<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 MARCH 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from
COMMISSION FILE NUMBER: 0-12113
CONNECTIVITY TECHNOLOGIES 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: 5,565,074 shares of Common Stock, par
value. $.04 per share, outstanding as of April 30, 1997.
Transitional small business disclosure Format (check one):
Yes No X
--- ---
<PAGE> 2
CONNECTIVITY TECHNOLOGIES INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
MARCH 31, 1997
<TABLE>
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS
Cash and cash equivalents $ 229,902
United States Treasury Bills 788,264
Other Assets, including restricted cash 0
Accounts receivable, less allowance of $791,954 17,489,653
Inventories, (primarily finished goods) 12,979,894
Prepaid expenses and other assets 610,188
-------------
Total current assets 32,097,901
Property, plant and equipment 7,343,830
Deferred tax asset 10,991,722
Deposits and other assets 409,156
Goodwill and intangible assets, net of accumulated
amortization 14,606,561
-------------
Total assets $ 65,449,170
=============
LIABILITIES
CURRENT LIABILITIES
Current portion of long term debt $ 3,022,500
Trade accounts payable 11,934,916
Accrued compensation and commissions 405,635
Accrued liabilities 928,799
-------------
Total current liabilities 16,291,850
Long term debt 36,477,500
-------------
Total liabilities 52,769,350
-------------
Minority interest, net of demand notes receivable of $620,310, 6 percent,
from a minority stockholder of the subsidiary (404,780)
STOCKHOLDERS' EQUITY
Preferred stock - par value $.01 per share;
authorized 10,000,000 shares, none issued
Series B Common Stock - par value $.04 per share; authorized 750,000 shares,
none issued
Common Stock - par value $.04; authorized 20,000,000 shares, outstanding
5,565,074 shares, net of 206,601
shares held in treasury 222,613
Additional paid-in capital 109,336,792
Accumulated deficit (96,474,805)
-------------
Total stockholders' equity 12,679,820
-------------
Total liabilities' and stockholders' equity $ 65,449,170
=============
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
2
<PAGE> 3
CONNECTIVITY TECHNOLOGIES INC.
CONDENSED CONSOLIDATED INCOME STATEMENT
(UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------ -----------
<S> <C> <C>
Net sales $ 24,910,188 $
Cost of goods sold 17,923,493
------------ -----------
Gross profit 6,986,695 0
Selling, general and administrative expenses 5,774,631 (245,000)
------------ -----------
Operating income (loss) 1,212,064 (245,000)
Other income (expense):
Interest income 10,350 162,000
Interest expense (870,953)
Other (2,500)
------------ -----------
Net income (loss) before income taxes
and minority interest 348,961 (83,000)
Provision for income taxes 221,651
------------ -----------
Net income (loss) before minority interest 127,310 (83,000)
Minority interest in subsidiary (61,750)
------------ -----------
Net income (loss) $ 65,560 $ (83,000)
============ ===========
Earnings (Loss) per Share $ 0.01 ($ 0.02)
============ ===========
Weighted Average Number of Common
Shares and Common Share Equivalents:
Primary 5,819,998 5,420,534
Fully Diluted 5,819,998 5,420,534
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
3
<PAGE> 4
CONNECTIVITY TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Three Months Ended March 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 65,560 $ (83,000)
Adjustments to reconcile net income (loss) to net
cash from (used in) operating activities:
Depreciation and amortization 482,599
Minority interest 61,750
Deferred taxes 206,059
Changes in operating assets and liabilities:
Decrease (increase) in:
Accounts receivable (1,312,700)
Inventories (621,323)
Prepaid and other current assets 81,994
Deposits and other assets (75,964) (5,000)
Increase (decrease) in:
Accounts payable 678,902
Accrued liabilities (1,239,494) 55,000
----------- -----------
Net cash used in operations (1,672,617) (33,000)
----------- -----------
Cash flows from investing activities:
Purchases of property, plant, and equipment, net (466,097)
Purchases of United States Treasury Bills (1,661,000)
Sales of United States Treasury Bills 201,677 1,380,000
----------- -----------
Net cash used in investing activities (264,420) (281,000)
----------- -----------
Cash flows from financing activities:
Proceeds from borrowing-net 1,950,000
Payment of financing costs (13,169) 299,000
----------- -----------
Net cash provided by financing activities 1,936,831 299,000
----------- -----------
Net decrease in cash (206) (15,000)
Cash and cash equivalents, beginning of period 230,108 176,000
----------- -----------
Cash and cash equivalents, end of period $ 229,902 $ 161,000
=========== ===========
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements
4
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CONNECTIVITY TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1 - Condensed Consolidated Financial Statements:
The Condensed Consolidated Financial Statements included
herein have been prepared by Connectivity Technologies Inc. ("CTI" or "the
Company") 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.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
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, 1996, included in CTI's Annual
Report on Form 10-KSB to the Securities and Exchange Commission.
Note 2 - Nature of Operations and Basis of Presentation:
The Company's 1997 financial statements include the accounts
of CTI and its 85% owned subsidiary, Connectivity Products Incorporated ("CPI").
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).
5
<PAGE> 6
Note 3 - Earnings Per Share
Statement of Financial Accounting Standards No. 128, "Earnings
per Share," was issued in March 1997. The statement is effective for fiscal
years ending after December 15, 1997. This statement addresses the calculation
of earnings per share. Under the new statement, there are two types of earnings
per share--basic and diluted. Basic earnings per share is calculated by dividing
income available to common stockholders by the weighted average number of common
shares outstanding. Diluted earnings per share is calculated by dividing income
available to common stockholders by the weighted average number of common shares
outstanding and common share equivalents.
Earnings per share calculated under the new statement are as follows:
<TABLE>
<CAPTION>
Three months ended
March 31,
---------------------
1997 1996
<S> <C> <C>
Basic earnings (loss) per share $0.01 $(0.02)
Diluted earnings (loss) per share $0.01 $(0.02)
</TABLE>
6
<PAGE> 7
CONNECTIVITY TECHNOLOGIES INC.
PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT
(UNAUDITED)
For the Three Months Ended March 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Net sales $ 24,910,188 $ 22,672,715
Cost of goods sold 17,923,493 16,398,284
------------ ------------
Gross profit 6,986,695 6,274,431
Selling, general and administrative expenses 5,774,631 5,508,410
------------ ------------
Operating income 1,212,064 766,021
Other income (expense):
Interest income 10,350 19,799
Interest expense (870,953) (737,547)
Other (2,500) 5
------------ ------------
Income before income taxes and minority
interest 348,961 48,278
Provision for income taxes 221,651 26,700
------------ ------------
Income before minority interest 127,310 21,578
Minority interest in subsidiary (61,750) (37,624)
------------ ------------
Net Income $ 65,560 $ (16,046)
============ ============
Primary and Fully Diluted Net Earnings per Share $ 0.01 ($ 0.00)
============ ============
Weighted Average Number of Common
Shares and Common Share Equivalents:
Primary 5,819,998 5,420,534
Fully Diluted 5,819,998 5,420,534
</TABLE>
See accompanying notes to Pro Forma Condensed Consolidated Income Statement
7
<PAGE> 8
CONNECTIVITY TECHNOLOGIES INC.
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
months ended March 31, 1997 and 1996 give effect to the acquisition
("Acquisition") of 85% of the capital stock of Connectivity Products
Incorporated ("CPI") by Connectivity Technologies Inc. ("CTI") and the
concurrent redemption by CPI of 1,274 shares of its common stock. The
Acquisition has been accounted for as a purchase.
The pro forma information is based on unaudited financial statements after
giving effect to adjustments related to the allocation of the purchase price.
The unaudited pro forma consolidated income statements include all adjustments,
consisting of normal recurring accruals, which CTI considers necessary for a
fair presentation of the results of operations for the three months ended March
31, 1997 and 1996.
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 CTI's results of operations at
any future period then ended.
2. EMPLOYMENT AGREEMENTS
Selling, general and administrative expense for the three months ended March 31,
1996 reflects actual compensation paid to three stockholders of CPI currently
employed by CPI which exceeds their current base salaries by $131,250 for the
three months ended March 31, 1996. These amounts have not been reflected as a
decrease in expense on the pro forma statements of income.
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The primary business of the Connectivity Technologies Inc. (the
"Company","CTI", or the "Registrant"), formerly named Tigera Group, Inc., 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 focuses 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.
COMPARISON OF ACTUAL RESULTS
The Company's financial statements include the operations of CPI from June 1,
1996, onward. Most significant changes in CTI'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 CTI and CPI are included with this Quarterly Report on Form
10-QSB for the three months ended March 31, 1997, compared to the like periods
of 1996. These statements are prepared as if the companies had been combined as
of 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 three months ended March 31, 1997, of $24,910,188 are due to CPI's
operations from the date of acquisition. In the comparable 1996 period, there
were no sales.
Cost of goods sold for the first quarter of 1997 of $17,923,493 are due to CPI's
operations from date of acquisition. In the comparable 1996 period, there were
not any cost of goods sold.
Selling, general and administrative expenses were $5,774,631 for the three
months ended March 31, 1997, compared to $245,000 for the first quarter of 1996.
The increases are primarily due to CPI's operations and other operating costs
incurred in relation to the acquisition.
Interest income was $10,350 for the first quarter of 1997. This compares to
$162,000 for the first quarter of 1996. The decrease was 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.
Interest expenses of $870,953 for the first quarter of 1997, relates to CPI's
interest expenses from the debt for financing of the CPI acquisition.
9
<PAGE> 10
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 64%,
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 March 31, 1997, increased 9.9% to $24,910,188
from $22,672,715 for the comparable year earlier period. In the current quarter
compared to last year, there were sales increases in distribution and
manufacturing. Distribution and cable assembly sales increases were strong.
Increases in sales were mainly due to unit sales volume.
Cost of goods sold for the three months ended March 31, 1997, was 72.0% of
sales or $17,923,423 versus 72.3% or $16,398,284 for the comparable prior year
period. The lower cost of goods sold percentage and the improved gross margin
for three months ended March 31, 1997, compared to 1996, was primarily due to
improved gross margin in the Company's distribution business. These
improvements were due to careful attention and focus on gross margin in all
product categories and an increased level of sales.
Selling and administrative expenses decreased as a percentage of sales to 23.2%
or $5,774,631 for the three months ended March 31, 1997, compared to 24.3% of
sales or $5,508,410 for the year earlier period. 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 would decrease to 23.7% for the
three months ended March 31, 1996. The lower percentage for the 1997 first
quarter versus the adjusted 1996 first quarter was primarily because of
economies realized due to higher sales volume, partially offset by additional
salaries and expenses for added infrastructure, and additional financial
personnel.
Interest income for the three months ended March 31, 1997, was $10,350 compared
to $19,799 for the first quarter of 1996. Differences in earnings were due to
average investment balances.
Interest expense for the first quarter of 1997 was $870,953 versus $737,547 for
the first quarter of 1996. Differences were due to working capital requirements
and differences in interest rates.
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 64%,
reflecting goodwill amortization which is not deductible.
10
<PAGE> 11
FINANCIAL CONDITION AND LIQUIDITY
The Company's principal sources of cash are results of operations and existing
credit arrangements. During the three months ended March 31, 1997, cash used
in operations was $1,672,617 compared to $33,000 used for operations in the
first three months of 1996. The net cash used in 1997 included, among other
things, $1,313,000 for increased accounts receivable primarily due to increased
sales and $621,000 in additional inventory, offset by an increase in accounts
payable of $679,000 and a decrease in accrued liabilities of $1,239,000. The
Company's working capital at March 31, 1997, was $15,806,051, including cash
and cash equivalents and short-term investments of $1,018,166.
CPI has a senior credit facility providing for borrowings up to $44,670,000
subject to a borrowing base limitation. The credit facility consists of a
revolver, a line of credit and a term loan. At March 31, 1997, $33,500,000 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.
INCOME TAX MATTERS
The Company has available approximately $85,000,000 of U.S. net operating loss
carryforwards ("NOLs") as of December 31, 1996, 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"). If the NOLs are
available, 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.
The future benefits of the NOL and tax credit carryforwards are dependent on
their continued availability as well as the availability of future taxable
income. The Deferred Tax Asset (net of a valuation allowance) included in the
Company's Consolidated Financial Statements has been computed on the assumption
that CTI will continue to file a consolidated tax return that includes CPI.
Management previously announced plans for an initial public offering ("IPO") of
CPI's common stock. Successful completion of the IPO, which has been deferred,
would result in CTI no longer being able to include CPI in its consolidated
tax return. There are many uncertainties related to a proposed IPO and
management is unable to represent that it is likely that the IPO will be
successfully completed. If the IPO is successful, there could be a material
negative adjustment to the valuation allowance in 1997.
Section 382 of the Internal Revenue Code (the "Code") contains certain
limitations on the ability of a corporation to utilize its net operating losses
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
11
<PAGE> 12
shareholder of certain groups of shareholders holding 5% or more of the
Company's stock. The Company does not believe that there has been an ownership
change in the past three years. However, future events, including events beyond
the control of the company such as the acquisition in the open market of shares
of the Company's 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, the Company's
ability to use its NOLs to reduce the future taxable income of the Company (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.
12
<PAGE> 13
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description of Document
- ----------- -----------------------
<S> <C>
10.1 First Amendment of Certain Security Documents and
Subordination Agreement and Third Amendment to Amended and
Restated Revolving Credit and Term Loan Agreement dated as of
February 24, 1997 (the "Amendment"), by and among Connectivity
Technologies Inc. (formerly known as Tigera Group, Inc.), a
Delaware corporation ("CTI"), Connectivity Products
Incorporated, a Delaware corporation (the "Borrower"), and NBD
Bank, a Michigan banking corporation as administrative agent
(in such capacity, the "Agent") for the Banks.
10.2 Fourth Amendment to Amended and Restated Revolving Credit and
Term Loan Agreement (the "Amendment") dated as of March 31,
1997, 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.
11 Computation of Earnings Per Share
27 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K:
The Registrant did not file any reports on form 8-K during the most recently
completed fiscal quarter.
13
<PAGE> 14
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.
CONNECTIVITY TECHNOLOGIES INC.
Date: May 14, 1997 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)
14
<PAGE> 15
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description of Document
- ----------- -----------------------
<S> <C>
10.1 First Amendment of Certain Security Documents and
Subordination Agreement and Third Amendment to Amended and
Restated Revolving Credit and Term Loan Agreement dated as of
February 24, 1997 (the "Amendment"), by and among Connectivity
Technologies Inc. (formerly known as Tigera Group, Inc.), a
Delaware corporation ("CTI"), Connectivity Products
Incorporated, a Delaware corporation (the "Borrower"), and NBD
Bank, a Michigan banking corporation as administrative agent
(in such capacity, the "Agent") for the Banks.
10.2 Fourth Amendment to Amended and Restated Revolving Credit and
Term Loan Agreement (the "Amendment") dated as of March 31,
1997, 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.
11 Computation of Earnings Per Share
27 Financial Data Schedule
</TABLE>
<PAGE> 1
-1-
FIRST AMENDMENT OF CERTAIN
SECURITY DOCUMENTS AND SUBORDINATION
AGREEMENT AND THIRD AMENDMENT TO AMENDED AND
RESTATED REVOLVING CREDIT AND TERM LOAN AGREEMENT
FIRST AMENDMENT OF CERTAIN SECURITY DOCUMENTS AND SUBORDINATION
AGREEMENT AND THIRD AMENDMENT TO AMENDED AND RESTATED REVOLVING CREDIT AND TERM
LOAN AGREEMENT, dated as of February 24, 1997 (the "Amendment"), by and among
CONNECTIVITY TECHNOLOGIES, INC. (formerly known as Tigera Group, Inc.), a
Delaware corporation ("CTI"), CONNECTIVITY PRODUCTS INCORPORATED, a Delaware
corporation (the "Borrower") and NBD BANK, a Michigan banking corporation as
administrative agent (in such capacity, the "Agent") for the Banks (as
hereinafter defined), and the Banks.
WHEREAS, the Borrower, the Agent, The First National Bank of Boston as
Documentation Agent (together with the Agent, the "Co-Agents"), and NBD Bank,
The First National Bank of Boston and Fleet Bank, N.A. (together, the "Banks")
are parties to an Amended and Restated Revolving Credit and Term Loan Agreement,
dated as of May 31, 1996 (as further amended and in effect from time to time,
the "Credit Agreement") and;
WHEREAS, the Borrower, Tigera Group, Inc., certain other Subordinating
Creditors listed therein and the Agent are parties to a Subordination Agreement,
dated as of May 31, 1996 (the "Subordination Agreement"); and
WHEREAS, the Borrower, Tigera Group, Inc., the Seller Pledgors listed
therein and the Agent are parties to a Note Pledge Agreement, dated as of May
31, 1996 (the "Note Pledge Agreement"); and
WHEREAS, Tigera Group, Inc. and the Agent are parties to a Stock Pledge
Agreement, dated as of May 31, 1996 (the "Stock Pledge Agreement"); and
WHEREAS, Tigera Group, Inc. has executed and delivered to the Agent a
Guaranty, dated as of May 31, 1996 (the "Tigera Guaranty") in favor of the Agent
and the Banks; and
WHEREAS, Tigera Group, Inc. changed its name to Connectivity
Technologies, Inc. effective as of December 5, 1996; and
WHEREAS, it is a condition precedent to the continuing effectiveness of
the Credit Agreement that the Borrower, CTI, the Agent and the Banks enter into
this Amendment amending the terms of the Credit Agreement, the Subordination
Agreement, the Note Pledge Agreement, the Stock Pledge Agreement, and the Tigera
Guaranty, (collectively, as each document is in effect prior to the
effectiveness hereof, the "Existing Documents");
NOW, THEREFORE, in consideration of the foregoing premises, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereby agree as follows:
1. AMENDMENTS. The parties hereto hereby acknowledge and agree that the
Existing Documents shall be amended as follows:
<PAGE> 2
-2-
(a) The Credit Agreement is amended by deleting the definition
of Obligations contained in Section 1.1 of the Credit
Agreement and restating it in its entirety as follows:
Obligations. All indebtedness, obligations and
liabilities of the Borrower and its Subsidiaries to any of the
Banks and the Co-Agents, individually or collectively,
existing on the date of this Credit Agreement or arising
thereafter, direct or indirect, joint or several, absolute or
contingent, matured or unmatured, liquidated or unliquidated,
secured or unsecured, arising by contract, operation of law or
otherwise, arising or incurred (i) under this Credit Agreement
or any of the other Loan Documents or in respect of any of the
Loans made or Reimbursement Obligations incurred or any of the
Notes, Letter of Credit Application, Letter of Credit, (ii) in
connection with any interest rate protection arrangements
entered into with any of the Banks, or (iii) under other
instruments at any time evidencing any thereof
(b) Each reference to "214 Nashua Street, Leominister,
Massachusetts 01453" contained in any of the Existing
Documents shall be amended by deleting such reference and
substituting "680 Mechanic Street, Leominister, Massachusetts
01453" therefor;
(c) Each reference to "Tigera Group, Inc." contained in any of the
Existing Documents shall be amended by deleting such reference
and substituting "Connectivity Technologies, Inc." therefor;
and
(d) Each reference to "Tigera" contained in any of the Existing
Documents shall be amended by deleting such reference and
substituting "CTI" therefor.
2. CONTINUED VALIDITY OF EXISTING DOCUMENTS. Except as specifically
amended by this Amendment, the Existing Documents shall remain in full force and
effect, and each of the Borrower and CTI reaffirms the continued validity of the
Existing Documents as amended on the date hereof. Each of the Existing Documents
and this Amendment shall be read and construed as a single agreement. All
references in each of the Existing Documents or any related agreement or
instrument to the Existing Documents shall hereafter refer to each of the
Existing Documents as amended hereby.
3. REPRESENTATIONS AND WARRANTIES. Each of the Borrower (with respect
to those made by the Borrower) and CTI (with respect to those made by Tigera
Group, Inc.) represents and warrants that all the representations and warranties
as set forth in each of the Existing Documents are true and correct in all
material respects on and as of the date hereof. All such representations and
warranties are hereby ratified, affirmed and incorporated herein by reference,
with the same force and effect as though set forth herein in their entirety.
4. DEFINITIONS. Each capitalized term used herein without specific
definition shall have the same meaning herein as in the Credit Agreement.
<PAGE> 3
-3-
5. NO WAIVER. Nothing contained herein shall constitute a waiver of,
impair or otherwise affect any Obligations, any other obligation of the
Borrower, CTI, the other Subordinating Creditors (as defined in the
Subordination Agreement) or the Seller Pledgors (as defined in the Note Pledge
Agreement) or any right of the Co-Agents or any Banks consequent thereon.
6. COUNTERPARTS. This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original but which together shall
constitute one and the same instrument.
7. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS (WITHOUT
REFERENCE TO CONFLICT OF LAWS).
8. EFFECTIVENESS OF AMENDMENT. This Amendment shall become effective as
of the date hereof upon receipt by the Agent of counterparts of this Amendment
duly executed by each of the Borrower, CTI, the Agent and the Banks and a copy
of the Certificate of the Secretary of State of the State of Delaware evidencing
the name change of Tigera Group, Inc. to Connectivity Technologies, Inc.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their duly authorized officers as a document under seal as of the
date first set forth above.
CONNECTIVITY TECHNOLOGIES, INC.
(formerly known as Tigera Group, Inc.)
By: /s/ Gregory C. Kowert
----------------------------------------
Gregory C. Kowert
Senior Vice President &
Chief Financial Officer
CONNECTIVITY PRODUCTS
INCORPORATED
By: /s/ Gregory C. Kowert
----------------------------------------
Gregory C. Kowert
Senior Vice President &
Chief Financial Officer
NBD BANK, individually and as
Administrative Agent
By: /s/ Erik W. Bakker
----------------------------------------
Erik W. Bakker
Vice President
<PAGE> 4
-4-
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/ Eugenie M. Sullivan
----------------------------------------
Eugenie M. Sullivan
Senior Vice President
<PAGE> 1
-1-
CONNECTIVITY PRODUCTS INCORPORATED
FOURTH AMENDMENT
TO
AMENDED AND RESTATED
REVOLVING CREDIT AND TERM LOAN AGREEMENT
This FOURTH AMENDMENT (this "Amendment"), dated as of March 31, 1997,
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 to Amended and Restated
Revolving Credit and Term Loan Agreement, dated as of August 26, 1996, the
Second Amendment to Amended and Restated Revolving Credit and Term Loan
Agreement, dated as of September 30, 1996, and the [First Amendment of Certain
Security Documents and Subordination Agreement and] Third Amendment to Amended
and Restated Revolving Credit and Term Loan Agreement, dated as of February 24,
1997, 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. The Credit Agreement is
hereby amended as follows:
(a) Sections 11.2, 11.3 and 11.5 of the Credit Agreement are
amended by deleting such Sections 11.2, 11.3 and 11.5 and
restating them in their entirety as follows:
11.2 Senior Funded Debt to EBITDA. The Borrower will not
permit the ratio of Senior Funded Debt to Consolidated EBITDA
as at the end of any Reference Period ending on March 31,
1997, June 30, 1997 or September 30, 1997, to exceed
4.25:1.00; provided, however, if Consolidated EBITDA shall
equal or exceed $9,000,000 as at the end of any Reference
Period ending on
<PAGE> 2
-2-
March 31, 1997, June 30, 1997 or September 30, 1997 (the first
such date on which Consolidated EBITDA equals or exceeds
$9,000,000 hereinafter referred to as the "Reset Date"), from
and after the earlier of the Reset Date and December 30, 1997,
the Borrower will not permit such ratio as at the end of any
Reference Period described in the table set forth below to
exceed the ratio set forth opposite such period in such table:
<TABLE>
<CAPTION>
------------------------------------------------------------------------
Period Ratio
------------------------------------------------------------------------
------------------------------------------------------------------------
<S> <C>
Reference Period 4.00:1.00
Ending 3/31/97*
------------------------------------------------------------------------
Reference Period 4.00:1.00
Ending 6/30/97*
------------------------------------------------------------------------
Reference Period 4.00:1.00
Ending 9/30/97*
------------------------------------------------------------------------
Reference Period 4.00:1.00
Ending 12/31/97
------------------------------------------------------------------------
01/01/98 to 12/31/98 3.25:1.00
------------------------------------------------------------------------
Thereafter 2.50:1.00
------------------------------------------------------------------------
------------------------------------------------------------------------
*Effective only if the Reset Date shall have occurred.
------------------------------------------------------------------------
</TABLE>
11.3 Total Funded Debt to EBITDA. The Borrower will not permit
the ratio Total Funded Debt to Consolidated EBITDA as at the
end of any Reference Period ending on March 31, 1997, June 30,
1997 or September 30, 1997 to exceed 5.00:1.00; provided,
however, from and after the earlier of Reset Date and December
31, 1997, the Borrower will not permit such ratio as at the
end of any Reference Period described in the table below to
exceed the ratio set forth opposite such period in such table:
<TABLE>
<CAPTION>
------------------------------------------------------------------------
Period Ratio
------------------------------------------------------------------------
------------------------------------------------------------------------
<S> <C>
Reference Period 5.25:1.00
Ending 3/31/97*
------------------------------------------------------------------------
Reference Period 5.25:1.00
Ending 6/30/97*
------------------------------------------------------------------------
Reference Period 5.25:1.00
Ending 9/30/97*
------------------------------------------------------------------------
Reference Period 5.25:1.00
Ending 12/31/97
------------------------------------------------------------------------
01/01/98 to 12/31/98 4.25:1.00
------------------------------------------------------------------------
Thereafter 3.50:1.00
------------------------------------------------------------------------
------------------------------------------------------------------------
*Effective only if the Reset Date shall have occurred.
------------------------------------------------------------------------
</TABLE>
<PAGE> 3
-3-
11.5 Fixed Charge Coverage Ratio. The Borrower will not, as at
the end of any Reference Period ending during any period
described in the table set forth below, permit the ratio of
(i) the sum of (A) Consolidated EBITDA, plus (B) Rental
Obligations with respect to all operating leases for equipment
of the Borrower and its Subsidiaries made during such period,
minus (C) Non-Discretionary Capital Expenditures made during
such period to (ii) the sum of (A) Consolidated Total Interest
Expense for such period, plus (B) all mandatory scheduled
payments of the Term Loan A and the Term Loan B, plus (C)
Rental Obligations with respect to all operating leases of the
Borrower and its Subsidiaries made during such period, plus
(D) all cash taxes and dividends paid during such period,
including without limitation, Distributions solely for the
payment of the Borrower's tax obligation permitted pursuant to
Section 10.4, to be less than the ratio set forth opposite
such period in such table:
<TABLE>
<CAPTION>
-----------------------------------------------------------------
Period Ratio
-----------------------------------------------------------------
-----------------------------------------------------------------
<S> <C>
01/01/97 to 03/31/97 1.15:1.00
-----------------------------------------------------------------
04/01/97 to 09/30/97 1.10:1.00
-----------------------------------------------------------------
10/01/97 to 12/31/97 1.05:1.00
-----------------------------------------------------------------
01/01/98 to 03/31/98 1.10:1.00
-----------------------------------------------------------------
04/01/98 to 06/30/98 1.15:1.00
-----------------------------------------------------------------
07/01/98 to 09/30/98 1.20:1.00
-----------------------------------------------------------------
10/01/98 to 12/31/98 1.25:1.00
-----------------------------------------------------------------
Thereafter 1.30:1.00
-----------------------------------------------------------------
</TABLE>
(b) Section 11 of the Credit Agreement is further amended by
adding the following new Section 11.7:
11.7 Minimum EBITDA. The Borrower will not permit
Consolidated EBITDA as at the end of the Reference Period
ending on December 31, 1997 to be less than $9,000,000.
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:
<PAGE> 4
-4-
(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.
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
<PAGE> 5
-5-
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.
[REMAINDER OF PAGE IS LEFT INTENTIONALLY BLANK]
<PAGE> 6
-6-
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
a document under seal as of the date first above written.
CONNECTIVITY PRODUCTS
INCORPORATED
By: /s/ Gregory C. Kowert
----------------------------------------
Gregory C. Kowert
Senior Vice President
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/ Eugenie M. Sullivan
----------------------------------------
Eugenie M. Sullivan
Senior Vice President
<PAGE> 1
EXHIBIT 11 - COMPUTATION OF EARNINGS PER SHARE
Earnings per common share were computed as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------
MARCH 31, 1997 MARCH 31, 1996
<S> <C> <C>
Net income (loss) applicable to common
shares: $ 65,560 ($ 83,000)
========== ===========
Weighted average number of common
shares and of common share equivalents:
Weighted average common shares 5,565,074 5,420,534
Common share equivalents pursuant
to APB 15 254,924 --
---------- -----------
Total primary weighted average number
of common shares and common share
equivalents 5,819,998 5,420,534
Additional shares for full dilution
pursuant to APB 15 -- --
---------- -----------
Total fully diluted average number of
common shares and common share
equivalents 5,819,998 5,420,534
========== ===========
Net income (loss) per share:
Primary $ 0.01 ($ 0.02)
========== ===========
Fully diluted $ 0.01 ($ 0.02)
========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 229,902
<SECURITIES> 788,264
<RECEIVABLES> 17,489,653
<ALLOWANCES> 0
<INVENTORY> 12,979,894
<CURRENT-ASSETS> 32,097,901
<PP&E> 7,343,830
<DEPRECIATION> 0
<TOTAL-ASSETS> 65,449,170
<CURRENT-LIABILITIES> 16,291,850
<BONDS> 0
0
0
<COMMON> 222,613
<OTHER-SE> 12,457,207
<TOTAL-LIABILITY-AND-EQUITY> 65,449,170
<SALES> 24,910,188
<TOTAL-REVENUES> 0
<CGS> 17,923,493
<TOTAL-COSTS> 23,700,624
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 860,603
<INCOME-PRETAX> 348,961
<INCOME-TAX> 221,651
<INCOME-CONTINUING> 65,560
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 65,560
<EPS-PRIMARY> $.01
<EPS-DILUTED> $.01
</TABLE>
