<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from
COMMISSION FILE NUMBER: 0-12113
CONNECTIVITY TECHNOLOGIES INC.
--------------------------------------------------
(Exact name of issuer as specified in its charter)
Delaware 94-2691724
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
680 Mechanic Street, Leominster, MA 01453
-----------------------------------------
(Address of principal executive offices)
(978) 537-9138
---------------------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date: 5,565,256 shares of Common Stock, par
value. $.04 per share, outstanding as of September 1, 1998.
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CONNECTIVITY TECHNOLOGIES INC.
INDEX
<TABLE>
<CAPTION>
Page No.
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Balance Sheets
as of June 30,1998 and December 31, 1997................. 3
Condensed Consolidated Statement of Operations
for the Three and Six Months Ended June 30, 1998......... 4
Condensed Consolidated Statement of Cash Flows
for the Six Months Ended June 30, 1998................... 5
Notes to Condensed Consolidated Financial Statements....... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...................... 10
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K........................... 14
</TABLE>
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CONNECTIVITY TECHNOLOGIES INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, 1998 DECEMBER 31, 1997
-------------- -----------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 569,737 $ 245,843
Marketable securities 2,833,331 3,127,012
Accounts receivable:
Trade, net 6,118,633 5,883,728
Other 14,035 119,093
Inventories, net 2,687,937 2,322,720
Prepaid expenses and other current assets 147,567 190,287
Current assets held for sale, net 4,540,153 5,171,851
------------- -------------
Total current assets 16,911,393 17,060,534
Property, plant and equipment, net 6,796,445 6,593,167
Deposits and other noncurrent assets 118,890 95,105
Goodwill and intangible assets, net 6,361,388 6,514,908
Noncurrent assets held for sale 4,051,890 4,022,938
------------- -------------
Total assets $ 34,240,006 $ 34,286,652
============= =============
LIABILITIES
CURRENT LIABILITIES
Long term, in default $17,655,000 $12,300,000
Subordinated notes, in default 5,650,000 6,000,000
Trade accounts payable 4,335,535 4,492,397
Accrued compensation and commissions 448,153 295,996
Federal and state income taxes payable 591,936 3,356,314
Accrued liabilities 1,342,061 3,300,915
------------- -------------
Total current liabilities 30,022,685 29,745,622
STOCKHOLDERS' EQUITY
Preferred stock - par value $.01 per share;
authorized 10,000,000 shares, none issued
Series B Common Stock -
par value $.04 per share;
authorized 750,000 shares, none issued
Common Stock - par value $.04;
authorized 20,000,000 shares,
outstanding 5,565,256 shares 230,874 230,874
Additional paid-in capital 109,336,244 109,336,244
Accumulated deficit (105,763,863) (105,635,869)
Less 206,601 shares held in treasury, at cost (8,264) (8,264)
Unrealized gain on marketable security,
net of income tax 422,330 618,045
------------- -------------
Total stockholders' equity 4,217,321 4,541,030
------------- -------------
Total liabilities and stockholders' equity $ 34,240,006 $ 34,286,652
============= =============
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements
3
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CONNECTIVITY TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED THREE MONTHS ENDED
JUNE 30, 1998 JUNE 30,1998
---------------- ------------------
<S> <C> <C>
Net sales $ 24,609,935 $ 12,806,230
Cost of goods sold 19,453,276 9,815,904
------------ ------------
Gross profit 5,156,659 2,990,326
Selling, general and administrative expenses 4,345,172 2,290,539
------------ ------------
Operating income 811,487 699,787
Other income (expense):
Interest income 1,309
Interest expense (973,713) (522,198)
Other 38,072 27,992
------------ ------------
(934,332) (494,206)
------------ ------------
Income (loss) from continuing operations
before income taxes (122,845) 205,581
Income taxes 43,300 43,300
------------ ------------
Income (loss) from continuing operations (166,145) 162,281
Discontinued operations:
Gain on sale, net of income taxes 38,151 0
------------ ------------
Net income (loss) $ (127,994) $ 162,281
============ ============
Basic and diluted income (loss) per share
Continuing operations $ (0.03) $ 0.03
Discontinued operations 0.01
------------ ------------
$ (0.02) 0.03
============ ============
Weighted average shares outstanding 5,565,256 5,565,256
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements
4
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CONNECTIVITY TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
<S> <C>
OPERATING ACTIVITIES
Loss from continuing operations $ (166,145)
Adjustments to reconcile income from continuing
operations to cash used in operating activities:
Depreciation and amortization 825,292
Changes in assets and liabilities:
Accounts receivable, net (129,847)
Inventories, net (365,217)
Prepaid expenses, deposits and other assets 18,935
Current assets held for sale, net 631,698
Trade accounts payable (156,862)
Federal and state income taxes payable (2,764,378)
Accrued liabilities (1,768,546)
-----------
Net cash used in operating activities (3,875,070)
-----------
INVESTING ACTIVITIES
Purchases of property, plant and equipment (743,411)
Sales of marketable securities 97,966
Purchases of property, plant and equipment, held for sale (160,591)
-----------
Net cash used in investing activities (806,036)
-----------
FINANCING ACTIVITIES
Proceeds from long-term borrowings 5,355,000
Repayment of subordinated debt (350,000)
-----------
Net cash provided by financing activities 5,005,000
-----------
Net increase in cash 323,894
Cash at beginning of period 245,843
-----------
Cash at end of period $ 569,737
===========
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements
5
<PAGE> 6
CONNECTIVITY TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
(UNAUDITED)
Note 1 - Condensed Consolidated Financial Statements:
The Condensed Consolidated Financial Statements included herein have been
prepared by Connectivity Technologies Inc. ("CTI" or "the Company") without
audit, pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes the disclosures which are made are
adequate to make the information presented not misleading. Further, the
Condensed Consolidated Financial Statements have been prepared in accordance
with generally accepted accounting principles for interim financial information,
the instructions to Form 10-Q and Regulation S-K and reflect, in the opinion of
management, all adjustments of a normal recurring nature necessary to present
fairly the financial position and results of operations as of and for the
periods indicated.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
These Condensed Consolidated Financial Statements should be read in
conjunction with the Consolidated Financial Statements and the Notes thereto
included in CTI's Annual Report on Form 10-KSB for the year ended December 31,
1997.
The accompanying condensed consolidated financial statements have been
prepared assuming that the Company will continue as a going concern, which
contemplates the realization of assets and the satisfaction of liabilities in
the normal course of business. The Company incurred a loss in 1997 and for the
six months ended June 30, 1998 and has a working capital deficiency. Also, as
further described in Note 4, the Company has negotiated an amendment to its
revolving credit and term loan facility, under which, among other things, all
amounts outstanding are to become due on November 30, 1998. These conditions
raise substantial doubt about the Company's ability to continue as a going
concern.
Management's plans to resolve these matters presently include the sale of
the Company's Energy Electric Assembly (EEA) division (see note 6). On September
16, 1998, the Company entered into a letter of intent with a buyer. If a sale is
successfully consummated, the proceeds from the sale would be applied against
the outstanding balance due under the revolving credit facility and the Company
would seek to refinance or amend its credit facility in order to extend the
repayment terms. In addition, the Company has recently formed a new management
team, replacing some key managers, and is currently making changes in its
operations in order to improve profitability and to
6
<PAGE> 7
generate sufficient cash flow to meet its obligations. Operational changes
include, but are not limited to, focusing solely on the BSCC division following
the sale of EEA, the installation of new machinery which will augment existing
product lines and the implementation of a new costing system which should enable
the Company to better analyze the profitability of its product lines.
There can be no assurance that management will be successful in its efforts
to sell the EEA division at a price acceptable to the Board of Directors.
Further, there can be no assurance that management will be successful in its
efforts to refinance or amend its credit facility at commercially available
rates and with favorable repayment terms, or carry out its operational plan. If
the Company's efforts are not successful, the lenders would be in a position to
commence legal proceedings against the Company for the repayment of the entire
debt, plus certain amounts, and to proceed against the Company's assets. The
accompanying condensed consolidated financial statements do not include any
adjustments to reflect the possible future effects on the recoverability and
classification of assets or the amounts and classification of liabilities that
may result from the outcome of these uncertainties.
Note 2 - Comparative 1997 Financial Statements
The accompanying condensed consolidated statements of income and cash flows
do not include comparative information for the corresponding periods of the
preceding year. The Company disclosed in its annual report on Form 10-KSB for
the year ended December 31, 1997, that several significant adjustments,
increasing the 1997 loss from continuing operations by approximately $14,447,000
and increasing the gain on sale of discontinued operations by approximately
$3,483,000, were recorded during th fourth quarter of 1997. The Company is in
the process of estimating the effect of these adjustments on previously reported
results of operations for each quarter of 1997. When its analysis is complete,
the Company will file an amended Form 10-Q for the quarter ended June 30, 1998,
to present restated financial statements for the comparable 1997 periods.
Note 3 - Nature of Operations and Basis of Presentation
The primary business of the Company is the manufacture and sale of wire and
cable products. The major market served by the Company is industrial (commercial
and residential security, factory automation, traffic and transit signal control
and audio systems).
The Company's second quarter and year to date 1998 condensed consolidated
financial statements include the accounts of CTI and operations of its of 85%
owned subsidiary (see Note 5) Connectivity Products Incorporated ("CPI"). All
significant intercompany accounts and transactions have been eliminated in
consolidation.
Certain reclassifications of amounts reported in the accompanying
December 31, 1997, Condensed Consolidated Balance Sheet have been made to permit
comparison with June 30, 1998 classifications.
7
<PAGE> 8
Note 4 - Revolving Credit and Term Loan Facility
On July 10, 1998, the Company's subsidiary, CPI, failed to make a required
payment of approximately $5,000,000 due on its revolving credit and term loan
facility. The loan balance was reduced by approximately $2,050,000 in August
1998, with proceeds received from the sale of marketable securities. On
September 1, 1998, CPI and its lenders finalized a Forbearance Agreement and
Tenth Amendment (the "Agreement") to the existing loan agreement. Under the
terms of the Agreement, the maximum principal balance was reduced from
$20,000,000 to $17,946,680, reflecting the sale of the marketable securities
discussed above. Proceeds from the sale of one of CPI's operating divisions also
are to be used to repay outstanding borrowings (see note 6). The terms of the
Agreement provide that it will expire on November 30, 1998, at which time all
outstanding borrowings will become payable. Interest is to accrue at the bank's
base rate (8.5% at September 1, 1998) plus 2%. The Agreement contains various
financial and operating covenants including meeting monthly minimum EBITDA
requirements, maintaining the overadvance amount within certain predetermined
levels, and limiting capital expenditures to a specific agreed upon amount. In
the event of any default, interest is to accrue at the bank's base rate plus 6%.
Note 5 - Subordinated Debt
On June 30, 1998, four stockholders assigned all of their rights, title and
interest in their subordinated notes ($3,352,800 plus accrued interest of
approximately $166,000), outstanding common stock of CPI (64 shares,
representing 8% of the total outstanding common stock of CPI) and outstanding
stock options of CTI (114,705 options) to CPI and CTI. In exchange, the Company
has agreed not to assert any claims concerning any matters against these former
stockholders. The agreement required consents, which were received in July 1998,
from outside third parties.
On August 26,1998 the Company entered into an agreement with another
stockholder pursuant to which the stockholder transferred to CTI and CPI
subordinated notes of $1,414,600 plus accrued interest of approximately $94,000,
33.7941 shares of common stock of CPI (representing 4.41% interest of the
oustanding common shares of CPI), 90,669 stock options of CTI and cash $325,000.
This agreement required consents from outside third parties, which were received
in September 1998.
The agreements have reduced the balance of subordinated notes payable to
$882,600 at August 26, 1998.
Note 6 - Assets Held for Sale
The Company has concluded a letter of intent with a buyer for its Energy
Electric Assembly (EEA) division and, accordingly, has classified the assets of
EEA as Assets Held for Sale in the accompanying condensed consolidated balance
sheet. Net sales of the division approximated $7.5 million and $3.8 million for
the six and three month periods ended June 30, 1998, respectively. Net proceeds
after income taxes received from the sale of the division are to be used to
repay outstanding indebtedness.
Note 7 - Inventories
8
<PAGE> 9
Inventories consist of the following:
June 30, 1998 December 31, 1997
-----------------------------------
Raw materials $ 905,536 $ 971,596
Work in process 758,950 320,101
Finished goods 1,023,451 1,031,023
-----------------------------
$2,687,937 $2,322,720
=============================
Note 8 - Comprehensive Income (Loss)
As of January 1, 1998, the Company adopted FASB Statement No. 130,
Reporting Comprehensive Income (Statement 130). Statement 130 established new
rules for the reporting and display of comprehensive income and its components.
Statement 130 requires unrealized gains or losses on the Company's
available-for-sale securities which, prior to adoption, were reported separately
in stockholders' equity, to be included in other comprehensive income. During
the six and three month periods ended June 30, 1998, total comprehensive
income(loss) amounted to ($323,709) and $281,329 and consisted of the following:
Six Months Three Months
----------------------------
Net income(loss) $(127,994) $162,281
Unrealized gain (loss) on investments (195,715) 119,048
---------------------------
$(323,709) $281,329
===========================
Note 9 - Marketable Securities
Marketable securities with a fair value of approximately $2,833,000 at
June 30, 1998, were sold during August 1998. Net proceeds of approximately
$2,050,000 received from the sale were used to reduce outstanding borrowings
(see Note 4).
Note 10 - Discontinued Operations
Income from discontinued operations of $38,151 recognized during 1998
resulted from the final settlement of the sale price of the Company's Energy
Electric Cable division, which was sold in 1997.
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
JUNE 30, 1998
The primary business of Connectivity Technologies Inc. (the "Company" or "CTI")
is the manufacture and sale of wire and cable products. The major market
served by the Company is industrial (commercial and residential security,
factory automation, traffic and transit signal control and audio systems).
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's goals are to
grow internally through capacity expansions and product line extensions.
RESULTS OF OPERATIONS
Operating results for the periods ended June 30, 1997 are not available at the
time of this filing (see Note 2 of Notes to Condensed Consolidated Financial
Statements). When the information becomes available upon the Company's
completion of its analysis of significant 1997 fourth quarter adjustments and
the related effect on previously reported results of operations, this discussion
will be amended to include a comparison of the results of operations for the
periods ended June 30, 1998, with those of the corresponding periods of the
preceding year. Because comparative information for 1997 is not available, the
following discussion compares operations for the six and three month periods
ended June 30, 1998, to the year ended December 31, 1997 and the three months
ended June 30, 1998 to the three months ended March 31, 1998.
SIX AND THREE MONTH PERIODS ENDED JUNE 30, 1998 COMPARED TO YEAR ENDED
DECEMBER 31, 1997
Gross profit as a percent of net sales increased to 21.0% year to date and 23.4%
during the quarter from 15.1% for the preceding year. The increase is
attributable principally to changes in product mix, increased manufacturing
efficiencies inherent in new machinery acquired and new manufacturing and
scheduling processes implemented by management. Stabilization of copper prices
over the three and six month periods also are reflected in improved gross margin
performance; whereas in 1997 decreases in copper commodity prices, which are
directly related to sales prices, lowered gross margins. Increases in net sales
at the Company's BSCC division also increased gross margins by spreading the
fixed costs of that division's manufacturing facilities over a broader base.
Selling, general and administrative expense decreased to 17.7% and 17.9% of net
sales for the six and three month periods ended June 30, 1998, respectively,
compared to 25.0% for the year ended December 31, 1997. The decrease is
attributable to a number of factors including bonuses and severance payments
made to former management and directors in 1997; write off of deferred debt
issuance costs of approximately $460,000 in 1997; greater professional fees in
1997;
10
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increased sales which on a percentage basis reduces the fixed cost component;
and cost-saving measures instituted by current management.
The average interest rate approximated 9.2% and 9.4% for the three and six month
periods ended June 30, 1998, as compared to 8.6% for the year ended December 31,
1997. The increase in interest rates is attributable to the Company no longer
being able to utilize the preferential LIBOR interest rates in the quarter ended
June 30, 1998.
Income tax expense represents provision for state income taxes which can not be
offset with net operating loss carryforwards.
THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31, 1998
Gross profit as a percent of net sales increased to 23.4% during the quarter
from 18.4% for the preceding quarter. The increase is attributable principally
to changes in product mix with the elimination of low margin products and the
addition of new cost effective insulation systems. Other contributing factors
include a change in the pricing structure, increased manufacturing efficiencies
inherent in new machinery acquired and new manufacturing and scheduling
processes implemented by management, and more effective negotiations with
suppliers. Stabilization of copper prices and improved methods for the purchase
of copper rod over the three month period also are reflected in improved gross
margin performance. Increases in net sales at the Company's BSCC division also
increased gross margins by spreading the fixed costs of that division's
manufacturing facilities over a broader base.
Selling, general and administrative expense increased to 17.9% of net sales
during the quarter compared to 17.4% for the preceding quarter.
The average interest rate approximated 9.2% for the three month period ended
June 30, 1998, as compared to 8.8% for the three months ended March 31, 1998.
The increase in interest rates is attributable to the Company no longer being
able to utilize the preferential LIBOR interest rates in the quarter ended June
30, 1998.
Income tax expense represents provision for state income taxes which can not be
offset with net operating loss carryforwards.
FINANCIAL CONDITION AND LIQUIDITY
The accompanying statement of cash flows for the six months ended June 30, 1998
reports cash used in operating activities of approximately $3,875,000. Included
in the determination of cash flows from operating activities are tax payments of
approximately $2,700,000 related to the taxable gain realized on the sale of its
Energy Electric Cable division in 1997. These tax payments were financed with
proceeds from long-term borrowings. Increased inventory levels resulted in
approximately $365,000 of cash flows used in operating activities, primarily
caused by an inventory build since December 31, 1997. This is a normal trend as
inventories were reduced in anticipation of a plant shut down during the
holidays. A decrease in assets held for sale resulted in approximately $ 632,000
of cash flows
11
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provided by operating activities, primarily as a result of a decrease in
accounts receivable at EEA due to improved collection efforts. Decreased accrued
liabilities used approximately $1,769,000 in operating cash flows, primarily
caused by a change in terms to essentially cash-on-delivery for a major copper
supplier and a pay-down of accrued professional fees.
Purchased manufacturing equipment for the BSCC division accounted for
approximately $743,000 of the cash used in investing activities. Proceeds from
long-term debt borrowings accounted for $5,355,000 of cash flows provided by
financing activities. These borrowings were used for the payment of $2,884,000
in taxes, the purchase of equipment, the prepayment of subordinated debt, and
the financing of working capital.
As described in Note 4 of the accompanying Notes to Condensed Consolidated
Financial Statements, the Company has negotiated a Forbearance Agreement and
tenth amendment to its revolving credit facility, which to date has been the
Company's principal external source of capital. The terms of the new agreement
extend the existing facility to November 30, 1998. The Company intends to enter
into discussions with its lender regarding further financing beyond this date.
However, no assurances can be given that the Company will be successful in
obtaining financing with its current lender beyond November 30, 1998, or from
any other source. If the Company is not successful in obtaining other financing
beyond November 30, 1998 the lenders would be in a position to commence legal
proceedings against the Company for the repayment of the entire debt plus
certain other amounts, and to proceed against the Company's assets. These
conditions raise substantial doubt about the Company's ability to continue as a
going concern.
At June 30, 1998 the Company had $5,650,000 of subordinated notes payable
outstanding which had been issued in 1996 for the redemption of stock in
connection with the acquisition of CPI. On June 30, 1998 four stockholders of
the Company assigned all of their rights, title, and interest in their
subordinated notes ($3,352,800), outstanding common stock of CPI (64 shares,
representing 8% of the total outstanding common stock of CPI) and outstanding
stock options of CTI (114,705 options) to CPI and CTI. The assignment was
finalized in July 1998 upon receipt of required consents from outside third
parties. On August 26, 1998, the Company entered into an agreement with another
stockholder pursuant to which the stockholder transferred to CPI and CTI
subordinated notes of $1,414,600, 33.7941 shares of common stock of CPI
(representing 4.41% of the outstanding common shares of CPI), 90,669 outstanding
stock options of CTI and cash of $325,000. These agreements have reduced the
balance of subordinated notes payable to $882,600 at August 26,1998.
SAFE HARBOR PROVISION OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The statements contained in Item 2 (Management's Discussion and Analysis of
Financial Condition and Results of Operations) that were not historical facts
may be forward-looking statements. Whenever possible, the Company has identified
these forward-looking statements by words such as "believes", "plans",
"intends", and similar expressions. The Company cautions readers that these
forward-looking statements are subject to a variety of risks and uncertainties
that could cause the Company's actual results in the remainder of 1998 and
beyond to differ
12
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materially from those expressed in any forward-looking statements made by, or on
behalf of, the Company. These risks and uncertainties are more fully described
in the Company's filings with the Securities and Exchange Commission including,
without limitation, general economic and business conditions affecting the
industries of the Company's customers, competition from other manufacturers and
assemblers that have greater financial, technical, and marketing resources than
the Company, the Company's ability to adequately address its going concern
issues in a timely matter including, without limitation, its ability to sell
EEA, reduce its debt, and negotiate a longer term credit facility.
13
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit No. Description of Document
- ----------- -----------------------
10.1 Ninth Amendment to Amended and Restated Revolving Credit and Term
Loan Agreement, dated as of April 30, 1998, by and among
Connectivity Products Incorporated, NBD Bank and BankBoston.
27 Financial Data Schedule
(b) Reports on Form 8-K
On June 30, 1998, the Registrant filed a Current Report on Form 8-K in
connection with its expected financial results to be reported on Form 10-KSB for
the fiscal year ended December 31, 1997 and the conclusion of an amended secured
credit agreement with its lenders effective June 2, 1998. The Registrant also
disclosed its intention to sell its Energy Electric Assembly division with the
proceeds to be used for debt repayment.
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the Registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CONNECTIVITY TECHNOLOGIES INC.
Date: September 17, 1998 By: /s/ James M. Hopkins
-------------------------------------------
James M. Hopkins
President and Chief Executive Officer (as a
duly authorized officer of the Registrant)
By: /s/ George H. Buckham
-------------------------------------------
George H. Buckham
Corporate Controller and Secretary
(as the principal accounting officer
of the Registrant)
15
<PAGE> 1
Exhibit 10.1
CONNECTIVITY PRODUCTS INCORPORATED
NINTH AMENDMENT
TO
AMENDED AND RESTATED
REVOLVING CREDIT AND TERM LOAN AGREEMENT
This NINTH AMENDMENT (this "Amendment"), dated as of April 30, 1998, is
among CONNECTIVITY PRODUCTS INCORPORATED, a Delaware corporation (the
"Borrower"), NBD BANK as Administrative Agent (the "Administrative Agent"),
BANKBOSTON, N.A., F/K/A THE FIRST NATIONAL BANK OF BOSTON as Documentation Agent
(the "Documentation Agent", and together with the Administrative Agent, the
"Co-Agents") for the lending institutions (the "Banks") listed on SCHEDULE 1 to
the Credit Agreement (as hereinafter defined) and the Banks.
WHEREAS, the Borrower, the Banks and the Co-Agents are parties to that
certain Amended and Restated Revolving Credit and Term Loan Agreement, dated as
of May 31, 1996 (as amended by the First Amendment to Amended and Restated
Revolving Credit and Term Loan Agreement, dated as of August 26, 1996, the
Second Amendment to Amended and Restated Revolving Credit and Term Loan
Agreement, dated as of September 30, 1996, the [First Amendment of Certain
Security Documents and Subordination Agreement and] Third Amendment to Amended
and Restated Revolving Credit and Term Loan Agreement, dated as of February 24,
1997, the Fourth Amendment to Amended and Restated Revolving Credit and Term
Loan Agreement, dated as of March 31, 1997, the Fifth Amendment to Amended and
Restated Revolving Credit and Term Loan Agreement, the Sixth Amendment to
Amended and Restated Revolving Credit and Term Loan Agreement, dated as of July
11, 1997, the Seventh Amendment to Amended and Restated Revolving Credit and
Term Loan Agreement, dated as of July 25, 1997, and the Eighth Amendment to
Amended and Restated Revolving Credit and Term Loan Agreement, dated as of June
30, 1997, the "Credit Agreement"), pursuant to which the Banks, upon certain
terms and conditions, have made loans to and may issue letters of credit for the
benefit of the Borrower; and
WHEREAS, the Borrower has requested that the Banks agree, and the Banks
have agreed, on the terms and subject to the conditions set forth herein, to
make certain changes to the Credit Agreement.
NOW, THEREFORE, the parties hereto hereby agree as follows:
ss.1. DEFINED TERMS. Capitalized terms which are used herein without
definition and which are defined in the Credit Agreement shall have the same
meanings herein as in the Credit Agreement.
ss.2. AMENDMENT OF CREDIT AGREEMENT. The Credit Agreement is hereby amended
as follows:
(a) Section 1.1 of the Credit Agreement is amended as follows:
<PAGE> 2
-2-
(i) The definition of ADMINISTRATIVE AGENT as set forth in such
ss.1.1 is amended by deleting the reference to "NBD" and substituting
"FNBB" therefor.
(ii) The definition of APPLICABLE MARGIN as set forth in such ss.1.1
is amended by deleting such definition and restating it in its entirety as
follows:
APPLICABLE MARGIN. The Applicable Margin for all Revolving Credit
Loans or with respect to the commitment fees as set forth in the table
below:
<TABLE>
<CAPTION>
---------------------------------------------------------
Revolving
Credit Loans Commitment Fee
---------------------------------------------------------
<S> <C>
1.00% .50%
---------------------------------------------------------
</TABLE>
(iii) The definition of BORROWING BASE as set forth in such ss.1.1 is
amended by (A) deleting the period at the end of clause (b) and
substituting "; plus" therefor and (B) adding the following new clauses
(c), (d) and (e):
(c) seventy percent (70%) of the Appraised Value of Equipment;
PLUS
(d) the Value of Anicom Stock MINUS the Trading Value of the
shares of common stock by Anicom, Inc. which are subject to a Claim
Notice under and as defined in the Escrow Agreement; PLUS
(e) the Overadvance Amount.
(iv) The definition of DRAWDOWN DATE set forth in such ss.1.1 is
amended by deleting such definition and restating it in its entirety as
follows:
DRAWDOWN DATE. The date on which any Revolving Credit Loan is made or
to be made.
(v) The definitions of INTEREST PAYMENT DATE and INTEREST PERIOD as
set forth in such ss.1.1 are amended by deleting such definitions and
restating them in their entirety as follows:
INTEREST PAYMENT DATE. The last day of each calendar quarter including
the calendar quarter which includes the Drawdown Date.
INTEREST PERIOD. Initially, the period commencing on the Drawdown Date
of each Revolving Credit Loan and ending on the last day of the
calendar quarter in which the Drawdown Date occurs and thereafter,
each calendar quarter.
(vi) The definition of LOAN DOCUMENTS as set forth in such ss.1.1 is
amended by deleting the reference to "Notes" and substituting "Revolving
Credit Notes" therefor.
<PAGE> 3
-3-
(vii) The definition of REFERENCE BANKS as set forth in such ss.1.1
is amended by deleting "NBD and" therefrom.
(viii) The definition of REVOLVING CREDIT LOAN MATURITY DATE as set
forth in such ss.1.1 is amended by deleting the date "May 31, 2002" and
substituting "July 31, 1998" therefor.
(ix) The definition of REVOLVING CREDIT NOTE RECORD as set forth in
such ss.1.1 is amended by deleting such definition and restating it in its
entirety as follows:
REVOLVING CREDIT NOTE RECORD. The grid attached to a Revolving Credit
Note, or the continuation of such grid, or any other similar record,
including computer records, maintained by any Bank with respect to any
Revolving Credit Loan referred to in such Note.
(x) Section 1.1 is further amended by:
(A) adding the following new definitions to such ss.1.1 in the
appropriate alphabetical order:
APPRAISED VALUE OF THE EQUIPMENT. The appraised value of the equipment
of the Borrower and its Wholly-Owned Subsidiaries used or useful in
their respective businesses based upon the auction value appraisal
conducted by an appraiser acceptable to the Administrative Agent and
in form and substance satisfactory to the Administrative Agent.
EFFECTIVE DATE OF THE NINTH AMENDMENT. June 2 , 1998.
ESCROW AGREEMENT. The Stock Escrow Agreement, dated as of July 11,
1997, among the Borrower, Anicom, Inc., Reel Acquisition Corp., NBD in
its capacity as administrative agent and Harris Trust and Savings Bank
in its capacity as escrow agent, as amended and in effect.
OVERADVANCE AMOUNT. Borrowing availability equal to (i) $8,000,000
during the period commencing on the Effective Date of the Ninth
Amendment and ending on July 10, 1998, and (ii) $0.00 thereafter.
TRADING VALUE. As at any date of determination, with respect to any
share of the common stock of Anicom, Inc. held by the Borrower, the
fair market value of such share, as determined by the Administrative
Agent by reference to the closing price of shares of such stock as
traded on the Nasdaq Stock Market, the New York Stock Exchange or the
American Stock Exchange, as the case may be, in each case, as reported
on the Business Day preceding such date of determination by the WALL
STREET JOURNAL or by another similar publication deemed reasonably
appropriate and authoritative by the Administrative Agent.
VALUE OF ANICOM STOCK. The amount equal to the Trading Value of all of
the shares of the common stock of Anicom, Inc. held by the Borrower
multiplied by (i), so long as the Trading Value is greater than $10.00
per share, seventy
<PAGE> 4
-4-
percent (70%), (ii) so long as the Trading Value is $10.00 per share
or less but greater than $1.00, forty percent (40%), or (iii) so long
as the Trading Value per share is $1.00 or less, zero percent.
(B) deleting the following definitions from such ss.1.1:
ADJUSTED EBITDA
COMMITMENT PERCENTAGE
CONSOLIDATED EXCESS CASH FLOW
CONSOLIDATED NET EARNINGS AVAILABLE FOR INTEREST CHARGES
CONSOLIDATED NET INCOME
CONSOLIDATED NET WORTH
CONSOLIDATED TOTAL ASSETS
CONSOLIDATED TOTAL INTEREST EXPENSE
CONSOLIDATED LIABILITIES
CONVERSION DATE
EUROCURRENCY RESERVE RATE
LEVERAGE RATIO
LIBOR BUSINESS DAY
LIBOR RATE
LINE OF CREDIT BASE RATE LOANS
LINE OF CREDIT COMMITMENT
LINE OF CREDIT COMMITMENT PERCENTAGE
LINE OF CREDIT LOANS
LINE OF CREDIT MATURITY
LINE OF CREDIT NOTE RECORD
LINE OF CREDIT NOTES
LINE OF CREDIT USAGE
LOANS
NOTES
RECORD
REVOLVING BASE RATE LOANS
SENIOR FUNDED DEBT
TERM BASE RATE LOANS
TERM LOAN A
TERM LOAN A COMMITMENT
TERM LOAN A COMMITMENT PERCENTAGE
TERM LOAN A MATURITY DATE
TERM LOAN A NOTES
TERM LOAN A RECORD
TERM LOAN B
TERM LOAN B MATURITY DATE
TERM LOAN B NOTES
TERM LOANS
TERM NOTES
TOTAL COMMITMENT
TOTAL FUNDED DEBT
TOTAL LINE OF CREDIT COMMITMENT
TYPE
<PAGE> 5
-5-
(b) Section 2.1.2 of the Credit Agreement is amended by deleting such ss.2.1.2
in its entirety and substituting the word "Deleted" therefor.
(c) Sections 2.2 through 2.8 of the Credit Agreement are amended by deleting
such Sections and restating them in their entirety as follows:
2.2. COMMITMENT FEE. The Borrower agrees to pay to the Administrative Agent
for the accounts of the Banks in accordance with the sum of their respective
Revolving Credit Commitment Percentages a commitment fee calculated at the
annual rate equal to the Applicable Margin on the average daily amount during
each calendar quarter or portion thereof from the Closing Date to the Revolving
Credit Loan Maturity Date by which the sum of the Total Revolving Credit
Commitment MINUS the sum of the Maximum Drawing Amount and all Unpaid
Reimbursement Obligations, exceeds the outstanding amount of the Revolving
Credit Loans during such calendar quarter. The commitment fee shall be payable
quarterly in arrears on the first day of each calendar quarter for the
immediately preceding calendar quarter commencing on the first such date
following the date hereof, with a final payment on the Revolving Credit Maturity
Date or any earlier date on which the Commitments shall terminate.
2.3. REDUCTION OF TOTAL COMMITMENT. The Borrower shall have the right at
any time and from time to time upon five (5) Business Days prior written notice
to the Administrative Agent to reduce by $100,000 or an integral multiple
thereof or terminate entirely the Total Revolving Credit Commitment whereupon
the Revolving Credit Commitments of the Banks shall be reduced PRO RATA in
accordance with their respective Revolving Credit Commitment Percentages of the
amount specified in such notice or, as the case may be, terminated. Promptly
after receiving any notice of the Borrower delivered pursuant to this ss.2.3,
the Administrative Agent will notify the Banks of the substance thereof. Upon
the effective date of any such reduction or termination, the Borrower shall pay
to the Administrative Agent for the respective accounts of the Banks the full
amount of any commitment fee then accrued on the amount of the reduction. No
reduction or termination of such Commitments may be reinstated.
2.4. THE REVOLVING CREDIT NOTES. The Revolving Credit Loans shall be
evidenced by separate promissory notes of the Borrower in substantially the form
of EXHIBIT D-1 hereto (each a "Revolving Credit Note"), completed with
appropriate insertions. One Revolving Credit Note shall be payable to the order
of each Bank in a principal amount equal to such Bank's Revolving Credit
Commitment or, if less, the outstanding amount of all Revolving Credit Loans
made by such Bank, plus interest accrued thereon, as set forth below. The
Borrower irrevocably authorizes each Bank to make or cause to be made, at or
about the time of the Drawdown Date of any Revolving Credit Loan or at the time
of receipt of any payment of principal on such Bank's Revolving Credit Note, an
appropriate notation on such Bank's Revolving Credit Note Record reflecting the
making of such Revolving Credit Loan or (as the case may be) the receipt of such
payment. The outstanding amount of the Revolving Credit Loans set forth on such
Bank's Revolving Credit Note Record shall be PRIMA FACIE evidence of the
principal amount thereof owing and unpaid to such Bank, but the failure to
record, or any error in so recording, any such amount on such Bank's Revolving
Credit Note Record shall not limit or otherwise affect the
<PAGE> 6
-6-
obligations of the Borrower hereunder or under any Revolving Credit Note to make
payments of principal of or interest on any Revolving Credit Note when due.
2.5. INTEREST ON REVOLVING CREDIT. Except as otherwise provided in ss.6.11,
each Revolving Credit Loan shall bear interest for the period commencing with
the Drawdown Date thereof and ending on the last day of the Interest Period with
respect thereto at the Base Rate PLUS the Applicable Margin.
2.6. REQUESTS FOR REVOLVING CREDIT. The Borrower shall give to the
Administrative Agent written notice in the form of EXHIBIT E hereto (or
telephonic notice confirmed in a writing in the form of EXHIBIT E hereto) of
each Revolving Credit Loan requested hereunder (a "Loan Request") one (1)
Business Day prior to the proposed Drawdown Date of any Revolving Credit Loan.
Each such notice shall specify (a) the principal amount of the Revolving Credit
Loan requested, and (b) the proposed Drawdown Date of each such Loan. Promptly
upon receipt of any such notice, the Administrative Agent shall notify each of
the Banks thereof. Each Loan Request shall be irrevocable and binding on the
Borrower and shall obligate the Borrower to accept the Revolving Credit Loan
requested from the Banks on the proposed Drawdown Date. Each Loan Request shall
be in a minimum aggregate amount of $100,000 or a whole multiple of $25,000 in
excess thereof.
2.7. DELETED.
2.8. FUNDS FOR REVOLVING CREDIT LOAN.
2.8.1. FUNDING PROCEDURES. Not later than 11:00 a.m. (Boston time) on
the proposed Drawdown Date of any Revolving Credit Loans, each of the Banks
will make available to the Administrative Agent, at the Administrative
Agent's Head Office in immediately available funds, the amount of such
Bank's Revolving Credit Commitment Percentage of the amount of the
requested Revolving Credit Loans. Upon receipt from each Bank of such
amount, and upon receipt of the documents required by ss.13 and the
satisfaction of the other conditions set forth therein, to the extent
applicable, the Administrative Agent will make available to the Borrower
the aggregate amount of such Revolving Credit Loans requested and made
available to the Administrative Agent by the Banks. The failure or refusal
of any Bank to make available to the Administrative Agent at the aforesaid
time and place on any Drawdown Date the amount of its Revolving Credit
Commitment Percentage of the requested Revolving Credit Loans shall not
relieve any other Bank from its several obligation hereunder to make
available to the Administrative Agent the amount of such other Bank's
Revolving Credit Commitment Percentage of any requested Revolving Credit
Loans.
2.8.2. ADVANCES BY ADMINISTRATIVE AGENT. The Administrative Agent may,
unless notified to the contrary by any Bank prior to a Drawdown Date,
assume that such Bank has made available to the Administrative Agent on
such Drawdown Date the amount of such Bank's Revolving Credit Commitment
Percentage of the Revolving Credit Loans requested to be made on such
Drawdown Date, and the Administrative Agent may (but it
<PAGE> 7
-7-
shall not be required to), in reliance upon such assumption, make available
to the Borrower a corresponding amount. If any Bank makes available to the
Administrative Agent such amount on a date after such Drawdown Date, such
Bank shall pay to the Administrative Agent on demand an amount equal to the
product of (i) the average computed for the period referred to in clause
(iii) below, of the weighted average interest rate paid by the
Administrative Agent for federal funds acquired by the Administrative Agent
during each day included in such period, TIMES (ii) the amount of such
Bank's Revolving Credit Commitment Percentage of such Revolving Credit
Loans, TIMES (iii) a fraction, the numerator of which is the number of days
that elapse from and including such Drawdown Date to the date on which the
amount of such Bank's Revolving Credit Commitment Percentage of such
Revolving Credit Loans shall become immediately available to the
Administrative Agent, and the denominator of which is 365. A statement of
the Administrative Agent submitted to such Bank with respect to any amounts
owing under this paragraph shall be PRIMA FACIE evidence of the amount due
and owing to the Administrative Agent by such Bank. If the amount of such
Bank's Revolving Credit Commitment Percentage of such Revolving Credit
Loans is not made available to the Administrative Agent by such Bank within
three (3) Business Days following such Drawdown Date, the Administrative
Agent shall be entitled to recover such amount from the Borrower on demand,
with interest thereon at the rate per annum applicable to the Revolving
Credit Loans made on such Drawdown Date.
(d) Section 3.2 of the Credit Agreement is amended by deleting the words "FIRST"
and "SECOND to the Line of Credit Loans" from the fourth sentence of such
ss.3.2.
(e) Sections 3.3 and 4 of the Credit Agreement are amended by deleting such
sections and restating them in their entirety as follows:
3.3. OPTIONAL REPAYMENTS OF REVOLVING CREDIT LOANS. The Borrower shall have
the right, at its election, to repay the outstanding amount of the Revolving
Credit Loans, as a whole or in part, at any time without penalty or premium. The
Borrower shall give the Administrative Agent, no later than 11:00 a.m. (Boston
time) at least one (1) Business Day prior written notice of any proposed
prepayment pursuant to this ss.3.3 of any Revolving Credit Loans, specifying the
proposed date of prepayment of such Loans. Each such partial prepayment of the
Revolving Credit Loans shall be in an integral multiple of $100,000, shall be
applied, in the absence of instruction by the Borrower, to the principal of such
Loans. Each partial prepayment shall be allocated among the Banks, in
proportion, as nearly as practicable, to the respective unpaid principal amount
of each Bank's Revolving Credit Note, with adjustments to the extent practicable
to equalize any prior repayments not exactly in proportion.
4. DELETED.
(f) Section 6.1 of Credit Agreement is amended by deleting such ss.6.1 and
restating it as follows:
<PAGE> 8
-8-
6.1 RESTRUCTURING FEE. The Borrower shall pay to the Administrative Agent
for the pro rata accounts of the Banks a restructuring fee payable as
follows:
(a) $150,000 on the Effective Date of the Ninth Amendment;
(b) $50,000 on the earlier to occur of (i) the sale of any asset or
group of assets in a single transaction the net proceeds of which
shall be equal to more than $2,000,000 and (ii) June 30, 1998; and
(c) $30,000 on July 10, 1998, but only if the Overadvance Amount is
greater than $0.00 on such date.
(g) Section 8.17 of the Credit Agreement is amended by deleting the first
sentence of such ss.8.17 and restating it in its entirety as follows:
The proceeds of the Revolving Credit Loans shall be used for working
capital and general corporate purposes.
(h) Section 9.4 of the Credit Agreement is amended by (i) inserting in clause
(a)(i) of such ss.9.4 immediately after the word "qualification" the
parenthetical "(except with respect to fiscal year 1997)", (ii) deleting the
word "and" at the end of clause (h) of such ss.9.4, (iii) deleting the period at
the end of clause (i) of such ss.9.4 and substituting a semicolon therefor, and
(iv) adding the following new clauses (j) and (k) to such ss.9.4:
(j) notwithstanding clause (b) above, no later than May 22, 1998, the
financial statements required to be delivered pursuant to clause (b) above
for the first fiscal quarter of 1998; and
(k) no later than May 22, 1998, fiscal year 1998 projections based on the
Borrower's and its Subsidiaries' actual performance for the first fiscal
quarter of 1998, which projections shall be prepared (i) including the EEA
division of the Borrower and (ii) excluding the EEA division of the
Borrower.
(i) Section 9.5 of Credit Agreement is amended by inserting the following
new ss.ss.9.5.5 and 9.5.6 at the end of ss.9.5:
9.5.5. STATUS REPORT ON THE SALE OF THE EEA DIVISION OF THE BORROWER. The
Borrower will deliver to the Administrative Agent on the last Business Day
of each calendar month commencing on April 30, 1998, a status report on the
steps taken by the Borrower to effect a sale of its EEA division, including
without limitation, any offers to purchase such division, and the timing
and purchase price with respect to any outstanding offers.
9.5.6. NOTICE OF CLAIM. The Borrower shall deliver to the Administrative
Agent a copy of any Claim Notice (as defined in the Escrow Agreement)
within twenty-four (24) hours of the Borrower's receipt of the same.
<PAGE> 9
-9-
(j) Section 10.8 of the Credit Agreement is amended by adding the following new
sentence at the end of such ss.10.8:
Notwithstanding any term or condition to the contrary set forth in any of
the Subordinated Debt Documents, so long as no Default or Event of Default
shall have occurred and be continuing or result after giving effect
thereto, scheduled interest payments, including any unpaid scheduled
interest payments, on the Redemption Notes shall be permitted to be paid on
such Notes following the earlier to occur of (A) the sale of the EEA
division of the Borrower, the net cash proceeds from which shall be equal
to $10,000,000 or more, which shall have been applied to the outstanding
Revolving Credit Loans and resulted in a permanent reduction of the
Revolving Credit Commitment by such amount, and (B) the date on which the
Overadvance Amount is equal to zero.
(k) Section 11 of the Credit Agreement is amended retroactively as of December
31, 1997 by (A) deleting ss.ss.11.1 through 11.5 and substituting the word
"Deleted" in each case and (B) deleting ss.11.7 and restating it in its entirety
as follows:
11.7. MINIMUM EBITDA. The Borrower will not permit Consolidated EBITDA at
the end of any calendar month commencing on April 30, 1998 to be less than
(A) $275,000 and (B) $100,000 following the sale of the EEA division of the
Borrower.
(l) The Credit Agreement is further amended by (i) deleting each reference to
"Line of Credit Loans", "Term Loan A" and "Term Loan B" contained in the Credit
Agreement and (ii) substituting for each reference to "Loans" the term
"Revolving Credit Loans".
(m) SCHEDULE 1 to the Credit Agreement is amended by deleting such SCHEDULE 1
and restating it in its entirety in the form of SCHEDULE 1 attached hereto.
ss.3. ADMINISTRATIVE AGENTS SET-UP FEE. The Borrower shall pay to FNBB, as
the Administrative Agent on the Effective Date of the Ninth Amendment a set-up
fee in the amount of $5,000 for the Administrative Agent's own accounts.
ss.4. CONDITIONS TO EFFECTIVENESS. The effectiveness of this Amendment
shall be subject to receipt by the Administrative Agent of:
(a) this Amendment executed by each of the Borrower, the Banks and the
Co-Agents,
(b) the set-up fee pursuant to ss.3 of this Amendment,
(c) the portion of the restructuring fee in the amount of $150,000
pursuant to ss.2(f) of this Amendment,
(d) evidence of payment in full in cash of the outstanding Line of Credit
Loans, Term Loan A and Term Loan B,
<PAGE> 10
-10-
(e) a waiver from each of the Sellers confirming such Seller's agreement
to waive all payments on the Subordinated Debt owing to such Seller until
the earlier to occur of (i) the sale of the EEA division of the Borrower,
the net cash proceeds from which shall be equal to $10,000,000 or more,
which shall have been applied to the outstanding Revolving Credit Loans and
resulted in a permanent reduction of the Revolving Credit Commitment by
such amount, and (ii) the date on which the Overadvance Amount is equal to
zero.
(f) a Third Amended and Restated Revolving Credit Note payable to each of
the Banks in the amount equal to each such Bank's Revolving Credit
Commitment Percentage of the Total Revolving Credit Commitment, and
(g) corporate resolutions of the Borrower with respect to the transactions
contemplated by this Amendment.
ss.5. AFFIRMATION AND ACKNOWLEDGMENT OF THE BORROWER. The Borrower hereby
ratifies and confirms all of its Obligations to the Banks and the Co-Agents,
including, without limitation the Loans, and the Borrower hereby affirms its
absolute and unconditional promise to pay to the Banks the Revolving Credit
Loans and all other amounts due under the Credit Agreement as amended hereby.
ss.6. REPRESENTATIONS AND WARRANTIES. The Borrower hereby represents and
warrants to the Co-Agents and the Banks as follows:
(a) REPRESENTATION AND WARRANTIES IN THE CREDIT AGREEMENT. The
representations and warranties of the Borrower contained in the Credit
Agreement were true and correct in all material respects as of the date
when made and continue to be true and correct in all material respects on
the date hereof, except to the extent of changes resulting from
transactions or events contemplated by the Credit Agreement and the other
Loan Documents and changes occurring in the ordinary course of business
that singly or in the aggregate are not materially adverse to the Borrower,
or to the extent that such representations and warranties relate expressly
to an earlier date or, with respect to ss.8.5 of the Credit Agreement,
except as disclosed in the Borrower's filings made with the Securities and
Exchange Commission.
(b) AUTHORITY, ETC. The execution and delivery by the Borrower of this
Amendment and the performance by the Borrower of all of its agreements and
obligations under the Credit Agreement as amended hereby are within the
corporate authority of the Borrower and have been duly authorized by all
necessary corporate action on the part of the Borrower.
(c) ENFORCEABILITY OF OBLIGATIONS. This Amendment and the Credit Agreement
as amended hereby constitute the legal, valid and binding obligations of
the Borrower, enforceable against the Borrower in accordance with their
terms, except as enforceability is limited by bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting generally
the enforcement of, creditors' rights and except to the extent that
availability of the remedy of specific performance or injunctive relief is
subject to the discretion of the court before which any proceeding therefor
may be brought.
<PAGE> 11
-11-
(d) NO DEFAULT. After giving effect to the provisions of ss.2, no
Default or Event of Default is continuing, and no Default or Event of
Default will exist after execution and delivery of this Amendment.
ss.7. NO OTHER AMENDMENTS OR WAIVERS. Except as expressly provided in this
Amendment, all of the terms and conditions of the Credit Agreement and the other
Loan Documents remain in full force and effect.
ss.8. EXPENSES. Pursuant to ss.17 of the Credit Agreement, all costs and
expenses incurred or sustained by the Co-Agents in connection with this
Amendment, including the fees and disbursements of legal counsel for the
Co-Agents in producing, reproducing and negotiating the Amendment, all
examination fees, and equipment appraisal fees, will be for the account of the
Borrower whether or not the transactions contemplated by this Amendment are
consummated.
ss.9. EXECUTION IN COUNTERPARTS. This Amendment may be executed in any
number of counterparts, each of which shall be deemed an original, but which
together shall constitute one instrument.
ss.10. MISCELLANEOUS. THIS AMENDMENT SHALL BE DEEMED TO BE A CONTRACT UNDER
THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND SHALL FOR ALL PURPOSES BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE COMMONWEALTH OF
MASSACHUSETTS (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). The
captions in this Amendment are for convenience of reference only and shall not
define or limit the provisions hereof.
<PAGE> 12
-12-
IN WITNESS WHEREOF, the parties hereto have executed this Ninth Amendment
as a document under seal as of the date first above written.
CONNECTIVITY PRODUCTS INCORPORATED
By:________________________________________
Name:
Title:
BANKBOSTON, N.A.
F/K/A THE FIRST NATIONAL BANK
OF BOSTON, individually
and as Documentation Agent
By:________________________________________
G. Christopher Miller, Director
NBD BANK, individually and as
Administrative Agent
By:________________________________________
Name:
Title:
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 569,737
<SECURITIES> 2,833,331
<RECEIVABLES> 6,132,668
<ALLOWANCES> 0
<INVENTORY> 2,687,937
<CURRENT-ASSETS> 16,911,393
<PP&E> 6,796,445
<DEPRECIATION> 0
<TOTAL-ASSETS> 34,240,006
<CURRENT-LIABILITIES> 30,022,685
<BONDS> 0
0
0
<COMMON> 230,874
<OTHER-SE> 3,986,447
<TOTAL-LIABILITY-AND-EQUITY> 34,240,006
<SALES> 12,806,230
<TOTAL-REVENUES> 12,806,230
<CGS> 9,815,904
<TOTAL-COSTS> 9,815,904
<OTHER-EXPENSES> 2,290,539
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 522,198
<INCOME-PRETAX> 205,581
<INCOME-TAX> 43,300
<INCOME-CONTINUING> 162,281
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