<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant /x/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/x/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
TIGERA GROUP, INC.
(Name of Registrant As Specified In Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/x/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
N/A
2) Aggregate number of securities to which transaction applies:
N/A
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11: N/A
4) Proposed maximum aggregate value of transaction: N/A
5) Total fee paid: N/A
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid: N/A
2) Form, Schedule or Registration Statement No.: N/A
3) Filing Party: N/A
4) Date Filed: N/A
<PAGE> 2
TIGERA GROUP, INC.
667 MADISON AVENUE
NEW YORK, NEW YORK 10021
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
NOVEMBER 19, 1996
To the Shareholders:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Tigera Group, Inc. (the "Company") will be held at ______________________,
New York, New York 10021, on November 19, 1996, at 2:30 P.M. (local time) for
the following purposes:
1. To elect eight directors to hold office until the next Annual
Meeting of Shareholders and until their successors are duly elected and
qualified;
2. To consider and vote upon a proposal to amend the Company's
Certificate of Incorporation to change the name of the Company to Connectivity
Technologies Inc.;
3. To consider and vote upon a proposal to amend the Company's
Certificate of Incorporation to effect a one-for-four reverse split of the
Company's outstanding Common Stock, and to reduce the number of authorized
shares of the Company's Common Stock and Preferred Stock;
4. To consider and vote upon a proposal to approve the adoption of the
Company's 1996 Stock Incentive Plan; and
5. To transact such other business as may properly be brought before
the meeting or any adjournment thereof.
The Board of Directors has fixed October 21, 1996, as the record date
for the determination of the shareholders entitled to notice of and to vote at
such meeting or any adjournment thereof, and only shareholders of record at the
close of business on that date are entitled to notice of and to vote at such
meeting.
A COPY OF THE ANNUAL REPORT ON FORM 10-KSB FOR 1995 IS ENCLOSED
HEREWITH. ON MAY 31, 1996, THE COMPANY COMPLETED THE ACQUISITION OF 85% OF THE
OUTSTANDING SECURITIES OF CONNECTIVITY PRODUCTS INCORPORATED, A DELAWARE
CORPORATION, A DISTRIBUTOR, MANUFACTURER AND ASSEMBLER OF SPECIALTY WIRE AND
CABLE PRODUCTS ("CPI"). A DESCRIPTION OF THE BUSINESS OF CPI IS ATTACHED HERETO
AS APPENDIX A. A COPY OF AMENDMENT NO. 1 TO THE CURRENT REPORT ON FORM 8-K/A,
WHICH INCLUDES A DESCRIPTION OF THE TRANSACTION AS WELL AS PRO FORMA FINANCIAL
INFORMATION WITH RESPECT TO THE ACQUISITION OF CPI, IS ALSO ENCLOSED HEREWITH.
You are cordially invited to attend the meeting. Whether or not you
plan to attend the meeting, it is important that your shares be represented.
Accordingly, please complete, date and sign the enclosed proxy and return it
promptly.
By Order of the Board of Directors
Gregory C. Kowert
Secretary
New York, New York
October 25, 1996
- - - --------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT
TO ENSURE A QUORUM, PLEASE COMPLETE AND RETURN THE PROXY IN THE ENCLOSED
ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF YOU ATTEND
THE MEETING, YOUR PROXY WILL BE RETURNED TO YOU UPON REQUEST TO THE SECRETARY OF
THE MEETING.
- - - --------------------------------------------------------------------------------
<PAGE> 3
TIGERA GROUP, INC.
667 MADISON AVENUE
NEW YORK, NEW YORK 10021
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
NOVEMBER 19, 1996
This Proxy Statement and accompanying form of proxy are being furnished
in connection with the solicitation of proxies by the Board of Directors of
Tigera Group, Inc., a Delaware corporation ("Tigera" or the "Company"), for use
at the Annual Meeting of Shareholders of Tigera to be held on November 19, 1996,
at 2:30 p.m. (local time) at _____________________________, or any adjournment
or postponement thereof (the "Meeting"). Copies of this Proxy Statement, the
attached Notice of Annual Meeting of Shareholders, and the enclosed form of
proxy were first mailed to shareholders on or about October 25, 1996.
The principal executive office of Tigera is located at 667 Madison
Avenue, New York, New York 10021. The telephone number of Tigera's principal
executive office is (212) 644-8880.
A proxy in the accompanying form, which is properly executed, duly
returned to the Board of Directors and not revoked, will be voted in accordance
with the instructions contained in the proxy. In the absence of contrary
instructions with respect to any matter specified in the Notice of Annual
Meeting to be acted upon at the Meeting, the proxy will vote the shares
represented thereby (i) FOR the election of the director nominees named below
under the caption "Election of Directors," (ii) FOR the proposal to amend the
Company's Certificate of Incorporation to change the name of the Company to
Connectivity Technologies Inc., (iii) FOR the proposal to amend the Company's
Certificate of Incorporation to effect a one-for-four reverse split of the
Company's issued and outstanding Common Stock and to reduce the number of
authorized shares of the Company's Common Stock and Preferred Stock, (iv) FOR
the proposal to approve the adoption of the Company's 1996 Stock Incentive Plan
(the "1996 Plan") and (v) in accordance with his best judgment on any other
matters which may properly be brought before the Meeting. The Board of Directors
currently knows of no other business that will be presented for consideration at
the Meeting.
Each shareholder who has executed a proxy and returned it to the Board
of Directors may revoke the proxy by notice in writing to the Secretary of the
Company, or by attending the Meeting in person and requesting the return of the
proxy, in either case at any time prior to the voting of the proxy. Presence at
the Meeting does not itself revoke the proxy. The cost of the solicitation of
proxies will be paid by the Company. In addition to the solicitation of proxies
by the use of the mails, management and regularly engaged employees of the
Company may, without additional compensation therefor, solicit proxies on behalf
of the Company by personal interviews, telephone or other means, as appropriate.
The Company may also engage a proxy soliciting firm to solicit proxies, although
the Company has no current plans to do so. The Company will, upon request,
reimburse brokers and others who are only record holders of the Company's common
stock, par value $.01 per share ("Common Stock"), for their reasonable expenses
in forwarding proxy material to, and obtaining voting instructions from, the
beneficial owners of such stock.
The close of business on October 21, 1996 has been fixed as the record
date (the "Record Date") for the determination of the shareholders entitled to
notice of and to vote at the Meeting or any adjournment
1
<PAGE> 4
thereof. As of the Record Date, there were 22,261,301 shares of Common Stock
issued and outstanding and entitled to vote.
Each share of Common Stock entitles the holder thereof to one vote on
all matters properly brought before the Meeting and any adjournment thereof,
except that each shareholder will be entitled to cumulate his or her votes in
the election of directors. Under cumulative voting, a shareholder is allowed one
vote per share multiplied by the number of directors to be elected (eight at the
Meeting) and may use the total number of votes for one nominee or may distribute
such number among two or more nominees. A majority of the shares of Common Stock
issued and outstanding constitutes a quorum. Abstentions and broker non-votes
(i.e. shares held by brokers or nominees as to which (i) instructions have not
been received from the beneficial owners and (ii) the broker or nominee does not
have discretionary authority to vote on a particular matter) are counted as
present in determining whether the quorum requirement is satisfied. The
affirmative vote of holders of a plurality of the shares of Common Stock present
in person or represented by proxy at the Meeting will be necessary for the
election of directors. Thus, abstentions and broker non-votes will not be
included in the vote total in the election of directors and will have no effect
on the outcome of the vote. The affirmative vote of the majority of shares of
Common Stock issued and outstanding is required to approve Proposal No. 2 and
Proposal No. 3. Abstentions and broker non-votes will have the same effect as
votes against Proposal No. 2 and Proposal No. 3. The affirmative vote of holders
of a majority of the shares of Common Stock present in person or represented by
proxy and entitled to vote at the Meeting is required to approve Proposal No. 4,
the proposal to approve the adoption of the 1996 Plan. Abstentions from voting
on Proposal No. 4 will have the same effect as votes against the proposal since
such shares are present at the Meeting and entitled to vote, but are not voting
in favor of the proposal; broker non-votes will have no effect on the outcome of
Proposal No. 4, since they are not considered shares entitled to vote on this
proposal.
To the best knowledge of the Company, none of the persons who were
executive officers or directors at any time since January 1, 1995, and none of
the nominees for election as directors, have any interest in the matters to be
acted upon at the Meeting, other than with reference to their election as
directors and with reference to awards which have been or may be granted to them
under the 1996 Plan.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as to each person who, to
the knowledge of the Board of Directors, as of the Record Date, was the
beneficial owner of more than 5% of the issued and outstanding shares of Common
Stock. Unless otherwise indicated, such ownership is believed to be direct, with
sole voting and investment powers.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF SHARES BENEFICIALLY PERCENT OF
OF BENEFICIAL OWNER OWNED CLASS (1)
- - - ------------------- ------------------- ----------
<S> <C> <C>
Victory Capital LLC
645 Madison Avenue
New York, NY 10022 6,996,178(2) 31.4%
</TABLE>
- - - -------------------
(1) Based on 22,261,301 shares of Common Stock issued and outstanding on the
Record Date.
(2) The information set forth in the table regarding shares of Common Stock
owned by Victory Capital LLC ("Victory") is based on Amendment No. 14 to the
Schedule 13D, filed on January 31, 1996 jointly by Forschner Enterprises,
Inc. (which has since merged with and into Victory), Brae Group, Inc.
("Brae") and Louis Marx, Jr., which schedule indicates that Victory holds
6,996,178 shares of the Company's Common
2
<PAGE> 5
Stock and Brae holds 863,850 (3.9%) shares of the Company's Common Stock. As
a significant indirect holder of voting securities of Victory, Brae may be
deemed to be beneficial owner, within the meaning of Rule 13d-3 promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
of the shares of the Company's Common stock held directly by Victory,
although Brae disclaims beneficial ownership thereof. As a significant
holder of voting securities of both Victory and Brae, Louis Marx, Jr. may be
deemed to be the beneficial owner of the shares of the Company's Common
Stock held directly by Victory and by Brae. Mr. Marx disclaims beneficial
ownership thereof.
The following table sets forth certain information, as of the Record
Date, concerning shares of Common Stock owned of record or beneficially by each
director, each director nominee and by each of the Named Executive Officers (as
defined in the section entitled "Management Compensation"), and by all executive
officers and directors as a group. The footnotes reflect the ownership by such
persons of each class of equity securities of Victory, which may be deemed to be
the parent of Tigera within the meaning of the federal securities laws, and
Connectivity Products Incorporated ("CPI"), a subsidiary of Tigera.
<TABLE>
<CAPTION>
PERCENT
SHARES BENEFICIALLY BENEFICIALLY
NAME OWNED(1) OWNED (2)
- - - ---- ------------------- ------------
<S> <C> <C>
A. Clinton Allen 291,666(3) 1.3%
Ramon D. Ardizzone 25,000(4) *
Clarke H. Bailey 266,666(5) 1.2%
Deborah A. Farrington 581,666(6) 2.6%
Herbert M. Friedman 25,000(7) *
Duane A. Gawron -0-(8) *
James S. Harrington -0-(9) *
Stephen P. Kelbley -0- *
Robert E. Kelly 600,100(10) 2.7%
Louis Marx, Jr. -0-(11) *
Donald T. Pascal 533,332(12) 2.3%
John E. Pylak -0-(13) *
Michael Weatherly -0-(14) *
Albert M. Zlotnick 659,000(15) 3.0%
All executive officers and directors
as a group (15 persons) 2,515,663(16) 10.6%
</TABLE>
- - - -----------------------------
* Less than 1%.
(1) Unless otherwise indicated, each of the parties listed has sole voting
and investment power over the shares owned. The number of shares of
Common Stock indicated includes, in each case, the number of shares of
Common Stock currently issuable upon exercise of options granted under
the Company's 1991 Stock Incentive Plan (the "1991 Plan"), and non-plan
warrants and options. For purposes of this table, shares are deemed to
be "currently issuable" if they may become issuable upon exercise of an
option or warrant within 60 days following the Record Date. Shares
subject to options granted under the Company's 1996 Plan, if such plan
is approved by the shareholders at the Meeting, are not included in
this table.
(2) Based on 22,261,301 shares of Common Stock currently issued and
outstanding on the Record Date. In addition, treated as outstanding for
the purpose of computing the percentage ownership of each
3
<PAGE> 6
individual or group are shares of Common Stock currently issuable to
such individual or group upon exercise of options or warrants.
(3) Consists of 266,666 shares of Common Stock currently issuable upon
exercise of a warrant and 25,000 shares of Common Stock currently
issuable upon exercise of an option. Mr. Allen is the beneficial owner
of 14,286 series B preferred units (less than 1% of the voting
securities) of Victory, including 4,762 units held by Mr. Allen's wife.
(4) Consists solely of shares of Common Stock currently issuable upon
exercise of a warrant.
(5) Consists of 266,666 shares of Common Stock currently issuable upon
exercise of a warrant. Mr. Bailey is the owner of 95,239 series B
preferred units of Victory and holds 155,000 plan units issued by
Victory which entitle Mr. Bailey to voting rights and to receive a
portion of the appreciation of Victory's assets since the date of grant
of such units, under certain circumstances ("Plan Units"). The series B
preferred units and the Plan Units beneficially owned by Mr. Bailey
collectively represent 2.6% of the voting securities of Victory.
(6) Consists of 315,000 shares of Common Stock held directly, 236,666
shares of Common Stock currently issuable upon exercise of an option
and 30,000 shares of Common Stock currently issuable upon exercise of a
warrant.
(7) Consists solely of shares of Common Stock currently issuable upon
exercise of a warrant. Mr. Friedman is the owner of 4,762 series B
preferred units (less than 1% of the voting securities) of Victory.
(8) Mr. Gawron is also the beneficial owner of 32.1044 shares (4.2%) of
common stock, par value $.01 per share, of CPI ("CPI Common Stock")
including 20.8397 shares held by Mr. Gawron as trustee under a trust
and 11.2647 shares held by Mr. Gawron's wife.
(9) Mr. Harrington is the beneficial owner of 33.7941 shares (4.4%) of CPI
Common Stock.
(10) Consists of 580,100 shares of Common Stock held directly and 20,000
shares of Common Stock currently issuable upon exercise of options.
(11) Does not include 6,996,178 shares of the Company's Common Stock held
directly by Victory and 863,850 shares of the Company's Common Stock
held directly by Brae. As Mr. Marx is the owner of 700,000 Plan Units
of Victory (7.2% of the voting securities) and is a significant
shareholder of Brae (which indirectly owns a significant percentage of
the voting securities of Victory), Mr. Marx may be deemed to be the
indirect beneficial owner, within the meaning of Rule 13d-3 promulgated
under the Exchange Act, of the shares of the Company's Common Stock
held directly by Victory and by Brae. Mr. Marx disclaims beneficial
ownership thereof. As a significant indirect owner of voting securities
of Victory, Brae may be deemed to be the beneficial owner of the shares
of the Company's Common stock held directly by Victory. Brae disclaims
ownership thereof.
(12) Consists of 306,666 shares of Common Stock currently issuable upon
exercise of options and 226,666 shares of Common Stock currently
issuable upon exercise of a warrant. Mr. Pascal is the beneficial owner
of 24,524 series B preferred units and 75,000 Plan Units (collectively
1% of the voting securities) of Victory.
(13) Mr. Pylak is the beneficial owner of 32.1044 shares of CPI Common Stock
(4.2%) including 20.8397 shares held by Mr. Pylak as trustee and
11.2647 held by Mr. Pylak's wife.
4
<PAGE> 7
(14) Mr. Weatherly is the owner of 10,000 series B preferred units (less
than 1% of the voting securities) of Victory.
(15) Consists of 634,000 shares of Common Stock held directly and 25,000
shares of Common Stock currently issuable upon exercise of a warrant.
(16) Includes 1,516,663 shares of Common Stock currently issuable upon
exercise of options and warrants and certain shares with respect to
which beneficial ownership is disclaimed. The executive officers and
directors as a group beneficially own 114.9 shares (15%) of CPI Common
Stock and 148,811 series B preferred units and 970,000 Plan Units
(collectively, 11.5% of the voting securities) of Victory.
CHANGE OF CONTROL
On November 8, 1995, Forschner Enterprises, Inc. (now known as Victory)
increased its ownership of the Company from 7.6% to 39.2% by (i) purchasing from
Beverly Hills Bancorp ("BHB") its holdings of the Company then owned directly
and indirectly by BHB (4,740,000 shares) for $.90 per share and (ii)
purchasing, or agreeing to purchase, certain shares of the Company then owned by
Albert M. Zlotnick (1,731,000 shares) and Michael S. Berlin (248,250 shares) at
$.90 per share. The purchase price was paid in cash partly from working capital
and partly from borrowings under a short-term loan obtained from Brae. As a
result of this transaction and the subsequent transfer of a 3.9% interest to
Brae and a 3.9% interest to certain officers of Victory, Victory holds
approximately 31.4% of the outstanding Common Stock of the Company and Victory
may be deemed to be the parent of the Company within the meaning of the federal
securities laws. Subsequent to this transaction, all of the prior directors of
the Company, except for Albert M. Zlotnick and A. Clinton Allen, resigned and
were replaced by directors recommended by Victory.
UTILIZATION OF NET OPERATING LOSSES
Section 382 of the Internal Revenue Code (the "Code") contains certain
limitations on the ability of a corporation to utilize its net operating losses
("NOLs") in any one year if there has been a change of ownership of more than
50% within a three-year period ("an ownership change"), counting for purposes of
measuring the ownership change generally only the value of stock owned by a
shareholder or certain groups of shareholders holding 5% or more of the
corporation's stock. Tigera does not believe that there has been an ownership
change in the past three years. However, future events, including events beyond
the control of Tigera such as the acquisition in the open market of shares of
Tigera Common Stock by a current or new 5% shareholder who was unaware of the
possible negative consequences of such acquisition, could result in an ownership
change. If an ownership change were to occur, Tigera's ability to use its NOLs
to reduce the future taxable income of Tigera (and the corporations with which
it files a consolidated federal income tax return) could be severely curtailed
and it is possible that a federal income tax liability may be incurred that
would otherwise have been avoidable had the NOLs been fully available.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Board of Directors has passed a resolution reducing the number of
directors constituting the Board of Directors to eight effective at the
conclusion of the term of the current directors. Accordingly, at the Meeting,
eight directors of the Company are to be elected by the shareholders, each to
hold office until the next Annual Meeting of Shareholders and until their
successors are duly elected and qualified or their earlier resignation or
removal. The Board of Directors has nominated the following persons for election
to the Board of Directors: Ramon D. Ardizzone, Clarke H. Bailey, Herbert M.
Friedman, Duane A. Gawron, James S. Harrington, Stephen P. Kelbley, Donald T.
Pascal, and John E. Pylak. All of the nominees except for Mr. Kelbley are
currently
5
<PAGE> 8
serving on the Board of Directors. Unless otherwise specified, the enclosed
proxy will be voted in favor of such nominees. The Board of Directors has no
reason to believe that the nominees named will be unable to serve if elected.
However, in the event that any of such nominees should become unavailable for
election or declines to serve as a director for any reason, it is intended that
votes will be cast pursuant to the accompanying proxy for such substitute
nominees as the Board of Directors may designate unless the Board of Directors
reduces the number of directors. The directors are to be elected by the vote of
the holders of a plurality of the shares of Common Stock entitled to vote and
present in person or represented by proxy at the Meeting. In their discretion,
the proxy holders may cumulate the votes represented by the proxies received in
the election of directors. If additional persons are nominated for election as
directors, the proxy holders intend to vote all proxies received by them in such
a manner in accordance with cumulative voting as will assure the election of as
many of the nominees described herein as possible, with the specific nominees to
be voted for to be determined by the proxy holders.
Pursuant to the Stockholders' Agreement dated as of May 17, 1996 (the
"Stockholders' Agreement") by and among the Company, CPI and James S.
Harrington, Duane A. Gawron, Trustee of the Living Trust of Duane A. Gawron,
Margo Gawron, John E. Pylak, Trustee of the John E. Pylak Living Trust, Rebecca
Pylak and Kurt Cieszkowski (collectively, the "Sellers"), effective at the
closing of the acquisition by the Company from the Sellers of certain of the
shares of capital stock of CPI, the Company caused the number of directors
constituting the entire Board of Directors of the Company to be increased by
three and caused the vacancies created thereby to be filled by the election of
Messrs. James S. Harrington, Duane A. Gawron and John E. Pylak (the "CPI
Nominees"). The Company has agreed to include the CPI Nominees who remain
employees of CPI or the Company in the management's slate of nominees for
election as directors at any meeting of shareholders at which directors are to
be elected and to recommend to the Company's shareholders the election of such
nominees.
The information set forth below, furnished to the Board of Directors by
the respective individuals, shows as to each nominee for director of the Company
and each of the executive officers of the Company (i) his name and age; (ii) his
principal position with the Company; (iii) his principal occupation or
employment, if different and (iv) the month and year in which he began to serve
as a director. No family relationship exists among any of the executive
officers, directors or persons nominated to become directors of the Company.
<TABLE>
<CAPTION>
PRESENT POSITION(S) PRINCIPAL OCCUPATION OR DIRECTOR
NAME AGE WITH TIGERA EMPLOYMENT; IF DIFFERENT SINCE
- - - ---- --- ------------------- ------------------------ -----
<S> <C> <C> <C> <C>
Donald T. Pascal 37 Chairman of the Board; November 1995
Director(1)
James S. Harrington 44 President and Chief May 1996
Executive Officer;
Director(1)
Duane A. Gawron 45 Senior Vice President; May 1996
Director
John E. Pylak 49 Senior Vice President; May 1996
Director
Kurt Cieszkowski 29 Senior Vice President -
Gregory C. Kowert 49 Senior Vice President, Chief -
Financial Officer and
Secretary
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
PRESENT POSITION(S) PRINCIPAL OCCUPATION OR DIRECTOR
NAME AGE WITH TIGERA EMPLOYMENT; IF DIFFERENT SINCE
- - - ---- --- ------------------- ------------------------ -----
<S> <C> <C> <C> <C>
Charles J. Di Bona II 31 Vice President -
Ramon D. Ardizzone 58 Director(2) Chairman and Chief November 1995
Executive Officer of
Glenayre Technologies,
Inc.
Clarke H. Bailey 42 Director(1) Chairman and Chief November 1995
Executive Officer of
United Acquisition
Company
Herbert M. Friedman 64 Director Partner, Zimet, Haines, November 1995
Friedman & Kaplan
Stephen P. Kelbley 54 - President, Diversified Nominee
Group of Springs
Industries, Inc.
</TABLE>
(1) Member of the Executive Committee.
(2) Member of the Audit Committee.
BIOGRAPHICAL INFORMATION
Donald T. Pascal has been a director since November 1995 and Chairman
of the Board since May 1996. Mr. Pascal served as President and Chief Executive
Officer of the Company from November 1995 to May 1996. Mr. Pascal has also
served as a Managing Director of Noel Group, Inc., a company which conducts its
operations through small and medium-sized operating companies in which Noel
holds controlling or other significant equity interests, since November 1991.
Previously, Mr. Pascal served as a director of Noel from October 1989 until
November 1991, and as a Vice President and Secretary of Noel from May 1988 until
November 1991, when he became a Managing Director. Mr. Pascal served as a Vice
President of The Prospect Group, Inc., a company which prior to its adoption in
1990 of a Plan of Complete Liquidation and Dissolution conducted its major
operations through subsidiaries acquired in leveraged buyout transactions
("Prospect"), from March 1986 until February 1989. Mr. Pascal is also a director
of Sylvan Inc., a company which produces mushroom spawn and fresh mushrooms.
James S. Harrington has served as President and Chief Executive Officer
and as a director of the Company since May 1996. From October 1995, Mr.
Harrington served as Chief Executive Officer of CPI with primary responsibility
for the BSCC manufacturing division. From 1988 to October 1995, Mr. Harrington
served as President of BSCC Corp., a predecessor of CPI.
Duane A. Gawron has served as a Senior Vice President and as a director
of the Company since May 1996. From October 1995 through May 1996, Mr. Gawron
served as Vice President and Treasurer of CPI with primary responsibility for
sales and marketing in the Energy Electric Cable distribution division. From
1984 to October 1995, Mr. Gawron served as Vice President of Energy Electric
Cable, Inc., a predecessor of CPI, with primary responsibility for sales and
marketing.
John E. Pylak has served as a Senior Vice President and as a director
of the Company since May 1996. From October 1995 through May 1996, Mr. Pylak
served as Vice President of CPI with primary responsibility
7
<PAGE> 10
for operations and the administration of the Energy Electric Cable distribution
division. From 1984 to October 1995, Mr. Pylak served as President of Energy
Electric Cable, Inc., a predecessor of CPI, with primary responsibility for
operations and administration.
Kurt Cieszkowski has served as a Senior Vice President of the Company
since May 1996. From October 1995 through May 1996, Mr. Cieszkowski served as
Vice President of CPI with primary responsibility for sales in the Energy
Electric Assembly division. From 1986 through October 1995, Mr. Cieszkowski
served as the President of Energy Electric Assembly, Inc., a predecessor of CPI.
Gregory C. Kowert has served as a Senior Vice President, Chief
Financial Officer and Secretary of the Company since July 1996. From 1993 to
1996, he was Vice President - Finance, Chief Financial Officer and a Director of
O'Sullivan Industries, Inc., a furniture manufacturer. From 1973 to 1992, Mr.
Kowert was employed by Baldor Electric Company, a manufacturer of electric
motors and drives. Mr. Kowert held various positions with Baldor, including Vice
President - Finance and Chief Financial Officer and President of Baldor Europe.
From March 1993 until June 1993 he was associated with Beverly Enterprises, a
nursing home operator, as Senior Director Financial Projects, and Chief
Financial Officer of Bass Pro Shops, a fishing equipment retailer.
Charles J. Di Bona II has served as a Vice President of the Company
since February 1996. Mr. Di Bona has served as a Vice President of Victory from
August 1994 until May 1996. From 1992 to 1994, he attended Harvard Business
School and received an MBA degree in June 1994. From 1991 to 1992, he worked as
a mortgage securities and derivatives consultant. From 1990 to 1991, he was a
Vice President in the Mortgage- Backed Securities Department of Dean Witter
Reynolds. From 1986 to 1990, Mr. Di Bona held several positions in finance and
trading at Drexel Burnham Lambert, an investment banking firm, leaving as Vice
President.
Ramon D. Ardizzone has served as a director of the Company since
November 1995, and is currently Chairman of the Board, Chief Executive Officer
and a director of Glenayre Technologies, Inc. ("Glenayre"), a paging and
messaging infra-structure technology company. Since 1988, Mr. Ardizzone has been
employed by Glenayre in various capacities. Mr. Ardizzone is also a director of
UAC Holdings Corp., a data storage and retrieval technology company.
Clarke H. Bailey has served as a director of the Company since November
1995. Since February 1995, Mr. Bailey served as Chairman of the Board and Chief
Executive Officer of United Acquisition Company, an acquisition company, and
Chairman of the Board and Chief Executive Officer of United Gas Holding
Corporation, an acquisition company. He is also currently Chairman of the Board
and a director of Arcus, Inc., the leading national provider of secure off-site
computer data storage, transportation and related disaster recovery services,
and a director and Co-Chairman of the Board of Victory. He served as Chief
Executive Officer and a director of Glenayre from December 1990 until March 1994
and as its Vice Chairman of the Board from November 1992 to July 1996. In March
1994, Mr. Bailey was named Chairman of the Executive Committee of the Board of
Glenayre, and he relinquished the title of Chief Executive Officer.
Herbert M. Friedman, Esq. has served as a director of the Company since
November 1995. He has been a member of the law firm of Zimet, Haines, Friedman &
Kaplan since 1967. Zimet, Haines, Friedman & Kaplan acts as counsel to the
Company. Mr. Friedman is also a director of Noel, Victory, Prospect and Swiss
Army Brands, Inc., the exclusive United States and Canadian importer and
distributor of Victorinox Original Swiss Army Knives and professional cutlery as
well as other products.
Stephen P. Kelbley is nominated as a new director. Mr. Kelbley has
served as President of the Diversified Group of Springs Industries, Inc.
("Springs") since May 1995 and as an Executive Vice President of Springs since
1991. From March 1994 to May 1995, he was President of Springs' Specialty
Fabrics Group. Mr. Kelbley started at Springs in 1991 as Executive Vice
President and Chief Financial Officer. Prior to joining Springs, he served for
seven years as Senior Vice President - Finance of Bausch & Lomb and two years as
Senior Vice President -
8
<PAGE> 11
Finance & Administration of Moog Automotive, Inc. He held significant financial
management positions with General Electric Company for 19 years before working
at Moog. Mr. Kelbley is a member of the Board of the Financial Executives
Institute.
MEETINGS AND COMMITTEES OF THE BOARD
During the fiscal year ended December 31, 1995, the Board of Directors
held four meetings. All of the directors attended at least 75% of the total
number of meetings of the Board of Directors and of the committees of which they
were members.
The Executive Committee, the Audit Committee and the Compensation
Committee are the only standing committees of the Board. There is no formal
Nominating Committee; the Board of Directors performs this function.
The Executive Committee was established in November 1995 and consisted
of A. Clinton Allen, its Chairman, Clarke H. Bailey, Deborah A. Farrington and
Donald T. Pascal until it was reconstituted in July 1996 to consist of Messrs.
Bailey, Harrington and Pascal. The Executive Committee has all the powers of the
Board of Directors in the management of the business and affairs of the Company,
including, without limitation, the power and authority to declare a dividend,
authorize the issuance of stock and adopt a certificate of ownership and merger
pursuant to Section 253 of the Delaware General Corporation Law. The Executive
Committee did not meet during the fiscal year ended December 31, 1995.
The Audit Committee currently consists of Ramon D. Ardizzone, its
Chairman, Michael A. Weatherly and Deborah A. Farrington. Prior to November 8,
1995 the Audit Committee consisted of Irving I. Lassoff, Albert M. Zlotnick and
Robert E. Kelly which committee as then constituted met once during the fiscal
year ended December 31, 1995. The Audit Committee recommends to the Board of
Directors the appointment of independent public accountants, meets from time to
time with such accountants and certain officers of the Company to ensure the
adequacy of internal controls and reporting, reviews the Company's financial
statements, the scope of the audit of the Company's annual financial statements,
the auditing fees and the audited reports related to the audit and performs such
other duties relating to the financial statements and other matters of the
Company as the Board of Directors may assign from time to time.
The Compensation Committee currently consists of Louis Marx, Jr., its
Chairman and Michael A. Weatherly. Prior to November 8, 1995, the Compensation
Committee consisted of Michael S. Berlin, Irving I. Lassoff and James A. Martin,
III. The Compensation Committee has all of the powers of the Board of Directors
to grant options and to exercise all powers under and pursuant to the Company's
option plans and to take all action in respect of the approval of the
compensation and bonuses paid by the Company. During the fiscal year ended
December 31, 1995, the Compensation Committee met three times.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the officers and directors
of the Company, and persons who own more than ten percent of any class of the
Company's equity securities registered under Section 12 of the Exchange Act, to
file reports of ownership and changes in ownership with the Securities and
Exchange Commission (the "Commission") and to furnish the Company with copies of
such reports.
Based solely on its review of the copies of such reports furnished to
the Company by such reporting persons during the fiscal year ended December 31,
1995, or written representations from such reporting persons that no Forms 5
were required for those persons with respect to such period, the Company
believes that during the fiscal year ended December 31, 1995 all filing
requirements applicable to its officers, directors, and greater than ten-percent
beneficial owners were complied with on a timely basis, except that the Forms 3
for each of
9
<PAGE> 12
Ramon D. Ardizzone, Clarke H. Bailey, Louis Marx, Jr. and Donald T. Pascal were
filed five days late, and the Form 3 for Victory was filed twelve days late.
MANAGEMENT COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information regarding
compensation awarded or paid to, or earned by, during each of the last three
fiscal years, the persons who served as the Company's Chief Executive Officer
during the fiscal year ended December 31, 1995, and the Company's executive
officers (other than the Chief Executive Officers) who were serving as executive
officers at December 31, 1995 and whose total salary and bonus during the fiscal
year ended December 31, 1995 exceeded $100,000 (the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
--------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
--------------------------------- ---------- -------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
OTHER
ANNUAL RESTRICTED SECURITIES ALL OTHER
COMPEN- STOCK UNDERLYING LTIP COMPEN-
NAME AND PRINCIPAL SATION AWARD(S) OPTIONS/ PAYOUTS SATION
POSITION YEAR SALARY($) BONUS($) ($) (1) ($) SARs(#) ($) ($)
- - - ---------------------------- ---- --------- -------- ------- --------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Donald T. Pascal (2) 1995 -0- -0- -0- -0- 800,000(3) -0- -0-
Chairman of the Board, 1994 -0- -0- -0- -0- -0- -0- -0-
former President and 1993 -0- -0- -0- -0- -0- -0- -0-
Chief Executive Officer
Albert M. Zlotnick (4) 1995 235,000 -0- -0- -0- 275,000(5) -0- -0-
Former Chairman of the 1994 240,000 -0- -0- -0- -0- -0- -0-
Board, President and 1993 220,000 -0- -0- -0- -0- -0- -0-
Chief Executive Officer
Robert E. Kelly 1995 132,000 -0- -0- -0- 180,000(6) -0- -0-
Former Senior Vice 1994 118,667 -0- -0- -0- -0- -0- -0-
President, Chief Financial 1993 132,000 -0- -0- -0- -0- -0- -0-
Officer and Secretary
</TABLE>
- - - --------------------
(1) The dollar value of perquisites and other personal benefits for each of
the Named Executive Officers was less than established reporting
thresholds.
(2) Donald T. Pascal served as President and Chief Executive Officer from
November 1995 to May 1996 and currently serves as Chairman of the
Board. Commencing January 1, 1996, the Company is paying Mr. Pascal a
salary of $125,000 per year.
(3) Represents options and warrants issued in November 1995 at an exercise
price of $0.885 per share. One-third of the options and warrants were
exercisable and an additional one-third of the options and warrants
become exercisable on each anniversary of the date of grant.
10
<PAGE> 13
(4) Effective November 8, 1995, Mr. Zlotnick resigned as Chairman of the
Board, President and Chief Executive Officer. Prior to December 1,
1995, Albert M. Zlotnick was paid $20,000 per month. The Company has
retained Mr. Zlotnick as a consultant for a period of two years from
December 1, 1995, at a rate of $15,000 per month.
(5) Consists of (i) a warrant to purchase 25,000 shares of Common Stock at
an exercise price of $0.885 per share granted in November 1995, (ii)
options to purchase 190,000 shares of Common Stock at an exercise price
of $.516 granted under the 1991 Plan in January 1995 (which options
were exercised in January 1996) and (iii) options to purchase 60,000
shares of Common Stock at an exercise price of $.469 granted under the
1991 Plan in January 1995 (which options were exercised in January
1996).
(6) Consists of options to purchase 150,000 shares of Common Stock at an
exercise price of $0.469 granted pursuant to the 1991 Plan in January
1995 (which options were exercised in January 1996) and options to
purchase 30,000 shares of Common Stock at an exercise price of $0.885
granted pursuant to the 1991 Plan in November 1995.
OPTION/SAR GRANTS DURING 1995
The following table sets forth information regarding individual grants
of options and/or warrants made by the Company during the fiscal year ended
December 31, 1995 to each of the Named Executive Officers:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------------------
(a) (b) (c) (d) (e)
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARs
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS/SARs EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED FISCAL YEAR(1) ($/SH) DATE
- - - ---- ------------ -------------- ----------- ----------
<S> <C> <C> <C> <C>
Donald T. Pascal............. 800,000(2) 48.3% $0.885 11/14/05
Albert M. Zlotnick........... 190,000(3) 11.5% $0.516 1/19/00
60,000(3) 3.6% $0.469 1/19/05
25,000(4) 1.5% $0.885 11/14/05
Robert E. Kelly.............. 150,000(3) 9.1% $0.469 1/19/05
30,000(5) 1.8% $0.885 11/14/05
</TABLE>
- - - --------------------
(1) Percentage does not include options granted to non-employee directors
and consultants. If options granted to non-employee directors and
consultants were included, the percentages are 26.2% for Mr. Pascal,
6.2%, 2.0% and 0.8% for Mr. Zlotnick and 4.9% and 1.0% for Mr. Kelly.
(2) Consists of (i) an incentive option to purchase 338,982 shares of
Common Stock, (ii) a non-incentive option to purchase 121,018 shares of
Common Stock and (iii) a warrant to purchase 340,000 shares of Common
Stock, each of which was granted in November 1995 at an exercise price
of $0.885 per share. One-third of each option and warrant was
exercisable on the date of grant and an additional one- third becomes
exercisable on each of the first two anniversaries of the date of
grant.
(3) This option was granted in January 1995 and exercised in January 1996.
(4) Consists of a warrant to purchase 25,000 shares of Common Stock at an
exercise price of $0.885 per share granted in November 1995.
11
<PAGE> 14
(5) Consists of an incentive option to purchase 30,000 shares of Common
Stock at an exercise price of $0.885 per share granted in November
1995. One-third of this option was exercisable on the date of grant and
an additional one-third becomes exercisable on each of the first two
anniversaries of the date of grant.
AGGREGATED OPTION/SAR EXERCISES DURING 1995 AND FISCAL YEAR-END OPTION/SAR
VALUE.
The following table provides information related to options and
warrants exercised by the Named Executive Officers during 1995 and the number
and value of unexercised options and warrants held by each of the Named
Executive Officers at year-end. The Company does not have any outstanding stock
appreciation rights:
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
OPTIONS, WARRANTS/SARs AT OPTIONS, WARRANTS/SARs
FISCAL YEAR-END(#)(1) AT FISCAL YEAR-END ($)(2)
SHARES ACQUIRED ----------------------------- ------------------------------
NAME ON EXERCISE(#) VALUE REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - - ---- -------------- ----------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Donald T. Pascal -- -- 266,667 533,333 $ 54,667 $109,333
Albert M. Zlotnick(3) -- -- 275,000 -0- 151,445 -0-
Robert E. Kelly(4) -- -- 310,000 20,000 202,450 4,100
</TABLE>
- - - --------------------
(1) The number of exercisable options set forth in the above table may
differ from the number reflected in the table on page 3 because the
information in the above table is as of December 31, 1995.
(2) Based on a closing price on December 29, 1995 of $1.09 per share.
(3)
Mr. Zlotnick exercised options to purchase 250,000 shares in January
1996, 190,000 of which had an exercise price of $0.516 and 60,000 of
which had an exercise price of $0.469.
(4) Mr. Kelly exercised options to purchase 300,000 shares in January 1996,
150,000 of which had an exercise price of $0.375 and 150,000 of which
had an exercise price of $0.469.
COMPENSATION OF DIRECTORS
Effective November 1995, non-employee directors are paid an annual
retainer of $5,000, are reimbursed for out-of-pocket expenses incurred in
attending meetings of the Board of Directors and of the Committees to which they
are elected, and are eligible to participate in the 1991 Plan and, if adopted by
the shareholders at the Meeting, the 1996 Plan. Prior to November 1995,
non-employee directors were paid a fee for attending Board meetings in lieu of
an annual retainer. The attendance fee was increased from $750 to $1,250 per
meeting in April 1995 at which time the Board also approved a fee of $625 for
attendance at Board meetings by telephonic communication.
In connection with the change of control of the Company in November
1995, each of five non-employee directors, who resigned from the Board in
connection with the change of control, exchanged outstanding options entitling
each of them to purchase 25,000 shares of the Company's Common Stock for
warrants to purchase 25,000 shares of the Company's Common Stock a purchase
price of $0.71875 per share for a period ending on
12
<PAGE> 15
November 8, 1996. In consideration for their service and anticipated service to
the Company as non-employee directors, Messrs. Ardizzone, Friedman and Zlotnick
were each granted a warrant to purchase 25,000 shares of the Company's Common
Stock at a purchase price of $0.885 per share, which warrants were exercisable
in full on the date of grant, and Messrs. Allen and Bailey were each granted a
warrant to purchase 400,000 shares of the Company's Common Stock at a purchase
price of $0.885 per share, which warrants were exercisable to the extent of
one-third of the shares issuable thereunder on the date of grant; an additional
one-third of the shares issuable thereunder will become exercisable on each of
the first two anniversaries of the date of grant.
The Company has retained Albert M. Zlotnick, a former Chairman and
Chief Executive Officer, as a consultant for a period of two years commencing
December 1, 1995, at a rate of $15,000 per month.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
The Company has retained Donald T. Pascal as an executive officer for a
period of three years from November 15, 1995. As compensation for his services,
Mr. Pascal was granted options and warrants to purchase 800,000 shares of Common
Stock at a price of $0.885 per share, and, commencing January 1, 1996, Mr.
Pascal is being paid $125,000 per year.
The Company has retained Deborah A. Farrington as a consultant
for a period of three years from November 15, 1995. As compensation for her
services, Ms. Farrington was granted options and warrants to purchase 400,000
shares of Common Stock at a price of $0.885 per share and Victory was paid at
the rate of $25,000 per year through June 30, 1996.
CPI has entered into an employment agreement with each of James S.
Harrington, Duane A. Gawron, John E. Pylak and Kurt Cieszkowski which, in each
case provides that they will be employed for a period of three years from May
31, 1996 at an annual salary of $175,000 per year plus an annual cash bonus
(subject to a maximum of the annual base salary for such year or partial year)
equal to five percent of the amount by which the "Adjusted Bonus EBITDA" (as
defined) for such year, or partial year, exceeds the "Adjusted Bonus EBITDA" for
the prior year or part thereof. The employment agreements provide for payment of
both salary and bonus for the full three-year term if the executive is
discharged other than for cause, death or disability, and, in the case of the
death or disability of the executive, for the payment of salary for the full
three-year term and bonus for the year in which the executive dies or becomes
disabled. If the employee is terminated for cause or resigns in breach of the
employment agreement, no further salary is payable and any bonus for the year of
termination is forfeited. The employment agreements also include provisions on
non-competition, non-solicitation, confidentiality and proprietary information
and are automatically renewable for terms of one year unless either party gives
no less than 60 days prior written notice of its intention not to renew the
agreement.
In connection with the CPI Acquisition, the Company issued an aggregate
of 1,888,593 options, subject to shareholder approval, to officers and employees
of CPI including options covering 362,677 shares to Mr. Harrington, an option
covering 344,172 shares to each of Messrs. Gawron and Pylak, and an option
covering 182,572 shares to Mr. Cieszkowski. The options are not exercisable
until July 8, 1999, but will become fully exercisable if there is a "change of
control," as defined. The right to exercise the options vests over a two year
period with respect to options granted to Messrs. Harrington, Gawron, Pylak and
Cieszkowski and over a five year period with respect to other employees. If an
optionee dies, becomes disabled or is terminated other than for cause, the
option will become fully vested and may be exercised for a specified period
commencing on the later of the date of such event and July 8, 1999; if the
optionee resigns or is terminated for cause the option may be exercised, to the
extent vested on the date of such resignation or termination, for a specified
period commencing on the later of the date of such event and July 8, 1999. If
the 1996 Plan is not approved by the shareholders or if an event, such as a
change of control, occurs prior to such approval, under the terms of the
purchase agreement executed in connection with the CPI Acquisition, the Company
is obligated to issue stock purchase warrants to Messrs. Harrington, Gawron,
Pylak Cieszkowski on the same terms and conditions as the options previously
issued to each of them. For additional information on the options, see "Proposal
No. 4 -- Proposal to Approve the Adoption of the 1996 Stock Incentive Plan - New
Plan Benefits Table."
13
<PAGE> 16
For a description of a change of control provision in the Stockholder's
Agreement, see "Certain Transactions" below.
CERTAIN TRANSACTIONS
On May 31, 1996, the Company acquired 85% of the outstanding capital
stock of CPI, a privately held company engaged in the business of distribution,
manufacturing and assembly of wire and cable, from James S. Harrington, Duane A.
Gawron, Trustee of the Living Trust of Duane A. Gawron, Margo Gawron, John E.
Pylak, Trustee of the John E. Pylak Living Trust, Rebecca Pylak and Kurt
Cieszkowski. As a result of the transaction, Mr. Harrington became the
President, Chief Executive Officer and a director of the Company; Messrs. Gawron
and Pylak became Senior Vice Presidents and directors of the Company; and Mr.
Cieszkowski became a Senior Vice President of the Company. Margo Gawron is the
wife of Duane A. Gawron and Rebecca Pylak is the wife of John E. Pylak. The
remaining 15% of the outstanding capital stock of CPI continues to be held by
the Sellers.
In consideration for such sale, the Sellers received: (i) from CPI, in
consideration for shares of CPI Common Stock held by them and redeemed by CPI,
(A) an aggregate of $7,622,919 (the "Redemption Amount"), $250,000 of which was
placed in escrow, (B) promissory notes due May 31, 2003 in the aggregate
principal amount of $6,000,000, (C) additional promissory notes due May 31, 2003
in the aggregate principal amount of $3,000,000, payment of which is contingent
upon the achievement by CPI of certain financial targets, and (D) forgiveness of
an aggregate of $2,000,000 in indebtedness of the Sellers to CPI; and (ii) from
Tigera, an aggregate of $7,990,000, $1,000,000 of which was placed in escrow. In
addition, Tigera committed to invest an additional $3,500,000 in preferred stock
of CPI ("CPI Preferred Stock") to fund future expansion, $1,350,000 of which was
invested on the closing date. The CPI Preferred Stock has a preference on
liquidation equal to its purchase price, is non-voting, is not entitled to
dividends, and is subject to mandatory redemption at its purchase price per
share (i) after the payment of the promissory notes issued to the Sellers in
partial consideration for the shares of CPI Common Stock redeemed by CPI, and
(ii) subject to the consent of CPI's lenders. Tigera has also invested $400,000
for a subordinated note payable by CPI for working capital purposes.
Pursuant to the Stockholders' Agreement executed in connection with
the acquisition of CPI, the Company granted to the Sellers a put option to sell
their shares of CPI Common Stock to the Company, and the Sellers granted the
Company a call option to purchase Sellers' shares of CPI Common Stock
(collectively, the "Put/Call Options") at a price to be determined based on the
then market value of the shares of the Company's Common Stock now outstanding
subject to specified adjustments. The Put/Call Options are exercisable in
increments of one-third of Sellers' shares of CPI common stock on each of the
54th, 60th and 66th month anniversary dates of the closing of the CPI
Transaction and become immediately exercisable in the event of a merger,
liquidation, sale of substantially all of the assets or change of control of the
Company. The Stockholders Agreement contains additional provisions including,
among other, provisions relating to the inclusion of the CPI Nominees in the
management's slate of nominees for election as directors of the Company (which
is more particularly described above), the Company's investment of $3,500,000 in
CPI Preferred Stock, restrictions on the transferability of shares of CPI stock
held by the Company and by the Sellers, "tag along" rights which entitle the
Sellers to sell, and "drag along" rights which require the Sellers to sell,
their shares of CPI Common Stock in the event of a proposed transfer by the
Company of all of its shares of CPI Common Stock, participation rights in favor
of the Sellers in any future issuances of capital stock or options or warrants
convertible into capital stock of CPI (other than employee stock options) for
cash or in any additional entity organized by the Company to make acquisitions
in the wire and cable industry, and restrictions on the Company's ability to
acquire any business not engaged in the wire and cable industry without the
consent of the holders of a majority of the shares of CPI Common Stock held by
the Sellers.
As of June 30, 1996, Mr. James S. Harrington, President, Chief
Executive Officer and a director of the Company, was indebted to CPI in the
aggregate amount of $608,165, which indebtedness is payable on demand and bears
interest at the federal tax rate.
14
<PAGE> 17
On November 8, 1995, Victory purchased from BHB its holdings of the
Company then owned directly and indirectly (4,740,000 shares) for $.90 per
share. Victory also purchased certain shares of the Company then owned by Albert
M. Zlotnick (1,731,000 shares) and Michael S. Berlin (248,250 shares), each of
whom was then a director of the Company, at $.90 per share. As a result of this
transaction and subsequent transfers by Victory to its affiliates, including
Brae, Victory holds approximately 31% of the outstanding Common Stock and
Victory may be deemed to be the parent of the Company within the meaning of the
federal securities laws. Subsequent to this transaction, all of the prior
directors of the Company, except Albert M. Zlotnick and A. Clinton Allen,
resigned and were replaced by directors recommended by Victory.
The Company pays to Noel the sum of $20,676 per month in consideration
of the rental of office space and support staff payments as well as
reimbursement for salary payments made by Noel to employees of the Company.
From January 1 through June 30, 1996, the Company paid $12,917 per
month to Victory in consideration of the rental of office space and
reimbursement for salary payments made by Victory to employees of the Company,
including Ms. Farrington.
Since January 1, 1996, the Company has paid $379,400 for legal services
rendered by the law firm of Zimet, Haines, Friedman & Kaplan, of which Herbert
M. Friedman, a director of the Company, is a partner.
PROPOSAL NO. 2
PROPOSAL TO AMEND CERTIFICATE OF INCORPORATION
TO EFFECT
A CHANGE OF NAME OF THE COMPANY
GENERAL
The Board of Directors believes that it is in the best interests of the
Company and its shareholders to change the name of the Company to Connectivity
Technologies Inc., which the Board believes more clearly reflects the current
business of the Company. Accordingly, the Board of Directors has approved, and
recommends that the shareholders of the Company approve, an amendment to the
Certificate of Incorporation of the Company to change the name of the Company to
Connectivity Technologies Inc. The complete text of the proposed amendment to
the Certificate of Incorporation to change the name is attached hereto as
Appendix B.
VOTE REQUIRED FOR APPROVAL
Approval of the proposed amendment of the Certificate of Incorporation
to change the name of the Company requires the affirmative vote of the holders
of a majority of the shares of Common Stock issued and outstanding. As
abstentions and broker non-votes are not affirmative votes, they will have the
same effect as votes against this proposal. A broker non-vote occurs when a
nominee holding shares for a beneficial owner does not vote on a proposal
because the nominee does not have discretionary voting power and has not
received instructions from the beneficial owner. Thus, beneficial owners of
Common Stock are urged to respond promptly to requests for instructions by
brokers and other nominees.
RECOMMENDATION OF BOARD OF DIRECTORS
The Company's Board of Directors recommends a vote FOR Proposal No. 2.
15
<PAGE> 18
PROPOSAL NO. 3
PROPOSAL TO AMEND CERTIFICATE OF INCORPORATION
TO EFFECT
A REVERSE SPLIT OF THE OUTSTANDING COMMON STOCK
AND TO REDUCE THE AUTHORIZED CAPITAL OF THE COMPANY
GENERAL
The Board of Directors has approved, and recommends that the
shareholders of the Company approve, an amendment to the Certificate of
Incorporation of the Company (i) to effect a one-for-four reverse split (the
"Reverse Split") of the presently issued and outstanding shares of Common Stock,
and (ii) to reduce the number of shares of Common Stock and Preferred Stock
which the Corporation will be authorized to issue to 20,000,000 and 1,000,000
shares, respectively (collectively, the "Recapitalization"). If the
Recapitalization is approved by the shareholders at the Meeting, the Board of
Directors will be given the discretion to effect the Recapitalization without
further shareholder action, at any time on or prior to the next annual meeting
of shareholders, upon a determination by the Board that the Recapitalization is
in the best interests of the Company and its shareholders. The following
description of the proposed amendment to the Certificate of Incorporation is a
summary and is not intended to be complete. The complete text of the proposed
amendment to the Certificate of Incorporation to effect the Recapitalization is
attached hereto as Appendix C.
PURPOSE OF THE PROPOSED RECAPITALIZATION
The primary purpose of the proposed Reverse Split is to encourage an
increase in the market value and the liquidity of the Common Stock. The Board of
Directors believes that the Reverse Split should enhance the acceptability of
the Common Stock by the financial community and investing public and may result
in a broader market for the Common Stock than that which currently exists. The
Board of Directors is hopeful that the decrease in the number of shares of
Common Stock outstanding resulting from the proposed Reverse Split and the
anticipated corresponding increased price at which the Common Stock trades will
stimulate interest in the Common Stock, promote greater liquidity for the
Company's shareholders with respect to those shares presently held by them and
assist the Company in meeting the minimum share price standards established by
The Nasdaq Stock Market for inclusion in the Nasdaq National Market.
Although the Board of Directors believes that it is advisable to effect
the Reverse Split in an attempt to achieve these results, there can be no
assurance that the proposed Reverse Split will achieve these results or that the
price at which the Common Stock trades immediately after the proposed Reverse
Split will increase proportionately with the Reverse Split or otherwise or that
any increase which occurs can be sustained for a prolonged period of time. Also,
the possibility does exist that any additional liquidity which may result from
the Reverse Split may be adversely affected by the reduced number of shares
which would be outstanding if the proposed Reverse Split is effected.
Shareholders should note that the Board of Directors cannot predict what effect
the Reverse Split will have on the price at which the Common Stock trades.
16
<PAGE> 19
The Board of Directors has proposed a reduction in the number of shares
of Common Stock and Preferred Stock which the Company would be authorized to
issue because the Board does not currently foresee a need to issue shares of
either Common stock or Preferred Stock in excess of the proposed amount. The
reduction in the authorized shares of capital stock should also reduce the
Company's Delaware franchise tax liability.
EFFECTS OF THE PROPOSED RECAPITALIZATION
The Certificate of Incorporation currently authorizes the issuance of
40,000,000 shares of Common Stock, of which 22,261,301 shares of Common Stock
were issued and outstanding on the Record Date, 10,000,000 shares of Preferred
Stock, par value $.01 per share, none of which are outstanding; and 750,000
shares of Series B Common Stock, par value $.01 per share, none of which are
outstanding. If the Recapitalization is approved, the number of authorized
shares of Common Stock and Preferred Stock will be reduced to 20,000,000 and
1,000,000 shares, respectively; the number of authorized shares of Series B
Common Stock will not be effected by the proposed Amendment.
Based on 22,261,301 shares of Common Stock issued and outstanding on
the Record Date, approximately 5,565,325 shares of Common Stock would be
outstanding after the Recapitalization and an additional 1,613,750 shares would
be reserved for issuance upon exercise of options granted or to be granted under
the 1991 Plan, the 1996 Plan (if approved by the shareholders at the Meeting)
and upon exercise of outstanding non-plan options and warrants. The foregoing
number assumes that no additional shares of Common Stock are issued after the
Record Date and does not take into account any reduction in the number of
outstanding shares resulting from the payment of cash in lieu of fractional
shares. If the Recapitalization is approved, the number of shares of Common
Stock issuable upon exercise, and the exercise price, of options granted or to
be granted under the 1991 Plan, the 1996 Plan (if approved), and outstanding
non-plan options and warrants, will be adjusted to reflect the Recapitalization.
The following tables illustrate the probable effects of the
Recapitalization on the Common Stock:
<TABLE>
<CAPTION>
PRIOR TO AFTER
SHARES OF COMMON STOCK RECAPITALIZATION RECAPITALIZATION
<S> <C> <C>
Authorized 40,000,000 20,000,000
Outstanding 22,261,301 5,565,325
Available for Future Issuance 17,738,699 14,434,675
Reserved for Issuance Upon Exercise of Options under the 1991 Plan 1,325,000 331,250
Reserved for Issuance Upon Exercise of Options under the 1996 Plan 3,000,000 750,000
Reserved for Issuance Upon Exercise of Non-Plan Options and Warrants 2,130,000 532,500
</TABLE>
17
<PAGE> 20
If the Recapitalization is effected, adjustments will be made in the
Company's capitalization as reflected in the following table:
<TABLE>
<CAPTION>
DECEMBER 31, 1995
ACTUAL AS ADJUSTED
------ -----------
<S> <C> <C>
Shareholders' Equity $ 213,000 $ 213,000
Common Stock, 40,000,000 shares, par value $.01
per share, authorized, 22,112,706 shares,
outstanding, less 826,405 shares in treasury; 20,000,000 shares, par value
$.04 per share, authorized, as adjusted; 5,528,177 shares outstanding, less
206,601 shares in treasury, as adjusted;
Series B Common Stock, par value $.01 per share, -- --
750,000 shares authorized; none issued;
Preferred Stock, par value $.01 per share, -- --
10,000,000 shares authorized, none issued;
1,000,000 shares authorized, as adjusted; none issued
as adjusted;
Additional Paid-In Capital 108,742,000 108,742,000
Accumulated deficit (96,900,000) (96,900,000)
------------ ------------
Total Shareholders' Equity $ 12,055,000 $ 12,055,000
============ ============
</TABLE>
The foregoing adjustments will be accomplished exclusively by means of
accounting entries and do not involve actual transactions, other than the
Recapitalization.
As the number of authorized shares of the Company's Common Stock will
not be decreased in the Recapitalization by the same ratio as number of shares
outstanding will be decreased, the percentage of authorized shares of Common
Stock which will be available to be issued in the future will be increased. The
future issuance of additional shares of Common Stock may dilute the existing
shareholders' percentage ownership in the Company. The increase in the number of
shares of Common Stock available for issuance in the future may also have a
potential anti-takeover effect in that it would enhance the ability of the
Company to issue additional shares which could be used to thwart persons, or
otherwise dilute the stock ownership of shareholders, seeking to control the
Company. The Board of Directors is not aware of any present efforts by any
persons to accumulate Common Stock or to obtain control of the Company, and the
proposed Recapitalization is not intended to be an antitakeover device.
The par value of the Common Stock will be increased to $.04 per share
pursuant to the Recapitalization. As the number of shares of Common Stock
outstanding will be reduced if the Recapitalization is effected, and the par
value per share will increase proportionately, the aggregate par value of the
outstanding Common Stock and the aggregate capital in excess of par value
attributable to outstanding Common Stock for statutory and accounting purposes
will not be effected by the Recapitalization.
Pursuant to the Delaware General Corporation Law, the Company's
shareholders are not entitled to dissenters' rights of appraisal with respect to
the proposal to effect the Recapitalization. Approval of the Recapitalization
will not affect any shareholder's percentage ownership interest in the Company,
proportional voting power or other rights and privileges as holders of the
Common Stock. After the effective date of the Recapitalization, shares of the
Common Stock will be reported on the OTC Bulletin Board under the new symbol
"___", the registration of the Common Stock under Section 12(g) of the Exchange
Act will not be effected and the Company will continue to file periodic reports
with the Commission.
18
<PAGE> 21
EXCHANGE OF STOCK CERTIFICATES AND CASH PAYMENTS FOR FRACTIONAL SHARES
If the proposal to effect the Recapitalization is approved by the
requisite vote of the shareholders of the Company, the Board of Directors will
have discretion to effect the Recapitalization any time on or prior to the next
annual meeting of shareholders. Upon a determination by the Board that the
Recapitalization is in the best interests of the Company and its shareholders,
the officers will file a certificate of amendment with the Delaware Secretary of
State. Upon filing of the certificate of amendment, the Recapitalization will
become effective and each certificate representing shares of Common Stock
outstanding immediately prior to the Recapitalization (the "Old Common Stock")
will be deemed automatically without any action on the part of the shareholder
to represent one-fourth of the number of shares of Common Stock after the
Recapitalization (the "New Common Stock"); provided, however, that no fractional
shares of New Common Stock will be issued as a result of the Recapitalization.
Shareholders who own a number of shares not evenly divisible by four shall be
entitled to receive a cash payment for any fractional share resulting from the
Recapitalization. The cash payment shall be based on the average of the closing
bid prices reported by the OTC Bulletin Board for the Old Common Stock on the
five trading days prior to the effective date of the Recapitalization. If the
Recapitalization is not effected by the date of the next annual meeting of
shareholders, the Board of Directors will take action to abandon the
Recapitalization pursuant to Section 242(c) of the Delaware General Corporation
Law.
After the Recapitalization becomes effective, shareholders will be
asked to surrender certificates representing shares of Old Common Stock in
accordance with the procedures set forth in a letter of transmittal to be sent
by the Company's exchange agent. Upon such surrender, a certificate representing
the shares of New Common Stock will be issued and forwarded to the shareholders,
together with cash in lieu of fractional shares, if any. Each certificate
representing shares of Old Common Stock will continue to be valid and represent
shares of New Common Stock equal to the number of shares of Old Common Stock
divided by four and rounded down to the nearest whole number. SHAREHOLDERS
SHOULD NOT SUBMIT ANY CERTIFICATES TO THE EXCHANGE AGENT UNTIL REQUESTED TO DO
SO. Shareholders are urged to surrender their certificates to the exchange
agent, when requested to do so, and to claim the sums, if any, due them for
fractional shares promptly after the effective date of the Recapitalization.
Under the escheat laws of the various jurisdictions where shareholders reside,
where the Company is domiciled and where the funds are deposited, sums due for
fractional shares which are not timely claimed after the effective date of the
Recapitalization will, unless correspondence has been received by the Company or
the exchange agent concerning those funds within the time allowed by those
jurisdictions, be paid to those various jurisdictions. Thereafter, shareholders
otherwise entitled to the funds will have to seek to obtain them directly from
the state to which the funds were paid. The ownership of a fractional interest
will not give the shareholder any voting, dividend or other right with respect
to such interest, except the right to receive payment therefor as described
above. No service charges will be payable by shareholders in connection with the
exchange of certificates or the issuance of cash for fractional shares, all of
which costs will be borne by the Company.
FEDERAL INCOME TAX CONSEQUENCES OF THE RECAPITALIZATION
A summary of the federal income tax consequences of the
Recapitalization is set forth below. The following discussion is based upon
present federal tax law, which is subject to change by legislation,
administrative action and judicial decision, and does not purport to be a
complete discussion of such consequences. SHAREHOLDERS ARE ADVISED TO CONSULT
THEIR OWN TAX ADVISORS FOR MORE DETAILED INFORMATION REGARDING THE EFFECTS OF
THE PROPOSED RECAPITALIZATION ON THEIR INDIVIDUAL TAX STATUS.
1. The Recapitalization will be a tax-free recapitalization for the
Company and its shareholders to the extent that shares of Old Common Stock are
exchanged for shares of New Common Stock.
19
<PAGE> 22
2. The shares of New Common Stock in the hands of a shareholder,
including any fractional shares to which such shareholder would be entitled but
for the Company's decision to pay cash in lieu of issuing fractional shares,
will have an aggregate basis for computing gain or loss equal to the aggregate
basis of shares of Old Common Stock held by that shareholder immediately prior
to the Recapitalization.
3. A shareholder's holding period for shares of New Common Stock,
including any fractional shares to which such shareholder would be entitled, but
for the Company's decision to pay cash in lieu of issuing fractional shares,
will include the holding period of shares of Old Common Stock exchanged
therefor, provided that the shares of Old Common Stock were capital assets in
the hands of the shareholder.
4. Shareholders who receive cash in lieu of fractional shares will be
treated for Federal income tax purposes as if the fractional shares were
distributed to such shareholders and then redeemed by the Company. Shareholders
who receive cash in lieu of fractional shares will recognize gain or loss for
Federal income tax purposes on the redemption of the fractional shares, which
will be capital gain or loss if the New Common Stock is a capital asset in the
hands of such shareholder.
VOTE REQUIRED FOR APPROVAL
Approval of the proposed amendment to the Certificate of Incorporation
to effect the Recapitalization requires the affirmative vote of the holders of a
majority of the shares of Common Stock issued and outstanding. As abstentions
and broker non-votes are not affirmative votes, they will have the same effect
as votes against this proposal. A broker non-vote occurs when a nominee holding
shares for a beneficial owner does not vote on a proposal because the nominee
does not have discretionary voting power and has not received instructions from
the beneficial owner. Thus, beneficial owners of Common Stock are urged to
respond promptly to requests for instructions by brokers and other nominees.
RECOMMENDATION OF BOARD OF DIRECTORS
The Company's Board of Directors recommends a vote FOR Proposal No. 3.
PROPOSAL NO. 4
PROPOSAL TO APPROVE THE ADOPTION OF
1996 STOCK INCENTIVE PLAN
The Company believes that the granting of stock options and stock-based
performance awards promotes continuity of management and increases incentive and
personal interest in the welfare of the Company by those who are or may become
primarily responsible for shaping and carrying out the long-rang plans of the
Company and securing its growth and financial success. As only 275,000 shares of
the Company's Common Stock remain available under the Company's 1991 Plan, on
March 7, 1996, the Executive Committee of the Board of Directors adopted the
1996 Stock Incentive Plan (the "1996 Plan"), subject to shareholder approval.
The purpose of the 1996 Plan is to provide officers, directors, employees,
consultants and other persons or entities who have been or may be in a position
to benefit the Company or its subsidiaries, an incentive (i) to enter into and
remain in the service of the Company or its subsidiaries, (ii) to enhance the
long-term performance of the Company, and (iii) to acquire a proprietary
interest in the success of the Company. The following summary of the 1996 Plan
is qualified in its entirety by reference to the full text thereof set forth in
Appendix D to this Proxy Statement.
20
<PAGE> 23
The total number of shares of Common Stock which may be issued pursuant
to the 1996 Plan is 3,000,000 (750,000 if the Recapitalization is approved),
which as of _________ , 1996, had an aggregate fair market value equal to $ .
The number of shares subject to the 1996 Plan is subject to adjustment in
certain events including, but not limited to, the Recapitalization. Such shares
may be authorized but unissued shares of Common Stock or authorized and issued
shares of Common Stock held in the Company's treasury or acquired by the Company
for the purposes of the 1996 Plan. Awards may be made under the 1996 Plan in the
form of (a) incentive stock options, (b) nonqualified stock options, (c)
restricted stock, and (d) performance shares. Awards under the 1996 Plan to any
employee of the Company or its subsidiaries shall be limited to awards of no
more than 400,000 shares of Common Stock per calendar year (100,000 shares if
the Recapitalization is approved).
Awards under the 1996 Plan may be made to officers (eight persons),
directors (eight persons) and employees ( persons, including employees of CPI),
consultants ( persons), and other persons or entities who have been or may be in
a position to benefit, the Company and its subsidiaries, as the Committee shall
in its sole discretion select (collectively, "key persons") provided, however,
that incentive stock options may be granted only to a person who is an employee
of the Company or its subsidiaries on the date of grant. Upon approval of the
1996 Plan by the shareholders, the 1991 Plan will be automatically amended to
terminate the automatic grant of options thereunder to non-employee directors.
The 1996 Plan may be administered by the Compensation Committee (the
"Committee") of the Board of Directors (the "Board"), which shall consist of not
less than two directors appointed by, and to serve at the pleasure of, the
Board, although the Board may, in its sole discretion, at any time and from time
to time, resolve to administer the 1996 Plan directly. In such event the term
"Committee" as used herein shall be deemed to mean the Board.
All incentive stock options shall have an exercise price at least equal
to the greater of the par value or 100% of the "fair market value" of the Common
Stock on the date of grant. Incentive stock options are not transferable and may
not be exercised more than 10 years after the date of grant. An incentive stock
option may not be granted under the 1996 Plan to an individual who, at the time
the option is granted, owns stock possessing more than 10% of the total combined
voting power of all classes of stock of his employer corporation or of its
parent or subsidiary corporations (as such ownership may be determined for
purposes of section 422(b)(6) of the Internal Revenue Code of 1986, as amended
(the "Code")) unless (i) at the time such incentive stock option is granted the
option exercise price is at least 110% of the "fair market value" of the shares
subject thereto and (ii) the incentive stock option by its terms is not
exercisable after the expiration of five years from the date it is granted. To
the extent that the aggregate fair market value (determined as of the time the
option is granted) of the stock with respect to which incentive stock options
are first exercisable by any employee of the Company or any subsidiary during
any calendar year shall exceed $100,000, or such higher amount as may be
permitted from time to time under section 422 of the Code, such options shall be
treated as nonqualified stock options. Unless sooner terminated by the Board,
the provisions of the 1996 Plan regarding the grant of incentive stock options
shall terminate on the tenth anniversary of the adoption of the 1996 Plan by the
Board. No incentive stock options shall thereafter be granted under the 1996
Plan, but all incentive stock options granted theretofore shall remain in effect
in accordance with their terms.
Nonqualified stock options shall have an exercise price at least equal
to the greater of the par value or 100% of the "fair market value" of the Common
Stock on the date of grant. The period during which such nonqualified stock
options shall be exercisable shall be determined by the Committee in its
discretion.
Each award granted under the 1996 Plan shall be evidenced by a written
agreement ("Plan Agreement") which, subject to the further conditions of the
1996 Plan, shall contain such provisions as the Committee may in its sole
discretion deem necessary or desirable. The exercise price of any option shall
be paid in accordance with the provisions of the applicable Plan Agreement which
may permit payment (i) by certified or official bank
21
<PAGE> 24
check; (ii) by delivery of shares of Common Stock having a "fair market value"
(determined as of the exercise date) equal to all or a part of the option
exercise price and a certified or official bank check (or the equivalent thereof
acceptable to the Company) for any remaining portion of the full exercise price;
and (iii) at the discretion of the Committee and to the extent permitted by law,
if the optionee is an employee of the Company or a subsidiary thereof, by
delivery of a promissory note for some or all of the exercise price the terms of
which note shall be determined by the Committee. The Committee may allow other
methods of payment in its discretion to the extent permitted by law and the
applicable requirements of the Delaware General Corporation Law.
A restricted stock award, entitling the recipient to acquire shares of
Common Stock for a purchase price at least equal to par value, may be granted to
such key persons and in such amounts and subject to such terms and conditions as
the Committee shall determine in its sole discretion, subject to the provisions
of the 1996 Plan. Shares of restricted stock may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of except as specified
in the 1996 Plan or the Plan Agreement. The Committee, at the time of grant,
will specify the date or dates (which may depend upon or be related to the
attainment of performance goals and/or other conditions) on which the
nontransferability of the restricted stock shall lapse. During the 120 days
following the termination of the grantee's employment for any reason, the
Company has the right to require the return of any shares to which restrictions
on transferability apply, in exchange for the amount paid by the grantee for
such shares.
The Committee may grant performance share awards to such key persons,
and in such amounts and subject to such terms and conditions, as the Committee
shall in its sole discretion determine, subject to the provisions of the 1996
Plan. A grant of performance shares shall entitle the grantee to acquire shares
of Common Stock, or to be paid the value thereof in cash, as the Committee shall
determine, if specified performance goals are met. Performance shares may be
awarded independently of or in connection with any other award under the 1996
Plan. A grantee has no right with respect to a performance share award unless he
accepts the award by executing a Plan Agreement at such time and in such form as
determined by the Committee.
The Board of Directors may from time to time amend the 1996 Plan in any
respect whatsoever, except that no such amendment shall materially impair any
rights or materially increase any obligations under any outstanding award
without the consent of the grantee, provided, however, that any amendment that
alters or affects the tax treatment of any award shall not be considered to
materially impair any rights of any grantee. Notwithstanding the foregoing,
shareholder approval shall be required with respect to any amendment which
increases the aggregate number of shares which may be issued pursuant to the
1996 Plan or changes the class of employees eligible to receive incentive stock
options or the class of employees eligible to receive other awards. The 1996
Plan may be amended by the Committee to incorporate or conform to requirements
imposed by any amendments made to the Code or regulations promulgated thereunder
which the Committee deems to be necessary or desirable to preserve (a) status
for outstanding incentive stock options and the ability to issue incentive stock
options pursuant to the 1996 Plan, and (b) the deductibility by the Company
pursuant to Section 162(m) of the Code of amounts taxed to plan participants as
ordinary compensation income.
FEDERAL INCOME TAX CONSEQUENCES OF THE 1996 PLAN
The Company believes that under present Federal tax laws the grant of
an option will create no tax consequences for an option holder or the Company.
The option holder will generally have no taxable income upon exercising an
incentive stock option (except that the alternative minimum tax may apply), and
the Company will receive no deduction when an incentive stock option is
exercised. The option holder will generally have no taxable income even if
shares are applied in payment of the exercise price of an incentive stock
option, unless such shares were acquired by exercise of an incentive stock
option and are applied in payment of the exercise price before the applicable
incentive stock option holding periods have been satisfied. The option holder
must recognize a specified amount of ordinary income with respect to the
exercise of a nonqualified stock option, and
22
<PAGE> 25
the Company (or its subsidiaries) will generally be entitled to a deduction for
the same amount. Option holders who utilize shares in payment of the exercise
price of a nonqualified stock option will generally not recognize gain or loss
to the extent that on the date of payment the fair market value of the shares
received is equal to the fair market value of the shares surrendered. The tax
treatment to an option holder of a disposition of shares acquired under the 1996
Plan depends on whether the shares were acquired by exercising an incentive
stock option or a nonqualified stock option, and whether shares were used in
payment of the exercise price. Generally, there will be no tax consequence to
the Company in connection with a disposition of shares acquired under an option
except that the Company (or its subsidiaries) will generally be entitled to a
deduction in the case of a disposition of shares acquired under an incentive
stock option before the applicable incentive stock option holding periods have
been satisfied. Under certain circumstances, issuance of stock options that are
transferable may result in tax consequences different from those discussed
above.
The 1996 Plan is designed to enable the Company to grant options which
meet the requirements of Section 162(m) of the Code. Section 162(m) limits to $1
million per year the federal income tax deduction available to public companies
for compensation paid to each of its chief executive officer and its four other
highest paid executive officers, unless that compensation qualifies for certain
"performance-based" exceptions provided for in that section. Included within the
$1 million limit is the deduction otherwise available on the exercise of
options, to the extent such options are granted after February 17, 1993, unless
the options meet the requirements for "performance-based" compensation set forth
in Section 162(m) of the Code. Such requirements include that the plan be
administered by a committee of "outside directors" (as defined in Section
162(m)), that the plan include a limitation on the amount of options that can be
granted to an executive during a specified period and that the options be issued
with an exercise price of no less than fair market value. Options under the 1996
Plan issued and administered by the Committee subsequent to the adoption of the
1996 Plan by the shareholders should meet these requirements if the Committee
consists solely of two or more "outside directors" within the meaning of
Section 162(m) of the Code.
In general, the recipient of a restricted stock award or a performance
share award will recognize ordinary income in the amount of any cash received
plus the market value of the shares received less any amount paid for the
shares, and the Company will generally be entitled to a deduction unless Secton
162(m) applies. Income with respect to shares received will generally be
recognized on the date when the shares are transferrable or no longer subject to
a substantial risk of forfeiture. If shares of Common Stock are issued which are
not transferable and are subject to a substantial risk of forfeiture, a grantee
may, in connection with such acquisition of shares of Common Stock under the
1996 Plan, make the election permitted under Section 83(b) of the Code to
include in his gross income in the year of transfer of the shares the difference
between the amount paid for the shares and the fair market value of the shares
at the time of transfer.
Whenever cash is paid pursuant to an award under the 1996 Plan, the
Company is entitled to deduct therefrom an amount sufficient in its opinion to
satisfy all federal, state and other governmental tax withholdings related to
such payment. Whenever shares of Common Stock are to be delivered pursuant to an
award under the 1996 Plan, the Company is entitled to require as a condition of
delivery of the shares that the grantee remit to the Company an amount
sufficient in the opinion of the Company to satisfy all federal, state and other
governmental tax withholding requirements related thereto. With the approval of
the Committee, which it shall have sole discretion to grant, the grantee may
satisfy the foregoing condition by electing to have the Company withhold from
delivery shares having a value equal to the amount of tax to be withheld. Such
shares shall be valued at their "fair market value" as of the date on which the
amount of tax to be withheld is determined. Such an election by a grantee whose
transactions in Common Stock are subject to Section 16(a) of the Exchange Act
may be subject to additional restrictions.
23
<PAGE> 26
NEW PLAN BENEFITS TABLE
As of September 20, 1996, an aggregate of 2,006,593 options have been
issued under the 1996 Plan, subject to shareholder approval including an
aggregate of 1,888,593 options which were issued in connection with the CPI
Acquisition. The following table sets forth, to the extent determinable, the
benefits or amounts that will be received by the following persons in the year
following approval of the 1996 Plan: (i) each of the Named Executive Officers;
(ii) the current executive officers as a group; (iii) the current directors who
are not executive officers as a group; (iv) each nominee for election as a
director, (v) each associate of any director, executive officer or nominee and
(vi) all employees, including all current officers who are not executive
officers, as a group. No other person received or is now expected to receive 5%
of the options, restricted stock or performance shares issuable under the 1996
Plan.
NEW PLAN BENEFITS
<TABLE>
<CAPTION>
1996 Stock Incentive Plan
- - - -----------------------------------------------------------------------------------------
Name and Position or Group Dollar Value ($)(1) Number of Units
-------------------------- ------------------- ---------------
<S> <C> <C>
Donald T. Pascal
Chairman of the Board,
Former President and
Chief Executive Officer Undeterminable
Albert M. Zlotnick
Former Chairman of
the Board, President
and Chief Executive
Officer Undeterminable
Robert E. Kelly
Former Senior Vice President,
Chief Financial Officer
and Secretary Undeterminable
Current Executive Officers (as a Group) 1,333,593(2)
Current Non-Executive Directors
(as a Group) 16,000(3)
Director Nominees
Ramon D. Ardizzone 2,000(3)
Clark H. Bailey 2,000(3)
Herbert M. Friedman 2,000(3)
Duane A. Gawron 344,172(4)
James S. Harrington 362,677(5)
Stephen P. Kelbley 10,000(3)
Donald T. Pascal Undeterminable
</TABLE>
24
<PAGE> 27
NEW PLAN BENEFITS
<TABLE>
<CAPTION>
1996 Stock Incentive Plan
- - - -----------------------------------------------------------------------------------------
Name and Position or Group Dollar Value ($)(1) Number of Units
-------------------------- ------------------- ---------------
<S> <C> <C>
John E. Pylak 344,172(4)
Associates Undeterminable
Employees (as a Group) 657,000(6)
</TABLE>
- - - ---------------
(1) The dollar value of the awards under the 1996 Plan will depend upon (i) in
the case of options, the spread between the exercise price of the options, and
the value of the Common Stock on the date of exercise of the options, (ii) in
the case of restricted stock awards, the spread between the purchase price of
the Common Stock and the value of the Common Stock on the date of the award, and
(iii) in the case of performance shares, the spread between the purchase price
of the Common Stock and the value of the Common Stock on the date the
performance shares vest. Such amounts are at this time undeterminable.
(2) Consists of 555,552 incentive options with an exercise price equal to $2.16
per share; 678,040 non-incentive options with an exercise price of $2.03 per
share and 100,000 incentive options issued to an executive officer with an
exercise price of $2.16 per share. The options are not exercisable until July 8,
1999 but will become fully exercisable if there is a "change of control," as
defined, prior thereto. The right to exercise the options vests over a two year
period with respect to options granted to Messrs. Harrington, Gawron, Pylak and
Cieszkowski and over a five year period with respect to other officers and
employees. If an optionee dies, becomes disabled, is terminated or resigns, the
option may be exercised for a specified period commencing on the later of such
event and July 8, 1999; and in some cases, will be fully vested. If the 1996
Plan is not approved by the shareholders or if an event, such as a change of
control, occurs prior to such approval, under the terms of the purchase
agreement executed in connection with the CPI Acquisition, the Company is
obligated to issue stock purchase warrants to each option holder, including
Messrs. Harrington, Gawron, Pylak and Cieszkowski, on the same terms and
conditions as the options previously issued to each of them. For additional
information on the options issued to Messrs. Harrington, Gawron, Pylak and
Cieszkowski, see "Proposal No. 1 - Election of Directors Management Compensation
- - - - Employment Contracts and Termination of Employment and Change in Control
Arrangements".
(3) The number of options which may be issued in the future to the individual or
the group, as the case may be, is not now determinable.
(4) Includes 138,888 incentive options with an exercise price equal to $2.16 per
share, and 205,284 non-incentive options with an exercise price of $2.03 per
share. The number of options which may be issued in the future to the nominee is
not now determinable.
(5) Includes 138,888 incentive options with an exercise price of $2.16 per
share, 233,789 non-incentive options with an exercise price of $2.03 per share.
The number of options which may be issued in the future to the nominee is not
now determinable.
(6) Includes all current officers who are not executive officers and all
employees of CPI. The number of options includes 655,000 options issued in
connection with the acquisition of CPI. The number of options which may be
issued in the future to employees is not now determinable.
25
<PAGE> 28
VOTE REQUIRED FOR APPROVAL
The affirmative vote of holders of a majority of the shares of
Common Stock present and entitled to vote at the Meeting will be required to
approve the 1996 Plan. An abstention will have the same effect as a vote against
this proposal since such shares are present at the Meeting and entitled to vote,
but are not voting in favor of this proposal. Broker non-votes will have no
effect on the outcome of this proposal, since they are not considered shares
entitled to vote on this proposal.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends a vote FOR Proposal No. 4.
AUDITORS
On June 10, 1996, as a result of the consummation of the
acquisition of the capital stock of CPI on May 31, 1996, BDO Seidman, LLP
("BDO"), the Company's independent public accountant for the fiscal year ended
December 31, 1995, was dismissed to allow Coopers & Lybrand LLP, CPI's
independent public accountant, to be engaged as the Company's independent public
accountant. BDO's report on the financial statements of the Company for each of
the last two years did not contain an adverse opinion or disclaimer of opinion
and was not modified as to uncertainty, audit scope or accounting principles.
The decision to change accountants was recommended by the Executive Committee of
the Board of Directors. There were no disagreements with BDO on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which, if not resolved to BDO's satisfaction, would have
caused it to make reference to the subject matter of the disagreement in
connection with its report. Representatives of Coopers & Lybrand LLP are
expected to be present at the Meeting and will have the opportunity to make a
statement if they desire. They will also be available to respond to appropriate
questions.
DEADLINE FOR SHAREHOLDER PROPOSALS
Shareholder proposals intended to be presented at the next annual
meeting of shareholders, to be held in 1997, must be received by the Company at
667 Madison Avenue, New York, New York 10021 by June 27, 1997, to be included in
the proxy statement and form of proxy relating to that meeting.
ANNUAL REPORT ON FORM 10-KSB
Additional copies of the Company's Annual Report on Form 10-KSB,
as filed with the Commission, are available to shareholders on request and may
be obtained by writing to: Tigera Group, Inc., 667 Madison Avenue, New York, New
York 10021, Attention: Mr. Robert E. Kelly, Assistant Secretary.
26
<PAGE> 29
OTHER BUSINESS
The Board of Directors does not know of any matter to be brought
before the Meeting other than the matters specified in the Notice of Annual
Meeting accompanying this Proxy Statement. The persons named in the form of
proxy by the Board of Directors will vote all proxies which have been properly
executed. If any matters other than those set forth in the Notice of Annual
Meeting are properly brought before the Meeting, such persons will vote thereon
in accordance with their best judgment.
By Order of the Board of Directors
GREGORY C. KOWERT
Secretary
27
<PAGE> 30
Appendix A
GENERAL DESCRIPTION OF THE BUSINESS OF CPI
CPI consists of three divisions operating in two business
segments, distribution and manufacturing. The distribution segment, located in
Auburn Hills, Michigan, operates under the name Energy Electric Cable ("EEC")
and distributes a full-line of wire and cable products for the computer
networking, voice, security, signal and sound markets. The manufacturing segment
consists of two divisions. The first, located in Leominster, Massachusetts,
operates under the name "BSCC" and manufactures low voltage wire and cable for
the security, factory automation, signal and sound markets. The second
manufacturing division, also located in Auburn Hills, Michigan, operates under
the name Energy Electric Assembly ("EEA") and specializes in designing and
manufacturing cable assemblies primarily for robotics and machine tool
manufacturers and end-users (factory automation). The two major market segments
served by CPI are (i) security, factory automation, signal and sound, and (ii)
computer networking and voice, which together constitute over 90% of 1995 sales.
CPI was formed by the merger of its three operating divisions in
October 1995. On May 31, 1996, Tigera completed the purchase of 85% of the
capital stock of CPI from its stockholders who continue to hold the remaining
15% of CPI. CPI's principal executive offices are located at Leominster,
Massachusetts and its telephone number is 508-840-3720. CPI has several regional
offices and distribution warehouses. See "Facilities" below.
By developing long-standing relationships based on quality
products, knowledge of its customers, continuity of supply, customized design
and prompt delivery at competitive prices, CPI endeavors to expand its current
market position in the connectivity industry. With a management team experienced
in distribution, manufacturing and the specialized assembly businesses and the
additional support of Tigera, CPI seeks to position itself to evaluate and
pursue opportunities for advancement and growth in its industry through internal
expansion into targeted geographical areas and new product lines, the
acquisition of additional companies, and the development of strategic
relationships with major suppliers and manufacturers in the industry.
GENERAL DESCRIPTION OF THE INDUSTRY
The connectivity industry provides copper and fiber optic cabling
products for a wide variety of applications including security, factory
automation, signal and sound applications; other industrial and electrical
signal transmission uses; computer networks; voice communications; computer
interconnection; and multimedia applications. CPI participates in the security,
factory automation, signal and sound markets and in the computer network
communication market, each of which is briefly described below:
Security, Factory Automation, Signal and Sound. Technological
advances in commercial building monitoring and a greater concern for safety
features in commercial buildings and residences have increased demand for wiring
products for fire and burglary alarms, motion detectors, voice activators,
climate controls, and electronic card and video surveillance devices.
Increasingly stringent safety requirements imposed by local and national
building codes and insurance providers has also increased demand for "safety
cable," which refers to certain physical attributes of cable that improve the
safety and performance of such cables under hazardous conditions, particularly
in buildings with advanced fire alarm and safety systems. Continued growth of
the factory automation and robotic machinery market as well as changes in
equipment installment procedures have increased the demand for wire and cable
products servicing this industry. Demand for signal wire used in traffic control
signals and transit wire installed in, among other things, subways, bridges,
tunnels and toll booths, is driven by the need to rebuild infrastructure and the
pace of new construction in this area.
A-1
<PAGE> 31
Computer Networks and Voice. The proliferation of personal
computers in the business world has created a need for products which enable
users to share files, applications and peripheral equipment such as printers and
data storage devices. Local area networks ("LAN's") which link personal
computers with other computers and peripherals inside of a building, and wide
area networks ("WAN's") which link personal computers between buildings or
campus settings, were developed in response to this demand. "Structured wiring
systems" are the electronic highways that connect personal computers in LAN's or
WAN's. In a structured wiring system, generally, a fiber optic cable provides
connectivity vertically up a riser shaft to the various wiring closets located
throughout the building. Then, high speed copper cable is distributed
horizontally throughout each floor through patch panels to the individual work
stations or desks. The number of personal computers connected and upgraded to
such systems increases with the penetration of networking technology and the
expansion of personal computers in the workplace. Rapid technological advances
in computers and software have necessitated similar advances in data
transmission cable to enable it to transmit increasingly complex data at faster
speeds without diminishing data integrity. Upgrading to accommodate advanced
network requirements is expected to increase demand for advanced data
transmission cable.
DESCRIPTION OF CPI'S DIVISIONS AND PRODUCTS
Distribution. EEC is a full-line distributor of wire and cable,
including (i) data communications cable, fiber optic cables, and a complete
range of connectivity devices, and (ii) security, signal, sound and control
products. EEC's distribution customers are primarily LAN and WAN installers,
systems integrators, large corporations, security and climate control system
installers and contractors, and electrical contractors. EEC's strategy has been
to pursue those segments of the wire and cable market for which a distributor
can add value through product knowledge, providing customer solutions, inventory
management, convenience and quick order processing.
Approximately 65% of EEC's 1995 sales were communication and
computer networking products related to the transmission of voice and data. The
majority of networking product sales are passive components associated with
"structured wiring systems". Networking products distributed by EEC include
copper and fiber optic cable and, to a lesser extent, repeaters, network
interface cards, hubs, routers, patch panels, and connectors. EEC is one of 22
exclusive regional distributors for AT&T networking products, which are
frequently specified by the contractor as required.
In addition to its networking products, EEC also distributes low
voltage copper wire which is used primarily in security, signal, sound and
control installations and accounted for approximately 24% of 1995 sales. The
majority of low voltage sales are to small, local security, sound, climate
control and fire alarm installers.
EEC also markets power cable, electronics wire (coaxial cable,
shielded cable, hook-up wire, ribbon and braided shielded wire), and
miscellaneous related electrical products. Customers for these products are
primarily original equipment manufacturers ("OEM's"), electrical contractors,
and large firms.
EEC aggressively pursues sales through targeted telemarketing to
end users of wire and cable products. EEC currently employs 46 telemarketers,
eight additional salespersons who concentrate on servicing large accounts and
three regional sales managers. EEC, which began as a regional distributor with a
strong presence in Detroit, Michigan, has been expanding into a national
distributor through the opening of branch offices and warehouses in Chicago,
Illinois; Ft. Lauderdale, Pensacola and Tampa, Florida; Atlanta, Georgia;
Dallas, Texas; and Torrance, California. EEC has also been expanding through the
opening of regional electronic sales offices ("ESO") in Orlando Florida; Houston
and Austin, Texas; Raleigh and Lexington, North Carolina; and Charlottesville,
Virginia. ESO's provide a local presence in the market and serve as a platform
from which to locate warehouses to optimize delivery times and freight costs.
All of the branch offices and ESO's are on-line with a centralized computer
located in Detroit and utilize a proprietary software system
A-2
<PAGE> 32
licensed to EEC. Each telemarketer has on-line access to the customer's order
and payment history and EEC's inventory and can fill a shipment from the site
which will best expedite delivery and minimize freight costs. EEC believes that
this proprietary system enables it to increase sales productivity, provide
personalized customer service and, in most cases, same day shipping of products
while enabling EEC to control and monitor inventory levels at its locations. The
Company has approximately 6,000 customers and in excess of 20,000 SKU's.
Management believes that retaining a highly motivated sales force
and minimizing the cost of turnover is important to the growth of its business.
EEC has developed a commission system based on profitability which provides
continued motivation for improved individual performance while serving corporate
objectives.
EEC acquires its products from a variety of vendors, including
BSCC which accounts for approximately 13% of EEC's purchases, and is not
dependent on any single vendor for any particular product. As EEC's ability to
deliver product on a timely cost-effective basis depends on its ability to
obtain such product from manufacturers on acceptable terms, management believes
that its relationships with its vendors are a key component of EEC's business.
Following the merger with BSCC, EEC has concentrated on maintaining its
relationships with other vendors and management believes that it has good
working relationships with its vendors.
Manufacturing. BSCC manufactures low voltage copper wire and
cable for the security, factory automation, signal and sound markets. Low
voltage wire and cable includes electronic and electrical wire and cable,
control and signal wire and cable, climate control wire and cable, transit wire
and cable and low smoke and low halogen wire and cable products. BSCC also
manufactures wire and cable for sale to distributors that is specifically
designated by OEM's or installers as meeting the specification of a particular
function ("spec'd product"). As competition for sales of spec'd product is
generally limited to select competitors, if any, who have also been designated
by the OEM as manufacturers of the spec'd product, BSCC intends to aggressively
pursue the manufacture and sale of additional spec'd products.
The manufacturing process for insulated wire consists of melting
plastic compounds (the insulation) and applying it to conductive metal (the
conductor). Cables are formed by combining various insulated wires. BSCC melts
and applies compound to wire using extruders that pump molten compound through
dies to shape it into its final form on the wire. After extrusion, insulated
wires pass through a variety of secondary operations depending on the finished
cable form. Secondary operations are primarily twinning (the twisting of two
insulated wires), cabling (the grouping of a multitude of insulated wires) and
jacketing (the extrusion of a plastic compound jacket over the finished cable).
Additional operations may be performed to stripe insulated wire for
identification and apply tape or braided metal shields for mechanical protection
and reduction of electrical interference. BSCC is an Underwriters Laboratory(TM)
approved manufacturer and is ISO 9002 certified.
BSCC uses copper as the base conductor material for the majority
of the wire and cable it produces. Management estimates that copper accounted
for approximately 52% of the cost of goods sold by BSCC in 1995. BSCC has not
experienced difficulties in obtaining sufficient supplies of copper in the past
and typically orders copper wire weekly to minimize its investment in inventory.
BSCC has generally been able to pass on increases in the price of copper to its
customers, but there can be no assurance that it will be able to do so in the
future. Given the volatility in the price of copper, BSCC does not generally
enter into long term agreements to supply its products at a fixed price.
Significant increases in the price of BSCC's products as a result of increases
in the cost of copper could have a negative effect on BSCC's profitability. BSCC
does not engage in hedging transactions for the purchase of copper.
BSCC also uses a number of plastic compounds as insulators.
Supplies of these materials are generally adequate and are expected to remain so
for the foreseeable future. BSCC has alternative sources of supply for these
insulating materials and may use alternative insulating materials in its
products.
A-3
<PAGE> 33
The manufacture of wire and cable products requires a wide
variety of manufacturing, electronic control and testing equipment. Due to the
high cost and long delivery times of new equipment, BSCC purchases used
manufacturing equipment and reconfigures it to achieve desired operating speeds
and tolerances. Although BSCC has been successful in acquiring used machinery in
the past, a shortage of such equipment could temporarily restrain the future
growth of BSCC. As the reconfiguration and operation of this equipment requires
experienced operators and a continual maintenance program, BSCC has several
equipment specialists on staff to modify and maintain the equipment.
BSCC's products are sold to distributors on a non-exclusive
basis. Prior to the formation of CPI, sales to EEC, BSCC's largest distributor,
accounted for 21% of BSCC's sales for 1995. BSCC also supplies standard and
specialty products to EEA which accounted for 3% of BSCC's sales for 1995. BSCC
currently sells to approximately 150 distributors nationwide and believes that
its relationships with its distributors are good. In general, BSCC's
distributors are not obligated to carry BSCC's products exclusively and may
carry products that compete with BSCC's products. Although the loss of one or
more distributors could have an adverse effect on BSCC's results of operations
in the short term, BSCC believes that additional distributors could be added
without significant delay. Sales of BSCC's products are currently limited by
BSCC's internal manufacturing capacity constraints. BSCC's backlog as of August
20, 1996 was approximately $5,400,000.
EEA, CPI's assembly division, seeks to provide design assistance
and advice as well as manufacturing and assembly services to OEM's, such as
machine-tool and robotics manufacturers, and to end-users of such capital
equipment, in each case, primarily in the automobile industry. EEA's strategy is
to design, engineer and produce subassemblies which combine cables with various
connectors to strict specifications to create value-added products. In the
assembly process, bulk cable is cut to an exact length and attached to specific
connectors. Electrical inspection is then performed before final shipment.
EEA seeks to capitalize on the development of modular machine
tool design which requires complex cable assemblies to link machinery with the
industrial computers controlling it. In addition, cable subassemblies previously
"hardwired" into machinery by electricians are now being designed in modular
form to promote faster and more economical retooling of equipment and assembly
lines.
EEA acquires its products from a variety of vendors, including
BSCC which accounts for approximately 40% of EEA's purchases, and is not
dependent on any single vendor.
As the services provided by EEA are often time-intensive and can
result in costly delays if not completed to exact specifications, EEA seeks to
encourage OEM's who currently perform this function "in-house" to "outsource"
these functions to EEA.
COMPETITION
The specialty wire and cable market is highly competitive and
fragmented. Many of CPI's competitors are substantially larger and have greater
financial, engineering, distribution, manufacturing and other resources than
CPI. Management believes that it competes successfully in its markets due to its
experienced management team, its established reputation for quality products,
large sales force, and its extensive knowledge of its current customer base.
EEC believes that the principal competitive factors in the
distribution market are knowledgeable salespeople, availability of inventory on
a wide variety of products, competitive prices and the ability to meet the
specific requirements of end-users on a timely basis. To compete successfully,
management believes that EEC must continue to distribute a broad range of
products, provide competitive pricing and prompt delivery, deliver responsive
customer service, maintain its relationships with its suppliers and attract and
retain highly qualified personnel. EEC faces substantial competition from
several national and regional distributors that have greater financial,
technical and marketing resources and distribution capabilities including
Anixter International and
A-4
<PAGE> 34
Graybar Electric. as well as a number of smaller companies. EEC also faces
competition from manufacturers who sell directly to end-users for certain large
scale products.
BSCC believes that the principal competitive factors in the
manufacturing division are quality and price. BSCC believes that its ability to
extrude and cable low voltage products at a high rate of speed, while
maintaining product quality, enables it to compete effectively. BSCC's faces
substantial competition from several manufacturers that have greater financial
and technical resources including Belden Wire & Cable Corp., General Cable
Industries, and the West Penn Wire Division of Cable Design Technologies
Corporation as well as several smaller regional companies.
EEA believes that the principal competitive factors in the
assembly market are knowledge of end-user requirements, quality production, and
the ability to deliver the finished product to end-users on a timely basis. EEA
competes primarily with numerous regional companies, OEM's and with the Northern
Wire and Cable division of Anicom, Inc., most of which have greater financial
and technical resources than the Company.
TECHNOLOGICAL DEVELOPMENT AND OTHER SPECIAL CONSIDERATIONS
Fiber optic technology represents a potential substitute for some
copper-based networking cable products. A significant decrease in the cost of
fiber optic systems could make such systems superior on a price performance
basis to copper systems and may have a material adverse effect on CPI's
business. To date, fiber optic cables have not significantly penetrated the
markets served by CPI due to the high relative cost required to interface
electronic and light signals and the high cost and technical difficulty of fiber
termination and connection. At the same time, advances are being made in
copper-based products to increase efficiency and enhance performance. While
fiber optic cable represents a small percentage of its current sales, CPI's
distribution business could shift its product mix towards fiber and away from
copper should demand for copper products decline significantly.
Wireless communications technology may represent a threat to both
copper and fiber optic-based systems by reducing the need for premise wiring.
CPI believes that the limited signal security and the relatively slow
transmission speeds of current wireless systems restrict the use of such systems
in many data communication markets. However, there can be no assurance that
future advances in wireless technology will not have a material adverse effect
on CPI's business.
Copper is the principal raw material used in the Company's
products. Significant increases in the price of the Company's products due to
increases in the cost of copper could have a negative effect on demand for the
Company's products. Similarly, significant decreases in the price of copper
could result in the price for the Company's products decreasing which could have
an adverse effect on the Company's gross margins until inventory with a higher
carrying cost is distributed. See "Description of CPI's Divisions and Products
Manufacturing."
In connection with the CPI acquisition, CPI increased and
refinanced its bank facility with a new facility consisting of a revolving
credit facility, a term loan and a line of credit (collectively, the "Bank
Facility"). Borrowings under the Bank Facility were approximately $31,000,000 as
of June 30, 1996, and bear interest at floating rates that will fluctuate over
time based on prevailing interest rates. CPI has pledged essentially all of its
assets, and the Company has pledged all of its CPI stock, to secure the
repayment of amounts borrowed. The credit agreement between CPI and its banks
contains certain covenants including, among others, financial covenants relating
to net worth, debt coverage, interest coverage and fixed charge coverage, as
well as covenants restricting CPI's ability to make capital expenditures in
excess of stated amounts, incur indebtedness, pay dividends on or purchase,
redeem or otherwise acquire its capital stock, or, in certain cases, merge or
purchase assets or stock of another entity. These covenants and restrictions,
together with the pledge of assets and the debt service requirements, may
restrict the Company's or CPI's ability to take advantage of business
opportunities or to respond to market conditions in the future. In addition, a
significant portion of CPI's operating cash flow
A-5
<PAGE> 35
will be required to satisfy interest and principal payments due under the Bank
Facility. Although the Company expects CPI to generate sufficient cash flow from
its operations to meet its debt service obligations, CPI's ability to meet such
obligations will be dependent on its future operating performance.
EMPLOYEES
EEC has 153 full time employees in its distribution division,
including 42 commissioned salespeople who are compensated primarily on a
commission basis. BSCC has 140 employees in its manufacturing division,
including 39 salaried employees and 101 hourly plant employees. EEA has 58
employees, including 7 commissioned salespeople.
FACILITIES
The principal operating office and primary distribution facility
for EEC consists of 60,000 square feet of leased space in Auburn Hills,
Michigan; EEC has also leased branch offices and warehousing facilities in the
following locations: Chicago, Illinois; Ft. Lauderdale, Pensacola and Tampa,
Florida; Atlanta, Georgia; Dallas, Texas; and Torrance, California. EEC also has
regional sales offices in Orlando Florida; Houston and Austin, Texas; Raleigh
and Lexington, North Carolina; and Charlottesville, Virginia.
The primary manufacturing facility for BSCC consists of 50,000
square feet of leased space in Leominster, Massachusetts. BSCC also leases an
additional 80,780 square feet of manufacturing space in a facility less than a
mile from its primary plant, 23,500 square feet of which space is subleased on a
month to month basis.
EEA leases 30,000 square feet of office, assembly and warehouse
space adjacent to EEC's headquarters facility in Auburn Hills, Michigan.
ENVIRONMENTAL MATTERS
CPI is subject to numerous United States federal, state and local
laws and regulations relating to the storage, handling, emission and discharge
of materials into the environment, including the United States Comprehensive
Environmental Response, Compensation and Liability Act (CERCLA), the Clean Water
Act, the Clean Air Act, the Emergency Planning and Community Right-To-Know Act
and the Resource Conservation and Recovery Act. Regulations of particular
significance to CPI include those pertaining to handling and disposal of solid
and hazardous waste, discharge of process wastewater and stormwater and release
of hazardous chemicals. Although CPI believes it is in compliance with such laws
and regulation, there can be no assurance that CPI will be in compliance with
such laws in the future or that it will not incur fines, penalties or other
costs as a result of noncompliance or an allegation thereof.
CPI does not currently anticipate any material adverse effect on
its results of operations, financial condition or competitive position as a
result of compliance with federal, state or local environmental laws or
regulations. However, some risk of environmental liability and other costs is
inherent in the nature of the CPIs' business, and there can be no assurance that
material environmental costs will not arise. Moreover, it is possible that
future developments, such as promulgation of implementing regulations for the
1990 amendments to the Clean Air Act or the imposition of other requirements of
environmental laws and enforcement policies thereunder, could lead to material
costs of environmental compliance and cleanup by CPI.
LEGAL PROCEEDINGS
CPI is a party to various legal proceedings and administrative
actions, all of which management believes to be of an ordinary or routine nature
incidental to its operations. In the opinion of management, such proceedings
should not, individually or in the aggregate, have a material adverse effect on
CPI's financial condition.
A-6
<PAGE> 36
Appendix B
CERTIFICATE OF AMENDMENT OF THE
CERTIFICATE OF INCORPORATION OF
TIGERA GROUP, INC
Pursuant to Section 242 of the
General Corporation Law
THE UNDERSIGNED, the President of Tigera Group, Inc., a
corporation organized and existing under the laws of the State of Delaware (the
"Corporation"), hereby certifies as follows:
FIRST: Article FIRST of the Certificate of Incorporation of the
Corporation is hereby amended so that, as amended, said Article shall be and
read as follows:
"FIRST: The name of this corporation is Connectivity Technologies
Inc.
SECOND: This amendment has been duly adopted by the holders of a
majority of the issued and outstanding shares of capital stock of the
Corporation in accordance with the provisions of Sections 228 and 242 of the
General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the undersigned have executed this
Certificate this th day of November, 1996.
------------------------------------
James S. Harrington
President
B-1
<PAGE> 37
Appendix C
CERTIFICATE OF AMENDMENT OF THE
CERTIFICATE OF INCORPORATION OF
TIGERA GROUP, INC
Pursuant to Section 242 of the
General Corporation Law
THE UNDERSIGNED, the President of Tigera Group, Inc., a
corporation organized and existing under the laws of the State of Delaware (the
"Corporation"), hereby certifies as follows:
FIRST: The Certificate of Incorporation of the Corporation
currently authorizes the issuance of up to forty million seven hundred fifty
thousand (40,750,000) shares of common stock, par value $.01 per share. In order
to reduce the number of shares of stock authorized and to effect a one-for-four
reverse stock split of all outstanding shares, Article FOURTH of the Certificate
of Incorporation of the Corporation is hereby amended to read, in its entirety,
as follows:
"The corporation shall be authorized to issue two classes
of shares of stock to be designated, respectively, "Preferred
Stock" and "common stock." The total number of shares which the
Corporation shall have authority to issue is Twenty-One Million
Seven Hundred Fifty Thousand (21,750,000) and the aggregate par
value of all shares of stock that are to have a par value shall
be Eight Hundred Seventeen Thousand Five Hundred Dollars
($817,500). The total number of shares of Preferred Stock shall
be One Million (1,000,000) and the par value of each share of
such class shall be One Cent ($.01). The total number of shares
of common stock shall be Twenty Million Seven Hundred Fifty
Thousand (20,750,000), Twenty Million (20,000,000) of which shall
be designated Common Stock, par value $.04 per share, and Seven
Hundred Fifty Thousand (750,000) of which shall be designated
Series B Common Stock, par value $.01 per share.
Part A. Provisions Relating to Preferred Stock.
The shares of Preferred Stock may be issued from time to
time in one or more series. The Board of Directors is hereby
authorized by filing a certificate pursuant to the applicable law
of the State of Delaware (hereinafter, a "Certificate of
Designation"), to establish from time to time the number of
shares to be included in each such series, and to fix the
designations, powers, preferences and rights of the shares of
each such series and the qualifications,
C-1
<PAGE> 38
limitations or restrictions thereof, including but not limited to
fixing the dividend rights, dividend rate, conversion rights,
voting rights, rights and terms of redemption (including sinking
fund provisions), the redemption price or prices, and the
liquidation preferences of any wholly unissued series of shares
of Preferred Stock; and to increase or decrease the number of
shares of any series subsequent to the issue of the shares of
that series, but not below the number of shares of such series
then outstanding. In case the number of shares of any series
shall be so decreased, the shares constituting such decrease
shall resume the status which they had prior to the adoption of
the resolution originally fixing the number of shares of such
series.
Part B. Provisions Relating to Common Stock.
1. Designation of Series. Subject to conversion or
exchange as provided for in subparagraph 3(a) hereinbelow, twenty
million (20,000,000) shares of the common stock authorized
hereinabove are designated "Common Stock" and seven hundred fifty
thousand (750,000) shares of the common stock authorized
hereinabove are designated "Series B Common Stock."
2. Authority of Board to Fix Rights of Series B Common
Stock. The Board of Directors is expressly authorized, in the
resolution or resolutions providing for the issuance of the
Series B Common Stock, to fix, state and express, within the
limits expressed hereinbelow, the powers, designations,
preferences and rights of the Series B Common Stock, and the
qualifications, limitations or restrictions thereof.
3. Specific Rights. The powers, designations, preferences
and rights, and the qualifications, limitations and restrictions
thereof, of the Common Stock and Series B Common Stock shall be
identical in all respects, except as follows or, for the Series B
Common Stock, as fixed and determined by the Board of Directors
within the limitations which follow:
(a) Conversion Rights. The Series B Common Stock may
be convertible into or exchangeable for Common Stock, at a
conversion or exchange ratio of not more than one share of Common
Stock for each share of Series B Common Stock and upon such other
terms and conditions as the Board of Directors may establish.
(b) Voting Rights. Subject to the special voting
rights of the Preferred Stock set forth or determined as provided
above, each holder of Common Stock of the corporation shall be
entitled to one vote for each share of such stock outstanding in
the name of such holder on the books of the corporation on the
record date designated for the purpose of such vote, and each
holder of Series B Common Stock of the corporation shall be
entitled, for each share of such Series B Common Stock
outstanding in the name of such holder on the books of the
corporation on the record date designated for the purpose of such
vote, to the number of votes as has been fixed by the Board of
Directors, but the vote per share of Series B Common Stock shall
be less than the proportionate vote of the Common Stock into
which such Series B Common Stock is convertible or exchangeable;
provided, however, that at all elections of directors of the
corporation, each holder of any shares of Common Stock and Series
B Common Stock of this Corporation shall be entitled to as many
votes as shall equal the number of votes which (except for this
provision as to cumulative voting) he would be entitled to cast
for the election of directors with respect to his shares of stock
multiplied by the number of directors to be elected by him, and
he may cast all of such votes for a single director or may
distribute them among the number to be voted for, or for any two
or more of them as he may see fit; and provided, further, that in
no event, whether in the election of directors or otherwise,
shall fractional votes be counted.
C-2
<PAGE> 39
(c) Dividend Rights. Subject to the prior rights (if
any) of the holders of the Preferred Stock as to dividends, the
holders of outstanding shares of Common Stock and Series B Common
Stock shall be entitled to receive, when and as declared by the
Board of Directors, out of the assets at the time legally
available therefor, dividends at the rate determined by the Board
of Directors, provided, however, that the dividend on each share
of Series B Common Stock shall be less than the proportionate
dividend on each share of Common Stock into which it is
convertible or exchangeable.
(d) Liquidation Rights. In the event of any
liquidation, dissolution or winding up of this corporation,
either voluntarily or involuntarily, but subject to the
liquidation preference (if any) of the holders of the Preferred
Stock by reason of their ownership thereof, the holders of Common
Stock and Series B Common Stock shall be entitled to receive pro
rata the remaining assets of the corporation available for
distribution to stockholders except that the amount per share
paid in liquidation on each share of the Series B Common Stock
shall be less than the proportionate amount per share paid on
each share of the Common Stock into which it is convertible or
exchangeable.
(e) Adjustments. The Board of Directors shall make
appropriate adjustments to the conversion or exchange ratio and
to the voting, dividend and liquidation rights of the Series B
Common Stock in the event of any stock split, stock dividend or
similar transaction affecting the number of outstanding shares of
Common Stock or Series B Common Stock without the corporation's
receipt of consideration therefor.
Reverse Stock Split: Effective as of 5:00 p.m. on the
date of filing of this Amendment to the Certificate of
Incorporation of the Corporation (the "Effective Date"), each
issued and outstanding share of Common Stock, par value $.01 per
share ("Old Common Stock"), of this Corporation shall
automatically and without any action on the part of the holder
thereof, become one-fourth of a share of Common Stock, par value
$.04 per share ("New Common Stock"). No scrip or fractional
shares of New Common Stock will be issued by reason of this
amendment. Holders of a number of shares of Old Common Stock not
divisible by four shall be entitled to receive a cash payment
equal to the fractional share multiplied by the average of the
closing bid prices as reported by the OTC Bulletin Board for the
Old Common Stock on the five trading days prior to the Effective
Date. As of the Effective Date and thereafter, a certificate(s)
representing shares of Old Common Stock shall be deemed to
represent the number of shares of New Common Stock into which the
shares of Old Common Stock are convertible and the right to
receive a cash payment in lieu of any fractional share."
SECOND: At the effective time of this amendment, each issued and
outstanding share of Common Stock ("Old Common Stock") of this Corporation shall
automatically and without any action on the part of the holder thereof, become
one-fourth of a share of Common Stock, par value $.04 per share ("New Common
Stock"). No scrip or fractional shares of New Common Stock will be issued by
reason of this amendment. The Corporation shall pay holders of fractional shares
cash in an amount equal to the fractional share multiplied by the average of the
closing bid prices as reported by the OTC Bulletin Board for the Old Common
Stock on the five trading days prior to the effective time of this amendment.
C-3
<PAGE> 40
THIRD: This amendment has been duly adopted by the holders of a
majority of the issued and outstanding shares of capital stock of the
Corporation in accordance with the provisions of Sections 228 and 242 of the
General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the undersigned have executed this Certificate
this th day of , 199 .
------------------------------------
James S. Harrington
President
C-4
<PAGE> 41
Appendix D
TIGERA GROUP, INC. 1996 STOCK INCENTIVE PLAN
ARTICLE I
GENERAL
1.1 Purpose
The purpose of the Tigera Group, Inc. 1996 Stock Incentive Plan (the
"Plan" ) is to provide officers, directors and employees of, consultants to, and
other persons or entities who have been or may be in a position to benefit
Tigera Group, Inc. (the "Company") or its subsidiaries, an incentive (i) to
enter into and remain in the service of the Company or its subsidiaries, (ii) to
enhance the long-term performance of the Company, and (iii) to acquire a
proprietary interest in the success of the Company.
1.2 Administration
(a) The Plan shall be administered by the Compensation Committee (the
"Committee") of the Board of Directors of the Company (the "Board"), which shall
consist of not less than two directors and to which the Board shall grant power
to authorize the issuance of shares of the Company's capital stock pursuant to
awards granted under the Plan. The members of the Committee shall be appointed
by, and serve at the pleasure of, the Board; provided, that the Board may, in
its sole discretion, at any time and from time to time, resolve to administer
the Plan. In such event the term "Committee" as used herein shall be deemed to
mean the Board.
(b) The Committee shall have the authority (i) to exercise all of the
powers granted to it under the Plan, (ii) to construe, interpret and implement
the Plan and any Plan Agreements executed pursuant to Section 2.1, consistent
with the provisions of the Plan, (iii) to adopt, amend and rescind rules and
regulations relating to the Plan, including rules governing its own operations,
(iv) to make all determinations necessary or advisable in administering the
Plan, (v) to correct any defect, supply any omission and reconcile any
inconsistency in the Plan, and (vi) to amend the Plan to reflect changes in
applicable law.
(c) Actions of the Committee shall be taken by the vote of a majority
of its members. Any action may be taken by a written instrument signed by all of
the Committee members, and action so taken shall be fully as effective as if it
had been taken by a vote at a meeting.
(d) The determination of the Committee on all matters relating to the
Plan or any Plan Agreement shall be conclusive and binding.
(e) No member of the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any award
thereunder.
1.3 Person Eligible for Awards
Awards under the Plan may be made to such officers, directors and
employees of, consultants to, and other persons or entities who have been or may
be in a position to benefit, the Company and its subsidiaries, as the Committee
shall in its sole discretion select (collectively, "key persons"). No incentive
stock option may be granted to a person who is not an employee of the Company or
its subsidiaries on the date of grant.
D-1
<PAGE> 42
1.4 Types of Awards Under Plan
Awards may be made under the Plan in the form of (a) incentive stock
options, (b) nonqualified stock options, (c) restricted stock, and (d)
performance shares, all as more fully set forth in Article II. The term "award"
means any one of the foregoing.
1.5 Shares Available for Awards
(a) The total number of shares of common stock of the Company, par
value $.01 ("Common Stock"), which may be issued pursuant to the Plan shall not
exceed 3,000,000 shares. Such shares may be authorized but unissued Common Stock
or authorized and issued Common Stock held in the Company's treasury or acquired
by the Company for the purposes of the Plan.
(b) If there is any change in the outstanding shares of Common Stock by
reason of a stock dividend or distribution, stock split-up, recapitalization,
combination or exchange of shares, or by reason of any merger, consolidation,
spinoff or other corporate reorganization in which the Company is the surviving
corporation, the number of shares available for issuance both in the aggregate
and with respect to each outstanding award, and the purchase price per share
under outstanding awards, may be equitably adjusted by the Committee, whose
determination shall be final, binding and conclusive; provided, however, that no
such adjustment shall be made by the Committee without obtaining any shareholder
approval which may be required in order to continue to issue incentive stock
options.
(c) Any shares of Common Stock that are subject to an award under the
Plan and that remain unissued upon the cancellation or termination of such award
for any reason whatsoever shall again become available for awards under the
Plan. Any shares of Common Stock reacquired by the Company pursuant to its
repurchase rights set forth in Section 2.3(f) or Section 2.6(e), and any shares
of Common Stock underlying any option surrendered under Section 2.4, shall not
be available for subsequent awards under the Plan.
1.6 Definitions of Certain Terms
(a) The "Fair Market Value" of a share of Common Stock on any day shall
be determined as follows.
(i) If the principal market for the Common Stock (the
"Market") is a national securities exchange or the NASDAQ Stock Market
National Market System or NASDAQ Stock Market (Small-Cap), the last
sale price on the applicable date or, if no reported sales take place
on the applicable date, the average of the high bid and low asked price
of Common Stock as reported for such Market on such date or, if no such
quotation is made on such date, on the next preceding day on which
there were quotations, provided that such quotations shall have been
made within the ten (10) business days preceding the applicable date;
(ii) If the Market is another market, including without
limitation the over-the-counter market, the average of the high bid and
low asked price for Common Stock on the applicable date, or, if no such
quotations shall have been made on such date, on the next preceding day
on which there were quotations, provided that such quotations shall
have been made within the ten (10) business days preceding the
applicable date; or
(iii) In the event that neither subparagraph (i) nor (ii)
shall apply, the Fair Market Value of a share of Common Stock on any
day shall be as determined in good faith by the Committee.
(b) The term "incentive stock option" means an option that is intended
to qualify for special federal income tax treatment pursuant to sections 421 and
422 of the Code, and which is so designated in the applicable
D-2
<PAGE> 43
Plan Agreement. Any option that is not specifically designated as an incentive
stock option shall under no circumstances be considered an incentive stock
option. Any option that is not an incentive stock option is referred to herein
as a "nonqualified stock option."
(c) The term "employed" or "employment" shall mean, in the case of a
grantee of an award under the Plan who is not a common law employee of the
Company or a subsidiary thereof, the grantee's association, if any, as a
consultant to, or the rendering of services by the grantee to, the Company or a
subsidiary thereof.
(d) A grantee shall be deemed to have a "termination of employment"
when he ceases to be employed by the Company or a subsidiary thereof. The
Committee may in its discretion determine (i) whether any leave of absence
constitutes a termination of employment for purposes of the Plan, (ii) the
impact, if any, of any such leave of absence on awards theretofore made under
the Plan, and (iii) when a change in a non-employee's association with the
Company or a subsidiary thereof constitutes a termination of employment for
purposes of the Plan. The Committee shall have the right to determine, subject
to the terms of any employment agreement between the Company and an employee or
the relevant Plan Agreement (as hereinafter defined), whether the termination of
a grantee's employment is a dismissal for cause and the date of termination in
such case, which date the Committee may retroactively deem to be the date of the
action that is cause for dismissal. Such determinations of the Committee shall
be final and conclusive.
(e) The terms "parent corporation" and "subsidiary corporation" as used
herein shall have the meanings given them in section 424(e) and (f) of the Code,
respectively.
ARTICLE II
AWARDS UNDER THE PLAN
2.1 Agreements Evidencing Awards
Each award granted under the Plan shall be evidenced by a written
agreement ("Plan Agreement") which, subject to the further conditions of this
Plan, shall contain such provisions as the Committee may in its sole discretion
deem necessary or desirable. By accepting an award pursuant to the Plan, a
grantee thereby agrees that the award shall be subject to all of the terms and
provisions of the Plan and the applicable Plan Agreement.
2.2 Grant of Stock Options
(a) The Committee may grant incentive stock options and nonqualified
stock options (collectively, "options") to purchase shares of Common Stock from
the Company, to such grantees, in such amounts, and subject to such terms and
conditions, as the Committee shall determine in its sole discretion, subject to
the provisions of the Plan.
(b) Each Plan Agreement with respect to an option shall set forth the
amount (the "option exercise price") payable by the grantee to the Company upon
exercise of the option evidenced thereby. The option exercise price per share
shall be at least 100% of the Fair Market Value of a share of Common Stock on
the date the option is granted, and provided further that in no event shall the
option exercise price be less than the par value of a share of Common Stock.
(c) Each Plan Agreement with respect to an option shall set forth the
periods during which such option shall be exercisable, whether in whole or in
part, such periods to be determined by the Committee in its discretion;
provided, that notwithstanding the foregoing or any other provision of the Plan,
no Plan Agreement shall permit an incentive stock option to be exercisable more
than 10 years after the date of grant.
D-3
<PAGE> 44
(d) To the extent that the aggregate Fair Market Value (determined as
of the time the option is granted) of the stock with respect to which incentive
stock options are first exercisable by any employee of the Company or any
subsidiary during any calendar year shall exceed $100,000, or such higher amount
as may be permitted from time to time under section 422 of the Code, such
options shall be treated as nonqualified stock options.
(e) Notwithstanding the provisions of paragraphs (b) and (c), an
incentive stock option may not be granted under the Plan to an individual who,
at the time the option is granted, owns stock possessing more than 10% of the
total combined voting power of all classes of stock of his employer corporation
or of its parent or subsidiary corporations (as such ownership may be determined
for purposes of section 422(b)(6) of the Code) unless (i) at the time such
incentive stock option is granted the option exercise price is at least 110% of
the Fair Market Value of the shares subject thereto and (ii) the incentive stock
option by its terms is not exercisable after the expiration of 5 years from the
date it is granted.
2.3 Exercise of Options
Subject to the provisions of this Article II, each option granted under
the Plan shall be exercisable as follows:
(a) Unless the applicable Plan Agreement otherwise provides, once an
option becomes exercisable in part, it shall remain exercisable with respect to
such part until expiration, cancellation or termination of the award.
(b) Unless the applicable Plan Agreement otherwise provides, an option
may be exercised from time to time as to all or part of the shares as to which
such award is then exercisable. Unless the applicable Plan Agreement otherwise
provides, an option shall be exercised by the filing of a written notice with
the Company, on such form and in such manner as the Committee shall in its sole
discretion prescribe.
(c) Any written notice of exercise of an option shall be accompanied by
payment for the shares being purchased. Such payment shall be made in accordance
with the provisions of the applicable Plan Agreement which may permit payment:
(i) by certified or official bank check for the full option exercise price
payable to the Company (or the equivalent thereof acceptable to the Company);
(ii) by delivery of shares of Common Stock having a Fair Market Value
(determined as of the exercise date) equal to all or part of the option exercise
price and a certified or official bank check (or the equivalent thereof
acceptable to the Company) for any remaining portion of the full option exercise
price; (iii) at the discretion of the Committee and to the extent permitted by
law, if the grantee is an employee of the Company or a subsidiary thereof, by
delivery of a promissory note for some part or all of that portion of the
exercise price the terms of which note shall be determined by the Committee; or
(iv) at the discretion of the Committee and to the extent permitted by law, by
such other provision, consistent with the terms of the Plan and the applicable
requirements of the Delaware General Corporation Law, as the Committee may from
time to time prescribe. In the event that the payment shall be in a nonmonetary
form other than shares of Common Stock, the Board or the Committee shall by
resolution state its determination of the fair market value of such
consideration.
(d) As soon as practicable after receiving payment of the full option
exercise price, the Company shall, subject to the provisions of Section 3.2 and
3.6, direct its transfer agent to record the grantee or such other person as may
have rightfully exercised the award, as owner of the shares of Common Stock as
to which the award was exercised. A certificate or certificates for such shares
of Common Stock shall be issued upon request of the grantee or such other
person. If the method of payment employed upon option exercise so requires, and
if applicable law permits, an optionee may direct the Company to deliver the
certificate(s) to his or her stockbroker.
D-4
<PAGE> 45
(e) No grantee of an option (or other person having the right to
exercise such award) shall have any of the rights of a shareholder of the
Company with respect to shares subject to such award until the issuance of a
stock certificate to him for such shares. Except as otherwise provided in
Section 1.5(b), no adjustment shall be made for dividends, distributions or
other rights (whether ordinary or extraordinary, and whether in cash, securities
or other property) for which the record date is prior to the date such stock
certificate is issued.
(f) Shares of Common Stock acquired upon the exercise of options
granted under the Plan may be subject to one or more repurchase rights of the
Company in accordance with the following provisions:
(i) The Committee may in its discretion determine that it
shall be a term and condition of one or more options granted under the
Plan as set forth in the applicable Plan Agreement that the Company (or
its assigns) shall have the right, exercisable upon the optionee's
termination of employment or service with the Company or a subsidiary
thereof, to repurchase at the option price any or all of the shares of
Common Stock previously acquired by the optionee upon the exercise of
the option. The Committee may further determine that any such
repurchase right shall expire in one or more installments at the time
or times specified in the applicable Plan Agreement.
(ii) The Committee may also in its discretion establish as a
term and condition of one or more options granted under the Plan as set
forth in the applicable Plan Agreement that the Company shall have a
right of first refusal with respect to the proposed disposition by the
optionee (or any successor in interest by reason of purchase, gift or
other mode of transfer) of any or all of the shares of Common Stock
acquired by the optionee upon the exercise of the option. Any such
right of first refusal shall be exercisable by the Company (or its
assigns) in accordance with the terms and conditions specified in the
applicable Plan Agreement.
2.4 Compensation in Lieu of Exercise of an Option
Upon written application of the grantee of an option, the Committee may
in its discretion determine to substitute, for the exercise of such option,
compensation to the optionee not in excess of the difference between the option
exercise price and the Fair Market Value of the shares covered by such written
application on the date of such application. Such compensation may be in cash,
in shares of Common Stock, or both, and the payment thereof may be subject to
such conditions as the Committee shall determine in its sole discretion. In the
event compensation is substituted pursuant to this Section 2.4 for the exercise,
in whole or in part, of an option, the number of shares subject to the option
shall be reduced by the number of shares for which such compensation is
substituted.
2.5 Termination of Employment; Death
Except to the extent otherwise provided in the applicable Plan
Agreement, all options not theretofore exercised shall terminate upon
termination of the grantee's employment for any reason (including death).
2.6 Grant of Restricted Stock
(a) The Committee may grant restricted stock awards, entitling the
grantee to acquire shares of Common Stock for a purchase price at least equal to
par value, to such key persons, and in such amounts and subject to such terms
and conditions, as the Committee shall determine in its sole discretion, subject
to the provisions of the Plan. Restricted stock awards may be made independently
of or in connection with any other award under the Plan. A grantee of a
restricted stock award shall have no rights with respect to such award unless he
accepts the award within such period as the Committee shall specify by making
payment to the Company by cashier's or certified check (or the equivalent
thereof acceptable to the Company) in an amount
D-5
<PAGE> 46
equal to the specified purchase price of the shares covered by the award, and by
executing a Plan Agreement in such form as the Committee shall determine.
(b) As soon as practicable after a grantee accepts a restricted stock
award, the Company shall direct its transfer agent to record the grantee as
owner of the shares of Common Stock subject thereto, and the grantee shall
thereupon have all the rights of a shareholder with respect to the restricted
stock including voting and dividend rights, subject to the transferability
restrictions and Company repurchase rights described in paragraphs (d) and (e)
below, and subject also to any other restrictions and conditions contained in
the applicable Plan Agreement.
(c) Unless the Committee shall otherwise determine, if any certificate
is issued evidencing shares of restricted stock, such certificate shall remain
in the possession of the Company until such shares are free of any restrictions
specified in the applicable Plan Agreement.
(d) Shares of restricted stock may not be sold, assigned, transferred,
pledged or otherwise encumbered or disposed of except as specifically provided
in this Plan or the applicable Plan Agreement. The Committee at the time of
grant shall specify the date or dates (which may depend upon or be related to
the attainment of performance goals and other conditions) on which the
nontransferability of the restricted stock shall lapse.
(e) During the 120 days following termination of the grantee's
employment for any reason, the Company shall have the right to purchase any
shares to which restrictions on transferability apply, in exchange for the
amount paid by the grantee for such shares.
2.7 Grant of Performance Shares
(a) The Committee may grant performance share awards to such key
persons, and in such amounts and subject to such terms and conditions, as the
Committee shall in its sole discretion determine, subject to the provisions of
the Plan. Such an award shall entitle the grantee to acquire shares of Common
Stock, or to be paid the value thereof in cash, as the Committee shall
determine, if specified performance goals are met. Performance shares may be
awarded independently of or in connection with any other award under the Plan. A
grantee shall have no rights with respect to a performance share award unless he
accepts the award by executing a Plan Agreement at such time and in such form as
the Committee shall determine.
(b) The grantee of a performance share award will have the rights of a
shareholder only as to shares for which a certificate has been issued pursuant
to the award and not with respect to any other shares subject to the award.
(c) Except as may otherwise be provided by the Committee at any time
prior to termination of employment, the rights of a grantee of a performance
share award shall automatically terminate upon the grantee's termination of
employment by the Company and its subsidiaries for any reason (including death).
(d) At the discretion of the Committee, the applicable Plan Agreement
may set out the procedures to be followed in exercising a performance share
award or it may provide that payment under a performance share award shall be
made automatically after satisfaction of the applicable performance goals.
(e) Except as otherwise specified by the Committee, (i) a performance
share award granted in tandem with an option may be exercised only while the
option is exercisable, and (ii) the exercise of a performance share award
granted in tandem with any award shall reduce the number of shares subject to
the related award in the manner specified in the Plan Agreement.
D-6
<PAGE> 47
2.8 Restriction on Awards to Employees
Notwithstanding any provision contained herein, awards under this Plan
to any employee of the Company or its subsidiaries shall be limited to awards of
no more than 400,000 shares of Common Stock per calendar year.
ARTICLE III
MISCELLANEOUS
3.1 Amendment of the Plan; Modification of Awards
(a) The Board may from time to time suspend, discontinue, revise or
amend the Plan in any respect whatsoever, except that no such amendment shall
materially impair any rights or materially increase any obligations under any
award theretofore made under the Plan without the consent of the grantee thereof
(or, upon the grantee's death, the person having the right to exercise the
award). For purposes of this Section 3.1, any action of the Board or the
Committee that alters or affects the tax treatment of any award shall not be
considered to materially impair any rights of any grantee, for that reason.
(b) Shareholder approval shall be required with respect to any
amendment which increases the aggregate number of shares which may be issued or
changes the class of employees eligible to receive incentive stock options or
the class of employees eligible to receive other awards.
(c) The Committee may cancel any award under the Plan and issue a new
award in substitution therefor. The Committee also may amend any outstanding
Plan Agreement, including, without limitation, by amendment which would (i)
accelerate the time or times at which the award becomes unrestricted or may be
exercised, or at which the Company's repurchase rights under Section 2.3(f)
terminate, or (ii) waive or amend any goals, restrictions or conditions set
forth in the Plan Agreement, or (iii) extend the scheduled expiration date of
the award. However, any such cancellation or amendment that materially impairs
the rights or materially increases the obligations of a grantee under an
outstanding award shall be made only with the consent of the grantee (or, upon
the grantee's death, the person having the right to exercise his award).
(d) Notwithstanding anything to the contrary set forth in paragraphs
(a), (b) and (c) of this Section 3.1, the Plan may be amended by the Committee
to incorporate or conform to requirements imposed by any amendments made to the
Code or regulations promulgated thereunder which the Committee deems to be
necessary or desirable to preserve (a) incentive stock option status for
outstanding incentive stock options and the ability to issue incentive stock
options pursuant to this Plan, and (b) the deductibility by the Company pursuant
to Section 162(m) of the Code of amounts taxed to plan participants as ordinary
compensation income.
3.2 Restrictions
(a) If the Committee shall at any time determine that any Consent (as
hereinafter defined) is necessary or desirable as a condition of, or in
connection with, the granting of any award under the Plan, the issuance or
purchase of shares or other rights thereunder, or the taking of any other action
thereunder (each such action being hereinafter referred to as a "Plan Action"),
then such Plan Action shall not be taken, in whole or in part, unless and until
such Consent shall have been effected or obtained to the full satisfaction of
the Committee.
(b) The term "Consent" as used herein with respect to any Plan Action
means (i) any and all listings, registrations or qualifications in respect
thereof upon any securities exchange or under any federal, state or local law,
rule or regulation, (ii) any and all written agreements and representations by
the grantee with respect to the disposition of shares, or with respect to any
other matter, which the Committee shall deem necessary or desirable to comply
with the terms of any such listing, registration or qualification or to obtain
an exemption
D-7
<PAGE> 48
from the requirement that any such listing, qualification or registration be
made and (iii) any and all consents, clearances and approvals in respect of a
Plan Action by any governmental or other regulatory bodies.
3.3 Nonassignability
No incentive stock option shall be assignable or transferable other
than by will or by the laws of descent and distribution and during the life of
the grantee any incentive stock option granted to him under the Plan or under
any Plan Agreement shall be exercisable only by him and, to the extent permitted
by law and the rules applicable to incentive stock options, such options may be
exercised by his legal representatives. Unless the Committee expressly provides
otherwise in the applicable Plan Agreement, no other award or right granted to
any person under the Plan or under any Plan Agreement shall be assignable or
transferable other than by will or by the laws of descent and distribution, and
during the life of the grantee, all rights granted to him under the Plan or
under any Plan Agreement shall be exercisable only by him or his legal
representative.
3.4 Requirement of Notification of Election Under Section 83(b) of the Code
If any grantee shall, in connection with his acquisition of shares of
Common Stock under the Plan, make the election permitted under section 83(b) of
the Code (i.e., an election to include in his gross income in the year of
transfer the amounts specified in section 83(b)), he shall notify the Company of
such election within 10 days of filing notice of the election with the Internal
Revenue Service, in addition to any filing and notification required pursuant to
regulations issued under the authority of Code section 83(b).
3.5 Requirements of Notification Upon Disqualifying Disposition Under Section
421(b) of the Code
Each Plan Agreement with respect to an incentive stock option shall
require the grantee to notify the Company of any disposition of shares of Common
Stock issued pursuant to the exercise of such option under the circumstances
described in section 421(b) of the Code (relating to certain disqualifying
dispositions), within 10 days of such disposition.
3.6 Withholding Taxes
(a) Whenever cash is to be paid pursuant to an award under the Plan,
the Company shall be entitled to deduct therefrom an amount sufficient in its
opinion to satisfy all federal, state and other governmental tax withholding
requirements related to such payment.
(b) Whenever shares of Common Stock are to be delivered pursuant to an
award under the Plan, the Company shall be entitled to require as a condition of
delivery of the shares of Common Stock that the grantee remit to the Company an
amount sufficient in the opinion of the Company to satisfy all federal, state
and other governmental tax withholding requirements related thereto. If
permitted by the Plan Agreement or with the approval of the Committee in its
sole discretion, the grantee may satisfy the foregoing condition by electing to
have the Company withhold from delivery shares having a value equal to the
amount of tax to be withheld. Such shares shall be valued at their Fair Market
Value as of the date on which the amount of tax to be withheld is determined
(the "Tax Date"). Fractional share amounts shall be settled in cash. Such a
withholding election may be made with respect to all or any portion of the
shares to be delivered pursuant to an award.
3.7 Right of Discharge Reserved
Nothing in the Plan or in any Plan Agreement shall confer upon any
grantee the right to continue in the employ of the Company or affect any right
which the Company may have to terminate such employment.
D-8
<PAGE> 49
3.8 Nature of Payments
(a) Any and all grants of awards and issuances of shares of Common
Stock under the Plan shall be in consideration of services performed or to be
performed for the Company by the grantee.
(b) All such grants and issuances shall constitute a special incentive
payment to the grantee and shall not be taken into account in computing the
amount of salary or compensation of the grantee for the purpose of determining
any pension, retirement, death or other benefits under (i) any person,
retirement, profit-sharing, bonus, life insurance or other benefit plan of the
Company or its subsidiaries or (ii) any agreement between the Company or its
subsidiaries and the grantee.
3.9 Non-Uniform Determinations
The Committee's determinations under the Plan need not be uniform and
may be made by it selectively among persons who receive, or are eligible to
receive, awards under the Plan (whether or not such person are similarly
situated). Without limiting the generality of the foregoing, the Committee shall
be entitled, among other things, to make non-uniform and selective
determinations, and to enter into non-uniform and selective Plan Agreements, as
to (i) the persons to receive awards under the Plan, (ii) the terms and
provisions of awards under the Plan, and (iii) the treatment of leaves of
absence pursuant to Section 1.6(d).
3.10 Other Payments or Awards
Nothing contained in the Plan shall be deemed in any way to limit or
restrict the Company from making any award or payment to any person under any
other plan, arrangement or understanding, whether now existing or hereafter in
effect.
3.11 Section Headings
The section headings contained herein are for the purpose of
convenience only and are not intended to define or limit the contents of said
sections.
3.12 Effective Date and Term of Plan
(a) The Plan was adopted by the Executive Committee of the Board,
subject to approval by the Company's shareholders. All awards under the Plan
prior to such shareholder approval are subject in their entirety to such
approval. Until such approval is obtained, no option granted under this Plan may
be exercised, no shares of restricted stock may become unrestricted, and no
payment may be made pursuant to an award of performance shares.
(b) Unless sooner terminated by the Board, the provisions of the Plan
respecting the grant of incentive stock options shall terminate on the tenth
anniversary of the adoption of the Plan by the Board, and no incentive stock
option awards shall thereafter be made under the Plan. All such awards made
under the Plan prior to its termination shall remain in effect until such awards
have been satisfied or terminated in accordance with the terms and provisions of
the Plan and the applicable Plan Agreements.
D-9
<PAGE> 50
3.13 Gender and Number
Pronouns shall be deemed to include both the masculine and feminine
gender and words used in the singular shall be deemed to include both the
singular and plural, unless the context indicates otherwise.
3.14 Governing Law
All rights and obligations under the Plan shall be construed and
interpreted in accordance with the laws of the State of New York, without giving
effect to principles of conflict of laws.
D-10
<PAGE> 51
TIGERA GROUP, INC.
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Annual Meeting of Shareholders, November 19, 1996
The undersigned shareholder of TIGERA GROUP, INC., a Delaware
corporation (the "Company") hereby acknowledges receipt of the Notice and Proxy
Statement dated _______________, 1996 and appoints Donald T. Pascal, James S.
Harrington and Gregory C. Kowert, or any of them, voting singly in the absence
of the others, attorneys and proxies, with full power of substitution and
revocation, to vote, as designated on the reverse side, all shares of Common
Stock of the Company which the undersigned is entitled to vote at the Annual
Meeting of Shareholders of the company to be held at __________________________
______________________, New York, New York 10021 on November 19, 1996 at 2:30
P.M. (local time) or any adjournment thereof, in accordance with the following
instructions:
(Continued and to be signed on the reverse side)
FOLD AND DETACH HERE
<PAGE> 52
<TABLE>
<S> <C> <C>
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED Please mark /X/
SHAREHOLDER. IF NO DIRECTION IS MADE, THE PROXY WILL BE VOTED "FOR" NOMINEES IN PROPOSAL NO. 1 AND your votes as
"FOR" EACH OF PROPOSALS NOS. 1, 2 AND 3. indicated in
this example
1. PROPOSAL NO. 1-ELECTION OF DIRECTORS
FOR all nominees WITHHOLD Ramon D. Ardizzone, Duane A. Gawron Donald T. Pascal
(except as marked to AUTHORITY Clarke H. Bailey, James S. Harrington, John E. Pylak
the contrary) to vote for Herbert M. Friedman, Stephen P. Kelbley,
all nominees
/ / / / (INSTRUCTION: To withhold authority to vote for any individual nominee
write that nominee's name in the space provided below.)
----------------------------------------------------------------------
2. PROPOSAL NO. 2-AMEND THE CERTIFICATE OF INCORPORATION TO EFFECT A CHANGE OF NAME OF THE COMPANY TO
CONNECTIVITY TECHNOLOGIES INC. / / FOR / / AGAINST / / ABSTAIN
3. PROPOSAL NO. 3-AMEND THE CERTIFICATE OF INCORPORATION TO EFFECT A ONE-FOR-FOUR REVERSE SPLIT OF THE COMMON
STOCK / / FOR / / AGAINST / / ABSTAIN
4. PROPOSAL NO. 4-APPROVE THE ADOPTION OF THE TIGERA GROUP, INC. 1996 STOCK INCENTIVE PLAN
/ / FOR / / AGAINST / / ABSTAIN
In their discretion, the proxies are authorized
to vote upon such other business as may properly
come before the meeting PLEASE SIGN EXACTLY AS NAME
APPEARS HEREON.
Date: , 1996
---------------------------------
----------------------------------------------------
Signature
----------------------------------------------------
Signature if held jointly
When shares are held by joint tenants, both should
sign. When signing as attorney, executor,
administrator, trustee or guardian, please give
full title as such, if a corporation, please sign
in full corporate name by an authorized officer.
If a partnership, please sign in partnership name
by an authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD
PROMPTLY USING ENCLOSED ENVELOPE.
FOLD AND DETACH HERE
</TABLE>
