<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
FORM 10-Q
(Mark One)
/ X / QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1995
OR
/ / TRANSACTION REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from N/A to N/A
Commission file number 0-1424
ADC Telecommunications, Inc.
----------------------------
(Exact name of registrant as specified in its charter)
Minnesota 41-0743912
- ---------------------------------------- ----------------------------------
(state or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4900 West 78th Street, Minneapolis, MN 55435
---------------------------------------------
(Address of principal executive offices) (zip code)
(612) 938-8080
----------------------------------------------------
(Registrant's telephone number, including area code)
N/A
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common stock, $.20 par value: 62,608,571 shares as of August 25, 1995
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - UNAUDITED
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
JULY 31, OCTOBER 31,
1995 1994
----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 226,020 $ 49,512
Accounts receivable 88,989 75,348
Inventories 83,120 64,203
Prepaid income taxes and other assets 11,238 10,305
----------- -----------
Total current assets 409,367 199,368
PROPERTY AND EQUIPMENT, net 74,461 66,132
OTHER ASSETS, principally goodwill 73,165 69,184
----------- -----------
$ 556,993 $ 334,684
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Current maturities of long-term debt $ 410 $ 400
Accounts payable 18,111 22,132
Accrued liabilities 49,103 44,821
----------- -----------
Total current liabilities 67,624 67,353
DEFERRED INCOME TAXES 1,875 2,163
LONG-TERM DEBT, less current maturities above -- 410
----------- -----------
Total liabilities 69,499 69,926
STOCKHOLDERS' INVESTMENT
(62,597 and 27,888 shares outstanding) 487,494 264,758
----------- -----------
$ 556,993 $ 334,684
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements
2
<PAGE>
ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE QUARTERS ENDED FOR THE NINE MONTHS ENDED
July 31, July 31,
----------------------- ------------------------
1995 1994 1995 1994
--------- --------- --------- ----------
<S> <C> <C> <C> <C>
NET SALES $ 150,454 $ 115,688 $ 412,570 $ 320,437
COST OF PRODUCT SOLD 78,742 57,346 212,447 158,753
--------- --------- --------- ----------
GROSS PROFIT 71,712 58,342 200,123 161,684
--------- --------- --------- ----------
Gross profit percentage 47.7% 50.4% 48.5% 50.5%
--------- --------- --------- ----------
EXPENSES:
Development and product engineering 16,202 12,515 45,348 35,765
Selling and administration 31,937 27,434 94,338 79,201
Goodwill amortization 784 784 2,350 2,351
Personnel reduction -- -- 3,914 --
--------- --------- --------- ----------
Total expenses 48,923 40,733 145,950 117,317
--------- --------- --------- ----------
OPERATING INCOME 22,789 17,609 54,173 44,367
OTHER INCOME (EXPENSE), NET:
Interest 1,929 318 3,132 615
Other (229) (471) (229) (892)
--------- --------- --------- ----------
INCOME BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM 24,489 17,456 57,076 44,090
PROVISION FOR INCOME TAXES 8,815 6,459 20,547 16,313
--------- --------- --------- ----------
NET INCOME BEFORE EXTRAORDINARY ITEM 15,674 10,997 36,529 27,777
EXTRAORDINARY ITEM, NET OF TAXES -- -- -- (1,450)
--------- --------- --------- ----------
NET INCOME $ 15,674 $ 10,997 $ 36,529 $ 26,327
--------- --------- --------- ----------
--------- --------- --------- ----------
AVERAGE COMMON SHARES OUTSTANDING 59,321 55,658 57,102 55,566
--------- --------- --------- ----------
--------- --------- --------- ----------
EARNINGS PER SHARE BEFORE
EXTRAORDINARY ITEM $ 0.26 $ 0.20 $ 0.64 $ 0.50
--------- --------- --------- ----------
--------- --------- --------- ----------
EARNINGS PER SHARE $ 0.26 $ 0.20 $ 0.64 $ 0.47
--------- --------- --------- ----------
--------- --------- --------- ----------
ORDERS $ 159,787 $ 119,160 $ 429,466 $ 325,162
--------- --------- --------- ----------
--------- --------- --------- ----------
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE>
ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
JULY 31,
----------------------------
1995 1994
---------- ---------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 36,529 $ 26,327
Adjustments to reconcile net income to net cash from
operating activities -
Depreciation and amortization 18,250 16,655
Reduction in deferred compensation 567 871
Decrease in deferred income taxes (288) (1,446)
Other 252 -
Changes in assets and liabilities
Accounts receivable (12,951) (5,154)
Inventories (17,948) (9,197)
Prepaid income taxes and other assets (1,654) 986
Accounts payable (4,116) 1,340
Accrued liabilities 2,890 7,560
---------- ---------
Total cash from operating activities 21,531 37,942
---------- ---------
INVESTMENT ACTIVITIES:
Acquisition payments (4,676) (7,087)
Property and equipment additions, net (21,011) (14,538)
Long-term investments (6,000) -
---------- ---------
Total cash used for investment activities (31,687) (21,625)
---------- ---------
FINANCING ACTIVITIES:
Decrease in long-term debt (400) (300)
Common stock issued 186,900 2,761
---------- ---------
Total cash from financing activities 186,500 2,461
---------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 164 -
---------- ---------
INCREASE IN CASH AND CASH EQUIVALENTS 176,508 18,778
CASH AND CASH EQUIVALENTS, beginning of period 49,512 16,324
---------- ---------
CASH AND CASH EQUIVALENTS, end of period $ 226,020 $ 35,102
---------- ---------
---------- ---------
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE>
ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
SUPPLEMENTAL FINANCIAL INFORMATION - UNAUDITED
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
3RD 2ND 1ST 4TH
QUARTER QUARTER QUARTER QUARTER
1995 1995 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
NET SALES $ 150,454 $ 140,342 $ 121,774 $ 128,298
COST OF PRODUCT SOLD 78,742 71,303 62,402 62,695
---------- ---------- ---------- ----------
GROSS PROFIT 71,712 69,039 59,372 65,603
---------- ---------- ---------- ----------
Gross profit percentage 47.7% 49.2% 48.8% 51.1%
---------- ---------- ---------- ----------
EXPENSES:
Development and product engineering 16,202 15,937 13,209 13,200
Selling and administration 31,937 32,638 29,763 31,607
Goodwill amortization 784 782 784 784
Personnel reduction -- 3,914 -- --
---------- ---------- ---------- ----------
Total expenses 48,923 53,271 43,756 45,591
---------- ---------- ---------- ----------
OPERATING INCOME 22,789 15,768 15,616 20,012
OTHER INCOME(EXPENSE), NET:
Interest 1,929 547 656 543
Other (229) (80) 80 (324)
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES 24,489 16,235 16,352 20,231
PROVISION FOR INCOME TAXES 8,815 5,846 5,886 7,487
---------- ---------- ---------- ----------
NET INCOME $ 15,674 $ 10,389 $ 10,466 $ 12,744
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
AVERAGE COMMON SHARES
OUTSTANDING 59,321 56,094 55,849 55,740
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
EARNINGS PER SHARE $ 0.26 $ 0.18 $ 0.19 $ 0.23
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
ORDERS $ 159,787 $ 144,999 $ 124,680 $ 137,170
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
See note 2 to the consolidated financial statements
5
<PAGE>
ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
Note 1 ACCOUNTING POLICIES: The information furnished in this report
is unaudited but reflects all adjustments which are necessary,
in the opinion of management, for a fair statement of the results
for the interim periods. The operating results for the nine months
ended July 31, 1995, are not necessarily indicative of the
operating results to be expected for the full fiscal year. These
statements should be read in conjunction with the Company's most
recent Annual Report on Form 10-K.
Note 2 ORDERS: Purchase orders received during a period for which
shipment is scheduled within one year are reported as orders for that
period. Substantially all of the Company's products are shipped
within the period that the related orders are received. As a
result, orders correspond generally to net sales for the specified
period and are not necessarily indicative of future results.
Note 3 STOCKHOLDERS' INVESTMENT: On January 24, 1995, the Company
declared a two-for-one stock split effected in the form of a 100%
stock dividend paid February 28, 1995, to stockholders of record as
of February 15, 1995. The share and per share information in the
accompanying financial statements (except balance sheet data) have
been adjusted to reflect the effect of the stock dividend.
On June 14, 1995, the Company completed a secondary public offering
of 6,325,000 shares of its common stock at $30 per share. The net
proceeds from the offering were $182 million, which will be used for
general corporate purposes, including working capital, capital
expenditures and possible acquisitions or strategic alliances.
Note 4 INVENTORIES: Inventories include material, labor and overhead
and are stated at the lower of first-in, first-out cost or market.
Inventories at July 31, 1995, and October 31, 1994, consisted of (in
thousands):
1995 1994
---- ----
Purchased materials and
manufactured products $74,989 $57,031
Work-in-process 8,131 7,172
-------- -------
$83,120 $64,203
-------- -------
-------- -------
6
<PAGE>
Note 5 EXTRAORDINARY ITEM: The building that serves as headquarters for
Fibermux Corporation, a wholly-owned subsidiary of the Company,
suffered damage as a result of the earthquake that struck Los Angeles
on January 17, 1994. The facility sustained damages of $2,300,000
(net of the related $850,000 tax benefit). All operations resumed by
February 8, 1994.
Note 6 PERSONNEL REDUCTION: During the quarter ended April 30, 1995, the
Company initiated a realignment of its Kentrox and Fibermux
subsidiaries into one business unit. The Company recorded a charge of
$3,914,000 in conjunction with the realignment, primarily related to
reductions in personnel. The realignment terminated approximately 110
Fibermux employees primarily in sales and administration and
engineering. Substantially all termination benefits are expected to
be paid by October 31, 1995.
Note 7 FOREIGN CURRENCY TRANSLATION: The functional currency for the
majority of the Company's foreign operations is the applicable local
currency. The translation to U.S. dollars is performed for balance
sheet accounts using exchange rates in effect at the balance sheet
date and for revenue and expense accounts using a weighted average
exchange rate during the period. The gains or losses resulting from
such translation are included in stockholders' investment. Prior to
1995, the Company's primary functional currency was the U.S. dollar.
The functional currency changed as a result of substantial changes in
the Company's foreign operations.
Note 8 NEW ACCOUNTING PRONOUNCEMENTS: A new accounting standard, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of, requires impairment losses on long-lived assets to be
recognized when an asset's book value exceeds its expected future cash
flows (undiscounted). The Company anticipates adopting this standard
on November 1, 1996, and does not expect that adoption will have a
material impact on the financial position or results of operations of
the Company.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company offers a broad range of products to address key areas of the
telecommunications network infrastructure. To meet its customers' needs, the
Company offers equipment, services and integrated solutions within the following
general functional product groups: transmission, enterprise networking and
broadband connectivity. The Company's transmission products are sold primarily
to public network providers in the United States and internationally. The
Company's enterprise networking products are sold primarily to private voice,
data and video network providers around the world. The Company's broadband
connectivity products are sold to both public and private network providers.
Historically, the Company's principal product offerings have generally
consisted of copper-based and fiber-based products designed to address the needs
of its customers for transmission, enterprise networking and connectivity on
traditional telephony networks. With the growth of multimedia applications and
the associated development of enhanced voice, data and video services, the
Company's more recent product offerings and research and development efforts
have increasingly focused on emerging technologies and applications relating to
the broadband telecommunications equipment market. The market for broadband
telecommunications equipment is evolving and rapidly changing. There can be no
assurance that the Company's new or enhanced products will meet with market
acceptance or be profitable.
The Company's operating results may fluctuate significantly from quarter to
quarter due to several factors. The Company's expense levels are based in part
on expectations of future revenues. If revenue levels in a particular period do
not meet expectations, operating results will be adversely affected. In
addition, the Company's results of operations are subject to seasonal factors.
The Company historically has experienced a stronger demand for its products in
the fourth fiscal quarter, primarily as a result of customer budget cycles and
Company year-end incentives, and has experienced a weaker demand for its
products in the first fiscal quarter, primarily as a result of the number of
holidays during late November, December and early January and a general industry
slowdown during that period.
8
<PAGE>
RESULTS OF OPERATIONS
The percentage relationships to net sales of certain income and expense
items for the quarters and nine-month periods ended July 31, 1995 and 1994, and
the percentage changes in these income and expense items between periods are
contained in the following table:
<TABLE>
<CAPTION>
Percentage Increase
Percentage of Net Sales Between Periods
-------------------------------------------- ----------------------
Quarters Ended Nine Months Ended
July 31, July 31, Quarters Nine Months
--------------------- -------------------- Ended Ended
1995 1994 1995 1994 July 31, July 31,
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET SALES 100.0% 100.0% 100.0% 100.0% 30.1% 28.8%
COST OF PRODUCT SOLD (52.3) (49.6) (51.5) (49.5) 37.3 33.8
------ ------ ------ ------
GROSS PROFIT 47.7 50.4 48.5 50.5
EXPENSES:
Development and product
engineering (10.8) (10.8) (11.0) (11.2) 29.5 26.8
Selling and administration (21.2) (23.7) (22.9) (24.7) 16.4 19.1
Goodwill amortization (0.5) (0.7) (0.6) (0.8) - -
Personnel reduction - - (0.9) - - -
------ ------ ------ ------
OPERATING INCOME 15.2 15.2 13.1 13.8 29.4 22.1
OTHER INCOME (EXPENSE), NET:
Interest 1.3 0.3 0.8 0.2 506.6 409.3
Other (0.2) (0.4) (0.1) (0.2) (51.4) (74.3)
------ ------ ------ ------
INCOME BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM 16.3 15.1 13.8 13.8 40.3 29.5
PROVISION FOR INCOME TAXES (5.9) (5.6) (4.9) (5.1) 36.5 26.0
------ ------ ------ ------
NET INCOME BEFORE
EXTRAORDINARY ITEM 10.4 9.5 8.9 8.7 42.5 31.5
EXTRAORDINARY ITEM, NET OF
TAXES - - - (0.5) - -
------ ------ ------ ------
NET INCOME 10.4% 9.5% 8.9% 8.2% 42.5 38.8
------ ------ ------ ------
------ ------ ------ ------
</TABLE>
NET SALES: The following table sets forth the Company's net sales for the
quarters and nine-month periods ended July 31, 1995 and 1994, for each of the
Company's functional product groups described above (dollars in thousands):
<TABLE>
<CAPTION>
Quarters Ended July 31, Nine Months Ended July 31,
------------------------------------------ -------------------------------------------
1995 1994 1995 1994
-------------------- ----------------- -------------------- --------------------
PRODUCT GROUP Net Sales % Net Sales % Net Sales % Net Sales %
---------- ------ --------- ----- ---------- ------ ---------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
TRANSMISSION $ 48,752 32.4% $ 28,477 24.6% $ 123,503 29.9% $ 74,239 23.2%
ENTERPRISE
NETWORKING 32,342 21.5 31,779 27.5 94,454 22.9 86,975 27.1
BROADBAND
CONNECTIVITY 69,360 46.1 55,432 47.9 194,613 47.2 159,223 49.7
---------- ------ --------- ----- ---------- ------ ---------- ------
TOTAL $ 150,454 100.0% $115,688 100.0% $ 412,570 100.0% $ 320,437 100.0%
---------- ------ --------- ----- ---------- ------ ---------- ------
---------- ------ --------- ----- ---------- ------ ---------- ------
</TABLE>
9
<PAGE>
Net sales for the three-month and nine-month periods ended July 31, 1995,
were $150.5 million and $412.6 million, reflecting 30.1% and 28.8% increases
over the comparable 1994 time periods. These increases in net sales were
primarily the result of increases in sales of transmission products of 71.2% and
66.4% during the quarter and nine-months ended July 31, 1995, respectively. The
Company's increased sales of transmission products predominately consisted of
fiber optic systems sold to public telecommunications network providers.
During the quarter and nine months ended July 31, 1995, net sales of
broadband connectivity products increased 25.1% and 22.2% over the comparable
1994 periods, reflecting the Company's success in selling these products into
new global broadband market applications. The Company believes that future
sales of broadband connectivity products will continue to account for a
substantial portion of the Company's revenues, although these products may
continue to decline as a percentage of total net sales primarily due to the
ongoing evolution of technologies in the telecommunications marketplace.
Reflecting increased sales of fiber optic products in both the
transmission and broadband connectivity functional product groups, net
sales of fiber optic products represented 41.7% and 40.4% of total net
sales for the quarter and nine months ended July 31, 1995, respectively,
as compared to 36.0% and 34.4% of total net sales for the quarter and nine
months ended July 31, 1994, respectively.
Net sales of enterprise networking products for the quarter and nine
months ended July 31, 1995, increased 1.8% and 8.6%, respectively, over the
comparable 1994 time periods. These increases reflect significant growth in net
sales of access equipment which were partially offset by decreases in net sales
of Local Area Network ("LAN") equipment. Recognizing changes in the competitive
environment for LAN equipment, the Company has realigned its Kentrox and
Fibermux subsidiaries into the Enterprise Networking Group to better address the
industry trend toward integration of LAN and Wide Area Network ("WAN")
technologies and products.
GROSS PROFIT: In the three-month and nine-month periods ended July 31,
1995, the gross profit percentages were 47.7% and 48.5% of net sales,
respectively. These gross profit percentages compared to 50.4% and 50.5% of net
sales for the three-month and nine-month periods ended July 31, 1994. The
declines in gross profit percentages during the 1995 periods were primarily the
result of a change in product sales mix toward sales of newer, lower margin
products which address emerging broadband applications. Future gross profit
percentages will continue to be affected by the mix of products the Company
10
<PAGE>
sells, the timing of new product introductions and manufacturing volume, among
other factors.
OPERATING EXPENSES: Operating expenses for the three months ended July 31,
1995, were $48.9 million, an increase of 20.1% over operating expenses of $40.7
million for the three months ended July 31, 1994. Operating expenses
represented 32.5% of net sales for the three months ended July 31, 1995, down
from 35.2% of net sales for the three months ended July 31, 1994.
Operating expenses were $145.9 million for the nine months ended July 31,
1995, an increase of 24.4% over operating expenses of $117.3 million for the
nine months ended July 31, 1994. Operating expenses represented 35.4% of net
sales for the nine months ended July 31, 1995, compared to 36.6% of net sales
for the nine months ended July 31, 1994.
The increases in absolute dollars of operating expenses during the three-
month and nine-month periods ended July 31, 1995, were due primarily to the
expanded operations associated with higher revenue levels, and in the nine-
months ended July 31, 1995, a charge of $3.9 million related primarily to a
personnel reduction at the Fibermux facility resulting from the realignment of
the Company's enterprise networking operations. This charge increased operating
expenses as a percentage of net sales by 0.9% for the nine months ended July 31,
1995. All other operating expense categories decreased as a percentage of net
sales in the nine months ended July 31, 1995, reflecting the Company's ability
to leverage operating expenses against revenue levels.
Development and product engineering expenses were $16.2 million for the
three months ended July 31, 1995, an increase of 29.5% over $12.5 million for
the three months ended July 31, 1994. For the nine months ended July 31, 1995,
development and product engineering expenses were $45.3 million, an increase of
26.8% over $35.8 million for the nine months ended July 31, 1994. These
increases reflect substantial product development efforts in each of the
Company's three functional product groups. The Company believes that, given the
rapidly changing technology and competitive environment in the
telecommunications equipment industry, continued commitment to product
development efforts will be required for the Company to remain competitive.
Accordingly, the Company intends to continue to allocate substantial resources
to product development for each of its three functional product groups.
However, the Company recognizes the need to balance the cost of product
development with expense control and remains committed to carefully managing the
rate of increase of such expenses.
11
<PAGE>
Selling and administration expenses were $31.9 million for the three months
ended July 31, 1995, a 16.4% increase over $27.4 million for the three months
ended July 31, 1994. For the nine months ended July 31, 1995, selling and
administration expenses were $94.3 million, a 19.1% increase over $79.2 million
for the nine months ended July 31, 1994. These 1995 increases primarily reflect
selling activities associated with new product introductions and additional
personnel costs related to expanded operations.
OTHER INCOME (EXPENSE), NET: For the nine month periods ended July 31,
1995 and 1994, the net interest income (expense) category represented net
interest income on cash balances. (See Liquidity and Capital Resources below
for a discussion of cash levels.)
INCOME TAXES: The Company's effective income tax rate was 36.0% for both
the three-month and nine-month periods ended July 31, 1995, and 37.0% for both
the three-month and nine-month periods ended July 31, 1994. These rates reflect
the $.8 million of non-deductible goodwill amortization included in operating
expenses in each of the three-month periods ($2.4 million in each of the nine-
month periods) and the beneficial impact of tax credits.
EXTRAORDINARY ITEM: An extraordinary charge of $1.5 million (or $.03 per
share), net of income taxes, was recorded in the nine-month period ended July
31, 1994, representing expenses relating to the clean up and repair of damage to
the Fibermux facility resulting from an earthquake in January 1994.
NET INCOME: Reflecting all of the matters discussed above, net income was
$15.7 million (or $.26 per share) for the quarter ended July 31, 1995, an
increase of 42.5% over $11.0 million (or $.20 per share) for the quarter ended
July 31, 1994, and was $36.5 million (or $.64 per share) for the nine months
ended July 31, 1995, an increase of 38.8% over $26.3 million (or $.47 per share)
for the nine months ended July 31, 1994.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents, primarily short-term investments in commercial
paper with maturities of less than 90 days, increased $176.5 million and $18.8
million during the nine months ended July 31, 1995 and 1994, respectively. The
major elements of the 1995 increase were the $182 million of net proceeds from
the Company's June 14, 1995,
12
<PAGE>
secondary public offering of 6.3 million shares of common stock, and net income
before depreciation of $54.8 million, offset by property and equipment additions
of $21.0 million, acquisition and investment payments of $10.7 million and the
$30.9 million increase in inventory and receivable levels (reflecting an
acquisition completed in 1995, as well as growth in business). In the nine
months ended July 31, 1994, the major elements of the increase were net income
before depreciation of $43.0 million, offset by property and equipment additions
of $14.5 million, acquisition payments of $7.1 million and a $14.4 million
increase in inventory and receivable levels.
The Company may borrow up to $40 million under revolving credit agreements.
Borrowings under these agreements bear interest at floating short-term market
rates, may be repaid any time without penalty and may be converted to term loans
bearing interest principally at the prime rate, payable in annual installments
through December 2000. At July 31, 1995, the entire $40 million of borrowings
under these agreements was available to the Company and the Company had no long-
term debt outstanding.
Management believes that current cash balances, cash generated from
operating activities and borrowings available under revolving credit agreements
will be adequate to fund working capital requirements, capital expenditures and
possible acquisitions or strategic alliances for the remainder of 1995.
However, the Company may find it necessary to seek additional sources of
financing to support its capital needs, for additional working capital,
potential investments or acquisitions, or otherwise. Total property and
equipment additions for 1995 are expected to be approximately $30 million.
13
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
4-a Specimen certificate for shares of Common Stock of ADC
Telecommunications, Inc. (Incorporated by reference to
Exhibit 4-a to the Company's Quarterly Report on Form 10-Q
for the quarter ended July 31, 1989).
4-b Restated Articles of Incorporation of ADC
Telecommunications, Inc., as amended to date. (Incorporated
by reference to Exhibit 4(b) of the Company's Registration
Statement on Form 8-A dated March 11, 1994, for the
Company's 1994 Employee Stock Purchase Plan).
4-c Composite Restated Bylaws of ADC Telecommunications, Inc.,
as amended to date (Incorporated by reference to the
Company's Annual Report on Form 10-K for the fiscal year
ended October 31, 1989).
4-d Amended and Restated Rights Agreement, amended and restated
as of August 16, 1989, between ADC Telecommunications, Inc.
and Norwest Bank Minnesota, N.A., as Rights Agent
(Incorporated by reference to Exhibit 1 to Amendment No. 1
on Form 8 dated August 16, 1989, to the Company's
Registration Statement on Form 8-A dated September 23,
1986).
10-a Lease, dated July 17, 1995, between Centract VI LLC and ADC
Video Systems, Inc.
27-a Financial Data Schedule
b. Reports on Form 8-K
None.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ADC TELECOMMUNICATIONS, INC.
BY: /s/Robert E. Switz
-----------------------------
Robert E. Switz
Vice President, Chief Financial Officer
(Principal Financial Officer,
Duly Authorized Officer)
Dated: September 1, 1995
15
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ADC TELECOMMUNICATIONS, INC.
EXHIBIT INDEX TO FORM 10-Q
FOR THE QUARTER ENDED JULY 31, 1995
Exhibit
Number Description Page
- ------- -------------- -------
4-a Specimen certificate for shares of Common Stock of ADC N/A
Telecommunications, Inc. (Incorporated by reference to
Exhibit 4-a to the Company's Quarterly Report on Form 10-Q
for the quarter ended July 31, 1989).
4-b Restated Articles of Incorporation of ADC Telecommunications, N/A
Inc., as amended to date. (Incorporated by reference to
Exhibit 4(b) of the Company's Registration Statement on Form
8-A dated March 11, 1994, for the Company's 1994 Employee Stock
Purchase Plan).
4-c Composite Restated Bylaws of ADC Telecommunications, Inc., as N/A
amended to date (Incorporated by reference to the Company's
Annual Report on Form 10-K for the fiscal year ended
October 31, 1989).
4-d Amended and Restated Rights Agreement, amended and restated as N/A
of August 16, 1989, between ADC Telecommunications, Inc. and
Norwest Bank Minnesota, N.A., as Rights Agent (Incorporated by
reference to Exhibit 1 to Amendment No. 1 on Form 8 dated
August 16, 1989, to the Company's Registration Statement on
Form 8-A dated September 23, 1986).
10-a Lease, dated July 17, 1995, between Centract VI LLC and ADC Video
Systems, Inc.
27-a Financial Data Schedule
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EXHIBIT 10-a
LANDLORD
CENTRACT VI LLC
AND
ADC VIDEO SYSTEMS, INC.
DATE
JULY 17, 1995
<PAGE>
INDEX
1. Specific Provisions 1
2. Premises 2
3. Use 3
4. Base Rent 3
5. Lease Term 3
6. Taxes, Assessments, and
Operating Expenses 3
7. Utilities and Services 5
8. Landlord's Obligations 5
9. Tenant's Obligations 6
10. Parking 7
11. Uses Prohibited 7
12. Compliance with Law 7
13. Insurance 8
14. Subordination 8
15. Damage; Destruction 9
16. Eminent Domain 10
17. Repairs and Maintenance 10
18. Assignment: Subletting 11
19. Indemnification & Liability
of Landlord 11
20. Force Majeure 12
21. Alterations, Additions
and Improvements 12
22. Mechanic's Liens 13
23. Fees and Expenses 14
24. Quiet Enjoyment 14
25. Default 14
26. Remedies of Landlord 15
27. Right to Enter and
Exhibit Premises 16
28. Surrender of Premises 16
29. Captions and Headings 17
30. Signs 17
31. Late Charges 17
32. General Provisions 17
33. Estoppel Certificate 18
34. Security Deposit 18
35. Holdover 19
36. Recording Prohibited 19
37. Assigns 19
38. Landlord 19
39. Amendments 20
40. Governing Law 20
41. Notice 20
42. Expansion Options 20
43. Broker 21
<PAGE>
LEASE AGREEMENT
THIS LEASE AGREEMENT dated as of this 17th day of JULY 1995, is made by and
between CENTRACT VILLC having an address at 1375 KINGS HIGHWAY EAST, FAIRFIELD,
CONNECTICUT 06430, (herein called "LANDLORD") and ADC VIDEO SYSTEMS, INC. having
an office and address at 999 RESEARCH PARKWAY, MERIDEN, CONNECTICUT 06450
(herein called "TENANT").
WITNESSETH:
THAT FOR AND IN CONSIDERATION of the mutual covenants and agreements
contained herein, the parties hereto do hereby covenant and agree as follows:
1. SPECIFIC PROVISIONS:
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a) DEFINED TERMS:
--------------
(i) LANDLORD'S BUILDING means the structure constructed by Landlord at 11
Fairfield Boulevard, Wallingford as the same may be altered, reduced, expanded
or replaced from time to time.
(ii) PREMISES means Tenant's rentable space located in Landlord's Building
as delineated on Schedule A and as further set forth in Paragraph 2, having
27,518.5 Sq. Ft. of rentable space (of total rentable building consisting of
36,659 Sq. Ft. Landlord shall substantially complete its work on the Premises as
further described in Paragraph 2 by July 28, 1995 unless construction is delayed
by causes beyond Landlord's control.
(iii) PERMITTED USE means general offices and electronics laboratory.
(iv) LEASE TERM means a period of five (5) years (as further described in
Paragraph 5 hereof). The Commencement Date is August 1, 1995. The Termination
Date means July 31, 2000.
(v) TERMINATION OPTION means the Tenant's option to be exercised during
January of 1997, 1998, or 1999 to end the term on July 31st. of that same year
without requirement to pay a penalty or premium or other charge except for those
referred hereon to the date of termination.
(vi) TENANT'S PROPORTIONATE SHARE OF OPERATING EXPENSE INCREASES (as
further set forth and defined in Paragraph 6) shall be 75%.
(vii) TENANT'S NOTICE ADDRESS from and after the Commencement Date shall
be:
ADC Video Systems, Inc.
ATTN: V. P. Finance
999 Research Parkway
Meriden, Connecticut 06450-8323
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b) MINIMUM BASE RENT PAYMENTS means the following amounts set forth
below, to be paid monthly.
Lease Year Annual Rent Monthly Payments
---------- ----------- ----------------
1-5 162,359.15 13,529.93
The first monthly rental payment shall be made at the time of the execution
of this Lease, and shall be credited against the Minimum Rent due on the first
day of the said first Lease Year.
c) ATTACHMENTS. The following documents are attached hereto, and such
documents shall be deemed to be a part hereof:
Schedule "A" The Premises
Schedule "B" Improvements
Schedule "C" Cleaning Specifications
Schedule "D" CAM Budget
d) PARKING SPACES. The Tenant shall be entitled to 111 parking spaces as
further set forth in Paragraph 10 hereof.
2. PREMISES. Landlord does hereby lease to Tenant and Tenant hereby leases
from Landlord the Premises containing the rentable space set forth in Paragraph
1 (a) (ii) hereof. Tenant's said rentable space is the space occupied by the
Tenant measured from the outside wall of all exterior demising partitions to the
center wall of all interior demising partitions and, in addition thereto, a
proportionate share of the common areas of the Landlord's Building.
Landlord shall construct the Premises in accordance with the conditions and
specifications contained in Schedule B attached hereto. Such work shall
hereafter be referred to as "Landlord's Work". Except as provided in Schedule
B, Tenant agrees to take the premises "as is".
Landlord's Work shall be deemed to be substantially completed upon
Landlord's delivery of written notice to Tenant of such completion, accompanied
by a copy of the Certificate of Occupancy or temporary Certificate of Occupancy
for the Premises from the Town of Wallingford. On the day prior to Tenant's
taking occupancy, Landlord and Tenant shall jointly inspect the premises and
establish, in writing, a punch list of items required by this Lease but not yet
finished in accordance herewith. An additional punchlist not including finish
items, shall be established four weeks after move in.
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3. USE. Tenant shall use the Premises for the Permitted Uses only and
shall not use or permit the Premises to be used for any other purpose without
the prior written consent of Landlord.
4. BASE RENT. Tenant agrees to pay as Base Rent to Landlord, without
deduction or set-off of any kind, the monthly sums as set forth in Paragraph 1
(b) hereof (and, during the Renewal Term, such sums as are set forth in
Paragraph 1 (c) hereof), all of which shall be payable, in advance, on the first
day of each and every successive calendar month during the-Lease Term.
Such rental shall be paid to Landlord, without deduction or set-off, in
lawful money of the United States of America, at Landlord's office or such other
place as Landlord may designate in writing.
5. LEASE TERM
The term of this Lease shall begin as of the Commencement Date and shall
expire on the Termination Date set forth in Paragraph 1 (a) (iv) hereof, unless
sooner terminated as provided herein.
6). TAXES, ASSESSMENTS, AND OPERATING EXPENSES
a) ADDITIONAL RENT. Tenant shall also pay as Additional Rent its
proportionate share of operating expenses for the Landlord's Building. Tenant's
proportionate share shall be that percentage stated in Paragraph (a) (iv) above.
If certain services, such as cleaning and energy, are provided to some tenants,
and not to others, proration of expenses may, instead, be apportioned over the
area served with such service, billed on an equitable basis. Landlord
represents that Tenant's proportionate share is approximately proportionate to
the subject premises in relation to Landlord's Building and that the total of
all the allocated proportionate shares in Landlord's Building, including but not
limited to the space, if any, occupied by the Landlord, does not exceed one
hundred (100%) percent.
"Operating Expenses" shall mean all expenses, costs and disbursements of
any kind properly charged against income which the Landlord shall become
obligated to pay in connection with the operation of Landlord's Building which,
in accordance with generally accepted accounting principles, apply to the
operation and maintenance of first-class office buildings, including real estate
taxes. See Exhibit D for a list of expenses calculated on an annual per square
foot bases as estimated for 1996. Tenant will pay its share monthly with the
minimum rent on a proportionate basis.
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Operating Expenses shall not include repairs or other work occasioned by
fire, windstorm or other insurable casualties, general costs attributable to
defaults of other tenants or any sums reimbursable by tenants, realtor
commissions, legal services, interest, depreciation, taxes (except real estate
sales and use taxes), alterations and services made for the accommodation of a
specific tenant, and expenditures made for capital investment or improvements.
Cost of refinancing or sale are also not included.
Prior to each calendar year of the term hereof, Landlord shall provide
Tenant with a reasonable estimate of the real estate taxes and operating
expenses for Landlord's building for the coming calendar year. The first such
statement shall be furnished prior to the beginning of 1996. Tenant agrees to
pay as additional rent monthly during the calendar year for which the estimate
is furnished, 1/12 of Tenant's proportionate share of the estimated real estate
taxes and operating expenses. Following each such calendar year, Landlord shall
provide Tenant with a statement of actual real estate taxes and operating
expenses for Landlord's Building for the preceding calendar year, the first such
statement to be with respect to 1995. If Tenant's proportionate share of the
estimate exceeded the actual, Tenant shall receive a credit for the next sums
due hereunder and if Tenant's proportionate share of estimate was less than
actual, Tenant shall pay the difference within thirty days after being billed
therefor. (with respect to the last year of the term there shall be a refund
instead of a credit, if due).
b) LANDLORD'S OPERATIONS, ACCOUNTING
a.) OPERATIONS. Landlord shall operate the building reasonably
efficiently and economically at all times during the term of this Lease so as
to give Tenant all the services required for tenants of first-class office
buildings and, at the same time, keep operating expenses at a reasonable
level, all in accordance with standards for running first-class office
buildings in and around the area. Landlord shall take the benefit of the
provisions of any statute or ordinance permitting any assessment to be paid
over a period of time, and Tenant shall be obligated to pay only its
proportionate share of the installments of any such assessments which shall
become due and payable during the term of this Lease.
b.) ACCOUNTING. Landlord agrees to keep books and records reflecting
direct operating costs of the building in accordance with a standard method
of accounting recognized and approved for maintaining accounts for large
office buildings. Tenant, its authorized agent or representative, or a
public accounting firm selected by it, shall have the right to inspect the
books of the Landlord during business hours, upon reasonable notice, for the
purpose of verifying information in any statement and computation of
Additional Rent.
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7. UTILITIES AND SERVICES
a) ELECTRICITY AND GAS
Tenant agrees to pay for its consumption, of heat, air conditioning,
electricity, water, and other such building utility services, including
telephone service, as may be necessary for reasonable use of the Premises seven
(7) days per week on a twenty-four (24) hour basis.
b) CLEANING SERVICES
Tenant agrees to use the cleaning service contractor provided by Landlord
in connection with the cleaning of the Premises in accordance with the
specifications set forth in Schedule C. Such cleaning specifications shall be
the standard service offered not only to Tenant, but to other office Tenants in
the Landlord's Building. Tenant may contract directly with such cleaning
service contractor to provide any further services, as Tenant may desire or
require for its Premises, and Tenant shall be responsible to make payment for
such additional cleaning service directly to the cleaning service contractor.
If Tenant is dissatisfied with the cleaning service provided by such contractor,
Tenant may, after 10 days written notice specifying its complaints and may, if
the notice states, replace the contractor with another meeting the same specs
for service at its own cost. If Tenant elects to provide its own cleaning
service, common charges will be reduced by Landlord to eliminate the cleaning
charge thereto and Tenant will pay its cleaning service directly.
Landlord shall also provide extermination services to control vermin and
rodents as required. Tenant agrees to notify Landlord of any vermin or rodents,
or signs thereof, observed in the Premises.
c) TRASH REMOVAL SERVICES
Tenant agrees to use the refuse disposal contractor provided by Landlord to
service Landlord's Building. Any trash, rubbish, or refuse to be removed from
the Premises shall be stored in appropriate trash bags or receptacles and placed
in dumpsters provided for such purpose by the janitorial staff.
8. LANDLORD'S OBLIGATIONS
a) Landlord shall light the parking areas during the hours between 7:00 A.M.
and 12:00 P.M. The parking area in the vicinity of the building entrance will be
lit all night. (provided, however, that Landlord shall not be obliged to light
the parking areas after sunrise or before sunset), Monday through Friday.
b) Landlord shall clean and remove snow and ice (or, if the removal of ice is
not possible, salt and sand the same) from parking lots, driveways, walkways,
steps and entrance areas. Landlord shall not be obliged to begin any snow
plowing until accumulation exceeds two (2) inches.
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c) Landlord shall not be required, unless otherwise agreed to in writing, to
furnish any service during hours other than those set forth in this Lease.
d) Landlord shall maintain the parking areas in good order and repair.
9. TENANT'S OBLIGATIONS
a) Tenant agrees not to employ any contractor in connection with any services,
provisions, alteration or maintenance without first obtaining Landlord's prior
written approval; it being the intention of Landlord to limit the number of such
contractors in the Landlord's Building so as to insure the overall quality and
harmony of services to be provided herein. Tenant acknowledges that it shall be
reasonable for Owner to withhold consent to the contractor proposed by Tenant if
the use of such contractor would tend to cause labor problems at Landlord's
Building. Landlord may cause to be revoked any agreements or contracts, whether
written or oral, if no such prior written consent has been obtained and in such
event Tenant shall forthwith cancel such contract as being invalid due to
Tenant's failure to obtain Landlord's prior consent. The categories of services
referred to above shall include, but not be limited to, window cleaning
services, extermination of vermin, food services and vending machines and shall
not include such services as Tenant's office equipment, maintenance, provision
of office supplies or the like or alterations not requiring a demolition or
building permit and costing $10,000.00 or less. Landlord's disapproval of any
contractor selected by Tenant must be accompanied by the designation of one or
more contractors acceptable to Landlord whose prices must be reasonably
competitive. In the event the Landlord does not approve or disapprove Tenant's
contractor within ten (10) business days after receipt of written request
therefor, then the contractor so selected by Tenant shall be deemed to have been
approved by Landlord.
b) With respect to any work to be performed by the Tenant on the Premises, in
addition to any other limitations set forth in this Lease, Landlord does not
consent to the reservation of any title by any conditional vendor or secured
party to any property which may be affixed to the realty so as to become a part
thereof, wholly or in any portion without material injury to the freehold.
c) Tenant shall promptly remove litter or debris from the walkways, steps or
paved ways leading from the common areas to Tenant's entrances and exits;
provided such walkways, steps and paved ways are for the sole use of Tenant.
d) To insure design harmony throughout Landlord's Building, Landlord has
agreed to provide window coverings which shall be standard vertical Levelors,
approximately three (3) inches in width and beige in color. Landlord agrees
that Tenant may provide, at its own expense, for higher quality window covering;
provided that any such window covering installed by Tenant shall adhere to the
same basic standards, in that such window coverings shall be vertical Levelors,
approximately three (3) inches in width and beige in color and shall become a
part of the building upon installation.
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e) Tenant will make application for telephone service directly to the
telephone company. Landlord does not initiate or provide said service, but will
cooperate and coordinate with the provider of telephone service in the
installation thereof.
f) Tenant shall continuously operate its HVAC system to maintain temperature
inside of not less than 60DEG.F during the heating season or 70DEG.F during the
air condition season and not higher than 80DEG.F except for any warehouse area
which shall not be lower than 55DEG.F during the heating season.
10. PARKING.
Landlord agrees to make available to Tenant parking for such number of cars
as is set forth in Paragraph 1 (d) hereof at Landlord's Building. Such parking
spaces, however, shall not be separately designated or assigned for Tenant's
uses, but shall be used in common with Landlord and other Tenants in Landlord's
Building. Landlord shall not be responsible for policing any such parking
areas. Landlord consents to Tenant keeping its van and box truck at the
building.
11. USES PROHIBITED.
Tenant shall not do or permit anything to be done in or about the Premises
or the Building or bring or keep anything therein which is not within the
Permitted Use of the Premises or which will in any way increase the existing
rate of or affect any fire or other insurance upon Landlord's Building or any of
its contents, or cause a cancellation of any insurance policy covering
Landlord's Building or any part thereof or any of its contents. Tenant shall
not do or permit anything to be done in or about the Premises which will create
a safety or environmental hazard; which will in any way obstruct or interfere
with the rights or other tenants or occupants of the Landlord's Building or
injure or annoy them or use or allow the Premises to be used for any improper,
immoral, unlawful or objectionable purpose; or which will, in Landlord's
opinion, impair the reputation or character of Landlord's Building; nor shall
Tenant cause, maintain or permit any nuisance in, on, or about the Premises.
Tenant shall not commit or allow to be committed any waste in or upon the
Premises.
12. COMPLIANCE WITH LAW.
Tenant shall not use the Premises, or permit anything to be done in or
about the Premises, which will in any way conflict with any law, statute,
ordinance or governmental rule or regulation now in force or which may hereafter
be enacted or promulgated. Tenant shall, at its sole cost and expense, promptly
comply with all laws, statutes, ordinances and governmental rules, regulations
or requirements now in force or which may hereafter be in force and with the
requirements of any board of fire underwriters or other similar
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bodies now or hereafter constituted relating to or affecting the condition, use
or occupancy of the Premises, excluding structural not related to or affected by
Tenants improvements or acts. The judgment of any court of competent
jurisdiction or the admission of Tenant in any action against Tenant, whether
Landlord be a party thereto or not, that Tenant has violated any law, statute,
ordinance or governmental rule, regulation or requirement, shall be conclusive
of that fact as between the Landlord and Tenant. If any work is required to be
done to make the Premises, by virtue of Tenant's improvements or acts, comply
with any such ordinance, regulation, statute, ruling or Board of Fire
Underwriters or insurance company requirement, Landlord shall perform such work
and charge it to Tenant in addition to its Additional Rent.
13. INSURANCE.
From and after the commencement date of the term of this Lease and any
renewal thereof, Tenant shall keep the Premises insured, at its sole cost and
expense, against claims for bodily injury or tanible property damage under a
policy of general public liability insurance each with a combined single limit
of not less than $1,000,000.00 for bodily injury and for tangible property
damage or in such greater amounts as Landlord or any mortgagee of Landlord may
reasonably require. At least ten (10) days prior to the Commencement Date
hereof, Tenant shall deliver to the Landlord certificates of insurance
certifying that such insurance is in full force and effect. Such insurance
policy shall designate Landlord as an additional insured and shall include
contractual liability coverage.
Such insurance required to be maintained by Tenant under this Paragraph 13
shall be issued by an insurance company authorized to do business under the laws
of the State of Connecticut. Any such policy of insurance shall contain an
agreement by the insurers that such policies shall not be cancelled without at
least fifteen (15) days prior written notice to Landlord.
Notwithstanding the fact that liability of Tenant to Landlord may be
covered by Tenant's insurance, Tenant's liability shall in no way be limited by
the amount of its insurance recovery.
Tenant shall pay for any increase in the property insurance premiums for
Landlord's Building caused by Tenant's acts or omissions or occupancy of the
Premises.
14. SUBORDINATION.
a) SUBORDINATION
This Lease is subject and subordinate to all mortgages which may now or
hereafter affect the real property of which the Premises form a part, and to all
renewals, modifications, consolidations, replacements and extensions thereof.
This clause shall be
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self-operative and no further instrument of subordination shall be required to
affect the subordination of this Lease. If confirmation of such subordination
is required by any mortgagee or intended mortgagee, Tenant shall execute
promptly any certificate that Landlord may request. Tenant hereby constitutes
and appoints Landlord the Tenant's attorney-in-fact to execute any such
certificate or certificates for and on behalf of Tenant.
b) ATTORNMENT
Tenant agrees that neither the foreclosure of Landlord's interest in the
land and building of which the Premises are a part, or the institution of any
suit or proceedings against the Landlord by or otherwise result in the
cancellation or termination of this Lease or the obligations of Tenant
hereunder, and Tenant agrees to attorn to and recognize the holder of any such
mortgage as Tenant's Landlord hereunder in the event that such mortgagee shall
succeed to Landlord's interest in the Premises.
c) SUPPLEMENTAL AGREEMENT
If any mortgagee proposes execution and delivery of a supplemental
agreement reasonably embodying all of the substance of the provisions of this
Paragraph 14, Tenant agrees to promptly enter into such an agreement.
15. DAMAGE; DESTRUCTION
a) PREMISES RENDERED UNTENANTABLE. If the Premises or Landlord's Building
are damaged or rendered untenantable by fire or other cause and cannot
reasonably be repaired by Landlord within thirty (30) days, then Landlord may,
within ten (10) days after such casualty, give Tenant written notice of its
intention to terminate this Lease, and such termination shall occur within
thirty (30) days of the date of such written notice, and Tenant shall vacate the
Premises and surrender the same to Landlord. Upon such termination, Tenant's
liability for rent shall cease as of the day following the casualty or when
Tenant ceases to do business in the leased premises, whichever date is later.
Under these circumstances, Tenant shall have the same option to terminate that
Landlord has.
b) PARTIAL DAMAGE. If the Premises shall be partially damaged by fire or
other casualty, the damages to the Premises, to the extent that they were
originally constructed and furnished by the Landlord, shall be repaired by and
at Landlord's expense within thirty (30) days. The damage to all of Tenant's
fixtures, equipment and other improvements installed by Tenant, shall be
promptly repaired by and at Tenant's expense. The rent, until such repairs
required to be made by Landlord shall be made, shall be apportioned according to
the part of the leased premises which is used by Tenant.
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c) WAIVER OF SUBROGATION. Neither Landlord nor Tenant shall be liable or
responsible to each other or to anyone claiming through or under them by way of
subrogation or otherwise for any loss or damage to tangible property of the
other or anyone claiming under the other, caused by fire or any other casualty
which shall have been caused by the fault or negligence of the other, or anyone
for whom the other may be responsible.
d) TENANT'S INSURANCE. Tenant shall have the right to carry fire
insurance on all property of Tenant and all interior moveable fixtures and
equipment or other improvements installed by it in the Premises, any loss
payable under such insurance being payable directly to Tenant.
16. EMINENT DOMAIN. If the whole of the Premises shall be acquired or condemned
by eminent domain for any public or quasi-public use or purpose, or if any
substantial part thereof or of Landlord's Building is so acquired or condemned
as to render the Premises untenantable, then and in that event the term of this
Lease shall cease and terminate from the date of title vesting in such
proceeding, or the termination of the right to possession, whichever is later,
and Tenant shall have no claim against Landlord for the value of any unexpired
term of said Lease, nor a claim to any part of any award in such proceeding and
rent shall be adjusted and paid to the date of such termination. Nothing herein
contained shall be deemed to affect or be in derogation of any right or rights
of Tenant against the condemning authority to claim and recover damages, if any,
to or for the taking of its moveable fixtures and equipment or expenses of
removal or relocation resulting from any such condemnation or acquisition.
17. REPAIRS AND MAINTENANCE.
a) REPAIRS. In the event the leased premises shall need repairs which this
Agreement requires Landlord to make, Tenant shall give immediate notice to
Landlord of the need for repairs of which it is aware, and Landlord agrees to
proceed promptly to make such repairs or effect whatever maintenance is
necessary.
b) MAINTENANCE. Tenant shall exercise due care in its use of the Premises,
but shall have no duty to repair or maintain them or any part of the Building in
which the Premises are located. Landlord shall have sole responsibility for all
repairs and maintenance in and about the Landlord's Building and the Premises,
including, but not limited to, the heating, electrical, plumbing and ventilating
or air-conditioning systems and shall keep them in good order and repair and
clean condition at Landlord's own expense. However, Tenant shall reimburse
Landlord for all costs of such repair for damage to the extent caused by
Tenant's own negligence, except damage caused by or resulting from fire.
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c) SIGNS OR ANTENNA. Tenant shall not mount any signs or antenna or other
device on the roof of Landlord's Building or allow the roof to be pierced in any
manner without the consent of Landlord. If Tenant mounts any antenna or signs
or other device on the roof or pierces the roof in any manner, Tenant shall
thereafter be responsible for any required repairs to the roof required because
of any injury or leaks arising out of such installation, or the work in doing
them, within five (5) days after receipt of an invoice therefor.
18. ASSIGNMENT: SUBLETTING. Tenant-shall not have the right to sublet or
assign, mortgage, or encumber this Lease without the consent, in writing, of
Landlord, which consent may not be unreasonably withheld or delayed provided,
however, that any such assignment or subletting shall not relieve Tenant of its
liability hereunder, and if the rent payable by any subtenant or assignee is
higher than the rent provided for herein, the excess shall be paid over to the
Landlord. Landlord's acceptance of rent from any assignee, subtenant or
successor in interest of Tenant, with or without notice, shall not relieve
Tenant of its liability hereunder, nor shall it be deemed a waiver of any of
Landlord's rights hereunder.
19. INDEMNIFICATION AND LIABILITY OF LANDLORD. Landlord and its agents shall
not be liable for any damage to property of Tenant or of others entrusted to
employees of the Landlord's Building, nor for the loss or damage to any property
of Tenant by theft or otherwise, resulting from fire, explosion, falling
plaster, steam, gas, electricity, water, rain or snow or leaks from any part of
the Landlord's Building or from the pipes, appliances or plumbing works or from
the roof, street or sub-surface or from any other place or by dampness or by any
other cause of whatsoever nature, nor shall Landlord and its agents be liable
for any such damage caused by operations in construction of any private, public
or quasi-public work, nor shall Landlord be liable for any latent defect in the
Premises or in the Landlord's Building. Tenant shall give immediate notice to
Landlord in case of accidents in the Premises or in the Landlord's Building or
of defects therein or in any fixtures or equipment. Tenant shall indemnify and
save harmless Landlord from and against any and all suits, claims and demands of
every kind and nature, including reasonable counsel fees, by or on behalf of any
person, firm, association or corporation arising out of or based upon any
accident, bodily injury or tangible property damage, however occurring, which
shall or may happen during the period between the date upon which the Premises
are made available to the Tenant for the making of Tenant's improvements and the
expiration of the term herein, on or about the Premises, to the extent caused by
the Tenant's act or failure to act with regard to its responsibilities hereunder
concerning the condition, alteration, use occupation or operation of the
Premises. The foregoing paragraph is applicable in any event with respect to
Tenant's contents of its demised premises or with respect to damages for
business interruption. In such cases Tenant agrees, to look only to its own
insurance for satisfaction.
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Notwithstanding the foregoing, the Landlord shall be responsible for any
damage suffered by a third party as a result of Landlord's negligence or willful
misconduct, to the extent that such loss or damage does not arise out of the
Tenant's use and occupancy of the Premises. Landlord agrees to carry not less
than $2,000,000 of public liability insurance with respect to Landlord's
Building. In any event, there shall be no personal liability on the part of the
Landlord to the Tenant with respect to any of the terms, covenants and
conditions of this Lease and Tenant shall look solely to the equity of the
Landlord or any successor in interest to the Landlord in the fee estate of the
Landlord in Landlord's Building for the satisfaction of each and every remedy of
the Tenant in the event of any breach by the Landlord or by any successor in
interest of the Landlord of any of the terms, covenants and conditions of this
Lease to be performed by the Landlord. Such exculpation of personal liability
of Landlord is absolute and without exception whatsoever, and Tenant waives any
right to look to the individual assets of the Landlord for satisfaction of any
such liability.
20. FORCE MAJEURE. Landlord and Tenant, respectively, shall not be in
default hereunder if Landlord, or as the case may be, Tenant, is prevented from
fulfilling or is delayed in fulfilling its obligations hereunder, by reason of
fire or other casualty, strikes or labor troubles, governmental preemption in
connection with a national emergency, shortage of supplies or materials, or by
reason of any rule, order or regulation of any governmental authority, or by
reason of the condition of supply and demand affected by war or other emergency,
or any other cause beyond its control including, but not limited to, adverse
weather conditions affecting or limiting performance by Landlord's contractor
provided the party prevented from performing gives written notice thereof to the
other party. Such inability or delay by Landlord or Tenant in fulfilling any of
their respective obligations hereunder shall not affect, impair or excuse the
other party hereto from the performance of any of the terms, conditions,
covenants, limitations, provisions or agreements hereunder on its part to be
performed, nor, except for Paragraphs 15 and 16 result in any abatement of rents
or additional rents payable hereunder which shall in any event be payable as and
when provided for in Articles 4, 5 and 6 hereof.
21. ALTERATIONS ADDITIONS AND IMPROVEMENTS. Tenant shall not make any
alterations, installations, additions or improvements in or to the Premises
without Landlord's prior written consent, which consent Landlord agrees shall
not be unreasonably withheld or delayed provided, however, that if required,
Tenant shall also obtain the consent of any mortgagee of Landlords. All
Tenant's work shall be done at Tenant's sole expense, and shall be done only by
contractors or mechanics and pursuant to plans and specifications approved by
the Landlord which approval shall not be unreasonably withheld see Article 9
(a). Landlord shall not be liable for any failure of any building facilities or
services installed by Landlord caused by any alterations, installations and/or
additions by Tenant, and Tenant shall promptly correct such failure. In the
event Tenant does not promptly correct same, Landlord may correct the same and
charge Tenant for the cost thereof. Such sum due Landlord shall be deemed
additional rent and shall be paid by Tenant promptly upon being billed therefor.
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All alterations, decorations, installations, additions or improvements upon
the Premises made by any party shall, at the expiration of the term hereof,
become the property of the Landlord and be surrendered with said premises as
part thereof at the end of the term. Tenant's business and trade fixtures,
machinery and equipment, whether or not attached to the Premises which are
installed by or for the account of Tenant and can be removed without permanent
structural damage to the premises, and all furniture, furnishings and other
articles of movable personal property shall be and shall remain Tenant's
property and may be removed by it prior to the expiration date of this Lease;
provided, however, that if any of Tenant's property is removed, Tenant shall
repair or pay the cost of repairing any damage to the Premises resulting from
such removal.
Upon termination, or the date of any earlier termination of this Lease,
Tenant, at its expense, shall remove from the Premises all of Tenant's property
except such items thereof as Tenant shall have expressly agreed in writing with
Landlord were to remain and to become the property of Landlord, and shall repair
any damage to the Premises or Landlord's Building resulting from such removal.
Any other items of Tenant's property (except money, securities and other like
valuables) which shall remain in the Premises after the termination or after a
period of fifteen (15) days following an earlier termination date may, at the
option of Landlord, be deemed to have been abandoned and, in such case, either
may be retained by Landlord as its property, or may be disposed of, without
accountability, in such manner as Landlord may see fit at Tenant's expense.
22. MECHANIC'S LIENS. Tenant will not permit, during the term hereby granted,
any mechanic's or other lien or order for payment of work, labor, services, or
materials furnished or to be furnished to, attach to or affect the Premises or
any portion thereof, and agrees that no such lien or order shall under any
circumstances attach to or affect the fee, leasehold or other estate of Landlord
herein, or the building. The Tenant's obligation to keep the Premises in
repair, and its right to make alterations therein, if any, shall not be
construed as the consent of the Landlord to the furnishing of any such work,
labor or materials within the meaning of any present or future lien law. Notice
is hereby given that the Tenant has no power, authority or right to do any act
or to make any contract which may create, or be the foundation for, any lien
upon the fee or leasehold estate of the Landlord in the Premises or upon
Landlord's Building; and if any such mechanic's or other lien or order shall be
filed against the Premises or the Landlord's Building, the Tenant shall, within
thirty (30) days thereafter, discharge said lien or order by payment, deposit or
by bond fixed in a proper proceeding according to law. If the Tenant shall fail
to take such action, or shall not cause such lien or order to be discharged
within thirty (30) days after the filing thereof, Landlord may pay the amount of
such lien or discharge the same by deposit or bond or in any other manner
according to law, and pay any judgment recovered in any action to establish or
foreclose such lien or order, and any amount so paid, together with the expenses
incurred by Landlord, including all reasonable attorney's fees and disbursements
incurred in any defense of any such action, bonding or other proceeding, shall
be deemed additional rent.
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23. FEES AND EXPENSES. If Tenant defaults in the observance or performance of
any term or covenant to be observed or performed under or by virtue of any of
the terms of provisions in any article on this Lease, Landlord may, after
reasonable notice to Tenant to cure the default and failure by Tenant to cure
the same, or immediately, or at any time thereafter, without notice in event of
emergency, perform the same for the account of Tenant, and if Landlord makes any
expenditures or incurs any obligations for the payment of money in connection
therewith, including, but not limited to, reasonable attorney's fees in
instituting, prosecuting or defending any action or proceeding, such reasonable
sums paid or obligations incurred with interest and costs shall be deemed to be
additional rent hereunder and shall be paid by Tenant to Landlord within thirty
(30) days of rendition of any bill or statement to Tenant hereunder. This
paragraph shall not, however, relieve Tenant of its obligation to pay rent or
other sums due at the time provided for elsewhere in this Lease.
24. QUIET ENJOYMENT. Landlord covenants and agrees with Tenant that upon
Tenant paying the rent and additional rent and observing and performing all of
the terms, covenants and conditions on Tenant's part to be observed and
performed, Tenant may peaceably and quietly enjoy the Premises, free from any
interference, molestation or acts of the Landlord subject, nevertheless, to the
terms and conditions of this Lease.
25. DEFAULT.
a) CANCELLATION. If Tenant defaults in fulfilling any of the material
covenants of this Lease other than the covenants for the payment of rent or
additional rent, or if the Premises become vacant or deserted, then, in any one
or more of such events, upon Landlord serving a written thirty (30) days notice
upon Tenant specifying the nature of said default and upon the expiration of
said thirty (30) days, if Tenant shall have failed to comply with or remedy such
default, or if the said default or omission complained of shall be of such a
nature that the same cannot be completely cured or remedied within said thirty
(30) day period, and if Tenant shall not have diligently commenced curing such
default within such thirty (30) day period, and shall not thereafter with
reasonable diligence and in good faith proceed to remedy or cure such default,
then Landlord may serve a written ten (10) days notice of cancellation of this
Lease upon Tenant, and upon the expiration of such ten (10) days, this Lease and
the term thereunder shall end and expire as fully and completely as if the date
of expiration of such ten (10) day period were the day herein definitely fixed
for the end and expiration of this Lease and the term thereof and the Tenant
shall then quit and surrender the Premises to Landlord, but Tenant shall remain
liable as hereinafter provided.
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b) RE-ENTRY BY LANDLORD. If the notice provided for in (a) hereof shall
have been given, and the term shall expire as aforesaid; or (i) if Tenant shall
make default in payment of the rent reserved herein or any item of additional
rent herein mentioned or any part of either or in making any other payment
herein provided ten (10) days after the same shall fall due; or (ii) if any
execution shall be issued against Tenant or any of Tenant's property whereupon
the Premises shall be taken or occupied or attempted to be taken or occupied by
someone other than Tenant or (iii) if Tenant shall fail to move into or take
possession of the Premises within fifteen (15) days after commencement of the
term of this lease, then and in any of-such events, Landlord may, without
notice, re-enter the Premises, either by force or otherwise, and dispossess
Tenant, and the legal representative of Tenant or other occupant of Premises, by
summary proceedings or otherwise, and remove their effects and hold the premises
as if this Lease had not been made, and Tenant hereby waives the service of
notice of intention to re-enter or to institute legal proceedings to that end.
If Tenant shall make default hereunder and such default is not cured prior to
the date fixed as the commencement of any renewal or extension of this Lease,
Landlord may cancel and terminate such renewal or extension agreement by written
notice.
26. REMEDIES OF LANDLORD. In case of any such default, re-entry, expiration
and/or dispossess by summary proceedings or otherwise:
a) The rent shall become due thereupon and be paid up to the time of such re-
entry, dispossess and/or expiration, together with such expenses as Landlord may
incur for legal expenses, attorney's fees, brokerage and/or putting the Premises
in good order, or for preparing the same for re-rental;
b) Landlord may re-let the Premises or any part or parts thereof, either in
the name of Landlord or otherwise, for a term or terms, which may, at Landlord's
option, be less than or exceed the period which would otherwise have constituted
the balance of the term of this Lease and may grant concessions or free rent;
and/or
c) Tenant or the legal representatives of Tenant shall also pay Landlord
liquidated damages for the failure of Tenant to observe and perform said
Tenant's covenants herein contained, any deficiency between (i) the rent hereby
reserved and/or covenanted to be paid, and (ii) the net amount, if any, of the
rents collected on account of the lease or leases of the Premises for each month
of the period which would otherwise have constituted the balance of the term of
this lease. In computing such liquidated damages, there shall be added to the
said deficiencies such expenses as Landlord may incur in connection with re-
letting, such as legal expenses, attorney's fees, brokerage and for keeping the
Premises in good order or for preparing the same for re-letting and interest on
any payments made after the due date computed at twelve (12%) percent per annum,
or, if greater, at a rate equal to three (3) percentage points above the so-
called "Prime Rate" or "Best Rate" given by banks in Bridgeport to its best
customers for short term borrowing, but not exceeding the maximum rate allowed
by law. Any such liquidated damages shall be paid in monthly installments by
Tenant on the rent day specified in this Lease or, at the option of the
Landlord, on demand, shall be paid in
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full to the end of the term hereof imputing an interest rate of four (4%)
percent into such payments for the purpose of determining the then present
value. Landlord, at its option, may make such alterations, repairs,
replacements and/or decorations in the demised premises, as Landlord considers
advisable and necessary for the purpose of re-letting the Premises; and the
making of such alterations and/or decorations shall not operate or be construed
to release Tenant from liability hereunder as aforesaid. The failure of
Landlord to re-let the premises or any part thereof shall not release or affect
Tenant's liability for damages hereunder, nor shall Landlord in any event be
liable in any way whatsoever for failure to re-let the Premises. In the event
of a breach or threatened breach by Tenant of any of the covenants or provisions
thereof, Landlord shall have the right of injunction and the right to invoke any
remedy allowed at law or in equity as if re-entry, summary proceedings and other
remedies were not herein provided for. Mention in this Lease of any particular
remedy shall not preclude Landlord from any other remedy, in law or in equity.
27. RIGHT TO ENTER AND EXHIBIT PREMISES.
a) Landlord reserves the right to re-enter the Premises to inspect the same
and to exhibit same at any reasonable time (i) to prospective mortgagees,
purchasers and contractors at any time during the term, and (ii) to prospective
tenants at any time within the last year before the expiration of the term of
this Lease, or any renewal or extensions thereof.
b) Landlord further reserves the right to enter Premises at reasonable times,
except in the case of an emergency, and then immediately, for the purpose of
making any repairs, additions or alterations as may be necessary for the safety
or preservation of the Premises or as may be required to comply with terms of
this Lease.
c) Landlord further reserves the right to enter the premises for the purpose
of constructing, maintaining and repairing any pipes, wires, cables, conduits,
plumbing and vents that may run through, over or under the Premises as and to
the extent that Landlord may at any time during the term of this Lease deem to
be necessary or appropriate for the proper operation and maintenance of
Landlord's Building, or for the proper operation and maintenance of other
tenants in Landlord's Building.
28. SURRENDER OF PREMISES. On the last day of the term of this Lease, or upon
any earlier termination of this Lease, or upon any re-entry by Landlord upon the
Premises, Tenant shall quit and surrender the Premises to Landlord in broom
clean condition, in good order, condition and repair except for ordinary wear
and tear and damage by fire or other insured casualty; Tenant shall remove
Tenant's property subject to the provisions of Paragraph 22 hereof; and Tenant
shall surrender to Landlord all keys.
29. CAPTIONS AND HEADINGS. The captions and headings contained in this Lease
are inserted only as a matter of convenience and for reference and in no way
define, limit or describe the scope or intent of this Lease, nor in any way
affect this Lease.
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30. SIGNS. Tenant shall not mount or place any signs on the roof, on the
exterior of Landlord's Building, or on the grounds surrounding Landlord's
Building or from the interior of the Premises of Landlord's Building which would
be visible from the exterior of Landlord's Building. Landlord shall provide a
directory of tenants in Landlord's Building near the parking entrance visible
from the street, and shall designate a graphic scheme and sign location for
Tenant's identification sign at its entrance. To insure overall balance and
design harmony with the other tenants in Landlord's Building, Landlord shall
have the final authority to decide the overall design, color scheme, size and
placement of any signage.
31. LATE CHARGES. Tenant's failure to pay rent promptly may cause Landlord to
incur unanticipated costs. The exact amount of such costs are impractical or
extremely difficult to ascertain. Such costs may include, but are not limited
to, processing and accounting charges and late charges which may be imposed on
Landlord by any ground lease, mortgage or trust deed encumbering the Property.
Therefore, if Landlord does not receive any rent payment within ten (10) days
after it becomes due, Tenant shall pay Landlord a late charge equal to five (5%)
percent of the overdue amount. The parties agree that such late charge
represents a fair and reasonable estimate of the costs Landlord will incur by
reason of such late payment.
32. GENERAL PROVISIONS.
a) Tenant shall not store any vehicles (except for its van and box
truck), equipment, goods or other materials outside of the Landlord's Building.
b) Tenant shall, subject to the other applicable terms of this Lease,
remove, on vacating the premises, any private telephone systems, communication
systems or security systems unless Landlord has specifically consented in
writing to their remaining on the premises.
c) Wherever Tenant shall have affixed wall coverings, wall fixtures such
as wall shelving, hooks, pictures, etc., to the walls and shall have covered,
obscured or penetrated Landlord's standard painted finish, Tenant shall be
responsible, upon removal from the Premises, to leave behind a wall surface that
is intact, generally acceptable in color or type, and if not easily repaintable,
shall be removed and the surface restored to a paintable condition. Where such
wall coverings are serviceable or repairable, they may be left in place, at
Landlord's discretion. Normal wear and tear will be acceptable.
d) Any provision of this Lease which requires Landlord not to
unreasonably withhold its consent or approval shall never be the basis for an
award of damages or give rise to a right of setoff or termination to Tenant, but
may be the basis for a declaratory judgment or specific injunction with respect
to the matter in question. Alternatively, if Landlord has refused to consent,
Landlord or Tenant may make an application to any judge of the Superior Court of
Connecticut for review and his decision after hearing, shall be final and
binding on the parties.
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e) Wherever in this Lease consent of the Landlord is required, Landlord
agrees not to unreasonably withhold it except that under no circumstances shall
Landlord be required to agree to roof signs or other signs visible from the
exterior of Landlord's Building that
differ from Landlord's size and placement policy.
f) Landlord shall have the right to change the shape and location of
parking areas and the use of same, but no action by Landlord shall materially
affect access to the Premises, nor shall Landlord do anything which would
prevent the availability to the Tenant of the parking spaces described above,
except for temporary work for repairs, maintenance and installation. Tenant and
its officers, employees, agents, customers and invitees shall have the right, in
common with Landlord and all others to whom Landlord has granted or may
hereafter grant rights, to use the common areas as designated from time to time
by Landlord subject to such reasonable rules and regulations as Landlord may,
from time to time, impose, including the designation of special areas in which
cars, other vehicles owned by the Tenant, its officers, employees, agents,
customers and invitees must be parked. Tenant shall not, at any time, interfere
with the rights of Landlord and other occupants of Landlord's Building, their
officers, employees, agents, customers and invitees to use any part of the
parking areas and other common areas not specifically allocated to Tenant.
33. ESTOPPEL CERTIFICATE. Upon request of the Landlord, the Tenant will
execute and deliver to the Landlord, an instrument prepared by Landlord stating,
if the same be true, that this Lease is a true and exact copy of the lease
between the parties hereto, that there are no amendments hereof (or stating what
amendments there may be), that the same is then in full force and effect and
that, to the best of Tenant's knowledge, there are then no offsets, defenses or
counterclaims with respect to the payment or rent reserved hereunder or in the
performance of the other terms, covenants and conditions hereof on the part of
the Tenant to be performed, and that as of such date, no default has been
declared hereunder by either party hereto and that the Tenant at the time has no
knowledge of any facts or circumstances which it might reasonably believe would
give rise to a default by either party or, as of such date if Tenant believes a
default exists, the statement shall specify each default of which Tenant may
have knowledge. Such instrument shall contain such further matters as are
reasonably requested by the Landlord, it being intended that such instrument may
be relied upon by any prospective mortgagee or purchaser or any assignee
thereof, or any subtenant or assignee of the Tenant.
Upon request from Landlord, Tenant agrees to submit to Landlord's
institutional first mortgagee, within a reasonable period of time, such
financial information as it shall reasonably require.
34. SECURITY DEPOSIT. Tenant shall deposit with Landlord at the commencement
date, the amount of one (1) month's rent as a security deposit.
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Provided Tenant is not in default in the payment of rent or any other
charges due Landlord, and further provided the demised premises are left in good
condition, reasonable wear and tear excepted, as described in Paragraphs 21 and
28, said deposit shall be returned to Tenant within thirty (30) days after the
termination of this Lease. If Tenant is in default or if the Premises are not
left in good condition, then the security deposit shall be applied to the extent
available on account of sums due Landlord or the cost of repairing damages to
the Premises. In the event of the sale or transfer of Landlord's interest in
the Building, Landlord shall have the right to transfer the security deposit
to such purchaser or transferee, in which event Tenant shall look only to the
new Landlord for the return of the security deposit and Landlord shall thereupon
be released from all liability to Tenant for the return of such security
deposit.
Such security deposit may be commingled with other funds of Landlord, need
not be deposited in any special account, and shall not bear interest.
35. HOLDOVER. Any holding over of the Premises after the expiration or
other termination of this Lease or any renewal or extension without Landlord's
permission shall be operated and be construed as a tenancy from month-to-month
at 1 1/2 the monthly rental rate that applied to that last preceding month and
subject to all the other terms and conditions provided. In no event shall the
tenancy be deemed to be from year-to-year or any period longer than month to
month. However, this provision shall not be construed by the Landlord to the
holding over of the leased premises by Tenant.
36. RECORDING PROHIBITED. Tenant agrees not to record, or cause to be
recorded, this Lease on the Land Records of the Town of Wallingford. A
recording of this Lease on the Land Records of the Town of Wallingford by Tenant
may be deemed a material breach by Landlord and at Landlord's option the Lease
may be terminated.
Landlord and Tenant do agree to exercise and deliver a notice of lease
complying with the provisions of Sec. 47-19, Connecticut General Statutes in
recordable form and either party shall have the right to file such notice in the
Wallingford Town Clerk's Office.
37. ASSIGNS. The covenants, conditions and agreements contained in this Lease
shall bind and inure to the benefit of Landlord and Tenant and their respective
heirs, distributee, executors, administrators, successors and, except as
otherwise provided in this Lease, their assigns.
38. LANDLORD. The word "Landlord" as used in this Lease means only the
owner for the time being of Landlord's interest in the Lease. In the event (i)
of any assignment of Landlord's interest in the Lease, the assignor in each case
shall no longer be liable for the performance or observance of any agreements or
conditions on the part of the Landlord to be performed or observed provided that
the assignee agrees in writing, and (ii) that Landlord's interest in the Lease,
the Building or the Premises; is terminated by foreclosure
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proceedings, whether by operation of law or otherwise, the successor to such
interest hereby agrees, (a) to recognize Tenant, (b) that Tenant shall not be
disturbed in the peaceful and quiet enjoyment of the premises, and (c) that
assignee or successor assumes all responsibilities and obligations of Landlord
under this Lease.
39. AMENDMENTS. This Lease contains the entire agreement between the
parties. There are no oral understandings, terms or conditions upon which
either party relied in making this Lease which are not contained in this Lease.
This Lease may not be changed orally, but may only be modified by an agreement
in writing and signed by the party against whom enforcement of any waiver,
change or modification is sought.
40. GOVERNING LAW. This Lease shall be governed by the laws of the State of
Connecticut.
41. NOTICE. Any notice required to be given herein shall be in writing and
shall be mailed to the respective parties, certified mail, return receipt
requested as follows:
If to Landlord at:
Peter A. Penczer
Connecticut Properties Development, Corp.
1375 Kings Highway East
Fairfield, Connecticut 06430
If to Tenant at from and after the Commencement Date, at the Tenant's Notice
Address set forth in Paragraph 1 (a) (vii) hereof.
Any notice which is so personally delivered shall be deemed to have been
properly given and received on the day on which it is delivered or, if such day
is not a business day, on the first business day thereafter. If any notice
which is so personally delivered shall be deemed to have been properly given and
received on the day on which it is delivered or, if such day is not a business
day, on the first business day thereafter.
If any notice is given by certified mail, any official U.S. Postal Service
delivery receipt shall constitute conclusive proof of such delivery; provided
that if delivery is refused or delayed by the addressee it shall be deemed
delivered on the date of deposit in the U.S. mail.
Notice can also be given by fax (telephone) communication, in which case it
will be deemed given when received by the intended recipient's fax machine.
42. EXPANSION OPTIONS. Tenant shall have the right to lease the remaining
space in the building pursuant to the following two expansion options:
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(a) The space presently occupied by Stanton Maintenance plus the
unoccupied area adjacent to it, consisting of 3,903 sq. ft. of rentable area may
be added to the existing lease in its "as is" condition by giving two months
notice in writing not late than November 30, 1995, which will be available to
Tenant on the first of the month occuring no more than 90 days and less than 60
days after notice as provided in Article 41 hereof unless it is unoccupied, in
which case it will be available earlier if agreed to by Tenant in which case
base rent will be increased by $1,920.45 per month and the percentage provision
in Article 1 (a) (vi) now reading 75% will be increased by 11%; and
(b) The space presently occupied by Servicescope consisting of 5,237.5 sq.
ft. of rentable area may be added to the existing lease in its "as is" condition
by giving notice as provided in Article 41 hereof in writing not later than
December 31, 1995, in which case occupancy shall be delivered on April 1, 1996,
and in which case base rent will be increased by $2,575.10 per month and the
percentage provision in Article 1 (a) (vi) now reading 75% will be increased by
14%.
43. BROKER. Trevor Davis of Farley Whittier Partners of Hartford,
Connecticut, is recognized as the broker who assisted in bringing about this
transaction and who will be paid by Landlord pursuant to a separate agreement.
Tenant represents that no other broker participated with Tenant in procuring
this lease and holds Landlord harmless from any liability to any other broker
claiming a commission by reason of any such participation.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and
seals by their representatives, duly authorized as of the year and day first
written above.
Signed, Sealed and Delivered in the Presence of:
CENTRACT VI LLC
LANDLORD:
by /s/ Peter A. Penczer
------------------------
PETER A. PENCZER
TENANT:
ADC VIDEO SYSTEMS, INC.
by /s/ Carleton Brown 7/17/95
----------------------------
CARLETON BROWN, PRESIDENT
/s/ David Almeida, Vice President, Finance
ADC/MM
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SCHEDULE B
Landlord agrees to do the following work to the exterior of Landlord's
Building:
a) Power wash the exterior of the building;
b) Paint the brick soldier course to match the metal panel
at the top of the exterior of the building;
c) restripe the parking lot;
d) upgrade the landscaping to equal the standards of
10 Fairfield Boulevard (across the street).
Tenant has taken the interior of the premises "as is" provided that the
heating, ventilating and air conditioning systems and electrical and plumbing
systems, which shall be in good, working order. All improvements will be
subject to reasonable approval by Landlord and will be done in accordance with
all applicable codes.
<PAGE>
SCHEDULE C
CLEANING SPECIFICATIONS
-----------------------
A. NIGHTLY SERVICES - Office Areas (Nightly, 5x per week)
a. Vacuum all carpeted areas and rugs with high suction
equipment, moving light furniture other than desks and file
cabinets.
b. Dust sweep all hard surface flooring using approved dust-
down preparations to ensure dust free floors. Special attention to
be given areas under and behind furnishings and other hard to reach
areas.
c. Empty and clean all ash trays and waste receptacles, damp
dust each ash tray.
d. Clean and polish all cigarette urns (sand or water to be
replaced as necessary).
e. Dust wipe all furniture, fixtures, pictures, wall hangings,
window sills, exposed shelving and any other horizontal surfaces
within high hand reach using chemically treated cloths.
f. Dust all telephones, all glass topped desks and tables
maintaining same in a smudge and fingermark free condition at all
times. Dust underneath desk top equipment.
g. Remove all waste paper and other debris to a designated area
on the premises, utilizing janitor carriages especially designated
for this purpose. Trash gondolas to be supplied by Owner.
B. PERIODIC SERVICES
1. OFFICE AREAS
a. Dust door bucks, frames and louvers once each week.
b. Unoccupied areas are to be checked for general cleanliness and
swept or vacuumed as necessary to ensure they are being
maintained in an acceptable condition at all times (except
unfurnished areas and offices under construction).
<PAGE>
c. Coat racks and closets are to be checked and cleaned weekly.
Dust shelving and wash or vacuum floor of closets.
d. Do high dusting once every three months including pictures,
frames, charts, graphs and other wall
mounted objects; dust window frames and ledges, all vertical
surfaces, overhead pipes, sprinklers, light fixtures, etc.
C. EXCLUSIONS
Cleaning of private bathrooms, kitchens, and other tenant
specialty rooms (such as computer rooms, etc.) and partition
glass. These services to be contracted for by tenant with the
authorized building cleaning contractor.
D. CORE LAVATORIES (Nightly, 5x per week)
a. Sweep and wash flooring with approved germicidal detergent
solution.
b. Wash and polish mirrors, powder shelves, bright work, etc.,
including flushometers, piping and toilet seat hinges.
c. Wash both sides of toilet seats, wash basins, bowls and urinals
with approved germicidal detergent solution.
d. Dust partitions, tile walls, dispensers, doors and receptacles.
Spot wash, removing smudges, fingermarks and graffiti.
e. Empty and clean towel and sanitary disposal receptacles.
f. Remove wastepaper and refuse to a designated area on the
premises, using special janitor carriages.
g. Fill toilet tissue dispensers, vending machines in ladies room
and soap and towel dispensers with supplies furnished by Owner,
except for sanitary napkins, furnished by Contractor.
h. Proceeds of vending machines in ladies room will be collected
directly by Contractor.
E. PERIODIC SERVICES
LAVATORIES
a. Machine scrub flooring once each month, using approved
-2-
<PAGE>
germicidal detergent solutions
b. Wash partitions, tile walls and enamel surfaces once per month.
c. High dust all areas, including lighting fixtures, tops of
partitions and all areas not reached in nightly maintenance.
Public Areas
1. Entrance Lobbies and Public Areas (Nightly 5x per week)
a. Sweep and wash flagstone and tiles with special attention to
grouting and recesses between same. Maintain any finished
applied to flagstone. Vacuum public areas if carpeted.
b. Clean cigarette urns, replacing sand or water as required.
c. Maintain elevator cabs. If carpeted, same area to be
thoroughly vacuumed, with particular attention to edges
and corners. Soluble stains are to be removed nightly.
Saddles and door tracks are to be checked nightly and
any cigarette butts or debris removed.
d. Maintain lobby walls, glass doors and windows, metalwork,
frames,ledges and other surfaces free of dust, smudges and
fingermarks. This includes elevator doors, signal buttons,
floor indicators and any other metalwork.
e. Sweep revolving door floor nightly ensuring all dirt and
debris is removed.
f. Dust sweep all tile flooring using approved dust down
preparations to ensure dust free floors and damp mop same.
g. Dust wipe and damp wipe all furniture, fixtures, pictures, door
and window sills, mail boxes, building directories, etc.
PERIODIC SERVICES
ENTRANCE LOBBIES AND RELATED AREAS
a. Dust walls, full length, once each month.
b. Wash partitions, tile walls and enamel surfaces once each
week.
- 3-
<PAGE>
c. Rub down metal and other high level brlght work once each week.
d. Stairways, office and utility doors are to be washed monthly
and continually checked for general cleanliness.
WINDOW CLEANING
1. Clean exterior of all windows, including lobby windows and doors,
approximately two (2) times per year.
2. Clean interior of all windows, including lobby windows and doors,
approximately two (2) times per year.
INITIAL CLEANING
Contractor shall perform the initial general cleaning of newly opened
space prior to tenant move in, including common areas. This general
cleaning will be a comprehensive, wall-to-wall, floor-to-ceiling
preparation of all facilities of the tenant and all halls, lobbies,
rest rooms, etc. Work to be on a Time and Material basis.
The foregoing cleaning specifications do not include cleaning of vinyl asbestos
tile floor or cafeteria areas which are subject to direct price and
specification negotiation between Cleaning Contractor and Tenant and which will
be billed directly by Cleaning Contractor to Tenant.
3366g
0065g
-4-
<PAGE>
1995 ESTIMATED OPERATING EXPENSES FOR FAIRFIELD ASSOCIATES VI
CENTRACT BUSINESS PARK
11 FAIRFIELD BLVD
WALLINGFORD, CT 06492
TOTAL S.F. 36500
ACTUAL 1995
1994 PROJECTION
EXPENDITURES COSTS/S.F.
- ----------------------------------------------------------------------
REAL ESTATE TAXES 47616 1.30
JANITORIAL (CONTRACT) 27348 .75
INSURANCE 9980 .27
HEAT (GAS) COMMON 1131 .03
COMMON AREA ELECTRIC (INCLUDES A/C) 123 .00
DOMESTIC ENERGY FURNISHED BY TENANT 0 .00
GROUNDS MAINT (LAWN) 3183 .09
GROUNDS MAINT (SNOW REMOVAL) 5342 .15
TRASH REMOVAL 7441 .20
REPAIRS & MAINT 7232 .20
WATER/SEWER 4183 .11
SECURITY 1895 .05
MANAGEMENT CONTRACT 25439 .60
- -----------------------------------------------------------------------
TOTAL ESTIMATED OPERATING EXPENSES 140913 3.75
-------
-------
RE: DOMESTIC UTILITIES
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements for ADC Telecommunications, Inc. and Subsidiaries, for the
nine month period ended July 31, 1995, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-START> NOV-01-1994
<PERIOD-END> JUL-31-1995
<CASH> 226,020
<SECURITIES> 0
<RECEIVABLES> 88,989<F1>
<ALLOWANCES> 2,002
<INVENTORY> 83,120<F2>
<CURRENT-ASSETS> 409,367
<PP&E> 182,204
<DEPRECIATION> (107,743)
<TOTAL-ASSETS> 556,993
<CURRENT-LIABILITIES> 67,624
<BONDS> 0
<COMMON> 12,519
0
0
<OTHER-SE> 474,975
<TOTAL-LIABILITY-AND-EQUITY> 556,993
<SALES> 412,570
<TOTAL-REVENUES> 412,570
<CGS> 212,447
<TOTAL-COSTS> 212,447
<OTHER-EXPENSES> 145,950
<LOSS-PROVISION> 537
<INTEREST-EXPENSE> 232
<INCOME-PRETAX> 57,076
<INCOME-TAX> 20,547
<INCOME-CONTINUING> 36,529
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 36,529
<EPS-PRIMARY> 0.64
<EPS-DILUTED> 0.64
<FN>
<F1>Amount is net of allowance for bad debts and returns and allowances
<F2>Amount is net of obsolescence reserves
</FN>
</TABLE>
