemnity may be sought by such Holders against the Company may employ their own counsel if they have been advised by counsel in writing that, in the reasonable judgment of such counsel, it is advisable for such Holders and their controlling persons to be represented by separate counsel due to the presence or reasonable probability of conflicts of interest, and in that event the fees and expenses of such separate counsel will also be paid by the Company; provided that the Company shall not be liable for the reasonable fees and expenses of more than one separate counsel at any time for all such indemnified parties. An indemnifying party shall not, without the prior written consent of the indemnified parties, settle, compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes a release of such indemnified party reasonably acceptable to such indemnified party from all liability arising out of such claim, action, suit or proceeding or unless the indemnifying party shall confirm in a written agreement reasonably acceptable to such indemnified party, that notwithstanding any federal, state or common law, such settlement, compromise or consent shall not adversely affect the right of any indemnified party to indemnification or contribution as provided in this Agreement. (d) If for any reason the indemnification provided for in Sections 9(a) or (b) is unavailable to an indemnified party or is insufficient to hold it harmless as contemplated therein, then the indemnifying party shall contribute to the amount paid or payable by the indemnified party as a result of such loss, claim, damage or liability - 11 - in such proportion as is appropriate to reflect not only the relative benefits received by the indemnifying and the indemnified party, but also the relative fault of the indemnifying party and the indemnified party, as well as any other relevant equitable considerations. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. (e) The obligations under this Section 9 shall survive the completion of any offering of Registrable Securities in a Registration Statement pursuant to this Agreement, and otherwise. 10. REPORTS UNDER EXCHANGE ACT. With a view to making available to the Holders the benefits of Rule 144 and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration or pursuant to registration, the Company agrees to: (a) Make and keep public information available, as those terms are understood and defined under Rule 144, at all times; (b) Take such action as is necessary to enable the Holders to utilize Form S-3 for the sale of their Registrable Securities; (c) 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; and (d) Furnish to any Holder, so long as the Holder owns any Registrable Securities, upon request (i) a written statement by the Company as to its compliance with the reporting requirements of Rule 144, the Securities Act and the Exchange Act, or as to its qualification as a registrant whose securities may be resold pursuant to Form S-3, (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC which permits the selling of any such securities without registration or pursuant to such form. 11. ASSIGNMENT OF REGISTRATION RIGHTS. (a) Emerson's rights pursuant to this Agreement may be transferred or assigned by Emerson to (a) any affiliate of Emerson, or (b) any other entity in connection with the transfer to such entity of not less than 120,000 shares of Common Stock ((a) and (b) together, "Permitted Assigns"); provided, however, that (i) the Company is, promptly upon such transfer, furnished with written notice of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being assigned, (ii) the transfer of such securities may be effected in accordance with all applicable securities laws, (iii) immediately following such transfer the further disposition of such securities by the transferee or assignee is restricted under the Securities Act, and - 12 - (iv) the transferee executes and agrees to be bound by this Agreement, an executed counterpart of which shall be furnished to the Company. (b) Except in connection with a transfer permitted under Section 11(a) above, in no event may the rights of Holders hereunder be transferred or assigned, it being intended that the rights of Emerson under this Agreement may be exercised only by Emerson or a Permitted Assign, subject to the provisions and restrictions of Section 11(a) above. 12. LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and after the date of this Agreement, the Company may enter into any agreement with any holder or prospective holder of any securities of the Company which would allow such holder or prospective holder to require the Company to effect a registration or to include such securities in any registration filed under Section 2 or 3 hereof; provided, however, that (i) the terms of such agreement shall provide that any such holder or prospective holder may include such securities in any such registration filed under Section 2 hereof only to the extent that the inclusion of such holder's securities will not reduce the amount of the Registrable Securities included in such registration and (ii) such agreement includes the equivalent of Section 14 as a term. 13. AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Agreement may be amended or the observance thereof may be waived (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of the Company and the holders of seventy-five percent (75%) of the Registrable Securities then outstanding. Any amendment or waiver effected in accordance with this Section shall be binding upon each Holder of any Registrable Securities, each future Holder of such securities and the Company. 14. "MARKET STAND-OFF" AGREEMENT. Any Holder, if requested by the Company or an underwriter of an underwritten public offering, agrees not to sell, make any short sale of, loan, grant any option for the purchase of, or otherwise transfer or dispose of any Common Stock held by such Holder (other than Registrable Securities included in the registration) without the prior written consent of the Company or such underwriter(s), as the case may be, during a period of up to seven days prior to and 180 days following the effective date of any underwritten registration of the Company's securities effected pursuant to Section 2 or 3 hereof. Such agreement shall be in writing in form satisfactory to the Company and such underwriter, and may be included in the underwriting agreement. The Company may impose stop-transfer instructions with respect to the securities subject to the foregoing restriction until the end of the required stand- off period. 15. TERMINATION OF REGISTRATION RIGHTS. If the number of shares of Registrable Securities owned by a Holder represents less than one percent (1%) of the total number of shares of Common Stock then outstanding, then such Holder's registration rights under this Agreement relating to such Registrable Securities shall terminate on the date such Holder is able to dispose of all of its shares of Registrable Securities in any 90- day period pursuant of Rule 144. All registration rights (except for rights previously exercised in connection with an underwritten public offering pursuant to Section 3) of a Holder - 13 - under this Agreement shall terminate on the date on which all of such Holder's shares of Registrable Securities can be sold pursuant to Rule 144(k) or similar successor rule. The provisions of Sections 2, 3, 4, 11 and 12 of this Agreement shall expire on March 26, 2006. 16. INFORMATION CONFIDENTIAL. No Holder may use any confidential information received by it pursuant to this Agreement in violation of the Exchange Act or reproduce, disclose, or disseminate such information to any other person (other than its employees or agents having a need to know the contents of such information and its attorneys), except to the extent reasonably related to the exercise of rights under this Agreement, unless such information has been made available to the public generally (other than by such recipient in violation of this Section 16) or such recipient is required to disclose such information by a governmental body or regulatory agency or by law in connection with a transaction that is not otherwise prohibited hereby. 17. NOTICES. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, registered first-class mail, or air-courier guaranteeing overnight delivery: (a) If to a Holder of Registrable Securities, initially at Emerson Electric Co., 8000 West Florissant, St. Louis, MO 63136, Attention: H. M. Smith (facsimile: (314) 553-3713), and thereafter at such other address as may be designated from time to time by notice given in the manner provided in this Section 17. (b) If to the Company, initially at PCD Inc., 2 Technology Drive, Peabody, MA 01960, Attention: Chairman (facsimile: 978-532-6800), and thereafter at such other address as may be designated from time to time by notice given in the manner provided in this Section 17. (c) All such notices and other communications shall be deemed to have been delivered and received (i) in the case of personal delivery, telex, telecopier or telegram, on the date of such delivery, (ii) in the case of air courier, on the business day after the date when sent, and (iii) in the case of mailing, on the third business day following such mailing. (d) From time to time as the Company may request, each Holder shall provide to the Company such evidence or documentation reasonably satisfactory to the Company, in its sole discretion, certified by an appropriate officer of such Holder, regarding the number of shares of Common Stock beneficially owned by such Holder and its status as an "affiliate" under the Securities Act. 18. SUCCESSORS AND ASSIGNS. Subject to the provisions of Section 11 hereof, this Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties. 19. COUNTERPARTS. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to - 14 - be an original and all of which taken together shall constitute one and the same agreement. 20. HEADINGS. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. 21. GOVERNING LAW. This Agreement shall be governed by and constructed in accordance with the laws of the Commonwealth of Massachusetts, without regard for its choice of law rules. 22. SEVERABILITY. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. 23. ENTIRE AGREEMENT. This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter, including, without limitation, the Prior Purchase Agreement. IN WITNESS WHEREOF, the parties hereto have executed this Registration Rights Agreement as of the date first written above. PCD INC. By: /S/ John L. Dwight, Jr. ------------------------------- John L. Dwight, Jr. Chairman of the Board EMERSON ELECTRIC CO. By: /S/ J.D. Switzer ------------------------------- J.D. Switzer Senior Vice President - Development 15 EX-21 22 EXHIBIT 10.19 SUBORDINATION AGREEMENT THIS SUBORDINATION AGREEMENT (this "Agreement"), dated as of December 26, 1997, is by and among PCD INC., a Massachusetts corporation with a principal place of business at 2 Technology Drive, Centennial Park, Peabody, Massachusetts 01960 (the "Borrower"); EMERSON ELECTRIC CO., a Missouri corporation with a principal place of business at 8000 West Florissant, P.O. Box 4100, St. Louis, Missouri 63136 (the "Subordinated Creditor"); and FLEET NATIONAL BANK, a national banking association organized under the laws of the United States and having an office at One Federal Street, Boston, Massachusetts 02110 (hereinafter the "Agent") as Agent for itself and each of the other Lenders (collectively, with the Agent in its role as a Lender, the "Lenders", and individually, a "Lender") who now and/or hereafter become parties to the hereinafter defined Loan Agreement. RECITALS. On December 26, 1997, the Lenders, pursuant to that certain Loan Agreement dated as of December 26, 1997 by and among the Borrower, the Agent and the Lenders (as amended and in effect from time to time, including any replacement agreement therefor, the "Loan Agreement") agreed, upon the terms and subject to the conditions contained therein, to make loans and otherwise extend credit to the Borrower in an aggregate principal amount of up to $90,000,000. On December 26, 1997, the Subordinated Creditor, pursuant to (i) that certain Subordinated Debenture (as amended and in effect from time to time, including any replacement agreement therefor, the "Subordinated Debenture") and (ii) that certain Subordinated Debenture and Warrant Purchase Agreement (as amended and in effect from time to time, including any replacement agreement therefor, the "Subordinated Debenture Purchase Agreement") agreed, upon the terms and subject to the conditions contained therein, to make loans to the Borrower in an aggregate principal amount of $25,000,000. It is a condition precedent to the Lenders' willingness to make the Loans and otherwise extend credit to the Borrower pursuant to the Loan Agreement and the Notes that the Borrower and the Subordinated Creditor enter into this Agreement with the Agent, and, in order to induce the Lenders to make the Loans and otherwise extend credit to the Borrower pursuant to the Loan Agreement and the Notes, the Borrower and the Subordinated Creditor have agreed to enter into this Agreement with the Agent. NOW, THEREFORE, in consideration of the foregoing, the mutual agreements herein contained and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows: 1. DEFINITIONS. Terms not otherwise defined herein have the same respective meanings given to them in the Loan Agreement. In addition, the following terms shall have the following meanings: - 1 - AFFILIATE. Singly and collectively, any Person who, directly or indirectly, is in control of, is controlled by, or is under common control with, any party hereto. For purposes of this definition, a Person shall be deemed to be "controlled by" a party hereto if such party, or any Person with an ownership interest in such party, possesses, directly or indirectly, power either to (i) vote 66.67% or more of the securities having ordinary voting power for the election of directors of such Person or (ii) direct or cause the direction of the management and policies of such Person whether by contract or otherwise. A charitable trust established by a party hereto (or by an Affiliate of a party hereto) shall be deemed to be an "Affiliate" as used herein. SENIOR DOCUMENTS. Collectively, the Loan Agreement, the Notes, the Security Documents, the other Financing Documents and any and all guaranties, documents granting security interests, mortgages and other Liens directly or indirectly guarantying or securing any of the Senior Indebtedness, and any and all other documents or instruments evidencing or further guarantying or securing directly or indirectly any of the Senior Indebtedness, whether now existing or hereafter created, as each may be amended (subject to the limitations set forth herein) from time to time. SENIOR INDEBTEDNESS. All Indebtedness and other Obligations of the Borrower to the Agent and/or any of the Lenders from time to time outstanding arising in connection with the Senior Documents. SUBORDINATED DOCUMENTS. The Subordinated Debenture, the Subordinated Debenture Purchase Agreement and any other promissory note and any other agreement, instrument or document executed by the Borrower in favor of the Subordinated Creditor evidencing Indebtedness of the Borrower to the Subordinated Creditor, and any and all guaranties and documents granting security interests, mortgages and other Liens, if any, directly or indirectly guarantying or securing any of the Subordinated Indebtedness, and any and all other documents or instruments, if any, evidencing or further guarantying or securing directly or indirectly any of the Subordinated Indebtedness, whether now existing or hereafter created. SUBORDINATED INDEBTEDNESS. All Indebtedness and other obligations, whether for principal, interest, premium, fees, costs, expenses and other amounts in respect of the Subordinated Documents or any other obligations owing by the Borrower to the Subordinated Creditor, in each case, whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising. 2. GENERAL. The Subordinated Indebtedness and any and all of the Subordinated Documents shall be and hereby are subordinated to, and the payment thereof is deferred, until the full and final payment in cash of the Senior Indebtedness in the maximum principal amount of $90,000,000 (plus an additional amount of principal of up to $10,000,000), the interest thereon and all fees, expenses, indemnification reimbursements, indemnitees and other charges in connection therewith owing under any of the Financing Documents (including, without limitation, any and all interest accruing or out of pocket costs or expenses incurred after the date of any filing by or against the Borrower or any guarantor of the Senior Indebtedness ("Guarantor") pursuant to a Bankruptcy Proceeding (as such term is defined in - 2 - Section 7(a) hereof) regardless of whether the Agent's or any Lender's claim therefor is allowed or allowable in the case or proceeding relating thereto), whether now or hereafter incurred or owed by the Borrower and/or any Guarantor, and any obligation of the Lenders to advance funds to the Borrower pursuant to the terms of the Senior Documents has terminated. Notwithstanding the immediately preceding sentence, the Borrower shall be permitted to pay, and the Subordinated Creditor shall be permitted to receive, regularly scheduled payments of interest (and regularly scheduled payments of principal only as provided in subsection (ii) below) on the Subordinated Indebtedness so long as: (i) such payments of regularly scheduled interest are made not more frequently than once in any calendar quarter; (ii) the Borrower may apply any net cash proceeds from the sale or issuance of any class of the Borrower's or any Subsidiary's equity securities to reduce the then-outstanding balance of the Subordinated Indebtedness (including any prepayment premiums in connection therewith as provided in the Subordinated Documents); (iii) such payments are made only after the payment by the Borrower to the Agent, for the benefit of the Lenders, of any amounts then due and payable pursuant to the terms of the Senior Documents; (iv) at the time of each such payment, no Event of Default of any nature shall have occurred and be continuing with respect to the Senior Indebtedness, or under any of the Senior Documents and no Event of Default shall occur or be created as a result of such payment. 3. LEGEND. The Subordinated Creditor covenants, represents and warrants to the Agent: (a) that the Subordinated Indebtedness is represented by the Subordinated Documents which shall bear a legend reading "This Subordinated Debenture is subject to a Subordination Agreement dated as of December 26, 1997 by and among PCD Inc., Emerson Electric Co. and Fleet National Bank, as Agent for itself and the other Lenders"; (b) that at no time hereafter will any part of the Subordinated Indebtedness be represented by any negotiable instruments or other writing, except such as comply with the provisions of (a) herein; (c) that it has not made any prior transfer, encumbrance or assignment of any part of the Subordinated Indebtedness; and (d) that it will not further subordinate any part of the Subordinated Indebtedness except to or in favor of the Agent. 4. ENFORCEMENT. The Subordinated Creditor will not take or omit to take any action or assert any claim with respect to the Subordinated Indebtedness or otherwise which is contrary to the provisions of this Agreement. Without limiting the foregoing, the Subordinated Creditor will not, until the Senior Indebtedness has been finally paid in full in cash, assert, collect or enforce the Subordinated Indebtedness or any part thereof, initiate, commence or join any Bankruptcy Proceeding or take any action to foreclose or realize upon the Subordinated Indebtedness or any part thereof or enforce any of the Subordinated Documents; PROVIDED, HOWEVER, that the Subordinated Creditor shall be permitted to obtain equity securities in the Borrower by the - 3 - exercise of its so-called "conversion" rights as set forth in Section 6 of the Subordinated Debenture (the "Conversion"). Until the Senior Indebtedness has been finally paid in full in cash, the Subordinated Creditor shall have no right of subrogation, reimbursement or indemnity whatsoever from any assets of the Borrower or any guarantor of or provider of collateral security for the Senior Indebtedness. 5. PAYMENTS HELD IN TRUST. In the event that any payment or distribution, in the form of cash, collateral or otherwise (except for the equity securities in the Borrower received by the Subordinated Creditor pursuant to the Conversion), with respect to the Subordinated Indebtedness is received by the Subordinated Creditor, or the Subordinated Creditor obtains any cash or other assets of the Borrower or any Guarantor as a result of any administrative, legal or equitable actions, in any such case contrary to the terms of this Agreement, the Subordinated Creditor will hold in trust and immediately pay over to the Agent, in the same form as received, such payment or distribution, with appropriate endorsements, for application to the Senior Indebtedness and any such other assets or collateral for the Senior Indebtedness until the Senior Indebtedness has been finally paid in full. 6. DEFENSE TO ENFORCEMENT. If the Subordinated Creditor in contravention of the terms of this Agreement, shall commence, prosecute or participate in any suit, action or proceeding against the Borrower or any Guarantor, then the Borrower or any Guarantor may interpose as a defense or plea the making of this Agreement, and the Agent may intervene and interpose such defense or plea in its name or in the name of the Borrower or any Guarantor. If the Subordinated Creditor, in contravention of the terms of this Agreement, shall attempt to collect any of the Subordinated Indebtedness or enforce any of the Subordinated Documents (other than the Conversion), then the Agent or the Borrower may, by virtue of this Agreement, restrain the enforcement thereof in the name of the Agent or in the name of the Borrower or any Guarantor. 7. BANKRUPTCY, ETC. (a) At any meeting of creditors of the Borrower or any Guarantor or in the event of any case or proceeding, voluntary or involuntary, for the distribution, division or application of all or part of the assets of the Borrower or any Guarantor or the proceeds thereof, whether such case or proceeding be for the liquidation, dissolution or winding up of the Borrower or any Guarantor or its business, a receivership, insolvency or bankruptcy case or proceeding, an assignment for the benefit of creditors or a proceeding by or against the Borrower or any Guarantor for relief under the federal Bankruptcy Code or any other bankruptcy, reorganization or insolvency law or any other law relating to the relief of debtors, readjustment of indebtedness, reorganization, arrangement, composition or extension or marshalling of assets or otherwise (each of the foregoing being herein called a "Bankruptcy Proceeding"), the Agent is hereby irrevocably authorized at any such meeting or in any such proceeding to receive or collect any cash or other assets of the Borrower or such Guarantor distributed, divided or applied by way of dividend or payment, or any securities issued on account of any Subordinated Indebtedness (other than equity securities of the Borrower received by the Subordinated Creditor pursuant to the Conversion), and apply such cash to or to hold such other assets or securities as collateral for the Senior - 4 - Indebtedness, and to apply to the Senior Indebtedness any cash proceeds of any realization upon such other assets or securities that the Agent in its discretion elects to effect, until all of the Senior Indebtedness shall have been finally paid in full in cash, rendering to the Subordinated Creditor any surplus to which the Subordinated Creditor is then entitled; provided, however, that the Agent shall provide the Subordinated Creditor with a reasonably detailed written accounting of such cash or other assets received or collected on account of the Subordinated Indebtedness by the Agent and the application by the Agent thereof. (b) The Subordinated Creditor covenants and agrees with the Agent that the Subordinated Creditor shall not, to the extent prohibited by Section 4 hereof, commence or join with any other creditor or creditors of the Borrower or any Guarantor in commencing any Bankruptcy Proceeding against the Borrower or any Guarantor. At any Bankruptcy Proceeding, if all Senior Indebtedness has not been finally paid in full at the time, the Agent, in addition to all other rights set forth in this Agreement, is hereby authorized, which authorization shall be irrevocable except upon the express written waiver of the Agent, at any such meeting or any such proceeding: (i) to evidence claims comprising the Subordinated Indebtedness either in its own name, the name of the Subordinated Creditor, by proof of debt, proof of claim, suit or otherwise, following notice from the Agent to the Subordinated Creditor of a requirement to evidence any such claim and the failure on the part of the Subordinated Creditor to take any required action within 10 Business Days following such notice or any shorter period as may be necessary to protect such claim (ii) to vote claims comprising the Subordinated Indebtedness to accept or reject any plan of partial or complete liquidation, reorganization, arrangement, composition or extension; and (iii) to collect any assets or securities or distributed securities (other than equity securities of the Borrower received by the Subordinated Creditor pursuant to the Conversion) issued on account of the Subordinated Indebtedness until such time as the Senior Indebtedness has been paid in full. (c) If the Borrower or any Guarantor shall become subject to a proceeding under the Bankruptcy Code and if the Agent desires (i) to permit the Borrower or any Guarantor, under either Section 363 or Section 364 of the Bankruptcy Code, to use cash collateral in the ordinary course of its business, including without limitation, to make any permitted payments on the Senior Indebtedness and/or (ii) to provide financing to the Borrower or any Guarantor to be used in the ordinary course of its business, the Subordinated Creditor agrees as follows: (A) adequate notice to the Subordinated Creditor shall be deemed to have been given to Subordinated Creditor if the Subordinated Creditor receives notice two (2) Business Days prior to the entry of the order approving such financing, and (B) no objection will be raised by the Subordinated Creditor to any such financing on the ground of a failure to provide "adequate protection" for the Subordinated Creditor' junior Lien on the security provided the Subordinated Creditor retains a Lien on and security interest in the post- petition security to the extent and with the same priority as existed prior to the commencement of the Bankruptcy Proceeding. Notwithstanding anything to the contrary contained herein, the Subordinated Creditor shall be entitled to assert a claim pursuant to Section 507(b) of the Bankruptcy Code. For purposes of this Section, notice of a proposed financing or use of cash collateral shall be deemed given when given, in the manner prescribed by this Agreement, to the Subordinated Creditor or its counsel. - 5 - 8. LIENS PROHIBITED. The Subordinated Indebtedness shall at all times during the term hereof remain unsecured. In furtherance of the foregoing, the Subordinated Creditor agrees that, within five (5) Business Days following the Agent's written request therefor, the Subordinated Creditor will execute, deliver and file any and all termination statements, mortgage discharges, Lien releases and other agreements and instruments as the Agent reasonably deems necessary or appropriate. Furthermore, the Subordinated Creditor hereby irrevocably appoints each of the Agent, and its respective successors and assigns, and its respective officers, with full power of substitution, the true and lawful attorney(s) of the Subordinated Creditor for the purpose of effecting any such executions, deliveries and filings if and to the extent that the Subordinated Creditor shall have failed to perform such obligations pursuant to the foregoing provisions within such five (5) Business Day period, which power of attorney shall be deemed to be coupled with an interest. 9. AGENT'S FREEDOM OF DEALING. Without affecting the rights of the Agent hereunder, and except as otherwise set forth herein, the Subordinated Creditor agrees and consents: (a) to waive, and does hereby waive, any and all notice of the receipt and acceptance by the Agent of this Agreement or of the creation, renewal, extension or accrual of any of the Senior Indebtedness, present or future, in whole or in part, by any of the Lenders or of the reliance by the Agent and/or the Lenders on this Agreement at any time; and (b) with respect to the Senior Indebtedness and any and all collateral therefor or guaranties thereof, that the Borrower, the Agent and the Lenders may agree to increase the amount of the Senior Indebtedness (subject, however, to the limitation on Senior Indebtedness set forth in the first sentence of Section 2 hereof) or otherwise modify the terms of any of the Senior Indebtedness, and the Agent may grant extensions of the time of payment or performance to and make compromises, including releases of collateral or guaranties, and settlements with the Borrower and all other Persons, in each case without the consent of the Subordinated Creditor or the Borrower and without affecting the agreements of the Subordinated Creditor or the Borrower contained in this Agreement; and (c) to waive, and does hereby waive, all presentment for payment, protest and notice of nonpayment and protest of negotiable or other instruments to which the Subordinated Creditor may be a party. 10. MODIFICATION OR SALE OF THE SUBORDINATED INDEBTEDNESS. The Subordinated Creditor will not, without the prior written consent of the Agent, at any time while this Agreement is in effect, modify in any material respect any of the terms of the Subordinated Debenture or the Subordinated Debenture Purchase Agreement; provided that the following amendments or modifications shall be deemed to be per se material modifications and to require the prior written consent of the Agent. (i) any increase in the principal amount of the Subordinated Indebtedness; - 6 - (ii) any shortening of the maturity of the Subordinated Indebtedness (including by way of acceleration) or any change in any of the payment provisions, if any, or any other alteration of the repayment provisions of the Subordinated Indebtedness in any respect; (iii) any increase in the interest rate, fees or premium applicable to the Subordinated Indebtedness; (iv) any change in any of the subordination provisions, including, without limitation, any further subordination of the Subordinated Indebtedness to any other indebtedness; (v) the requirement of any lien or other security for, or guaranty of, the Subordinated Indebtedness; (vi) any change in any Subordinated Document which could materially increase the Subordinated Creditor's rights or could adversely affect the Agent or the Borrower or the rights and remedies of the Agent against the Borrower. The Subordinated Creditor shall not sell, transfer, pledge, assign, hypothecate or otherwise dispose of any or all of the Subordinated Indebtedness to any Person, PROVIDED, HOWEVER that assignments of the Subordinated Indebtedness to an Affiliate of the Subordinated Creditor shall be permitted so long as such Affiliate of the Subordinated Creditor has in a writing, satisfactory in form and substance to the Agent, become a party hereto and succeeded to the rights and is bound by all of the obligations of the Subordinated Creditor hereunder (and in the event the Affiliate shall be a charitable trust, evidence reasonably satisfactory to the Agent that the charitable trust may become a party hereto without contravening the terms of said charitable trust). In the case of any such disposition by the Subordinated Creditor, the Subordinated Creditor will notify the Agent at least 10 days prior to the date of any of such intended disposition. 11. BORROWER'S OBLIGATIONS ABSOLUTE. Nothing contained in this Agreement shall impair, as between the Borrower and the Subordinated Creditor, the obligation of the Borrower to pay to the Subordinated Creditor all amounts payable in respect of the Subordinated Indebtedness as and when the same shall become due and payable in accordance with the terms thereof, or prevent the Subordinated Creditor (except as expressly otherwise provided in this Agreement) from exercising all rights, powers and remedies otherwise permitted by the Subordinated Documents and by applicable law upon a default in the payment of the Subordinated Indebtedness or under any Subordinated Document, all, however, subject to the rights of the Agent as set forth in this Agreement. 12. SUBROGATION. Subject to the final payment in full of all Senior Indebtedness, the Subordinated Creditor shall be subrogated to the rights of the Agent and holders of the Senior Indebtedness to receive payments or distributions of assets of the Borrower made on account of the Senior Indebtedness until the Subordinated Indebtedness shall be paid in full. For the purposes of such subrogation, no payments or distributions to the Agent or the holders of the Senior Indebtedness of any cash, property or securities to which the Subordinated Creditor would - 7 - be entitled except for the provisions of this Agreement, and no payment over pursuant to the provisions of this Agreement to the Agent or the holders of the Senior Indebtedness by the Subordinated Creditor, shall as between the Borrower and the creditors of the Borrower, other than the Agent and the holders of the Senior Indebtedness and the Subordinated Creditor, be deemed to be a payment by the Borrower to or on account of Senior indebtedness. 13. MARSHALLING. Neither the Agent nor the Lenders shall be under any obligation to marshall any assets in payment of any or all of the Senior Indebtedness. The Subordinated Creditor further waives any and all rights with respect to marshaling. 14. TERMINATION OF SUBORDINATION. This Agreement shall continue in full force and effect, and the obligations and agreements of the Subordinated Creditor and the Borrower hereunder shall continue to be fully operative, until all of the Senior Indebtedness shall have been paid and satisfied in full in cash and such full payment and satisfaction shall be final and not avoidable. To the extent that the Borrower or any Guarantor or provider of collateral for the Senior Indebtedness makes any payment on the Senior Indebtedness that is subsequently invalidated, declared to be fraudulent (except on account of actual fraud) or preferential or set aside or is required to be repaid to a trustee, receiver or any other party under any Bankruptcy Proceeding (such payment being hereinafter referred to as a "Voided Payment"), then to the extent of such Voided Payment, that portion of the Senior Indebtedness that had been previously satisfied by such Voided Payment shall be revived and continue in full force and effect as if such Voided Payment had never been made. In the event that a Voided Payment is recovered from the Agent or any Lender, an Event of Default shall be deemed to have existed and to be continuing under the Loan Agreement from the date of the Agent's or such Lender's initial receipt of such Voided Payment until the full amount of such Voided Payment is restored to the Agent and/or such Lender. During any continuance of any such Event of Default, this Agreement shall be in full force and effect with respect to the Subordinated Indebtedness. To the extent that the Subordinated Creditor has received any payments with respect to the Subordinated Indebtedness subsequent to the date of the Agent's or such Lender's initial receipt of such Voided Payment and such payments have not been invalidated, declared to be fraudulent or preferential or set aside or required to be repaid to a trustee, receiver, or any other party under any bankruptcy act, state or federal law, common law or equitable cause, the Subordinated Creditor shall be obligated and hereby agrees that any such payment so made or received (other than equity securities of the Borrower received by the Subordinated Creditor pursuant to the Conversion) shall be deemed to have been received in trust for the benefit of the Agent and/or such Lender to the same extent as is provided under Section 5 hereof, and the Subordinated Creditor hereby agrees to pay to the Agent, upon demand, the full amount so received by the Subordinated Creditor during such period of time to the extent necessary fully to restore to the Agent and/or such Lender the amount of such Voided Payment. Upon the payment and satisfaction in full in cash of all of the Senior Indebtedness, which payment shall be final and not avoidable, this Agreement will automatically terminate without any additional action by any party hereto. 15. NOTICES. All notices and other communications which are required and may be given pursuant to the terms of this Agreement shall be in writing and shall be sufficient and - 8 - effective in all respects if given in writing or telecopied, delivered or mailed by registered or certified mail, postage prepaid, as follows: (a) If to the Agent: Fleet National Bank One Federal Street Boston, Massachusetts 02109 Attention: Thomas W. Davies, Senior Vice President Telecopy: 617) 346-1633 With a copy to: Hinckley, Allen & Snyder 28 State Street Boston, Massachusetts 02109 Attention: Malcolm Farmer III, Esquire Telecopy: (617) 345-9020 (b) If to the Subordinated Creditor: Emerson Electric Co. 8000 West Florissant P.O. Box 4100 St. Louis, Missouri 63136 Attention: H.M. Smith Telecopy: (314) 553-3713 With a copy to: Bryan Cave, LLP One Metropolitan Square 211 North Broadway, Suite 3600 St. Louis, Missouri 63102 Attention: James L. Nouss, Jr., Esquire Telecopy: (314) 259-2020 (c) If to the Borrower: PCD Inc. 2 Technology Drive Peabody, Massachusetts 01960-7977 Attention: President Telecopy: (978) 532-6800 - 9 - With a copy to: Hill & Barlow One International Place Boston, Massachusetts 02110-2607 Attention: Thomas C. Chase, Esquire Telecopy: (617) 428-3500 or such other address or addresses as any party hereto shall have designated by written notice to the other parties hereto. Notices shall be deemed given and effective upon the earlier to occur of (i) the third day following deposit thereof in the U.S. mail or (ii) receipt by the party to whom such notice is directed. 16. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND SHALL BE A SEALED INSTRUMENT UNDER SUCH LAWS. 17. WAIVER OF JURY TRIAL. THE SUBORDINATED CREDITOR, THE AGENT, AND THE BORROWER HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS. EXCEPT AS PROHIBITED BY LAW, THE AGENT, THE SUBORDINATED CREDITOR AND THE BORROWER HEREBY WAIVES ANY RIGHT WHICH IT MAY HAVE TO CLAIM OR RECOVER IN ANY LITIGATION REFERRED TO IN THE PRECEDING SENTENCE ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES. THE SUBORDINATED CREDITOR, THE AGENT AND THE BORROWER (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (B) ACKNOWLEDGES THAT SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS CONTAINED HEREIN. 18. WAIVER. Except as otherwise provided herein, no waiver shall be deemed to have been made by the Subordinated Creditor or the Agent of any of its respective rights hereunder unless the same shall be in writing and duly signed by its duly authorized officers and each waiver, if any, shall be a waiver only with respect to the specific instance involved and shall in no way impair the rights of the Subordinated Creditor or the Agent in any other respect at any time. No executory agreement shall be effective to change or modify or to discharge, in whole or in part, this Agreement, unless such executory agreement is in writing and duly signed by the duly authorized officers of the Agent, or the Subordinated Creditor, as the case may be. - 10 - 19. SPECIFIC PERFORMANCE. The Subordinated Creditor and the Agent agree that each shall be authorized to demand specific performance of the provisions set forth in this Agreement, whether or not the Borrower shall have complied with the provisions hereof applicable to it, at any time when the other shall have failed to comply with any such provision hereof applicable to it. Each of the Agent and the Subordinated Creditor hereby irrevocably waives any defense based on the adequacy of a remedy at law which might be asserted as a bar to the remedy of specific performance brought in any action relating hereto. The Subordinated Creditor further waives all demands and notices (except any such demand or notice required to be given by the terms of this Agreement) in connection with the exercise of the Agent's rights hereunder and assents (except as may be otherwise provided herein) to any renewal, extension or postponement of the time of payment of Senior Indebtedness or any indulgence with respect thereto, any substitution, exchange or release of collateral for or any guaranty of the Senior Indebtedness and to the addition or release of any Person primarily or secondarily liable thereon; and agrees to the provisions of any instrument, security or other writing, evidencing Senior Indebtedness. 20. COSTS AND EXPENSES. The Borrower agrees to pay to the Agent on demand all expenses of every kind, including reasonable attorneys' fees, which the Agent or any Lender may incur in enforcing or endeavoring to enforce any of its rights hereunder. 21. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon, and shall inure to the benefit of, the parties hereto and their respective successors and assigns. 22. MISCELLANEOUS. This Agreement may be executed in several counterparts and by each party on a separate counterpart, each of which when so executed and delivered shall be an original, and all of which together shall constitute one instrument. In proving this Agreement, it shall not be necessary to produce or account for more than one such counterpart signed by the party against which enforcement is sought. The Agent may, in its sole and absolute discretion, waive any provisions of this Agreement benefiting the Agent; provided, however, that such waiver shall be effective only if in writing and signed by the Agent and shall be limited to the specific provision or provisions expressly so waived. This Agreement shall be binding upon the successors and assigns of the Agent, the Subordinated Creditor and the Borrower and shall inure to the benefit of the Agent, the Agent's successors and assigns, any lender or lenders refunding or refinancing any of the Senior Indebtedness and their respective successors and assigns, but shall not otherwise create any rights or benefits for any third party. In the event that any lender or lenders refund or refinance any of the Senior Indebtedness, such refunding or refinancing shall be substantially on the same terms and conditions as provided in the Financing Documents, (as the same are permitted to be modified by the terms of Section 9 hereof), and this Agreement shall be amended to the extent necessary to reflect the agreements and instruments in favor of such lender or lenders and to the related definitions contained therein. (Signatures appear on the next page) - 11 - IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. Witness: PCD Inc. /s/ David Horne By: /s/ John L. Dwight Jr. - ------------------- --------------------- David Horne John L. Dwight Jr. Chairman of the Board, President and Chief Executive Officer Witness: Emerson Electric Co. By: /s/ J. D. Switzer - ------------------- -------------------- J. D. Switzer Senior Vice President - Development Witness: Fleet National Bank, as Agent for itself and the other Lenders /s/ Christopher Nelson By: /s/ Thomas W. Davies - ----------------------- --------------------- Christopher Nelson Thomas W. Davies Senior Vice President - 12 - EX-22 23 EXHIBIT 10.20 Undertaking to Furnish Copies of Omitted Exhibits to Subordinated Debenture and Warrant Purchase Agreement dated as of December 26, 1997. PCD Inc. (the "Registrant") is not filing as exhibits to its Current Report on Form 8-K dated January 9, 1998, copies of the exhibits to the Subordinated Debenture and Warrant Purchase Agreement dated as of December 26, 1997 between the Registrant and Emerson Electric Co., which Agreement is filed as Exhibit 10.15 thereto. The Registrant undertakes to furnish to the Securities and Exchange Commission, upon request, copies of such omitted exhibits. Dated: January 9, 1998 PCD INC. (Registrant) By: /s/ John L. Dwight, Jr. ----------------------- John L. Dwight, Jr. Chairman of the Board, President and Chief Executive Officer EX-23 24 EXHIBIT 99.1 FOR IMMEDIATE RELEASE Contact: John L. Dwight, Jr. James R. Buckley Chief Executive Officer Senior Consultant PCD Inc. Sharon Merrill Associates, Inc. 978/532-8800 617/542-5300 PCD INC. COMPLETES ACQUISITION OF WELLS ELECTRONICS, INC. With Transaction, PCD Becomes Leading U.S. Provider of Test and Burn-in Sockets PEABODY, Mass., December 29, 1997 -- PCD Inc. (NASDAQ:PCDI), a manufacturer of electronic connectors, today announced that it has completed its acquisition of Wells Electronics, Inc., a manufacturer of burn-in and test sockets for the global semiconductor industry. The acquisition was an all cash transaction valued at approximately $130 million. Prior to the transaction, Wells was owned by UL America, Inc., an indirect wholly owned subsidiary of Siebe plc. Richard Mullin, Wells Electronics' chief executive officer, has been named president of the combined operations of Wells and PCD's wholly owned subsidiary, CTi Technologies, Inc. "The acquisition of Wells Electronics provides us with an increased global presence," stated John L. Dwight, Jr., PCD's Chairman, President and Chief Executive Officer. "Plans for the integration of Wells and CTi are well underway. We anticipate benefiting from synergies created by this combination, particularly within the test and burn-in product areas. Also, Wells has an impressive senior management team with extensive industry experience." "The addition of Wells Electronics positions PCD as the primary U.S. supplier of test and burn-in sockets, as well as the third largest supplier worldwide in the rapidly growing burn-in market," Dwight continued. "Going forward, our increased global distribution channels and broad-based product line will provide us with the leverage necessary to further capitalize on market opportunities. We anticipate that the burn-in segment of our business will be a strong performer next year." Statements in this press release concerning the future revenues, profitability, financial resources, product mix, market demand, product development and other statements in this press release concerning the future results of operations, financial condition and business of PCD Inc. are "forward-looking" statements as defined in the Securities Act of 1933 and Securities Exchange Act of 1934. Investors are cautioned that the Company's actual results in the future may differ materially from those projected in the forward-looking statements due to risks and uncertainties that exist in the Company's operations and business environment, including the Company's dependence on the integrated circuit package industry, the Company's dependence on its principal customers and independent distributors, fluctuations in demand for the Company's products, patent litigation involving the Company, rapid technological evolution in the electronics industry, and the like. The Company's filings with the Securities and Exchange Commission, including its 1996 Form 10-K, contain additional information concerning such risk factors, and copies of these filings are available from the Company upon request and without charge. In addition, the Company may experience unanticipated costs or other difficulties in connection with the acquisition and integration of a new business such as Wells. PCD Inc. designs, manufactures and markets electronic connectors to defined niche markets in the semiconductor, industrial equipment and avionic industries worldwide. Headquartered in Peabody, Massachusetts, PCD focuses on four distinct product categories: industrial terminal blocks, avionic control connectors, burn-in sockets and production/IC sockets. The Company employs a carefully targeted approach to product development and marketing, focusing on the key segments of each market that meet its growth and profit objectives. -----END PRIVACY-ENHANCED MESSAGE-----