-----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, GAOtbTaiVV1kpZG7+3iR5DkURo4G2NyLkOcqONEBtZ3icOzY8Kw8SbeILH7DLsQy eBISii66Dyc0umbXOALyEQ== 0000950135-97-002212.txt : 19970509 0000950135-97-002212.hdr.sgml : 19970509 ACCESSION NUMBER: 0000950135-97-002212 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970330 FILED AS OF DATE: 19970508 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: WPI GROUP INC CENTRAL INDEX KEY: 0000881771 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COILS, TRANSFORMERS & OTHER INDUCTORS [3677] IRS NUMBER: 020218767 STATE OF INCORPORATION: NH FISCAL YEAR END: 0928 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-19717 FILM NUMBER: 97597826 BUSINESS ADDRESS: STREET 1: 1155 ELM STREET CITY: MANCHESTER STATE: NH ZIP: 03101 BUSINESS PHONE: 6034563111 FORMER COMPANY: FORMER CONFORMED NAME: WALKER POWER INC DATE OF NAME CHANGE: 19930328 10-Q 1 WPI GROUP, INC. 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (MARK ONE) /XX/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 30, 1997 / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO . ---------- ---------- COMMISSION FILE NUMBER: 0-19717 WPI GROUP, INC. --------------- (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) NEW HAMPSHIRE 02-0218767 - -------------------------------- ---------------------- (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER) 1155 ELM STREET, MANCHESTER, NEW HAMPSHIRE 03101 ------------------------------------------ --------- (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE: (603) 627-3500 (FORMER NAME, FORMER ADDRESS, AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST REPORT) CHECK 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 PAST 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO --- --- APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: CHECK WHETHER THE REGISTRANT FILED ALL DOCUMENTS AND REPORTS REQUIRED TO BE FILED BY SECTION 12, 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 AFTER THE DISTRIBUTION OF SECURITIES UNDER A PLAN CONFIRMED BY THE COURT. YES NO --- --- APPLICABLE ONLY TO CORPORATE ISSUERS: STATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF COMMON EQUITY, AS OF THE LATEST PRACTICABLE DATE: CLASS OUTSTANDING AS OF APRIL 25, 1997 ----- -------------------------------- COMMON STOCK, PAR VALUE $.01 5,980,867 SHARES 2 WPI GROUP, INC. INDEX -----
PART I - FINANCIAL INFORMATION PAGE NO. -------- Item 1. Consolidated Financial Statements Consolidated Balance Sheets 3 - March 30, 1997 and September 29, 1996 Consolidated Statements of Income 4 - Three months ended March 30, 1997 and March 31, 1996 - Six months ended March 30, 1997 and March 31, 1996 Consolidated Statements of Cash Flows 5 - Six months ended March 30, 1997 and March 31, 1996 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and 8 Results of Operations PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 9 SIGNATURES 10
-2- 3 WPI GROUP, INC. CONSOLIDATED BALANCE SHEETS
September 29, March 30, 1996 1997 ------------- ----------- (unaudited) ASSETS CURRENT ASSETS Cash and cash equivalents $ 206,829 $ 84,719 Accounts receivable - net of allowance for doubtful accounts of $244,300 and $304,000 respectively 10,881,315 9,272,179 Accounts receivable - other 1,618,873 269,165 Inventories 7,068,496 7,858,055 Prepaid expenses and other current assets 230,509 772,649 Prepaid income taxes 1,103,840 1,103,840 Refundable income taxes 547,750 621,825 ----------- ----------- Total current assets 21,657,612 19,982,432 PROPERTY, PLANT AND EQUIPMENT at cost less accumulated depreciation 9,447,758 9,713,807 OTHER ASSETS 19,569,574 19,785,258 ----------- ----------- $50,674,944 $49,481,497 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 4,265,217 $ 3,055,075 Accrued expenses 3,464,164 2,060,116 Accrued income taxes 1,772,630 330,059 ----------- ----------- Total current liabilities 9,502,011 5,445,250 NOTE PAYABLE TO BANK 18,650,000 19,542,000 NON-COMPETE AGREEMENT 20,000 -- DEFERRED INCOME TAXES 1,954,287 1,951,533 COMMITMENTS STOCKHOLDERS' EQUITY: Common stock, $.01 par value; authorized 20,000,000 shares, issued 5,947,922 and 5,978,367 respectively 59,479 59,784 Additional paid-in capital 13,658,604 13,817,711 Retained earnings 6,815,801 8,453,675 Cumulative foreign currency translation adjustments 14,762 211,544 ----------- ----------- Total stockholders' equity 20,548,646 22,542,714 ----------- ----------- $50,674,944 $49,481,497 =========== ===========
See notes to financial statements -3- 4 WPI GROUP, INC. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended Six Months Ended March 31, March 30, March 31, March 30, 1996 1997 1996 1997 ----------- ----------- ----------- ----------- NET SALES $10,741,866 $14,222,033 $20,348,169 $28,330,852 COST OF GOODS SOLD 6,386,905 8,518,690 12,193,158 17,047,939 ----------- ----------- ----------- ----------- GROSS PROFIT 4,354,961 5,703,343 8,155,011 11,282,913 ----------- ----------- ----------- ----------- OPERATING EXPENSES: Research and new product development 766,734 1,035,392 1,433,881 1,965,150 Selling, general and administration 2,547,390 3,255,627 4,849,316 6,367,951 ----------- ----------- ----------- ----------- Total operating expense 3,314,124 4,291,019 6,283,197 8,333,101 ----------- ----------- ----------- ----------- OPERATING INCOME 1,040,837 1,412,324 1,871,814 2,949,812 OTHER INCOME (EXPENSE) (131,707) (126,701) (180,304) (505,938) ----------- ----------- ----------- ----------- INCOME BEFORE PROVISION FOR INCOME TAXES 909,130 1,285,623 1,691,510 2,443,874 PROVISION FOR INCOME TAXES 301,000 424,000 567,000 806,000 ----------- ----------- ----------- ----------- NET INCOME $ 608,130 $ 861,623 $ 1,124,510 $ 1,637,874 =========== =========== =========== =========== NET INCOME PER WEIGHTED AVERAGE NUMBER OF COMMON SHARES $ 0.10 $ 0.14 $ 0.19 $ 0.27 =========== =========== =========== =========== Weighted Average Common Shares and Equivalent Outstanding 6,005,628 6,187,474 5,929,266 6,169,747 =========== =========== =========== ===========
See notes to financial statements - 4 - 5 WPI GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended March 31, March 30, 1996 1997 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 1,124,510 $ 1,637,874 ----------- ----------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 861,683 1,438,022 Changes in current assets and liabilities net of effects of acquisition: Accounts receivable (1,252,236) 1,609,136 Accounts receivable - other (3,103,868) 1,349,708 Inventories (1,371,573) (789,559) Prepaid expenses and other current assets 160,793 (616,215) Accounts payable 2,960,894 (1,210,142) Accrued expenses (71,466) (889,998) Accrued income taxes 162,930 (1,442,571) ----------- ----------- Total adjustments (1,652,843) (551,619) ----------- ----------- Net cash provided by (used in) operating activities (528,333) 1,086,255 ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Increase (Decrease) in notes payable 4,582,225 892,000 Decrease in long-term liabilities (3,145,000) (22,754) Proceeds from issuance of common stock 27,286 41,174 Proceeds from exercise of stock options 105,613 70,238 Tax benefit on exercise of non-statutory options -- 48,000 ----------- ----------- Net cash provided by financial activities 1,570,124 1,028,658 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property, plant and equipment (436,056) (953,940) Payment of accrued acquisition costs (195,110) (514,050) Increase in other assets (160,913) (965,815) ----------- ----------- Net cash used for investing activities (792,079) (2,433,805) ----------- ----------- EFFECT OF FOREIGN CURRENCY TRANSLATION ON CASH -- 196,782 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 249,712 (122,110) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 29,664 206,829 ----------- ----------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 279,376 $ 84,719 =========== =========== SUPPLEMENTAL DISCLOSURE OF CASH INFORMATION: Income taxes paid $ 405,070 $ 1,210,000 Interest paid 201,258 682,967
See notes to financial statements - 5 - 6 WPI GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITIES:
Six Months Ended March 31, March 30, 1996 1997 ----------- --------- On November 10, 1995 the Company acquired the common stock of Micro Processor Systems, Inc. (MPSI) and subsidiary for $1 in cash plus the assumption of agreed upon liabilities: Fair value of assets acquired $ 7,398,285 $ -- Cash paid and expenses incurred of $510,001 (510,001) -- ----------- --- Liabilities assumed $ 6,888,284 $ =========== ===
See notes to financial statements - 6 - 7 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION The financial statements for the three months and six months ended March 30, 1997 and March 31, 1996 are unaudited and include all adjustments which, in the opinion of management, are necessary to present fairly the results of operations for the periods then ended. All such adjustments are of a normal recurring nature. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Form 10-KSB filed with the Securities and Exchange Commission (File No. 0-19717), which included financial statements for the years ended September 29, 1996 and September 24, 1995. The results of the Company's operations for any interim period are not necessarily indicative of the results of the Company's operations for any other interim period or for a full fiscal year. 2. INVENTORIES
Inventory consists of: September 29, March 30, 1996 1997 ------------ ---------- Raw Materials $4,360,602 $4,452,218 Work in Process 1,986,821 2,524,540 Finished Goods 721,073 881,297 ---------- ---------- Total $7,068,496 $7,858,055 ========== ==========
- 7 - 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis by management is provided to identify certain significant factors that affected the Company's financial position and operating results during the periods included in the accompanying financial statements. RESULTS OF OPERATIONS Net sales of $14.2 million for the second quarter of fiscal 1997 increased 32.4 percent from sales of $10.7 million for the second quarter of fiscal 1996. The increase was primarily due to improved sales in our targeted markets and the acquisition of Oyster Terminals, Ltd.. For the first six months of fiscal 1997 the company reported sales of $28.3 million, 39.2 percent higher than the sales of $20.3 million for the first six months of fiscal 1996. Cost of sales of $8.5 million for the second quarter of fiscal 1997 resulted in a gross profit of 40.1 percent, compared to a gross profit of 40.5 percent for the same period of fiscal 1996. Cost of sales of $17.0 million for the first six months of fiscal 1997 resulted in a gross profit of 39.8 percent, compared to a gross profit of 40.1 percent for the same period of fiscal 1996. Total gross profit for the three and six months increased due to the higher revenues discussed above. As a percentage of sales, selling, general and administrative expenditures were 22.9 and 23.7 percent for the quarters and 22.5 and 23.8 percent of the six month periods ended March 30, 1997 and March 31, 1996, respectively. Actual expenditures increased due to the acquisitions discussed above. Research and new product development expenses were 7.3 percent of sales for the quarter and 6.9 percent of sales for the six months ended March 30, 1997, compared to 7.1 and 7.1 percent of sales for the same three and six month periods in fiscal 1996. Actual expenditures increased slightly due to the acquisition discussed above. Income before provision for income taxes of $2.4 million for the six months ended March 30, 1997 increased 44.5 percent compared to $1.7 million for the six months ended March 31, 1996. The increase is primarily due to improved sales. The effective income tax rate for fiscal 1997 is estimated at 33 percent year-to-date compared to 34 percent for fiscal 1996. LIQUIDITY AND CAPITAL RESOURCES The Company had working capital of $14.5 million at March 30, 1997 compared to $12.2 million at September 29, 1996. Cash flow provided from operations and financing activities was approximately $2.1 million for the six months ended March 30, 1997. This inflow amount was offset by the cash flow used in investing activities of approximately $2.4 million for the six months ended March 30, 1997. The Company's management believes it has sufficient working capital to meet its liquidity needs. As of March 30, 1997, the Company had no material commitments for capital expenditures. - 8 - 9 WPI GROUP, INC. PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K A. Exhibits 4.1 Revolving Line of Credit Promissory Note dated February 27, 1997, replacement to Revolving Line of Credit Promissory Note dated July 12, 1996. 4.2 Third Amendment dated February 27, 1997 to Commercial Loan Agreement dated October 24, 1995. 27 Financial Data Schedule for six months ended March 30, 1997. (This exhibit is filed electronically and not included with printed copies of this form.) B. Reports on Form 8-K None - 9 - 10 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on behalf by the undersigned thereunto duly authorized. WPI GROUP, INC. (Registrant) Date: May 8, 1997 By:/s/Dennis M. Deegan ------------------- Dennis M. Deegan President and Chief Operating Officer Date: May 8, 1997 By:/s/John W. Powers ------------------- John W. Powers Vice President and Chief Financial Officer -10- EX-4.1 2 REVOLVING LINE OF CREDIT PROMISSORY NOTE 1 Exhibit 4.1 REVOLVING LINE OF CREDIT PROMISSORY NOTE ---------------------------------------- $30,000,000.00 U.S. Manchester, NH February 27, 1997 FOR VALUE RECEIVED, the undersigned, WPI GROUP, INC., WPI ELECTRONICS, INC., WPI MAGNETEC, INC., WPI MICRO PALM, INC., WPI POWER SYSTEMS, INC., WPI TERMIFLEX, INC., MICRO PROCESSOR SYSTEMS, INC., and WPI DECISIONKEY, INC., WPI UK HOLDING, INC., WPI UK HOLDING, INC., and WPI OYSTER TERMINALS, INC., each a New Hampshire corporation, WPI GROUP (U.K.), an unlimited company organized under the laws of England and Wales, and WPI OYSTER TERMINALS LIMITED, a corporation organized under the laws of England and Wales, all such entities having executive offices at 1155 Elm Street Manchester, New Hampshire 03101 (all of such entitites are hereinafter referred to individually and collectively as the "BORROWER"), hereby promise, jointly and severally, to pay to the order of FLEET BANK - NH, a bank organized under the laws of the State of New Hampshire with an address of Mail Stop NHNA E02A, 1155 Elm Street, Manchester, New Hampshire 03101 (the "Bank"), at such address, or such other place or places as the holder hereof may designate in writing from time to time hereafter, the maximum principal sum of THIRTY MILLION DOLLARS ($30,000,000.00), or so much thereof as may be advanced or readvanced by the Bank to the Borrower from time to time hereafter (such amounts defined as the "Debit Balance" below), together with interest as provided for hereinbelow, in lawful money of the United States of America, all as provided hereinbelow. The Borrower's "Debit Balance" shall mean the debit balance in an account on the books of the Bank, maintained in the form of a ledger card, computer records or otherwise in accordance with the Bank's customary practice and appropriate accounting procedures wherein there shall be recorded the principal amount of all advances and readvances made by the Bank to the Borrower, all principal payments made by the Borrower to the Bank hereunder, and all other appropriate debits and credits to principal. The Bank shall render to the Borrower a statement of account with respect thereto on a monthly basis. The statement shall be considered correct and be considered accepted by the Borrower, and shall conclusively bind the Borrower, unless Borrower notifies the Bank to the contrary within thirty (30) days after the date of Borrower's receipt of the statement. The Bank agrees to lend to the Borrower, and the Borrower may borrow, up to the maximum principal sum provided for in this Note in accordance with and subject to the terms, conditions, and limitations of this Note and the Commercial Loan Agreement dated October 24, 1995, as amended by First Amendment to Commercial Loan Agreement and Loan Documents dated March 20, 1996, and by Second Amendment to Commercial Loan Agreement and Loan Documents dated July 12, 1996 and Third Amendment to Commercial Loan Agreement and Loan Documents of even date herewith among the Bank and the Borrower, and as the same may be further amended from time to time 2 hereafter (as amended, the "Loan Agreement"). The holder of this Note is entitled to all of the benefits and rights, and is subject to all of the obligations, of the Bank under the Loan Agreement. However, neither this reference to the Loan Agreement nor any provision thereof shall impair the absolute and unconditional obligation of the Borrower to pay the principal and interest of this Note as herein provided. Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Loan Agreement. The Borrower agrees that the Bank may deliver all advances under this Note by direct deposit to any demand account of the Borrower with the Bank or in such other reasonable manner as may be designated in writing by the Bank to the Borrower, and that all such advances shall represent binding obligations of the Borrower. The Borrower acknowledges that this Note is to evidence the Borrower's obligation to pay its Debit Balance, plus interest and any other applicable charges as determined from time to time, and that it shall continue to do so despite the occurrence of intervals when no Debit Balance exists because the Borrower has paid the previously existing Debit Balance in full. Interest shall be calculated and charged daily, based on the actual days elapsed over a three hundred sixty (360) day banking year, on the Debit Balance outstanding from time to time at an annual variable rate equal to the Prime Rate. The "Prime Rate" shall be the rate published by THE WALL STREET JOURNAL from time to time under the category "Prime Rate: The Base Rate on Corporate Loans posted by at least 75% of the Nation's 30 Largest Banks" (the lowest of the rates so published if more than one rate is published under this category at any given time) or such other comparable index rate selected by the Bank in its sole discretion if THE WALL STREET JOURNAL ceases to publish such rate. The BORROWER acknowledges that the Prime Rate is used for reference purposes only as an index and is not necessarily the lowest interest rate charged by the BANK on commercial loans. Each time the Prime Rate changes the interest rate hereunder shall change contemporaneously with such change in the Prime Rate. Notwithstanding the foregoing, the Borrower may elect from time to time a fixed rate of interest equal to the Eurodollar Based Rate to apply to outstanding principal hereunder, all in accordance with, and subject to the limitations of, the provisions of the Loan Agreement. Outstanding principal hereunder shall be paid in accordance with the terms and conditions of the Loan Agreement. Accrued interest only on the outstanding Debit Balance hereunder shall be payable monthly in arrears commencing thirty (30) days from the date hereof (or on any day within 30 days of the date hereof agreed to by the Borrower and the Bank to provide for a convenient payment date) and continuing on the same date of each month thereafter through and until the Review Date as to which the Bank does not renew the Revolving Line of Credit Loan, whereupon all outstanding principal and accrued and unpaid interest hereunder shall be due and payable in full. The Borrower may prepay this Note in whole or in part at any time; provided, however, that such prepayment shall be subject to the terms and conditions of the Loan Agreement and the charges provided thereunder payable by Borrower to Bank. In the event that any such prepayment shall be made by the Borrower, the amount thereof shall be applied first to accrued interest and thereafter to principal. 3 At the option of the Bank, this Note shall become immediately due and payable in full, without further demand or notice, if any installment of principal or interest is not paid when due hereunder or upon the occurrence of any other Event of Default under the terms hereof, of the Loan Agreement, or of any other Loan Document. The holder may impose upon the Borrower a delinquency charge of five percent (5%) of the amount of the principal and/or interest not paid on or before the tenth (10th) day after such installment is due. The entire principal balance hereof, together with accrued interest, shall after maturity, whether by demand, acceleration or otherwise, bear interest at the contract rate of this Note plus an additional five percent (5%) per annum. The Borrower grants to Bank the right to set off and apply, upon an Event of Default and without demand or notice of any nature, all, or any portion, of deposits, credits and other property now or hereafter due from the holder to the Borrower, against the indebtedness evidenced by this Note. The Borrower agrees to pay on demand all reasonable out-of-pocket costs of collection hereof, including reasonable attorneys' fees, whether or not any action is instituted by the holder in its discretion. No delay or omission on the part of the holder in exercising any right, privilege or remedy shall impair such right, privilege or remedy or be construed as a waiver thereof or of any other right, privilege or remedy. No waiver of any right, privilege or remedy or any amendment to this Note shall be effective unless made in writing and signed by the holder. Under no circumstances shall an effective waiver of any right, privilege or remedy on any one occasion constitute or be construed as a bar to the exercise of or a waiver of such right, privilege or remedy on any future occasion. The acceptance by the holder hereof of any payment after any default hereunder shall not operate to extend the time of payment of any amount then remaining unpaid hereunder or constitute a waiver of any rights of the holder hereof under this Note. All rights and remedies of the holder, whether granted herein or otherwise, shall be cumulative and may be exercised singularly or concurrently. The Borrower hereby waives, to the fullest extent permitted by law, presentment, notice, and protest. Borrower assents to any extension of the time of payment or any other indulgence. This Note and the provisions, hereof shall be binding upon the Borrower and the Borrower's successors and assigns and shall inure to the benefit of and shall bind the holder, the holder's heirs, administrators, executors, successors, legal representatives and assigns. The word "holder" as used herein shall mean the payee or endorsee of this Note who is in possession of it, or the bearer, if this Note is at the time payable to the bearer. 4 This Note may not be amended, changed or modified in any respect except by a written document which has been executed by each party. This Note constitutes a New Hampshire contract to be governed by the laws of such state and to be paid and performed therein. This Note is executed and delivered in replacement of, but not in novation or discharge of, the Revolving Line of Credit Promissory Note of WPI Group, Inc., WPI Electronics, Inc., WPI Magnetec, Inc., WPI Micro Palm, Inc., WPI Power Systems, Inc., WPI Termiflex, Inc., WPI Micro Processor Systems, Inc., and WPI DecisionKey, Inc., payable to the order of the Bank in the principal amount of Thirty Million Dollars ($30,000,000.00) dated July 12, 1996, as amended to date (collectively, as amended, the "Old Note"). All references to the Old Note in the Loan Agreement or any other Loan Document shall be deemed to refer to this Note. Executed and delivered this 27th day of February, 1997. WITNESSES: BORROWER: WPI GROUP, INC. /s/ Michael Tule (to all) By:/s/ Michael Foster - ----------------------------- ------------------ Michael Foster, Chairman WPI POWER SYSTEMS, INC. By:/s/ Michael Foster - ----------------------------- ------------------ Michael Foster, Chairman WPI MAGNETEC, INC. By:/s/ Michael Foster - ----------------------------- ------------------ Michael Foster, Chairman 5 WPI ELECTRONICS, INC. By:/s/ Michael Foster - ----------------------------- ------------------ Michael Foster, Chairman WPI TERMIFLEX, INC. By:/s/ Michael Foster - ----------------------------- ------------------ Michael Foster, Chairman WPI MICRO PALM, INC. By:/s/ Michael Foster - ----------------------------- ------------------ Michael Foster, Chairman WPI MICRO PROCESSOR SYSTEMS, INC. By:/s/ Michael Foster - ----------------------------- ------------------ Michael Foster, Chairman WPI DECISIONKEY, INC. By:/s/ Michael Foster - ----------------------------- ------------------ Michael Foster, Chairman WPI GROUP (U.K.) By:/s/ Michael Foster - ----------------------------- ------------------ Michael Foster, Chairman WPI OYSTER TERMINALS LIMITED 6 By:/s/ Michael Foster - ----------------------------- ------------------ Michael Foster, Chairman WPI UK HOLDING, INC. By:/s/ Michael Foster - ----------------------------- ------------------ Michael Foster, Chairman WPI UK HOLDING II, INC. By:/s/ Michael Foster - ----------------------------- ------------------ Michael Foster, Chairman WPI OYSTER TERMINALS, INC. By:/s/ Michael Foster - ----------------------------- ------------------ Michael Foster, Chairman EX-4.2 3 THIRD AMENDMENT TO COMMERCIAL LOAN AGREEMENT 1 Exhibit 4.2 FLEET BANK - NH THIRD AMENDMENT TO COMMERCIAL LOAN AGREEMENT AND LOAN DOCUMENTS THIS THIRD AMENDMENT (the "Amendment") made as of the 27th day of February, 1997, is by and among FLEET BANK - NH, a bank organized under the laws of the State of New Hampshire with an address of Mail Stop NHNA E02A, 1155 Elm Street, Manchester, New Hampshire 03101 (the "Bank"), and WPI GROUP, INC., WPI ELECTRONICS, INC., WPI MAGNETEC, INC., WPI MICRO PALM, INC., WPI POWER SYSTEMS, INC., WPI TERMIFLEX, INC., WPI MICRO PROCESSOR SYSTEMS, INC., and WPI DECISIONKEY, INC., WPI UK HOLDING, INC., WPI UK HOLDING II, INC. and WPI OYSTER TERMINALS, INC., each a New Hampshire corporation, WPI GROUP (U.K.), an unlimited company organized under the laws of England and Wales, and WPI OYSTER TERMINALS LIMITED, a corporation organized under the laws of England and Wales, all such entities having executive offices at 1155 Elm Street Manchester, New Hampshire 03101 (all of such entities are hereinafter referred to individually and collectively as the "Borrower"). R E C I T A L S: ---------------- WHEREAS, pursuant to a Commercial Loan Agreement dated October 24, 1995, as amended by First Amendment to Commercial Loan Agreement and Loan Documents dated March 20, 1996, and Second Amendment to Commercial Loan Agreement and Loan Documents dated July 12, 1996 (as amended, the "Loan Agreement") and certain Loan Documents as defined therein, the Bank has extended to WPI Group, Inc., WPI Electronics, Inc., WPI Magnetec, Inc., WPI Micro Palm, Inc., WPI Power Systems, Inc., WPI Termiflex, Inc. WPI Micro Processor Systems, INC., and WPI DecisionKey, Inc., a revolving line of credit loan in the principal amount of up to Thirty Million Dollars ($30,000,000.00) (the "Revolving Line of Credit Loan"); WHEREAS, the Bank and the Borrower have agreed that each of WPI UK Holding, Inc., WPI UK Holding II, Inc., WPI Oyster Terminals, Inc., WPI Group (U.K.) and WPI Oyster Terminals Limited shall join the Loan Amendment and Loan Documents as borrowers thereunder; WHEREAS, the Borrower has requested, and the Bank has agreed, to eliminate the required reductions as of December 1, 1996 and June 30, 1997 of the maximum principal amount available to the Borrower under the Revolving Line of Credit Loan and to extend the Revolving Line of Credit Initial Review Date to March 31, 1999; and WHEREAS, to effect the foregoing the Bank and the Borrower are entering into this Amendment. Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Loan Agreement. NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants, agreements and promises contained herein, the parties hereby agree as follows: 1. ADDITION OF WPI UK HOLDING, INC., WPI UK HOLDING II, INC. WPI OYSTER TERMINALS, INC., WPI OYSTER TERMINALS LIMITED AND WPI GROUP (UK) AS BORROWER. Borrower and Bank agree that, effective as of the date hereof, each of the Loan 2 Agreement and the Loan Documents shall be and hereby is amended to join and include each of WPI UK Holding, Inc., WPI UK Holding II, Inc., WPI Oyster Terminal, Inc., WPI Oyster Terminals Limited, jointly and severally, as a borrower thereunder, such that each reference to "Borrower" in the Loan Agreement and in each of the Loan Documents shall hereafter mean and include each of WPI Group, Inc., WPI Electronics, Inc., WPI Magnetec, Inc., WPI Micro Palm, Inc., WPI Power Systems, Inc., WPI Termiflex, Inc., WPI Micro Processor Systems, Inc., WPI DecisionKey, Inc., WPI UK Holding, Inc., WPI UK Holding II, Inc., WPI Oyster Terminals, Inc., WPI Oyster Terminals Limited, and WPI Group (U.K.), jointly and severally. Borrower agrees to take all such further actions and to excuse all such further documents and instruments as are necessary, proper, or required to effect the provisions of this Section I. 2. Amendment of Loan Agreement. --------------------------- (a) Section I. A. of the Loan Agreement shall be and hereby is amended by deleting the same and inserting in place thereof the following: "A. MAXIMUM AVAILABLE AMOUNT. THE AGGREGATE MAXIMUM PRINCIPAL AMOUNT AVAILABLE TO THE BORROWER UNDER THE REVOLVING LINE OF CREDIT LOAN SHALL BE UP TO THIRTY MILLION DOLLARS ($30,000,000.00). (b) Section I.C. of the Loan Agreement shall be and hereby is amended by changing the Revolving Line of Credit Initial Review Date referenced thereunder from March 31, 1998 to March 31, 1999. 3. SUBSTITUTION AND REPLACEMENT OF REVOLVING LINE OF CREDIT PROMISSORY NOTE. To reflect the amendments hereby, the Bank and the Borrower agree that the Revolving Line of Credit Promissory Note in the principal amount of Thirty Million Dollars ($30,000,000.00) dated July 12, 1996 of WPI Group, Inc., WPI Electronics, Inc., WPI Magnetec, Inc., WPI Micro Palm Inc., WPI Power Systems, Inc., WPI Termiflex, Inc., WPI Micro Processor Systems, Inc., and WPI DecisionKey, Inc., payable to the order of the Bank shall be substituted and replaced in full by the Revolving Line of Credit Promissory Note in the principal amount of Thirty Million Dollars ($30,000,000.00) of Borrower payable to the order of the Bank attached hereto as Exhibit A (the "Replacement RLOC Note"), which Replacement RLOC Note shall be executed contemporaneously with the execution of this Amendment, such that the indebtedness of WPI Group, Inc., WPI Electronics, Inc., WPI Magnetec, Inc., WPI Micro Palm, Inc., WPI Power Systems, Inc., WPI Termiflex, Inc., WPI Micro Processor Systems, Inc., and WPI DecisionKey, Inc., currently due and owing to the Bank under the Revolving Line of Credit Loan shall hereafter be evidenced by the Replacement RLOC Note. 4. AMENDMENT OF OTHER LOAN DOCUMENTS. Each of the other Loan Documents, whether or not specifically referenced herein or hereby, shall be and hereby is amended to reflect the terms and conditions of this Amendment and to include within the scope of such Loan Documents and the description of loans and notes therein, the Revolving Line of Credit Loan as increased, amended and modified hereby. 3 5. REPRESENTATIONS AND WARRANTIES. Each Borrower individually hereby makes, confirms, reasserts, and restates all of the representations and warranties of the Borrower under the Loan Agreement and each of the Loan Documents, all as of the date hereof. 6. AFFIRMATIVE COVENANTS. Each Borrower individually hereby makes, confirms, reasserts, and restates all of the Affirmative Covenants of the Borrower as set forth in the Loan Agreement and each of the Loan Documents, as amended hereby, all as of the date hereof. 7. NEGATIVE COVENANTS. Each Borrower individually hereby makes confirms, reasserts, and restates all of the Negative Covenants of the Borrower as set forth in the Loan Agreement and each of the Loan Documents, all as of the date hereof. 8. NO OTHER MODIFICATIONS. Except as specifically modified or amended herein or hereby, all of the terms and conditions of each of the Revolving Line of Credit Loan, the Loan Agreement and the Loan Documents, remain otherwise unchanged, and in full force and effect, all of which are hereby confirmed and ratified by the parties hereto. 9. BANK FEE. For and in consideration of the Bank entering into this Amendment and increasing the maximum principal amount available to the Borrower under the Revolving Line of Credit Loan, the Borrower shall pay the Bank a fee in the amount of Twenty-five Thousand Dollars ($25,000.00); provided, however, that such fee shall only be due and payable in the event that the Parent issues additional capital stock within the twelve (12) month period from the date hereof, and the proceeds of such issuance are used, in whole or in part, to pay down the outstanding principal amount under the Revolving Line of Credit Loan by an amount in excess of $1,000,000.00. 10. COSTS AND EXPENSES OF BANK. The Borrower agrees to reimburse the Bank for all reasonable costs, expenses, and fees, including attorneys' fees, associated with the documentation of this Amendment. Borrower consents to Bank charging Borrower's Revolving Line of Credit Loan account for all such costs, expenses and fees. IN WITNESS WHEREOF, the parties have executed and delivered this Amendment all as of the date first set forth above. WITNESSES FLEET BANK - NH 4 /s/Paula Belanger By:/s/Mark L. Young - ----------------------------- ---------------- Mark L. Young, Senior Vice President WITNESSES: BORROWER: WPI GROUP, INC. /s/ Michael Tule ( to all) By:/s/ Michael Foster - ----------------------------- ------------------ Michael Foster, Chairman WPI POWER SYSTEMS, INC. By:/s/ Michael Foster - ----------------------------- ------------------ Michael Foster, Chairman WPI MAGNETEC, INC. By:/s/ Michael Foster - ----------------------------- ------------------ Michael Foster, Chairman WPI ELECTRONICS, INC. By:/s/ Michael Foster - ----------------------------- ------------------ Michael Foster, Chairman WPI TERMIFLEX, INC. By:/s/ Michael Foster - ----------------------------- ------------------ Michael Foster, Chairman 5 WPI MICRO PALM, INC. By:/s/ Michael Foster - ----------------------------- ------------------ Michael Foster, Chairman WPI MICRO PROCESSOR SYSTEMS, INC. By:/s/ Michael Foster - ----------------------------- ------------------ Michael Foster, Chairman WPI DECISIONKEY, INC By:/s/ Michael Foster - ----------------------------- ------------------ Michael Foster, Chairman WPI 6 GROUP (U.K.) By:/s/ Michael Foster - ----------------------------- ------------------ Michael Foster, Chairman WPI OYSTER TERMINALS LIMITED By:/s/ Michael Foster - ----------------------------- ------------------ Michael Foster, Chairman WPI UK HOLDING, INC. By:/s/ Michael Foster - ----------------------------- ------------------ Michael Foster, Chairman WPI UK HOLDING II, INC. By:/s/ Michael Foster - ----------------------------- ------------------ Michael Foster, Chairman WPI OYSTER TERMINALS, INC. By:/s/ Michael Foster - ----------------------------- ------------------ Michael Foster, Chairman 7 EXHIBIT A REVOLVING LINE OF CREDIT PROMISSORY NOTE ---------------------------------------- $30,000,000.00 U.S. Manchester, NH February 27, 1997 FOR VALUE RECEIVED, the undersigned, WPI GROUP, INC., WPI ELECTRONICS, INC., WPI MAGNETEC, INC., WPI MICRO PALM, INC., WPI POWER SYSTEMS, INC., WPI TERMIFLEX, INC., MICRO PROCESSOR SYSTEMS, INC., and WPI DECISIONKEY, INC., WPI UK HOLDING, INC., WPI UK HOLDING, INC., and WPI OYSTER TERMINALS, INC., each a New Hampshire corporation, WPI GROUP (U.K.), an unlimited company organized under the laws of England and Wales, and WPI OYSTER TERMINALS LIMITED, a corporation organized under the laws of England and Wales, all such entities having executive offices at 1155 Elm Street Manchester, New Hampshire 03101 (all of such entitites are hereinafter referred to individually and collectively as the "BORROWER"), hereby promise, jointly and severally, to pay to the order of FLEET BANK - NH, a bank organized under the laws of the State of New Hampshire with an address of Mail Stop NHNA E02A, 1155 Elm Street, Manchester, New Hampshire 03101 (the "Bank"), at such address, or such other place or places as the holder hereof may designate in writing from time to time hereafter, the maximum principal sum of THIRTY MILLION DOLLARS ($30,000,000.00), or so much thereof as may be advanced or readvanced by the Bank to the Borrower from time to time hereafter (such amounts defined as the "Debit Balance" below), together with interest as provided for hereinbelow, in lawful money of the United States of America, all as provided hereinbelow. The Borrower's "Debit Balance" shall mean the debit balance in an account on the books of the Bank, maintained in the form of a ledger card, computer records or otherwise in accordance with the Bank's customary practice and appropriate accounting procedures wherein there shall be recorded the principal amount of all advances and readvances made by the Bank to the Borrower, all principal payments made by the Borrower to the Bank hereunder, and all other appropriate debits and credits to principal. The Bank shall render to the Borrower a statement of account with respect thereto on a monthly basis. The statement shall be considered correct and be considered accepted by the Borrower, and shall conclusively bind the Borrower, unless Borrower notifies the Bank to the contrary within thirty (30) days after the date of Borrower's receipt of the statement. The Bank agrees to lend to the Borrower, and the Borrower may borrow, up to the maximum principal sum provided for in this Note in accordance with and subject to the terms, conditions, and limitations of this Note and the Commercial Loan Agreement dated October 24, 1995, as amended by First Amendment to Commercial Loan Agreement and Loan Documents dated March 20, 1996, and by Second Amendment to Commercial Loan Agreement and Loan Documents dated July 12, 1996 and Third Amendment to Commercial Loan Agreement and Loan Documents of even date herewith among the Bank and the Borrower, and as the same may be further amended from time to time 8 hereafter (as amended, the "Loan Agreement"). The holder of this Note is entitled to all of the benefits and rights, and is subject to all of the obligations, of the Bank under the Loan Agreement. However, neither this reference to the Loan Agreement nor any provision thereof shall impair the absolute and unconditional obligation of the Borrower to pay the principal and interest of this Note as herein provided. Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Loan Agreement. The Borrower agrees that the Bank may deliver all advances under this Note by direct deposit to any demand account of the Borrower with the Bank or in such other reasonable manner as may be designated in writing by the Bank to the Borrower, and that all such advances shall represent binding obligations of the Borrower. The Borrower acknowledges that this Note is to evidence the Borrower's obligation to pay its Debit Balance, plus interest and any other applicable charges as determined from time to time, and that it shall continue to do so despite the occurrence of intervals when no Debit Balance exists because the Borrower has paid the previously existing Debit Balance in full. Interest shall be calculated and charged daily, based on the actual days elapsed over a three hundred sixty (360) day banking year, on the Debit Balance outstanding from time to time at an annual variable rate equal to the Prime Rate. The "Prime Rate" shall be the rate published by THE WALL STREET JOURNAL from time to time under the category "Prime Rate: The Base Rate on Corporate Loans posted by at least 75% of the Nation's 30 Largest Banks" (the lowest of the rates so published if more than one rate is published under this category at any given time) or such other comparable index rate selected by the Bank in its sole discretion if THE WALL STREET JOURNAL ceases to publish such rate. The BORROWER acknowledges that the Prime Rate is used for reference purposes only as an index and is not necessarily the lowest interest rate charged by the BANK on commercial loans. Each time the Prime Rate changes the interest rate hereunder shall change contemporaneously with such change in the Prime Rate. Notwithstanding the foregoing, the Borrower may elect from time to time a fixed rate of interest equal to the Eurodollar Based Rate to apply to outstanding principal hereunder, all in accordance with, and subject to the limitations of, the provisions of the Loan Agreement. Outstanding principal hereunder shall be paid in accordance with the terms and conditions of the Loan Agreement. Accrued interest only on the outstanding Debit Balance hereunder shall be payable monthly in arrears commencing thirty (30) days from the date hereof (or on any day within 30 days of the date hereof agreed to by the Borrower and the Bank to provide for a convenient payment date) and continuing on the same date of each month thereafter through and until the Review Date as to which the Bank does not renew the Revolving Line of Credit Loan, whereupon all outstanding principal and accrued and unpaid interest hereunder shall be due and payable in full. The Borrower may prepay this Note in whole or in part at any time; provided, however, that such prepayment shall be subject to the terms and conditions of the Loan Agreement and the charges provided thereunder payable by Borrower to Bank. In the event that any such prepayment shall be made by the Borrower, the amount thereof shall be applied first to accrued interest and thereafter to principal. 9 At the option of the Bank, this Note shall become immediately due and payable in full, without further demand or notice, if any installment of principal or interest is not paid when due hereunder or upon the occurrence of any other Event of Default under the terms hereof, of the Loan Agreement, or of any other Loan Document. The holder may impose upon the Borrower a delinquency charge of five percent (5%) of the amount of the principal and/or interest not paid on or before the tenth (10th) day after such installment is due. The entire principal balance hereof, together with accrued interest, shall after maturity, whether by demand, acceleration or otherwise, bear interest at the contract rate of this Note plus an additional five percent (5%) per annum. The Borrower grants to Bank the right to set off and apply, upon an Event of Default and without demand or notice of any nature, all, or any portion, of deposits, credits and other property now or hereafter due from the holder to the Borrower, against the indebtedness evidenced by this Note. The Borrower agrees to pay on demand all reasonable out-of-pocket costs of collection hereof, including reasonable attorneys' fees, whether or not any action is instituted by the holder in its discretion. No delay or omission on the part of the holder in exercising any right, privilege or remedy shall impair such right, privilege or remedy or be construed as a waiver thereof or of any other right, privilege or remedy. No waiver of any right, privilege or remedy or any amendment to this Note shall be effective unless made in writing and signed by the holder. Under no circumstances shall an effective waiver of any right, privilege or remedy on any one occasion constitute or be construed as a bar to the exercise of or a waiver of such right, privilege or remedy on any future occasion. The acceptance by the holder hereof of any payment after any default hereunder shall not operate to extend the time of payment of any amount then remaining unpaid hereunder or constitute a waiver of any rights of the holder hereof under this Note. All rights and remedies of the holder, whether granted herein or otherwise, shall be cumulative and may be exercised singularly or concurrently. The Borrower hereby waives, to the fullest extent permitted by law, presentment, notice, and protest. Borrower assents to any extension of the time of payment or any other indulgence. This Note and the provisions, hereof shall be binding upon the Borrower and the Borrower's successors and assigns and shall inure to the benefit of and shall bind the holder, the holder's heirs, administrators, executors, successors, legal representatives and assigns. The word "holder" as used herein shall mean the payee or endorsee of this Note who is in possession of it, or the bearer, if this Note is at the time payable to the bearer. 10 This Note may not be amended, changed or modified in any respect except by a written document which has been executed by each party. This Note constitutes a New Hampshire contract to be governed by the laws of such state and to be paid and performed therein. This Note is executed and delivered in replacement of, but not in novation or discharge of, the Revolving Line of Credit Promissory Note of WPI Group, Inc., WPI Electronics, Inc., WPI Magnetec, Inc., WPI Micro Palm, Inc., WPI Power Systems, Inc., WPI Termiflex, Inc., WPI Micro Processor Systems, Inc., and WPI DecisionKey, Inc., payable to the order of the Bank in the principal amount of Thirty Million Dollars ($30,000,000.00) dated July 12, 1996, as amended to date (collectively, as amended, the "Old Note"). All references to the Old Note in the Loan Agreement or any other Loan Document shall be deemed to refer to this Note. Executed and delivered this 27th day of February, 1997. WITNESSES: BORROWER: WPI GROUP, INC. /s/ Michael Tule (to all) By:/s/ Michael Foster - ----------------------------- ------------------ Michael Foster, Chairman WPI POWER SYSTEMS, INC. By:/s/ Michael Foster - ----------------------------- ------------------ Michael Foster, Chairman WPI MAGNETEC, INC. By:/s/ Michael Foster - ----------------------------- ------------------ Michael Foster, Chairman 11 WPI ELECTRONICS, INC. By:/s/ Michael Foster - ----------------------------- ------------------ Michael Foster, Chairman WPI TERMIFLEX, INC. By:/s/ Michael Foster - ----------------------------- ------------------ Michael Foster, Chairman WPI MICRO PALM, INC. By: /s/ Michael Foster - ----------------------------- ------------------ Michael Foster, Chairman WPI PROCESSOR SYSTEMS, INC. By:/s/ Michael Foster - ----------------------------- ------------------ Michael Foster, Chairman WPI DECISIONKEY, INC. By:/s/ Michael Foster - ----------------------------- ------------------ Michael Foster, Chairman WPI GROUP (U.K.) By:/s/ Michael Foster - ----------------------------- ------------------ Michael Foster, Chairman 12 WPI OYSTER TERMINALS LIMITED By:/s/ Michael Foster - ----------------------------- ------------------ Michael Foster, Chairman WPI UK HOLDING, INC. By: /s/ Michael Foster - ----------------------------- ------------------ Michael Foster, Chairman WPI UK HOLDING II, INC. By:/s/ Michael Foster - ----------------------------- ------------------ Michael Foster, Chairman WPI OYSTER TERMINALS, INC. By:/s/ Michael Foster - ----------------------------- ------------------ Michael Foster, Chairman EX-27 4 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF WPI GROUP, INC. FOR THE SIX MONTHS ENDED MARCH 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATMENTS. 6-MOS SEP-28-1997 SEP-29-1996 MAR-30-1997 84,719 0 9,576,179 304,000 7,858,055 19,982,432 11,967,164 2,253,357 49,481,497 5,445,250 0 0 0 59,784 22,482,930 49,481,497 28,330,852 28,330,852 17,047,939 17,047,939 8,333,101 0 505,938 2,443,874 806,000 1,637,874 0 0 0 1,637,874 .27 .27
-----END PRIVACY-ENHANCED MESSAGE-----