<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended September 29, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _______ to ________
Commission file number 0-19717
WPI GROUP, INC.
---------------
(Name of small business issuer in its charter)
New Hampshire 02-0218767
------------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1155 Elm Street, Manchester, New Hampshire 03101
- ------------------------------------------ -----
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (603) 627-3500
--------------
Securities registered under Section 12(b) of the Act: None
----
Securities registered under Section
12(g) of the Act: Common Stock, par value $.01 per share
--------------------------------------
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or for such
shorter period that the issuer was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes X No
--- ---
Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of the issuer's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this form 10-KSB or any
amendment to this form 10-KSB, or any amendment to this Form 10-KSB [ ]
Issuer's revenues for its most recent fiscal year were $47,498,058.
As of December 5, 1996, the aggregate market value of the 5,057,958 outstanding
shares of voting stock held by non-affiliates of the issuer was $37,934,685.
As of December 5, 1996, 5,952,922 shares of the Issuer's Common Stock, par value
$.01 per share, were issued and outstanding.
Documents Incorporated by Reference
-----------------------------------
Portions of the following documents are incorporated by reference in this
report Form 10-KSB:
1) Annual Report to Shareholders for fiscal year ended September 29, 1996
(Part II).
2) Proxy Statement dated December 12, 1996 for the Issuer's Annual
Shareholder's Meeting to be held on February 12, 1997 (Part III).
<PAGE> 2
PART I
ITEM 1. DESCRIPTION OF BUSINESS
- -------------------------------
GENERAL
- -------
WPI Group, Inc. is a diversified technology company serving a number of
commercial markets worldwide. The Company is organized into two operating
groups: the Information Solutions Group which develops, manufactures and markets
rugged, hand-held, programmable terminals, as well as DOS and Windows-based
computers, diagnostic tools and expert decision support and diagnostic software;
and the Power Solutions Group which designs, manufactures and markets electronic
ballasts, electro-mechanical linear actuators (solenoids), transformers and
power systems.
The Company was incorporated in New Hampshire in 1948 and its corporate
headquarters are located at 1155 Elm Street, Manchester, New Hampshire, 03101.
The Company's telephone number is (603) 627-3500.
Information Solutions Group
- ---------------------------
The Information Solutions Group, consisting of WPI Termiflex, Inc., WPI Micro
Processor Systems, Inc., WPI DecisionKey, Inc. and WPI Oyster Terminals, Limited
designs, manufactures and markets programmable DOS-based terminals and hand-held
computers used in telecommunications, utilities and industrial automation
applications; and diagnostic tools, expert decision support and diagnostic
software, and other devices used in the transportation and other industries.
Power Solutions Group
- ---------------------
The Power Solutions Group, consisting of WPI Electronics, WPI Power Systems and
WPI Magnetec, produces large magnetic transformers and power systems used in
elevators, thermal processing and industrial microwave applications; solenoids
used in industries such as instant photography, dot matrix printers and ground
fault safety devices; and electronic lamp ballasts used to power arc lamps used
in multi-media projection equipment, medical endoscopes, entertainment, track
and security lighting applications.
BUSINESS DEVELOPMENT
- --------------------
The Company's mission is to grow its business, both internally and through
acquisitions of complementary business and product lines. Internally, the
Company grows its business by delivering products to targeted niche markets
using its engineering expertise, high quality manufacturing and reliable service
and support to its customers. The Company seeks to provide innovative,
cost-effective solutions to its customers' requirements in specialized growing
markets.
In September 1993 the Company acquired the solenoid product line from Magnetec
Corporation, a Connecticut-based manufacturer of dot matrix printers.
In May 1994, the Company completed the acquisition of all of the outstanding
stock of Termiflex Corporation, a Merrimack, New Hampshire-based manufacturer of
very rugged hand-held and panel-mounted programmable terminals. The acquisition
allowed the Company to expand into the rapidly growing market for industrial
information solutions. Later that year in September 1994, the Company acquired
all of the outstanding stock of Micro Palm Computers, Inc., a Clearwater,
Florida-based manufacturer of rugged, DOS/386 compatible hand-held PC's designed
for use in hostile, field-based applications. Micro Palm's operations were moved
to Termiflex's Merrimack, New Hampshire facility in 1994.
In November 1995 the Company acquired all of the outstanding stock of Micro
Processor Systems, Inc. ("MPSI"), a Michigan-based manufacturer of diagnostic
and information related systems and equipment, including Windows[Registered
Trademark] based computers, for the automotive and heavy duty vehicle
industries. Included in that acquisition was AI Squared (now known as WPI
DecisionKey, Inc.), a developer and marketer of advanced diagnostic and
decision support software. These acquisitions gave the Company a significant
presence in the growing market for information systems in the transportation
industry.
<PAGE> 3
In July 1996 the Company acquired all of the outstanding stock of Oyster
Terminals Limited, a U.K.-based manufacturer of rugged hand-held terminals,
including RF terminals, used in a variety of industries. Oyster is widely-known
in Europe and the United States for the wide variety of options available on its
standard terminals and for its ability to customize for unique applications.
PRODUCT DEVELOPMENT
- -------------------
Management believes that its commitment to product development in its
Information Solutions and Power Solutions groups is a critical element of its
strategy aimed at exploiting niche markets. The Company's product development
activities are focused on the design of products identified by both its
customers and its sales and marketing groups. A key element of the Company's
product development activities is the enhancement of product offerings based on
its existing technologies.
RESEARCH AND PRODUCT DEVELOPMENT
- --------------------------------
The Company charged to operations approximately $954,000, $1,509,000 and
$2,940,000 for research and new product development in fiscal 1994, 1995 and
1996, respectively. Expenditures on research and new product development
represented 5.6%, 5.8% and 6.2% of net revenues in fiscal 1994, 1995 and 1996,
respectively. These charges represent the Company's continuing efforts to
develop new technologies for future products.
CUSTOMERS
- ---------
For the year ended September 29, 1996, two customers accounted for 11% and 10%,
respectively, of total Company sales. For the years ended September 24, 1995 and
September 25, 1994, one of these customers accounted for 12% and 17%,
respectively, of total Company sales.
PATENTS AND PROPRIETARY INFORMATION
- -----------------------------------
The Company has a number of United States and foreign patents on certain
products. The Company also relies on trade secrets, in-house expertise and
technological advancement to maintain its competitive position.
The Company does not believe patent protection to be significant to its current
operations. However, the Company considers its patents to be a strong deterrent
against unauthorized copying of its products and key product attributes. The
Company believes in vigorously protecting its rights under its patents.
Similarly, the Company and its subsidiaries have certain registered trademarks,
none of which are considered significant to current operations.
COMPETITION
- -----------
Lamp Ballasts
- -------------
The major competitive factors in the lamp ballast market are performance
features, reliability, physical design characteristics and cost. The Company's
principal competition in this market segment has been from manufacturers of
magnetic lamp ballasts and manufacturers of lighting equipment using arc lamps
who manufacture their own lamp ballasts.
The Company has very limited competition in the market for ballasts in
endoscopes incorporating metal halide arc lamps. The Company's principal sources
of competition in the metal halide lamp ballast market outside of endoscopes are
manufacturers of magnetic lamp ballasts. In such applications where cost is a
more important factor than flicker-free illumination and size and weight,
magnetic lamp ballasts are often preferred over the Company's electronic
Safe-Arc ballast.
The Company has developed and is presently selling a line of xenon lamp ballasts
for use in the medical endoscope and entertainment market in order to enhance
its competitive position and increase its market share. There are companies
presently selling xenon ballasts. These companies primarily sell their ballasts
as a component of a light source and principally serve lower volume users who do
not have the resources or capability to design their own complete light source.
<PAGE> 4
While the Company currently has very limited competition in the electronic metal
halide ballast market, there can be no assurance that the Company will not face
effective competition in the future from parties who may have greater resources
than the Company.
Custom Electronic Power Supplies and Power Systems
- --------------------------------------------------
The Company has established competitors in the markets for custom electronic
power supplies and power systems. The major competitive factors in those markets
are applications knowledge, product reliability and fully integrated design and
manufacturing. Certain competitors in the custom electronic power supply market
may have greater financial, technological and marketing resources than the
Company.
Electro-Mechanical Linear Actuators (Solenoids)
- -----------------------------------------------
The Company has several established competitors in the market for solenoids,
some of which are larger than the Company and some of which are smaller than the
Company. The major competitive factors in the market for solenoids are
reliability, applications knowledge, delivery schedule and price. The Company
believes that it competes favorably against its competitors with respect to each
of those factors. Reliability is a key competitive factor because while the
price of a solenoid is relatively small in relation to the components that go
into a product, the failure of the solenoid will, in most cases, render the
entire product in which it is incorporated unusable. Certain competitors in the
solenoid market may have greater financial, technical and marketing resources
than the Company.
Programmable and DOS-based, Hand-Held Terminals and Computers
- -------------------------------------------------------------
The major competitive factors in the programmable and DOS-based hand-held
terminals and computer markets are product performance, custom features,
software support and ruggedness. The Company has several competitors in
specified niche markets. The data entry terminal market is served by companies
with significantly greater resources than the Company, which have developed
terminals to complement their own product line and to be sold as a stand-alone
product. Many of the Company's potential customers now satisfy their control
panel needs by designing and producing their own packaged units or conventional
terminals. Management believes that the Company competes effectively in this
market by offering products that are rugged and easily customized and by
providing excellent customer service.
Diagnostic Systems, Computers, Software and Other Devices
- ---------------------------------------------------------
Currently these products are sold primarily to the transportation industry. The
major competitive factors in this market include product features, portability,
product knowledge and customer service. The Company has a number of competitors
in certain segments of the transportation market. Some of the competitors have
significantly greater resources than the Company. Management believes that the
Company competes effectively in these markets by offering innovative, rugged and
portable products and by providing excellent customer service.
EMPLOYEES
- ---------
The Company employs 402 people, 231 of whom work in manufacturing, 59 of whom
work in administration, 62 of whom work in product development and 50 of whom
work in sales and marketing. None of the Company's employees are represented by
a union, and management believes that the Company's employee relations are good.
ITEM 2. DESCRIPTION OF PROPERTY
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The Company currently owns and operates in properties located in Warner and
Merrimack, New Hampshire and Newport, Wales, U.K.. The Warner property is
comprised of approximately 80,000 square feet of modern facilities. The
Merrimack property is comprised of approximately 38,000 square feet of modern
facilities. The Newport property is comprised of approximately 10,000 square
feet of manufacturing facilities. The Company leases approximately 17,000 square
feet of modern facilities in Sterling Heights, Michigan. The Company leases
approximately 10,000 square feet of office space in Manchester, New Hampshire
which houses its corporate offices, approximately 3,000 square feet in Newport,
Wales, U.K. which houses sales and marketing offices and approximately 500
square feet of office space in Tampa, Florida, which houses sales offices. The
Company believes that its existing space is adequate for its current needs.
<PAGE> 5
ENVIRONMENTAL PROTECTION
- ------------------------
The Company believes that its manufacturing operations and properties are in
material compliance with existing federal, state and local provisions enacted to
protect the environment. Such compliance has been achieved without material
effect on the Company's earnings or competitive position.
ITEM 3. LEGAL PROCEEDINGS
- -------------------------
The Company is not a party to any litigation that in management's opinion would
have a material adverse effect upon the Company's financial position or results
of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- -----------------------------------------------------------
Not applicable.
PART II
ITEM 5. MARKET FOR ISSUER'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
- ------------------------------------------------------------------------
The information required by this item is incorporated herein by reference to the
information captioned "Corporate Information" and "Shareholder Information" on
the inside back cover of the Issuer's Annual report to Shareholders for the
fiscal year ended September 29, 1996 (the "1996 Annual Report").
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- -----------------------------------------------------------------------
RESULTS OF OPERATIONS
- ---------------------
The information required by this item is incorporated herein by reference to the
information captioned "Management's Discussion and Analysis of Financial
Condition and Results of Operations" on page 13 of the 1996 Annual Report.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ---------------------------------------------------
The financial statements of the Issuer required by this item are incorporated
herein by reference to pages 14 through 23 of the 1996 Annual Report.
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE ISSUER
- ------------------------------------------------------
(a) DIRECTORS. The information with respect to directors required by this item
is incorporated herein by reference to pages 2 and 3 of the Issuer's Proxy
Statement dated December 12, 1996 for the annual shareholders meeting to be
held on February 12, 1997 (the "1996 Proxy Statement").
(b) EXECUTIVE OFFICERS. The information with respect to executive officers
required by this item is set forth below:
EXECUTIVE OFFICERS OF THE ISSUER
NAME AGE POSITION WITH THE COMPANY
- ---- --- -------------------------
Michael Foster 61 Chairman of the Board of Directors and
Chief Executive Officer
Dennis M. Deegan 52 President and Chief Operating Officer
Dr. John K. Allen 44 Vice President, Power Solutions Group
Karen S. Hebert 36 Vice President, Human Resources
Timothy G. Jones 52 Vice President, Information Solutions
Group
Michael B. Tule 35 Vice President, General Counsel and
Secretary
<PAGE> 6
Michael Foster, Chairman of the Board of Directors and Chief Executive Officer,
led the leveraged buy-out of the Company from Walker Magnetics Group, Inc. in
October 1988.
Dennis M. Deegan has served as President and Chief Operating Officer of the
Company since June 1996. From October 1988 to June 1996, Mr. Deegan served as
Executive Vice President, Treasurer and Chief Financial Officer.
Dr. John K. Allen has served as Vice President, Power Solutions Group since
November 1995. From August 1995 he served as Corporate Vice President of
Planning and Development. From December of 1994 to August 1995, he served as
Director of Planning and Development. From 1985 to December 1994, Dr. Allen was
President of his own consulting firm, Allen Associates.
Karen S. Hebert has served as Vice President of Human Resources since August
1995. From November 1993 to August 1995, she served as Director of Human
Resources. From 1987 until 1993, Ms. Hebert served as Manager of Human Resources
with the Company.
Timothy G. Jones has served as Vice President, Information Solutions Group since
November 1995. Prior to this date, Mr. Jones served as Assistant to the
Chairman. From 1993 to 1995, Mr. Jones was President of Ionic Fuel Technology,
Inc. From 1991 to 1995, Mr. Jones was President of Plume & Atwood, Inc..
Michael B. Tule has served as Vice President and General Counsel of the Company
since March 1996. Mr. Tule has served as Secretary since December 1994. From
1987 to 1996, Mr. Tule was an attorney at McLane, Graf, Raulerson & Middleton,
Professional Association.
ITEM 10. EXECUTIVE COMPENSATION
- -------------------------------
The information required under this item is incorporated herein by reference to
pages 5, 6 and 7 of the 1996 Proxy Statement.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- -----------------------------------------------------------------------
The information required by this item is incorporated herein by reference to
page 3 of the 1996 Proxy Statement.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- -------------------------------------------------------
None.
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
- ------------------------------------------------------------------------
(a) Documents filed as part of the Report:
(1) Financial Statements of the Issuer and Report of Independent
Public Accountants thereon incorporated herein by reference to
pages 14 through 23 of the 1996 Annual Report.
Consolidated Balance Sheets, September 29, 1996 and September
24, 1995.
Consolidated Statements of Income for the Years Ended
September 29, 1996 and September 24, 1995.
Consolidated Statements of Stockholder's Equity for the Years
Ended September 29, 1996 and September 24, 1995.
Consolidated Statements of Cash Flows for the Years Ended
September 29, 1996 and September 24, 1995.
Notes to Consolidated Financial Statements.
Report of Independent Public Accountants.
<PAGE> 7
(2) Exhibits:
Incorporated by reference to the Exhibit Index at the end of
this report.
(b) The Issuer has filed the following reports on Form 8-K since the
beginning of the quarter ended September 29, 1996:
NONE
<PAGE> 8
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Issuer has duly caused this report to be signed on its
behalf of the undersigned, thereunto duly authorized.
WPI GROUP, INC.
December 20, 1996 By: /s/ Michael Foster
--------------------
Chairman
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the Issuer in
the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Michael Foster Director, Chairman December 20, 1996
- ------------------ and Chief Executive Officer
(Principal Executive Officer)
/s/ Dennis M. Deegan Director, President and December 20, 1996
- -------------------- Chief Operating Officer
(Principal Financial and
Accounting Officer)
/s/ Peter D. Danforth Director December 20, 1996
- ----------------------
Peter D. Danforth
/s/ Paul G. Giovacchini Director December 20, 1996
- -----------------------
Paul G. Giovacchini
/s/ Dennis M. Deegan for Director December 20, 1996
- ------------------------
Irving Gutin *
/s/ Robert C. McCray Director December 20, 1996
- --------------------
Robert C. McCray
/s/ Bernard H. Tenenbaum Director December 20, 1996
- ------------------------
Bernard H. Tenenbaum
* By power of attorney
<PAGE> 9
EXHIBIT INDEX
Certain of the following exhibits, designated with an asterisk (*) are
filed herewith. The exhibits not designated have been previously filed with the
Commission and are incorporated herein by reference to the documents indicated
following the descriptions of such exhibits.
Page No.
Exhibit No. Description Of Paper Filing
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* 3.1 Amended and Restated Articles of Incorporation of
WPI Group, Inc.
3.2 Bylaws of WPI Group, Inc. are incorporated by
reference to Exhibit 3.2 of the Registrant's
Registration on Form S-4 filed with the Commission
on February 22, 1994, Registration No. 33-75656.
4.1 Revolving Line of Credit Promissory Note, dated
October 24, 1995 is incorporated by reference to
Exhibit 4.8 of the Registrant's Report on Form
10-KSB for the year ended September 24, 1995.
4.2 Commercial Loan Agreement, dated October 24, 1995,
is incorporated by reference to Exhibit 4.9 of the
Registrant's Report on Form 10-KSB for the year
ended September 24, 1995.
* 4.3 Revolving Line of Credit Promissory Note, dated
March 20, 1996, replacement to Revolving Line of
Credit Promissory Note dated October 24, 1995.
* 4.4 First Amendment, dated March 20, 1996, to Commercial
Loan Agreement dated October 24, 1995.
* 4.5 Revolving Line of Credit Promissory Note, dated
July 12, 1996, replacement to Revolving Line of
Credit Promissory Note dated March 20, 1996.
* 4.6 Second Amendment, dated July 12, 1996 to Commercial
Loan Agreement dated October 24, 1995.
4.7 Asset Purchase Agreement dated September 28,
1993 among WPI Group, Inc. and Magnetec Corporation
and Tridex Corporation, previously filed and
incorporated by reference to Registrant's report
on Form 10-KSB for the year ended September 26, 1993.
4.8 Agreement and Plan of Merger, dated as of January
27, 1994, by and between WPI Group, Inc. and
Termiflex Corporation, previously filed and
incorporated by reference to Exhibit 28.11 of
Registrant's report on Form 8-K filed on September
30, 1994.
4.9 Agreement and Plan of Merger, dated August 31,
1994, by and between WPI Group, Inc. and Micro Palm
Computers, Inc., previously filed and incorporated by
reference to Exhibit 28.11 of Registrant's report on
Form 8-K filed on September 30, 1994.
4.10 Stock Purchase Agreement, dated November 7, 1995
between WPI Group, Inc. and IVHS Technologies, Inc.
previously filed and incorporated by reference to
Exhibit 28.13 of Registrant's report on Form 8-K,
dated November 10, 1995.
4.11 Share Purchase Agreement dated July 16, 1996 by
and between WPI Group (U.K.) and D.R. Watkins and
others, previously filed and incorporated by reference
to Exhibit 28.15 in Registrant's report on Form 8-K,
dated July 16, 1996.
<PAGE> 10
Page No.
Exhibit No. Description Of Paper Filing
----------- ----------- ---------------
10.1 Walker Power, Inc. Employee Stock Purchase Plan
and Bonus Award Plan adopted May 7, 1992
previously filed and incorporated by reference
to Exhibit 28.1 of Registrant's Registration on
Form S-8 filed on June 1, 1992, Registration
No. 33-48285.
10.2 Termiflex Corporation 1981 Employee Incentive
Stock Option Plan, previously and incorporated
by reference to Exhibit 10.1 of the Termiflex
Registration Statement No. 2-85910-B on Form S-8.
10.3 The 1992 Stock Option Plan for Directors of Micro
Palm Computers, Inc. previously filed and
incorporated by reference to Exhibit 99.4 of the
Registrant's Registration Statement on Form S-8
filed February 28, 1996, Registration No. 333-1696.
10.4 Noncompetition agreement, dated January 17, 1994,
by and between WPI Group, Inc. and William E.
Fletcher previously filed and incorporated by
reference to Exhibit 10.7 of the Registrant's
report on Form 10-KSB for the year ended
September 25, 1996.
10.5 Employment contract, dated September 23, 1994, by
and between WPI Termiflex, Inc., WPI Micro Palm,
Inc. and Velton S. Casler previously filed and
incorporated by reference to Exhibit 10.8 of the
Registrant's report on Form 10-KSB for the year ended
September 25, 1996.
10.6 Lease agreement, dated October 7, 1994, by and
between WPI Group, Inc. and State Mutual Life
Assurance Company of America previously filed and
incorporated by reference to Exhibit 10.9 of the
Registrant's report on Form 10-KSB for the year
ended September 24, 1995.
10.7 WPI Group, Inc. 1995 Stock Option Plan, adopted
June 6, 1995 previously filed and incorporated by
reference to Exhibit 10.10 of Registrant's report
on Form 10-KSB for the year ended September 24, 1995.
* 10.8 WPI Group, Inc. Change In Control Plan adopted
December 15, 1995.
* 13 Portions of the 1996 Annual Report.
* 21 List of subsidiaries of the Registrant as of
September 29, 1996.
* 23 Consent of Arthur Andersen LLP.
* 24 Power of Attorney.
* 27 Financial Data Schedule [Electronic Filing Only].
<PAGE> 1
Exhibit 3.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
WPI GROUP, INC.
AS AMENDED FEBRUARY 7, 1996
FIRST: The name of the corporation is WPI GROUP, INC.
SECOND: The period of the corporation's duration is perpetual.
THIRD: The principal purpose or purposes for which the corporation is
organized are:
To manufacture all kinds and varieties of mechanical appliances,
instruments, machines and products, particularly transformers and all other
electrical appliances, equipment, appurtenances, goods and devices capable of
being employed in connection with the generation, distribution and use of
electricity, and to sell and dispose of the same when manufactured.
The corporation is further empowered to transact any and all lawful
business for which corporations may be incorporated under RSA 293-A.
FOURTH: The aggregate number of shares that the corporation shall have
authority to issue is Twenty Million (20,000,000) shares of One Cent ($.01) par
value common stock.
FIFTH: The capital stock will be sold or offered for sale within the
meaning of RSA 421-B.
SIXTH: Shareholders shall have no preemptive rights to acquire
unissued or treasury shares or securities convertible into such shares or
carrying a right to subscribe to or acquire shares.
SEVENTH: Provisions for the regulation of the internal affairs of the
corporation are contained in the corporation's bylaws.
EIGHTH: To the fullest extent now or hereafter permitted by law, no
director or officer of the corporation shall be personally liable to the
corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director or officer. No amendment or repeal
<PAGE> 2
of this article shall have any effect on any right or protection of any director
or officer for or with respect to acts or omissions occurring prior to such
amendment or repeal.
NINTH: The number of directors constituting the current board of
directors is five (5) and the names and addresses of the persons who serve as
directors, until the next annual meeting of shareholders and until their
successors are elected and shall qualify are:
Name Address
---- -------
Michael H. Foster Mill Street, P.O. Box 267
Warner, NH 03278
Robert C. McCray Pine Valley Mill
Milford, NH 03055
Frederick H. Fruitman c/o Loeb Partners
61 Broadway
New York, NY 10006
Peter D. Danforth c/o Kearsarge Capital
Fund, L.P.
41 Brook Street
Manchester, NH 03104
Paul G. Giovacchini c/o Signal Capital
Corporation
55 Ferncroft Road
Danvers, MA 01923
TENTH: The address of the registered office of the corporation is
40 Stark Street, Manchester, New Hampshire 03101 and the name of its
registered agent is John A. Graf.
ATTEST: /s/ John A. Graf
-----------------------------
Secretary
<PAGE> 1
Exhibit 4.3
REVOLVING LINE OF CREDIT PROMISSORY NOTE
----------------------------------------
$20,000,000.00 U.S. Manchester, NH March 20, 1996
FOR VALUE RECEIVED, the undersigned, WPI GROUP, INC., WPI ELECTRONICS,
INC., WPI MAGNETEC, INC., WPI MICRO PALM, INC., WPI POWER SYSTEMS, INC., WPI
TERMIFLEX, INC., MICRO PROCESSOR SYSTEMS, INC., and WPI DECISIONKEY, INC., each
a New Hampshire corporation with a principal office at 1155 Elm Street
Manchester, New Hampshire 03101 (all of such corporations are hereinafter
referred to individually and collectively as the "BORROWER"), hereby promise,
jointly and severally, to pay to the order of FLEET BANK - NH, a bank organized
under the laws of the State of New Hampshire with an address of Mail Stop NHNA
E02A, 1155 Elm Street, Manchester, New Hampshire 03101 (the "Bank"), at such
address, or such other place or places as the holder hereof may designate in
writing from time to time hereafter, the maximum principal sum of TWENTY MILLION
DOLLARS ($20,000,000.00), or so much thereof as may be advanced or readvanced by
the Bank to the Borrower from time to time hereafter (such amounts defined as
the "Debit Balance" below), together with interest as provided for hereinbelow,
in lawful money of the United States of America, all as provided hereinbelow.
The Borrower's "Debit Balance" shall mean the debit balance in an account
on the books of the Bank, maintained in the form of a ledger card, computer
records or otherwise in accordance with the Bank's customary practice and
appropriate accounting procedures wherein there shall be recorded the principal
amount of all advances and readvances made by the Bank to the Borrower, all
principal payments made by the Borrower to the Bank hereunder, and all other
appropriate debits and credits to principal. The Bank shall render to the
Borrower a statement of account with respect thereto on a monthly basis. The
statement shall be considered correct and be considered accepted by the
Borrower, and shall conclusively bind the Borrower, unless Borrower notifies the
Bank to the contrary within thirty (30) days after the date of Borrower's
receipt of the statement.
The Bank agrees to lend to the Borrower, and the Borrower may borrow, up
to the maximum principal sum provided for in this Note in accordance with and
subject to the terms, conditions, and limitations of this Note and the
Commercial Loan Agreement dated October 24, 1995, entered into by and among WPI
GROUP, INC., WPI ELECTRONICS, INC., WPI MAGNETEC, INC., WPI MICRO PALM, INC.,
WPI POWER SYSTEMS, INC., and WPI TERMIFLEX, INC., and the Bank, as amended by
First Amendment to Commercial Loan Agreement and Loan Documents of even date
herewith among the Borrower and the Bank, and as the same may be further amended
from time to time hereafter (as amended, the "Loan Agreement"). The holder of
this Note is entitled to all of the benefits and rights, and is subject to all
of the obligations, of the Bank under the Loan Agreement. However, neither this
reference to the Loan Agreement nor any provision thereof shall impair the
absolute and unconditional obligation of the Borrower to pay the principal and
interest of this Note as herein provided.
<PAGE> 2
Capitalized terms not otherwise defined herein shall have the meanings ascribed
to them in the Loan Agreement.
The Borrower agrees that the Bank may deliver all advances under this Note
by direct deposit to any demand account of the Borrower with the Bank or in such
other reasonable manner as may be designated in writing by the Bank to the
Borrower, and that all such advances shall represent binding obligations of the
Borrower.
The Borrower acknowledges that this Note is to evidence the Borrower's
obligation to pay its Debit Balance, plus interest and any other applicable
charges as determined from time to time, and that it shall continue to do so
despite the occurrence of intervals when no Debit Balance exists because the
Borrower has paid the previously existing Debit Balance in full.
Interest shall be calculated and charged daily, based on the actual days
elapsed over a three hundred sixty (360) day banking year, on the Debit Balance
outstanding from time to time at an annual variable rate equal to the Prime
Rate. The "Prime Rate" shall be the rate published by THE WALL STREET JOURNAL
from time to time under the category "Prime Rate: The Base Rate on Corporate
Loans posted by at least 75% of the Nation's 30 Largest Banks" (the lowest of
the rates so published if more than one rate is published under this category at
any given time) or such other comparable index rate selected by the Bank in its
sole discretion if THE WALL STREET JOURNAL ceases to publish such rate. The
BORROWER acknowledges that the Prime Rate is used for reference purposes only as
an index and is not necessarily the lowest interest rate charged by the BANK on
commercial loans. Each time the Prime Rate changes the interest rate hereunder
shall change contemporaneously with such change in the Prime Rate.
Notwithstanding the foregoing, the Borrower may elect from time to time a fixed
rate of interest equal to the Eurodollar Based Rate to apply to outstanding
principal hereunder, all in accordance with, and subject to the limitations of,
the provisions of the Loan Agreement.
Accrued interest only on the outstanding Debit Balance hereunder shall be
payable monthly in arrears commencing thirty (30) days from the date hereof (or
on any day within 30 days of the date hereof agreed to by the Borrower and the
Bank to provide for a convenient payment date) and continuing on the same date
of each month thereafter through and until the Review Date as to which the Bank
does not renew the Revolving Line of Credit Loan, whereupon all outstanding
principal and accrued and unpaid interest hereunder shall be due and payable in
full.
The Borrower may prepay this Note in whole or in part at any time;
provided, however, that such prepayment shall be subject to the terms and
conditions of the Loan Agreement and the charges provided thereunder payable by
Borrower to Bank. In the event that any such prepayment shall be made by the
Borrower, the amount thereof shall be applied first to accrued interest and
thereafter to principal.
At the option of the Bank, this Note shall become immediately due and
payable in full, without further demand or notice, if any installment of
principal or interest is not paid when due
<PAGE> 3
hereunder or upon the occurrence of any other Event of Default under the terms
hereof, of the Loan Agreement, or of any other Loan Document.
The holder may impose upon the Borrower a delinquency charge of five
percent (5%) of the amount of the principal and/or interest not paid on or
before the tenth (10th) day after such installment is due. The entire principal
balance hereof, together with accrued interest, shall after maturity, whether by
demand, acceleration or otherwise, bear interest at the contract rate of this
Note plus an additional five percent (5%) per annum.
The Borrower grants to Bank the right to set off and apply, upon an Event
of Default and without demand or notice of any nature, all, or any portion, of
deposits, credits and other property now or hereafter due from the holder to the
Borrower, against the indebtedness evidenced by this Note.
The Borrower agrees to pay on demand all reasonable out-of-pocket costs of
collection hereof, including reasonable attorneys' fees, whether or not any
action is instituted by the holder in its discretion.
No delay or omission on the part of the holder in exercising any right,
privilege or remedy shall impair such right, privilege or remedy or be construed
as a waiver thereof or of any other right, privilege or remedy. No waiver of any
right, privilege or remedy or any amendment to this Note shall be effective
unless made in writing and signed by the holder. Under no circumstances shall an
effective waiver of any right, privilege or remedy on any one occasion
constitute or be construed as a bar to the exercise of or a waiver of such
right, privilege or remedy on any future occasion.
The acceptance by the holder hereof of any payment after any default
hereunder shall not operate to extend the time of payment of any amount then
remaining unpaid hereunder or constitute a waiver of any rights of the holder
hereof under this Note.
All rights and remedies of the holder, whether granted herein or
otherwise, shall be cumulative and may be exercised singularly or concurrently.
The Borrower hereby waives, to the fullest extent permitted by law,
presentment, notice, and protest. Borrower assents to any extension of the time
of payment or any other indulgence.
This Note and the provisions, hereof shall be binding upon the Borrower
and the Borrower's successors and assigns and shall inure to the benefit of and
shall bind the holder, the holder's heirs, administrators, executors,
successors, legal representatives and assigns.
The word "holder" as used herein shall mean the payee or endorsee of this
Note who is in possession of it, or the bearer, if this Note is at the time
payable to the bearer.
This Note may not be amended, changed or modified in any respect except by
a written
<PAGE> 4
document which has been executed by each party. This Note constitutes a New
Hampshire contract to be governed by the laws of such state and to be paid and
performed therein.
This Note is executed and delivered in replacement of, but not in novation
or discharge of, the Revolving Line of Credit Promissory Note of WPI GROUP,
INC., WPI ELECTRONICS, INC., WPI MAGNETEC, INC., WPI MICRO PALM, INC., WPI POWER
SYSTEMS, INC., and WPI TERMIFLEX, INC., payable to the order of the Bank in the
original principal amount of Fifteen Million Dollars ($15,000,000.00) dated
October 24, 1995, as amended to date (collectively, as amended, the "Old Note").
All references to the Old Note in the Loan Agreement or any other Loan Document
shall be deemed to refer to this Note.
Executed and delivered this 20th day of March, 1996.
WITNESSES: BORROWER:
WPI GROUP, INC.
/s/ Michael Tule By: /s/ Michael Foster
- ----------------------- -----------------------
Signature and Title
Duly Authorized
Chairman and CEO
-----------------------
Print Name and Title
WPI POWER SYSTEMS, INC.
/s/ Michael Tule By: /s/ Michael Foster
- ----------------------- -----------------------
Signature and Title
Duly Authorized
Chairman and CEO
-----------------------
Print Name and Title
<PAGE> 5
WITNESSES: WPI MAGNETEC, INC.
/s/ Michael Tule By: /s/ Michael Foster
- ----------------------- -----------------------
Signature and Title
Duly Authorized
Chairman and CEO
-----------------------
Print Name and Title
WPI ELECTRONICS, INC.
/s/ Michael Tule By: /s/ Michael Foster
- ----------------------- -----------------------
Signature and Title
Duly Authorized
Chairman and CEO
-----------------------
Print Name and Title
WPI TERMIFLEX, INC.
/s/ Michael Tule By: /s/ Michael Foster
- ----------------------- -----------------------
Signature and Title
Duly Authorized
Chairman and CEO
-----------------------
Print Name and Title
WPI MICRO PALM, INC.
/s/ Michael Tule By: /s/ Michael Foster
- ----------------------- -----------------------
Signature and Title
Duly Authorized
Chairman and CEO
-----------------------
Print Name and Title
<PAGE> 6
WITNESSES: WPI PROCESSOR SYSTEMS, INC.
/s/ Michael Tule By: /s/ Michael Foster
- ----------------------- -----------------------
Signature and Title
Duly Authorized
Chairman and CEO
-----------------------
Print Name and Title
WPI DECISIONKEY, INC.
/s/ Michael Tule By: /s/ Michael Foster
- ----------------------- -----------------------
Signature and Title
Duly Authorized
Chairman and CEO
-----------------------
Print Name and Title
<PAGE> 1
Exhibit 4.4
FLEET BANK - NH
FIRST AMENDMENT TO COMMERCIAL LOAN AGREEMENT
AND LOAN DOCUMENTS
THIS FIRST AMENDMENT (the "Amendment") made as of the 20th day of March,
1996, is by and among FLEET BANK - NH, a bank organized under the laws of the
State of New Hampshire with an address of Mail Stop NHNA E02A, 1155 Elm Street,
Manchester, New Hampshire 03101 (the "Bank"), and WPI GROUP, INC., WPI
ELECTRONICS, INC., WPI MAGNETEC, INC., WPI MICRO PALM, INC., WPI POWER SYSTEMS,
INC., WPI TERMIFLEX, INC., WPI MICRO PROCESSOR SYSTEMS, INC., and WPI
DECISIONKEY, INC., each a New Hampshire corporation with a principal office at
1155 Elm Street Manchester, New Hampshire 03101 (all of such corporations are
hereinafter referred to individually and collectively as the "BORROWER").
R E C I T A L S:
----------------
WHEREAS, pursuant to a Commercial Loan Agreement dated October 24, 1995
(the "Loan Agreement") and certain Loan Documents as defined therein, the Bank
has extended to WPI GROUP, INC., WPI ELECTRONICS, INC., WPI MAGNETEC, INC., WPI
MICRO PALM, INC., WPI POWER SYSTEMS, INC., and WPI TERMIFLEX, INC. a revolving
line of credit loan in the principal amount of up to Fifteen Million Dollars
($15,000,000.00) (the "Revolving Line of Credit Loan");
WHEREAS, WPI GROUP, INC., owns all of the outstanding capital stock of
each of WPI ELECTRONICS, INC., WPI MAGNETEC, INC., WPI MICRO PALM, INC., WPI
POWER SYSTEMS, INC., and WPI TERMIFLEX, INC.;
WHEREAS, WPI GROUP, INC., has formed, and owns all of the capital stock
of, both WPI MICRO PROCESSOR SYSTEMS, INC., and WPI MICRO PROCESSOR SYSTEMS,
INC. owns all of the capital stock of WPI DECISIONKEY, INC.; and
WHEREAS, the Borrower has requested, and the Bank has agreed, to (A) join
each of WPI MICRO PROCESSOR SYSTEMS, INC., and WPI DECISIONKEY, INC. as
borrowers under the Loan Agreement and Loan Documents, and (B) increase the
maximum principal amount available to the Borrower under the Revolving Line of
Credit Loan to up to Twenty Million Dollars ($20,000,000.00), all upon and
subject to the terms and conditions of the Loan Agreement and the Loan
Documents, as the same are amended hereby, and, in connection therewith, to
amend the Loan Agreement and Loan Documents in certain other respects.
Capitalized terms not otherwise defined herein shall have the meanings ascribed
to them in the Loan Agreement.
<PAGE> 2
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants, agreements and promises contained herein, the parties hereby agree as
follows:
1. ADDITION OF WPI MICRO PROCESSOR SYSTEMS, INC., AND WPI DECISIONKEY,
INC. AS BORROWER. Each of the Loan Agreement and the Loan Documents shall be and
hereby is amended by joining and including each of WPI MICRO PROCESSOR SYSTEMS,
INC., and WPI DECISIONKEY, INC., jointly and severally, as a borrower
thereunder, such that each reference to "Borrower" in the Loan Agreement and in
each of the Loan Documents shall mean and include each of WPI GROUP, INC., WPI
ELECTRONICS, INC., WPI MAGNETEC, INC., WPI MICRO PALM, INC., WPI POWER SYSTEMS,
INC., WPI TERMIFLEX, INC., WPI MICRO PROCESSOR SYSTEMS, INC., and WPI
DECISIONKEY, INC., each a New Hampshire corporation, jointly and severally.
2. AMENDMENT OF LOAN AGREEMENT. Section I. A. of the Loan Agreement shall
be and hereby is amended by deleting the same and inserting in place thereof the
following:
A. MAXIMUM AVAILABLE AMOUNT. THE AGGREGATE MAXIMUM AMOUNT AVAILABLE TO
THE BORROWER FROM TIME TO TIME UNDER THE REVOLVING LINE OF CREDIT LOAN
SHALL BE UP TO TWENTY MILLION DOLLARS ($20,000,000.00)
A-1. SUBLIMIT FOR FOREIGN CURRENCY FORWARD PURCHASE CONTRACTS. AT THE
BORROWER'S REQUEST, THE BANK SHALL FROM TIME TO TIME ADVANCE FUNDS UNDER
THE REVOLVING LINE OF CREDIT LOAN TO COVER MARGINS OF UP TO TWENTY PERCENT
(20%) OF U.S. DOLLARS EQUIVALENT VALUE OF FORWARD PURCHASE CONTRACTS
("FORWARD PURCHASE CONTRACTS") FOR FOREIGN CURRENCY ENTERED INTO BY
BORROWER WITH BANK'S FOREIGN EXCHANGE DEPARTMENT. FOR PURPOSES OF THE
FOREGOING, THE AGGREGATE OUTSTANDING ADVANCES UNDER THE REVOLVING LINE OF
CREDIT LOAN TO COVER MARGINS OF BORROWER'S FORWARD PURCHASE CONTRACTS
SHALL AT NO TIME EXCEED TWO HUNDRED FIFTY THOUSAND DOLLARS ($250,000.00),
AND THE MAXIMUM AMOUNT AVAILABLE TO BORROWER UNDER THE REVOLVING LINE OF
CREDIT LOAN UNDER PARAGRAPH A ABOVE SHALL BE REDUCED BY THE AGGREGATE U.S.
DOLLAR EQUIVALENT VALUE OF ALL MARGIN COVERAGE OF BORROWER'S FORWARD
PURCHASE CONTRACTS OUTSTANDING FROM TIME TO TIME.@
3. SUBSTITUTION AND REPLACEMENT OF REVOLVING LINE OF CREDIT PROMISSORY
NOTE. To reflect the amendments hereby, the Bank and the Borrower agree that the
Revolving Line of Credit Promissory Note in the original principal amount of
Fifteen Million Dollars ($15,000,000.00) dated October 24, 1995 of WPI GROUP,
INC., WPI ELECTRONICS, INC., WPI MAGNETEC, INC., WPI MICRO PALM, INC., WPI POWER
SYSTEMS, INC., and WPI TERMIFLEX, INC. payable to the order of the Bank shall be
substituted and replaced in full by the Revolving Line of Credit Promissory Note
in the principal amount of Twenty Million Dollars ($20,000,000.00) of Borrower
payable to the order of the Bank attached hereto as Exhibit A (the "Replacement
RLOC Note"), which Replacement RLOC Note shall be executed contemporaneously
with the execution of this Amendment, such that the indebtedness of WPI
<PAGE> 3
GROUP, INC., WPI ELECTRONICS, INC., WPI MAGNETEC, INC., WPI MICRO PALM, INC.,
WPI POWER SYSTEMS, INC., and WPI TERMIFLEX, INC. currently due and owing to the
Bank under the Revolving Line of Credit Loan shall hereafter be evidenced by the
Replacement RLOC Note.
4. AMENDMENT OF OTHER LOAN DOCUMENTS. Each of the other Loan Documents,
whether or not specifically referenced herein or hereby, shall be and hereby is
amended to reflect the terms and conditions of this Amendment and to include
within the scope of such Loan Documents and the description of loans and notes
therein, the Revolving Line of Credit Loan as increased, amended and modified
hereby.
5. REPRESENTATIONS AND WARRANTIES. Each Borrower individually hereby
makes, confirms, reasserts, and restates all of the representations and
warranties of the Borrower under the Loan Agreement and each of the Loan
Documents, all as of the date hereof.
6. AFFIRMATIVE COVENANTS. Each Borrower individually hereby makes,
confirms, reasserts, and restates all of the Affirmative Covenants of the
Borrower as set forth in the Loan Agreement and each of the Loan Documents, as
amended hereby, all as of the date hereof.
7. NEGATIVE COVENANTS. Each Borrower individually hereby makes confirms,
reasserts, and restates all of the Negative Covenants of the Borrower as set
forth in the Loan Agreement and each of the Loan Documents, all as of the date
hereof.
8. NO OTHER MODIFICATIONS. Except as specifically modified or amended
herein or hereby, all of the terms and conditions of each of the Revolving Line
of Credit Loan, the Loan Agreement and the Loan Documents, remain otherwise
unchanged, and in full force and effect, all of which are hereby confirmed and
ratified by the parties hereto.
9. COSTS AND EXPENSES OF BANK. The Borrower agrees to reimburse the Bank
for all reasonable costs, expenses, and fees, including attorneys' fees,
associated with the documentation of this Amendment. Borrower consents to Bank
charging Borrower's Revolving Line of Credit Loan account for all such costs,
expenses and fees.
IN WITNESS WHEREOF, the parties have executed and delivered this Amendment
all as of the date first set forth above.
WITNESSES FLEET BANK - NH
/s/ Michael Tule By: /s/ Karen A. Cross
- -------------------------- --------------------------------
Karen A. Cross, Vice President
<PAGE> 4
WITNESSES: BORROWER:
WPI GROUP, INC.
/s/ Michael Tule By: /s/ Michael Foster
- ----------------------- -----------------------
Signature and Title
Duly Authorized
Chairman and CEO
-----------------------
Print Name and Title
WPI POWER SYSTEMS, INC.
/s/ Michael Tule By: /s/ Michael Foster
- ----------------------- -----------------------
Signature and Title
Duly Authorized
Chairman and CEO
-----------------------
Print Name and Title
WPI MAGNETEC, INC.
/s/ Michael Tule By: /s/ Michael Foster
- ----------------------- -----------------------
Signature and Title
Duly Authorized
Chairman and CEO
-----------------------
Print Name and Title
<PAGE> 5
WITNESSES: WPI ELECTRONICS, INC.
/s/ Michael Tule By: /s/ Michael Foster
- ----------------------- -----------------------
Signature and Title
Duly Authorized
Chairman and CEO
-----------------------
Print Name and Title
WPI TERMIFLEX, INC.
/s/ Michael Tule By: /s/ Michael Foster
- ----------------------- -----------------------
Signature and Title
Duly Authorized
Chairman and CEO
-----------------------
Print Name and Title
WPI MICRO PALM, INC.
/s/ Michael Tule By: /s/ Michael Foster
- ----------------------- -----------------------
Signature and Title
Duly Authorized
Chairman and CEO
-----------------------
Print Name and Title
WITNESSES: WPI MICRO PROCESSOR SYSTEMS, INC.
/s/ Michael Tule By: /s/ Michael Foster
- ----------------------- -----------------------
Signature and Title
Duly Authorized
Chairman and CEO
-----------------------
Print Name and Title
<PAGE> 6
WPI DECISIONKEY, INC.
/s/ Michael Tule By: /s/ Michael Foster
- ----------------------- -----------------------
Signature and Title
Duly Authorized
Chairman and CEO
-----------------------
Print Name and Title
<PAGE> 1
Exhibit 4.5
REVOLVING LINE OF CREDIT PROMISSORY NOTE
----------------------------------------
$30,000,000.00 U.S. Manchester, NH July 12, 1996
FOR VALUE RECEIVED, the undersigned, WPI GROUP, INC., WPI ELECTRONICS,
INC., WPI MAGNETEC, INC., WPI MICRO PALM, INC., WPI POWER SYSTEMS, INC., WPI
TERMIFLEX, INC., MICRO PROCESSOR SYSTEMS, INC., and WPI DECISIONKEY, INC., each
a New Hampshire corporation with a principal office at 1155 Elm Street
Manchester, New Hampshire 03101 (all of such corporations are hereinafter
referred to individually and collectively as the "BORROWER"), hereby promise,
jointly and severally, to pay to the order of FLEET BANK - NH, a bank organized
under the laws of the State of New Hampshire with an address of Mail Stop NHNA
E02A, 1155 Elm Street, Manchester, New Hampshire 03101 (the "Bank"), at such
address, or such other place or places as the holder hereof may designate in
writing from time to time hereafter, the maximum principal sum of THIRTY MILLION
DOLLARS ($30,000,000.00), or so much thereof as may be advanced or readvanced by
the Bank to the Borrower from time to time hereafter (such amounts defined as
the "Debit Balance" below), together with interest as provided for hereinbelow,
in lawful money of the United States of America, all as provided hereinbelow.
The Borrower's "Debit Balance" shall mean the debit balance in an account
on the books of the Bank, maintained in the form of a ledger card, computer
records or otherwise in accordance with the Bank's customary practice and
appropriate accounting procedures wherein there shall be recorded the principal
amount of all advances and readvances made by the Bank to the Borrower, all
principal payments made by the Borrower to the Bank hereunder, and all other
appropriate debits and credits to principal. The Bank shall render to the
Borrower a statement of account with respect thereto on a monthly basis. The
statement shall be considered correct and be considered accepted by the
Borrower, and shall conclusively bind the Borrower, unless Borrower notifies the
Bank to the contrary within thirty (30) days after the date of Borrower's
receipt of the statement.
The Bank agrees to lend to the Borrower, and the Borrower may borrow, up
to the maximum principal sum provided for in this Note in accordance with and
subject to the terms, conditions, and limitations of this Note and the
Commercial Loan Agreement dated October 24, 1995, as amended by First Amendment
to Commercial Loan Agreement and Loan Documents dated March 20, 1996, and by
Second Amendment to Commercial Loan Agreement and Loan Documents of even date
herewith among the Bank and the Borrower, and as the same may be further amended
from time to time hereafter (as amended, the "Loan Agreement"). The holder of
this Note is entitled to all of the benefits and rights, and is subject to all
of the obligations, of the Bank under the Loan Agreement. However, neither this
reference to the Loan Agreement nor any provision thereof shall impair the
absolute and unconditional obligation of the Borrower to pay the principal and
interest of this Note as herein provided. Capitalized terms not otherwise
defined herein shall have the meanings ascribed to them in the Loan Agreement.
<PAGE> 2
The Borrower agrees that the Bank may deliver all advances under this Note
by direct deposit to any demand account of the Borrower with the Bank or in such
other reasonable manner as may be designated in writing by the Bank to the
Borrower, and that all such advances shall represent binding obligations of the
Borrower.
The Borrower acknowledges that this Note is to evidence the Borrower's
obligation to pay its Debit Balance, plus interest and any other applicable
charges as determined from time to time, and that it shall continue to do so
despite the occurrence of intervals when no Debit Balance exists because the
Borrower has paid the previously existing Debit Balance in full.
Interest shall be calculated and charged daily, based on the actual days
elapsed over a three hundred sixty (360) day banking year, on the Debit Balance
outstanding from time to time at an annual variable rate equal to the Prime
Rate. The "Prime Rate" shall be the rate published by THE WALL STREET JOURNAL
from time to time under the category "Prime Rate: The Base Rate on Corporate
Loans posted by at least 75% of the Nation's 30 Largest Banks" (the lowest of
the rates so published if more than one rate is published under this category at
any given time) or such other comparable index rate selected by the Bank in its
sole discretion if THE WALL STREET JOURNAL ceases to publish such rate. The
BORROWER acknowledges that the Prime Rate is used for reference purposes only as
an index and is not necessarily the lowest interest rate charged by the BANK on
commercial loans. Each time the Prime Rate changes the interest rate hereunder
shall change contemporaneously with such change in the Prime Rate.
Notwithstanding the foregoing, the Borrower may elect from time to time a fixed
rate of interest equal to the Eurodollar Based Rate to apply to outstanding
principal hereunder, all in accordance with, and subject to the limitations of,
the provisions of the Loan Agreement.
Outstanding principal hereunder shall be paid in accordance with the terms
and conditions of the Loan Agreement. Accrued interest only on the outstanding
Debit Balance hereunder shall be payable monthly in arrears commencing thirty
(30) days from the date hereof (or on any day within 30 days of the date hereof
agreed to by the Borrower and the Bank to provide for a convenient payment date)
and continuing on the same date of each month thereafter through and until the
Review Date as to which the Bank does not renew the Revolving Line of Credit
Loan, whereupon all outstanding principal and accrued and unpaid interest
hereunder shall be due and payable in full.
The Borrower may prepay this Note in whole or in part at any time;
provided, however, that such prepayment shall be subject to the terms and
conditions of the Loan Agreement and the charges provided thereunder payable by
Borrower to Bank. In the event that any such prepayment shall be made by the
Borrower, the amount thereof shall be applied first to accrued interest and
thereafter to principal.
At the option of the Bank, this Note shall become immediately due and
payable in full, without further demand or notice, if any installment of
principal or interest is not paid when due hereunder or upon the occurrence of
any other Event of Default under the terms hereof, of the Loan Agreement, or of
any other Loan Document.
<PAGE> 3
The holder may impose upon the Borrower a delinquency charge of five
percent (5%) of the amount of the principal and/or interest not paid on or
before the tenth (10th) day after such installment is due. The entire principal
balance hereof, together with accrued interest, shall after maturity, whether by
demand, acceleration or otherwise, bear interest at the contract rate of this
Note plus an additional five percent (5%) per annum.
The Borrower grants to Bank the right to set off and apply, upon an Event
of Default and without demand or notice of any nature, all, or any portion, of
deposits, credits and other property now or hereafter due from the holder to the
Borrower, against the indebtedness evidenced by this Note.
The Borrower agrees to pay on demand all reasonable out-of-pocket costs of
collection hereof, including reasonable attorneys' fees, whether or not any
action is instituted by the holder in its discretion.
No delay or omission on the part of the holder in exercising any right,
privilege or remedy shall impair such right, privilege or remedy or be construed
as a waiver thereof or of any other right, privilege or remedy. No waiver of any
right, privilege or remedy or any amendment to this Note shall be effective
unless made in writing and signed by the holder. Under no circumstances shall an
effective waiver of any right, privilege or remedy on any one occasion
constitute or be construed as a bar to the exercise of or a waiver of such
right, privilege or remedy on any future occasion.
The acceptance by the holder hereof of any payment after any default
hereunder shall not operate to extend the time of payment of any amount then
remaining unpaid hereunder or constitute a waiver of any rights of the holder
hereof under this Note.
All rights and remedies of the holder, whether granted herein or
otherwise, shall be cumulative and may be exercised singularly or concurrently.
The Borrower hereby waives, to the fullest extent permitted by law,
presentment, notice, and protest. Borrower assents to any extension of the time
of payment or any other indulgence.
This Note and the provisions, hereof shall be binding upon the Borrower
and the Borrower's successors and assigns and shall inure to the benefit of and
shall bind the holder, the holder's heirs, administrators, executors,
successors, legal representatives and assigns.
The word "holder" as used herein shall mean the payee or endorsee of this
Note who is in possession of it, or the bearer, if this Note is at the time
payable to the bearer.
This Note may not be amended, changed or modified in any respect except by
a written document which has been executed by each party. This Note constitutes
a New Hampshire contract to be governed by the laws of such state and to be paid
and performed therein.
<PAGE> 4
This Note is executed and delivered in replacement of, but not in novation
or discharge of, the Revolving Line of Credit Promissory Note of WPI GROUP,
INC., WPI ELECTRONICS, INC., WPI MAGNETEC, INC., WPI MICRO PALM, INC., WPI POWER
SYSTEMS, INC., WPI TERMIFLEX, INC., MICRO PROCESSOR SYSTEMS, INC., and WPI
DECISIONKEY, INC., payable to the order of the Bank in the principal amount of
Twenty Million Dollars ($20,000,000.00) dated March 20, 1996, as amended to date
(collectively, as amended, the "Old Note"). All references to the Old Note in
the Loan Agreement or any other Loan Document shall be deemed to refer to this
Note.
Executed and delivered this 12th day of July, 1996.
WITNESSES: BORROWER:
WPI GROUP, INC.
/s/ Michael Tule By: /s/ Michael Foster
- ----------------------- -----------------------
Signature and Title
Duly Authorized
Chairman and CEO
-----------------------
Print Name and Title
WPI POWER SYSTEMS, INC.
/s/ Michael Tule By: /s/ Michael Foster
- ----------------------- -----------------------
Signature and Title
Duly Authorized
Chairman and CEO
-----------------------
Print Name and Title
<PAGE> 5
WITNESSES: WPI MAGNETEC, INC.
/s/ Michael Tule By: /s/ Michael Foster
- ----------------------- -----------------------
Signature and Title
Duly Authorized
Chairman and CEO
-----------------------
Print Name and Title
WPI ELECTRONICS, INC.
/s/ Michael Tule By: /s/ Michael Foster
- ----------------------- -----------------------
Signature and Title
Duly Authorized
Chairman and CEO
-----------------------
Print Name and Title
WPI TERMIFLEX, INC.
/s/ Michael Tule By: /s/ Michael Foster
- ----------------------- -----------------------
Signature and Title
Duly Authorized
Chairman and CEO
-----------------------
Print Name and Title
WPI MICRO PALM, INC.
/s/ Michael Tule By: /s/ Michael Foster
- ----------------------- -----------------------
Signature and Title
Duly Authorized
Chairman and CEO
-----------------------
Print Name and Title
<PAGE> 6
WITNESSES: WPI PROCESSOR SYSTEMS, INC.
/s/ Michael Tule By: /s/ Michael Foster
- ----------------------- -----------------------
Signature and Title
Duly Authorized
Chairman and CEO
-----------------------
Print Name and Title
WPI DECISIONKEY, INC.
/s/ Michael Tule By: /s/ Michael Foster
- ----------------------- -----------------------
Signature and Title
Duly Authorized
Chairman and CEO
-----------------------
Print Name and Title
<PAGE> 1
Exhibit 4.6
FLEET BANK - NH
SECOND AMENDMENT TO COMMERCIAL LOAN AGREEMENT
AND LOAN DOCUMENTS
THIS SECOND AMENDMENT (the "Amendment") made as of the 12th day of July,
1996, is by and among FLEET BANK - NH, a bank organized under the laws of the
State of New Hampshire with an address of Mail Stop NHNA E02A, 1155 Elm Street,
Manchester, New Hampshire 03101 (the "Bank"), and WPI GROUP, INC., WPI
ELECTRONICS, INC., WPI MAGNETEC, INC., WPI MICRO PALM, INC., WPI POWER SYSTEMS,
INC., WPI TERMIFLEX, INC., WPI MICRO PROCESSOR SYSTEMS, INC., and WPI
DECISIONKEY, INC., each a New Hampshire corporation with a principal office at
1155 Elm Street Manchester, New Hampshire 03101 (all of such corporations are
hereinafter referred to individually and collectively as the "BORROWER").
R E C I T A L S:
----------------
WHEREAS, pursuant to a Commercial Loan Agreement dated October 24, 1995,
as amended by First Amendment to Commercial Loan Agreement and Loan Documents
dated March 20, 1996 (as amended, the "Loan Agreement") and certain Loan
Documents as defined therein, the Bank has extended to WPI GROUP, INC., WPI
ELECTRONICS, INC., WPI MAGNETEC, INC., WPI MICRO PALM, INC., WPI POWER SYSTEMS,
INC., WPI TERMIFLEX, INC. WPI MICRO PROCESSOR SYSTEMS, INC., and WPI
DECISIONKEY, INC., a revolving line of credit loan in the principal amount of up
to Twenty Million Dollars ($20,000,000.00) (the "Revolving Line of Credit
Loan");
WHEREAS, WPI GROUP, INC., owns all of the outstanding capital stock of
each of WPI ELECTRONICS, INC., WPI MAGNETEC, INC., WPI MICRO PALM, INC., WPI
POWER SYSTEMS, INC., WPI TERMIFLEX, INC., and WPI MICRO PROCESSOR SYSTEMS, INC.,
and WPI MICRO PROCESSOR SYSTEMS owns all of the capital stock of WPI
DECISIONKEY, INC.;
WHEREAS, WPI GROUP, INC. and WPI TERMIFLEX, INC, will form, and own all
of the ownership interest of, WPI GROUP UNITED KINGDOM UNLIMITED, an
unlimited company organized under the laws of the United Kingdom ("WPI-UK");
WHEREAS, WPI-UK is to acquire all of the capital stock of OYSTER TERMINALS
LIMITED, a corporation organized under the laws of the United Kingdom ("OTL");
and
WHEREAS, the Borrower has requested, and the Bank has agreed, to (A)
provide for the joinder of each of OTL and WPI-UK as a borrower under the Loan
Agreement and Loan Documents after the acquisition; and (B) increase the maximum
principal amount available to the
<PAGE> 2
Borrower under the Revolving Line of Credit Loan to up to Thirty Million Dollars
($30,000,000.00), all upon and subject to the terms and conditions of the Loan
Agreement and the Loan Documents, as the same are amended hereby, and, in
connection therewith, to amend the Loan Agreement and Loan Documents in certain
other respects. Capitalized terms not otherwise defined herein shall have the
meanings ascribed to them in the Loan Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants, agreements and promises contained herein, the parties hereby agree as
follows:
1. ADDITION OF OTL AND WPI-UK AS BORROWER. Borrower hereby agrees that
after the acquisition of OTL, each of the Loan Agreement and the Loan Documents
shall be amended to join and include each of OTL and WPI-UK, jointly and
severally, as a borrower thereunder, such that each reference to "Borrower" in
the Loan Agreement and in each of the Loan Documents shall mean and include each
of WPI GROUP, INC., WPI ELECTRONICS, INC., WPI MAGNETEC, INC., WPI MICRO PALM,
INC., WPI POWER SYSTEMS, INC., WPI TERMIFLEX, INC., WPI MICRO PROCESSOR SYSTEMS,
INC., WPI DECISIONKEY, INC., WPI-UK and OTL, jointly and severally. Borrower
agrees to take all such actions and to execute all such documents and
instruments as are necessary, proper, or required to effect the provisions of
this Section 2.
2. Amendment of Loan Agreement.
----------------------------
A. Section I. A. of the Loan Agreement shall be and hereby is amended
by deleting the same and inserting in place thereof the following:
A. MAXIMUM AVAILABLE AMOUNT. THE AGGREGATE MAXIMUM AMOUNT AVAILABLE TO
THE BORROWER UNDER THE REVOLVING LINE OF CREDIT LOAN SHALL BE (i) UP TO
THIRTY MILLION DOLLARS ($30,000,000.00) THROUGH AND UNTIL THE SOONER OF
(a) THE DATE UPON WHICH THE BORROWER RECEIVES FINAL PAYMENT OF INSURANCE
PROCEEDS FOR PROPERTY CASUALTY LOSSES TO ITS FACILITIES IN WARNER, NEW
HAMPSHIRE,(b) THE DATE UPON WHICH THE AGGREGATE AMOUNT OF INSURANCE
PROCEEDS RECEIVED BY BORROWER FOR PROPERTY CASUALTY LOSSES TO ITS
FACILITIES IN WARNER, NEW HAMPSHIRE EXCEEDS THREE MILLION DOLLARS
($3,000,000.00), OR (c) DECEMBER 31, 1996; AND (ii) THEREAFTER, UP TO
TWENTY-SEVEN MILLION FIVE HUNDRED THOUSAND DOLLARS ($27,500,000.00)
THROUGH JUNE 30, 1997; AND (iii) THEREAFTER, UP TO TWENTY-FIVE MILLION
DOLLARS ($25,000,000.00) THROUGH THE NEXT REVIEW DATE."
B. The Loan Agreement shall be and hereby is amended by inserting therein
the following new negative covenant as Section VI. I. thereof:
"I. COVENANT TO THIRD PARTIES REGARDING LIENS AND MORTGAGES. PROVIDE ANY
COVENANT TO, OR ENTER INTO ANY AGREEMENT WITH, ANY THIRD PARTY IDENTICAL
TO, SUBSTANTIALLY SIMILAR TO, OR OF THE GENERAL NATURE OF THE COVENANT
PROVIDED BY THE BORROWER TO THE BANK IN SECTION VI. C. OF THIS AGREEMENT
HEREINABOVE."
<PAGE> 3
C. Section II of Schedule A of the Loan Agreement shall be and hereby is
amended by inserting the following new paragraph D:
"D. LETTERS TO MANAGEMENT ISSUED TO BORROWER BY ITS INDEPENDENT CERTIFIED
PUBLIC ACCOUNTING FIRM IN CONNECTION WITH ITS AUDIT OF THE BORROWER FOR
THE 1994 FISCAL YEAR AND FOR EACH FISCAL YEAR THEREAFTER WITH RESPECT TO
WHICH ANY SUCH LETTERS ARE ISSUED, AS AND WHEN SUCH LETTERS ARE RECEIVED
BY THE BORROWER."
D. Section III of Schedule A of the Loan Agreement shall be and hereby is
amended by deleting paragraph A thereof and inserting the following new
paragraph A:
"A. BORROWER SHALL HAVE ON A CONSOLIDATED BASIS A NET WORTH (AS
HEREINAFTER DEFINED) EQUAL TO AT LEAST EIGHTEEN MILLION DOLLARS
($18,000,000.00) AS AT SEPTEMBER 30, 1996 AND AT ALL TIMES THEREAFTER
THROUGH SEPTEMBER 29, 1997 AND EQUAL TO LEAST TWENTY-ONE MILLION DOLLARS
($21,000,000.00) AS AT SEPTEMBER 30, 1997 AND AT ALL TIMES THEREAFTER.
"NET WORTH " MEANS TOTAL ASSETS MINUS TOTAL LIABILITIES, ALL AS DETERMINED
IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES FROM
BORROWER'S FINANCIAL STATEMENTS DELIVERED TO THE BANK IN ACCORDANCE WITH
THE COVENANTS OF BORROWER HEREINABOVE (THE "FINANCIAL STATEMENTS")".
E. Section III of Schedule A of the Loan Agreement shall be and hereby is
amended by deleting paragraph B thereof and inserting the following new
paragraph B:
"B. BORROWER SHALL HAVE ON A CONSOLIDATED BASIS A RATIO OF FUNDED DEBT (AS
HEREINAFTER DEFINED) TO EBITDA (AS HEREINAFTER DEFINED) OF NOT GREATER
THAN (i) 3.5:1 AS AT SEPTEMBER 30, 1996 AND DECEMBER 31, 1996; (ii) 3:1 AS
AT MARCH 31, 1997 AND JUNE 30, 1997; AND (ii) 2.5:1 AS AT SEPTEMBER 30,
1997 AND AS AT EACH FISCAL QUARTER END THEREAFTER. "FUNDED DEBT " MEANS
THE AGGREGATE INTEREST BEARING INDEBTEDNESS OF THE BORROWER AS OF THE
APPLICABLE DATE OF DETERMINATION, ALL AS DETERMINED IN ACCORDANCE WITH
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES FROM BORROWER'S FINANCIAL
STATEMENTS. "EBITDA" MEANS EARNINGS FOR THE TWELVE-MONTH PERIOD ENDING ON
THE APPLICABLE DATE OF DETERMINATION, BEFORE REDUCTION FOR INTEREST,
TAXES, DEPRECIATION, AND AMORTIZATION EXPENSE FOR SUCH PERIOD, ALL AS
DETERMINED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
FROM BORROWER'S FINANCIAL STATEMENTS."
F. Section III of Schedule A of the Loan Agreement shall be and hereby is
amended by changing the reference in paragraph C thereof from "1.5:1" to
"2.0:1".
3. SUBSTITUTION AND REPLACEMENT OF REVOLVING LINE OF CREDIT PROMISSORY
NOTE. To reflect the amendments hereby, the Bank and the Borrower agree that the
Revolving Line of Credit Promissory Note in the principal amount of Twenty
Million Dollars ($20,000,000.00) dated March 20, 1996 of WPI GROUP, INC., WPI
ELECTRONICS, INC., WPI MAGNETEC,
<PAGE> 4
INC., WPI MICRO PALM, INC., WPI POWER SYSTEMS, INC., WPI TERMIFLEX, INC., WPI
MICRO PROCESSOR SYSTEMS, INC., and WPI DECISIONKEY, INC., payable to the order
of the Bank shall be substituted and replaced in full by the Revolving Line of
Credit Promissory Note in the principal amount of Thirty Million Dollars
($30,000,000.00) of Borrower payable to the order of the Bank attached hereto as
Exhibit A (the "Replacement RLOC Note"), which Replacement RLOC Note shall be
executed contemporaneously with the execution of this Amendment, such that the
indebtedness of WPI GROUP, INC., WPI ELECTRONICS, INC., WPI MAGNETEC, INC., WPI
MICRO PALM, INC., WPI POWER SYSTEMS, INC., WPI TERMIFLEX, INC., WPI MICRO
PROCESSOR SYSTEMS, INC., and WPI DECISIONKEY, INC., currently due and owing to
the Bank under the Revolving Line of Credit Loan shall hereafter be evidenced by
the Replacement RLOC Note.
4. AMENDMENT OF OTHER LOAN DOCUMENTS. Each of the other Loan Documents,
whether or not specifically referenced herein or hereby, shall be and hereby is
amended to reflect the terms and conditions of this Amendment and to include
within the scope of such Loan Documents and the description of loans and notes
therein, the Revolving Line of Credit Loan as increased, amended and modified
hereby.
5. REPRESENTATIONS AND WARRANTIES. Each Borrower individually hereby makes,
confirms, reasserts, and restates all of the representations and warranties of
the Borrower under the Loan Agreement and each of the Loan Documents, all as of
the date hereof.
6. AFFIRMATIVE COVENANTS. Each Borrower individually hereby makes,
confirms, reasserts, and restates all of the Affirmative Covenants of the
Borrower as set forth in the Loan Agreement and each of the Loan Documents, as
amended hereby, all as of the date hereof.
7. NEGATIVE COVENANTS. Each Borrower individually hereby makes confirms,
reasserts, and restates all of the Negative Covenants of the Borrower as set
forth in the Loan Agreement and each of the Loan Documents, all as of the date
hereof.
8. NO OTHER MODIFICATIONS. Except as specifically modified or amended
herein or hereby, all of the terms and conditions of each of the Revolving Line
of Credit Loan, the Loan Agreement and the Loan Documents, remain otherwise
unchanged, and in full force and effect, all of which are hereby confirmed and
ratified by the parties hereto.
9. BANK FEE. For and in consideration of the Bank entering into this
Amendment and increasing the maximum principal amount available to the Borrower
under the Revolving Line of Credit Loan, the Borrower shall pay the Bank a fee
in the amount of Twenty-five Thousand Dollars ($25,000.00); provided, however,
that such fee shall only be due and payable in the event that the Parent issues
additional capital stock within the twelve (12) month period from the date
hereof, and the proceeds of such issuance are used, in whole or in part, to pay
down the outstanding principal amount under the Revolving Line of Credit Loan by
an amount in excess of $1,000,000.00.
<PAGE> 5
WPI MAGNETEC, INC.
/s/ Michael Tule By: /s/ Michael Foster
- ----------------------- -----------------------
Signature and Title
Duly Authorized
Chairman and CEO
-----------------------
Print Name and Title
WITNESSES: WPI ELECTRONICS, INC.
/s/ Michael Tule By: /s/ Michael Foster
- ----------------------- -----------------------
Signature and Title
Duly Authorized
Chairman and CEO
-----------------------
Print Name and Title
WPI TERMIFLEX, INC.
/s/ Michael Tule By: /s/ Michael Foster
- ----------------------- -----------------------
Signature and Title
Duly Authorized
Chairman and CEO
-----------------------
Print Name and Title
WPI MICRO PALM, INC.
/s/ Michael Tule By: /s/ Michael Foster
- ----------------------- -----------------------
Signature and Title
Duly Authorized
Chairman and CEO
-----------------------
Print Name and Title
<PAGE> 6
10. COSTS AND EXPENSES OF BANK. The Borrower agrees to reimburse the Bank
for all reasonable costs, expenses, and fees, including attorneys' fees,
associated with the documentation of this Amendment. Borrower consents to Bank
charging Borrower's Revolving Line of Credit Loan account for all such costs,
expenses and fees.
IN WITNESS WHEREOF, the parties have executed and delivered this Amendment
all as of the date first set forth above.
WITNESSES FLEET BANK - NH
/s/ Michael Tule By: /s/ Mark L. Young
- ------------------------ ------------------------------------
Mark L. Young, Senior Vice President
WITNESSES: BORROWER:
WPI GROUP, INC.
/s/ Michael Tule By: /s/ Michael Foster
- ----------------------- -----------------------
Signature and Title
Duly Authorized
Chairman and CEO
-----------------------
Print Name and Title
WPI POWER SYSTEMS, INC.
/s/ Michael Tule By: /s/ Michael Foster
- ----------------------- -----------------------
Signature and Title
Duly Authorized
Chairman and CEO
-----------------------
Print Name and Title
<PAGE> 7
WPI PROCESSOR SYSTEMS, INC.
/s/ Michael Tule By: /s/ Michael Foster
- ----------------------- -----------------------
Signature and Title
Duly Authorized
Chairman and CEO
-----------------------
Print Name and Title
WPI DECISIONKEY, INC.
/s/ Michael Tule By: /s/ Michael Foster
- ----------------------- -----------------------
Signature and Title
Duly Authorized
Chairman and CEO
-----------------------
Print Name and Title
<PAGE> 1
Exhibit 10.8
WPI GROUP, INC.
---------------
CHANGE IN CONTROL PLAN
----------------------
This Change in Control Plan ("the Plan") has been adopted by the Board of
Directors ("the Board") of WPI Group, Inc. ("the Company") and has been executed
by its duly authorized officer as of December 15, 1995.
STATEMENT OF PURPOSE
--------------------
The Board recognizes that, as is the case with many publicly held
corporations, there always exists the possibility of a change of control of the
Company. This possibility and the uncertainty it creates may result in the loss
or distraction of members of management of the Company and its subsidiaries to
the detriment of the Company and its shareholders.
The Board considers the establishment, maintenance, and continuity of a
sound and vital management to be essential to protecting and enhancing the best
interests of the Company and its shareholders. The Board also believes that when
a change in control is perceived as imminent, or is occurring, the Board should
be able to receive and rely on disinterested advice from management regarding
the best interests of the Company and its shareholders without concern that
members of management might be distracted or concerned by the personal
uncertainties and risks created by the perception of an imminent or occurring
change of control.
Accordingly, the Board has determined that appropriate steps should be
taken to assure the Company of the continued employment and attention and
dedication to duty of certain members of management of the Company and to ensure
the availability of their disinterested advice, notwithstanding the possibility,
threat or occurrence of a change of control.
PLAN PROVISIONS
---------------
1. OPERATION. The Plan shall become effective immediately upon its
approval by the Board, but, neither the Plan nor any of its provisions shall be
operative unless and until there has been a Change of Control (defined below)
while the individuals identified on Exhibit A to this Plan (collectively the
"Covered Individuals" and singly, a "Covered Individual") are still employees of
the Company, nor shall this Plan govern or affect a Covered Individual's
relationship with the Company except as explicitly set forth herein. Upon a
Change of Control, if a Covered Individual is still employed by the Company,
this Plan and all of its provisions shall become operative immediately. If a
Covered Individual's employment relationship with the Company is terminated
before a Change of Control, then that individual shall have no rights or
obligations under the Plan.
<PAGE> 2
2. CHANGE OF CONTROL. For the purpose of the Plan, a "Change of
Control" shall mean a change in control of a nature that would be required to be
reported in response to Item 1(a) of Form 8-K, Current Report pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"); provided that, without limitation, a Change in Control shall be
deemed to have occurred if (i) with the exception of Michael H. Foster, any
"person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act)
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company representing
25% or more of the combined voting power of the Company's then outstanding
securities; or (ii) any change occurs in the composition of the Board of
Directors of the Company resulting in a majority of the present directors of the
Company not constituting a majority two years hence, provided, that in making
such determination directors who were elected by, or on the recommendation of,
such present majority, shall be excluded. Notwithstanding the foregoing, a
Change in Control shall not be deemed to have occurred if such change in control
results from a distressed sale of the Company due to the Company's material
default with respect to any applicable debt covenants with its lender.
3. SEVERANCE BENEFITS. If, within one (1) year after a Change of
Control of the Company, a Covered Individual is discharged without Cause or
resigned for Good Reason (as defined below) the Company shall pay to such
individual within ten (10) business days following the date of termination (as
defined below) a lump sum severance benefit, as set forth on Exhibit A to this
Plan.
4. GOOD REASON. If any of the following occurs within one (1) year
after a Change in Control, a Covered Individual may voluntarily terminate his or
her employment within thirty (30) days of the occurrence of such event and be
entitled to the severance benefits set forth on Exhibit A.
a. The Company assigns any duties to such individual which
are inconsistent with that individual's position,
duties, offices, titles, responsibilities, reporting
requirements or status with the Company immediately
prior to a Change of Control;
b. The Company takes any action with respect to such
individual which results in the material diminution
of such individual's duties or status with the
Company;
c. The Company reduces such individual's base salary,
including deferrals, as in effect immediately prior
to a Change of Control;
d. The Company changes a Covered Individual's place of
employment to a location outside the fifty mile
radius from that individual's current place of
employment; or
<PAGE> 3
e. The Company purports to terminate a Covered
Individual's employment otherwise than as expressly
permitted by the Plan.
The Covered Individual shall have the sole right to determine, in good
faith, whether any of the above events has occurred. Notwithstanding anything to
the contrary in the Plan, a Covered Individual may terminate his employment for
any reason during the first year after a Change of Control and receive the base
salary component only of the severance benefit described in section 3.
5. CAUSE. Cause shall mean: conviction of a felony or crime
involving an act of moral turpitude, dishonesty or misfeasance, or willful
misconduct which substantially interferes with the orderly business of the
Company or any of its subsidiaries, action that directly causes the Company or
its subsidiaries to suffer substantial loss or damage, and conduct that
substantially interferes with or damages the standing or reputation of the
Company or any of its subsidiaries.
6. OTHER BENEFITS PAYABLE. The severance benefit described in
section 3 above shall be payable in addition to, and not in lieu of, all other
accrued or vested or earned deferred compensation, rights, options or other
benefits which may be owed to a Covered Individual following discharge or
resignation (and not contingent on any Change of Control preceding such
termination), including but not limited to, accrued vacation or sick pay,
amounts or benefits payable, if any, under any bonus or other compensation
plans, stock option plan, stock ownership plan, stock purchase plan, life
insurance plan, health plan, disability plan or similar plan. At the discretion
of the Board of Directors, the vesting of stock options held by a Covered
Individual may be accelerated in the event of a Change of Control.
7. NOTICE OF TERMINATION. Any termination by Company for Cause, or
by a Covered Individual for Good Reason, shall be communicated by Notice of
Termination to the other party. A "Notice of Termination" means a written notice
which (i) indicates the specific termination provision relied under this Plan,
(ii) to the extent applicable, sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination under the provision so
indicated, and (iii) if the Date of Termination (as defined below) is other than
the date of receipt of such notice, specifies the termination date (which date
shall not be more than 15 days after the giving of such notice).
8. DATE OF TERMINATION. "Date of Termination" means (i) the date of
receipt of the Notice of Termination or any later date specified therein, as the
case may be, (ii) if a Covered Individual's employment is terminated by the
Company other than for Cause or disability, the Date of Termination shall be the
date on which the Company notifies such individual of such termination, and
(iii) if a covered individual's employment is terminated by reason of death or
disability, the Date of Termination shall be the date of death or the date that
the Covered Individual is determined to have a Disability (defined below) as the
case may be.
For the purposes of the Plan, "Disability" shall have the same
meaning as in any disability plan or policy covering a Covered Individual.
<PAGE> 4
9. PAYMENT OBLIGATIONS ABSOLUTE. Upon a Change of Control, the
Company's obligations to pay the severance benefits or make any other payments
described in this section shall be absolute and unconditional and shall not be
affected by any circumstances, including, without limitation, any set-off,
counterclaim, recoupment, defense or other right which the Company or any of its
subsidiaries may have against the Covered Individual or anyone else. The Covered
Individual shall not be required to mitigate his or her damages, and if he or
she does accept other employment, any benefits or payments hereunder shall not
be reduced by any compensation earned or other benefits received as a result of
such employment.
10. SUCCESSOR. The Company shall require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all of the business assets and/or assets of the Company, to assume
expressly and agree to perform this agreement and in the same manner and to the
same extent that the Company would be required to perform. As used in this
agreement, Company shall mean the Company hereinbefore defined and any successor
to its business and/or assets as aforesaid which assumes and agrees to perform
this agreement by operation of law or otherwise.
11. AMENDMENT. Prior to the occurrence of a Change of Control, this
Plan may be amended or terminated at any time by a vote of the Board. After the
occurrence of a Change of Control, this Plan may only be amended by a written
instrument signed by each of the Covered Individuals and the duly authorized
representative of the Company.
12. GOVERNING LAW. The validity and construction of the Plan shall
be governed by the laws of the State of New Hampshire.
IN WITNESS WHEREOF, the Plan has been executed by the duly
authorized officer of the Company as of the date first above written.
WPI GROUP, INC.
By: /s/ Michael Foster
---------------------------
Duly Authorized
<PAGE> 5
EXHIBIT A
Covered Individual Severance Amount
- ------------------ ----------------
Karen Hebert Six months current aggregate
compensation(1)
Rod Perron Six months current aggregate
compensation
John Allen Nine months current aggregate
compensation
Timothy Jones Nine months current aggregate
compensation
Michael Tule Nine months current aggregate
compensation
Dennis Deegan Twelve months current aggregate
compensation
Michael Foster Eighteen months current aggregate
compensation
- ----------
(1) "Current aggregate compensation" means the highest current base salary
for a Covered Individual, together with the full amount of the higher of: (1)
the cash bonus paid to a Covered Individual during the prior fiscal year; or (2)
if the Covered Individual's employment terminates during the last six months of
the fiscal year, the projected cash bonus that would have been payable to a
Covered Individual for the current fiscal year.
<PAGE> 1
Exhibit 13
CORPORATE INFORMATION
CORPORATE OFFICERS
- ------------------
Michael Foster Dennis M. Deegan
Chairman, and Chief Executive Officer President and
Chief Operating Officer
Dr. John K. Allen Karen S. Hebert
Vice President, Power Solutions Group Vice President, Human Resources
Timothy G. Jones Michael B. Tule
Vice President, Information Solutions Group Vice President, Secretary and
General Counsel
POWER SOLUTIONS GROUP
- ---------------------
WPI ELECTRONICS, INC. WPI MAGNETEC, INC.
WARNER, NH WARNER, NH
John W. Stewart III David C. Lincoln
President President
WPI POWER SYSTEMS, INC.
WARNER, NH
David J. Edwards
President
INFORMATION SOLUTIONS GROUP
- ---------------------------
WPI DECISIONKEY, INC. WPI TERMIFLEX/MICRO PALM, INC.
MERRIMACK, NH MERRIMACK, NH
Bradford S. Wild Velton S. Casler
President President
WPI MICRO PROCESSOR SYSTEMS, INC. WPI OYSTER TERMINALS, LTD.
STERLING HEIGHTS, MI NEWPORT, GWENT, U.K.
Dr. Andrew R. Reading Doug Watkins
President Managing Director
<PAGE> 2
BOARD OF DIRECTORS
- ------------------
Michael Foster
Chairman and Chief Executive Officer
WPI Group, Inc.
Dennis M. Deegan
President and Chief Operating Officer
WPI Group, Inc.
Peter D. Danforth
General Partner
Kearsarge Ventures, Ltd.
Paul G. Giovacchini
Senior Investment Manager
Signal Capital Corporation
Irving Gutin
Senior Vice President
Tyco International, Ltd.
Robert C. McCray
President
Valvcon Corporation
Bernard H. Tenenbaum
Vice President
Russ Berrie & Co.
AUDITORS
- --------
Arthur Andersen, LLP
One International Place
Boston, MA 02110
CORPORATE COUNSEL
- -----------------
Michael B. Tule
Vice President, General Counsel
WPI Group, Inc.
1155 Elm Street
Manchester, NH 03101
<PAGE> 3
SHAREHOLDER INFORMATION
TRANSFER AGENT AND REGISTRAR
- ----------------------------
Boston Equiserve
150 Royall Street
Canton, Massachusetts 02021
Telephone: (617) 575-2000
INVESTOR RELATIONS CONTACT
- --------------------------
Michele M. Normandin
Investor Relations
WPI Group, Inc.
1155 Elm Street
Manchester, NH 03101
Telephone: (603) 627-3500
FORM 10-KSB
- -----------
A copy of the Company's annual report to the Securities and Exchange Commission
on Form 10-KSB, exclusive of Exhibits, is available without charge upon written
request to Michele Normandin, Investor Relations, WPI Group, Inc., 1155 Elm
Street, Manchester, New Hampshire 03101, Telephone (603) 627-3500
FAX (603) 627-3150
ANNUAL MEETING
- --------------
The 1997 Annual Meeting of Shareholders is scheduled for February 12, 1997
at 10:00 a.m. at the WPI Group, Inc. Corporate Headquarters, 1155 Elm Street,
Manchester, NH 03101.
<PAGE> 4
STOCK PROFILE AND ACTIVITY
The Company's common stock is traded on the NASDAQ National Market System under
the symbol WPIC. Set forth below for each quarter of its last 2 fiscal years
indicated are the high and low sale prices for WPI Group, Inc. common stock.
1996 1995
Fiscal Quarter High Low High Low
- ---------------------------------------------------------
First $ 4 1/8 $2 1/2 $3 1/8 $2 1/8
Second $ 7 1/8 $3 5/8 $3 $2 15/32
Third $13 3/8 $7 1/4 $2 7/8 $2 1/8
Fourth $10 5/8 $6 $3 3/8 $2 3/8
- ---------------------------------------------------------
The number of shareholders of record on December 5, 1996 was approximately
2,800. No dividends have been paid on the common stock to date, and the Company
does not expect to pay cash dividends in the foreseeable future.
<PAGE> 5
WPI GROUP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This review should be read in conjunction with the financial statements and
related notes beginning on page 9 of this annual report.
RESULTS OF OPERATIONS
Net sales increased 84% to $47.5 million in 1996 from $25.9 million in 1995. The
increase was due primarily to internal growth in our targeted markets and the
acquisitions of Micro Processor Systems, Inc. and Oyster Terminals, Ltd.
Gross profit in 1996 increased 81% to $17.9 million from $9.9 million in 1995.
As a percentage of sales, gross profit remained constant compared to 1995, at
38%. Total gross profit increased due to the increase in revenues discussed
above.
Research and new product development expenses increased 95% to $2.9 million in
1996 from $1.5 million in 1995. The increase was due primarily to the
acquisitions discussed above and additions to engineering staff for new products
that support internal growth.
Selling, general and administrative expenses increased 63% to $10.8 million in
1996 compared to $6.6 million in 1995. During 1996, selling, general and
administrative expenses decreased to 23% of sales from 26% of sales in 1995. The
decrease was due to improved cost control and efficiency in servicing our target
markets, and a favorable impact from the acquisitions described above.
Operating income increased 134% to $4.2 million compared to $1.8 million in
1995. The increase was due to increased sales, stable gross profits and the
changes in operating expenses discussed above.
Income before provision for income tax more than doubled in 1996 to $3.7 million
compared to $1.8 million in 1995. As a percentage of net sales, income before
provision for income taxes increased from 7% of sales in 1995 to 8% of sales in
1996.
The Company's combined federal and state income tax rates, as a percentage of
pre-tax income, were 33% and 34% for 1996 and 1995, respectively. The decrease
in 1996 reflects increased DISC benefits resulting from international sales.
On December 29, 1995, the Company had a fire at its Warner facility. The Company
continued operations from temporary quarters and, on March 1, 1996, employees
returned to a new facility. As of September 29, 1996, the Company has recorded a
gain related to insurance recoveries, which is included in other income, net. In
addition to the insurance recoveries related to the property damage and related
expenses, including those associated with expedited construction under winter
conditions, the Company has been reimbursed by its insurance carrier for
business interruption costs that have been offset in cost of sales.
LIQUIDITY AND CAPITAL RESOURCES
At September 29, 1996, the Company had working capital of $12.2 million versus
$6.6 million at September 24, 1995. Net cash provided from operating activities
totaled $2.2 million in 1996 and $1.6 million in 1995.
As of September 29, 1996, the Company had no material commitments for capital
expenditures.
The Company has a $30 million revolving credit agreement with a bank which
expires on March 31, 1998. At September 29, 1996, the Company had $18.7 million
of borrowing outstanding.
The Company believes that its existing sources of liquidity and anticipated cash
flow from operations will satisfy the Company's working capital and capital
expenditure requirements for the foreseeable future.
INFLATION
The Company does not believe that inflation has had a significant impact on its
results of operations in the last two years.
<PAGE> 6
WPI GROUP, INC. AND SUBSIDIARIES
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO WPI GROUP, INC.:
We have audited the accompanying consolidated balance sheets of WPI Group, Inc.
(a New Hampshire corporation) and subsidiaries as of September 29, 1996 and
September 24, 1995, and the related consolidated statements of income,
stockholders' equity and cash flows for the years then ended. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of WPI
Group, Inc. and subsidiaries as of September 29, 1996 and September 24, 1995,
and the results of their operations and their cash flows for the years then
ended, in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Boston, Massachusetts
November 18, 1996
<PAGE> 7
WPI GROUP, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED BALANCE SHEETS
<CAPTION>
September 29,1996 and September 24, 1995 1996 1995
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 206,829 $ 29,664
Accounts receivable-net of allowance for doubtful
accounts of $244,300 and $217,000 in 1996 and 1995, respectively 10,881,315 4,490,477
Accounts receivable-other 1,618,873 146,145
Inventories 7,068,496 3,748,601
Prepaid expenses and other current assets 230,509 118,607
Prepaid income taxes 1,103,840 505,000
Refundable income taxes 547,750 101,093
- -----------------------------------------------------------------------------------------------------------
Total current assets 21,657,612 9,139,587
- -----------------------------------------------------------------------------------------------------------
Property, Plant and Equipment at cost less accumulated depreciation 9,447,758 6,857,475
Other Assets 19,569,574 6,383,275
- -----------------------------------------------------------------------------------------------------------
$50,674,944 $22,380,337
===========================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 4,265,217 $ 1,484,470
Accrued expenses 3,464,164 1,029,424
Accrued income taxes 1,772,630 --
- -----------------------------------------------------------------------------------------------------------
Total current liabilities 9,502,011 2,513,894
- -----------------------------------------------------------------------------------------------------------
Note Payable to Bank 18,650,000 1,123,308
Non-compete Agreement Payable 20,000 65,000
Deferred Income Taxes 1,954,287 1,367,000
- -----------------------------------------------------------------------------------------------------------
Commitments
Stockholders' Equity
Common stock, $.01 par value; authorized 20,000,000
shares in 1996; issued and outstanding 5,947,922 and 5,687,850
shares in 1996 and 1995, respectively 59,479 56,878
Additional paid-in capital 13,658,604 12,959,646
Retained earnings 6,815,801 4,294,611
Cumulative foreign currency translation adjustments 14,762 --
- -----------------------------------------------------------------------------------------------------------
Total stockholders' equity 20,548,646 17,311,135
- -----------------------------------------------------------------------------------------------------------
$50,674,944 $22,380,337
===========================================================================================================
</TABLE>
See notes to consolidated financial statements.
<PAGE> 8
WPI GROUP, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
For the years ended September 29, 1996 and September 24, 1995
- -------------------------------------------------------------------------------------
1996 1995
- -------------------------------------------------------------------------------------
<S> <C> <C>
Net Sales $47,498,058 $25,855,790
Cost of Sales 29,580,058 15,959,216
- -------------------------------------------------------------------------------------
Gross Profit 17,918,000 9,896,574
- -------------------------------------------------------------------------------------
Operating Expenses:
Research and new product development 2,939,984 1,508,942
Selling, general and administration 10,783,030 6,597,060
- -------------------------------------------------------------------------------------
Total operating expenses 13,723,014 8,106,002
- -------------------------------------------------------------------------------------
Operating Income 4,194,986 1,790,572
Other Income (Expense):
Interest income 18,377 22,386
Interest expense (694,370) (129,981)
Other, net 229,197 72,141
- -------------------------------------------------------------------------------------
Income Before Provision for Income Taxes 3,748,190 1,755,118
Provision for Income Taxes 1,227,000 600,000
- -------------------------------------------------------------------------------------
Net Income 2,521,190 1,155,118
=====================================================================================
Net Income Per Share $ 0.42 $ 0.20
=====================================================================================
Weighted Average Common Shares and
Common Equivalent Shares Outstanding 6,001,438 5,822,906
=====================================================================================
</TABLE>
See notes to consolidated financial statements.
<PAGE> 9
WPI GROUP, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<CAPTION>
For the years ended September 29, 1996 and September 24, 1995
- ---------------------------------------------------------------------------------------------------------------------------------
Common Stock
$.01 Par Value Additional Foreign
-------------------- Paid-in Retained Currency
Shares Amount Capital Earnings Translation Total
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE
SEPTEMBER 25, 1994 5,775,641 $57,757 $13,258,053 $3,139,493 $ -- $16,455,303
Employee stock purchase plan 2,130 21 5,194 -- -- 5,215
Stock bonus plan 3,170 32 9,204 -- -- 9,236
Exercise of stock options 27,538 275 61,358 -- -- 61,633
Repurchase and retirement of common stock (120,629) (1,207) (374,163) -- -- (375,370)
Net income -- -- -- 1,155,118 1,155,118
- ---------------------------------------------------------------------------------------------------------------------------------
BALANCE
SEPTEMBER 24, 1995 5,687,850 $56,878 $12,959,646 $4,294,611 $ -- $17,311,135
Employee stock purchase plan 4,085 41 25,416 -- -- 25,457
Stock bonus plan 5,170 52 19,074 -- -- 19,126
Exercise of stock options and warrants 250,817 2,508 496,468 -- -- 498,976
Income tax benefit from stock options exercised -- -- 158,000 -- -- 158,000
Foreign currency translation -- -- -- -- 14,762 14,762
Net income -- -- -- 2,521,190 -- 2,521,190
- ---------------------------------------------------------------------------------------------------------------------------------
BALANCE
SEPTEMBER 29, 1996 5,947,922 $59,479 $13,658,604 $6,815,801 $14,762 $20,548,646
=================================================================================================================================
</TABLE>
See notes to consolidated financial statements.
<PAGE> 10
WPI GROUP, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
For the years ended September 29, 1996 and September 24, 1995
- ----------------------------------------------------------------------------------------------
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 2,521,190 $ 1,155,118
- ----------------------------------------------------------------------------------------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,986,612 1,285,463
Deferred income taxes 569,613 620,000
Non-cash compensation 19,126 9,236
Changes in current assets and liabilities, net of
effects of acquisitions:
Accounts receivable (3,888,310) (674,217)
Accounts receivable-other (1,464,498) (85,468)
Inventories 178,270 (644,615)
Prepaid expenses and other current assets 32,267 (40,196)
Prepaid income taxes (55,115) 202,680
Refundable income taxes (446,657) 42,907
Accounts payable 1,280,236 193,084
Accrued expenses 850,561 (411,619)
Accrued income taxes 569,033 (52,502)
- ----------------------------------------------------------------------------------------------
Total adjustments (368,862) 444,753
- ----------------------------------------------------------------------------------------------
Net cash provided by operating activities 2,152,328 1,599,871
- ----------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in notes payable to bank 15,607,225 1,123,308
Decrease in long-term liabilities (3,190,000) --
Repurchase of common stock -- (375,370)
Proceeds from exercise of stock options 498,976 61,633
Issuance of common stock 25,457 5,215
Payments on notes payable -- (833,054)
Tax benefit on exercise of non-statutory options 158,000 --
- ----------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 13,099,658 (18,268)
- ----------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (2,332,051) (855,912)
Additions to other assets (671,025) (623,453)
Acquisitions, net of cash acquired (10,994,215) --
Payments of accrued acquisition costs (1,092,292) (717,500)
- ----------------------------------------------------------------------------------------------
Net cash used in investing activities (15,089,583) (2,196,865)
- ----------------------------------------------------------------------------------------------
EFFECT OF FOREIGN CURRENCY TRANSLATION ON CASH 14,762 --
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS 177,165 (615,262)
CASH AND EQUIVALENTS, BEGINNING OF YEAR 29,664 644,926
- ----------------------------------------------------------------------------------------------
CASH AND EQUIVALENTS, END OF YEAR $ 206,829 $ 29,664
==============================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Income taxes paid (refunded) 439,081 (38,941)
Interest paid 688,585 117,533
- ----------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF NON-CASH
INVESTING ACTIVITIES:
Summary of entities acquired:
Fair value of assets acquired $ 21,858,037 --
Cash paid (11,475,317) --
-----------------------------
Liabilities assumed $ 10,382,720 --
=============================
</TABLE>
See notes to consolidated financial statements
<PAGE> 11
WPI GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 29, 1996
1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
-------------------------------------------------------
BUSINESS - WPI Group, Inc. (the Company) designs, manufactures and markets
electronic ballasts, transformers and complete power systems, electro-mechanical
linear actuators, rugged hand-held programmable terminals and computers,
diagnostic information systems for the transportation industry and decision
support software. During 1996, the Company organized its divisions and
subsidiaries into two groups; POWER SOLUTIONS with WPI Electronics, WPI Magnetec
and WPI Power Systems - all providers of solutions that deal with the
application of power; and INFORMATION SOLUTIONS with WPI Termiflex/Micro Palm,
WPI Oyster Terminals, WPI Micro Processor Systems (MPSI) and WPI DecisionKey -
providers of computers, terminals, software and information-related services.
BASIS OF CONSOLIDATION - The consolidated financial statements as of September
29, 1996 and September 24, 1995 include the Company and its wholly owned
subsidiaries. Significant intercompany balances and transactions have been
eliminated.
FISCAL YEAR-END - The company operates on a 52- to 53-week fiscal year ending
on the last Sunday in September.
REVENUE RECOGNITION - Sales are recorded when products are shipped or when
services are performed. The Company provides for estimated warranty costs at the
time of shipment. Arrangements to deliver software or software systems which
require significant production, modification or customization are accounted for
on a percent completed basis. Revenue is recognized in the proportion that the
cost of milestones achieved bear to the total estimated costs of the project at
completion. Losses, if any, are provided for in the period in which the loss is
determined.
MANAGEMENT ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Management is not aware of any specific concentrations that could cause a severe
impact to its operations.
CASH AND CASH EQUIVALENTS - For the purposes of the consolidated statement of
cash flows, the Company considers all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents.
FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying amounts reported on the
balance sheet for cash, receivables, accrued expenses and debt approximate fair
value.
INVENTORIES - Inventories are stated at the lower of cost (first-in, first-out
method) or market and include materials, labor and manufacturing overhead.
<TABLE>
Inventories consist of:
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Raw materials $4,360,602 $2,703,790
Work in process 1,986,821 828,769
Finished goods 721,073 216,042
========== ==========
$7,068,496 $3,748,601
========== ==========
</TABLE>
<PAGE> 12
PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment are recorded at
cost. Expenditures for maintenance, repairs and renewals are charged to expense
as incurred whereas major betterments are capitalized as additions to property,
plant and equipment. The provision for depreciation and amortization has been
calculated using the straight-line method over the assets estimated useful lives
ranging from 3 to 39 years.
<TABLE>
Property, plant and equipment consist of:
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Construction in progress $ 96,432 $ 56,333
Land and land improvements 439,336 412,056
Buildings and improvements 4,421,935 4,026,466
Machinery and equipment 3,450,652 2,468,849
Tooling and dies 1,031,328 522,035
Office equipment 1,602,309 1,229,442
Equipment under capital leases 9,740 37,374
----------- -----------
11,051,732 8,752,555
Less: accumulated depreciation (1,603,974) (1,895,080)
----------- -----------
$ 9,447,758 $ 6,857,475
=========== ===========
</TABLE>
GOODWILL - The excess of the purchase price over the fair value of net assets
acquired in an acquisition (goodwill) is included in other assets in the
accompanying consolidated balance sheets and is being amortized over 5 to 25
years on a straight-line basis. The Company periodically evaluates the existence
of goodwill impairment on the basis of whether the goodwill is fully recoverable
from projected undiscounted net cash flows of the related business unit. The
purchase accounting is subject to future refinement: the impact of which would
be adjusted to goodwill. Goodwill (net of accumulated amortization) was
approximately $17,629,000 and $5,172,000 at the end of 1996 and 1995.
Amortization of goodwill amounted to approximately $759,000 and $193,000 for
1996 and 1995, respectively.
DEFERRED PRODUCT ENHANCEMENT COSTS - Deferred product enhancement costs
represent incremental direct costs specifically identified with the adaptation
and enhancement of existing commercial products to meet the needs of
specifically identified customers. Such costs are amortized on a straight-line
basis over the estimated economic useful lives of the related products which
presently do not exceed five years. Periodically the Company evaluates each
product on a number of factors, including customer projections of ongoing
business, including projected units for the following year when available and
includes our customers' evaluation of the state of the technology and estimated
stage of the life cycle of the product. The Company also reviews sales during
the previous year and the future gross margin analysis projections of the
product. The amortization of these costs are included in cost of sales in the
accompanying consolidated statements of income. The table set forth below
details the costs and accumulated amortization for deferred product enhancement
costs:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Deferred product enhancement costs $2,452,682 $1,633,339
Less: accumulated amortization (860,240) (675,385)
---------- ----------
$1,592,442 $ 957,954
</TABLE>
SOFTWARE DEVELOPMENT COSTS - Certain software development costs are capitalized
when incurred. Capitalization of software development costs begins upon the
establishment of technological feasibility and ceases when the product is ready
for release. Research and development costs incurred prior to the establishment
of technological feasibility are charged to development expense. Development
costs associated with product enchancements that extend the life of the original
product or significantly improve the marketability of the original product are
also capitalized upon technological feasibility. Amortization of capitalized
software development costs begins when the product is available for release to
customers. Amortization is provided on a product-by-product basis, using the
straight-line method over the economic life of the product, initially estimated
at two years. The Company capitalized approximately $132,000 of software
development costs in 1996. Amortization of these costs begins in 1997.
NET INCOME PER SHARE - Net income per share data are computed using the weighted
average number of shares of common and common equivalent shares outstanding,
during the year. Common equivalent shares reflect stock options and warrants
which have been included in the computation using the treasury stock method only
when their effects are dilutive.
<PAGE> 13
FOREIGN CURRENCY TRANSLATION - Assets and liabilities of the Company's foreign
operation are translated at year-end exchange rates. Net sales and expenses are
translated at the average rates prevailing during the year. Balance sheet
translation gains and losses are reflected as a separate component of
stockholders' equity. Foreign currency gains and losses arising from
transactions are reflected in net income.
RECLASSIFICATIONS - Certain prior year amounts have been reclassified to conform
with current presentation.
2. OTHER ASSETS
------------
<TABLE>
Other assets consist of:
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Goodwill $18,387,820 $ 5,404,635
Deferred product enhancement cost 2,452,682 1,633,339
Non-compete agreement 275,000 275,000
Software development costs 131,592 --
Other 128,322 81,832
----------- -----------
21,375,416 7,394,806
Less: accumulated amortization (1,805,842) (1,011,531)
----------- -----------
$19,569,574 $ 6,383,275
=========== ===========
</TABLE>
3. NOTES PAYABLE
-------------
On October 24, 1995, the Company terminated its existing line of credit
and obtained a $15,000,000 unsecured revolving line of credit agreement
with another bank. This agreement was amended on March 20, 1996 and July
12, 1996 to increase the total line of credit to $20,000,000 and
$30,000,000 respectively. The agreement expires on March 31, 1998, at
which time all borrowings under the agreement are due and payable.
Interest is payable monthly at the prime rate or at the Company's option,
the Eurodollar-based rate, as defined. The Company is required to pay an
annual commitment fee equal to 0.2% of the unused line. The agreement also
requires the Company to maintain minimum levels of net worth,
capitalization ratios and earnings, as defined. The agreement limits the
Company's ability to incur additional indebtedness and pay dividends and
limits capital expenditures to $1,500,000 annually. Proceeds from this
line were used to repay the outstanding borrowing under its previous line
of credit agreement.
4. ACCRUED EXPENSES
----------------
<TABLE>
Accrued expenses consist of:
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Payroll and related amounts $ 851,899 $ 428,300
Warranty 447,650 181,003
Acquisition related 622,763 41,556
Deferred revenue 1,084,896 172,322
Other 406,633 151,243
Current portion of non-compete agreement 50,323 55,000
---------- ----------
$3,464,164 $1,029,424
========== ==========
</TABLE>
<PAGE> 14
5. INCOME TAXES
------------
<TABLE>
The components of federal and state income taxes are as follows:
<CAPTION>
1996 1995
---------- --------
<S> <C> <C>
Current:
Federal $ 900,000 $(45,000)
State 156,000 25,000
Foreign 124,000 --
---------- --------
1,180,000 (20,000)
---------- --------
Deferred:
Federal 41,000 511,000
State 6,000 109,000
Foreign -- --
---------- --------
47,000 620,000
---------- --------
$1,227,000 $600,000
========== ========
</TABLE>
<TABLE>
A reconciliation of income taxes at the federal statutory rate of 34% to income
taxes at the Company's effective tax rate is as follows:
<CAPTION>
1996 1995
----------- ---------
<S> <C> <C>
Income tax at 34% of income before
provision for income taxes $ 1,274,000 $ 597,000
State income tax (net of effect
of federal tax) 173,000 88,000
DISC Benefit (289,000) (122,000)
Goodwill Amortization 88,000 49,000
Alternative minimum tax credit (72,000) --
Other 53,000 (12,000)
----------- ---------
Total provision for income taxes $ 1,227,000 $ 600,000
=========== =========
</TABLE>
<TABLE>
The approximate income tax effect of temporary differences comprising the
deferred tax assets and liabilities are as follows:
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Prepaid
Inventory related $ 600,000 $ 177,000
Bad debt reserve 82,000 84,000
Warranty reserve 175,000 70,000
Alternative minimum tax 101,000 100,000
Payroll related 74,000 74,000
Other 72,000 --
---------- ----------
$1,104,000 $ 505,000
========== =========
Deferred
Tax in excess of book depreciation $ 606,000 $ 588,000
DISC deferral 280,000 280,000
Goodwill 550,000 414,000
Deferred enhancement costs 472,000 113,000
Other 46,000 (28,000)
---------- ----------
$1,954,000 $1,367,000
========== ==========
</TABLE>
<PAGE> 15
A portion of the Company's goodwill is deductible over a shorter tax life,
resulting in a deferred tax liability.
The Company's subsidiary, WPI Micro Palm, Inc., which was acquired on September
23, 1994, had net operating loss carryforwards of approximately $2,874,000, the
utilization of which is limited to approximately $126,000 annually as a result
of the acquisition. The Company has not recorded any deferred tax assets for
these net operating loss carryforwards because their future utilization is
uncertain. The realization of these net operating loss carryforwards are
accounted for as a reduction of goodwill.
6. COMMON STOCK
------------
A) OPTION AND WARRANT PLANS
The Company has option plans for selected officers and key employees. Under
these plans, options may be granted at prices equal to at least the fair market
value at the date of grant. Options granted under the 1995 Stock Option Plan are
exercisable commencing on February 6, 1996 and ending on the expiration or
termination of the option as specified in the underlying option agreement. The
options automatically expire upon termination of employment with the Company.
All other options are exercisable or expired.
<TABLE>
A summary of the option activity is as follows:
<CAPTION>
Shares Under Option Price Per Share
------------------- ---------------
<S> <C> <C>
Balance, September 25, 1994 300,780 $ 1.30-3.25
Exercised (44,130) 1.82-2.41
Terminated (58,800) 1.82-3.25
Granted 167,550 2.50-6.00
-------- -----------
Balance, September 24, 1995 365,400 $ 1.30-6.00
Exercised (218,017) 1.30-3.25
Terminated (22,167) 2.75-2.88
Granted 189,730 2.88-10.00
-------- -----------
Balance, September 29, 1996 314,946 $2.00-10.00
======== ===========
</TABLE>
WPI Micro Palm Warrants
- ------------------------
On September 23, 1994 in connection with the Micro Palm acquisition, the Company
issued warrants to purchase 32,800 shares of the Company's common stock at an
exercise price of $2.00 per share. As of September 29, 1996, all warrants have
been exercised.
B) COMMON STOCK REPURCHASE PROGRAM
On June 6, 1995 the Board of Directors authorized the Company to repurchase an
additional 200,000 shares of its common stock, bringing the total shares
authorized to be repurchased to 400,000. In fiscal year 1995 the Company
repurchased and retired 120,600 shares of its common stock.
7. EMPLOYEE BENEFITS
-----------------
A) POST RETIREMENT BENEFITS
The Company has no obligation for post-retirement benefits.
B) WPI EMPLOYEE STOCK PURCHASE PLAN
The Company's Employee Stock Purchase Plan (Purchase Plan) was adopted by the
Board of Directors on May 7, 1992. The Purchase Plan is a qualified stock
purchase plan under the Internal Revenue Code covering all employees of the
<PAGE> 16
Company, who are neither executive officers of the Company, participants in the
Company's Executive Stock Plan, nor owners of (or who would become owners of)
5% of the Company's stock. Eligible employees can purchase shares on a quarterly
basis on December 15, March 15, June 15 and September 15.The minimum purchase
amount is 10 shares per quarter to a maximum of 400 shares per year. The
purchase price of the shares is 93% of the average of the closing prices of the
common stock during the period of 5 trading days ending on the purchase date. An
aggregate of 40,000 shares were reserved for issuance under the Purchase Plan.
At September 29, 1996, a cumulative total of 12,844 shares had been purchased
under the Purchase Plan.
C) WPI STOCK BONUS AWARD PLAN
The Company's Stock Bonus Award Plan (Bonus Plan) was adopted by the Board of
Directors on May 7, 1992. Employees of the Company who are neither executive
officers of the Company, nor participants in the Company's Executive Stock Plan
are eligible to participate in the Bonus Plan. The Bonus Plan allows for the
award of shares of the Company's common stock. Awards under the Bonus Plan are
made at the discretion of the Chief Executive Officer to employees who have
demonstrated outstanding performance and commitment in their employment with the
Company. On August 8, 1995, the aggregate shares reserved for issuance under the
Bonus Plan increased from 10,000 to 30,000 shares. At September 29, 1996, a
cumulative total of 14,070 shares had been awarded under the Bonus Plan. The
compensation expense related to these awards is not significant.
D) WPI 401k PLAN
In 1990, the Company established a Profit-Sharing 401(k) Plan for the benefit of
eligible employees whereby the Company matches a portion of the employees'
contributions to the plan. The Company currently matches 50% of the first 4% of
employees= contributions. The Company's expense relating to this plan amounted
to approximately $150,000 and $109,000 for the years ended September 29, 1996
and September 24, 1995, respectively.
8. SIGNIFICANT CUSTOMERS
---------------------
The Company markets its products to customers in diversified industries in the
United States and Europe. For the year ended September 29, 1996, two customers
accounted for 11% and 10%, respectively, of total Company sales. For the year
ended September 24, 1995, one of these customers accounted for 12% of total
Company sales.
9. ACQUISITIONS
------------
On November 10, 1995 the Company acquired all the outstanding capital stock of
Micro Processor Systems, Inc. (MPSI) and its subsidiary. MPSI is a developer and
marketer of electronic test and diagnostic hardware and software for heavy- and
light-duty vehicles. The purchase price was $1 in cash plus assumption of
liabilities and expenses totaling $7.6 million. The acquisition was accounted
for using the purchase method. Accordingly, the purchase price was allocated to
assets acquired based on their estimated fair values. This treatment resulted in
$3.1 million of goodwill acquired, which is being amortized on a straight-line
basis primarily over 15 years.
On July 16, 1996, a subsidiary of the Company acquired all the outstanding
capital stock of Oyster Terminals, Ltd., a manufacturer of hand-held
programmable terminals. The purchase price consisted of $11.5 million in cash
plus assumed liabilities and expenses totaling $2.7 million. The acquisition was
accounted for using the purchase method. Accordingly, the purchase price was
allocated to assets acquired based on their estimated fair values. This
treatment resulted in $10.3 million of goodwill acquired, which is being
amortized on a straight-line basis over 25 years.
<TABLE>
The following summarized, unaudited pro forma results of operations for the
years ended September 29, 1996 and September 24, 1995, assume the acquisitions
of Micro Processor Systems, Inc. and Oyster Terminals, Ltd. occurred as of the
beginning of the respective periods (dollars in thousands except per share
amounts):
<CAPTION>
Pro forma 1996 1995
---- ----
<S> <C> <C>
Net sales $54,082 $42,030
Net income 2,014 317
Net income per share $ 0.34 $ 0.05
</TABLE>
<PAGE> 17
The unaudited pro forma results are not necessarily indicative of either actual
results of operations that would have occurred had the acquisitions been made at
the beginning of the periods shown or future results.
10. COMMITMENTS
-----------
<TABLE>
On October 7, 1994, the Company entered into a five-year operating lease
commitment for its corporate headquarters. This lease was amended on October 24,
1996. Future minimum lease commitments under this operating lease are as
follows:
<CAPTION>
Fiscal Year Amount
----------- ------
<S> <C>
1997 151,000
1998 154,000
1999 158,000
2000 107,000
-------
570,000
=======
</TABLE>
Rent expense for 1996 and 1995 totaled approximately $110,000 and $92,000,
respectively.
11. OTHER, NET
----------
On December 29, 1995, the Company had a fire at its Warner facility. The Company
continued operations from temporary quarters and on March 1, 1996 returned to
the new facility.
As of September 29, 1996, the Company has recorded a gain of $364,000 related to
insurance recoveries, which is included in other income, net. In addition to the
insurance recoveries related to the property damage and related expenses,
including those associated with expedited construction under winter conditions,
the Company has been reimbursed by the insurance carrier for business
interruption costs of approximately $1,200,000 that have been offset in cost of
sales.
Also included in other income, net are the costs of approximately $130,000
related to settlement of a dispute and $100,000 of nonrecurring acquisition
related costs.
12. BUSINESS SEGMENT AND GEOGRAPHICAL INFORMATION
---------------------------------------------
The Company's business segments are:
[Square Bullet] POWER SOLUTIONS: power systems, electronics and solenoids
[Square Bullet] INFORMATION SOLUTIONS: rugged hand-held programmable
terminals and computers, vehicle diagnostic information
systems, and decision support software.
<TABLE>
Business Segment Information
- ----------------------------
(in thousands)
<CAPTION>
Power Information
Solutions Solutions Corporate Total
--------- --------- --------- -----
<S> <C> <C> <C> <C>
1996(d)
Net sales $27,071 $20,427 $ -- $47,498
Operating income 4,143 2,904 (2,852)(a) 4,195
Identifiable assets 13,719 33,224 3,732 (b) 50,675
Depreciation and amortization 859 579 549 1,987
Capital expenditures 1,818 399 115 2,332
</TABLE>
<PAGE> 18
<TABLE>
Geographical Information
- ------------------------
(in thousands)
<CAPTION>
United
States Europe Corporate Total
------ ------ --------- -----
<S> <C> <C> <C> <C>
1996 (d)
Net sales $46,042(c) $ 1,456 $ -- $47,498
Operating income 6,568 479 (2,852)(a) 4,195
Identifiable assets 33,615 13,328 3,732 (b) 50,675
<FN>
(a) Includes corporate expenses, interest income, interest expense,
amortization of goodwill and other, net.
(b) Primarily cash, prepaid and refundable income taxes, corporate prepaid
expenses and other assets and equipment at the Company's corporate
offices.
(c) Includes export sales of $7,499 and $5,902 in 1996 and 1995 respectively.
(d) The segment structure was implemented in November 1995 accordingly, 1995
information has not been provided.
</TABLE>
<PAGE> 1
Exhibit 21
SUBSIDIARIES OF THE REGISTRANT STATE OF INCORPORATION
- ------------------------------ ----------------------
WPI Electronics, Inc. New Hampshire
WPI Magnetec, Inc. New Hampshire
WPI Power Systems, Inc. New Hampshire
WPI Termiflex, Inc. New Hampshire
WPI DecisionKey, Inc. New Hampshire
WPI Micro Palm, Inc. New Hampshire
WPI Micro Processor Systems, Inc. New Hampshire
WPI Oyster Terminals Limited England and Wales
WPI Oyster Terminals, Inc. New Hampshire
WPI UK Holding, Inc. New Hampshire
WPI UK Holding II, Inc. New Hampshire
WPI Group (U.K.) England and Wales
<PAGE> 1
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this form 10-KSB of our report dated November 18, 1996.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
December 18, 1996
<PAGE> 1
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes
and appoints Michael Foster and Dennis M. Deegan, and each of them, his true and
lawful attorney-in-fact and agent with full power of substitution and
re-substitution, for him and in his name, place and stead, in any and all
capacities, to execute for and on behalf of the undersigned the Annual Report on
Form 10-KSB of WPI Group, Inc. for the fiscal year ended September 29, 1996, and
to file the same, with all exhibits thereto, and any other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in the exercise of the powers granted herein, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
/s/ Irving Gutin
-----------------------------
Irving Gutin
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF WPI GROUP, INC. FOR THE TWELVE MONTHS ENDED SEPT. 29,
1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-29-1996
<PERIOD-END> SEP-29-1996
<EXCHANGE-RATE> 1
<CASH> 206,829
<SECURITIES> 0
<RECEIVABLES> 11,125,615
<ALLOWANCES> 244,300
<INVENTORY> 7,068,496
<CURRENT-ASSETS> 21,657,612
<PP&E> 11,051,732
<DEPRECIATION> 1,603,974
<TOTAL-ASSETS> 50,674,944
<CURRENT-LIABILITIES> 9,502,011
<BONDS> 0
0
0
<COMMON> 59,479
<OTHER-SE> 20,489,167
<TOTAL-LIABILITY-AND-EQUITY> 50,674,944
<SALES> 47,498,058
<TOTAL-REVENUES> 47,498,058
<CGS> 29,580,058
<TOTAL-COSTS> 29,580,058
<OTHER-EXPENSES> 13,723,014
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 694,370
<INCOME-PRETAX> 3,748,190
<INCOME-TAX> 1,227,000
<INCOME-CONTINUING> 2,521,190
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,521,190
<EPS-PRIMARY> .42
<EPS-DILUTED> .42
</TABLE>
