<PAGE> 1
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from
COMMISSION FILE NUMBER: 0-12113
TIGERA GROUP, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 94-2691724
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
667 Madison Avenue, New York, New York 10021
--------------------------------------------
(Address of principal executive offices)
(212) 644-8880
--------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes /X/ No / /
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date: 22,261,301 shares of Common Stock, par
value. $.01 per share, outstanding as of November 12, 1996.
Transitional small business disclosure Format (check one):
Yes / / No /X/
<PAGE> 2
TIGERA GROUP, INC.
INDEX
<TABLE>
<CAPTION>
Page No.
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1 Condensed Consolidated Balance Sheet (Unaudited)
as of September 30, 1996 . . . . . . . . . . . . . . . . . . 3
Condensed Consolidated Income Statements
(Unaudited) for the Three Months Ended
September 30, 1996 and 1995 . . . . . . . . . . . . . . . . . 4
Condensed Consolidated Income Statements
(Unaudited) for the Nine Months Ended
September 30, 1996 and 1995 . . . . . . . . . . . . . . . . . 5
Condensed Consolidated Statements of Cash
Flows (Unaudited) for the Nine Months
Ended September 30, 1996 and 1995 . . . . . . . . . . . . . . 6
Notes to Condensed Consolidated Financial
Statements (Unaudited) . . . . . .. . . . . . . . . . . . . . 7
Pro Forma Condensed Consolidated Income
Statements (Unaudited) for the Three Months
Ended September 30, 1996 and 1995 . . . . . . . . . . . . . . 11
Pro Forma Condensed Consolidated Income
Statements (Unaudited) for the Nine Months
Ended September 30,1996 and 1995 . . . . . . . . . . . . . . . 12
Notes to Pro Forma Condensed Consolidated
Income Statements (Unaudited) . . . . . . . . . . . . . . . . 13
Item 2 Management's Discussion and Analysis or Plan
of Operations . . . . . . . . . . . . . . . . . . . . . . . . 15
PART II - OTHER INFORMATION
Item 1 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . .II-I
Item 6 Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . II-I
</TABLE>
<PAGE> 3
TIGERA GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
September 30, 1996
ASSETS
<TABLE>
<S> <C>
CURRENT ASSETS
Cash and cash equivalents $ 276,000
United States Treasury Bills 1,492,000
Restricted cash 1,000,000
Accounts receivable 15,996,000
Inventories, (primarily finished goods) 10,764,000
Prepaid expenses and other assets 196,000
---------------
Total current assets 29,724,000
Property, plant and equipment 7,409,000
Unallocated purchase price, including deferred tax asset 25,245,000
Other assets 354,000
---------------
Total assets $ 62,732,000
===============
LIABILITIES
CURRENT LIABILITIES
Current portion of long term debt $ 2,557,000
Trade accounts payable 10,732,000
Accrued liabilities 2,398,000
---------------
Total current liabilities 15,687,000
Long term debt 34,193,000
---------------
Total liabilities 49,880,000
---------------
STOCKHOLDERS' EQUITY
Preferred stock - par value $.01 per share;
authorized 10,000,000 shares, none issued
Series B. Common Stock - par value $.01 per share;
authorized 750,000 shares, none issued
Common Stock - par value $.01; authorized 40,000,000 shares, outstanding
22,261,301 shares, net of 826,405
shares held in treasury 223,000
Additional paid-in capital 109,337,000
Accumulated deficit (96,708,000)
---------------
Total stockholders' equity 12,852,000
---------------
Total liabilities' and stockholders' equity $ 62,732,000
===============
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE> 4
TIGERA GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED INCOME STATEMENT
(UNAUDITED)
For the Three Months Ended September 30, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Net sales $ 24,276,000 $
Cost of goods sold 17,695,000
------------ ------------
Gross profit 6,581,000 0
Selling, general and administrative expenses 5,077,000 182,000
------------ ------------
Operating income (loss) 1,504,000 (182,000)
Other income (expense):
Interest income 37,000 175,000
Interest expense (829,000)
Other 69,000
------------ ------------
Net income (loss) before income taxes
and minority interest 781,000 (7,000)
Provision for income taxes 322,000
------------ ------------
Net income (loss) before minority interest 459,000 (7,000)
Minority interest in subsidiary (93,000)
------------ ------------
Net income (loss) $ 366,000 $ (7,000)
============ ============
Earnings (Loss) per Share $ 0.02 $ 0.00
============ ============
Weighted Average Number of Common
Shares and Common Share Equivalents:
Primary 24,271,463 21,286,301
Fully Diluted 24,271,463 21,286,301
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE> 5
TIGERA GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED INCOME STATEMENT
(UNAUDITED)
For the Nine Months Ended September 30, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Net sales $ 32,224,000 $
Cost of goods sold 23,779,000
------------- -----------
Gross profit 8,445,000 0
Selling, general and administrative expenses 7,156,000 635,000
------------- -----------
Operating income (loss) 1,289,000 (635,000)
Other income (expense):
Interest income 312,000 529,000
Interest expense (1,110,000)
Other 68,000
------------- -----------
Net income (loss) before income taxes
and minority interest 559,000 (106,000)
Provision for income taxes 252,000
------------- -----------
Net income (loss) before minority interest 307,000 (106,000)
Minority interest in subsidiary (116,000)
------------- -----------
Net income (loss) $ 191,000 $ (106,000)
============= ===========
Earnings (Loss) per Share $ 0.01 ($ 0.01)
============= ===========
Weighted Average Number of Common
Shares and Common Share Equivalents:
Primary 24,065,009 21,286,301
Fully Diluted 24,065,009 21,286,301
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE> 6
TIGERA GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Nine Months Ended September 30, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
---- -----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 191,000 $ (106,000)
Adjustments to reconcile net income (loss) to net
cash from (used in) operating activities:
Depreciation and amortization 558,000
Minority interest 116,000
Deferred taxes 125,000
Changes in operating assets and liabilities:
Decrease (increase) in:
Accounts receivable 345,000
Inventories 704,000
Prepaid and other current assets 138,000
Deposits and other assets (17,000) 12,000
Increase (decrease) in:
Accounts payable (1,592,000)
Accrued liabilites (660,000) (63,000)
------------- ---------
Net cash from (used in) operations (92,000) (157,000)
------------- ---------
Cash flows from investing activities:
Purchases of property, plant, and equipment, net (897,000)
Sales of United States Treasury Bills 9,368,000 206,000
Purchase of 85% of the common stock of CPI,
net of cash acquired of $756,000 (7,234,000)
------------- ---------
Net cash provided by investing activities 1,237,000 206,000
------------- ---------
Cash flows from financing activities:
Repayment of debt (1,650,000)
Exercise of stock options and warrants 605,000
------------- ---------
Net cash used in financing activities (1,045,000)
------------- ---------
Net increase in cash 100,000 49,000
Cash and cash equivalents, beginning of period 176,000 214,000
------------- ---------
Cash and cash equivalents, end of period $ 276,000 $ 263,000
============= =========
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements
<PAGE> 7
TIGERA GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1 - Condensed Consolidated Financial Statements:
The Condensed Consolidated Financial Statements included
herein have been prepared by Tigera Group, Inc. ("Tigera"), without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations, although
the Company believes the disclosures which are made are adequate to make the
information presented not misleading. Further, the Condensed Consolidated
Financial Statements have been prepared in accordance with generally accepted
accounting principles for interim financial information, the instructions to
Form 10-QSB and Regulation S-B (including Item 310(b) thereof) and reflect, in
the opinion of management, all adjustments necessary to present fairly the
financial position and results of operations as of and for the periods
indicated.
It is suggested that these Condensed Consolidated Financial
Statements be read in conjunction with the Consolidated Financial Statements and
the Notes thereto for the year ended December 31, 1995, included in the Tigera
Group, Inc. Form 10-KSB Annual Report to the Securities and Exchange Commission,
and with the Financial Statements of Connectivity Products Incorporated and the
Notes thereto for the year ended December 31, 1995, included in Amendment No. 1
to the Tigera Group, Inc. Current Report on Form 8-K dated May 31, 1996.
Note 2 - Nature of Operations and Basis of Presentation:
The 1996 condensed consolidated balance sheet as of September
30, 1996, includes the accounts of Tigera, its wholly-owned subsidiary, San
Carlos Insurance Ltd., and its 85% owned subsidiary, Connectivity Products
Incorporated (CPI) (collectively referred to as the "Company"). The 1996
condensed consolidated statement of operations includes the results of
operations of CPI subsequent to May 31, 1996. All significant intercompany
accounts and transactions have been eliminated in consolidation. Certain prior
period amounts have been reclassified to conform to current period presentation.
The primary business of the Company is the distribution and
manufacture of wire and cable products. The two major markets served by the
company are industrial (commercial and residential security, factory automation,
traffic and transit signal control and audio systems) and communications
(networking, voice and data).
Note 3 - Acquisition of Connectivity Products Incorporated:
On May 31,1996, the Company acquired for $7.99 million 85% of
the outstanding common stock of CPI. Concurrent with the acquisition CPI
redeemed 1,274 shares of its common stock for approximately $7.62 million in
cash, an aggregate of $6 million in subordinated notes, an aggregate of $3
million in subordinated contingent notes, and forgiveness of $2 million of
stockholder notes (see the Company's Current Report on Form 8-K dated May
31,1996, as amended by Form 8-K/A, for a further explanation of this
transaction).
This transaction has been accounted for as a purchase, and the
assets and liabilities
<PAGE> 8
of CPI are stated at estimated fair value as of the May 31, 1996, acquisition
date. The revaluing of the assets and liabilities resulted in a write-up of net
property, plant and equipment and unallocated purchase price of approximately
$25,361,000. The unallocated purchase price consists of net operating loss tax
carryforwards which will be benefitted, identifiable intangible assets and
goodwill. Goodwill will be amortized over 25 years and other intangible assets
(principally refinancing costs and amounts related to non compete agreements)
will be amortized over approximately 5 years. The purchase price allocation is
an estimate and will be finalized in connection with the preparation of the
Company's consolidated financial statements for the year ended December 31,
1996.
Included in Item 1 of this Form 10-QSB are pro forma condensed
consolidated results of operations as if the acquisition had occurred on January
1, 1995.
Note 4 - Debt
Debt at September 30, 1996 (all of which was assumed as part of the Acquisition)
consists of the following:
Revolving credit (see below)
$12,150,000
<TABLE>
<S> <C>
Term loan, due in quarterly installments of $697,500 to $930,000
through May 31, 2002 18,600,000
Subordinated note in connection with the stock redemption, interest at 10
percent payable quarterly, due May 31, 2003 6,000,000
-----------
36,750,000
Less current portion 2,557,000
-----------
$34,193,000
===========
</TABLE>
In connection with the Acquisition, CPI refinanced its bank
borrowings with a revolving credit facility, a term loan and a line of credit
("Bank Borrowings"). Interest on the Bank Borrowings is payable at various
intervals and accrues at the applicable LIBOR rate plus 2.75 percent. CPI may
elect to have all or a portion of the bank borrowings accrue interest at the
lender's base rate plus 1 percent. Under certain conditions, the 1 percent add
on will be reduced to zero and the 2.75 percent add on will be reduced to 1.75
percent. In addition CPI must pay a fee equal to .5 percent (to be reduced to
.375 percent in future years under certain conditions) of the average unused
balance under the revolving credit agreement. The Bank Borrowings are
collateralized by essentially all of the assets of CPI and are guaranteed by
Tigera to the extent of its holdings of CPI stock.
The revolving credit facility matures on May 31, 2002, and
allows for maximum borrowings of $20 million. Amounts advanced under this
facility are based upon percentages of eligible accounts receivable and
inventory. The line of credit is for $7 million and is to be used for qualified
capital expenditures and acquisitions. Advances under the line of credit mature
on May 31, 1998, at which time (subject to certain conditions) advances may be
converted to a term loan. No amounts were outstanding under the line of credit
at September 30, 1996.
<PAGE> 9
The debt matures as follows:
<TABLE>
<CAPTION>
Year ended September 30:
<S> <C>
1997 $ 2,557,000
1998 2,790,000
1999 3,023,000
2000 3,720,000
2001 3,720,000
Thereafter 20,940,000
-----------
$36,750,000
===========
</TABLE>
The agreements governing the Bank Borrowings, as amended as of
September 30, 1996, contain various financial covenants related, among other
things, to maintenance of minimum consolidated net worth, maintenance of a
maximum ratio of senior debt (and overall debt) to EBITDA (as defined) and
maintenance of minimum interest and fixed charges (as defined) coverage ratios.
Note 5 - Earnings per Share:
Earnings per share is based on the weighted average number of
common shares and common share equivalents during each period.
Note 6 - Income Taxes:
The Company files a consolidated federal income tax return.
The Company recognizes certain expenses for income tax purposes in years
different from those in which they are provided for in financial reporting.
As of December 31, 1995, the Company had net operating loss
carryforwards of approximately $88,000,000, which are available to offset future
taxable income expiring from 1996 through 2010. The Company also has available
investment and research and development credits of approximately $2,000,000
expiring in 1996 through 2000. The ability of the Company to utilize these
carryforwards in future years may be limited, or even eliminated.
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.
<PAGE> 10
As of September 30, 1996, there is a deferred tax asset
related to the net operating loss carryforwards of approximately $30,000,000 and
investment and research and development credit carryforwards totaling
approximately $1,000,000. A portion of these amounts are included in the
unallocated purchase price. The amounts not recorded as an asset in connection
with the CPI acquisition will represent a valuation reserve.
Note 7 - Derivative Lawsuit:
On December 3, 1991, Civil Action No. 12374, Smith vs.
Gilinski, et.al., was filed in the Court of Chancery of the State of Delaware
(the "Court") by a stockholder as a derivative action against eleven former
officers and directors of the Registrant and the Registrant as a nominal
defendant. On July 30, 1996, the Court approved a settlement agreement pursuant
to which, the Registrant's directors' and officers' outside insurance carrier
paid to the Registrant $140,000 (the "Settlement Fund"). Plaintiff was awarded
$55,000 in attorneys' fees and expenses, which was paid out of the Settlement
Fund. The resulting net proceeds to the Registrant from the Settlement Fund is
$85,000. Since the litigation was filed, the Registrant has charged
approximately $185,000 to operations for legal fees and expenses. For further
information regarding this action, please see item 3 of the Registrant's Annual
Reports on Form 10-KSB for the years ended December 31, 1995 and December 31,
1994.
<PAGE> 11
TIGERA GROUP, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT
(UNAUDITED)
For the Three Months Ended September 30, 1996 and 1995
<TABLE>
<CAPTION>
(Actual)
1996 1995
-------- ----
<S> <C> <C>
Net sales $ 24,276,000 $23,759,000
Cost of goods sold 17,695,000 17,445,000
------------- -----------
Gross profit 6,581,000 6,314,000
Selling, general and administrative expenses 5,077,000 4,882,000
------------- -----------
Operating income 1,504,000 1,432,000
Other income (expense):
Interest income 37,000 26,000
Interest expense (829,000) (728,000)
Other 69,000 13,000
------------- -----------
Income before income taxes and minority
interest 781,000 743,000
Provision for income taxes 322,000 336,000
------------- -----------
Income before minority interest 459,000 407,000
Minority interest in subsidiary (93,000) (80,000)
------------- -----------
Net Income $ 366,000 $ 327,000
============= ===========
Primary and Fully Diluted Net Earnings per Share $ 0.02 $ 0.02
============= ===========
Weighted Average Number of Common
Shares and Common Share Equivalents:
Primary 24,271,463 21,286,301
Fully Diluted 24,271,463 21,286,301
</TABLE>
See accompanying notes to Pro Forma Condensed Consolidated Income Statement
<PAGE> 12
TIGERA GROUP, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT
(UNAUDITED)
For the Nine Months Ended September 30, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Net sales $ 72,790,000 $ 66,488,000
Cost of goods sold 53,605,000 48,889,000
--------------- -------------
Gross profit 19,185,000 17,599,000
Selling, general and administrative expenses 15,770,000 13,919,000
--------------- -------------
Operating income 3,415,000 3,680,000
Other income (expense):
Interest income 73,000 83,000
Interest expense (2,317,000) (2,197,000)
Other 63,000 13,000
--------------- -------------
Income before income taxes and
minority interest 1,234,000 1,579,000
Provision for income taxes 555,000 711,000
--------------- -------------
Income before minority interest 679,000 868,000
Minority interest in subsidiary (198,000) (207,000)
--------------- -------------
Net Income $ 481,000 $ 661,000
=============== =============
Primary and Fully Diluted Net Earnings per Share $ 0.02 $ 0.03
=============== =============
Weighted Average Number of Common
Shares and Common Share Equivalents:
Primary 24,065,009 21,286,301
Fully Diluted 24,065,009 21,286,301
</TABLE>
See accompanying notes to Pro Forma Condensed Consolidated Income Statement
<PAGE> 13
TIGERA GROUP, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENTS
(UNAUDITED)
1. PRO FORMA FINANCIAL STATEMENTS
The unaudited pro forma consolidated statements of operations for the
three and nine months ended September 30, 1996 and 1995 give effect to
the acquisition ("Acquisition") of 85% of the capital stock of
Connectivity Products Incorporated ("CPI") by Tigera Group, Inc.
("Tigera") and the concurrent redemption by CPI of 1,247 shares of its
common stock. The Acquisition, which is being accounted for as a
purchase, as well as the October 3, 1995 merger (see Note 1 to the
audited 1995 financial statements of CPI included in Amendment No. 1 in
the Tigera Group, Inc. Form 8-K dated May 31, 1996), are treated as if
they had occurred on January 1, 1995. It was assumed that the pro forma
redemption price at January 1, 1995 was approximately $3.2 million less
than the actual redemption price on May 31, 1996, reflecting lower
working capital.
The pro forma information is based on unaudited financial statements
after giving effect to adjustments related to the allocation of the
purchase price. Such adjustments are estimates and will differ from the
final amount allocated to the May 31, 1996 assets and liabilities. The
final purchase price allocation will be completed in connection with
the preparation of Tigera's 1996 financial statements.
The unaudited pro forma consolidated income statements include all
adjustments, consisting of normal recurring accruals, which Tigera
Group, Inc. considers necessary for a fair presentation of the results
of operations for the three and nine months ended September 30, 1996
and 1995.
The unaudited pro forma consolidated income statements may not be
indicative of the results that actually would have been achieved if the
transaction had occurred on the date assumed and do not project Tigera
Group, Inc.'s results of operations at any future period then ended.
2. EMPLOYMENT AGREEMENTS
CPI has entered into an employment agreement with each of James S.
Harrington, Duane A. Gawron, John E. Pylak and Kurt Cieszkowski which
employment agreement, as amended, in each case provides that they will
be employed for a period of three years from May 31, 1996, at an annual
base salary of $163,600 for the first twelve months and $175,000 per
year thereafter ("Base Salaries") 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-
<PAGE> 14
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.
Selling, general and administrative expense reflects actual
compensation paid to the four stockholders which exceeds the total Base
Salaries by $231,830 for the three months ended September 30, 1995 and
by $291,667 and $694,891 for the nine months ended September 30, 1996
and 1995, respectively. These amounts have not been reflected as a
decrease in expense on the pro forma statements of income.
<PAGE> 15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
SEPTEMBER 30, 1996
The primary business of the Tigera Group, Inc. (the "Company", "Tigera", or the
"Registrant"), formerly named Fortune Systems Corporation, is the distribution
and manufacture of wire and cable products. The two major markets served by the
Company are industrial (commercial and residential security, factory automation,
traffic and transit signal control and audio systems) and communications
(networking, voice and data).
Before acquiring 85% of the common stock of Connectivity Products Incorporated
("CPI") as of May 31, 1996, the Company's principal activity consisted of
seeking and evaluating candidates for acquisition. The Company now intends to
focus its acquisition activity on companies in the wire and cable business
according to established strategic and financial criteria. The Company's goals
are to grow (i) internally through branch openings, capacity expansions and
product line extensions and (ii) externally through complementary acquisitions.
On May 31, 1996, the Company acquired for $7.99 million, 85% of the outstanding
stock of CPI. Concurrent with the acquisition, CPI redeemed shares of its common
stock and incurred additional indebtedness, including refinancing of its
existing debt. The acquisition and related financing are more fully described in
Notes 3 and 4 in the "Notes to Condensed Consolidated Financial Statements"
included in Item 1 of this Quarterly Report on Form 10-QSB.
COMPARISON OF ACTUAL RESULTS
The financial statements filed herewith include the operations of CPI from June
1, 1996, onward. Most significant changes in Tigera's results of operations are
a result of the CPI acquisition. To enable a clearer understanding of the
combined operations, pro forma consolidated financial statements covering
operations of Tigera and CPI are included with this Quarterly Report on Form
10-QSB for the three months and nine months ended September 30, 1996, compared
to the like periods of 1995. These statements are prepared as if the companies
had been combined as of January 1, 1995, the beginning of the periods reported
on. A discussion of the pro forma results is also included in a separate section
in this Management's Discussion and Analysis or Plan of Operation.
Sales for the third quarter of 1996 of $24,276,000 and nine months ended
September 30, 1996, of $32,224,000 are due to CPI operations from date of
acquisition. In comparable 1995 periods, there were no sales.
Cost of goods sold for the third quarter of 1996 of $17,695,000 and nine months
ended September 30, 1996, of $23,779,000 are due to CPI operations from date of
acquisition. In comparable 1995 periods, there were not any cost of goods sold.
Selling, general and administrative expenses were $4,934,000 for the third
quarter of 1996 and $7,044,000 for the nine months ended September 30, 1996,
compared to $182,000 for the third quarter 1995 and $635,000 for the nine months
ended September 30, 1995. The increases are
<PAGE> 16
primarily due to CPI operations and other operating costs incurred in relation
to the acquisition. Also, in the second quarter of 1996, the Company expensed
$255,000 of one-time consulting fees related to acquisition reviews.
Interest income was $37,000 for the third quarter of 1996 and $312,000 for the
nine months ended September 30, 1996. This compares to $175,000 for the third
quarter 1995 and $529,000 for the nine months ended September 30, 1995. The
comparative decreases were primarily due to a decrease in the amount of Treasury
Bills held by the Company subsequent to the acquisition of CPI on May 31, 1996
and lower interest rates on the Company's United States Treasury Bills.
Interest expense, of $829,000 for the third quarter of 1996 and $1,110,000 for
the nine months ended September 30, 1996, relates to CPI interest expense from
the date of acquisition.
Income tax expense is provided on operating results at the statutory tax rates
estimated to be effective for federal and state income taxes for financial
reporting purposes for the year. The estimated effective rate is currently 45%,
reflecting goodwill amortization which is not deductible.
COMPARISON OF PRO FORMA RESULTS
Pro forma income statements included with this Form 10-QSB are prepared as if
the companies had been combined since January 1, 1995. All explanations in this
section comparing pro forma results are based on the pro forma financial
statements included with this Quarterly Report on Form 10-QSB.
Sales for the three months ended September 30, 1996, increased 2.2% to
$24,276,000 from $23,759,000 for the comparable year earlier period. For the
nine months ended September 30, 1996, sales increased 9.5% to $72,790,000 versus
$66,488,000 for the nine months ended September 30, 1995. In the current quarter
compared to last year, sales increased in manufacturing and decreased slightly
in distribution. Changes in distribution sales were mainly due to unit sales
volumes. Manufacturing unit sales increases exceeded dollar volume increases due
to lower copper prices. For the first nine months of 1996, both manufacturing
and distribution sales increased with manufacturing sales up at a more rapid
rate than distribution. Prices during the nine months of 1996 versus 1995 were
down in manufacturing due to lower copper prices and down slightly in
distribution.
Cost of goods sold for the three months ended September 30, 1996, was 72.9% of
sales or $17,695,000 versus 73.4% or $17,445,000 for the comparable prior year
period. Cost of goods sold was 73.6% of sales or $53,605,000 for the nine months
ended September 30 1996, compared to 73.5% or $48,889,000 for the nine months
ended September 30, 1995. The lower cost of goods sold percentage for the three
months ended September 30, 1996, compared to 1995 was primarily due to volume
increases and productivity improvements in the Company's Massachusetts
manufacturing operations and consistent margins in the distribution business.
For the nine month period, the small increase in the cost of goods sold
percentage was due to lower
<PAGE> 17
margins in the distribution business during the first six months of 1996, which
were mostly offset by improvements at the Company's Massachusetts manufacturing
operations.
Selling and administrative expenses decreased as a percentage of sales to 20.9%
or $5,077,000 for the three months ended September 30, 1996, compared to 20.5%
of sales or $4,882,000 for the year earlier period. For the nine months ended
September 30, 1996, selling and administrative expenses were 21.7% of sales or
$15,770,000 versus 20.9% or $13,919,000 for the nine months ended September 30,
1995. Once the adjustments relating to certain employment agreements are made,
as described in Note 2 of "Notes to Pro Forma Condensed Consolidated Financial
Statements", selling and administrative expense as a percentage of sales
decreases to 19.6% in the three months ended September 30, 1995, and 21.3% and
19.9% for the nine months ended September 30, 1996 and 1995 respectively. The
higher percentage for the 1996 third quarter versus the adjusted 1995 third
quarter was primarily the result of start-up expenses for two new
sales/warehouse branches in distribution, additional salaries and expenses for
added infrastructure, and costs to further build the finance department. The
higher percentage for the nine months ended September 30, 1996, versus 1995 was
primarily due to additional salaries and expenses for added infrastructure to
support increased sales and additional costs indirectly related to the CPI
acquisition. Additionally, in the 1996 second quarter, the company expensed
$255,000 of one-time consulting fees related to acquisition reviews.
Interest income for the three months ended September 30, 1996, was $37,000
compared to $26,000 for the third quarter of 1995. For the nine months ended
September 30, 1996, interest income amounted to $73,000 versus $83,000 for the
comparable 1995 period. Differences in earnings were due to average investment
balances and rates on the Company's United States Treasury Bills.
Interest expense for the third quarter of 1996 was $829,000 versus $728,000 for
the third quarter of 1995. For the nine months ended September 30, 1996,
interest expense was $2,330,000 versus $2,197,000 for the same 1995 period.
Differences were primarily due to working capital requirements.
Income tax expense is provided on operating results at the statutory tax rates
estimated to be effective for federal and state income taxes for financial
reporting purposes for the year. The estimated effective rate is currently 45%,
reflecting goodwill amortization which is not deductible.
FINANCIAL CONDITION AND LIQUIDITY
The Company's principal sources of cash are results of operations and existing
credit arrangements. During the nine months ended September 30, 1996, cash used
in operations was $92,000 compared to $157,000 used for operations in the first
nine months of 1995. The net cash used in 1996 included planned reductions in
inventory and cash used for reductions in accounts payable of $1,592,000 and
accrued liabilities of $660,000. The Company's working capital at September 30
1996, was $14,027,000, including cash and cash equivalents and short-term
investments of $ 2,768,000.
<PAGE> 18
CPI has a senior credit facility providing for borrowings up to $45,000,000
subject to a borrowing base limitation. The credit facility consists of a
revolver, a line of credit and a term loan and is more fully described in "Note
4 - Debt" to the financial statements included in the Quarterly Report on Form
10-QSB. At September 30, 1996, $30,750,000 was outstanding against these
facilities which is secured by CPI's assets as well as the Company's stock in
CPI.
The Company believes that funds generated from operations along with existing
credit arrangements will be sufficient to support the short-term and long-term
liquidity requirements for operations. Acquisitions are intended to be financed
from operating cash flows, existing credit arrangements and possibly by
additional equity which may be raised for acquisitions.
INCOME TAX MATTERS
The Company has available approximately $88,000,000 of U.S. net operating loss
carryforwards ("NOLs") as of December 31, 1995, available to offset future U.S.
taxable income generated by the Company and its subsidiaries with which it files
a federal consolidated return (the "Consolidated Group"). The NOLs are described
in "Note 6 - Income Taxes" to the Condensed Consolidated Financial Statements.
If the NOLs are available (see "Note 6 - Income Taxes" to the Condensed
Consolidated Financial Statements), it is expected that the actual cash outlay
by the Consolidated Group for the next several years will be limited to U.S.
alternative minimum tax along with state income taxes and foreign taxes, if any.
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.
A valuation reserve for the NOLs not benefitted will result in a reduction of
the deferred tax asset of the Company. At this time, the reserve is not
finalized and benefitted NOLs are included in the asset "Unallocated Purchase
Price." The valuation reserve will be finalized during preparation of the
Company's financial statements for the year ended December 31, 1996.
<PAGE> 19
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On December 3, 1991, Civil Action No. 12374, Smith vs. Gilinski, et
al., was filed in the Court of Chancery of the State of Delaware (the "Court")
by a stockholder as a derivative action against eleven former officers and
directors of the Registrant as a nominal defendant. On July 30, 1996, the Court
approved a settlement agreement pursuant to which, the Registrant's directors'
and officers' outside insurance carrier will pay to the Registrant $140,000 (the
"Settlement Fund"). Plaintiff was awarded $55,000 in attorneys' fees and
expenses, which was paid out of the Settlement Fund. The resulting net proceeds
to the Registrant from the Settlement Fund is $85,000. Since the litigation was
filed, the Registrant has charged approximately $185,000 to operations for legal
fees and expenses. For further information regarding this action, please see
Item 3 of the Registrant's Annual Reports on form 10-KSB for the years ended
December 31, 1995, and December 31, 1994.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit No. Description of Document
10.1 First Amendment, dated as of August 26, 1996, to Credit
Agreement dated as of May 31, 1996, (the "Credit Agreement"),
by and among NBD Bank ("NBD") and The First National Bank of
Boston ("FNBB"), each individually and as Co-Agent, and
Connectivity Products Incorporated ("CPI").
10.2 Second Amendment, dated as of September 30, 1996, to the
Credit Agreement, by and among NBD, FNBB, each individually
and as Co-Agent, Fleet Bank, N.A.
and CPI.
10.3 Agreement, dated as of September 27, 1996, by and among James
S. Harrington, Duane A. Gawron, John E. Pylak, Kurt
Cieszkowski and CPI.
10.4 Form of Employee Stock Option Agreement pursuant to the
Company's 1996 Stock Incentive Plan.
11 Computation of Earnings Per Share
27 Financial Data Schedule
(b) Reports on Form 8-K:
On June 14, 1996, the Registrant filed a Current Report on Form 8-K
(the "Form 8-K") relating to (i) the purchase by the Registrant of 85% of the
capital stock of Connectivity
<PAGE> 20
Products Incorporated, a Delaware corporation (the "CPI Transaction"), a
privately held company in the wire and cable distribution, manufacturing and
assembly business, 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 and (ii) the
dismissal of BDO Seidman, LLP as the Registrant's independent accountant and the
appointment of Coopers & Lybrand LLP as the Registrant's independent accountant.
On August 14, 1996, the Registrant filed an amendment to the Form 8-K on Form
8-K/A, inter alia, providing the financial statements and pro forma financial
information required by Item 7 of Form 8-K and further clarifying, correcting
and restating the description of the CPI Transaction.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the Registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TIGERA GROUP, INC.
Date: November 13, 1996 By: /s/ James S. Harrington
------------------------
James S. Harrington
President and Chief Executive Officer
(as a duly authorized officer of the
Registrant)
By: /s/ Gregory C. Kowert
-------------------------
Gregory C. Kowert
Senior Vice President, Chief Financial
Officer and Secretary (as the principal
financial officer of the Registrant)
<PAGE> 21
EXHIBIT INDEX
Exhibit No. Description of Document
10.1 First Amendment, dated as of August 26, 1996, to Credit
Agreement dated as of May 31, 1996, (the "Credit Agreement"),
by and among NBD Bank ("NBD") and The First National Bank of
Boston ("FNBB"), each individually and as Co-Agent, and
Connectivity Products Incorporated ("CPI").
10.2 Second Amendment, dated as of September 30, 1996, to the
Credit Agreement, by and among NBD, FNBB, each individually
and as Co-Agent, Fleet Bank, N.A.
and CPI.
10.3 Agreement, dated as of September 27, 1996, by and among James
S. Harrington, Duane A. Gawron, John E. Pylak, Kurt
Cieszkowski and CPI.
10.4 Form of Employee Stock Option Agreement pursuant to the
Company's 1996 Stock Incentive Plan.
11 Computation of Earnings Per Share
27 Financial Data Schedule
<PAGE> 1
Exhibit 10.1
CONNECTIVITY PRODUCTS INCORPORATED
FIRST AMENDMENT
TO
AMENDED AND RESTATED
REVOLVING CREDIT AND TERM LOAN AGREEMENT
This FIRST AMENDMENT (this "Amendment"), dated as of August 26, 1996, is
among CONNECTIVITY PRODUCTS INCORPORATED, a Delaware corporation (the
"Borrower"), NBD BANK as Administrative Agent (the "Administrative Agent"), THE
FIRST NATIONAL BANK OF BOSTON as Documentation Agent (the "Documentation Agent",
and together with the Administrative Agent, the "Co-Agents") for the lending
institutions (the "Banks") listed on Schedule 1 to the Credit Agreement (as
hereinafter defined) and the Banks.
WHEREAS, the Borrower, the Banks and the Co-Agents are parties to that
certain Amended and Restated Revolving Credit and Term Loan Agreement, dated as
of May 31, 1996 (the "Credit Agreement"), pursuant to which the Banks, upon
certain terms and conditions, have made loans to and may issue letters of credit
for the benefit of the Borrower; and
WHEREAS, the Borrower had requested that the Banks agree, and the Banks
have agreed, on the terms and subject to the conditions set forth herein, to
make certain changes to the Credit Agreement;
NOW, THEREFORE, the parties hereto hereby agree as follows:
SECTION 1. DEFINED TERMS. Capitalized terms which are used herein without
definition and which are defined in the Credit Agreement shall have the same
meanings herein as in the Credit Agreement.
SECTION 2. AMENDMENT OF CREDIT AGREEMENT. Section 27 of the Credit
Agreement is hereby amended by deleting the second sentence of such Section 27
and restating it in its entirety as follows:
Notwithstanding the foregoing, the principal amount of the Loans may not
be decreased (other than as permitted by the terms of this Agreement), the
maturity of or any scheduled principal payment date or Interest Payment
Date or date for payment of any Reimbursement Obligation may not be
extended, and the rate of interest on the Notes (other than interest
accruing pursuant to Section 6.11 following the effective date of any
waiver by the Majority Banks of the Default or Event of Default relating
thereto), the amount of the Commitments of the Banks, and the amount of
commitment fee or Letter of Credit Fees hereunder may not be changed
without the written consent of the Borrower and the written consent of
each Bank affected thereby; the definition of Majority Banks may not be
amended, and none of the Guaranties nor all or substantially all of the
assets of the Borrower or any of its Subsidiaries may be released, without
the written consent of all of the Banks; the
<PAGE> 2
-2-
amount of the Agents' fee and Section 16 may not be amended without the
written consent of the Administrative Agent; and any Letter of Credit Fees
payable for the Issuing Bank's account may not be amended without the
written consent of the Issuing Bank.
SECTION 3. CONDITIONS TO EFFECTIVENESS. The effectiveness of this
Amendment shall be subject to receipt by the Administrative Agent of this
Amendment executed by each of the Borrower, the Banks and the Co-Agents.
SECTION 4. AFFIRMATION AND ACKNOWLEDGMENT OF THE BORROWER. The Borrower
hereby ratifies and confirms all of its Obligations to the Banks and the
Co-Agents, including, without limitation the Loans, and the Borrower hereby
affirms its absolute and unconditional promise to pay to the Banks the Loans and
all other amounts due under the Credit Agreement as amended hereby.
SECTION 5. REPRESENTATIONS AND WARRANTIES. The Borrower hereby represents
and warrants to the Co-Agents and the Banks as follows:
(a) Representation and Warranties in the Credit Agreement. The
representations and warranties of the Borrower contained in the Credit
Agreement were true and correct in all material respects as of the date
when made and continue to be true and correct in all material respects on
the date hereof, except to the extent of changes resulting from
transactions or events contemplated by the Credit Agreement and the other
Loan Documents and changes occurring in the ordinary course of business
that singly or in the aggregate are not materially adverse to the
Borrower, or to the extent that such representations and warranties relate
expressly to an earlier date.
(b) Authority, Etc. The execution and delivery by the Borrower of
this Amendment and the performance by the Borrower of all of its
agreements and obligations under the Credit Agreement as amended hereby
are within the corporate authority of the Borrower and have been duly
authorized by all necessary corporate action on the part of the Borrower.
(c) Enforceability of Obligations. This Amendment and the Credit
Agreement as amended hereby constitute the legal, valid and binding
obligations of the Borrower, enforceable against the Borrower in
accordance with their terms, except as enforceability is limited by
bankruptcy, insolvency, reorganization, moratorium or other laws relating
to or affecting generally the enforcement of, creditors' rights and except
to the extent that availability of the remedy of specific performance or
injunctive relief is subject to the discretion of the court before which
any proceeding therefor may be brought.
(d) No Default. No Default or Event of Default has occurred
and is continuing, and no Default or Event of Default will exist after
execution and delivery of this Amendment.
<PAGE> 3
-3-
SECTION 6. NO OTHER AMENDMENTS OR WAIVERS. Except as expressly provided in
this Amendment, all of the terms and conditions of the Credit Agreement and the
other Loan Documents remain in full force and effect.
SECTION 7. EXPENSES. Pursuant to Section 17 of the Credit Agreement, all
costs and expenses incurred or sustained by the Co-Agents in connection with
this Amendment, including the fees and disbursements of legal counsel for the
Co-Agents in producing, reproducing and negotiating the Amendment, will be for
the account of the Borrower whether or not the transactions contemplated by this
Amendment are consummated.
SECTION 8. EXECUTION IN COUNTERPARTS. This Amendment may be executed in
any number of counterparts, each of which shall be deemed an original, but which
together shall constitute one instrument.
SECTION 9. MISCELLANEOUS. THIS AMENDMENT SHALL BE DEEMED TO BE A CONTRACT
UNDER THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND SHALL FOR ALL PURPOSES
BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE COMMONWEALTH OF
MASSACHUSETTS (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). The
captions in this Amendment are for convenience of reference only and shall not
define or limit the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have executed this First Amendment
as a document under seal as of the date first above written.
CONNECTIVITY PRODUCTS
INCORPORATED
By: /s/ Gregory C. Kowert
-----------------------------------------
Name: Gregory C. Kowert
Title: Senior Vice President, Finance
and Chief Financial Officer
NBD BANK, individually and as
Administrative Agent
By: /s/ Erik W. Bakker
-----------------------------------------
Erik W. Bakker, Vice President
THE FIRST NATIONAL BANK
OF BOSTON, individually
and as Documentation Agent
By: /s/ G. Christopher Miller
-----------------------------------------
G. Christopher Miller, Vice President
<PAGE> 1
Exhibit 10.2
CONNECTIVITY PRODUCTS INCORPORATED
SECOND AMENDMENT
to
AMENDED AND RESTATED
REVOLVING CREDIT AND TERM LOAN AGREEMENT
This SECOND AMENDMENT (this "Amendment"), dated as of September 30, 1996,
is among CONNECTIVITY PRODUCTS INCORPORATED, a Delaware corporation (the
"Borrower"), NBD BANK as Administrative Agent (the "Administrative Agent"), THE
FIRST NATIONAL BANK OF BOSTON as Documentation Agent (the "Documentation Agent",
and together with the Administrative Agent, the "Co-Agents") for the lending
institutions (the "Banks") listed on Schedule 1 to the Credit Agreement (as
hereinafter defined) and the Banks.
WHEREAS, the Borrower, the Banks and the Co-Agents are parties to that
certain Amended and Restated Revolving Credit and Term Loan Agreement, dated as
of May 31, 1996 (as amended by the First Amendment, dated as of August 26, 1996,
the "Credit Agreement"), pursuant to which the Banks, upon certain terms and
conditions, have made loans to and may issue letters of credit for the benefit
of the Borrower; and
WHEREAS, the Borrower had requested that the Banks agree, and the Banks
have agreed, on the terms and subject to the conditions set forth herein, to
make certain changes to the Credit Agreement;
NOW, THEREFORE, the parties hereto hereby agree as follows:
SECTION 1. DEFINED TERMS. Capitalized terms which are used herein without
definition and which are defined in the Credit Agreement shall have the same
meanings herein as in the Credit Agreement.
SECTION 2. AMENDMENT OF CREDIT AGREEMENT. Section 11.5 of the Credit
Agreement is hereby amended by adding the following new paragraph at the end of
such Section 11.5:
For the purposes of Sections 11.4 and 11.5 (i) the Reference Period
Ending on (a) September 30, 1996 shall be comprised of the two (2)
consecutive fiscal quarters ending on such date, (b) December 31, 1996
shall be comprised of the three (3) consecutive fiscal quarters ending on
such date, and (c) March 31, 1997 and each fiscal quarter end thereafter
shall be comprised of the four (4) consecutive fiscal quarters ending on
each such date, and (ii) with respect to the fiscal quarter ended June 30,
1996, (a) EBITDA shall be calculated for such fiscal quarter based on
Adjusted EBITDA for the first two (2) months of such fiscal quarter and
Consolidated EBITDA for the remaining one month of such fiscal quarter,
and (b) Consolidated Total Interest Expense shall be calculated for such
fiscal quarter based on the assumption that Indebtedness of the Borrower
and its Subsidiaries outstanding during the months of April and May, 1996
and the rate of interest with respect thereto were the same as the
Indebtedness of the Borrower and its
<PAGE> 2
-2-
Subsidiaries outstanding during the month of June, 1996 and the rate of
interest with respect thereto.
SECTION 3. CONDITIONS TO EFFECTIVENESS. The effectiveness of this
Amendment shall be subject to receipt by the Administrative Agent of this
Amendment executed by each of the Borrower, the Banks and the Co-Agents.
SECTION 4. AFFIRMATION AND ACKNOWLEDGMENT OF THE BORROWER. The Borrower
hereby ratifies and confirms all of its Obligations to the Banks and the
Co-Agents, including, without limitation the Loans, and the Borrower hereby
affirms its absolute and unconditional promise to pay to the Banks the Loans and
all other amounts due under the Credit Agreement as amended hereby.
SECTION 5. REPRESENTATIONS AND WARRANTIES. The Borrower hereby represents
and warrants to the Co-Agents and the Banks as follows:
(a) Representation and Warranties in the Credit Agreement. The
representations and warranties of the Borrower contained in the Credit
Agreement were true and correct in all material respects as of the date
when made and continue to be true and correct in all material respects on
the date hereof, except to the extent of changes resulting from
transactions or events contemplated by the Credit Agreement and the other
Loan Documents and changes occurring in the ordinary course of business
that singly or in the aggregate are not materially adverse to the
Borrower, or to the extent that such representations and warranties relate
expressly to an earlier date.
(b) Authority, Etc. The execution and delivery by the Borrower of
this Amendment and the performance by the Borrower of all of its
agreements and obligations under the Credit Agreement as amended hereby
are within the corporate authority of the Borrower and have been duly
authorized by all necessary corporate action on the part of the Borrower.
(c) Enforceability of Obligations. This Amendment and the Credit
Agreement as amended hereby constitute the legal, valid and binding
obligations of the Borrower, enforceable against the Borrower in
accordance with their terms, except as enforceability is limited by
bankruptcy, insolvency, reorganization, moratorium or other laws relating
to or affecting generally the enforcement of, creditors' rights and except
to the extent that availability of the remedy of specific performance or
injunctive relief is subject to the discretion of the court before which
any proceeding therefor may be brought.
(d) No Default. No Default or Event of Default has occurred
and is continuing, and no Default or Event of Default will exist after
execution and delivery of this Amendment.
SECTION 6. NO OTHER AMENDMENTS OR WAIVERS. Except as expressly provideD in
this Amendment, all of the terms and conditions of the Credit Agreement and the
other Loan Documents remain in full force and effect.
<PAGE> 3
-3-
SECTION 7. EXPENSES. Pursuant to Section 17 of the Credit Agreement, all
costs and expenses incurred or sustained by the Co-Agents in connection with
this Amendment, including the fees and disbursements of legal counsel for the
Co-Agents in producing, reproducing and negotiating the Amendment, will be for
the account of the Borrower whether or not the transactions contemplated by this
Amendment are consummated.
SECTION 8. EXECUTION IN COUNTERPARTS. This Amendment may be executed in
any number of counterparts, each of which shall be deemed an original, but which
together shall constitute one instrument.
SECTION 9. MISCELLANEOUS. THIS AMENDMENT SHALL BE DEEMED TO BE A CONTRACT
UNDER THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND SHALL FOR ALL PURPOSES
BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE COMMONWEALTH OF
MASSACHUSETTS (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). The
captions in this Amendment are for convenience of reference only and shall not
define or limit the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Second Amendment
as a document under seal as of the date first above written.
CONNECTIVITY PRODUCTS
INCORPORATED
By: /s/ Gregory C. Kowert
-----------------------------------------
Name: Gregory C. Kowert
Title: Senior Vice President, Finance
and Chief Financial Officer
NBD BANK, individually and as
Administrative Agent
By: /s/ Erik W. Bakker
-----------------------------------------
Erik W. Bakker, Vice President
THE FIRST NATIONAL BANK
OF BOSTON, individually
and as Documentation Agent
By: /s/ G. Christopher Miller
-----------------------------------------
G. Christopher Miller, Vice President
FLEET BANK, N.A.
By: /s/ Alexander Sade
-----------------------------------------
Name: Alexander Sade
Title: Senior Vice President
<PAGE> 1
Exhibit 10.3
AGREEMENT dated as of September 27, 1996 between James S.
Harrington, Duane A. Gawron, John E. Pylak, Kurt Cieszkowski (collectively, the
"Executive Officers") and CONNECTIVITY PRODUCTS INCORPORATED, a Delaware
corporation ("CPI").
W I T N E S S E T H:
WHEREAS, each of the Executive Officers is a party to an employment
agreement, dated as of May 17, 1996 (each, an "Employment Agreement"), with CPI
pursuant to which they are each entitled to receive a salary of $175,000 per
annum.
NOW THEREFORE, in consideration of the premises and of the mutual
covenants hereinafter set forth, the parties hereto hereby agree as follows:
1. Notwithstanding the terms of the Employment Agreements, each of
the Executive Officers hereby agrees to permanently and irrevocably forego
$11,461.52 of their salary due to them in September 1996 under the Employment
Agreements.
2. Except as otherwise provided herein, the terms of the Employment
Agreements shall remain in full force and effect.
3. This Agreement may be executed in any number of counterparts, and
each such counterpart hereof shall be deemed to be an original instrument, but
all such counterparts together shall constitute but one agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
/s/ James S. Harrington /s/ Duane A. Gawron
- ----------------------------------- -----------------------------------
James S. Harrington Duane A. Gawron
/s/ John E. Pylak /s/ Kurt Cieszkowski
- ----------------------------------- -----------------------------------
John E. Pylak Kurt Cieszkowski
CONNECTIVITY PRODUCTS INCORPORATED
By:/s/James S. Harrington
-----------------------------------------
Name: James S. Harrington
Title: President
<PAGE> 1
Exhibit 10.4
TIGERA GROUP, INC.
Agreement Relating to Nonqualified Stock Options
Pursuant to the 1996 Stock Incentive Plan
--------------------------
Option granted as of _____________ (hereinafter referred to as the
"Date of Grant"), by TIGERA GROUP, INC. (the "Corporation") to _________________
(the "Grantee"):
1. DEFINITIONS. The following terms, as used herein, shall have the
meanings set forth below:
(a) "Cause" shall mean by reason of any of the following: (1)
proven or admitted: (i) embezzlement, or (ii) material dishonest misuse of
Corporation funds or assets; (2) an admitted or proven act constituting a felony
or misdemeanor (other than minor offenses such as traffic violations) or
conviction for such act; (3) deliberate and unwarranted disclosure of
Corporation confidential information; (4) violation of any non-competition or
confidentiality covenants contained in any agreement between the Grantee and the
Corporation or any of its Subsidiaries; (5) continued conduct materially adverse
to the interests of the Corporation which does not cease within thirty (30) days
of written notice from an officer of the Corporation; (6) repeated material
failure by the Grantee, after written warning by an officer of the Corporation,
to perform the duties of his employment (including without limitation material
failure to follow or comply with the reasonable and lawful directives of an
officer of the Corporation); or (7) breach of any statutory or common law
fiduciary duty of loyalty to the Corporation which is not cured within thirty
(30) days of written notice from an officer of the Corporation.
(b) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(c) "Committee" shall mean the committee established by the
Board of Directors of the Corporation pursuant to the Plan to administer the
Plan.
(d) "Fair Market Value" shall have the meaning set forth in
the Plan.
(e) "Incentive Stock Option" shall mean an option that is
intended to qualify for special federal income tax treatment under Section 421
and 422 of the Code.
(f) "Nonqualified Stock Option" shall mean an option that is
not an Incentive Stock Option.
<PAGE> 2
(g) "Notice" shall have the meaning set forth in Section 4(c)
hereof.
(h) "Option" shall have the meaning set forth in Section 2
hereof.
(i) "Option Period" shall have the meaning set forth in
Section 4(a) hereof.
(j) "Option Price" shall have the meaning set forth in Section
3 hereof.
(k) "Plan" shall mean the Corporation's 1996 Stock Incentive
Plan.
(l) "Securities Act" shall mean the Securities Act of 1933, as
amended.
(m) "Shares" shall mean shares of the Common Stock, par value
$0.01 per share, of the Corporation.
(n) "Subsidiary" shall mean any direct or indirect
majority-owned subsidiary of the Corporation.
2. THE OPTION.
(a) The Corporation hereby grants to the Grantee, effective on
the Date of Grant, a stock option (the "Option") to purchase, on the terms and
conditions herein set forth, up to ________ of the Corporation's fully paid,
non-assessable Shares at the option exercise price set forth in Section 3 below.
(b) The Option is granted pursuant to the Plan, and is subject
in all respects to the approval of the Plan by the stockholders of the
Corporation. A copy of the Plan is delivered herewith by the Corporation and
receipt thereof is acknowledged by the Grantee. The Option and this Option
Agreement are subject in all respects to the terms and conditions of the Plan,
which terms and conditions are incorporated herein by reference and which the
Grantee is by acceptance of the Option deemed to accept. Notwithstanding
anything in this Option Agreement to the contrary, unless and until the Plan has
been approved by the stockholders of the Corporation the Option shall not be
exercisable and the Grantee shall have no rights hereunder.
(c) The Option is an Nonqualified Stock Option.
-2-
<PAGE> 3
(d) Notwithstanding anything to the contrary contained herein,
in the event Connectivity Products Incorporated, a Delaware corporation ("CPI"),
neither is on December 8, 1996, nor had at any time prior to December 8, 1996
been, a Subsidiary of the Corporation, then this Option (or any unexercisable
portion thereof) shall expire on such date and shall cease to be exercisable.
3. THE PURCHASE PRICE. The purchase price of the Shares shall be
$ _____ per share, the Fair Market Value in the Date of Grant (the "Option
Price").
4. EXERCISE OF OPTION.
(a) Except as otherwise provided in the Plan and this Option
Agreement, the Option is exercisable over a period of ten years from the Date of
Grant (the "Option Period") in accordance with the following schedule (the
"Vesting Schedule"):
PERCENT OF SHARES SUBJECT
DATE TO OPTION PURCHASABLE (THE
"VESTED PORTION")
From sixteen (16) months after the
Date of Grant to twenty-eight (28)
months after the Date of Grant. 20%
From twenty-eight (28) months after
the Date of Grant to forty (40)
months after the Date of Grant. 40%
From forty (40) months after the
Date of Grant to fifty-two (52)
months after the Date of Grant. 60%
From fifty-two (52) months after
the Date of Grant to sixty-four (64)
months after the Date of Grant. 80%
From sixty-four (64) months after
the Date of Grant to the expiration
of the Option. 100%
Except as otherwise provided herein, the Option may be exercised from time to
time during the Option Period as to the Vested Portion of this Option, or any
lesser amount thereof, as long as the Grantee performs services as an officer,
director, employee or consultant for the Corporation or any of its Subsidiaries.
Notwithstanding anything to the contrary contained herein, except as provided by
subsection 4(f), the Option may not be exercised, in whole or in part, prior to
July 8, 1999. If the Grantee's services to the Corporation or any Subsidiary are
terminated for
-3-
<PAGE> 4
any reason other than (i) the Grantee's death or disability, (ii) the Grantee's
termination for Cause or (iii) Grantee's resignation from his positions with the
Corporation, then this entire Option may be exercised, without regard to the
Vesting Schedule, during the period of ninety (90) days (unless the Committee,
in its discretion, shall specify a longer period) commencing on the later of (i)
the date of such termination or (ii) July 8, 1999, so long as the Option Period
has not expired. If the Grantee shall die or become disabled within the meaning
of Section 22(e)(3) of the Code while still performing such services for the
Corporation or any of its Subsidiaries, this entire Option shall be exercisable,
without regard to the Vesting Schedule, and may be exercised during the period
commencing on the later of (i) the date of the Grantee's death or the date he or
she first becomes disabled, as the case may be, and (ii) July 8, 1999, and
ending on the earlier of the first anniversary of such date and the expiration
of the Option Period, after which period this Option shall expire and shall
cease to be exercisable. In the event of the death of the Grantee, this Option
may be exercised by the person or persons entitled to do so under the Grantee's
will (a "legatee"), or, if the Grantee shall fail to make testamentary
disposition of this Option, or shall die intestate, by the Grantee's legal
representative (a "legal representative"). In the event that (i) the Grantee's
services to the Corporation or any Subsidiary are terminated for Cause or (ii)
the Grantee resigns from his positions with the Corporation (each, a "Cessation
Date"), then the Vested Portion of this Option may be exercised during the
period of ninety (90) days (unless the Committee, in its discretion, shall
specify a longer period) after the later of (i) the date such performance ceases
or (ii) July 8, 1999, so long as the Option Period has not expired.
Notwithstanding anything to the contrary contained herein, in the event that (i)
the Grantee's services to the Corporation or any Subsidiary are terminated by
the Company for any reason prior to July 8, 1996 and (ii) on the date of such
termination, CPI is or has at any time been a Subsidiary of the Corporation,
then such termination shall for purposes of this Option Agreement be deemed to
have occurred on July 8, 1996.
(b) If this Option shall extend to 100 or more Shares, then
this Option may not be exercised for less than 100 Shares at any one time, and
if this Option shall extend to less than 100 Shares, then this Option must be
exercised for all such Shares at one time.
(c) Not less than five days nor more than thirty days prior to
the date upon which all or any portion of the Option is to be exercised, the
person entitled to exercise the Option shall deliver to the Corporation written
notice in substantially the form attached as an Exhibit hereto (the "Notice") of
his election to exercise all or a part of the Option, which Notice shall specify
the date for the exercise of the Option and the number of Shares in respect of
which the Option is to be exercised. The date specified in the Notice shall be a
business day of the Corporation.
-4-
<PAGE> 5
(d) On the date specified in the Notice, the person entitled
to exercise the Option shall pay to the Corporation the Option Price of the
Shares in respect of which the Option is exercised and the amount of any
applicable Federal and/or state withholding tax or employment tax. The Option
Price shall be paid in full at the time of purchase, (i) in cash or by certified
check (ii) with shares of the Common Stock of the Corporation which have been
owned by the Grantee for at least six months prior to the exercise of the Option
or (iii) if and to the extent the Corporation may lawfully do so, by delivery of
a promissory note for same or all of that portion of the Option Price exceeding
the amount determined to be capital pursuant to Section 145 of the Delaware
General Corporation Law, the terms of which note shall be determined by the
Committee. The value of any shares of Common Stock delivered by the Grantee in
payment of the Option Price shall be the Fair Market Value of such shares. If
the Option is exercised in accordance with the provisions of the Plan and this
Option Agreement, the Corporation shall deliver to such person certificates
representing the number of Shares in respect of which the Option is being
exercised which Shares or other securities shall be registered in his or her
name.
(e) This Option is not exercisable after the expiration of ten
years from the Date of Grant.
(f) Notwithstanding the provisions of subsection 4(a), in the
event that at any time during the term hereof (but only if after CPI becomes a
subsidiary of the Corporation): (i) CPI sells or otherwise disposes of all or
substantially all of its assets, or (ii) there is a change in control of the
Corporation such that a majority of the outstanding voting capital stock of the
Corporation is owned by a person or entity or "group" (as defined in Section
13(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"))
that is not on the date hereof a holder of 5% or more of the outstanding shares
of the Corporation's common stock, or (iii) the Corporation is merged into or
consolidated with any other person (other than a direct or indirect subsidiary
of or corporation or other entity controlled by the Corporation) or any other
person (other than a direct or indirect subsidiary of or corporation or other
entity controlled by the Corporation) is merged into or consolidated with the
Corporation, or (iv) the Corporation sells or otherwise disposes of all or
substantially all of its assets, or (v) the Corporation is liquidated or
dissolved, then in any such event, the Option shall become immediately
exercisable at the election of the Grantee as to all or any part of the Shares
not theretofore issued and sold hereunder. The Corporation shall provide the
Grantee with at least 30 days' notice prior to the consummation of any of the
events referred to in the preceding sentence, during which period the Grantee
may so exercise the Option. If not so exercised, this Option shall expire and
terminate at the end of such 30-day period.
-5-
<PAGE> 6
5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF GRANTEE.
(a) The Grantee represents and warrants that he is acquiring
this Option and, in the event this Option is exercised, the Shares (unless the
Shares are subject to a then effective registration statement under the
Securities Act), for investment, for his or her own account and not with a view
to the distribution thereof, and that he or she has no present intention of
disposing of this Option or the Shares (unless the Shares are subject to a then
effective registration statement under the Securities Act) or any interest
therein or sharing ownership thereof with any other person or entity.
(b) The Grantee agrees that he or she will not offer, sell,
hypothecate, transfer or otherwise dispose of any of the Shares unless either:
(i) A registration statement covering the Shares which are to
be so offered has been filed with the Securities and Exchange
Commission (the "Commission") pursuant to the Securities Act and such
sale, transfer or other disposition is accompanied by a prospectus
relating to a registration statement which is in effect under the
Securities Act covering the Shares which are to be sold, transferred
or otherwise disposed of and meeting the requirements of Section 10
of the Securities Act; or
(ii) Counsel satisfactory to the Corporation renders a reasoned
opinion in writing and addressed to the Corporation, satisfactory in
form and substance to the Corporation and its counsel, that in the
opinion of such counsel such proposed sale, offer, transfer or other
disposition of the Shares is exempt from the provisions of Section 5
of the Securities Act in view of the circumstances of such proposed
offer, sale, transfer or other disposition.
(c) The Grantee acknowledges that (i) the Shares and this
Option constitute "securities" under the Securities Act and/or the Exchange Act,
and/or the Rules and Regulations promulgated under said acts; (ii) the Shares
may not be transferred until such Shares are subsequently registered under the
Securities Act or an exemption from such registration is available; and (iii)
the Corporation is not under any obligation with respect to the registration of
the Shares.
(d) The Grantee acknowledges and agrees that the certificate or
certificates representing the Shares shall have an appropriate legend referring
to the terms of this Option.
(e) The Grantee acknowledges and agrees that he or she, or his
or her legatee or legal representative, as the case may be and as defined above,
may be required to make an
-6-
<PAGE> 7
appropriate representation at the time of any exercise of this Option in form
and substance similar to the representations contained herein, relating to the
Shares then being purchased.
(f) The Grantee acknowledges that, in the event he ceases to
perform services for the Corporation or its Subsidiaries, his or her rights to
exercise this Option are restricted as set forth in Section 4(a) above.
6. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE CORPORATION.
(a) The Corporation represents and warrants that this Option
has been duly granted by the Committee, subject to approval of the Plan by the
stockholders of the Corporation.
(b) The Corporation represents and warrants that, upon the
approval of the Plan by the stockholders of the Corporation, the Shares will be
reserved for issuance upon the exercise of this Option.
(c) The Corporation represents and warrants that it is
currently eligible to file registration statements on Form S-3 and Form S-8
under the Securities Act.
7. SUCCESSORS AND ASSIGNS. This Option Agreement shall be binding
upon and shall inure to the benefit of any successor or assign of the
Corporation and, to the extent herein provided, shall be binding upon and inure
to the benefit of the Grantee's legatee or legal representative, as defined
above.
8. ADJUSTMENT OF OPTIONS.
(a) The number of Shares issuable upon exercise of this Option,
or the amount and kind of other securities issuable in addition thereto or in
lieu thereof upon the occurrence of the events specified in Section 1.5 of the
Plan, shall be determined and subject to adjustment, as the case may be, in
accordance with the procedures therein specified.
(b) Fractional shares resulting from any adjustment in options
pursuant to this Section may be settled in cash or otherwise as the Committee
shall determine. Notice of any adjustment in this Option shall be given by the
Corporation to the holder of this Option and such adjustment (whether or not
such notice is given) shall be effective and binding for all purposes of the
Plan.
9. EXERCISE AND TRANSFERABILITY OF OPTION. During the lifetime of
the Grantee, this Option is exercisable only by him or her and shall not be
assignable or transferable by him or her
-7-
<PAGE> 8
and no other person shall acquire any rights therein. If the Grantee, while
still employed by the Corporation or any of its Subsidiaries, shall die within
the Option Period, his or her legatee or legal representative shall have the
rights provided in Section 4(a) above.
10. GENERAL PROVISIONS. Nothing contained in this Option Agreement
shall confer upon the Grantee any right to continue in the employ of the
Corporation or shall in any way affect the right and power of the Corporation to
dismiss or otherwise terminate the employment of the Grantee at any time for any
reason with or without cause. This Option Agreement shall be governed and
construed in accordance with the laws of the State of New York applicable to
contracts entered into and to be performed wholly within such state.
If the foregoing is in accordance with the Grantee's understanding
and accepted and agreed by the Grantee, the Grantee may so confirm by signing
and returning the duplicate of this Option Agreement provided for that purpose.
TIGERA GROUP, INC.
By_______________________________________
Name:
Title:
The foregoing is in accordance with my understanding and is hereby confirmed and
agreed to as of the Date of Grant.
__________________________________________
Name:
-8-
<PAGE> 9
EXHIBIT
NOTICE OF EXERCISE
DATE
The undersigned hereby gives notice to Tigera Group, Inc., a Delaware
corporation (the "Corporation"), of his intention to exercise his right to
purchase the number of Shares set forth below of the Common Stock of the
Corporation, at the exercise price and on the date set forth below, pursuant to
the Nonqualified Stock Option (the "Option") granted to the undersigned on March
8, 1996, and to pay the purchase price thereof, plus any applicable federal or
state withholding or employment taxes, by means of [the undersigned's check]
[other method of payment] which the undersigned is delivering to the Corporation
herewith pursuant to the terms of the Option.
Print Name:__________________________________
Date of Exercise:____________________________
Number of Shares
to be Purchased:__________________________
Exercise Price Per Share:____________________
Aggregate Exercise Price:____________________
_____________________________________________
(Signature)
-9-
<PAGE> 1
Exhibit 11 - Computation of earnings per share
Earnings per common share were computed as follows:
<TABLE>
<CAPTION>
Nine Months ended Three Months ended
----------------------------------------- ---------------------------------------
September 30, 1996 September 30, 1995 September 30, 1996 September 30, 1995
<S> <C> <C> <C> <C>
Net income (loss) applicable to common
shares: $ 191,000 ($ 106,000) $ 366,000 ($ 7,000)
============ =========== =========== ===========
Weighted average number of common
shares and of common share equivalents:
Weighted average common shares 22,032,227 21,286,301 22,261,301 21,286,301
Common share equivalents pursuant
to APB 15 2,032,782 -- 2,010,162 --
------------ ------------ ----------- -----------
Total primary weighted average number
of common shares and common share
equivalents 24,065,009 21,286,301 24,271,463 21,286,301
Additional shares for full dilution
pursuant to APB 15 -- -- -- --
------------ ----------- ----------- ------------
Total fully diluted average number of
common shares and common share
equivalents 24,065,009 21,286,301 24,271,463 21,286,301
============ =========== =========== ============
Net income (loss) per share:
Primary $ 0.01 ($ 0.01) $ 0.02 $ 0.00
============ =========== =========== ============
Fully diluted $ 0.01 ($ 0.01) $ 0.02 $ 0.00
============ =========== =========== ============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,276,000
<SECURITIES> 1,492,000
<RECEIVABLES> 15,996,000
<ALLOWANCES> 0
<INVENTORY> 10,764,000
<CURRENT-ASSETS> 29,724,000
<PP&E> 7,409,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 62,732,000
<CURRENT-LIABILITIES> 15,687,000
<BONDS> 0
0
0
<COMMON> 223,000
<OTHER-SE> 12,629,000
<TOTAL-LIABILITY-AND-EQUITY> 62,732,000
<SALES> 32,224,000
<TOTAL-REVENUES> 32,224,000
<CGS> 23,779,000
<TOTAL-COSTS> 30,935,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,110,000
<INCOME-PRETAX> 559,000
<INCOME-TAX> 252,000
<INCOME-CONTINUING> 191,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 191,000
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
