-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TeHjZwvhPvR60vBSerj5RZcVKIiZroXLByioiW5rcP6lhPgiLEaWQ2OqCkXp9D+8 reF8ywe+R2NWyc4r868lmA== 0000023071-96-000003.txt : 19960325 0000023071-96-000003.hdr.sgml : 19960325 ACCESSION NUMBER: 0000023071-96-000003 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19951229 FILED AS OF DATE: 19960322 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMPUTER PRODUCTS INC CENTRAL INDEX KEY: 0000023071 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPONENTS, NEC [3679] IRS NUMBER: 591205269 STATE OF INCORPORATION: FL FISCAL YEAR END: 1230 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-04466 FILM NUMBER: 96537305 BUSINESS ADDRESS: STREET 1: 7900 GLADES RD STE 500 CITY: BOCA RATON STATE: FL ZIP: 33434-4105 BUSINESS PHONE: 4074511000 MAIL ADDRESS: STREET 1: 7900 GLADES ROAD STREET 2: SUITE 500 CITY: BOCA RATON STATE: FL ZIP: 33434-4105 10-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the Fiscal year ended DECEMBER 29, 1995 Commission File No. 0-4466 COMPUTER PRODUCTS, INC. ----------------------- (Exact name of Registrant as specified in its charter) FLORIDA 59-1205269 ------- ---------- (STATE OR OTHER (I.R.S. JURISDICTION OF EMPLOYER INCORPORATION) IDENTIFICATION NO.) 7900 GLADES ROAD, SUITE 500, 33434-4105 - ---------------------------- ---------- BOCA RATON, FL (ZIP CODE) -------------- (Address of principal executive offices) (407) 451-1000 -------------- (Registrant's telephone number, including area code) SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: COMMON STOCK, $.01 PAR VALUE COMMON STOCK PURCHASE RIGHTS ---------------------------- (Title of each class) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO . - -- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K [ ]. The aggregate market value of the voting stock held by non-affiliates of the Registrant as of March 15, 1996 was approximately $210 million. As of March 15, 1996, 23,020,265 shares of the Registrant's $.01 par value common stock were outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Company's annual shareholders' report for the year ended December 29, 1995 (the "Annual Report") are incorporated by reference into Parts I and II. Portions of the Company's proxy statement for the annual meeting of shareholders to be held May 2, 1996 are incorporated by reference into Part III. PART I ITEM 1. BUSINESS -------- GENERAL The Company was incorporated under the laws of the State of Florida in 1968. Unless the context indicates otherwise, as used herein the term "Company" means Computer Products, Inc. and its consolidated subsidiaries. Computer Products, Inc. (the "Company") designs, develops, manufactures and markets the following lines of electronic products and systems: (1) power conversion products for electronic equipment used in commercial and industrial applications requiring a precise and constant voltage level for proper operation; (2) industrial automation hardware and software systems and components which are used in computer-directed process control and data acquisition applications; and (3) high performance single-board computers, systems and subsystems for real- time applications. PRODUCTS The following table sets forth sales of the Company's product lines (after elimination of intercompany transactions) during the fiscal years indicated ($000s):
1995 1994 1993 --------- --------- --------- Power Conversion $155,426 $117,995 $ 94,501 Computer Systems 19,026 18,198 16,053 Industrial Automation 16,926 18,607 13,236 --------- --------- --------- Total $191,378 $154,800 $123,790 ========= ========= =========
For further information on sales, particularly with respect to foreign and intercompany sales, refer to Note 17 of the Consolidated Financial Statements in the Annual Report, which is incorporated herein by reference. POWER CONVERSION The Company is one of the leading suppliers of power supplies, power converters and distributed power systems to the communications industry. According to independent industry sources, the Company ranks among the top ten independent power supply manufacturers in sales volume worldwide. Product offerings include over 300 standard products, in addition to custom designed products, distributed through multiple sales channels. Power Conversion's products include AC-to-DC power supplies and modular DC- to-DC converters that focus on the worldwide communications market including networking, data communications, telecommunications, and wireless infrastructure. Computer, industrial and instrumentation markets are also served. AC-to-DC power supplies are used to convert alternating electric current (the form in which virtually all electric current is delivered by utility companies) to a precisely controlled direct current. Direct current is required to operate virtually all solid state electronic equipment. DC- to-DC converters are used to convert a particular direct current voltage into another (higher or lower) direct current voltage that is required by the electronic device to which it is connected. It is the Company's objective to provide the fastest time-to-market for engineered power solutions and to produce a broad range of high quality standard products to meet customers' needs. Ranging from 3 to 1500 watts, the Company currently offers standard power products in over 1,000 configurations and accommodates a wide variety of customer applications. The products can be configured as open frames, enclosed or encapsuled. The Company's products are tested by regulatory agencies for safety and are also tested for compliance with a variety of international emissions standards. The Company's Power Conversion activities are carried on principally through its Power Conversion North America Division, located in Boston, Massachusetts, and Fremont, California, Power Conversion Europe, headquartered in Youghal, Ireland, Computer Products Asia-Pacific Limited in Hong Kong, and in Zhongshan, China. COMPUTER SYSTEMS The Computer Systems division designs and manufactures high performance board- level computers and communication controllers, integrating them with real-time operating system software, enclosures and peripherals to form complete systems for communications and other real-time applications. The products are designed around and incorporate industry standards which permit easy portability to a variety of applications. The technology relies on popular and powerful microprocessors from sources such as Motorola, Intel and MIPS. The primary product line combines both the worldwide industry standard VMEbus, which defines physical board size and signal characteristics for the interconnection of microprocessors, and popular real-time operating system software. Application requirements for these products usually include environments requiring rapid computer response time with high quality processing capabilities, such as communications. Computer Systems has recently introduced the Baja product family. The Baja utilizes a MIPS 4700 processor that takes advantage of the very high speed processing capability of the MIPS 4000 family of RISC-based microprocessors. Baja also includes two industry standard PCI Mezzanine Bus Connectors (PMC) which gives the user the flexibility of adding standard modules such as ATM or Fast Ethernet to meet their application needs. The Company believes that Computer Systems' Nitro family of products based on the Motorola 68060 and 68040 CISC processors has been well received by the communications industry. Both CISC and RISC based single-board computers have powerful networking, communications and peripheral interfaces that provide the latest features available for VMEbus products. Computer Systems' customers are primarily original equipment manufacturers (OEMs), who use the products for high speed telecommunications applications. They are also used in other areas such as medical instrumentation, airplane and weapons training simulators, process control, industrial automation and traffic control systems. Management believes that the market for VMEbus and real-time products will expand as communications companies move from proprietary to open systems in order to speed time to market and enhance upgrade capability. Computer Systems' products are manufactured in Madison, Wisconsin. INDUSTRIAL AUTOMATION Industrial Automation's product line consists of electronic real-time input/output subsystems, intelligent controllers and software that are utilized in data acquisition, monitoring and control of processes in industrial automation. The Company's products are characterized by their ability to measure and process data at high speeds on a continuous `real- time''basis. These products are used in a broad range of industries including utilities, metals, glass, automotive, paper and food processing as well as in training simulators and research and development laboratories. Industrial Automation's products provide the interfaces linking sensors and actuators to a computer or controller. In general, sensors convert physical phenomena, such as pressure, temperature, flow and weight, into electrical signals, while actuators provide the force required to adjust devices controlling such physical phenomena and other aspects of industrial processes. Such electrical signals are not standardized and occur in a broad range of voltages and currents. The Company has recently focused on modularity and connectivity as strategies to expand its customer base in this industrial market area. The modularity engineered into the product provides customers with maximum flexibility to modify, update and expand process control systems without requiring replacement of existing systems. Connectivity further enhances the product line's ability to communicate with third-party hardware and software products through industry standard interfaces and networks. The Company believes that Industrial Automation has bridged the gap between existing products with minicomputers and microcomputers commonly used in today's process environment. The introduction of the RTP 2000 product provides industrial customers with a data acquisition and control solution utilizing an embedded Intel 486 controller and industry standard software. The Company has established arrangements with several third party software companies offering bundled hardware and software solutions for the industrial process market. Industrial Automation's products, generally available as standard products, are used in a wide range of plant and laboratory environments. These products are offered with a large number of options that are designed to enable them to perform numerous special functions and, when required, meet or exceed the design specifications for safety-related equipment used in nuclear power plants. In addition, the Company maintains a special engineering group to assist customers who require special hardware solutions. Industrial Automation's products are manufactured in Pompano Beach, Florida. MARKETING AND DISTRIBUTION The Company's distribution channels consist of distributors, independent manufacturers' representatives, and a direct sales team. The business of the Company is not seasonal in nature. Power Conversion products are sold directly to OEMs, private-label customers and distributors. In addition, the Company's sales and engineering personnel supervise and provide technical assistance to independent domestic sales representatives and to domestic and foreign distributors. Industrial Automation and Computer Systems products are marketed domestically through independent sales representative organizations. Substantially all foreign sales are made through independent foreign distributors and foreign trading companies. Both Industrial Automation and Computer Systems manage some sales on a direct basis. One customer accounted for 11% of the Company's consolidated sales during fiscal 1995. The Company does not believe that the loss of any single customer would have a materially adverse effect on its business. The Company has derived a significant portion of its sales in recent years from its international operations. Thus, the Company's future operations and financial results could be significantly affected by international factors, such as changes in foreign currency exchange rates or political instability. The Company's operating strategy and pricing take into account changes in exchange rates over time. However, the Company's future results of operations may be significantly affected in the short term by fluctuations in foreign currency exchange rates. See Note 17 of the Notes to Consolidated Financial Statements, incorporated herein by reference, for additional information. MATERIALS AND COMPONENTS The manufacture of the Company's products requires a wide variety of materials and components. The Company has multiple external sources for most of the materials and components used in its production processes, and it manufactures certain of these components. Although the Company has from time to time experienced shortages of certain supplies, such shortages have not resulted in any significant disruptions in production. During 1995, the Company experienced supply shortages of certain components which are expected to persist in 1996. To compensate for these shortages, the Company acquired additional inventories of certain components and intends to continue this practice on a selective basis in 1996. The Company believes that there are adequate alternative sources of supply to meet its requirements. PATENTS The Company believes that its future success is primarily dependent upon the technical competence and creative skills of its personnel, rather than upon any patent or other proprietary rights. However, the Company has protected certain of its products with patents where appropriate and has defended, and will continue to defend, its rights under these patents. BACKLOG Order backlog from continuing operations at December 29, 1995 was $52.1 million as compared to $37.0 million at December 30, 1994. Historically, the effects of changes and cancellations have not been significant to the Company's operations. The Company expects to ship substantially all of its December 29, 1995 backlog in the first six months of fiscal 1996. COMPETITION The Company faces intense competition from a significant number of companies. Many of these competitors have resources, financial or otherwise, substantially greater than those of the Company. Competitors include both independent manufacturers of competing products, and manufacturers of overall electronic systems and devices, who manufacture competing products on an "in-house" or "captive" basis for use in their own systems or devices. Although a significant portion of its present overall market is served on a "captive" or "in-house" basis, the Company believes there is a trend toward the use of independent manufacturers as a source of these products, as these items become more technologically advanced and complex. RESEARCH AND DEVELOPMENT The Company maintains active research and development departments which are engaged in the modification and improvement of existing products and the development of new products. Expenditures for research and development during the 1995, 1994, and 1993 fiscal years were approximately $16.1 million, $10.9 million, and $9.4 million, respectively. As a percentage of total sales, research and development accounted for 8.4%, 7.0%, and 7.6% in 1995, 1994 and 1993, respectively. Research and development spending has increased in each of the past three years as the Company invested in new product platforms to service the communications industry. The Company views continued investment in research and development as critical to its future growth and competitiveness and is committed to continuing its efforts in new standard and custom product development. EMPLOYEES The Company presently employs approximately 1,630 full-time people. In addition, the Company presently has approximately 1,300 temporary employees and contractors in its China facility. The Company's ability to conduct its present and proposed activities would be impaired if the Company lost the services of a significant number of its engineers and technicians and could not readily replace them with comparable personnel. Although there is demand for qualified technical personnel, the Company has not, to date, experienced difficulty in attracting and retaining sufficient engineering and technical personnel to meet its needs. None of the Company's domestic employees is covered by collective bargaining agreements. The Company considers its relations with its employees to be satisfactory. ENVIRONMENTAL MATTERS Compliance with federal, state and local laws and regulations regulating the discharge of materials into the environment has not had, and, under present conditions the Company does not anticipate that such laws and regulations will have, a material effect on the results of operations, capital expenditures or competitive position of the Company. ITEM 2. PROPERTIES ---------- The Company currently occupies approximately 442,000 square feet of office and manufacturing space worldwide. In addition to the Company's principal executive offices in Boca Raton, Florida, the Company maintains facilities in Boston, Massachusetts; Fremont, California; Youghal, Ireland; Hong Kong; Pompano Beach, Florida; and Madison, Wisconsin. Approximately 76% of the space utilized by the Company is owned while the remainder is leased. Certain of the facilities owned by the Company are subject to liens, which are described in Note 7 to the Consolidated Financial Statements, incorporated herein by reference. In addition to the above locations, the Company has leased sales offices located in or near London, England; Paris, France; and Munich, Germany. The Company considers the facilities described in this Item to be generally well-maintained, adequate for its current needs and capable of supporting a reasonably higher level of demand for its products. ITEM 3. LEGAL PROCEEDINGS ----------------- None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS --------------------------------------------------- None. ITEM 4A. EXECUTIVE OFFICERS ------------------ Name Age Position(s) with the Company - ---- --- ---------------------------- Joseph M. O'Donnell 49 President and Chief Executive Officer, Director Richard J. Thompson 46 Vice President - Finance, Chief Financial Officer, Secretary, Treasurer Robert J. Aebli 60 President - Computer Systems Division Louis R. DeBartelo 55 President - Power Conversion North America Gary J. Duffy 43 Managing Director - Power Conversion Europe W.K. Lo 43 Managing Director - Power Conversion Asia-Pacific Salvatore R. Provanzano 53 President - Industrial Automation Division Joseph M. O'Donnell has served as President and Chief Executive Officer of the Company since July 1994. Mr. O'Donnell served as Managing Director of O'Donnell Associates, a consulting firm, from March 1994 to June 1994 and from October 1992 to September 1993; as Chief Executive Officer of Savin Corporation, an office products distributor, from October 1993 to February 1994; and as President and Chief Executive Officer of Go/Dan Industries, a manufacturer of automotive parts, from June 1990 to September 1992. He is a Director of Cincinnati Microwave, Inc., a manufacturer of consumer electronics, and a Director of V-Band Corporation, a manufacturer of computer systems. Richard J. Thompson has served as Vice President - Finance, Chief Financial Officer, Secretary and Treasurer of the Company since June 1990. Prior to joining the Company, Mr. Thompson served as Group Controller - Technical Services and Controller - Pan Am/Asia Pacific at Control Data Corporation, a multi-national computer company. Prior to 1986, Mr. Thompson held a variety of managerial positions at Schlumberger Limited, an oil field services and electronics company, including assignments in the Fairchild Semiconductor subsidiary and oil field services industries as well as corporate staff responsibilities. Robert J. Aebli was appointed in November 1993 to the position of President of Computer Systems. From 1991 to 1993 Mr. Aebli served as Vice President - Operations of Contraves, Inc., a manufacturer of test and simulation systems, and from 1987 to 1991, he was a principal of Booz, Allen & Hamilton, an international management consulting organization, where his primary consulting work focused on the simulation and training business. Louis R. DeBartelo was appointed President of the Company's Power Conversion North America Division in 1993. From 1992 to 1994 he served as President - Power Conversion National Accounts Division and from 1990 to 1992 as President - Power Conversion America. Prior to joining the Company, from 1987 to 1989, he was President and Chief Executive Officer of ZAC Precision, Inc., a manufacturer of precision parts for the computer industry. Gary J. Duffy has served as Managing Director of the Company's European Power Conversion Division since 1987, having held manufacturing and general management positions since joining the Company in 1982. Prior to 1982, Mr. Duffy held positions in materials and systems management with a European division of Emerson Electric Corporation. W.K. Lo has served as Managing Director of the Company's Power Conversion Asia- Pacific division since 1988. Prior to joining the Company, Mr. Lo held management positions from 1984 to 1988 with M.C. Packaging (Hong Kong) Limited, a highly automated manufacturer of packaging containers. Prior to 1984, he held various managerial positions with a manufacturing division of Union Carbide Corporation. Salvatore R. Provanzano was appointed in November 1993 to the position of President -Industrial Automation division. Previously, Mr. Provanzano served as Vice President - Product Research & Development for QMS, Inc., a manufacturer of laser and color thermal transfer printers. From 1990 to 1992 he served as General Manager - Customer Services of Foxboro Company, a manufacturer of instrumentation and control systems. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS --------------------------------------------------------------------- The common stock of Computer Products, Inc. is traded on the NASDAQ national stock market under the symbol CPRD. High and low sales prices of such stock and the information pertaining to the number of record holders on page 30 of the Annual Report for the year ended December 29, 1995 is incorporated herein by reference. The Registrant has not paid cash dividends in the past and no change in such policy is anticipated. Future dividends, if any, will be determined by the Board of Directors in light of the circumstances then existing, including the Company's earnings and financial requirements and general business conditions. The $25 million seven-year term loan and $20 million revolving credit facility contain certain restrictive covenants which, among other things, require the Company to maintain certain financial ratios and limit the purchase, redemption or retirement of capital stock and other assets. No funds have been drawn on the revolving credit facility. ITEM 6. SELECTED FINANCIAL DATA ----------------------- The Consolidated Five-Year Financial History on page 13 of the Annual Report for the fiscal year ended December 29, 1995 is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND --------------------------------------------------------------- RESULTS OF OPERATIONS --------------------- Management's Discussion and Analysis of Financial Condition and Results of Operations included in the Annual Report for the fiscal year ended December 29, 1995 is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ------------------------------------------- The Consolidated Financial Statements including Note 18, Selected Consolidated Quarterly Data, included in the Annual Report for the fiscal year ended December 29, 1995 are incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND --------------------------------------------------------------- FINANCIAL DISCLOSURE -------------------- None. PART III ITEMS 10, 11, 12 AND 13. The information called for by that portion of Item 10 which relates to the Directors of the Company, by Item 11 (Executive Compensation), Item 12 (Security Ownership of Certain Beneficial Owners and Management) and Item 13 (Certain Relationships and Related Transactions) is incorporated herein by reference from the Company's definitive proxy statement for the Annual Meeting of Shareholders to be filed with the Securities and Exchange Commission not later than 120 days after the close of the fiscal year ended December 29, 1995. That portion of Item 10 which relates to Executive Officers of the Company appears as Item 4A of Part I of this Report. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8K. -------------------------------------------------------------- (a) (1 and 2) List of Financial Statements and Financial Statement Schedule ------------------------------------------------------------- The following consolidated financial statements of Computer Products, Inc. and subsidiaries included in the Annual Report for the fiscal year ended December 29, 1995 are incorporated herein by reference in Item 8: Consolidated Statements of Operations -- Years Ended on the Friday nearest December 31, 1995, 1994 and 1993 Consolidated Statements of Financial Condition -- as of the Friday nearest December 31, 1995 and 1994 Consolidated Statements of Cash Flows -- Years Ended on the Friday nearest December 31, 1995, 1994 and 1993 Consolidated Statements of Shareholders' Equity -- Years Ended on the Friday nearest December 31, 1995, 1994 and 1993 Notes to Consolidated Financial Statements Report of Independent Certified Public Accountants The following consolidated financial statement schedule of Computer Products, Inc. is included in response to Item 14(a) (2): Schedule II - Valuation and Qualifying Accounts Schedules other than that listed above have been omitted because they are either not required or not applicable, or because the required information has been included in the consolidated financial statements or notes thereto. (a) (3) Exhibits -------- 3.1 Articles of Incorporation of the Company, as amended, on May 15, 1989 - incorporated by reference to Exhibit 3.1 of Registrant's Annual Report on Form 10-K for the fiscal year ended December 28, 1989. 3.2 By-laws of the Company, as amended, effective October 16, 1990 - incorporated by reference to Exhibit 3.2 of Registrant's Current Report on Form 8-K, filed with the Commission on November 30, 1990. 4.1 Indenture, dated as of May 15, 1987 between Computer Products, Inc. and LaSalle National Bank, as Trustee - incorporated by reference to Exhibit 4.1 of Registrant's Annual Report on Form 10-K for the fiscal year ended January 1, 1988. 4.2 First Supplemental Indenture dated as of January 7, 1991 between Computer Products, Inc. and LaSalle National Bank, as Trustee - incorporated by reference to Exhibit 4 of Registrant's Current Report on Form 8-K, filed with the Commission on January 14, 1991. 4.3 Rights Agreement, dated as of November 9, 1988, by and between Computer Products, Inc. and The Bank of New York, as amended - incorporated by reference to Exhibit 4.1 of Registrant's Current Report on Form 8-K filed with the Commission on June 15, 1990. 10.1 Grant Agreement, dated June 19, 1981, as supplemented, by and among the Industrial Development Authority of Ireland, Power Products Ltd. and Computer Products, Inc. - incorporated by reference to Exhibit 10.2 of Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1982. 10.2 Indenture between Industrial Development Authority of Ireland and Power Products Ltd. - incorporated by reference to Exhibit 10.3 of Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1982. 10.3 (a) Industrial Revenue Bond dated as of December 17, 1982, by and among Stevens-Arnold, Inc., the City of Boston Industrial Development Financing Authority, State Street Bank and Trust Company and the First Bankers, N.A.; (b) Guaranty Agreement dated December 17, 1982 by and among Computer Products, Inc., the City of Boston Industrial Development Financing Authority, State Street Bank and Trust Company and the First Bankers, N.A.; (c) Loan Agreement dated as of December 17, 1982, between Stevens-Arnold, Inc. and the City of Boston Industrial Development Financing Authority; and (d) Mortgage, Security and Trust Agreement dated as of December 17, 1982, among Stevens-Arnold, Inc., the City of Boston Industrial Development Financing Authority and State Street Bank and Trust Company and the First Bankers, N.A. - incorporated by reference to Exhibit 10.6 of Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1982. 10.4 Second Amendment of Guaranty Agreement dated as of June 7, 1988 by and between Computer Products, Inc. and State Street Bank and Trust Company - incorporated by reference to Exhibit 10.4 of Registrant's Annual Report on Form 10-K for the fiscal year ended December 29, 1989. 10.5 Sublease for facilities located in Pompano Beach, Florida - incorporated by reference to Exhibit 10.5 of Registrant's Annual Report on Form 10-K for the fiscal year ended January 1, 1988. 10.6 Lease for facilities of Boschert, Incorporated located in Milpitas, California - incorporated by reference to Exhibit 10.14 of Registrant's Annual Report on Form 10-K for the fiscal year ended January 3, 1986. 10.7 Letter Amendment to Lease for facilities of Boschert, Incorporated, dated January 9, 1991 located in Milpitas, California - incorporated by reference to Exhibit 10.8 of Registrant's Annual Report on Form 10-K for the fiscal year ended December 28, 1990. 10.8 Sublease for facilities of Boschert, Incorporated located in Milpitas, California - incorporated by reference to Exhibit 10.8 of Registrant's Annual Report on Form 10-K for the fiscal year ended January 1, 1988. 10.9 Sublessee Estoppel Certificate to Sublease for facilities of Boschert, Incorporated, dated February 4, 1991, located in Milpitas, California - incorporated by reference to Exhibit 10.10 of Registrant's Annual Report on Form 10-K for the fiscal year ended December 28, 1990. 10.10 Lease for facilities of Boschert, Incorporated, located in Fremont, California - incorporated by reference to Exhibit 10.9 of Registrant's Annual Report on Form 10-K for the fiscal year ended January 1, 1988. 10.11 1981 Stock Option Plan, as amended, effective as of October 16, 1990 - incorporated by reference to Exhibit 10.10 of Registrant's Current Report on Form 8-K, filed with the Commission on November 30, 1990. 10.12 Computer Products, Inc. 1986 Outside Directors' Stock Option Plan, amended as of February 22, 1988 - incorporated by reference to Exhibit 10.12 of Registrant's Annual Report on Form 10-K for the fiscal year ended January 1, 1988. 10.13 Employment Agreement, dated August 29, 1990, by and between Computer Products, Inc. and John N. Lemasters - incorporated by reference to Exhibit 10.1 of Registrant's Current Report on Form 8-K, filed with the Commission on November 30, 1990. 10.14 Employment Agreement, dated July 9, 1992, by and between Computer Products, Inc. and Ronald J. Ritchie - incorporated by reference to Exhibit 10.14 of Registrant's Annual Report on Form 10-K for the fiscal year ended January 1, 1993. 10.15 Asset Purchase Agreement, dated as of January 1, 1992, by and among Computer Products, Inc., HC Holding Corp. and Heurikon Corporation including exhibits and schedules thereto - incorporated by reference to Exhibit 2 of Registrant's Current Report on Form 8-K, filed with the Commission on January 20, 1992. 10.16 Employment Agreement, dated January 3, 1992, by and between Computer Products, Inc., HC Holding Corp., and Christopher M. Priebe - incorporated by reference from Exhibit 8.11A of the Asset Purchase Agreement filed as Exhibit 2 of Registrant's Current Report on Form 8-K, filed with the Commission on January 20, 1992. 10.17 Non-Competition Agreement, dated January 3, 1992, by and between Computer Products, Inc., HC Holding Corp. and Christopher M. Priebe - incorporated by reference from Exhibit 8.11B of the Asset Purchase Agreement filed as Exhibit 2 of Registrant's Current Report on Form 8-K, filed with the Commission on January 20, 1992. 10.18 Contract to Purchase between Computer Products, Inc. and Sauk Enterprises dated December 23, 1991 for the premises located at 8310 Excelsior Drive, Madison, Wisconsin - incorporated by reference to Registrant's Annual Report on Form 10-K for the fiscal year ended January 3, 1992. 10.19 Plan Stock Option Agreement dated as of August 29, 1990 by and between Computer Products, Inc. and John N. Lemasters - incorporated by reference to Exhibit 10.2 of Registrant's Current Report on Form 8-K, filed with the Commission on November 30, 1990. 10.20 Amended and Restated Revolving Credit Agreement, dated as of March 23, 1990, by and between Computer Products, Inc. and Continental Bank, N.A. - incorporated by reference to Exhibit 10.18 of Registrant's Annual Report on Form 10-K for the fiscal year ended December 28, 1990. 10.21 First Amendment to Amended and Restated Revolving Credit Agreement, dated as of October 25, 1990, by and between Computer Products, Inc. and Continental Bank N.A. - incorporated by reference to Exhibit 10.19 of Registrant's Annual Report on Form 10-K for the fiscal year ended December 28, 1990. 10.22 Second Amendment to Amended and Restated Revolving Credit Agreement, dated as of April 11, 1991, by and between Computer Products, Inc. and Continental Bank N.A. - incorporated by reference to Exhibit 10.21 of Registrant's Annual Report on Form 10-K for the fiscal year ended January 3, 1992. 10.23 Third Amendment to Amended and Restated Revolving Credit Agreement, dated as of January 3, 1992, by and between Computer Products, Inc. and Continental Bank N.A. - incorporated by reference to Exhibit 10.22 of Registrant's Annual Report on Form 10-K for the fiscal year ended January 3, 1992. 10.24 Fourth Amendment to Amended and Restated Revolving Credit Agreement, dated as of January 1, 1993, by and between Computer Products, Inc. and Continental Bank N.A. - incorporated by reference to Exhibit 10.14 of Registrant's Annual Report on Form 10-K for the fiscal year ended January 1, 1993. 10.25 Lease for facilities of the executive offices located in Boca Raton, Florida - incorporated by reference to Exhibit 10.23 of Registrant's Annual Report on Form 10-K for the fiscal year ended December 30, 1988. 10.26 1989 Qualified Employee Stock Purchase Plan - incorporated by reference to Exhibit 10.20 of Registrant's Annual Report on Form 10-K for the fiscal year ended December 29, 1989. 10.27 Annual Executive Incentive Plan, effective January 1, 1992 - incorporated by reference to Exhibit 10.25 of Registrant's Annual Report on Form 10-K for the fiscal year ended January 3, 1992. 10.28 Outside Directors' Retirement Plan, effective October 17, 1989 - incorporated by reference to Exhibit 10.22 of Registrant's Annual Report on Form 10-K for the fiscal year ended December 29, 1989. 10.29 1990 Performance Equity Plan - incorporated by reference to Exhibit 10.26 of Registrant's Annual Report on Form 10-K for the fiscal year ended December 28, 1990. 10.30 1990 Outside Directors' Stock Option Plan - incorporated by reference to Exhibit 10.27 of Registrant's Annual Report on Form 10-K for the fiscal year ended December 28, 1990. 10.31 1991 Long Term Performance Plan - incorporated by reference to Exhibit 10.28 of Registrant's Annual Report on Form 10-K for the fiscal year ended December 28, 1990. 10.32 Manufacturing and Development Agreement dated March 16, 1992, between Computer Products, Inc. and Analogic Corporation - incorporated by reference to Exhibit 10.30 of Registrant's Annual Report on Form 10-K for the fiscal year ended January 3, 1992. 10.33 License Agreement dated March 16, 1992, between Computer Products, Inc. and Analogic Corporation - incorporated by reference to Exhibit 10.31 of Registrant's Annual Report on Form 10-K for the fiscal year ended January 3, 1992. 10.34 Asset Purchase Agreement between Computer Products, Inc., Tecnetics Incorporated, Miller Acquisition Corporation and certain former managers of Tecnetics Incorporated - incorporated by reference to Exhibit 10.29 of Registrant's Quarterly Report on Form 10-Q for the quarterly period ended April 3, 1992. 10.35 Manufacturing License and Technical Assistance Agreement between Heurikon Corporation and Lockheed Sanders, Inc. dated January 31, 1992 - incorporated by reference to Exhibit 10.34 of Registrant's Quarterly Report on Form 10-Q for the quarterly period ended July 3, 1992. 10.36 Star MVP Domestic Terms and Conditions of Sale Between Heurikon Corporation and Lockhead Sanders, Inc. dated March 18, 1992 - incorporated by reference to Exhibit 10.35 of Registrant's Quarterly Report on Form 10-Q for the quarterly period ended July 3, 1992. 10.37 DSP32C VME Board License Agreement between Heurikon Corporation and American Telephone and Telegraph Company dated October 28, 1991 - incorporated by reference to Exhibit 10.36 of Registrant's Quarterly Report on Form 10-Q for the quarterly period ended July 3, 1992. 10.38 Software License agreement between Heurikon Corporation and American Telephone and Telegraph Company dated October 28, 1991 - incorporated by reference to Exhibit 10.37 of Registrant's Quarterly Report on Form 10-Q for the quarterly period ended July 3, 1992. 10.39 Fifth Amendment and Restated Revolving Credit Agreement, dated as of December 31, 1993, by and between Computer Products, Inc. and Continental Bank, N.A.- incorporated by reference to Exhibit 10.39 of Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1993. 10.40 Severance and consulting agreement between John N. Lemasters and the Company - incorporated by reference to Exhibit 10.40 of Registrant's Quarterly Report on Form 10-Q for the quarterly period ended April 1, 1994. 10.41 Employment Agreement, dated June 29, 1994, by and between Computer Products, Inc. and Joseph M. O'Donnell - incorporated by reference to Exhibit 10.41 of Registrant's Quarterly Report on Form 10-Q for the quarterly period ended July 1, 1994. 10.42 (a) Credit Agreement, dated as of June 28, 1994, by and between Heurikon Corporation and Firstar Bank Madison, N.A.; (b) Guaranty of Payment, dated as of June 28, 1994, by and between Computer Products, Inc. and Firstar Bank Madison, N.A. (c) Term Note, as of June 28, 1994, by and between Heurikon Corporation and Firstar Bank Madison, N.A.; (d) Mortgage, Security Agreement, and Fixture Financing Statement, dated as of June 28, 1994, by and between Heurikon Corporation and Firstar Bank Madison, N.A. - incorporated by reference to Exhibit 10.42 of Registrant's Quarterly Report on Form 10-Q for the quarterly period ended July 1, 1994. 10.43 Grant Agreement, dated October 26, 1994, by and among the Industrial Development Authority of Ireland, Power Products Ltd. and Computer Products, Inc. - incorporated by reference to Exhibit 10.43 of Registrant's Annual Report on Form 10-K for the fiscal year ended December 30, 1994. 10.44 Loan agreement between Computer Products, Inc. and First Union National Bank of Florida dated as of April 4, 1995 - incorporated by reference to Exhibit 10.44 of Registrant's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1995. 10.45 1996 Employee Stock Purchase Plan. 10.46 1990 Performance Equity Plan as amended. 10.47 1990 Outside Directors Stock Option Plan, restated as of January 25, 1996. 10.48 1996 Executive Incentive Plan 10.49 Executive Stock Ownership plan 11 Statement regarding Computation of Per Share Earnings. 13 Annual Report of Computer Products, Inc. for the fiscal year ended December 29, 1995. 21 List of subsidiaries of Registrant. 23 Consent of Independent Certified Public Accountants. 27 Financial data schedule. (b) Reports on Form 8-K ------------------- The Registrant did not file any reports on Form 8-K during the thirteen- week period ended December 29, 1995. REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON SCHEDULE To the Board of Directors and Shareholders of Computer Products, Inc.: We have audited in accordance with generally accepted auditing standards, the consolidated financial statements included in Computer Products, Inc.'s annual report to shareholders incorporated by reference in this Form 10-K, and have issued our report thereon dated January 18, 1996. Our audit was made for the purpose of forming an opinion on those statements taken as a whole. The schedule listed in Item 14(a)(2) is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN LLP Fort Lauderdale, Florida, January 18, 1996. COMPUTER PRODUCTS, INC. AND SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS For the Years Ended on the Friday Nearest December 31 ($000s)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E ADDITIONS BALANCE CHARGED CHARGED BALANCE AT TO TO AT BEGINNIN COSTS & OTHER DEDUCTIONS END OF DESCRIPTION OF EXPENSE ACCOUNT DESCRIP AMOUNT PERIOD PERIOD S S TION FISCAL YEAR 1995: Reserve deducted from asset to which it applies: Allowance for doubtful accounts $ 1,354 $ 199 (2) $ 63 $ 1,490 Inventory 4,523 3,877 (4) 1,515 6,885 Deferred tax asset valuation allowance 10,453 74 (3) 637 9,890 Other 292 292 FISCAL YEAR 1994: Reserve deducted from asset to which it applies: Allowance for doubtful accounts $ 1,174 $ 251 (4) $ 71 $ 1,354 Inventory 5,462 3,043 (4) 3,982 4,523 Deferred tax asset valuation allowance 11,626 395 (3) 1,568 10,453 Other 292 292 FISCAL YEAR 1993: SCAL YEAR 1993: year ended December 28, 1990. 10.31 1991 Long Term Performance Plan - incorporated by reference to Exhibit SCAL YEAR 1993: Reserve deducted from asset to which it applies: Allowance for doubtful accounts $ 1,031 $ 210 (4) $ 67 $ 1,174 0 11,626 (1) 11,626 Other 292 292
[FN] (1) This amount includes $11,553 recorded upon initial adoption of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes". (2) This amount relates to recoveries. (3) The reduction relates to utilization of tax loss carryforwards. (4) The reduction relates to charge-offs. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. COMPUTER PRODUCTS, INC. (Registrant) Dated: March 22, 1996 By:Joseph M. O'Donnell ------------------- Joseph M. O'Donnell President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant in the capacities and on the dates indicated. Signature Title Date - --------- ----- ---- Joseph M. O'Donnell President and Chief Executive 03/22/95 - ------------------- Joseph M. O'Donnell Officer, Director Richard J. Thompson Vice President-Finance, 03/22/95 - ------------------- Richard J. Thompson Chief Financial and Accounting Officer Earl Templeton Director 03/22/95 - -------------- Earl Templeton Edward S. Croft, III Director 03/22/95 - -------------------- Edward S. Croft, III Stephen A. Ollendorff Director 03/22/95 - --------------------- Stephen A. Ollendorff Bert Sager Director 03/22/95 - ---------- Bert Sager Phillip A. O'Reilly Director 03/22/95 - ------------------- Phillip A. O'Reilly Lewis Solomon Director 03/22/95 - ------------- Lewis Solomon INDEX TO EXHIBITS EXHIBIT NO. DESCRIPTION - -------------------------------------------------- 10.45 1996 Employee Stock Purchase Plan 10.46 1990 Performance Equity Plan, as amended 10.47 1990 Outside Directors Stock Option Plan, restated as of January 25, 1996 10.48 1996 Executive Incentive Plan 10.49 Executive Stock Ownership Plan 11 Statement regarding Computation of Per Share Earnings 13 Annual Report of Computer Products, Inc. for the fiscal year ended December 29, 1995 21 List of subsidiaries of Registrant 23 Consent of Independent Certified Public Accountants 27 Financial Data Schedule EX-10 2 COMPUTER PRODUCTS, INC. EMPLOYEE STOCK PURCHASE PLAN 1.PURPOSE OF PLAN The purpose of this plan (the "Plan") is to provide eligible employees who wish to become stockholders of Computer Products, Inc. (the "Company") or wish to increase their stock holdings in the Company with a method of doing so which is both convenient and on a basis more favorable than would otherwise be available. With the expiration of the Computer Products, Inc. Qualified Stock Purchase Plan that expired on December 31, 1995, the Company hereby continues to provide a plan whereby employees may acquire shares of the Company's Common Stock, par value $0.01 per share ("Common Stock"), directly from the Company on a payroll deduction basis, thus making it easier for them to acquire such shares and relieving them of the details of a transaction unfamiliar to most of them. It is felt that employee participation in ownership of the Company on this basis will thus be to the mutual benefit of both the employees and the Company. It is intended that the Plan shall constitute an "employee stock purchase plan" within the meaning of Section 423 of the Internal Revenue Code of 1986, as amended (the "Code"). 2.EMPLOYEES ELIGIBLE TO PARTICIPATE An employee, except an employee who (a) has been employed less than three months, (b) whose customary employment is not more than five months per calendar year, or (c) whose customary employment is 20 hours or less per week, of the Company or any subsidiary of the Company which adopts the Plan with the consent of the Company, who is in the employ of the Company or any participating subsidiary (the "Employing Corporation") is eligible to participate in the Plan. The term "employee" shall include an officer but not a non-employee member of the board of directors of the Employing Corporation. 3.OFFERS The Compensation and Stock Option Committee (the "Committee") of the Company's board of directors shall determine the date or dates upon which one or more offers ("Offer"/"Offers") shall be made under the Plan, and shall notify each eligible employee at least ten (10) days prior to the effective date thereof. In order to participate in an Offer, an eligible employee must sign and forward to the Company, prior to the effective date of the Offer, a payroll deduction authorization form authorizing regular payroll deductions, which must be 2% or more of the employee's base salary per pay period but may not exceed 6% of the employee's base salary per pay period, to be applied toward the purchase of Common Stock pursuant to the Offer. 4.OPTIONS On the effective date of an Offer, each eligible employee who has elected to participate will be granted an option to purchase, through payroll deductions, as many whole shares of Common Stock, subject to the limitations hereinafter set forth, as may be purchased, at the option price set forth in Section 6 hereof, with the compensation deferred by such employee pursuant to Section 3 hereof during the period commencing on the effective date of the Offer and expiring on the date which is three (3) months thereafter. Each option granted pursuant to an Offer shall be automatically exercised on the date (the "Exercise Date") of the tenth trading day following the date which is three (3) months from the effective date of the Offer. No interest shall be paid on any amounts deferred by any employee. 5.PARTICIPATION LIMITATIONS Notwithstanding anything herein to the contrary, no employee shall be permitted to purchase any shares under the Plan if the employee, immediately after the purchase, owns or would own shares (including all shares which may be purchased under outstanding options under the Plan) possessing 5% or more of the total combined voting power or value of all classes of shares of capital stock of the Employing Corporation or of its parent or subsidiary corporations. For purposes of the foregoing limitation, the rules of Section 424(d) (relating to attribution of stock ownership) of the Code shall apply in determining share ownership, and stock which the employee may purchase under outstanding options shall be treated as stock owned by such employee. Further, if pursuant to the terms of the Plan, an employee would be granted an option that violates Section 424(b)(8) of the Code, such option shall not be granted. 6.OPTION PRICE The option price (the "Option Price") at which shares of Common Stock may be purchased under the Plan shall be 85% of the fair market value of a share of Common Stock on the Exercise Date. As used herein, the term "fair market value" shall mean: (A) if the Common Stock is listed on a national securities exchange or quoted on The NASDAQ National Market, the closing price of the Common Stock on the relevant date; (B) if the Common Stock is not listed on a national securities exchange or quoted on The NASDAQ National Market, but is traded in the over-the-counter market, the last sales price or, if not available, the average of the bid and asked prices for the Common Stock on the relevant date, or the most recent preceding day for which such quotations are reported by The NASDAQ Stock Market; and (C) if the fair market value of the Common Stock cannot be determined pursuant to clause (A) or (B) above, such price as the Committee shall in good faith determine. 7.EXERCISE OF OPTIONS On the Exercise Date, each participant will be deemed to have exercised his option to purchase, at the then applicable Option Price, that number of full shares of Common Stock determined pursuant to Section 4 hereof and the Company will remit to a custodian designated by the Company all employee payroll deductions made by the Company during the corresponding payroll deduction period. Upon receipt of such funds from the Company, the custodian will purchase from the Company, at the Option Price, as many full shares of Common Stock as may be purchased with the funds received from each Plan participant. Any funds not expended in the purchase of whole shares on any particular Exercise Date will, for each participant, be carried forward and applied to the purchase of shares on the next subsequent Exercise Date or refunded to the employee if requested in writing. The custodian for the Plan shall hold all shares purchased under the Plan and shall maintain a separate account for each participant, in which Common Stock purchased by such participant under the Plan shall be held and dividends received will be reinvested. The custodian shall vote all shares purchased by each participant under the Plan in the manner designated by the participant, and, upon the written request of any participant, all or any specified portion of any shares held by the custodian on behalf of such participant, may be withdrawn by such participant. Each participant shall receive a statement as soon as practicable after each Exercise Date reflecting purchases and other transactions in his account under the Plan through such Exercise Date. 8.NUMBER OF SHARES TO BE OFFERED Except as provided in Section 13 hereof, the maximum number of shares that may be offered under the Plan is 200,000. 9.ADMINISTRATION OF THE PLAN The Plan shall be administered by the Committee, which shall consist of not less than three directors and shall be appointed from time to time by the Company's board of directors. The Committee may prescribe rules and regulations from time to time for the administration of the Plan and may decide questions which may arise with respect to its interpretation or application. The Committee may, subject to Section 14 hereof, amend or modify the Plan and may determine the terms and conditions of Offers under the Plan. The Committee may not, however, make any alterations which would materially and adversely affect an option previously granted without the consent of the optionee. Furthermore, the Committee may not reduce the applicable option price per share or make any change or addition which does not meet the requirements of Section 423(b) of the Code. 10.WITHDRAWAL FROM PARTICIPATION A participant may, at any time and for any reason, by giving written notice of his desire in this regard to the Committee or its designee, elect to withdraw from any further participation in an Offer, but may not otherwise amend his payroll deduction authorization form during the period of any Offer. A withdrawing participant will, on the next succeeding Exercise Date, have his account credited with the number of full shares of Common Stock which may be acquired at the Exercise Price with any cash in such participant's account on such Date. In addition, the amount of any excess cash remaining in the account of any participant who withdraws from participation in any Offer or who does not participate in any succeeding Offer shall be distributed to such participant as promptly as practicable. Except as provided in Section 18 hereof, a withdrawing participant may recommence participation on the effective date of the next Offer. 11.RIGHTS NOT TRANSFERABLE Except for transfers by will or under the laws of descent and distribution, or unless otherwise permitted by law (including, without limitation, the Code), no employee shall have the right to sell, assign, transfer, pledge or otherwise dispose of or encumber either his right to participate in the Plan or his interest in any options hereunder, and such right and interest shall not be liable for or subject to the debts, contracts or liabilities of the employee. Any attempted transfers in violation of this Section 11 shall be void and the attempted transferor shall, except as may otherwise be required by law, be deemed to have irrevocably withdrawn from the Plan as of the date thereof. 12.TERMINATION OF EMPLOYMENT In the event of a participant's retirement, death or other termination of employment, a certificate representing the number of full shares of Common Stock then credited to the participant's account, and any amount of excess deferred funds as of that date, will be issued to the employee or his representative as promptly as practicable. 13.REORGANIZATION In the event of reorganization, recapitalization, stock split, stock dividend, combination of shares, merger, consolidation, offering of rights or any other change in the structure of Common Stock, the Company's board of directors may make such adjustments, if any, as it may deem appropriate in the number, kind and price of shares available for purchase under the Plan, and in the minimum and maximum number of shares which a participant is entitled to purchase. 14.APPROVAL OF STOCKHOLDERS The Plan was adopted by the board of directors of the Company on January 25, 1996, subject to approval by the Company's stockholders. No amendment of the Plan which would (a) increase the number of shares reserved for issuance under the Plan (except as provided in Section 13 hereof), (b) materially increase the benefits to participants, (c) materially modify the requirements for participation, or (d) cause the options to fail to meet the requirements of Section 423 of the Code, shall be effective unless it is duly approved by the Company's stockholders. 15.TERMINATION OF PLAN The Plan and all rights of employees participating in an Offer will terminate (a) on the day that participants have exercised options to purchase a number of shares equal to or greater than the number of shares then subject to the Plan, and in the latter event options will be exercisable by participants on a pro rata basis, (b) at any time, at the discretion of the Committee, or (c) on June 30, 1996 if the Plan has not been approved by the Company's stockholders on or prior to that date. Upon termination of the Plan, shares of the Common Stock and all cash in the participants' accounts, will be returned to the participants, without interest, as soon as is administratively feasible. 16.NO RIGHTS AS STOCKHOLDER The holder of an option shall have no rights, as such, as a stockholder of the Company prior to the Exercise Date thereof. 17.NO RIGHT TO EMPLOYMENT Nothing in the Plan or any option shall be deemed to confer upon any employee any right to continue in the employ of any Employing Corporation or in any way interfere with the right of any such Employing Corporation to terminate the employment of any employee at any time, with or without cause. 18.SPECIAL PROVISIONS FOR OFFICERS AND DIRECTORS Notwithstanding any provisions contained herein to the contrary, any officer or director, as such terms are defined under Section 16 of the Securities and Exchange Act of 1934 (the "Exchange Act") and the rules promulgated thereunder, who withdraws any shares of Common Stock from the Plan shall either (a) agree to hold such shares for at least six months prior to disposition, or (b) cease any further purchases of Common Stock under the Plan for a period of at least six months. In addition, any such officer or director who withdraws from, or elects not to participate in, any Offer, may not participate again for at least six months. The provisions of this Section 18 are intended to comply with Rule 16b- 3(d) under the Exchange Act and shall be interpreted in such a manner as to cause the Plan to comply with the provisions thereof. 19.COMPLIANCE WITH SECTION 423 All eligible employees shall have equal rights and privileges with respect to the Plan, so that the Plan qualifies as an "employee stock purchase plan" within the meaning of Section 423 or any successor provision of the Code and related regulations. Any provision of the Plan which is inconsistent with Section 423 or any successor provision of the Code shall, without further act or amendment by the Company, be reformed to comply with the requirements of Section 423. This Section 19 shall take precedence over all other provisions of the Plan. 20.REQUIRED GOVERNMENTAL APPROVALS The Plan, and all options granted under and other rights inherent in the Plan, are subject to stockholder approval as provided in Section 14 above and to receipt by the Company of all necessary approvals or consents of governmental agencies having jurisdiction, and, notwithstanding any other provision of the Plan, all options granted under the Plan and all other rights inherent in the Plan are subject to termination and/or modification as may be required or advisable in order to obtain any such necessary approval or consent or, as a result of consequences attaching to any such required approval or consent, as may be required or advisable in order to avoid, in the judgment of the Company's board of directors, adverse impact on the Company's overall wage and salary policy as applied to all employees of the Company. 21.GENDER Pronouns shall be deemed to include the masculine and feminine gender and words used in the singular shall be deemed to include both the singular and the plural, unless the context indicates otherwise. EX-10 3 COMPUTER PRODUCTS, INC. 1990 PERFORMANCE EQUITY PLAN AS AMENDED SECTION 1. PURPOSE; DEFINITIONS. 1.1. Purpose. The purpose of the Computer Products, Inc. (the "Company") 1990 Performance Equity Plan (the "Plan") is to enable the Company to offer to its key employees and to key employees of its subsidiaries, long term performance-based stock and/or other equity interests in the Company, thereby enhancing its ability to attract, retain and reward such key employees, and to increase the mutuality of interests between those employees and the stockholders of the Company. The various types of long-term incentive awards which may be provided under the Plan will enable the Company to respond to changes in compensation practices, tax laws, accounting regulations and the size and diversity of its businesses. 1.2. Definitions. For purposes of the Plan, the following terms shall be defined as set forth herein: (a) "Agreement" means the agreement between the Company and the Holder setting forth the terms and conditions of an award under the Plan. (b) "Board" means the Board of Directors of the Company. (c) "Change of Control" means a change of control of the Company pursuant to Section 10 hereof. (d) "Code" means the Internal Revenue Code of 1986, as amended from time to time, and any successor statute or statutes thereto. (e) "Committee" means the Stock Option Committee of the Board or any other committee of the Board which the Board may designate. (f) "Common Stock" means the Common Stock of the Company, par value $.01 per share. (g) "Company" means Computer Products, Inc., a corporation organized under the laws of the State of Florida, and any successor thereto. (h) "Deferred Stock" means Stock to be received, under an award made pursuant to Section 8 hereof, at the end of a specified deferral period. (i) "Disability" means disability as determined under procedures established by the Committee for purposes of the Plan. (j) "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, or any successor statute or statutes thereto. (k) "Exchange Act Holder" means such officer or director or 10% beneficial owner of Common Stock subject to Section 16(b) of the Exchange Act. (l) "Fair Market Value", unless otherwise required by any applicable provision of the Code or any regulations issued thereunder, means, as of any given date: (i) if the Common Stock (as hereinafter defined) is listed on a national securities exchange or quoted on the NASDAQ National Market System, the closing price of the Common Stock on the last preceding day on which the Common Stock was traded, as reported on the composite tape or by NASDAQ/NMS System Statistics, as the case may be; (ii) if the Common Stock is not listed on a national securities exchange or quoted on the NASDAQ National Market System, but is traded in the over-the-counter market, the average of the bid and asked prices for the Common Stock on the last preceding day for which such quotations are reported by NASDAQ; and (iii) if the fair market value of the Common Stock cannot be determined pursuant to clause (i) or (ii) hereof, such price as the Committee shall determine. (m) "Formula Price Per Share" means the highest gross price (before brokerage commissions, soliciting dealers' fees and similar charges) paid for any share of Common Stock at any time during the ninety-day period immediately prior to the Change of Control (whether by way of exchange, conversion, distribution, liquidation or otherwise) paid or to be paid for any share of Common Stock in connection with a Change of Control. If the consideration paid or to be paid in any transaction that results in a Change of Control consists, in whole or in part, of consideration other than cash, the Board shall take such action, as in its judgment it deems appropriate, to establish the cash value of such consideration, but such valuation shall not be less than the value, if any, attributed to such consideration by any other party to such transaction that results in a Change of Control. (n) "Holder" means an eligible employee or prospective employee of the Company or a Subsidiary who has received an award under the Plan. (o) "Incentive Stock Option" means any Stock Option intended to be and designated as an "incentive stock option" within the meaning of Section 422 of the Code. (p) "Non-Qualified Stock Option" means any Stock Option that is not an Incentive Stock Option. (q) "Other Stock-Based Award" means an award under Section 9 hereof that is valued in whole or in part by reference to, or is otherwise based upon, Common Stock. (r) "Plan" means this Computer Products, Inc. 1990 Performance Equity Plan, as hereinafter amended from time to time. (s) "Restricted Stock" means Common Stock, received under an award made pursuant to Section 7 hereof, that is subject to restrictions under said Section 7. (t) "SAR Value" means the excess of the Fair Market Value of one share of Common Stock over the exercise price per share specified in a related Stock Option in the case of a Stock Appreciation Right granted in tandem with a Stock Option and the Stock Appreciation Right price per share in the case of a Stock Appreciation Right awarded on a free standing basis multiplied by the number of shares in respect of which the Stock Appreciation Right shall be exercised, on the date of exercise. (u) "Stock Appreciation Right" means the right, pursuant to an award granted under Section 6 hereof, to recover an amount equal to the SAR Value. (v) "Stock Option" or "Option" means any Non-Qualified Stock Option or Incentive Stock Option to purchase shares of Stock which is awarded pursuant to the Plan. (w) "Subsidiary" means any present or future subsidiary corporation of the Company, as such term is defined in Section 425(f) of the Code. SECTION 2. ADMINISTRATION. 2.1. Committee Membership. The Plan shall be administered by the Committee, the membership of which shall be at all times constituted so as to not adversely affect the compliance of the Plan with the requirements of Rule 16b-3 under the Exchange Act or with the requirements of any other applicable law, rule or regulation. 2.2. Powers of Committee. The Committee shall have full authority to award, pursuant to the terms of the Plan, to eligible employees and prospective employees described under Section 4 hereof: (i) Stock Options, (ii) Stock Appreciation Rights, (iii) Restricted Stock, (iv) Deferred Stock, and/or (v) Other Stock-Based Awards. For purposes of illustration and not of limitation, the Committee shall have the authority (subject to the express provisions of this Plan): (a) to select the eligible employees and prospective employees to whom Stock Options, Stock Appreciation Rights, Restricted Stock, Deferred Stock and/or Other Stock-Based Awards may from time to time be awarded hereunder; (b) to determine the Incentive Stock Options, Non-Qualified Stock Options, Stock Appreciation Rights, Restricted Stock, Deferred Stock and/or Other Stock-Based Awards, or any combination thereof, if any, to be awarded hereunder to one or more eligible employees; (c) to determine the number of shares to be covered by each award granted hereunder; (d) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any award hereunder (including, but not limited to, share price, any restrictions or limitations, and any vesting, exchange, surrender, cancellation, acceleration, termination, exercise or forfeiture provisions, as the Committee shall determine); (e) to determine any specified performance goals or such other factors or criteria which need to be attained for the vesting of an award granted hereunder; (f) to determine the terms and conditions under which awards hereunder are to operate on a tandem basis and/or in conjunction with or apart from other equity awarded under this Plan and cash awards made by the Company or any Subsidiary outside of this Plan; (g) to determine the extent and circumstances under which Common Stock and other amounts payable with respect to an award hereunder shall be deferred, which may be either automatic or at the election of the Holder; and (h) to substitute (A) new Stock Options for previously granted Stock Options, which previously granted Stock Options have higher option exercise prices and/or contain other less favorable terms, and (B) new awards of any other type for previously granted awards of the same or other type, which previously granted awards are upon less favorable terms. 2.3. Interpretation of Plan. Subject to Section 11 hereof, the Committee shall have the authority to adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan as it shall, from time to time, deem advisable, to interpret the terms and provisions of the Plan and any award issued under the Plan (and to determine the form and substance of all Agreements relating thereto), and to otherwise supervise the administration of the Plan. Anything in the Plan to the contrary notwithstanding, no term of the Plan relating to Incentive Stock Options or any Agreement providing for Incentive Stock Options shall be interpreted, amended or altered, nor shall any discretion or authority granted under the Plan be so exercised, so as to disqualify the Plan under Section 422 of the Code, or, without the consent of the Holder(s) affected, to disqualify any Incentive Stock Option under such Section 422. Subject to Section 11 hereof, all decisions made by the Committee pursuant to the provisions of the Plan shall be made in the Committee's sole discretion and shall be final and binding upon all persons, including the Company, its Subsidiaries and the Holders. SECTION 3. COMMON STOCK SUBJECT TO PLAN. 3.1. Number of Shares. The total number of shares of Common Stock reserved and available for distribution under the Plan shall be 4,450,000 shares. If any shares of Common Stock that are subject to a Stock Option or Stock Appreciation Right cease to be subject to such Option or Stock Appreciation Right, or if any shares that are subject to a Restricted Stock or Deferred Stock award or Other Stock-Based Award granted hereunder are forfeited or any such award otherwise terminates without a payment being made to the Holder in the form of Common Stock, such shares shall again be available for distribution in connection with future grants and awards under the Plan. The number of shares of Common Stock deemed to be issued under the Plan upon the exercise of an Option or Other Stock-Based Award in the nature of a stock purchase right shall be reduced by the number of shares of Common Stock surrendered by the Holder in payment of the exercise or purchase price of the award and withholding taxes thereon. 3.2. Character of Shares. Shares of Common Stock under the Plan may consist, in whole or in part, of authorized and unissued shares or treasury shares. 3.3. Adjustment Upon Changes in Capitalization, Etc. In the event of any merger, reorganization, consolidation, recapitalization, dividend (other than a dividend or its equivalent which is credited to a Holder or a regular cash dividend), stock split, reverse stock split, or other change in corporate structure affecting the Common Stock, such substitution or adjustment shall be made in the aggregate number of shares reserved for issuance under the Plan, in the number and exercise price of shares subject to outstanding Options, in the number of shares and Stock Appreciation Right price relating to Stock Appreciation Rights, and in the number of shares subject to, and related terms of, other outstanding awards (including but not limited to awards of Restricted Stock, Deferred Stock and Other Stock-Based Awards) as may be determined to be appropriate by the Committee in order to prevent dilution or enlargement of each Holder's rights, provided that the number of shares subject to any award shall always be a whole number. SECTION 4. ELIGIBILITY. 4.1. General. Awards under the Plan may be made to (i) officers and other key employees of the Company or any Subsidiary (including officers and key employees serving as directors of the Company) who are at the time of the grant of an award under this Plan regularly employed by the Company or any Subsidiary; and (ii) prospective employees of the Company or its Subsidiaries. The exercise of any Stock Option and the vesting of any award hereunder granted to a prospective employee shall be conditioned upon such person becoming an employee of the Company or a Subsidiary. The term "prospective employee" shall mean any person who holds an outstanding offer of regular employment on specific terms from the Company or a Subsidiary. 4.2. Ineligibility for Awards. No person designated by the Board to serve on the Committee, effective at such future time so that he qualifies as a disinterested person, shall be eligible to receive any awards under the Plan during the period from the date such designation is made to the date such designation becomes effective. Notwithstanding Section 4.1 hereof, no member of the Committee, while serving as such, shall be eligible to receive an award under the Plan. SECTION 5. STOCK OPTIONS. 5.1. Grant and Exercise. Stock Options granted under the Plan may be of two types: (i) Incentive Stock Options and (ii) Non-Qualified Stock Options. Any Stock Option granted under the Plan shall contain such terms, not inconsistent with this Plan, as the Committee may from time to time approve. The Committee shall have the authority to grant to any Holder hereof Incentive Stock Options, Non-Qualified Stock Options, or both types of Stock Options (in each case with or without Stock Appreciation Rights) and may be granted alone, in tandem with or in addition to other awards under the Plan. To the extent that any Stock Option (or portion thereof) does not qualify as an Incentive Stock Option, it shall constitute a separate Non-Qualified Stock Option. Unless granted in substitution for another outstanding award, Options shall be granted for no consideration other than services. 5.2. Terms and Conditions. Stock Options granted under the Plan shall be subject to the following terms and conditions: (a) Exercise Price. The exercise price per share of Common Stock purchasable under a Stock Option shall be determined by the Committee at the time of grant but shall be not less than 100% of the Fair Market Value of the Common Stock at the time of grant (110%, in the case of an Incentive Stock Option granted to a Holder ("10% Stockholder") who, at the time of grant, owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or its parent (if any) or subsidiary corporations, as those terms are defined in Sections 425(e) and (f) of the Code). (b) Option Term. The term of each Stock Option shall be fixed by the Committee, but no Stock Option shall be exercisable more than ten years (five years, in the case of an Incentive Stock Option granted to a 10% Stockholder) after the date on which the Option is granted. (c) Exercisability. Stock Options shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Committee. If the Committee provides, in its discretion, that any Stock Option is exercisable only in installments, the Committee may waive such installment exercise provisions at any time at or after the time of grant in whole or in part, based upon such factors as the Committee shall determine. (d) Method of Exercise. Subject to whatever installment, exercise and waiting period provisions are applicable in a particular case, Stock Options may be exercised in whole or in part at any time during the term of the Option, by giving written notice of exercise to the Company specifying the number of shares of Common Stock to be purchased. Such notice shall be accompanied by payment in full of the purchase price, which shall be in cash or, unless otherwise provided in the Agreement, in whole shares of Common Stock which are already owned by the Holder of the Stock Option or, unless otherwise provided in the Stock Option Agreement, partly in cash and partly in such Common Stock. Cash payments shall be made by wire transfer, certified or bank check or personal check, in each case payable to the order of the Company; provided, however, that the Company shall not be required to deliver certificates for shares of Common Stock with respect to which a Stock Option is exercised until the Company has confirmed the receipt of good and available funds in payment of the purchase price thereof. Payments in the form of Common Stock (which shall be valued at the Fair Market Value of a share of Common Stock on the date of exercise) shall be made by delivery of stock certificates in negotiable form which are effective to transfer good and valid title thereto to the Company, free of any liens or encumbrances. Subject to the terms of the Agreement, the Committee may, in its sole discretion, at the request of the Holder, deliver upon the exercise of a Non-Qualified Stock Option a combination of shares of Deferred Stock and Common Stock; provided that, notwithstanding the provisions of Section 8 of the Plan, such Deferred Stock shall be fully vested and not subject to forfeiture. Except as otherwise expressly provided in this Plan or in the Agreement, no Stock Option may be exercised at any time unless the Holder thereof is then an employee of the Company or of a Subsidiary. The Holder of a Stock Option shall have none of the rights of a stockholder with respect to the shares subject to the Stock Option until such shares shall be transferred to the Holder upon the exercise of the Stock Option. (e) Buyout and Settlement Provisions. The Committee may at any time offer to buy out for cash or otherwise settle a Stock Option previously granted, based upon such terms and conditions as the Committee shall establish and communicate to the Holder at the time that such offer is made, including a settlement by exchange of a different award under the Plan for the surrender of the Option. SECTION 6. STOCK APPRECIATION RIGHTS. 6.1. Grant and Exercise. Stock Appreciation Rights may be granted in tandem with ("Tandem Stock Appreciation Right") or in conjunction with all or part of any Stock Option granted under the Plan or may be granted on a free-standing basis. In the case of a Non-Qualified Stock Option, a Tandem Stock Appreciation Right may be granted either at or after the time of the grant of such Non-Qualified Stock Option. In the case of an Incentive Stock Option, a Tandem Stock Appreciation Right may be granted only at the time of the grant of such Incentive Stock Option. Unless granted in substitution for another outstanding award, Stock Appreciation Rights shall be granted for no consideration other than services. A Tandem Stock Appreciation Right shall terminate and shall no longer be exercisable upon the termination or exercise of the related Stock Option, except that, unless otherwise determined by the Committee, a Tandem Stock Appreciation Right granted with respect to less than the full number of shares covered by a related Stock Option shall not be reduced until after the number of shares remaining under the related Stock Option equals the number of shares covered by the Tandem Stock Appreciation Right. A Tandem Stock Appreciation Right may be exercised by a Holder, in accordance with Section 6.2 hereof, by surrendering the applicable portion of the related Stock Option. Upon such exercise and surrender, the Holder shall be entitled to receive such amount in the form of payment determined in the manner prescribed in Section 6.2 hereof. Stock Options which have been so surrendered, in whole or in part, shall no longer be exercisable to the extent Tandem Stock Appreciation Rights have been exercised. 6.2. Terms and Conditions. Stock Appreciation Rights shall be subject to the following terms and conditions: (a) Exercisability. Tandem Stock Appreciation Rights shall be exercisable only at such time or times and to the extent that the Stock Options to which they relate shall be exercisable in accordance with the provisions of Section 5 hereof and this Section 6, and may be subject to such additional limitations on exercisability as shall be determined by the Committee and set forth in the Agreement. Other Stock Appreciation Rights shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Committee and set forth in the Agreement. Notwithstanding anything to the contrary contained herein (including the provisions of Section 10.1 hereof), any Stock Appreciation Right granted to an Exchange Act Holder to be settled wholly or partially in cash (i) shall not be exercisable during the first six months of the term of such Stock Appreciation Right, except that this special limitation shall not apply in the event of death or Disability of such Holder prior to the expiration of the six-month period, and (ii) shall only be exercisable during the period beginning on the third business day following the date of release for publication of the Company of quarterly or annual summary statements of sales and earnings and ending on the twelfth business day following such date. (b) Receipt of SAR Value. Upon the exercise of a Stock Appreciation Right, a Holder shall be entitled to receive up to, but not more than, an amount in cash and/or shares of Common Stock equal to the SAR Value with the Committee having the right to determine the form of payment. (c) Shares Affected Under Plan. Upon the exercise of a Tandem Stock Appreciation Right, the Stock Option or part thereof to which such Tandem Stock Appreciation Right is related shall be deemed to have been exercised for the purpose of the limitation set forth in Section 3 hereof on the number of shares of Common Stock to be issued under the Plan, but only to the extent of the number of shares, if any, issued under the Tandem Stock Appreciation Right at the time of exercise based upon the SAR Value. (d) Limited Stock Appreciation Rights. The Committee may grant "Limited Stock Appreciation Rights" i.e., Stock Appreciation Rights that become exercisable upon the occurrence of one or more of the events which trigger a Change of Control as defined in Section 10 hereof, and shall be settled in an amount equal to the Formula Price Per Share, subject to such other terms and conditions as the Committee may specify; provided, however, if any Limited Stock Appreciation Right is granted to an Exchange Act Holder such Limited Stock Appreciation Right (i) shall only be exercisable within sixty (60) days after the event triggering the Change of Control; and (ii) may not be exercised during the first six months after the date of grant of such Limited Stock Appreciation Right (except in the event of death or Disability of such Holder prior to the expiration of the six-month period; and (iii) shall only be exercisable in the event that the date of the Change of Control was outside the control of such Holder; and (iv) shall only be settled in cash in an amount equal to the Formula Price Per Share. SECTION 7. RESTRICTED STOCK. 7.1. Grant. Shares of Restricted Stock may be awarded either alone or in addition to other awards granted under the Plan. The Committee shall determine the eligible persons to whom, and the time or times at which, grants of Restricted Stock will be awarded, the number of shares to be awarded, the time or times within which such awards may be subject to forfeiture (the "Restriction Period"), the vesting schedule and rights to acceleration thereof, and all other terms and conditions of the awards. Unless granted in substitution for another outstanding award, Restricted Stock shall be granted for no consideration other than services. 7.2. Terms and Conditions. Each Restricted Stock award shall be subject to the following terms and conditions: (a) Certificates. Restricted Stock, when issued, will be represented by a stock certificate or certificates registered in the name of the Holder to whom such Restricted Stock shall have been awarded. During the Restriction Period, certificates representing the Restricted Stock and any securities constituting Retained Distributions (as hereinafter defined) shall bear a restrictive legend to the effect that ownership of the Restricted Stock (and such Retained Distributions), and the enjoyment of all rights appurtenant thereto, are subject to the restrictions, terms and conditions provided in the Plan and the Agreement. Such certificates shall be deposited by the Holder with the Company, together with stock powers or other instruments of assignment, each endorsed in blank, which will permit transfer to the Company of all or any portion of the Restricted Stock and any securities constituting Retained Distributions that shall be forfeited or that shall not become vested in accordance with the Plan and the Agreement. (b) Rights of Holder. Restricted Stock shall constitute issued and outstanding shares of Common Stock for all corporate purposes. The Holder will have the right to vote such Restricted Stock, to receive and retain all regular cash dividends and other cash equivalent distributions as the Board may in its sole discretion designate, pay or distribute on such Restricted Stock and to exercise all other rights, powers and privileges of a Holder of Common Stock with respect to such Restricted Stock, with the exceptions that (A) the Holder will not be entitled to delivery of the stock certificate or certificates representing such Restricted Stock until the Restriction Period shall have expired and unless all other vesting requirements with respect thereto shall have been fulfilled; (B) the Company will retain custody of the stock certificate or certificates representing the Restricted Stock during the Restriction Period; (C) other than regular cash dividends and other cash equivalent distributions as the Board may in its sole discretion designate, pay or distribute, the Company will retain custody of all distributions ("Retained Distributions") made or declared with respect to the Restricted Stock (and such Retained Distributions will be subject to the same restrictions, terms and conditions as are applicable to the Restricted Stock) until such time, if ever, as the Restricted Stock with respect to which such Retained Distributions shall have been made, paid or declared shall have become vested and with respect to which the Restriction Period shall have expired; and (D) a breach by the Holder of any of the restrictions, terms or conditions contained in this Plan or the Agreement or otherwise established by the Committee with respect to any Restricted Stock or Retained Distributions will cause a forfeiture of such Restricted Stock and any Retained Distributions with respect thereto. (c) Vesting; Forfeiture. Upon the expiration of the Restriction Period with respect to each award of Restricted Stock and the satisfaction of any other applicable restrictions, terms and conditions (A) such Restricted Stock shall become vested in accordance with the terms of the Agreement, and (B) any Retained Distributions with respect to such Restricted Stock shall become vested to the extent that the Restricted Stock related thereto shall have become vested. Any such Restricted Stock and Retained Distributions that do not vest shall be forfeited to the Company and the Holder shall not thereafter have any rights with respect to such Restricted Stock and Retained Distributions that shall have been so forfeited. SECTION 8. DEFERRED STOCK. 8.1. Grant. Shares of Deferred Stock may be awarded either alone or in addition to other awards granted under the Plan. The Committee shall determine the eligible persons to whom, and the time or times at which, grants of Deferred Stock shall be awarded, the number of shares of Deferred Stock to be awarded, the duration of the period (the "Deferral Period") during which, and the conditions under which, receipt of the shares will be deferred, and all the other terms and conditions of the awards. Unless granted in substitution for an outstanding award or upon exercise of an Option, Deferred Stock shall be issued for no consideration other than services. 8.2. Terms and Conditions. Each Deferred Stock award shall be subject to the following terms and conditions: (a) Certificates. At the expiration of the Deferral Period (or the additional Deferral Period referred to in Section 8.2(d) hereof ("Additional Deferral Period", where applicable), share certificates shall be delivered to the Holder, or his legal representative, representing the number of the shares equal to the number covered by the Deferred Stock award. (b) Dividends. As determined by the Committee, amounts equal to any dividends declared during the Deferral Period (or the Additional Deferral Period, where applicable) with respect to the number of shares covered by a Deferred Stock award may be paid to the Holder currently or deferred and deemed to be reinvested in additional Deferred Stock. (c) Vesting; Forfeiture. Upon the expiration of the Deferral Period (or the Additional Deferral Period, where applicable) with respect to each award of Deferred Stock and the satisfaction of any other applicable limitations, terms or conditions, such Deferred Stock shall become vested in accordance with the terms of the Agreement. Any Deferred Stock that does not vest shall be forfeited to the Company and the Holder shall not thereafter have any rights with respect to such Deferred Stock that has been so forfeited. (d) Additional Deferral Period. A Holder may request to, and the Committee may in its sole discretion at any time, defer the receipt of an award (or an installment of an award) for an additional specified period or until a specified event (the "Additional Deferral Period"). Subject to any exceptions adopted by the Committee, such request must generally be made at least one year prior to expiration of the Deferral Period for such Deferred Stock award (or such installment). SECTION 9. OTHER STOCK-BASED AWARDS. 9.1. Grant and Exercise. Other Stock-Based Awards may be awarded, subject to limitations under applicable law, that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, shares of Common Stock, as deemed by the Committee to be consistent with the purposes of the Plan, including, without limitation, purchase rights, shares of Common Stock awarded which are not subject to any restrictions or conditions, convertible or exchangeable debentures, or other rights convertible into shares of Common Stock and awards valued by reference to the value of securities of or the performance of specified Subsidiaries. Other Stock-Based Awards may be awarded either alone or in addition to or in tandem with any other awards under this Plan or any other plan of the Company. The Committee shall determine the eligible persons to whom and the time or times at which grants of such awards shall be made, the number of shares of Common Stock to be awarded pursuant to such awards, and all other terms and conditions of the awards. Notwithstanding the foregoing, except to the extent that an Other Stock-Based Award is granted in substitution for another outstanding award or is delivered upon exercise of an Option, the amount of consideration to be required to be received by the Company shall be either no consideration (other than services) or, in the case of an Other Stock-Based Award in the nature of a purchase right, an amount equal to or greater than 50% of the Fair Market Value of the shares to which the award relates on the date of grant of such award. 9.2. Terms and Conditions. Each Other Stock-Based Award shall be subject to the following terms and conditions: (a) Dividends. The Holder of an Other Stock-Based Award shall be entitled to receive, currently or on a deferred basis, dividends or dividend equivalents with respect to the number of shares covered by the award, as determined by the Committee. The Committee may provide that such amounts (if any) shall be deemed to have been reinvested in additional Common Stock. (b) Vesting; Forfeiture. Any Other Stock-Based Award and any Common Stock covered by an Other Stock-Based Award shall vest or be forfeited to the extent so provided in the Agreement. SECTION 10. ACCELERATION. 10.1. Acceleration Upon Change of Control. Unless the award Agreement provides otherwise or unless the Holder waives the application of this Section 10.1 prior to a Change of Control (as hereinafter defined), in the event of a Change of Control: (a) Each outstanding Stock Option, Stock Appreciation Right and Limited Stock Appreciation Right granted under the Plan shall immediately become exercisable in full notwithstanding the vesting or exercise provisions contained in the Agreement; and (b) All restrictions and deferral limitations related to awards of Restricted Stock, Deferred Stock and Other Stock-Based Awards, shall be deemed to have expired and all such awards and any related Retained Distributions shall become vested. 10.2. Change of Control Defined. A "Change of Control" shall be deemed to have occurred upon any of the following events: (a) The consummation of any of the following transactions: (i) any merger, reverse stock split, recapitalization or other business combination of the Company, with or into another corporation, or an acquisition of securities or assets by the Company, pursuant to which the Company is not the continuing or surviving corporation or pursuant to which shares of Common Stock would be converted into cash, securities or other property, other than a transaction in which the majority of the holders of Common Stock immediately prior to such transaction will own at least 50% of the total voting power of the then-outstanding securities of the surviving corporation immediately after such transaction, or (ii) any sale, lease, exchange, or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company, or (iii) the liquidation or dissolution of the Company; or (b) A transaction in which any person (as such term is defined in Sections 13(d)(3) and 14(d)(2) of the Exchange Act), corporation or other entity (other than the Company, or any profit-sharing, employee ownership or other employee benefit plan sponsored by the Company or any Subsidiary, or any trustee of or fiduciary with respect to any such plan when acting in such capacity, or any group comprised solely of such entities): (i) shall purchase any Common Stock (or securities convertible into Common Stock) for cash, securities or any other consideration pursuant to a tender offer or exchange offer, without the prior consent of the Board, or (ii) shall become the "beneficial owner" (as such term is defined in Rule 13d-3 under the Exchange Act), directly or indirectly (in one transaction or a series of transactions), of securities of the Company representing 50% or more of the total voting power of the then-outstanding securities of the Company ordinarily (and apart from the rights accruing under special circumstances) having the right to vote in the election of directors (calculated as provided in Rule 13d-3(d) in the case of rights to acquire the Company's securities); or (c) If, during any period of two consecutive years, individuals who at the beginning of such period constituted the entire Board and any new director whose election by the Board, or nomination for election by the Company's stockholders was approved by a vote of at least two thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election by the stockholders was previously so approved, cease for any reason to constitute a majority thereof. 10.3. General Waiver by Committee. The Committee may, after grant of an award, accelerate the vesting of all or any part of any Stock Option, Deferred Stock, Restricted Stock or any Other Stock-Based Award and/or waive any limitations or restrictions, if any, for all or any part of an award. 10.4. Acceleration Upon Termination of Employment. In the case of a Holder whose employment with the Company or a Subsidiary is involuntarily terminated for any reason (other than for cause), the Committee may accelerate the vesting of all or any part of any award and/or waive in whole or in part any or all of the remaining deferral limitations or restrictions imposed hereunder or pursuant to the Agreement. SECTION 11. AMENDMENTS AND TERMINATION. 11.1. Amendments to Plan. The Board may at any time, and from time to time, amend any of the provisions of the Plan, and may at any time suspend or terminate the Plan; provided, however, that no such amendment shall be effective unless and until it has been duly approved by the stockholders of the outstanding shares of Common Stock if (a) it increases the aggregate number of shares of Common Stock which are available pursuant to the Plan, (except as provided in Section 3 hereof) or (b) the failure to obtain such approval would adversely affect the compliance of the Plan with the requirements of Rule 16b-3 under the Exchange Act, or with the requirements of any other applicable law, rule or regulation. 11.2. Amendments to Individual Awards. The Committee may amend the terms of any award granted under the Plan; provided, however, that subject to Section 3 hereof, no such amendment may be made by the Committee which in any material respect impairs the rights of the Holder without the Holder's consent. SECTION 12. TERM OF PLAN. 12.1. Effective Date. The Plan shall be effective as of August 29, 1990 ("Effective Date"), subject to the approval of the Plan by the stockholders of the Company within one year after the Effective Date. Any awards granted under the Plan prior to such approval shall be effective when made (unless otherwise specified by the Committee at the time of grant), but shall be conditioned upon, and subject to, such approval of the Plan by the Company's stockholders (and no awards shall vest or otherwise become free of restrictions prior to such approval). 12.2. Termination Date. No award shall be granted pursuant to the Plan on or after the tenth anniversary of the Effective Date, but awards granted prior to such tenth anniversary may extend beyond that date. The Plan shall terminate at such time as no further awards may be granted and all awards granted under the Plan are no longer outstanding. SECTION 13. GENERAL PROVISIONS. 13.1. Investment Representations. The Committee may require each person acquiring shares of Common Stock pursuant to an award under the Plan to represent to and agree with the Company in writing that the Holder is acquiring the shares for investment without a view to distribution thereof. 13.2. Additional Incentive Arrangements. Nothing contained in the Plan shall prevent the Board from adopting such other or additional incentive arrangements as it may deem desirable, including, but not limited to, the granting of stock options and the awarding of stock and cash otherwise than under the Plan; and such arrangements may be either generally applicable or applicable only in specific cases. 13.3. No Right of Employment. Nothing contained in the Plan or in any award hereunder shall be deemed to confer upon any employee of the Company or any Subsidiary any right to continued employment with the Company or any Subsidiary, nor shall it interfere in any way with the right of the Company or any Subsidiary to terminate the employment of any of its employees at any time. 13.4. Withholding Taxes. Not later than the date as of which an amount first becomes includible in the gross income of the Holder for Federal income tax purposes with respect to any award under the Plan, the Holder shall pay to the Company, or make arrangements satisfactory to the Committee regarding the payment of, any Federal, state and local taxes of any kind required by law to be withheld or paid with respect to such amount. If permitted by the Committee, tax withholding or payment obligations may be settled with Common Stock, including Common Stock that is part of the award that gives rise to the withholding requirement. The obligations of the Company under the Plan shall be conditional upon such payment or arrangements and the Company or the Holder's employer (if not the Company) shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the Holder from the Company or any Subsidiary. 13.5. Governing Law. The Plan and all awards made and actions taken thereunder shall be governed by and construed in accordance with the laws of the State of Florida (without regard to choice of law provisions). 13.6. Other Benefit Plans. Any award granted under the Plan shall not be deemed compensation for purposes of computing benefits under any retirement plan of the Company or any Subsidiary and shall not affect any benefits under any other benefit plan now or subsequently in effect under which the availability or amount of benefits is related to the level of compensation (unless required by specific reference in any such other plan to awards under this Plan). 13.7. Employee Status. A leave of absence, unless otherwise determined by the Committee prior to the commencement thereof, shall not be considered a termination of employment. Any awards granted under the Plan shall not be affected by any change of employment, so long as the Holder continues to be an employee of the Company or any Subsidiary. 13.8. Non-Transferability. Other than the transfer of a Stock Option, Stock Appreciation Right or other award by will or by the laws of descent and distribution, no award under the Plan may be alienated, sold, assigned, hypothecated, pledged, exchanged, transferred, encumbered or charged, and any attempt to alienate, sell, assign, hypothecate, pledge, exchange, transfer, encumber or charge the same shall be void. No right or benefit hereunder shall in any manner be liable for or subject to the debts, contracts, liabilities or torts of the person entitled to such benefit. Any Stock Option, Stock Appreciation Right or other award granted under this Plan is only exercisable during the lifetime of the Holder by the Holder or by his guardian or legal representative. 13.9. Applicable Laws. The obligations of the Company with respect to all awards under the Plan shall be subject to (i) all applicable laws, rules and regulations and such approvals by any governmental agencies as may be required, including, without limitation, the effectiveness of a registration statement under the Securities Act of 1933, as amended, and (ii) the rules and regulations of any securities exchange on which the Common Stock may be listed or the NASDAQ National Market System if the Common Stock is designated for quotation thereon. 13.10. Conflicts. If any of the terms or provisions of the Plan conflict with the requirements of Rule 16b-3 under the Exchange Act, or with the requirements of any other applicable law, rule or regulation, and/or with respect to Incentive Stock Options, Section 422 of the Code, then such terms or provisions shall be deemed inoperative to the extent they so conflict with the requirements of said Rule 16b-3, and/or with respect to Incentive Stock Options, Section 422 of the Code. With respect to Incentive Stock Options, if this Plan does not contain any provision required to be included herein under Section 422 of the Code, such provision shall be deemed to be incorporated herein with the same force and effect as if such provision had been set out at length herein. 13.11. Written Agreements. Each award granted under the Plan shall be confirmed by, and shall be subject to the terms of the Agreement executed by the Company and the Holder. The Committee may terminate any award made under the Plan if the Agreement relating thereto is not executed and returned to the Company within 60 days after the Agreement has been delivered to the Holder for his or her execution. 13.12. Consideration For Common Stock. The Committee may not grant any awards under the Plan pursuant to which the Company will be required to issue any shares of Common Stock unless the Company will receive consideration for the shares of Common Stock sufficient under the laws of the State of Florida so that such shares of Common Stock will be fully paid and non-assessable when issued. 13.13. Common Stock Certificates. Notwithstanding anything to the contrary contained herein, whenever certificates representing shares of Common Stock subject to an award are required to be delivered pursuant to the terms of the Plan, the Company may in lieu of such delivery requirement comply with the provisions of Section 607.0626 of the Florida Business Corporation Act. All certificates for shares of Common Stock delivered under the Plan shall be subject to such stop-transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Common Stock is then listed, any applicable Federal or state securities law, and any applicable corporate law, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. 13.14. Unfunded Status of Plan. The Plan is intended to constitute an "unfunded" plan for incentive and deferred compensation. With respect to any payments not yet made to a Holder by the Company, nothing contained herein shall give any such Holder any rights that are greater than those of a general creditor of the Company. EX-10 4 COMPUTER PRODUCTS, INC. 1990 OUTSIDE DIRECTORS STOCK OPTION PLAN (RESTATED AS OF JANUARY 25, 1996) ARTICLE I DEFINITIONS As used herein, the following terms have the meanings hereinafter set forth unless the context clearly indicates to the contrary: (a) "Board" shall mean the Board of Directors of the Company. (b) "Company" shall mean Computer Products, Inc. (c) "Compensation" shall mean, for any Eligible Director, the amount of cash actually paid to such Director as compensation for his or her service on the Board and any committees thereof including, without limitation, all amounts paid to such Director in connection with his or her attendance at any meetings of the Board or committees thereof. (d) "Date of Grant" shall mean the date an Eligible Director is initially elected to the Board of Directors and each date after the Effective Date of the Plan on which the Stockholders of the Company shall elect directors at an Annual Meeting of such Stockholders or any adjournment thereof. (e) "Deemed Value" shall mean, with respect to each share of Stock owned by an Eligible Director on any Date of Grant, the Fair Market Value of a share of Stock on the last day of the fiscal year of the Company immediately preceding such Date of Grant. (f) "Effective Date of the Plan" shall mean the original date of adoption by the stockholders of the Company. (g) "Eligible Director" shall mean any Director of the Company who is not an employee of the Company or its subsidiaries. (h) "Fair Market Value" shall mean the closing sales price, or the mean between the closing high "bid" and low "asked" prices, as the case may be, of the Stock in the over-the-counter market on the day on which such value is to be determined, as reported by the National Association of Securities Dealers Automated Quotation System or successor national quotation service. If the Stock is listed on a national securities exchange, "Fair Market Value" shall mean the closing price of the Stock on such national securities exchange on the day on which such value is to be determined, as reported in the composite quotations for securities traded on such exchange provided by the National Association of Securities Dealers or successor national quotation service. In the event no such quotations are available for the day in question, "Fair Market Value" shall be determined by reference to the appropriate prices on the next preceding day for which such prices are reported. (i) "Option" shall mean an Eligible Director's stock option to purchase Stock granted pursuant to the provisions of Article V hereof. (j) "Optionee" shall mean an Eligible Director to whom an Option has been granted hereunder. (k) "Option Price" shall mean the price at which an Optionee may purchase a share of Stock under a Stock Option Agreement. (l) "Plan" shall mean the Computer Products, Inc. 1990 Outside Directors Stock Option Plan, the terms of which are set forth herein. (m) "Stock" shall mean the common stock, par value $.01 per share, of the Company or, in the event that the outstanding shares of Stock are hereafter changed into or exchanged for different stock or securities of the Company or some other corporation, such other stock or securities. (n) "Stock Option Agreement" shall mean an agreement between the Company and the Optionee under which the Optionee may purchase Stock in accordance with the Plan. ARTICLE II THE PLAN 2.1 Name. This Plan shall be known as the "Computer Products, Inc. 1990 Outside Directors Stock Option Plan." 2.2 Purpose. The purpose of the Plan is to advance the interests of the Company and its Stockholders by affording Eligible Directors of the Company an opportunity to acquire or increase their proprietary interests in the Company, and thereby to encourage their continued service as directors and to provide them additional incentives to achieve the growth objectives of the Company. 2.3 Effective Date. The Effective Date of the Plan is the date of adoption by the stockholders of the Company. 2.4 Termination Date. The Plan shall terminate and no further Options shall be granted hereunder upon the tenth anniversary of the Effective Date of the Plan. ARTICLE III PARTICIPANTS Each Eligible Director shall participate in the Plan, provided that he is elected to a regular term as such a member at an Annual Meeting of Stockholders, or any adjournment thereof. ARTICLE IV SHARES OF STOCK SUBJECT TO PLAN 4.1 Limitations. Subject to any antidilution adjustment pursuant to the provisions of Section 4.2 hereof, the maximum number of shares of Stock which may be issued and sold hereunder shall not exceed 500,000 shares of Stock. Shares of Stock subject to an Option may be either authorized and unissued shares or shares issued and later acquired by the Company; provided however, the shares of Stock with respect to which an Option has been exercised shall not again be available for Option hereunder. If outstanding Options granted hereunder shall terminate or expire for any reason without being wholly exercised prior to the end of the period during which Options may be granted hereunder, new Options may be granted hereunder covering such unexercised shares. 4.2 Antidilution. In the event that the outstanding shares of Stock are changed into or exchanged for a different number or kind of shares or other securities of the Company or of another corporation by reason of merger, con- solidation, reorganization, recapitalization, reclassification, combination of shares, stock splitup or stock dividend: (a) The aggregate number and kind of shares of Stock for which Options may be granted hereunder shall be adjusted appropriately; (b) The rights under outstanding Options granted hereunder, both as to the number of subject shares and the Option price, shall be adjusted appropriately; and (c) Where dissolution or liquidation of the Company or any merger or combination in which the Company is not a surviving corporation is involved, each outstanding Option granted hereunder shall terminate, but the Optionee shall have the right, immediately prior to such dissolution, liquidation, merger or combination, to exercise his Option, in whole or in part, to the extent that it shall not have been exercised, without regard to the date on which such Option would otherwise have become exercisable pursuant to Sections 5.4 and 5.5. The foregoing adjustments and the manner of application thereof shall be determined solely by the Board, and any such adjustment may provide for the elimination of fractional share interests. The adjustments required under this Article shall apply to any successor or successors of the Company and shall be made regardless of the number or type of successive events requiring adjustments hereunder. ARTICLE V OPTIONS 5.1 Option Grant, Number of Shares and Agreement. (a) Subject to the provisions of Section 5.1(b) hereof, each Eligible Director shall automatically be granted an Option to purchase Ten Thousand (10,000) shares Stock on each Date of Grant. Each Option so granted shall be evidenced by a written Stock Option Agreement, dated as of the Date of Grant and executed by the Company and the Optionee, stating the Option's duration, time of exercise, and exercise price. The terms and conditions of the Option shall be consistent with the Plan. (b) Notwithstanding the provisions of Section 5.1(a) hereof, an Eligible Director shall not be entitled to receive a grant of an Option on any Date of Grant unless the Deemed Value of all shares of Stock owned by such Eligible Director on such Date of Grant shall be no less than three hundred percent (300%) of (i) such Director's Compensation during the preceding fiscal year of the Company or (ii) if such Director has not previously served, or served for less than a full fiscal year, the average of all other Eligible Directors' Compensation during the preceding fiscal year of the Company. An Eligible Director, who shall not be entitled to receive a grant of an Option on any particular Date of Grant as a result of the limitation set forth in this Section 5.1(b), shall not be precluded from receiving a grant of an option pursuant to Section 5.1(a) hereof on any subsequent Dates of Grant on which the limitation set forth herein shall be satisfied. 5.2 Option Price. The Option Price of the Stock subject to each Option shall be the Fair Market Value of the Stock on its Date of Grant. 5.3 Exercise Period. The period for the exercise of each Option shall expire on the tenth anniversary of the Date of Grant. 5.4 Option Exercise. (a) Any Option granted under the Plan shall only become exercisable in full on the first anniversary of the Date of Grant, provided that the Eligible Director has not voluntarily resigned, or been removed "for cause", as a member of the Board of Directors on or prior to the first anniversary of the Date of Grant. An Option shall remain exercisable after its exercise date at all times during the Exercise Period, regardless of whether the Optionee thereafter continues to serve as a member of the Board. (b) An Option may be exercised at any time or from time to time during the term of the Option as to any or all full shares which have become exercisable in accordance with this Section, but not as to less than 25 shares of Stock unless the remaining shares of Stock that are so exercisable are less than 25 shares of Stock. The Option price is to be paid in full in cash upon the exercise of the Option. The holder of an Option shall not have any of the rights of a Stockholder with respect to the shares of Stock subject to the Option until such shares of Stock have been issued or transferred to him upon the exercise of his Option. (c) An Option shall be exercised by written notice of exercise of the Option, with respect to a specified number of shares of Stock, delivered to the Company at its principal office, and by cash payment to the Company at said office of the full amount of the Option price for such number of shares. In addition to, and prior to the issuance of a certificate for shares pursuant to any Option exercise, the Optionee shall pay to the Company in cash the full amount of any federal and state withholding or other employment taxes applicable to the taxable income of such Optionee resulting from such exercise. 5.5 Nontransferability of Option. Options may not be transferred by an Optionee otherwise than by will or the laws of descent and distribution. During the lifetime of an Optionee, his Option may be exercised only by him (or by his guardian or legal representative, should one be appointed). In the event of the death of an Optionee, any Option held by him may be exercised by his legatee(s) or other distributee(s) or by his personal representative. ARTICLE VI STOCK CERTIFICATES The Company shall not be required to issue or deliver any certificate for shares of Stock purchased upon the exercise of any Option granted hereunder or any portion thereof unless, in the opinion of counsel to the Corporation, there has been compliance with all applicable legal requirements. An Option granted under the Plan may provide that the Company's obligation to deliver shares of Stock upon the exercise thereof may be conditioned upon the receipt by the Company of a representation as to the investment intention of the holder thereof in such form as the Company shall determine to be necessary or advisable solely to comply with the provisions of the Securities Act of 1933, as amended, or any other federal, state or local securities laws. ARTICLE VII TERMINATION, AMENDMENT AND MODIFICATION OF PLAN The Board may at any time terminate the Plan, and may at any time and from time to time and, in any respect amend or modify the Plan. Notwithstanding the foregoing, the provisions of Section 5.1 of this Plan may not be amended more than once every six months, other than to comport with changes in the Internal Revenue Code of 1986, as amended, the Employee Retirement Income Security Act of 1974, as amended, or the rules thereunder. ARTICLE VIII RELATIONSHIP TO OTHER COMPENSATION PLANS The adoption of the Plan shall neither affect any other stock option, incentive or other compensation plans in effect for the Company or any of its subsidiaries, nor shall the adoption of the Plan preclude the Company from establishing any other forms of incentive or other compensation plan for directors of the Company. ARTICLE IX MISCELLANEOUS 9.1 Plan Binding on Successors. The Plan shall be binding upon the successors and assigns of the Company. 9.2 Singular, Plural; Gender. Whenever used herein, nouns in the singular shall include the plural, and the masculine pronoun shall include the feminine gender. 9.3 Headings, etc., No Part of Plan. Headings of articles and paragraphs hereof are inserted for convenience and reference, and do not constitute a part of the Plan. EX-10 5 COMPUTER PRODUCTS, INC. EXECUTIVE ANNUAL INCENTIVE PLAN TABLE OF CONTENTS PAGE ---- I. Purpose 2 II. Effective Date 2 III. Plan Year 2 IV. Plan Administration 3 V. Eligibility 3 VI. Company Performance Objectives 4 - Threshold 4 - Performance Measures and Weights 4 VII. Incentive Awards 5 - Payout Cap 5 - Performance Schedule 5 VIII. Individual Annual Incentive Awards 5 - Payment 6 - Stock Option Award 6 IX. Special Incentive Awards 6 X. Termination of Employment 6/7 XI. Miscellaneous 7 - Plan Accounting 7 - Payment From General Assets 7 - No Right of Employment 7 - Non-Assignment/Death Benefits 8 - Amendment and Termination of Plan 8 - Change of Control 8 XII. Definitions 8/9 I. PURPOSE Computer Products, Inc. (`Company'' or ``CPI'') establishes the Executive Annual Incentive Plan (`Plan'') to provide a financial incentive for selected members of management. This Plan is designed to achieve several objectives to include: - Linking Company business objectives with key executives' compensation; - Rewarding teamwork and individual performance for achieving annual business results; - Providing motivation to key executives to excel by offering competitive incentive and total cash compensation; - Promoting human resources goals to attract, hire and retain quality talent; and; - Balancing short and long term considerations through compensation for achievement of 12 months goals that are consistent with long term objectives. II. EFFECTIVE DATE The Plan shall be effective on the first day of fiscal 1996 and will remain effective until amended or terminated by the Board of Directors. III. PLAN YEAR The Plan Year shall be the Company's fiscal year. The Plan automatically shall be renewed for each fiscal year thereafter, unless otherwise terminated by the Board of Directors. IV. PLAN ADMINISTRATION The Plan shall be administered by the Chief Executive Officer (Plan Administrator). The Compensation Committee of the Board will approve annually Corporate and Division Head performance measures, objectives, award levels and funding amounts. The Chief Executive Officer/Plan Administrator, with support from the executive staff, determines eligibility, approves actual awards, recommends Corporate and Division Head performance measures/weights, objectives, award levels and funding amounts. The Chief Executive Officer is authorized to interpret and administer Plan provisions. The Chief Executive Officer as Plan Administrator shall have no authority to amend or modify any of the terms of the Plan, such authority being fully reserved to the Board of Directors. V. ELIGIBILITY The Chief Executive Officer shall select those key executives (`Participants'') who will be eligible to receive an annual incentive award for the Plan Year. In determining eligibility, the Chief Executive Officer shall consider the executive's potential impact on profitability, revenue growth and operating results, as well as reporting level of the executive. To be eligible to be selected as a Participant, the executive must: - report directly to a Division President and/or be within two reporting levels of the Chief Executive Officer; and - must be an active employee at the end of the Plan Year, unless specified differently in other contractual agreements. An eligible executive must be a Participant for a minimum of six months to be eligible for a prorata award. Participants shall receive a copy of the Plan to serve as written notice from the Plan Administrator of their eligibility to participate in the Plan and their contingent rights to an annual incentive award. VI. COMPANY PERFORMANCE OBJECTIVES Threshold: The threshold is defined as the level at which payment of objectives will begin. Actual thresholds for each measure will be detailed on the individual sheets. Net Income thresholds for Division/Corporate must be achieved in order for other objectives to be paid. Maximum payout for each performance measure is 200%. Note: There may be no incentive payout if the corporation is not profitable. Performance Measures and Weights: Annually, the Chief Executive Officer, with support from executive staff, will determine and recommend the appropriate performance measures and weights. Taking into consideration the annual business plan, the Chief Executive Officer will develop target and performance objectives. Performance measures will utilize `formulas'' or objective measures as much as possible; however, discretion may be required particularly in developing individual objectives. The Compensation Committee annually approves Corporate and Division Heads performance measures. Upon approval by the Compensation Committee, performance objectives/weights will be communicated in writing to all Plan Participants at the beginning of the Plan Year. VII. INCENTIVE AWARDS Payout Cap Tax effected executive annual incentive awards shall be limited to no more than 10% of the company's net income before the total after tax cost of the executive annual incentive payout, unless otherwise approved by the Compensation Committee and Board of Directors. (See Section XII for definition of NI.) Should calculated payout at the end of the year exceed this amount, the payouts may be reduced on a pro rata basis. The Compensation Committee shall have discretion to interpret the effect of `windfall'' events on the Plan. Examples of ``windfall'' events include income/ (loss) from the sale of an asset, discontinued operations, effect of changes in accounting principles, extraordinary credits, etc. Performance Schedule The award levels shall be based on the levels of financial performance attained. Each Performance Measure will either be paid on a straight line interpolation with a minimum payout at threshold and a maximum payout at 200% or on a calculation based on minimum payout at a predetermined threshold up to a maximum of 200%. Actual thresholds and payment formulas will be detailed on each participants individual plan documents. VIII. INDIVIDUAL ANNUAL INCENTIVE AWARDS As determined by the Chief Executive Officer/Plan Administrator, the annual incentive award for a Participant shall be based on the individual Participant's group level and achievement of mutually agreed to goals which shall be set forth in writing in advance for the Plan Year. Payment The award level shall be expressed as a percent of base salary (See Section XII for definition of base salary.) and shall be payable in cash within seventy-five (75) days following the Plan Year. Awards shall be subject to normal rules and regulations regarding the withholding of taxes. As described in the Executive Equity Ownership Plan, the employee's EIP payouts in whole or part will be made in common stock until the participant has achieved the year end minimum ownership target. The number of common shares will be determined by dividing the eligible compensation by the common stock closing price as listed in the Wall Street Journal at the date of award. Any resulting fractional shares will be paid in cash. IX. SPECIAL INCENTIVE AWARDS In the years when the Company is profitable overall, but individual divisions achieve less than the minimum NI, the Chief Executive Officer/Plan Administrator may recommend special incentive; discretionary awards for high achievers in the Company and/or Divisions that are profitable. For these discretionary awards, the Compensation Committee has the authority to fund from 0-50% of the total participants target award level. X. TERMINATION OF EMPLOYMENT In the event of death, extended disability or retirement, Plan Participants will normally be entitled to receive prorated awards based upon the number of months in which they have participated in the Plan for the applicable Plan Year. (See Section XII for definitions.) In the event of voluntary termination of a Plan Participant during the Plan Year, the Participant will typically forfeit his award for the Plan Year. In the event of involuntary termination of a Plan Participant through no fault of his/her own during the Plan Year, the Participant may be entitled to a prorated award. Such decisions regarding prorated awards will be reviewed by the Compensation Committee. In the event of termination for cause such as misconduct, fraud, or other acts injurious to the Company, the Participant will not be entitled to any award, whether prorated or not, for the Plan Year. XI. MISCELLANEOUS Plan Accounting The Plan shall be funded by accrual during the Plan Year. Payment from General Assets The payment of an award under the Plan shall be from the general assets of the Company, and a Participant under the Plan shall have no greater rights to payment than other general creditors of the Company. There shall be no separate trust for the payment of awards hereunder. No Right of Employment ---------------------- Nothing in the Plan, including the employee's eligibility for participation in the Plan, will infer any right of employment by the Company to such employee. The Plan does not affect the terms of any employment agreements that may exist between the Company and any Participant. The Company retains all its rights to discipline or discharge employees who participate in the Plan. Non-Assignment/Death Benefits ----------------------------- An award or the right to a payment of an award granted under this Plan shall not be assignable or transferable by a Participant except by will or the laws of descent and distribution. Each Participant may designate, on a form approved by the Plan Administrator, a beneficiary or beneficiaries to receive payment of any Plan death benefits that may be payable with respect to the Participant. During the lifetime of a Participant, only the Participant may receive payment of an award granted hereunder. No transfer of an award shall be effective to bind the Company unless the Company shall have been furnished with written notice thereof and a copy of the will or such evidence as the Company may deem necessary to establish the validity of the transfer. Amendment, Suspension, or Termination of the Plan ------------------------------------------------- The Board of Directors, upon recommendation of the Compensation Committee, may at any time elect to amend, suspend, or terminate the Plan. Change of Control ----------------- In the event of a sale, merger, consolidation, combination or reorganization involving the Company and any other entity or corporation, the Chief Executive Officer and Board of Directors shall not agree to such merger, consolidation, combination or reorganization unless and until the succeeding or continuing business entity shall expressly assume the obligations of the Company under this Plan. XII. DEFINITIONS ---------------- For purposes of this document and the Plan, the terms listed below are defined as follows: (1) BASE SALARY means all regular salary amounts actually paid to the Participant during the Plan Year and shall not include commissions, bonuses, options and/or any amounts received in connection with any fringe benefit, retirement or welfare employee benefit program. (2) NET INCOME (NI) Defined as net income (loss) before extraordinary items, cumulative effect of changes in accounting principles and discontinued operations, as reported by the company in its audited consolidated statement of operations. (3) MANAGEMENT NET INCOME (MNI) Defined as management net income as calculated strictly according to the company's accounting policies and contained in the company's management reporting system. (4) CASH FLOW defined as operating cash flow (excluding intercompany account activity) minus investing cash flow. (5) DISABILITY A Participant's incapacity to engage in any substantial gainful activity because of a medically determinable physical or mental impairment which can be expected to result in death, or to be of long, continued and indefinite duration. Such determination of disability shall be made by the Plan Administrator with the advice of competent medical authority. All Participants in similar circumstances will be treated alike. (6) RETIREMENT Termination of a Participant's employment at a specific age determined by CPI, when Participant chooses to withdraw from their position or occupation. Normal retirement age is age 65 or, if later, the fifth anniversary of the Participant's employment date. (7) TERMINATION FOR CAUSE `Cause'' shall mean such actions by Participant involving dishonesty, fraud, the commission of a felony, gross negligence, or willful misconduct, which resort in material harm to the business and/or reputation of CPI as reasonably determined by CPI's Board of Directors. Attachment 1 PERFORMANCE WEIGHTS MEASURES CORPORATE: CEO, CFO NET INCOME 75% REVENUE GROWTH 25% OTHER CORPORATE MANAGEMENT: NET INCOME 75% REVENUE GROWTH* 25% EFFECTIVE TAX RATE* 25% COMPANY CASH FLOW* 25% *MEASUREMENT APPLIED TO RELEVANT CORPORATE POSITION DIVISIONS: (EXCEPT PCAP) MANAGEMENT NET INCOME REVENUE GROWTH CASH FLOW (% WILL VARY BY DIVISION BASED ON THE IMPORTANCE OF THIS FACTOR TO THE INDIVIDUAL DIVISION PERFORMANCE) PCAP GROSS PROFIT MARGIN OVERHEAD SPENDING G&A SPENDING CASH FLOW HONG KONG DIRECT LABOR HEADCOUNT (% WILL VARY BY DIVISION BASED ON THE SIGNIFICANCE OF THE INDIVIDUAL'S IMPACT ON THESE MEASURES) Attachment 2 PERFORMANCE SCHEDULE PERCENT (%) OF PERCENT (%) OF FINANCIAL PERFORMANCE TARGET INCENTIVE TARGET ACHIEVED AWARD EARNED --------------- ------------ Less than 70% Discretionary 70% 70% 75% 75% 80% 80% 85% 85% 90% 90% 95% 95% 100% 100% 105% 105% 110% 110% PAYOUT RATIO = 1 : 1 115% 115% 120% 120% 125% 125% 130% 130% 135% 135% 140% 140% 145% 145% 150% 150% 200% 200% For levels of financial performance attained which are between the increments cited in the Performance Schedule above, the percent of target award earned is based upon straight-line interpolation. EX-10 6 COMPUTER PRODUCTS, INC. EXECUTIVE STOCK OWNERSHIP PLAN INTRODUCTION Computer Products, Inc. believes that senior executives who have the ability to impact the success of the Company should also participate as shareholders in the Company. The new Executive Stock Ownership Plan, effective January 1, 1996, has been designed to achieve this goal. Targeted stock ownership is in direct relation to your base salary and level of incentive plan participation. As a Senior executive, you have a period of three years (1996 - 1998) to meet your personal share target. If you achieve your target, you will receive additional stock option grants. BACKGROUND The Executive Stock Ownership Plan provides you with a competitive approach to compensation. It is based upon the best of practices gleaned from a study of stock ownership programs among high technology companies and other Fortune 500 companies. PARTICIPATION The Plan identifies senior executives as required participants. Participants are defined as the CEO, CFO, Division Presidents, and Senior Executives. This brochure provides you with general information regarding the Executive Stock Ownership Plan in which you will participate. If you have any questions about this Plan, please contact the Corporate Human Resources department with questions. OWNERSHIP TARGETS The three year program begins in January of 1996 and runs through 1998. The program may be renewed for consecutive three year periods thereafter. Stock ownership targets for the initial offering are as follows: Share Target Range Title Minimum-Maximum CEO 75,000 CFO 12,500 25,000 Division Presidents 12,500 25,000 Senior Executives 2,000 8,000 The required ownership levels above are to be achieved and maintained as follows: % of Stock Ownership Minimum Target to be Achieved Calendar Year at Year End 1996 33% 1997 67% 1998 100% Note: New (hire) senior executives are given an extended period to meet their initial minimum share target. As a new senior executive you can achieve your target in 20% intervals over six years (0% in the first year). REWARD -- STOCK OPTION GRANT! When you achieve your minimum ownership target, a reward option is issued equal to that target. A second reward option grant is issued at the end of the three year plan period for any amount achieved over your minimum , up to your maximum. Or, if you meet your maximum target earlier, the second option will be issued shortly thereafter. For example.... ...a participant's share target minimum is 12,500 shares and the maximum is 25,000 shares. The participant achieves his/her minimum target on July 1, 1997. The participant receives a new stock option grant for 12,500 shares. At the end of the three year period in 1998, the participant has achieved an additional 10,000 shares for a total of 22,500 shares toward the target ownership. A second stock option grant for 10,000 shares will be issued. The rewarded stock option grant is administered according to a vesting schedule: The stock option grant is 50% vested upon a 25% increase in the stock. The remaining 50% is vested upon an additional 25% increase in the stock price. Increases are measured based on the grant price and must be sustained for 20 of 30 consecutive trading days. The grant price is established on the day the verification of share target achievement is registered at Corporate. OWNERSHIP LEVEL ENFORCEMENT If minimum ownership levels are not achieved within the designated three year time period, your Annual Executive Incentive/Commission will be paid (all or a portion) in stock. (May cause "short swing" situation for some). The stock must be held until minimum ownership requirements are met. Additionally,m you can only receive additional stock options when minimum targets are achieved. 1. WHY DID THE COMPANY DECIDE TO IMPLEMENT THIS PLAN? The Board of Directors, supported by market data and research, believes that companies whose executive stock ownership is significant, tend to outperform those companies whose executives do not own substantial numbers of shares. Therefore, the Executive Stock Ownership Plan was developed to continue to build and strengthen both the Company and employee opportunity. 2.WHAT DOES THE COMPANY HOPE TO ACHIEVE THROUGH THE IMPLEMENTATION OF THIS PLAN? Computer Products, Inc. believes that senior executives who have the ability to impact the success of the Company should also participate as shareholders in the Company. The Company and executives will benefit. Executives who own and retain shares participate in Company growth, increased share values, and eligibility for additional stock options. In turn, the senior executives' interests will grow in alignment with the shareholders' interests, thus benefiting the future of the Company as a whole. EX-11 7 EXHIBIT NO. 11 COMPUTER PRODUCTS, INC. AND SUBSIDIARIES COMPUTATION OF PER SHARE EARNINGS - PRIMARY FOR THE YEARS ENDED THE FRIDAY NEAREST DECEMBER 31, 1995, 1994 AND 1993 (Amounts in Thousands)
1995 1994 1993 ----- ----- ----- Weighted average shares outstanding 21,881 20,229 20,097 Net effect of dilutive stock options - based on the treasury stock method using average market price. 1,197 700 677 ------ ---- ------ Weighted average number of common and equivalent shares outstanding 23,078 20,929 20,774 ====== ====== ======
-------- EXHIBIT NO. 11 (CONTINUED) COMPUTER PRODUCTS, INC. AND SUBSIDIARIES COMPUTATION OF PER SHARE EARNINGS - FULLY DILUTED FOR THE YEARS ENDED THE FRIDAY NEAREST DECEMBER 31, 1995, 1994 AND 1993 (Amounts in Thousands Except Per Share Data)
1995 1994 1993 ----- ----- ----- Shares outstanding 23,053 20,303 20,141 Net effect of dilutive stock options - based on the treasury stock method using the greater of month end market price or average market price 1,499 1,063 677 Assumed conversion of convertible subordinated debentures 7,218 7,329 ------ ------ ------ Totals 24,552 28,584 28,147 ====== ======= ======= * * * * * Income after taxes $14,117 $6,059 $ 597 Add convertible debenture interest and amortization,net of applicable federal income taxes 788 2,260 2,064 ------- ------ ----- $14,905 $8,319 $2,661 ======== ======= ====== Per share amounts $ 0.61 $ 0.29 $ 0.09 ==== ===== ==== Net income $13,720 $6,059 $2,867 Add convertible debenture interest and amortization,net of applicable federal income taxes 788 2,260 2,064 ------ ------ ------ $14,508 $8,319 $4,931 ======= ======= ======= Per share amounts $ 0.59 $0.29 $0.18 ====== ====== =====
EX-13 8 FIVE-YEAR FINANCIAL HISTORY For the Years Ended on the Friday Nearest December 31 (Dollars in Thousands Except Per Share Data)
1995 1994 1993 1992 1991 ------- ------- ------- ------- ------- RESULTS OF OPERATIONS Sales $191,378 $154,800 $123,790 $114,799 $83,240 Income(loss)from continuing 14,117 6,059 597 2,002 (4,234) operations Per share 0.61 0.29 0.03 0.10 (0.21) Net income (loss) 13,720 6,059 2,867 2,676 (9,638) Per share 0.59 0.29 0.14 0.13 (0.49) FINANCIAL POSITION Working capital $51,992 $40,346 $31,122 $29,524 $35,508 Property, plant & equipment, net 27,715 26,238 24,017 23,949 19,252 Total assets 136,491 114,396 101,436 102,662 105,423 Total debt 32,568 42,571 39,713 42,900 48,309 Shareholders' equity 61,522 39,958 32,802 30,806 28,531 Total capital 94,090 82,529 72,515 73,706 76,840 FINANCIAL STATISTICS Selling,generaland administrative expenses $34,210 $33,687 $32,030 $35,093 $24,166 - as a % of sales 17.9% 21.8% 25.9% 30.6% 29.0% Research and development expenses 16,125 10,905 9,412 8,959 6,154 - as a % of sales 8.4% 7.0% 7.6% 7.8% 7.4% Operating income 21,744 12,418 4,217 6,908 (1,461) - as a % of sales 11.4% 8.0% 3.4% 6.0% (1.8%) Total debt as a % of total capital 35% 52% 55% 58% 63% Debt to equity ratio 53% 107% 121% 139% 169% Interest coverage ratio 7.03 3.44 1.27 1.81 0.14 OTHER DATA Capital expenditures $ 7,381 $ 5,608 $ 3,411 $ 8,055 $ 1,508 Provision for depreciation and amortization $ 5,252 $ 5,057 $ 4,817 $ 4,375 $ 3,710 Common shares outstanding 23,053 20,303 20,141 19,973 19,890 Common shareholders 6,700 5,900 7,300 7,500 9,000 Employees 1,629 1,600 1,547 1,470 1,432 Temporary employees and contractors 1,273 779 532 459 221
CONSOLIDATED STATEMENTS OF OPERATIONS For the Years Ended on the Friday Nearest December 31 (Amounts in Thousands Except Per Share Data)
1995 1994 1993 ------- ------- ------- SALES $191,378 $154,800 $123,790 COST OF SALES 119,299 97,730 75,448 --------- -------- -------- GROSS PROFIT 72,079 57,070 48,342 -------- -------- -------- EXPENSES Selling, general and administrative 34,210 33,747 31,713 Research and development 16,125 10,905 9,412 Restructuring charge 3,000 -------- -------- -------- 50,335 44,652 44,125 -------- -------- -------- OPERATING INCOME 21,744 12,418 4,217 -------- -------- -------- OTHER INCOME (EXPENSE) Interest expense (3,253) (3,760) (3,735) Interest income 1,116 522 519 -------- -------- -------- (2,137) (3,238 (3,216) ------- ------- ------- INCOME BEFORE INCOME TAXES 19,607 9,180 1,001 PROVISION FOR INCOME TAXES 5,490 3,121 404 -------- -------- -------- INCOME BEFORE CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES AND EXTRAORDINARY ITEM 14,117 6,059 597 Cumulative effect of changes in accounting principles 2,270 Extraordinary item (397) -------- -------- -------- NET INCOME $13,720 $ 6,059 $ 2,867 ======== ======== ======== EARNINGS PER SHARE: INCOME BEFORE CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES AND EXTRAORDINARY ITEM $ 0.61 $ 0.29 $ 0.03 Cumulative effect of changes in accounting principles 0.11 Extraordinary item (0.02) -------- -------- ------- Net Income $ 0.59 $ 0.29 $ 0.14 ======== ======== ======== Common and common equivalent shares outstanding 23,078 20,929 20,774
See notes to consolidated financial statements. CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION As of the Friday Nearest December 31 (Amounts in Thousands)
1995 1994 ------- ------- ASSETS CURRENT ASSETS Cash and equivalents $26,650 $20,211 Accounts receivable, net 29,933 24,669 Inventories, net 31,236 20,047 Prepaid expenses and other 2,575 2,157 Deferred income taxes, net 517 528 ------ ------ Total current assets 90,911 67,612 PROPERTY, PLANT & EQUIPMENT, NET 27,715 26,238 OTHER ASSETS Goodwill, net 13,532 14,911 Deferred income taxes, net 2,521 3,395 Other assets 1,812 2,240 ------ ------ Total other assets 17,865 20,546 ------- -------- $136,491 $114,396 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Current maturities of long-term debt $ 2,719 $ 1,820 Accounts payable and accrued liabilities 36,200 25,446 ------ ------ Total current liabilities 38,919 27,266 LONG-TERM LIABILITIES Long-term debt 29,849 7,368 Lease liabilities 6,201 6,421 Convertible subordinated debentures 33,383 ------ ------ Total long-term liabilities 36,050 47,172 ------ ------ Total liabilities 74,969 74,438 COMMITMENTS AND CONTINGENCIES (see Notes 7, 9 and 11) SHAREHOLDERS' EQUITY Preferred stock, par value $.01; 1,000,000 shares authorized; none issued Common stock, par value $.01; 80,000,000 shares authorized; 23,052,781 issued and outstanding in 1995 (20,302,654 231 203 shares in 1994) Additional paid-in capital 40,633 27,190 Retained earnings 20,886 13,521 Foreign currency translation adjustment (228) (956) ------ ------ Total shareholders' equity 61,522 39,958 -------- -------- $136,491 $114,396 ======== ========
See notes to consolidated financial statements. CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended on the Friday Nearest December 31 (Amounts in Thousands)
1995 1994 1993 ------- ------- ------- OPERATING ACTIVITIES Net income $13,720 $ 6,059 $ 2,867 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 5,252 5,057 4,817 Provision for restructuring 3,000 Cumulative effect of changes in (2,270) accounting principles Deferred income taxes 2,533 1,872 71 Provision for inventory losses 3,877 3,043 1,166 Other non-cash charges 627 375 204 Changes in operating assets and liabilities: Increase in accounts receivable (5,302) (1,423) (3,435) Increase in inventories, prepaid expenses and other (15,421) (4,964) (3,519) Increase (decrease) in accounts payable and accrued liabilities 11,972 2,679 (1,805) -------- -------- -------- NET CASH PROVIDED BY OPERATING ACTIVITIES 17,258 12,698 1,096 -------- -------- -------- INVESTING ACTIVITIES Purchases of property, plant & equipment (7,381) (4,686) (3,411) Proceeds from sale of building 1,524 800 (Increase) decrease in other assets 1,103 (433) (335) -------- -------- -------- NET CASH USED IN INVESTING ACTIVITIES (4,754) (5,119) (2,946) -------- -------- -------- FINANCING ACTIVITIES Principal payments on debt and leases (1,947) (1,259) (3,428) Proceeds from exercises of stock options 4,209 253 286 Repurchases of common stock (8,305) Issuance of long-term debt 24,375 3,600 Repurchase of convertible subordinated debentures (24,505) (520) -------- -------- -------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (6,173) 2,074 (3,142) -------- -------- -------- EFFECT OF EXCHANGE RATE CHANGES ON CASH AND EQUIVALENTS 108 412 (423) -------- -------- -------- INCREASE (DECREASE) IN CASH AND EQUIVALENTS 6,439 10,065 (5,415) CASH AND EQUIVALENTS, BEGINNING OF YEAR 20,211 10,146 15,561 -------- -------- -------- CASH AND EQUIVALENTS, END OF YEAR $26,650 $20,211 $10,146 ======== ======== ========
[FN] NONCASH INVESTING AND FINANCING ACTIVITIES: In fiscal 1995, holders of the Company's convertible subordinated debentures representing a principal amount of $9,121,000 converted the debentures into 1,972,085 shares of the Company's common stock (see Note 8). Also, goodwill decreased by $646,000 as a result of utilizing tax loss carryforwards obtained in a prior business combination. In fiscal 1994, the Company incurred long-term debt of $857,000 (net of unamortized discount of $222,000) for the purchase of a building for $922,000. Also, goodwill decreased by $795,000 as a result of utilizing tax loss carryforwards obtained in a prior business combination. See notes to consolidated financial statements. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY For the Years Ended on the Friday Nearest December 31 (Amounts in Thousands)
Foreign Additional Currency Common Stock Paid-In Retained Translation Shares Amount Capital Earnings Adjustments BALANCE, JANUARY 2, 1993 19,973 $200 $26,455 $ 4,595 $ (444) Issuance of stock 38 100 Exercises of stock options 130 1 285 Foreign currency translation adjustment (1,257) Net income 2,867 BALANCE, DECEMBER 31, 1993 20,141 201 26,840 7,462 (1,701) Issuance of stock 42 1 98 Exercises of stock options 120 1 252 Foreign currency translation adjustment 745 Net income 6,059 BALANCE, DECEMBER 30, 1994 20,303 203 27,190 13,521 (956) Issuance of stock 33 100 Exercises of stock options 1,883 19 3,955 Tax benefit from exercises of stock options 1,945 Repurchases and retirement of common stock (1,138) (11) (1,939) (6,355) Conversion of convertible subordinated debentures 1,972 20 9,382 Foreign currency translation adjustment 728 Net income 13,720 BALANCE, DECEMBER 29, 1995 23,053 $231 $40,633 $20,886 $ (228)
- -------- See notes to consolidated financial statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Consolidation The consolidated financial statements include the accounts of Computer Products, Inc. (the `Company'') and its subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation. The Company's fiscal year ends on the Friday nearest December 31. Cash and Equivalents Only highly-liquid investments with original maturities of 90 days or less are classified as cash and equivalents. These investments are carried at cost, which approximates market value. Accounts Receivable The Company's accounts receivable are primarily due from companies in the high technology and electronics industries. Collateral generally is not required. Credit losses are provided for in the financial statements and consistently have been within management's expectations. The allowance for doubtful accounts was $1,490,000 and $1,354,000 at December 29, 1995 and December 30, 1994, respectively. Inventories Raw material inventories are stated at the lower of cost, on a first-in, first-out basis, or market. Work in process and finished goods inventories are stated at accumulated costs, which are not in excess of market, less customer progress payments, if applicable. Reserves are provided for excess and obsolete inventories. Property, Plant & Equipment Property is stated at cost and is depreciated using the straight-line method over the estimated useful lives of the assets, which range from 3 to 30 years. Major renewals and betterments are capitalized, while maintenance, repairs and minor renewals are expensed as incurred. Goodwill and Other Intangibles The excess of purchase price over net assets of acquired companies (goodwill) is capitalized and amortized on a straight-line basis over periods ranging from 20 to 40 years. Related accumulated amortization was $4,943,000 and $4,210,000 at December 29, 1995 and December 30, 1994, respectively. On a periodic basis, the Company estimates the future undiscounted cash flows and operating income of the businesses to which goodwill relates in order to ensure that the carrying value of such goodwill has not been impaired. At December 29, 1995, other intangibles consist primarily of debt issuance costs which are being amortized on a straight-line basis over a five-year period. Related accumulated amortization was $1,860,000 and $2,945,000 at December 29, 1995 and December 30, 1994, respectively. Foreign Currency Translation Assets and liabilities of the Company's European subsidiaries are translated from their functional currency into U.S. dollars using exchange rates in effect at the balance sheet date. Results of operations are translated using average exchange rates prevailing throughout the period. The effect of exchange rate fluctuations on translating foreign currency assets and liabilities into U.S. dollars is included in shareholders' equity, while gains and losses from foreign currency transactions are included in income. The functional currency for the Company's Asian subsidiaries is the U.S. dollar, as their transactions are substantially denominated in U.S. dollars. Revenue Recognition The Company recognizes revenue at the time products are shipped, or as services are performed. Income Taxes On January 2, 1993, the Company adopted SFAS No. 109, "Accounting for Income Taxes." Under this statement, deferred tax assets and liabilities reflect the future tax consequences of the differences between the financial reporting and tax bases of assets and liabilities using tax rates in effect for the year in which differences are expected to reverse. In addition, this standard requires the recognition of future tax benefits, such as net operating loss carryforwards, to the extent that realization of such benefits is more likely than not. Earnings Per Share Earnings per share is calculated based upon the weighted average number of common shares outstanding during each year, adjusted for dilutive common stock equivalents as applicable. Accounting Pronouncements In March 1995, the Financial Accounting Standards Board issued SFAS No. 121, `Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of', which requires adoption in fiscal 1996. SFAS No. 121 establishes accounting standards for the impairment of long-lived assets, certain identifiable intangibles, and goodwill related to those assets to be held and used, and for long-lived assets and certain identifiable intangibles to be disposed. The Company believes the adoption of SFAS No. 121 will not have a material effect on the Company's financial condition or results of operations. In October 1995, the Financial Accounting Standards Board issued SFAS No. 123, `Accounting for Stock-Based Compensation'', which requires adoption in fiscal 1996. SFAS No. 123 requires that the Company's financial statements include certain disclosures about stock-based employee compensation arrangements and permits the adoption of a change in accounting for such arrangements. Changes in accounting for stock-based compensation are optional and the Company plans to adopt only the disclosure requirements in 1996. Use of Estimates in the Preparation of Financial Statements 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. Reclassifications Certain amounts in the 1994 and 1993 financial statements have been reclassified to be consistent with the method of presentation used in the 1995 financial statements. 2.INVENTORIES The components of inventories, net of allowances for slow-moving and obsolete items, are as follows ($000s):
1995 1994 ------- ------- Raw materials $15,350 $11,016 Work in process 4,215 3,174 Finished goods 11,671 5,857 ------- ------- Inventories, net $31,236 $20,047 ======= =======
3.PROPERTY, PLANT & EQUIPMENT Property, plant & equipment is comprised of ($000s):
1995 1994 ------- ------- Land $ 762 $ 1,327 Buildings 18,428 20,715 Equipment 32,897 28,247 Leasehold improvements 1,348 968 ------- ------- 53,435 51,257 Less accumulated depreciation 25,720 25,019 ------- ------- Property, plant & equipment, net $27,715 $26,238 ======= =======
Depreciation expense was $3,931,000, $3,483,000 and $3,097,000 in fiscal years 1995, 1994 and 1993, respectively. 4.ACCOUNTS PAYABLE AND ACCRUED LIABILITIES The components of accounts payable and accrued liabilities are as follows ($000s):
1995 1994 ------- ------- Accounts payable $17,041 $10,123 Accrued liabilities: Compensation and benefits 8,948 7,685 Income taxes payable 2,272 1,449 Other 7,939 6,189 ------- ------- Total $36,200 $25,446 ======= =======
At December 29, 1995 and December 30, 1994, other accrued liabilities primarily consists of accruals for product warranty costs, commissions, interest, advertising, rent, accounting and legal fees, and other taxes. On January 2, 1993, the Company adopted SFAS No. 112, "Employers' Accounting for Postemployment Benefits." This statement requires employers to recognize the severance cost benefits of former or inactive employees after employment but before retirement, as the benefits are earned. The cumulative effect of adoption was a non-cash charge of $821,000 ($0.04 per share), net of income tax benefits of $84,000. The effect of this change on 1993 income before taxes was not material. 5.RESTRUCTURING OF OPERATIONS In the fourth quarter of 1993, the Company initiated a plan to restructure its operations to eliminate low volume, high-cost production lines in North America and consolidate its remaining U.S. Power Conversion activities into one division, and, in connection with this plan, recorded a $3.0 million restructuring charge to operating expenses ($2.2 million or $0.11 per share, after taxes). The restructuring costs included $1.9 million of estimated employee-related severance costs and $1.1 million of estimated asset write-downs and other expenses associated with the consolidation and termination of certain Power Conversion North America operations. At the time the restructuring was announced, management estimated that the restructuring would reduce fiscal 1994 operating costs by $1.2 million, a reduction which was achieved during that year. At the end of fiscal 1994, consistent with the Company's restructuring plan, 109 employees had been terminated and certain other employees had been reassigned. As of December 29, 1995, the Company had completed its restructuring activities. 6.SHORT-TERM BORROWINGS On April 4, 1995, the Company entered into an unsecured credit agreement with First Union National Bank of Florida (`First Union'') which provided for a $20 million revolving line of credit which extends through April 1, 1998. The agreement provides for interest at the Company's option of either .75% above the London Interbank Offered Rate (`LIBOR'') or at the prime rate minus .50%, and includes a fee of .25% on the unused balance. The agreement contains certain restrictive covenants which, among other things, require the Company to maintain certain financial ratios and limit the purchase, redemption or retirement of capital stock and other assets. As of December 29, 1995, the Company had made no borrowings under the line of credit and was in compliance with the agreement's covenants. 7.LONG-TERM DEBT
Long-term debt is comprised of the following: 1995 1994 ------- ------- ($000s) ($000s) 8.25% interest-bearing note, due in bi-annual installments, maturing April 1, 2002 (a) $25,000 7.5% mortgage note due in monthly installments of $79,268, including interest, through January 31, 2000 (d) 3,065 $3,674 6.9% mortgage note due in monthly installments of $27,700, including interest, through June 28, 2001 (b)(d) 3,477 3,568 Non-interest-bearing note, due 1997, net of unamortized discount of $155,000 and $222,000 at December 29, 1995 and December 30, 1994, respectively, based on an imputed interest rate of 10% (c)(d) 618 857 Non-interest-bearing Senior Subordinated Note due in common stock of the Company on January 3, 1996 100 400 10% mortgage note due in monthly installments of $7,600, including interest, through April 1, 1995 469 Other 308 220 ------- ------- 32,568 9,188 Less: current maturities 2,719 1,820 ------- ------- Long-term debt $29,849 $7,368 ======== =======
[FN] (a)On April 4, 1995, the Company entered into an unsecured credit agreement with First Union which provided for a $25 million seven-year term loan. The note specifies repayment as follows: $1,500,000 due on April 1, 1996 and April 1, 1997, and $2,200,000 due on April 1 and October 1 of each year beginning October 1, 1997 until maturity, with interest payable monthly. Proceeds from the term loan were used to redeem the Company's Debentures (see Note 8). The agreement contains certain restrictive covenants which are the same as those discussed in Note 6. In May 1995, the Company entered into an Interest Rate Collar Agreement with First Union, which set boundaries for the interest payment terms on its $25 million term loan. The agreement placed a ceiling of 9.75% on the Company's floating rate option in exchange for First Union's ability to elect a fixed rate option of 8.25%. In June 1995, First Union exercised its option to receive interest at the fixed rate for the remaining term of the loan. (b)On June 28, 1994, the Company obtained a $3,600,000 seven-year commercial mortgage loan from Firstar Bank Madison, N.A. at a fixed interest rate of 6.9% for the first three years, repriced thereafter at 250 basis points over the then prevailing four-year U.S. Treasury Index. The loan is secured by a first mortgage on a subsidiary's facility in Wisconsin and by the Company's guaranty. The loan proceeds were used to provide additional working capital. (c)On December 30, 1994, the Company purchased a building for approximately $922,000 from the Industrial Development Authority (``IDA'') of Ireland in exchange for a three year non-interest-bearing note. The note specifies repayment in three yearly installments due on September 30, 1995, 1996 and 1997. (d)Collateralized by properties with an aggregate net book value of approximately $12,641,000 at December 29, 1995. Maturities of long-term debt are as follows: $2,719,000 in 1996, $4,965,000 in 1997, $5,332,000 in 1998, $5,326,000 in 1999, $4,558,000 in 2000 and $9,823,000 thereafter. Interest paid was approximately $3,274,000, $3,877,000, and $3,688,000 in 1995, 1994 and 1993, respectively. 8.CONVERTIBLE SUBORDINATED DEBENTURES The Company's 9.5% Convertible Subordinated Debentures (the ``Debentures'') due 1997 were issued pursuant to an underwritten public offering. The Debentures were subordinated to all existing and future Senior Indebtedness of the Company (as defined in the indenture), and were convertible into shares of common stock at a conversion price of $4.625 per share, subject to adjustment as set forth in the indenture. In 1992, the Company repurchased $4,000,000 in principal of the Debentures for a purchase price of $3,874,000. Additionally, in 1994, the Company repurchased $512,000 in principal of the Debentures for a purchase price of $520,000. The respective gain and loss on repurchase, net of unamortized issuance costs, was not material to the Company. In May 1995, the Company called for redemption all of its outstanding Debentures which amounted to $33.4 million. The Debentures were redeemed for an aggregate amount of $1,054.86 per $1,000 of principal amount (consisting of a redemption payment of $1,010 plus accrued and unpaid interest of $44.86). As a result of the redemption, holders of Debentures representing a principal amount of $9.1 million elected to convert the Debentures into 1,972,085 shares of the Company's common stock, pursuant to the terms of the Debentures, while the balance of $24.3 million was redeemed. This transaction resulted in an increase in Shareholders' Equity of approximately $9.4 million. The redemption resulted in an extraordinary loss of approximately $397,000 (net of taxes of $187,000), consisting of a 1% redemption premium of $165,000 and a write-off of unamortized financing costs of $232,000. 9.LEASE COMMITMENTS The Company is obligated under noncancellable operating leases for facilities and equipment which expire at various dates through 2005 and contain renewal options at favorable terms. Future minimum annual rental obligations and noncancellable sublease income are as follows ($000s):
Rental Sublease Obligations Income ----------- ------- YEAR 1996 $ 3,443 $2,414 1997 3,396 2,414 1998 2,721 402 1999 2,544 2000 2,574 Thereafter 13,684 ------- ------- Total $28,362 $5,230 ======= =======
Rental expense under operating leases amounted to $2,512,000, $2,142,000 and $2,184,000 in 1995, 1994 and 1993, respectively. Sublease income was $1,655,000, $1,611,000 and $1,570,000 for 1995, 1994 and 1993, respectively. Lease liabilities have been recorded for certain leased manufacturing facilities no longer deployed in the Company's operations. Although the facilities are being subleased, the future lease obligations exceed future sublease income, thereby creating loss contracts. The aggregate minimum annual rental obligations and sublease income under these leases have been included in the lease commitments table presented above. Lease liabilities are estimated based on contract provisions and historical and current market rates. These estimates can be materially affected by changes in market conditions. 10. INCOME TAXES As discussed in Note 1, the Company adopted SFAS No. 109 on a prospective basis in the first quarter of 1993. The cumulative effect of this change in accounting principle that relates to years prior to 1993 was to increase net income in the first quarter of 1993 by $3,091,000, or $0.15 per share, and reduce goodwill by $2 million for net operating loss carryforwards of acquired companies. The effect of adopting this statement on income before income taxes was not material. Income before income taxes for domestic and foreign operations consists of the following ($000s):
1995 1994 1993 ------- ------- ------- U.S. $13,903 $7,018 $(1,175) Foreign 5,704 2,162 2,176 -------- -------- -------- Total income before income taxes $19,607 $9,180 $ 1,001 ======== ======= ========
The components of the provision for income taxes consist of the following ($000s):
1995 1994 1993 ------- ------- ------- Currently payable: Federal $ 299 $ 170 State 1,253 596 $127 Foreign 1,405 483 206 -------- -------- -------- Total current 2,957 1,249 333 -------- -------- -------- Deferred provision (benefit): Federal 2,280 1,660 (423) State 186 212 302 Foreign 67 192 -------- ------- -------- Total deferred 2,533 1,872 71 -------- -------- -------- Total provision for income taxes $5,490 $3,121 $404 ======== ======== ========
- -------- The exercise of non-qualified stock options resulted in state and federal income tax benefits to the Company related to the difference between the fair market price at the date of exercise and the exercise price. In 1995, the provision for income taxes excludes current tax benefits of $1,945,000 related to the exercise of stock options credited directly to additional paid-in capital. During 1995 and 1994, the Company utilized tax loss carryforwards obtained in a prior business combination. The effect of utilizing these carryforwards was to reduce goodwill by approximately $646,000 and $795,000 in 1995 and 1994, respectively. In 1993, the Company had a net loss for federal income tax purposes. Income taxes have not been provided on the undistributed earnings of the Company's foreign subsidiaries, which approximated $22.1 million as of December 29, 1995, as the Company does not intend to repatriate such earnings. The effective income tax rate differs from the statutory federal income tax rate for the following reasons:
1995 1994 1993 ------- ------- ------- Statutory federal income tax 35.0% 34.0% 34.0% rate Foreign tax effects (2.7) (2.8) (23.3) Adjustments to beginning of year deferred tax assets 9.1 Amortization of goodwill 0.3 0.7 8.5 Change in the valuation (11.7) (8.4) 7.3 allowance Effect of AMT and state 7.3 7.7 (0.4) income taxes Other (0.2) 2.8 5.2 -------- -------- -------- Effective income tax rate 28.0% 34.0% 40.4% ======== ======== ========
Significant components of the Company's deferred income tax assets and liabilities as of December 29, 1995 and December 30, 1994 are as follows ($000s):
1995 1994 ------- ------- Acquired net operating loss carryforwards (expiring 1998 through 2000) $1,211 $ 2,496 Lease liabilities 2,474 2,659 Inventory reserves 2,007 2,094 Net operating loss carryforwards (expiring 2,725 2,648 2003 through 2008) Tax credit carryforwards (expiring 1996 through 2001) 2,034 1,899 Other accrued liabilities 2,133 2,172 Other 344 408 -------- -------- Total deferred tax assets 12,928 14,376 Valuation allowance (9,890) (10,453) -------- --------- Net deferred income tax assets $ 3,038 $ 3,923 ======== ========
The valuation allowance at December 29, 1995 includes approximately $605,000 associated with acquired net operating loss carryforwards, which, if subsequently recognized, will reduce goodwill and $2.5 million related to the exercise of stock options which, when recognized, will be credited directly to additional paid-in capital. During the year ended December 29, 1995, the valuation allowance decreased by $563,000 mainly due to the utilization of tax loss carryforwards. In assessing the likelihood of utilization of existing deferred tax assets, management has considered the historical results of operations and the current operating environment. Management believes, more likely than not, that future taxable income will be sufficient to utilize deferred tax assets of $3.0 million. The Company made payments for federal, state and foreign income taxes of approximately $878,000, $534,000, and $206,000 during 1995, 1994, and 1993, respectively. 11. CONTINGENCIES In current and prior years, the Company received grant assistance, under grant agreements, from the IDA in connection with the Company's establishment of its Irish manufacturing facility. The funds received reduced the cost of facility and equipment and operating expenses. On October 26, 1994, the Company entered into a new Grant Agreement whereby the IDA granted the sum of approximately $2.0 million to the Company in consideration of the Company providing employment for a given number of Irish citizens, over a three year period. As of December 29, 1995, the Company had received approximately $1.3 million of the $2.0 million grant. The funds received reduced operating expenses incurred in connection with the expansion of the Company's operations in Ireland. In the event of noncompliance with certain terms and conditions of the above mentioned grant agreements, the Company may be required to repay approximately $2.2 million of funds received to date. Management believes that noncompliance with the agreements is unlikely. 12.STOCK REPURCHASES During fiscal 1995, the Company repurchased and retired a total of 1,138,000 shares of its common stock pursuant to a share buy-back plan announced in May 1995. According to the plan, the Company intends to repurchase from time to time up to an aggregate of 2,000,000 shares through open market transactions to minimize the dilutive effect of the shares issued to converting debentureholders. The excess of the cost of shares repurchased over par value was allocated to additional paid-in capital based on the pro-rata share amount of additional paid-in capital for all shares with the difference charged to retained earnings. 13.STOCK OPTION PLANS The Company maintains a qualified stock option plan, a qualified employee stock purchase plan and certain non-qualified plans, including a key employee option plan, two plans for outside directors and a Performance Equity Plan ("PEP") for certain officers and key employees. The employee stock purchase plan provides for the grant of options to employees at an exercise price equal to the lower of 85% of the common stock market value at the date of grant or at various exercise dates throughout the year. Under such plans, a maximum of 6,350,000 option shares have been authorized, of which 224,183 are available to be granted. These options may be exercised at various times as determined at the time of grant. The PEP options may become exercisable after the price of the Company's common stock achieves certain levels for specified periods of time or upon the passage of designated time periods. Options outstanding have been granted at prices ranging from $1.63 to $7.38 per share. During 1995, the price of options exercised ranged from $1.75 to $4.875. Stock option activity was as follows:
1995 1994 1993 --------- -------- -------- OPTIONS OUTSTANDING, BEGINNING OF YEAR 3,650,438 3,663,567 3,814,665 Options granted 882,551 682,115 306,960 Options exercised (1,998,440) (120,378) (130,146) Options canceled (232,042) (574,866) (327,912) --------- --------- --------- OPTIONS OUTSTANDING, END OF YEAR 2,302,507 3,650,438 3,663,567 ========= ========= ========= OPTIONS EXERCISABLE, END OF YEAR 2,068,299 2,077,270 1,194,017
14.EMPLOYEES' THRIFT AND SAVINGS PLAN The Company's Section 401(k) Qualified Plan permits substantially all United States employees to invest up to 15% of their base compensation (as defined) on a pretax basis in common stock of the Company, or growth equity and fixed income funds. The Company may, at the discretion of the Board of Directors, make a contribution to the Plan. The Board of Directors authorized contributions of $400,000, $218,000 and $250,000, respectively, for fiscal years 1995, 1994 and 1993. 15.FINANCIAL INSTRUMENTS DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS - In 1995, the Company utilized foreign currency forward contracts to minimize its exposure to potentially adverse changes in foreign currency exchange rates on anticipated but not firmly committed purchases or sales made by its international subsidiaries. No forward contracts were outstanding at December 29, 1995 and the amount of any gain or loss on these contracts during the year was not material. The Company does not hold or issue financial instruments for trading purposes. The Company enters into various other types of financial instruments in the normal course of business. Fair values for certain financial instruments are based on quoted market prices. For other financial instruments, fair values are based on the appropriate pricing models using current market information. The amounts ultimately realized upon settlement of these financial instruments will depend on actual market conditions during the remaining life of the instruments. Fair values of cash and equivalents, accounts receivable, accounts payable, other current liabilities and debt reflected in the December 29, 1995 statement of financial condition approximate carrying value at that date. CONCENTRATION OF CREDIT RISK - The Company's cash and equivalents and accounts receivable are subject to potential credit risk. The Company's cash management and investment policies restrict investments to low risk, highly-liquid securities and the Company performs periodic evaluations of the credit standing of the financial institutions with which it deals. Concentrations of credit risk with respect to trade receivables are limited due to the large number of customers comprising the Company's customer base and their dispersion across geographic regions. As of December 29, 1995 and December 30, 1994, the Company had no significant concentrations of credit risk. 16.SIGNIFICANT CUSTOMER For the years ended December 29, 1995 and December 30, 1994, sales to one customer amounted to $20.7 million, or 11%, and $9.9 million, or 6.4%, of consolidated net sales, respectively. 17.FOREIGN OPERATIONS The Company is engaged principally in the development, manufacturing and sale of electronic products and subsystems for power conversion, industrial automation and other real-time systems applications. The Company's sales are made through both direct and indirect sales channels to a wide customer base in North America, Europe and the Pacific Rim. The principal markets served are telecommunications, networking, wireless communications and computing. In recent years, the Company's primary focus has been to grow its presence in the communications marketplace, particularly in the networking and telecommunications sectors. Approximately 80% of the Company's products are manufactured in foreign locations. Specifically, 65% of the Company's 1995 sales were from products manufactured in the Company's facilities in Hong Kong and China, 16% from products manufactured in the Company's facility in the Republic of Ireland and the remaining 19% from domestic operations. Included in the Company's consolidated statement of financial condition at December 29, 1995 are the net assets of the Company's European and Asian subsidiaries which total approximately $16.5 million and $14.9 million, respectively. Sales and marketing operations outside the United States are conducted principally through Company sales representatives, independent manufacturer's representatives and distributors in Canada, Europe and the Pacific Rim. Sales are primarily in U.S. dollars and certain European currencies. Intercompany sales are in U.S. dollars and are based on cost plus a reasonable profit but less than pricing to unaffiliated customers. There were no material amounts of United States export sales. A summary of the Company's operations by geographic area is presented below ($000s):
1995 1994 1993 ------ ------ ------ SALES TO UNAFFILIATED CUSTOMERS: United States $139,274 $117,300 $ 96,327 Europe & other 46,428 34,794 23,434 Asia-Pacific Rim 5,676 2,706 4,029 INTERCOMPANY SALES: United States 2,937 3,897 3,360 Europe & other 4,219 2,225 182 Asia-Pacific Rim 79,191 50,701 38,356 Eliminations (86,347) (56,823) (41,898) --------- --------- --------- Consolidated $191,378 $154,800 $123,790 ========= ========= ========= INCOME (LOSS) BEFORE INCOME TAXES United States $18,197 $12,686 $4,646 Europe & other 5,362 2,169 2,462 Asia-Pacific Rim 3,560 1,799 1,312 Other (a) (6,075) (7,437) (7,561) Eliminations ( 1,437) (37) 142 --------- --------- --------- Consolidated $19,607 $ 9,180 $1,001 ========= ========= ========= IDENTIFIABLE ASSETS United States $ 61,967 $ 55,720 $ 60,504 Europe & other 21,657 17,112 11,814 Asia-Pacific Rim 33,058 23,784 18,693 Other (a) 22,262 18,062 10,669 Eliminations (2,453) (282) (244) --------- --------- --------- Consolidated $136,491 $114,396 $101,436 ========= ========= =========
[FN] (a)Other included in the table above represents interest, corporate general and administrative expenses, and certain assets not allocable to other geographic segments. 18.SELECTED CONSOLIDATED QUARTERLY DATA (UNAUDITED) (Amounts in Thousands Except Per Share Data and Stock Prices)
FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER ------- ------- ------- ------- FISCAL 1995 Sales $44,297 $47,316 $46,905 $52,860 Gross profit 16,152 17,524 18,390 20,012 Income before extraordinary item 2,019 2,866 4,358 4,874 Net Income 2,019 2,469 4,358 4,874 Earnings per share before 0.09 0.12 0.18 0.20 extraordinary item Earnings per share 0.09 0.10 0.18 0.20 Stock price: High 5.00 6.25 8.94 13.25 Low 3.13 4.81 5.88 7.50 FISCAL 1994 Sales $37,664 $38,393 $36,941 $41,802 Gross profit 13,757 14,392 13,787 15,133 Net Income 1,215 1,513 1,458 1,874 Earnings per share 0.06 0.07 0.07 0.09 Stock price: High 2.94 3.19 3.63 3.63 Low 2.25 2.13 2.69 2.88
The Company recorded an after-tax extraordinary item of $397,000 in the second quarter of 1995. Data in the above tables are presented on a thirteen- week period basis rather than on a calendar quarter basis. As of December 29, 1995, there were approximately 6,700 shareholders comprised of record holders and individual participants in security position listings. MANAGEMENT'S DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Operating performance improved significantly in 1995 producing net income of $13.7 million, or $0.59 per share, versus $6.1 million, or $0.29 per share, in 1994, as a result of a 24% sales increase, lower manufacturing overhead and operating expense efficiencies. Operating income increased to $21.7 million or 11.4% of sales compared to $12.4 million or 8.0% a year ago, with total operating expenses as a percent of sales decreasing from 29% to 26%. Selling, general and administrative expenses remained at relatively the same level in dollar terms, decreasing from 22% of sales a year ago to 18%, while investment in research and development increased 48% as the Company continued to focus on developing customer defined product solutions for the communications industry. The following table summarizes the Company's sales performance by product category ($000s):
1995 1994 1993 ----- ----- ----- Power Conversion $155,426 $117,995 $ 94,501 Computer Systems 19,026 18,198 16,053 Industrial Automation 16,926 18,607 13,236 --------- --------- --------- Total $191,378 $154,800 $123,790 ========= ========= =========
The increase in sales is the result of the Company's further penetration of the communications marketplace particularly in the networking and telecommunications sectors. Sales growth in the Company's Power Conversion business was largely due to new OEM customer programs and expansion of its distribution sales channels in North America, Europe and Asia. Computer Systems sales grew as a result of new product introductions directed towards the communications and graphics market sectors while Industrial Automation sales decreased year to year largely due to lower demand from utility customers. 1995 COMPARED TO 1994 SALES increased by 24% in 1995 and order backlog increased by 41% from $37.0 million at December 30, 1994 to $52.1 million at December 29, 1995. The growth resulted from a $37.4 million (32%) sales increase in Power Conversion and a $0.8 million (5%) increase in Computer Systems offset by a decrease of $1.7 million (9%) in Industrial Automation. Power Conversion sales increased over 1994 primarily due to continued strong worldwide growth in both direct and indirect sales channels. The Company's European Power Conversion business recorded a 33% increase in sales over 1994 while North American sales increased 28% over the prior year. These improvements resulted from the Company's efforts in developing new and existing customer partnerships in high growth market sectors within the communications marketplace, introducing new products and expanding its distribution channels. Sales to customers in Asia and the Pacific Rim increased 110% to $5.7 million due to increased demand from customers in China, the Company's largest Asian marketplace. Computer Systems sales increased by 5% over 1994 on increased demand for several newly released products from both new and established OEM customers in product applications such as video-on-demand, machine vision and voice messaging. In 1996, Computer Systems will continue its initiative to develop new products aimed at customers in the communications industry. Industrial Automation sales decreased 9% from 1994 due to lower sales to nuclear utility customers. The business has been adversely affected in recent years by the cyclical nature of utility customer demand and is developing new products which will expand its industrial customer base reducing its reliance on utility sector sales as the business strives for consistent sales growth. The strong growth in the Power Conversion business required expansion of production capabilities and, to address this requirement, the Company increased its manufacturing presence in China by contracting additional workforce and investing in plant and equipment. Likewise, to service the increasing demand from European customers, the Company completed a $7.0 million capital investment program to acquire manufacturing plant and equipment in the Republic of Ireland providing the European business with advanced surface mount technology manufacturing capability. GROSS PROFIT in 1995 increased by $15.0 million compared to 1994 on higher sales volume while gross margin increased to 37.7% of sales in 1995 from 36.9% in 1994. This performance improvement resulted from the Company's ongoing commitment to reduce manufacturing costs and implement overall process improvements and the favorable effect of higher volumes on fixed cost per unit. These factors were sufficient to overcome price increases paid for certain components that are in short supply industry wide and an increasing proportion of sales to OEM customers at lower overall margins. Price increases resulting from supply shortages of certain components are expected to persist in 1996 presenting a continuing challenge to the Company in its efforts to obtain adequate quantities of scarce components to fulfill customer commitments. During 1995, the Company compensated for these shortages by acquiring additional inventories of certain components and will continue this practice on a selective basis in 1996. OPERATING EXPENSES declined to approximately 26% of sales in 1995 from the 29% reported a year ago. OPERATING INCOME rose to 11.4% of sales from 8.0% in 1994, despite the increase in research and development expenses. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES in 1995 declined to 18% of sales versus 22% a year ago, resulting from the significantly higher sales volume and efficiencies generated by information systems investment and greater management focus on reducing total enterprise cost per product. RESEARCH AND DEVELOPMENT EXPENSES increased $5.2 million (48%) compared to 1994 as the Company invested in new product platforms to service the communications marketplace. As a result of the Company's increased product development activities, six new families of products were introduced in 1995. The Company views continued investment in research and development as critical to its future growth and competitiveness and is committed to continuing its efforts in new standard and custom product development. NET INTEREST COST decreased to $2.1 million from $3.2 million in 1994 as a result of higher cash balances and interest rates and from lower debt after the redemption of the Company's debentures. PROVISION FOR INCOME TAXES decreased to 28% of pretax income in 1995 from 34% in 1994. The effective tax rate for 1995 decreased primarily as a result of a reduction in the valuation allowance resulting from a higher than expected utilization of deferred tax assets. For additional information regarding income taxes, refer to pages 27 and 28 of the Notes to Consolidated Financial Statements. 1994 COMPARED TO 1993 SALES increased by 25% in 1994 and order backlog increased by 15% from $32.3 million at December 31, 1993 to $37.0 million at December 30, 1994. The growth resulted from a $23.5 million (25%) sales increase in Power Conversion, a $5.4 million (41%) increase in Industrial Automation, and a $2.1 million (13%) increase in Computer Systems. Power Conversion sales increased over 1993 primarily due to strong growth in the European business and increased worldwide demand from OEMs. The Company's European Power Conversion business recorded a 49% increase in sales over 1993 driven by growth in both its OEM and distribution sales channels. On a worldwide basis, the Company's focus on tailoring its product and service offerings towards customers in the telecommunications and networking market sectors proved successful, enabling the Company to participate in the strong growth seen in those markets during 1994. In the other geographical areas served, North American sales increased 20% over 1993 on strong OEM and distributor sales channel performance, while sales to customers in Asia and the Pacific Rim during 1994 decreased 33% from 1993 due to stringent government economic controls to curb inflation in China. Computer Systems sales increased by 13% over 1993 on increased demand from many of its established OEM customers and sales of several new products which were released during the year including the Nitro60 based on Motorola's MC 68060 microprocessor, while Industrial Automation sales increased 41% over 1993 as nuclear utility customer demand recovered from the depressed levels encountered in the prior year. GROSS PROFIT for the year increased by $8.7 million on higher sales volume. However, gross margin declined from 39.1% of sales for 1993 to 36.9% for 1994, primarily due to changes in mix within Power Conversion toward higher volume sales to OEM customers at lower margins, and the impact from production costs associated with increased sales of the Company's high density converter product. These negative influences on gross margin exceeded benefits gained from lower production costs resulting from cost reduction efforts and the transition of North American Power Conversion manufacturing to overseas locations during 1994. OPERATING EXPENSES declined to 29% of sales in 1994 from 33% in 1993 (excluding the $3.0 million pretax restructuring charge). OPERATING INCOME rose to 8.0% of sales from 5.8% (excluding the restructuring charge) in 1993, despite the decline in gross profit as a percent of sales. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES declined steadily during 1994 to 22% of sales compared to 26% in 1993, reflecting cost containment measures implemented by management to confine growth in expenses in light of the reduced gross margins. RESEARCH AND DEVELOPMENT EXPENSES increased by 16% over 1993 as the Company continued to invest in new product development in each of its businesses. PROVISION FOR INCOME TAXES was 34% and 40% of pretax income in 1994 and 1993, respectively. The effective tax rate for 1994 decreased primarily as a result of a reduction in the valuation allowance resulting from a higher than expected utilization of deferred tax assets. CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES of $2.3 million includes a benefit of $3.1 million ($0.15 per share) from the adoption of SFAS No. 109 and a charge of $0.8 million ($0.04 per share), net of income tax benefits, from the adoption of SFAS No. 112. These amounts represent the impact of adoption related to fiscal years before 1993. The effect of these changes on income before income taxes in 1993 was not material. Prior years financial statements have not been restated to apply the provisions of these statements. OTHER In fiscal 1996, the Company is required to adopt the provisions of Statements of Financial Accounting Standards (`SFAS'') No. 121, ``Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of''and No. 123, `Accounting for Stock-Based Compensation.'' The Company believes the adoption of SFAS No. 121 will not have a material effect on the Company's financial condition or results of operations. Changes in accounting for stock- based compensation are optional and the Company plans to adopt only the disclosure requirements in 1996. The Company maintains significant assets and operations in Europe and Asia and, as a result, its financial performance could be significantly affected by foreign currency gains and losses. As a result of its procurement of products and sales in foreign currencies, the Company may be exposed to cost increases relative to local currencies. To mitigate potential adverse trends, the Company's operating strategy and pricing take into account changes in exchange rates over time. In 1995, the Company also entered into foreign currency forward contracts to fix certain of its product costs. FINANCIAL CONDITION CASH AND EQUIVALENTS increased to $26.7 million at December 29, 1995 from $20.2 million at December 30, 1994. The increase is the result of higher net income, proceeds of $1.5 million from the sale of the Pompano Beach, Florida facility, and $4.2 million from the exercise of stock options, partially offset by the repurchase of 1,138,000 shares of the Company's common stock for $8.3 million and purchases of plant and equipment for $7.4 million. ACCOUNTS RECEIVABLE, NET increased $5.3 million over 1994 due to the growth in fourth quarter sales reported principally in the Power Conversion business. INVENTORIES, NET increased $11.2 million (56%) from December 30, 1994 primarily in the Power Conversion business to meet higher sales volumes and to protect against component shortages being experienced in the electronics marketplace. Due to the increase in inventory and increased utilization of vendor financing, accounts payable increased $6.9 million. PROPERTY, PLANT & EQUIPMENT increased $1.5 million net of changes in accumulated depreciation. The increase relates to the expansion of manufacturing capacity in the European and Asia Pacific Power Conversion divisions and additional capital expenditures to support the increased sales volume. LONG-TERM DEBT - In April 1995, the Company entered into an unsecured credit agreement with First Union National Bank of Florida which provided for a $25 million seven-year term loan and a $20 million three-year revolving line of credit. Proceeds from the term loan were used to redeem the Company's debentures. The revolving facility replaced and expanded the Company's previous $15 million line of credit which expired in March 1995. No borrowings have been made under the revolving line of credit to date. CONVERTIBLE SUBORDINATED DEBENTURES - In May 1995, the Company called for redemption all of its outstanding debentures which amounted to $33.4 million. As a result of the redemption, holders of debentures representing a principal amount of $9,121,000 elected to convert the debentures into 1,972,085 shares of the Company's common stock while the balance of $24,262,000 was redeemed. SHAREHOLDERS' EQUITY increased $21.6 million (54%) from 1994 due to the following: earnings for the period of $13.7 million, proceeds from exercises of stock options of $4.2 million, current tax benefits of $1.9 million related to the exercise of stock options, and $9.4 million from conversion of $9.1 million debentures into 1,972,085 shares of the Company's common stock, partially offset by the repurchase and retirement of 1,138,000 shares of the Company's common stock for $8.3 million. CASH FLOWS AND LIQUIDITY NET CASH PROVIDED BY OPERATING ACTIVITIES increased to $17.3 million in 1995 versus $12.7 million in 1994 and $1.1 million in 1993. The increase in 1995 is mainly the result of higher net income offset by an overall higher investment in net operating assets. The 1994 increase reflected the Company's improved management of operating assets and liabilities. The Company believes its available credit line, its cash flow from operations, and other financing activities are adequate to fund its working capital requirements in 1996. NET CASH USED IN INVESTING ACTIVITIES decreased to $4.8 million in 1995 from $5.1 million in 1994 due to proceeds of $1.5 million from the sale of its Pompano Beach, Florida facility which partially offset the $7.4 million investment in plant & equipment related to the continued upgrading of the Company's worldwide manufacturing capabilities. The increase in 1994 compared to 1993 related mainly to acquisitions of manufacturing plant and equipment. NET CASH USED IN FINANCING ACTIVITIES in 1995 of $6.2 million consists of the issuance of the $25 million seven-year term loan, net of debt issuance costs, and the $4.2 million proceeds from the exercise of stock options, reduced by the repurchase of $24.3 million of the Company's Debentures, the repurchase of 1,138,000 shares of the Company's common stock for $8.3 million and by long-term debt principal payments. Net cash provided by financing activities in 1994 of $2.1 million includes the issuance of a $3.6 million mortgage loan partially reduced by the repurchase of $520,000 of Debentures and by long-term debt principal payments. Net cash used in financing activities in 1993 of $3.1 million consists of the repayment of an 8.5% Senior Subordinated Note for $2.1 million and scheduled debt payments. REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Board of Directors and Shareholders of Computer Products, Inc. : We have audited the accompanying consolidated statements of financial condition of Computer Products, Inc. (a Florida corporation) and subsidiaries as of December 29, 1995 and December 30, 1994, and the related consolidated statements of operations, shareholders' equity and cash flows for the three fiscal years ended December 29, 1995. These 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 financial statements referred to above present fairly, in all material respects, the financial position of Computer Products, Inc. and subsidiaries as of December 29, 1995 and December 30, 1994, and the results of their operations and their cash flows for the three fiscal years ended December 29, 1995 in conformity with generally accepted accounting principles. As explained in Notes 4 and 10 to the consolidated financial statements, effective January 2, 1993, the Company adopted Statements of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits", and No. 109, "Accounting for Income Taxes." ARTHUR ANDERSEN LLP Fort Lauderdale, Florida, January 18, 1996. STATEMENT OF MANAGEMENT RESPONSIBILITY The Company's management is responsible for the preparation, integrity and objectivity of the consolidated financial statements and other financial information presented in this report. The accompanying financial statements have been prepared in conformity with generally accepted accounting principles and reflect the effects of certain estimates and judgments made by management. The Company's management maintains an effective system of internal control that is designed to provide reasonable assurance that assets are safeguarded and transactions are properly recorded and executed in accordance with management's authorization. The system is continuously monitored by direct management review and by internal auditors who conduct an extensive program of audits throughout the company. The Company selects and trains qualified people who are provided with and expected to adhere to the Company's standards of business conduct. These standards, which set forth the highest principles of business ethics and conduct, are a key element of the Company's control system. Additionally, our independent certified public accountants, Arthur Andersen LLP, obtain a sufficient understanding of the internal control structure in order to plan and complete the annual audit of the Company's financial statements. The Audit Committee of the Board of Directors, which consists of six outside directors, meets regularly with management, the internal auditors and the independent certified public accountants to review accounting, reporting, auditing and internal control matters. The Committee has direct and private access to both internal and external auditors. JOSEPH M. O'DONNELL President and Chief Executive Officer RICHARD J. THOMPSON Vice President, Finance and Chief Financial Officer EX-21 9 EXHIBIT 21 -- SUBSIDIARIES OF REGISTRANT Subsidiaries of the Company, all of which are wholly-owned and are included in the consolidated financial statements, are as follows: Name State or Country of Incorporation - ---- --------------------------------- Boschert Incorporated California C.P. Power Products (Zhong Shan) Co., Ltd. People's Republic of China Computer Products Asia-Pacific Limited Hong Kong Computer Products (France) SARL France Computer Products GmbH Germany Computer Products Power Conversion Limited England Heurikon Corporation Wisconsin Power Products (Ireland), Ltd. Cayman Islands, B.W.I. Power Products, Ltd. Cayman Islands, B.W.I. RTP Corp. Florida RTP Foreign Sales Corporation U.S. Virgin Islands Stevens-Arnold, Inc. Massachusetts Wealth Scene Limited Hong Kong EX-23 10 EXHIBIT 23 Consent of Independent Certified Public Accountants As independent certified public accountants, we hereby consent to the incorporation of our reports included in or incorporated by reference in this Form 10-K, into the Company's previously filed Form S-3 Registration Statement File Nos. 33-70326 and 33-49176 and Form S-8 Registration Statement File Nos. 33-42516, 33-63503, 33-63501, and 33-63499. ARTHUR ANDERSEN LLP Fort Lauderdale, Florida, March 22, 1996. EX-27 11
5 1,000 YEAR DEC-29-1995 DEC-29-1995 26,650 0 31,423 1,490 31,236 90,911 53,435 25,720 136,491 38,919 29,849 0 0 40,864 20,658 136,491 191,378 191,378 119,299 119,299 50,335 0 3,253 19,607 5,490 14,117 0 397 0 13,720 0.59 0.59
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