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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31,1996
Commission file number 0-12113
CONNECTIVITY TECHNOLOGIES INC.
(Exact Name of Small Business Issuer in its charter)
Delaware 94-2691724
(State of Incorporation) (I.R.S. Employer Identification No.)
667 Madison Avenue, 25th Floor, New York, NY 10021
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: 212-644-8880
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.04 par value
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days.
Yes X No.
--- ---
Check if disclosure of delinquent filers pursuant to Item 405 of Regulation S-B
is not contained herein, and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB.
[ X ]
Issuer's revenues for its most recent fiscal year: $56,697,955
Aggregate market value of the Common Stock, $.04 par value, held by
non-affiliates of the registrant based on the closing price of such stock on
March 19, 1997, was $17,715,443. On such date, the closing price of registrant's
Common Stock was $4.69 per share. Solely for the purposes of this calculation,
shares beneficially owned by directors, executive officers and stockholders of
the registrant that beneficially own more than 10% of the registrant's voting
stock have been excluded, except shares with respect to which such directors and
officers disclaim beneficial ownership. Such exclusion should not be deemed a
determination or admission by the registrant that such individuals are, in fact,
affiliates of the registrant.
The number of shares of Common Stock, $.04 par value, outstanding as of March
18, 1997 was 5,565,074.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
(a) Business Development.
Connectivity Technologies Inc. (the "Company" or the "Registrant") is
principally engaged in the manufacture, distribution and assembly of wire and
cable through its subsidiary, Connectivity Products Incorporated ("CPI"). The
Company owns 85% of the capital stock of CPI which it acquired on May 31, 1996
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 (collectively, the "Sellers"). The
Sellers own the remaining 15% of the capital stock of CPI. See "Item 12 Certain
Relationships and Related Transactions." Prior to its acquisition of CPI, the
Company was principally engaged in evaluating candidates for acquisition.
During 1996, the Company purchased an option from its Chief Executive
Officer to acquire all of the capital stock of Signal Sales Corp., a distributor
of wire and cable to the municipal traffic signal and communications market. See
"Item 12 Certain Relationships and Related Transactions." The Company also
opened three additional sales offices during 1996.
In March 1997, the Company announced that CPI is planning an initial
public offering ("IPO"). The proposed IPO is intended to raise equity capital to
fund acquisitions and provide flexibility to use stock in future acquisitions.
Proceeds from the proposed IPO would also be used to reduce debt. No assurance
may be given that such an IPO will occur.
The Company was incorporated under the laws of Delaware on September 29,
1980 as Fortune Systems Corporation. In June 1987, the Company changed its name
to Tigera Group, Inc. In December 1996, the Company changed its name from Tigera
Group, Inc. to Connectivity Technologies Inc.
In December 1996, the Company effectuated a one-for-four reverse stock
split. Unless otherwise indicated, all share and per share amounts set forth in
this Report reflect such reverse stock split.
On November 8, 1995, Beverly Hills Bancorp sold to Hudson River Capital
LLC, formerly Victory Capital LLC ("Hudson River"), its holdings of shares of
Common Stock, par value $.04 per share, of the Company ("Common Stock") owned
directly and indirectly (1,185,000 shares) for $3.60 per share. Hudson River
makes investments in entities in which it holds either controlling or
non-controlling equity interests. Hudson River also purchased, or agreed to
purchase, certain shares of the Company owned by Albert M. Zlotnick (432,750
shares) and Michael S. Berlin (62,062 shares) at $3.60 per share which purchases
were completed on November 15, 1995 and January 4, 1996, respectively. Effective
as of November 8, 1995, all of the prior directors of the Company resigned
(except for Albert M. Zlotnick and A. Clinton Allen) and were replaced by
directors recommended by Hudson River. Hudson River and its affiliates currently
hold approximately 31.4% of the outstanding shares of Common Stock of the
Company.
CPI was formed by the merger of CPI's three operating divisions in October
1995. CPI's three divisions operate in two business segments, distribution and
manufacturing. The distribution segment, located in Auburn Hills, Michigan,
operates under the name Energy Electric Cable ("EEC") and distributes a
full-line of wire and cable products for the computer networking, voice,
security, signal and sound markets. The manufacturing segment consists of two
divisions. The first, located in Leominster, Massachusetts, operates under the
name "BSCC" and manufactures low voltage wire and cable for the security,
factory automation, signal and sound markets. The second manufacturing division,
located in Auburn Hills, Michigan, operates under the name Energy Electric
Assembly ("EEA") and specializes in designing and manufacturing cable assemblies
primarily for robotics and machine tool manufacturers and end-users (factory
automation). The two major market segments served by the Company are (i)
security, factory automation, signal and sound, and (ii) computer networking and
voice, which together accounted for all of 1996 sales.
By developing long-standing relationships based on quality products,
knowledge of its customers, continuity of supply, customized design and prompt
delivery at competitive prices, the Company endeavors to expand its current
market position in the connectivity industry. With a management team experienced
in distribution, manufacturing and
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the specialized assembly businesses, the Company seeks to position itself to
evaluate and pursue opportunities for advancement and growth in its industry
through internal expansion into targeted geographical areas and new product
lines, the acquisition of additional companies, and the development of strategic
relationships with major suppliers and manufacturers in the industry.
(b) Business of Issuer.
GENERAL DESCRIPTION OF THE INDUSTRY
The wire and cable industry encompasses both a wide range of copper and
fiber optic products and a wide variety of product applications requiring
electronic and electrical connectivity. The Company's main product focus is on
low voltage copper wire and cable, but it also handles numerous other products,
including fiber optic cable. The Company participates in the security, factory
automation, signal and sound markets and in the computer network and voice
communications market, each of which is briefly described below:
Security, Factory Automation, Signal and Sound. Technological advances in
commercial building monitoring and a greater concern for safety features in
commercial buildings and residences have increased demand for wiring products
for fire and burglary alarms, motion detectors, voice activators, climate
controls, and electronic card and video surveillance devices. Increasingly
stringent safety requirements imposed by local and national building codes and
insurance providers have also increased demand for "safety cable," which refers
to certain physical attributes of cable that improve the safety and performance
of such cables under hazardous conditions, particularly in buildings with
advanced fire alarm and safety systems. Continued growth of the factory
automation and robotic machinery market as well as changes in equipment
installation procedures have increased the demand for wire and cable products
servicing this industry. Demand for signal wire used in traffic control signals
and transit wire installed in, among other things, subways, bridges, tunnels and
toll booths, is driven by the need to rebuild infrastructure and the pace of new
construction in this area.
Computer Networks and Voice. The proliferation of personal computers in
the business world has created a need for products which enable users to share
files, applications and peripheral equipment such as printers and data storage
devices. Local area networks ("LAN's") which link personal computers with other
computers and peripherals inside of a building, and wide area networks ("WAN's")
which link personal computers between buildings or campus settings, were
developed in response to this demand. "Structured wiring systems" are the
electronic highways that connect personal computers in LAN's or WAN's. In a
structured wiring system, generally, a fiber optic cable provides connectivity
vertically up a riser shaft to the various wiring closets located throughout a
building. Then, high speed copper cable is distributed horizontally throughout
each floor through patch panels to the individual work stations or desks. The
number of personal computers connected and upgraded to such systems increases
with the penetration of networking technology and the expansion of personal
computers in the workplace. Rapid technological advances in computers and
software have necessitated similar advances in data transmission cable to enable
it to transmit increasingly complex data at faster speeds without diminishing
data integrity. Upgrading to accommodate advanced network requirements is
expected to increase demand for advanced data transmission cable.
DIVISIONS AND PRODUCTS
Distribution. The Company's EEC division is a full-line distributor of
wire and cable, including (i) data communications cable, fiber optic cables, and
a complete range of connectivity devices, and (ii) security, signal, sound and
control products. EEC's distribution customers are primarily LAN and WAN
installers, systems integrators, large corporations, security and climate
control system installers and contractors, and electrical contractors. The
Company's strategy for EEC has been to pursue those segments of the wire and
cable market for which a distributor can add value through product knowledge,
providing customer solutions, inventory management, convenience and quick order
processing.
Approximately 59% of EEC's 1996 sales were communication and computer
networking products related to the transmission of voice and data. The majority
of networking product sales are passive components associated with
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"structured wiring systems". Networking products distributed by EEC include
copper and fiber optic cable and, to a lesser extent, repeaters, network
interface cards, hubs, routers, patch panels, and connectors.
In addition to its networking products, EEC also distributes low voltage
copper wire which is used primarily in security, signal, sound and control
installations and accounted for approximately 31% of 1996 sales. The majority of
low voltage sales are to small, local security, sound, climate control and fire
alarm installers.
EEC also markets power cable, electronics wire (coaxial cable, shielded
cable, hook-up wire, ribbon and braided shielded wire), and miscellaneous
related electrical products. Customers for these products are primarily original
equipment manufacturers ("OEM's"), electrical contractors, and large firms.
EEC aggressively pursues sales through targeted telemarketing to end users
of wire and cable products. EEC currently employs 57 telemarketers, ten
additional salespersons who concentrate on servicing large accounts and four
regional sales managers. EEC, which began as a regional distributor with a
strong presence in Detroit, Michigan, has been expanding into a national
distributor through the opening of branch offices and warehouses in Chicago,
Illinois; Ft. Lauderdale, Pensacola and Tampa, Florida; Atlanta, Georgia;
Dallas, Texas; and Torrance, California. EEC has also been expanding through the
opening of sales offices in Orlando Florida; Houston and Austin, Texas; and
Lexington, North Carolina. Sales offices provide a local presence in the market
and serve as potential platforms from which to locate warehouses to optimize
delivery times and freight costs. All of the sales offices are on-line with a
centralized computer located in Detroit and utilize a proprietary software
system licensed to EEC. Each telemarketer has on-line access to the customer's
order and payment history and EEC's inventory and can fill a shipment from the
site which will best expedite delivery and minimize freight costs. The Company
believes that EEC's proprietary system enables it to increase sales
productivity, provide personalized customer service and, in most cases, same day
shipping of products while enabling EEC to control and monitor inventory levels
at its locations. The Company has approximately 8,400 customers and in excess of
30,000 stock keeping units ("SKU's").
Management believes that retaining a highly motivated sales force and
minimizing the cost of turnover is important to the growth of its business. EEC
has developed a commission system based on profitability which provides
continued motivation for improved individual performance while serving corporate
objectives.
EEC acquires its products from a variety of vendors, including BSCC which
accounted for approximately 13% and 19% of EEC's purchases in 1995 and 1996,
respectively, and is not dependent on any single vendor for any particular
product. As EEC's ability to deliver product on a timely cost-effective basis
depends on its ability to obtain such product from manufacturers on acceptable
terms, management believes that its relationships with its vendors are a key
component of EEC's business. Following the merger with BSCC, EEC has
concentrated on maintaining its relationships with other vendors and management
believes that it has good working relationships with its vendors.
Manufacturing. The Company's BSCC division manufactures low voltage copper
wire and cable for the security, factory automation, signal and sound markets.
Low voltage wire and cable includes electronic and electrical wire and cable,
control and signal wire and cable, climate control wire and cable, transit wire
and cable and low smoke and low halogen wire and cable products. BSCC also
manufactures wire and cable for sale to distributors that is specifically
designated by OEM's or installers as meeting the specification of a particular
function ("spec'd product"). As competition for sales of spec'd product is
generally limited to select competitors, if any, who have also been designated
by the OEM as manufacturers of the spec'd product, BSCC intends to aggressively
pursue the manufacture and sale of additional spec'd products.
The manufacturing process for insulated wire consists of extruding plastic
compounds (the insulation) over conductive metal, such as copper (the
conductor). Cables are then formed by combining various insulated wires. BSCC
melts and applies compound to wire using extruders that pump molten compound
through dies to shape it into its final form on the wire. After extrusion,
insulated wires pass through a variety of secondary operations depending on the
finished cable form. Secondary operations are primarily twinning (the twisting
of two insulated wires), cabling (the grouping of a multitude of insulated
wires) and jacketing (the extrusion of a plastic compound jacket over the
finished cable). Additional operations may be performed to stripe insulated wire
for identification and apply tape or braided metal shields for mechanical
protection and reduction of electrical interference. BSCC is an Underwriters
Laboratory(TM) approved manufacturer and is ISO 9002 certified.
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BSCC uses copper as the base conductor material for the majority of the
wire and cable it produces. BSCC has not experienced difficulties in obtaining
sufficient supplies of copper in the past and typically orders copper wire
weekly to minimize its investment in inventory. BSCC has generally been able to
pass on increases in the price of copper to its customers, but there can be no
assurance that it will be able to do so in the future. Given the volatility in
the price of copper, BSCC does not generally enter into long term agreements to
supply its products at a fixed price. Significant increases in the price of
BSCC's products as a result of increases in the cost of copper could have a
negative effect on BSCC's profitability. BSCC does not engage in hedging
transactions for the purchase of copper.
BSCC also uses a number of plastic compounds as insulators. Supplies of
these materials are generally adequate and are expected to remain so for the
foreseeable future. BSCC has alternative sources of supply for these insulating
materials and may use alternative insulating materials in its products.
The manufacture of wire and cable products requires a wide variety of
manufacturing, electronic control and testing equipment. Due to the high cost
and long delivery times of new equipment, BSCC purchases used manufacturing
equipment and reconfigures it to achieve desired operating speeds and
tolerances. Although BSCC has been successful in acquiring used machinery in the
past, a shortage of such equipment could temporarily restrain the future growth
of BSCC. As the reconfiguration and operation of this equipment requires
experienced operators and a continual maintenance program, BSCC has several
equipment specialists on staff to modify and maintain the equipment.
BSCC's products are sold to distributors on a non-exclusive basis. Sales
to EEC, BSCC's largest distributor, accounted for 21% and 24% of BSCC's sales
for 1995 and 1996, respectively. BSCC also supplies standard and specialty
products to the Company's EEA division which accounted for 3% and 6% of BSCC's
sales for 1995 and 1996, respectively. BSCC currently sells to approximately 275
distributors nationwide and believes that its relationships with its
distributors are good. In general, BSCC's distributors are not obligated to
carry BSCC's products exclusively and may carry products that compete with
BSCC's products. Although the loss of one or more distributors could have an
adverse effect on BSCC's results of operations in the short term, BSCC believes
that additional distributors could be added without significant delay. Sales of
BSCC's products are currently limited by BSCC's internal manufacturing capacity
constraints. BSCC's backlog as of December 31, 1996 was approximately
$4,110,000. Substantially all of the Company's backlog is subject to
rescheduling or cancellation.
EEA, the Company's assembly division, provides design application and
assembly services to OEM's, such as machine-tool and robotics manufacturers, and
to end-users of such factory automation equipment, in each case, primarily in
the automobile industry. EEA's strategy is to design, engineer and produce
subassemblies which combine cables with various connectors to strict
specifications to create value-added products. In the assembly process,
specialized cables are cut to length, then undergo many detailed processes in
order to prepare the cables for connection and then are attached to specified
connectors. Electrical inspection is then performed before final shipment.
EEA seeks to capitalize on the development of modular machine tool design
which requires complex cable assemblies to link machinery with the industrial
computers controlling it. In addition, cable subassemblies previously
"hardwired" into machinery by electricians are now being designed in modular
form to promote faster and more economical retooling of equipment and assembly
lines.
Although EEA acquires its products from a variety of vendors and is not
dependent on any single vendor, BSCC accounted for approximately 21% and 36% of
EEA's purchases in 1995 and 1996, respectively.
As the services provided by EEA are often time-intensive and can result in
costly delays if not completed to exact specifications, EEA seeks to encourage
OEM's who currently perform this function "in-house" to "outsource" these
functions to EEA.
COMPETITION
The specialty wire and cable market is highly competitive and fragmented.
Many of the Company's competitors are substantially larger and have greater
financial, engineering, distribution, manufacturing and other resources than the
Company. Management believes that it competes successfully in its markets due to
its experienced
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management team, its established reputation for quality products, large sales
force, and its extensive knowledge of its current customer base.
EEC believes that the principal competitive factors in the distribution
market are knowledgeable salespeople, availability of inventory on a wide
variety of products, competitive prices and the ability to meet the specific
requirements of end-users on a timely basis. To compete successfully, management
believes that EEC must continue to distribute a broad range of products, provide
competitive pricing and prompt delivery, deliver responsive customer service,
maintain its relationships with its suppliers and attract and retain highly
qualified personnel. EEC faces substantial competition from several national and
regional distributors that have greater financial, technical and marketing
resources and distribution capabilities including Anixter International and
Graybar Electric, as well as a number of smaller companies. EEC also faces
competition from manufacturers who sell directly to end-users for certain large
scale products.
BSCC believes that the principal competitive factors in the manufacturing
division are quality and price. BSCC believes that its ability to extrude and
cable low voltage products at a high rate of speed, while maintaining product
quality, enables it to compete effectively. BSCC faces substantial competition
from several manufacturers that have greater financial and technical resources
including Belden Wire & Cable Corp., General Cable Industries, and the West Penn
Wire Division of Cable Design Technologies Corporation as well as several
smaller regional companies.
EEA believes that the principal competitive factors in the assembly market
are knowledge of end-user requirements, quality production, and the ability to
deliver the finished product to end-users on a timely basis. EEA competes
primarily with numerous regional companies, OEM's and with the Northern Wire and
Cable division of Anicom, Inc., most of which have greater financial and
technical resources than the Company.
TECHNOLOGICAL DEVELOPMENT AND OTHER SPECIAL CONSIDERATIONS
Fiber optic technology represents a potential substitute for some
copper-based networking cable products. A significant decrease in the cost of
fiber optic systems could make such systems superior on a price performance
basis to copper systems and may have a material adverse effect on the Company's
business. To date, fiber optic cables have not significantly penetrated the
markets served by the Company due to the high relative cost required to
interface electronic and light signals and the high cost and technical
difficulty of fiber termination and connection. At the same time, advances are
being made in copper-based products to increase efficiency and enhance
performance. While fiber optic cable represents a small percentage of its
current sales, the Company's distribution business could shift its product mix
toward fiber and away from copper should demand for copper products decline
significantly.
Wireless communications technology may represent a threat to both copper
and fiber optic-based systems by reducing the need for premise wiring. The
Company believes that the limited signal security, the relatively slow
transmission speeds of current wireless systems and the relatively higher cost
restrict the use of such systems in many data communication markets. However,
there can be no assurance that future advances in wireless technology will not
have a material adverse effect on the Company's business.
Copper is the principal raw material used in the Company's products.
Significant increases in the price of the Company's products due to increases in
the cost of copper could have a negative effect on demand for the Company's
products. Similarly, significant decreases in the price of copper could result
in the price for the Company's products decreasing which could have an adverse
effect on the Company's gross margins until inventory with a higher carrying
cost is distributed. See "Business -- Divisions and Products - Manufacturing."
In connection with the Company's acquisition of CPI, CPI increased and
refinanced its bank facility with a new facility consisting of a revolving
credit facility, a term loan and a line of credit (collectively, the "Bank
Facility"). Borrowings under the Bank Facility were approximately $31,550,000 as
of December 31, 1996, of which $16,550,000 bears interest at floating rates that
will fluctuate over time based on prevailing interest rates and $15,000,000 of
which bears interest at a fixed rate. CPI has pledged essentially all of its
assets, and the Company has pledged all of its CPI stock, to secure the
repayment of amounts borrowed. The credit agreement between CPI and its banks
contains certain covenants including, among others, financial covenants relating
to net worth, debt coverage, interest coverage and fixed charge coverage, as
well as covenants restricting CPI's ability to make capital
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expenditures in excess of stated amounts, incur indebtedness, pay dividends on
or purchase, redeem or otherwise acquire its capital stock, or, in certain
cases, merge or purchase assets or stock of another entity. Although certain
acquisitions are permitted under the credit agreement, these covenants and
restrictions, together with the pledge of assets and the debt service
requirements, may restrict the Company's or CPI's ability to take advantage of
business opportunities or to respond to market conditions in the future. In
addition, a significant portion of CPI's operating cash flow will be required to
satisfy interest and principal payments due under the Bank Facility. Although
the Company expects CPI to generate sufficient cash flow from its operations to
meet its debt service obligations, CPI's ability to meet such obligations will
be dependent on its future operating performance.
ENVIRONMENTAL MATTERS
The Company is subject to numerous United States federal, state and local
laws and regulations relating to the storage, handling, emission and discharge
of materials into the environment, including the United States Comprehensive
Environmental Response, Compensation and Liability Act (CERCLA), the Clean Water
Act, the Clean Air Act, the Emergency Planning and Community Right-To-Know Act
and the Resource Conservation and Recovery Act. Regulations of particular
significance to the Company are those pertaining to handling and disposal of
solid and hazardous waste, discharge of process wastewater and stormwater and
release of hazardous chemicals. Although the Company believes it is in
compliance with such laws and regulations, there can be no assurance that the
Company will be in compliance with such laws in the future or that it will not
incur fines, penalties or other costs as a result of noncompliance or an
allegation thereof.
The Company does not currently anticipate any material adverse effect on
its results of operations, financial condition or competitive position as a
result of compliance with federal, state or local environmental laws or
regulations. However, some risk of environmental liability and other costs is
inherent in the nature of the Company's business, and there can be no assurance
that material environmental costs will not arise. Moreover, it is possible that
future developments, such as promulgation of implementing regulations for the
1990 amendments to the Clean Air Act or the imposition of other requirements of
environmental laws and enforcement policies thereunder, could lead to material
costs of environmental compliance and cleanup by the Company.
EMPLOYEES
As of March 1, 1997, the Company had 156 full time employees in its EEC
distribution division, 140 employees in its BSCC manufacturing division, and 64
employees in its EEA assembly division.
ITEM 2. DESCRIPTION OF PROPERTIES
The principal operating office and primary distribution facility for EEC
consists of 60,000 square feet of leased space in Auburn Hills, Michigan. EEC
has also leased branch offices and warehousing facilities in the following
locations: Chicago, Illinois; Ft. Lauderdale, Pensacola and Tampa, Florida;
Atlanta, Georgia; Dallas, Texas; and Torrance, California. EEC also has regional
sales offices in Orlando Florida; Houston and Austin, Texas; and Lexington,
North Carolina.
The manufacturing facilities for BSCC consist of two leased premises
comprised of 50,000 and 80,000 square feet of space, respectively, in
Leominster, Massachusetts. The Company also leases an additional 9,000 square
feet of office space in Leominster, Massachusetts.
EEA leases 30,000 square feet of office, assembly and warehouse space
adjacent to EEC's headquarters facility in Auburn Hills, Michigan.
The Company rents office space in New York City from, and makes certain
support personnel payments to, Noel Group, Inc. ("Noel") on a month-to-month
basis at a monthly cost of $20,676. See "Certain Relationships and Related
Transactions."
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ITEM 3. LEGAL PROCEEDINGS
The Company is a party to various legal proceedings and administrative
actions, all of which management believes to be of an ordinary or routine nature
incidental to its operations. In the opinion of management, such proceedings
should not, individually or in the aggregate, have a material adverse effect on
the Company's financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Company held its annual meeting of shareholders on December 4,
1996.
(b) At the meeting, the following nominees were elected as Directors of
the Company:
<TABLE>
<CAPTION>
Names Votes For Votes Withheld
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<S> <C> <C>
Donald T. Pascal 4,966,529 68,557
James S. Harrington 4,951,000 68,557
Duane A. Gawron 4,954,624 68,557
John E. Pylak 4,954,457 68,557
Ramon D. Ardizzone 4,966,691 68,557
Clark H. Bailey 4,967,901 68,557
Herbert M. Friedman 4,966,705 68,557
Stephen P. Kelbley 4,954,624 68,557
</TABLE>
(c) The proposal to amend the Company's Certificate of Incorporation to
change the name of the Company to Connectivity Technologies Inc. was approved as
follows: 4,975,584 votes for such proposal; 14,869 votes against such proposal;
and 35,171 votes abstaining.
The proposal to amend the Company's Certificate of Incorporation to effect
a one-for-four reverse split of the Company's outstanding Common Stock, and to
reduce the number of authorized shares of the Company's Common Stock and
Preferred Stock was approved as follows: 4,842,516 votes for such proposal;
95,317 votes against such proposal; and 34,540 votes abstaining.
The proposal to adopt the Company's 1996 Stock Incentive Plan was approved
as follows: 3,258,014 votes for such proposal; 131,363 votes against such
proposal; and 82,834 votes abstaining.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
A. Market Information.
The Company's shares of Common Stock are currently quoted in the OTC
Bulletin Board under the trading symbol "CVTK". Prior to the Company's name
change in December 1996, the Company's Common Stock traded under the symbol
"TYGR". Prior to September 30, 1995, the Common Stock traded on The Nasdaq Stock
Market ("NASDAQ"). On September 30, 1995, NASDAQ no longer listed the Common
Stock since the Company did not have an operating business. The following table
sets forth the range of high and low sales prices as reported by NASDAQ for
shares of Common Stock for the first three quarters of 1995. The high and low
bid prices for the quarter ended December 31, 1995 and for the year ended
December 31, 1996, as reported by the OTC Bulletin Board, reflect inter-dealer
prices, without retail mark up, mark down or commission and may not represent
actual transactions. The public market for Common Stock is limited, and the
following quotations should not be taken as necessarily reflective of prices
which might be obtained in actual market transactions or in transactions
involving
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substantial numbers of shares. The following prices have been adjusted to
reflect to the Company's one-for-four reverse stock split which was effected in
December 1996.
<TABLE>
<CAPTION>
1996 1995
-------------- ------------
High Low High Low
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<S> <C> <C> <C> <C>
Fiscal quarter ended March 31 $10.50 $4.13 $3.24 $1.88
Fiscal quarter ended June 30 14.75 9.25 3.24 2.12
Fiscal quarter ended September 30 13.00 8.00 3.00 2.24
Fiscal quarter ended December 31 10.00 6.38 5.10 2.00
</TABLE>
B. Holders.
On March 18, 1997, as reported by the Company's transfer agent, there were
5,565,074 shares of Common Stock issued and outstanding which were held of
record by 1,966 persons, including several holders who are nominees for an
undetermined number of beneficial owners.
C. Dividends.
The Company has not declared or paid any cash dividends on its Common
Stock since its inception nor does the Company intend to do so in the immediate
future. It is currently the policy of the Company's Board of Directors to retain
earnings to finance the Company's operations and the expansion of the Company's
business.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF
OPERATIONS
Overview
The primary business of Connectivity Technologies Inc. (the "Company",
"CTI" or the "Registrant"), 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).
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 1 and 5 in the "Notes to Condensed Consolidated Financial
Statements" included in this Report.
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.
The Company was incorporated under the laws of Delaware on September 29,
1980 as Fortune Systems Corporation. In June 1987, the Company changed its name
to Tigera Group, Inc. In December 1996, the Company changed its name from Tigera
Group, Inc. to Connectivity Technologies Inc. to better fit the Company's wire
and cable business along with its products and markets.
Comparison of Actual Results
The financial statements filed herewith 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 the
operations of CTI and CPI are included with this Report for 1996, compared to
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
- 9 -
<PAGE> 10
pro forma results is also included in a separate section in this Management's
Discussion and Analysis or Plan of Operation.
The purchase price allocation initially reported in 1996 interim periods
was reported as an estimate and has been finalized in connection with the
Company's Consolidated Financial Statements for the year ended December 31,
1996. The purchase price has been allocated to the fair value of net assets
acquired including tangible assets, deferred tax assets related primarily to net
operating loss carry forwards, and goodwill. See also the separate section
titled "Income Tax Matters" and footnote 7 to the Financial Statements.
Sales for the year ended December 31, 1996 of $56,697,955 are due to CPI's
operations from the date of acquisition. In 1995, there were no sales.
Cost of goods sold for 1996 of $41,275,166 are due to CPI's operations
from the date of acquisition. In the comparable 1995 period, there were not any
cost of goods sold.
Selling, general and administrative expenses were $12,709,069 for 1996
compared to $853,700 for 1995. The increases in 1996 compared to 1995 are
primarily due to CPI's 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 $336,717 in 1996 compared to $700,248 in 1995. The
decreases in 1996 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 $1,968,323 for 1996 relates to CPI's interest expense
from the date of acquisition.
Income tax expense is provided on operating results at statutory tax
rates. The Company's effective tax rate was 55.3% for 1996 versus no rate in
1995. Non-deductible goodwill amortization, which does not reduce cash flow from
operations, and state and local taxes caused the higher rate compared to normal
statutory rates.
Comparison of Pro Forma Results
Pro forma income statements contained in this Report 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 Report.
Sales for the year ended December 31, 1996, increased 9.4% to $97,264,000
from $88,893,000 for the year earlier period. Manufactured products accounted
for approximately three fourths of the sales increase. Manufacturing unit sales
increases exceeded dollar volume increases due to lower copper prices. Prices
during 1996 versus 1995 were down in manufacturing due to lower copper prices
and down slightly in distribution.
Cost of goods sold for the year ended December 31, 1996, was 73.1% of
sales or $71,059,000 versus 73.5% or $65,294,000 for 1995. The lower cost of
goods sold percentage for the year ended December 31, 1996, compared to 1995 was
primarily due to volume increases and productivity improvements in the Company's
Massachusetts manufacturing operations, partially offset by slightly lower gross
margins in distribution and lower gross margins in the cable assembly portion of
the manufacturing operations.
Selling and administrative expenses decreased as a percentage of sales to
21.6% or $21,053,000 for the year ended December 31, 1996, compared to 21.7% or
$19,281,000 for 1995. The increase in amounts, as compared to 1995, is primarily
due to the increased level of sales and the addition of senior sales and
financial personnel, and general cost increases offset by salary reductions to
the founders of CPI, according to the acquisition agreement.
Interest income for the year ended December 31, 1996, was $98,000 compared
to $122,000 for 1995. Differences in earnings were due to average investment
balances and rates on the Company's United States Treasury Bills.
- 10 -
<PAGE> 11
Interest expense for the year of 1996 was $3,176,000 versus $2,924,000 for
1995. Differences were primarily due to working capital requirements.
Income tax expense is provided on operating results at statutory tax
rates. The Company's effective tax rate was 51.1% for 1996 and 55.0% for 1995.
Nondeductible goodwill amortization, which does not reduce cash flow from
operations, and state and local taxes resulted in the higher rates.
Financial Condition and Liquidity
The Company's principal sources of cash are results of operations and
existing credit arrangements. During the year ended December 31, 1996, cash
generated from operations was $40,000 compared to $192,000 cash used for
operations in 1995. Since the acquisition of CPI, the Company's cash flow has
been directed toward increases in inventories and accounts receivable. Also,
accounts payable decreased. The Company's working capital at December 31, 1996,
was $14,540,000 including cash and cash equivalents and short-term investments
of $1,220,000.
CPI has a senior credit facility providing for borrowings up to
$45,600,000 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 5-Debt" to the Consolidated Financial Statements.
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. The Company has
announced that CPI is planning an initial public offering of its capital stock.
No assurance can be given that such an IPO will occur.
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"). The NOLs are
described in "Note 7 - Income Taxes" to the Consolidated Financial Statements.
If the NOLs are available (see "Note 7 - Income Taxes" to the 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.
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 is currently planning an initial public offering ("IPO") of CPI's
common stock which, if successful, 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 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
shareholder or 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.
- 11 -
<PAGE> 12
ITEM 7. FINANCIAL STATEMENTS
The Consolidated Financial Statements of the Company are set forth in a
separate section of this Annual Report on Form 10-KSB. See "Item 13 Exhibits and
Reports on Form 8-K" and the Index to Financial Statements on page F-1 of this
Annual Report on Form 10-KSB.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On June 10, 1996, as a result of the consummation of the acquisition of
the capital stock of CPI on May 31, 1996, BDO Seidman, LLP ("BDO"), the
Company's independent public accountant for the fiscal year ended December 31,
1995, was dismissed to allow Coopers & Lybrand LLP, CPI's independent public
accountant, to be engaged as the Company's independent public accountant. BDO's
report on the financial statements of the Company for each of the last two years
did not contain an adverse opinion or disclaimer of opinion and was not modified
as to uncertainty, audit scope or accounting principles. The decision to change
accountants was recommended by the Executive Committee of the Board of
Directors. There were no disagreements with BDO on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure, which, if not resolved to BDO's satisfaction, would have caused it to
make reference to the subject matter of the disagreement in connection with its
report.
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT; COMPLIANCE WITH
SECTION 16(a) OF THE EXCHANGE ACT
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Director and/or Executive
Name Age Position(s) Officer Since
- ---- --- ----------- -------------
<S> <C> <C> <C>
Donald T. Pascal 37 Chairman of the Board; November 1995
Director(1)
James S. Harrington 45 President and Chief Executive Officer; May 1996
Director(1)
Duane A. Gawron 45 Senior Vice President; Director May 1996
Kurt Cieszkowski 30 Senior Vice President May 1996
Gregory C. Kowert 50 Senior Vice President, Chief Financial July 1996
Officer and Secretary
Charles J. Di Bona II 32 Vice President February 1996
Ramon D. Ardizzone 59 Director(2) November 1995
Clarke H. Bailey 42 Director(1) November 1995
Herbert M. Friedman 65 Director(3) November 1995
Stephen P. Kelbley 54 Director(2)(3) December 1996
</TABLE>
(1) Member of the Executive Committee.
(2) Member of the Compensation Committee.
(3) Member of the Audit Committee.
- 12 -
<PAGE> 13
Directors hold office until the next annual meeting of stockholders of the
Company and until their successors have been elected and qualified or until
their earlier resignation or removal. Officers serve at the discretion of the
Board of Directors. No family relationship exists among any of the executive
officers and directors of the Company.
The following sets forth the principal occupations of each of the
Company's executive officers and directors during the previous five years, as
well as the names of any other public or affiliated companies or registered
investment companies of which they are directors.
Donald T. Pascal has been a director of the Company since November 1995
and Chairman of the Board since May 1996. Mr. Pascal served as President and
Chief Executive Officer of the Company from November 1995 to May 1996. Mr.
Pascal has also served as a Managing Director of Noel Group, Inc. ("Noel"), a
company which conducts its operations through small and medium-sized operating
companies in which Noel holds controlling or other significant equity interests,
since November 1991. Previously, Mr. Pascal served as a director of Noel from
October 1989 until November 1991, and as a Vice President and Secretary of Noel
from May 1988 until November 1991, when he became a Managing Director. Mr.
Pascal served as a Vice President of The Prospect Group, Inc., a company which
prior to its adoption in 1990 of a Plan of Complete Liquidation and Dissolution
conducted its major operations through subsidiaries acquired in leveraged buyout
transactions ("Prospect"), from March 1986 until February 1989. Mr. Pascal is
also a director of Sylvan Inc., a company which produces mushroom spawn and
fresh mushrooms. Mr. Pascal became a Senior Vice President of Hudson River
Capital LLC ("Hudson River") in February 1997.
James S. Harrington has served as President and Chief Executive Officer
and as a director of the Company since May 1996. From October 1995, Mr.
Harrington served as Chief Executive Officer of CPI with primary responsibility
for the BSCC manufacturing division. From 1988 to October 1995, Mr. Harrington
served as President of BSCC Corp., a predecessor of CPI.
Duane A. Gawron has served as a Senior Vice President and as a director of
the Company since May 1996. From October 1995 through May 1996, Mr. Gawron
served as Vice President and Treasurer of CPI with primary responsibility for
sales and marketing in the Energy Electric Cable distribution division. From
1984 to October 1995, Mr. Gawron served as Vice President of Energy Electric
Cable, Inc., a predecessor of CPI, with primary responsibility for sales and
marketing.
Kurt Cieszkowski has served as a Senior Vice President of the Company
since May 1996. From October 1995 through May 1996, Mr. Cieszkowski served as
Vice President of CPI with primary responsibility for sales in the Energy
Electric Assembly division. From 1986 through October 1995, Mr. Cieszkowski
served as the President of Energy Electric Assembly, Inc., a predecessor of CPI.
Gregory C. Kowert has served as a Senior Vice President, Chief Financial
Officer and Secretary of the Company since July 1996. From 1993 to 1996, he was
Vice President - Finance, Chief Financial Officer and a Director of O'Sullivan
Industries, Inc., a furniture manufacturer. From 1973 to 1992, Mr. Kowert was
employed by Baldor Electric Company, a manufacturer of electric motors and
drives. Mr. Kowert held various positions with Baldor, including Vice President
- - Finance and Chief Financial Officer and President of Baldor Europe. From March
1993 until June 1993, he was associated with Beverly Enterprises, a nursing home
operator, as Senior Director Financial Projects, and Chief Financial Officer of
Bass Pro Shops, a fishing equipment retailer.
Charles J. Di Bona II has served as a Vice President of the Company since
February 1996. Mr. Di Bona served as a Vice President of Hudson River from
August 1994 until May 1996. From 1992 to 1994, he attended Harvard Business
School and received an MBA degree in June 1994. From 1991 to 1992, he worked as
a mortgage securities and derivatives consultant. From 1990 to 1991, he was a
Vice President in the Mortgage-Backed Securities Department of Dean Witter
Reynolds. From 1986 to 1990, Mr. Di Bona held several positions in finance and
trading at Drexel Burnham Lambert, an investment banking firm, leaving as Vice
President.
Ramon D. Ardizzone has served as a director of the Company since November
1995, and is currently Chairman of the Board of Glenayre Technologies, Inc.
("Glenayre"), a paging and messaging infra-structure technology company. Since
1988, Mr. Ardizzone has been employed by Glenayre in various capacities. Mr.
Ardizzone is also a director of UAC Holdings Corp., a data storage and retrieval
technology company.
- 13 -
<PAGE> 14
Clarke H. Bailey has served as a director of the Company since November
1995. Since February 1995, Mr. Bailey served as Chairman of the Board and Chief
Executive Officer of United Acquisition Company, an acquisition company, and
Chairman of the Board and Chief Executive Officer of United Gas Holding
Corporation, an acquisition company. He is also currently Chairman of the Board
and a director of Arcus, Inc., the leading national provider of secure off-site
computer data storage and related disaster recovery services and information
technology staffing solutions, and a director and Co-Chairman of the Board of
Hudson River. He served as Chief Executive Officer and a director of Glenayre
from December 1990 until March 1994 and as its Vice Chairman of the Board from
November 1992 to July 1996. In March 1994, Mr. Bailey was named Chairman of the
Executive Committee of the Board of Glenayre, and he relinquished the title of
Chief Executive Officer. Mr. Bailey is also a director of Swiss Army Brands,
Inc. ("Swiss Army"), the exclusive United States and Canadian importer and
distributor of Victorinox Original Swiss Army Knives and professional cutlery as
well as other products
Herbert M. Friedman, Esq. has served as a director of the Company since
November 1995. He has been a member of the law firm of Zimet, Haines, Friedman &
Kaplan since 1967. Zimet, Haines, Friedman & Kaplan acts as counsel to the
Company. Mr. Friedman is also a director of Noel, Hudson River, Prospect, Swiss
Army and Victory Ventures LLC, a company which conducts its operations through
small and medium sized companies in which it holds either controlling or
non-controlling equity interests.
Stephen P. Kelbley has served as a director of the Company since December
1996. Mr. Kelbley has served as President of the Diversified Home Products Group
of Springs Industries, Inc. ("Springs") since January 1997 and as an Executive
Vice President of Springs since 1991. From May 1995 to January 1997, he served
as President of the Diversified Group and from March 1994 to May 1995, he was
President of Springs' Specialty Fabrics Group. Mr. Kelbley joined Springs in
September 1991 as Executive Vice President and Chief Financial Officer. Prior to
joining Springs, he served for seven years as Senior Vice President - Finance of
Bausch & Lomb and two years as Senior Vice President - Finance & Administration
of Moog Automotive, Inc. He held significant financial management positions with
General Electric Company for 19 years before working at Moog. Mr. Kelbley is a
member of the Board of the Financial Executives Institute.
MEETINGS AND COMMITTEES OF THE BOARD
The Board of Directors currently has standing Executive, Audit and
Compensation Committees. There is no formal Nominating Committee; the Board of
Directors performs this function. None of the directors who serve on any of such
Committees is an employee or officer of the Company except that Donald T. Pascal
and James S. Harrington who serve on the Executive Committee, are Chairman of
the Board and Chief Executive Officer, respectively.
The Executive Committee was established in November 1995 and consisted of
A. Clinton Allen, its Chairman, Clarke H. Bailey, Deborah A. Farrington and
Donald T. Pascal until it was reconstituted in July 1996 to consist of Messrs.
Bailey, Harrington and Pascal. The Executive Committee has all the powers of the
Board of Directors in the management of the business and affairs of the Company,
including, without limitation, the power and authority to declare a dividend,
authorize the issuance of stock and adopt a certificate of ownership and merger
pursuant to Section 253 of the Delaware General Corporation Law. There was one
meeting of the Executive Committee during the fiscal year ended December 31,
1996.
The Audit Committee currently consists of Stephen P. Kelbley, its Chairman
and Herbert M. Friedman. From November 8, 1995 to December 4,1996, the Audit
Committee consisted of Ramon D. Ardizzone, its Chairman, Michael Weatherly and
Deborah A. Farrington. The Audit Committee recommends to the Board of Directors
the appointment of independent public accountants, meets from time to time with
such accountants and certain officers of the Company to ensure the adequacy of
internal controls and reporting, reviews the Company's financial statements, the
scope of the audit of the Company's annual financial statements, the auditing
fees and the audited reports related to the audit and performs such other duties
relating to the financial statements and other matters of the Company as the
Board of Directors may assign from time to time. During the year ended December
31, 1996, the Audit Committee held two meetings.
The Compensation Committee currently consists of Ramon D. Ardizzone, its
Chairman and Stephen P. Kelbley. From November 8, 1995 to December 4, 1996, the
Compensation Committee consisted of Louis Marx, Jr.,
- 14 -
<PAGE> 15
its Chairman and Michael A. Weatherly. The Compensation Committee has all of the
powers of the Board of Directors to grant options and to exercise all powers
under and pursuant to the Company's option plans and to take all action in
respect of the approval of the compensation and bonuses paid by the Company.
During the fiscal year ended December 31, 1996, the Compensation Committee met
three times.
During the fiscal year December 31, 1996, the Board of Directors held four
meetings. All of the directors attended at least 75% of the total number of
meetings they were eligible to attend, during the fiscal year ended December 31,
1996, by (i) the Board and (ii) the Board Committees of which they were members.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
and to furnish the Company with copies of such reports.
Based solely on its review of the copies of such forms furnished to the
Company by such reporting persons during the fiscal year ended December 31,
1996, or written representations from such reporting persons that no Forms 5
were required for those persons with respect to such period, the Company
believes that during the fiscal year ended December 31, 1996 all filing
requirements applicable to its officers, directors, and greater than ten-percent
beneficial owners were complied with.
- 15 -
<PAGE> 16
ITEM 10. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information regarding compensation
awarded or paid to, or earned by, during each of the last three fiscal years,
the persons who served as the Company's Chief Executive Officer during the
fiscal year ended December 31, 1996 (the "Named Executive Officers"). The
compensation of no other executive officers exceeded $100,000 during the year
ended December 31, 1996.
<TABLE>
<CAPTION>
Long Term Compensation
--------------------------------
Annual Compensation Awards Payouts
----------------------------- ------ -------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other
Annual Restricted Securities All Other
Compen- Stock Underlying LTIP Compen-
Name and Principal sation Award(s) Options/ Payouts sation
Position Year Salary($) Bonus($) ($) ($) SARs(#) ($) ($)
- ------------------------ ---- -------- ------- ------- --------- --------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
James S. Harrington 1996 $ 87,498 -0- $12,520 -0- 90,669(1) -0- -0-
President and 1995 -0- -0- -0- -0- -0- -0- -0-
Chief Executive Officer 1994 -0- -0- -0- -0- -0- -0- -0-
Donald T. Pascal (2) 1996 $125,000 -0- -0- -0- -0- -0- -0-
Chairman of the Board, 1995 -0- -0- -0- -0- 200,000(3) -0- -0-
former President and 1994 -0- -0- -0- -0- -0- -0- -0-
Chief Executive Officer
</TABLE>
- --------------------
(1) Represents options to acquire 55,947 shares of Common Stock exercisable at
$8.12 per share and options to acquire 34,722 shares exercisable at $8.64
per share. Such options are not exercisable until July 8, 1999 unless a
change of control occurs with respect to the Company. In such event, the
options become exercisable to the extent vested. The right to exercise such
options vests over a two year period.
(2) Donald T. Pascal served as President and Chief Executive Officer from
November 1995 to May 1996 and currently serves as Chairman of the Board.
(3) Represents options and warrants issued in November 1995 at an exercise
price of $3.54 per share. One-third of the options and warrants were
exercisable and an additional one-third of the options and warrants become
exercisable on each anniversary of the date of grant. Mr. Pascal has agreed
not to exercise any such options or warrants until February 1999.
- 16 -
<PAGE> 17
OPTION/SAR GRANTS DURING 1996
The following table sets forth information regarding individual grants of
options and/or warrants made by the Company during the fiscal year ended
December 31, 1996 to each of the Named Executive Officers:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- --------------------------------------------------------------------------------
(a) (b) (c) (d) (e)
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise or
Options/SARs Employees In Base Price Expiration
Name Granted Fiscal Year ($/Sh) Date
- ---- ----------- ----------- -------- ---------
<S> <C> <C> <C> <C>
Donald T. Pascal.... -0- -0- -0- --
James S. Harrington. 55,947(1) 9.2% $8.12 3/07/06
34,722(1) 5.7% $8.64 7/25/06
</TABLE>
- ------------
(1) Consists of options to purchase shares of Common Stock which are not
exercisable until July 8, 1999 unless a change of control occurs with
respect to the Company. In such event, the options become exercisable
to the extent vested. The right to exercise such options vests over a
two year period.
AGGREGATED OPTION/SAR EXERCISES DURING 1996 AND FISCAL YEAR-END OPTION/SAR
VALUE.
The following table provides information related to options and warrants
exercised by the Named Executive Officers during 1996 and the number and value
of unexercised options and warrants held by each of the Named Executive Officers
at year-end. The Company does not have any outstanding stock appreciation
rights:
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised In-the-Money
Options, Warrants/SARs at Options, Warrants/SARs
Fiscal Year-End(#) at Fiscal Year-End ($)(1)
------------------------- --------------------------
Shares Acquired
Name on Exercise(#) Value Realized($) Exercisable Unexercisable Exercisable Unexercisable
- ---- -------------- ----------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Donald T. Pascal -0- -- -0- 200,000(2) -0- $654,000
James S. Harrington -0- -- -0- 90,669(3) -0- -0-
</TABLE>
- ------------
(1) Based on a closing price on December 31, 1996 of $6.81 per share.
(2) Consists of 115,000 options and 85,000 warrants to acquire a like number of
shares of Common Stock at an exercise price of $3.54 per share.
(3) Consists of 55,947 options exercisable at $8.12 per share and 34,722 options
exercisable at $8.64 per share to acquire a like number of shares of Common
Stock.
- 17 -
<PAGE> 18
COMPENSATION OF DIRECTORS
Effective December 1996, non-employee directors are paid a quarterly
retainer of $2,000 and are reimbursed for out-of-pocket expenses incurred in
attending meetings of the Board of Directors and of the Committees to which they
are elected. Prior thereto during 1996, non-employee directors were paid an
annual retainer of $5,000.
Commencing as of December 1996, each person, other than employees of the
Company, elected to the Board of Directors, who was not a director preceding
such person's election, shall receive an option to purchase 2,500 shares of the
Company's Common Stock exercisable at the then fair market value. Thereafter, as
of the date of the Company's annual meeting of stockholders, each non-employee
director is presently entitled to receive an option to acquire 500 shares of the
Company's Common Stock exercisable at the then fair market value.
In connection with the change of control of the Company in November 1995,
each of five non-employee directors, who resigned from the Board in connection
with the change of control, exchanged outstanding options entitling each of them
to purchase 6,250 shares of the Company's Common Stock for warrants to purchase
6,250 shares of the Company's Common Stock at a purchase price of $2.875 per
share for a period ending on November 8, 1996. In consideration for their
service and anticipated service to the Company as non-employee directors,
Messrs. Ardizzone, Friedman and Zlotnick were each granted a warrant to purchase
6,250 shares of the Company's Common Stock at a purchase price of $3.54 per
share, which warrants were exercisable in full on the date of grant, and Messrs.
Allen and Bailey were each granted a warrant to purchase 100,000 shares of the
Company's Common Stock at a purchase price of $3.54 per share, which warrants
were exercisable to the extent of one-third of the shares issuable thereunder on
the date of grant; an additional one-third of the shares issuable thereunder
will become exercisable on each of the first two anniversaries of the date of
grant. The holders of the foregoing warrants have agreed not to exercise any of
such warrants until February 1999.
The Company has retained Albert M. Zlotnick, a former Chairman and Chief
Executive Officer, as a consultant for a period of two years commencing December
1, 1995, at a rate of $15,000 per month.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
The Company has retained Donald T. Pascal as an executive officer for a
period of three years from November 15, 1995. As compensation for his services,
Mr. Pascal was granted options and warrants to purchase 200,000 shares of Common
Stock at a price of $3.54 per share, and, commencing January 1, 1996, Mr. Pascal
has been paid $125,000 per year.
Deborah A. Farrington, a former director of the Company, rendered services
to the Company pursuant to an agreement dated November 15, 1995. As compensation
for her services, Ms. Farrington was granted options and warrants to purchase
100,000 shares of Common Stock at a price of $3.54 per share and Hudson River
was paid at the rate of $25,000 per year through June 30, 1996. Ms. Farrington
has agreed not to exercise such options or warrants until February 1999.
CPI has entered into an employment agreement with each of James S.
Harrington, Duane A. Gawron, 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 salary of $163,600 for the first twelve
months and $175,000 per year thereafter plus an annual cash bonus (subject to a
maximum of the annual base salary for such year or partial year) equal to five
percent of the amount by which the "Adjusted Bonus EBITDA" (as defined) for such
year, or partial year, exceeds the "Adjusted Bonus EBITDA" for the prior year or
part thereof. The employment agreements provide for payment of both salary and
bonus for the full three-year term if the executive is discharged other than for
cause, death or disability, and, in the case of the death or disability of the
executive, for the payment of salary for the full three-year term and bonus for
the year in which the executive dies or becomes disabled. If the employee is
terminated for cause or resigns in breach of the employment agreement, no
further salary is payable and any bonus for the year of termination is
forfeited. The
- 18 -
<PAGE> 19
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.
John E. Pylak, a former director and officer of the Company, entered into an
agreement with CPI which was identical in form to the ones entered into with
Messrs. Harrington, Gawron and Cieszkowski. Mr. Pylak resigned as a director and
officer of the Company in January 1997 and his employment agreement was
terminated concurrently.
In connection with the CPI Acquisition, the Company issued an aggregate of
472,148 options, subject to shareholder approval, to officers and employees of
CPI including options covering 90,669 shares to Mr. Harrington, an option
covering 86,043 shares to each of Messrs. Gawron and Pylak, and an option
covering 45,643 shares to Mr. Cieszkowski. The Company's shareholders approved
the 1996 Plan relating to the foregoing options in December 1996. The options
are not exercisable until July 8, 1999, but will become fully exercisable if
there is a "change of control," as defined. The right to exercise the options
vests over a two year period with respect to options granted to Messrs.
Harrington, Gawron, Pylak and Cieszkowski and over a five year period with
respect to other employees. If an optionee dies, becomes disabled or is
terminated other than for cause, the option will become fully vested and may be
exercised for a specified period commencing on the later of the date of such
event and July 8, 1999; if the optionee resigns or is terminated for cause the
option may be exercised, to the extent vested on the date of such resignation or
termination, for a specified period commencing on the later of the date of such
event and July 8, 1999.
On July 9, 1996, CPI entered into an Employment Agreement with Gregory C.
Kowert, Chief Financial Officer, Senior Vice President and Secretary of the
Company. The agreement is for a term of 18 months and provides for Mr. Kowert to
be compensated at the rate of $160,000 per annum. Under the agreement, Mr.
Kowert may also be paid a discretionary bonus of up to $60,000 per annum. The
employment agreement provides for payment of both salary and bonus for the full
term if Mr. Kowert is discharged other than for cause, death or disability, and,
in the case of the death or disability of Mr. Kowert, for the payment of salary
for the term and bonus for the year in which Mr. Kowert dies or becomes
disabled. If Mr. Kowert 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 agreement also includes provisions
regarding non-competition, non-solicitation, confidentiality and proprietary
information. In connection with the commencement of his employment, the Company
granted Mr. Kowert an option to acquire 25,000 shares of the Company's common
stock. The options are not exercisable until July 8, 1999, but will become fully
exercisable if there is a "change of control," as defined.
For a description of a change of control provision in the Stockholder's
Agreement, see "Item 12 Certain Transactions" below.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee currently consists of Ramon D.
Ardizzone and Stephen P. Kelbley. Until December 4, 1996, Louis Marx, Jr. and
Michael Weatherly served as the Compensation Committee. Except for Mr. Marx, who
was the Company's Co-Chairman, none of the members of the Compensation Committee
during the last fiscal year were officers or employees of the Company. During
the year ended December 31, 1996, no executive officer of the Company served as
a director or a member of the Compensation Committee (or other board committee
performing equivalent functions) of another entity one of whose executive
officers served on the Compensation Committee or the Board of Directors of the
Company.
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<PAGE> 20
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners.
The following table sets forth, as of March 18, 1997, information
regarding the holdings of all persons known to own beneficially more than 5% of
the Common Stock. Unless otherwise indicated, such ownership is believed to be
direct, with sole voting and investment powers.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED CLASS (1)
- ------------------------------------ --------------------- -------------
<S> <C> <C>
Hudson River Capital LLC 1,749,044 (2) 31.4%
667 Madison Avenue
New York, NY 10022
</TABLE>
- -------------------
(1) Based on 5,565,074 shares of Common Stock outstanding.
(2) The information set forth in the table regarding shares of Common Stock
owned by Hudson River is based on Amendment No. 14 to the Schedule 13D,
filed on January 31, 1996 jointly by Forschner Enterprises, Inc. (which has
since merged with and into Victory Capital LLC which changed its name to
Hudson River), Brae Group, Inc. ("Brae") and Louis Marx, Jr., which
schedule indicates that Hudson River holds 1,749,044 shares of the
Company's Common Stock and Brae holds 215,962 (3.7%) shares of the
Company's Common Stock. As a significant indirect holder of voting
securities of Hudson River, Brae may be deemed to be beneficial owner,
within the meaning of Rule 13d-3 promulgated under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), of the shares of the
Company's Common stock held directly by Hudson River, although Brae
disclaims beneficial ownership thereof. As a significant holder of voting
securities of both Hudson River and Brae, Louis Marx, Jr. may be deemed to
be the beneficial owner of the shares of the Company's Common Stock held
directly by Hudson River and by Brae. Mr. Marx disclaims beneficial
ownership thereof.
The following table sets forth certain information, as of March 18, 1997
concerning shares of Common Stock owned of record or beneficially by each
director, and by each of the Named Executive Officers (as defined in the section
entitled "Management Compensation"), and by all executive officers and directors
as a group. The footnotes reflect the ownership by such persons of each class of
equity securities of Hudson River, which may be deemed to be the parent of the
Company within the meaning of the federal securities laws, and CPI.
<TABLE>
<CAPTION>
PERCENT
SHARES BENEFICIALLY BENEFICIALLY
NAME OWNED(1) OWNED (2)
- ---- ------------------- ------------
<S> <C> <C>
Ramon D. Ardizzone -0-(3) *
Clarke H. Bailey 9,500(4) *
Herbert M. Friedman -0-(5) *
Duane A. Gawron -0-(6) *
James S. Harrington -0-(7) *
Stephen P. Kelbley -0-(8) *
Donald T. Pascal 16,750(9) *
All executive officers and directors
as a group (10 persons) 38,750(10) .7%
</TABLE>
- ----------------
* Less than 1%.
(1) Unless otherwise indicated, each of the parties listed has sole voting and
investment power over the shares owned. The number of shares of Common
Stock indicated includes, in each case, the number of shares of Common
Stock currently issuable upon exercise of options granted under the
Company's 1991 Stock Incentive Plan (the "1991 Plan"), the Company's 1996
Stock Incentive Plan (the "1996 Plan") and non-plan warrants and options.
For
- 20 -
<PAGE> 21
purposes of this table, shares are deemed to be "currently issuable" if
they may become issuable upon exercise of an option or warrant within 60
days following the Record Date.
(2) Based on 5,565,074 shares of Common Stock currently issued and outstanding.
In addition, treated as outstanding for the purpose of computing the
percentage ownership of each individual or group are shares of Common Stock
currently issuable to such individual or group upon exercise of options or
warrants.
(3) Does not reflect 6,250 shares of Common Stock currently issuable upon
exercise of a warrant and 500 shares of Common Stock which is issuable upon
exercise of an option which Mr. Ardizzone has agreed not to exercise until
1999.
(4) Consists of 9,500 shares held directly. Does not reflect 66,666 shares of
Common Stock currently issuable upon exercise of a warrant and 500 shares
of Common Stock which are issuable upon exercise of an option which Mr.
Bailey has agreed not to exercise until 1999. Mr. Bailey is the owner of
95,239 series B preferred units of Hudson River and holds 155,000 plan
units issued by Hudson River which entitle Mr. Bailey to voting rights and
to receive a portion of the appreciation of Hudson River's assets since the
date of grant of such units, under certain circumstances ("Plan Units"). Of
Mr. Bailey's Plan Units, 75,000 are beneficially owned by a charitable
foundation of which Mr. Bailey is a trustee. The series B preferred units
and the Plan Units beneficially owned by Mr. Bailey collectively represent
2.6% of the voting securities of Hudson River.
(5) Does not reflect 6,250 shares of Common Stock currently issuable upon
exercise of a warrant and 500 shares of Common Stock issuable upon exercise
of an option which Mr. Friedman has agreed not to exercise until 1999. Mr.
Friedman is the owner of 4,762 series B preferred units (less than 1% of
the voting securities) of Hudson River.
(6) Mr. Gawron is the beneficial owner of 32.1044 shares (4.2%) of common
stock, par value $.01 per share, of CPI ("CPI Common Stock") including
20.8397 shares held by Mr. Gawron as trustee under a trust and 11.2647
shares held by Mr. Gawron's wife.
(7) Mr. Harrington is the beneficial owner of 33.7941 shares (4.4%) of CPI
Common Stock.
(8) Does not reflect 2,500 shares of Common Stock currently issuable upon
exercise of an option which Mr. Kelbley has agreed not to exercise until
1999.
(9) Consists of 13,000 shares held directly and 3,750 shares held in trust for
Mr. Pascal's children. Does not reflect 76,666 shares of Common Stock
currently issuable upon exercise of options and 56,666 shares of Common
Stock currently issuable upon exercise of a warrant which Mr. Pascal has
agreed not to exercise until 1999. Mr. Pascal is the beneficial owner of
24,524 series B preferred units and 75,000 Plan Units (collectively 1% of
the voting securities) of Hudson River.
(10) Does not include 258,164 shares of Common Stock currently issuable upon
exercise of options and warrants which the holders have agreed not to
exercise until 1999 and certain shares with respect to which beneficial
ownership is disclaimed. If the foregoing options and warrants which the
holders have agreed not to exercise were included, the shares beneficially
owned by all executive officers and directors as a group would be 296,914
or 5.1%. The executive officers and directors as a group beneficially own
82.7956 shares (10.8%) of CPI Common Stock and 124,525 series B preferred
units and 270,000 Plan Units (collectively, 4.1% of the voting securities)
of Hudson River.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On May 31, 1996, the Company acquired 85% of the outstanding capital stock
of CPI, a privately held company engaged in the business of distribution,
manufacturing and assembly of wire and cable, from James S. Harrington, Duane A.
Gawron, Trustee of the Living Trust of Duane A. Gawron, Margo Gawron, John E.
Pylak, Trustee of the John E. Pylak Living Trust, Rebecca Pylak and Kurt
Cieszkowski (the "Sellers"). As a result of the transaction, Mr. Harrington
became the President, Chief Executive Officer and a director of the Company;
Messrs. Gawron and Pylak became Senior Vice Presidents and directors of the
Company; and Mr. Cieszkowski became a Senior Vice President of the Company.
Margo Gawron is the wife of Duane A. Gawron and Rebecca Pylak is the wife of
John E. Pylak. The remaining 15% of the outstanding common stock of CPI
continues to be held by the Sellers.
- 21 -
<PAGE> 22
In consideration for such sale, the Sellers received: (i) from CPI, in
consideration for shares of CPI Common Stock held by them and redeemed by CPI,
(A) an aggregate of $7,622,919 (the "Redemption Amount"), $250,000 of which was
placed in escrow, (B) promissory notes due May 31, 2003 in the aggregate
principal amount of $6,000,000, (C) additional promissory notes due May 31, 2003
in the aggregate principal amount of $3,000,000, payment of which is contingent
upon the achievement by CPI of certain financial targets, and (D) forgiveness of
an aggregate of $2,000,000 in indebtedness of the Sellers to CPI; and (ii) from
the Company, an aggregate of $7,990,000, $1,000,000 of which was placed in
escrow. In addition, the Company committed to invest an additional $3,500,000 in
preferred stock of CPI ("CPI Preferred Stock") to fund future expansion,
$1,350,000 of which was invested on the closing date and $1,250,000 of which was
invested in December 1996. The CPI Preferred Stock has a preference on
liquidation equal to its purchase price, is non-voting, is not entitled to
dividends, and is subject to mandatory redemption at its purchase price per
share (i) after the payment of the promissory notes issued to the Sellers in
partial consideration for the shares of CPI Common Stock redeemed by CPI, and
(ii) subject to the consent of CPI's lenders. The Company has also invested
$400,000 for a subordinated note payable by CPI for working capital purposes.
Pursuant to the Stockholders' Agreement executed in connection with the
acquisition of CPI, the Company granted to the Sellers a put option to sell
their shares of CPI Common Stock to the Company, and the Sellers granted the
Company a call option to purchase Sellers' shares of CPI Common Stock
(collectively, the "Put/Call Options") at a price to be determined based on the
then market value of the shares of the Company's Common Stock now outstanding
subject to specified adjustments. The Put/Call Options are exercisable in
increments of one-third of Sellers' shares of CPI common stock on each of the
54th, 60th and 66th month anniversary dates of the closing of the CPI
Transaction and become immediately exercisable in the event of a merger,
liquidation, sale of substantially all of the assets or change of control of the
Company. The Stockholders Agreement contains additional provisions including,
among others, provisions relating to the inclusion of James Harrington, Duane A.
Gawron and John E. Pylak in management's slate of nominees for election as
directors of the Company, the Company's investment of $3,500,000 in CPI
Preferred Stock, restrictions on the transferability of shares of CPI stock held
by the Company and by the Sellers, "tag along" rights which entitle the Sellers
to sell, and "drag along" rights which require the Sellers to sell, their shares
of CPI Common Stock in the event of a proposed transfer by the Company of all of
its shares of CPI Common Stock, participation rights in favor of the Sellers in
any future issuances of capital stock or options or warrants convertible into
capital stock of CPI (other than employee stock options) for cash or in any
additional entity organized by the Company to make acquisitions in the wire and
cable industry, and restrictions on the Company's ability to acquire any
business not engaged in the wire and cable industry without the consent of the
holders of a majority of the shares of CPI Common Stock held by the Sellers.
Pursuant to a Stock Option Purchase Agreement dated as of December 17,
1996, CPI purchased an option to acquire 100% of the capital stock of Signal
Sales Corp. ("Signal"), a distributor of wire and cable to the municipal traffic
signal and communication market, from James S. Harrington, President, Chief
Executive Officer and a director of the Company in consideration for payment to
Mr. Harrington of $600,000. The option is presently exercisable for nominal
consideration. In the year ended December 31, 1996, CPI supplied Signal with
over $2,234,139 in wire and cable products for distribution to such market,
which products represented most of the wire and cable marketed by Signal in such
year. Signal was founded in 1993 by Stuart Zeiff with the assistance of Mr.
Harrington and Wayne McPherson, Vice President of Sales of the BSCC division of
CPI, who currently holds all of the outstanding capital stock of Signal.
Concurrently with the acquisition of the option, CPI acquired Signal's name and
certain of its assets and Mr. Zeiff entered into an employment agreement with
CPI. CPI and the Company elected to treat Mr. Harrington's status in respect of
Signal as not in contravention of the non-competition provisions included in Mr.
Harrington's employment agreement and in the purchase agreement governing the
Company's acquisition of CPI.
As of December 31, 1996, Mr. Harrington was indebted to CPI in the
aggregate amount of $620,310, which indebtedness is payable on demand and bears
interest at the federal tax rate.
On November 8, 1995, Hudson River purchased from Beverly Hills Bancorp its
holdings of the Company then owned directly and indirectly (1,185,000 shares)
for $3.60 per share. Hudson River also purchased certain shares of the Company
then owned by Albert M. Zlotnick (432,750 shares) and Michael S. Berlin (62,062
shares), each of whom was then a director of the Company, at $3.60 per share. As
a result of this transaction and subsequent transfers by Hudson River to its
affiliates, including Brae, Hudson River holds approximately 31% of the
outstanding Common Stock and Hudson River may be deemed to be the parent of the
Company within the meaning of the federal
- 22 -
<PAGE> 23
securities laws. The Company retained Albert M. Zlotnick as a consultant for a
period of two years from December 1, 1995, at a rate of $15,000 per month. From
February 1993 to November 1995, Mr. Zlotnick served as Chairman of the Board and
Chief Executive Officer of the Company and was paid a salary of $20,000 per
month. Effective as of November 8, 1995, all of the prior directors of the
Company resigned (except for Albert M. Zlotnick and A. Clinton Allen) and were
replaced by directors recommended by Hudson River. Hudson River and its
affiliates currently hold approximately 31.4% of the outstanding shares of
Common Stock of the Company.
The Company pays to Noel the sum of $20,676 per month in consideration of
the rental of office space and support staff payments as well as reimbursement
for salary payments made by Noel to employees of the Company.
From January 1 through June 30, 1996, the Company paid $12,917 per month
to Hudson River in consideration of the rental of office space and reimbursement
for salary payments made by Hudson River to employees of the Company, including
Deborah Farrington, a former director.
During the year ended December 31, 1996, the Company paid $379,400 for
legal services rendered by the law firm of Zimet, Haines, Friedman & Kaplan, of
which Herbert M. Friedman, a director of the Company, is a partner.
Reference is also made to "Item 10 Executive Compensation-Compensation of
Directors".
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
(1) The financial statements of the Company and the report thereon listed
on the Index to Financial Statements on page F-1 hereof are being
filed as part of this Annual Report on Form 10-KSB.
(2) The following exhibits are being filed as exhibits to this Annual
Report on Form 10-KSB or, where indicated, are incorporated by
reference:
2 Plan of acquisition, reorganization, arrangement, liquidation or
succession.
2.1 Stock Redemption and Purchase Agreement dated as of May 17, 1996 (the
"Purchase Agreement") by and among James S. Harrington, Duane A. Gawron, Trustee
of the Living Trust of Duane A. Gawron, Margo Gawron, John E. Pylak, Trustee of
the John E. Pylak Living Trust, Rebecca Pylak and Kurt Cieszkowski
(collectively, the "Sellers"), Connectivity Products Incorporated, a Delaware
corporation ("CPI"), and the Company (incorporated by reference to Exhibit of
the same number to the Company's Current Report on Form 8-K dated May 31, 1996).
2.2 Amendment No. 1 to the Purchase Agreement dated as of May 31, 1996
(incorporated by reference to Exhibit of the same number to the Company's
Current Report on Form 8-K dated May 31, 1996).
3 Articles of Incorporation and By-Laws.
3.1 Certificate of Amendment of the Restated Certificate of Incorporation
of the Registrant dated July 21, 1987 (incorporated by reference to Exhibit 3.1
to the Company's Annual Report on Form 10-K for the year ended December 31,
1987).
3.2 Amended and Restated By-Laws of the Registrant (incorporated by
reference to Exhibit 3.2 to the Company's Annual Report on form 10-K for the
year ended December 31, 1988).
3.3 Certificate of Amendment to Certificate of Incorporation of Tigera
Group, Inc. dated December 5, 1996, filed herewith.
- 23 -
<PAGE> 24
3.4 Certificate of Amendment to the Certificate of Incorporation of
Connectivity Technologies Inc. dated December 13, 1996, filed herewith.
4 Instruments defining the rights of security holders, including
indentures.
4.1 Reference is made to Exhibits 3.1 , 3.2 and 3.4.
9 Voting Trust Agreements. None.
10 Material Contracts.
10.1 Letter Agreement dated April 11, 1991, among Joseph M. Girard and
James S. Campbell and the Registrant (incorporated by reference to Exhibit of
the same number to the Company's Annual Report on Form 10-K for the year ended
December 31, 1991).
10.2 Registrant's 1991 Stock Option Plan (incorporated by reference to
Exhibit of the same number to the Company's Annual Report on Form 10-K for the
year ended December 31, 1991).
10.3 Form of Non-Employee Stock Option Agreement used in connection with
the 1991 Stock Option Plan (incorporated by reference to Exhibit of the same
number to the Company's Annual Report on Form 10-K for the year ended December
31, 1991).
10.4 Form of Incentive Stock Option Agreement used in connection with the
1991 Stock Option Plan (incorporated by reference to Exhibit of the same number
to the Company's Annual Report on Form 10-K for the year ended December 31,
1991).
10.5 Form of Incentive Stock Option Agreement used in connection with the
1991 Stock Option Plan (incorporated by reference to Exhibit of the same number
to the Company's Annual Report on Form 10-KSB for the year ended December 31,
1995).
10.6. Form of Employee Non-Qualified Stock Option Agreement used in
connection with the 1991 Stock Option Plan (incorporated by reference to Exhibit
of the same number to the Company's Annual Report on Form 10- KSB for the year
ended December 31, 1995).
10.7. Form of non-Employee Non-Qualified Stock Option Agreement used in
connection with the 1991 Stock Option Plan (incorporated by reference to Exhibit
of the same number to the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1995).
10.8 Form of Warrant Agreement dated as of April 11, 1991, by and between
the Registrant and each of James S. Campbell and Joseph M. Gerard (incorporated
by reference to Exhibit of the same number to the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1995).
10.9 Form of Warrant Agreement dated as of November 15, 1995, by and
between the Registrant and each of Donald T. Pascal and Deborah A. Farrington
(incorporated by reference to Exhibit of the same number to the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1995).
10.10 Form of Warrant Agreement dated as of November 15, 1995, by and
between the Registrant and each of Messrs. Julien H. Meyer III and Francis G.
Hayes (incorporated by reference to Exhibit of the same number to the Company's
Annual Report on Form 10-KSB for the year ended December 31, 1995).
10.11 Form of Warrant Agreement dated as of November 15, 1995, by and
between the Registrant and each of A. Clinton Allen and Clarke H. Bailey
(incorporated by reference to Exhibit of the same number to the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1995).
10.12 Form of Warrant Agreement dated as of November 15, 1995, by and
between the Registrant and each of Ramon Ardizzone, Albert M. Zlotnick and
Herbert M. Friedman (incorporated by reference to Exhibit of the same number to
the Company's Annual Report on Form 10-KSB for the year ended December 31,
1995).
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<PAGE> 25
10.13 Form of Warrant Agreement dated as of December 26, 1995, by and
between the Registrant and each of Michael S. Berlin, Philip R. Hankin, Irving
I. Lassoff, James A. Martin III and Daniel A. Rivetti (incorporated by reference
to Exhibit of the same number to the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1995).
10.14 Employment Agreement dated as of November 15, 1995, by and between
the Registrant and Donald T. Pascal (incorporated by reference to Exhibit of the
same number to the Company's Annual Report on Form 10- KSB for the year ended
December 31, 1995).
10.15 Employment Agreement dated as of November 15, 1995, by and between
the Registrant and Deborah A. Farrington (incorporated by reference to Exhibit
of the same number to the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1995).
10.16 Form of Consulting Agreement dated as of November 15, 1995, by and
between the Registrant and each of Messrs. Julien H. Meyer III and Francis G.
Hayes (incorporated by reference to Exhibit of the same number to the Company's
Annual Report on Form 10-KSB for the year ended December 31, 1995).
10.17 Stockholders' Agreement relating to CPI dated as of May 17, 1996
among the Sellers, CPI and the Company (incorporated by reference to Exhibit
10.1 of the Company's Current Report on Form 8-K dated May 31, 1996).
10.18 Form of Employment Agreement dated as of May 17, 1996 by and between
CPI and each of Messrs. Harrington, Gawron, Pylak and Cieszkowski (incorporated
by reference to Exhibit 10.2 of the Company's Current Report on Form 8-K dated
May 31, 1996).
10.19 Form of Redemption Note dated as of May 31, 1996 by CPI in favor of
each of the Sellers (incorporated by reference to Exhibit 10.3 of the Company's
Current Report on Form 8-K dated May 31, 1996).
10.20 Form of Contingent Note dated as of May 31, 1996 by CPI in favor of
each of the Sellers (incorporated by reference to Exhibit 10.4 of the Company's
Current Report on Form 8-K dated May 31, 1996).
10.21 Credit Agreement dated as of May 31, 1996, by and among NBD Bank
("NBD") and The First National Bank of Boston ("FNBB" and, together with NBD and
the other lending institutions listed on Schedule 1 thereto, the "Banks"), each
individually and as Co-Agent, and CPI (incorporated by reference to Exhibit 10.1
of the Company's Quarterly Report on Form 10-QSB for the quarter ended June 30,
1996).
10.22 $10,000,000 Revolving Credit Note dated as of May 31, 1996 executed
by CPI in favor of NBD (incorporated by reference to Exhibit 10.2 of the
Company's Quarterly Report on Form 10-QSB for the quarter ended June 30, 1996).
10.23 $10,000,000 Revolving Credit Note dated as of May 31, 1996 executed
by CPI in favor of FNBB (incorporated by reference to Exhibit 10.3 of the
Company's Quarterly Report on Form 10-QSB for the quarter ended June 30, 1996).
10.24 $3,500,000 Line of Credit Note dated as of May 31, 1996 executed by
CPI in favor of NBD (incorporated by reference to Exhibit 10.4 of the Company's
Quarterly Report on Form 10-QSB for the quarter ended June 30, 1996).
10.25 $3,500,000 Line of Credit Note dated as of May 31, 1996 executed by
CPI in favor of FNBB (incorporated by reference to Exhibit 10.5 of the Company's
Quarterly Report on Form 10-QSB for the quarter ended June 30, 1996).
10.26 $9,300,000 Term Loan A Note dated as of May 31, 1996 executed by CPI
in favor of NBD (incorporated by reference to Exhibit 10.6 of the Company's
Quarterly Report on Form 10-QSB for the quarter ended June 30, 1996).
- 25 -
<PAGE> 26
10.27 $9,300,000 Term Loan A Note dated as of May 31, 1996 executed by CPI
in favor of FNBB (incorporated by reference to Exhibit 10.7 of the Company's
Quarterly Report on Form 10-QSB for the quarter ended June 30, 1996).
10.28 Subordination Agreement dated as of May 31, 1996, executed by James
S. Harrington, Duane A. Gawron, Trustee of the Living Trust of Duane A. Gawron,
Margo Gawron, John E. Pylak, Trustee of the John E. Pylak Living Trust, Rebecca
Pylak and Kurt Cieszkowski (collectively, the "Sellers"), the Company and CPI in
favor of NBD, as administrative agent for the Banks (the "Agent") (incorporated
by reference to Exhibit 10.8 of the Company's Quarterly Report on Form 10-QSB
for the quarter ended June 30, 1996).
10.29 Security Agreement dated as of October 5, 1995, by and between CPI
and the Agent (incorporated by reference to Exhibit 10.9 of the Company's
Quarterly Report on Form 10-QSB for the quarter ended June 30, 1996).
10.30 First Amendment to the Security Agreement dated as of May 31, 1996,
by and between CPI and the Agent (incorporated by reference to Exhibit 10.9(a)
of the Company's Quarterly Report on Form 10-QSB for the quarter ended June 30,
1996).
10.31 Guaranty dated as of May 31, 1996 executed by the Company in favor
of the Agent (incorporated by reference to Exhibit 10.10 of the Company's
Quarterly Report on Form 10-QSB for the quarter ended June 30, 1996).
10.32 Stock Pledge Agreement dated as of May 31, 1996, by and between the
Company and the Agent (incorporated by reference to Exhibit 10.11 of the
Company's Quarterly Report on Form 10-QSB for the quarter ended June 30, 1996).
10.33 Note Pledge Agreement dated as of May 31, 1996, by and among the
Sellers and the Agent (incorporated by reference to Exhibit 10.12 of the
Company's Quarterly Report on Form 10-QSB for the quarter ended June 30, 1996).
10.34 Form of Stock Option Agreement dated as of March 8, 1996, by and
between the Company and each of James S. Harrington, Duane A. Gawron, John E.
Pylak and Kurt Cieszkowski (incorporated by reference to Exhibit 10.13 of the
Company's Quarterly Report on Form 10-QSB for the quarter ended June 30, 1996).
10.35 Employment Agreement dated as of July 9, 1996 between Gregory C.
Kowert and CPI (incorporated by reference to Exhibit 10.14 of the Company's
Quarterly Report on Form 10-QSB for the quarter ended June 30, 1996).
10.36 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 CPI (incorporated by reference to Exhibit 10.1 of the Company's
Quarterly Report on Form 10-QSB for the quarter ended September 30, 1996).
10.37 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 (incorporated by reference to Exhibit 10.2 of the Company's
Quarterly Report on Form 10-QSB for the quarter ended September 30, 1996).
10.38 Agreement, dated as of September 27, 1996, by and among James S.
Harrington, Duane A. Gawron, John E. Pylak, Kurt Cieszkowski and CPI
(incorporated by reference to Exhibit 10.3 of the Company's Quarterly Report on
Form 10-QSB for the quarter ended September 30, 1996).
10.39 Form of Employee Stock Option Agreement pursuant to the Company's
1996 Stock Incentive Plan (incorporated by reference to Exhibit 10.4 of the
Company's Quarterly Report on Form 10-QSB for the quarter ended September 30,
1996).
10.40 Company's 1996 Stock Incentive Plan (incorporated by reference to
Exhibit D to the Company's Proxy Statement relating to the Company's Annual
Meeting of Shareholders held on December 4, 1996).
- 26 -
<PAGE> 27
10.41 Stock Option Purchase Agreement by and among James S. Harrington,
CPI, Wayne McPherson and Signal Sales Corp. dated as of December 17, 1996, filed
herewith.
10.42 Building Lease between Anthony Bennet Properties and Energy Electric
Cable, Inc. dated December 22, 1988, filed herewith.
10.43 First Amendment to Building Lease between Anthony Bennet Properties
and Energy Electric Cable, Inc. dated February 9, 1994, filed herewith.
10.44 Lease of Real Property at Crossroad Office Park by Peter F. Zichelle
to Connectivity Products, Inc. dated December 19, 1996, filed herewith.
10.45 Lease by and between Key Plastics, Inc. and Connectivity Products,
Inc. dated March 6, 1997, filed herewith.
10.46 First Amendment of Certain Security Documents and Subordination
Agreement and Third Amendment to Amended and Restated Revolving Audit and Term
Loan Agreement by and among CTI, CPI and NBD, filed herewith.
10.47 Net Lease by and between Douglas J. Detweiler and BSCC Corp. dated
June 5, 1995, filed herewith.
10.48 Second Amendment to Lease by and between Douglas J. Detweiler and
BSCC Corp. dated August 29, 1995, filed herewith.
11 Statement re computation of per share earnings, filed herewith.
16 Letter re change in accountants. None
18 Letter re change in accounting principles. None
21 Subsidiaries of the Registrant, filed herewith.
23 Consent of Experts and Counsel.
23.1 Consent of Coopers & Lybrand LLP, filed herewith.
24 Power of Attorney. None
27 Financial Data Schedule, filed herewith.
99 Additional Exhibits. None.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the last quarter of the year
ended December 31, 1996.
- 27 -
<PAGE> 28
CONNECTIVITY TECHNOLOGIES INC.
CONTENTS
<TABLE>
<CAPTION>
PAGES
-----
<S> <C>
Report of Independent Accountants ...................................... F-2
Financial Statements:
Consolidated Balance Sheet ........................................ F-3
Consolidated Statements of Income ................................. F-4
Consolidated Statements of Stockholders' Equity ................... F-5
Consolidated Statements of Cash Flows ............................. F-6
Notes to Consolidated Financial Statements ......................... F-7 - F-17
</TABLE>
F-1
<PAGE> 29
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
of Connectivity Technologies Inc.:
We have audited the accompanying consolidated balance sheet of Connectivity
Technologies Inc. as of December 31, 1996 and the related consolidated
statements of income, stockholders' equity, and cash flows for the years ended
December 31, 1996 and 1995. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Connectivity
Technologies Inc. as of December 31, 1996 and the results of its operations and
its cash flows for the years ended December 31, 1996 and 1995, in conformity
with generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P
Detroit, Michigan ----------------------------
February 24, 1997
F-2
<PAGE> 30
CONNECTIVITY TECHNOLOGIES INC.
(formerly Tigera Group, Inc.)
CONSOLIDATED BALANCE SHEET
as of December 31, 1996
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current assets:
Cash and cash equivalents $ 230,107
United States Treasury Bills 989,941
Accounts receivable:
Trade (net of allowance for doubtful accounts of $735,000) 15,993,055
Other 183,898
Inventories 12,358,571
Prepaid expenses and other assets 357,330
Deferred tax asset 1,524,852
-------------
Total current assets 31,637,754
Property, plant and equipment:
Machinery and equipment 6,535,865
Transportation equipment 139,472
Office equipment 566,896
Leasehold improvements 579,298
-------------
7,821,531
Less accumulated depreciation 645,485
-------------
7,176,046
Deferred tax asset 10,007,781
Deposits and other assets 333,192
Goodwill and intangible assets, net of accumulated amortization 14,790,177
-------------
$ 63,944,950
=============
LIABILITIES
Current liabilities:
Current portion of long-term debt $ 3,255,000
Trade accounts payable 11,256,014
Accrued compensation and commissions 394,475
Accrued liabilities 2,191,949
-------------
Total current liabilities 17,097,438
Long-term debt 34,295,000
-------------
Total liabilities 51,392,438
-------------
Minority interest, net of demand notes receivable of $620,310, 6 percent, from a minority
stockholder of the subsidiary (466,531)
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 per share, authorized 20,000,000 shares, outstanding
5,565,325 shares, net of 206,601 shares held in treasury 222,613
Additional paid-in capital 109,336,792
Accumulated deficit (96,540,362)
-------------
Total stockholders' equity 13,019,043
-------------
Total liabilities and stockholders' equity $ 63,944,950
=============
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
F-3
<PAGE> 31
CONNECTIVITY TECHNOLOGIES INC.
(formerly Tigera Group, Inc.)
CONSOLIDATED STATEMENTS OF INCOME
for the years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Net sales $ 56,697,955 --
Cost of goods sold 41,275,166 --
------------ ------------
Gross profit 15,422,789 --
Selling, general and administrative expenses 12,709,069 $ 853,700
------------ ------------
Operating income (loss) 2,713,720 (853,700)
Other income (expense):
Interest income 336,717 700,248
Interest expense (1,968,323) --
Other 65,077 --
------------ ------------
Income (loss) before income taxes and minority interest 1,147,191 (153,452)
Provision for income taxes 634,252 --
------------ ------------
Income (loss) before minority interest 512,939 (153,452)
Minority interest in income of consolidated subsidiary (153,779) --
------------ ------------
Net income (loss) $ 359,160 $ (153,452)
============ ============
Primary and fully-diluted net income (loss) per share $ 0.06 $ (0.03)
============ ============
Weighted average number of common shares outstanding (after giving
retroactive effect to reverse stock split):
Primary 5,987,925 5,321,575
============ ============
Fully-diluted 5,987,925
============
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
F-4
<PAGE> 32
CONNECTIVITY TECHNOLOGIES INC.
(formerly Tigera Group, Inc.)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
for the years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
------------------------- PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
--------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1995 21,286,301 $ 212,863 $108,741,543 $(96,746,070) $ 12,208,336
Net loss (153,452) (153,452)
------------ ------------ ------------ ------------ ------------
Balance, December 31, 1995 21,286,301 212,863 108,741,543 (96,899,522) 12,054,884
Net income 359,160 359,160
Stock options and warrants exercised 975,000 9,750 595,249 604,999
Reverse stock split (16,695,976)
------------ ------------ ------------ ------------ ------------
Balance, December 31, 1996 5,565,325 $ 222,613 $109,336,792 $(96,540,362) $ 13,019,043
============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
F-5
<PAGE> 33
CONNECTIVITY TECHNOLOGIES INC.
(formerly Tigera Group, Inc.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
Cash flows from operating activities:
<S> <C> <C>
Net income (loss) $ 359,160 $ (153,452)
Adjustments to reconcile net income (loss) to net cash from (used in)
operating activities:
Depreciation 645,485 --
Amortization 412,958 --
Minority interest in income of consolidated subsidiary 153,779 --
Deferred taxes 459,252 --
Changes in operating assets and liabilities:
Decreases (increase) in:
Accounts receivable (340,295) --
Inventories (940,693) --
Prepaid expenses and other assets 977,188 8,434
Deposits and other assets 3,443 --
(Decreases) increases in:
Accounts payable (1,349,733) --
Accrued liabilities (340,602) (47,000)
------------ ------------
Net cash provided by (used in) operating activities 39,942 (192,018)
------------ ------------
Cash flows from investing activities:
Purchases of United Sates treasury bills -- (16,021,000)
Sales of United States treasury bills 9,869,666 16,175,000
Purchases of property, plant and equipment (1,720,837) --
Acquisition of Connectivity Products, net of cash acquired of $756,170 (7,233,830) --
Acquisition of options of Signal ($629,182) and other intangible assets (655,815) --
------------ ------------
Net cash provided by investing activities 259,184 154,000
Cash flows from financing activities:
Proceeds from borrowing -- --
Repayment of long-term debt (850,000) --
Stock option exercised 604,999 --
------------ ------------
Net cash provided by financing activities (245,001) --
------------ ------------
Net increase (decrease) in cash and cash equivalents 54,125 (38,018)
Cash and cash equivalents, beginning of year 175,982 214,000
------------ ------------
Cash and cash equivalents, end of year $ 230,107 $ 175,982
============ ============
Supplementary disclosures of cash flow information:
Interest paid $ 1,652,264 --
============ ============
Taxes paid $ 63,138 --
============ ============
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
F-6
<PAGE> 34
CONNECTIVITY TECHNOLOGIES INC.
(formerly Tigera Group, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND ACQUISITION:
On May 31, 1996, Connectivity Technologies Inc. ("CTI," formerly known as
Tigera Group, Inc.) acquired for $7.99 million 85 percent of the
outstanding common stock of Connectivity Products Incorporated ("CPI"). The
primary business of CPI is the distribution and manufacture of wire and
cable products. CPI's operations include the distribution of a full line of
wire and cable products for the computer networking market and the
security, signal and sound markets, as well as the manufacture and assembly
of wire and cable products. Principal manufacturing markets include
security, factory automation, signal and sound. The stock acquisition has
been accounted for as a purchase and the purchase price allocated as
follows:
<TABLE>
<CAPTION>
<S> <C>
Current assets (including deferred taxes of $1,945,766) $ 30,167,738
Property, plant and equipment 6,100,694
Deferred taxes ($10,046,119) and other assets 10,382,754
Goodwill and intangible assets 14,547,320
------------
61,198,506
Liabilities (53,828,816)
Note receivable from minority stockholder 620,310
------------
$ 7,990,000
============
</TABLE>
Unaudited pro forma results of operations as if the acquisition had
occurred at January 1, 1995 follow:
<TABLE>
<CAPTION>
1996 1995
Unaudited
<S> <C> <C>
Revenue $97,264,000 $88,892,000
Income before income taxes and minority interest 2,034,000 1,471,000
Net income 768,000 511,000
Net income per share 0.13 0.10
</TABLE>
In connection with the acquisition, CTI granted the CPI minority
stockholders ("Stockholders") the option to require CTI to purchase (put)
their remaining common stock of CPI, and each Stockholder granted CTI the
option to purchase (call) the remaining outstanding stock. The put and call
purchase price is based on a formula which is tied to the market value of
CTI's common stock at the date of sale. These options are exercisable on
November 30, 2000, May 31, 2001 and November 30, 2001 in an amount on each
option date equal to one-third of the outstanding stock (on a cumulative
basis). There are limitations on the Stockholders ability to sell the
common stock.
F-7
<PAGE> 35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
1. ORGANIZATION AND ACQUISITION, CONTINUED:
Immediately prior to CTI's stock acquisition, CPI redeemed on a pro rata
basis 1,274 shares of its common stock for $7.6 million in cash, a $6
million subordinated note, a $3 million subordinated contingent note and
forgiveness of $2 million of stockholder notes. The subordinated
contingent note (which will bear interest at 10 percent beginning January
1, 1998, and will be due May 31, 2003) will become a liability of CPI
only if cumulative earnings before interest, taxes, depreciation and
amortization ("EBITDA," as defined) for the two years ended December 31,
1997, exceeds $22 million. The $3 million subordinated contingent note
has not been recorded by CPI since the conditions giving rise to the
liability are not assured.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
a. PRINCIPLES OF CONSOLIDATION: The consolidated financial statements
include the accounts of CTI and its 85 percent owned subsidiary, CPI
(collectively, the "Company"), after the elimination of all
intercompany accounts and transactions.
b. CASH AND CASH EQUIVALENTS: For purposes of the consolidated financial
statements, the Company considers all bank time deposits, commercial
paper and certificates of deposit with an original maturity of three
months or less to be cash equivalents.
c. NET INCOME (LOSS) PER SHARE: Net income per share is based on the
weighted average number of common shares and common share equivalents
(common stock options and warrants) outstanding during each period.
The computation of the net loss per share is based on weighted average
number of shares outstanding and does not include common stock
equivalents. Weighted average shares outstanding and earnings per
share for 1995 have been restated to reflect a 1-for-4 reverse stock
split approved by the Board of Directors on December 4, 1996.
d. INVENTORIES: Inventories are stated at the lower of cost or market,
with cost determined on the first-in, first-out basis. Inventory costs
include materials, direct labor and manufacturing overhead.
e. PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment are
recorded at cost less accumulated depreciation. Depreciation is
calculated using the straight-line method over the estimated useful
lives of the individual assets (5 to 12 years for equipment and 3 to
10 years for leasehold improvements). Costs of major renewals and
additions are capitalized, while expenditures for repairs and
maintenance costs are expensed as incurred. Upon retirement or
disposal of property and equipment, the cost and accumulated
depreciation are removed from the accounts, and any gain or loss is
included in the determination of net income.
F-8
<PAGE> 36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
f. ESTIMATES: 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.
g. FAIR VALUE OF FINANCIAL INSTRUMENTS: The Company has evaluated the
fair value of its financial instruments based on the current interest
rate environment and current pricing of debt instruments with
comparable terms. The carrying value of debt and other financial
instruments are considered to approximate fair value.
h. INTANGIBLE ASSETS: Intangible assets are comprised primarily of
goodwill. At each balance sheet date, management assesses whether
there has been impairment in the carrying value of the intangible
assets. This assessment is based on comparing amortization to
anticipated cash flows and operating results.
i. UNITED STATES TREASURY BILLS: Under the provisions of Statement of
Financial Accounting Standards No. 115 ("SFAS 115"), "Accounting for
Certain Investments in Debt and Equity Securities," the Company has
classified its United States treasury bills as available-for-sale.
Available-for-sale securities are stated at market and unrealized
holding gains and losses, net of the related tax effect, are excluded
from earnings and reported as a separate component of stockholders'
equity until realized. The carrying value of the United States
treasury bills approximates fair value.
j. NEW ACCOUNTING STANDARD: 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 stockholders by the weighted average
number of common shares outstanding and common stock equivalents.
Earnings per share calculated under the new statement are as follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Basic earnings (loss) per share $ 0.07 $ (0.03)
Diluted earnings (loss) per share 0.06 (0.03)
</TABLE>
F-9
<PAGE> 37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
3. INVENTORIES:
<TABLE>
<CAPTION>
Inventories consist of the following components:
<S> <C>
Raw materials $ 3,278,572
Work in process 567,436
Finished goods 8,512,563
-----------
$12,358,571
===========
</TABLE>
4. INTANGIBLE ASSETS:
<TABLE>
<CAPTION>
Intangible assets consist of the following:
<S> <C>
Financing fees (6-year amortization) $ 593,104
Goodwill (25-year amortization) 14,610,031
-----------
15,203,135
Accumulated amortization 412,958
-----------
$14,790,177
===========
</TABLE>
5. DEBT:
<TABLE>
<CAPTION>
Debt consists of the following:
<S> <C>
Revolving credit (see below) $12,950,000
Term loan, due in quarterly installments of $697,500 to $930,000
through May 31, 2002 18,600,000
Subordinated note in connection with CPI's stock redemption,
interest at 10 percent payable quarterly, due May 31, 2003 6,000,000
-----------
37,550,000
Less current portion 3,255,000
-----------
$34,295,000
===========
</TABLE>
F-10
<PAGE> 38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
5. DEBT, CONTINUED:
Interest on the bank borrowings (revolving credit, term loan and line of
credit) is payable at various dates and accrues primarily at various LIBOR
rates (5.50 percent to 6.06 percent - LIBOR rate at December 31 was
approximately 5.6 percent) 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 1.0 percent. Under certain conditions, the 2.75 percent add on will be
reduced to 1.75 percent, and the 1.0 percent add on will be reduced to zero
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 assets of CPI and by the CPI stock
owned by CTI. Total bank borrowings are limited to $45.6 million and are
further limited by formula based on EBITDA. Total availability at December
31, 1996 under the bank borrowings was $3.5 million.
The revolving credit facility matures on May 31, 2002 and allows for
maximum borrowings of $20 million (subject to an overall limitation, as
described above). Amounts advanced under the facility are based on a
percentage of eligible inventory and accounts receivables. The line of
credit is for $7 million (subject to an overall limitation, as discussed
above) 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 December
31, 1996.
In December 1996, CPI entered into an interest rate swap agreement with the
lending banks to eliminate the impact of changes in interest rates on a
portion of its bank borrowings. Under the terms of the agreement (which
expires in December 1999), CPI will receive (or remit) on a quarterly basis
the difference between interest computed at a fixed rate of 5.98 percent on
a notional principal amount of $15 million (reduced to $10 million in
December 1998) and interest computed at various LIBOR rates (5.50 percent
to 6.06 percent at December 31, 1996), as established under the bank
borrowing agreement, on $15 million (reduced to $10 million in December
1998).
The debt matures as follows:
<TABLE>
<CAPTION>
Year ended May 31,:
<S> <C>
1997 $ 3,255,000
1998 2,790,000
1999 3,255,000
2000 3,720,000
2001 3,255,000
Thereafter 21,275,000
-----------
$37,550,000
===========
</TABLE>
F-11
<PAGE> 39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
5. DEBT, CONTINUED:
The bank borrowings contain various covenants related, among others, to
maintenance of minimum consolidated net worth, maintenance of a maximum
ratio of senior debt (and total debt) to EBITDA (as defined) and
maintenance of minimum interest and fixed charges coverage ratios (as
defined).
6. LEASES:
CPI leases its facilities and certain shop equipment, vehicles and office
equipment under various operating leases which expire on various dates
through 2000. Management expects that in the normal course of business,
leases that expire will be renewed or replaced by other leases.
Future minimum payments under the operating leases are summarized as
follows:
<TABLE>
<CAPTION>
Years ending December 31,:
<S> <C>
1997 $1,719,764
1998 1,593,156
1999 1,329,344
2000 1,060,668
2001 821,336
Thereafter 1,378,859
----------
Total minimum lease payments $7,903,127
==========
</TABLE>
Rent expense was approximately $1,181,200 for the year ended December 31,
1996.
7. INCOME TAXES:
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
United States:
Current $ 359,586 --
Deferred 459,252 --
Utilization of net operating loss ("NOL") carryforward (359,586) --
Valuation allowance
State and local 175,000 --
--------- -------
$ 634,252 --
========= =======
</TABLE>
F-12
<PAGE> 40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
7. INCOME TAXES, CONTINUED:
A reconciliation of the federal statutory income tax rate to the effective
tax rate follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Statutory rate 34.00% 34.00%
Goodwill not deductible for tax purposes 11.20 --
State and local taxes, net of federal tax benefits 10.10 --
Net operating losses not benefited -- (34.00)
----- -----
55.30% --
===== =====
</TABLE>
Deferred taxes are the result of NOL and tax credit carryforwards and
differences for financial and income tax reporting in the basis of assets
and liabilities. These differences relate primarily to accounts receivable,
inventory and property, plant and equipment. Net deferred taxes on the
balance sheet are comprised of the following:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Deferred tax assets (includes NOL and tax credit carryforwards of
$31,342,000 and $32,000,000 for 1996 and 1995,
respectively) $ 31,677,705 $ 32,000,000
Deferred tax liabilities (property, plant and equipment) (680,000) --
Valuation allowance (19,465,072) (32,000,000)
------------ ------------
$ 11,532,633 --
============ ============
</TABLE>
For income tax reporting purposes, CTI has approximately $85 million of NOL
carryforwards and $2 million of tax credit carryforwards available at
December 31, 1996. These NOLs and credits, if unused, will expire beginning
in 1998 through 2008. In addition, under certain circumstances resulting in
an ownership change of CTI which exceeds certain thresholds over a period
of time (as defined by the Internal Revenue Code of 1986), CTI could lose
the ability to utilize all of these NOL and tax credit carryforwards.
Ownership changes, as defined, could occur in a number of ways including
CTI's issuance or repurchase of its common stock as well as common stock
ownership changes among the stockholders which are beyond the control of
CTI. CTI has determined that an ownership change has not occurred through
December 31, 1996.
F-13
<PAGE> 41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
7. INCOME TAXES, CONTINUED:
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 valuation allowance has been computed on the assumption
that CTI will continue to file a consolidated tax return that includes CPI.
In computing the allowance, no value was assigned to the tax credit or to
the NOL carryforwards which expire prior to expected utilization.
Management is currently planning an initial public offering ("IPO") of
CPI's common stock which, if successful, 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 adjustment to the
valuation allowance in 1997.
8. STOCK OPTIONS AND WARRANTS:
CTI's stock incentive plans allow for the issuance of options to officers,
directors, employees and consultants to CTI for the purchase of up to
1,275,000 shares of common stock. In general, all options issued have an
exercise price of at least 100 percent of the fair market value of CTI's
common stock at the date of grant and vest over 3 or 4 years. Options
granted expire 10 years after the date of the grant and the weighted
average life of options outstanding at December 31, 1996 is one year. The
Board of Directors may also issue nonqualified stock options with the
exercise price and terms determined at the date of the grant. No options
have been issued at an exercise price lower than fair market value at the
date of the grant.
The following is a summary of stock option activity (restated for 1-for-4
reverse stock split):
<TABLE>
<CAPTION>
WEIGHTED
EXERCISE AVERAGE
PRICE EXERCISE
SHARES PER SHARE PRICE
------- ---------- -----
<S> <C> <C> <C>
Outstanding, December 31, 1994 62,500 1.50-$2.50 $1.90
Granted 375,000 1.88-$3.54 3.03
Canceled (31,250) $2.88 2.88
------- ---------- -----
Outstanding, December 31, 1995 406,250 1.50-$3.54 2.87
Granted 544,148 8.12-$8.64 8.25
Exercised (162,500) 1.50-$3.30 1.94
------- ---------- -----
Outstanding, December 31, 1996 787,898 2.88-$8.64 $6.79
======= ========== =====
Available for future grant 274,602
=======
</TABLE>
F-14
<PAGE> 42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
8. STOCK OPTIONS AND WARRANTS, CONTINUED:
CTI has issued to certain current and former members of its Board of
Directors, officers and consultants to CTI warrants to purchase shares of
its common stock. The exercise price of the warrants is equal to the fair
value of CTI's common stock at the date of the grant. Warrants granted
expire 10 years after the date of grant and the weighted average life of
warrants outstanding at December 31, 1996 is one year. A summary of
activities related to the warrants follows (restated for 1-for-4 reverse
stock split):
<TABLE>
<CAPTION>
WEIGHTED
EXERCISE AVERAGE
PRICE EXERCISE
SHARES PER SHARE PRICE
------- ---------- -----
<S> <C> <C> <C>
Outstanding, December 31, 1994 50,000 $4.00 $4.00
Granted 420,000 $2.86-$3.54 3.49
------- ---------- -----
Outstanding, December 31, 1995 470,000 $2.88-$4.00 3.54
Granted 62,500 $8.12 8.12
Exercised (81,250) $2.88-$4.00 3.57
------- ---------- -----
Outstanding, December 31, 1996 451,250 $3.54-$8.12 $4.17
======= ========== =====
</TABLE>
No options or warrants are currently exercisable and all become exercisable
beginning in 1999.
The Company applies Accounting Principles Board Opinion 25, "Accounting for
Stock Issued to Employees," and related interpretations in accounting for
this plan; accordingly, no compensation cost has been recognized. Had
compensation cost been determined based upon the fair value at the grant
date, consistent with the methods of Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation," the Company's
net loss would have been $481,153 and $387,651 (net loss per share of $.08
and $.07) in 1996 and 1995, respectively.
The Company has opted to measure compensation cost utilizing the intrinsic
value method. The fair value of each option grant was estimated as of the
date of grant using the Black-Scholes option-pricing model with the
following assumptions for options granted in:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Estimated fair value per share of options and warrants
granted during the year (restated for 1-for-4 reverse
stock split) $3.75 $1.29
Assumptions:
Annualized dividend yield 0.0% 0.0%
Common stock price volatility 50.0% 50.0%
Risk-free rate of return 5.6% - 6.6% 5.5% - 7.4%
Expected option term in years 8 8
</TABLE>
F-15
<PAGE> 43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
9. EMPLOYMENT AND NONCOMPETE AGREEMENTS:
In connection with the stock acquisition by CTI, CPI entered into
three-year employment agreements with four of the stockholders which are
automatically renewed on an annual basis thereafter unless the
stockholder's employment has been terminated. Under the terms of the
agreements, each stockholder will be paid a base salary of $175,000 per
year plus an annual bonus (subject to a maximum amount equal to the base
salary) equal to 5 percent of the amount by which adjusted bonus EBITDA (as
defined in the employment agreements) exceeds adjusted bonus EBITDA for the
prior year. All pay and benefits under the agreements shall cease upon
voluntary termination or termination for cause. Subsequently, one of the
former stockholders voluntarily terminated his employment. The agreements
call for the continuation of pay and benefit in the event that the
individual is unable to perform his duties by reason of illness or
incapacity. In connection with the employment agreements, the stockholders
have agreed not to compete with CPI through the later of May 31, 2001, or
the second anniversary date that the employee ceases to be an employee of
CPI.
10. RELATED PARTY TRANSACTIONS:
On November 8, 1995, Beverly Hills Bancorp sold to Hudson River Capital LLC
("Hudson River," formerly Victory Capital LLC), its holdings of CTI shares
owned directly and indirectly (1,185,000 shares) for $3.60 per share.
Hudson River also purchased, or agreed to purchase, certain shares of CTI
owned by Albert M. Zlotnick (432,750 shares) and Michael S. Berlin (62,062
shares) at $3.60 per share. All shares and price per share have been
restated to reflect the 1-for-4 reverse stock split. CTI retained Albert M.
Zlotnick as a consultant for a period of two years from December 1, 1995,
at a rate of $15,000 per month. The Company has expensed and accrued for
all 1997 consulting fees for Albert M. Zlotnick. From February 1, 1993 to
November 30, 1995, Mr. Zlotnick served as Chairman of the Board and Chief
Executive Officer of the Company at a rate of $20,000 per month.
As a result of this and other transactions, Hudson River and affiliates
hold approximately 31 percent of the outstanding common stock of the
Company. Subsequent to this transaction, all of the prior directors of the
Company resigned (except for Albert M. Zlotnick and A. Clinton Allen) and
were replaced by directors recommended by Hudson River.
Beginning January 1, 1996, the Company rented office space from and made
certain support personnel payments to a related company on a month-to-month
basis at a monthly cost of 20,676. In addition, from January 1, 1996 to
June 30, 1996, the Company rented additional space and made certain
support personnel payments to Hudson River on a month-to-month basis at a
monthly cost of $12,917.
During 1996, the Company incurred approximately $500,000 in costs for
legal services rendered by a law firm of which one of its partners is a
director of the Company.
F-16
<PAGE> 44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
10. RELATED PARTY TRANSACTIONS, CONTINUED:
During 1996, CPI acquired for $629,182 an option to acquire 100 percent of
the capital stock of Signal Sales Corp. (a company owned by a minority
stockholder of CPI). In connection with this purchase, the sole remaining
employee of Signal became employed by CPI. It is the intention of the
Signal stockholder to liquidate the company and CPI does not intend to
exercise its option. The amount of this purchase is included in goodwill.
At December 31, 1996, $827,000 was due to related parties and is included
in accrued liabilities.
11. SEGMENT INFORMATION:
The Company operates in two principal industry segments: the manufacture
and sale of wire and cable for the security, factory automation, signal and
sound markets and the distribution of wire and cable for the computer
networking, security and signal and sound markets. Segment information
concerning the Company's 1996 business segments is as follows (there were
no manufacturing or distribution operations in 1995):
<TABLE>
<CAPTION>
DISTRIBUTION MANUFACTURING OTHER ELIMINATIONS TOTAL
------------- -------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales to customers $ 36,378,959 $ 27,707,926 -- $ (7,388,930) $ 56,697,955
Operating income 1,894,603 2,894,825 $ (1,684,708) (391,000) 2,713,720
Identifiable assets 19,646,087 19,073,840 13,814,885 11,410,138 63,944,950
Depreciation and amortization 192,442 511,746 354,255 -- 1,058,443
Capital expenditures 238,908 1,481,929 -- -- 1,720,837
</TABLE>
12. CONTINGENCIES:
The Company is a party to various legal proceedings and administrative
actions, all of which management believes to be of an ordinary or routine
nature incidental to its operations. In the opinion of management, such
proceedings will not, individually or in the aggregate, have a material
adverse impact on the Company's financial position.
F-17
<PAGE> 45
CONNECTIVITY TECHNOLOGIES INC. AND SUBSIDIARIES
(Formerly Tigera Group, Inc.)
PRO FORMA CONSOLIDATED INCOME STATEMENT
(UNAUDITED)
For The Years Ended December 31, 1996 And 1995
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Net sales $ 97,264,498 $ 88,892,754
Cost of goods sold 71,058,931 65,294,310
------------ ------------
Gross profit 26,205,567 23,598,444
Selling, general and administrative expenses 21,053,480 19,281,400
------------ ------------
Operating income 5,152,087 4,317,044
Other income (expense):
Interest income 97,596 122,454
Interest expense (3,176,022) (2,923,965)
Other (39,449) (44,798)
------------ ------------
Income before income taxes and
minority interest 2,034,212 1,470,735
Provision for income taxes 1,038,980 808,588
------------ ------------
Income before minority interest 995,232 662,147
Minority interest in subsidiary (227,500) (151,172)
------------ ------------
Net Income $ 767,732 $ 510,975
============ ============
Primary and Fully Diluted Net Earnings per Share $ 0.13 $ 0.10
============ ============
Weighted Average Number of Common
Shares and Common Share Equivalents:
Primary 5,987,925 5,321,575
Fully Diluted 5,987,925 5,321,575
</TABLE>
-28-
<PAGE> 46
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Dated: March 28, 1997 CONNECTIVITY TECHNOLOGIES INC.
(Registrant)
By: /s/ Donald T. Pascal
------------------------
Donald T. Pascal
Chairman of the Board
By: /s/ Gregory C. Kowert
------------------------
Gregory C. Kowert
Principal Accounting Officer,
Senior Vice President, Chief
Financial Officer and Secretary
S - 1
<PAGE> 47
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
REGISTRANT: CONNECTIVITY TECHNOLOGIES INC.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Donald T. Pascal Director, Chairman of the March 28, 1997
- -------------------------------
Donald T. Pascal Board
/s/ James S. Harrington Director, President and March 28, 1997
- -------------------------------
James S. Harrington Chief Executive Officer
/s/ Duane A. Gawron Director, Senior Vice March 28, 1997
- -------------------------------
Duane A. Gawron President
/s/ Ramon D. Ardizzone Director March 28, 1997
- -------------------------------
Ramon D. Ardizzone
/s/ Clarke H. Bailey Director March 28, 1997
- --------------------------------
Clarke H. Bailey
/s/ Herbert M. Friedman Director March 28, 1997
- -------------------------------
Herbert M. Friedman
/s/ Stephen P. Kelbley Director March 28, 1997
- --------------------------------
Stephen P. Kelbley
</TABLE>
S - 2
<PAGE> 48
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
Item Exhibit
Number Description Number
- ------ ----------- ------
<S> <C> <C>
2 Plan of acquisition, reorganization, arrangement, liquidation or
succession.
2.1 Stock Redemption and Purchase Agreement dated as of May 17, 1996
(the "Purchase Agreement") by and among James S. Harrington, Duane
A. Gawron, Trustee of the Living Trust of Duane A. Gawron, Margo
Gawron, John E. Pylak, Trustee of the John E. Pylak Living Trust,
Rebecca Pylak and Kurt Cieszkowski (collectively, the "Sellers"),
Connectivity Products Incorporated, a Delaware corporation ("CPI"),
and the Company (incorporated by reference to Exhibit of the same
number to the Company's Current Report on Form 8-K dated May 31,
1996).
2.2 Amendment No. 1 to the Purchase Agreement dated as of May 31, 1996
(incorporated by reference to Exhibit of the same number to the
Company's Current Report on Form 8-K dated May 31, 1996).
3 Articles of Incorporation and By-Laws.
3.1 Certificate of Amendment of the Restated Certificate of
Incorporation of the Registrant dated July 21, 1987 (incorporated
by reference to Exhibit 3.1 to the Company's Annual Report on Form
10-K for the year ended December 31, 1987).
3.2 Amended and Restated By-Laws of the Registrant (incorporated by
reference to Exhibit 3.2 to the Company's Annual Report on form
10-K for the year ended December 31, 1988).
3.3 Certificate of Amendment to Certificate of Incorporation of Tigera
Group, Inc. dated December 5, 1996. 3.3
3.4 Certificate of Amendment to the Certificate of Incorporation of
Connectivity Technologies Inc. dated December 5, 1996. 3.4
4 Instruments defining the rights of security holders, including indentures.
4.1 Reference is made to Exhibits 3.1 and 3.2.
9 Voting Trust Agreements. None.
10 Material Contracts.
10.1 Letter Agreement dated April 11, 1991, among Joseph M. Girard and
James S. Campbell and the Registrant (incorporated by reference to
Exhibit of the same number to the Company's Annual Report on Form
10-K for the year ended December 31, 1991).
10.2 Registrant's 1991 Stock Option Plan (incorporated by reference to
Exhibit of the same number to the Company's Annual Report on Form
10-K for the year ended December 31, 1991).
</TABLE>
E-1
<PAGE> 49
<TABLE>
<CAPTION>
Item Exhibit
Number Description Number
- ------ ----------- ------
<S> <C> <C>
10.3 Form of Non-Employee Stock Option Agreement used in connection with
the 1991 Stock Option Plan (incorporated by reference to Exhibit of
the same number to the Company's Annual Report on Form 10-K for the
year ended December 31, 1991).
10.4 Form of Incentive Stock Option Agreement used in connection with
the 1991 Stock Option Plan (incorporated by reference to Exhibit of
the same number to the Company's Annual Report on Form 10-K for the
year ended December 31, 1991).
10.5 Form of Incentive Stock Option Agreement used in connection with
the 1991 Stock Option Plan (incorporated by reference to Exhibit of
the same number to the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1995).
10.6. Form of Employee Non-Qualified Stock Option Agreement used in
connection with the 1991 Stock Option Plan (incorporated by
reference to Exhibit of the same number to the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1995).
10.7. Form of non-Employee Non-Qualified Stock Option Agreement used in
connection with the 1991 Stock Option Plan (incorporated by
reference to Exhibit of the same number to the Company's Annual
Report on Form 10- KSB for the year ended December 31, 1995).
10.8 Form of Warrant Agreement dated as of April 11, 1991, by and
between the Registrant and each of James S. Campbell and Joseph M.
Gerard (incorporated by reference to Exhibit of the same number to
the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1995).
10.9 Form of Warrant Agreement dated as of November 15, 1995, by and
between the Registrant and each of Donald T. Pascal and Deborah A.
Farrington (incorporated by reference to Exhibit of the same number
to the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1995).
10.10 Form of Warrant Agreement dated as of November 15, 1995, by and
between the Registrant and each of Messrs. Julien H. Meyer III and
Francis G. Hayes (incorporated by reference to Exhibit of the same
number to the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1995).
10.11 Form of Warrant Agreement dated as of November 15, 1995, by and
between the Registrant and each of A. Clinton Allen and Clarke H.
Bailey (incorporated by reference to Exhibit of the same number to
the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1995).
10.12 Form of Warrant Agreement dated as of November 15, 1995, by and
between the Registrant and each of Ramon Ardizzone, Albert M.
Zlotnick and Herbert M. Friedman (incorporated by reference to
Exhibit of the same number to the Company's Annual Report on Form
10-KSB for the year ended December 31, 1995).
10.13 Form of Warrant Agreement dated as of December 26, 1995, by and
between the Registrant and each of Michael S. Berlin, Philip R.
Hankin, Irving I. Lassoff, James A. Martin III and Daniel A.
Rivetti (incorporated by reference to Exhibit of the same number to
the Company's Annual Report on Form 10- KSB for the year ended
December 31, 1995).
</TABLE>
E-2
<PAGE> 50
<TABLE>
<CAPTION>
Item Exhibit
Number Description Number
- ------ ----------- ------
<S> <C> <C>
10.14 Employment Agreement dated as of November 15, 1995, by and between
the Registrant and Donald T. Pascal (incorporated by reference to
Exhibit of the same number to the Company's Annual Report on Form
10-KSB for the year ended December 31, 1995).
10.15 Employment Agreement dated as of November 15, 1995, by and between
the Registrant and Deborah A. Farrington (incorporated by reference
to Exhibit of the same number to the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1995).
10.16 Form of Consulting Agreement dated as of November 15, 1995, by and
between the Registrant and each of Messrs. Julien H. Meyer III and
Francis G. Hayes (incorporated by reference to Exhibit of the same
number to the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1995).
10.17 Stockholders' Agreement relating to CPI dated as of May 17, 1996
among the Sellers, CPI and the Company (incorporated by reference
to Exhibit 10.1 of the Company's Current Report on Form 8-K dated
May 31, 1996).
10.18 Form of Employment Agreement dated as of May 17, 1996 by and
between CPI and each of Messrs. Harrington, Gawron, Pylak and
Cieszkowski (incorporated by reference to Exhibit 10.2 of the
Company's Current Report on Form 8-K dated May 31, 1996).
10.19 Form of Redemption Note dated as of May 31, 1996 by CPI in favor of
each of the Sellers (incorporated by reference to Exhibit 10.3 of
the Company's Current Report on Form 8-K dated May 31, 1996).
10.20 Form of Contingent Note dated as of May 31, 1996 by CPI in favor of
each of the Sellers (incorporated by reference to Exhibit 10.4 of
the Company's Current Report on Form 8-K dated May 31, 1996).
10.21 Credit Agreement dated as of May 31, 1996, by and among NBD Bank
("NBD") and The First National Bank of Boston ("FNBB" and, together
with NBD and the other lending institutions listed on Schedule 1
thereto, the "Banks"), each individually and as Co-Agent, and CPI
(incorporated by reference to Exhibit 10.1 of the Company's
Quarterly Report on Form 10- QSB for the quarter ended June 30,
1996).
10.22 $10,000,000 Revolving Credit Note dated as of May 31, 1996 executed
by CPI in favor of NBD (incorporated by reference to Exhibit 10.2
of the Company's Quarterly Report on Form 10-QSB for the quarter
ended June 30, 1996).
10.23 $10,000,000 Revolving Credit Note dated as of May 31, 1996 executed
by CPI in favor of FNBB (incorporated by reference to Exhibit 10.3
of the Company's Quarterly Report on Form 10-QSB for the quarter
ended June 30, 1996).
10.24 $3,500,000 Line of Credit Note dated as of May 31, 1996 executed by
CPI in favor of NBD (incorporated by reference to Exhibit 10.4 of
the Company's Quarterly Report on Form 10-QSB for the quarter ended
June 30, 1996).
10.25 $3,500,000 Line of Credit Note dated as of May 31, 1996 executed by
CPI in favor of FNBB (incorporated by reference to Exhibit 10.5 of
the Company's Quarterly Report on Form 10-QSB for the quarter ended
June 30, 1996).
</TABLE>
E-3
<PAGE> 51
<TABLE>
<CAPTION>
Item Exhibit
Number Description Number
- ------ ----------- ------
<S> <C> <C>
10.26 $9,300,000 Term Loan A Note dated as of May 31, 1996 executed by
CPI in favor of NBD (incorporated by reference to Exhibit 10.6 of
the Company's Quarterly Report on Form 10-QSB for the quarter ended
June 30, 1996).
10.27 $9,300,000 Term Loan A Note dated as of May 31, 1996 executed by
CPI in favor of FNBB (incorporated by reference to Exhibit 10.7 of
the Company's Quarterly Report on Form 10-QSB for the quarter ended
June 30, 1996).
10.28 Subordination Agreement dated as of May 31, 1996, executed by James
S. Harrington, Duane A. Gawron, Trustee of the Living Trust of
Duane A. Gawron, Margo Gawron, John E. Pylak, Trustee of the John
E. Pylak Living Trust, Rebecca Pylak and Kurt Cieszkowski
(collectively, the "Sellers"), the Company and CPI in favor of NBD,
as administrative agent for the Banks (the "Agent") (incorporated
by reference to Exhibit 10.8 of the Company's Quarterly Report on
Form 10-QSB for the quarter ended June 30, 1996).
10.29 Security Agreement dated as of October 5, 1995, by and between CPI
and the Agent (incorporated by reference to Exhibit 10.9 of the
Company's Quarterly Report on Form 10-QSB for the quarter ended
June 30, 1996).
10.30 First Amendment to the Security Agreement dated as of May 31, 1996,
by and between CPI and the Agent (incorporated by reference to
Exhibit 10.9(a) of the Company's Quarterly Report on Form 10-QSB
for the quarter ended June 30, 1996).
10.31 Guaranty dated as of May 31, 1996 executed by the Company in favor
of the Agent (incorporated by reference to Exhibit 10.10 of the
Company's Quarterly Report on Form 10-QSB for the quarter ended
June 30, 1996).
10.32 Stock Pledge Agreement dated as of May 31, 1996, by and between the
Company and the Agent (incorporated by reference to Exhibit 10.11
of the Company's Quarterly Report on Form 10-QSB for the quarter
ended June 30, 1996).
10.33 Note Pledge Agreement dated as of May 31, 1996, by and among the
Sellers and the Agent (incorporated by reference to Exhibit 10.12
of the Company's Quarterly Report on Form 10-QSB for the quarter
ended June 30, 1996).
10.34 Form of Stock Option Agreement dated as of March 8, 1996, by and
between the Company and each of James S. Harrington, Duane A.
Gawron, John E. Pylak and Kurt Cieszkowski (incorporated by
reference to Exhibit 10.13 of the Company's Quarterly Report on
Form 10-QSB for the quarter ended June 30, 1996).
10.35 Employment Agreement dated as of July 9, 1996 between Gregory C.
Kowert and CPI (incorporated by reference to Exhibit 10.14 of the
Company's Quarterly Report on Form 10-QSB for the quarter ended
June 30, 1996).
10.36 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 CPI (incorporated by
reference to Exhibit 10.1 of the Company's Quarterly Report on Form
10-QSB for the quarter ended September 30, 1996).
</TABLE>
E-4
<PAGE> 52
<TABLE>
<CAPTION>
Item Exhibit
Number Description Number
- ------ ----------- ------
<S> <C> <C>
10.37 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 (incorporated by reference to
Exhibit 10.2 of the Company's Quarterly Report on Form 10-QSB for
the quarter ended September 30, 1996).
10.38 Agreement, dated as of September 27, 1996, by and among James S.
Harrington, Duane A. Gawron, John E. Pylak, Kurt Cieszkowski and
CPI (incorporated by reference to Exhibit 10.3 of the Company's
Quarterly Report on Form 10-QSB for the quarter ended September 30,
1996).
10.39 Form of Employee Stock Option Agreement pursuant to the Company's
1996 Stock Incentive Plan (incorporated by reference to Exhibit
10.4 of the Company's Quarterly Report on Form 10-QSB for the
quarter ended September 30, 1996).
10.40 Company's 1996 Stock Incentive Plan (incorporated by reference to
Exhibit D to the Company's Proxy Statement relating to the
Company's Annual Meeting of Shareholders held on December 4, 1996).
10.41 Stock Option Purchase Agreement by and among James S. Harrington, 10.41
CPI, Wayne McPherson and Signal Sales Corp. dated as of December
17, 1996.
10.42 Building Lease between Anthony Bennet Properties and Energy 10.42
Electric Cable, Inc. dated December 22, 1988.
10.43 First Amendment to Building Lease between Anthony Bennet Properties 10.43
and Energy Electric Cable, Inc. dated February 9, 1994.
10.44 Lease of Real Property at Crossroad Office Park by Peter F. 10.44
Zichelle to Connectivity Products, Inc. dated December 19, 1996.
10.45 Lease by and between Key Plastics, Inc. and Connectivity Products, 10.45
Inc. dated March 6, 1997.
10.46 First Amendment of Certain Security Documents and Subordination 10.46
Agreement and Third Amendment to Amended and Restated Revolving
Audit and Term Loan Agreement by and among CTI, CPI and NBD.
10.47 Net Lease by and between Douglas J. Detweiler and BSCC Corp. dated 10.47
June 5, 1995.
10.48 Second Amendment to Lease by and between Douglas J. Detweiler and 10.48
BSCC Corp. dated August 29, 1995.
11 Statement re computation of per share earnings. 11
16 Letter re change in accountants. None
18 Letter re change in accounting principles. None
21 Subsidiaries of the Registrant. 21
23 Consent of Experts and Counsel.
23.1 Consent of Coopers & Lybrand LLP. 23.1
24 Power of Attorney. None
27 Financial Data Schedule 27
</TABLE>
E-5
<PAGE> 53
<TABLE>
<CAPTION>
Item Exhibit
Number Description Number
- ------ ----------- ------
<S> <C> <C>
99 Not Applicable.
</TABLE>
E-6
<PAGE> 1
CERTIFICATE OF AMENDMENT OF THE
CERTIFICATE OF INCORPORATION OF
TIGERA GROUP, INC
-------------------------------
Pursuant to Section 242 of the
General Corporation Law
-------------------------------
THE UNDERSIGNED, the President of Tigera Group, Inc., a corporation
organized and existing under the laws of the State of Delaware (the
"Corporation"), hereby certifies as follows:
FIRST: Article FIRST of the Certificate of Incorporation of the Corporation
is hereby amended so that, as amended, said Article shall be and read as
follows:
"FIRST: The name of this corporation is Connectivity Technologies Inc.
SECOND: This amendment has been duly adopted by the holders of a majority
of the issued and outstanding shares of capital stock of the Corporation in
accordance with the provisions of Sections 228 and 242 of the General
Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the undersigned has executed this Certificate this 4th
day of December, 1996.
/s/ James S. Harrington
------------------------
James S. Harrington
President
<PAGE> 1
CERTIFICATE OF AMENDMENT OF THE
CERTIFICATE OF INCORPORATION OF
CONNECTIVITY TECHNOLOGIES INC.
Pursuant to Section 242 of the
General Corporation Law
THE UNDERSIGNED, the President of Connectivity Technologies Inc., a
corporation organized and existing under the laws of the State of Delaware (the
"Corporation"), hereby certifies as follows:
FIRST: The Certificate of Incorporation of the Corporation currently
authorizes the issuance of up to forty million seven hundred fifty thousand
(40,750,000) shares of common stock, par value $.01 per share. In order to
reduce the number of shares of stock authorized, to effect a one-for-four
reverse stock split of all outstanding shares and to change the par value of the
shares of common stock, Article FOURTH of the Certificate of Incorporation of
the Corporation is hereby amended to read, in its entirety, as follows:
"The corporation shall be authorized to issue two classes of shares of
stock to be designated, respectively, "Preferred Stock" and "common stock."
The total number of shares which the Corporation shall have authority to
issue is Twenty-One Million Seven Hundred Fifty Thousand (21,750,000) and
the aggregate par value of all shares of stock that are to have a par value
shall be Eight Hundred Forty Thousand Dollars ($840,000). The total number
of shares of Preferred Stock shall be One Million (1,000,000) and the par
<PAGE> 2
value of each share of such class shall be One Cent ($.01). The total
number of shares of common stock shall be Twenty Million Seven Hundred
Fifty Thousand (20,750,000), Twenty Million (20,000,000) of which shall be
designated Common Stock, par value $.04 per share, and Seven Hundred Fifty
Thousand (750,000) of which shall be designated Series B Common Stock, par
value $.04 per share.
Part A. Provisions Relating to Preferred Stock.
The shares of Preferred Stock may be issued from time to time in one
or more series. The Board of Directors is hereby authorized by filing a
certificate pursuant to the applicable law of the State of Delaware
(hereinafter, a "Certificate of Designation"), to establish from time to
time the number of shares to be included in each such series, and to fix
the designations, powers, preferences and rights of the shares of each such
series and the qualifications, limitations or restrictions thereof,
including but not limited to fixing the dividend rights, dividend rate,
conversion rights, voting rights, rights and terms of redemption (including
sinking fund provisions), the redemption price or prices, and the
liquidation preferences of any wholly unissued series of shares of
Preferred Stock; and to increase or decrease the number of shares of any
series subsequent to the issue of the shares of that series, but not below
the number of shares of such series then outstanding. In case the number of
shares of any series shall be so decreased, the shares constituting such
decrease shall resume the status which they had prior to the adoption of
the resolution originally fixing the number of shares of such series.
Part B. Provisions Relating to Common Stock.
1. Designation of Series. Subject to conversion or exchange as
provided for in subparagraph 3(a) hereinbelow, twenty million (20,000,000)
shares of the common stock authorized hereinabove are designated "Common
Stock" and seven hundred fifty thousand (750,000) shares of the common
stock authorized hereinabove are designated "Series B Common Stock."
2. Authority of Board to Fix Rights of Series B Common Stock. The
Board of Directors is expressly authorized, in the resolution or
resolutions providing for the issuance of the Series B Common Stock, to
fix, state and express, within the limits expressed hereinbelow, the
powers, designations, preferences and
- 2 -
<PAGE> 3
rights of the Series B Common Stock, and the qualifications, limitations or
restrictions thereof.
3. Specific Rights. The powers, designations, preferences and rights,
and the qualifications, limitations and restrictions thereof, of the Common
Stock and Series B Common Stock shall be identical in all respects, except
as follows or, for the Series B Common Stock, as fixed and determined by
the Board of Directors within the limitations which follow:
(a) Conversion Rights. The Series B Common Stock may be
convertible into or exchangeable for Common Stock, at a conversion or
exchange ratio of not more than one share of Common Stock for each
share of Series B Common Stock and upon such other terms and
conditions as the Board of Directors may establish.
(b) Voting Rights. Subject to the special voting rights of the
Preferred Stock set forth or determined as provided above, each holder
of Common Stock of the corporation shall be entitled to one vote for
each share of such stock outstanding in the name of such holder on the
books of the corporation on the record date designated for the purpose
of such vote, and each holder of Series B Common Stock of the
corporation shall be entitled, for each share of such Series B Common
Stock outstanding in the name of such holder on the books of the
corporation on the record date designated for the purpose of such
vote, to the number of votes as has been fixed by the Board of
Directors, but the vote per share of Series B Common Stock shall be
less than the proportionate vote of the Common Stock into which such
Series B Common Stock is convertible or exchangeable; provided,
however, that at all elections of directors of the corporation, each
holder of any shares of Common Stock and Series B Common Stock of this
Corporation shall be entitled to as many votes as shall equal the
number of votes which (except for this provision as to cumulative
voting) he would be entitled to cast for the election of directors
with respect to his shares of stock multiplied by the number of
directors to be elected by him, and he may cast all of such votes for
a single director or may distribute them among the number to be voted
for, or for any two or more of them as he may see fit; and provided,
further, that in no event, whether in the election of directors or
otherwise, shall fractional votes be counted.
(c) Dividend Rights. Subject to the prior rights (if any) of the
holders of the Preferred Stock
- 3 -
<PAGE> 4
as to dividends, the holders of outstanding shares of Common Stock and
Series B Common Stock shall be entitled to receive, when and as
declared by the Board of Directors, out of the assets at the time
legally available therefor, dividends at the rate determined by the
Board of Directors, provided, however, that the dividend on each share
of Series B Common Stock shall be less than the proportionate dividend
on each share of Common Stock into which it is convertible or
exchangeable.
(d) Liquidation Rights. In the event of any liquidation,
dissolution or winding up of this corporation, either voluntarily or
involuntarily, but subject to the liquidation preference (if any) of
the holders of the Preferred Stock by reason of their ownership
thereof, the holders of Common Stock and Series B Common Stock shall
be entitled to receive pro rata the remaining assets of the
corporation available for distribution to stockholders except that the
amount per share paid in liquidation on each share of the Series B
Common Stock shall be less than the proportionate amount per share
paid on each share of the Common Stock into which it is convertible or
exchangeable.
(e) Adjustments. The Board of Directors shall make appropriate
adjustments to the conversion or exchange ratio and to the voting,
dividend and liquidation rights of the Series B Common Stock in the
event of any stock split, stock dividend or similar transaction
affecting the number of outstanding shares of Common Stock or Series B
Common Stock without the corporation's receipt of consideration
therefor.
Reverse Stock Split: Effective as of 5:00 p.m. on the date of filing
of this Amendment to the Certificate of Incorporation of the Corporation
(the "Effective Date"), each issued and outstanding share of Common Stock,
par value $.01 per share ("Old Common Stock"), of this Corporation shall
automatically and without any action on the part of the holder thereof,
become one-fourth of a share of Common Stock, par value $.04 per share
("New Common Stock"). No scrip or fractional shares of New Common Stock
will be issued by reason of this amendment. Holders of a number of shares
of Old Common Stock not divisible by four shall be entitled to receive a
cash payment equal to the fractional share multiplied by the average of the
closing bid prices as reported by the OTC Bulletin Board for the Old Common
Stock on the five trading days prior to the Effective Date. As of the
Effective Date and thereafter, a
- 4 -
<PAGE> 5
certificate(s) representing shares of Old Common Stock shall be deemed to
represent the number of shares of New Common Stock into which the shares of
Old Common Stock are convertible and the right to receive a cash payment in
lieu of any fractional share."
SECOND: At the effective time of this amendment, each issued and
outstanding share of Common Stock ("Old Common Stock") of this Corporation shall
automatically and without any action on the part of the holder thereof, become
one-fourth of a share of Common Stock, par value $.04 per share ("New Common
Stock"). No scrip or fractional shares of New Common Stock will be issued by
reason of this amendment. The Corporation shall pay holders of fractional shares
cash in an amount equal to the fractional share multiplied by the average of the
closing bid prices as reported by the OTC Bulletin Board for the Old Common
Stock on the five trading days prior to the effective time of this amendment.
THIRD: This amendment has been duly adopted by the holders of a majority of
the issued and outstanding shares of capital stock of the Corporation in
accordance with the provisions of Sections 228 and 242 of the General
Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the undersigned has executed this Certificate this 4th
day of December, 1996.
/s/ James S. Harrington
------------------------
James S. Harrington
President
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<PAGE> 1
================================================================================
STOCK OPTION PURCHASE AGREEMENT
================================================================================
STOCK OPTION PURCHASE AGREEMENT
by and among
JAMES S. HARRINGTON
CONNECTIVITY PRODUCTS INCORPORATED
(a Delaware corporation)
WAYNE MCPHERSON
SIGNAL SALES CORP.
(a Massachusetts corporation),
Dated as of December 17, 1996
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
ARTICLE I PURCHASE AND SALE OF OPTION.................................. 1
Section 1.01. Purchase and Sale of Option.................................. 1
Section 1.02. Purchase Price............................................... 1
Section 1.03. Other Concurrent Transactions................................ 2
Section 1.04. Deliveries at the Closing; Further Assurances................ 2
Section 1.05. Interdependence.............................................. 2
Section 1.06. Consent of Company and Shareholder........................... 2
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE SELLER
AND THE COMPANY.............................................. 2
Section 2.01. Corporate Organization and Good Standing..................... 3
Section 2.02. Capitalization of the Company................................ 3
Section 2.03. Validity and Terms of Option; Title to Option................ 3
Section 2.04. Authorization, Execution and Binding Effect.................. 4
Section 2.05. Consents and Approvals....................................... 4
Section 2.06. Compliance With Laws; Payment of Taxes....................... 4
Section 2.07. Financial Statements......................................... 5
Section 2.08. Net Worth; Absence of Undisclosed Liabilities................ 5
Section 2.09. Legal Proceedings............................................ 5
Section 2.10. Finders...................................................... 6
Section 2.11. No Misrepresentation or Omission............................. 6
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLER
AND THE SHAREHOLDER.......................................... 6
Section 3.01. Ownership of Shares, etc..................................... 6
Section 3.02. Validity and Terms of Option; Title to Option................ 6
Section 3.03. Authorization, Execution and Binding Effect.................. 7
Section 3.04. Consents and Approvals....................................... 7
Section 3.05. Legal Proceedings............................................ 7
Section 3.06. Knowledge as to Seller's and Company's Representations....... 7
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER.................. 7
Section 4.01. Authorization, Execution and Binding Effect.................. 8
Section 4.02. Investment Intent............................................ 8
ARTICLE V MISCELLANEOUS................................................ 8
Section 5.01. Survival of Representations and Warranties; Indemnification;
Limitation on Damages........................................ 8
Section 5.02. Discontinuance of Business; Waiver of Purchase Rights........ 9
Section 5.03. Headings; Grammatical Usage.................................. 9
Section 5.04. Notices...................................................... 10
Section 5.05. Assignment; Third Parties.................................... 10
Section 5.06. Expenses..................................................... 10
Section 5.07. Complete Agreement........................................... 10
Section 5.08. Amendments and Waivers....................................... 11
Section 5.09. Counterparts................................................. 11
Section 5.10. Governing Law................................................ 11
Section 5.11. Action by Purchaser.......................................... 11
Exhibit A Option Agreement
Exhibit B Financial Statements
</TABLE>
<PAGE> 3
STOCK OPTION PURCHASE AGREEMENT, dated as of December 17, 1996 (this
"AGREEMENT"), entered into by and among (1) JAMES S. HARRINGTON, a resident of
Ashburnham, Massachusetts (the "SELLER"); (2) CONNECTIVITY PRODUCTS
INCORPORATED, a Delaware Corporation (the "PURCHASER"); (3) WAYNE MCPHERSON, a
resident of the State of New York (the "SHAREHOLDER"); and (4) SIGNAL SALES
CORP., a Massachusetts corporation (the "COMPANY").
W I T N E S E T H:
WHEREAS, the Shareholder is the holder of one hundred (100) shares (the
"SHARES") of the Common Stock, no par value ("COMMON STOCK") of the Company; and
WHEREAS, the Seller currently owns an option, granted by the Shareholder as
of April 27, 1993 (the "OPTION"), to purchase all of the Shares from the
Shareholder at any time for an aggregate purchase price of $1.00, the terms and
conditions of which Option are set forth in the copy of the instrument granting
such Option attached as EXHIBIT A hereto (the "OPTION AGREEMENT"); and
WHEREAS, the Seller desires to sell and assign to the Purchaser, and the
Purchaser desires to purchase from the Seller, in accordance with the terms
hereof, the Option and all of the Seller's rights, title and interest in, to and
under the Option Agreement; and
WHEREAS, the Company and the Shareholder consent to such sale and
assignment of the Option and the Option Agreement to the Purchaser;
NOW, THEREFORE, in consideration of the foregoing premises and the
respective representations, warranties, covenants, conditions, agreements, and
undertakings hereinafter set forth, the sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, the parties hereto
hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF OPTION
Section 1.01. Purchase and Sale of Option
The Seller HEREBY SELLS, CONVEYS, ASSIGNS, TRANSFERS, AND DELIVERS the
Option, and all of the Seller's rights, title and interest in, to and under the
Option Agreement, to the Purchaser and Purchaser's successors and assigns
forever, free and clear of all liens, pledges, claims, charges, security
interests, and other encumbrances ("ENCUMBRANCES"), and the Purchaser hereby
purchases the Option and accepts assignment of the Option Agreement from the
Seller. The Purchaser does not hereby assume any liability or obligation
whatsoever of the Seller, including without limitation any such liability or
obligation under the Option Agreement.
Section 1.02. Purchase Price
The aggregate purchase price for the Option shall be SIX HUNDRED THOUSAND
DOLLARS ($600,000.00), of which $100,000 shall be payable to the Seller on the
date hereof and $500,000 shall be payable to the Seller on January 2, 1997, in
each case in cash by a bank or certified check or by wire transfer to an account
or accounts in the United States designated in writing by Seller.
<PAGE> 4
Section 1.03. Other Concurrent Transactions
Simultaneously with the execution and delivery of this Agreement, (i) the
Purchaser and the Company are entering into an agreement pursuant to which the
Purchaser is purchasing from the Company all rights in and to the Company's name
and certain other assets of the Company; and (ii) the Purchaser is entering into
an employment agreement (the "EMPLOYMENT AGREEMENT") with Stuart Zeiff ("MR.
ZEIFF").
Section 1.04. Deliveries at the Closing; Further Assurances
(a) Simultaneously with the execution and delivery of this Agreement, the
Seller is also executing and delivering to the Purchaser such other documents of
assignment and other instruments, with any required documentary stamps affixed,
as, in the reasonable judgment of Purchaser and its counsel, are necessary to
vest in Purchaser good and valid title to the Option.
(b) In addition, the parties hereto agree that each will execute and
deliver to the other any and all documents in addition to those expressly
provided for in this Agreement that may be reasonably necessary or appropriate
to carry out the purposes of this Agreement and the transactions contemplated
hereby, whether on or after the date hereof.
Section 1.05. Interdependence
The transfers and deliveries described in Sections 1.01, 1.02, 1.03 and
1.04(a) hereof are mutually interdependent and regarded as occurring
simultaneously; and, unless waived by both the Purchaser and the Seller, none of
the transactions described in Sections 1.01, 1.02, 1.03 and 1.04(a) hereof shall
become effective unless and until all other transfers and deliveries provided
for in such Sections (including without limitation the execution and delivery of
the Employment Agreement) have also been consummated.
Section 1.06. Consent of Company and Shareholder
The Company and the Shareholder each hereby consent to the transactions
contemplated by this Agreement including without limitation (i) the purchase of
the Option by the Purchaser and the assignment to the Purchaser of all of the
Seller's rights, title and interest in, to and under the Option Agreement, (ii)
the employment by the Purchaser of Mr. Zeiff pursuant to the Employment
Agreement, and (iii) the use by the Purchaser from and after the date hereof,
without limitation or restriction and without any further payment or
consideration, of any and all customer lists and other information heretofore
acquired, developed or used by the Company or Mr. Zeiff relating to the
businesses or the operations, employees or customers of the Company.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE SELLER AND THE COMPANY
The Seller and the Company, jointly and severally, hereby represent and
warrant to the Purchaser as follows, and the Seller and the Company acknowledge
and confirm that Purchaser is relying upon such representations and warranties
notwithstanding any investigation made by Purchaser or on its behalf:
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<PAGE> 5
Section 2.01. Corporate Organization and Good Standing
The Company is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Massachusetts. The Company has all
requisite corporate power and authority to own, operate, and lease its
properties and to carry on its business as now being conducted. The Seller has
heretofore delivered to the Purchaser complete and correct copies of the
Company's Articles of Organization and By-Laws, each as amended and in effect on
the date hereof.
Section 2.02. Capitalization of the Company
(a) The Company is authorized to issue 2,000 shares of Common Stock, of
which the Shares are the only shares of Common Stock issued and outstanding. All
of the Shares are held beneficially and of record by the Shareholder on the date
hereof. All of the outstanding shares of Common Stock have been duly authorized,
and are validly issued, fully paid and non-assessable.
(b) Other than the Shares, no shares of any class of capital stock or other
securities of the Company are issued or outstanding; and other than the Option,
there are no rights, subscriptions, warrants, options, conversion rights or
agreements of any kind outstanding to purchase or otherwise acquire from the
Company or from any other individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
institution, public benefit corporation or governmental entity or any
department, agency or political subdivision thereof (each, a "PERSON"),
including without limitation from the Shareholder or from the Seller, any shares
of the capital stock, or any other securities or obligations of the Company of
any kind whatsoever. There are no authorized, outstanding or existing proxies,
voting trusts or other agreements or understandings with respect to the voting
of the Shares.
(c) None of the shares of capital stock of the Company is subject to any
preemptive rights of any person, including, without limitation, present or
former stockholders of the Company.
Section 2.03. Validity and Terms of Option; Title to Option
(a) The Option Agreement grants to the Seller, and upon the execution and
delivery of this Agreement will grant to the Purchaser, the unrestricted right
to purchase, at any time, all of the outstanding capital stock of the Company
for an aggregate purchase price of $1.00. Without limiting the generality of the
foregoing, all of the terms and conditions of the Option are set forth in the
Option Agreement, a true and correct copy of which is attached as EXHIBIT A
hereto. The Option Agreement is in full force and effect and has not in any
respect been revised or amended.
(b) The Option Agreement has been duly executed and delivered by the
Shareholder and constitutes the legal, valid and binding agreement of the
Shareholder, enforceable against the Shareholder in accordance with its terms.
(c) The Seller has the right, title, power and authority, without any
restriction whatsoever, to sell, assign, transfer and deliver the Option to the
Purchaser, and the Seller is hereby transferring to the Purchaser good and valid
title to the Option, free and clear of any Encumbrances or other rights
whatsoever of any other Person.
(d) The Seller has not offered the Option, and neither the Seller nor the
Company has sold or issued, or offered for sale, any other securities of the
Company, options or other rights to purchase securities of the Company or all or
any substantial portion of the assets of the Company (other
3
<PAGE> 6
than inventory offered or sold in the ordinary course of business) for sale to
any person or persons other than Purchaser, which, in the case of offers for
sale, remains outstanding on the date hereof or could give rise to liability on
the part of the Company or the Purchaser.
Section 2.04. Authorization, Execution and Binding Effect
The Company has full corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby and
thereby. The Board of Directors of the Company has duly authorized the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby and no other corporate proceedings on the part of the
Company are necessary to approve and authorize the execution and delivery of
this Agreement or the consummation of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by the Seller, the Company and
the Shareholder and constitutes the legal, valid and binding agreement of each
of them, enforceable against each of them in accordance with its terms.
Section 2.05. Consents and Approvals
(a) Neither the execution and delivery by the Seller, the Company and the
Shareholder of this Agreement, nor the consummation by each of them of the
transactions contemplated hereby, nor compliance by the Seller, the Company and
the Shareholder with any of the provisions hereof will (i) violate or conflict
with any provision of the Articles of Organization or By-Laws of the Company,
(ii) result in a violation of any order, writ, injunction, decree, judgment or
ruling of any court or governmental authority, (iii) result in a violation of or
default under any law, rule or regulation applicable to the Seller, the Company
or the Shareholder, (iv) result in the material breach of or otherwise
materially affect any of the terms, conditions, or provisions of, any note,
bond, mortgage, indenture, deed of trust, license, franchise, permit, contract,
agreement, or other instrument or commitment or obligation of the Seller, the
Company or the Shareholder, or (v) require any consent, approval, or
authorization of, or notice to, or declaration, filing, or registration with,
any governmental or regulatory authority or any other Person.
(b) Mr. Zeiff is not bound or restricted by any employment agreement,
noncompetition covenant or any other contract, agreement or covenant that in any
way restricts or purports to restrict in any manner his right to enter into the
Employment Agreement and to perform his duties thereunder.
Section 2.06. Compliance With Laws; Payment of Taxes
(a) The Company is in, and since inception the Company has operated its
business in substantial compliance with, all laws, regulations, decrees and
orders applicable to the Company; and the Company is not in default or violation
of, or to the best knowledge of the Seller under investigation with respect to,
any of such laws, regulations decrees or orders; provided, however, that the
Company has not qualified to conduct business in the State of New York.
(b) The Company has duly and timely filed all reports and returns,
including without limitation tax returns, required to be filed by it with
governmental authorities, and all of such reports and returns were correct and
complete in all material respects.
(c) The Company has obtained all governmental permits and licenses and
other governmental consents which are required in connection with its business.
All of such permits, licenses
4
<PAGE> 7
and consents are in full force and effect, and no proceedings for the suspension
or cancellation of any of them is pending or, to the best knowledge of the
Seller, threatened.
(d) All taxes (which for purposes of this Agreement shall include all
federal, state, local, or foreign income, gross receipts, license, payroll,
employment, excise, severance, stamp, occupation, premium, windfall profits,
environmental (including taxes under Code Section 59A), customs duties, capital
stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated,
or other tax of any kind whatsoever, including any interest, penalty, or
addition thereto, whether disputed or not) which are due and payable by the
Company have been paid in full, and the Company is not delinquent in the payment
of any taxes and has no tax deficiency or claim outstanding, proposed or
assessed against it, and there is no basis for any such deficiency or claim.
There is no dispute or claim concerning any taxes of the Company either (i)
claimed or raised by any authority in writing or (ii) as to which the Seller has
knowledge. No claim has ever been made in any jurisdiction where the Company
does not file tax returns that the Company is or may be subject to taxation by
that jurisdiction.
(e) The Company and the Predecessor Companies have withheld and paid all
taxes required to have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor, stockholder or other
Person.
Section 2.07. Financial Statements
(a) Attached hereto as EXHIBIT B are (i) the balance sheet of the Company
as of October 31, 1996 and (ii) the income statement of the Company for the
twelve months then ended (the "FINANCIAL STATEMENTS"). The Financial Statements
are correct and complete in all material respects and present fairly and
accurately the financial position of the Company as of the dates of such
Financial Statements and the results of operations of the Company for the
periods covered by such Financial Statements. All accounts receivable reflected
on the balance sheets of the Company have arisen from bona fide transactions in
the ordinary course of business of the Company and represent valid and binding
obligations due to the Company enforceable in accordance with their terms.
Section 2.08. Net Worth; Absence of Undisclosed Liabilities
The Company has a net worth of not less than $50,000. The Company has no
liabilities (known or unknown, absolute, contingent or otherwise), other than:
(i) those reflected or reserved against on the most recent balance sheet of the
Company included in the Financial Statements, and (ii) those incurred since the
date of such balance sheet in the ordinary course of business in arms' length
transactions with Persons not affiliated with or related to the Company and
which do not have and cannot reasonably be expected to have, in the aggregate, a
material adverse effect on the assets, business, operations, income, prospects
or condition (financial or otherwise) of the Company.
Section 2.09. Legal Proceedings
There are no claims, actions, suits, arbitrations, inquiries,
investigations, or proceedings pending or, to the best knowledge of the Seller,
threatened or imminent, (i) against or relating to the Company, (ii) against or
relating to the Seller or the Shareholder to the extent that any such claim,
action, suit, arbitration, inquiry, investigation, or proceeding (individually
or together) could have an adverse effect on the ability of the Seller or the
Shareholder to perform his obligations under this Agreement, or (iii) which
question or challenge the validity of this Agreement or any action taken or to
be taken by the
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<PAGE> 8
Seller, the Company or the Shareholder pursuant hereto. Neither the Company nor,
to the extent relating to or affecting the Company, the Shares or the Option,
the Seller or the Shareholder, is subject to any judgment, order or decree, or
to any governmental restriction not applicable generally to companies engaged in
the same business as the Company.
Section 2.10. Finders
Neither the Seller, the Company nor the Shareholder, nor any of their
respective affiliates, has paid or become obligated to pay any fee or commission
to any broker, finder, intermediary or any other Person for or on account of the
transactions provided for in this Agreement.
Section 2.11. No Misrepresentation or Omission
No representation or warranty by the Seller in this Agreement or in any
certificate or other document furnished or to be furnished to the Purchaser by
the Seller in connection with the transactions contemplated by this Agreement,
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading. To the knowledge of the Seller and the Company, there is no fact
that the Seller has not disclosed in writing to the Purchaser that materially
adversely affects the Option or the assets, liabilities, business, financial
condition, results of operations or prospects of the Company.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE SELLER AND THE SHAREHOLDER
The Seller and the Shareholder, jointly and severally, hereby represent and
warrant to the Purchaser as follows, and the Seller and the Shareholder
acknowledge and confirm that the Purchaser is relying upon such representations
and warranties notwithstanding any investigation made by Purchaser or on its
behalf:
Section 3.01. Ownership of Shares, etc.
All of the Shares are held beneficially and of record by the Shareholder on
the date hereof, and the Shareholder has good and valid title to the Shares,
free and clear of any Encumbrances or other rights whatsoever (other than the
Option) of any other Person. Without limiting the generality of the foregoing,
other than the Option there are no authorized, outstanding or existing options
or other rights to acquire the Shares or any proxies, voting trusts or other
agreements or understandings with respect to the voting of the Shares.
Section 3.02. Validity and Terms of Option; Title to Option
(a) The Option Agreement grants to the Seller, and upon the execution and
delivery of this Agreement will grant to the Purchaser, the unrestricted right
to purchase, at any time, all of the outstanding capital stock of the Company
for an aggregate purchase price of $1.00. Without limiting the generality of the
foregoing, all of the terms and conditions of the Option are set forth in the
Option Agreement, a true and correct copy of which is attached as EXHIBIT A
hereto. The Option Agreement is in full force and effect and has not in any
respect been revised or amended.
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<PAGE> 9
(b) The Option Agreement has been duly executed and delivered
by the Shareholder and constitutes the legal, valid and binding agreement of the
Shareholder, enforceable against the Shareholder in accordance with its terms.
Section 3.03. Authorization, Execution and Binding Effect
This Agreement has been duly executed and delivered by the Shareholder and
constitutes the legal, valid and binding agreement of the Shareholder,
enforceable against the Shareholder in accordance with its terms.
Section 3.04. Consents and Approvals
Neither the execution and delivery by the Shareholder of this Agreement,
nor the consummation by the Shareholder of the transactions contemplated hereby,
nor compliance by the Shareholder with any of the provisions hereof will (i)
result in a violation of any order, writ, injunction, decree, judgment or ruling
of any court or governmental authority, (ii) result in a violation of or default
under any law, rule or regulation applicable to the Shareholder, (iii) result in
the material breach of or otherwise materially affect any of the terms,
conditions, or provisions of, any note, bond, mortgage, indenture, deed of
trust, license, franchise, permit, contract, agreement, or other instrument or
commitment or obligation of the Shareholder, or (v) require any consent,
approval, or authorization of, or notice to, or declaration, filing, or
registration with, any governmental or regulatory authority or any other Person.
Section 3.05. Legal Proceedings
There are no claims, actions, suits, arbitrations, inquiries,
investigations, or proceedings pending or, to the best knowledge of the
Shareholder, threatened or imminent, (i) against or relating to the Shareholder
to the extent that any such claim, action, suit, arbitration, inquiry,
investigation, or proceeding (individually or together) could have an adverse
effect on the ability of the Shareholder to perform his obligations under this
Agreement, or (ii) which question or challenge the validity of this Agreement or
any action taken or to be taken by the Shareholder pursuant hereto.
Section 3.06. Knowledge as to Seller's and Company's Representations
The Shareholder neither knows nor has any reason to believe that any of the
representations and warranties made by the Seller or the Company in this
Agreement is not true and correct.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PURCHASER
The Purchaser hereby represents and warrants to the Seller as follows and
acknowledges and confirms that the Seller is relying upon such representations
and warranties notwithstanding any investigation made by the Seller or on his
behalf:
7
<PAGE> 10
Section 4.01. Authorization, Execution and Binding Effect
Purchaser has full corporate power and authority to execute and deliver
this Agreement and the other agreements contemplated hereby to which the
Purchaser is a party and to consummate the transactions contemplated hereby and
thereby. The Board of Directors of Purchaser has duly approved and authorized
the execution and delivery of this Agreement and the other agreements
contemplated hereby and the consummation of the transactions contemplated hereby
and thereby, and no other corporate proceedings on the part of Purchaser are
necessary to approve and authorize the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby. This Agreement has
been duly executed and delivered by Purchaser and constitutes the legal, valid
and binding agreement of Purchaser, enforceable against Purchaser in accordance
with its terms.
Section 4.02. Investment Intent
Purchaser is acquiring the Option for its own account, for investment
purposes only, and not with a view to the distribution, resale, transfer or
other disposition thereof and recognizes that the Option has not been registered
under any federal or state securities laws; and the Purchaser will not sell,
transfer, pledge or hypothecate the Option in violation of applicable securities
laws. The Purchaser is an "accredited investor" (as that term is defined in Rule
501 promulgated under the Securities Act of 1933, as amended) by virtue of the
Purchaser being a corporation, not formed for the specific purpose of acquiring
the Option, with total assets in excess of $5,000,000.
ARTICLE V
MISCELLANEOUS
Section 5.01. Survival of Representations and Warranties; Indemnification;
Limitation on Damages.
(a) All representations and warranties, covenants, agreements, and other
undertakings of the parties contained in this Agreement shall survive the
closing of the transactions contemplated hereby and shall remain in full force
and effect, regardless of any investigation made by or on behalf of any party
hereto for a period of three (3) years following the Closing Date; provided,
however, that (i) all representations and warranties which relate to taxes
(including without limitation the representations and warranties set forth in
Sections 2.06 (other than paragraphs (a) and (c) of such Section to the extent
such paragraphs (a) and (c) relate to laws, regulations, decrees, orders
permits, licenses and consents that do not directly or indirectly relate to
taxes) shall survive until the expiration of all applicable statutes of
limitation and any extensions thereof, and (ii) the representations and
warranties contained in Article III hereof shall not, to the extent made by the
Shareholder (but not to the extent made by the Seller, with respect to whom this
clause (ii) shall not apply) survive the Closing; and provided further, that the
expiration of any representation or warranty shall not affect any claim of a
breach of such representation or warranty made prior to the date of such
expiration.
(b) The Seller and the Company jointly and severally agree to indemnify the
Purchaser, its affiliates and each of their respective officers, directors,
employees and agents (collectively, the "Indemnified Parties") and hold them
harmless from any loss, liability, claim, damage or expense (including
reasonable legal fees and expenses) suffered or incurred by any such Purchaser
Indemnified Party to the extent arising from any breach of any representation,
warranty or covenant of the Seller or the Company contained in this Agreement.
8
<PAGE> 11
(c) No party hereto shall be entitled to claim as damages for breaches of
representations and warranties hereunder, against any other party hereto, an
aggregate amount in excess of $600,000.00; provided, however, that nothing
herein shall be, or shall be deemed to be, an assumption by the Purchaser of, or
an agreement on the part of the Purchaser to be liable or responsible for, any
liabilities or obligations of any other party hereto, and the Seller hereby
expressly agrees that he shall indemnify, defend, and hold harmless the
Purchaser and the Purchaser's affiliates (which indemnity shall not be subject
to the limitations as to amount set forth in the first clause of this paragraph
(c)) from and against any and all losses, liabilities, damages, obligations,
payments, costs, and expenses arising out of, or directly or indirectly due to,
any liability or obligation of the Seller, the Company or the Shareholder;
provided further, that for purposes of this Section 5.01(c) the term
"affiliates" shall not with respect to the Purchaser include the Company (and
the Seller shall not be hereby required to indemnify the Company), whether or
not the Purchaser exercises the Option.
Section 5.02. Discontinuance of Business; Waiver of Purchase Rights
(a) The Company covenants and agrees that after the date hereof the Company
shall cease all of its current business operations relating directly or
indirectly to the wire and cable product manufacturing, distributing or
assembling businesses, and after the date hereof the Company shall not engage
directly or indirectly in the wire and cable product manufacturing, distributing
or assembling businesses anywhere in the United States. Notwithstanding the
foregoing, the Company may use reasonable efforts to collect accounts receivable
owing to the Company.
(b) The Company covenants and agrees that, for a period of three (3) years
from and after the date hereof, or for such longer period as the Option remains
outstanding, the Company shall not offer to sell or sell, issue or grant to any
Person, other than the Purchaser, any securities of the Company, any options or
other rights to purchase securities of the Company or all or any substantial
portion of the assets of the Company.
(c) The Shareholder covenants and agrees that for so long as the Option
remains outstanding, he shall not offer to sell or sell, issue or grant to any
Person, other than the Purchaser, any securities of the Company or any options
or other rights to purchase securities of the Company, and that he shall not as
the sole shareholder of the Company consent to the sale by the Company of any
securities of the Company, any options or other rights to purchase securities of
the Company or all or any substantial portion of the assets of the Company.
(d) Each of the Company and the Shareholder hereby irrevocably waives any
and all rights to purchase or repurchase shares of the Company's capital stock,
whether such rights arise under or pursuant to the Company's Articles of
Organization, By-Laws or otherwise, and each of the Company and the Shareholder
hereby covenants not to assert any such right to purchase or repurchase such
capital stock; the foregoing waiver and covenant to apply with respect to any
and all transfers of the Company's capital stock, including without limitation
any transfer of the Shares upon exercise of the Option by the Purchaser or any
subsequent holder thereof.
Section 5.03. Headings; Grammatical Usage
The descriptive headings of the several Articles and Sections of this
Agreement, and the Table of Contents, are inserted for convenience only and do
not constitute a part of this Agreement. In construing this Agreement, feminine
or neuter pronouns shall be substituted for those masculine in form and vice
versa, and plural terms shall be substituted for singular terms and vice versa,
in any place in which the context so requires.
9
<PAGE> 12
Section 5.04. Notices
Any notices or other communications required or permitted hereunder shall
be given in writing and shall be sufficient if delivered personally or sent by
certified or registered mail, postage prepaid, addressed as follows:
If to the Seller, the Company or the Shareholder, to:
James S. Harrington
c/o Connectivity Products Incorporated
214 Nashua Street
Leominster, Massachusetts 01453
If to the Purchaser, to: c/o Tigera Group, Inc.
667 Madison Avenue
Suite 2500
New York, New York 10021
Attention: Mr. Donald T. Pascal
with a copy to: Zimet, Haines, Friedman & Kaplan
460 Park Avenue
New York, New York 10022
Attention: Herbert M. Friedman, Esq.
or to such other address as shall be furnished in writing by such party, and any
such notice or communication shall be effective and be deemed to have been given
as of the date so mailed; provided that any notice or communications changing
any of the addresses set forth above shall be effective and deemed given only
upon its receipt.
Section 5.05. Assignment; Third Parties
This Agreement and all of the provisions hereof shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns, but except as expressly herein provided, neither this
Agreement nor any of the rights, interest, or obligations hereunder shall be
assigned by any of the parties hereto without the prior written consent of the
other parties. Neither this Agreement nor any other agreement contemplated
hereby shall be deemed to confer upon any Person not a party hereto or thereto
any rights or remedies.
Section 5.06. Expenses
Each party hereto shall bear all of the fees and expenses incurred by such
party in connection with this Agreement and the transactions contemplated
hereby.
Section 5.07. Complete Agreement
This Agreement contains the entire understanding of the parties with
respect to the transactions contemplated hereby and supersedes all prior
arrangements or understandings with respect thereto. There are no restrictions,
agreements, promises, warranties, covenants, or undertakings other than those
expressly set forth herein or therein.
10
<PAGE> 13
Section 5.08. Amendments and Waivers
This Agreement may be amended or modified, and the terms hereof may be
waived, only by a written instrument signed by the parties hereto or, in the
case of a waiver, by the party waiving compliance. No delay on the part of any
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof. No course of dealing on the part of any party hereto, its agents
or employees, nor any failure or delay on their part with respect to the
exercise of any right, power or privilege given or granted hereunder shall
operate as a waiver thereof as to any future defaults, nor shall any single or
partial exercise by a party hereto of any right, power or privilege granted or
contained herein preclude such party from later or further exercise of any
right, power or privilege as to any future defaults.
Section 5.09. Counterparts
This Agreement may be executed in two or more counterparts, all of which
shall be considered one and the same Agreement and each of which shall be deemed
an original.
Section 5.10. Governing Law
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED
ENTIRELY WITHIN SUCH STATE. EACH OF THE PARTIES HERETO HEREBY AGREES THAT ANY
SUIT, ACTION OR PROCEEDING FOR THE ENFORCEMENT OF THIS AGREEMENT SHALL BE
BROUGHT ONLY IN THE STATE COURTS OF OR FEDERAL COURTS SITTING IN THE CITY AND
STATE OF NEW YORK. EACH PARTY HERETO IRREVOCABLY CONSENTS TO THE JURISDICTION OF
SUCH COURTS AND TO SERVICE OF PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING
BEING MADE UPON SUCH PARTY BY REGISTERED OR CERTIFIED MAIL AT THE ADDRESS
SPECIFIED IN SECTION 5.04 HEREOF. EACH PARTY HERETO HEREBY WAIVES ANY OBJECTION
IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING
OR ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING IS BROUGHT IN AN
INCONVENIENT COURT.
Section 5.11. Action by Purchaser
Any reference in this Agreement, or in any of the agreements being or to be
entered into by the Purchaser in connection herewith, to action to be taken by
the Purchaser or to the Purchaser's consent, agreement or election, shall mean
and refer to such action, consent, agreement or election that has been
authorized by the board of directors of the Purchaser or by a committee of such
board to which such authority has been delegated.
11
<PAGE> 14
IN WITNESS WHEREOF, each of the parties hereto has executed this Stock
Option Purchase Agreement, individually or by its duly authorized officers (as
the case may be), as of the date first above written.
CONNECTIVITY PRODUCTS SIGNAL SALES CORP.
INCORPORATED
By: /s/ Donald T. Pascal By: /s/ Wayne McPherson
---------------------------- ----------------------
Name: Donald T. Pascal Name: Wayne McPherson
Title: Chairman of the Board Title: President
/s/ James S. Harrington /s/ Wayne McPherson
- -------------------------------- --------------------------
James S. Harrington, Wayne McPherson,
individually, individually,
12
<PAGE> 1
BUILDING LEASE
Between
ANTHONY-BENNETT PROPERTIES
a Michigan Co-Partnership
(Landlord)
and
ENERGY ELECTRIC CABLE, INC.
a Michigan Corporation
(Tenant)
DATED: December 22, 1988
<PAGE> 2
BUILDING LEASE
PREAMBLE
This Lease made as of the ______________ day of ___________________
____, by and between:
Anthony-Bennett Properties
a Michigan Co-Partnership
Whose address is:
5800 Crooks Road, Suite # 100
Troy, MI 48098-2830
as lessor ("Landlord"), and
Energy Electric Cable Inc.,
a Michigan Corporation
whose address is:
35500 Mound Road
Sterling Heights, MI 48310
as lessee ("Tenant").
<PAGE> 3
INDEX
<TABLE>
<CAPTION>
<S> <C>
SECTION I................................................................... 1
1.1 Demise of Premises.............................................. 1
SECTION II.................................................................. 1
2.1 Construction of Improvements.................................... 1
SECTION III................................................................. 2
3.1 Term of Lease................................................... 2
3.2 Commencement Date............................................... 2
SECTION IV.................................................................. 3
4.1 Obligation to Pay Rent.......................................... 3
4.2 Annual Rent..................................................... 3
4.3 Option to Renew................................................. 4
4.4 Annual Rent Net to Landlord..................................... 4
SECTION V................................................................... 5
5.1 Additional Rent................................................. 5
5.2 Method of Payment............................................... 5
5.3 Late Charges.................................................... 5
5.4 Security Deposit................................................ 5
SECTION VI.................................................................. 7
6.1 Definition of Expenses.......................................... 7
6.2 Definition of "Real Estate Taxes"............................... 7
6.3 Definition of "Insurance Premiums".............................. 8
6.4 Utility Costs................................................... 8
SECTION VII................................................................. 8
7.1 Maintenance of Insurance........................................ 8
7.2 Liability Insurance............................................. 9
7.3 Hazard Insurance................................................10
7.4 Acceptable Insurers.............................................11
7.5 Other Insurance.................................................11
7.6 Failure to Provide..............................................11
7.7 Insurance Proceeds..............................................11
SECTION VIII................................................................12
8.1 Maintenance and Repair..........................................12
SECTION IX..................................................................13
9.1 Indemnification.................................................13
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C>
SECTION X...................................................................14
10.1 Landlord May Cure Tenant's Default..............................14
SECTION XI..................................................................15
11.1 Alterations by Tenant...........................................15
11.2 Ownership Upon Expiration of Lease..............................15
11.3 Mechanics Liens.................................................16
SECTION XII.................................................................17
12.1 Repairs to Premises.............................................17
12.2 Extension of Term...............................................17
12.3 Landlord's Option to Terminate..................................18
12.4 Partial Damage to Premises......................................19
12.5 Waiver of Subrogation...........................................19
SECTION XIII................................................................20
13.1 Use of Premises.................................................20
13.2 Surrender of Premises...........................................20
13.3 Compliance with Law.............................................21
SECTION XIV.................................................................22
14.1 Total Taking....................................................22
14.2 Landlord's Option to Terminate..................................22
14.3 Repair of Premises..............................................23
14.4 Rights to Award.................................................23
14.5 Adjustment of Rent..............................................23
SECTION XV..................................................................25
15.2 Assignment and Subletting by Tenant.............................25
15.2 Landlord's Mortgage Provisions..................................25
15.2.1. Landlord's Rights to Subordinate Lease.........................26
15.2.2. Estoppel Certificate...........................................26
15.2.3. Changes to Lease Required by Lender............................27
SECTION XVI.................................................................27
16.1 Definition of Event of Default..................................27
16.2 Remedies........................................................28
16.3 Termination Notice..............................................30
16.4 Waiver..........................................................30
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
<S> <C>
SECTION XVII................................................................30
17.1 Landlord's Option To Terminate Upon
Insolvency of Tenant............................................30
17.2 Tenant's Interest Not Transferable by
Virtue of State Insolvency Law without
Landlord's Consent..............................................31
17.3 Time for Assumption or Rejection
of Lease in Tenant's Bankruptcy.................................31
17.4 Conditions to the Assumption of
Lease in Bankruptcy Proceedings.................................32
17.5 Assignment of Lease by Tenant...................................34
17.6 Measure of Damages..............................................34
SECTION XVIII...............................................................35
18.1 Quiet Enjoyment.................................................35
SECTION XIX.................................................................35
19.1 Notice..........................................................35
19.2 Holding Over....................................................35
19.3 Landlord's Access...............................................36
19.4 Provisions Relating to Landlord.................................36
19.5 Landlord's Representations......................................37
19.6 Entire Agreement................................................37
19.7 Memorandum of Lease.............................................38
19.8 Modification; Waivers...........................................38
19.9 Applicable Law; Binding Effect;
Topical Headings................................................38
19.10 Force Majeure...................................................38
SECTION XX..................................................................39
Exhibits to Lease......................................................39
</TABLE>
<PAGE> 6
SECTION I
Demise of Premises
1.1 Demise of Premises
Landlord hereby leases to Tenant and Tenant hires from Landlord certain
premises ("Leased Premises" or "Premises") to be constructed located in the City
of Auburn Hills and commonly known as 270 Rex Boulevard, Auburn Hills, Michigan
48057.
The Premises consist of the land ("Land") described in Exhibit A attached
hereto and the building ("Building") and related improvements (together with the
Building, collectively referred to as the "Improvements") to be constructed
thereon as described in Exhibit B attached hereto.
SECTION II
Construction of Improvements
2.1 Construction of Improvements
Landlord agrees to construct the Improvements on the Land, prior to the
Commencement Date (defined in Section 3.2) in accordance with the plans and
specifications attached hereto as Exhibit B on the property owned by Landlord
described in Exhibit A attached hereto. No "minor" change from the plans which
may become necessary during construction will invalidate, change, or affect this
Lease, provided that, unless the Tenant shall otherwise agree in writing, such
changes do not adversely affect the size or utility of the Improvements for
Tenant's intended use.
<PAGE> 7
SECTION III
Term of Lease
3.1 Term of Lease
The Term of this Lease begins on the Commencement Date (as defined in
Section 3.2) and continues for a period of five (5) years beginning on the
Commencement Date or, if the Commencement Date is other than the first day of a
calendar month, then beginning on the first day of the first calendar month
following the Commencement Date ("Anniversary Date").
"Lease Year" shall mean the consecutive twelve month period following the
Commencement Date or, if the Commencement Date is other than the first day of a
calendar month, then the twelve month period following the Anniversary Date, and
each anniversary thereof. The first Lease Year shall also include the period
from the Commencement Date to the first Anniversary Date.
3.2 Commencement Date
The Commencement Date shall be the date on which possession of the Leased
Premises is delivered to Tenant. Possession of the Premises shall be deemed
delivered to the Tenant on the date on which both the Landlord receives a
temporary Certificate of Occupancy and the Premises are substantially completed
with the remaining work to be done on the Premises not interfering with Tenant's
use.
Promptly following the Commencement Date, such Date shall be confirmed by
the parties in a written memorandum. However, the failure of one party to
acknowledge the Commencement Date shall not affect any obligations of either
party hereunder.
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<PAGE> 8
SECTION IV
Annual Rent
4.1 Obligation to Pay Rent
The rent payable under this Lease shall consist of Annual Rent. The Tenant
shall pay Annual Rent to the Landlord in the amounts specified in this Lease, in
advance, on the first day of each calendar month during the Term hereof. The
Tenant shall pay Additional Rent in the manner described in Section V. Except as
otherwise provided, all rent shall be paid without any set off or deduction
whatsoever at the address of the Landlord given above or at such other place as
Landlord may designate from time to time in writing.
4.2 Annual Rent
The Annual Rent for Lease Year One of the term of this Lease shall be One
Hundred Fifty Thousand Six Hundred Sixty-Six and 67/100 ($150,666.67) Dollars
payable in eight monthly installments of Eighteen Thousand Eight Hundred
Thirty-Three and 33/100 ($18,833.33) Dollars, beginning on the first day of the
fifth month following the first Anniversary Date. The Annual Rent for Lease Year
Two of the term of this Lease shall be Two Hundred Twenty Six Thousand and
No/100 ($226,000.00) Dollars payable in twelve monthly installments of
$18,833.33 beginning on the second Anniversary Date. The Annual Rent for Lease
Years Three through Five shall be Two Hundred Thirty Eight Thousand and No/100
($238,000.00) payable in monthly installments of $19,833.33 beginning on the
third Anniversary Date.
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<PAGE> 9
4.3 Option to Renew
Provided Tenant is not then in default under the terms of this Lease, on
or before six months prior to the expiration of the original term of the Lease,
Tenant may elect, in writing, to extend the term of the Lease for an additional
five (5) year period. The Annual Rent for this additional five (5) year term
shall be $270,350.00 (Two Hundred Seventy Thousand Three Hundred Fifty Dollars)
or $22,529.16 per month.
Provided Tenant is not then in default under the terms of this Lease, on
or before six months prior to the expiration of this first five year extension,
Tenant may elect, in writing, to extend the term of this Lease for a second five
(5) year period. The Annual Rent for this second five year term shall be
$313,400.00 (Three Hundred Thirteen Thousand Four Hundred Dollars) or $26,116.67
per month.
Notwithstanding the above, Landlord shall have the right, in Landlord's
sole discretion, to revoke an elected extension of the term of this Lease by
Tenant if Tenant is in default under the terms of this Lease at the time the
extended term is scheduled to commence.
4.4 Annual Rent Net to Landlord
Except for Landlord's obligations as set forth hereunder, Landlord and
Tenant intend that the Annual Rent due hereunder, together with any adjustments
during the term of this Lease, shall be absolutely net of all costs, expenses,
taxes (real and personal) and charges of every kind and nature whatsoever
relating to the ownership, occupancy or use of the Premises so
- 4 -
<PAGE> 10
that the rent together with any adjustments, constitute the minimum income
realized by Landlord from the leasing of the Premises.
SECTION V
Additional Rent; Late Charges; Security Deposit
5.1 Additional Rent
"Additional Rent" means all of the Expenses (as defined in
Section VI) attributable to the Leased Premises.
5.2 Method of Payment
The Tenant shall pay Additional Rent, in addition to the Annual Rent, by
paying all Expenses (as defined in Section VI), in full, when due and before any
interest and/or penalty accrues, directly to the appropriate taxing authority or
supplier provided that if the appropriate taxing authority or Supplier permits,
the Expense may be paid in installments.
5.3 Late Charges
Any rent or other sums, if any, payable by Tenant to Landlord under this
Lease which are not paid within ten (10) days after they are due, and any rent
or other sums received and accepted by Landlord more than ten days after they
are due, will be subject to interest at a per annum rate of three (3%) percent
above the then prevailing prime rate of interest charged by the National Bank of
Detroit. Such late charges will be due and payable as additional rent on or
before the next date on which rent is due.
5.4 Security Deposit
- 5 -
<PAGE> 11
Landlord hereby acknowledges the receipt of Thirty-Seven Thousand Six
Hundred Sixty-Six and 67/100 ($37,666.67) Dollars as security for the faithful
performance by Tenant of all of the Terms and conditions upon Tenant's part
under this Lease. In the event Tenant defaults in any of the terms and
conditions of this Lease, Landlord shall have the right (but not the obligation)
to apply any part of the security deposit to cure any such default, including
damages or deficiency in the reletting of the Leased Premises. In the event
Landlord so applies the security deposit, Tenant shall upon demand immediately
deposit with Landlord an amount sufficient to fund the security deposit in the
amount required hereunder. In the event Tenant fully complies with all the terms
and conditions of this Lease, the security deposit, or balance thereof, shall be
returned to Tenant without interest upon the termination of this Lease and
surrender of possession of the Leased Premises to Landlord. Landlord shall be
obligated to keep the security deposit as a separate fund and may not co-mingle
such with Landlord's funds. Landlord shall maintain separate accounting records
for such deposit.
In the event of the sale of the Leased Premises or transfer of the
Landlord's rights hereunder, Landlord shall have the right to transfer the
security deposit to the vendee or transferee subject to the obligations of the
above paragraph. In such event, Landlord shall be considered released by Tenant
from all liability for the return of the security deposit and Tenant shall seek
recovery of the security deposit directly from such vendee or transferee. This
provision shall apply to each and every such
- 6 -
<PAGE> 12
transfer of the security deposit provided Tenant is given written notice of such
transfer. The Tenant shall not pledge, mortgage, assign or encumber the security
deposit without the prior written consent of Landlord and any such attempt shall
be void. In the absence of satisfactory evidence to Landlord of the assignment
of the right to receive the security deposit, or balance thereof, Landlord may
return the security deposit to the original Tenant without liability.
SECTION VI
Expenses, Taxes, Utilities, Insurance and Maintenance
6.1 Definition of Expenses
"Expenses" are those costs attributable in whole or in part to the Leased
Premises which are to be paid by Tenant.
"Expenses" as used in this Lease shall include:
a. Real Estate Taxes, as defined in Section 6.2;
b. Insurance Premiums, as defined in Section 6.3;
c. Utility Costs, as defined in Section 6.4.
6.2 Definition of "Real Estate Taxes"
"Real Estate Taxes" (or "Taxes") shall mean all property taxes (whether
real or personal), assessments made after the Commencement Date (general or
special), and water and sewer connection or tap-in charges for connections and
tap-ins made after the Commencement Date, and all other governmental impositions
(including without limitation any tax imposed with
- 7 -
<PAGE> 13
respect to the parking areas or number of parking spaces including in the
Premises) which may be levied during the term of this Lease upon the Land and
Building (or any part thereof) comprising the Leased Premises. In the event such
taxes are eliminated or reduced by any federal, state or municipal body or
governmental agency having jurisdiction thereof, and another tax or assessment
is imposed by way of substitution for (or in addition thereto) all or any part
of such Taxes, then such substituted (or additional) tax or assessment shall be
included as Taxes under this Lease. Where Special Assessments are spread in
installments over a period of years, Tenant shall be liable only for
installments accruing during the Term of the Lease. Landlord shall have no
obligation to contest the amount of the Taxes.
For the purpose of calculating Additional Rent, Taxes shall be
attributable to the Lease Year in which they first become due and payable.
6.3 Definition of "Insurance Premiums"
"Insurance Premiums" shall mean the premiums necessary to
obtain and maintain the policies described in Section VII.
6.4 Utility Costs
"Utility Costs" shall include all charges made for the use
of gas, heat, air conditioning, steam, electricity, water and sewer in
connection with the Leased Premises during the term of this Lease but shall not
include the costs of transmitting or otherwise transporting the same to the
demised premises.
- 8 -
<PAGE> 14
SECTION VII
Insurance
7.1 Maintenance of Insurance
Tenant at its sole expense, will obtain and maintain at all times until
termination of this Lease and surrender of the Premises to Landlord, a primary
policy of Liability Insurance as provided under this Section VII. Landlord will
provide Hazard Insurance for the Premises under Landlord's blanket insurance
policy and Tenant shall reimburse Landlord for the Tenant's pro rata share of
the cost of such insurance.
7.2 Liability Insurance
The Liability coverage under the primary policy will name Landlord and
Landlord's mortgagee as additional insured parties, and will provide
comprehensive general public liability insurance including blanket contractual
coverage against claims for or arising out of bodily injury, death or property
damage, occurring in, on or about the Premises or property in, on or about the
streets, sidewalks or properties adjacent to the Premises. The limits of
coverage will be, initially, if dual limits are provided, not less than Three
Million Dollars ($3,000,000.00) with respect to injury or death of a single
person, not less than Three Million ($3,000,000.00) with respect to any one
occurrence and not less than Three Million Dollars ($3,000,000.00) with respect
to any one occurrence of property damage, or, in the alternative, a single limit
policy in the amount of Three Million Dollars ($3,000,000.00), and thereafter in
such reasonably appropriate increased amounts as may be determined by Landlord
or
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Landlord's mortgagee; provided, however, that the amount of coverage will not be
increased more frequently than at one (1) year intervals.
7.3 Hazard Insurance
The blanket policy will insure the Building and Improvements as defined in
Section 1.1 hereof (but not any personal property, fixtures or equipment of
Tenant) for full replacement cost against loss or damage by fire or other
casualty, with standard extended risk coverage, vandalism, malicious mischief,
and sprinkler leakage, and all other risks embraced by "All Risks" insurance
coverage. The named insureds will be Landlord and Landlord's mortgagee, only.
The amount of said insurance shall be $1,400,000.00 in Lease Year One, which
amount shall be increased by eight (8) percent per annum in each succeeding
year.
7.4 Acceptable Insurers
The insurance policy or policies to be provided by Tenant or Landlord
hereunder shall be issued by an insurance company or companies having an A. M.
Best Company rating of not less than "A". Each policy procured under this
Section VII must provide for at least thirty (30) days written notice to the
other Party of any cancellation. At either Party's option, either certificates
of insurance or the original policy or policies will be delivered to the
requesting Party prior to the effective date thereof, together with receipts
evidencing payment of the premiums thereof. Certificates of renewal for such
policies will be delivered to all parties at least thirty (30) days prior to the
expiration dates thereof. The insurance provided by Tenant
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under this Section VII may be in the form of a blanket insurance policy covering
other properties as well as the Premises; provided, however, that any such
policy or policies of blanket insurance (i) must specify therein, or Tenant must
furnish Landlord with a written statement from the insurers under such policy or
policies specifying, the amount of the total insurance allocated to the
Premises, which amounts will not be less than the amounts required by
Subsections 7.1, and 7.2 hereof, and (ii) such amounts so specified must be
sufficient to prevent Landlord or Landlord's mortgagee from becoming a
co-insurer within the terms of the applicable policy or policies, and provided
further, however, that any such policy or policies of blanket insurance must, as
to the Premises, otherwise comply as to endorsements and coverage with the other
provisions of this Section VII.
7.5 Other Insurance
Except with respect to the insurance required in Subsection 7.2, and
insurance which may be taken out by Tenant covering loss or casualty to personal
property, fixtures, or equipment of Tenant, neither Landlord nor Tenant may take
out separate insurance concurrent in form or contributing in the event of loss
with that required under this Section VII unless Landlord and Tenant are
included therein as the insured payable as provided in this Lease. Each party
will notify the other immediately of the placing of any such separate insurance.
7.6 Failure to Provide
If Tenant fails to provide all or any of the insurance required by this
Section VII, or subsequently fails to maintain
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such insurance in accordance with the requirements of this Section, Landlord may
(but will not be required to) procure or renew such insurance, and any amounts
paid by Landlord for such insurance will be Additional Rent due and payable on
or before the next date on which rent is due, together with late charges as
provided in Section V. If Landlord fails to provide all or any of the insurance
required by this Section VII, or subsequently fails to maintain such insurance
in accordance with the requirements of this Section, Tenant may procure or renew
such insurance and may offset the costs of such insurance against Annual Rent.
7.7 Insurance Proceeds
In the event of loss under any policy or policies provided by Tenant to
Landlord under this Section VII, other than the liability policy required by
Subsection 7.2, the insurance proceeds will be payable to Landlord or Landlord's
mortgagee; thereafter, such proceeds will be used for the expense of repairing
or rebuilding the Improvements which have been damaged or destroyed if Landlord
and its mortgagee are satisfied that the amount of insurance proceeds are and
will be at all times sufficient to pay for the completion of the repairs or
rebuilding.
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SECTION VIII
Maintenance and Repair
8.1 Maintenance and Repair
Except as otherwise provided, the Tenant will, at its own expense (as
limited by a certain "Maintenance and Easements Agreement" dated the 5th day of
December, 1986 by and between Cunningham-Limp Company and RV Development Co.),
keep the Premises in good repair and at the expiration of the term yield and
deliver up the same in like condition as when taken, reasonable use and wear
thereof and damage by the elements excepted. The Tenant shall not make any
alterations, additions or improvements to said premises without the Landlord's
written consent, which shall not be unreasonably withheld, and all alterations,
additions or improvements made by either of the parties shall be the property of
the Landlord, and shall remain upon and be surrendered, without molestation or
injury.
Landlord, at its expense, shall keep the roof and exterior walls
(including such walls as are common with another building) in good repair during
the term of this Lease (including extensions). Such repair shall be made within
a reasonable time after written notice of the need for repair to Landlord.
Landlord, at its expense, shall keep all other Improvements (other than those
mechanical in nature) in good repair for a period of one year from the
Commencement Date. All Improvements that are mechanical in nature shall be kept
in good repair by Landlord, at its expense, for a period of two years from the
Commencement Date.
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SECTION IX
Indemnification
9.1 Indemnification
Tenant shall indemnify and hold Landlord, its licensees, servants, agents,
employees and contractors harmless from any and all loss, damage, claim of
damage, liability or expense, including without limitation reasonable attorney
fees (collectively "Damages"), to any person or property in or on the Leased
Premises arising directly or indirectly out of or in connection with (a) the use
of the Premises by Tenant, its agents, employees, contractors, licensees or
invitees, or (b) the failure of Tenant to comply with any provision of this
Lease, or (c) the condition of the Premises, except by or attributable to the
act or omission of Landlord, its agents, employees, contractors, licensees and
invites. Landlord shall indemnify and hold Tenant, its licensees, servants,
agents, employees and contractors harmless from any and all loss, damage, claim
of damage, liability or expense, including, without limitation, reasonable
attorney fees (collectively "Damages"), to any person or property in or on the
Leased Premises arising directly or indirectly from Landlord's failure to comply
with any provisions of the Lease or for damages caused by acts or omissions of
Landlord, its employees, agents, licensees, servants or contractors. This
Section shall survive any termination of this Lease, except if this Section is
specifically terminated by both parties in writing.
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SECTION X
Curing Default
10.1 Landlord May Cure Tenant's Default
If Tenant defaults in the performance of any provision of
this Lease, Landlord shall have the right (but not the obligation) in addition
to any and all other rights and remedies hereunder, to cure such default for the
account of Tenant, upon 30 days prior written notice to Tenant, except that for
a default of rent Landlord shall provide 10 days prior written notice, and
excepting further that in an emergency, or if such default would jeopardize or
leave uninsured the Leased Premises, or result in the failure of public
liability or property damage insurance to be in effect, or if the nature of such
default is such that Landlord would risk further harm by waiting for Tenant to
cure (e.g., a toxic spill), Landlord may cure such default without prior notice
to Tenant. Upon receipt of notice of such cure and demand for payment, Tenant
shall repay any payment or expenditure made by Landlord with the next monthly
rent payment together with interest at the greater of a per annum rate of 3%
above the then prevailing prime rate of interest charged by National Bank of
Detroit, or 10% per annum, from the date of the payment or expenditure by
Landlord until the date of repayment by Tenant.
Landlord's failure to exercise its right to cure such default(s) shall not
be deemed a breach of the Lease nor a waiver or release of any Tenant's
obligations under the Lease.
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SECTION XI
Alterations and Mechanics Liens
11.1 Alterations by Tenant.
Tenant at its own expense may make non-structural alterations, additions
or improvements in or to the Leased Premises. Tenant shall not make any
alterations, additions or improvements in or to the Leased Premises without
Landlord's prior written consent which shall not be unreasonably withheld.
Tenant shall, before making any alterations, additions, installments or
improvements, at its expense, obtain all permits, approvals and certificates
required by any governmental or quasi-governmental bodies and (upon completion)
certificates of final approval thereof and shall deliver promptly duplicates of
all such permits, approvals and certificates to Landlord, and Tenant agrees to
carry, and to cause Tenant's contractor and subcontractors to carry such
worker's compensation, general liability, personal and property damage insurance
as Landlord may reasonably require.
11.2 Ownership Upon Expiration of Lease.
All fixtures and all paneling, partitions, railing and like
installations, alterations, additions and improvements, installed in the Leased
Premises by either Tenant or Landlord on Tenant's behalf, shall become the
property of Landlord and shall remain upon and be surrendered with the Premises
upon the termination of the Lease. Nothing in this Section shall be construed to
give Landlord title to or to prevent Tenant's removal of trade fixtures,
moveable office furniture and equipment, but upon
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removal of any such equipment and fixtures from the Premises, Tenant shall
immediately and at it's expense, repair and restore the Premises to the
condition existing prior to installation (subject to ordinary wear and tear) and
repair any damage to the Premises or the Building due to such removal. All
property that was permitted to be removed by Tenant at the end of the term but
which remains in the Premises for 60 days after Tenant vacates the Premises
shall be deemed abandoned and may, at the election of Landlord, either be
retained as Landlord's property or may be removed from the Premises by Landlord
provided, however, if Tenant is delayed or hindered in the removal of the
property permitted under this Section for reasons beyond Tenant's control then
Tenant's removal of its property shall be extended for up to twelve (12) months
at the Annual Rent described in Section 19.2 hereof.
11.3 Mechanics Liens.
Tenant shall (a) pay before delinquency all costs and expenses of work
done or caused to be done by Tenant in the Leased Premises; (b) keep the title
to the Premises and every part thereof free and clear of any lien or encumbrance
in respect of such work; and (c) indemnify and hold harmless Landlord against
any claim, loss, cost demand (including reasonable legal fees), whether in
respect of liens or otherwise, arising out of the supply of material, services
of labor for such work. Tenant shall immediately notify Landlord of any lien,
claim of lien or other action of which Tenant has or reasonably should have
knowledge and which affects the title to the Premises or any part
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thereof, and shall cause the same to be removed within 15 days (or such
additional time as Landlord may consent to in writing), either by paying and
discharging such lien or by posting a bond or such other security as may be
reasonably satisfactory to Landlord. If Tenant shall fail to remove same within
said time period after written notice to Tenant, Landlord may take such action
as Landlord deems necessary to remove the same and the entire cost thereof shall
be immediately due and payable by Tenant to Landlord.
SECTION XII
Casualty Damage
12.1 Repairs to Premises.
It is understood and agreed that if the Premises are damaged or destroyed
in whole or in part by fire or other casualty during the Term, the Landlord, if
there are sufficient insurance proceeds, will repair and restore the same to
good tenantable condition with reasonable dispatch. The rent and all other
charges which are the obligation of Tenant under this Lease will abate, if and
to the extent covered by loss of rents insurance proceeds, for the period the
Premises are untenantable.
12.2 Extension of Term.
Tenant will have the option, exercisable by written notice to Landlord
upon restoration of the Premises, to extend the original Term of this Lease (or
the extension of the Term during which the damage or destruction occurred, as
the case may be) for a period equal to the period, if any, during which Tenant
was
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deprived of the use of all or a significant portion of the Premises by reason of
such damage or destruction. Tenant's option must be exercised within ninety (90)
days following completion of the work of restoration and repair.
12.3 Landlord's Option to Terminate
Notwithstanding anything to the contrary contained in this Lease, in the
event the Building is damaged or destroyed by fire or other casualty during the
term hereof, Landlord shall have the right to terminate this Lease upon the
occurrence of any of the following and upon written notice given to Tenant
within thirty (30) days after the date of such occurrence:
a. If less than 50% in area of the Building has been damaged or
destroyed, but in Landlord's opinion repairs cannot be completed
within 180 days after the date of such occurrence; or
b. If more than 50% of the Building has been damaged or destroyed; or
c. If the available insurance proceeds are insufficient to complete the
necessary repair and restoration; or
d. If the damage or destruction occurs within the last year of the
original term of this Lease or of any extension of such term;
provided, however, that the Lease may not be terminated under this
Subsection if Tenant's option, if any, to further extend the term of
the Lease has been exercised before such occurrence. Termination of
the Lease pursuant to this Section shall
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be effective thirty (30) days after Tenant receives from Landlord
the written notice required above.
Section 12.4 Partial Damage to Premises
Notwithstanding anything to the contrary contained in this
Lease, in the event of partial damage to the premises, Landlord agrees, upon
notification, to use its best efforts promptly to repair such damage. Tenant
agrees to report to the best of its knowledge the extent of any partial damage
to Landlord. Landlord shall be required, within ten (10) days of receipt of
Tenant's notice, to give the time required for repair. Within ten (10) days of
receiving Landlord's report and notification to repair, Tenant at its option may
terminate this Lease as of the date of partial damage if the Premises cannot be
restored within one hundred eight (180) days of the casualty. Tenant shall also
have the option to terminate or to extend Landlord's time for completion if at
the end of such one hundred eight (180) day period the restoration has not been
completed. Notwithstanding the foregoing, Tenant shall not have such right of
termination if the partial damage resulted from the actions or negligence of
Tenant. In the event Tenant does not elect to terminate as provided hereunder,
Landlord shall repair the partial damages rapidly as is feasible by using its
best efforts.
12.5 Waiver of Subrogation
Landlord shall cause each insurance policy carried by Landlord insuring
the Premises against loss by fire, casualty and other causes covered by standard
extended coverage, and Tenant shall cause each insurance policy carried by
Tenant and insuring
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the Premises and its fixtures and contents against loss by fire and causes
covered by standard extended coverage, to be written in a manner so as to
provide that the Insurance Company waives all right of recovery by way of
subrogation against Landlord or Tenant in connection with any loss or damage
covered by any such policies. Neither party shall be liable to the other for any
loss or damage caused by fire or any of the risks enumerated in standard
extended coverage insurance, provided such insurance was obtainable at the time
of such loss or damage. If the release of either Landlord or Tenant, as set
forth in the second sentence of this paragraph, shall contravene any law with
respect to exculpatory agreements, the liability of the party in question shall
be deemed not released but shall be deemed secondary to the latter's insurance.
SECTION XIII
Use and Occupancy
13.1 Use of Premises
Tenant shall use and occupy the Leased Premises during the term of this
Lease for office, warehousing, and light assembly use only and for no other
purpose without the prior written consent of Landlord (which shall not be
unreasonably withheld).
13.2 Surrender of Premises
Except as otherwise provided in this Lease, during the term hereof Tenant
shall keep the Leased Premises and every part thereof in good repair and
condition at its sole cost and expense. At the expiration of the term (or the
earlier
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termination of this Lease), Tenant shall surrender the Premises broom clean and
in substantially the same condition and repair as existed at the time Tenant
took possession, reasonable wear and tear excepted.
13.3 Compliance with Laws
Tenant shall not do, permit or suffer any act or thing to be done: which
is injurious to the Land, the Building, or the Premises; which is a nuisance;
contrary to any laws, regulations, rulings or guidelines, whether local, State
or Federal; in violation of the certificate of occupancy issued for the
Building; which would result in the cancellation of, or any increase in premiums
for, insurance maintained by Landlord with respect to the Premises or the Land
or the Building; or, which would violate the terms of any deed restrictions
affecting the Premises. Further, Tenant shall not keep, use, sell or offer for
sale in or upon the Premises any article which may be prohibited by any then
available standard forms of fire insurance policies with extended coverage.
At all times during the term of this Lease, Tenant shall give prompt
notice to Landlord of any notice Tenant receives of any violation of any law or
requirement of a governmental authority affecting the Premises or the Building,
and, at its sole cost and expense, shall comply with all laws and requirements
of governmental authorities, including any violation order or duty imposed upon
Landlord or Tenant, arising from or relating to (1) Tenant's use of the
Premises; (2) the manner or conduct of Tenant's business of operation of its
installations,
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equipment or other property therein; (3) any cause or condition created by or at
the insistence of Tenant; or (4) breach of any Tenant's obligations hereunder.
SECTION XIV
Eminent Domain
14.1 Total Taking
If the whole of the Leased Premises is taken by any public authority under
the power of eminent domain, then this Lease shall terminate on the date
possession of the premises is delivered to such public authority. Annual Rent
and Additional Rent shall be paid to that date and prorated accordingly.
14.2 Landlord's Option to Terminate
Notwithstanding anything to the contrary contained in this Lease, if part
of the Leased Premises is taken by any public authority under the power of
eminent domain, Landlord shall have the right to terminate this Lease upon the
occurrence of any of the following and upon written notice given to Tenant not
later than 60 days after condemnation proceedings against the Land and/or
Building (or, if such proceedings are not commenced, not later than 14 days
before Landlord delivers possession of part so taken by such public authority):
a. If the taking of part of the Premises significantly and adversely
affects Tenant's use of the Premises; or
b. If restoration of the remainder of the Premises cannot in Landlord's
opinion be completed within 180 days
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after the date possession is required by the public authority; or
c. If Landlord's Condemnation Award (defined in Section 14.4) is
insufficient to complete the necessary restoration; or
d. If the taking (i.e., the date possession is required by the public
authority) occurs within the last 60 days of the original term of
this Lease or any extension of such term, provided, however, that
the Lease may not be terminated under this Subsection if Tenant's
option, if any, to further extend the term of this Lease is
exercised within 10 days after Tenant receives from Landlord the
termination notice described above.
Termination of the Lease pursuant to this Section shall be effective as of the
later of the date possession is required by the public authority or 60 days
after Tenant receives the termination notice described above. Annual Rent and
Additional Rent shall be paid to the date of termination and prorated
accordingly.
14.3 Repair of Premises
If this Lease is not terminated following such a condemnation or taking,
Landlord, as soon as reasonably practicable after such condemnation or taking
and the determination and payment of Landlord's award on account thereof, shall
expend as much as may be necessary of the net amount which is awarded to
Landlord and released by Landlords's mortgagee, if any, in restoring, to the
extent originally constructed by
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Landlord (consistent, however, with zoning laws and building codes then in
existence), so much of the Building as was originally constructed by Landlord to
an architectural unit as nearly like its condition prior to such taking as shall
be practicable. Should the net amount so awarded to Landlord be insufficient to
cover the cost of restoring the Building, in the reasonable estimate of
Landlord, Landlord may, but shall have no obligation to, supply the amount of
such insufficiency and restore the Building to such an architectural unit, with
all reasonable diligence, or Landlord may terminate this Lease by giving notice
to Tenant not later than a reasonable time after Landlord has determined the
estimate net amount which may be awaarded to Landlord and the estimated cost of
such restoration.
14.4 Rights to Award
All damages awarded for such taking shall belong to and be the property of
the Landlord, whether such damages shall be awarded as compensation for
diminution in value to the leasehold or to the fee of the Leased Premises and
any improvements to the Premises whether made by Landlord or Tenant. The amount
received by Landlord which is allocable to the Leased Premises shall be
"Landlord's Condemnation Award". However, Tenant shall be entitled to any award
for removal and relocation expenses, Tenant's loss of business, and fixtures
paid for by Tenant. Landlord and Tenant shall each seek their own award and pay
their own expenses in connection therewith.
14.5 Adjustment of Rent
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If this Lease is not terminated pursuant to Sections 14.1 or 14.2, the
minimum net rental payable by Tenant shall be reduced in proportion to the
reduction in net rentable area of the Building by reason of the condemnation or
taking.
SECTION XV
Assignment, Subletting and Mortgage Provisions
15.1 Assignment and Subletting by Tenant
Tenant shall not assign or in any manner transfer this Lease or any estate
or interest therein, hypothecate or mortgage the same or sublet the Leased
Premises or any part thereof or permit the use of the Premises by any other
party without the prior written consent of Landlord, which consent shall not be
unreasonably withheld. Any assignment, transfer, hypothecation, mortgage or
subletting without such consent shall give Landlord the right to terminate this
Lease and re-enter and repossess the Premises. However, consent by Landlord to
one or more assignments of this Lease or to one or more sublettings of the
Premises shall not be deemed a consent to any subsequent assignment, subletting,
occupation or use by any other person, and the acceptance of rent from an
assignee, subtenant or occupant shall not constitute a release of Tenant from
the oligations and covenants in this Lease.
A transfer of majority control of Tenant, including, without being limited
to, a transfer of a majority stock or partnership interest or the merger,
consolidation, sale of all or substantially all of the other assets of Tenant or
other
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corporate or other reorganization of Tenant (whether or not Tenant shall be the
surviving entity), shall be deemed a transfer under this Lease and shall be
subject to all the provisions of this Article.
15.2 Landlord's Mortgage Provisions
15.2.1 Landlord's Rights to Subordinate Lease
Landlord reserves the right to subject and subordinate this Lease, at all
times, to the lien of any mortgage or mortgages now or hereafter placed upon the
Leased Premises, provided however that Tenant's right of possession will not be
disturbed by any such mortgagee in connection with any mortgage foreclosure
proceedings so long as Tenant performs its obligations set forth in the Lease.
In the event Landlord exercises its rights hereunder, Landlord shall provide
Tenant with a Subordination, Non-Disturbance and Attornment Agreement in form
and substance satisfactory to Landlord, which shall provide, inter alia, (i)
that this Lease is subordinate to the lien of any mortgage or mortgages upon the
Leased Premises, (ii) that the Tenant's right of possession will not be
disturbed by the mortgagee in connection with any mortgage foreclosure
proceedings so long as Tenant performs its obligations set forth in the Lease,
and (iii) that the Tenant shall attorn to any foreclosing mortgagee or purchaser
at the foreclosure sale. Tenant agrees to execute such Subordination,
Non-Disturbance and Attornment Agreement and hereby irrevocably appoints
Landlord as Tenant's attorney-in-fact to execute such Agreement.
15.2.2 Estoppel Certificate
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Tenant shall at anytime upon the request of Landlord, execute and deliver
in recordable form and in substance satisfactory to Landlord, an estoppel
certificate certifying: the date Tenant accepted occupancy of the Lease
Premises; the date to which rent has been paid; the amount of any security
deposit; that this Lease is in full force and effect and has not been modified
or amended (or if modified or amended, describing the same) and, to the best of
Tenant's knowledge and belief and without due diligence investigation, that
there are no defenses or offsets thereto or defaults of Landlord under this
Lease (or if any be claimed, describing the same); and such other matters as
Landlord may reasonably request. If Tenant fails to deliver the estoppel
certificate within 20 days of the demand therefore, the accuracy of the proposed
certificate will be deemed conclusively confirmed.
15.2.3 Changes to Lease Required by Lender
This Lease shall be modified (as to non-economic terms only)
at the request of any institutional first mortgage lender furnishing financing
to Landlord for the Lease Premises. Only those modifications shall be permitted
by Section 15.2.3 which do not adversely affect the Tenant's ability to use the
Premises or otherwise impose additional costs or business hinderances upon the
Tenant.
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SECTION XVI
Default and Remedies
16.1 Definition of Event of Default
Any of the following occurrences shall constitute an Event of Default:
a. Tenant fails to pay any installment of Annual Rent or Additional
Rent or any portion of either of them when due and payable, and
Tenants fails to pay same for a period of ten (10) days after
receipt of written notice from Landlord that payment is due.
b. Landlord declares an Event of Default as permitted in Section XVII,
entitled "Bankruptcy of Insolvency."
c. Tenant violates or fails to comply with or is in default in the
performance of any other provision of this Lease for a period of 30
days after written notice from Landlord of such violation,
noncompliance, or default, provided that in the case of a default
which cannot with due diligence be cured within a period of 30 days,
Tenant shall have such additional time to cure same as may
reasonably be necessary so long as Tenant commences curing such
default within the thirty (30) day period and proceeds promptly,
effectively, continuously and with due diligence to cure such
default after receipt of said notice.
16.2 Remedies
Upon the occurrence of an Event of Default, Landlord may (but will not be
required to) declare this Lease forfeited and
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the Term ended, or re-enter the Premises, or may exercise all other remedies
available under Michigan law. Landlord will not be liable for damages to person
or property by reason of any legitimate re-entry or forfeiture, and Landlord
will be aided and assisted by Tenant, its agents, representatives and employees.
Tenant, by the execution of this Lease, waives notice of re-entry by Landlord.
In the event of re-entry by Landlord without declaration of forfeiture, the
liability of Tenant for the rent provided herein will not be relinquished or
extinguished for the balance of the Term, and any rentals prepaid may be
retained by Landlord and applied against the costs of re-entry, or as liquidated
damages, or both. Tenant will pay, in addition to the rentals and other sums
agreed to be paid hereunder, reasonable attorneys' fees, costs and expenses in
any suit or action instituted by or involving Landlord to enforce the provisions
of, or the collection of the rentals due Landlord under this Lease, including
any proceeding under the Federal Bankruptcy Code.
In the event of declaration of forfeiture at or after the time of
re-entry, Landlord may re-lease the Premises or any portion(s) of the Premises
for a term or terms and at a rent which may be less than or exceed the balance
of the Term of and the rent reserved under this Lease provided Landlord uses its
best efforts to relet said Premises and abate said damages. In such event Tenant
will pay to Landlord as liquidated damages for Tenant's default any deficiency
between the total rent reserved and the net amount, if any, of the rents
collected on account of the lease or leases of the Premises which otherwise
would have
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constituted the balance of the term of this Lease. In computing such liquidated
damages, there will be added to the deficiency any reasonable expenses which
Landlord may incur in connection with re-leasing, such as legal expenses,
attorneys' fees, brokerage fees and expenses, advertising and for keeping
premises in good order or for preparing the Premises for re-leasing. Any such
liquidated damages will be paid in monthly installments by Tenant on the date on
which rent is payable and any suit brought to collect the deficiency for any
month will not prejudice Landlord's right to collect the deficiency for any
subsequent month by a similar proceeding.
16.3 Cumulative Remedies
Each and every right, remedy and benefit provided by this Lease to
Landlord shall be cumulataive and shall not be exclusive of any other right,
remedy or benefit allowed by law. These remedies may be exercised jointly or
severally without constituting an election of remedies.
16.4 Waiver
One or more waiver by Landlord of any term and condition hereunder or
default by Tenant hereunder shall not be construed as a waiver of such term and
condition or default in the future or any subsequent default for the same cause.
Any consent or approval given by Landlord requiring such consent or approval
shall not constitute consent or approval to any subsequent similar act by
Tenant.
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SECTION XVII
Bankruptcy or Insolvency
17.1 Landlord's Option to Terminate Upon Insolvency of Tenant
If the estate of Tenant created hereby shall be taken in execution or by
other process of law, or if Tenant shall be adjudicated insolvent pursuant to
the provisions of any present or future insolvency law under state law, or if
any proceedings are filed by or against the Tenant under the Bankruptcy Code or
any similar provisions of any future federal bankruptcy laws, or if Tenant shall
cease doing business as a going concern or generally not pay its debts as they
become due, or if a receiver or trustee of the property of Tenant shall be
appointed under state law by reason of Tenant's insolvency or inability to pay
its debts as they become due or otherwise, or if any assignment shall be made of
Tenant's property for the benefit of creditors under state law, then and in such
event, Landlord may, at its option, terminate this Lease and all rights of
Tenant hereunder declaring an Event of Default under Section XVI.
17.2. Tenant's Interest Not Transferable by Virtue of State Insolvency Law
Without Landlord's Consent
Neither Tenant's interest in the Lease, nor any lesser interest of Tenant
herein, nor any estate of Tenant hereby created shall pass to any trustee,
receiver, assignee for the benefit of creditors or other person or entity or
otherwise by operation of law under the laws of any state having jurisdiction of
the person or property of Tenant unless Landlord shall consent
- 32 -
<PAGE> 38
to such transfer in writing. No acceptance by Landlord of rent or any other
payment from any such trustee, receiver, assignee, person or other entity shall
be deemed to have waived nor shall it waive the requirement of Landlord's
consent or the right of Landlord to terminate this Lease in the absence of such
consent to any transfer of Tenant's interest in this Lease.
17.3 Time for Assumption or Rejection of Lease in Tenant's Bankruptcy
In the event that either a voluntary petition or involuntary petition for
reorganization or liquidation or adjustment of debts is filed either by or
against Tenant under Chapter 7, 11, or 13 of the Bankruptcy Code, The Tenant, as
debtor in possession, or the bankruptcy trustee, must elect to assume or reject
this Lease within 60 days after the date of filing of the petition. If the
Tenant, trustee or debtor in possession shall elect to assume this Lease,
whether for the purpose of assignment or otherwise, such election and assignment
may only be made if all of the terms and conditions of Section 17.4 hereof are
satisfied. If the Tenant, trustee or debtor in possession shall fail to elect or
assume this Lease within 60 days after the date of filing the bankruptcy
petition, this Lease shall be deemed to have been rejected. In the event of such
rejection, Landlord shall thereupon be immediately entitled to possession of the
Leased Premises without further obligation to the Tenant, trustee or debtor in
possession and this Lease shall be cancelled, but Landlord's right to be
compensated for damages in such proceeding shall survive.
- 33 -
<PAGE> 39
17.4 Conditions to the Assumption of Lease in Bankruptcy Proceedings.
In the event that a voluntary or involuntary bankruptcy petition is filed
by or against Tenant, and Tenant, trustee or debtor in possession elects to
assume the lease in accordance with the provisions of the preceding paragraph,
such assumption shall only be effective if each of the following conditions,
which Landlord and Tenant hereby acknowledge to be commercially reasonable in
the context of a bankruptcy proceeding of tenant, have been satisfied:
a. The Tenant, trustee or the debtor in possession has cured or has
provided Landlord adequate assurance that the Tenant, trustee or
debtor in possession will cure all monetary defaults under the Lease
within 10 days from the date of assumption of the Lease.
b. The Tenant, trustee or the debtor in possession has cured or has
provided Landlord adequate assurance that the Tenant, trustee or
debtor in possession will cure all non-monetary defaults under the
Lease within 30 days from the date of assumption of the Lease.
c. The Tenant, trustee or the debtor in possession has compensated or
had provided to Landlord adequate assurance that Landlord will be
compensated for any pecuniary loss incurred by Landlord arising from
the default of the Tenant, trustee or debtor in possession
- 34 -
<PAGE> 40
within 10 days from the date of assumption of the Lease.
d. The Tenant, trustee or debtor in possession has provided Landlord
with adequate assurance of the future performance of each of the
Tenant's, trustee's or debtor in possession's obligations under this
Lease; provided, however, that the Tenant, trustee or debtor in
possession shall also deposit with the Landlord as security for the
timely payment of rent an amount equal to 2 months rent accuring
under this Lease.
e. The assumption of the Lease will not breach any provision in any
other lease, mortgage, financing agreement or other agreement by
which Landlord is bound relating to the premises.
17.5 Assignment of Lease by Tenant
Notwithstanding any provisions of Section XV to the
contrary, if this Lease is assigned to any person or entity pursuant to the
provisions of the Bankruptcy Code:
a. any and all monies or other considerations, payable or otherwise, to
be delivered in connection with such assignment, shall be paid or
delivered to Landlord, shall be and remain the exclusive property of
Landlord and shall not constitute property of Tenant or the estate
of Tenant within the meaning of the Bankruptcy Code. Any and all
monies or other considerations constituting Landlord's property
under the preceding sentence not paid or delivered to Landlord shall
be
- 35 -
<PAGE> 41
held in trust for the benefit of Landlord and shall be promptly paid
or delivered to Landlord; and
b. any person or entity to which this Lease is assigned pursuant to the
provisions of the Bankruptcy Code shall be deemed without further
act or deed to have assumed all of the obligations arising under
this Lease on and after the date of such assignment. Any such
assignee shall upon demand execute and deliver to Landlord an
instrument confirming such assumption.
17.6 Measure of Damages
Notwithstanding anything in this Lease to the contrary, all amounts
payable by tenant to or on behalf of Landlord under this Lease, whether or not
expressly denominated as rent, shall constitute rent for the purposes of Section
502 (b) (6) of the Bankruptcy Code.
SECTION XVIII
Quiet Enjoyment
18.1 Quiet Enjoyment
Landlord covenants that so long as tenant is not in default in the terms
and conditions of this Lease, Tenant may peacefully and quietfully hold and
enjoy the Leased Premises for the Term hereof without interference by Landlord
or any person claiming by, through or under Landlord.
- 36 -
<PAGE> 42
SECTION XIV
Miscellaneous Provisions
19.1 Notice
All notices which are required or permitted under this Lease shall be
deemed delivered if made in writing, addressed to the other party at the address
given above (or such other address of which notice is given pursuant to this
paragraph), and deposited in the United States Postal Service, first class,
certified mail, return receipt requested, postage prepaid.
19.2 Holding Over
In the event that Tenant retains possession of the Leased Premises after
the expiration of the term of this Lease, then the tenancy shall continue from
month to month in the absence of a written agreement to the contrary, subject to
all of the terms and conditions hereof except Annual Rent, which shall be 150%
of the Annual Rent for the last Lease Year of the Term of the Lease.
19.3 Landlord's Access
Landlord shall have the right to enter into the Leased Premises for the
purpose of inspecting the physical condition of the Premises; provided, however,
that, except in the event of an emergency, Landlord shall enter the Premises for
such purposes only (a) upon reasonable written notice to Tenant, (b) at such
times as may be approved by Tenant, and (c) in such a manner as to cause the
minimum disruption to Tenant's employees and business activities on the
Premises.
- 37 -
<PAGE> 43
Further, Landlord shall have the right for a period commencing 180 days
prior to the expiration of the term of this Lease to exhibit the Leased Premises
to prospective tenants, on the same conditions listed as (a), (b) and (c) above,
and may display in or about the Leased Premises the usual and ordinary "for
lease" or "for sale" signs.
19.4 Provisions Relating to Landlord
a. The term "Landlord" as used in this Lease so far as covenants,
agreements, stipulations or obligations on the part of the Landlord
are concerned is limited to mean and include only the owner or
owners of fee title to the Premises at the time in questions, and in
the event of any transfer or transfers of the title to such fee the
Landlord herein named (and in case of any subsequent transfers or
conveyances the then grantor) will automatically be freed and
relieved from and after the date of such transfer or conveyance of
all personal liability for the performance of any covenants or
obligations on the part of the Landlord contained in this Lease
thereafter to be performed.
b. If Landlord fails to perform any provision of this Lease upon
Landlord's part to be performed, and if as a con-sequence of such
default Tenant recovers a money judgment against Landlord, such
judgment may be satisfied only out of the proceeds of sale received
upon execution of such judgment and levied thereon against the
right, title and interest of Landlord in
- 38 -
<PAGE> 44
the Premises and out of rents or other income from such property
receivable by Landlord and Landlord shall not be personally liable
for any deficiency.
19.5 Landlord's Representations
Neither Landlord nor Landlord's agents have made any
representations or promises with respect to the physical condition of the
Building, the Land, the Lease Premises, permissible uses of Leased Premises, the
rents, leases, expenses of operation or any other matter or thing affecting or
related to the Leased Premises except, as expressly set forth in the provisions
of this Leases.
19.6 Entire Agreement
All understandings and agreements heretofore made between the parties
hereto are merged in this Lease, which alone fully and completely expresses the
agreement between Landlord and Tenant, and any executory agreement hereafter
made shall be ineffective to change, modify, discharge or effect abandonment of
it, in whole or in part, or a surrender of this Lease or of the Leased Premises
or any part thereof or of any interest of Tenant therein unless such executory
agreement is in writing and signed by Landlord and Tenant.
19.7 Memorandum of Lease
Neither party shall record this Lease or any portion thereof. However,
Tenant may prepare, and Landlord will execute, a Memorandum of Lease in
substantially the form attached hereto at Exhibit C, and Tenant may record same
at Tenant's expense.
19.8 Modification; Waivers
- 39 -
<PAGE> 45
This Lease shall not be modified or amended except by a writing signed by
Landlord and Tenant. Any consent or approval given by Landlord with respect to
any act, neglect or default by Tenant will not waive or make unnecessary
Landlord's consent or approval with respect to any later similar act, neglect or
default by Tenant.
19.9 Applicable Law; Binding Effect; Topical Headings
This Lease shall be construed and enforced in accordance
with the laws of the State of Michigan and shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns.
Topical headings appearing in the Lease are for convenience only. They do not
define, limit or construe the contents of any paragraphs or clauses.
19.10 Force Majeure
In the event the Landlord shall be delayed or hindered in or prevented
from the performance of any act required hereunder by reason of strikes,
lock-outs, labor troubles, inability to procure materials, failure of power,
restrictive governmental laws or regulations, riots, insurrection, war or other
reason of a like nature beyond the reasonable control of that party, in
performing work or doing acts required under the terms of this Lease, then
performance of such act shall be extended for a period equivalent to the period
of such delay, but not to exceed twelve months.
SECTION XX
EXHIBITS TO LEASE
- 40 -
<PAGE> 46
Exhibit A Legal Description
Exhibit B Building Plans & Specifications
Exhibit C Form of Memorandum of Lease
IN WITNESS WHEREOF, the parties have caused this Lease to be executed as of the
date first written above.
WITNESS: LANDLORD:
Anthony-Bennett Properties
----------------------------
a Michigan Corporation
/s/ By: J. Bennett Donaldson
- ---------------------------- ------------------------
/s/ Its: Partner
- ---------------------------- ------------------------
Dated: 12-22-88
WITNESS: TENANT:
ENERGY ELECTRIC CABLE
----------------------------
----------------------------
/s/ By: /s/ John E. Pylak
- ---------------------------- ------------------------
John E. Pylak
/s/ Its: President
- ---------------------------- ------------------------
Dated: 12-22-88
---------------------
- 41 -
<PAGE> 47
STATE OF MICHIGAN)
)ss
COUNTY OF OAKLAND)
The foregoing instrument was acknowledged before me this 22nd day of
December , 1988, by J. Bennett Donaldson of Anthony-Bennett Properties , a
Michigan Corporation, on behalf of the corporation.
/s/ Donald R. Kegley
---------------------------------
Notary Public, Oakland County, MI
My Commission expires: 10-23-89
STATE OF MICHIGAN)
)ss
COUNTY OF OAKLAND)
The foregoing instrument was acknowledged before me this 22nd day of
December , 1988, by John E. Pylak of Energy Electric Cable, Inc., President , on
behalf of the corporation.
/s/ Donald R. Kegley
---------------------------------
Notary Public, Oakland County, MI
My Commission expires: 10-23-89
- 42 -
<PAGE> 48
EXHIBIT C
MEMORANDUM OF LEASE
THIS MEMORANDUM OF LEASE, dated December 22, 1998 by and between
Anthony-Bennett Properties, a Michigan partnership as lessor ("Landlord"), whose
address is 5800 Crooks Road, Suite 100, Troy, Michigan 48098-2830, and Energy
Electric Cable, Inc. as lessee ("Tenant"), whose address is 35500 Mound Road,
Sterling Heights, Michigan 48077.
W I T N E S S E T H
In consideration of the rents, covenants and conditions more particularly
set forth in a certain unrecorded lease between Landlord and Tenant dated as of
December 22 , 1988 ("Lease"), which Lease is incorporated herein by this
reference, Landlord and Tenant do represent as follows:
1. Landlord has leased to Tenant certain premises, consisting of land
described in Exhibit A attached hereto and the building and related improvements
to be constructed thereon, located in the City of Auburn Hills County of
Oakland, Michigan and commonly known as 270 Rex Boulevard.
2. The term of the Lease is to commence on the date possession is
delivered to Tenant and continues for a period of 5 years, with certain optional
and contingent early termination provisions.
This Memorandum is intended solely to give Notice of the Lease and is not
a complete summary of terms and conditions thereof. Provisions in this
Memorandum shall not be used in interpreting provisions in the Lease. In the
event of conflict between this Memorandum and the Lease, the Lease shall
control.
- 1 -
<PAGE> 49
IN WITNESS WHEREOF, the parties hereto have each caused this Memorandum of
Lease to be executed as of the day and year first above written.
WITNESSES: LANDLORD:
/s/ By: /s/ J. Bennett Donaldson
- ---------------------------- -------------------------
J. Bennett Donaldson
/s/ Its: Partner
- ---------------------------- -------------------------
WITNESS: TENANT:
ENERGY ELECTRIC CABLE
----------------------------
/s/ By: /s/ John E. Pylak
- ---------------------------- -------------------------
John E. Pylak
/s/ Its: President
- ---------------------------- -------------------------
STATE OF MICHIGAN)
)ss
COUNTY OF OAKLAND)
The foregoing instrument was acknowledged before me this 22nd day of
December, 1988, by J. Bennett Donaldson, a Michigan corporation on behalf of
the corporation.
/s/ Donald R. Kegley
---------------------------------
Notary Public, Oakland County, MI
My Commission expires: 10-23-89
- 2 -
<PAGE> 50
STATE OF MICHIGAN)
)ss
COUNTY OF OAKLAND)
The foregoing instrument was acknowledged before me this 22nd day of
December, 1988, by John E. Pylak, President of Energy Electric Cable, Inc.,
President, on behalf of the corporation.
/s/ Donald R. Kegley
---------------------------------
Notary Public, Oakland County, MI
My Commission expires: 10-23-89
- 3 -
<PAGE> 1
FIRST AMENDMENT TO LEASE
THIS FIRST AMENDMENT TO LEASE ("Amendment") is entered into on February 9,
1994 between Anthony-Bennett Properties, a Michigan Co-Partnership
("Landlord"), whose address is 5800 Crooks Road, Suite 100, Troy, MI 48098-2830
and Energy Electric Cable, Inc., a Michigan Corporation ("Tenant"), whose
address is 270 Rex Blvd., Auburn Hills, MI 48321. This Amendment amends the
Building Lease entered into by the parties on December 22, 1988 ("Lease").
For valuable consideration, the parties agree as follows:
1. Section 1.1 of the Lease is amended and completely restated as follows:
SECTION 1
Demise of Premises
1. 1.1 Demise of Premises
Landlord hereby leases to Tenant and Tenant hires from Landlord
certain premises located in the City of Auburn Hills and commonly known as
260 and 270 Rex Boulevard, Auburn Hills, Michigan 48321.
Prior to the Second Commencement Date, the term "Premises" shall
consist of the land ("Initial Land") described in Exhibit A attached
hereto and the building (sometimes referred to herein as "Initial
Building") and related improvements (together with the Initial Building,
collectively referred to as the "Initial Improvements") constructed
thereon as described in Exhibit B attached hereto.
Beginning on the Second Commencement Date, the term "Premises" shall
consist of the land ("Entire Land") described in Exhibit D attached hereto
and the entire 87,932 square foot building ("Entire Building") and related
improvements (together with the Entire Building, collectively referred to
as the "Entire Improvements") constructed thereon as described in Exhibit
E attached hereto. Beginning on the Second Commencement Date, the term
"Building" shall mean the Entire Building and the term "Improvements"
shall mean the Entire Improvements.
2. Section 2.1 of the Lease is amended and completely restated as follows:
<PAGE> 2
SECTION II
Construction of Leasehold Improvements
2.1 Construction of Leasehold Improvements
Landlord agrees to construct certain leasehold improvements to the
Entire Land and the Entire Building prior to February 1, 1994 in
accordance with the plans and specifications attached hereto as Exhibit F
(the "Leasehold Improvements").
3. Section 3.1 and 3.2 of the Lease are amended and completely restated as
follows:
SECTION III
Term of Lease
3.1 Term of Lease.
The term of this Lease begins on the Initial Commencement Date (as
defined in Section 3.2) and continues until the tenth anniversary of the
Second Commencement Date.
"Lease Year" shall mean the consecutive twelve month period
following the Commencement Date or, if the Commencement Date is other than
the first day of a calendar month, then the twelve month period following
the Anniversary Date, and each anniversary thereof. The first Lease Year
shall also include the period from the Commencement Date to the first
Anniversary Date.
3.2 Commencement Date
The commencement date with respect to the Initial Land and Initial
Building ("Initial Commencement Date") shall be
June 9, 1989.
The commencement date with respect to the Entire Land and Entire
Building ("Second Commencement Date") shall be
February 1, 1994.
4. The following paragraph shall be added to Section 4.2 of the Lease:
Notwithstanding any provision in the preceding
paragraph to the contrary;
<PAGE> 3
(a) The Annual Rent for the Premises for each of the first five
Lease Years following the Second Commencement Date shall be
Four Hundred Eight Thousand and Eighty Three Dollars
($408,833.00) per year, payable in monthly installments of
Thirty-Four Thousand Seventy Three and 58/100 ($34,073.58) on
the first day of each month beginning with February 1, 1994;
provided, however, that if possession of the Entire Building
is not delivered to Tenant on February 1, 1994, then from
February 1, 1994 until possession of the Entire Building is
delivered, rent shall abate on a prorata basis with respect to
that portion of the Entire Building for which possession has
not been delivered. (For example, if 10% of the square footage
of the Entire Building is not ready for occupancy until
February 10, then the rent would be reduced by 10% for those
10 days). Possession shall be deemed delivered when (i) the
space in question is available for occupancy by Tenant, (ii)
the Leasehold Improvements applicable to that space have been
completed, and (iii) Landlord has received a temporary
certificate of occupancy for that space, if required.
(b) The Annual Rent for each of the five Lease Years after the
fifth anniversary of the Second Commencement Date shall be the
lessor of:
(i) Four Hundred Seventy Four Thousand Seven Dollars and
44/100 ($474,007.44); or
(ii) A figure equal to: $408,883 increased in the same
proportion that the CPI for February, 1999 increased
over the CPI for February, 1994;
payable in equal monthly installments, each installment due on the
first day of each month coincident with or following the fifth
anniversary of the Second Commencement Date.
The CPI is defined as the Consumer Price Index for Detroit - All
Urban Consumers (CPI-U): All Items (1982-1984 =100) as promulgated by the
United States Department of Labor. If a CPI is not issued for February,
1999 or February, 1994, the CPI shall be the most recent CPI issued prior
to such respective dates. In the event a substantial change is made in the
method of establishing the CPI, then the CPI will be adjusted to the
figure which would have resulted had no change occurred in the manner of
computing the CPI. In the event that the CPI (or a successor of
<PAGE> 4
substitute index) is not available, a reliable governmental or other non
partisan publication, evaluating the information previously used in the
CPI, will be used.
By way of example only, Section 4.2(b) is illustrated as follows:
Assuming the CPI for February 1994 is 138.3 and the Lease for CPI for
February, 1999 is 158.7, the Annual Rent for Lease Years after the fifth
anniversary of the Second Commencement Date would be the lessor of:
(i) $474,007.44; or
(ii) $469,195 ($408,883 multiplied by 158.7/138.3), or
namely, $469,195.
5. Section 4.3 of the Lease shall be deleted in its entirety.
6. Section 8.1 is amended by inserting the word "Initial" immediately before the
phrase "Commencement Date" wherever such phrase occurs, and by adding the
following sentence:
With respect to the Leasehold Improvements outlined in Exhibit F,
(a) all Leasehold Improvements that are mechanical in nature shall
be kept in good repair by Landlord at its expense for a period of
two years from February 1, 1994 or their completion, whichever is
later, and (b) all other Leasehold Improvements shall be kept in
good repair by Landlord, at its expense, for a period of one year
from February 1, 1994 or their completion, whichever is later.
7. Section 9A is added as follows:
SECTION 9A
1. Landlord shall provide, at its sole expense, a Phase I environmental
assessment of the portion of the Entire Land and the Building not
previously occupied by Tenant ("Subject Premises") in full
compliance with ASTM Standards E1527-93 and E1528-93. Tenant and
Landlord together shall select the firm which shall perform the
Phase I at Landlord's expense. If the Phase I report suggests or
identifies any areas of environmental concern, Tenant or Landlord
may, at its sole discretion, advise the other in writing that it is
opting to terminate this Amendment and same shall be considered void
ab initio. If neither party so advises the other within 10 days of
receipt of the Phase I report, then the report shall be deemed
acceptable to both parties and said termination rights shall lapse.
2. At the conclusion of this Lease, a supplemental Phase I report shall
be obtained with respect to the operation
<PAGE> 5
of Tenant on the Entire Premises. The cost of the supplemental Phase
I report shall be split evenly by Landlord and Tenant.
3. Except to the extent permitted by federal, state and local law,
Tenant shall not discharge, release, generate, treat, store, dispose
of or deposit in, on or under the Premises, or permit to be
discharged, released, generated, treated, stored, disposed of or
deposited in, on or under the Premises, any "toxic or hazardous
substance", asbestos, urea formaldehyde insulation, PCB's,
radioactive materials, flammable explosives or any other hazardous
or contaminated substance (collectively "Hazardous Materials")
prohibited, limited or regulated under the Comprehensive
Environmental Response Compensation and Liability Act of 1980
("CERCLA") or under any other applicable federal, state or local
statues, regulations or ordinances (collectively the "Environmental
Laws"). Tenant agrees to indemnify and hold Landlord harmless from
and against any and all claims, liabilities, damages, costs and
expenses (including reasonable attorney fees) incurred by Landlord
relating to or arising as a result of Tenant's breach of this
section, including, without limitation, cleanup costs and future
response costs under CERCLA.
4. Landlord represents and warrants that Landlord does not now use, and
had not at any time since it acquired the Premises (or the buildings
of which the Premises form a part) used or knowingly allowed any
other person to use the Premises for the purpose of disposal,
refining, generating, manufacturing, producing, handling,
transferring, releasing, storing, processing or transporting any
Hazardous Materials and any other substances identified in or for
purposes of the Resource and Conservation Recovery Act of 1976,
Comprehensive Environmental Response Compensation and Liability Act
of 1980, or the Superfund Amendments and Reauthorization Act except
in such a manner permitted under federal, state and local law, and
to the best of Landlord's knowledge the Premises have never ben used
for the foregoing purposes or for the release, generation, storage,
treatment, disposal or deposit of Hazardous Materials except in such
a manner permitted under federal, state and local law; nor has
Landlord conducted or knowingly permitted any activity at the
Premises which was in violation of any other state, local or federal
environmental law, statute or regulation.
Landlord further represents as follows:
<PAGE> 6
(a) Neither Landlord, nor to its knowledge, any of its prior tenants or
predecessors in interest, have maintained or have had any knowledge
regarding the existence of underground or above ground storage tanks
on the Entire Land and Entire Building at any time.
(b) To the knowledge of Landlord, all operations at the Entire Land and
Entire Building have been in compliance with all applicable laws,
rules, ordinances, permits and regulations regarding the handling of
hazardous substances.
(c) That except for (1) any certificate of occupancy required for Tenant
to take occupancy of the Subject Premises and (2) any permits,
licenses and approvals required of Tenant to conduct its operations,
Landlord represents that it has secured all necessary permits,
licenses and approvals necessary to the current operations at the
Subject Premises and that it is in compliance with such permits,
licenses and approvals.
(d) Landlord represents that it has not received notices of any pending
legislative, administrative, or judicial proceedings, claims or
lawsuits arising out of operations at the Subject Premises.
If any claim of any nature arises out of any activity alleged
to have been violative of any state, local or federal environmental
law, statute or regulation, which violation is alleged to have
occurred prior to the Second Commencement Date of this Lease and
Tenant's occupancy of the Subject Premises, Landlord shall
indemnify, hold harmless and defend Tenant against any claims,
liabilities, damages, costs and expense (including reasonable
attorney fees) arising out of any such alleged violation provided
that such violation was neither (i) known to Tenant prior to
Tenant's occupancy of the Subject Premises or (ii) a result or
consequence of Tenant's operations at the Premises.
5. Within thirty (30) days of the Second Commencement Date and
thereafter upon the reasonable request of Landlord or its lender
from time to time, but not more frequently than once every twelve
(12) months unless required of any of the parties by any applicable
law or governmental authority, Tenant shall furnish Landlord a list
of all Hazardous Materials, to the extent
<PAGE> 7
regulated by Environmental Laws, used or stored on the Premises.
8. Except as specifically amended by this Amendment, the parties hereby ratify
and reconfirm all other provisions of the Lease.
WITNESSES: LANDLORD:
ANTHONY-BENNETT PROPERTIES, a
----------------------------
Michigan Co-Partnership
By: /s/
- ---------------------------- ------------------------
Its:
--------------------
TENANT:
ENERGY ELECTRIC CABLE, INC., a
----------------------------
Michigan Corporation
/s/ Arthur I. Shaw By: /s/ John E. Pylak
- ---------------------------- ------------------------
Arthur I. Shaw Its: President
<PAGE> 1
LEASE OF REAL PROPERTY
AT
CROSSROADS OFFICE PARK
BY
PETER F. ZICHELLE, LANDLORD
To
CONNECTIVITY PRODUCTS, INC., TENANT
FROM THE OFFICE OF:
NIRES COMPANY
80 ERDMAN WAY, STE 1
LEOMINSTER, MA 01453-1841
(508) 840-8000
FAX (508)840-8008
Page 1 of 26
<PAGE> 2
CROSSROADS OFFICE PARK
LEASE ABSTRACT
PARTIES TO LEASE AGREEMENT
PETER F. ZICHEILE, 235 VISCOLOID AVENUE, LEOMINSTER, MA 01453, LANDLORD.
&
CONNECTIVITY PRODUCTS, INC., C/O JAMES HARRINGTON, PRESIDENT, 233 FLORENCE
STREET, LEOMINSTER, MA 01453, TENANT.
ARTICLE 1, PREMISES - Approximately 9,152 Leaseable Square Feet in Landlord's
building at 680 Mechanic Street.
ARTICLE 2, TI - Relocate common area doors back beyond the entrance to the
common restrooms. The parties warrant that no other construction work is
required of Landlord.
ARTICLE 3, TERM & OCCUPANCY - 8 Year Original Term with one renewal option for a
minimum term of 2 years. Tenant must notify Landlord of its election to exercise
such renewal not less than 18 months prior to expiration of the Original Term.
The Tenant shall take occupancy of the Premises on December 1, 1996.
ARTICLE 4, SECURITY DEPOSIT - Landlord warrants that Tenant has paid a security
deposit of $ 7,527. Such security deposit shall be non-interest bearing and
shall not be held in escrow.
ARTICLE 5, RENT - Upon the execution hereof the Tenant shall pay the 1st month's
rent of $7,627. The rent for the 1st year of the Original Term shall be $91,520.
The rent for each subsequent year of the Original Term and the two years
of the renewal option shall be the rent of the previous plus the Greater of 3%
or the percentage change in the CPI, Boston as provided by the US Bureau of
Labor Statistics for the appropriate time period. The rent shall increase on
January 1 of each year of the Original Term and the 2 years of the renewal
option.
ARTICLE 6, OPERATING EXPENSES & UTILITIES - All operating expenses and gas
service for heat are included in the rent. The Tenant shall pay for its own
electrical service separately to the utility company.
ARTICLE 7, SIGNS - As agreed by the Parties and the provisions of this Article.
ARTICLE 8, REPAIRS, ALTERATIONS & MAINTENANCE - The Landlord shall maintain the
common areas at its own cost. Landlord shall maintain the Premises and every
part thereof for Tenant at Tenant's sole cost. Tenant shall always be
responsible for the Tenant's own janitorial services. Tenant responsible to
shampoo carpet once per year and repaint the demised premises as necessary.
ARTICLE 9, FIRE & OTHER CASUALTY - Standard Lease Provision.
ARTICLE 10, EMINENT DOMAIN - Standard Lease Provision.
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<PAGE> 3
ARTICLE 11, INDEMNITY & INSURANCE - Standard Lease Provision.
ARTICLE 12, ACCESS TO THE PREMISES - Standard Lease Provision.
ARTICLE 13, DEFAULTS - Standard Lease Provision.
ARTICLE 14, MORTGAGES - Standard Lease Provision.
ARTICLE 15, SUBROGATION - Standard Lease Provision.
ARTICLE 16, FAILURE OF PERFORMANCE - Standard Lease Provision.
ARTICLE 17, BROKERS - Standard Lease Provision.
ARTICLE 18, HOLDING OVER - Standard Lease Provision.
ARTICLE 19, QUIET ENJOYMENT - Standard Lease Provision.
ARTICLE 20, USE - Office Only.
ARTICLE 21, ASSIGNMENT - Standard Lease Provision.
ARTICLE 22, DELAYS - Standard Lease Provision.
ARTICLE 23, NOTICES - As stated on Page 4 of the Lease.
ARTICLE 24, DEFINITIONS & INTERPRETATIONS - Standard Lease Provision.
ARTICLE 25, TENANT COVENANTS - Standard Lease Provision.
ARTICLE 26, PARKING - The Tenant shall have 6 reserved parking spaces, such
spaces shall be located at the back side of the building closest to an entrance
door of 680 Mechanic Street, all other parking shall be in common with all other
tenants of the Entire Premises.
ARTICLE 27, OTHER PROVISIONS - See Lease provision.
ARTICLE 28, SIGNATURE PAGE - Standard Lease Provision.
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<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Article Description Page
<C> <S> <C>
Cover Page 1
Lease Abstract 2
Table of Contents 4
Preamble, Parties to Lease Agreement 5
1 Premises 5
2 Construction 6
3 Term & Occupancy 7
4 Security Deposit 7
5 Rent 8
6 Operating Expenses 9
7 Signs 11
8 Repairs, Alterations & Maintenance 11
9 Fire & Other Casualty 12
10 Eminent Domain 13
11 Indemnity & Insurance 14
12 Access to the Premises 15
13 Defaults 16
14 Mortgages 18
15 Subrogation 19
16 Failure of Performance 19
17 Brokers 20
18 Holding Over 20
19 Quiet Enjoyment 20
20 Use 20
21 Assignment 20
22 Delays 22
23 Notices 22
24 Definitions & Interpretations 22
25 Tenant Covenants 24
26 Parking 25
27 Other Provisions 25
28 Signature Page 26
Exhibit A Floor Plan & Expansion Space Plan 27
Exhibit B Connectivity Technologies, Inc's Guarantee 28
</TABLE>
Page 4 of 26
<PAGE> 5
CROSSROADS OFFICE PARK LEASE AGREEMENT
Lease made this 20th day of December, 1996 by and between Peter F. Zichelle,
Owner of Crossroads Office Park, 680 & 690 Mechanic Street whose notice address
shall be Crossroads Office Park C/O Peter F. Zichelle, 235 Viscoloid Avenue,
Leominster, Massachusetts, 01453 its heirs or assigns as landlord (hereinafter
referred to as "Landlord")
AND
Connectivity Products, Inc., a Delaware corporation, whose notice address shall
be Connectivity Products, Inc., C/O James Harrington, President, 233 Florence
Street, Leominster, MA 01453 (hereinafter together with any corporation
succeeding thereto by consolidation, merger or acquisition of its assets
substantially as an entity), as tenant (hereinafter referred to as "Tenant").
The parties hereto hereby agree to the following terms and conditions of this
lease agreement (hereinafter referred to as the "Lease") for a portion of the
office space of at Crossroads Office Park. As used herein the term "Entire
Premises" shall be defined as the whole of the buildings located at 680 and 690
Mechanic Street, Leominster, Massachusetts, 01453, together with all other
related improvements.
ARTICLE ONE, PREMISES
1.1 In consideration of the rents, agreements and conditions herein
reserved and contained on the part of Tenant to be paid, performed and observed,
Landlord does hereby demise and lease to Tenant, for the term hereinafter set
forth, a portion of the Entire Premises, (hereinafter be described as the
"Premises"). The Premises are located at 680 Mechanic Street, Suite I201,
Leominster, Massachusetts, 01453. The tenant shall have the right to use, in
common with all others now or hereafter entitled thereto, subject to exclusive
parking rights granted by Landlord for specific spaces, the common hallways,
elevators, stairways, restrooms, entrances and service doors of the Entire
Premises of which the Premises are a part, and the parking areas and driveways
of the Entire Premises. The Premises consist of a portion of the Second (2nd)
Floor of the 680 Mechanic Street as shown upon a plan attached hereto and hereby
incorporated herein as Exhibit A. The Premises consists of approximately 9,l52
square feet of leasable floor area. It is understood and agreed that the
calculation of the leasable floor area includes a proportionate share of the
common areas of the Entire Premises.
1.2 Provided Tenant is in full compliance with all of the terms and
conditions contained herein, the Landlord hereby grants Tenant an option at any
time during the Original Term hereof to lease additional space adjacent to the
Premises as indicated on Exhibit A. Hereinafter such space shall be referred to
as the Expansion Space. In the event Landlord procures a different tenant for a
part or all of the Expansion Space the Landlord must notify Tenant in writing of
such event. Upon receipt of such notice from Landlord, Tenant must notify
Landlord in writing of its election to exercise such option within 30 days of
receipt of Landlord's notice. In the event Tenant fails to so notify Landlord
within such 30 day time period Tenant's option right relative to that portion of
the Expansion Space being rented to another tenant shall forever be void. In any
event of which Tenant exercises its option due to the existence of a different
tenant for a part or all of the Expansion Space, Tenant must lease at least the
same portion of the Expansion Space as the other tenant is considering.
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<PAGE> 6
In the event Tenant exercises its option hereunder of its own volition and it is
the 1st event of such exercise than the amount of space the Tenant must option
shall be at least 2,392 usable square feet. In the event Tenant exercises its
option hereunder of its own volition and it is the 2nd event of such exercise
than the amount of space the Tenant must option shall be at least 4,853 usable
square feet. Whether Tenant exercises such option due the existence of another
Tenant for a part or all of the Expansion Space or due to its own volition the
rent per leaseable square foot that shall be payable thereon shall be the same
rent per leasable square foot as Tenant is then paying as provided herein for
the Premises. Tenant shall commence the payment of rent relative to the space
optioned upon the first to occur of: (1) the substantial completion of the
construction improvements relative thereto or (2) 90 days form Tenant's notice
of its election to exercise any such option. In the event the construction
improvements for the Expansion Space are not substantially completed within 90
days of the Tenant's notice to exercise such option and such event is no fault
of Tenant then the Tenant's obligation to commence the payment of rent thereon
shall commence upon the substantial completion of such construction
improvements. The Tenant shall be responsible for all costs associated with any
and all plans and construction required to prepare such Expansion Space for
Tenant's use. Landlord and Tenant agree that no construction work relative
thereto shall commence until both parties have agreed to a budget for such
construction work and the subcontractors performing all such work. Tenant
acknowledges that Landlord shall act as the Construction Manager relative to all
such construction work and shall be entitled to a Fee as agreed by the parties
hereto. In the event the Tenant elects to exercise any such option after the 5th
year of the original term or any extension hereof Tenant and Landlord agreement
to extend the term hereof for a period of not less than 3 years.
1.3 In the event the portion of the Expansion Space which houses the
Tenant's electrical panels is actually rented to a different tenant, Tenant
acknowledges that approximately 57 square feet of such area shall not be
rentable to the other tenant due to the location of said electrical panels. In
such event 57 leasable square feet shall be added to the Tenant's leasable area
and the Tenant's rent shall be adjusted accordingly.
ARTICLE TWO, CONSTRUCTION
2.1 Landlord and Tenant agree that the construction of the Entire
Premises including all common areas, all parking areas, driveways and other
improvements of the Entire Premises are complete. Landlord warrants to Tenant
that the construction improvements (hereinafter referred to as the Tenant
Improvements) shall be completed by Landlord in accordance with Article 2.2 and
except as specifically provided therein the Landlord shall not be obligated to
complete any other tenant improvements.
2.2 Landlord shall relocate the existing entrance doors to the Premises
as indicated on Exhibit A and complete all other miscellaneous work relative
thereto prior to Tenant taking occupancy.
2.3 Tenant shall be responsible for all costs associated with the
installation of it's telephone, computer and fax system, including all
equipment, wiring and final terminations relative thereto. Such work maybe
completed by a vendor of Tenant's choice. Landlord agrees to give such vendor at
least Seven (7) Days prior written notice as of the date upon which such vendor
shall have access to the Premises to complete such work.
2.4 Any items customary to office use and any other incidental uses of
the Premises which are considered personal property shall specifically not be
included in such Tenant Improvements. The
Page 6 of 26
<PAGE> 7
Landlord shall specifically not be responsible for providing the Tenant with;
shelving, reception or other counters, cabinets, assemblies and/or office
systems furnishings.
2.5 Any Tenant Improvements requested by Tenant during the term hereof
shall require the express written consent of Landlord and shall be completed by
Landlord at the sole cost and expense of Tenant. Landlord shall not withhold
such consent unreasonably and Landlord shall act in a timely manner relative to
such request. Landlord and Tenant agree that no construction work relative
thereto shall commence until both parties have agreed to a budget for such
construction work and the subcontractors performing all such work. Tenant
acknowledges that Landlord shall act as the Construction Manager relative to all
such construction work and shall be entitled to a Fee as agreed by the parties
hereto.
2.6 Tenant may make decorations to the Premises costing less than
$10,000 without the Landlord's consent, but Tenant shall still be obligated to
notify Landlord relative thereto.
ARTICLE THREE, OCCUPANCY & TERM
3.1 The Tenant shall take occupancy of the Premises on January 1, 1996.
However as of 12/23/1996 Landlord shall make the Premises available to Tenant so
Tenant may prepare the Premises for its use.
3.2 The Original Term of this Lease shall be for a period of 8 years
commencing upon January 1, 1996 and expiring on December 31, 2004. As used
herein the term "Original Term shall be defined as the 1st 8 years of the Lease.
3.3 Provided Tenant shall not then be in default, under any of the
agreements and conditions hereof beyond the applicable grace period, nor have
sublet or assigned any portion of the Premises, Tenant shall have the right, at
its election, to renew the Original Term hereof for a minimum period of 2 years,
commencing upon the expiration of the Original Term, provided, further, that
Tenant must give Landlord notice of its election hereunder on or before July 1,
2003. The expression "the Original Term" means the period of 8 Years referred to
in Section 3.2. Prior to the exercise by Tenant of said election to extend the
Original Term, the expression "the term of this lease" shall mean the Original
Term; after the exercise by Tenant of the aforesaid election, the expression
"the term of this lease" shall mean the Original Term as extended. Landlord and
Tenant agree that all terms and conditions pertaining to the Lease as it may be
extended from the Original Term of the lease to the extended term shall be the
same as provided for herein.
ARTICLE FOUR, SECURITY DEPOSIT
4.1 Landlord acknowledges that Landlord has received from Tenant the sum
of $ 7,527 Dollars as security for the payment of rents and the performance and
observance of the agreements and conditions hereof on the part of Tenant to be
performed and observed. In the event of any default or defaults in such payment,
performance or observance Landlord may apply said sum or any part thereof
towards the curing of any such default or defaults and/or towards compensating
Landlord for any loss arising from any such default or defaults. Upon the
yielding up of the Premises at the expiration or other termination of the term
of this Lease, if Tenant shall not then be in default or otherwise liable to
Landlord, said sum or the unapplied balance thereof shall be returned to Tenant
within Thirty (30) Days of the such termination. It is understood and agreed
that Landlord shall always have the right to apply said sum, or any part
thereof, as aforesaid, in the event of any such
Page 7 of 26
<PAGE> 8
default or defaults, without prejudice to any other remedy or remedies which
Landlord may have, or Landlord may pursue any such remedy or remedies in lieu of
applying said sum or any part thereof. No interest shall be payable on said sum
or any part thereof. If Landlord shall apply said sum or any part thereof as
aforesaid, Tenant shall upon demand pay to Landlord the amount so applied by
Landlord, to restore the security deposit to its original amount. Whenever the
holder of Landlord's interest in this lease, whether it be the Landlord named in
this lease or any transferee of said Landlord, immediate or remote, shall
transfer its interest in this lease, said holder shall turn over to its
transferee said sum or the unapplied balance thereof, and thereafter such holder
shall be released from any and all liability to Tenant with respect to said sum
or its application or return; it being understood that Tenant shall thereafter
look only to such transferee with respect to said sum, its application and
return. The holder of any mortgage on the Entire Premises which includes the
Premises shall never be responsible to Tenant for said sum unless such sum shall
actually have been received in hand by such holder.
ARTICLE FIVE, RENT
5.1 The Tenant's obligation to pay Rent shall commence on January 1, 1997.
Tenant shall pay to Landlord, on account of all Fixed Base Rent for the Original
Term, at Landlord's address set forth above, or at such other address or to such
other person as Landlord from time to time may designate, the minimum sum of
$813,827 in 96 monthly installments, in accordance with the terms hereof until
the full $803,191 shall have been paid.
5.2 During the 1st year of the Original Term Tenant agrees to pay to
Landlord Fixed Base Rent at a rate per year of $ 91,520. Landlord acknowledges
that Tenant has paid the rent for January, 1997 simultaneously with the
execution hereof.
5.3 During the 2nd, 3rd, 4th, 5th, 6th, 7th and 8th year of the Original
Term and the 1st and 2nd of the term as it may be extended in accordance with
Article 3.3 hereof, Tenant agrees to pay Fixed Base Rent to Landlord at a rate
per year of the Fixed Base Rent of the previous year plus the greater of:
5.3.1. 3%; or
5.3.2 the percentage change in the Consumer Price Index, Boston as
provided by the US Bureau of Labor Statistics. The calculation of such
percentage change shall use the annual time period of November 1st to October 31
of each year of the Original Term and term as it may be extended.
5.3.3 The annual increase of the Fixed Base Rent shall be effective
as of January 1, of each year of Original Term and the extended term hereof.
5.4 All such Fixed Base Rent shall be payable in equal monthly
installments due on the first day of each month for the succeeding month
commencing upon January 1, 1996. All such rent shall be made payable to Peter F.
Zichelle, D/B/A Crossroads Office Park, and hand delivered or mailed to
Crossroads Office Park, C/O Peter F. Zichelle, 235 Viscoloid Avenue, Leominster,
Massachusetts, 01453, unless Landlord shall direct otherwise by written notice
to Tenant. If any installment of rent or additional rent payable under this
Lease shall not be paid within seven (7) days after the due date thereof, Tenant
shall pay to Landlord together with such late rent payment, as a late charge, an
amount equal to Four (4) Percent of the amount not paid within such seven (7)
day period.
Page 8 of 26
<PAGE> 9
5.6 All amounts which Tenant is required to pay pursuant to this Lease
(other than Fixed Base Rent and amounts payable as liquidated damages pursuant
to Article 25), together with all interest and late penalties which may be added
for non-payment or late payments, shall constitute additional rental
obligations. If Tenant shall fail to pay any additional rental obligations,
Landlord shall have the right to pay the same and shall have the rights, powers
and remedies with respect thereto as are provided herein or by law in the case
of non-payment of Fixed Base Rent.
5.7 Tenant shall perform all its obligations under this Lease at its sole
cost and expense, and shall pay all Fixed Base Rent when due, without notice or
demand.
ARTICLE SIX, OPERATING EXPENSES & UTILITIES
6.1 The Fixed Base Rent provided for herein shall include all normal costs
for maintaining and operating the Entire Premises. Hereinafter such costs shall
be referred to as "Operating Expenses". Such Operating Expenses shall include:
real estate taxes, building insurance, common area and Entire Premises
maintenance, common area utilities and capital repairs required of Landlord.
6.2 Tenant shall pay all charges for the electrical consumption of the
Premises. The Tenant shall procure in its name an account with Massachusetts
Electric for its electrical service. Landlord warrants to Tenant that only the
lights, plugs and heat pump units serving the Premises exclusively, are tied
into the electrical service of the Premises. Tenant acknowledges and agrees that
the electric service to be provided to the Premises will be for normal office
use by Tenant and that if (1) any equipment installed in the Premises by Tenant
or any person claiming under Tenant, including, but without limitation, computer
equipment or (2) the use to which any portion of the Premises may be put other
than the use contemplated hereunder shall result in additional air conditioning,
water service or electricity service being required for the Premises, Tenant
shall pay for such service and, in the case of air conditioning, the cost of
operating, installing and maintaining the same.
6.3 Tenant shall provide and pay for such cleaning and janitorial services
as are customary in similar buildings in Leominster for the Premises. Such
services shall include normal cleaning, vacuuming, emptying of waste baskets,
carpet shampooing (1 per year in the spring), washing the inside of all exterior
windows as required, replacing and or cleaning light lenses, switches and
ballast for all lights in the Premises, in each case at the same extent as is
commonly provided in similar buildings in Leominster. Tenant agrees to provide
and maintain proper waste receptacles within the Premises, employ sound
housekeeping and sanitary practices. In the event Tenant desires to have an
independent vendor provide such janitorial service the Landlord shall have the
option to provide such janitorial service either by an employee of Landlord or
by Landlord's janitorial vendor. And in such event such services shall be
provided to Tenant at the Tenant's sole cost on competitive bid basis. Landlord
agrees to use reasonable efforts relative to such service being provided to
Tenant in a satisfactory manner. Landlord shall provide and pay for a common
trash receptacle for all of the tenants of the Entire Premises. Tenant shall
have the right with all others entitled thereto to use such trash receptacle for
normal trash generated by Tenant.
6.4 The common areas of the Entire Premises shall be the common restrooms,
elevators and shafts, entrances, exits, service doors, hallways and stairways of
the Entire Premises and the parking areas, driveways, drainage facilities,
walkways, entrances, exits and service roads of the Entire Premises. All costs
and expenses incurred by Landlord (including, as expenses, amounts determined as
reasonable and appropriate reserves for the replacement of equipment not real
estate in nature used incident thereto and a reasonable supervisory fee) in
insuring against loss by fire and other casualties
Page 9 of 26
<PAGE> 10
(including loss of rental income) and public liability claims, operating,
heating, air conditioning, lighting, repairing and maintaining the Building and
the remainder of the Entire Premises, including but without limitation, costs
and expenses for municipal water and sewer use fees, maintenance charges,
sprinkler standby charges, snow and rubbish removal, gardening of landscaped
areas and common area janitorial services, shall be paid for and provided by
Landlord during the Original Term hereof and the extended term.
6.5 Landlord shall, at the Landlord's cost and expense, furnish the,
elevator, electrical and HVAC service to reasonably heat or air condition the
common areas of the Entire Premises during normal business hours, on normal
business days. All such services shall be subject to interruption due to any
accident, to the making of repairs, alterations or improvement, to labor
difficulties, to trouble in obtaining fuel, electricity, service or supplies
from the source for which they are usually obtained for the said Entire
Premises, or to any other cause beyond the Landlord's control. In the event any
such service is interrupted Landlord agrees to use its reasonable efforts to
restore the services interrupted promptly. As used herein the term normal
business hours shall mean from 8:00 AM to 6:00 PM weekdays. As used herein the
term normal business days shall mean Monday to Friday of each week. In the event
any such service is interrupted due to Landlord's willful misconduct and such
event lasts more than 3 business days, and such interruption materially
interferes with the Tenant's useful occupation of the Premises, Tenant shall be
entitled to an appropriate abatement of the rent payable hereunder for as long
as such interruption exists. In the event any such service is interrupted due to
Landlord's willful misconduct and such event lasts more than 30 business days
and such interruption materially interferes with the Tenant's useful occupation
of the Premises, Tenant may at its sole election terminate the term hereof by
giving Landlord written notice thereof unless Landlord restores said services
within 30 days of Tenant's notice to terminate.
6.6 Landlord shall pay for and furnish the gas service required to
reasonably heat the Premises at the Landlord's cost and expense during normal
business hours, on regular business days. Landlord reserves the right to use
locking covers for the Tenant's thermostats and the right to use an energy
management system to control the thermostat set points during unoccupied
periods. During normal business hours of normal business days the thermostats of
the Premises shall be set at 70 degrees Fahrenheit during the winter and 74
degrees Fahrenheit during the summer. All such services shall be subject to
interruption due to any accident, to the making of repairs, alterations or
improvement, to labor difiiculties, to trouble in obtaining fuel, electricity,
service or supplies from the source for which they are usually obtained for the
said Entire Premises and the Premises, or to any other cause beyond the
Landlord's control. Tenant shall have reasonable access to the thermostats that
control the HVAC service of the Premises. If any equipment installed in the
Premises or any person claiming under Tenant, including, but without limitation,
computer equipment, or if the use to which the Tenant may put a portion or the
whole of the Premises shall result in additional gas service being required for
the Premises, Tenant shall pay for such service and, the cost of installing,
operating, and maintaining the same.
ARTICLE SEVEN, SIGNS
7.1 No sign, advertisement, notice or other lettering shall be exhibited,
inscribed, painted or affixed by Tenant on any part of the Premises, the Entire
Premises or the Building so as to be visible from outside the Premises without
Landlord's prior written approval, of which Landlord shall not unreasonably
withhold or delay. In the event of the violation of this Article, Landlord may
charge the expense incurred in such removal to Tenant, as additional rent. No
awnings, curtains, blinds, shades, screens or other projections shall be
attached to or hung in, or used in connection with, any
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<PAGE> 11
window of the Premises on any outside wall of the Building without the prior
written consent of Landlord.
ARTICLE EIGHT, REPAIRS, ALTERATIONS & MAINTENANCE
8.1 Landlord agrees to make repairs and maintain the elements of the
property which Landlord is required to maintain, as herein set forth. The
property which Landlord is required to maintain is the foundation, the roof, the
exterior side of the exterior walls and the structural columns, members and
beams of the Building, the heating, air conditioning, plumbing and electrical
systems of the Entire Premises, the exterior side of the demising walls of the
Premises and the common areas of the Entire Premise in at least the same
condition as of the commencement date. Notwithstanding the foregoing, if (1) any
of said repairs or maintenance shall be made necessary by damage, negligence,
waste, failure to act or an act of Tenant or for reason of repairs,
installations, alterations, additions or improvements made by Tenant or by
reason of the fault or negligence of Tenant by reason of default in the
performance or observance of any agreements, conditions or other provisions on
the part of Tenant to be performed or observed, or (2) by reason of any special
use to which the Premises may be put, other than the use contemplated hereunder,
Tenant shall reimburse Landlord for the cost of making all such repairs or
alterations within 30 days of receipt of a bill for the same. Landlord shall not
be deemed to have committed a breach of any obligation to make repairs or
alterations or perform any other act unless (1) it shall have made such repairs
or alterations or performed such other act negligently, or (2) it shall have
received notice from Tenant designating the particular repairs or alterations
needed or another of which there has been failure of performance and shall have
failed to make such repairs or alterations or performed such other act within a
reasonable time after the receipt of such notice; and in the latter event
Landlord's liability shall be limited to the cost of making such repairs or
alterations or performing such other act subject only to the provisions of
Article 9 and 10;
8.2 Landlord shall maintain the Premises for the benefit of Tenant and
every part thereof including, but without limitation, the HVAC (including a
proportionate share of the Preventive Maintenance Contract), plumbing and
electrical systems within the Premises only, the interior surface of all
exterior and demising walls, all interior walls, all floors and ceilings, all
glass, windows, carpeting, shelving, doors, window sashes, window frames, door
frames and window treatments. Notwithstanding the foregoing, Tenant shall not be
under any obligation to make any repairs or alterations to the property which
Landlord is required to maintain as provided for in Article 8.1 hereof. It is
understood and agreed that the Landlord shall perform all such maintenance work.
8.3 Tenant specifically agrees to replace all glass damaged with glass of
the same kind and quality. Tenant also agrees to paint and otherwise redecorate
the Premises when required to keep the Premises in good repair.
8.4 Tenant agrees that neither it nor anyone claiming under it will make
any installations, alterations, additions or improvements to or upon the
Premises except only the installation of fixtures and/or equipment necessary for
the conduct of Tenant's business, without the prior written approval of
Landlord, of which Landlord agrees not to withhold or delay unreasonably. And in
such event any and all approved installations, alterations, additions or
improvements other than the installation of fixtures and/or equipment necessary
for the conduct of Tenant's business shall be completed by Landlord. However
prior to commencement of any work relative thereto Landlord and Tenant shall
agree to the cost thereof and the vendors that shall complete work relative
thereto. All installations, alterations, additions and improvements made to or
upon the Premises whether made by Landlord or Tenant or any other person (except
only signs and movable trade fixtures and equipment installed in
Page 11 of 26
<PAGE> 12
the Premises prior to or during the term of this lease at the cost of Tenant or
any person claiming under Tenant), shall be deemed part of the Premises and upon
the expiration or other termination of the term of this lease shall be
surrendered with the Premises as a part thereof without disturbance, molestation
or injury unless Landlord shall give notice to Tenant within Thirty (30) days
prior to termination of the term of this Lease that Landlord elects to have
Tenant remove any of the same. And in such event Tenant shall remove all such
installations, alterations, additions and improvements so designed no later than
30 days after the termination hereof. Said signs, movable trade fixtures and
equipment shall not be deemed part of the Premises and may be removed by Tenant
at any time or times during the term of this Lease or upon the termination of
the term of this Lease, if, and only if, Tenant shall not then be in default in
the performance or observance of any of the agreements or conditions in this
Lease contained on the part of Tenant to be performed or observed. Movable trade
fixtures and equipment shall include trade fixtures, equipment and other
installments not affixed to the reality and trade fixtures, equipment and other
installations affixed only by nails, screws or other similar means.
8.5 Tenant agrees that it will procure any necessary permits, if any are
required for installing equipment and/or fixtures required in the conduct of
Tenant's business. Landlord and Tenant agree that all installations,
alterations, improvements and removals done by it or anyone claiming under it
shall be done in a good and workmanlike manner, that the same shall be done in
conformity with all laws, ordinances and regulations of all public authorities
and all insurance inspection or rating bureaus having jurisdiction, that the
structure of the Building will not be endangered or impaired and that such party
will pay for the cost to repair any and all damage caused by or resulting from
any such, installations, alterations, additions, improvements or removals,
including, but without limitation. Tenant agrees to pay promptly when due all
charges for labor and materials in connection with any work done by Tenant or
anyone claiming under Tenant upon the Premises so that the Premises shall at all
times be free of liens. Tenant agrees to save Landlord harmless from, and
indemnify Landlord against, any claims for injury, loss or damage to person or
property caused by or resulting from the doing of any such work.
ARTICLE NINE, FIRE OR OTHER CASUALTY
9.1 If the Premises or the Entire Premises, or any part thereof,
(excluding equipment, trade fixtures and furniture of Tenant) shall be damaged
or destroyed by fire or other casualty, then Tenant shall promptly thereafter
give Landlord written notice thereof and Landlord shall within 120 days after
its receipt of such notice from Tenant, repair or restore the Premises to
substantially the same condition they were in immediately prior to the casualty.
In the event Landlord fails to expeditiously commence and diligently complete
such repairs or restoration within said 120 days, Tenant may at its sole
election terminate the term hereof by giving Landlord written notice thereof,
unless Landlord completes such repairs or restoration work within 30 days of
Tenant's notice to terminate. Landlord shall not be obligated to expend an
amount in excess of the insurance proceeds or damages payable on account of such
damage or destruction in making such repair or restoration. A just proportion of
the rent according to the nature and extent of the injury to the Premises shall
be suspended or abated until the Premises shall be repaired or restored by
Landlord as aforesaid and the same are delivered to Tenant in a tenantable
condition.
9.2 Landlord agrees that it will maintain at all times during the term of
this Lease with respect to the Premises and the Entire Premises insurance
against loss or damage by fire, the so-called extended coverage casualties and
such other casualties as shall be required by the holder of any mortgage upon
the Entire Premises. Said insurance shall be in an amount equal to the full
insurable
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<PAGE> 13
value of the building and said insurance may be written with a so-called eighty
(80%) percent or ninety (90%) co-insurance clause, and in such event sufficient
insurance shall be carried so that the insured shall not be a co-insurer.
Insurance against any or all of such risks may be maintained under a blanket
policy covering the Entire Premises and other real estate of Landlord and/or its
affiliated business organizations. The policies of such insurance shall be
payable in case of loss to the holders of any mortgages upon the property of
which the building is a part, as their interests may appear. Said insurance
shall be written by responsible insurance companies satisfactory to the holder
of any first mortgage upon the Entire Premises authorized to do business in the
Commonwealth of Massachusetts. Nothing in this Lease contained shall be deemed
to create in Tenant any interest in said insurance policies or the proceeds
thereof.
9.3 Notwithstanding anything in this Article to the contrary, it is agreed
and understood that if at any time preceding the expiration of the term of this
Lease the Premises shall be damaged or destroyed by fire or other casualty to
the extent that twenty five percent (25%) or more of its insurable value,
Landlord at its sole election may elect to terminate this Lease by giving Tenant
notice thereof within thirty (30) days after such damage or destruction. It is
further agreed that if at any time during the term of this Lease the Entire
Premises or that part of the Entire Premises which provides access to and from
the Premises shall be damaged or destroyed as aforesaid to such an extent that
continued operation thereof would be uneconomical, Landlord at its election, may
terminate this Lease by notice to Tenant given no later than thirty (30) days
after such damage or destruction. In the event of any termination of this Lease
pursuant to the provisions of this Article 9, the termination shall become
effective on the twentieth (20) day after the giving of the notice of
termination, rent shall be apportioned on a per day basis and adjusted as of the
time of loss and Landlord shall not be obligated to repair or restore any damage
or destruction caused by fire or other casualty.
ARTICLE TEN, EMINENT DOMAIN
10.1 If after the execution of this Lease and prior to the expiration of
the term of this Lease the whole of the Premises or the whole or a part of the
Entire Premises shall be taken by under the power of eminent domain, then the
term of this Lease shall cease as of the time when Landlord shall be divested of
its title in the Entire Premises and/or Premises, and rent shall be apportioned
on a per day basis and adjusted as of the time of termination.
l0.2 If only a part of the Premises or that part of that part of the
Entire Premises that provides access to the Premises shall be taken under the
power of eminent domain and if as a result thereof the floor area of the
Premises shall be reduced by more than twenty percent or the part remaining
shall not be reasonably adequate for the operation of the business conducted in
the Premises prior to the taking, Tenant may at its election, terminate this
Lease by giving Landlord notice of the exercise of its election within twenty
days after it shall receive notice of such taking; the termination shall be
effective as of the time that possession of the part so taken shall be required
for public use; and rent shall be apportioned and adjusted as of the time of
termination. If at any time during the term of this Lease such portion of the
Building shall be taken by eminent domain that Landlord shall determine that
operation thereof as an office building would be uneconomical, Landlord at its
election, may terminate this Lease by a notice to Tenant given within thirty
(30) days after physical possession of the portion so taken shall be required
for public use. If only part of the Premises shall be taken under the power of
eminent domain and if this Lease shall not be terminated as aforesaid, then the
term of this Lease shall continue in full force and effect and Landlord shall,
within a reasonable time after possession is required for public use, repair and
rebuild what may remain of the Premises and the remainder of the Building so as
to put the same into condition for use and occupancy by Tenant,
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<PAGE> 14
and a just proportion of the minimum rent according to the nature and extent of
the injury to the Premises shall be suspended or abated until what may remain of
the Premises shall be put into such condition by Landlord and delivered to
Tenant in a tenantable condition, and thereafter ajust proportion of the part so
taken shall be abated for the balance of the term of this Lease
10.3 Landlord reserves to itself, and Tenant assigns to Landlord, all
rights to damages accruing on account of any taking under the power of eminent
domain or by reason of any act of any public or quasi-public authority for which
damages are payable. Tenant agrees to execute such instruments of assignment as
may be reasonably required by Landlord in any proceeding for the recovery of
such damages if requested by Landlord, and to turn over to Landlord any damages
that may be recovered in such proceedings. It is agreed and understood, however,
that Landlord does not reserve to itself, and Tenant does not assign to
Landlord, any damages payable for movable trade fixtures installed by Tenant or
anybody claiming under Tenant at its own cost and expense or for moving expenses
incurred by Tenant.
ARTICLE ELEVEN, INDEMNITY AND INSURANCE
11.1 Except in the event of negligence on the part of Landlord or
Landlord's willful misconduct, Tenant agrees to save Landlord harmless from, and
indemnify Landlord against, to the extent permitted by law, any and all injury,
loss or damage and any and all claims for injury, loss or damage and any and all
claims for injury, loss of whatever nature (1) caused by or resulting from or,
claimed to have been caused by or to have resulted from, any act, omission or
negligence of Tenant or anyone claiming under Tenant (including, but without
limitation, subtenants and concessionaires of Tenant and employees and
contractors of Tenant or its subtenants or concessionaires), no matter where
occurring, or (2) occurring upon or about the Premises, no matter how caused.
This indemnity and hold harmless agreement shall include indemnity against all
costs, expenses and liabilities, incurred in connection with any such injury,
loss or damage or any such claim, or any proceeding brought thereon or the
defense thereof. To the maximum extent that this Lease may be made effective
according to law, Tenant agrees to use and occupy the Premises at its sole risk.
Without limiting the generality of the immediately preceding sentence, if Tenant
or anyone claiming under Tenant or the whole or any part of the property of
Tenant or anyone claiming under Tenant shall be injured, lost or damaged by
theft, fire, water or steam or in any other way or manner, whether similar or
dissimilar to the foregoing, no part of said injury, loss or damage is to be
borne by Landlord or its agents. Tenant agrees that Landlord shall not be liable
to Tenant or anyone claiming under Tenant for any injury, loss or damage that
may be caused by or result from the fault or negligence of any persons occupying
adjoining premises or any other part ot the Entire Premises.
11.2 Tenant will maintain general comprehensive public liability
insurance, with respect to the Premises and its appurtenances, issued by
insurance companies authorized to do business in the Commonwealth of
Massachusetts, naming Landlord and Tenant as the insureds, in amounts not less
than $ 2,000,0000 with respect to injuries to any one person and not less than $
3,000,000 with respect to injuries suffered in any one accident, and not less
than $500,000 with respect to property. Such policies shall provide that
Landlord is a named additional insured under such policy and each and every
certificate of insurance as required to be provided by Tenant to Landlord shall
name OWNER as the certificate holder and the so called descriptions or special
conditions section of certificate shall state that the Landlord as herein
defined is a named additional insured. Such policies of insurance or
certificates thereof shall be delivered to Landlord, at least fifteen (15) days
prior to the commencement of the term of this Lease, and each renewal policy or
certificate thereof, at least fifteen (15) days prior to the expiration of the
policy it renews. In the event the Tenant fails to
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<PAGE> 15
provide Landlord with such Certificates of Insurance in the form as described
above at the time of renewal or at the time of a change by Tenant regarding the
Tenants general comprehensive public liability insurance within Fifteen (15)
Days of such renewal or change the Landlord may charge the Tenant a processing
fee of One Hundred ($100) Dollars. Tenant may maintain such insurance under a
blanket policy affecting other premises of Tenant and/or its affiliated business
organizations. Each such policy of insurance shall contain a provision
prohibiting cancellation or amendment thereof without Landlord's receiving at
least thirty (30) days prior written notice from the insurance carrier of such
cancellation or amendment.
ARTICLE TWELVE, ACCESS TO PREMISES
12.1 Landlord shall have the right to enter upon the Premises or any part
thereof without charge at all reasonable times, with reasonable prior notice and
in case of emergency, at any time, to inspect the same, to show the Premises to
prospective purchasers or lenders, to make or facilitate any repairs,
alterations, additions or improvements to the Premises and other portions of the
Entire Premises. But nothing in this Article 12 contained shall obligate
Landlord to make any repairs, alterations, additions or improvements not
required to be made by Landlord. Tenant shall not be entitled to any abatement
or reduction of rent or damages by reason of any of the foregoing, but Landlord
agrees to use reasonable efforts to minimize any disruption to the tenant's
useful occupation of the Premises. No forcible entry shall be made by Landlord
unless such entry shall be reasonably necessary to prevent serious injury, loss
or damage to persons or property. Landlord shall repair any damage to property
of Tenant or anyone claiming under Tenant caused by or resulting from Landlord's
forcible entry, the making of any such repairs, alterations, additions or
improvements, except only such damage as shall result from the making of such
repairs, alterations, additions, improvements or forcible entry which Landlord
shall make as a result of default, fault or negligence of Tenant or anyone
claiming under Tenant. Provided Tenant does not exercise its election to renew
the term of the Lease in accordance with the provisions of Article 3.3, then for
the period commencing 6 months prior to the expiration of the term of this
Lease, Landlord may maintain "For Rent" signs on the Premises and Landlord or
Landlord agents may show the Premises to prospective tenants, provided Landlord
and/or its agents gives Tenant reasonable oral notice thereof.
ARTICLE THIRTEEN, DEFAULTS
13.1 Any of the following occurrences or acts shall constitute an event
of default under this Lease: if Tenant shall:
(1) fail to pay any fixed base rent, additional rental obligations hereof or
other sum required to be paid by Tenant hereunder and such failure shall
continue for thirty (30) days after written notice as specified herein to Tenant
of such failure; or
(2) fail to observe or perforrn any other provision hereof and such failure
shall continue for thirty (30) days after written notice as specified herein
Tenant of such failure (provided, that, in the case of any such default which
cannot be cured by the payment of money and cannot with diligence be cured
within such 30 day period, if Tenant shall commence promptly to cure the same
and thereafter prosecute the curing thereof with diligence, the time within
which such default may be cured shall be extended for such period as is
necessary to complete the curing thereof with diligence); or
(3) abandon the Premises: or
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<PAGE> 16
(4) shall file a petition commencing a voluntary case under any federal
bankruptcy or similar law, federal or state, or for reorganization or an
arrangement pursuant to any bankruptcy law, insolvency or any similar law,
federal or state, or shall be adjudicated a debtor or bankrupt under any
bankruptcy, insolvency or any similar law, federal or state, or become
insolvent, or shall make assignment for the benefit of creditors, or shall admit
in writing its inability to pay its debts generally as they become due, or if a
petition commencing an involuntary case against tenant or answer proposing the
adjudication of Tenant as a debtor or bankrupt or its reorganization pursuant to
any federal or state bankruptcy law or any similar law shall be tiled in any
court and Tenant shall consent to or acquiesce in the filing thereof or such
petition or answer shall not be dismissed, discharged or denied within ninety
(90) days after the filing thereof; or
(5) if a custodian, receiver, trustee, United States trustee or liquidator of
Tenant or of all substantially all of the assets of Tenant or of the Premises or
Tenant's estate therein shall be appointed in any proceeding brought by Tenant,
or if any such custodian, receiver, trustee, United States trustee or liquidator
shall be appointed in any proceeding brought against Tenant and shall not be
discharged within ninety (90) days after such appointment, or if Tenant shall
consent to or acquiesce in such appoint; or
(6) if any material representation or warranty of Tenant contained in this
Lease, any assignment or reassignment of this Lease or consent thereto executed
by Tenant or in any notice, demand, certificate, request or instrument delivered
pursuant to or in connection with this Lease, any such assignment or
reassignment or consent shall prove to be incorrect in any material respect as
of the time when the same shall have been made, to the detriment of any person
to whom or for whose benefit the representation or warranty was made.
13.2 If an event of default shall have happened and be continuing,
Landlord shall have the right to give Tenant written notice as specified herein
of Landlord's intention to terminate the term of this Lease on a date not less
than 30 days after the date of such notice, hereinafter referred to as the
termination date. Upon the giving of such notice, the term of this Lease shall
expire and terminate on the termination date such as fully and completely and
with the same effect as if such date were the date herein fixed for the
expiration of the term of this Lease, and all rights of Tenant hereunder shall
expire and terminate, but Tenant shall remain liable for of its obligations as
hereinafter provided.
13.3 If an event of default shall have happened and be continuing,
Landlord shall have the immediate right, whether or not the term of this Lease
shall have been terminated pursuant to Article 13.2 hereof, to re-enter and
repossess the Premises by summary proceedings, ejectment or in any manner
Landlord determines to be necessary or desirable and the right to remove all
persons and property therefrom. Landlord shall be under no liability by reason
of any such re-entry, repossession or removal. No such re-entry or repossession
of the Premises shall be construed as an election by Landlord to terminate the
term of this Lease unless a notice of such intention is given to Tenant pursuant
to Article 13.2 hereof, or unless such termination is decreed by a court of
competent jurisdiction.
13.4 after the re-entry of repossession of the Premises pursuant to
Article 13.3 hereof, whether or not the term of this Lease shall have been
terminated pursuant to Article 13.2 hereof, Landlord shall make reasonable
effort to relet the Premises for the account of Tenant in the name of Tenant or
Landlord or otherwise, with or without notice to Tenant, for such term or terms
and on such reasonable conditions and for such uses as Landlord, in its absolute
discretion, may determine, however such rent shall be commercially reasonable.
Landlord may collect and receive any rents
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<PAGE> 17
payable by reason of such reletting. Landlord shall not be liable for any
failure to relet the Premises (after making reasonable efforts to relet) or for
any failure to collect (after making reasonable efforts to collect) any rent due
upon any such reletting.
13.5 No such termination of the term of this Lease pursuant to this
Article, by operation of law or otherwise, and no re-entry or repossession of
the Premises pursuant to Article 13.3 hereof or otherwise, and no reletting of
the Premises pursuant to Article 13.4 hereof or otherwise, shall relieve Tenant
of its liabilities and obligations hereunder, all of which shall survive such
expiration, termination, re-entry, repossession or reletting.
13.6 In the event of any such termination or rentry or repossession of the
Premises by reason of the occurrence of any event on default, Tenant will pay to
Landlord all Fixed Base Rent, additional rental obligations and other sums
required to be paid by Tenant to and including the date of such expiration,
termination, re-entry or repossession, including any reasonable attorneys' fees
and expenses incurred in connection with such expiration, termination, re-entry
or repossession; and, thereafter, Tenant shall, until the end of what would have
been the term of this Lease in the absence of such expiration, termination,
re-entry, or repossession, and whether or not the Premises shall have been
relet, be liable to Landlord for, and shall pay to Landlord, as liquidated and
agreed current damages:
13.6.1 all fixed base rent, additional rental obligations, monies
expensed or which shall be required to be expensed by Landlord for the Tenant
Improvements, as well as any monies for brokerage and legal fees for
consummating this Lease and any other sums which would be payable under this
Lease by Tenant in the absence of such expiration, termination, re-entry, or
repossession, including any reasonable attorneys' fees and expenses incurred in
connection with such expiration, termination, re-entry, or repossession; LESS:
13.6.2 the net proceeds, if any, of any reletting effected for the
account of Tenant pursuant to Article 13.4 hereof, after deducting from such
proceeds all Landlord's reasonable expenses in connection with such reletting
(including all repossession costs, brokerage commissions, reasonable attorneys'
fees and expenses, reasonable employees' expenses, alteration costs and expenses
of preparation for such reletting). Tenant will pay such current damages on the
days on which fixed base rent would be payable under this Lease in the absence
of such expiration, termination, re-entry, or repossession, and Landlord shall
be entitled to recover the same from Tenant on each such day.
13.7 Notwithstanding any other relevant provisions contained herein any
monies expensed or which shall be required to be expensed by Owner for the
Tenant Improvements completed hereunder by Landlord or the unamortized portion
thereof; as well as any monies for brokerage and legal fees for consummating
this Lease and any other sums which would be payable under this Lease by Tenant
in the absence of such expiration, termination, re-entry, or repossession shall
be due and payable from Tenant immediately upon termination of this Lease.
ARTICLE FOURTEEN, MORTGAGES
14.1 Tenant agrees that upon the request of Landlord it will subordinate
this Lease and the lien hereof to the lien of any present or future mortgage or
mortgages upon the Premises or any property of which the Premises are a part,
irrespective of the time of execution or time of recording
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<PAGE> 18
of any such mortgage or mortgages; provided that the holder of any such mortgage
shall agree with Tenant that this Lease and the rights of Tenant hereunder shall
not be disturbed in the event of a foreclosure or other transfer of title to the
property except in accordance with the terms of this Lease. Tenant agrees that
it will upon the reasonable request of Landlord execute, acknowledge and deliver
any and all instruments deemed by Landlord necessary or desirable to give effect
to or notice of such subordination. The word "mortgage" as used herein includes
mortgages, deeds of trust or other similar instruments and modifications,
consolidations, extensions, renewals, replacements and substitutes thereof,
whether the lien of any mortgage upon the Premises or any property of which the
Premises are a part shall be superior or subordinate to this Lease and the lien
hereof. Tenant agrees that it will, upon request, attorn to the holder of such
mortgage or any one claiming under such holder and their respective successors
and assigns in the event of foreclosure of or similar action taken under such
mortgage.
14.2 After the commencement of the term of this Lease and witbin twenty
(20) days after written request therefor by Landlord, Tenant agrees to deliver
to Landlord or to any mortgagee a certificate stating that Tenant has entered
into occupancy of the Premises in accordance with the provisions of this Lease,
that this Lease is in full force and effect, that Landlord has performed
Landlord's construction work and any other information reasonably requested.
14.3 After receiving notice from Landlord or from any person, firm or
other entity that such person, firm or other entity holds a mortgage, as herein
defined, which includes the Premises as part of the mortgaged premises, no
notice from Tenant to Landlord shall be effective unless and until a copy of the
same is given by certified or registered mail to such holder, and the curing of
any of Landlord's defaults by such holder shall be treated as performance by
Landlord, it being understood and agreed that such holder shall be afforded a
reasonable period of time after the receipt of such notice in which to effect
such cure.
ARTICLE FIFTEEN, WAIVER OF SUBROGATION
15.1 Each of Landlord and Tenant hereby releases the other, to the extent
of its insurance coverage, from any and all liability for any loss or damage
caused by fire or any of the extended coverage casualties or any other casualty
insured against, even if such fire or other casualty shall be brought about by
the fault or negligence of the other party or its agents, provided, however,
this release shall be in force and effect only with respect to loss or damage
occurring during such time as releasor's policies covering such loss or damage
shall contain a clause to the effect that this release shall not affect said
policies or the right of releasor to recover thereunder. Each of Landlord and
Tenant agrees that their respective fire and other casualty insurance policies
will include such a clause so long as the same is includable without extra cost,
or if extra cost is chargeable therefor, so long as the other party pays such
extra cost. If an extra cost is chargeable therefor, each party will advise the
other of the amount thereof. The other party at its election, may pay the same,
but shall not be obligated to do so.
ARTICLE SIXTEEN, FAILURE OF PERFORMANCE AND WAIVER
16.1 If Tenant shall default in the performance of any agreement or
condition in this Lease contained on its part to be performed or observed other
than an obligation to pay money, and shall not have begun to cure and diligently
complete the curing of such default within thirty (30) days after written notice
from Landlord specifying the default or shall not within said period commence to
cure such default and thereafter prosecute the curing of such default to
completion with due diligence,
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Landlord may, at its option, without waiving any claim for damages for breach of
agreement, at any time thereafter cure such default for the account of Tenant,
and any amount paid or any contractual liability incurred by Landlord in so
doing shall be deemed paid or incurred for the account of Tenant and Tenant
agrees to reimburse Landlord therefor or save Landlord harmless therefrom;
provided that Landlord may cure any such default as aforesaid prior to the
expiration of said waiting period but after notice to Tenant, if the curing of
such default prior to the expiration of said waiting period is reasonably
necessary to protect the real estate or Landlord's interest therein, or to
prevent injury or damage to persons or property. If Tenant shall fail to
reimburse Landlord upon demand for any amount paid for the account of Tenant
hereunder, said amount shall be added to and become due as a part of the next
payment of rent due hereunder.
16.2 Failure of either party to complain of any act or omission on the
part of the other party, no matter how long the same may continue, shall not be
deemed to be a waiver by said party of any of its rights hereunder. No waiver by
either party at any time, express or implied, of any breach of any provision of
this Lease shall be deemed a waiver of a breach of any other provision of this
Lease or a consent to any subsequent breach of the same or any other provision.
If any action by either party shall require the consent or approval of the other
party, the other party's consent to or approval of such action on any one
occasion shall not be deemed a consent to or approval of said action on any
subsequent occasion or a consent to or approval of any other action on the same
or any subsequent occasion. Any and all rights and remedies which either party
may have under this Lease or by operation of law, either at law or in equity,
upon any breach, shall be distinct, separate and cumulative and shall not be
deemed inconsistent with each other; and no one of them, whether exercised by
said party or not, shall be deemed to be in exclusion of any other; and any two
or more or all of such rights and remedies may be exercised at the same time.
ARTICLE SEVENTEEN, BROKERS
17.1 Tenant hereby represents and warrants to Landlord that, except to the
extent, if any, hereinafter set forth, it has dealt with no broker in connection
with this Lease and there are no brokerage commissions or other finders' fees
due in connection herewith. Tenant hereby agrees to hold Landlord harmless from,
and indemnified against, all loss or damage (including, without limitation, the
cost of defending same) arising from any claim by any broker claiming to have
dealt with Tenant other then NIRES COMPANY. Landlord acknowledges that NIRES
COMPANY is due a commission relative to this Lease in accordance with the
Agreement between said Broker and Landlord, of which Landlord shall be solely
obligated to pay.
ARTICLE EIGHTEEN, HOLDING OVER
18.1 If Tenant or anyone claiming under Tenant shall remain in possession
of the Premises or any part thereof after the expiration of the term of this
Lease without any agreement in writing between Landlord and Tenant with respect
thereto, the person remaining in possession shall be deemed a tenant at
sufferance and after acceptance of rent by Landlord the person remaining in
possession shall be deemed a tenant at will, subject to the provisions of this
Lease insofar as the same may be made applicable to a tenancy at will. The Fixed
Base Rent payable by such person shall be twice the amount of the Fixed Base
Rent payable at the expiration of the term of this Lease as long as such person
remains in possession of the Premises.
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ARTICLE NINETEEN, QUIET ENJOYMENT
19.1 Landlord agrees that upon Tenant's paying the rent and performing and
observing the agreements, conditions and other provisions on its part to be
performed and observed, Tenant shall and may peaceably and quietly have, hold
and enjoy the Premises during the term of this Lease without any manner of
hindrance or molestation from Landlord or anyone claiming under Landlord,
subject, however, to the terms of this Lease and any instruments having prior
lien.
ARTICLE TWENTY, USE
20.1 Tenant agrees that during the term of this lease and any extension
thereof the Premises will be used and occupied for the normal administrative and
management business operations of Tenant, but not for any research and
development, assembly or manufacturing purposes nor for any other purpose
without the written consent of Landlord: The Tenant shall not use the Premises
for any use which materially interferes with the lawful use of other parts of
the Entire Premises by the other tenants of the Entire Premises nor shall the
Tenant use the Premises or any part thereof for any use or activity which is
contrary to any law, rule, bylaw or regulation of any governmental agency having
jurisdiction thereof. Landlord represents that use of the Premises for office
purposes is permitted under applicable zoning laws.
ARTICLE TWENTY ONE, ASSIGNMENT
21.1 Tenant agrees that it will not assign, mortgage, pledge or otherwise
encumber this Lease or any interest therein, or sublet the whole or any part of
the Premises without obtaining on each occasion the written consent of the
Landlord, said consent not to be unreasonably withheld or delayed. If and
whenever Tenant shall not be a so-called "publicly held" company, it is
understood and agreed that the transfer of fifty percent (50%) or more of the
stock in Tenant of any class to any single entity (whether at one time or at
intervals) shall constitute an "assignment" of Tenant's interest in this Lease
only if such event in the reasonable judgment of mutually agreeable competent
third party materially adversely effects the credit worthiness of this Lease or
the Tenant. Provided the Tenant is so called publicly held company the sale of
any portion of its stock shall not be considered an assignment hereunder.
21.2 If Tenant shall request permission to assign this Lease or sublet all
or any part of the Premises to any person other than a business organization
affiliated with Tenant, Tenant shall, together with its request for consent
thereto, inform Landlord of the rental to be paid by such assignee or subtenant
and Landlord shall have the right to terminate this Lease rather than consent to
such assignment or subletting; provided that Landlord shall exercise such right
within thirty (30) days of its receipt of Tenant's request for such consent and
provided, further, that Tenant shall have the right to withdraw its request for
such consent within thirty (30) days after its receipt of such notice from
Landlord, in which event such notice of termination shall become null and void.
If this Lease shall be terminated pursuant to the provisions of the immediately
preceding sentence, such termination shall become effective upon the last day of
the calendar month next following Landlord's giving of notice of termination.
21.3 Tenant shall reimburse Landlord promptly upon demand for reasonable
legal and other expenses incurred by Landlord in connection with any request by
Tenant for consent of assignment or subletting. Without intending to limit
Landlord's discretion in granting or withholding such consent, if Landlord shall
consent to any assignment of this Lease by Tenant or a subletting of the whole
of
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<PAGE> 21
the Premises or any part thereof by Tenant at a rent in excess of the subleased
portion's pro rata share of the rent payable hereunder by Tenant, then Tenant
shall pay to Landlord, as additional rent forthwith upon Tenant's receipt of
each installment of any such excess rent, one half of any such excess rent.
However in the event such sublet or assignment is to Tenant's parent company,
another subsidiary thereof or any other company affiliated with Tenant, then
Landlord shall be entitled to the full amount of any such excess rent. All costs
associated with the procurement of any such approved sublet or assignment shall
borne entirely by the Tenant and no deduction relative thereto shall be made
from the portion of excess rent due Landlord. Each request by Tenant for
permission to assign this Lease or to sublet the whole or any part of the
Premises shall be accompanied by a warranty by Tenant as to the amount of rent
to be paid to Tenant by the proposed assignee or subtenant. For purposes of this
Section, the term "rent" shall mean all fixed rent, additional rent or other
payments and/or consideration payable by one party to another for the use and
occupancy of the whole or any part of the Premises. Tenant agrees, however, that
neither it nor anyone claiming under it shall enter into any sublease, license,
concession or other agreement for use, occupancy or utilization of the whole or
any part of the Premises which provides for rental or other payment for such
use, occupancy or utilization based, in whole or in part, on the net income or
profits derived by any person or entity from the space leased, used, occupied or
utilized (other than an amount based on a fixed percentage or percentage of
receipts or sales), and Tenant agrees that any such purported sublease, license,
concession or other agreement shall be absolutely void and ineffective as a
conveyance of any right or interest in the possession, use, occupancy or
utilization of any part of the Premises. Tenant further agrees that any
sublease, license, concession or agreement for use, occupancy or utilization of
space in the Premises entered into by it or by anyone claiming under it shall
contain the provisions set forth in the immediately preceding sentence. Tenant
further agrees that if a sublease is entered into, neither the rent payable
thereunder nor the amount thereof passed on to any person or entity shall have
deducted therefrom any expenses or costs related in any way to the subleasing of
such space.
21.4 In any event of assignment or sublease the Tenant shall always remain
principally liable to the Landlord for the performance of all agreements,
conditions, terms and obligations herein reserved and contained on the part of
Tenant to be observed by Tenant for the term and any extension herein set forth.
ARTICLE TWENTY TWO, DELAYS
22.1 In any case where either party hereto is required to do any act,
delays caused by or resulting from Act of God, war, civil commotion, fire or
other casualty, labor difficulties, shortages of labor, materials or equipment,
government regulations or other causes beyond such party's reasonable control
such delay shall not be counted in determining the time during which such work
shall be completed, whether such time be designated by a fixed date, a fixed
time or "a reasonable time." In any case where work is to be paid for out of
insurance proceeds or condemnation awards, due allowance shall be made, both to
the party required to perform such work and to the party required to make such
payment, for delays in the collection of such proceeds and awards.
ARTICLE TWENTY THREE, NOTICES
23.1 All notices and/or other communications authorized or required
hereunder shall be in writing and shall be given by mailing the same by
certified or registered mail, return receipt requested, postage prepaid. If
given to Tenant the same shall be mailed to Tenant at the address provided on
Page 5 hereof or to such other person at such other address as Tenant may
hereafter
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<PAGE> 22
designate by notice to Landlord; and if given to Landlord the same shall be
mailed to Landlord at the address provided on Page 5 hereof, with a copy to
NIRES COMPANY, 80 Erdman Way, STE 1, Leominster Massachusetts, 01453-1841 or to
such other person or at such other address as Landlord may hereafter designate
by notice to Tenant. In the event the notice mailed with sufficient postage as
above provided shall not be received upon attempted delivery thereof to the
proper address and shall be returned by the Postal Service to the sender because
of a refusal of receipt, the absence of a person to receive, or otherwise, the
time of the giving of such notice shall be the time of the first such attempted
delivery.
ARTICLE TWENTY FOUR, DEFINITIONS AND INTERPRETATIONS
24.1 The words "Landlord" and "Tenant" and the pronouns referring thereto,
as used in this Lease, shall mean, where the context requires or admits, the
persons named herein as Landlord and as Tenant, respectively, and their
respective heirs, legal representative, successors and assigns, irrespective of
whether singular or plural, masculine, feminine or neuter. Except as hereinafter
provided otherwise, the agreements and conditions in this Lease contained on the
part of the Landlord to be performed and observed shall be binding upon Landlord
and its heirs, legal representatives, successors and assigns and shall inure to
the benefit of Tenant and its heirs, legal representatives, successors and
assigns; and the agreements and conditions on the part of Tenant to be performed
and observed shall be binding upon Tenant and its heirs, legal representatives,
successors and assigns and shall inure to the benefit of Landlord and its heirs,
legal representatives, successors and assigns. The word "Landlord", as used
herein, means only the owner for the time being of Landlord's interest in this
Lease, that is, in the event of any transfer of Landlord's interest in this
Lease the transferor shall cease to be liable, and shall be released from all
liability for the performance or observance of any agreements or conditions on
the part of Landlord to be performed or observed subsequent to the time of said
transfer, it being understood and agreed that from and after said transfer and
transferee shall be liable for the performance and observance of said agreements
and conditions. As used herein the term "Landlord" shall include the Landlord's
lawful agents, fiduciaries, subcontractors and vendors. As used herein the term
Tenant shall include the entity named herein as Tenant, its guarantors, agents,
invitees, employees, as well as any other persons lawfully claiming under Tenant
including sub tenants.
24.2 It is agreed that if any provisions of this Lease shall be determined
to be void by any court of competent jurisdiction then such determination shall
not affect any other provision of this Lease, all of which shall remain in full
force and effect; and it is the intention of the parties hereto that if any
provision of this Lease is capable of two constructions, one of which would
render the provision void and the other which would render the provision valid,
then the provision shall have the meaning which renders it valid.
24.3 This instrument contains the entire and only agreement between the
parties, and no oral statements or representations or prior written matter not
contained in this instrument shall have any force or effect. This Lease shall
not be modified in any way except by a writing subscribed by both parties.
24.4 Wherever in this Lease provision is made for the doing of any act by
any person it is understood and agreed that said act shall be done by such
person at its own cost and expense unless a contrary intent is expressed.
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<PAGE> 23
24.5 If all or any part of Landlord's interest in this Lease shall be held
by a trust, no trustee, shareholder or beneficiary of said trust shall be
personally liable for any of the covenants, or agreements, express or implied,
hereunder. Landlord's covenants and agreements shall be binding upon the
trustees of said trust as trustees as aforesaid and not individually and upon
the trust estate. Without limiting the generality of the foregoing, and whether
or not all or any part of Landlord's interest in this Lease shall be held by a
trust. Tenant specifically agrees to look solely to Landlord's interest in the
Entire Premises for recovery of any judgment from Landlord; it being
specifically agreed that Landlord shall never otherwise be personally liable for
any such judgment.
24.6 Wherever in this Lease provision is made that either party shall have
the right to terminate this Lease, then, unless in said provision it is
expressly provided otherwise, neither party hereto shall thereafter have any
claim against the other under this Lease or on account of the termination
thereof unless provided otherwise.
24.7 The marginal notes used as headings for the various articles, the
title page and the lease abstract of this Lease are used only as a matter of
convenience for reference, and are not to be considered a part of this Lease or
to be used in determining the intent of the parties of this Lease. Whenever in
this Lease any portion, or part thereof, has been stricken out, whether or not
any provision has been substituted therefor, this Lease shall be read and
construed as if the words so stricken out were never included herein and no
implication shall be drawn from the words so stricken out.
24.8 Landlord reserves the right at any time during the term of this Lease
to use the exterior and demising walls of the Premises in connection with
additional construction; provided that Landlord shall not close any windows of
or entrances to the Premises without the prior consent of Tenant. Landlord
further reserves the right to install, maintain, repair and/or replace any and
all utility lines, conduits and equipment located within the Premises and
serving other premises in the Building; provided, however, that none of the same
shall be installed below the suspended ceiling, above the finished floor or
outside of the demising walls of the Premises and provided, further, that any
entry by Landlord to perform such installation, maintenance, repair or
replacement work shall not unreasonably interfere with Tenant's use and
occupation of the Premises.
24.9 For the purposes of this Lease, a business organization shall be
deemed to be affiliated with Tenant (1) if such business organization controls
Tenant either directly by ownership of a majority of its voting stock or of such
minority thereof as to give it substantial control of Tenant, or indirectly by
ownership of such a majority or minority of the voting stock of another business
organization so controlling Tenant or (2) if said business organization is so
controlled by another business organization so controlling Tenant.
24.10 Connectivity Technologies, Inc. (a Delaware Corporation) the parent
company of Connectivity Products, Inc. shall be jointly and severally liable
with Tenant hereunder and the term "Tenant" as in used in all and every part of
this Lease shall refer to such guarantor and to any other persons, corporations
or other entities constituting Tenant now or in the future by merger, sale
and/or consolidation. Connectivity Technologies, Inc.'s guarantee is fully
described on Exhibit B hereof.
ARTICLE TWENTY FIVE, TENANT COVENANTS
25.1 Tenant agrees that during the term of this Lease and any extension
thereof: no nuisance will be permitted on or about the Premises; nothing will be
done upon or about the Premises which
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<PAGE> 24
shall be unlawful, improper, noisy or offensive or contrary to any law,
ordinance, regulation or requirement of any public authority or insurance
inspection or rating bureau or similar organization having jurisdiction, or
which may be injurious to or adversely affect the quality or tone of the Entire
Premises, any part thereof or any abutting or adjacent property of the Landlord;
the Premises will not be overloaded, damaged or defaced; Tenant will not drill
or make holes in the stone or brickwork; Tenant will not permit the emission of
any objectionable noise or odor from the Premises; Tenant will procure all
licenses and permits which may be required for any use made of the Premises,
except for the certificate of occupancy for office use which shall be procured
by Landlord, if such certificate is required; no load shall be placed upon any
part of the floor of the Premises exceeding fifty (50) pounds per square foot
live load; no safe, vault or other heavy equipment shall be moved in, about or
out of the Premises except in such manner and at such times as Landlord shall
approve in writing in each instance; Tenant's business machines and mechanical
equipment which cause vibration or noise that may be transmitted to the Building
structure or to any other space in the Building shall be placed and maintained
by Tenant in settings of cork, rubber, spring or other types of vibration
eliminators sufficient to confine such vibration or noise to the Premises; and
all waste and refuse will be stored upon and removed from the Premises in
accordance with all applicable governmental codes and regulations. Tenant shall
comply with all reasonable rules and regulations, provided such do not conflict
with the terms and conditions of this Lease, hereafter made by Landlord, but
only after copies thereof have been delivered to Tenant for the care and use of
the Building and the Entire Premises and their facilities and approaches, it
being expressly understood, however, that Landlord shall not be liable to Tenant
for the failure of other tenants of the Building to conform to such rules and
regulations. Tenant will not do, or suffer to be done, or keep, or suffer to be
kept, or omit to do anything in, upon or about the Premises which may prevent
the obtaining of any insurance on the Entire Premises or on any property
therein, including, but without limitation, fire, extended coverage and public
liability insurance, or which may make void or voidable any such insurance, or
which may create any extra premiums for, or increase the rate of, any such
insurance. If anything shall be done or kept or permitted to be done in, upon or
about the Premises which shall create any extra premiums for, or increase the
rate of, any such insurance, Tenant will pay the increased cost of the same to
Landlord upon demand.
ARTICLE TWENTY SIX, PARKING
26.1 The Tenant shall be entitled to the use all of the parking spaces of
the Entire Premises in common with all tenants subject to exclusive rights of
others. Landlord agrees to provide adequate visitor only parking. The Tenant
shall have 6 reserved parking spaces, such spaces shall be located at the back
side of the building closest to an entrance door of 680 Mechanic Street.
ARTICLE TWENTY SEVEN, OTHER PROVISIONS
27.1 Upon the execution hereof by the TENANT this Lease shall for all
purpose and intent of law be considered fully executed by TENANT. In the event a
lapse of less than 14 business days occurs between the time TENANT executes this
Lease and the execution of this Lease by OWNER this event shall have no force or
effect relative to TENANT'S obligations hereunder in part or in whole. In the
event Landlord fails to execute this Lease and return a fully executed copy to
Tenant within 14 days of Landlord receiving this Lease from Tenant fully
executed, this Lease shall be null and void and Tenant shall be entitled to a
full refund of any and all monies paid hereunder and in such event neither party
shall have any other recourse to the other.
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<PAGE> 25
27.2 This Lease shall be governed by and in accordance with the Laws of
the Commonwealth of Massachusetts.
27.3 Prior to the execution hereof the TENANT shall deliver to OWNER a
certificate of corporate vote or other acceptable assurance from TENANT
indicating that James Harrington has the authority to enter into and bind
Connectivity Products, Inc. relative to the terms, obligations and conditions of
this Lease.
27.4 During the term hereof and any extension thereto the Tenant agrees to
provide Landlord with financial statements as reasonably requested within 30
days of such request. Landlord agrees to keep all information not of a public
nature confidential.
27.5 Any and all Exhibits attached hereto are hereby incorporated herein
as if such were part of the text of this Lease.
27.6 To the best of Landlord's knowledge at the time of the inception of
this Lease no asbestos or asbestos containing materials are present in the
Premises, no hazardous or toxic materials exist in or under the Premises, nor
are any such materials used in any construction that would require reporting or
remediation under applicable law and all parts of the Entire Premises and
Premises comply with all laws relating to the accessibility thereof to the
handicapped and other disabled persons. Tenant acknowledges that in the event
any of the above representations is untrue such event shall not be considered a
material breach of the Lease by Landlord, unless such event materially
interferes with Tenant useful occupation of the Premises or its access thereof.
Landlord warrants that in the event any of the above representations is untrue
Landlord shall use reasonable efforts to remedy such situation.
27.7 Tenant shall to the best of its ability prevent its employees,
invitees and guests from smoking at the front entrance of the building. Tenant
shall with respect to its own employees, invitees and guests enforce a no
smoking policy within the building and the Premises and shall enforce all
smoking policies of the Whole Premises.
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<PAGE> 26
IN WITNESS WHEREOF, Landlord and Tenant have each caused this Lease to be
duly executed and delivered, on this 20th day of December, 1996.
OWNER DATE 12-20-96 /s/ Peter F. Zichelle
-------- --------------------------
PETER F. ZICHELLE, D/B/A
CROSSROADS OFFICE PARK
TENANT DATE 12-20-96 /s/ James Harrington
-------- --------------------------
CONNECTIVITY PRODUCTS, INC.
BY JAMES HARRINGTON
ITS PRESIDENT
WITNESS DATE 12/20/96 /s/
-------- --------------------------
WITNESS DATE 12/20/96 /s/
-------- --------------------------
Page 26 of 26
<PAGE> 1
LEASE
BY AND BETWEEN
KEY PLASTICS, INC. (LESSOR)
and
CONNECTIVITY PRODUCTS, INC. (LESSEE)
This Lease made the 1st day of June, 1997, between KEY PLASTICS, INC., a
Massachusetts corporation having its usual place of business at 233 Florence
Street, Leominster, Worcester County, Massachusetts, (hereinafter referred to as
the "Lessor"), and CONNECTIVITY PRODUCTS, INC., a Massachusetts corporation
having its usual place of business at 680 Mechanic Street, Leominster,
Massachusetts, (hereinafter referred to as the "Lessee").
WITNESSETH
1. Leased Premises. In consideration of the rent and covenants herein
reserved and contained on the part of the Lessee to be paid, performed, or
observed, and subject to the conditions hereinbelow set forth, the Lessor does
hereby demise and lease unto the Lessee, and Lessee does hereby lease from the
Lessor, the following premises ("Leased Premises"):
Approximately 50,000 square feet, consisting of the entire building (the
"Building") located at Rear 233 Florence Street, Leominster, Worcester County,
Massachusetts, as shown on the floor plan attached hereto.
2. Term. The term of this lease is five (5) years, commencing June 1,
1997, and terminating May 31, 2002.
3. Rent. The Lessee shall yield and pay unto the Lessor at 233 Florence
Street, Leominster, Massachusetts, or such other place as the Lessor may from
time to time designate in writing, the rent of ONE HUNDRED SIXTY-TWO THOUSAND
FIVE HUNDRED AND NO/100 ($162,500.00) Dollars per year, payable in equally
monthly installments in advance as follows: THIRTEEN THOUSAND FIVE HUNDRED FORTY
ONE and 67/100 ($13,541.67) Dollars on the first day of June, 1997, together
with a like amount on the first day of each successive month thereafter during
the term hereof.
4. Use. It is understood that the Leased Premises shall be used for wire
extruding and for no other purpose without the prior written consent of Lessor,
which shall not be unreasonably withheld.
5. Rules and Regulations. The Lessor shall have the right, from time to
time, to make reasonable rules and
<PAGE> 2
regulations for the benefit of all tenants in regard to the Leased Premises and
those areas and elevator which are used in common with other tenants.
6. Operation Outside of Hours. The Lessee shall have a key to its
permitted entrance to the building of which the Leased Premises is a part. The
Lessee shall have the right, during times of the day and night when the Lessor
or other tenants are not conducting business, to enter the building and conduct
its business in the Leased Premises provided that the Lessee designates one of
its responsible employees, whom the Lessor has approved, as its representative
who shall lock and unlock the Leased Premises and the building of which the
Leased Premises forms a part. The Lessee agrees to be responsible and liable for
any damage or loss caused the Lessee, Lessor, or other tenants of the Lessor
during such times due to the negligence or failure of the Lessee or its agent to
lock the building of which the Leased Premises forms a part or to take
reasonable precautions to see that no unauthorized person enters the building.
7. Lessor's Covenants. The Lessor warrants that it is the holder of legal
title to the Leased Premises and has the right to lease the same. The Lessor
also warrants that the Lessee shall peaceably hold and enjoy the Leased Premises
without hindrance by the Lessor or by any person claiming by, through, or under
the Lessor, provided always, however, that the Lessee shall perform its
covenants under this Lease.
8. Utilities, Real Estate Taxes. Lessor shall, at its expense, pay for
all water and sewer charges consumed in, on or from the Leased Premises. Lessee
shall pay for all other utilities, including, but not limited to, heat, gas,
telephone, and electricity, consumed by the Lessee in, on, or from the Leased
Premises.
Lessee shall pay for 100% of the real estate taxes levied and assessed on
the Building. To the extent that any real estate tax bill for the Building
covers any period of time prior to or after expiration of the term of this
Lease, Lessee shall only pay the portion of such taxes equitably allocable to
the term of this lease.
9. Right to Place, Etc., Utility Lines, Etc. The Lessor reserves the
right to place, maintain, repair, and replace such utility facilities or lines,
pipes, wires, and the like, over, upon and through the Leased Premises as may be
necessary or advisable for servicing the Leased Premises or the building of
which the Leased Premises are a part, provided, however, that the Lessee's use
of the Leased Premises shall be interfered with only reasonably and temporarily
during such placing, maintaining, repairing, and/or replacing.
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<PAGE> 3
10. Condition of the Leased Premises. The Premises are demised to the
Lessee in an "as is" condition and the Lessee agrees that the Lessor shall have
no obligation to perform any work or repair to render the premises fit for
Lessee's purposes or otherwise. The Lessee acknowledges that the Lessee has
inspected the Leased Premises and that the Lessor has made no warranties or
representations on which the Lessee has relied other than those which are
specifically set fort in this Lease.
11. Exterior Repairs. The Lessor covenants and agrees to keep in good
order and repair the roof, exterior walls (but not including plate or other
glass unless the same be damaged by fire), foundations, and structure of the
Leased Premises, excepting for reasonable wear and tear and damage caused by any
act or negligence of the Lessee or any person or persons for which Lessee is
legally responsible.
12. Interior Repairs. The Lessee covenants and agrees to keep in good
order, condition, and repair, excepting for reasonable wear and tear and damage
by fire, the exterior and interior portions of all doors, windows, and plate
glass, all hearing, plumbing, piping, and sewerage facilities within and serving
the Leased Premises, as well as all fixtures, interior walls, floors, ceilings,
all wiring, wiring equipment, and building appliances and similar equipment.
Unless damaged or broken by fire, the Lessee agrees to replace all glass and
glass windows which may become injured or broken in the Leased Premises with
glass of the same quality. If the Lessee shall not, within three (3) days after
written notice by Lessor of repairs to be made by the Lessee, commence to make
such repairs and carry same through with dispatch, the Lessor may make such
repairs, and the expense thereof shall constitute a debt by the Lessee payable
in addition to rental payments, with interest at the legal rate.
13. Overloading and Damage. The Lessee covenants that it will not strip
or overload the Leased Premises or approaches thereto, or damage or deface or
injure any part of the Leased Premises, the building of which the Leased
Premises is a part, or the fixtures therein.
14. Indemnification and Insurance. Lessee shall indemnify and hold the
Lessor harmless from any and all claims for injury to persons or damage to
property by reason of any accident or happening on the Leased Premises unless
caused by the fault or negligence of Lessor, its agents, servants, or employees,
Lessee shall carry public liability insurance in limits of at least ONE MILLION
DOLLARS ($1,000,000.00) for injury or death to one person, or more than one
person in the same accident and FIVE HUNDRED THOUSAND DOLLARS ($500,000.00) for
damage to property. On the commencement of the term of this Lease, and
thereafter not less than thirty (30) days prior to the expiration date of the
policies of insurance required by this paragraph, Lessee shall deliver to Lessor
copies of such notices
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<PAGE> 4
or certificates of the insurer with respect thereto reasonably satisfactory to
Lessor, accompanied by evidence of the payment of the premiums for the policies.
Said insurance shall name the Lessor as an insured. All such insurance policies
shall provide that no cancellation thereof or material change therein shall be
made unless Lessor shall have been given twenty (20) days prior written notice
thereof and that no act or omission by Lessee shall invalidate such policies as
they apply to Lessor.
Lessor shall, at its expense, carry all risk property insurance, on a
replacement cost basis, covering the roof, exterior walls and structure of the
Leased Premises.
15. Release from Liability for Fire. In no event shall the Lessor be
liable to the Lessee for any loss suffered by Lessee from fire, providential
loss, or any other casualty however caused. The Lessee's policies of property
insurance shall contain the provisions that the insurance provided thereby shall
not be invalidated should the insured, prior to a loss, waive in writing any or
all right of recovery against any party for loss occurring to the property
described in said policies.
16. Nuisances. The Lessee covenants that it will be answerable for all
nuisances upon the Leased Premises, or caused by the Lessee in said building or
its approaches, and for all damages, fines, and charges imposed by law for any
nuisance made or suffered by the Lessee on the Leased Premises.
17. Assignment or Sub-letting. The Lessee covenants not, and shall have
no right, to assign this Lease, nor lease nor sublet, nor permit any other
person, corporation, trust, or other entity to occupy or improve, the Leased
Premises without having the consent in writing of the Lessor which consent shall
not be unreasonably withheld or delayed; provided, however, the proposed
assignee or sub-lessee (i) is an entity owned or controlled (at least to the
extent of 51%) by Lessee, or (ii) is financially able (in the judgment of
Lessor) to perform Lessee's obligations hereunder, and provided further, in each
case, Lessee shall remain liable to Lessor for all obligations of Lessee
hereunder.
18. Improper Use. The Lessee covenant not to allow any unlawful,
improper, or offensive use to be made of the Leased Premises, nor to permit any
use of the same which makes void or voidable any policy of insurance, or may
render any increase or extra premium payable for any such insurance (but
nevertheless will on demand reimburse the Lessor the amount of any such extra
premium), or which is contrary to any valid law or ordinance, rule or regulation
which may be made by any public authority.
19. Fire Regulations. The Lessee covenants to conform to all rules and
regulations from time to time established by the Board of Fire Underwriters, as
applicable to the Leased Premises,
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<PAGE> 5
but Lessee shall have no obligation to make any structural repairs to the Leased
Premises.
20. Inspection and Entry by the Lessor. The Lessee agrees to permit the
Lessor, and the agents or representatives of the Lessor, at reasonable times, to
enter to view or examine the Leased Premises.
21. Lessee's Obligations on Termination. At the expiration or other
termination of this Lease, the Lessee agrees to remove from the Leased Premises
all goods and effects (personal property) not the property of the Lessor, and to
yield up to the Lessor the Leased Premises, broom clean, and all keys, locks,
and other fixtures connected therewith (including trade fixtures and floor
coverings, unless Lessor shall require Lessee to remove the same) and all
erections and additions made to or upon the Leased Premises (except those as to
which the Lessee has been given written permission by the Lessor to remove) in
as good repair and condition in all respects as the same were in at the
commencement of this Lease and were put in by the Lessor or Lessee during the
term hereof, reasonable wear and use thereof and damage by accidental fire or
other unavoidable casualty only excepted.
22. Alterations and Improvement. The Lessee may make such alterations,
changes or improvements in or to the Leased Premises as it may desire, only with
the consent of the Lessor, provided that same does not involve structural or
substantial changes or alterations, or damage to the premises.
23. Lessor's Furnishing of Services. The Lessor shall not be under any
duty at any time to supply, or constitute to supply, any service to the Leased
Premises except as may be expressly agreed herein. Furthermore, Lessor shall not
be held liable to anyone for cessation of any service agreed to be supplied by
Lessor in the event the cessation of the service is due to accident, repairs,
strikes, the inability to obtain services or supplies from the source from which
they are usually obtained, or any cause beyond the Lessor's control.
24. Damage to Property. All furniture and property of any kind which may
be on the Leased Premises during the term of this Lease are to be at the sole
risk of the Lessee, and if the whole part or any part thereto shall be damaged
by fire, water, or otherwise, or by the use or abuse of the city water, or by
the leakage or bursting of water pipes, or in any other way, no part of said
loss or damage is to be charged to, or be borne by, the Lessor unless caused by
the negligence of the lessor, its agents, or employees.
25. General. The covenants of the Lessee contained herein relating to the
use of the Leased Premises, and of said building and of anything therein, shall
be construed to include
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<PAGE> 6
use thereof by Lessee's agents, successors, servants, employees, or others
claiming rights in the Leased Premises through or under the Lessee, and all the
foregoing covenants of the Lessee shall be in force, without demand or notice,
during the term of this Lease and for such further time as the Lessee or any
person or persons claiming under the Lessee shall hold the Leased Premises.
26. Taking the Eminent Domain. In the event the Leased Premises, or any
part thereof, shall be taken by eminent domain, a proportionate part of the rent
shall be abated. Notwithstanding the foregoing, in the event of any taking of a
substantial part of the Leased Premises, i.e., 25% or more of the total floor
area, these presents may be terminated by either party. All rights to damages to
the Leased Premises, and the building of which the Leased Premises is a part,
and the leasehold hereby created, accruing by any exercise of the right of
eminent domain or by reason of acts of any public authority are expected and
reserved, and shall belong solely, to the Lessor.
27. Fire. In the event the Leased Premises, or any part thereof, during
the term of this Lease, shall be destroyed by fire or other unavoidable casualty
so that the same shall thereby be rendered unfit for use or occupancy, then, and
in such case, the rent hereinbefore reserved, or a just or proportionate part
thereof according to the nature and extent of the injury sustained, shall be
abated until the Leased Premises shall have been repaired and restored by the
Lessor, and in the event the Lessor chooses not to repair the Leased Premises or
does not do so within sixty (60) days of said destruction or in the event a
substantial part of the Leased Premises or a substantial part of the building of
which they are a part shall be destroyed or damaged by fire or other unavoidable
casualty, these presents are to be thereby determined and ended at the election
of the Lessor or at the election of the Lessee.
28. Compliance with Superfund and Hazardous Waste Laws. Lessee warrants
and represents to the Lessor that there will be no "oil", "Hazardous materials",
"Hazardous wastes" or "Hazardous substances" (collectively, the "Materials"), as
such terms are defined under the Comprehensive Environmental Response,
Compensations, and Liability Act, 42 U.S.C. Section 9601 et seq., as amended,
the Resource Conservation and Recovery Act of 1976, 42 U.S.C. Section 9601 et
seq., as amended, and the regulations promulgated thereunder, and all applicable
state and local laws, rules, and regulations, including, without limitations,
Massachusetts General Laws, Chapter 21C and 21E, (collectively the "Superfund
and Hazardous Waste Laws") in or on the Leased Premises, except those for which
Lessee has been properly licensed and approved by all appropriate governmental
officials and in accordance with all applicable laws and regulations.
- 6 -
<PAGE> 7
Lessee covenants and agrees to comply strictly with the requirements of
the Superfund and Hazardous Waste Laws and to promptly notify Lessor of the
presence of any materials in or on the Leased Premises. Lessee hereby covenants
and agrees to protect, indemnify, and hold Lessor harmless from and against all
loss, cost, damage, and liability, including attorneys' fees and costs of
litigation, suffered or incurred by Lessor as a result of the presence of any
such materials in or on the Leased Premises, including without limitations, any
such loss, cost, damage, or liability arising from the violation of any of the
Superfund or Hazardous Waste Laws.
Any breach of this warranty or representation by Lessee shall entitle the
Lessor to terminate this Lease. In no event, however, shall such termination
relieve the Lessee of its agreements to indemnify Lessor from any items set
forth above.
29. Insolvency or Breach of Covenant. These presents are upon condition
that if the Lessee shall be adjudged bankrupt or insolvent according to law, or
shall make an assignment for the benefit of creditors, or of a receiver or other
officer shall be appointed to take charge of any part of the Lessee's property
or to wind up the affairs of the Lessee, or if any proceeding be filed by or
against the Lessee under any provision of the Federal Bankruptcy Act, and, in
the case of any involuntary proceeding, the same has not been dismissed within
ninety (90) days after the filing of the same, or if the estate shall be taken
on execution or by other process of law, or if the Lessee within ten (10) days
after delivery of notice in writing by Lessor to Lessee shall neglect or fail to
perform or observe any of the covenants or conditions herein contained which on
the part of the Lessee are to be performed or observed, then, in any of said
cases, notwithstanding any waiver of the benefits thereof in a former instance,
the Lessor, its heirs, successors, or assignes, may immediately or at any time
thereafter, without further notice or demand, enter the Leased Premises, or any
part thereof, in the name of the whole, and repossess the same as of its former
estate, and expel the Lessee and those claiming under the Lessee, forcibly if
necessary, and remove the effects of the Lessee, without being taken or deemed
guilty of trespass and without prejudice to any remedies which may otherwise be
used for arrears of rent or proceeding breach of covenant, and that upon entry
as aforesaid, the said term shall be ended; and the Lessee covenants that in the
event of such termination or in the event of termination under the provisions of
statute by reason of the default of the Lessee, the Lessee with forthwith pay to
the Lessor as damages a sum equal to the amount by which the rent and other
payments, called for hereunder for the remainder of the original term and of any
extension thereof exceed the fair rental value of said premises for the
remainder of the original term and of any extension thereof, and in addition
thereto will furthermore indemnify the Lessor during the remainder of the
original term and of any extensions thereof against all loss and
- 7 -
<PAGE> 8
damage suffered by the Lessor by reason of such termination, however caused,
first deducting any damages paid as above provided, the loss and damage for each
rent payment during the remainder of the original term and of any extension
thereof to be paid at the end of each such rent payment period.
30. The Lessee agrees, at the request of the Lessor, to subordinate and
attorn this Lease to any mortgage placed upon the Leased Premises by the Lessor,
provided that said mortgagee enters into an agreement with the Lessee by the
terms of which the mortgagee under said mortgage will agree (a) not to disturb
the possession and other rights of the Lessee under this Lease so long as the
Lessee performs its obligations hereunder, and (b) to accept the Lessee as
Lessee of the Leased Premises under the terms and conditions of this Lease in
the event of acquisition of title by such mortgagee through foreclosure
proceedings or otherwise. The aforementioned non-disturbance agreement shall
also provide that the Lessee will agree to recognize the holder of such mortgage
as the Lessor in the event of acquisition by the mortgagee through foreclosure.
In addition, the agreement shall be made expressly binding upon the successors
and assigns of the Lessee and the mortgagee and upon anyone purchasing the
Leased Premises at any foreclosure sale. Any such mortgage to which this Lease
shall be subordinated may contain such other terms, provisions, and conditions
as the mortgagee deems usual or customary.
31. Waivers, etc.. Any consent or permission by the Lessor or Lessee to
any breach of any covenant or condition herein, or any waiver by the Lessor or
Lessee of any breach of any covenant or condition herein, shall not in any way
be held or construed (unless expressly so declared) to operate so as to impair
the continuing obligation of any covenant or condition herein, or otherwise
operate to permit similar acts or omissions.
32. Covenants and Agreements. It is understood and agreed that the
covenants and agreements of the parties hereto shall run with the land and that
no covenant or agreement, express or implied, of the Lessor shall be binding
upon the Lessor except in respect to any breach or breaches thereof committed
during the Lessor's ownership of the Leased Premises.
33. Notice. Whenever notice or demand shall be required to be, or may be,
given to the Lessee pursuant to the terms of this Lease, it shall be mailed by
prepaid registered or certified mail to the Lessee at such address as shall last
have been designated in writing by the Lessee to the Lessor, the Lessee's
present address being designated as:
Connectivity Products, Inc.
680 Mechanic Street
Leominster, MA 01453
- 8 -
<PAGE> 9
Whenever notice or demand shall be required to be, or may be, given to
the Lessor pursuant to the terms of this Lease, it shall be deemed to have been
given if mailed by prepaid registered or certified mail to the Lessor at such
address as shall have been last designated in writing by the Lessor to the
Lessee, the Lessor's present address being designated as:
KEY PLASTICS, INC.
233 Florence Street
Leominster, MA 01453
with a copy to:
Michael V. Marino, Esquire
67 West Boylston Street, Suite 3
West Boylston, MA 01583-1752
The provisions hereof shall be binding upon and inure to the benefit of the
parties hereto, their respective successors, heirs and assigns.
34. Electrical Improvements to Premises. Lessor and Lessee acknowledge
that Lessee, notwithstanding the provisions of Paragraph 12 and 22 of this
agreement, must install, at Lessee's sole cost and expense, certain electrical
wiring, conduits, and services consistent with the use of the Leased Premises.
Lesssor agrees that Lessee may make such improvements. However, it is agreed by
the parties that upon termination of the Lease, for whatever cause, all of said
electrical improvements and alterations shall become the property of Lessor
without any compensation to Lessee.
35. Lessee's First Right to Purchase. Lessor hereby grants to Lessee the
first right to purchase the property of which the Leased Premises are a part
(hereinafter referred to as "the Property"). At the time that Lessor, in its
sole discretion, elects to sell the Property, Lessor shall first offer the
property for sale to Lessee on terms and conditions mutually agreeable to both
parties. In the event Lessor and Lessee cannot agree on the terms of the
purchase and sale, the parties shall retain the services of three (3) appraisers
who shall determine the purchase price for the Property. Lessor and Lessee shall
each choose one (1) appraiser, and the two appraisers so chosen shall select a
third appraiser. The costs of retaining the three (3) appraisers shall be borne
equally by Lessor and Lessee.
- 9 -
<PAGE> 10
EXECUTED as a sealed instrument this 6th day of March , 1997.
LESSOR - KEY PLASTICS, CORP.
By /s/ Enio Clementi /s/ Phyllis Clementi
---------------------------- ----------------------------
Enio Clementi Witness
Its President Print Name: Phyllis Clementi
LESSEE - CONNECTIVITY PRODUCTS, INC.
By /s/ James Harrington /s/ Steven M. LeBlanc
---------------------------- ----------------------------
James Harrington Witness
Its President Print Name: Steven M. LeBlanc
Senior Vice President
- 10 -
<PAGE> 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,
<PAGE> 2
(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:
(a) The Credit Agreement is amended by deleting the definition of
Obligations contained in ss.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
-2-
<PAGE> 3
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.
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.
-3-
<PAGE> 4
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
---------------------------------
Name: Gregory C. Kowert
Title: Chief Financial Officer
CONNECTIVITY PRODUCTS INCORPORATED
By: /s/ Gregory C. Kowert
---------------------------------
Name: Gregory C. Kowert
Title: Chief Financial Officer
NBD BANK, individually and as
Administrative Agent
By: /s/ Erik W. Bakker
---------------------------------
Name: Erik W. Bakker
Title: Vice President
THE FIRST NATIONAL BANK OF BOSTON,
individually and as
Documentation Agent
By: /s/ G. Christopher Miller
---------------------------------
Name: G. Christopher Miller
Title: Vice President
FLEET BANK, N.A.
By: /s/ Eugenie M. Sullivan
---------------------------------
Name: Eugenie M. Sullivan
Title: Senior Vice President
-4-
<PAGE> 1
NET LEASE
ARTICLE I
1.1 Parties. This Lease is executed this 5th day of June, 1995 by and
between Douglas J. Detweiler, an individual residing in Holden, Massachusetts
("Landlord") and BSCC, Corp., a Massachusetts corporation ("Tenant").
1.2 Reference Data. Each reference in this Lease to any of the following
subjects shall be construed to incorporate the data stated for that subject in
this Section.
Building: The building generally known as and numbered as 214 Nashua
Street, Leominster, Massachusetts, more specifically described in Exhibit A
attached hereto (the "Land").
Premises: A portion of the building comprising shown as Units 2, 4, and 8
of the plan attached hereto and incorporated herein as Exhibit B for Year 1 of
the Lease and Units 2, 4, 8, 3 and 5 for Years 2, 3, 4 and 5.
Original Address of Landlord: 28 Surrey Lane, Holden, MA
01520
Original Address of Tenant: 233 Florence Street
Leominster, MA 01453
Common Areas: All driveways, access roads, parking areas, landscaped
areas, roof and any other areas of the Building or Land not leased for the
exclusive use of another Tenant.
Term: Five (5) year(s) commencing on the
Commencement Date and terminating
May 31, 2000.
Commencement Date: June 1, 1995
<TABLE>
<S> <C> <C> <C>
Fixed Rent: Year 1 $ 63,717.50 $ 5,309.79 per month
Year 2 $144,066.00 $12,005.50 per month
Year 3 $156,071.50 $13,005.96 per month
Year 4 $168,077.00 $14,006.42 per month
Year 5 $175,280.30 $14,606.69 per month
</TABLE>
Permitted Uses: Manufacture and storage of wire and cable
products and all related activities.
Public Liability Insurance Limits: $1,000,000.00 each
occurrence, $2,000,000.00
annual aggregate for
<PAGE> 2
bodily injury and/or
property damage
Tenant's Proportionate Share: 29.2% for Year 1
60.0% for Years 2
through 5
Security Deposit: NONE
1.3 Exhibits. The exhibits listed below in this Section are incorporated
in this Lease by reference and are to be construed as a part of this Lease:
Exhibit A - Description of Land
Exhibit B - Plan of Premises
1.4 Occupancy. The Tenant shall have occupancy rights upon all parties
signing this Lease and provided that Tenant pay additional rent for the month of
May 1995 in the amount of $.039 per square foot plus utilities.
ARTICLE II
2.1 Premises. Landlord hereby leases to Tenant and Tenant hereby leases
from Landlord, subject to and with the benefit of the terms, covenants,
conditions and provisions of this Lease, the Premises, as is.
2.2 Common Areas. Tenant shall have the right to use, in common with
others entitled thereto and subject to the provisions hereof and to reasonable
rules and regulations promulgated from time to time by Landlord, the Common
Areas, as they may be modified from time to time by Landlord. As of this date,
the Landlord has not adopted any rules and regulations governing the common
areas.
2.3 Term. Tenant shall hold the Premises for a term beginning with the
Commencement Date, and continuing for the Term.
ARTICLE III
3.1 Landlord's Work. Intentionally left blank.
ARTICLE IV
4.1 Rent. Tenant covenants to pay to Landlord, at the Original Address of
Landlord or at such other place or to such other person or entity as Landlord
may by notice in writing to Tenant from time to time direct, during the Term
hereof and so
-2-
<PAGE> 3
long thereafter as Tenant or anyone claiming under Tenant occupied the Premises,
the following rent:
4.1.1 Annual Fixed Rent. The Annual Fixed Rent set forth in Section 1.2,
in equal monthly installments in advance prior to the first day of each month of
the Term, and pro rata for any fraction payable with respect to a portion of a
month at the beginning of the Term is to be paid on the Commencement Date.
4.1.2 Additional Rent. Tenant shall pay to Landlord, as Additional Rent,
the following (collectively, "Operating Expenses"):
(a) Tenant's Proportionate Share of all real estate taxes and assessments
payable with respect to the Land and Building (estimate at $0.29 per
square foot annually); and
(b) Tenant's Proportionate Share of all insurance carried by Landlord on
the Building (estimated at $0.10 per square foot annually).
Tenant shall pay the aforesaid Additional Rent in monthly
installments, based on Landlord's reasonable estimate of such
amounts for the current calendar year. Not later than 30 days after
the end of the calendar year, Landlord shall deliver to Tenant a
statement detailing the actual Operating Expenses for the preceding
calendar year together with copies of actual invoices and bills
respecting said Operating Expenses exceeds the actual Operating
Expenses for the preceding year, Tenant shall receive a credit
against Additional Rent next due; in the event the actual Operating
Expenses exceed Landlord estimate, Tenant shall pay the difference
to Landlord together with the next monthly installment of Annual
Fixed Rent.
4.1.3 Late Payments of Rent. If any installment of rent is paid more than
five (5) days after the date the same was due, it shall bear interest at the
rate of eighteen percent (18%) per annum from the due date, but in no event more
than the maximum rate of interest allowed by law, which shall be Additional
Rent. In addition, Tenant shall pay a late charge of $50.00 for each month the
rent is paid after the due date, which charge shall be additional rent.
4.1.4 Tenant's Insurance. Tenant shall at its sole cost and expense obtain
and maintain throughout the Term with reputable insurance companies qualified to
do business in Massachusetts, the following insurance, designating Landlord as a
named insured:
-3-
<PAGE> 4
(a) Comprehensive liability insurance indemnify Landlord and Tenant
against all claims and demands for any injury to person or property which
may be claimed to have occurred in the Premises, in amounts which shall at
the beginning of the Term, be not less than the amounts set forth in
Section 1.2, from time to time during the Term, may be for such higher
amounts as Landlord may require, taking into account the region in which
the premises are located and similar Property, used for similar purposes:
(b) So-called "all-risk" property insurance in the amount of the
full replacement cost of all Tenant's property, fixtures, improvements and
betterments;
(c) Workmen's compensation, automobile insurance and any other
insurance required by law or the nature of Tenant's business (it is
understood that the Landlord will not be designated as a named insured on
these policies);
(d) Insurance against such other hazards as may from time to time be
required by Landlord, or others with a financial interest in the Premises,
provided that such insurance is customarily carried in the region in which
the Premises are located, on property similar to the Premises and used for
similar Purposes.
(e) If Tenant's use or occupancy of the Premises causes any increase
in insurance premiums for the Building or Premises, Tenant will pay such
additional cost.
Tenant shall furnish Landlord with certificates or policies of all such
insurance prior to the beginning of the Term and of each renewal policy at least
20 days prior to the expiration of the policy being renewed.
Tenant's use and occupancy of the Premises shall conform to and comply
with all requirements of Landlord's insurers, as such requirements may be
amended or modified from time to time.
4.1.5 Utilities. The Tenant shall be responsible for the payment of any
utilities servicing the leased premises.
ARTICLE V
Tenant further covenants and agrees:
5.1 Repair and Maintenance. To keep the Premises, (excluding the roof,
exterior walls and floor slab) in good order and repair, and in at least as good
order and repair as they are in on the Commencement Date, reasonable use and
wear and damage by fire or casualty and damage resulting from the failure of the
Landlord to perform its obligations under this Lease only
-4-
<PAGE> 5
excepted; and to keep all glass, fixtures and equipment now or hereafter on the
premises, including, without limitation, all heating, plumbing, electrical, air
conditioning, and mechanical fixtures and equipment serving only the Premises,
in good order and repair, and in at least as good order and repair as they are
in on the Commencement Date, damage by fire or casualty and damage resulting
from the failure of the Landlord to perform its obligations under this Lease
only excepted; and to make all repairs and replacements and to do all other work
necessary for the foregoing purposes, both ordinary and extraordinary. it is
further agreed that the exception of reasonable use and wear shall not apply so
as to permit Tenant to keep the Premises in anything less than suitable,
efficient and usable condition considering the nature of the Premises and the
use reasonable made thereof, or in less than good order, repair, and condition.
Notwithstanding the foregoing, with respect to the repair or replacement
of the heating, plumbing, electrical, air conditioning, and mechanical fixtures
and equipment which constitutes a capital item under generally accepted
accounting practices and which has been approved in writing in advance by
Landlord, the Landlord shall pay a portion of the reasonable costs thereof as
set forth below, provided that no event of default or condition which, with the
giving of notice or the lapse of time, or both, would constitute an event of
default exists at the time that such payment is required hereunder. Such payment
shall be equal to the product of (a) such reasonable cost and (b) a fraction (i)
the denominator of which is the total number of months for this Lease and (ii)
the numerator of which is the number of 4 months which have elapsed in the Lease
as of the commencement of the repair or replacement. Such payment shall be made
by Landlord within sixty (60) days after written notice from Tenant setting
forth in reasonable detail the cost of the replacement or repair. At the
Landlord's option, the Landlord rather than paying the money owing to the
Tenant, may provide the Tenant with a rent credit against the amounts owing
under this Lease. Further, if the Landlord shall not be obligated to make any
payment to the Tenant under this section for what is a cosmetic or totally
voluntary repair and/or replacement to such systems.
5.2 Damage to the Premises. Subject to the provisions of Section 8.13 of
this Lease, Tenant shall pay the cost of all repairs to the Building (including,
without limitation, the floor slab, roof and exterior walls), and any of the
common areas, if any damage thereto is caused by Tenant's improper use thereof.
Any major repair or maintenance costs to the roof, exterior walls and floor slab
incurred by Landlord as a result of Tenant's negligent use or occupation of the
Building shall be borne solely by Tenant, except to the extent that such cost or
damage is covered by insurance with respect thereto.
-5-
<PAGE> 6
5.3 Indemnity. To indemnify and save Landlord harmless from all claims,
action, damages, liability, cost or expense arising on account of (i) any injury
or damage to any person or property on the premises or sidewalks, stairs, or
ways adjacent thereto, or otherwise resulting from the use and maintenance and
occupancy of the Premises or any part thereof or any thing or facility kept or
used thereon; (ii) any violation of this Lease by Tenant; or (iii) contractors,
employees, licensees, subtenants or invitees. Notwithstanding the foregoing, the
Tenant shall not be obligated to indemnify and save Landlord harmless from any
claims, action, damage, liability, cost or expense arising from the gross
negligence or willful misconduct of Landlord, his agents, contractors, employees
or invitees.
5.4 Personal Property at Tenant's Risk. To the extent permitted by law,
all merchandise, furniture, fixtures, effects and property of every kind, nature
and description belonging to Tenant or to any persons claiming through or under
tenant, which may be on the premises at any time, shall be at the sole risk and
hazard of Tenant, and if the whole or any part thereof shall be destroyed or
damaged by fire, water or otherwise, by theft or from any other cause, no part
of said loss or damage is to be charged to or be borne by Landlord.
5.5 Assignment and Subletting. Not to assign or sublet this Lease without
first obtaining on each occasion the written consent of Landlord which consent
shall not be unreasonably withheld or delayed. In the event that Landlord
consents to any assignment or subletting of any or all the Premises and the rent
and other sums and considerations received by Tenant on account of such
assignment or sublease of the Premises, or any part thereof as the case may be
shall exceed the Annual Fixed Rent and Additional rent due hereunder, Tenant
shall pay to the Landlord, as an additional charge, 50 Percent (50%) of such
excess less Tenant's reasonable expenses incurred to obtain such sublease or
assignment, including brokerage commissions, advertising and reasonable
attorney's fees. Such excess shall be paid monthly as received by tenant. No
assignment or subletting shall in any way impair the continuing primary
liability of Tenant hereunder, and no consent to any assigning or subletting in
a particular instance shall be deeded to be a waiver of the obligation to obtain
the Landlord's approval in the case of any other assignment or subletting.
5.6 Compliance with Law. At Tenant's sole cost and expense, to conform to
and comply with all zoning, building, environmental, fire, health and other
codes, regulations, ordinances or laws.
5.7 Landlord's Right to Enter. To permit Landlord and Landlord's
representatives to enter into and examine the Premises
-6-
<PAGE> 7
and show them to prospective purchasers, tenants and mortgages at any time.
5.8 Yield Up. At the expiration of the Term or upon earlier termination of
this Lease: (i) to remove such of Tenant's goods and effects as are not
permanently affixed to the Premises; (ii) to remove such of the alterations and
additions made by Tenant as Landlord which Landlord indicated were to be removed
at the time of approval; (iii) to repair any damage caused by such removal; (iv)
peaceably to yield up the Premises and all alterations and additions thereto
(except such as Landlord has requested Tenant to remove, as aforesaid) in the
same order and repair as they were in at the beginning of the Term of this Lease
or were put in during the Term hereof, reasonable use and wear and damage by
fire or casualty only excepted. Tenant shall indemnify and hold Landlord
harmless against any loss, cost or damage resulting from the failure and delay
of Tenant or anyone claiming by or through him to surrender the Premises as
provided in this Section.
5.9 Use. To use the Premises only for the Permitted Uses, and not to
cause, permit or suffer the emission of objectionable odor, fumes, noise or
vibration from the Premises.
5.10 Additions or Alterations. Not to make or permit any installation,
alterations or additions in, to or on the Premises without the prior written
consent of the Landlord.
5.11 Signs. Except for a uniform sign approved by Landlord, located in the
area designated by the Landlord, not to place or paint on the Premises or
anywhere in the Building any placard or sign which is visible from the exterior
of the Premises without the prior written consent of the Landlord. Tenant shall
pay for the cost of erecting and maintaining any such sign and shall remove the
same upon the termination of this Lease.
5.12 Window Appearance. Not to place on the Premises any window coverings
(or items on the window sill) visible from the exterior of the Premises without
the prior written consent of Landlord.
5.13 Overloading and Nuisance. Not to injure, overload, deface or permit
to be injured, overloaded or defaced, the Premises, the Building, or the Common
Areas, and not to permit, allow or suffer any waste or any unlawful, improper or
offensive use of the Premises or any occupancy thereof that shall be injurious
to any person or property, or invalidate or increase the premiums for any
insurance on the Building or the Common Areas.
-7-
<PAGE> 8
5.14 Tenant's Work. To procure at Tenant's sole expense all necessary
permits and licenses before undertaking any work on the Premises; to do all such
work in a good and workmanlike manner, employing materials of good quality and
so as to conform with all applicable zoning, building, environmental, fire,
health and other codes, regulations, ordinances and laws, to furnish to Landlord
prior to the commencement of any such work in excess of $10,000 a bond or other
security reasonably acceptable to Landlord, assuring that any work commenced by
Tenant will be completed in accordance with plans or specifications approved in
writing by Landlord, and that no liens for labor or materials will attach to the
Premises with respect to any such work; to pay promptly when due the entire cost
of any work on the premises undertaken by Tenant, so that the Premises shall at
all times be free of liens of labor and materials; to employ for such work one
or more responsible contractors; to save Landlord harmless and indemnified from
all injury, loss, claims or damage to any person or property occasioned or
growing out of such work; and to provide copies of as built plans of such work
to Landlord upon completion.
5.15 Costs of Enforcement. To pay on demand Landlord's costs and expenses,
including reasonable attorney's fees, incurred by Landlord in enforcing any
obligation of Tenant under this Lease, or in connection with any request by
Tenant for Landlord's consent or approval under this Lease. Further, the
Landlord shall pay to Tenant Tenant's costs and expenses, including reasonable
attorney's fees, incurred by Tenant in enforcing any obligation of Landlord
under this Lease.
5.16 Trash Removal. To provide and pay for regular, ongoing trash removal
service adequate to ensure that the Premises are kept in a first-class and
orderly condition. Tenant agrees that such trash removal service shall be
performed by a vendor acceptable to Landlord.
5.18 Snow Plowing. To provide and pay for snow plowing service adequate to
ensure that the Premises are kept accessible and in an orderly condition. Tenant
agrees that such snow removal service shall be performed by a vendor acceptable
to the Landlord and done in such a fashion as to not interfere with the other
tenant's use of their leased areas.
ARTICLE VI
6.1 Casualty or Taking; Termination. In the event that the Premises, or
any part thereof, or any part of the Building other than the Premises, or any
portion of the Common Areas shall be taken by any public authority or for any
public use, or shall be destroyed or damaged by fire or casualty, or by the
action of any public authority, and Landlord elects not to restore the Building
or the Premises and so notified Tenant, then either Landlord or
-8-
<PAGE> 9
Tenant may elect to terminate this Lease. Such election shall be made by the
electing party giving written notice of its election to the other party within
thirty (30) days after the right of election accrues.
6.2 Restoration. If this Lease is not terminated pursuant to Section 6.1
above, this Lease shall continue in force and a just proportion of the rent
reserved, according to the nature and extent of the damages sustained by the
Premises, but not in excess of the net proceeds of insurance recovered by
Landlord, shall be abated until the Premises, or what may remain thereof, shall
be put by Landlord in proper condition for use to the extent permitted by the
net proceeds of insurance recovered or damages, awarded for such taking,
destruction or damage, and subject to zoning and building laws and ordinances
then in existence. "Net Proceeds of insurance recovered or damages awarded"
refers to the gross amount of such insurance or damages less the reasonable
expenses of Landlord in connection with the collection of the same, including
without limitation, fees and expenses for legal and appraisal services.
6.3 Award. Irrespective of the form in which recovery may be had by law,
all rights to damages or compensation for the Premises shall belong to Landlord
in all cases. Tenant hereby grants to Landlord all of Tenant's rights to such
damages and covenants to deliver such further assignments or endorsements as
Landlord may from time to time request.
ARTICLE VII
7.1 Events of Default; Remedies. If (a) Tenant shall default in the
Performance of any of its monetary obligations under this Lease, and if such
default shall continue for ten (10) days after written notice from Landlord to
Tenant (provided that Landlord shall not be required to give such notice more
than twice during the Term, the second such nonpayment constituting an Event of
Default without the requirement of notice) or (b) if within thirty (30) days
after written notice from Landlord to Tenant specifying any other default or
defaults, Tenant has not commenced diligently to correct such default or has not
thereafter diligently pursued such correction to completion, or (c) if any
assignment shall be made by Tenant for the benefit of creditors, or if a
petition is filed by or against Tenant under any provision of the Bankruptcy
Code and, in the case of an involuntary petition, such petition is not dismissed
within ninety (90) days, or (d) if the Tenant's leasehold interest shall be
taken on execution or by other process of law, attached or subjected to any
other involuntary encumbrance, then and in any of such cases Landlord and its
agents and servants may lawfully, immediately or at any time thereafter, and
without further notice or demand, and without prejudice to any other remedies
available to Landlord for arrearages of rent or otherwise, either (i) enter
-9-
<PAGE> 10
into and upon the Premises or any part thereof, in the name of the whole, and
repossess the same as of Landlord's former estate or (ii) mail a notice of
termination addressed to Tenant at the Premises, and upon such entry or mailing
this Lease shall terminate. In the event that this Lease is terminated under any
of the foregoing provisions, or otherwise for breach of Tenant's obligations
hereunder, Tenant covenants to pay forthwith to Landlord as compensation the
total rent reserved for the residue of the Term. In calculating the rent
reserved there shall be included the value of all other considerations agreed to
be paid or performed by Tenant for such residue of the Term.
Tenant further covenants as an additional and cumulative obligation after
any such termination or entry to pay punctually to Landlord all the sums and
perform all the obligations which Tenant covenants in this Lease to pay and to
perform in the same manner to the same extent and at the same times as if this
Lease had not been terminated. In calculating the amounts to be paid by Tenant
under the foregoing covenant, Tenant shall be credited with any amount actually
paid to Landlord as compensation as hereinbefore provided and also with any
additional rent actually obtained by Landlord by reletting the Premises, after
deducting the expenses of collecting the same.
Nothing herein contained shall, however, limit or prejudice the right of
Landlord to prove for and obtain in proceedings for bankruptcy or insolvency or
reorganization or arrangement with creditors as liquidated damages by reason of
such determination and amount equal to the maximum allowed by any statute or
rule of law in effect at the time when, and governing the proceedings in which,
such damages are to be proved, whether or not such amount be greater than, equal
to, or less than the amounts referred to above.
7.2 Landlord's right to Cure. If Tenant shall at any time default in the
performance of any Tenant obligation under this Lease, then after written notice
to Tenant and a continued default by Tenant, Landlord shall have the right to
perform such obligation. All sums so paid by Landlord and all necessary
incidental costs and expenses in connection with the performance of any such act
by Landlord shall be deemed to be Additional Rent under this Lease and shall be
payable to Landlord immediately on demand. Landlord may exercise the foregoing
rights without waiving or releasing Tenant from any of its obligations under
this Lease.
ARTICLE VIII
8.1 Effect of Waivers of Default. Any consent or permission by Landlord to
any act or omission which otherwise would be a breach of any covenant or
condition herein, or any waiver by Landlord of the breach of any covenant or
condition
-10-
<PAGE> 11
herein, shall not in any way be construed to operate so as to impair the
continuing obligation of any covenant or condition herein.
8.2 No Accord and Satisfaction. No acceptance by Landlord of a lesser sum
than the Annual Fixed rent and any other charge then due shall be deemed to be
other than on account of the earliest installment of rent then due, and Landlord
may accept such payment without prejudice to Landlord's right to recover the
balance of such installment or pursue any other remedy available to Landlord.
8.3 Subordination. This Lease shall be subordinate to any mortgage now or
hereafter placed upon the Premises by Landlord, and to each advance made or to
be made under any such mortgage. Tenant agrees to execute and deliver any
appropriate instruments necessary to confirm such subordination.
8.4 Successors and Assigns. This Lease shall be binding upon Landlord and
Tenant and their respective successors and permitted assigns. If Landlord is a
trust, Tenant agrees that only the trust estate of Landlord shall be liable for
the performance of Landlord's obligations hereunder and that in no event shall
any trustee or beneficiary of the trust be individually liable hereunder, and
Tenant further agrees that the Landlord named herein and any subsequent Landlord
shall be liable hereunder only for obligations accruing while owing of the
Premises. No holder of a mortgage of the Landlord's interest shall be deemed to
be the owner of the Premises until such holder shall have acquired indefeasible
title to the Premises.
8.5 Quiet Enjoyment. Landlord agrees that upon Tenant's paying the rent
and performing and observing the agreements and conditions herein on its part to
be performed and observed, Tenant shall and may peaceably and quietly have, hold
and enjoy the premises during the Term hereof without any manner of hindrance or
molestation from Landlord or anyone claiming under Landlord. Subject, however,
to the terms of this Lease.
8.6 Notices. All notices for Landlord shall be addressed to Landlord at
the Original Address of Landlord, or to such other place as may be designated by
written notice to Tenant; and all notices for Tenant shall be addressed to
Tenant at the Premises, or to such other place as may be designated by written
notice to Landlord. Any notice shall be deemed duly given when mailed to such
address postage prepaid registered or certified mail, return receipt requested,
or when delivered to such address by hand.
8.7 Parking. Tenant shall have the right to use designated parking spaces
for itself, its employees, customers, and other persons visiting the Premises.
Tenant shall use best efforts to ensure that his employees, customers and
visitors park in
-11-
<PAGE> 12
accordance with this parking scheme. Such parking spaces may be relocated by
Landlord from time to time by written notice to Tenant.
8.8 Broker. Landlord and Tenant represent and warrant each to the other
that neither has employed any broker other than Romano & Porier Realty
Associates with respect to this Lease and each shall hold harmless the other
from any claim for brokerage or other commission arising from any breach of the
foregoing warranty. The Landlord shall pay the commission owing to Romano and
Porier Realty Associates.
8.9 Holding Over. In the event Tenant or anyone claiming through the
Tenant shall retain Possession of the Premises or any portion thereof after the
termination or expiration of this Lease, such holding over shall be as a tenant
at sufferance at an occupancy and use charge equal to 150 Percent (150%) of the
Rent due hereunder for the last month of the Term and otherwise subject to all
of the covenants and conditions of this Lease.
8.10 Applicable Law. This Lease, and the rights and obligations of the
parties hereto, shall be construed and enforced in accordance with the laws of
the Commonwealth of Massachusetts.
8.11 Partial Invalidity. If any term of this Lease, or the application
thereof to any person or circumstances, shall to any extent be invalid or
unenforceable, the remainder of this Lease, or the application of such term to
persons or circumstances other than those as to which it is invalid or
unenforceable, shall not be affected thereby, and each term of this Lease shall
be valid and enforceable to the fullest extent permitted by law.
8.12 All Agreements Contained. This Lease contains all the agreements of
the parties with respect to the subject matter thereof and supercedes all prior
dealings between them with respect to such subject matter.
8.13 Waiver of Subrogation. Each party hereto hereby waives any cause of
action it might have against the other party on account of any loss or damage
that is insured against under any insurance policy that covers the Building,
Land or Premises, Landlord's and Tenant's fixtures or personal property, as the
case may be, as a party insured. Each party hereto agrees that it will request
its insurance carrier to endorse all applicable policies waiving the carrier's
rights of recovery under subrogation or otherwise against the other party.
8.14 Keys. Tenant agrees to notify Landlord if Tenant replaces or changes
the lock on any exterior door to the Premises and to provide Landlord with
copies of keys to any such lock prior to or upon its installation.
-12-
<PAGE> 13
8.15 Estoppel Certificate. From time to time, upon prior written request
by Landlord, Tenant shall execute, acknowledge and deliver to Landlord a
statement in writing certifying that this Lease is unmodified and in full force
and effect and that Tenant has no defenses, offsets or counterclaims against its
obligations to pay the Rent and any other charges and to perform its other
covenants under this Lease.
8.16 Rules and Regulations. Tenant shall comply with all rules and
regulations promulgated by Landlord respecting the Building, Land and Premises,
as the same may be amended or modified.
8.17 Hazardous Waste Indemnification. Tenant shall indemnify and hold
harmless Landlord and any mortgagee from and against any loss, damage,
liability, cost or expense, including without limitation, attorneys' fees,
suffered by Landlord or such mortgagee by reason of the release, discharge,
storage or use by Tenant on the Premises of any oil, hazardous materials or
hazardous waste, as defined from time to time under applicable state and federal
laws or regulations. Landlord represents to Tenant, to the best of Landlord's
knowledge, that there is not presently any release or threat of a release of any
hazardous materials or asbestos at the building or the land.
ARTICLE IX
9.1 Security Deposit. Intentionally left blank.
EXECUTED as a sealed instrument as of the day and year first above
written.
Landlord:
/s/ Douglas J. Detweiler
--------------------------------
Douglas J. Detweiler
Tenant:
BSCC, Corp.
By: /s/ James Harrington
--------------------------------
James Harrington, President
duly authorized
-13-
<PAGE> 1
SECOND AMENDMENT TO LEASE
THIS SECOND AMENDMENT made this 29th day of August, 1995, is by and
between DOUGLAS J. DETWEILER of Holden, Massachusetts ("Landlord") and BSCC,
CORP., a Massachusetts corporation with a place of business at 233 Florence
Street, Leominster, Massachusetts 01453 ("Tenant").
RECITALS
Landlord and Tenant entered into a Net Lease dated June 5, 1995 (the
"Lease") for a portion of the building located at 214 Nashua Street, Leominster,
Massachusetts shown as Units 2, 4 and 8 on the plan attached to the Net Lease as
Exhibit B (the "Plan") for Year 1 of the Lease and Units 2, 3, 4, 5 and 8, as
shown on the Plan for Years 2, 3, 4 and 5 of the Lease; and
Tenant desires to also lease from Landlord Units 3 and 5 for Year 1 of the
Lease; and
Tenant desires to also lease from Landlord Units 1, 6 and 7 for the term
of the Lease; and
Landlord and Tenant previously entered into a First Amendment to Lease;
and
Landlord and Tenant desire to delete the First Amendment to Lease in its
entirety; and
Landlord and Tenant desire to amend the Lease.
TERMS OF AGREEMENT
THEREFORE, in consideration of One Dollar and other good and valuable
consideration, the receipt of which is hereby acknowledged, Landlord and Tenant
agree as follows:
1. Section 1.2 of the Lease is amended as follows:
a. By deleting the definition of Premises and inserting the following:
A portion of the building comprising of Units 1, 2, 4, and 8 as
shown on the plan attached hereto beginning July 1, 1995 of Year 1
of the Lease and Units 1, 2, 3, 4, 5, 6, 7 and 8 as shown on the
plan attached hereto beginning August 1, 1995 of Year 1 and for
Years 2, 3, 4 and 5 Lease.
b. By deleting the definition of Fixed Rent and inserting the
following:
<PAGE> 2
The Fixed Rent is as follows:
<TABLE>
<CAPTION>
Monthly Annual
------- ------
<S> <C> <C>
Year 1 $216,725.00
June, 1995 $ 5,309.79
July, 1995 $ 7,309.79
August, 1995 - May, 1996 $20,410.54
Year 2 $20,771.60 $249,259.20
Year 3 $22,152.64 $265,831.66
Year 4 $23,539.58 $282,475.01
Year 5 $24,458.93 $293,507.16
</TABLE>
c. By deleting the definition of Tenant's Proportionate Share and
inserting the following:
Tenant's Proportionate Share: 100% for Years 1 through 5
2. Section 4.1.2 of the Lease is amended by deleting it in its entirety
and inserting the following:
4.1.2 Additional Rent. Tenant shall pay to Landlord, as Additional Rent,
the following (collectively, "Operating Expenses"):
(a) Tenant's Proportionate Share of all real estate taxes and assessments
payable with respect to the Land and Building (estimated at $0.29 per
square foot annually);
(b) Tenant's Proportionate Share of all insurance carried by Landlord on
the Building (estimated at $0.10 per square foot annually); and
(c) Tenant's Proportionate Share of common area maintenance charges
(estimated to be $0.00 per square foot annually).
Tenant shall pay the aforesaid Additional Rent in monthly
installments, based on Landlord's reasonable estimate of such
amounts for the current calendar year. Not later than 30 days after
the end of the calendar year. Landlord shall deliver to Tenant a
statement detailing the actual Operating Expenses for the preceding
calendar year together with copies of actual
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<PAGE> 3
invoices and bills respecting said Operating Expenses exceeds the
actual Operating Expenses for the preceding year, Tenant shall
receive a credit against Additional Rent next due; in the event the
actual Operating Expenses exceed Landlord estimate, Tenant shall pay
the difference to Landlord together with the next monthly
installment of Annual Fixed Rent.
3. Capitalized terms not defined herein shall have the meaning set forth
in the Lease.
4. This Second Amendment supercedes and replaces the First Amendment to
Lease.
5. Except as amended by this Second Amendment, the Lease remains in
effect.
EXECUTED as a sealed instrument as of the date first written above.
LANDLORD:
/s/ Douglas J. Detweiler
--------------------------------
Douglas J. Detweiler
TENANT:
BSCC, Corp.
By: /s/ James Harrington
--------------------------------
James Harrington, President
-3-
<PAGE> 4
Exhibit A
Diagram of Lockwood Building on Nashua Street
<PAGE> 1
EXHIBIT 11 - COMPUTATION OF EARNINGS PER SHARE
Earnings per common share were computed as follows:
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
-------------------------
DEC.31,1996 DEC.31,1995
<S> <C> <C>
Net income (loss) applicable to common
shares: $359,160 ($153,452)
=========== ===========
Weighted average number of common shares and of
common share equivalents:
Weighted average common shares 5,508,057 5,321,575
Dilution from stock options
outstanding 441,617 --
Incremental dilution, exercised options 38,251 --
----------- -----------
Common share equivalents pursuant
to APB 15 479,868 --
----------- -----------
Total primary weighted average number
of common shares and common share
equivalents 5,987,925 5,321,575
Additional shares for full dilution
pursuant to APB 15 -- --
----------- -----------
Total fully diluted average number of
common shares and common share
equivalents 5,987,925 5,321,575
Net income (loss) per share:
Primary $0.06 ($0.03)
=========== ===========
Fully diluted $0.06 ($0.03)
=========== ===========
</TABLE>
<PAGE> 1
Subsidiaries of Connectivity Technologies Inc.
<TABLE>
<CAPTION>
Name Jurisdiction
---- ------------
<S> <C>
Connectivity Products Incorporated Delaware
</TABLE>
<PAGE> 1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Connectivity Technologies Inc. (formerly Tigera Group, Inc.) on Form S-8 (File
No. 33-02655) of our report dated February 24, 1997, on our audits of the
consolidated financial statements of Connectivity Technologies Inc. as of
December 31, 1996, and for the years ended December 31, 1996 and 1995, which
report is included in this Annual Report on Form 10-KSB.
/s/ Coopers & Lybrand L.L.P.
Detroit, Michigan
March 27, 1997
17
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 230,107
<SECURITIES> 989,941
<RECEIVABLES> 16,911,953
<ALLOWANCES> (735,000)
<INVENTORY> 12,358,571
<CURRENT-ASSETS> 31,637,754
<PP&E> 7,821,531
<DEPRECIATION> 645,845
<TOTAL-ASSETS> 63,944,950
<CURRENT-LIABILITIES> 17,097,438
<BONDS> 34,295,000
0
0
<COMMON> 13,019,043
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 63,944,950
<SALES> 56,697,955
<TOTAL-REVENUES> 56,697,955
<CGS> 41,275,166
<TOTAL-COSTS> 12,709,069
<OTHER-EXPENSES> 65,707
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,631,606
<INCOME-PRETAX> 1,147,191
<INCOME-TAX> 634,252
<INCOME-CONTINUING> 512,939
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 359,160
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
