SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended July 31, 1996 Commission File No. 1-9389
CHARTER POWER SYSTEMS, INC.
(Exact name of Registrant as specified in its charter)
Delaware 13-3314599
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1400 Union Meeting Road
Blue Bell, Pennsylvania 19422
(Address of principal executive office) (Zip Code)
(215) 619-2700
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO_____
Number of shares of the Registrant's Common Stock outstanding on September 9,
1996: 6,309,644
1
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CHARTER POWER SYSTEMS, INC.
AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION Page No.
Item 1 - Financial Statements
Consolidated Balance Sheets -
July 31, 1996 and January 31, 1996.................... 3
Consolidated Statements of Income -
Three and Six Months Ended July 31, 1996
and 1995............................................. 5
Consolidated Statements of Cash Flows -
Six Months Ended July 31, 1996 and 1995............... 6
Notes to Consolidated Financial Statements............ 8
Report of Independent Accountants..................... 14
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations..... 15
PART II. OTHER INFORMATION 18
SIGNATURES 19
2
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CHARTER POWER SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
July 31, January 31,
1996 1996
---- ----
ASSETS
Current assets:
Cash and cash equivalents................. $ 1,219 $ 5,472
Restricted cash and cash equivalents...... 1,805 5,402
Accounts receivable, less allowance for
doubtful accounts of $1,429 and
$1,421, respectively................. 38,436 31,855
Inventories............................... 41,764 35,227
Deferred income taxes..................... 5,823 6,235
Other current assets...................... 2,965 1,367
-------- --------
Total current assets........... 92,012 85,558
Property, plant and equipment, net.............. 49,061 39,375
Intangible and other assets, net................ 5,481 3,287
Goodwill, net................................... 11,388 2,607
-------- --------
Total assets................... $157,942 $130,827
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt......... $ 1,241 $ 200
Accounts payable.......................... 21,710 19,008
Accrued liabilities....................... 13,555 13,513
Other current liabilities................. 3,504 2,535
-------- --------
Total current liabilities...... 40,010 35,256
Deferred income taxes........................... 3,338 2,750
Long-term debt.................................. 29,752 15,417
Other liabilities............................... 9,304 8,478
-------- --------
Total liabilities.............. 82,404 61,901
-------- --------
The accompanying notes are an integral part of these statements.
3
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CHARTER POWER SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (continued)
(Dollars in thousands)
(Unaudited)
July 31, January 31,
1996 1996
---- ----
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value,
10,000,000 shares authorized;
6,504,226 and 6,326,176 shares
issued, respectively.................. 65 63
Additional paid-in capital................. 38,678 36,283
Minimum pension liability adjustment....... (760) (760)
Treasury stock, at cost, 57,400 shares .... (1,304) (1,304)
Notes receivable from stockholder,
net of discount of $120............. (1,601) --
Cumulative translation adjustment.......... (126) --
Retained earnings.......................... 40,586 34,644
-------- --------
Total stockholders' equity...... 75,538 68,926
-------- --------
Total liabilities and
stockholders' equity.......... $157,942 $130,827
======== ========
The accompanying notes are an integral part of these statements.
4
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CHARTER POWER SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Three months ended Six months ended
July 31, July 31,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales............................ $71,748 $63,381 $134,177 $122,158
Cost of sales........................ 56,467 48,057 103,775 93,042
------- ------- -------- --------
Gross profit..................... 15,281 15,324 30,402 29,116
Selling, general and
administrative expenses......... 8,653 7,382 16,096 14,447
Research and development
expenses......................... 2,162 1,447 4,036 3,040
------- ------- -------- --------
Operating income................. 4,466 6,495 10,270 11,629
Interest expense, net................ 291 294 553 525
Other expense, net................... 130 199 127 255
------- ------- -------- --------
Income before income taxes....... 4,045 6,002 9,590 10,849
Provision for income taxes........... 1,395 2,072 3,294 3,744
------- ------- -------- --------
Net income....................... $ 2,650 $ 3,930 $ 6,296 $ 7,105
======= ======= ======== ========
Net income per common and
common equivalent share.......... $ .40 $ .61 $ .96 $ 1.11
======= ======= ======== ========
Weighted average common and
common equivalent shares......... 6,602 6,434 6,576 6,414
======= ======= ======= ========
Dividends per share.................. $0.0275 $0.0275 $0.0550 $ 0.0550
======= ======= ======= ========
</TABLE>
The accompanying notes are an integral part of these statements.
5
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CHARTER POWER SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Six months ended
July 31,
1996 1995*
---- ----
Cash flows provided (used) by operating activities:
Net income ..................................... $ 6,296 $ 7,105
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization............. 4,104 3,138
Deferred income taxes..................... 1,000 (342)
Loss on disposal of assets................ 10 139
Changes in:
Accounts receivable................. (3,976) (2,024)
Inventories......................... 602 (6,418)
Other current assets................ (391) (185)
Accounts payable.................... 928 4,431
Accrued liabilities................. (1,654) (27)
Income taxes payable................ (72) 78
Other current liabilities........... 477 (533)
Other liabilities................... 609 799
Other, net................................ 63 (225)
------- -------
Net cash provided by operating activities........... 7,996 5,936
------- -------
Cash flows provided (used) by investing activities:
Acquisition of businesses, net of cash
acquired..................................... (19,739) --
Acquisition of property, plant and equipment ... (8,847) (3,430)
Change in restricted cash....................... 3,597 75
------- -------
Net cash used by investing activities............... (24,989) (3,355)
------- -------
Cash flows provided (used) by financing activities:
Repayment of long-term debt..................... (7,094) (2,223)
Proceeds from new borrowings.................... 20,500 --
Proceeds from issuance of common stock.......... 739 368
Payment of common stock dividends............... (350) (492)
Purchase of treasury stock...................... -- (317)
Note receivable from stockholder in
connection with issuance of common stock...... (1,057) --
------- -------
The accompanying notes are an integral part of these statements.
6
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CHARTER POWER SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Dollars in thousands)
(Unaudited)
Six months ended
July 31,
1996 1995*
---- ----
Net cash provided (used) by financing activities.... 12,738 (2,664)
------- ------
Effect of exchange rate changes on cash............. 2 11
------- ------
Decrease in cash and cash equivalents............... (4,253) (72)
Cash and cash equivalents at beginning
of period........................................ 5,472 1,097
------- ------
Cash and cash equivalents at end of period.......... $ 1,219 $1,025
======= ======
SUPPLEMENTAL CASH FLOW DISCLOSURES
Interest paid, net.................................. $ 593 $ 701
Income taxes paid................................... 2,368 4,008
SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES
Acquired businesses:
Estimated fair value of assets acquired....... $14,565 $ --
Goodwill and identifiable intangible
assets . ................................... 11,661 --
Purchase price obligations.................... (1,160) --
Cash paid, net of cash acquired............... (19,739) --
------- ------
Liabilities assumed........................... $ 5,327 $ --
======= ======
Dividends declared but not paid..................... $ 177 $ --
Note receivable from stockholder in connection
with issuance of common stock..................... $ 664 $ --
* Reclassified for comparative purposes.
The accompanying notes are an integral part of these statements.
7
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CHARTER POWER SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(UNAUDITED)
1. INTERIM STATEMENTS
The accompanying interim consolidated financial statements should be
read in conjunction with the consolidated financial statements and notes thereto
contained in the Company's Annual Report to Shareholders for the fiscal year
ended January 31, 1996. The consolidated financial statements presented herein
are unaudited but, in the opinion of management, include all necessary
adjustments (which comprise only normal recurring items) required for a fair
presentation of the consolidated financial position as of July 31, 1996 and the
consolidated statements of income for the three and six months ended July 31,
1996 and 1995 and the consolidated statements of cash flows for the six months
ended July 31, 1996 and 1995. However, interim results of operations necessarily
involve more estimates than annual results and are not indicative of results for
the full fiscal year.
2. INVENTORIES
Inventories consisted of the following:
July 31, January 31,
1996 1996
---- ----
Raw materials ........................... $18,817 $14,033
Work-in-progress ........................ 11,277 9,357
Finished goods .......................... 11,670 11,837
------- -------
$41,764 $35,227
======= =======
3. INCOME TAXES
A reconciliation of the provision for income taxes from the statutory
rate to the effective rate is as follows:
Six months ended
July 31,
1996 1995
---- ----
U.S. statutory income tax ...................... 35.0% 35.0%
State tax, net of federal income tax benefit.... 3.3 3.7
Reduction in valuation allowance................ -- (3.8)
Reduction of taxes provided in prior years...... (3.1) --
Other........................................... (0.9) (0.4)
---- ----
34.3% 34.5%
==== ====
8
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CHARTER POWER SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands)
(UNAUDITED)
4. CONTINGENT LIABILITIES
With regard to the following contingent liabilities there have been no
material changes since January 31, 1996.
Because the Company uses lead and other hazardous substances in its
manufacturing processes, it is subject to numerous federal, Canadian, Mexican,
state and local laws and regulations that are designed to protect the
environment and employee health and safety. These laws and regulations include
requirements of periodic reporting to governmental agencies regarding the use
and disposal of hazardous substances and compliance with rigorous criteria
regarding exposure to employees and the disposal of scrap. In the opinion of the
Company, the Company complies in all material respects with these laws and
regulations.
Notwithstanding such compliance, if damage to persons or the
environment has been or is caused by hazardous substances used or generated in
the conduct of the Company's business, the Company may be held liable for the
damage and be required to pay the cost of remedying the same, and the amount of
any such liability might be material to the results of operations or financial
condition. However, under the terms of the purchase agreement with Allied for
the Acquisition of the Company (the Acquisition Agreement), Allied is obligated
to indemnify the Company for any liabilities of this type resulting from
conditions existing at January 28, 1986 that were not disclosed by Allied to the
Company in the schedules to the Acquisition Agreement.
The Company, along with numerous other parties, has been requested to
provide information to the United States Environmental Protection Agency (the
EPA) in connection with investigations of the source and extent of contamination
at several lead smelting facilities (the Third Party Facilities) to which the
Company had made scrap lead shipments for reclamation prior to the date of the
Acquisition. As of January 16, 1989, the Company, with the concurrence of
Allied, entered into an agreement with other potentially responsible parties
(PRPs) relating to remediation of a portion of one of the Third Party
Facilities, the former NL Industries (NL), facility in Pedricktown, New Jersey
(the NL Site), which agreement provides for their joint funding on a
proportionate basis of certain remedial investigation and feasibility study
activities with respect to that site.
9
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CHARTER POWER SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands)
4. CONTINGENT LIABILITIES (continued)
In fiscal 1993 in accordance with an EPA order, a group comprised of
the Company and 30 other parties commenced work on the cleanup of a portion of
the NL Site based on a specified remedial approach which is now completed. Based
on currently available information and well defined contribution levels of the
other parties, including NL Industries, the Company does not expect to incur
costs in excess of the $138 previously reserved.
With regard to the remainder of the NL Site, the EPA is pursuing
negotiations with NL and the other PRPs, including the Company, regarding the
conduct and funding of the remedial work plan. The EPA has proposed a cost
allocation plan, however, the allocation percentages between parties and the
basis for allocation of cost are not defined in the plan or elsewhere.
Therefore, a reliable range of the potential cost to the Company of this phase
of the clean-up cannot currently be determined. Accordingly, the Company has not
created any reserve for this potential exposure.
The remedial investigation and feasibility study at a second Third
Party Facility, the former Tonolli Incorporated facility at Nesquehoning,
Pennsylvania (the Tonolli Site), was completed in fiscal 1993. The EPA and the
PRPs are continuing to evaluate the draft remedial design work plan for the
site. Based on the estimated cost of the remedial approach selected by the EPA,
the Company believes that the potential cost of remedial action at the Tonolli
Site is likely to range between $16,000 and $17,000. The Company's allocable
share of this cost has not been finally determined, and will depend on such
variables as the financial capability of various other PRPs to fund their
respective allocable shares of the remedial cost. Based on currently available
information, however, the Company believes that its most likely exposure with
respect to the Tonolli Site will be the approximately $579 previously reserved,
the majority of which is expected to be paid over the next three to five years.
The Company has responded to requests for information from the EPA with
regard to three other Third Party Facilities, one in September 1991, one (the
Chicago Site) in October 1991 and the third (the ILCO Site) in October 1993. Of
the three sites, the Company has been identified as a PRP at the ILCO and
Chicago Sites only.
Based on currently available information, the Company believes that the
potential cost of remediation at the ILCO Site is likely to range between
$54,000 and $59,000 (based on the estimated costs of the remedial approach
selected by the EPA). The Company's allocable share of this cost has not been
finally determined and will depend on such variables as the financial capability
of various other PRPs to fund their respective allocable shares of
10
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CHARTER POWER SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands)
4. CONTINGENT LIABILITIES (continued)
the remedial cost. However, on October 31, 1995 the Company received
confirmation from the EPA that it is a de minimis PRP at the ILCO Site. Based on
currently available information, however, the Company believes that its most
likely exposure with respect to the ILCO Site is an immaterial amount which has
been previously reserved, the majority of which is expected to be paid over the
next three to five years.
Based on currently available information, the Company believes that the
potential cost of the remediation at the Chicago Site is likely to range between
$8,000 and $10,500 (based on the preliminary estimated costs of the remediation
approach negotiated with the EPA). Sufficient information is not available to
determine the Company's allocable share of this cost. Based on currently
available information, however, the Company believes that its most likely
exposure with respect to the Chicago Site will be the approximately $283
previously reserved, the majority of which is expected to be paid over the next
two to five years.
Allied has accepted responsibility under the Acquisition Agreement for
potential liabilities relating to all Third Party Facilities other than the
aforementioned Sites. Based on currently available information, management of
the Company believes that the foregoing will not have a material adverse effect
on the Company's financial condition or results of operations.
5. ACQUISITIONS
Effective February 22, 1996 the Company acquired certain equipment and
inventory of LH Research, Inc. used in their power supply business, along with
all rights to the name "LH Research," for approximately $4,100, subject to
certain adjustments. The Company used available cash to finance the acquisition.
The acquisition has been recorded using the purchase method of
accounting and the net purchase price approximates the fair value of the assets
acquired. The results of operations are included in the Company's consolidated
financial statements from the date of acquisition.
Effective March 12, 1996, the Company acquired from Burr-Brown
Corporation its entire interest in Power Convertibles Corporation (PCC)
consisting of 1,044,418 shares of PCC common stock and all outstanding preferred
stock. In addition the Company acquired or repaid approximately $5,200 of
indebtedness of PCC. On April 26, 1996, the Company
11
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CHARTER POWER SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except per share data)
5. ACQUISITIONS (continued)
acquired 190,000 shares of PCC common stock from the former chief executive
officer of PCC which together with the shares previously acquired represents in
excess of 99.6% of the outstanding PCC common stock. As of May 29, 1996, the
Company purchased all remaining shares of PCC common stock and shares of PCC
common stock covered by stock options.
The source of funds for the acquisition was advances under the
Company's existing credit facility with NationsBank, N.A., National Westminster
Bank, NJ and CoreStates Bank, N.A. PCC is engaged in the business of designing
and manufacturing DC to DC converters used in communications, computer, medical
and industrial and instrumentation markets and also produces battery chargers
for cellular phones.
The acquisition has been recorded using the purchase method of
accounting. The aggregate purchase price of approximately $17,000 has been
allocated on the basis of the estimated fair market values of the assets
acquired and liabilities assumed. The excess of the aggregate purchase price
over the estimated fair market values of the net assets acquired was recognized
as goodwill and is being amortized over a period of 20 years. The results of
operations are included in the Company's consolidated financial statements from
the date of acquisition.
The following unaudited pro forma financial information combines the
consolidated results of operations as if both acquisitions had occurred as of
the beginning of the periods presented. Pro forma adjustments include only the
effects of events directly attributed to a transaction that are factually
supportable and expected to have a continuing impact. The pro forma adjustments
contained in the table below include amortization of intangibles, interest
expense on the acquisition debt, elimination of interest expense on debt not
acquired, reduction of certain selling, general and administrative expenses and
the related income tax effects.
Six months
ended July 31,
1996 1995
---- ----
Net sales $136,100 $142,657
Net income 6,042 6,545
Net income per common and
common equivalent share $ .92 $ 1.02
12
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CHARTER POWER SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands)
5. ACQUISITIONS (continued)
The pro forma financial information does not necessarily reflect the
operating results that would have occurred had the acquisitions been consummated
as of the above dates, nor is such information indicative of future operating
results. In addition, the pro forma financial results contain estimates since
the acquired businesses did not maintain information on a period comparable with
the Company's fiscal year-end.
13
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of
Charter Power Systems, Inc.
We have reviewed the accompanying consolidated balance sheet of Charter Power
Systems, Inc. and Subsidiaries as of July 31, 1996, the related consolidated
statements of income for the three and six months ended July 31, 1996 and 1995
and the related consolidated statements of cash flows for the six months ended
July 31, 1996 and 1995. These financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of January 31, 1996 and the related
consolidated statements of income, stockholders' equity and cash flows for the
year then ended (not presented herein); and in our report dated March 22, 1996,
we expressed an unqualified opinion on those consolidated financial statements.
In our opinion, the information set forth in the accompanying consolidated
balance sheet as of January 31, 1996, is fairly presented, in all material
respects, in relation to the consolidated balance sheet from which it has been
derived.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
August 29, 1996
14
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Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company completed two acquisitions during the first quarter of
fiscal 1996. Effective February 22, 1996, the Company purchased certain
equipment and inventory of LH Research, Inc., ("LH") a Costa Mesa, California
based manufacturer of standard power supply systems for the electronics
industry. The power supplies are used in telecommunications, computer, medical,
process control and other industrial applications. Effective March 12, 1996, the
Company acquired from Burr-Brown Corporation its entire interest in Power
Convertibles Corporation ("PCC") consisting of 1,044,418 shares of PCC common
stock and all outstanding preferred stock. In addition the Company acquired or
repaid approximately $5,200,000 of indebtedness of PCC. On April 26, 1996, the
Company acquired 190,000 shares of PCC Common Stock from the former chief
executive officer of PCC, which together with shares previously acquired by the
Company represented in excess of 99.6% of the outstanding PCC Common Stock. As
of May 29, 1996 the Company purchased all remaining shares of PCC Common Stock
and shares of PCC Common Stock covered by stock options. Tucson, Arizona based
PCC produces DC to DC converters used in communications, computer, medical and
industrial and instrumentation markets and also produces battery chargers for
cellular phones.
Net sales for the fiscal 1997 second quarter and six months ended July
31, 1996 increased $8,367,000 or 13 percent and $12,019,000 or 10 percent,
respectively, compared to the equivalent periods in fiscal 1996. Sales for the
second quarter and half year of fiscal 1997 increased as a result of sales
recorded by the Company's PCC and LH subsidiaries, coupled with lower motive
power and power supplies sales, partially offset by higher sales to the
telecommunications industry. Sales resulting from the acquisitions completed
earlier this year were approximately $9,000,000 and $14,000,000 for the quarter
and six months ended July 31, 1996, respectively. On a company wide basis, sales
to the telecommunications market increased approximately 32 percent and 28
percent for the fiscal 1997 second quarter and six months ended July 31, 1996,
respectively. Sales of motive power products were down 19 percent for the
current quarter and 18 percent for the first half of fiscal 1997 due to lower
volumes partially offset by higher prices.
Gross profit was flat for the second quarter of fiscal 1997 and
increased $1,286,000 or 4 percent for the six-month period ended July 31, 1996.
Gross margins decreased to 21.3 percent from 24.2 percent for the quarter and to
22.7 percent from 23.8 percent for the year to date. Gross profit for the second
quarter and for the six months ended July 31, 1997 were unfavorably impacted by
non-recurring charges for relocating an electronics business from
15
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Seattle, Washington to Tucson, Arizona and Dunlap, Tennessee, costs related to
the failure of plastic casings used in Charter Power batteries, higher materials
costs experienced by the electronics business and lower motive power sales.
Selling, general and administrative expenses remained proportional to
sales at 12 percent of sales for the second quarter and half year of both fiscal
1997 and 1996.
Research and development expenses increased $715,000 for the second
quarter and $996,000 for the six months ended July 31, 1996 primarily as a
result of the acquisitions.
Interest expense, net, remained relatively flat for the quarter and six
months ended July 31, 1996 due to higher debt balances, offset by lower
effective rates and higher capitalized interest related to the plant expansions
at the Company's Conyers, Georgia and Leola, Pennsylvania locations.
As a result of the above, income before income taxes decreased 33
percent for the second quarter of fiscal 1997 and 12 percent for the six-month
period ended July 31, 1996 versus the comparable periods of the prior year. Net
income for the quarter decreased 33 percent to $2,650,000 or 40 cents per share,
while for the six-month period, net income decreased 11 percent to $6,296,000 or
96 cents per share.
LIQUIDITY AND CAPITAL RESOURCES
Net cash flows provided by operating activities increased 35 percent to
$7,996,000 for the six-month period ended July 31, 1996 compared to $5,936,000
in the comparable period of the prior year. This increase was primarily due to a
decrease in inventory levels during the first six months of fiscal 1997 (versus
an increase in inventory and associated higher payables during the comparable
prior year period), partially offset by a larger increase in accounts
receivables resulting from higher sales levels during fiscal 1997. Also
contributing to the increase were changes in deferred taxes due to the timing of
the deductibility of exercised stock options and an increase in other current
liabilities resulting from recording deferred revenue. Partially offsetting
these increases was a larger reduction in accrued liabilities, which included
cash payments related to certain liabilities established on the opening balance
sheets of the aforementioned acquisitions.
Net cash used by investing activities totaling $24,989,000 for the
six-month period ended July 31, 1996 includes the purchase by the Company of PCC
and certain equipment and inventory of LH for $19,739,000. Acquisition of
property, plant and equipment during the first six months of fiscal 1997
increased by $5,417,000 over the comparable period of the
16
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
prior year, primarily due to the plant capacity expansion programs at the
Company's Conyers, Georgia and Leola, Pennsylvania facilities. The change in
restricted cash resulted from the use of proceeds obtained from the Development
Authority of Rockdale County Industrial Development Revenue Bonds, obtained in
fiscal 1996, to finance the Company's expansion of the Conyers, Georgia plant.
Net cash provided by financing activities was $12,738,000 for the
six-month period ended July 31, 1996 compared to net cash used by financing
activities of $2,664,000 for the comparable prior year period. The additional
borrowings in the current year's six month period were used primarily for the
funding of the aforementioned acquisitions. The reduction of long-term debt
occurred primarily as a result of the Company's election to accelerate the
retirement of the remaining term loan portion of its long-term debt during the
first quarter of fiscal 1997.
The Company's availability under the current loan agreement is expected
to be sufficient to meet its ongoing cash needs for working capital
requirements, debt service, capital expenditures and possible strategic
acquisitions. Capital expenditures in the first six months of fiscal 1997 were
incurred primarily to fund capacity expansion, new product development, a
continuing series of cost reduction programs, normal maintenance capital, and
regulatory compliance. Fiscal 1997 capital expenditures are expected to be
approximately $17,000,000 for similar purposes.
FORWARD LOOKING STATEMENTS
Certain information contained in this Quarterly Report on Form 10-Q,
including, without limitation, information appearing under Item 2, "Management's
Discussion and Analysis of Financial Condition and Results of Operations," are
forward-looking statements (within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934). Factors
that appear with the forward-looking statements, or in the Company's other
Securities and Exchange Commission filings, could affect the Company's actual
results and could cause the Company's actual results to differ materially from
those expressed in any forward-looking statements made by the Company in this
Quarterly Report on Form 10-Q.
17
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PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Company held its annual meeting of shareholders on July 25, 1996.
(b) See Item 4(c) below.
(c) Each of David Beretta, Glenn M. Feit and John A. H. Shober was elected
as a director by a vote of 5,418,755 for and 22,154 withheld. Alfred
Weber was elected as a director by a vote of 5,418,405 for and 22,504
withheld. Warren A. Law was elected as a director by a vote of
5,418,705 for with 22,204 withheld. William Harral, III was elected as
a director by a vote of 5,417,905 for with 23,004 withheld. Alan G.
Lutz was elected as a director by a vote of 5,417,855 for and 23,054
withheld.
The Charter Power Systems, Inc. 1996 Stock Option Plan was approved by
a vote of 3,314,597 for and 1,040,970 against with 7,995 abstentions
and 1,077,347 broker non-votes.
The appointment of Coopers & Lybrand L.L.P. as the Company's
independent accountants for the year ending January 31, 1997 was
ratified by a vote of 5,431,909 for and 4,200 against, with 4,800
abstentions.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
10.1 Charter Power Systems, Inc. 1996 Stock Option Plan (filed
herewith).
10.2 Employment Agreement, dated as of April 1, 1996, and Pledge and
Security Agreement and Reimbursement Agreement, each dated April
30, 1996, between Alfred Weber and the Company; Secured
Promissory Note and Option Secured Promissory Note, each dated
April 30, 1996, by Alfred Weber in favor of the Company (filed
herewith).
11. Computation of per share earnings (filed herewith).
15. Letter from Coopers & Lybrand L.L.P., independent accountants for
the Company, regarding unaudited interim financial information
(filed herewith).
27. Financial Data Schedule (filed herewith).
(b) Reports on Form 8-K:
None
18
<PAGE>
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 thereunto duly authorized.
CHARTER POWER SYSTEMS, INC.
September 13, 1996 BY: /s/ Alfred Weber
---------------------------------
Alfred Weber
Chairman, President and Chief
Executive Officer
September 13, 1996 BY: /s/ Stephen E. Markert, Jr.
----------------------------------
Stephen E. Markert, Jr.
Vice President Finance and
Treasurer
(Principal Financial and
Accounting Officer)
19
<PAGE>
EXHIBIT INDEX
10.1 Charter Power Systems, Inc. 1996 Stock Option Plan.
10.2 Employment Agreement, dated as of April 1, 1996, and Pledge and
Security Agreement and Reimbursement Agreement, each dated April
30, 1996, between Alfred Weber and the Company; Secured
Promissory Note and Option Secured Promissory Note, each dated
April 30, 1996, by Alfred Weber in favor of the Company.
11. Computation of per share earnings.
15. Letter from Coopers & Lybrand L.L.P., independent accountants for
the Company, regarding unaudited interim financial information.
27. Financial Data Schedule.
20
<PAGE>
EXHIBIT 10.1
CHARTER POWER SYSTEMS, INC.
1996 STOCK OPTION PLAN
1. PURPOSES
The purposes of the Charter Power Systems, Inc. 1996 Stock Option Plan (the
"Plan") are to aid Charter Power Systems, Inc. (the "Company") and its
subsidiaries in attracting and retaining highly capable employees and to enable
selected key employees of the Company and its subsidiaries to acquire or
increase ownership interests in the Company on a basis that will encourage them
to perform at increasing levels of effectiveness and use their best efforts to
promote the growth and profitability of the Company and its subsidiaries.
Consistent with these objectives, this Plan authorizes the granting to selected
key employees of Incentive Stock Options and Nonqualified Stock Options to
acquire shares of the Company's Common Stock, par value $.01 per share (the
"Common Stock"), pursuant to the terms and conditions hereinafter set forth. As
used herein the term "subsidiary" shall have the meaning ascribed to it under
Section 424(f) of the Internal Revenue Code of 1986, as amended (the "Code").
2. DEFINITIONS
As used in this Plan, the following words shall have the following
meanings:
(a) "Board of Directors" means the Board of Directors of the Company;
(b) "Incentive Stock Option" means a stock option to purchase shares of
Common Stock which is intended to qualify as an incentive stock option as
defined in Section 422(b) of the Code;
(c) "Nonqualified Stock Option" means a stock option to purchase shares of
Common Stock that is not an Incentive Stock Option;
(d) "Option" means an Incentive Stock Option or a Nonqualified Stock
Option.
3. EFFECTIVE DATE
This Plan shall become effective on July 25, 1996 (the "Effective Date"),
subject to approval of this Plan by the holders of a majority of the capital
stock entitled to vote thereon (at the time of approval). In the event that this
Plan is not so approved, it shall not become effective.
4. ADMINISTRATION
(a) This Plan shall be administered by a committee (the "Committee"), which
may be a subcommittee of the compensation committee, consisting of at least two
members of the Board of Directors selected by the Board of Directors, or such
greater number as the Board of Directors may from time to time determine. At the
time of such selection, each such member shall not have been granted an Option
under this Plan during the one-year period prior to the later of the Effective
Date or such member's appointment to the Committee, or received stock or an
option to purchase stock of the Company or any of its "affiliates" (as such term
is defined under Rule 405 under the Securities Act of 1933, as amended) under
any other plan maintained by the Company or any of its affiliates, except as may
be otherwise provided in Rule 16b-3(c) under the Securities Exchange Act of
1934, as amended (the "Exchange Act") (or any successor rule). In addition, each
such member shall qualify as an "outside director" as defined in Section 162(m)
of the Code
<PAGE>
and the regulations thereunder. If, at any time, there are less than two members
of the Committee eligible to serve in such capacity, the Board of Directors
shall appoint one or more other eligible members of the Board of Directors to
serve on the Committee. All Committee members shall serve, and may be removed,
at the pleasure of the Board of Directors.
(b) A majority of the members of the Committee (but not less than two)
shall constitute a quorum, and any action taken by a majority of such members
present at any meeting at which a quorum is present, or acts approved in writing
by all such members, shall be the acts of the Committee.
(c) Subject to the other provisions of this Plan, the Committee shall have
full authority to decide when Options to acquire shares of Common Stock will be
granted under this Plan, to select the key employees to whom the Options will be
granted, to determine whether the Options to be granted will be Incentive Stock
Options or Nonqualified Stock Options, and to determine the number of shares of
Common Stock to be covered by each Option, the price at which such shares may be
purchased upon the exercise of such Option (the "Option Exercise Price") and
other terms and conditions of such purchase including Company, department and
individual performance goals. In making those determinations, the Committee
shall solicit the recommendations of the Chief Executive Officer of the Company
and may take into account the key employee's present and potential contributions
to the Company's business and any other factors which the Committee may deem
relevant. Subject to the other provisions of this Plan, the Committee shall also
have full authority to interpret this Plan and any stock option agreements
evidencing Options granted hereunder, to issue rules for administering this
Plan, to change, alter, amend or rescind such rules, and to make all other
determinations necessary or appropriate for the administration of this Plan. All
determinations, interpretations and constructions made by the Committee pursuant
to this Section 4 shall be final and conclusive. No member of the Board of
Directors or the Committee shall be liable for any action, determination or
omission taken or made in good faith with respect to this Plan or any Option
granted hereunder.
5. ELIGIBILITY
(a) Subject to the provisions of Section 6 below, key employees of the
Company and its subsidiaries (including officers and directors who are
employees) shall be eligible to receive Options under this Plan.
(b) The aggregate Fair Market Value (as such term is defined in Section
7(a) below), determined as of the Date of Grant (as such term is defined in
Section 7(a) below), of the shares of stock with respect to which Incentive
Stock Options (and incentive stock options under all other incentive stock
option plans of the Company, its parent (if any) and its subsidiaries) are
exercisable for the first time by an Optionee (as such term is defined in
Section 7 below) during any calendar year may not exceed $100,000.
(c) In addition to the foregoing, the maximum number of shares with respect
to which Options may be granted to a person under this Plan during any calendar
year may not exceed 100,000 (subject to the adjustments set forth in Section
6(b) below). To the extent that the maximum number of shares with respect to
which Options may be granted to a person are not granted in a particular
calendar year (beginning with the year in which the person receives his or her
first grant of Options hereunder), such ungranted Options for that year shall
increase the maximum number of shares with respect to which Options may be
granted to such person in subsequent calendar years during the term of the Plan
until used.
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<PAGE>
6. OPTION SHARES
(a) The shares subject to Options granted under this Plan shall be shares
of Common Stock and the aggregate number of shares with respect to which Options
may be granted shall not exceed 500,000 shares (subject to the adjustments set
forth in Section 6(b) below). If an Option expires, terminates or is otherwise
surrendered, in whole or in part, the shares allocable to the unexercised
portion of such Option shall again become available for grants of Options
hereunder. Notwithstanding the foregoing, in order to comply with Section 162(m)
of the Code, the Committee shall take into account that (1) if an Option is
canceled, the canceled Option continues to be counted against the maximum number
of shares for which Options may be granted to any person under the Plan in the
original year of grant and (2) for purposes of Section 162(m) of the Code, if
after the grant of an Option, the Committee or the Board of Directors reduces
the Option Exercise Price, the transaction is treated as a cancellation of the
Option and a grant of a new Option, and in such case, both the Option that is
deemed to be canceled and the Option that is deemed to be granted reduce the
maximum number of shares for which Options may be granted to the person under
the Plan. As determined from time to time by the Board of Directors, the shares
available under this Plan for grants of Options may consist either in whole or
in part of authorized but unissued shares of Common Stock or shares of Common
Stock which have been reacquired by the Company or a subsidiary following
original issuance.
(b) The aggregate number of shares of Common Stock as to which Options may
be granted hereunder, as provided in Section 6(a) above, the number of shares
covered by each outstanding Option and the Option Exercise Price shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split or other subdivision or
consolidation of shares or other capital adjustment, or the payment of a stock
dividend; provided, however, that any fractional shares resulting from any such
adjustment shall be eliminated. Notwithstanding the foregoing, no adjustment
shall be made upon the issuance of new shares of Common Stock for fair
consideration including the conversion of shares of Preferred Stock.
7. TERMS AND CONDITIONS OF OPTIONS
Each Option granted pursuant to this Plan shall be evidenced by a stock
option agreement between the Company and the key employee to whom the Incentive
Stock Option or Nonqualified Stock Option is granted (the "Optionee") in such
form or forms as the Committee, from time to time, shall prescribe, which
agreements need not be identical to each other but shall comply with and be
subject to the following terms and conditions:
(a) Option Exercise Price. The Option Exercise Price at which each share of
Common Stock may be purchased pursuant to a Nonqualified Stock Option intended
to be "performance-based" under Section 162(m) of the Code or an Incentive Stock
Option shall not be less than 100% of the Fair Market Value for each such share
on the date the Committee grants such Option (the "Date of Grant"). The Fair
Market Value of the shares of Common Stock on any date the Common Stock is
quoted on NASDAQ or listed upon an established stock exchange shall be,
respectively, the closing bid price of the shares of Common Stock as quoted on
NASDAQ on such date or the closing sale price of such shares as quoted on the
stock exchange on which such shares are listed, or if shares of Common Stock
were not traded on such date, on the next preceding trading day during which
such shares were traded. If the Common Stock is not quoted on NASDAQ or listed
(page 3 continues)
<PAGE>
on an established stock exchange, then the Fair Market Value shall be determined
by such other method consistent with the Code and applicable regulations
thereunder, as the Committee shall in its discretion select and apply at the
time of grant of the Option concerned. Subject to the foregoing, the Committee
in fixing the Option Exercise Price shall have full authority and discretion and
3
<PAGE>
be fully protected in doing so. Anything contained in this Section 7(a) to the
contrary notwithstanding, in the event that the number of shares of Common Stock
subject to any Option is adjusted pursuant to Section 6(b) above, a
corresponding adjustment shall be made in the Option Exercise Price per share.
The Option Exercise Price at which each share of Common Stock may be purchased
pursuant to a Nonqualified Stock Option, other than a Nonqualified Stock Option
intended to be "performance-based" under Section 162(m) of the Code, shall be
not less than the par value of each such share on the Date of Grant.
(b) Duration of Options. Each Incentive Stock Option granted hereunder
shall expire and all rights to purchase shares of Common Stock pursuant thereto
shall cease on a date not later than the tenth anniversary of the Date of Grant
of the Option, which date shall be fixed by the Committee. Each Nonqualified
Stock Option granted hereunder shall expire and all rights to purchase shares of
Common Stock pursuant thereto shall cease on a date not later than ten years and
one day from the Date of Grant of the Option which date shall be fixed by the
Committee. (The expiration date for the Incentive Stock Option and Nonqualified
Stock Options may collectively be referred to herein as the "Expiration Date".)
(c) Vesting of Options. Each Option granted hereunder shall vest at such
time and in such amounts and based on lapse of time, or such Company, department
or individual performance goals as the Committee may specify upon the grant
thereof. Only Options which have vested may be exercised. Anything contained in
this Section 7(c) to the contrary notwithstanding, unless the Committee shall
specify otherwise, an Optionee shall become fully (100%) vested in each of his
or her Options upon his or her termination of employment with the Company or any
of its subsidiaries for reasons of death, disability or retirement. The
Committee shall, in its sole discretion, determine whether or not disability or
retirement has occurred. Notwithstanding the foregoing, the Committee at any
time may in its sole discretion limit the number of Options that can be
exercised in any taxable year of the Company, to the extent necessary to prevent
the application of Section 162(m) of the Code (or any similar or successor
provision), provided that the Committee may not postpone the earliest date on
which Options can be exercised beyond the last day of the stated term of such
Options.
(d) Merger, Consolidation, etc. In the event the Company shall, pursuant to
action by its Board of Directors, at any time propose to merge with or into,
consolidate with, or sell or otherwise transfer all or substantially all of its
assets to, another entity or in the event of the acquisition of all or
substantially all of the Company's outstanding Common Stock by a single person
or entity and/or group of entities acting in concert and provision is not made
pursuant to the terms of such transaction for (i) the continuation or assumption
by the surviving, resulting or acquiring entity of all outstanding Options, (ii)
the substitution of new options therefor, or (iii) the payment of cash or other
consideration in respect thereof, the Committee shall cause written notice of
the proposed transaction to be given to each Optionee not less than 30 days
prior to the anticipated effective date of the proposed transaction. On a date
which the Committee shall specify in such notice, which date shall not be less
than 10 days prior to the anticipated effective date of the proposed
transaction, each Optionee's Options shall become fully (100%) vested and each
Optionee shall have the right to exercise his or her Options to purchase any or
all shares then subject to such Options (conditioned on the consummation of the
proposed transaction). If the transaction is consummated, each Option, to the
extent not previously exercised prior to the effective date of the transaction,
(page 4 continues)
<PAGE>
shall terminate on such effective date. If the transaction is abandoned or
otherwise not consummated then, to the extent that any Option not exercised
prior to such abandonment or termination shall have vested solely by operation
of this Section 7(d), such vesting shall be annulled and be of no further force
or effect, and the vesting period set forth in Section 7(c) above shall be
re-instituted, as of the date of such abandonment or termination.
4
<PAGE>
(e) Exercise of Options. A person entitled to exercise an Option may
exercise it in whole at any time, or in part from time to time, by delivering to
the Company at its principal office, directed to the attention of its Treasurer,
written notice specifying the number of shares of Common Stock with respect to
which the Option is being exercised, together with payment in full of the
purchase price for such shares. Such payment shall be made in cash or by
certified check or bank draft to the order of the Company; provided, however,
that the Committee may, in its sole discretion, authorize such payment, in whole
or in part, in any other form, including payment by personal check or by the
exchange of shares of Common Stock of the Company previously acquired by the
person entitled to exercise the Option and having a Fair Market Value on the
date of exercise equal to the price for which the shares of Common Stock may be
purchased pursuant to the Option. Subject to applicable securities laws, the
Committee may also permit "cashless exercise" of Options through the delivery of
irrevocable instructions to a broker to deliver promptly to the Company an
amount equal to the aggregate Option Exercise Price plus all applicable tax
withholding by payment through a cash or margin arrangement with such broker.
(f) Nontransferability. Options shall not be transferable other than by
will or the laws of descent and distribution and no Option may be exercised by
anyone other than the Optionee, except that, if the Optionee dies or becomes
incapacitated, the Option may be exercised by his or her estate, legal
representative or beneficiary, as the case may be, subject to all other terms
and conditions contained in this Plan.
(g) Termination and Employment. Unless the Committee shall specify
otherwise, the following rules shall apply in the event of an Optionee's
termination of employment with the Company or any of its subsidiaries:
(i) In the event of an Optionee's termination of employment with the
Company or any of its subsidiaries either (1) by the Company or any of its
subsidiaries for cause given by the Optionee, or (2) voluntarily on the
part of the Optionee, his or her Options shall immediately terminate.
(ii) In the event of an Optionee's termination of employment with the
Company or any of subsidiaries for reason of retirement or under
circumstances other than those specified in Section 7(g)(i) immediately
above, and for reasons other than death or disability, such Options shall
terminate three months after the date of such termination of employment or
on their respective Expiration Dates, whichever shall first occur;
provided, however, that if the Optionee dies within such 3 month period,
the time period set forth in Section 7(g)(iii) immediately below shall
apply.
(iii) In the event of the death or disability of an Optionee while
such Optionee is employed by the Company or any of its subsidiaries, such
Options shall terminate on the first anniversary of the Optionee's death or
disability, as the case may be, or on their respective Expiration Dates,
whichever shall first occur.
(iv) Anything contained in this Section 7(g) to the contrary
notwithstanding, an Option may only be exercised following the Optionee's
termination of employment with the Company or any of its subsidiaries for
reasons other than death, disability or retirement if, and to the extent
that, such Option was exercisable immediately prior to such termination of
employment.
(page 5 continues)
<PAGE>
(v) An Optionee's transfer of employment between the Company and any
of its subsidiaries or between subsidiaries shall not constitute a
termination of employment and the Committee shall determine in each case
whether an authorized leave of absence for military service
5
<PAGE>
or otherwise shall constitute a termination of employment. Furthermore, the
Committee may in its discretion determine that, if an Optionee provides
consulting services to the Company after his or her cessation of
employment, the Optionee's employment will be deemed, for purposes of
Options held by him or her, to continue until the termination of his or her
consulting services or at such earlier time as the Committee may determine.
(h) No Rights as Stockholder or to Continued Employment. No Optionee shall
have any rights as a stockholder of the Company with respect to any shares
covered by an Option prior to the date of issuance to such Optionee of the
certificate or certificates for such shares, and neither this Plan nor any
Option granted hereunder shall confer upon an Optionee any right to continuance
of employment by the Company or any of its subsidiaries or interfere in any way
with the right of the Company or of its subsidiaries to terminate the employment
of such Optionee.
8. TEN PERCENT STOCKHOLDERS
The Committee shall not grant an Incentive Stock Option to an individual
who owns, at the time such Option is granted (directly or by attribution
pursuant to Section 424(d) of the Code), shares of capital stock of the Company
possessing more than 10% of the voting power of all classes of capital stock of
the Company unless, at the time such Option is granted, the price at which each
share of Common Stock may be purchased pursuant to the Option is at least 110%
of the Fair Market Value for each such share on the Date of Grant and such
Option, by its terms, is not exercisable after the expiration of five years from
the Date of Grant.
9. ISSUANCE OF SHARES; RESTRICTIONS
(a) Subject to the conditions and restrictions provided in this Section 9,
the Company shall, within 20 business days after an Option has been duly
exercised in whole or in part, deliver to the person who exercised the Option
one or more certificates, registered in the name of such person, for the number
of shares of Common Stock with respect to which the Option has been exercised.
The Company may legend any stock certificate issued hereunder to reflect any
restrictions provided for in this Section 9.
(b) Unless the shares subject to Options granted under the Plan have been
registered under the Securities Act of 1933, as amended (the "Act") (and, in the
case of any Optionee who may be deemed an "affiliate" of the Company as such
term is defined in Rule 405 under the Act, such shares have been registered
under the Act for resale by such Optionee), or the Company has determined that
an exemption from registration under the Act is available, the Company may
require prior to and as a condition of the issuance of any shares of Common
Stock, that the person exercising an Option hereunder furnish the Company with a
written representation in a form prescribed by the Committee to the effect that
such person is acquiring such shares solely with a view to investment for his or
her own account and not with a view to the resale or distribution of all or any
part thereof, and that such person will not dispose of any of such shares
otherwise than in accordance with the provisions of Rule 144 under the Act
unless and until either such shares are registered under the Act or the Company
is satisfied that an exemption from such registration is available.
(page 6 continues)
<PAGE>
(c) Anything contained herein to the contrary notwithstanding, the Company
shall not be obligated to sell or issue any shares of Common Stock pursuant to
the exercise of an Option granted hereunder unless and until the Company is
satisfied that such sale or issuance complies with all applicable provisions of
the Act and all other laws or regulations by which the Company is bound or to
which the Company or such shares are subject.
6
<PAGE>
10. SUBSTITUTE OPTIONS
Anything contained herein to the contrary notwithstanding, Options may, at
the discretion of the Board of Directors, be granted under this Plan in
substitution for options to purchase shares of capital stock of another
corporation which is merged into, consolidated with, or all or a substantial
portion of the property or stock of which is acquired by, the Company or a
subsidiary.
11. TERM OF THE PLAN
Unless the Plan has been sooner terminated pursuant to Section 12 below,
this Plan shall terminate on, and no Options shall be granted after, the tenth
anniversary of the Effective Date. The provisions of this Plan, however, shall
continue thereafter to govern all Options theretofore granted, until the
exercise, expiration or cancellation of such Options.
12. AMENDMENT AND TERMINATION OF PLAN
The Board of Directors at any time may terminate this Plan or amend it from
time to time in such respects as it deems desirable; provided, however, that,
without the further approval of the stockholders of the Company, no amendment
shall (i) increase the maximum aggregate number of shares of Common Stock with
respect to which Options may be granted under this Plan (except by operation of
Section 6(b)), (ii) increase the maximum individual number of shares of Common
Stock with respect to which Options may be granted in any calendar year under
this Plan (except by operation of Section 6(b)), (iii) decrease the Option
Exercise Price provided for in Section 7(a) hereof, (iv) change the eligibility
provisions of Section 5 hereof, or (v) effect any change that would require
stockholder approval under Section 162(m) of the Code or Rule 16b-3 under the
Exchange Act and provided, further, that, subject to the provisions of Section 9
hereof, no termination of or amendment hereto shall adversely affect the rights
of an Optionee or other person holding an Option theretofore granted hereunder
without the consent of such Optionee or other person, as the case may be.
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<PAGE>
CHARTER POWER SYSTEMS, INC.
1400 Union Meeting Road
Blue Bell, Pa. 19422-0858
Mr. Alfred Weber
2583 Cold Spring Road
Lansdale, Pennsylvania 19446 As of April 1, 1996
Dear Mr. Weber:
Charter Power Systems, Inc., a Delaware corporation (the
"Company"), agrees to continue to employ Alfred Weber ("you" or the "Executive")
and you agree to continue such employment, under the following terms and
conditions:
1. TERM OF EMPLOYMENT. Except for earlier termination as
provided in Section 5 or 11 below, your employment under this Agreement, and the
term of this Agreement, shall be for an initial period commencing as of April 1,
1996 (the "Effective Date") and terminating on March 31, 1999 (the "Initial
Term"). After the Initial Term, this Agreement and your employment hereunder
shall be renewed automatically for successive terms of one year each (each, a
"Renewal Term"), unless prior to the end of the Initial Term or any Renewal Term
either party shall have given to the other party at least three months' prior
written notice (a "Termination Notice") of termination of this Agreement. If a
Termination Notice is given by either party, (a) the Company shall, without any
liability to you, have the right, exercisable at any time after the
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Termination Notice is given, to elect any other person to the office or offices
in which you are then serving and to remove you from such office or offices, but
(b) except for Sections 3 and 6, all other obligations each of you and the
Company have to the other, including the Company's obligation to pay your
compensation and make available the benefits to which you are entitled
hereunder, shall continue until the end of the Initial Term or any Renewal Term,
as the case may be.
2. COMPENSATION. You shall be compensated for performance of
your obligations under this Agreement at a rate of not less than $400,000 per
annum (such salary, as adjusted from time to time, hereinafter referred to as
the "Base Salary"), payable in such manner as is consistent with the Company's
payroll practices for executive employees. The Base Salary shall be increased
each year, on April 1, 1997, April 1, 1998 and April 1, 1999 (if this Agreement
continues after the Initial Term), by $35,000 per annum. Any increase in the
Base Salary after March 31, 2000, if this Agreement shall be in effect, shall be
determined by the Company's Board of Directors or Compensation Committee in its
discretion; provided that in no event shall the Base Salary be decreased at any
time.
3. DUTIES. (a) During the term of your employment
hereunder, including any Renewal Term hereof, you shall serve and
the Company shall employ you as the Chairman of the Board,
President and Chief Executive Officer of the Company with such
executive duties and responsibilities consistent with such
positions and stature as the Board of Directors from time to time
2
<PAGE>
may determine. You shall report to, and act under the general direction of, the
Board of Directors of the Company. You shall be nominated, on an annual basis so
long as you continue to be employed hereunder, for election as a director of the
Company and, if elected, you shall serve as a director. In addition, at the
request of the Board of Directors, you shall serve as an officer and/or director
of any of the Company's subsidiaries, in all cases in conformity with the
by-laws and the policies of the Board of Directors of each such corporation,
without additional compensation.
(b) You shall be required to devote your entire business time
and energies during normal business hours to the business and affairs of the
Company and its subsidiaries. Nothing in this Section shall be construed as
prohibiting you from investing your personal assets in businesses in which your
participation is solely that of a passive investor in such form or manner as
will not violate Section 8 hereof or require any services on your part in the
operation or affairs of those businesses. You may also participate in
philanthropic or civic activities so long as they do not materially interfere
with your performance of your duties hereunder.
(c) You shall be subject to the Company's rules, practices and
policies applicable to the Company's senior executive employees, except to the
extent the same are inconsistent with any of the express provisions hereof.
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<PAGE>
4. BENEFITS. (a) You shall have the benefit of and be entitled
to participate in such employee benefit plans and programs, including life,
disability and medical insurance, pension, savings, retirement and other similar
plans, as the Company now has or hereafter may establish from time to time, and
in which you would be entitled to participate pursuant to the terms thereof. The
foregoing, however, shall not be construed to require the Company to establish
any such plans or to prevent the Company from modifying or terminating any such
plans, and no such action or failure thereof shall affect this Agreement.
(b) You shall be entitled (i) to participate in the Company's
Incentive Compensation Plan each year in accordance with criteria and for
amounts approved by the Compensation Committee, and (ii) to be granted options,
to the extent (if any) approved by the Compensation Committee or the relevant
Option Committee, under the Company's stock option plans in effect from time to
time.
(c) You shall be entitled to four weeks of vacation
each year.
(d) The Company shall reimburse you annually for up to $5,000
of fees and expenses incurred by you for personal tax and financial planning
advice, upon presentation by you of appropriate substantiation of such fees and
expenses. The Company also shall reimburse you for any reasonable legal fees
incurred by you in the negotiation and preparation of this Agreement.
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(e) The Company shall provide you with a leased automobile of
reasonable size and quality suitable to your position.
5. CHANGE OF CONTROL. In the event of a Change of
Control Termination of this Agreement, you shall be entitled to
certain payments and benefits, as provided in Exhibit A hereto.
6. WORKING AND OTHER FACILITIES. During the Initial Term and
any Renewal Term, you shall be provided with such working facilities and other
support services as are suitable to your position and appropriate for the
performance of your duties. In the event the Company's principal executive
offices are relocated to a location more than fifty (50) miles from your
residence, the Company shall reimburse your moving expenses (including
reasonable costs relating to any interim living accommodations).
7. EXPENSES. The Company shall reimburse you for all
reasonable expenses incurred by you in connection with your
employment hereunder, and vouchered by you to the Company in
accordance with its expense reimbursement practice.
8. RESTRICTIVE COVENANTS. (a) During such time as
you shall be employed by the Company, and for a period of one
year thereafter, you shall not, without the written consent of
the Board of Directors, directly or indirectly, become associated
with, render services to, invest in, represent, advise or
otherwise participate as an officer, employee, director,
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stockholder, partner or agent of, or as a consultant for, any business within
the United States, Canada or Mexico which is competitive with the business in
which the Company is engaged at the time your employment with the Company ceases
(a "Competitive Business"); PROVIDED, HOWEVER, that (i) nothing herein shall
prevent you from investing without limit in the securities of any company listed
on a national securities exchange or quoted on the NASDAQ quotation system,
PROVIDED that your involvement with any such company is solely that of a
stockholder, and (ii) nothing herein is intended to prevent you from being
employed during the one-year period following the termination of your employment
with the Company by any business other than a Competitive Business.
(b) The parties hereto intend that the covenant contained in
this Section 8 shall be deemed a series of separate covenants for each
appropriate jurisdiction. If, in any judicial proceeding, a court shall refuse
to enforce all the separate covenants deemed included in this Section 8 on
grounds that, taken together, they cover too extensive a geographic area, the
parties intend that those covenants (taken in order of the jurisdictions that
are the least populous) that, if eliminated would permit the remaining separate
covenants to be enforced in that proceeding, shall, for the purpose of such
proceeding, be deemed eliminated from the provisions of this Section 8.
9. CONFIDENTIALITY, NONINTERFERENCE AND PROPRIETARY
INFORMATION. (a) In the course of your employment by the
Company hereunder, you will have access to confidential or
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proprietary data or information of the Company. You shall not at any time
divulge or communicate to any person, nor shall you direct any Company employee
to divulge or communicate to any person (other than to a person bound by
confidentiality obligations similar to those contained herein and other than as
necessary in performing your duties hereunder) or use to the detriment of the
Company or for the benefit of any other person, any of such confidential or
proprietary data or information, except to the extent the same (i) becomes
publicly known other than through a breach of this Agreement by you, (ii) was
known to you prior to the disclosure thereof by the Company to you or (iii) is
subsequently disclosed to you by a third party who shall not have received it
under any obligation of confidentiality to the Company. The provisions of this
Section 9(a) shall survive your employment hereunder, whether by the normal
expiration thereof or otherwise, for as long as such data or information remains
confidential. The term "confidential or proprietary data or information" as used
in this Agreement shall mean data or information not generally available to the
public, including personnel information, financial information, customer lists,
supplier lists, product and trading specifications, trade secrets, information
concerning product composition and formulas, tools and dies, drawings and
schematics, manufacturing processes, information regarding operations, systems
and services, knowhow, computer and any other processed or collated data,
computer programs, and pricing, marketing, sales and advertising data.
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(b) You shall not, during the term of this Agreement and for a
period of one year after the termination of your employment by the Company, for
your own account or for the account of any other person, interfere with the
Company's relationship with any of its suppliers, customers or employees;
PROVIDED, however, that you shall not be prohibited from contacting suppliers or
customers after termination of your employment with regard to matters that do
not violate your noncompetition or confidentiality obligations contained in
Sections 8(a) and 9(a); and, PROVIDED further that such contacts do not
interfere with the Company's relationship with such parties.
(c) You shall at all times promptly disclose to the Company,
in such form and manner as the Company reasonably may require, any inventions,
improvements or procedural or methodological innovations, programs, methods,
forms, systems, services, designs, marketing ideas, products or processes
(whether or not capable of being trade-marked, copyrighted or patented)
conceived or developed or created by you during and in connection with your
employment hereunder and which relate to the business of the Company
("Intellectual Property"). All such Intellectual Property shall be the sole
property of the Company. You shall execute such instruments and perform such
acts as reasonably may be requested by the Company to transfer to and perfect in
the Company all legally protectable rights in such Intellectual Property. If the
Company is unable for any reason to secure your signature on such instruments,
you irrevocably
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appoint the Company and its duly authorized officers and agents as your agents
and attorneys-in-fact to execute such instruments and to do such things with the
same legal force and effect as if executed or done by you. The Company shall not
claim any benefits under this paragraph if the same are substantially derived or
adapted from information or data held or possessed by third parties and
generally available to you whether or not employed by the Company.
(d) All written materials, records and documents made by you
or coming into your possession during your employment concerning any products,
processes or equipment, manufactured, used, developed, investigated or
considered by the Company or otherwise concerning the business or affairs of the
Company, shall be the sole property of the Company, and upon termination of your
employment, or upon the request of the Company during your employment, you shall
deliver the same to the Company. In addition, upon termination of your
employment, or upon request of the Company during your employment, you shall
deliver to the Company all other Company property in your possession or under
your control, including confidential or proprietary data or information and all
Company credit cards.
10. EQUITABLE RELIEF. With respect to the covenants
contained in Sections 8 and 9 of this Agreement, you acknowledge
that any remedy at law for any breach of said covenants may be
inadequate and that the Company, in addition to its rights at
law, shall be entitled to specific performance or any other mode
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of injunctive or other equitable relief to enforce its rights
hereunder.
11. TERMINATION; ADDITIONAL COMPENSATION. This
Agreement, and your employment hereunder, shall terminate prior
to the end of the Initial Term or any Renewal Term, upon the
following terms and conditions:
(a) This Agreement shall terminate automatically
on the date of your death. Notwithstanding the foregoing, the Company shall
continue to make payments to your estate of your Base Salary until six months
after your death, at the rate in effect from time to time during such period
pursuant to this Agreement (including any increases pursuant to Section 2).
(b) This Agreement shall be terminated, at the
option of the Company, if you are unable to perform a substantial portion of
your duties hereunder for any 180 days (whether or not consecutive) during any
period of 365 consecutive days by reason of physical or mental disability.
Notwithstanding the foregoing, the Company shall continue to pay to you, until
six months after termination of your employment due to such disability, your
Base Salary at the rate in effect from time to time during such period pursuant
to this Agreement (including any increases pursuant to Section 2), but less any
amounts paid to you pursuant to any disability policy sponsored by the Company.
For purposes of this Agreement, "physical or mental disability" shall mean your
inability, due to health reasons, to discharge properly your duties of
employment, supported by the opinion of a physician
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reasonably satisfactory to both you and the Company. If the parties do not agree
on a mutually satisfactory physician within ten days of written demand by one or
the other, a physician shall be selected by the president of the Pennsylvania
Medical Association, and the physician shall, within 30 days thereafter, make a
determination as to whether disability exists and certify the same in writing.
The services of the physician shall be paid for by the Company. You shall fully
cooperate with the examining physician including submitting yourself to such
examinations as may be requested by the physician for the purpose of determining
whether you are disabled.
(c) This Agreement shall terminate immediately
upon the Company's sending you written notice terminating your employment
hereunder for Cause. "Cause", as used herein, shall mean: (i) your conviction of
a felony (other than a traffic violation); (ii) your continued material breach
of any obligations under this Agreement 30 days after the Company has given you
notice thereof in reasonable detail, if such breach has not been cured by you
during such period; or (iii) your gross negligence or willful misconduct with
respect to your duties or gross misfeasance of office.
(d) You shall have the right to terminate this
Agreement effective at any time by giving at least six month's prior written
notice of termination to the Company.
(e) Upon termination of this Agreement for any
reason, in addition to any other rights or benefits to which you
may be entitled under this Agreement, you shall be paid all
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Accrued Obligations through the date of termination. Accrued Obligations shall
mean (i) your Base Salary through the date of termination, (ii) any annual bonus
earned pursuant to the terms of any applicable incentive compensation or bonus
plans of the Company but not yet paid with respect to any fiscal year completed
prior to termination, (iii) a prorated annual bonus for the fiscal year in which
termination occurs equal to the product of (x) the annual bonus paid to you for
the last full fiscal year of the Company multiplied by (y) a fraction, the
numerator of which is the number of days in the current fiscal year during which
you were employed by the Company, and the denominator of which is 365; and (iv)
any accrued vacation pay not yet paid by the Company; PROVIDED, that if
termination is by the Company for Cause or by you voluntarily, the term "Accrued
Obligations" will not include (iii) above. Upon termination, (w) you shall also
be entitled to all rights and benefits under benefit and incentive plans (other
than those relating to the annual bonus) in accordance with the respective terms
of the plans; (x) you shall be reimbursed for all of your business expenses
incurred prior to termination in accordance with Section 7 above; (y) the
Company shall, at your request within 15 days after termination and at your
expense, assign to you the lease and any related purchase option for the
automobile provided to you pursuant to Section 4(e), provided such lease and
purchase option is assignable; and (z) to the extent the Company's life
insurance plan has a conversion option available upon termination of employment,
the Company shall make such option available to you. For purposes of
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(ii) above, a bonus shall be deemed to be earned upon completion of the fiscal
year to which it relates regardless of whether the Compensation Committee has
approved bonuses for such year as of the date of termination.
(f) If your employment hereunder shall be
terminated by the Company (i) without Cause, other than pursuant to Section
11(a) or 11(b), or (ii) as a result of nonrenewal pursuant to a Termination
Notice given by the Company under Section 1, then in addition to any other
rights or benefits to which you may be entitled, the Company shall, for a period
of one year after termination, (i) continue to pay you your Base Salary at the
rate in effect from time to time during such one-year period pursuant to Section
2, (ii) continue to provide you with a leased automobile pursuant to Section
4(e), and (iii) continue all other benefits provided to you prior to termination
(except not including any bonus with respect to the period after termination).
The compensation under this Section 11(f) shall not be payable in the event of a
Change of Control Termination, which shall be governed by the terms of Exhibit A
hereto. Nothing herein shall limit or affect any rights you may have in the
event of a termination of this Agreement by the Company in violation of its
terms.
12. ENTIRE AGREEMENT; MODIFICATION; CONSTRUCTION.
This Agreement, together with Exhibit A hereto, constitutes the
full and complete understanding of the parties, and supersedes
all prior agreements and understandings, oral or written, between
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the parties, with respect to the subject matter hereof. Exhibit A is hereby
incorporated by reference and made a part of this Agreement. Each party to this
Agreement acknowledges that no representations, inducements, promises or
agreements, oral or otherwise, have been made by either party, or anyone acting
on behalf of either party, which are not embodied or referred to herein. This
Agreement may not be modified or amended except by an instrument in writing
signed by the party against which enforcement thereof may be sought.
13. SEVERABILITY. Any term or provision of this Agreement that
is held to be invalid or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of that invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement or affecting the validity or enforceability of
any of the terms or provisions of this Agreement in any other jurisdiction.
14. WAIVER OF BREACH. The waiver by either party of a
breach of any provision of this Agreement, which waiver must be
in writing to be effective, shall not operate as or be construed
as a waiver of any subsequent breach.
15. NOTICES. All notices hereunder shall be in
writing and shall be sent by messenger or by certified or
registered mail, postage prepaid, return receipt requested, if to
you, to your residence set forth above, and if to the Company, to
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the address set forth above with copies to the Chief Financial Officer, at the
Company's address, and to Proskauer Rose Goetz & Mendelsohn LLP, 1585 Broadway,
New York, New York 10036, Attention: Steven L. Kirshenbaum, Esq., or to such
other address as either party to this Agreement shall specify to the other.
16. ASSIGNABILITY; BINDING EFFECT. This Agreement shall not be
assignable by either party, except that it may be assigned to an acquiror of all
or substantially all of the assets of the Company, subject to your rights
arising from a Change of Control as provided in Exhibit A. This Agreement shall
be binding upon and inure to the benefit of you, your legal representatives,
heirs and distributees, and shall be binding upon and inure to the benefit of
the Company, its successors and assigns.
17. GOVERNING LAW. All questions pertaining to the
validity, construction, execution and performance of this
Agreement shall be construed and governed in accordance with the
laws of the Commonwealth of Pennsylvania, without giving effect
to the conflicts or choice of law provisions thereof.
18. ARBITRATION. Any controversy or claim arising out
of or relating to this contract, or the breach thereof, shall be
settled in Philadelphia, Pennsylvania or other mutually agreed
location, by arbitration administered by the American Arbitration
Association under its Commercial Arbitration Rules, and judgment
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on the award rendered by the arbitrator(s) may be entered in any
court having jurisdiction thereof.
19. HEADINGS. The headings in this Agreement are
intended solely for convenience of reference and shall be given
no effect in the construction or interpretation of this
Agreement.
20. COUNTERPARTS. This Agreement may be executed in
several counterparts each of which shall be deemed to be an
original but all of which together shall constitute one and the
same instrument.
If this letter correctly sets forth our understanding, please
sign the duplicate original in the space provided below and return it to the
Company.
CHARTER POWER SYSTEMS, INC.
By:/s/ Stephen E. Markert, Jr.
----------------------------
Agreed as of the date first above written:
/s/ Alfred Weber
- ----------------------------------
Alfred Weber
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EXHIBIT A TO EMPLOYMENT AGREEMENT ("AGREEMENT")
OF ALFRED WEBER DATED AS OF APRIL 1, 1996
I. SPECIAL TERMINATION PROVISIONS. In the event a Change of
Control (as defined below) occurs, and within twenty-four months after such
Change of Control: (a) the Executive's employment is terminated pursuant to a
Termination for Good Reason (as defined below); or (b) the Executive's
employment with the Company is terminated by the Company for any reason other
than death, disability or for Cause pursuant to Sections 11(a), (b) or (c) of
the Agreement; or (c) the Executive's employment is terminated or this Agreement
is not renewed due to a Termination Notice given by the Company, as provided in
Section 1(a) of the Agreement (the events under (a), (b) and (c) herein
collectively called a "Change of Control Termination"), the Executive shall be
entitled to receive the payments and benefits set forth in Section III below.
II. DEFINITIONS. (a) CHANGE OF CONTROL. For
purposes of the Agreement, a "Change of Control" shall be deemed
to have occurred if: (i) any person (as defined in Section 3(a)(9) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and as used in
Sections 13(d) and 14(d) thereof)), excluding the Company, any "Subsidiary" and
any employee benefit plan sponsored or maintained by the Company or any
Subsidiary (including any trustee of any such plan acting in his capacity as
trustee), but including a "group" as defined in Section 13(d)(3) of the Exchange
Act, becomes the beneficial
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owner of shares of the Company having at least thirty percent (30%) of the total
number of votes that may be cast for the election of directors of the Company;
(ii) the shareholders of the Company shall approve any merger or other business
combina tion of the Company, sale of all or substantially all of the Company's
assets or combination of the foregoing transactions (a "Transaction"), other
than a Transaction involving only the Company and one or more of its
Subsidiaries, or a Transaction immediately following which the shareholders of
the Company immediately prior to the Transaction continue to have a majority of
the voting power in the resulting entity (excluding for this purpose any
shareholder owning directly or indirectly more than ten percent (10%) of the
shares of the other company involved in the Transaction) and no person is the
beneficial owner of 30% of the shares of the resulting entity as contemplated by
Section II(a)(i) above, or (iii) within any twenty-four (24) month period
beginning on or after the date hereof, the persons who were directors of the
Company immediately before the beginning of such period (the "Incumbent
Directors") shall cease to constitute at least a majority of the Board or the
board of directors of any successor to the Company, provided that any director
who was not a director as of the date hereof shall be deemed to be an Incumbent
Director if such director was elected to the Board by, or on the recommendation
of or with the approval of, at least two-thirds of the directors who then
qualified as Incumbent Directors either actually or by prior operation of this
Section II(a)(iii), unless such election, recommendation or approval was
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the result of an actual or threatened election contest of the type contemplated
by Regulation 14a-11 promulgated under the Exchange Act or any successor
provision. Notwithstanding the foregoing, no Change of Control of the Company
shall be deemed to have occurred for purposes of this Agreement by reason of any
actions or events in which the Executive participates in a capacity other than
in his capacity as an executive or director of the Company.
(b) TERMINATION FOR GOOD REASON. For purposes of
the Agreement, a Termination for Good Reason means a termination by Executive by
written notice given within ninety (90) days after the occurrence of the Good
Reason event. A notice of Termination for Good Reason shall indicate the
specific termination provision in Section II(c) relied upon and shall set forth
in reasonable detail the facts and circumstances claimed to provide a basis for
Termination for Good Reason. The failure by Executive to set forth in such
notice any facts or circumstances which contribute to the showing of Good Reason
shall not waive any right of Executive hereunder or preclude Executive from
asserting such fact or circumstance in enforcing his rights hereunder. The
notice of Termination for Good Reason shall provide for a date of termination
not less than ten (10) nor more than sixty (60) days after the date such Notice
of Termination for Good Reason is given.
(c) GOOD REASON. For purposes of the Agreement,
"Good Reason" shall mean the occurrence, without Executive's
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express written consent, of any of the following circumstances, unless such
circumstances are fully corrected prior to the date of termination specified in
the notice of Termination for Good Reason as contemplated in Section II(b)
above: (i) Any material diminution of Executive's positions, duties or
responsibilities hereunder (except in each case in connection with the
termination of Executive's employment for Cause pursuant to Section 11(c) of the
Agreement or due to disability or death pursuant to Sections 11(a) or 11(b) of
the Agreement, or temporarily as a result of Executive's illness or other
absence), or the assignment to Executive of duties or responsibilities that are
inconsistent with Executive's position as Chairman of the Board, President and
Chief Executive Officer; (ii) Removal of, or the nonreelection of, the Executive
from the officer positions with the Company specified herein; (iii) Relocation
of the Company's principal United States executive offices to a location more
than fifty (50) miles from his residence at the time of the relocation; (iv)
Failure by the Company, after a Change of Control, (A) to continue any bonus
plan, program or arrangement in which Executive is entitled to participate
immediately prior to the Change of Control (the "Bonus Plans"), provided that
any such Bonus Plans may be modified at the Company's discretion from time to
time but shall be deemed terminated if (x) any such plan does not remain
substantially in the form in effect prior to such modification and (y) if plans
providing Executive with substantially similar benefits are not substituted
therefor ("Substitute Plans"), or (B) to continue Executive as a
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participant in the Bonus Plans and Substitute Plans on at least the same basis
as to potential amount of the bonus and substantially the same level of criteria
for achievability thereof as Executive participated in immediately prior to any
change in such plans or awards, in accordance with the Bonus Plans and the
Substitute Plans; (v) Any material breach by the Company of any provision of
this Agreement; (vi) If the Executive is on the Board of Directors at the time
of a Change of Control, Executive's removal from or failure to be reelected to
the Board of Directors thereafter or (vii) Failure of any successor to the
Company to assume in a writing delivered to Executive upon the assignee becoming
such, the obligations of the Company hereunder.
III. PAYMENTS AND BENEFITS. Upon a Change of Control
Termination, as provided in Section I(a) above, the Company shall
pay or provide the Executive the following payments and benefits:
(a) The Company shall pay to the Executive in a
lump sum within five business days after the date of termination any Accrued
Obligations.
(b) The Company shall pay to the Executive as
severance pay, not later than the fifth business day following the date of
termination of Executive's employment:
(i) a lump sum in an amount equal to two (2)
years of the Executive's Base Salary (or the aggregate Base Salary the Executive
would have earned for the Term Balance, as defined below, if greater); and
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(ii) a lump sum in an amount equal to the
product of (A) the annual bonus paid by the Company to the Executive based on
the average of the bonuses paid during the last two fiscal years of the Company
ending prior to the date of termination, multiplied by (B) the greater of two or
the number of years (including fractions) remaining in the Term Balance.
For purposes of this Exhibit, Term Balance shall mean the balance of the Initial
Term after termination, if termination occurs during the Initial Term.
(c) As additional severance, the Company shall
continue the participation of the Executive and the Executive's dependents for
the greater of two (2) years or the Term Balance (and at the same level and at
the same charges to the Executive) in all health, medical and accident, life and
other welfare plans (as defined in Section 3(1) of ERISA), in which the
Executive was participating immediately prior to the date of termination, except
for any disability plans, and shall provide the Executive with a leased
automobile pursuant to Section 4(e) for such period; PROVIDED, however, that to
the extent the Company's plans do not permit such continued participation or
such participation would have an adverse tax impact on such plans or on the
other participants in such plans, the Company may instead provide materially
equivalent benefits to the Executive outside of such plans; PROVIDED further
that under such circumstances, (i) medical insurance benefits may be provided by
the Company paying
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any COBRA premiums (COBRA coverage, in any event, to be measured from the date
of termination of employment) and (ii) if the Company is unable to continue the
Executive's life insurance coverage, it shall pay the Executive an amount equal
to twice the premium paid during the year prior to termination or if the
Executive converts the insurance to an individual policy, the Company shall pay
the premium for such insurance for two years.
The Executive shall complete such forms and take such physical
examinations as reasonably requested by the Company. To the extent the Executive
incurs any tax obligation as a result of the provisions of this paragraph (c)
that the Executive would not have incurred if the Executive remained an employee
of the Company and had continued to participate in the benefit plans as an
employee, the Company shall pay to the Executive, at the time the tax is due, an
amount to cover such taxes and the taxes on the amount paid to cover such taxes.
(d) To the extent permitted under the terms of
the applicable stock option or restricted stock plan (if any), any stock options
that would vest in the two (2) years after termination, or during the Term
Balance, if greater, and any restricted stock that would become nonforfeitable
in such two (2) year period or during the Term Balance, if greater, shall
immediately vest or become nonforfeitable, as the case may be, and the exercise
period of any stock options shall be extended as if the Executive remained
employed until the end of such additional two (2) years, or the Term Balance,
whichever is
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longer. In the event the foregoing sentence becomes applicable, the Company
agrees to cause the Board of Directors or plan committee to take all steps
necessary to implement the foregoing sentence.
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SECURED PROMISSORY NOTE
$1,057,138 April 30, 1996
FOR VALUE RECEIVED, ALFRED WEBER (the "Payor") hereby promises
to pay to CHARTER POWER SYSTEMS, INC., a Delaware corporation (the "Company"),
the principal sum of One Million Fifty Seven Thousand One Hundred Thirty Eight
($1,057,138), on April 29, 1997 (the "Due Date"). The Payor also agrees to pay
the Company interest on the outstanding principal amount hereof at the rate of
5.33% per annum, payable annually or upon prepayment of this Note in full.
Payments of principal and interest are to be made in lawful money of the United
States of America at the offices of the Company or at such other place as the
holder hereof shall designate.
The Payor may by written notice given to the Company prior to
the Due Date extend the Due Date to a date no later than April 29, 1999.
This Note is secured by the pledge by the Payor to the Company
of certain shares ("Shares") of common stock of the Company, in accordance with
the terms of a Pledge and Security Agreement (the "Security Agreement") between
the Payor and the Company, dated as of April 30, 1996, and in that respect is
subject to all of the terms, provisions and conditions of the Security
Agreement.
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If the Payor shall sell or transfer any of his Shares or the
proceeds thereof, or any cash (other than cash dividends), securities, or other
property at any time and from time to time receivable or otherwise distributed
in respect of or in exchange for any or all of the Shares (collectively, the
"Additional Shares"), there shall be due and payable, immediately upon the
consummation of the sale or transfer, a payment of principal hereunder in an
amount equal to the product obtained by multiplying the then outstanding
principal amount of this Note by a fraction, the numerator of which shall be the
number of Shares and Additional Shares then sold or transferred and the
denominator of which shall be the number of Shares and Additional Shares then
owned by the Payor (before giving effect to the sale or transfer). Nothing in
this paragraph shall be deemed to permit any sale or transfer by the Payor of
any Shares or Additional Shares, to the extent the same otherwise would be
prohibited by the provisions of any other agreement to which the Payor and the
Company are parties.
If: (i) the Payor fails to make any payment hereunder within
ten days after notice from the Company to the Payor that the payment is due; or
(ii) the Payor's employment with the Company is terminated for "Cause", as
defined in the employment agreement, dated as of April 1, 1996, between the
Payor and the Company, the then outstanding principal balance hereof, together
with all accrued and unpaid interest, shall be immediately due and payable.
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The Payor may, at any time and from time to time, prepay in
whole or part, without premium or penalty, the then outstanding principal
balance hereof and accrued but unpaid interest thereon.
The Payor hereby agrees to pay all reasonable costs, fees and
expenses incurred by the Company for the collection of all sums due hereunder,
including reasonable attorneys' fees and court costs. The Payor hereby waives
presentment, demand, notice of dishonor, protest and all other demands and
notices in connection with this Note (including any acceleration of the maturity
hereof) and further agrees that this Note shall be deemed to have been made
under and shall be governed by the laws of the State of New York in all respects
(without giving effect to the conflicts of law provisions thereof), including
matters of construction, validity and performance, and that none of its terms or
provisions may be waived, altered, modified or amended except to the extent the
Company may consent thereto in writing.
IN WITNESS WHEREOF, the Payor has executed and delivered this
Note to the Company as of the date first above written.
/s/ Alfred Weber
----------------------------
ALFRED WEBER
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OPTION
SECURED PROMISSORY NOTE
$664,400 April 30, 1996
FOR VALUE RECEIVED, ALFRED WEBER (the "Payor") hereby promises
to pay to CHARTER POWER SYSTEMS, INC., a Delaware corporation (the "Company"),
the principal sum of Six Hundred Sixty-four Thousand Four Hundred Dollars
($664,400.00), without interest, on October 31, 1997. Payment of principal is to
be made in lawful money of the United States of America at the offices of the
Company or at such other place as the holder hereof shall designate.
This Note is secured by the pledge by the Payor to the Company
of certain shares of common stock of the Company, in accordance with the terms
of a Pledge and Security Agreement (the "Security Agreement") between the Payor
and the Company, dated as of April 30, 1996, and in that respect is subject to
all of the terms, provisions and conditions of the Security Agreement.
This Note evidences a loan made by the Company to the Payor to
enable him to purchase an aggregate 110,000 shares of common stock of the
Company (the "Shares"). If the Payor shall sell or transfer any of his Shares or
the proceeds thereof, or any cash (other than cash dividends), securities, or
other property at any time and from time to time receivable or otherwise
distributed in respect of or in exchange for any or all of the Shares
(collectively, the "Additional Shares"), there
1
<PAGE>
shall be due and payable, immediately upon the consummation of the sale or
transfer, a payment of principal hereunder in an amount equal to the product
obtained by multiplying the then outstanding principal amount of this Note by a
fraction, the numerator of which shall be the number of Shares and Additional
Shares then sold or transferred and the denominator of which shall be the number
of Shares and Additional Shares then owned by the Payor (before giving effect to
the sale or transfer). Nothing in this paragraph shall be deemed to permit any
sale or transfer by the Payor of any Shares or Additional Shares, to the extent
the same otherwise would be prohibited by the provisions of any other agreement
to which the Payor and the Company are parties.
If: (i) the Payor fails to make any payment hereunder within
ten days after notice from the Company to the Payor that the payment is due; or
(ii) the Payor's employment with the Company is terminated for "Cause", as
defined in the employment agreement, dated as of April 1, 1996, between the
Payor and the Company; or (iii) a Default (as such term is defined in the
Security Agreement) shall have occurred under the Security Agreement (each of
the events listed in (i), (ii) and (iii) above being an "Event of Default"
hereunder), the then outstanding principal balance hereof shall be immediately
due and payable.
The Payor may, at any time and from time to time, prepay in
whole or part, without premium or penalty, the then outstanding principal
balance hereof.
2
<PAGE>
The Payor hereby agrees to pay all reasonable costs, fees and
expenses incurred by the Company for the collection of all sums due hereunder,
including reasonable attorneys' fees and court costs. The Payor hereby waives
presentment, demand, notice of dishonor, protest and all other demands and
notices in connection with this Note (including any acceleration of the maturity
hereof) and further agrees that this Note shall be deemed to have been made
under and shall be governed by the Laws of the State of New York in all respects
(without giving effect to the conflicts of law provisions thereof), including
matters of construction, validity and performance, and that none of its terms or
provisions may be waived, altered, modified or amended except to the extent the
Company may consent thereto in writing.
IN WITNESS WHEREOF, the Payor has executed and delivered this
Note to the Company as of the date first above written.
/s/ Alfred Weber
--------------------------
ALFRED WEBER
3
<PAGE>
PLEDGE AND SECURITY AGREEMENT
PLEDGE AND SECURITY AGREEMENT, dated April 30, 1996,
between ALFRED WEBER ("Pledgor") and CHARTER POWER SYSTEMS, INC.,
a Delaware corporation ("the Company").
WHEREAS, the Company has made loans (collectively, the "Loan")
to Pledgor on the date hereof (a) in the amount of $664,400 to purchase 60,000
shares (the "Option Shares") of Common Stock of the Company, par value $.01 per
share ("Common Stock"), upon the exercise of an option granted to him pursuant
to the Option Agreement dated May 30, 1989, as amended (the "Option Agreement"),
between Pledgor and the Company, and (b) in the amount of $1,057,138; and
WHEREAS, in order to induce the Company to make the Loan,
Pledgor has agreed to grant, and does hereby grant, to the company, a security
interest in the Option Shares.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements hereinafter contained, the parties hereto agree as follows:
1. CREATION OF SECURITY INTEREST. As security for
payment in full of the Loan, Pledgor hereby pledges,
hypothecates, assigns, transfers, sets over and delivers unto the
Company as collateral security, and hereby grants to the Company
1
<PAGE>
a first lien and security interest in, all of the Option Shares, the proceeds
thereof, and all cash (other than cash dividends, except to the extent expressly
provided herein), securities or other property at any time and from time to time
receivable or otherwise distributed in respect of or in exchange for any of the
Option Shares (all of such Option Shares, proceeds thereof, cash (other than
cash dividends, except to the extent expressly provided herein), securities and
other property hereinafter being referred to collectively as the "Collateral").
Concurrently with the execution of this Agreement, Pledgor is delivering to the
Company (i) all stock certificates representing the Option Shares and (ii) a
duly endorsed irrevocable stock power in blank therefor.
2. STOCK DIVIDENDS AND ADJUSTMENTS; VOTING RIGHTS. If, during
the term of this Agreement, any stock dividend, reclassification, stock split,
readjustment, warrant, option or right to acquire additional securities is
issued with respect to the Collateral or any part thereof, or any other change
is made in the capital structure of the Company, all new, substituted or
additional shares or securities that Pledgor shall become entitled to receive as
a result thereof promptly shall be delivered to the Company (together with
appropriate instruments of transfer duly endorsed in blank) and, from and after
the time Pledgor shall be entitled to receive the same, those shares and
securities shall be, and be deemed to be, part
2
<PAGE>
of the property pledged hereunder and included in the term Collateral as
defined herein. So long as a Default (as hereinafter defined) shall not have
occurred and be continuing, Pledgor shall be entitled to receive all cash
dividends payable with respect to, and to exercise all rights to vote, the
securities contained in the Collateral. Upon the occurrence and during the
continuance of a Default, the Company shall be entitled to receive all such cash
dividends and to exercise all such voting rights.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS.
Pledgor hereby represents, warrants and covenants that:
(a) Pledgor is and will be the sole legal and
equitable owner of the Collateral, and Pledgor has and will have
the right to transfer, pledge and deliver the Collateral to the
Company hereunder;
(b) there are and will be no outstanding liens,
encumbrances, or claims in respect of the Collateral other than
the security interest created by this Agreement;
(c) Pledgor will preserve and defend all right,
title and interest of the Company in and to the Collateral
against all claims thereon; and
(d) the pledge of the Collateral made hereby and
the delivery of the Collateral in accordance herewith are and will be effective
to vest in the Company a perfected, first priority security interest in the
Collateral as set forth herein.
3
<PAGE>
4. DEFAULT; REMEDIES. (a) A Default shall be deemed
to have occurred hereunder if:
(i) an Event of Default (as such term is defined
in the promissory notes evidencing the Loan (the "Notes")) shall
occur;
(ii) Pledgor sells, assigns, transfers or
otherwise disposes of, or grants a lien on or security interest in or option or
right with respect to, or otherwise encumbers the Collateral or any part thereof
or any interest therein, unless concurrently therewith Pledgor repays the Notes
to the extent required in accordance with the terms thereof;
(iii) Pledgor becomes insolvent, makes a general
assignment for the benefit of creditors, or files or has filed against him any
petition under any bankruptcy or insolvency law or any action for the
appointment of a receiver or trustee; PROVIDED, HOWEVER, that in the event of an
involuntary bankruptcy or insolvency proceeding, Pledgor shall have 60 days from
the date of filing thereof to stay such proceeding;
(iv) any of the Collateral shall be attached or
levied upon or seized in any legal proceedings, or held by virtue of any levy or
distraint, which attachment, levy or distraint shall not be vacated within 60
days, PROVIDED, HOWEVER, that any such attachment, levy or distraint shall not
constitute a Default so long as it is stayed; or
(v) Pledgor otherwise defaults in any material
respect in the observance or performance of any representation or
4
<PAGE>
other covenant or agreement contained herein or in the Note, and that default
continues for a period of ten days after notice thereof from the Company.
(b) If a Default shall have occurred and be continuing, the
Company shall be entitled, in addition to any other rights granted under the
Note, to exercise all of the rights and remedies with respect to the Collateral
of a secured party under the Uniform Commercial Code or any other applicable
law, all of which rights and remedies, to the full extent permitted by law,
shall be cumulative and not alternative. Pledgor agrees that 30 days shall
constitute reasonable notice of a sale or other disposition of any of the
Collateral. The remainder of the proceeds from any such sale or other
disposition, after deducting therefrom all expenses incurred in connection
therewith (including reasonable legal fees and expenses) and after payment in
full of Pledgor's obligations to the Company under the Note and this Agreement,
shall be paid over to Pledgor. The Company shall not sell or otherwise dispose
of a greater number of Option Shares or other Collateral than it reasonably
determines is necessary for the payment in full of Pledgor's obligations to the
Company under the Note and this Agreement, including all expenses incurred in
connection with such sale or other disposition. Pledgor further agrees that a
private sale of the Collateral on such terms as the Company approves shall be
deemed to be commercially reasonable: PROVIDED, HOWEVER, that the Company is
authorized in its absolute
5
<PAGE>
discretion to restrict the prospective purchasers to those persons who represent
and agree to the satisfaction of the Company and its counsel that they are
purchasing the Collateral for their own account, for investment, and not with a
view to or for sale in connection with a distribution in violation of the
Securities Act of 1933 or any other applicable law or regulation.
5. WAIVER OF RIGHTS OR REMEDIES. (a) The Company, by act,
delay, omission, acceptance of partial payment or otherwise, shall not be deemed
to have waived any rights or remedies hereunder or under the Note unless the
waiver is in writing and signed by the Company, and then only to the extent
therein set forth. A waiver by the Company of any right or remedy on any one
occasion, shall not be construed as a bar to or waiver of any such right or
remedy, or both, that the Company otherwise would have had on any future
occasion.
(b) To the full extent that Pledgor may lawfully so agree,
Pledgor agrees that he will not at any time plead, claim or take the benefit of
any moratorium or redemption law now or hereafter enforced, in order to prevent
or delay the enforcement of this Agreement or the application of any portion or
all of the Collateral as provided by this Agreement, and Pledgor, for himself
and all who may claim under Pledgor, as far as they now or hereafter lawfully
may, hereby waives the benefit of all such laws.
6
<PAGE>
6. AUTHORIZATION. The Company shall have and be entitled to
exercise all such powers hereunder as are specifically delegated to the Company
by the terms hereof, together with such powers as are reasonable incidental
thereto. The Company may execute any of its duties hereunder by or through
designees and shall be entitled to retain counsel and to act in reliance upon
the advice of such counsel concerning all matters pertaining to its duties
hereunder. Neither the Company, nor any director, officer or employee of the
Company, shall be liable to Pledgor for any action taken or omitted to be taken
by it or them hereunder in connection herewith, except for its or their own
negligence or willful misconduct or breach of this Agreement. The Company shall
be entitled to rely on 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.
7. FURTHER ASSURANCES. Pledgor agrees that he shall at the
request of the Company execute and deliver all such further assignments,
endorsements and other documents and take all such further action as the company
may reasonably request in order to effect the purposes and provisions of this
Agreement and to perfect, continue, better assure or confirm the rights of the
Company in the Collateral provided for hereunder.
8. ERMINATION. The security interest and assignment
created and granted hereunder shall terminate only when Pledgor
has fully satisfied all of his obligations hereunder and under
7
<PAGE>
the Note, and at that time all Collateral remaining in the possession of the
Company shall be returned to Pledgor, accompanied by appropriate stock powers.
Notwithstanding anything contained herein to the contrary, Pledgor may sell
Collateral free and clear of the security interest and assignment created and
granted hereunder, and the Company will cooperate with Pledgor in connection
with such sale, if concurrently with any such sale Pledgor repays the Notes to
the extent requred in accordance with the terms thereof.
9. NOTICES. Notices or other communications to either of the
parties shall be in writing and shall be deemed to have been duly and properly
given on the date such notices or other communications are (i) personally
delivered with receipt acknowledged, or (ii) received when mailed by registered
or certified mail, postage prepaid, return receipt requested, to the addresses
set forth below or to which other address as either party to this Agreement
shall specify to the other:
To Pledgor: Alfred Weber
2583 Cold Spring Road
Lansdale, PA 19446
To the Company: Charter Power Systems, Inc.
1400 Union Meeting Road
Blue Bell, PA 19422
Attention: Chief Financial Officer
-with a copy to-
Proskauer Rose Goetz & Mendelsohn LLP
1585 Broadway
New York, NY 10036
Attention: Steven L. Kirshenbaum, Esq.
8
<PAGE>
10. MISCELLANEOUS. (a) This Agreement shall be governed by and
interpreted under the laws of the State of New York applicable to contracts made
and performed therein without regard to the principles of conflict of laws
thereof. If any term or provision of this Agreement shall, for any reason, be
held to be illegal, invalid or unenforceable under the laws of any governmental
authority to which this Agreement is subject, the term or provision shall be
deemed severed from this Agreement, and the remaining terms and provisions shall
be enforceable, to the fullest extent, permitted by law.
(b) This Agreement shall inure to the benefit of and shall be
binding upon the respective successors, assigns and legal representatives of the
parties, except that Pledgor shall not be permitted to assign this Agreement or
any interest herein or in the Collateral, or any part thereof, or otherwise
pledge, encumber or grant any option with respect to the Collateral, or any part
thereof, or any cash or property held by the Company as Collateral under this
Agreement, except to the extent provided herein. The Company may assign this
Agreement, any interest herein or in the Collateral or any part thereof, to any
wholly owned affiliated entity of the Company.
(c) Captions used herein are inserted for reference
purposes only and shall not affect the interpretation or meaning
of this Agreement.
9
<PAGE>
(d) 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 agreement.
(e) This Agreement may not be changed, modified or, except as
provided in Section 8 hereof, terminated, in whole or in part, except by a
written instrument signed by the party against whom any such change,
modification or termination is sought to be enforced.
IN WITNESS WHEREOF, Pledgor has executed this Agreement on the
date hereinabove first written.
/s/ Alfred Weber
----------------------------
Alfred Weber
TO AND ACCEPTED:
CHARTER POWER SYSTEMS, INC.
By: /s/ Stephen E. Markert, Jr.
- ----------------------------------
Title:
10
<PAGE>
Charter Power Systems, Inc.
1400 Union Meeting Road
Blue Bell, Pennyslvania 19422
April 30, 1996
Mr. Alfred Weber
2583 Cold Spring Road
Lansdale, PA 19446
Dear Mr. Weber:
We refer to the Promissory Note (the "Note"), dated April 30,
1996, by you to us in the original principal amount of $1,057,138. We hereby
agree to reimburse you for all interest on the Note accruing through the earlier
of April 29, 1997 or the date of prepayment of the Note, plus an amount equal to
the taxes payable by you on any payments made to you pursuant to this letter.
Very truly yours,
CHARTER POWER SYSTEMS, INC.
By:/s/ Stephen E. Markert, Jr.
-------------------------------
Title:
Agreed to:
/s/ Alfred Weber
- ----------------------------------
ALFRED WEBER
<PAGE>
EXHIBIT 11
CHARTER POWER SYSTEMS, INC. AND SUBSIDIARIES
EARNINGS PER SHARE COMPUTATIONS
(Dollars and shares in thousands)
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Three months ended Six months ended
July 31, July 31,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET INCOME ................................. $2,650 $3,930 $6,296 $7,105
====== ====== ====== ======
Weighted average number of common
shares outstanding ....................... 6,441 5,979 6,363 5,973
Effect of shares issuable under stock
option plan .............................. 161 455 213 441
------ ------ ------ ------
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING (PRIMARY) ............. 6,602 6,434 6,576 6,414
====== ====== ====== ======
NET INCOME PER COMMON AND
COMMON EQUIVALENT SHARE
(PRIMARY) ............................... $ 0.40 $ 0.61 $ 0.96 $ 1.11
====== ====== ====== ======
Weighted average number of common
shares outstanding ....................... 6,441 5,979 6,363 5,973
Effect of shares issuable under stock
option plan .............................. 161 468 213 448
------ ------ ------ ------
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING (FULLY
DILUTED) ................................. 6,602 6,447 6,576 6,421
====== ====== ====== ======
NET INCOME PER COMMON AND
COMMON EQUIVALENT SHARE
(FULLY DILUTED) .......................... $ 0.40 $ 0.61 $ 0.96 $ 1.11
====== ====== ====== ======
</TABLE>
<PAGE>
EXHIBIT 15
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
re: Charter Power Systems, Inc. and Subsidiaries
Registration on Forms S-8 (Registration No. 33-31978,
No. 33-71390 and No. 33-86672)
We are aware that our report dated August 29, 1996 on our review of interim
financial information of Charter Power Systems, Inc. and Subsidiaries for the
period ended July 31, 1996 and included in the Company's quarterly report on
Form 10-Q for the quarter then ended is incorporated by reference in the
registration statements of Charter Power Systems, Inc. and Subsidiaries on Forms
S-8 (Registration No. 33-31978, No. 33-71390 and No. 33-86672). Pursuant to Rule
436(c) under the Securities Act of 1933, this report should not be considered a
part of the registration statement prepared or certified by us within the
meaning of Sections 7 and 11 of that Act.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
September 13, 1996
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF 7/31/96 AND STATEMENT OF INCOME FOR THE PERIOD
ENDED 7/31/96 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-END> JUL-31-1996
<CASH> 3024
<SECURITIES> 0
<RECEIVABLES> 39865
<ALLOWANCES> 1429
<INVENTORY> 41764
<CURRENT-ASSETS> 92012
<PP&E> 49061
<DEPRECIATION> 0
<TOTAL-ASSETS> 157942
<CURRENT-LIABILITIES> 40010
<BONDS> 29752
0
0
<COMMON> 65
<OTHER-SE> 75473
<TOTAL-LIABILITY-AND-EQUITY> 157942
<SALES> 134177
<TOTAL-REVENUES> 134177
<CGS> 103775
<TOTAL-COSTS> 103775
<OTHER-EXPENSES> 4036
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 553
<INCOME-PRETAX> 9590
<INCOME-TAX> 3294
<INCOME-CONTINUING> 6296
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6296
<EPS-PRIMARY> .96
<EPS-DILUTED> .96
</TABLE>
