SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934---------------------------------Filed by the Registrant
|X|xFiled by a party other than the Registrant
|_| ---------------------------------oCheck the appropriate box:
| |o Preliminary
Proxy Statement |X| DefinitiveProxy Statement Rule 14a-(b)|_|x Definitive Proxy Statemento Definitive Additional Materials
|_|oSoliciting Material Pursuant to Rule 14a-11(c) or Rule14a- 12 |_|14a-12o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
-------------------------------------------NEXIQ TECHNOLOGIES, INC.
(formerly WPI
GROUP, INC. (NameGroup, Inc.)(Name of Registrant as Specified in Its Charter)
-------------------------------------------Payment of Filing Fee (Check the appropriate box):
|X|x No fee required.
|_|o Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1)
TitleTitles of each class of securities to which transaction applies: N/A(2) Aggregate number of securities to which transaction applies: N/A
(3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11:1 N/A
(4) Proposed maximum aggregate value of transaction: N/A
(5) Total fee paid: N/A
1 Set forth the amount on which the filing fee is calculated and state how it was determined.
|_|o Fee paid previously with preliminary materials.
|_|o Check box if any part of the fee is offset as provided by Exchange Act Rule 0-1l(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
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WPI GROUP, INC. 1155 ELM STREET MANCHESTER, NH 03101-1508 October 5, 2000 Dear Shareholder: On behalf of the Board of Directors and management of WPI Group, Inc., I cordially invite you to attend the Annual Meeting of Shareholders to be held at the Company's headquarters at 1155 Elm Street, Manchester, New Hampshire, on November 2, 2000 at 10:00 a.m. It is an exciting time for WPI Group. The Company has recently taken large steps in its plans to divest itself of its non-core businesses and to focus on the development of its promising diagnostics business. We have also helped to secure our future by obtaining addition financing through a debt and equity investment made by Sunrise Capital Partners, a private investment fund based in New York. Sunrise manages over $200 million of committed capital, focusing on small and middle-market companies. At the Annual Meeting you will be asked to consider and vote on a number of proposals: o the election of seven directors to the Company's Board of Directors; o an amendment to the Company's Articles of Incorporation increasing the number of shares of common stock that the Company is authorized to issue; o an amendment to the Company's Articles of Incorporation changing the name of the Company; o an amendment to the Company's 1997 Equity Incentive Plan increasing the number of shares available for issuance under that plan; o an amendment to the Company's Articles of Incorporation creating a class of preferred stock, for which the Board of Directors of the Company will have the right to fix the rights, terms and preferences at the time of issuance, with no further action on the part of the shareholders; o the ratification of the appointment of Arthur Andersen LLP as the Company's independent accountants. The amendment to the Company's Articles of Incorporation increasing the number of authorized shares of common stock is being sought in connection with the financing transaction between the Company and Sunrise. The first portion of that transaction was completed on August 9, 2000, but the amendment is necessary to complete the other portions. The Board of Directors and management of the Company believe that this transaction is vital to the Company's near-and long-term success. Failure by the Company's shareholders to approve the proposal could have a material adverse effect on our business and the development of new products. Detailed descriptions of each of the matters presented for shareholder approval are set forth in the accompanying proxy statement. I urge you to read it and consider each of the proposals carefully. Whether or not you plan to attend the meeting in person, please take the time to fill out and return the enclosed proxy card; doing so will not limit your right to vote in person if you decide to attend the meeting. I hope that you can join us. Sincerely, John R. Allard Chairman of the Board, President and Chief Executive Officer[LOGO OMITTED][
LOGO OMITTED] The WPI Family of CompaniesNEXIQ TECHNOLOGIES LOGO]NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held
November 2, 2000July 18, 2001TO OUR SHAREHOLDERS:
The Annual Meeting of Shareholders of
WPI Group,NEXIQ Technologies, Inc. will be held at the Company's corporate headquarters at11151155 Elm Street, Manchester, New Hampshire, onNovember 2, 2000July 18, 2001 at 10:00 a.m., local time, for the following purposes:1. To elect
seveneight directors to the Board of Directors.2.
To approve an amendment to the Company's Amended and Restated Articles of Incorporation increasing the authorized number of shares of common stock which may be issued by the Company from 20,000,000 to 75,000,000. 3. To approve an amendment to the Company's Amended and Restated Articles of Incorporation changing the name of the Company. 4. To approve amendments to the Company's 1997 Equity Incentive Plan increasing the number of shares of the Company's common stock available for issuance from 750,000 to 3,500,000 and increasing the limit on the number of stock-based awards that can be granted to any one person during any year from 200,000 to 500,000. 5. To approve an amendment to the Company's Amended and Restated Articles of Incorporation creating a class of preferred stock, for which the Board of Directors of the Company will have the right to fix the rights, terms and preferences at the time of issuance, with no further action on the part of the shareholders, and authorizing the issuance of up to 20,000,000 shares of preferred stock. 6.To ratify the appointment ofArthur AndersonPricewaterhouseCoopers LLP as the Company's independent accountants for the fiscal year ending September24, 2000. 7.30, 2001.3. To transact such other business as may properly come before the Annual Meeting and any adjournment thereof.
The Board of Directors has fixed the close of business on
October 2, 2000June 19, 2001 as the record date for the determination of shareholders entitled to notice of and to vote at the Annual Meeting and any adjournment thereof.BY ORDER OF THE BOARD OF DIRECTORS
William V. A. Zorn, SecretaryOctober 5, 2000 - --------------------------------------------------------------------------------June 27, 2001
YOUR VOTE IS IMPORTANT
On behalf of the Board of Directors we urge you to promptly mark, sign, date and return the accompanying proxy in the enclosed envelope even if you plan to attend the Meeting. This will not prevent you from voting in person, but will assure that your vote is counted if you are unable to attend the Meeting. You may revoke your proxy and vote in person if you decide to attend the Meeting.
- --------------------------------------------------------------------------------WPI GROUP,NEXIQ TECHNOLOGIES, INC.
PROXY STATEMENT2000
2001 ANNUAL MEETING OF SHAREHOLDERSThis Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors of
WPI Group,NEXIQ Technologies, Inc. (the "Company") for the Annual Meeting of Shareholders to be held onNovember 2, 2000,July 18, 2001, and any adjournment thereof.Copies of this Proxy Statement and the accompanying proxy are being mailed on or about
October 5, 2000June 27, 2001 to the holders of record of the common stock of the Company onOctober 2, 2000June 19, 2001 (the "Record Date"). On that date there were7,890,6639,608,523 shares of common stock outstanding and entitled to vote. The proxy may be revoked by a shareholder at any time prior to its use by giving notice of such revocation to the Secretary of the Company prior to the Annual Meeting, by appearing at the Meeting and voting in person or by returning a duly executed proxy bearing a later date. The expense of this solicitation will be paid by the Company. Some of the officers and regular employees of the Company may solicit proxies personally and by telephone.At the Meeting, each shareholder will be entitled to one vote for each share of stock standing in such shareholder's name on the books of the Company at the close of business on the Record Date.
The presence at the Meeting in person or by proxy of the holders of a majority of the shares of common stock outstanding on the Record Date will constitute a quorum.
Properly executed proxies will be voted in accordance with the directions made in the proxy card by the shareholder. If no directions are given in an otherwise properly executed proxy, the proxy will be voted in accordance with the recommendation of the Board of Directors as described in this Proxy Statement.
The Company will treat abstentions and broker non-votes as present at the Annual Meeting
solelyfor the purpose of determining whether or not a quorum exists. Abstentions and broker non-votes will have no effect on the outcome of the election ofdirectors,directors. Abstentions and broker non-votes will have theproposals to amend the Company's Amended and Restated Articleseffect ofIncorporation, the proposal to amend the Company's 1997 Equity Incentive Plan or the proposal to ratifya vote against the appointment of independent accountants.A plurality of the votes cast is required for the election of directors. The affirmative vote of the majority of the
votes castshares present or represented at the Meeting is requiredto amend the Company's Amended and Restated Articles of Incorporation, to amend the Company's 1997 Equity Incentive Plan andto ratify the appointment of independent accountants for fiscal2000.year 2001.The mailing address of the principal executive offices of the Company is
11151155 Elm Street, Manchester, New Hampshire 03101.Proposal No.PROPOSAL NO. 1
ELECTION OF DIRECTORS
(Item(ITEM 1
on the Proxy Card)ON THE PROXY CARD)The Board of Directors of the Company is currently composed of
seveneight directors, although up to 15 directors are permitted by the Company's By Laws.SevenEight directors are to be elected at the Meeting to serve one-year terms until the20012002 Annual Meeting of Shareholders and until their respective successors are elected and qualify. The Board of Directors has nominated John R. Allard, Lawrence S. Coben, Paul J. Giovacchini, Irwin N. Gold, Joseph A. Julian, Jr., David A. Preiser, Michael D. Stewart and Bernard H. Tenenbaum, each of whom is currently a director, for election to the Board of Directors.The Board of Directors believes that all nominees are willing and are able to serve as directors, but if any nominee should decline to serve or become unavailable for election as a director at the Meeting, the persons named in the proxy will vote for such nominee or nominees as may be designated by the Board of Directors, unless the Board of Directors reduces the number of directors accordingly.
The following table sets forth, as of
August 18, 2000,May 31, 2001, certain information as to the nominees:
| Name | Age | Director Since | Position with the Company |
| John R. Allard ............................. | 36 | 1998 | Chairman and Chief Executive Officer |
| Lawrence S. Coben..................... | 43 | 2001 | Director |
| Paul G. Giovacchini...................... | 44 | 1990 | Director |
| Irwin A. Gold............................... | 44 | 2000 | Director |
| Joseph A. Julian, Jr....................... | 33 | 2000 | Director |
| David A. Preiser........................... | 44 | 2000 | Director |
| Michael D. Stewart....................... | 32 | 2000 | Director |
| Bernard H. Tenenbaum................. | 46 | 1994 | Director |
John Allard has been Chairman of the Company since July 2000, a director of the Company since August 1998 and President and Chief Executive Officer of the Company since December 1999. From February 1999 to December 1999, Mr. Allard served as President and Chief Operating Officer of the Company. Mr. Allard was Senior Vice President, Business Development from August 1998 to February 1999. Mr. Allard is also a Director and Senior Partner of Allard NazarianAllard-Nazarian Group, Inc.,where he served as Chief Executive Officer from December 1992 to August 1998.
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Lawrence Coben has been a director of the Company since January 2001. Mr. Coben has been a principal of Sunrise Capital Partners, L.P. ("Sunrise"), a private investment fund,since January 2001. From 1997 to 2000, Mr. Coben provided consulting services, primarily to energy and environmental industries. Prior to 1997, Mr. Coben was Chief Executive Officer of Bolivian Power Company, Ltd. and Managing Director of Liberty Power Corp.
Paul Giovacchini has been a director of the Company since September 1990. Mr. Giovacchini washas been a Senior Investment Manager for Signal Capital Corporation, a Massachusetts-based investment firm, fromsince August 1990 through December 1999.1990. Since 1995, Mr. Giovacchini has also been a partner of Seacoast Capital Partners, L.P., a private equity investment partnership which focuses on investing in small, growing companies.
Irwin Gold has been a director of the Company since July 2000. Mr. Gold is a Senior Managing Director and member of the Board of Directors of Houlihan Lokey Howard & Zukin, ("Houlihan Lokey"), an affiliate of Sunrise Capital
Partners, L.P. ("Sunrise").Sunrise. Mr. Gold is a principal of Sunrise and has been national co-director of Houlihan Lokey's Financial Restructuring Group since 1988. Mr. Gold is also a director of Cole National Corporation.
Joseph Julian, Jr. has been a director of the Company since July 2000. Mr. Julian is currently a principal of Sunrise. Mr. Julian has worked for the Financial Restructuring Group of Houlihan Lokey since 1989.
David Preiser has been a director of the Company since July 2000. Mr. Preiser is currently the Managing Partner of Sunrise. Mr. Preiser has worked for the Financial Restructuring Group of Houlihan Lokey since 1991. Mr. Preiser is also a director of Jos A. Bank Clothiers and NVR, Inc.
Michael Stewart has been a director of the Company since July 2000. Mr. Stewart is currently a principal of Sunrise. Mr. Stewart has worked for the Financial Restructuring Group of Houlihan Lokey since 1990.
Bernard Tenenbaum has been a director of the Company since 1989.1994. Since April 1997, Mr. Tenenbaum has been President of the Children's Leisure Products Group of The Jordan Company, a leveraged buyout firm based in New York. From 1993 to 1997, Mr. Tenenbaum was Vice President, Corporate Development, of Russ Berrie & Company, a global impulse-gift company. Mr. Tenenbaum was also the founding Director of the George Rothman Institute for Entrepreneurial Studies at Fairleigh Dickinson University in New Jersey. He also served as the Associate Director of the Sol C. Snider Entrepreneurial Center of the Wharton School at the University of Pennsylvania. In addition to his career in business development and advanced business studies, Mr. Tenenbaum has served as a business consultant for AT&T, IBM, CIGNA Corporation and the Philadelphia Phillies.
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Recommendation of the Board of DirectorsDirectors
The Board of Directors recommends that shareholders vote "FOR" the election of the seveneight nominees. Proxies solicited by the Board of Directors will be voted "FOR" the seveneight nominees unless otherwise indicated.
Board of Directors and Committees of the Board
The Board of Directors held nineten meetings during the last fiscal year. With the exception of Irving Gutin, and Bernard Tenenbaum, each of the directors who
served during the 1999 fiscal year attended 75% or more of the aggregate total number of Board meetings and total number of meetings of committeesCommittees on which hethe director served. There are two committees of the Board, the Audit Committee and the Stock Option/Compensation Committee. The Audit Committee, consisting of Stephen Carlotti, Paul Giovacchini, and Peter Danforth from October
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1998 through January 1999 and consisting of Stephen Carlotti, Paul Giovacchini,
Irving Gutin, Steven Shulman, Bernard Tenenbaum and James Risher (all the
outside directors), from FebruaryOctober 1999 through July 2000 and consisting of Paul Giovacchini, Joseph Julian, Jr. and Michael Stewart from August 2000 through September 1999,2000, held fivefour meetings during the 19992000 fiscal year. The Audit Committee reviews the scope of and the results of the audit by the independent public accountants, makes recommendations to the Board as to the selection of independent public accountants for each fiscal year, and reviews the adequacy of the Company's internal accounting and financial controls.
The Stock Option/Compensation Committee, consisting during the 1999 fiscal
year of Irving Gutin, Steven Shulman and Bernard Tenenbaum from October 1999 through July 2000 and consisting of Joseph Julian, Jr., David Preiser and Bernard Tenenbaum from August 2000 to September 2000 held one meetingtwo meetings during the 19992000 fiscal year. The Stock Option/Compensation Committee is responsible for reviewing and making recommendations to the Board on matters concerning the administration of the employee incentive plans and the compensation of executive officers of the Company. The Company does not have a nominating committee.
Compensation of Directors
Directors who are not employees of the Company receive an annual fee of $14,000 and $250 for each committee meeting attended; committee chairmen receive an additional $500 annual fee for each committee they chair. Directors may elect to take all or a portion of their annual retainer in shares of Company common stock. Officers serve at the discretion of the Board of Directors. Directors who are employees of the Company do not receive any directors' fees.
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Executive Officers
Officers serve at the discretion of the Board of Directors. The following table sets forth in certain information concerning the executive officers of the Company.
Name Age Position and Offices
John R. Allard 34 Chairman of the Board, President and Chief
Executive Officer
John W. Powers 43
| Name | Age | Position and Offices |
| John R. Allard | 36 | Chairman of the Board and Chief Executive Officer |
| Jack E. Schang | 64 | President and Chief Operating Officer |
| John W. Powers | 44 | Vice President and Chief Financial Officer |
Jack E. Schang has been President and Chief Operating Officer of the Company since December 2000. From 1998 to 2000 Mr. Schang was Chief Operating Officer of Orbcomm Enterprises, a provider of wireless products for the transportation industry. From 1996 to 1998, Mr. Schang was Vice President and General Manager of Qualcomm's OmniTRACS division, a provider of satellite tracking and communications for mobile workforces. Prior to his tenure at Qualcomm, Mr. Schang held senior executive positions at Rockwell International, Ryder-P*I*E and Allied Van Lines.
John Powers has been Vice President and Chief Financial Officer of the Company since February 1997. From August 1993 to February 1997, Mr. Powers was the Chief Financial Officer of Janco Companies, a manufacturer of medical and electronic products. Prior to August 1993, Mr. Powers was a certified public accountant with an national and regional public accounting firm.
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SECURITY OWNERSHIP OF
PRINCIPAL SHAREHOLDERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial ownership of the common stock, which is the Company's only outstanding class of stock, as of August 29, 2000May 31, 2001 by: (i) each person who is known by the Company to beneficially own more than 5% of the outstanding shares of common stock; (ii) each of the Company's directors; and (iii) all directors and officers of the Company as a group.
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| Name and Address | Number of Shares Beneficially Owned | Percentage Beneficially Owned(1) |
| 5% Owners | ||
| Gerald R. Allard (2).......................................... 520 South Collier Boulevard Chalet Number 301 Marco Island, FL 38937 | 801,299 | 8% |
| Dimensional Fund Advisors (3)....................... 1299 Ocean Avenue, 11th Floor Santa Monica, CA 90401 | 448,300 | 5% |
| Michael Foster (4)........................................... 170 Cliff Road Nantucket, MA 02584 | 925,937 | 9% |
| James C. Griffin, Jr. (5)..................................... 2475 Coral Court Coralville, IA 52241 | 663,897 | 7% |
| Motorola, Inc. (6).............................................. 1303 East Algonquin Road Schaumburg, IL 60196 | 756,240 | 8% |
| Sunrise Capital Partners, L.P. (7).................... 685 Third Avenue, 15th Floor New York, NY 10017 | 17,352,379 | 68% |
| Directors and Executive Officers | ||
| John R. Allard (8).............................................. 1155 Elm Street Manchester, NH 03101 | 502,489 | 5% |
| Lawrence S. Coben (9)...................................... 685 Third Avenue, 15th Floor New York, NY 10017 | 17,352,379 | 68% |
| Paul G. Giovacchini (10).................................... 55 Ferncroft Road Danvers, MA 01923 | 11,667 | * |
| Irwin N. Gold (11)................................................ 685 Third Avenue, 15th Floor New York, NY 10017 | 17,352,379 | 68% |
| Joseph A. Julian, Jr. (12).................................... 685 Third Avenue, 15th Floor New York, NY 10017 | 17,352,379 | 68% |
| John W. Powers (13)........................................... 1155 Elm Street Manchester, NH 03101 | 79,800 | 1% |
| David A. Preiser (14)........................................... 685 Third Avenue, 15th Floor New York, NY 10017 | 17,352,379 | 68% |
| Jack E. Schang...................................................... 6405 Nineteen Mile Road Sterling Heights, MI 48314 | -- | * |
| Michael D. Stewart (15)........................................ 685 Third Avenue, 15th Floor New York, NY 10017 | 17,352,379 | 68% |
| Bernard H. Tenenbaum (16)................................. 767 5th Avenue, 48th Floor New York, NY 10053 | 14,762 | * |
| All executive officers and directors as a group (10 persons)(17).......................................... | 17,961,097 | 69% |
__________
* Less than one percent
(1) According to a Schedule 13D filed with the Securities and Exchange
Commission (the "Commission") on September 8, 2000, Gerald R. Allard, a
private investor with an address of 520 South Collier Boulevard, Chalet
Number 301, Marco Island, Florida 38937, has shared voting power (with
Sunrise, see footnote (4)) and sole dispositive power with respect to the
677,012 shares of common stock (which figure includes 31,907 shares of
common stock which Mr. Allard has the right to acquire within 60 days
pursuant to the exercise of common stock purchase warrants and 162,727
shares of common stock which Mr. Allard has the right to acquire within
60 days pursuant to the conversion of convertible promissory notes held
by him).
(2) According to a Schedule 13G filed with the Commission on February 3,
2000, Dimensional Fund Advisors, a Commission-registered investment
adviser with its principal place of business at 1299 Ocean Avenue, 11th
Floor, Santa Monica, CA 90401, has sole voting and dispositive power with
respect to the 468,300 shares of common stock.
(3) Includes 317,280 shares of the Company's common stock which Mr.
Foster has the right to acquire within 60 days pursuant to the exercise
of stock options. Mr. Foster retired as Chairman and Chief Executive
Officer of WPI Group as of December 21, 1999.
(4) According to a Schedule 13D filed with the Commission on August 21,
2000, Sunrise, a private investment fund with its principal place of
business at 685 Third Avenue, 15th Floor, New York, NY 10017, has sole
voting and dispositive power with respect to 9,514,944 shares of common
stock (which figure includes 1,308,204 shares of common stock which
Sunrise has the right to acquire within 60 days pursuant to the exercise
of common stock purchase warrants and 6,671,840 shares of common stock
which Sunrise has the right to acquire within 60 days pursuant to the
conversion of convertible promissory notes held by Sunrise). Sunrise also
has shared voting power (but not shared dispositive power) with respect
to 1,359,342 shares of common stock not held of record by Sunrise but
which are the subject of a stockholders agreement between Sunrise and the
owners of such shares.
(5) Mr. Allard has shared voting power (with Sunrise, see footnote (4)) and
sole dispositive power with respect to the 294,602 shares (which figure
includes 155,000 shares of common stock which Mr. Allard has the right to
acquire within 60 days pursuant to the exercise of the exercise of stock
options, 12,264 shares of common stock which Mr. Allard has the right to
acquire within 60 days pursuant to the exercise of common stock purchase
warrants and 62,548 shares of common stock which Mr. Allard has the right
to acquire within 60 days pursuant to the conversion of convertible
promissory notes held by him.)
(6) Includes 10,833 shares of the Company's common stock which Mr.
Giovacchini has the right to acquire within 60 days pursuant to exercise
of stock options.
(7) Includes 10,874,286 shares of the Company's common stock beneficially
owned by Sunrise (see footnote (4)). Mr. Gold
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| (1) | Calculated on the basis of the amount of outstanding common stock, excluding stock held by or for the account of the Company or its subsidiaries and including stock deemed outstanding pursuant to that person's right to acquire beneficial ownership of such stock within 60 days. |
| (2) | According to a Schedule 13D filed with the Securities and Exchange Commission (the "Commission") on April 10, 2001, Gerald R. Allard has shared voting power (with Sunrise, see footnote (7)) and sole dispositive power with respect to the 801,299 shares of common stock (which figure includes 41,642 shares of common stock which Mr. Allard has the right to acquire within 60 days pursuant to the exercise of common stock purchase warrants and 212,379 shares of common stock which Mr. Allard has the right to acquire within 60 days pursuant to the conversion of convertible promissory notes held by him). |
| (3) | According to a Schedule 13G filed with the Commission on February 2, 2001, Dimensional Fund Advisors, a Commission-registered investment adviser has sole voting and dispositive power with respect to the 448,300 shares of common stock. |
| (4) | Mr. Foster has shared voting power (with Sunrise, see footnote (7)) and sole dispositive power with respect to the 925,937 shares (which figure includes 317,280 shares of the Company's common stock which Mr. Foster has the right to acquire within 60 days pursuant to the exercise of stock options). Mr. Foster retired as Chairman and Chief Executive Officer of the Company on December 21, 1999. |
| (5) | According to a Schedule 13D filed with the Commission on May 18, 2001, James C. Griffin, Jr. has sole voting and dispositive power with respect to 663,897 shares of common stock (which figure includes 5,000 shares of common stock which Mr. Griffin has the right to acquire within 60 days pursuant to the exercise of stock options). |
| (6) | According to a Schedule 13G filed with the Commission on May 17, 2001, Motorola, Inc. has sole voting and dispositive power with respect to the 756,240 shares of common stock. |
| (7) | According to a Schedule 13D filed with the Commission on February 1, 2001, Sunrise Capital Partners, L.P. has sole voting and dispositive power with respect to 15,877,917 shares of common stock (which figure includes 2,351,314 shares of common stock which Sunrise has the right to acquire within 60 days pursuant to the exercise of common stock purchase warrants and 11,991,703 shares of common stock which Sunrise has the right to acquire within 60 days pursuant to the conversion of convertible promissory notes held by Sunrise). Sunrise also has shared voting power (but not shared dispositive power) with respect to 1,474,462 shares of common stock not held of record by Sunrise but which are the subject of a stockholders agreement between Sunrise and the owners of such shares. |
| (8) | Mr. Allard has shared voting power (with Sunrise, see footnote (7)) and sole dispositive power with respect to the 502,489 shares (which figure includes 303,500 shares of common stock which Mr. Allard has the right to acquire within 60 days pursuant to the exercise of stock options, 21,999 shares of common stock which Mr. Allard has the right to acquire within 60 days pursuant to the exercise of common stock purchase warrants and 112,200 shares of common stock which Mr. Allard has the right to acquire within 60 days pursuant to the conversion of convertible promissory notes held by him). |
| (9) | Includes 17,352,379 shares of the Company's common stock beneficially owned by Sunrise (see footnote (7)). Mr. Coben may be deemed to share beneficial ownership of the common stock owned by Sunrise by virtue of his status as a principal of Sunrise Advisors, LLC, the managing partner of |
| (10) | Includes 11,667 shares of the Company's common stock which Mr. Giovacchini has the right to acquire within 60 days pursuant to exercise of stock options. |
| (11) | Includes 17,352,379 shares of the Company's common stock beneficially owned by Sunrise (see footnote (7)). Mr. Gold disclaims any beneficial ownership in these shares. |
| (12) | Includes 17,352,379 shares of the Company's common stock beneficially owned by Sunrise (see footnote (7)). Mr. Julian disclaims any beneficial ownership in these shares. |
| (13) | Includes 79,800 shares of the Company's common stock which Mr. Powers has the right to acquire within 60 days pursuant to exercise of stock options. |
| (14) | Includes 17,352,379 shares of the Company's common stock beneficially owned by Sunrise (see footnote (7)). Mr. Preiser disclaims any beneficial ownership in these shares. |
| (15) | Includes 17,352,379 shares of the Company's common stock beneficially owned by Sunrise (see footnote (7)). Mr. Stewart disclaims any beneficial ownership in these shares. |
| (16) | Includes 11,667 shares of the Company's common stock which Mr. Tenenbaum has the right to acquire within 60 days pursuant to the exercise of stock options. |
| (17) | Includes 608,718 shares of the Company's common stock which certain officers and directors (excluding Messrs. Coben, Gold, Julian, Preiser and Stewart) have a right to acquire within 60 days pursuant to the exercise or conversion of stock options, common stock purchase warrants and convertible promissory notes (consisting of 406,634 shares of common stock pursuant to the exercise of stock options, 21,999 shares of common stock pursuant to the exercise of common stock purchase warrants and 112,200 shares of common stock pursuant to the conversion of convertible promissory notes). Also includes 17,352,379 shares of the Company's common stock which are beneficially owned by Sunrise (see footnote (7)). Messrs. Coben, Gold, Julian, Preiser and Stewart each disclaim beneficial ownership of the shares owned by Sunrise. |
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CHANGE OF CONTROL TRANSACTION
On July 31, 2000, the Company and its subsidiaries entered into a Convertible Note Agreement (the "Convertible Note Agreement") with Sunrise
Capital Partners, L.P., a private investment fund ("Sunrise"). The Convertible
Note Agreement and the transactions contemplated thereby are described more
fully under the heading "Proposal No. 2" on page 15; the description which
follows below is qualified entirely by reference to that section. We urge you to
read the information contained under the heading "Proposal No. 2" for a more
complete description of the Sunrise transaction.Sunrise. Pursuant to the Convertible Note Agreement, Sunrise and certain other participants (which include certain members of the Company's management and some members of the Allard-Nazarian Group, Inc.) have agreed to invest up topurchased $24.1 million in convertible promissory notes, common stock of the Company, and warrants to purchase common stock. Sunrise and the other participants will
purchasepurchased the securities from the Company in three series. The first series of securities werewas purchased on August 9, 2000;2000, the second on November 16, 2000 and the third series can be
purchased only ifon January 29, 2001. Sunrise now owns or has the shareholdersright to acquire common shares representing approximately 68% of the Company approve the amendment to the
Company's Articles of Incorporation described under "Proposal No. 2" and certain
other conditions are satisfied. Purchase of the third series of securities is at
the option of Sunrise.
After purchasing the first series of securities on August 9, 2000, Sunrise
owned approximately 50% of the outstanding voting shares of the Company on a
fully-diluted basis (assuming conversion by Sunrise of all the promissory notes
and exercise by Sunrise of all thetotal common stock purchase warrants). In the event
the Proposal No. 2 is approved and Sunrise purchases additional notes and
warrants pursuant to the terms of the Convertible Note Agreement, Sunrise will
beneficially own approximately 56% of the outstanding voting shares of the
Company on a fully-diluted basis (assuming conversion by Sunrise of all the
promissory notes and exercise by Sunrise of all the common stock purchase
warrants). Because the percentages in this paragraph were calculated on a fully
diluted basis and include only those shares held of record by Sunrise, the
percentages are smaller than the Sunrise percentages shown in the table under
"Security Ownership of Principal Shareholders and Management" on page 5.
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In addition, pursuant to the Convertible Note Agreement, for so long as any
of the promissory notes purchased by Sunrise remain outstanding, the Company has
agreed to nominate for election to the Company's Board of Directors a majority
of nominees designated by Sunrise.shares.
Prior to entering into the transaction with Sunrise, Stephen Carlotti resigned from the Board of Directors of the Company. Four additional Board members - Michael(Michael Foster, Irving Gutin, James Risher and Steven Shulman -Shulman) resigned from the Board of Directors in connection with the transaction, and were replaced by four nominees designated by Sunrise who were
elected by the remaining Board members: David(David A. Presier,Preiser, Joseph A. Julian, Jr., Michael D. Stewart and Irwin N. Gold.Gold) who were elected by the remaining Board members.
Sunrise Capital Partners, L.P. is a private investment fund with over $200 million in committed capital focusing on the acquisition of controlling interests in middle market companies. The funds invested by Sunrise were drawn from funds held for investment. Participating with Sunrise in the purchase of the first series of securities were The John R. Allard Revocable Trust of 1993, Lisa A. DiBrigida, Kim Allard Socha, The Michael E. Allard Revocable Trust of 1994, Gerald R. Allard, The David and Angella Nazarian Family Trust, The Samy Nazarian Trust, Younes Nazarian and Richard A. Beyer. Collectively, these participating interests represented approximately 11%14% of the outstanding voting shares of the Company on a fully-diluted basis (assuming conversion by the participants of all the promissory notes purchased by them and exercise by the participants of all the common stock purchase warrants) following the sale on
August 9, 2000.
series of sales.
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires that each director and certain officers of the Company file reports of initial beneficial ownership and changes in beneficial ownership of the Company's common stock with the Securities and Exchange Commission. To the Company's knowledge, during 19992000 all directors and officers filed such required notices.
-8-
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation for services in all capacities to the Company for the fiscal years ended September 24, 2000, September 26, 1999, and September 27, 1998 and September 28, 1997 of those persons who were atduring the fiscal year ended September 26, 199924, 2000 (i) the Chief Executive Officer and (ii) each of the four
most highly compensated executive officers of the Company other than the Chief Executive Officer (with the Chief Executive Officer, collectively, the "Named Officers" ).
).
Summary Compensation Table
| | | | | | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Annual Compensation(1) | Long-Term Compensation Securities Underlying Options | | |||||||||||||||
| | All Other Compensation($) | |||||||||||||||||
| Name and Principal Position | Year | Salary($) | Bonus($) | |||||||||||||||
| John R. Allard(2)............. | 2000 | 300,040 | — | 200,000 | 15,029(3) | |||||||||||||
| Chairman, President and CEO | 1999 | 272,921 | — | 25,000 | 13,234(4) | |||||||||||||
| 1998 | — | — | 20,000 | — | ||||||||||||||
| John W. Powers............... | 2000 | 178,263 | 50,000 | 50,000 | 9,783(5) | |||||||||||||
| Vice President and CFO | 1999 | 168,222 | — | 7,200 | 11,992(6) | |||||||||||||
| 1998 | 135,522 | — | 5,000 | 10,848(7) | ||||||||||||||
| Michael H. Foster(8).......... | 2000 | 138,133 | — | — | 214,153(9) | |||||||||||||
| Formerly, Chairman and CEO | 1999 | 509,648 | — | 100,000 | 79,939(10) | |||||||||||||
| 1998 | 400,036 | — | 86,000 | 23,855(11) | ||||||||||||||
__________
| (1) | Excludes perquisites and |
| (2) | Mr. Allard became Chief Executive Officer in December 1999 |
| (3) | Includes $10,500 auto allowance, $4,266 contribution to the Company's 401(k) plan and |
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| (4) | Includes $9,000 auto allowance, $4,000 contribution to the Company's 401(k) plan and |
| (5) | Includes $6,250 auto allowance, $3,376 contribution to the Company's 401(k) plan and $157 for group term life insurance. |
| (6) | Includes $7,800 auto allowance, $4,000 contribution to the Company's 401(k) plan and $192 for group term life insurance. |
| (7) | Includes $7,800 auto allowance, $2,650 contribution to the Company's 401(k) plan and $398 for group term life insurance. |
| (8) | Mr. Foster retired as Chairman and |
| (9) | Includes $187,512 severance, $3,424 auto allowance, $16,233 life insurance premium paid by the Company, $4,288 contribution to the Company's 401(k) plan and $2,696 for group term life insurance. |
| (10) | Includes $68,700 life insurance premium paid by the Company, $2,287 auto allowance, $4,000 contribution to the Company's 401(k) plan and $4,952 for group term life insurance. |
| (11 | Includes $20,000 life insurance premium paid by the Company, $3,200 contribution to the Company's 401(k) plan and $655 for group term life insurance. |
Option Grants in Last Fiscal Year (Individual Grants)
The following table contains information concerning the grant of stock options under the Company's 1995 Stock Option Plan and the 1997 Equity Incentive Plan to the Named Officers during the Company's last fiscal year.
| | | | | | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Number of Securites Underlying Options Granted | | |||||||||||||
| | % of Total Options Granted to Employees In Fiscal 2000 | ||||||||||||||
| Name | Exercise Price($) | Expiration Date | Grant Date Present Value(1) | ||||||||||||
| John R. Allard (2).................. | 200,000(3) | 47.1% | $1.437 | 01/27/10 | $144,580 | ||||||||||
| Chairman, President and CEO | |||||||||||||||
| John W. Powers.................... | 50,000(3) | 11.8% | $1.437 | 01/27/10 | $36,145 | ||||||||||
| Vice President,CFO | |||||||||||||||
| Michael Foster (4).................. | — | 0.0% | $ — | — | $ — | ||||||||||
| Formerly, Chairman and CEO | |||||||||||||||
__________
| (1) | The weighted average fair value of | |
| (2) | Mr. Allard became Chief Executive Officer in December 1999 and Chairman in July 2000 and was President until December 2000. | |
| (3) | Options | |
| (4) | Mr. Foster retired as Chairman and |
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Option Exercises And Fiscal Year End Values
The following table contains information with respect to aggregate stock options exercised by the Named Officers during fiscal 1999,2000, as well as unexercised options to purchase the Company's common stock granted through September 26, 199924, 2000 under the Company's 1995 Stock Option Plan or 1997 Equity Incentive Plan to the Named Officers and held by them at that date.
Aggregated Options/SAR Exercises In Last Fiscal Year And Fiscal Year End Option Value
| | | | Number of Securities Underlying Unexercised Options at September 24, 2000 Common Stock | | | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Shares Acquired on Exercise (#) | | Value of Unexercised In-the-Money Options at September 24, 2000 ($)(1) Common Stock | ||||||||||||
| | Value Realized ($) | ||||||||||||||
| Name | Exercisable | Unexercisable | Exercisable | Unexercisable | |||||||||||
| John Allard.......................... | — | — | 155,001 | 89,999 | 133,333 | 66,667 | |||||||||
| Chairman, President | |||||||||||||||
| and CEO | |||||||||||||||
| John Powers.......................... | — | — | 44,067 | 23,133 | 33,333 | 16,667 | |||||||||
| Vice President, CFO | |||||||||||||||
| Michael Foster....................... | — | — | 317,280 | — | — | — | |||||||||
| Formerly Chairman | |||||||||||||||
| and CEO | |||||||||||||||
__________
| (1) | Based on the difference between the exercise price of |
The foregoing options were granted under either the 1995 Stock Option Plan (the "1995 Plan") or the 1997 Equity Incentive Plan (the "1997 Plan"). Both plans are administered by the Stock Option/Compensation Committee, which consists of not less than three outside directors. The Committee determines the key employees to whom, and the time or times at which, options will be granted, the number of shares subject to each option and the terms upon which each option may be granted. An aggregate of 550,000 shares of common stock are reserved for issuance under the 1995 Plan and an aggregate of 750,0003,500,000 shares of common stock are reserved for issuance under the 1997 Plan. Since the adoption of the
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434,2001,607,200 shares of common stock have been granted to selected officers and key employees of the Company.
-11-
Change In Control Plan and Severance Agreements
The Board of Directors has adopted a Change in Control Plan which covers two current officers and one key employee, including certain Named Officers. The provisions of the Change in Control Plan only become effective upon the occurrence of an event constituting a change in control of the Company. Under the Change in Control Plan, a "Change in Control" shall be deemed to have occurred if any of the following events occur: (i) any "person" (as such term is defined in Section 13 and 14 under the Exchange Act) except for Michael Foster (the former Chairman and Chief Executive Officer of the Company), directly or indirectly, is or becomes the "beneficial owner" (as such term is defined in Rule 13d-3 under the Exchange Act) of 25% or more of the Company's common stock; (ii) any change occurs in the composition of the company's Board of Directors resulting in a majority of the present directors not constituting a majority two years from such date, provided that directors who were elected by or on the recommendation of such present majority shall be excluded; or (iii) any other event that would be required to be reported under Item 1 of Form 8-K pursuant to Section 13 or Section 15(d) of the Exchange Act. A change in control shall not be deemed to have occurred if such change in control results from a distressed sale of the Company due to the Company's material default with respect to any applicable debt covenants with its lender. The July 2000 Sunrise Change in Control transaction described above constituted a change in control under the Change in Control Plan.
The Change in Control Plan provides that if, within one (1) year after a change in control of the Company, a Named Officer is discharged without Cause (as defined below) or has resigned for reasons relating to a diminution of responsibilities, compensation or benefits or relocation of place of employment, the Company shall pay to such individual a lump sum severance benefit. For purposes of the Change in Control Plan, "Cause" shall mean conviction of certain crimes, willful misconduct or conduct that caused the Company to suffer a substantial loss or damage. Currently, each Named Officer would receive between nine and eighteen months of base salary, plus bonus, depending upon the Named Officer's years of service and status with the Company. At the discretion of the Board of Directors, the vesting of options may be accelerated in the event of a Change in Control. A Named Officer may resign at any time and for any reason within one year of a Change in Control and receive the base salary component only of the lump sum benefit.
In addition to being covered by the Change In Control Plan, Mr. Allard has a Severance Agreement with the Company which provides, in relevant part, that if the Company terminates his employment for any reason other than cause, or in connection with a change-in-control, the Company will continue to pay him at his then present salary rate for a period of twelveeighteen months.
Mr. Foster has a Severance Agreement with the Company, effective January 1, 2000 and continuing for a period of five years, which provides, in relevant part, for severance of $250,000 per year, payment of life and medical insurance premiums of $16,000 for the first year of the Agreement and approximately $20,000 for the next four years and a car allowance of $12,000 per year. The agreement also provides for the full vesting of options held by Mr. Foster. The expiration and option exercise prices remain unchanged.
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Report of the Stock Option/Compensation Committee
During fiscal 1999,2000, the Stock Option/Compensation Committee in consultation with the Company's other outside directors established the compensation of the Chairman, President and Chief Executive -12-
OperatingFinancial Officer of the Company. The
criteria for bonus awards of the Chief Executive Officer and Chief Operating
Officer in respect of the 1999 fiscal year were determined at a meeting of the
Compensation Committee as constituted on October 20, 1998 (Messrs. Irving Gutin,
Steven Shulman and Bernard Tenenbaum). In determining the individual elements of compensation, the Stock Option/Compensation Committee strives to enable the Company to attract and retain key executives critical to the long-term success of the Company, provide compensation opportunities which are comparable to those offered by similar companies, reward long-term strategic management and the enhancement of shareholder value and create a performance-oriented environment.
In order to meet the foregoing objectives, the Stock Option/Compensation Committee in consultation with the Company's other outside directors has attempted to design and choose components of compensation. The Compensation Committee consulted with
outside compensation consultants to assist in this process and provide
competitive information, advice and recommendations relating to compensation
issues. Compensation packages consist of cash, certain benefits and equity-based compensation. The Company's compensation provides for competitive base salaries which reflect individual performance and level of responsibility. Annual bonuses, when given, are linked to the financial performance of the Company and its subsidiaries as a whole, job performance and the meeting of specific goals. Also included are plans which reward the enhancement of long-term value to the Company's shareholders.
The compensation of the Named Officers for fiscal 19992000 was based on the policies described above. Bonus awards are determined on the basis of a formula in which a weighted performance factor is applied to a target award established for each of the above officer's respective salary levels. The weighted performance factor is derived as a result of the achievement of certain Company performance targets, including the achievement of a certain level of earnings per share. No bonuses were paid to the above officers in fiscal 1999.2000.
Annually, the Stock Option/Compensation Committee reviews with the Chief Executive Officer the individual performance of each of the other executive officers and his recommendations with respect to the appropriate compensation awards. The Stock Option/Compensation Committee also reviews with the Company's Chief Executive Officer the financial and other objectives for each of the executive officers for the following year.
The Stock Option/Compensation Committee has not formally addressed the restrictions under Section 162(m) of the Internal Revenue Code of 1986 because the
Compensation Committeeit does not
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Irving Gutin (Chairman)
Steven Shulman
Stock Option/Compensation Committee:
Joseph A. Julian, Jr.
David A. Preiser
Bernard H. Tenenbaum
Performance Graph
Set forth below is a line graph comparing the yearly percentage change in
the total shareholder return on the Company's common stock against the total
return of the NASDAQ Market Index
Compensation Committee Interlocks and a peer group index consisting of companies
which sell handheld computers, terminals and associated software, electrical
equipment products and instrumentation.Insider Participation
The peer group was selected with the
assistancecurrent members of the Company's Stock Option/Compensation Committee are Messrs. Julian, Preiser and Tenenbaum. No executive officer of the Company has served as a director or member of the compensation committee (or other committee serving an equivalent function) of any other entity, whose executive officers served as a director of or member of the Stock Option/Compensation Committee of the Company.
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Report of the Audit Committee
The Audit Committee reviews the scope of and the results of the audit by the independent public accountants, makes recommendations to the Board as to the selection of independent public accountants for each fiscal year, and reviews the adequacy of the Company's internal accounting and financial controls.
The current members of the Audit Committee are Messrs. Giovacchini, Julian and Stewart. Mr. Giovacchini is independent as that term is defined in Sections 303.01(B)(2)(a) and (3) of the New York Stock Exchange ("NYSE") listing standards. Messrs. Julian and Stewart, who would not meet the NYSE standard of independence for audit committee independence, have served as directors since July 2000 and members of the Audit Committee since August 2000. Under the NYSE independence standards, a director is not considered independent for audit committee purposes if he is employed by the Company or any of its affiliates during the current year or any of the past three years. The NYSE independence standards, which do not apply to the Company, provide that a stockholder holding 10% or more of the Company's outstanding shares may be deemed an affiliate of the Company.
Messrs. Julian and Stewart are principals of Sunrise, a private investment bankersfund with over $200 million in committed capital focusing on the acquisition of controlling interests in middle market companies. As of May 31, 2001, Sunrise beneficially owns approximately 72% of the Company's outstanding shares making it an affiliate of the Company. The Company's Board of Directors determined that the membership on the audit committee of Messrs. Julian and includesStewart is in the best interests of the Company and its stockholders.
Presently, the Audit Committee does not operate under a written charter approved by the Board of Directors.
In fulfilling its oversight responsibilities regarding the Company's financial statements for the year ended September 24, 2000, the Audit Committee reviewed with management the audited financial statements included in the Company's Annual Report. This review included a discussion of the quality, and not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements.
The Audit Committee reviewed with the independent auditors their judgments as to the quality, and not just the acceptability, of the Company's accounting principles and other matters required for discussion under Statement of Accounting Standards No. 61.
The Audit Committee received and reviewed the written disclosure and the letter from the independent auditors required by Independence Standards Board Standard No. 1. Further, the Audit Committee recommended to the Company's Board of Directors, and the Board approved, that the Company's audited financial statements for the year ended September 24, 2000 be included in the Annual Report on Form 10-K as filed with the Securities and Exchange Commission.
Audit Committee:
Paul G. Giovacchini
Joseph A. Julian, Jr.
Michael D. Stewart
-14-
The following issuers: Aura Systems, Inc., Applied Cellular Technology, Inc., BEIgraph compares the five-year cumulative total returns of NEXIQ Technologies, Inc., Fieldworks, Inc., Itron, Inc., Magnetek, Inc., Metrologic
Instruments, Inc., Miltopethe Nasdaq Stock Market Index, the Nasdaq Stocks (SIC 3800-3899) Index and the Previous Peer Group(1). The Company has chosen the Nasdaq Stock (SIC 3800-3899) Index to replace the Previous Peer Group Inc., NAI Technologies, Inc., Percon, Inc.,
Symbol Technologies, Inc., ScanSource, Inc., Telxon Corp., Unova, Inc. and
Woodhead Industries, Inc. The current peer group has not changed fromas a result of the Company's restructuring actions in recent years such that the businesses of the peer group used last year. Management believes that the current peer group provides a
broad cross section of companies in lines of business that are no longer similar to the Company's linebusiness. The performance of business.
[OBJECT OMITTED]
year Company Marketthe Previous Peer 1994 100.000 100.000 100.000Group is displayed here for comparative purposes as required by Securities and Exchange Commission rules and will not be provided in the future. The graph assumes $100 was invested in the stock or the Index on October 1, 1995, 104.348 138.067 120.351
1996 282.609 163.845 118.733
1997 421.739 224.968 164.934
1998 230.435 228.773 151.972
1999 104.348 371.687 137.442
and also assumes the reinvestment of dividends.
EDGAR PRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
COMPARISON OF STOCKHOLDER TOTAL RETURN AMONG NEXIQ TECHNOLOGIES, INC., NASDAQ STOCK MARKET (U.S.COMPANIES), NASDAQ STOCKS (SIC 3800-3899) AND SELF-DETERMINED PEER GROUP
09/30/95 | 09/30/96 | 09/30/97 | 09/30/98 | 09/30/99 | 09/30/00 | |
| NEXIQ Technologies, Inc. | 100 | 270.833 | 404.167 | 220.833 | 100 | 54.167 |
| NASDAQ Stock Market (U.S. Companies) | 100 | 118.665 | 162.899 | 165.470 | 270.346 | 358.869 |
| NASDAQ Stocks (SIC 3800-3899 U.S. Companies) | 100 | 102.528 | 135.590 | 95.520 | 149.793 | 238.81 |
| Self-Determined Peer Group | 100 | 98.655 | 137.045 | 126.274 | 114.043 | 161.249 |
| (1) | The Previous Peer Group was a composite group index consisting of companies which sell handheld computers, terminals and associated software, electrical equipment products and instrumentation. The peer group, selected with the assistance of the Company's investment bankers, is composed of the following issuers: Advanced Lighting Technologies, Inc., Applied Digital Solutions, Inc., Aura Systems, Inc., BEI Technologies, Inc., Fieldworks, Inc., Itron, Inc., Magnetek, Inc., Metrologic Instruments, Inc., Miltope Group, Inc., NAI Technologies, Inc., PSC, Inc., Percon, Inc., ScanSource, Inc., Symbol Technologies, Inc., Telxon Corp., Unova, Inc. and Woodhead Industries, Inc. |
-15-
Certain Relationships and Related Transactions
On July 31, 2000, the Company and its subsidiaries entered into a Convertible Note Agreement with Sunrise Capital Partners, L.P., a private investment fund. David A. Preiser, Joseph A. Julian, Jr., Michael D. Stewart, Irwin N. Gold and Lawrence S. Coben, directors of the Company, are affiliated with Sunrise. Pursuant to the Convertible Note Agreement, Sunrise and certain other participants (which include John R. Allard and certain members of the Allard-Nazarian Group, Inc.) agreed to invest up to $24.1 million in exchange for convertible promissory notes, common stock of the Company, and warrants to purchase common stock. Sunrise and the other participants purchased the securities from the Company in three series. The first, second and third series of securities were purchased on August 9, 2000, November 16, 2000 and January 29, 2001, respectively. The purchase of the third series of securities was at the option of Sunrise. See Note 4 to the consolidated financial statement for a more complete description of the Sunrise transaction.
Prior to the sale of WPI Instruments, Inc. in November 2000, the Company is currently leasingleased and occupyingoccupied a building at 850 Perimeter Road, Manchester, New Hampshire (the "Perimeter Road Facility") from 850 Perimeter Road -14-
current yearly base rental for the Perimeter Road facility, which houses the operations of WPI Instruments, Inc., is $402,408. The
lease term expires on December 31, 2002, and may be renewed by the Company for
an extended term to December 31, 2007.was approximately $468,000. In management's opinion, the lease rate for this facility is not in excess of the range of fair market rentals in the relevant area.
Hinckley, Allen & Snyder, a law firm of which Stephen Carlotti, a director
until June 2000, is a member, provided legal services to the Company during its
1999 fiscal year.
Proposal No.
PROPOSAL NO. 2
AMENDMENT TO AMENDED AND RESTATED ARTICLES OF INCORPORATION
TO INCREASE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
(Item 2 on the Proxy Card)
General
The Company's Amended and Restated Articles of Incorporation authorize the
issuance of 20,000,000 shares of common stock, $.01 par value. On September 13,
2000, the Board of Directors of the Company unanimously approved an amendment to
the Amended and Restated Articles of Incorporation to increase the number of
authorized shares of common stock from 20,000,000 to 75,000,000 and to submit
the proposed amendment to the Company's shareholders.
The general purpose and effect of the proposed amendment to the Company's
Amended and Restated Articles of Incorporation is to increase the number of
shares of common stock that the Company is authorized to issue. The Company's
Amended and Restated Articles of Incorporation currently provide that the
Company may issue up to 20,000,000 shares of common stock. The proposed
amendment would increase the number of authorized shares by 55,000,000, to
75,000,000 shares. This increase would create a sufficient reserve of shares of
common stock for the Company's future needs, and would allow the Company to
reserve shares of common stock for issuance upon conversion of certain debt
instruments described below.
The Sunrise Capital Partners Transaction
On July 31, 2000, the Company and its subsidiaries entered into a
Convertible Note Agreement with Sunrise. Pursuant to the Convertible Note
Agreement, Sunrise and certain other participants (which include members of the
Company's management and some members of the Allard-Nazarian Group) have agreed
to invest up to $24.1 million in a combination of convertible promissory notes
(the "Notes"), common stock and warrants to purchase common stock (the
"Warrants"). The Company entered into the Convertible Note Agreement in order to
raise capital to help the Company meet its near- and long-term liquidity needs.
The Board of Directors and management of the Company believes that the
transactions contemplated by the Convertible Note Agreement are necessary to
finance the Company's continuing operations and to finance the development of
the Company's new products.
The Company will use the money raised from the sale of Notes, common stock
and Warrants to refinance, in part, amounts owed under the Company's existing
senior credit facility
-15-
with certain lenders, including Fleet Bank-NH. The money will also be used to
repay amounts owed to certain affiliates of the Allard-Nazarian Group under a
series of promissory notes dated August 3, 1998. The balance of the cash will be
used to finance the Company's operations and to finance the development of new
products.
Background of the Sunrise Transaction
Beginning in April 1999, the Board of Directors of the Company instructed
management to explore various strategic alternatives for the Company in order to
maximize shareholder value. After several months of planning and analysis, the
Board authorized a series of initiatives designed to reposition the Company as a
provider of vehicle diagnostic equipment and software solutions. Accordingly,
the Company engaged in a series of transactions to divest several of its
business lines and use the proceeds from those divestitures to reduce corporate
debt. The Company also continued to invest in research and development in order
to develop new products for its diagnostic business.
The Company's operating losses increased in fiscal 1999 and 2000 due to a
number of factors, including the restructuring charges it recognized as a result
of the divestitures, decreased sales in some of its remaining business units and
increased interest costs. During that period of time, the Company also failed to
comply with the financial covenants contained in its existing senior credit
facility, and sought from its lenders a number of waivers and amendments to the
terms of its facility designed to address the Company's inability to comply with
the terms of the debt. During this period, cash from the Company's operations
became insufficient to meet the Company's near- and long-term liquidity
requirements, and to finance the Company's investment in developing new
products.
In January, 2000, the Company, with the assistance of the investment
banking firm of McFarland Dewey & Co., L.L.C. ("McFarland Dewey"), began
exploring means of raising additional capital for the Company to finance the
Company's continuing operations and refinance its existing indebtedness. During
this period, the Company negotiated with its lenders several forbearance
arrangements pursuant to which the lenders agreed to forbear from exercising
certain rights and remedies available under the senior credit facility while the
Company pursued alternative means of financing.
Between March and May 2000, the Company engaged in discussions with a
number of parties, including Sunrise, about possible investments in the Company.
The Board of Directors and management of the Company, with the assistance of its
outside financial advisors, considered each of the proposals that the Company
received, and the increasing urgency for obtaining a means of funding the
Company's short-term operations. On May 17, 2000, the Board of Directors
concluded that the proposal received from Sunrise was the most favorable to the
Company and its shareholders and directed the Company to execute a commitment
letter with Sunrise outlining the material terms of Sunrise's investment. The
Company and Sunrise then began the preparation and negotiation of the definitive
documentation for their agreement, while continuing to negotiate with the
Company's senior lenders appropriate modifications to the Company's existing
senior credit facility.
The Board of Directors also retained McFarland Dewey to render its opinion
as to whether the proposal to invest up to $24 million into the Company by
Sunrise was fair from a financial perspective to the shareholders of the
Company. On July 25, 2000 McFarland Dewey delivered a written opinion to the
Board of Directors of the Company stating that, as of that date,
-16-
the financial terms of Sunrise's investment in the Company were fair from a
financial perspective to the shareholders of the Company. The full text of the
fairness opinion is set forth in Appendix A attached to this proxy statement.
Shareholders are urged to read this opinion in its entirety for a description of
the procedures followed, matters considered, assumptions made and methods
employed by McFarland Dewey in arriving at its opinion.
In approving the transaction with Sunrise, the Company's Board considered,
among other things, the following factors (none of which were qualified or
assigned relative weight as compared to any other factor):
o the Company's need for capital to finance its current operations and
the development of new products
o the Company's inability to meet the financial covenants in its existing
senior credit facility, and the ability of the lenders thereunder to
cause the amounts owing under the facility to be payable at any time
o the extensive effort that the Company and the Board of Directors had
made to obtain alternative sources of funding, and the Board's belief
that the proposal made by Sunrise was superior to all other proposals
o the substantial amount of capital that Sunrise and the other
participants were prepared to commit to invest in the Company
o the terms of the Notes to be issued to Sunrise, which permitted the
Company to defer payment of fees and interest in the short term by
delivery of additional Notes
In light of these and other factors, the Company's Board of Directors approved
the form and terms of the transaction with Sunrise. The parties executed the
Convertible Note Agreement on July 31, 2000.
Terms of the Sunrise Transaction
The Convertible Note Agreement provides for the sale of three series of
convertible Notes, in aggregate principal amounts of $14.1 million, $5.0 million
and up to $5.0 million, respectively. The Notes, which mature three years from
the date of issuance, bear interest at the rate of 10.75% per annum, and are
convertible into shares of the Company's common stock. At any time prior to
maturity of the Notes, each holder thereof has the option to convert any or all
of the outstanding principal balance of the Notes, together with any accrued but
unpaid interest and fees, into common stock of the Company at a rate of one
share of common stock for each $1.75 of principal, interest and fees converted
(subject to adjustment in the event of any stock dividend, stock split,
combination, reclassification or similar event). Under certain circumstances,
the Company may demand that a holder convert the Notes into common stock on the
same terms.
Interest on the Notes is payable in cash. If the Company is not in default
under the terms of the Convertible Note Agreement, the Company may elect to pay
interest in additional Notes.
In addition, in conjunction with the sale of each series of Notes, the
Convertible Note Agreement provides for the sale of Warrants representing the
right to purchase 20% of the number of shares of common stock which would be
issuable upon conversion of each such series
-17-
of Notes. The Warrants, which will be exercisable at any time at the option of
the holder, have an exercise price of $1.75 per share.
Each sale of Notes and Warrants is subject to a closing fee equal to 2% of
the aggregate principal amount of the Notes issued. The Company may also elect
to pay the closing fee in additional Notes. In addition, Sunrise Advisors, LLC,
the managing partner of Sunrise, will receive a transaction fee, payable in
cash, equal to 2% of the aggregate principal amount of Notes issued.
The Notes are subordinated in right of payment to the payment in full of
all obligations of the Company under the Company's existing senior credit
facility as amended in an aggregate amount not to exceed $26 million. The
Company is not permitted to incur any other indebtedness that is subordinated to
the indebtedness under the existing senior credit facility and senior to the
Notes or any other indebtedness of the Company.
The Notes are secured by a second priority lien on all the Company's
existing and after-acquired real, personal and intellectual property, including
a pledge of 100% of the capital stock of all the Company's subsidiaries (other
than certain foreign subsidiaries to the extent such pledge would result in
material adverse tax consequences).
The shares of common stock of the Company issued and to be issued to
Sunrise and the other participants have been and will be issued pursuant to
exemptions from the registration requirements of federal and state securities
laws. These shares may therefore, be resold without registration only as
provided for by Rule 144 under the Securities Act of 1933 or as otherwise
provided under the Securities Act. Pursuant to a Registration Rights Agreement
entered into by the Company, Sunrise and the other participants in connection
with the Convertible Note Agreement, the holders of at least 30% of the shares
of common stock of the Company issued or issuable upon conversion of the Notes
and exercise of the Warrants issued to Sunrise and the other participants have
the right to require the Company to register the shares under the Securities
Act. In the event the Company proposes to register any securities of the Company
for sale to the public under the Securities Act, all holders of the shares of
common stock of the Company underlying the Notes and the Warrants also have the
right to require the Company to include their shares along with the securities
of the Company in the registration statement.
In the event of a change of control in the Company, Sunrise and the other
participants have the option to require the Company to repurchase the Notes at a
price equal to 110% of the outstanding principal amount, including accrued
interest and fees, of the Notes. In the event of asset dispositions or the
issuance of equity securities by the Company, Sunrise and the other participants
have the option to require the Company to make repayments on the Notes in
certain circumstances.
Purchase of the Initial Series of Securities
On August 9, 2000, Sunrise and the other participants purchased the first
series of Notes (in aggregate principal amount of approximately $14.1 million),
Warrants to purchase an additional 1.6 million shares of common stock, as well
as approximately 1.8 million shares of Company common stock (representing
approximately 20% of the outstanding capital stock of the Company). In
connection with this initial purchase, the closing fee of approximately $280,000
was paid by the Company by the issuance of additional Notes.
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As of August 9, 2000, after giving effect to the initial purchase of Notes,
Warrants and common stock by Sunrise and the other participants, there were
approximately 7.9 million shares of common stock of the Company outstanding. In
addition, approximately 11.2 million shares were reserved for issuance, as
follows: approximately 1.3 million shares were reserved under the Company's 1997
Plan and its 1995 Plan; approximately 25,000 shares were reserved under the
Company's Employee Stock Purchase Plan and its Stock Bonus Award Plan;
approximately 8.2 million shares were reserved for issuance upon conversion of
the outstanding principal of the Notes and related fees; and approximately 1.7
million shares were reserved for issuance upon exercise of outstanding common
stock purchase warrants. Accordingly, after the first sale of Notes to Sunrise
and the other participants, the Company has only .8 million authorized shares
that are not issued or reserved for issuance.
Purpose and Effect of the Proposed Charter Amendment
As described above, the Convertible Note Agreement contemplates the sale to
Sunrise and the other participants of two series of additional Notes in
aggregate principal amount of up to $10,000,000, as well as Warrants to purchase
approximately 1.1 million additional shares of common stock. Assuming the
issuance and conversion of all the additional Notes, including the conversion of
interest and related closing fees, and the exercise of all additional Warrants,
the Company will be required to issue approximately 7.0 million additional
shares of common stock. Accordingly, the Company and its Board of Directors are
asking the shareholders to increase the number of authorized shares of common
stock in order to allow the Company to issue the additional Notes and the
additional Warrants and to pay any interest accruing on the Notes "in kind" by
delivery of additional Notes.
If the shareholders of the Company fail to approve Proposal No. 2, the
Company will be unable to satisfy its obligations under the Convertible Note
Agreement and issue additional Notes and Warrants. This could have a material
adverse effect of the Company because, without the proceeds to be provided by
the sale of the additional Notes and Warrants:
o the Company may not generate sufficient cash to fund its costs of
operations
o the Company may not be able to meet its payment obligations, including
payments to suppliers and payments due under the Company's existing
senior credit facility
o the Company may not be able to pursue opportunities in its existing
business lines
o the Company may be unable to finance the development of new products
o the Company will be unable to meet the operating and financial covenants
contained in its existing debt instruments which may result in events of
default under the terms thereof
o the Company would again be forced to seek alternative means of raising
capital, which would likely be on terms less favorable than the terms of
the Sunrise transaction
Any or all of these factors could have a material adverse effect on the
Company. Accordingly, the Board is asking its shareholders to vote in favor of
Proposal No. 2 so that the Company will have a sufficient number of authorized
shares to complete the transaction with Sunrise and the other participants.
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The Company is asking its shareholders to authorize an increase in the
number of authorized shares of common stock that is greater than the number
necessary to allow the Company to issue the additional Notes and the related
additional Warrants, in order to create a reserve for future needs. If the Board
of Directors deems it to be in the best interest of the Company and that of the
shareholders to issue these additional shares of common stock in the future, the
Board of Directors generally will not seek further authorization by vote of the
shareholders, unless such authorization is otherwise required by law or
regulations. The proposed amendment would give the Board of Directors the
flexibility to act promptly when it determines that issuance of additional
shares in the best interest of the Company and the Shareholders.
Other Factors to be Considered by Shareholders
The increase in the number of authorized shares of common stock will have a
dilutive effect on the percentage ownership of shares held by existing
shareholders when those shares are issued. Issuance of shares greater than those
necessary to allow the Company to issue the additional Notes and related
additional Warrants could have an anti-takeover effect. If the Board of
Directors desired to issue additional shares in the future, such issuance could
dilute the voting power of a person seeking control of the Company, thereby
deterring or rendering more difficult a merger, tender offer, proxy contest or
an extraordinary corporate transaction opposed by the Company.
Stockholders Agreement
Pursuant to a Stockholders Agreement dated August 9, 2000, Sunrise and
certain other shareholders (including all the participants in the Sunrise
transaction and certain current and former members of management) have agreed to
vote in favor of Proposal No. 2. These shareholders, in the aggregate, own
approximately 64% of the outstanding shares of common stock of the Company.
Recommendation of the Board of Directors
For the reasons discussed above, the Board of Directors recommends that the
shareholders adopt the following vote:
That the proposed amendment to the Corporation's Amended and
Restated Articles of Incorporation to increase the authorized
capital stock of the Corporation to seventy-five million
(75,000,000) shares of One Cent ($.01) par value common stock as
heretofore recommended by the Board of Directors hereby is
approved and adopted.
The affirmative vote of a majority of the outstanding shares of common
stock present or represented at the Meeting is required to approve an amendment
to Amended and Restated Articles of Incorporation increasing the number of
authorized shares of common stock from 20,000,000 to 75,000,000.
The Board of Directors recommends that the shareholders vote "FOR" the
amendment to the Amended and Restated Articles of Incorporation to increase the
number of authorized shares of common stock from 20,000,000 to 75,000,000.
Proxies solicited by the Board of Directors will be voted "FOR" the proposal
unless otherwise indicated.
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Proposal No. 3
AMENDMENT TO AMENDED AND RESTATED ARTICLES OF
INCORPORATION TO CHANGE THE NAME OF THE COMPANY
(Item 3 on the Proxy Card)
The Board of Directors of the Company is proposing that the shareholders
amend the Company's Amended and Restated Articles of Incorporation to change the
name of the Company.
At the present time, the Company has not decided on a new name. The Company
has retained the services of a consultant to help it choose a new name and is
awaiting the consultant's report. By the time of the Annual Meeting, the Board
of Directors will have chosen a new name, and the new name will be presented to
the shareholders at the Meeting. Properly executed proxies marked "FOR" Proposal
No. 3, and properly executed proxies for which no direction on Proposal No. 3 is
given, will be voted at the Annual Meeting in favor of the new name determined
by the Board of Directors, although shareholders voting by proxy will not know
the new name when they are completing and returning their proxies.
Reasons for the Proposal
With the recent sales of six of the Company's subsidiaries and the
Company's expansion of its electronic vehicle diagnostics business, the current
name is no longer readily identifiable with the Company's business. Management
and the Board intend to choose a new name that is a more exciting, descriptive
reflection of the Company's new focus and that will create more awareness of the
Company's most important product line. The Company plans to continue to focus on
the electronic vehicle diagnostics business, and the Board of Directors believes
that it is in the Company's best interest to change its name to one more
identified with that business.
Recommendation of the Board of Directors
The Board of Directors recommends that the shareholders adopt the following
vote:
That the proposed amendment to the Corporation's Amended and Restated
Articles of Incorporation to change the name of the Corporation to the name
determined by the Board of Directors and presented to shareholders at the
Annual Meeting is approved and adopted.
The affirmative vote of a majority of the outstanding shares of common
stock present or represented at the Meeting is required to approve an amendment
to the Company's Amended and Restated Articles of Incorporation changing the
Company's name.
The Board of Directors recommends that the shareholders vote "FOR" approval
of the amendment to the Amended and Restated Articles of Incorporation to change
the name of the Company from WPI Group, Inc. to the name determined by the Board
of Directors and presented to shareholders at the Annual Meeting. Proxies
solicited by the Board of Directors will be voted "FOR" the proposal unless
otherwise indicated.
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Proposal No. 4
AMENDMENT OF 1997 EQUITY INCENTIVE PLAN
(Item 4 on the Proxy Card)
The Board of Directors has unanimously approved, subject to shareholder
approval, amendments to the Company's 1997 Equity Incentive Plan to increase the
number of shares of the Company's common stock available for issuance under the
1997 Plan from 750,000 to 3,500,000 and to increase the limit on the number of
stock-based awards that can be granted to any one person during any year from
200,000 to 500,000 (the "Amendment").
Background
The Company has historically utilized stock options as part of its overall
compensation program for key employees, directors and officers. As of September
15, 2000, options for approximately 716,000 shares were outstanding under the
1997 Plan, leaving a balance of only approximately 34,000 shares that could be
used for future awards under the 1997 Plan. The Board of Directors believes that
it is in the best interest of the Company to have stock-based awards available
in order to retain, attract and motivate highly qualified personnel for the
Company. The Amendment, if approved by shareholders, will enable the Company to
reserve a sufficient number of shares of common stock for future awards under
the 1997 Plan. The amendment will also increase the number of stock-based awards
that can be granted to any one person during any one year of the Company.
Description of the 1997 Plan
The 1997 Plan was originally approved by the Board in 1997 and by the
shareholders at the Company's 1998 Annual Meeting. The following summary of the
1997 Plan is qualified in its entirety by reference to the complete text of the
1997 Plan. The full text of the 1997 Plan, as proposed to be amended, is
available upon written request to the Company. Capitalized terms used herein
will, unless otherwise defined, have the meanings assigned to them in the text
of the 1997 Plan.
The 1997 Plan is intended to provide officers and other employees of the
Company and each of its subsidiaries with appropriate incentives and rewards to
encourage them to enter into and continue in the employ of the Company and to
acquire a proprietary interest in the long-term success of the Company; to
compensate each member of the Board of the Company who is not an employee of the
Company (each a "Non-Employee Director") and provide incentives to Non-Employee
Directors which are directly linked to increases in stock value; and to reward
the performance of individual officers, other employees, consultants and
Non-Employee Directors in fulfilling their personal responsibilities for
long-range achievements.
The 1997 Plan is intended to comply with the requirements of Rule 16b-3
promulgated under the Securities Exchange Act of 1934. In addition, the 1997
Plan is intended to provide performance-based compensation so as to be eligible
for compliance with Section 162(m) of the Internal Revenue Code which,
generally, limits the deduction by an employer for compensation of certain
covered officers. Under Section 162(m), certain compensation, including
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compensation based on the attainment of performance goals, may be disregarded
for purposes of this deduction limit if certain requirements are met. Among the
requirements for compensation to qualify for this exception is that the material
terms pursuant to which the compensation is to be paid be disclosed to and
approved by the shareholders in a separate vote prior to the payment.
General
The 1997 Plan provides for the granting of awards to such employees
(including officers of the Company, whether or not they are directors of the
Company) and consultants of the Company as the Stock Option/Compensation
Committee of the Board (the "Committee") may select from time to time. Currently
there are approximately 480 employees and consultants eligible to participate in
the 1997 Plan. The 1997 Plan also provides for the mandatory grant of
Non-Qualified Stock Options to Non-Employee Directors of the Company. Currently,
there are six such directors.
An aggregate of 750,000 shares of common stock of the Company is currently
reserved for issuance under the 1997 Plan, subject to adjustment as described
below. Such shares may be authorized but unissued common stock or authorized and
issued common stock held in the Company's treasury. Generally, shares subject to
an award that remain unissued upon expiration or cancellation of the award will
be available for other awards under the 1997 Plan. Currently, the total number
of shares of common stock subject to awards (including awards paid in cash but
denominated as shares of common stock) granted to any one Participant of the
1997 Plan during any tax year of the Company cannot exceed 200,000 shares. In
the event that the Committee determines that any dividend or other distribution,
stock split, recapitalization, reorganization, merger or other similar corporate
transaction or event affects the common stock such that an adjustment is
appropriate in order to prevent dilution or enlargement of the rights of
Participants under the 1997 Plan, then the Committee will make such equitable
changes or adjustments as it deems necessary to the number and kind of shares of
common stock which may thereafter be issued in connection with awards, the limit
on individual awards, the number and kind of shares of common stock subject to
each outstanding award, and the exercise price, grant price or purchase price of
each award.
Awards under the 1997 Plan may be made in the form of (a) Incentive Stock
Options, (b) Non-Qualified Stock Options (Incentive and Non-Qualified Stock
Options are collectively referred to as "options"), (c) Stock Appreciation
Rights, (d) Restricted Stock, (e) Phantom Stock, and (f) Other Awards.
Administration
The 1997 Plan is administered by the Committee. The Committee consists of
two or more persons, each of whom is a "nonemployee director" within the meaning
of Section 162(m) and a "disinterested person" within the meaning of Rule 16b-3.
The Committee is authorized, among other things, to construe, interpret and
implement the provisions of the 1997 Plan, to select the persons to whom awards
will be granted, to determine the terms and conditions of such awards and to
make all other determinations deemed necessary or advisable for the
administration of the 1997 Plan; provided, however, that the Committee may not
exercise discretion under any provision of the 1997 Plan with respect to
Non-Qualified Stock Options granted to Non-Employee Directors.
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Options
The Committee determines each option's expiration date; provided, however,
that no incentive stock option may be exercised more than ten years after the
date of grant. The purchase price per share payable upon the exercise of an
option (the "option exercise price") is established by the Committee; provided,
however, that in the case of an Incentive Stock Option, the option exercise
price may be no less than the Fair Market Value of a share of common stock on
the date of grant. The option exercise price is payable by any one of the
following methods or a combination thereof: (a) cash; (b) personal, certified or
bank cashier's check; (c) wire transfer; (d) with consent of the Committee, by
surrender of shares of common stock held at least six months by the Participant
and having a Fair Market Value on the date of the exercise equal to the option
exercise price; or (e) by such other payment method as the Committee may
prescribe.
The Committee may specify at the time of grant or with respect to
Non-Qualified Stock Options, at or after the time of grant, that a Participant
will be granted a new Non-Qualified Stock Option (a "Reload Option") for a
number of shares equal to the number of shares surrendered by the participant
upon exercise of all or part of an option. Reload Options will be subject to
such conditions as may be specified by the Committee in its discretion, subject
to the terms of the 1997 Plan. The 1997 Plan provides that a Non-Employee
Director who first became a director after April 1, 1997 will be granted
automatically a Non-Qualified Stock Option to purchase 10,000 shares of common
stock. Commencing with the 1999 Annual Meeting of Shareholders, each
Non-Employee Director (other than a director who is first elected at the annual
meeting for that year or within six months prior to such annual meeting) will be
granted automatically a Non-Qualified Stock Option to purchase 2,500 shares of
common stock; provided, however, that no annual grants to Non-Employee Directors
shall be made unless the Company's earnings per share for the most recently
completed fiscal year has increased from the prior fiscal year by at least 15%.
Non-Qualified Stock Options granted to Non-Employee Directors shall be
exercisable in 1/3 increments beginning on the first anniversary of the date
that the Non-Qualified Stock Option is granted and expire ten years from the
date of grant.
Stock Appreciation Rights
Stock appreciation rights may be granted in connection with all or any part
of, or independently of, any option granted under the 1997 Plan. A stock
appreciation right granted independently of any option will be subject to the
same vesting rules as described above for options. A stock appreciation right
granted in tandem with any stock option will be exercisable only when and to the
extent the option to which it relates is exercisable. The grantee of a stock
appreciation right has the right to surrender the stock appreciation right and
receive from the Company, in cash, an amount equal to the excess of the Fair
Market Value of a share of common stock over the exercise price of the stock
appreciation right for each share of common stock in respect of which such stock
appreciation right is being exercised.
Restricted Stock
The Committee may grant restricted shares of common stock to such persons,
in such amounts, and subject to such terms and conditions (including the
attainment of performance goals) as the Committee may determine in its
discretion.
-24-
Phantom Stock
The Committee may grant shares of Phantom Stock to such persons, in such
amounts, and subject to such terms and conditions (including the attainment of
performance goals) as the Committee may determine in its discretion. If the
requirements specified by the Committee are met, the grantee of such an award
will receive a cash payment equal to the Fair Market Value of the shares covered
thereby plus the dividends that would have been paid on such shares had they
actually been outstanding following the grant date.
Other Awards
Other awards valued in whole or in part by reference to, or otherwise based
on, common stock may be granted either alone or in addition to other awards
under the 1997 Plan. Subject to the provisions of the 1997 Plan, the Committee
will have the sole and complete authority to determine the persons to whom and
the time or times at which such Other Awards will be granted, the number of
shares of common stock to be granted pursuant to such Other Awards and all other
conditions of such Other Awards.
Other Features of the 1997 Plan
The Board may suspend, revise, terminate or amend the 1997 Plan at any
time; provided, however, that shareholder approval must be obtained if and to
the extent that the Board deems it appropriate to satisfy Section 162(m); and
provided further that no such action may, without the consent of a Participant,
reduce the Participant's rights under any outstanding award.
Unless otherwise determined by the Committee, or unless the applicable
agreement otherwise provides, in the event of a Change In Control (as defined
under the Company's Change In Control Plan), all outstanding awards will become
fully vested and/or immediately exercisable.
Certain Federal Income Tax Consequences
The following discussion is a brief summary of the principal United States
Federal income tax consequences under current Federal income tax laws relating
to awards under the 1997 Plan. This summary is not intended to be exhaustive
and, among other things, does not describe state, local or foreign income and
other tax consequences.
Non-Qualified Stock Options
An optionee will not recognize any taxable income upon the grant of a
Non-Qualified Stock Option. The Company will not be entitled to a tax deduction
with respect to the grant of a Non-Qualified Stock Option. Upon exercise of a
Non-Qualified Stock Option, the excess of the Fair Market Value of the common
stock on the exercise date over the option exercise price will be taxable as
compensation income to the optionee and will be subject to applicable
withholding taxes. The Company will generally be entitled to a tax deduction at
such time in the amount of such compensation income. The optionee's tax basis
for the common stock received pursuant to the exercise of a Non-Qualified Stock
Option will equal the sum of the compensation income recognized and the exercise
price.
In the event of a sale of common stock received upon the exercise of a
Non-Qualified Stock Option, any appreciation or depreciation after the exercise
date generally will be taxed as
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capital gain or loss and will be long-term capital gain or loss if the holding
period for such common stock is more than twelve months.
Incentive Stock Options
An optionee will not recognize any taxable income at the time of grant or
timely exercise of an Incentive Stock Option and the Company will not be
entitled to a tax deduction with respect to such grant or exercise. Exercise of
an Incentive Stock Option may, however, give rise to taxable compensation income
subject to applicable withholding taxes, and a tax deduction to the Company, if
the Incentive Stock Option is not exercised on a timely basis (generally, while
the optionee is employed by the Company or within 90 days after termination of
employment) or if the optionee subsequently engages in a "disqualifying
disposition" as described below.
A sale or exchange by an optionee of shares acquired upon the exercise of
an Incentive Stock Option more than one year after the transfer of the shares to
such optionee and more than two years after the date of grant of the Incentive
Stock Option will result in any difference between the net sale proceeds and the
exercise price being treated as long-term capital gain (or loss) to the
optionee. If such sale or exchange takes place within two years after the date
of grant of the Incentive Stock Option or within one year from the date of
transfer of the Incentive Stock Option shares to the optionee, such sale or
exchange will generally constitute a "disqualifying disposition" of such shares
that will have the following results: any excess of (a) the lesser of (i) the
Fair Market Value of the shares at the time of exercise of the Incentive Stock
Option and (ii) the amount realized on such disqualifying disposition of the
shares over (b) the option exercise price of such shares, will be ordinary
income to the optionee, subject to applicable withholding taxes, and the Company
will be entitled to a tax deduction in the amount of such income. Any further
gain or loss after the date of exercise generally will qualify as capital gain
or loss and will not result in any deduction by the Company.
Restricted Stock
A grantee will not recognize any income upon the receipt of Restricted
Stock unless the holder elects under Section 83(b) of the Code, within thirty
days of such receipt, to recognize ordinary income in an amount equal to the
Fair Market Value of the Restricted Stock at the time of receipt, less any
amount paid for the shares. If the election is made, the holder will not be
allowed a deduction for amounts subsequently required to be returned to the
Company. If the election is not made, the holder will generally recognize
ordinary income, on the date that the restrictions to which the Restricted Stock
are subject are removed, in an amount equal to the Fair Market Value of such
shares on such date, less any amount paid for the shares. At the time the holder
recognizes ordinary income, the Company generally will be entitled to a
deduction in the same amount.
Generally, upon a sale or other disposition of Restricted Stock with
respect to which the holder has recognized ordinary income (i.e., a Section
83(b) election was previously made or the restrictions were previously removed),
the holder will recognize capital gain or loss in an amount equal to the
difference between the amount realized on such sale or other disposition and the
holder's basis in such shares. Such gain or loss will be long-term capital gain
or loss if the holding period for such shares is more than twelve months.
-26-
Other Types of Awards
The grant of a stock appreciation right or Phantom Stock award will not
result in income for the grantee or in a tax deduction for the Company. Upon the
settlement of such a right or award, the grantee will recognize ordinary income
equal to the aggregate value of the payment received, and the Company generally
will be entitled to a tax deduction in the same amount.
Recommendation of the Board of Directors
The Board of Directors recommends that the shareholders adopt the
following vote:
That the proposed amendments to the 1997 Equity Incentive Plan
increasing the number of shares of common stock available for
issuance under the Plan from 750,000 to 3,500,000 and
increasing the limit on the number of stock-based awards that
can be granted to any one person during any one year from
200,000 to 500,000 as heretofore recommended by the Board of
Directors hereby are approved and adopted.
The affirmative vote of a majority of the outstanding shares of common
stock present or represented at the Meeting is required to approve the
amendments to the 1997 Plan increasing the number of authorized shares of common
stock available for issuance from 750,000 to 3,500,000 and increasing the number
of share limits on the number of stock-based awards that can be granted to any
one person during any one year by the Company from 200,000 to 500,000.
The Board of Directors recommends that the shareholders vote "FOR" the
amendments to the 1997 Equity Incentive Plan. Proxies solicited by the Board of
Directors will be voted "FOR" the proposal unless otherwise indicated.
Proposal No. 5
AMENDMENT TO AMENDED AND RESTATED ARTICLES OF INCORPORATION
TO AUTHORIZE THE ISSUANCE OF 20,000,000 SHARES OF PREFERRED STOCK
(Item 5 on the Proxy Card)
On September 13, 2000, the Board of Directors of the Company unanimously
approved an amendment to the Amended and Restated Articles of Incorporation of
the Company which would create a series of preferred stock, par value $.01 per
share (the "Preferred Stock"), for which the Board would have the right to fix
the rights, terms and preferences at the time of issuance, and which would
authorize the issuance of up to 20,000,000 shares of such Preferred Stock. The
Company's Amended and Restated Articles of Incorporation currently only
authorize the issuance of common stock.
Purpose and Effect of the Proposed Charter Amendment
Subject to the provisions of the Company's Amended and Restated Articles of
Incorporation and the limitations prescribed by law, the Board of Directors
would be expressly authorized, at its discretion, to adopt resolutions to issue
shares, to fix the number of shares and to change the number of shares
constituting any series and to provide for or change the voting powers,
designations, preferences and relative, participating, optional or other special
rights,
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qualifications, limitations or restrictions thereof, including dividend rights
(including whether the dividends are cumulative), dividend rates, terms of
redemption (including sinking fund provisions), redemption prices, conversion
rights and liquidation preferences of the shares constituting any series of the
Preferred Stock, in each case without any further action or vote by the
shareholders. The board of directors would be required to make any determination
to issue shares of preferred stock based on its judgment as to the best
interests of the Company and its shareholders.
The proposed amendment will provide the Company with increased financial
flexibility in meeting future capital requirements by providing another type of
security in addition to its common stock, as it will allow Preferred Stock to be
available for issuance from time to time and with such features as determined by
the Board of Directors for any proper corporate purpose. Such purposes could
include, without limitation, issuance for cash as a means of obtaining capital
for use by the Company, or issuance as part or all of the consideration required
to be paid by the Company for acquisitions of other businesses or properties.
The Board of Directors believes that it is desirable that the Company have the
flexibility to issue shares of Preferred Stock without further shareholder
action, except as otherwise provided by law.
The Company has no immediate definitive plans to issue any shares of
preferred stock. Therefore, the terms, rights and features of any Preferred
Stock issued cannot be stated or predicted with certainty.
It is not possible to state the effects of the proposed amendment upon the
rights of holders of common stock until the Board of Directors determines the
respective rights of the holders of one or more series of Preferred Stock.
However, the issuance of shares of Preferred Stock pursuant to the Board of
Directors' authority described above may adversely affect the rights of the
holders of common stock. Specifically, the effects of such issuances of
Preferred Stock could include (i) reduction of the amount otherwise available
for payment of dividends on common stock, if any, (ii) restrictions on dividends
on common stock, (iii) dilution of the voting power of common stock, and (iv)
restrictions on the rights of holders of common stock to share in the Company's
assets on liquidation until satisfaction of any liquidation preference granted
to the holders of such subsequently designated series of Preferred Stock. For
example, Preferred Stock issued by the Company may rank prior to the common
stock as to dividend rights, liquidation preferences or both, may have full or
limited voting rights, and may be convertible into shares of common stock.
Accordingly, the issuance of shares of Preferred Stock could decrease the amount
of earnings and assets allocable to or available for distribution to holders of
common stock and adversely affect the rights and powers, including voting rights
of the common stock, and may discourage bids for the common stock or may
otherwise adversely affect the market price of the common stock
Any issuance of Preferred Stock with voting rights could, under certain
circumstances, have the effect of delaying or preventing a change in control of
the Company by increasing the number of outstanding shares entitled to vote and
by increasing the number of votes required to approve a change in control of the
Company. Shares of voting or convertible Preferred Stock could be issued, or
rights to purchase such shares could be issued, to render more difficult or
discourage an attempt to obtain control of the Company by means of a tender
offer, proxy contest, merger or otherwise. The ability of the Board of Directors
to issue such additional shares of Preferred Stock, with the rights and
preferences it deems advisable, could discourage an attempt by a party to
acquire control of the Company by tender offer or other means. Such issuances
could therefore deprive shareholders of benefits that could result from such an
attempt,
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such as the realization of a premium over the market price that such an attempt
could cause. Moreover, the issuance of such additional shares of Preferred Stock
to persons friendly to the Board of Directors could make it more difficult to
remove incumbent managers and directors from office even if such change were to
be favorable to shareholders generally.
While the amendment may have anti-takeover ramifications, the Board of
Directors believes that the financial flexibility offered by the amendment
outweighs any disadvantages. To the extent that the amendment may have
anti-takeover effects, the amendment may encourage persons seeking to acquire
the Company to negotiate directly with the Board of Directors enabling the Board
of Directors to consider the proposed transaction in a manner that best serves
the shareholders' interests.
Recommendation of the Board of Directors
The Board of Directors recommends that the shareholders adopt the
following vote:
That the proposed amendment to the Amended and Restated
Articles of Incorporation to authorize the issuance of
20,000,000 shares of preferred stock, $.01 par value, having
such designations, preferences and relative, participating,
optional and or other special rights as determined by the
Board of Directors pursuant to the New Hampshire Business
Corporation Act as heretofore recommended by the Board of
Directors hereby is approved and adopted.
The affirmative vote of a majority of the outstanding shares of common
stock present or represented at the Meeting is required to approve an amendment
to Amended and Restated Articles of Incorporation authorizing the issuance of
20,000,000 shares of Preferred Stock.
The Board of Directors recommends that the shareholders vote "FOR" the
amendment to the Amended and Restated Articles of Incorporation authorizing the
issuance of 20,000,000 shares of Preferred Stock. Proxies solicited by the Board
of Directors will be voted "FOR" the proposal unless otherwise indicated.
Proposal No. 6
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
(Item 6 on the Proxy Card)
(ITEM 2 ON THE PROXY CARD)
The Board of Directors has appointed Arthur AndersenPricewaterhouseCoopers LLP as its independent accountants for the fiscal year ending September 24, 2000,30, 2001, subject to shareholder ratification.
Previous Independent Accountants
On May 24, 2001, NEXIQ Technologies, Inc. (the "Company") notified Arthur Andersen, LLP that it was changing its independent accountants to PricewaterhouseCoopers LLP for the fiscal year ending September 30, 2001. The Audit Committee of the Board of Directors and the Board of Directors of the Company approved the decision to change its independent accountants.
The reports of Arthur Andersen LLP on the Company's financial statements for the past two fiscal years did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles, except that the report of Arthur Andersen LLP on the Company's financial statements for the year ended September 24, 2000 included an explanatory paragraph relating to an uncertainty about the Company's ability to continue as a going concern.
-16-
The Company and Arthur Andersen LLP have not, in connection with the audit of the Company's financial statements for each of the prior two years ended September 24, 2000 and September 26, 1999 or for any subsequent interim period prior to and including May 24, 2001, had any disagreement on any matter of accounting principles or practices, financial statement disclosure, or auditing scope. During this period, there were also no disagreements which, if not resolved to Arthur Andersen LLP's satisfaction, would have caused them to make reference to the subject matter of such disagreement in their reports on the financial statements for such years, except with respect to the information previously reported in the Company's February 9, 1999 press release concerning the results of operations for the fiscal 1999 first quarter.
A representative of Arthur Andersen LLP willis not expected to be present at the Meeting,
will haveMeeting.
Audit Fees
The aggregate fees billed by Arthur Andersen LLP for professional services rendered in connection with the audit of the Company's Annual Report on Form 10-K for the year ended September 24, 2000 and the review of the Company's quarterly financial statements set forth in the Company's Quarterly Reports on Form 10-Q for the quarters ended December 26, 1999, March 26, 2000 and June 25, 2000, totaled $96,750.
Financial Information Systems Design and Implementation Fees
Arthur Andersen LLP did not render any information technology services to the Company for the fiscal year ended September 24, 2000.
All Other Fees
The aggregate fees for all other non-audit services, including fees for tax related services, rendered by Arthur Andersen LLP for the Company's fiscal year ended September 24, 2000, totaled $54,700.
The Audit Committee has determined that the non-audit services rendered by Arthur Andersen LLP for the Company's most recent fiscal year were compatible with maintaining the independence of Arthur Andersen LLP.
New Independent Accountants
During the fiscal years ended September 24, 2000 and September 26, 1999 and through the date of this report, PricewaterhouseCoopers LLP has not been engaged as an opportunityindependent accountant to makeaudit either the financial statements of the Company, nor has it been consulted regarding the application of the Company's accounting principles to a statement if hespecified transaction, either completed or she so desires andproposed, or the type of audit opinion that might be rendered on the Company's financial statements.
A representative of Pricewaterhouse Coopers LLP is not expected to be available to respond to appropriate questions.present at the Meeting.
-17-
Ratification of the appointment of Arthur AndersenPricewaterhouseCoopers LLP as independent accountants requires the affirmative vote of a majority of the outstanding shares of common stock present or represented at the Meeting by holders of the Company's common stock entitled to vote thereon.
-29-
Recommendation of the Board of Directors
The Board of Directors recommends that the shareholders vote "FOR" ratification of this appointment. Proxies solicited by the Board of Directors will be voted "FOR" the proposal unless otherwise indicated.
DEADLINE FOR SHAREHOLDERS' PROPOSALS
Any shareholder proposals to be considered by the Company for inclusion in the Company's proxy materials for the 20012002 Annual Meeting must be received by the Company at its principal executive offices by October 27, 2000.
31, 2001. With respect to any shareholder proposal that a shareholder does not seek to have included in the Company's proxy materials, the proxyholders named in management's proxy for that annual meeting will be entitled to exercise their discretionary authority on that proposal if the Company does not receive proper notice of the matter proposed before December 1, 2001. If proper notice is timely received, the proxyholders named in management's proxy may nevertheless exercise discretionary authority to the extent permitted by appropriate regulations of the Securities and Exchange Commission. In any event, the Company may have no obligation to include such proposals submitted after October 31, 2001 on the agenda of the 2002 Annual Meeting.
OTHER MATTERS
Management knows of no matters to be presented at the Meeting other than those set forth in the accompanying proxy. However, if other matters are properly presented for action, it is the intention of the persons named in the proxy to vote upon such matters in accordance with their best judgment.
AVAILABILITY OF FORM 10-K AND FORM 10-Q
The Company's annual reportAnnual Report on Form 10-K for the year ended September 26,
1999 and the Company's quarterly report on Form 10-Q for the period ending June
25,24, 2000 areis incorporated by reference and areis being mailed to shareholders with this Proxy Statement.
BY ORDER OF THE BOARD OF DIRECTORS
William V. A. Zorn, Secretary
Manchester, New Hampshire
October 5, 2000
-30-
Appendix A
----------
McFarland Dewey & Co., LLC
230 Park Avenue
New York, New York 10169 - 1450
-----
Telephone (212) 867-4949
Facsimile (212) 867-0334
E-mail: general@mcfd.com
July 25, 2000
Board of Directors
WPI Group, Inc.
June 27, 2001
-18-
NEXIQ TECHNOLOGIES, INC.
1155 Elm Street
Manchester, NH 03101
Attention: Mr. John Allard
President and Chief Executive Officer
Gentlemen:
WPI Group, Inc. ("WPI") and Sunrise Capital Partners
("Sunrise") have proposed entering into an agreement pursuant to which Sunrise
shall invest up to $24 million into WPI in the form of convertible subordinated
notes (the "Transaction"). The convertible subordinated notes, which mature in
three years, shall bear interest at a rate of 10.75% per annum and will be paid
either in cash or in kind. The conversion price is $1.75 per WPI share. This
Transaction will give Sunrise effective control of WPI. Upon the closing of the
Transaction certain Directors of WPI will resign and Sunrise will elect nominees
in their place which will give Sunrise a majority of the seats on the board.
In a separate Participation Agreement between Sunrise and the Allard
Nazarian Group ("ANG"), ANG will participate in the investment by Sunrise. ANG
will invest $1.5 million. In addition, WPI will exchange approximately $1.6
million of existing promissory notes (including accrued interest) held by ANG
for convertible subordinated notes, with the same terms as stated above.
You have asked us whether, in our opinion, the financial terms of the
above Transaction is fair from a financial point of view to the shareholders of
WPI.
In arriving at the opinion set forth below, we have, among other
things:
(1) Reviewed certain publicly available business and financial
information relating to WPI that we deemed to be relevant;
(2) Reviewed certain confidential information furnished to us by WPI,
including financial forecasts relating to the business, earnings, cash
flow, assets, liabilities and prospects of WPI;
(3) Conducted discussions with members of senior management and
Directors of WPI concerning the matters described in clauses 1 and 2
above;
(4) Reviewed the potential pro forma financial impact on the business
and the existing shareholder's ownership of WPI;
(5) Considered the highly leveraged financial condition of WPI and the
effect that the demands of meeting its obligations to its senior
secured lenders has had on WPI in conducting its on-going business and
investing in lines of business presently under development;
(6) Reviewed the latest draft agreements for the Transaction which we
are advised reflect in all material aspects the final agreements;
(7) Reviewed such other financial studies and analyses and took into
account such other matters as we deemed necessary, including our
assessment of general economic, market and monetary conditions;
(8) Discussed the Transaction with other potential investors, all of
whom elected not to proceed with a Transaction.
We have been advised by management of the availability of funds from its
senior secured lenders which will, upon the closing of the Transaction, continue
to lend at least $15 million for the next 12 months. Such lenders are owed
approximately $30 million as of the date of this letter.
We have also reviewed the terms of a letter of intent that WPI executed to
sell the assets of its WPI Industrial Technology, Inc. ("Instruments")
subsidiary to a group of investors led by the present management of Instruments.
McFarland Dewey is acting as financial advisor to WPI with respect to this
potential transaction.
In preparing our opinion, we have assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to us, as
well as all information publicly available, and we have not assumed any
responsibility for independently verifying such information nor have we
undertaken an independent evaluation or appraisal of any of the assets or
liabilities of WPI or been furnished to us with any such evaluation or
appraisal. With respect to the financial forecast information furnished to or
discussed with us by WPI, we have assumed that it has been reasonably prepared
and reflects the best currently available estimates and judgment of WPI's
management as to the expected future financial performance of WPI.
We have assumed that in the course of obtaining the necessary regulatory or
other consents or approvals (contractual or otherwise) for the Transaction, no
restrictions, including any amendments or modifications, will be imposed that
will have a material adverse effect on the contemplated benefits of this
Transaction.
We are acting as financial advisor to WPI in connection with the
Transaction and will receive a fee from WPI for our services, which is
contingent upon the consummation of the Transaction. We will receive no separate
fee for this opinion. We have, in the past, provided financial advisory services
to WPI, and may continue to do so, and have received, and may receive, fees for
the rendering of such services. In addition, WPI has agreed to indemnify us for
certain liabilities arising out of our engagement.
-2-
This opinion is for the use and benefit of the Board of Directors of WPI.
Our opinion does not otherwise address the merits of the underlying decision by
WPI to engage in the Transaction.
We are not expressing any opinion herein as to the price at which WPI
shares will trade following the announcement or consummation of the Transaction.
On the basis of and subject to the foregoing, we are of the opinion that,
as of the date hereof, the financial terms of the Transaction are fair from a
financial point of view to the shareholders of WPI.
Very truly yours,
McFarland Dewey & Co., LLP
by: /s/ Alan R. McFarland
------------------------------
Alan R. McFarland, Member
-3-
Appendix B
----------
WPI GROUP, INC.
1115 Elm Street
Manchester, New Hampshire 03101
PROXY SOLICITED ON BEHALF OF THE BOARD OF THE COMPANY
FOR THE ANNUAL MEETING OF SHAREHOLDERS ON NOVEMBER 2, 2000
JULY 18, 2001
The undersigned hereby appoints as Proxies, each of John R. Allard and John W. Powers, each with full power to appoint his substitute, and hereby authorizes them to represent and to vote, as designated below, all shares of capital stock of WPI GROUP,NEXIQ TECHNOLOGIES, INC. held of record by the undersigned on October 2, 2000,June 19, 2001, at the Annual Meeting of Shareholders to be held on November 2, 2000,July 18, 2001, and any adjournmentsadjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED. YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICE BY MARKING THE APPROPRIATE BOXES, SEE REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. IF NO DIRECTION IS GIVEN WITH RESPECT TO A PARTICULAR PROPOSAL, THIS PROXY WILL BE VOTED FOR SUCH PROPOSAL. THE PROXIES CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
PLEASE MARK, DATE, SIGN, AND RETURN THIS PROXY CARD PROMPTLY, USING THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES OF AMERICA.
| FOR ALL | WITHHELD ALL | FOR ALL EXCEPT: | |
| 1. Election of John Allard, Lawrence Coben, Paul Giovacchini, Irwin Gold, Joseph Julian, Jr., David Preiser, Michael Stewart, Bernard Tenenbaum | / / | / / | / / |
| (Except nominee(s) written above) | |||
| 2. | FOR / / | AGAINST / / | ABSTAIN / / |
| 3. In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the Meeting. | FOR / / | AGAINST / / | ABSTAIN / / |
Date: _________________________________ , 2000
--------------------------------------
--------------------------------------
--------------------------------------
2001
_________________________________
_________________________________
Signature(s)
NOTE: Please sign exactly as name appears hereon.
If shares are registered in more than one name, the signatures of all such persons are required. A corporation should sign in the full corporate name by a duly authorized officer stating his title. Trustees, guardians, executors, and administrators should sign in their official capacity giving their full title as such. If a partnership, please sign in the partnership name by authorized persons.
If you have had a change of address, please print or type your new address on the lines below.
- ---------------------------
- ---------------------------
_________________________________
_________________________________
-2-
Appendix C
----------
WPI GROUP, INC.
1997 EQUITY INCENTIVE PLAN
1. Establishment and Purpose.
There is hereby adopted the WPI Group, Inc. 1997 Equity Incentive Plan
(the "Plan"). This Plan is intended to promote the interests of the Company (as
defined below) and the stockholders of WPI Group, Inc. ("WPI") by providing
officers and other employees of the Company (including directors who are also
employees of the Company) with appropriate incentives and rewards to encourage
them to enter into and continue in the employ of the Company and to acquire a
proprietary interest in the long-term success of the Company; to compensate
WPI's non-employee directors and provide incentives to such non-employee
directors which are directly linked to increases in stock value; and to reward
the performance of individual officers, other employees, consultants and
non-employee directors in fulfilling their personal responsibilities for
long-range achievements.
2. Definitions.
As used in the Plan, the following definitions apply to the terms
indicated below:
(a) "Agreement" shall mean the written agreement between WPI and a
Participant evidencing an Incentive Award.
(b) "Board of Directors" shall mean the Board of Directors of WPI.
(c) "Cause" shall mean (1) the willful and continued failure by
the Participant substantially to perform his or her duties and
obligations to the Company (other than any failure resulting
from his or her incapacity due to physical or mental illness);
(2) the willful engaging by the Participant in misconduct
which is materially injurious to the Company; (3) the
commission by the Participant of a felony; or (4) the
commission by the Participant of a crime against the Company
which is materially injurious to the Company. For purposes of
this Section 2(c), no act, or failure to act, on a
Participant's part shall be considered "willful" unless done,
or omitted to be done, by the Participant in bad faith and
without reasonable belief that his or her action or omission
was in the best interest of the Company. Determination of
Cause shall be made by the Committee in its sole discretion.
(d) "Change In Control" shall have the same meaning as in the WPI
Group, Inc. Change In Control Plan adopted on December 15,
1995.
(e) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and any regulations promulgated
thereunder.
(f) "Committee" shall mean the Stock Option/Compensation Committee
of the Board of Directors. The Committee shall consist of two
or more persons, each of whom is an "outside director" within
the meaning of Section 162(m) of the Code and a "Non-Employee
Director" within the meaning of Rule 16b-3.
(g) "Company" shall mean, collectively, WPI and each of its
Subsidiaries now held or hereinafter acquired.
(h) "Company Stock" shall mean the common stock of WPI, par value
of $.01 per share.
(i) "Disability" shall mean: (1) any physical or mental condition
that would qualify a Participant for a disability benefit
under the long-term disability plan maintained by the Company
and applicable
to him or her; (2) when used in connection with the exercise
of an Incentive Stock Option following termination of
employment, disability within the meaning of Section 22(e)(3)
of the Code; or (3) such other condition as may be determined
in the sole discretion of the Committee to constitute
Disability.
(j) "Effective Date" shall mean the date upon which this Plan is
adopted by the Board of Directors.
(k) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended from time to time.
(l) The "Fair Market Value" of a share of Company Stock, as of a
date of determination, shall mean the closing sales price per
share of Company Stock on the NASDAQ/NMS on the date preceding
the date of the action requiring such determination.
(m) "Incentive Award" shall mean any Option, Tandem SAR,
Stand-Alone SAR, Restricted Stock, Phantom Stock or Other
Award granted pursuant to the terms of the Plan.
(n) "Incentive Stock Option" shall mean an Option that is an
"incentive stock option" within the meaning of Section 422 of
the Code, or any successor provision, and that is designated
by the Committee as an Incentive Stock Option.
(o) "Issue Date" shall mean the date established by WPI on which
certificates representing shares of Restricted Stock shall be
issued by WPI pursuant to the terms of Section 10(e).
(p) "Non-Employee Director" shall mean a member of the Board of
Directors who is not an employee of the Company.
(q) "Non-Qualified Stock Option" shall mean an Option other than
an Incentive Stock Option.
(r) "Option" shall mean an option to purchase shares of Company
Stock granted pursuant to Section 7.
(s) "Other Award" shall mean an award granted pursuant to Section
13 hereof.
(t) "Partial Exercise" shall mean an exercise of an Incentive
Award for less than the full extent permitted at the time of
such exercise.
(u) "Participant" shall mean (1) an employee, non-employee
director or consultant of the Company to whom an Incentive
Award has been granted pursuant to the Plan, and (2) upon the
death of an individual described in (1), his or her
successors, heirs, executors and administrators, as the case
may be.
(v) "Phantom Stock" shall mean the right, granted pursuant to
Section 11, to receive in cash or shares the Fair Market Value
of a share of Company Stock.
(w) "Reload Option" shall mean a Non-Qualified Stock Option
granted pursuant to Section 7(c)(5).
(x) "Restricted Stock" shall mean a share of Company Stock which
is granted pursuant to the terms of Section 10 hereof and
which is subject to the restrictions set forth in
Section10(c).
(y) "Rule 16b-3" shall mean the Rule 16b-3 promulgated under the
Exchange Act, as amended from time to time.
(z) "Securities Act" shall mean the Securities Act of 1933, as
amended from time to time.
2
(aa) "Stand-Alone SAR" shall mean a stock appreciation right which
is granted pursuant to Section 9 and which is not related to
any Option.
(bb) "Subsidiary" shall mean a "subsidiary corporation" within the
meaning of Section 424(f) of the Code.
(cc) "Tandem SAR" shall mean a stock appreciation right which is
granted pursuant to Section 8 and which is related to an
Option.
(dd) "Vesting Date" shall mean the date established by the
Committee on which a share of Restricted Stock or Phantom
Stock may vest.
3. Stock Subject to the Plan.
(a) Shares Available for Awards
The maximum number of shares of Company Stock reserved for
issuance under the Plan shall be 750,000 (subject to
adjustment as provided herein). The maximum number of shares
of Company Stock which may be the subject of Options (which
shall include any Tandem SARs related to such Options) granted
to any individual during any calendar year shall not exceed
200,000 shares. Such shares may be authorized but unissued
Company Stock or authorized and issued Company Stock held in
WPI's treasury. The Committee may direct that any stock
certificate evidencing shares issued pursuant to the Plan
shall bear a legend setting forth such restrictions on
transferability as may apply to such shares pursuant to the
Plan.
The grant of a Tandem SAR, a Stand-Alone SAR which is paid
only in cash or Phantom Stock which is paid only in cash shall
not reduce the number of shares of Company Stock with respect
to which Incentive Awards may be granted pursuant to the Plan.
Notwithstanding the preceding, the maximum number of shares of
Company Common Stock with respect to which Stand-Alone SARs
may be granted to any individual during any calendar years
shall not exceed 200,000 shares.
(b) Adjustment for Change in Capitalization
In the event that the Committee shall determine that any
dividend or other distribution (whether in the form of cash,
Company Stock, or other property), recapitalization, Company
Stock split, reverse Company Stock split, reorganization,
merger, consolidation, spin-off, combination, repurchase, or
share exchange, or other similar corporate transaction or
event, affects the Company Stock such that an adjustment is
appropriate in order to prevent dilution or enlargement of the
rights of Participants under the Plan, then the Committee
shall make such equitable changes or adjustments as it deems
necessary or appropriate to any or all of (1) the number and
kind of shares of Company Stock which may thereafter be issued
in connection with Incentive Awards, (2) the number and kind
of shares of Company Stock issued or issuable in respect of
outstanding Incentive Awards, (3) the exercise price, grant
price or purchase price relating to any Incentive Award, and
(4) the maximum number of shares subject to Incentive Awards
which may be awarded to any employee during any tax year of
the Company; provided that, with respect to Incentive Stock
Options, such adjustment shall be made in accordance with
Section 424 of the Code.
3
(c) Re-use of Shares.
Except as restricted by applicable laws or regulations, any
shares subject to an Incentive Award that remain unissued upon
the cancellation, surrender, exchange or termination of such
award for any reason whatsoever and any shares of Restricted
Stock forfeited shall again become available for Incentive
Awards. Notwithstanding the preceding, with respect to any
Option (and any related Tandem SAR) and/or any Stand-Alone SAR
granted to any individual who is a "covered employee" within
the meaning of Section 162(m) of the Code that is cancelled,
the number of shares subject to such Option (and Tandem SARs),
and/or Stand-Alone SAR, shall continue to count against the
maximum number of shares which may be the subject of Options
(and Tandem SARs) and Stand-Alone SARs granted to such
individual. For purposes of the preceding sentence, if, after
grant, the exercise price of an Option (and any related Tandem
SAR) and/or the base amount of any Stand-Alone SAR is reduced,
such reduction shall be treated as a cancellation of such
Option, Tandem SAR and/or Stand-Alone SAR and the grant of a
new Option, Tandem SAR and/or Stand-Alone SAR and both the
cancellation and the new grant shall reduce the maximum number
of shares for which Options (and related Tandem SARs) and
Stand-Alone SARs may be granted to the holder of such Option
(and related Tandem SAR) and/or Stand-Alone SAR.
4. Administration of the Plan.
The Plan shall be administered by the Committee. The Committee shall
have the authority in its sole discretion, subject to and not inconsistent with
the express provisions of the Plan, to administer the Plan and to exercise all
the powers and authorities either specifically granted to it under the Plan or
necessary or advisable in the administration of the Plan, including, without
limitation, the authority to grant Incentive Awards; to determine the person to
whom and the time or times at which Incentive Awards shall be granted; to
determine the type and number of Incentive Awards to be granted, the number of
shares of Stock to which an Award may relate and the terms, conditions,
restrictions and performance criteria relating to any Incentive Award; to
determine whether, to what extent, and under what circumstances an Incentive
Award may be settled, cancelled, forfeited, exchanged, or surrendered; to make
adjustments in the performance goals in recognition of unusual or non-recurring
events affecting the Company or the financial statements of the Company, or in
response to changes in applicable laws, regulations, or accounting principles;
to construe and interpret the Plan and any Incentive Award; to prescribe, amend
and rescind rules and regulations relating to the Plan; to determine the terms
and provisions of Agreements; and to make all other determinations deemed
necessary or advisable for the administration of the Plan; provided, however,
that the Committee may not exercise discretion under any provision of the Plan
with respect to Non-Qualified Stock Options granted to Non-Employee Directors
pursuant to section 12 of the Plan.
The Committee may, in its absolute discretion, without amendment to the
Plan, (a) except with regard to Non-Qualified Stock Options granted to
Non-Employee Directors pursuant to section 12 hereof, accelerate the date on
which any Option or Stand-Alone SAR granted under the Plan becomes exercisable,
waive or amend the operation of Plan provisions respecting exercise after
termination of employment or otherwise adjust any of the terms of such Option or
Stand-Alone SAR, and (b) accelerate the Vesting Date or Issue Date, or waive any
condition imposed hereunder, with respect to any share of Restricted Stock,
Phantom Stock or other Incentive Award or otherwise adjust any of the terms
applicable to any such Incentive Award.
No member of the Committee shall be liable for any action, omission or
determination relating to the Plan, and the Company shall indemnify (to the
extent permitted under New Hampshire law and the bylaws of the of the Company)
and hold harmless each member of the Committee and each other director or
employee of the Company to whom any duty or power relating to the administration
or interpretation of the Plan has been delegated against any cost or expense
(including counsel fees) or liability (including any sum paid in settlement of a
claim with the approval of the Committee) arising out of any action, omission or
determination relating to the Plan, unless, in either case, such action,
omission or determination was taken or made by such member, director or employee
in bad faith and without reasonable belief that it was in the best interests of
the Company.
4
5. Eligibility.
The persons who shall be eligible to receive Incentive Awards pursuant
to the Plan shall be such employees of the Company (including officers of the
Company, whether or not they are directors of the Company) and consultants of
the Company as the Committee shall select from time to time. Non-Qualified Stock
Options shall be granted to Non-Employee Directors in accordance with the
provisions of section 12 hereof.
6. Awards Under the Plan; Agreement.
The Committee may grant Options, Tandem SARs, Stand-Alone SARs, shares
of Restricted Stock, shares of Phantom Stock and Other Awards in such amounts
and with such terms and conditions as the Committee shall determine, subject to
the provisions of the Plan.
Each Incentive Award granted under the Plan shall be evidenced by an
Agreement which shall contain such provisions as the Committee may in its sole
discretion deem necessary or desirable. By accepting an Incentive Award, a
Participant thereby agrees that the award shall be subject to all of the terms
and provisions of the Plan and the applicable Agreement.
7. Options.
The provisions of this Section 7 shall apply to the grant of Options
under the Plan, except to the extent the same are inconsistent with Section 12,
which shall govern grants of Non-Qualified Stock Options to Non-Employee
Directors.
(a) Identification of Options.
Each Option shall be clearly identified in the applicable
Agreement as either Incentive Stock Option or a Non-Qualified
Stock Option.
(b) Exercise Price.
Each Agreement with respect to an Option shall set forth the
amount (the "option exercise price") payable by the grantee to
the Company upon exercise of the Option. The option exercise
price per share shall be determined by the Committee;
provided, however, that in the case of an Incentive Stock
Option, the option exercise price shall in no event be less
than the Fair Market Value of a share of Company Stock on the
date the Option is granted.
(c) Term and Exercise of Options.
(1) The Committee shall determine the vesting and the
expiration date of each Option; provided, however,
that no Incentive Stock Option shall be exercisable
more than 10 years after the date of grant.
(2) An Option many be exercised for all or any portion of
the shares as to which it is exercisable, provided
that no Partial Exercise of an Option shall be for an
aggregate exercise price of less than $1,000. The
Partial Exercise of an Option shall not cause the
expiration, termination or cancellation of the
remaining portion thereof.
(3) An Option shall be exercised by delivering notice to
WPI's principal office, to the attention of its
Secretary. Such notice shall specify the number of
shares of Company Stock with respect to which the
Option is being exercised and the effective date of
the proposed exercise and shall be signed by the
Participant or other person then having the right to
exercise the Option. Payment for shares of Company
Stock purchased upon the
5
exercise of an Option shall be made on the effective
date of such exercise by one or a combination of the
following means: (i) in cash or by personal check,
certified check, bank cashier's check or wire
transfer; (ii) subject to the approval of the
Committee, in shares of Company Stock owned by the
Participant for at least six months prior to the date
of exercise and valued at their Fair Market Value on
the effective date of such exercise; or (iii) subject
to the approval of the Committee, by such other means
as the Committee may from time to time authorize. Any
payment in shares of Company Stock shall be effected
by the delivery of such shares to the Secretary of
WPI, duly endorsed in blank or accompanied by stock
powers duly executed in blank, together with any
other documents and evidences as the Secretary of WPI
shall require.
(4) Certificates for shares of Company Stock purchased
upon the exercise of an Option shall be issued in the
name of the Participant or other person entitled to
receive such shares, and delivered to the Participant
or such other person as soon as practicable following
the effective date on which the option is exercised.
(5) The Committee shall have the authority to specify, at
the time of grant or, with respect to Non-Qualified
Stock Options, at or after the time of grant, that a
Participant shall be granted a new Non-Qualified
Stock Option (a "Reload Option") for a number of
shares equal to the number of shares surrendered by
the Participant upon exercise of all or a part of an
Option in the manner described in Section 7(c)(3)(ii)
above, subject to the availability of shares of
Company Stock under the Plan at the time of such
exercise; provided, however, that no Reload Option
shall be granted to a Non-Employee Director. Reload
Options shall be subject to such conditions as may be
specified by the Committee in its discretion, subject
to the terms of the Plan.
(d) Limitations on Incentive Stock Options.
(1) To the extent that the aggregate Fair Market Value of
shares of Company Stock with respect to which
Incentive Stock Options are exercisable for the first
time by a Participant during any calendar year under
the Plan and any other stock option plan of the
Company (or any Subsidiary) shall exceed $100,000,
such Options shall be treated as Non-Qualified Stock
Options. Such Fair Market Value shall be determined
as of the date on which each such Incentive Stock
Option is granted.
(2) No Incentive Stock Option may be granted to an
individual if, at the time of the proposed grant,
such individual owns (or is attributed to own by
virtue of the Code) stock possessing more than ten
percent of the total combined voting power of all
classes of stock of the Company or any Subsidiary
unless (i) the exercise price of such Incentive Stock
Option is at least 110 percent of the Fair Market
Value of a share of Company Stock at the time such
Incentive Stock Option is granted and (ii) such
Incentive Stock Option is not exercisable more than
five years after the date such Incentive Stock Option
is granted.
(e) Effect of Termination of Employment.
(1) Unless the applicable Agreement provides otherwise,
in the event that the employment of a Participant
with the Company shall terminate for any reason other
than Disability or death, Options granted to such
Participant shall terminate on the date of
termination of such employment or other relationship.
The Committee may, in its sole discretion, extend the
exercise period for the vested portion of the Option
for up to three consecutive months after such
termination, on which date the Option shall expire.
Options granted to such Participant, to the extent
that they were not exercisable at the
6
time of such termination, shall expire at the close
of business on the date of such termination.
Notwithstanding the foregoing, no Option shall be
exercisable after the expiration of its term.
(2) Unless the applicable Agreement provides otherwise,
in the event that the employment of a Participant
with the Company shall terminate on the account of
the Disability or death of a Participant, (i) Options
granted to such Participant, to the extent that they
were exercisable at the time of such termination,
shall remain exercisable until the first anniversary
of such termination, on which date they shall expire,
and (ii) Options granted to such Participant, to the
extent that they were not exercisable at the time of
such termination, shall expire at the close of
business on the date of such termination; provided,
however, that no Option shall be exercisable after
the expiration of its term.
(f) Acceleration of Exercise Date Upon Change In Control.
Unless the Committee otherwise determines or unless
the applicable agreement otherwise provides, upon the
occurrence of a Change In Control, each Option
granted under the Plan and outstanding at such time
shall become fully and immediately exercisable and
shall remain exercisable until its expiration,
termination or cancellation.
8. Tandem SARs.
The Committee may grant in connection with any Option granted
hereunder, except a Non-Qualified Stock Option granted to a Non-Employee
Director pursuant to section 12 hereof, one or more Tandem SARs relating to a
number of shares of Company Stock less than or equal to the number of shares of
Company Stock subject to the related Option. A Tandem SAR granted in connection
with a Non-Qualified Stock Option may be granted subsequent to the time that
such Non-Qualified Stock Option is granted.
(a) Benefit Upon Exercise.
The exercise of a Tandem SAR with respect to any number of
shares of Company Stock shall entitle the Participant to cash
payment, for each such share, equal to the excess of (1) the
Fair Market Value of a share of Company Stock on the exercise
date over (2) the option exercise price of the related Option.
Such payment shall be made as soon as practicable after the
effective date of such exercise.
(b) Term and Exercise of Tandem SAR.
(1) A Tandem SAR shall be exercisable only if and to the
extent that its related Option is exercisable.
(2) The exercise of a Tandem SAR with respect to a number
of shares of Company Stock shall cause the immediate
and automatic cancellation of its related Option with
respect to an equal number of shares. The exercise of
an Option, or the cancellation, termination or
expiration of an Option (other than pursuant to this
Section 8(b)(2)), with respect to a number of shares
of Company Stock shall cause the automatic and
immediate cancellation of any related Tandem SARs to
the extent of the number of shares of Company Stock
subject to such Option which is so exercised,
cancelled, terminated or expired.
(3) A Tandem SAR may be exercised for all or any portion
of the shares as to which it is exercisable;
provided, that no Partial Exercise of a Tandem SAR
shall be for an aggregate payment by the Company of
less than $1,000.
7
(4) No Tandem SAR shall be assignable or transferable
otherwise than together with its related Option.
(5) A Tandem SAR shall be exercised by delivering notice
to WPI's principal office, to the attention of its
Secretary. Such notice shall be accompanied by the
applicable Agreement, shall specify the number of
shares of Company Stock with respect to which the
Tandem SAR is being exercised and the effective date
of the proposed exercise and shall be signed by the
Participant or other person then having the right to
exercise the Option to which the Tandem SAR is
related.
9. Stand-Alone SARs.
(a) Base Amount.
The base amount per share of a Stand-Alone SAR shall be
determined by the Committee at the time of grant, but shall in
no event be less than the Fair Market Value of a share of
Company Stock on the date of grant.
(b) Benefit Upon Exercise.
The exercise of a Stand-Alone SAR with respect to any number
of shares of Company Stock shall entitle the Participant to a
payment, for each such share, equal to the excess of (1) the
Fair Market Value of a share of Company Stock on the exercise
date over (2) the base amount of the Stand-Alone SAR. Such
payments shall be made as soon as practicable after such
exercise, in cash and/or shares of the Company Stock, as
determined by the Committee.
(c) Term and Exercise of Stand-Alone SAR's.
(1) The Committee shall determine the terms, vesting and
expiration date of each Stand-Alone SAR. Unless the
applicable Agreement provides otherwise, no
Stand-Alone SAR shall be exercisable prior to the
first anniversary of the date of grant.
(2) A Stand-Alone SAR may be exercised for all or any
portion of the shares as to which it is exercisable;
provided, that no Partial Exercise of a Stand-Alone
SAR shall be for an aggregate payment by the Company
of less than $1,000.
(3) A Stand-Alone SAR shall be exercised by delivering
notice to WPI's principal office, to the attention of
its Secretary. Such notice shall be accompanied by
the applicable Agreement, shall specify the number of
shares of Company Stock with respect to which the
Stand-Alone SAR is being exercised, and the effective
date of the proposed exercise, and shall be signed by
the Participant.
(d) Effect of Termination of Employment.
The provisions set forth in Section 7(e) with respect to the
exercise of Options following termination of employment shall
apply as well to such exercise of Stand-Alone SARs.
(e) Acceleration of Exercise Date Upon Change In Control.
Unless the Committee otherwise determines or unless the
applicable agreement otherwise provides, upon the occurrence
of a Change In Control, any Stand Alone SAR granted under the
Plan and outstanding at such time shall become fully and
immediately exercisable and shall remain exercisable until its
expiration, termination or cancellation.
8
10. Restricted Stock.
(a) Issue Date and Vesting Date.
At the time of the grant of shares of Restricted Stock, the
Committee shall establish an Issue Date or Issue Dates and a
Vesting Date or Vesting Dates with respect to such shares. The
Committee may divide such shares into classes and assign a
different Issue Date and/or Vesting Date for each class. If
the grantee is employed by the Company on an Issue Date (which
may be the date of grant), the specified number of shares of
Restricted Stock shall be issued in accordance with the
provisions of Section 10(e). Provided that all conditions to
the vesting of a share of Restricted Stock imposed pursuant to
Section 10(b) are satisfied, and except as provided in Section
10(g), upon the occurrence of the Vesting Date with respect to
a share of Restricted Stock, such share shall vest and the
restrictions of Section 10(c) shall lapse.
(b) Conditions to Vesting.
At the time of grant of shares of Restricted Stock, the
Committee may impose such restrictions or conditions to the
vesting of such shares as it, in its absolute discretion,
deems appropriate.
(c) Restrictions on Transfer Prior to Vesting.
Prior to the vesting of a share of Restricted Stock, no
transfer of a Participant's rights with respect to such share,
whether voluntary or involuntary, by operation of law or
otherwise, shall be permitted. Immediately upon any attempt to
transfer such rights, such share, and all of the rights
related thereto, shall be forfeited by the Participant.
(d) Dividends on Restricted Stock.
The Committee in its discretion may require that any dividends
paid on shares of Restricted Stock be held in escrow until all
restrictions on such shares have lapsed.
(e) Issuance of Certificates.
(1) Reasonably promptly after the Issue Date with respect
to shares of Restricted Stock, WPI shall cause to be
issued a stock certificate, registered in the name of
the Participant to whom such shares were granted,
evidencing such shares; provided that WPI shall not
cause such a stock certificate to be issued unless it
has received a stock power duly endorsed in blank
with respect to such shares. Each such stock
certificate shall bear the following legend:
The transferability of this certificate and
the shares of stock represented hereby are
subject to the restrictions, terms and
conditions (including forfeiture provisions
and restrictions against transfer) contained
in the WPI Group, Inc. 1997 Equity Incentive
Plan and an Agreement entered into between
the registered owner of such shares and WPI.
A copy of the Plan and Agreement is on file
in the office of the Secretary of WPI, 1155
Elm Street., Manchester, New Hampshire,
03101.
Such legend shall not be removed until such shares
vest pursuant to the terms hereof.
(2) Each certificate issued pursuant to this Section
10(e), together with the stock powers relating to the
shares of Restricted Stock evidenced by such
certificate, shall be held by WPI unless the
Committee determines otherwise.
9
(f) Consequences of Vesting.
Upon the vesting of a share of Restricted Stock pursuant to
the terms hereof, the restrictions of Section 10(c) shall
lapse with respect to such share. Reasonably promptly after a
share of Restricted Stock vests, WPI shall cause to be
delivered to the Participant to whom such shares were granted,
a certificate evidencing such share, free of the legend set
forth in Section 10(e).
(g) Effect of Termination of Employment.
Subject to such other provision as the Committee may set forth
in the applicable Agreement, and to the Committee's amendment
authority pursuant to Section 4, upon the termination of a
Participant's employment for any reason any and all shares to
which restrictions on transferability apply shall be
immediately forfeited by the Participant and transferred to,
and reacquired by, WPI; provided that if the Committee, in its
sole discretion, shall within thirty (30) days after such
termination of employment notify the Participant in writing of
its decision not to terminate the Participant's rights in such
shares, then the Participant shall continue to be the owner of
such shares subject to such continuing restrictions as the
Committee may prescribe in such notice. In the event of a
forfeiture of shares pursuant to this section, WPI shall repay
to the Participant (or the Participant's estate) any amount
paid by the Participant for such shares. In the event that WPI
requires a return of shares, it shall also have the right to
require the return of all dividends paid on such shares,
whether by termination of any escrow arrangement under which
such dividends are held or otherwise.
(h) Effect of Change In Control.
Unless the Committee otherwise determines or unless the
applicable agreement otherwise provides, upon the occurrence
of a Change In Control, all outstanding shares of Restricted
Stock which have not theretofore vested shall immediately vest
and all restrictions on such shares shall immediately lapse.
11. Phantom Stock.
(a) Vesting Date.
At the time of the grant of shares of Phantom Stock, the
Committee shall establish a Vesting Date or Vesting Dates with
respect to such shares. The Committee may divide such shares
into classes and assign a different Vesting Date for each
class. Provided that all conditions to the vesting of a share
of Phantom Stock imposed pursuant to Section 11(c) are
satisfied, and except as provided in Section 11(d), upon the
occurrence of the Vesting Date with respect to a share of
Phantom Stock, such share shall vest.
(b) Benefit Upon Vesting.
Upon the vesting of a share of Phantom Stock, the Participant
shall be entitled to receive, within 30 days of the date on
which such share vests, an amount, in cash and/or shares of
Company Stock, as determined by the Committee, equal to the
sum of (1) the Fair Market Value of a share of Company Stock
on the date on which such share of Phantom Stock vests and (2)
the aggregate amount of cash dividends paid with respect to a
share of Company Stock during the period commencing on the
date on which the share of Phantom Stock was granted and
terminating on the date on which such share vests.
10
(c) Conditions to Vesting.
At the time of the grant of shares of Phantom Stock, the
Committee may impose such restrictions or conditions to the
vesting of such shares as it, in its absolute discretion,
deems appropriate.
(d) Effect of Termination of Employment.
Subject to such other provision as the Committee may set forth
in the applicable Agreement, and to the Committee's amendment
authority pursuant to Section 4, shares of Phantom Stock that
have not vested, together with any dividends credited on such
shares, shall be forfeited upon the Participant's termination
of employment for any reason.
(e) Effect of Change In Control.
Unless the Committee otherwise determines or unless the
applicable agreement otherwise provides, upon the occurrence
of a Change In Control, all outstanding shares of Phantom
Stock which have not theretofore vested shall immediately vest
and payment in respect of such shares shall be made in
accordance with the Plan.
12. Non-Employee Director Formula Stock Options.
The provisions of this Section 12 shall apply only to grants of
Non-Qualified Stock Options to Non-Employee Directors.
(a) General.
Non-Employee Directors shall receive Non-Qualified Stock
Options under the Plan. The exercise price per share of the
Company Stock purchasable under Non-Qualified Stock Options
granted to Non-Employee Directors shall be the Fair Market
Value of a share of Company Stock on the date of grant.
Non-Qualified Stock Options granted to a Non-Employee Director
shall not be subject to an acceleration of exercisability
except upon a Change in Control as described in Section 12(g).
(b) Initial Grants to Directors.
Each Non-Employee Director who first became a director after
April 1, 1997 and is reelected at the stockholders meeting at
which the Plan is approved shall be granted automatically a
Non-Qualified Stock Option to purchase 10,000 shares of
Company Stock, effective at such stockholders meeting. Each
Non-Employee Director who is first elected after such
stockholders meeting shall be granted automatically, at the
times such director first becomes a member of the Board of
Directors, a Non-Qualified Stock Option to purchase 10,000
shares of Company Stock.
(c) Subsequent Grants to Directors.
Commencing with the annual meeting of the stockholders of the
Company held in 1999, on the date of the first Board meeting
following the annual meeting of stockholders of each year,
each Non-Employee Director (other than a director who is first
elected at the annual meeting for that year or within six
months prior to such annual meeting) shall be granted
automatically a Non-Qualified Stock Option to purchase 2,500
shares of Company Stock. Notwithstanding the foregoing, no
annual grants to Non-Employee Directors shall be made unless
the Company's earnings per share for the most recently
completed fiscal year has increased from the prior fiscal year
by at least 15%.
11
(d) Method and Time of Payment.
The Option exercise price shall be paid in full, at the time
of exercise, in cash (including cash received from the Company
as compensation or, in the discretion of the Committee, cash
borrowed from the Company on such terms and subject to such
conditions as the Committee shall prescribe), in shares of
Company Stock having a Fair Market Value equal to such Option
exercise price, in a combination of cash and Company Stock or
through a cashless exercise procedure.
(e) Term and Exercisability.
Each Non-Qualified Stock Option granted under this Section 12
shall (i) be exercisable in 1/3 increments beginning on the
first anniversary of the date that the Non-Qualified Stock
Option is granted and (ii) expire ten years from the date of
grant.
(f) Termination.
In the event of the termination of a Non-Employee Director's
service with the Company other than for Cause, any
Non-Qualified Stock Option granted to such Non-Employee
Director under this Section 12, to the extent that it is
exercisable on the date of such termination, may be exercised
by such Non-Employee Director (or, if applicable, by his or
her executors, administrator, legatees or distributees) until
the earlier of (i) the date that is two years from the date of
such termination or (ii) the expiration of such Non-Qualified
Stock Option. In the event of the termination of a
Non-Employee Director's service with the Company for Cause,
all outstanding Non-Qualified Stock Options granted to such
Non-Employee Director shall expire at the commencement of
business on the date of such termination.
(g) Acceleration of Exercise Date Upon Change In Control.
Upon the occurrence of a Change In Control, each Non-Qualified
Stock Option granted under this Section 12 and outstanding at
such time shall become fully and immediately exercisable and
shall remain exercisable until its expiration, termination or
cancellation.
13. Other Awards.
Other forms of Incentive Awards ("Other Awards") valued in whole or in
part by reference to, or otherwise based on, Company Stock may be granted either
alone or in addition to other Incentive Awards under the Plan. Subject to the
provisions of the Plan, the Committee shall have sole and complete authority to
determine the persons to whom and the time or times at which such Other Awards
shall be granted, the number of shares of Company Stock to be granted pursuant
to such Other Awards and all other conditions of such Other Awards.
14. Rights as a Stockholder.
No person shall have any rights as a stockholder with respect to any
shares of Company Stock covered by or relating to any Incentive Award until the
date of issuance of a stock certificate with respect to such shares. Except as
otherwise expressly provided in Section 3(c), no adjustments to any Incentive
Award shall be made for dividends or other rights for which the record date
occurs prior to the date such stock certificate is issued.
15. No Special Employment Rights; No Right to Incentive Award.
12
Nothing contained in the Plan or any Agreement shall confer upon any
Participant any right with respect to the continuation of employment by the
Company or interfere in any way with the right of the Company, subject to the
terms of any separate employment agreement to the contrary, at any time to
terminate such employment or to increase or decrease the compensation of the
Participant.
Except for the automatic grant of Non-Qualified Stock Options to
Non-Employee Directors pursuant to Section 12 hereof, no person shall have any
claim or right to receive an Incentive Award hereunder and there is no
obligation of uniformity for treatment of Participants.. The Committee's
granting of an Incentive Award to a Participant at any time shall neither
require the Committee to grant any other Incentive Award to such Participant or
other person at any time or preclude the Committee from making subsequent grants
to such Participant or any other person.
16. Securities Matters.
(a) WPI shall be under no obligation to effect the registration
pursuant to the Securities Act of any interests in the Plan or
any Options or shares of Company Stock to be issued hereunder
or to effect similar compliance under any state laws.
Notwithstanding anything herein to the contrary, WPI shall not
be obligated to cause to be issued or delivered any
certificates evidencing shares of Company Stock pursuant to
the Plan unless and until WPI is advised by its counsel that
the issuance and delivery of such certificates is in
compliance with all applicable laws, regulations of
governmental authority and the requirements of any securities
exchange on which shares of Company Stock are traded. The
Committee may require, as a condition of the issuance and
delivery of certificates evidencing shares of Company Stock
pursuant to the terms hereof, that the recipient of such
shares make such agreements and representations, and that such
certificates bear such legends, as the Committee, in its sole
discretion, deems necessary or desirable.
(b) The transfer of any shares of Company Stock hereunder shall be
effective only at such time as counsel to WPI shall have
determined that the issuance and delivery of such shares is in
compliance with all applicable laws, regulations of
governmental authority and the requirements of any securities
exchange on which shares of Company Stock are traded. The
Committee may, in its sole discretion, defer the effectiveness
of any transfer of shares of Company Stock hereunder in order
to allow the issuance of such shares to be made pursuant to
registration or an exemption from registration or other
methods for compliance available under federal or state
securities laws. The Committee shall inform the Participant in
writing of its decision to defer the effectiveness of a
transfer. During the period of such deferral in connection
with the exercise of an Option, the Participant may, by
written notice, withdraw such exercise and obtain the refund
of any amount paid with respect thereto.
17. Withholding Taxes.
Whenever cash is to be paid pursuant to an Incentive Award, the Company
shall have the right to deduct therefrom an amount sufficient to satisfy any
federal, state and local withholding tax requirements related thereto.
Whenever shares of Company Stock are to be delivered pursuant to an
Incentive Award, the Company shall have the right to require the Participant to
remit to the Company in cash an amount sufficient to satisfy any federal, state
and local withholding tax requirements related thereto. With the approval of the
Committee, a Participant may satisfy the foregoing requirement by electing to
have the Company withhold from delivery shares of Company Stock having a value
equal to the amount of tax to be withheld. Such shares shall be valued at their
Fair Market Value on the date as of which the amount of tax to be withheld is
determined (the "Tax Date"). Fractional share amounts shall be settled in cash.
Such a withholding election may be made with respect to all or any portion of
the shares to be delivered pursuant to an Incentive Award.
18. Notification of Election Under Section 83(b) of the Code.
13
If any Participant shall, in connection with the acquisition of shares
of Company Stock under the Plan, make the election permitted under Section 83(b)
of the Code (i.e., an election to include in gross income in the year of
transfer the amounts specified in Section 83(b)), such Participant shall notify
the Company of such election within 10 days of filing notice of the election
with the Internal Revenue Service, in addition to any filing and notification
required pursuant to regulation issued under the authority of Section 83(b) of
the Code.
19. Notification Upon Disqualifying Disposition Under Section 421(b) of
the Code.
Each Agreement with respect to an Incentive Stock Option shall require
the Participant to notify the Company of any disposition of shares of Company
Stock issued pursuant to the exercise of such Option under the circumstances
described in Section 421(b) of the Code (relating to certain disqualifying
dispositions), within 10 days of such disposition.
20. Amendment or Termination of the Plan.
The Board of Directors may, at any time, suspend or terminate the Plan
or revise or amend it in any respect whatsoever; provided, however, that
stockholder approval shall be required if and to the extent required by Rule
16b-3 or by any comparable or successor exemption under which the Board of
Directors believes it is appropriate for the Plan to qualify, or if and to the
extent the Board of Directors determines that such approval is appropriate for
purposes of satisfying Sections 162(m) or 422 of the Code. Incentive Awards may
be granted under the Plan prior to the receipt of such stockholder approval but
each such grant shall be subject in its entirety to such approval and no award
may be exercised, vested or otherwise satisfied prior to the receipt of such
approval. Nothing herein shall restrict the Committee's ability to exercise its
discretionary authority pursuant to Section 4, which discretion may be exercised
without amendment to the Plan. No action hereunder may, without the consent of a
Participant, reduce the Participant's rights under any outstanding Incentive
Award.
21. Transfers Upon Death; Nonassignability.
Upon the death of a Participant, outstanding Incentive Awards granted
to such Participant may be exercised only by the executor or administrator of
the Participant's estate or by a person who shall have acquired the right to
such exercise by will or by the laws of descent and distribution. No transfer of
an Incentive Award by will or the laws of descent and distribution shall be
effective to bind the Company unless the Committee shall have been furnished
with (a) written notice thereof and with a copy of the will and/or such evidence
as the Committee may deem necessary to establish the validity of the transfer
and (b) an agreement by the transferee to comply with all the terms and
conditions of the Incentive Award that are or would have been applicable to the
Participant and to be bound by the acknowledgments made by the Participant in
connection with the grant of the Incentive Award.
During a Participant's lifetime, the Committee may permit the transfer,
assignment or other encumbrance of an outstanding Option unless such Option is
an Incentive Stock Option and the Committee and the Participant intend that it
shall retain such status. Subject to any conditions as the Committee may
prescribe and to approval by the Committee, a Participant may, upon providing
written notice to the Secretary of WPI, elect to transfer any or all such
Options granted to such Participant pursuant to the Plan to members of his or
her immediate family, including, but not limited to, children, grandchildren and
spouse or to trusts for the benefit of such immediate family members or to
partnerships in which such family members are the only partners; provided,
however, that no such transfer by any Participant may be made in exchange for
consideration.
22. Expenses and Receipts.
The expenses of the Plan shall be paid by the Company.
23. Failure to Comply.
14
In addition to the remedies of the Company elsewhere provided for
herein, failure by a Participant (or beneficiary) to comply with any of the
terms and conditions of the Plan or the applicable Agreement, unless such
failure is remedied by such Participant (or beneficiary) within ten days after
notice of such failure by the Committee, shall be grounds for the cancellation
and forfeiture of such Incentive Award, in whole or in part, as the Committee,
in its absolute discretion, may determine.
24. Effective Date and Term of Plan.
The Plan became effective on the Effective Date, but the Plan (and any
grants of Incentive Awards made prior to stockholder approval of the Plan) shall
be subject to the requisite approval of the stockholders of WPI. In the absence
of such approval, such Incentive Awards shall be null and void. Unless earlier
terminated by the Board of Directors, the right to grant Incentive Awards under
the Plan will terminate on the tenth anniversary of the Effective Date.
Incentive Awards outstanding at Plan termination will remain in effect according
to their terms and the provisions of the Plan.
25. Applicable Law.
Except to the extent preempted by any applicable federal law, the Plan
will be construed and administered in accordance with the laws of the State of
New Hampshire, without reference to its principles of conflicts of law.
26. Participant Rights.
Except as provided specifically herein, a Participant or a transferee
of an Incentive Award shall have no rights as a stockholder with respect to any
shares covered by any award until the date of issuance of a Company Stock
certificate to him or her for such shares.
27. Unfunded Status of Awards.
The Plan is intended to constitute an "unfunded" plan for incentive
compensation. With respect to any payments not yet made under or pursuant to an
Incentive Award, nothing contained in the Plan or any Agreement shall give any
such Participant any rights that are greater than those of a general creditor of
the Company.
28. No Fractional Shares.
No fractional shares of Company Stock shall be issued or delivered
pursuant to the Plan. Except as provided specifically herein, the Committee
shall determine whether cash, other Incentive Awards, or other property shall be
issued or paid in lieu of such fractional shares or whether such fractional
shares or any rights thereto shall be forfeited or otherwise eliminated.
29. Interpretation.
The Plan is designed and intended to permit Options, Tandem SARs and
Stand-Alone SARs which have an exercise price or base amount equal to the Fair
Market Value of the underlying Company Stock on the date of grant to qualify as
performance-based compensation under Section 162(m) of the Code, and all
provisions hereof shall be construed in accordance with such intention.
30. Severability.
If any provision of the Plan is held to be invalid or unenforceable,
the other provisions of the Plan shall not be affected but shall be applied as
if the invalid or unenforceable provision had not been included in the Plan.
15