Negative Pledge Agreement Dated Dec. 26, 1997

Exhibit 10.5


NEGATIVE PLEDGE AGREEMENT
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NEGATIVE PLEDGE AGREEMENT (the "Agreement"), made as of this 26th day of December, 1997, by and between WPI GROUP, INC., WPI UK HOLDING, INC., WPI UK HOLDING II, INC., each a New Hampshire corporation with executive offices at 1155 Elm Street, Manchester, New Hampshire 03101 (individually and collectively, the "Pledgor"), and FLEET BANK - NH, a bank organized under the laws of the State of New Hampshire with a principal place of business at 1155 Elm Street, Manchester, New Hampshire 03101(the "Bank").


WITNESSETH:
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WHEREAS, pursuant to an Amended and Restated Commercial Loan Agreement of even date (the "Loan Agreement"), Bank has granted to Pledgor and its Domestic Subsidiaries (defined below) a revolving line of credit loan in the principal amount of up to Thirty Million Dollars ($30,000,000.00) and a term loan in the principal amount of Fifteen Million Dollars ($15,000,000.00) (collectively, the "Loan"), all as set forth and described in the Loan Agreement; and


WHEREAS, the Pledgor owns all of the capital stock of WPI Group (U.K.), an unlimited company organized under the laws of the United Kingdom and Wales, which owns all of the capital stock of WPI Oyster-Termiflex Limited and WPI Husky Computers Limited, corporations organized under the laws of the United Kingdom (the foregoing entities are collectively referred to herein as the "Foreign Subsidiaries");


WHEREAS, pursuant to a Security Agreement of even date (the "Security Agreement"), Pledgor and the other subsidiaries of WPI Group, Inc., namely WPI Electronics, Inc., WPI Magnetec, Inc., WPI Micro Palm, Inc., WPI Power Systems, Inc., WPI Termiflex, Inc., WPI Micro Processor Systems, Inc., and WPI DecisionKey, Inc., and WPI Oyster Terminals, Inc., each a New Hampshire corporation, and WPI Husky Computers, Inc., a Florida corporation, (collectively, the "Domestic Subsidiaries") have granted to Bank a security interest in all of the assets and properties of the Pledgor and the Domestic Subsidiaries; and


WHEREAS, the Bank has agreed that for the convenience of the Pledgor's business operations, the Bank shall not require that the Foreign Subsidiaries be co-borrower's or guarantors of the Loan, or grant a security interest in their assets, provided that the Pledgor shall execute and deliver this Agreement agreeing not to authorize or consent to the transfer or pledge of any of the assets of the Foreign Subsidiaries. Terms not otherwise defined herein shall have the meanings ascribed to them in the Loan Agreement.


NOW, THEREFORE, in consideration of the willingness of the Bank to make the Loan to Pledgor and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:


1. Warranties and Representations of the Pledgor. Pledgor hereby makes
--------------------------------------------- the following representations and warranties which shall survive the execution and delivery of this Agreement and shall be continuing representations and warran ...