<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
__________
FORM 10-Q
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended June 30, 1996
or
( ) Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Transition Period From __________ To __________
Commission File Number: 0-25560
ACT Manufacturing, Inc.
-----------------------
(Exact name of registrant as specified in its charter)
Massachusetts 04-2777507
------------- ----------
(State or other jurisdiction of (IRS Employer ID NO.)
incorporation or organization)
108 Forest Avenue
Hudson, Massachusetts 01749
--------------------- -----
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (508) 562-1200
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 of 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
--- -------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock 8,770,000 Shares
------------ ----------------------
(Class) (Outstanding on August 8, 1996)
<PAGE>
ACT Manufacturing, Inc.
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
Page No.
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<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1 - Financial Statements:
- - - ------------------------------
Condensed Consolidated Statements of Income for the three and six months ended
June 30, 1996 and June 30, 1995. 3
Condensed Consolidated Balance Sheets as of June 30, 1996 and December 31, 1995. 4
Condensed Consolidated Statements of Cash Flows for the six months ended
June 30, 1996 and June 30, 1995. 5
Notes to Condensed Consolidated Financial Statements. 6
ITEM 2 - Management's Discussion and Analysis of Financial Condition and
- - - ------------------------------------------------------------------------
Results of Operations 7
---------------------
PART II. OTHER INFORMATION
ITEM 4 - Submission of Matters to a Vote of Security-Holders 9
- - - ------------------------------------------------------------
ITEM 6 - Exhibits and Reports on Form 8-K 9
- - - -----------------------------------------
Signatures 10
Exhibit Index 11
Exhibit 10.1
Exhibit 11
Exhibit 27
</TABLE>
2
<PAGE>
ACT MANUFACTURING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30:
--------------------------
1996 1995
---- ----
<S> <C> <C>
Net Sales $ 52,155 $ 30,532
Cost of goods sold 45,627 26,093
---------- ----------
Gross profit 6,528 4,439
Selling, general and administrative expenses 2,396 1,556
---------- ----------
Operating income 4,132 2,883
Interest and other (income) expense 377 (92)
---------- ----------
Income before provision for income taxes 3,755 2,975
Provision for income taxes 1,502 1,202
---------- ----------
Net income $ 2,253 $ 1,773
========== ==========
Net income per common share $.25 $.20
---------- ----------
Weighted average shares outstanding 9,010,984 8,989,900
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Six Months Ended June 30:
-------------------------
1996 1995
---- ----
Net Sales $ 92,671 $ 60,139
Cost of goods sold 81,375 51,569
---------- ----------
Gross profit 11,296 8,570
Selling, general and administrative expenses 4,466 3,104
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Operating income 6,830 5,466
Interest and other (income) expense 372 188
---------- ----------
Income before provision for income taxes 6,458 5,278
Provision for income taxes 2,583 1,060
---------- ----------
Net income $ 3,875 $ 4,218
========== ==========
PRO FORMA
(Note 3)
---------
Income before provision for income taxes $ 6,458 $ 5,278
Provision for income taxes $ 2,583 2,132
---------- ----------
Net income $ 3,875 $ 3,146
========== =========
Net income per common share $ .43 $ .42
---------- ---------
Weighted average shares outstanding 8,967,163 7,547,038
---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
ACT MANUFACTURING, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
Unaudited
June 30, 1996 December 31, 1995
------------- -----------------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 4,105 $ 7,097
Accounts receivable, net 36,907 19,585
Inventory 48,819 30,387
Deferred taxes 505 505
Prepaid expenses and other assets 395 265
------- -------
Total current assets 90,731 57,839
------- -------
PROPERTY AND EQUIPMENT - Net 3,487 2,696
OTHER ASSETS 667 560
------- -------
TOTAL $94,885 $61,095
======= =======
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 71 $ 71
Accounts payable 30,987 20,488
Accrued expenses 3,096 2,210
------- -------
Total current liabilities 34,154 22,769
------- -------
LONG-TERM DEBT - Less current portion 20,930 2,638
------- -------
STOCKHOLDERS' EQUITY
Common stock 88 87
Additional paid-in capital 32,152 31,914
-------
Retained earnings 7,561 3,687
------- -------
Total stockholders' equity 39,801 35,688
------- -------
TOTAL $94,885 $61,095
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements
4
<PAGE>
ACT MANUFACTURING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30:
------------------------
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................. $ 3,875 $ 4,218
-------- --------
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Deferred taxes.................................... - (348)
Depreciation and amortization..................... 487 370
Increase (decrease) in cash from:
Accounts receivable - trade................. (17,322) (2,242)
Inventory................................... (18,432) (2,675)
Prepaid expenses and other assets........... (130) 34
Accounts payable............................ 10,499 1,196
Accrued expenses............................ 886 583
-------- --------
Total adjustments............................................ (24,012) (3,082)
-------- --------
Net cash provided by (used for) operating activities......... (20,137) 1,136
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment................. (1,278) (1,262)
(Increase) decrease in other assets................... (107) 79
Purchase of marketable securities..................... - (5,878)
-------- --------
Net cash used for investing activities....................... (1,385) (7,061)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under line-of credit agreements............ 44,167 32,239
Repayments under line-of-credit agreements............ (25,817) (42,035)
Repayments of long-term debt.......................... (58) (442)
S Corporation distributions paid...................... - (11,425)
Net proceeds from sale of stock....................... 238 31,819
-------- --------
Net cash provided by financing activities.................... 18,530 10,156
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (2,992) 4,231
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR................. 7,097 191
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD.................... $ 4,105 $ 4,422
======== ========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
5
<PAGE>
ACT MANUFACTURING, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The unaudited interim condensed consolidated financial statements furnished
herein reflect all adjustments, which in the opinion of management are of a
normal recurring nature, necessary to fairly state the Company's financial
position, cash flows and the results of operations for the periods presented and
have been prepared on a basis substantially consistent with the audited
financial statements.
The results of operations for the interim periods are not necessarily indicative
of the results of operations to be expected for the fiscal year. These
condensed consolidated interim financial statements should be read in
conjunction with the Company's Annual Report on Form 10-K for the year ending
December 31, 1995 filed with the Securities and Exchange Commission.
2. Inventory consisted of the following at:
<TABLE>
<CAPTION>
(in thousands) June 30, 1996 December 31, 1995
------------- -----------------
<S> <C> <C>
Raw material $31,095 $22,602
Work in process 17,447 7,693
Finished goods 277 92
------- -------
TOTAL $48,819 $30,387
======= =======
</TABLE>
3. The pro forma adjustments reflect what the effects on historical net income
would have been if the Company had not elected to be taxed as a Subchapter S
Corporation for part of 1995. The adjustments include a provision for state and
federal income taxes at an effective rate of approximately 40%, as if the
Company were subject to such taxes. In connection with its initial public
offering, the Company terminated its status as an S Corporation on March 29,
1995.
Net income per share is based on the weighted average number of common and
dilutive common equivalent shares (common stock options) outstanding. Common
equivalent shares are not included in the per share calculations where the
effect of their inclusion would be antidilutive, except in accordance with
Securities and Exchange Commission Staff Accounting Bulletin No. 83.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Management's Discussion and Analysis of Financial Condition and Results of
Operations should be read in conjunction with the accompanying financial
statements for the periods specified and the associated notes. Further
reference should be made to the Company's Annual Report on Form 10-K for the
year ending December 31, 1995.
Overview
- - - --------
The Company provides value-added, turnkey contract manufacturing services for
emerging and major Original Equipment Manufacturers ("OEM's") in the commercial
electronics industry. The Company's manufacturing services include complex
printed circuit board ("PCB") assemblies, mechanical and molded cable and
harness assemblies, electromechanical sub-assemblies and total system assembly
and integration. As an integral part of its service to OEM customers, the
Company provides advanced manufacturing and test engineering and materials
management across the full range of the Company's assembly services.
The Company's principal manufacturing facilities are located in four leased
facilities in Massachusetts containing an aggregate of 204,000 square feet.
As of June 30, 1996, the Company had 625 employees, including 577 in
manufacturing and related activities and 48 in sales, marketing and
administrative services.
Three Months Ended June 30, 1996 and 1995
- - - -----------------------------------------
Net sales increased 71% to $52.2 million for the three months ended June 30,
1996 from $30.5 million for the same period in 1995. This increase was
attributable principally to increased PCB assembly sales to new customers in
1996.
Gross profit increased by $2.1 million, or 47% to $6.5 million for the three
months ended June 30, 1996 compared to $4.1 million for the same period in 1995.
Gross margin decreased to 12.5% for the three months ended June 30, 1996 from
14.5% for the same period in 1995 due primarily to a shift in the Company's
sales mix toward PCB assemblies.
Selling, general and administrative expenses increased 54% to $2.4 million, or
4.6% of net sales for the three months ended June 30, 1996 compared to $1.6
million, or 5.1% of net sales for the three months ended June 30, 1995. This
decrease as a percentage of net sales reflects the results of the continued
growth in the Company's business which allowed for higher utilization of fixed
costs. The increase in dollars reflects investment in the Company's Information
Systems, Human Resources and Program Management groups needed to support the
Company's growth.
Operating income increased 43% to $4.1 million, or 7.9% of net sales for the
three months ended June 30, 1996 compared to $2.9 million, or 9.4% of net sales
for the three months ended June 30, 1995 as a result of the above factors.
Interest and other expense was $377,000 for the three months ended June 30,
1996 compared to a contribution of interest income and other expense of $92,000
for the three months ended June 30, 1995. Interest and other expenses consisted
principally of fees and interest payable to the Company's bank lenders.
Interest income consists of the proceeds from the investment of the Company's
cash and cash equivalents and marketable securities. The change resulted from
borrowings on the Company's line of credit used to finance working capital
growth.
7
<PAGE>
Six Months Ended June 30, 1996 and 1995
- - - ---------------------------------------
Net sales for the six months ended June 30, 1996 increased 54% to $92.7 million
from $60.1 million for the same period in 1995. This increase was attributable
principally to increased PCB assembly sales to new customers in 1996.
Gross margin decreased to 12.2% for the six months ended June 30, 1996 from
14.3% for the same period in 1995 as a result of a shift in the Company's sales
mix toward PCB assemblies.
Selling, general and administrative expenses decreased as a percentage of sales
from 5.2% in 1995 to 4.8% in 1996. This decrease as a percentage of net sales
reflects the results of the continued growth in the Company's business which
allowed for higher utilization of fixed costs. The increase in dollars reflects
investment in the Company's Information Systems, Human Resources and Program
Management groups needed to support the Company's growth.
Interest and other expense increased to $372,000 in 1996 from $188,000 in 1995
as a result of additional borrowing costs and bank fees partially offset by
interest income.
Liquidity and Capital Resources
- - - -------------------------------
Traditionally, the Company has financed its growth and operations through
earnings and borrowings. The Company has experienced a significant increase in
working capital as the business has grown. At June 30, 1996, the Company had
working capital of $56.6 million compared to $35.1 million at December 31, 1995.
The net increase was due to the growth in accounts receivable and inventories
associated with an increase in sales offset by growth in accounts payable. The
change in accounts receivable reflects increased sales and a shift toward
product shipments at the end of the quarter. The change in inventory balance
reflects the inventory levels required to meet customer demand.
The Company has recently increased its revolving credit facility from $ 20.0
million to $28.0 million. As of June 30, 1996, there was $20.6 million
outstanding under the available credit facility. The Company anticipates that
its cash requirements for at least the next twelve months will be satisfied by
cash flows from operations and the use of the Company's existing bank credit and
equipment lease facilities.
8
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The annual meeting of stockholders was held on May 15, 1996. Two
proposals were submitted to stockholders as described in the Company's proxy
statement dated April 15, 1996. The following is a brief description of the
matters voted upon, the number of votes cast for and against each proposal, and
the number of abstentions.
1. To elect two Class I Directors to serve on the Company's Board of Directors
for three-year terms or until their successors have been duly elected and
qualified.
<TABLE>
<S> <C>
Nominees: Donald G. Polich
Edward T. Cuddy
Votes For All Nominees: 8,015,949
Votes Withheld from All Nominees: 48,750
</TABLE>
2. To ratify the selection of Deloitte & Touche LLP as independent auditors
for the fiscal year ending December 31, 1996.
<TABLE>
<S> <C>
Votes For: 8,055,670
Votes Against: 925
Abstain: 8,104
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
10.1 Lease dated January 31, 1996 between Mansfield/Forbes Ltd.
Partnership and ACT Manufacturing, Inc.
11. Weighted Shares Used in Computation of Earnings per Share.
27 Financial Data Schedule
(b) Reports on Form 8-K:
The registrant did not file any reports on From 8-K during the quarter
ended June 30, 1996.
9
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
ACT MANUFACTURING, INC.
August 7, 1996 /s/ John A. Pino
---------------------------------------
John A. Pino
President and Chief Executive Officer
(Principal Executive Officer)
August 7, 1996 /s/ Douglass C. Greenlaw
---------------------------------------
Douglass C. Greenlaw
Vice President of Finance and
Administration and Chief Financial Officer
(Principal Financial and Accounting Officer)
10
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No.
- - - -----------
<S> <C>
10.1 Lease dated January 31, 1996 between Mansfield/Forbes Ltd.
Partnership and ACT Manufacturing, Inc.
11. Weighted Shares Used in Computation of Earnings per Share
27 Financial Data Schedule
</TABLE>
11
<PAGE>
EXHIBIT 10.1
------------
LEASE
1. REFERENCE DATA, EXHIBITS; NATURE OF LEASE
1.1 Reference Data. Each reference in this lease to any of the following
--------------
subjects shall be construed to incorporate the data stated for that subject:
LANDLORD: Mansfield/Forbes Ltd. Partnership.
LANDLORD'S ADDRESS: c/o R.W. Reynolds
Spaulding & Slye
125 High Street
Boston, MA 02110
TENANT: ACT Manufacturing, Inc.
TENANT'S ADDRESS: 108 Forest Street
Hudson, MA 01749
Attention: Douglass Greenlaw
TENANT'S USES: Light industrial manufacturing, engineering, and office
uses, and no other purpose.
THE PROPERTY: The land with the building and other improvements thereon
known and numbered as 360 Forbes Blvd. in Mansfield, Bristol County,
Massachusetts, as described on Exhibit A attached hereto and made a part
hereof.
THE BUILDING: One-story steel frame and precast concrete building with a
net rentable area of approximately 44,080 sq. ft.
THE LOT: The land of the Property, as described in Exhibit A.
TERM: Commencing October 1, 1994 February 1, 1996 and
ending September 30, 1997 January 31, 2001.
FIXED RENT: $6.25 per sq. ft. or $275,500.00 for the first year of the
lease (February 1, 1996 to January 31, 1997); $6.50 per sq.
ft. or $286,520 for the second year of the lease (February 1, 1997
to January 31, 1998); $6.75 per sq. ft, or
$297,540 for the third year of the lease (February 1, 1998 to
January 31, 1999); $6.75 per sq. ft, or $297,540 for
the fourth year of the lease (February 1, 1999 to January
31, 2000); $7.00 per sq. ft, or $308,560 for the fifth
year of the lease (February 1, 2000 to January 31,
2001) except that for the first two months of the Term, Tenant will pay
$3.00 per sq. ft. per annum, or $11,020 per month.
THE PREMISES: The Premises consist of the Property in its entirety subject
to the limitations set forth in Exhibit B.
INSURANCE AMOUNTS:
Bodily Injury: $1,000,000 per person and $3,000,000 per occurrence
<PAGE>
Property Damage: $500,000
PARKING: Parking serving the Premises, as shown on the Site Plan
previously provided Tenant, shall be included in the Fixed Rent.
ACCESS: Tenant as sole tenant shall control all access to the Premises
except as provided for herein.
1.2 Exhibits. The Exhibit A attached to this lease are is
--------
incorporated as a part of this lease.
1.3 Nature of Lease. Notwithstanding anything else herein contained to
---------------
the contrary, Landlord and Tenant acknowledge that this is intended to be a so-
called "triple net" lease such that Landlord shall not be obligated, unless the
provisions hereof expressly so require, to bear any expense necessary or
appropriate in connection with the ownership, repair, operation or maintenance
of the Property excepting only (i) any interest and amortization on
mortgages encumbering the fee title at any time; and (ii) any estate,
inheritance, income or other personal taxes of Landlord; and as otherwise
expressly provided herein, including without limitation, section 7.2.
2. LEASE, TERM, FIXED RENT
2.1 Landlord hereby leases to Tenant and Tenant hires from Landlord the
Premises.
2.2 Term. TO HAVE AND TO HOLD for a period of Five (5) years
----
beginning on February 1, 1996, and continuing until midnight
on January 31, 2001for the Term, unless sooner terminated as hereinafter
provided. Tenant and its authorized agents, contractors, subcontractors and
employees shall be granted a license by Landlord to enter upon the Premises, at
Tenants' sole risk and expense, during ordinary business hours prior to the
commencement of the Term, for the sole purpose of installing Tenant's trade
fixtures and equipment in the Premises; provided, however, that (i) the
provisions of this Lease, other than with respect to the payment of Fixed Rent,
shall apply during such early entry, including, but not limited to, the
provisions of Section 6.8 relating to Tenant's indemnification of Landlord, (ii)
prior to any such entry, Tenant shall pay for and provide evidence of the
insurance to be provided by Tenant pursuant to the provisions of Article V, and
(iii) Tenant shall pay all utility, service and maintenance charges for the
Premises attributable to Tenant's early entry and use of the Premises as
reasonably determined by Landlord. Upon Tenant's breach of any of the foregoing
conditions, Landlord may, in addition to exercising any of its other rights and
remedies set forth herein, revoke such license upon written notice to Tenant.
(iv) Tenant shall not unreasonably interfere, delay or hinder Landlord, its
agents contractors or subcontractors in the construction of the Tenant
Improvements in accordance with the provisions of this Lease, and (v) Tenant
shall not use the Premises for storage of inventory or otherwise commence the
operation of business during the period of such early entry. Upon Tenant s
breach of any of the foregoing conditions, Landlord may, in addition to
exercising any of its other rights and remedies set forth herein, revoke such
license upon notice to Tenant.
2.3 Rent. YIELDING AND PAYING for the Term, the Fixed Rent in equal
----
monthly installments equal to 1/12 of the Fixed Rent for each full calendar
month, and a proportionate part thereof for any part of a month, payable in
advance on the first day of each month at the office of Landlord, and Additional
Rent as hereinafter specified, all without deduction or set-off of any kind,
except as otherwise expressly provided herein. Payments shall be made to
Landlord at Landlord's
<PAGE>
Address. All checks shall be made payable to Mansfield/Forbes Ltd. Partnership
unless and until otherwise directed by Landlord in writing.
2.4. Extended Term. Tenant may, upon nine (9) months' written notice to
-------------
Landlord, extend the Term of this Lease for an additional five (5) year period,
to begin October 1, 1997 February 1, 2001, and conclude September
30, January 31, 2006 ("Extended Term"). , Fixed Rent during the Extended
Term shall be ninety-five percent (95%) of the then current market price, as
determined by a real estate appraiser mutually agreed upon by Tenant and
Landlord. However, in no case shall Fixed Rent for the Extended Term be less
than the Fixed Rent last payable during the Term.
3. OCCUPANCY AND EXPANSION
3.1 As Is. Landlord shall have no duty whatsoever to prepare the Premises
-----
for occupancy by Tenant, and Tenant shall accept the Premises "as is" on the
first day of the Term.
3.2 Repairs, Fixtures and Improvements. All repairs, alterations,
----------------------------------
additions and restoration by Tenant or Landlord hereafter required or permitted
shall be done in good and workmanlike manner, including satisfactory materials,
and in compliance with all applicable laws, ordinances, bylaws, regulations and
orders of governmental authority, and requirements of the insurers and of any
mortgagee of the Property. Unless otherwise provided herein, all improvements,
alterations and additions to the Building and fixtures and equipment appurtenant
to it made or installed at any time by either Landlord or Tenant shall be part
of the Building, except that signs, machinery, fixtures or equipment which are
owned and/or installed by Tenant and used solely in the conduct of
Tenant's business, and any items which Landlord has agreed prior to installation
by Tenant to be removable by Tenant, such as movable office partitions and
special air conditioning, shall not become part of the Building. Each party
doing any construction of other work agrees to pay for such work and discharge
promptly any liens arising therefrom.
4. ADDITIONAL RENT:
4.1 Additional Rent. Tenant's Additional Rent shall mean payments on
---------------
account of real estate taxes and assessments allocated to the Premises and the
cost of Landlord's insurance on the Property, all of which Tenant hereby
covenants to pay as hereinafter set forth.
4.2 Tax Expenses. On or before the fifteenth (15th) day following receipt
------------
by Tenant of the certified statement referred to below in this Section, Tenant
shall pay to Landlord, as additional rent, Landlord's Tax Expenses, prorated in
the case of any fraction of a Tax Year falling within the Term. Not later than
ninety (90) days after Landlord's Tax Expenses are determinable for the first
such Tax Year or fraction thereof and for each succeeding Tax Year or fraction
thereof during the Term, Landlord shall render Tenant a statement in reasonable
detail certified by a representative of Landlord. The statement shall show, for
the year or fraction thereof, as the case may be, Landlord's Tax Expenses,
abatement
<PAGE>
receipts, and the amount payable by Tenant. Credit shall be given
Tenant for any amounts paid under Section 4.4.
Terms used herein are defined as follows:
(i) "Tax Year" means the twelve-month period beginning July 1 each year
or if the appropriate governmental tax fiscal period shall begin on any date
other than July 1, such other date.
(ii) "Landlord's Tax Expenses" with respect to any Tax Year means the
aggregate real estate taxes on the Property with respect to that Tax Year,
reduced by any abatement receipts with respect to that Tax Year.
(iii) "Real Estate Taxes" means all taxes and special assessments of
every kind and nature assessed by any governmental authority on the Lot or
the Building or the Property which the Landlord shall become obligated to
pay because of or in connection with the ownership, leasing and operation of
the Lot, the Building, and the Property (including without limitation any
excise or other payments prescribed by Massachusetts General Laws Chapter
121A. Section 10) and reasonable expenses of any proceedings for abatement
of taxes. Either party hereto may elect upon written notice to the other
to initiate and pursue a tax abatement and the costs incurred in connection
therewith shall be borne by the party seeking the abatement.
Landlord agrees to elect to pay any special or public assessments or
betterments over the longest time period available. The amount of
special taxes or special assessments to be included shall be limited to the
amount of the installment (plus any interest payable thereon, unless such
interest shall be due solely to Landlord's failure, upon timely receipt of
Tenant's payment, to make timely payment of real estate taxes to the
municipal authority) of such special tax or special assessment required to
be paid during the year in respect of which such taxes are being determined.
There shall be excluded from such taxes all income, estate, succession,
inheritance and transfer taxes; provided, however, that if at any time
during the Term the present system of ad valorem taxation of real
Pproperty shall be changed so that in lieu of the whole or any part
of the ad valorem tax on real Pproperty, there shall be assessed on
Landlord a capital levy or other tax on the gross rents received with
respect to the Lot or Building or Property, or a federal, state, county,
municipal, or other local income, franchise, excise or similar tax
assessment, levy or charge (distinct from any now in effect in the
jurisdiction in which the Property is located) measured by or based in whole
or in part, upon any such gross rents, then any and all of such taxes,
assessments, levies or charges, to the extent so measured or based, shall be
deemed to be included within the term "real estate taxes" but only to the
extent that the same would be payable if the Property were the only property
of Landlord.
<PAGE>
4.3 Insurance Costs. On or before the fifteenth (15th) day following
---------------
receipt by Tenant of the certified statement of Landlord as to Landlord's cost
of maintaining the insurance described in Section 5.2 hereof, Tenant shall pay
to Landlord, as Additional Rent, the amount set forth in such statement.
Landlord shall provide Tenant upon reasonable request with certificates of
insurance required to be maintained by Landlord on the Premises. Landlord
agrees to competitively bid all insurance maintained on the Premises.
4.4 Monthly Payments of Additional Rent. If requested by an insurance
-----------------------------------
company, bank, or other lending institution holding a mortgage on the Premises,
Tenant shall pay to Landlord for deposit by and in the name of the Landlord,
such monthly payment as such mortgage holder shall reasonably determine to be
sufficient to provide in the aggregate a fund adequate to pay, when they become
due and payable, all Tax Expenses and insurance costs referred to in Sections
4.2 and 4.3 all such payments to be applied by the holder to or toward the
payment of said taxes, assessments and costs and any balance remaining after
such payment to be accounted for by Landlord to Tenant annually. Such payments
shall be made when and as designated by such institution.
4.5 Time of Payment of Additional Rent. Except as otherwise specifically
----------------------------------
provided herein, any sum, amount, item or charge designated or considered as
Additional Rent in this lease shall be paid by Tenant to Landlord on the first
day of the month following the date on which Landlord notified Tenant of the
amount payable or on the tenthfifteenth day after the giving Tenant's
receipt of such notice, whichever shall be later. Any such notice
shall specify in reasonable detail the basis of such Additional Rent. Fixed and
Additional Rent shall be paid by Tenant to Landlord without offset or
deduction except as otherwise expressly provided for herein.
5. INSURANCE
5.1 Tenant's Liability Insurance. During the Term, Tenant shall maintain
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with respect to the Premises including the sidewalks or ways adjoining them,
comprehensive liability insurance (including Bodily Injury and Property Damage
insurance) with limits at least as high as the amount respectively stated
therefor under Section 1 of this lease, or such higher limits as a mortgagee or
Landlord may from time to time reasonably require, designating Landlord, Tenant
and any mortgages each as one of the named insureds.
5.2 Landlord's Insurance. -During the Term, Landlord shall maintain
--------------------
casualty insurance in an amount not less than eighty percent (80%) of the
insurable value of the Building and all other improvements on the Property
(exclusive of improvements made by Tenant) insuring the same against fire and
such other hazards, casualties and contingencies as Landlord or its mortgagee
may from time to time direct, together with appropriate liability insurance in
such amounts as Landlord shall deem
<PAGE>
reasonable. Tenant shall reimburse Landlord for all costs and fees relating to
insurance maintained hereunder.
5.3 Insurance Provisions; Waiver of Subrogation. All insurance carried by
-------------------------------------------
Tenant as hereinabove required shall include terms and conditions reasonably
acceptable to Landlord and any mortgagee and shall be issued by companies
approved by Landlord and such mortgagee. Each party, notwithstanding any
provisions of this lease to the contrary, waives any rights of recovery against.
the other for loss or-injury against which the waiving party is protected by
insurance, so long as the applicable policy is not thereby prejudiced and the
other party pays any resulting excess premium, reserving, however, any rights
with respect to any excess of loss or injury over the amount covered by the
insurance. No deductible shall be permitted on any insurance carried by
Tenant without the express written consent in advance of Landlord and any
mortgagee, and if consented to, Tenant hereby agrees to indemnify and hold
harmless Landlord and the mortgagee to the full extent of any deductible and to
the full extent of any additional amount not covered by said insurance.
Each party shall deliver a certificate of its insurance to the other party upon
request.
6. ADDITIONAL COVENANTS OF TENANT
Tenant agrees during the Term and such time as Tenant occupies any part of
the Premises:
6.1 To pay when due the Fixed and Additional Rent and to arrange for and
pay when due all charges by public authority or utility for water, gas,
electricity (including without limitation gas and electricity used to produce
heat and air conditioning), telephone, sewer and other services rendered to the
Premises and service inspections made and repairs and maintenance therefor,
whether called charge, tax assessment, fee or otherwise. Landlord shall have no
obligation to provide any utilities to the Premises on the Property.
6.2 Subject to the provisions of Section 7.2, to keep the Premises,
including without limitation the exterior of the Building and the Lot, neat and
clean and in the order and repair as they are in on the commencement of the Term
or may be put in during the Term, reasonable wear and tear and damage by fire
and casualty only excepted. Tenant's obligation hereunder includes the making
of all repairs as needed, including without limitation interior painting and
exterior repainting, replacement of glass injured or broken, keeping all
plumbing, lighting, heating, air conditioning, sprinkler and other utility
systems in good operating condition, removing all snow and ice from the Lot and
maintaining all lawns, plantings and other landscaped areas thereon in a healthy
and attractive state.
6.3 Not to permit in the Premises any auction sale or any nuisance, or the
emission from the Premises of any objectionable noise or odor, or any activity
which is improper, offensive, contrary to law or liable to invalidate or
increase-the insurance premiums or liable to make necessary any alteration or
addition to the Property.
<PAGE>
6.4 Not to erect any signs or conduct any activity on the Premises or the
Property not permitted by the Town of Mansfield or the Mansfield Industrial
Park, nor to make any alterations or additions except as provided 'in Section
3.2 hereof.
6.5 Not to overload or deface the Premises nor permit any use contrary to
law, or lawful ordinance, by-law, regulation or order of public authority,
whether with respect to safety appliances or to alterations, repairs, or
additions required as a condition for continuance of use, or otherwise.
6.6 Not to assign this lease or sublet the whole or any part of the
Premises without first obtaining on each occasion the consent in writing of
Landlord, which consent shall not be unreasonably withheld, provided that Tenant
shall reimburse Landlord promptly for all reasonable expenses, including legal
expenses, incurred by Landlord in connection with such consent. No assignment
or subletting shall in any way impair the continuing primary liability of Tenant
hereunder, and no consent to any assigning or subletting an a particular
instance shall be deemed to be a waiver of the obligation to obtain Landlord's
approval in the case of any other assignment or subletting.
6.7 To use the Premises only for the Tenant's Uses, and for such other
uses as are specifically permitted in writing by Landlord, and to procure any
licenses and permits from time to time required therefor.
6.8 To assume exclusive control of the Premises, and to defend, indemnify
and save Landlord harmless from any liability for injury, loss, claim, or damage
to or of any person or property while on the Premises unless arising from any
omission, fault, negligence or other misconduct of Landlord; and to defend,
indemnify and save Landlord harmless from all injury, loss, claim or damage to
or of any person or property anywhere occasioned by any omission, fault, neglect
or other misconduct of Tenant; and to keep all Tenant's employees and
contractors on the Premises covered by Worker's Compensation insurance
(including the right to self insure in compliance with Worker's Compensation
requirements).
6.9 That all of the improvements, additions, alterations, furnishings,
fixtures, equipment, effects and property of every kind, nature and description
of Tenant, and of all persons claiming by, through or under Tenant, which during
the continuance of this lease or any occupancy of the Premises, may be on the
Premises, 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, or
by the leakage or bursting of water pipes, steam pipes, or other pipes, or by
theft or from any other cause, no part of said loss or damage is to be charged
to or to be borne by Landlord, except that Landlord shall in no event be
indemnified or held harmless or exonerated from any liability to Tenant or to
any other person, for any injury, loss, damage, or liability to the extent
prohibited by law.
<PAGE>
6.10 To pay on demand Landlord's expenses, including reasonable attorney's
fees, incurred in enforcing any obligation of Tenant under this lease after
Tenant's failure to perform any such obligation beyond applicable cure
periods, or in curing any default by Tenant under this lease, and to
reimburse Landlord promptly on demand for all reasonable expenses, including
attorney's fees, incurred by Landlord in connection with all requests by Tenant
for consent or approval hereunder.
6.11 To permit Landlord and others designated by Landlord (including
without limitation prospective purchasers, lenders and tenants) to examine the
Premises, upon reasonable advance notice to Tenant, at reasonable times,
subject to Tenant's reasonable security regulations and business convenience,
and, during the year prior to expiration of the Term, to permit Landlord to keep
affixed in suitable places without obstruction of Tenant's signs or displays,
notices for letting; and
6.12 At the expiration of the Term or earlier termination of this lease,
promptly and peaceably to yield up, broom clean and neat, the Premises and all
improvements, alterations and additions thereto (except as otherwise set forth
herein), and all fixtures and equipment servicing the Building, in the same
condition in and in the order and repair as they arewere in on the
commencement of the Term or may be put in during the Term which the same are
required to be maintained hereunder, reasonable wear and tear and damage by fire
and casualty excepted. Tenant agrees thereupon to remove Tenant's signs, goods
and effects, and machinery, fixtures and equipment used solely in the conduct of
Tenant's business (and at the request of Landlord, any alterations or additions
whether or not approved by Landlord under this Section 6) and to repair any
damage caused by the removal and to restore the Premises to their former
condition. Such removal, repair and restoration shall be completed by the
expiration of the Term, or within thirty days of any earlier termination of this
lease.
7. COVENANTS OF LANDLORD
7.1 Landlord agrees that Tenant, on paying the Fixed and Additional Rent
and performing Tenant's obligations under this Lease, shall peacefully and
quietly have, hold and enjoy the Premises through the Term or until this lease
is terminated as hereinafter provided, Landlord may, however, enter the Premises
for the purpose of making such repairs or renovations as Landlord may desire to
make, or as may be necessary for the maintenance of the building, or as may be
required of Landlord under the terms of this Lease, provided that such entry
shall not unreasonably interfere with the conduct of Tenant's business.
7.2 At Landlord's sole cost and expense, Landlord shall make any
repairs necessary in order to keep the roof, foundation, exterior walls and
other structural components of the Building in good condition, provided however
that in the event of fire, casualty or taking, Landlord's obligations in this
regard shall be as provided in Section 8. Specifically, Landlord shall insure
that the roof of the Building is impervious to water and is kept in a first-
class condition.
<PAGE>
7.3 Except as otherwise provided herein, Landlord shall not be
liable to Tenant for any compensation or reduction of rent by reason of
inconvenience or annoyance or for loss of business arising from the necessity of
Landlord or its agents entering the Premises for any of the purposes authorized
in this lease, or for repairing the Premises or any portion of the Building,
however the necessity may occur. In case Landlord is prevented or delayed from
performing any other covenant or duty to be performed on Landlord's part by
reason of any cause reasonable beyond Landlord's control and such delay or
failure does not adversely affect Tenant's use or occupancy of the
Premises, Landlord shall not be liable to Tenant therefor, nor, except as
expressly otherwise provided in case of fire or taking, shall Tenant be entitled
to any abatement or reduction of rent by reason thereof, nor shall the same give
rise to a claim in Tenant's favor that such failure constitutes actual or
constructive, total or partial, eviction from the Premises; however, if such
delay or failure of Landlord adversely affects Tenant's use and occupancy
of the Premises, Tenant shall be entitled to an equitable abatement or
reduction of rent by reason thereof.
7.4 Landlord reserves the right to stop any service or utility system,
when necessary by reason of accident or emergency, or until necessary repairs
have been completed; provided however, that in each instance of stoppage,
Landlord shall exercise reasonable diligence to eliminate the cause thereof.
Except in case of emergency repairs Landlord will give Tenant reasonable advance
notice of any contemplated stoppage and will use reasonable efforts to avoid
unnecessary inconvenience to Tenant by reason thereof.
7.5 Landlord shall repair the parking area adjacent to % the Building in a
good, workmanlike manner so that storm properly drains away from the parking
surface.
7.5 Notwithstanding anything contained in this Lease to the contrary,
if the Premises shall, for a period of five (5) consecutive business days, be
untenantable due to the lack of any service or operation which Landlord
is required to provide or has the right to stop hereunder and the lack
thereof adversely affects the continued operation in the ordinary course
of Tenant's business, then Fixed Rent and all Additional Rent and other amounts
payable by Tenant hereunder shall thereafter be abated in proportion to such
untenantability until the day such service or operation is restored to the
extent necessary to allow Tenant business operations to fully resume.
8. CASUALTY OR TAKING
8.1 Except as otherwise provided herein, Iin case during the
Term all or any substantial part of the Premises or the Building or the Lot are
damaged materially by fire or other casualty or by action of public or other
authority in consequence thereof, or are taken by eminent domain or Landlord
receives compensable damage by reason of anything lawfully done in pursuance of
public or other authority, this Lease shall terminate at Landlord's election,
which may be made notwithstanding Landlord's entire interest may have been
divested, by notice given to Tenant within ninety (90) days after the date of
the casualty or taking election to terminate arises, specifying the
effective date of termination.
<PAGE>
The effective date of termination specified by Landlord shall be not less than
fifteen (15) thirty (30) nor more than thirty (30) sixty (60).
days after the date of notice of such termination. Unless terminated
pursuant to the foregoing provisions, this lease shall remain in full force and
effect following any such damage or taking, subject, however, to the following
provisions. If in any such case the Premises are rendered unfit for use and
occupation and this lease is not so terminated, Landlord shall use reasonable
efforts (following the expiration of the ninety (90) day period in which
Landlord may terminate this lease) to put the Premises, or in case of taking
what may remain thereof, into proper condition for use and occupation (excluding
in case of both casualty and taking any items installed or paid for by Tenant
which Tenant may be required to remove pursuant to this lease) provided,
however, if for any reason such restoration (without regard to the amount of
insurance proceeds available) shall not be substantially completed and
ready for Tenant's use and occupancy within six (6) months after the date of
such casualty or taking, Tenant shall have the right to terminate this Lease by
giving notice to Landlord thereof within thirty (30) days after the expiration
of such six (6) month period, and this Lease shall terminate thirty days
after the date of such notice to Landlord, unless Landlord substantially
completes such restoration within said 30-day period. Landlord shall not be
required to extend sums in excess of the net proceeds received on account of
such casualty or taking. A just proportion of the Fixed Rent according to the
nature and extent of the injury shall be abated until the Premises or such
remainder shall have been put by Landlord in such condition. In case of a taking
which permanently reduces the area of the Premises, a just proportion of the
Fixed Rent and Additional Rent shall be abated for the remainder of the Term.
Notwithstanding anything to the contrary contained herein, if the casualty or
permanent taking is greater than thirty-five percent (35%) of the Premises,
Tenant has the option to terminate the lease for the remainder of the
Term.
8.2 Landlord reserves to itself any and all rights to receive awards made
for damages to the Premises and Building and Lot and the leasehold hereby
created, or any one or more of them, accruing by reason of exercise of eminent
domain or by reason of anything lawfully done in pursuance of public or other
authority. Tenant hereby releases and assigns to Landlord all Tenant's rights
to such awards, and covenants to deliver such further assignments and assurances
thereof as Landlord may from time to time request, hereby irrevocably
designating and appointing Landlord as its attorney-in-fact to execute and
deliver in Tenant's name and behalf all such further assignments thereof,
except for Tenant's right to receive reimbursement or awards for Tenant's
reasonable moving expenses.
8.3 In the event of any taking of the Premises or any part thereof for
temporary use which taking does not affect Tenant's access to or use of the
Premises, (i) this lease shall be and remain unaffected thereby and rent
shall not abate, and (ii) Tenant shall be entitled to receive for itself such
portion or portions of any award made for such use with respect to the period of
the taking which is within the Term, provided that if such taking shall remain
in force at the expiration or earlier termination
<PAGE>
of this lease, Tenant shall then pay to Landlord a mutually acceptable
sum equal to the reasonable cost of performing Tenant's obligations with
respect to surrender of the Premises and upon such payment shall be excused from
such obligations. In the event such temporary taking of all or a portion of
the Premises shall affect Tenant's access to and/or use of the Premises, then
Tenant shall be entitled to an equitable abatement of the Fixed Rent and
Additional Rent and any other charges of Tenant under this lease until access
and/or use is fully restored.
9. DEFAULTS OF TENANT
9.1 Events of Default. This lease is upon the further condition that if
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(a) Tenant shall default in the due and punctual payment of rent or any other
sum payable hereunder and such default shall continue for ten (10) days after
Tenant's receipt of notice of such failure to pay, provided further, that
Landlord shall not be required to give more than two (2) notices of such failure
to pay in any twelve (12) month period; or (b) Tenant shall neglect or fail
to perform or observe any of Tenant's other covenants herein, and Tenant
shall fail to commence to cure such neglect or failure shall continue for a
period of within thirty (30) days after written notice to Tenant and
thereafter diligently pursue such cure to completion, which shall occur in all
events no later than ninety (90) days after such commencement to cure; or
(c) the leasehold hereby created shall be taken on execution, or by other
process of law and the same is not discharged or release within thirty (30)
days; or (d) Tenant shall commence a voluntary case under the federal
bankruptcy laws or shall admit in writing its insolvency or its inability to pay
its debts as they become due, or shall make an assignment for the benefit of
creditors, or shall apply for, consent to or acquiesce in the appointment of, or
taking possession by, a trustee, receivers custodian or similar official or
agent for itself or any substantial part of its Property or shall generally not
pay its debts as they become due; or (e) Tenant shall have an order or decree
for relief in an involuntary case under the federal bankruptcy laws entered
against it, or a petition seeking reorganization, readjustment, arrangement
composition, or other similar relief as to it under the federal bankruptcy laws
or any similar law for the relief of debtors shall be brought against it and
shall be consented to by it or shall remain undismissed for sixty (60) days; or
(f) a trustee, receiver, custodian or similar official or agent shall be
appointed to take charge of all or any part of Tenant's Property then, and in
any of said cases, Landlord lawfully may, immediately or at any time thereafter
while such condition continues give notice to Tenant terminating the lease in
accordance with applicable law and without demand and without prejudice to
any remedies which might otherwise be used for arrears of rent or preceding
breach of covenant give notice to Tenant terminating the lease. Upon such
notice, this lease shall terminate. Landlord may thereafter enter upon the
Premises or any part thereof and expel Tenant and those claiming through or
under it and remove its and their effects, in accordance with applicable law
forcibly if necessary, without being deemed guilty of any manner of
trespass.
<PAGE>
Tenant covenants that, in case of such termination, Tenant will pay
forthwith to Landlord, as compensation, the excess of the total rent reserved
for the residue of the Term over the rental value of the Premises for said
residue of the Term. In calculating the rent reserved there shall be included,
in addition to the Fixed Rent and all Additional Rent, the value of all other
considerations agreed to be paid or performed by Tenant for said residue.
Tenant further covenants as an additional and cumulative obligation after any
such termination 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 and to the same extent and at the same time as if this lease has not
been terminate. iIn calculating the amounts to be paid by Tenant under
the last covenant Tenant shall be credited with any amount paid to Landlord as
compensation as provided in this paragraph and also with the net proceeds of any
rent obtained by Landlord by reletting the Premises, after deducting all
Landlord's reasonable expenses in connection with such reletting,
including, without limitation, all repossession costs, brokerage commissions,
fees for legal services and expenses of preparing the Premises for such
reletting. It is agreed by Tenant that Landlord shall (i) use best
efforts to may relet the Premises or any part or parts thereof, for a term
or terms which may at Landlord's option be equal to or less than or exceed the
period which would otherwise have constituted the balance of the Term and may
grant such concessions and free rent as Landlord in its sole judgment considers
commercially reasonable or necessary to relet the same and (ii) make such
alterations, repairs and decorations in the Premises as Landlord in its sole
judgment considers advisable commercially reasonable or necessary to
relet the same, and no action of Landlord in accordance with the foregoing or
failure to relet or to collect rent under reletting shall operate or be
construed to release or reduce Tenant's liability as aforesaid.
In lieu of any other remedies, damages or indemnity and in lieu of
full recovery by Landlord of all sums payable under all the foregoing provisions
of this section, Landlord may by written notice to Tenant, at any time after
this lease is terminated under any of the provisions contained in this section
or is otherwise terminated for breach of any obligation of Tenant and before
such full recovery, elect to recover, and Tenant shall thereupon pay, as
liquidated damages, an amount equal to the aggregate of the Fixed Rent and
Additional Rent accrued under this lease in the twelve (12) months ended next
prior to such termination plus the amount of Fixed Rent and Additional Rent of
any kind accrued and unpaid at the time of termination.
Nothing herein contained shall, however, limit or prejudice the right of
Landlord to prove for and obtain in proceedings for bankruptcy or insolvency by
reason of the termination, an 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, the damages are to be proved, whether or not the amount be greater, equal
to, or less than the amount of the loss or damage referred to above.
<PAGE>
For the purpose of this Section 9, the term "Tenant" shall also include any
assignee, sublessee, transferee, and guarantor of Tenant under this Lease.
9.2 Landlord's Right to Cure Tenant's Default. If Tenant shall default in
-----------------------------------------
the performance or observance of any agreement, condition or other provision in
this lease contained on its part to be performed or observed, and shall not cure
such default within thirty (30) days after notice in writing 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). Landlord may, at its option, without waiving any claims for
breach of agreement, at any time thereafter cure such default for the account of
Tenant and Tenant shall, on the next installment of rent due, reimburse Landlord
for any amount paid, including reasonable attorneys fees, and any expense
or contractual liability so incurred. However, if it is necessary to protect
the Property or Landlord's interest therein or to prevent injury or damage to
persons or Property that certain action be taken within thirty (30) days, the
notice shall so specify, and Landlord shall have the right to cure such default
on behalf of Tenant if no action is initiated by Tenant prior to the time
specified in the notice.
9.2a Tenant's Right to Cure Landlord's Default. If Landlord
-----------------------------------------
shall default in the performance or observance of any agreement, condition or
other provision in this lease contained on its part to be performed or observed,
and shall not cure such default within thirty (30) days after notice in writing
from Tenant 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). Tenant may, at its option, without waiving any
claims for breach of agreement, at any time thereafter cure such default for the
account of Landlord and Landlord shall within fifteen (15) days after demand
thereof from Tenant, which demand shall be accompanied by the appropriate
invoice, bill or the like, reimburse Tenant for any amount paid, including
reasonable attorneys fees, and any expense or contractual liability so incurred.
However, if it is necessary to protect the Property or Tenant's interest therein
or to prevent injury or damage to persons or Property that certain action be
taken within thirty (30) days, the notice shall so specify, and Tenant shall
have the right to cure such default on behalf of Landlord if no action is
initiated by Landlord prior to the time specified in the notice.
9.3 Late Charge. If rent or any other sum payable hereunder remains
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outstanding for a period of fifteen (15) days, Tenant shall pay to Landlord a
late charge equal to two percent (2%) of the amount due for each month or
portion thereof during which the arrearage continues.
10. DEFAULT OF LANDLORD, MORTGAGE HOLDER'S RIGHTS
10.1 Mortgage Holder's Rights. After receiving notice from any person,
firm or other entity that it is a Mortgagee or Ground Lessor, no notice from the
Tenant to the Landlord shall be effective unless and until a copy of the same is
given to such Mortgagee or Ground Lessor, and the curing of any
<PAGE>
of the Landlord's defaults by such Mortgagee or Ground Lessor shall be treated
as performance by the Landlord. Accordingly, no act or failure to act on the
part of the Landlord which would entitle the Tenant under the terms of this
Lease, or by law, to be relieved of the Tenant's obligations hereunder or to
terminate this Lease, shall result in a release or termination of such
obligations or a termination of this Lease unless (a) the Tenant shall have
first given written notice of the Landlord's act or failure to act to such
Mortgagee or Ground Lessor specifying the act or failure to act on the part of
the Landlord which could or would give basis to the Tenant's rights; and (b)
such Mortgagee or Ground Lessor, after receipt of such notice, has failed or
refused to correct or cure the condition complained of within a reasonable time
thereafter, but nothing contained in this Section 21.5] 10.1 shall be
deemed to impose any obligation on any such Mortgagee or Ground Lessor to
correct or cure any such condition. "Reasonable time" as used above means and
includes a reasonable time to obtain possession of the Premises if any such
Mortgagee or Ground Lessor elects to do so and a reasonable time to correct or
cure the condition if such condition is determined to exist, but in no event
more than sixty (60) days.
10.2 Status of Lease. Tenant shall, on ten (10) days' request by Landlord
---------------
or any mortgagee, execute, acknowledge and deliver to Landlord, the mortgagee or
a prospective purchaser, a statement in writing certifying that this lease is
unmodified, or, if modified, terms of the modification and that as so modified,
this lease is in full force and effect; that Landlord and Tenant have fully
complied with the terms and provisions thereof, and if there is a claim of non-
compliance, the respect in which such noncompliance is claimed; that Tenant has
no defenses, offsets or counterclaims against Tenant's obligations under the
lease, and if there are, setting out the details thereof; certifying the date to
which rent and other charges have been paid; and certifying as to such other
information regarding Tenant or this lease as Landlord may reasonably require.
This certification shall be in such form as may reasonably be requested by
Landlord or a mortgagee.
10.3 Lease Subordination and Non-Disturbance. Tenant's obligations
---------------------------------------
under the Lease are contingent upon Landlord obtaining a mutually
satisfactory Non-Disturbance Agreement in a form suitable for recording from the
current mortgagee within ninety (90) days of the date hereof, and
from any future mortgagees. This lease shall be subject and
subordinate to any mortgage now or hereafter on the Lot or Building or the
Property, and to each advance made or, hereafter to be made under any mortgage,
and to all renewals, modifications, consolidations, replacements and extensions
thereof and all substitutions therefor, and Tenant shall execute and deliver
promptly any certificate that Landlord or mortgagee may request, provided Tenant
receives said Non-Disturbance Agreement.
11. MISCELLANEOUS PROVISIONS
11.1 Recording of Lease. Tenant agrees not to record this lease or any
------------------
notice thereof. Upon request of either party, however, bBoth parties
shall execute and deliver simultaneously with the lease execution as
notice hean instrument in form appropriate for recording
<PAGE>
acknowledging the date the Term begins, the parties hereto and the
Premises, and if this lease is terminated before the Term expires, an
instrument in such form acknowledging the date of termination.
11. 2 Implied Acts. No consent or waiver, express or implied, by Landlord
------------
or Tenant to or of any breach of any agreement or duty to the other shall he
construed as a consent or waiver of any other breach of the same or any other
agreement or duty.
11.3 Approval. Whenever any approval or consent by Landlord or Tenant is
--------
expressly required by this lease, the approval or consent shall not be
unreasonably withheld, or delayed or conditioned. Whenever any
approval, consent or request is given pursuant to this lease, it shall be in
writing.
11.4 Payment and Notice. Communications, notices and payments, unless
------------------
otherwise specified by fifteen (15) days' prior notice, shall be addressed to
the party's address stated in Section 1 above. Any communication so addressed
shall be deemed duly served, if in writing and mailed by (i) registered
or certified mail, return receipt requested or (ii) an nationally recognized
overnight carrier. If Landlord by notice to Tenant at any time designates
an agent to receive payments or notices, any payment or notice thereafter by
Tenant shall be paid or given to the agent designated until notice is received
by Tenant from Landlord of termination of the agency.
11.5 Binding Effect. The obligations of this lease shall run with the
--------------
land, and this lease shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns. No owner of the
Property shall be liable under this lease except for breaches of Landlord's
obligations occurring while owner of the Property. The obligations of Landlord
shall be binding upon the assets of Landlord which comprise the Property but not
upon other assets of Landlord. No individual partner, trustee, stockholder,
officer, director, employee or beneficiary of Landlord shall be personally
liable under this lease and Tenant shall look solely to Landlord's interest in
the Property in pursuit of its remedies upon an event of default hereunder, and
the general assets of the individual partners, trustees, stockholders, officers,
employees or beneficiaries of Landlord shall not be subject to levy, execution
or other enforcement procedure for the satisfaction of the remedies of Tenant;
provided that the foregoing provisions of this sentence shall not constitute a
waiver of any obligation evidenced by this Lease and provided further than the
foregoing provisions of this sentence shall not limit the right of Tenant to
name Landlord or any individual partner or trustee thereof as party defendant in
any-action or suit in connection with this Lease so long as no personal money
judgment shall be asked for or taken against any individual partner, trustee,
stockholder, officer, employee or beneficiary of Landlord.
11.6 Arbitration. Upon mutual agreement of Landlord and
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Tenant, any controversy or claim arising out of or in relation to this
agreement or the breach thereof, shall be determined by arbitration in
accordance with the Rules of the American Arbitration Association then
applicable, in the City of Boston
<PAGE>
by a single arbitrator mutually acceptable to both Landlord and Tenant. The
decision of the arbitrator shall be binding upon the parties hereto and judgment
upon an award made by the arbitrator may be entered in any court having
jurisdiction thereof. Except in such instances when the parties mutually
agree to arbitrate as aforesaid, Tenant and Landlord may utilize the
courts in connection with any claim, dispute or action arising in connection
with this lease.
11.7 Holdover. If, after the expiration of the Term, Tenant or anyone
--------
claiming by, through or under Tenant remains in possession of the Premises, then
Landlord shall, for the first three (3) months Tenant remains in such
possession, have the option of considering Tenant (or such occupant) as a tenant
from month to month at the monthly Fixed Rent and Additional Rent last payable
during the Term. Following said three (3)-month period, Landlord shall continue
to have the option of considering Tenant (or such occupant) as a tenant from
month to month, but Tenant shall pay to Landlord a monthly amount equal to one
hundred fifty percent (150%) of the monthly Fixed Rent and Additional Rent last
payable during the Term.
11.8 Governing Law. This agreement shall be governed by and
-------------
construed under the laws of the Commonwealth of Massachusetts.
11.9 Entire Agreement. This lease contains all of the agreements
----------------
of the parties with respect to the subject matter thereof and supersedes all
prior dealings between them with respect to such subject matter.
12. ENVIRONMENTAL HAZARDS
12.1 Prohibition of Use. Tenant and Tenant's officers, directors, agents,
------------------
employees, contractors, tenants, invitees and others for whom Tenant it,
responsible ("Tenant's Agents"), shall not use, maintain, generate, allow or
bring on the Premises or transport or dispose of, on or from the Premises
(whether into the ground, into any sewer or septic system, into the air, by
removal off-site or otherwise) any Hazardous Matter Environmental Hazards
(as hereinafter defined) in any fashion contrary to Environmental
Requirements (hereinafter defined).
12.2 Delivery of Notices. Tenant shall promptly deliver to Landlord
-------------------
copies of any notices, orders or other communications received from any
governmental agency or official affecting the Premises and concerning alleged
violations of the Environmental Requirements (hereinafter defined), and shall,
at Landlord's request, promptly deliver to Landlord copies of all manifests and
other records kept or required to be kept by Tenant in connection with the
disposal of all Hazardous Matters Environmental Hazards brought onto,
used at, or generated from the Premises during the Term.
12.3 Indemnification. Tenant agrees to indemnify and hold Landlord
---------------
harmless from any and all damages, claims, and costs (including costs of
defense) that Landlord may incur as a result of any
<PAGE>
environmental contamination caused by Tenant's activities on the premises. The
provisions of this paragraph will survive the expiration or earlier termination
of this Lease.
Landlord agrees to indemnify and hold Tenant harmless from any and all
damages, claims, and costs (including costs of defense) that Tenant may incur as
a result of any environmental contamination of the premises other than that
caused by Tenant's activities thereon. The provisions of this paragraph will
survive the expiration or earlier termination of this Lease.
Landlord represents and warrants to Tenant that it has not, nor to the best
of its knowledge has any other party, stored, used, generated, placed, dumped,
or otherwise deposited on or upon the subject property or any part thereof, any
Eenvironmental Hhazards, except for storage of office and cleaning
supplies which are used in the ordinary course of business. Landlord also
warrants that it has not received notification of and has no knowledge of, any
investigation of the subject property or any part thereof by Environmental
Protection Agency for any similar federal, state, or local governmental
authority. The term "Environmental Hazard" shall be defined as hazardous
substances, hazardous wastes, pollutants, asbestos, polychlorinated biphenyls
(PCB's) petroleum or other fuels (including crude oil or any fraction or
derivative thereof), and underground storage tanks. The term "Environmental
Requirements" shall be defined as any applicable Federal, state, and/or local
laws, regulations or ordinances concerning environmental protection.
Without in any way affecting the survival of any other provision of this
lease, this paragraph shall survive the termination or expiration of this lease.
WITNESS the execution hereof under seal as of the 31st day of January,
1996.
TENANT:
ACT MANUFACTURING, INC.
By: /s/ John A. Pino
--------------------
Name: John A. Pino
Title: President
LANDLORD:
MANSFIELD/FORBES LTD.
PARTNERSHIP
By: Reynolds, Vickery, Messina and Griefen,
Inc. its General Partner
By: /s/ Richard W. Reynolds
--------------------------
Richard W. Reynolds, President
<PAGE>
EXHIBIT A
360 Forbes Boulevard
Mansfield, Massachusetts
Parcel I
--------
A certain parcel of land with the buildings thereon situated in the
Interstate 95 Industrial Center at 495, Mansfield, Bristol County,
Massachusetts, shown as Lot 604 on a plan entitled "Plan of Land in Mansfield,
Mass. dated December 20, 1973, by Norwood Engineering Co., Inc., recorded with
Bristol North District Registry of Deeds in Book 144, Page 25, bounded and
described as follows: Northerly by Suffolk Road, 222.50 feet; Easterly by Lot
602 on said plan, 439.17 feet; Southerly by Lot 606 on said plan, 272.50 feet;
Westerly by Forbes Boulevard, 389.17 feet; Northerly by Suffolk Road, by a
curved line with a radius of 50.00 feet, 78.54 feet. Containing, according to
said Plan, 2 acres and 32,018 square feet or 119,138 feet.
Parcel 2
--------
A certain parcel of land situated in the Interstate 95 Industrial Center at
495, Mansfield, Bristol County, Massachusetts, shown as Lot 540 on a plan
entitled "Plan of Land in Mansfield and Foxboro, Massachusetts," dated November
13, 1975, by Norwood Engineering Co., Inc., recorded with Bristol North District
Registry of Deeds in Plan Book 156, Pages 50 to 53, and with Norfolk Registry of
Deeds as Plan 887 of 1975 in Plan Book 251, bounded and described as follows:
Westerly by Forbes Boulevard, as shown on said plan, 295.45 feet; Northerly by
land now or formerly of Sun Chemical Corp., as shown on said plan, 280 feet;
Easterly by land now or formerly of Questor Corp., as shown on said plan, 345.45
feet; Southerly by Suffolk Road, as shown on said plan, 230 feet; and
Southwesterly by the junction of Suffolk Road and Forbes Boulevard, as shown on
said plan, 78.54 feet. Containing, according to said plan, 96,189 square feet
(2.21 acres) of land.
<PAGE>
EXHIBIT 11
----------
ACT MANUFACTURING, INC.
Weighted Shares Used in Computation of Earnings per Share
Shares used in the net income per common share computation are the
weighted average number of common shares outstanding plus common share
equivalents.
<TABLE>
<CAPTION>
Quarter ended June 30,
-------------------------
1996 1995
---- ----
(in thousands)
<S> <C> <C>
Weighted average number of 8,757 8,560
common shares outstanding
Common share equivalents 254 430
----- -----
TOTAL 9,011 8,990
===== =====
<CAPTION>
Six Months ended June 30,
-------------------------
1996 1995
----- ----
(in thousands)
<S> <C> <C>
Weighted average number of 8,735 7,117
common shares outstanding
Common share equivalents 232 430
----- -----
TOTAL 8,967 7,547
===== =====
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 4,105
<SECURITIES> 0
<RECEIVABLES> 36,907
<ALLOWANCES> 225
<INVENTORY> 48,819
<CURRENT-ASSETS> 90,731
<PP&E> 6,979
<DEPRECIATION> 3,492
<TOTAL-ASSETS> 94,885
<CURRENT-LIABILITIES> 34,154
<BONDS> 20,930
0
0
<COMMON> 88
<OTHER-SE> 39,713
<TOTAL-LIABILITY-AND-EQUITY> 94,885
<SALES> 52,155
<TOTAL-REVENUES> 52,155
<CGS> 45,627
<TOTAL-COSTS> 48,023
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 377
<INCOME-PRETAX> 3,755
<INCOME-TAX> 1,502
<INCOME-CONTINUING> 2,253
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,253
<EPS-PRIMARY> .25
<EPS-DILUTED> .25
</TABLE>
