-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, V9ZldHkpxCtRzLMhPGSCcZ2rDTUA1Yk+bz5Z8ogCTWkj0uwGKVNpbYtR509vksZU j1Lcg4z5PqCdy/UDjIX6Rg== 0000950135-96-002542.txt : 19960612 0000950135-96-002542.hdr.sgml : 19960612 ACCESSION NUMBER: 0000950135-96-002542 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19960427 FILED AS OF DATE: 19960607 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: HADCO CORP CENTRAL INDEX KEY: 0000729533 STANDARD INDUSTRIAL CLASSIFICATION: PRINTED CIRCUIT BOARDS [3672] IRS NUMBER: 042393279 STATE OF INCORPORATION: MA FISCAL YEAR END: 1030 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-12102 FILM NUMBER: 96578083 BUSINESS ADDRESS: STREET 1: 12A MANOR PKWY CITY: SALEM STATE: NH ZIP: 03079 BUSINESS PHONE: 6038988000 MAIL ADDRESS: STREET 1: 12A MONOR PARKWAY CITY: SALEM STATE: NH ZIP: 03079 10-Q 1 HADCO CORPORATION 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) (X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended April 27, 1996 or ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from to ----------- ----------- Commission File Number 0-12102 HADCO CORPORATION (Exact name of registrant as specified in its charter) MASSACHUSETTS 04-2393279 - ------------- ---------- (State or other jurisdiction (I.R.S. Employer of incorporation organization) Identification No.) 12A Manor Parkway, Salem, New Hampshire 03079 - --------------------------------------- ----- (Address of principal executive offices) (Zip Code) Telephone: (603) 898-8000 ------------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Registrant had 10,358,898 shares of Common Stock, $0.05 Par Value, outstanding at June 3, 1996. 2 HADCO CORPORATION AND SUBSIDIARIES INDEX
Part I. Page Financial Information: Consolidated Condensed Balance Sheets as of April 27, 1996 and October 28, 1995 ............................. 3 Consolidated Condensed Statements of Income for the Quarters ended April 27, 1996 and April 29, 1995, and six months ended April 27, 1996 and April 29, 1995, respectively ....................... 4 Consolidated Condensed Statements of Cash Flows for the six months ended April 27, 1996 and April 29, 1995, respectively ................................ 5 Notes to Consolidated Condensed Financial Statements ...................................................... 6 Management's Discussion and Analysis of Results of Operations and Financial Condition ........................... 11 Part II. Other Information ................................................ 16 Signatures ....................................................... 18
2 3 HADCO CORPORATION AND SUBSIDIARIES ---------------------------------- CONSOLIDATED CONDENSED BALANCE SHEETS ------------------------------------- (In thousands, except share data)
ASSETS ------ April 27, October 28, 1996 1995 ----------- ----------- (unaudited) Current Assets: Cash and cash equivalents $ 13,815 $ 21,307 Short-term investments 8,170 15,167 Accounts receivable, net of allowance for doubtful accounts of $900,000 in 1996 and $850,000 in 1995, respectively 41,070 35,797 Inventories 17,194 13,304 Prepaid expenses 7,937 7,984 -------- -------- Total Current Assets 88,186 93,559 -------- -------- Property, Plant and Equipment, at cost 213,464 183,760 Less - Accumulated depreciation and amortization 122,389 116,068 -------- -------- 91,075 67,692 -------- -------- Other Assets 2,227 1,740 -------- -------- $181,488 $162,991 ======== ======== LIABILITIES AND STOCKHOLDERS' INVESTMENT ---------------------------------------- Current Liabilities: Current maturities of long-term debt and capital lease obligations $ 1,587 $ 2,143 Accounts payable and accrued expenses 32,335 40,352 Accrued Payroll and related expenses 15,728 10,021 -------- -------- Total Current Liabilities 49,650 52,516 -------- -------- Long-Term Debt and Capital Lease Obligations 1,670 2,387 -------- -------- Long-Term Liabilities (Note 5) 8,569 7,314 -------- -------- Stockholders' Investment: Common stock, $.05 par value - Authorized 25,000,000 shares Issued and outstanding 10,356,673 in 1996 and 9,763,461 in 1995 519 497 Paid-in Capital 30,704 25,077 Deferred Compensation Resulting from the Granting of Non-qualified Stock Options (317) (407) Retained Earnings 90,693 75,607 -------- -------- Total Stockholders' Investment 121,599 100,774 -------- -------- $181,488 $162,991 ======== ========
The accompanying notes are an integral part of these consolidated condensed financial statements 3 4 HADCO CORPORATION AND SUBSIDIARIES ---------------------------------- CONSOLIDATED CONDENSED STATEMENTS OF INCOME ------------------------------------------- unaudited --------- (In thousands, except share data)
Quarter Ended Six Months Ended ---------------------------- ---------------------------- April 27, April 29, April 27, April 29, 1996 1995 1996 1995 ----------- ----------- ----------- ----------- Net Sales $ 88,096 $ 67,637 $ 164,574 $ 124,462 Cost of Sales 66,203 51,376 123,201 96,909 ----------- ----------- ----------- ----------- Gross Profit 21,893 16,261 41,373 27,553 Selling, General and Administrative Expenses 9,190 7,919 17,139 14,441 ----------- ----------- ----------- ----------- Income from Operations 12,703 8,342 24,234 13,112 Interest Income 329 372 683 705 Interest Expense (95) (130) (190) (269) ----------- ----------- ----------- ----------- Income Before Provision for Income Taxes 12,937 8,584 24,727 13,548 Provision for Income Taxes 5,042 3,391 9,642 5,352 ----------- ----------- ----------- ----------- Net Income $ 7,895 $ 5,193 $ 15,085 $ 8,196 =========== =========== =========== =========== Net Income Per Common and Common Equivalent Share $ .71 $ .49 $ 1.36 $ .78 =========== =========== =========== =========== Weighted Average Common and Common Equivalent Shares Outstanding 11,134,610 10,626,412 11,124,599 10,553,048 =========== =========== =========== ===========
The accompanying notes are an integral part of these consolidated condensed financial statements. 4 5 HADCO CORPORATION AND SUBSIDIARIES ---------------------------------- CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS ----------------------------------------------- unaudited --------- (In thousands)
Six Months Ended ---------------------- April 27, April 29, 1996 1995 --------- --------- Total Cash Provided From Operations $ 12,761 $ 9,572 -------- ------- Cash Flows From Investing Activities: Net purchases of short-term investments 6,997 386 Purchases of property, plant and equipment (31,890) (5,512) Proceeds from sale of property, plant and equipment 255 279 -------- ------- Cash Used In Investing Activities (24,638) (4,847) -------- ------- Cash Flows From Financing Activities: Principal payments under capital lease obligations (1,227) (1,350) Principal payments of long-term debt (46) (2,046) Proceeds from issuance of common stock 5,658 749 Purchase and retirement of common stock 0 (1,018) -------- ------- Cash Provided by (used in) Financing Activities 4,385 (3,665) -------- ------- Increase (decrease) in Cash and Cash Equivalents (7,492) 1,060 Cash and Cash Equivalents Beginning of Period 21,307 19,064 -------- ------- Cash and Cash Equivalents End of Period $ 13,815 $20,124 ======== ======= Supplemental disclosure of cash flow information: Cash paid during the respective periods for: Interest $ 155 $ 321 ======== ======= Income taxes $ 7,730 $ 4,586 ======== =======
The accompanying notes are an integral part of these consolidated condensed financial statements. 5 6 HADCO CORPORATION AND SUBSIDIARIES ---------------------------------- NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS ---------------------------------------------------- (unaudited) ----------- 1. Basis of Presentation --------------------- In the opinion of management, these consolidated condensed financial statements contain all normal recurring adjustments for fair presentation. The results of operations for the quarter ended April 27, 1996, are not necessarily an indication of the results expected for the full year. The accompanying consolidated condensed financial statements include the accounts of Hadco Corporation (the Company) and its wholly-owned subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation. For information as to the significant accounting policies followed by the Company and other financial and operating information, see the Company's Form 10-K as filed with the Securities and Exchange Commission on January 9, 1996. These financial statements should be read in conjunction with the financial statements included in that Form 10-K. 2. Short-term Investments ---------------------- As of April 27, 1996, the Company held investments in the following held-to-maturity securities:
Fair Cost Market Value Maturity ---- ------------ -------- (in thousands) Debt securities issued by the US Government $2,000 $1,996 within 1 year Debt securities issued by states of the US 1,000 1,000 within 1 year Corporate debt securities 5,170 5,151 within 1 year ------ ------ $8,170 $8,147 ====== ======
6 7 HADCO CORPORATION AND SUBSIDIARIES ---------------------------------- NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS ---------------------------------------------------- (unaudited) ----------- 3. Inventories ----------- Inventories are stated at the lower of cost, first-in, first-out (FIFO) or market and consist of the following:
April 27, October 28, 1996 1995 -------- ----------- (In thousands) Raw Materials $ 8,294 $ 6,318 Work-in-process 8,900 6,986 ------- ------- Total $17,194 $13,304 ======= =======
4. Significant Customers --------------------- One customer accounted for 13% of net sales for the quarter ended April 27, 1996. For the quarter ended April 29, 1995, there were no customers who accounted for more than 10% of net sales. 5. Environmental Matters --------------------- During March 1995, the Company received a Record Of Decision (ROD) from the New York State Department of Environmental Conservation (NYSDEC), regarding soil and groundwater contamination at its Owego, New York facility. Based on a Remedial Investigation and Feasibility Study (RIFS) for apparent on-site contamination at that facility and a Focused Feasibility Study (FFS), each prepared by environmental consultants of the Company, the NYSDEC had approved a remediation program of groundwater withdrawal and treatment and iterative soil flushing. The cost, based upon the FFS, to implement this remediation is estimated to be $4.6 million, and is expected to be expended as follows: $300,000 for capital equipment and $4.3 million for operation and maintenance costs which will be incurred and expended over the estimated life of the program of 30 years. NYSDEC has requested that the Company consider taking additional samples from a wetland area near the Company's Owego facility. Analytical reports of earlier sediment samples indicated the presence of certain inorganics. There can be no assurance that the Company and/or other third parties will not be required to conduct additional investigations and remediation at that location, the costs of which are currently indeterminable due 7 8 HADCO CORPORATION AND SUBSIDIARIES ---------------------------------- NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS ---------------------------------------------------- (unaudited) ----------- 5. Environmental Matters (Continued) --------------------------------- to the numerous variables described in the second sentence of the fourth paragraph of this "Environmental Matters" section. From 1974 to 1980, the Company operated a printed circuit manufacturing facility in Florida as a lessee of property that is now the subject of a pending lawsuit ("the Florida Lawsuit") and investigation by the Florida Department of Environmental Regulation (FDER). On June 9, 1992, the Company entered into a Cooperating Parties Agreement in which it and Gould, Inc., another prior lessee of the site, have agreed to fund certain assessment and feasibility study activities at the site, and an environmental consultant has been retained to perform such activities. The cost of such activities is not expected to be material to the Company. In addition to the Cooperating Parties Agreement, Hadco and others are participating in alternative dispute resolution regarding the site with an independent mediator. In connection with the mediation, in February 1992 the FDER presented computer-generated estimates of remedial costs, for activities expected to be spread over a number of years, that ranged from approximately $3.3 million to $9.7 million. Mediation sessions were conducted in March 1992 but have been suspended during the ongoing assessment and feasibility activities. Management believes it is likely that it will participate in implementing a continuing remedial program for the site, the costs of which are currently unknown. However, based on information currently known by the Company, management does not expect these costs to have a material adverse effect on the Company. Also see the penultimate paragraph of this "Environmental Matters" section relating to the Company's having been named as a third-party defendant in the Florida Lawsuit. The Company is planning the installation of a groundwater extraction system at its Derry, New Hampshire facility to address certain groundwater contamination. Because of the uncertainty regarding both the quantity of contaminants beneath the building at the site and the long-term effectiveness of the groundwater migration control system the Company proposes to install, it is not possible to make a reliable estimate of the length of time remedial activity will have to be performed. However, it is anticipated that the groundwater extraction system will be operated for at least 30 years. There can be no assurance that the Company will not be required to conduct additional investigations and remediation relating to the Derry facility. The total costs of such groundwater extraction system and of conducting any additional investigations and remediation relating to the Derry facility are 8 9 HADCO CORPORATION AND SUBSIDIARIES ---------------------------------- NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS ---------------------------------------------------- (unaudited) ----------- 5. Environmental Matters (Continued) --------------------------------- not fully determinable due to the numerous variables described in the fourth paragraph of this "Environmental Matters" section. The Company accrues estimated costs associated with known environmental matters, when such costs can be reasonably estimated. The cost estimates relating to future environmental clean-up are subject to numerous variables, the effects of which can be difficult to measure, including the stage of the environmental investigations, the nature of potential remedies, possible joint and several liability, the magnitude of possible contamination, the difficulty of determining future liability, the time over which remediation might occur, and the possible effects of changing laws and regulations. The total reserve for environmental matters currently identified by the Company amounted to $9.5 million and $8.2 million at April 27, 1996 and October 28, 1995, respectively. The current portion of these costs as of April 27, 1996 and October 28, 1995, amounted to approximately $900,000, and is included in "Accounts Payable and Accrued Expenses." The long-term portion of these costs amounted to approximately $8.6 million and $7.3 million as of April 27, 1996 and October 28, 1995, respectively, and is reported under the caption "Long-Term Liabilities." Based upon its assessment at the current time, management estimates the cost of ultimate disposition of the above known environmental matters to range form approximately $7.0 million to $12.0 million, and is expected to be spread over a number of years. Management believes the ultimate disposition of the above known environmental matters will not have a material adverse effect upon the liquidity, capital resources, business or consolidated financial position of the Company. However, one or more of such environmental matters could have a significant negative impact on the Company's consolidated financial results for a particular reporting period. The Company is one of thirty-three entities which have been named as potentially responsible parties in a lawsuit pending in the federal district court of New Hampshire concerning environmental conditions at the Auburn Road, Londonderry, New Hampshire landfill site. Local, state and federal entities and certain other parties to the litigation seek contribution for past costs, totaling approximately $20 million, allegedly incurred to assess and remediate the Auburn Road site. In April, 1996, the EPA published for comment, and recommended for approval, a proposal to change the remedy at the Auburn Road site from active groundwater remediation to future monitoring. Other parties to the lawsuit also allege that future monitoring will be required. The Company is contesting liability, but is participating in mediation with twenty-seven other parties in an 9 10 HADCO CORPORATION AND SUBSIDIARIES ---------------------------------- NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS ---------------------------------------------------- (unaudited) ----------- 5. Environmental Matters (Continued) --------------------------------- effort to resolve the lawsuit. Management believes that the ultimate disposition of this lawsuit will not have a material adverse effect upon the liquidity, capital resources, business or consolidated financial position of the Company. In connection with the "Florida Lawsuit" (as described in the second paragraph of this "Environmental Matters" section), pending in the Circuit Court of Broward County, Florida, Hadco and Gould, Inc., another prior lessee of the site of the printed circuit manufacturing facility in Florida, each was served with a third-party complaint in June 1995, as third-party defendants in such pending Florida lawsuit by a party who had previously been named as a defendant when the Florida Lawsuit was commenced in 1993 by the FDER. The Florida Lawsuit seeks damages relating to environmental pollution and FDER costs and expenses, civil penalties, and declaratory and injunctive relief to require the parties to complete assessment and remediation of soil and groundwater contamination. The other parties include alleged owners of the property and Fleet Credit Corporation, a secured lender to a prior lessee of the property. The future costs in connection with the lawsuits described in the two immediately preceding paragraphs are currently indeterminable due to such factors as the unknown timing and extent of any future remedial actions which may be required, the extent of any liability of the Company and of other potentially responsible parties, and the financial resources of the other potentially responsible parties. 10 11 HADCO CORPORATION AND SUBSIDIARIES ---------------------------------- MANAGEMENT'S DISCUSSION AND ANALYSIS ------------------------------------ OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION ------------------------------------------------ Except for the historical information contained herein, the matters discussed below or elsewhere in this quarterly report including, without limitation "Environmental Matters" are forward-looking statements that involve risks and uncertainties. Any forward-looking statements should be considered in light of the factors described below under "Factors That May Affect Future Results." Actual results may vary materially from those projected, anticipated or indicated in any forward-looking statements. Results of Operations - --------------------- Second Quarter - -------------- Net sales for the second quarter of 1996 increased 30.2% over the same period in 1995. The change was due to an 11.1% increase in the volume of production and shipments, and a shift in product mix to higher layer, higher density printed circuits, as compared to the second quarter last year. Average pricing per unit increased 5.4% for the second quarter of 1996 over the second quarter of 1995. Sales of backplane and other electronic assemblies increased to 14% of the Company's net revenues for the quarter ended April 27, 1996, versus 6% for the same period last year. The Company believes that excess capacity may exist in the printed circuit and electronic assembly industries, as well as fluctuating growth rates in the electronics industry as a whole. Both factors could have an adverse impact on future orders and pricing. The gross profit margin increased from 24.0% in the second quarter of 1995 to 24.8% in the second quarter of 1996. The increase is a direct result of higher volume of shipments, and an increase in the technology level of product mix. The Company believes that the potential exists for a shortage of materials in the industry, which could have an adverse impact on future unit costs. Selling, general and administrative (SG&A) expenses, as a percent of net sales, decreased to 10.4% in the second quarter of 1996 as compared to 11.7% in the second quarter of 1995 due to increased revenue. SG&A expenses increased from $7.9 million in the second quarter of 1995 to $9.2 million in the second quarter of 1996, as a result of increased variable costs directly attributable to increased net sales. Included in SG&A expenses are charges for actual expenditures and accruals, based on estimates, for environmental matters. During the second quarter of 1996 and 1995, the Company made, and charged to SG&A expenses, actual payments of approximately $311,000 and $242,000, respectively, for environmental matters. In the second quarter of 1996 and 1995, the Company also accrued and charged to SG&A expenses approximately $569,000 and $922,000, respectively, as cost estimates relating to known environmental matters. To the extent and in amounts Hadco 11 12 believes circumstances warrant, it will continue to accrue and charge to SG&A expenses cost estimates relating to environmental matters. Management believes the ultimate disposition of known environmental matters will not have a material adverse effect upon the liquidity, capital resources, business or consolidated financial position of the Company. However, one or more of such environmental matters could have a significant negative impact on the Company's consolidated financial results for a particular reporting period. Interest income decreased in the second quarter of 1996 as compared to the second quarter of 1995 due to lower average cash balances available for investing. Interest expense decreased in the second quarter of 1996 as compared to the second quarter of 1995 due to a decrease in outstanding debt. Year-to-Date - ------------ Net sales for the first half of 1996 increased 32.2% above the same period in 1995. The increase is the result of a 13.9% higher volume of production and shipments and an increase in the technology level of product mix from the same period last year. The increase in net sales was affected by a 7.9% increase in average pricing. Sales of backplanes and other electronic assemblies increased to 12% of the Company's net revenues for the first half of 1996 versus 6% for the same period last year. The gross profit margin increased 22.1% to 25.1% for the first half of 1995 and 1996, respectively. The increase is a direct result of higher volume of shipments, an increase in the technology level of product mix and improvements in operating efficiencies. SG&A expenses decreased as a percent of net sales, from 11.6% to 10.4% for the first half of 1995 and 1996, respectively. This resulted from increased revenue. The SG&A expenses increased from $14.4 million to $17.1 million for the first half of 1995 and 1996, respectively, as a result of increased variable costs directly attributable to increased revenue. Included in SG&A expenses are charges for actual expenditures and accruals, based on estimates, for environmental matters. During the first half of 1996 and 1995, the Company made, and charged to SG&A expenses, actual payments of approximately $525,000 and $586,000, respectively, for environmental matters. In the first half of 1996 and 1995, the Company also accrued and charged to SG&A cost estimates approximately $1,255,00 and $1,227,000, respectively, as cost estimates relating to know environmental matters. Interest income decreased in the first half of 1996 as compared to the same period in 1995 due to lower cash balances available for investing. 12 13 Interest expense decreased in the first half of 1996 as compared to the second quarter of 1995 due to a decrease in outstanding debt. Income Taxes - ------------ In accordance with generally accepted accounting principles, the Company has provided for income taxes in the second quarter at its estimated annual effective rate. The Company presently anticipates that the effective annual rate of income taxes for 1996 will be 39.0%, which is less than the current combined federal and state statutory rates. This difference is caused by tax advantaged investment income, the tax benefit of a Foreign Sales Corporation (FSC), and various state investment tax credits. The effective tax rate for 1996 is based on current tax laws. Liquidity and Capital Resources - ------------------------------- At April 27, 1996, the Company's working capital was $38.5 million, including cash, cash equivalents and held-to-maturity securities of $21.9 million, as compared to working capital of $41.0 million, including cash, cash equivalents and held-to-maturity securities of $36.5 million, at October 28, 1995. At April 27, 1996, the following lines of credit were available to the Company:
(in thousands) ------------ Leasing Line of Credit $ 4,520 Revolving/Term Lines of Credit 25,000 ------- Total Credit Available $26,020 =======
The Company believes that the available cash balances, together with cash flow from operations, will be sufficient to meet the Company's cash requirements through its fiscal year ending October 26, 1996. Factors That May Affect Future Results - -------------------------------------- The Company operates in a changing environment that involves a number of risks, some of which are beyond the Company's control. The following discussion highlights some of these risks. Variability of Customer Requirements; Nature and Extent of Customer Commitments on Orders. The level and timing of orders placed by the Company's customers vary due to customer attempts to 13 14 manage inventory, changes in the customers' manufacturing strategies and variation in demand for customer products due to, among other things, technological change, introduction of new products, product life cycles, competitive conditions or general economic conditions. The Company generally does not obtain long-term purchase orders or commitments. A certain portion of the Company's backlog may be subject to cancellation or postponement without significant penalty or without any penalty. Competition. The domestic market for printed circuits is highly competitive and fragmented. The Company believes its major competitors are larger independent producers and captive producers world-wide, which also manufactures multilayer, high density printed circuits and provide backplane and other electronic assemblies. During periods of recession in the electronic industry, and other periods when excess capacity exists, electronic equipment manufacturers become more price sensitive, which could have a material adverse impact on pricing. In addition, the Company's competitors may seek orders in the open market to fill excess capacity, thereby increasing price competition. Process Technology and Risk of Process Failure. The Company's success depends in part on its proprietary techniques and manufacturing expertise, particularly in the area of the multilayer, high density circuit boards. At this time, the Company has no patents for these proprietary techniques and chooses to rely on trade secret protection. In addition, the introduction of new manufacturing processes are subject to failure. The loss of revenue and earnings to the Company from such a failure could have a material adverse effect on its results of operations. Dependence on Electronics Industry. The Company's customers include OEMs and contract manufacturers of data communications and telecommunications equipment, instrumentation and industrial equipment, and computers and peripheral business systems. These industry segments, as well as the electronics industry as a whole, are subject to rapid technological change and product obsolescence. Discontinuance or modification of products containing printed circuit boards manufactured by the Company could have a material adverse effect on the Company. The electronics industry is subject to economic cycles and has experienced and is likely in the future to experience recessionary periods. Pricing pressures, a general recession or any other event leading to excess capacity or a downturn in the electronics industry likely would result in intensified price competition, reduced gross margins and a decrease in unit volume, which could have a material adverse effect on the Company. Environmental Compliance. The Company is subject to a variety of environmental regulations relating to the use, storage, discharge and disposal of hazardous chemicals used during its manufacturing process. A failure by the Company to comply with present and 14 15 future regulations could subject it to future liabilities or the suspension of production. Such regulations could also restrict the Company's ability to expand its facilities or could require the Company to acquire costly equipment or to incur other significant expenses to comply with environmental regulations. The Company may also from time to time be subject to lawsuits with respect to environmental matters. The extent of the Company's liability under any such suit is indeterminable and may, in certain circumstances, have a material adverse effect on the Company. Possible Volatility of Market Price of Common Stock. The trading price of the common stock is subject to significant fluctuations in response to variations in quarterly operating results, general conditions in the electronics industry and other factors. In addition, the stock market is subject to price and volume fluctuations which affect the market price for many high technology companies in particular, and which often are unrelated to operating performance. 15 16 PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders (a) The annual meeting of stockholders of Hadco Corporation was held on February 28, 1996. (b) No information provided due to inapplicability of item. (c) A vote was proposed to (1) fix the number of directors at nine and to elect a Board of Directors to serve for the ensuing year or until their respective successors are duly elected and qualified; (2) ratify the selection of Arthur Andersen LLP as auditors for the fiscal year ending October 26, 1996; (3) approve an amendment to the Corporation's Restated Articles of Organization to increase the authorized shares from 25,000,000 to 100,000,000 (the requisite number of votes to pass this proposal was not obtained) and (4) approve the Hadco Corporation Nonqualified Stock Option Plan of November 29, 1995. The voting results are as follows:
Votes Votes Votes Votes Broker For Against Withheld Abstained Non-Votes (1) Horace H. Irvine II 8,081,800 N/A 1,137,265 N/A - Patrick Sweeney 8,081,250 N/A 1,137,815 N/A - Andrew E. Lietz 8,081,850 N/A 1,137,215 N/A - John O. Irvine 8,081,050 N/A 1,138,015 N/A - J. Stanley Hill 8,078,900 N/A 1,140,165 N/A - Oliver O. Ward 8,080,850 N/A 1,138,215 N/A - Lawrence Coolidge 8,081,750 N/A 1,137,315 N/A - Mikael Salovaara 8,079,950 N/A 1,139,115 N/A - John F. Smith 8,081,250 N/A 1,137,815 N/A - (2) Arthur Andersen LLP 8,956,145 28,130 N/A 234,790 - (3) Restated Articles of Organization 4,600,668 4,380,792 N/A 237,605 - (4) Stock Option Plan of November 29, 1995 4,484,931 3,215,327 N/A 270,824 1,247,983
16 17 (d) No information provided due to inapplicability of item. Item 6. Exhibits and reports on Form 8-K (a) Exhibits 10.1 Amendment to lease dated March 1, 1992 between Registrant and Equity Property Associates I. 10.2 Lease dated November 1, 1995 between Registrant and Equity Property Associates I. 10.3 Lease dated November 1, 1995 between Registrant and Equity Property Associates I. 10.4 Amendment to lease dated March 1, 1992 between Registrant and Equity Property Associates I. 27 Financial Data Schedule (b) Reports on Form 8-k There were no reports on Form 8-k filed for the quarter ended April 27, 1996. 17 18 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this amendment to be signed on its behalf by the undersigned thereunto duly authorized. Hadco Corporation /s/ Timothy P. Losik Date: June 03, 1996 By: Timothy P. Losik Chief Financial Officer, Vice President 18 EX-10.1 2 AMENDMENT TO LEASE DATED MARCH 1, 1992 1 EXHIBIT 10.1 AMENDMENT TO LEASE The Lease by and between Equity Property Associates I (Landlord) and HADCO Corporation (Tenant) dated March 1, 1992 is hereby amended as follows: Amendment No. 1: Tenant Floor Space will be 38,895 square feet Amendment No. 2: Tenant's Term will be extended to March 31, 2000. Amendment No. 3: The Annual Fixed Rent will be $234,394.00. Amendment No. 4: The Included Operating Expense Share will be $19,959.90. Amendment No. 5: The Included Tax Expense Share will be $39,407.40. Amendment No. 6: A new Exhibit D - "Renewal Option" will be attached hereto. Amendment No. 7: An additional Exhibit E - Right of First Refusal will be attached hereto. The effective date of this Amendment will be May 1, 1995. All other provisions of the Lease are hereby ratified and confirmed. IN WITNESS WHEREOF, the parties have executed this Amendment to Lease this day of July, 1995 WITNESS: LANDLORD: Equity Property Associates, I /s/ Timothy S. Mathews /s/ John W. Merchant - ------------------------------- --------------------------------------- TENANT: HADCO Corporation /s/ Timothy S. Mathews /s/ Timothy P. Losik - ------------------------------- --------------------------------------- EX-10.2 3 LEASE DATED NOVEMBER 1, 1995 1 EXHIBIT 10.2 LEASE Lease of space in 12B Manor Parkway, Salem, New Hampshire (hereinafter the "Building"). Dated for reference purposes as of November 1, 1995. ARTICLE I. TERMS DEFINED Each reference in this Lease to any of the following terms shall mean: 1.1 Landlord: Equity Property Associates I C/O JWM Properties, Inc. 12B Manor Parkway Salem, NH 03079 1.2 Tenant: HADCO Corporation 12B Manor Parkway Salem, NH 03079 1.3 Building Floor Space: 30,000 sq. ft. 1.4 Tenant's Floor Space: 5,376 sq. ft. 1.5 Term: 5 years 1.5.1 Schedule Term Commencement Date: November 1, 1995 1.6 Annual Fixed Rent: $35,482.00 1.6.1 Included Operating Expense Share: $2,957.00 1.6.2 Included Tax Expense Share: $5,645.00 1.7 Permitted Uses: Office 1.8 Security Deposit: None 1.9 Exhibits: Exhibit A - Description of Premises Exhibit B - Plan Exhibit C - Renewal Option 2 ARTICLE II PREMISES, TERM AND RENT 2.1 PREMISES. Landlord hereby leases to Tenant, subject to and with the benefit of the provisions of this Lease, the premises described in the Description (the "Premises"), attached as Exhibit A. 2.2 COMMON AREAS. Tenant shall have, as appurtenant to the premises, rights to use in common, subject to reasonable rules from time to time made by Landlord of which Tenant is given notice; (a) BUILDING COMMON AREA. The common accessways loading docks and platforms and any passageways thereto, and the common pipes, ducts, conduits, wires and appurtenant equipment serving the Premises; and (b) LAND COMMON AREA. Common walkways, sidewalks and driveways necessary for access to the Building and parking spaces or area from time to time maintained on the real property upon which the building is situated ("Lot"). 2.3 LANDLORD'S RESERVED RIGHTS IN COMMON AREA. Landlord reserves the right from time to time, without unreasonable interference with Tenant's use: (a) BUILDING CHANGES. To install, use, maintain, repair and replace pipes, ducts, conduits, wires and appurtenant meters and equipment for service to other parts of the building above the ceiling surfaces, below the floor surfaces, within the walls and in the central core areas, and to relocate any pipes, ducts, conduits, wires and appurtenant meters and equipment included in the premises which are so located or located elsewhere outside the premises. (b) BOUNDARY CHANGES. To change the lines of the lot. (c) FACILITY CHANGES. To alter or relocate any other common facility; provided, however, that substitutions are substantially equivalent or better in quality. 2.4 TERM. The term shall commence on the Scheduled Term Commencement Date as it may be extended pursuant to Section 3.1, and shall continue until terminated as herein provided. 2.5 RENT/MONTHLY PAYMENT. Tenant shall pay fixed rent of one-twelfth (1/12) of the Annual Fixed Rent, in advance on the first day of each calendar month, for each full calendar month of the term and for the appropriate fraction of a calendar month at the beginning and end of the term. 2 3 ARTICLE III. CONSTRUCTION 3.1 COMPLETION OF PREMISES. Tenant agrees to lease the premises "as is". 3.2 ALTERATIONS. (a) RIGHT TO MAKE ALTERATIONS. Tenant may, from time to time make non-structural alterations and additions to the interior of premises in accordance with plans and specifications first approved by Landlord in writing, the granting of said approval to be in the sole discretion of Landlord. Tenant shall indemnify and hold harmless Landlord from and against any loss, cost, damage, injury or expenses suffered by Landlord as a result of said work. (b) TITLE TO IMPROVEMENTS. All improvements and additions existing as of the commencement of this Lease shall be part of the building except such items as, by writing at the time of approval, the parties agree shall be removed by Tenant on termination of this Lease, or Landlord agrees that Tenant may then elect to remove or leave. 3.3 NO LIENS. Tenant shall within five (5) days after the attachment of any lien or claim of lien pay and discharge or secure the release from the building and/or lot of any lien or claim of lien arising out of or in connection with construction work by or for the account of Tenant; and Tenant shall promptly indemnify Landlord from and against all loss, cost, damage, injury or expense in connection with any such lien or claim of lien, including without limitation, reasonable attorney's fees. 3.4 QUALITY OF CONSTRUCTION. All work shall be done in a good and workmanlike manner and in compliance with all applicable laws and lawful ordinances, by-laws, regulations and orders of governmental authority and of the insurers of the premises. Landlord assumes no liability for special, consequential or incidental damages of any kind. There are no representations, warranties of merchantability or use of the premises, except as are expressly set forth herein. Tenant hereby waives the benefit of any rule that disclaimers of warranty shall be construed against Landlord and agrees that the disclaimers in this Lease shall be construed liberally in favor of Landlord. 3 4 ARTICLE IV. SERVICES AND REPAIRS 4.1 LANDLORD'S REPAIRS. Landlord agrees during the term hereof, after written notice from Tenant, unless occasioned by Tenant's misuse or negligence, to repair any structural defects in the roof and bearing walls, and to commence promptly and proceed diligently with any repair or restoration required. 4.2 INTERRUPTION. There shall be no rental abatement for nor shall Landlord be liable for interruption of any service due to accident, making of repairs, alterations or improvements, unusually severe weather, unusual difficulty or inability in obtaining services or supplies from sources usually used for the Building, labor difficulties, governmental regulations, or other causes beyond Landlord's reasonable control. ARTICLE V. TENANT'S COVENANTS 5.1 UTILITIES PAYMENT. Tenant agrees to pay all charges for utilities, including but not limited to, electricity, fuel services and service inspections therefor, which are metered and/or charged directly to the Tenant. 5.2 OPERATING EXPENSE ESCALATION. If Tenant's share of Landlord's Operating Expenses for the Building and Lot exceeds Tenant's Included Operating Expense Share for any year or part thereof of the Term, Tenant shall pay to Landlord as additional rent the amount of such excess upon demand. Tenant's Share of Landlord's Operating Expenses for the Lot is hereby defined to be that proportion of such expenses which Floor Space within Tenant's Premises bears to the Total Floor Space of the Buildings on the Lot. Landlord's Operating Expenses for the Building and Lot shall be insurance, management, exterior maintenance costs, including without limitation, exterior repainting and refurbishing, keeping roofs, exterior windows and doors watertight, snowplowing of drives and parking lots, maintenance of roadway, walks and parking and 1oading areas, fertilization, mowing and watering of lawns, care of shrubbery and general grounds upkeep, rubbish removal, and cost of utilities for providing common services such as parking lot lighting, security systems, and property identification signs. Landlord's determination as to whether such expenses are attributable to the Building or to the Lot shall be conclusive and binding upon the parties hereto. 5.3 TAX EXPENSE EXCALATION. (a) If Tenant's Share of Landlord's Tax Expenses for the Building and Lot exceed Tenant's Included Tax Share for any year or part thereof of the Term, Tenant shall pay to Landlord as Additional Rent the amount of such excess upon demand. Tenant's Share of Landlord's Tax Expenses for the Building is hereby defined to be that proportion of 4 5 such expenses which Floor Space within Tenant's Premises bears to Building Floor Space. Landlord's Tax Expenses for the Building and Lot shall mean any form of real estate tax, assessment, license fee, levy, penalty or tax imposed by any authority or agency having the direct or indirect power to tax. Landlord's determination as to whether such expenses are attributable to the Building or to the Lot shall be conclusive and binding upon the parties hereto." (b) Tenant shall also pay all personal property taxes for personal property on the Premises or used in connection therewith. (c) Tenant shall pay when due taxes levied or assessed against Landlord by reason of this lease on the rental or any other payment required to be made hereunder whether said taxes are assessed solely on the rental payment hereunder or jointly with other rentals collected pursuant to law or ordinance existing or hereinafter enacted (other than taxes levied on the net income to Landlord derived herefrom as part of a state or federal income tax law applicable to Landlord's income generally) and all costs, expenses and attorney's fees paid as incurred by Landlord in connection with the imposition, contest, or collection of the foregoing. 5.4 MAINTENANCE AND REPAIR. Except as provided in Sections 4.1 and 6.1, Tenant shall keep the Premises and all fixtures and equipment thereon and therein in good repair, operating condition and working order, and shall make all structural repairs necessitated by Tenant's misuse or negligence, and all exterior and interior repairs, renewals and replacements necessary to that end, including without limitation by their inclusion, interior repainting, replacement of glass damaged or broken and of floor and wall coverings worn or damaged, and shall keep all plumbing, lighting, heating, air-conditioning, sprinkler and other utility and mechanical systems in the Premises properly maintained and operated and in good operating condition. 5.5 NO SUBLEASE OR ASSIGNMENT. Without on each occasion obtaining a prior written consent of Landlord, Tenant shall not assign this Lease, or make any sublease (any purported assignment or sublease without such consent shall be void). Tenant shall reimburse Landlord promptly for reasonable legal and other expenses incurred by Landlord in connection with any request for such a consent. Prior to such approval by Landlord, which approval shall not be unreasonably withheld, Tenant shall provide Landlord with information concerning the proposed assignee's or subtenant's financial responsibility. Further, if for any proposed assignment or sublease Tenant receives rent or other consideration either initially or over the term of the assignment or sublease, in excess of the rent called for hereunder, or in case of the sublease of a portion of the Premises in excess of such rent fairly allocable to such portion, after appropriate adjustments to assure that all other payments called for hereunder are taken into account, Tenant shall pay to Landlord as additional rent hereunder one-half of the excess of each such payment of rent or other consideration received by Tenant promptly after its receipt. Tenant agrees to remain primarily and directly liable on all Tenant obligations hereunder notwithstanding any assignment or sublease, or any indulgences, waivers or extensions of time granted by Landlord to any assignee, or failure to take action against any assignee, hereby waiving notice of any default by any assignee, and agrees that Landlord may at its option 5 6 proceed against Tenant without having taken action against or joined any assignee, except that Tenant shall have the benefit of indulgences, waivers and extensions of time granted to any assignee. 5.6 INDEMNITY. Tenant shall indemnify Landlord from and against any liability for injury, loss, accident, or damage to any person or property, and from any claims, actions, proceedings and costs in connection therewith, including reasonable attorney's fees, arising from omission, fault, negligence or other misconduct of Tenant, or arising from any use made or thing done or occurring in the Premises, and to keep all Tenant's employees working in the Premises covered by workmen's compensation insurance, furnishing Landlord with certificate thereof. 5.7 HAZARDOUS MATERIALS. Tenant shall not (either with or without negligence) cause or permit the escape, disposal or release of any biologically or chemically active or other hazardous substances, or materials. Tenant shall not allow the storage or use of such substances or materials in any manner not sanctioned by law or by the highest standards prevailing in the industry for the storage and use of such substances or materials, nor allow to be brought into the Project any such materials or substances except to use in the ordinary course of Tenant's business. Without limitation, hazardous substances and materials shall include those described in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section 9601 et seq., the Resource Conservation and Recovery Act, as amended, 42 U.S.C. Section 6901 et seq., any applicable state or local laws and the regulations adopted under these acts. If any lender or governmental agency shall ever require testing to ascertain whether or not there has been any release of hazardous materials, then the reasonable costs thereof shall be reimbursed by Tenant to Landlord upon demand as additional charges if such requirement applies to the Premises. In addition, Tenant shall execute affidavits, representations and the like from time to time at Landlord's request concerning Tenant's best knowledge and belief regarding the presence of hazardous substances or materials on the Premises. In all events, Tenant shall indemnify Landlord in the manner elsewhere provided in this lease from any release of hazardous materials on the Premises occurring while Tenant is in possession, or elsewhere if caused by Tenant or persons acting under Tenant. The within covenants shall survive the expiration or earlier termination of the lease term. 5.8 COMPREHENSIVE LIABILITY INSURANCE. Tenant shall keep and maintain with insurance carriers acceptable to Landlord, comprehensive liability insurance applying to the activities of Tenant in and in connection with the Premises, with limits or liability of not less than Five Hundred Thousand ($500,000.00) Dollars for injury to or death of a single person, One Million ($1,000,000) Dollars per occurrence and One Hundred Thousand ($100,000) Dollars for property damage. Tenant shall furnish Landlord with a certificate of such insurance which shall name Landlord and any mortgagee of the Lot and/or Building, as any additional insureds and shall provide for noncancellation without thirty (30) days' prior written notice to Landlord and said mortgagee. Failure on the part of Tenant to renew such insurance at least thirty (30) days prior to the expiration date thereof, from time to time, shall constitute an event of default equivalent to a failure to pay an installment of rent due hereunder. 5.9 OTHER INSURANCE. Tenant shall assume the risk of damage to any fixtures, goods, inventory, 6 7 merchandise, equipment, furniture and leasehold improvements which remain the property of Tenant or as to which Tenant retains the right of removal from the Premises, and Tenant shall maintain reasonable insurance coverage with respect to such items during the Term of this Lease. Landlord shall maintain insurance on the Building (excluding any fixtures and items installed or paid for by Tenant which Tenant is entitled to or required to remove) against damage by fire and the perils now specified in the most current standard extended coverage endorsement in an amount equal to at least ninety percent (90%) or replacement cost of the Building as determined by Landlord, exclusive of escavations and foundations and Landlord's comprehensive liability coverage. 5.10 INSURANCE SUBROGATION. Any insurance carried by either party with respect to the Premises and property therein or occurrence thereon shall include a clause or endorsement denying to the insurer right of subrogation against the other party, its successors or any mortgagee thereof to the extent rights have been waived by the insured prior to occurrence of injury or loss. Each party, notwithstanding any provisions of this Lease to the contrary, hereby waives any rights of recovery against the other, its successors or its mortgagee for injury or loss due to hazards covered by insurance containing such clause or endorsement to the extent of the injury or loss covered thereby. 5.11 SIGNS. Tenant shall not, without the prior written consent of Landlord (a) paint or place any signs on the Premises or anywhere on or in the Building or (b) place any curtains, blinds, shades, awnings, aerials or flagpoles, or the like, in the Premises or anywhere on or in the Building visible from outside the Premises. Landlord reserves the right to disapprove of signs, curtains, blinds, shades, and awnings on wholly aesthetic grounds. Tenant shall pay the expenses involved in the erection of any sign and obtaining of a permit therefor. Tenant warrants that it shall obtain all necessary permits prior to erecting any such sign and Tenant shall remove said sign on the termination of this lease. 5.12 ENTRY AND INSPECTION. Tenant shall permit Landlord and Landlord's agents to examine the Premises at reasonable times, and if Landlord shall so elect, to make any repairs or replacements Landlord may deem necessary. Landlord may show the Premises to prospective purchasers and tenants during the one hundred eighty (180) days preceding expiration of the Term. 5.13 PERMITTED USES. Tenant agrees during the Term and so long as Tenant's occupancy continues: To use the Premises only for the Permitted Uses stated in Article I above, and to procure any governmental licenses and permits from time to time required therefor; and to require loading and unloading, and parking of cars for employees, customers and visitors, in connection with Tenant's business, to be done so far as practicable in the areas reserved therefor, and not on adjacent streets; 7 8 ARTICLE VI. CASUALTY AND TAKING 6.1 TERMINATION OR RECONSTRUCTION. If during the Term, the Premises, Building or Lot, or any substantial part thereof 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 receive compensable damage by reason of anything lawfully done under color of public or other authority, this Lease shall terminate at either Landlord's or Tenant's election by written notice given thirty (30) days after the casualty or taking has occurred. If in any such case the Lease is not so terminated, a just portion of the rent according to the nature and extent of the injury shall be abated until the Premises (or in case of taking what may remain thereof), excluding any fixtures or items installed or paid for by Tenant which Tenant is entitled or required to remove pursuant hereto, shall have been put by Landlord into proper condition. In case of a taking which permanently reduces the area of the Premises, a just proportion of the fixed rent shall be abated for the remainder of the term, and Tenant's share of Operating Expenses and Tenant's Share of Tax Expenses shall be adjusted as determined by Landlord. Notwithstanding the foregoing provisions, if insurance is not carried against the damage as above provided or if the insurance proceeds, in Landlord's sole reasonable judgment would be insufficient to cover the cost of repair of the Premises or the building, Landlord shall either repair the damage as above provided or terminate this Lease by giving Tenant, within thirty (30) days after the damage, at least fifteen (15) days' prior notice specifying the termination date. 6.2 LANDLORD RESERVES COMPENSATION. Landlord reserves all rights to compensation for damages to the Premises, the Building, the Lot and the leasehold hereby created, accruing by reason of exercise of eminent domain or by reason of anything lawfully done by public authority. ARTICLE VII. DEFAULT 7.1 EVENTS OF DEFAULT. If Tenant (i) fails to pay any rent or other sum of money due Landlord hereunder when due and such failure continues for a period often (10) days after notice, provided that if Landlord has given two (2) such notices within the prior twelve (12) months' period, no further notice shall be required and any failure to pay monies within ten (10) days after due shall constitute an event of default, (ii) vacates the Premises or permits the same to be unoccupied, (iii) fails to observe or perform any of the other Tenant's agreements herein contained, and within thirty (30) days of written notice of the same from Landlord, Tenant has not cured such default or, in the alternative where in the normal course such cure would require more than Thirty (30) days, has undertaken all steps necessary or possible to commence such cure, (iv) makes any assignment for the benefit of creditors, (v) commits any act of bankruptcy or files a petition under any bankruptcy or insolvency 8 9 law, or if such a petition filed against Tenant is not dismissed within ninety (90) days, or if a receiver or similar officer becomes entitled to this leasehold and it is not returned to Tenant within ninety (90) days, or if substantially all of Tenant's assets or Tenant's interest in this Lease is taken on execution or other process of law in any action against Tenant, then, Tenant shall be deemed to be in default hereunder; and Landlord may immediately or at any time while such defaults exists and without further notice, terminate this Lease by notice to Tenant, specifying a date not less than ten (10) days after the giving of such notice on which this Lease shall terminate and this Lease shall come to an end on the date specified therein as fully and completely as if such date were the date herein originally fixed for the expiration of the Term, and Tenant will then quit and surrender the Premises to Landlord, but Tenant shall remain liable as hereinabove provided. In case of such termination, or termination by legal proceedings for default, Tenant shall indemnify Landlord during the remaining period before this Lease would otherwise expire against all loss or damage suffered by reason of the termination, the loss or damage, if any, for each lease month to be paid at the end thereof'. Nothing herein contained shall, however, limit or prejudice the right of Landlord to exercise any or all rights and remedies available to Landlord or 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. 7.2 RIGHT TO CURE. In addition to the foregoing remedies and so long as this Lease is not terminated, Landlord shall have the right but not the obligation to remedy any default of Tenant and to add to the rent payable hereunder all of Landlord's reasonable costs in so doing, with interest at the rate of two percentage points over the then prevailing prime rate in Boston (as determined by Landlord). Landlord's proceeding under the rights reserved to Landlord under this Section shall not in any way prejudice any rights Landlord might otherwise have against Tenant by reason of Tenant's default, and whether or not Tenant shall be in default hereunder shall be determined as if Landlord had not proceeded. ARTICLE VIII. MISCELLANEOUS 8.1 SURRENDER. Upon the expiration of the Term or early termination thereof, Tenant shall promptly surrender the Premises in good and clean condition, and remove any signs, fixtures, or equipment. 8.2 NOTICES. Whenever any notice, approval, consent, request or election is given or made pursuant to this Lease it shall be in writing sent by certified mail, return receipt requested or 9 10 registered mail, or it shall be delivered personally. Notices and payments shall be addressed to Landlord's address and Tenant's address or at such other address as may have been specified by prior notice. Notices properly given by mail shall be deemed sufficiently served four (4) days after the date of mailing thereof. Notices given by personal delivery shall be deemed sufficiently served as of the date of delivery thereof. 8.3 SUCCESSORS AND ASSIGNS. 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, except that only the Landlord named herein shall be liable for obligations accruing before the beginning of the Term, and thereafter each successive owner of the Premises shall be liable only for obligations accruing during the period of its ownership, said liability terminating upon termination of such ownership and passing to the successor in ownership. 8.4 LIMITATION OF LANDLORD'S LIABILITY. The obligations of Landlord under this lease shall be binding upon Landlord's trust estate, but not upon any trustee or beneficiary of the trust individually. 8.5 NO WAIVER. The failure of Landlord or of Tenant to seek redress for violation, or to insist upon the strict performance of any covenant or condition of this Lease, shall not be deemed a waiver of such violation nor prevent a subsequent act, which would have originally constituted a violation, from having all the force and effect of an original violation. The receipt by Landlord of monthly rent or other monies due hereunder with knowledge of the breach of any covenant of this Lease shall not be deemed a waiver of such breach. 8.6 SEVERABILITY. If any term of this Lease, or the application thereof, to any person or circumstances shall, to any extent, be invalid or unenforceable, the remainder of this Lease, or the application of such term to persons or circumstances other than those as to which it is invalid or unenforceable, shall not be affected thereby, and each term of this Lease shall be valid and enforceable to the fullest extent permitted by law. 8.7 OFFSET STATEMENTS. Tenant agrees from time to time within fifteen (15) days of receipt of written request by Landlord, to execute, acknowledge and deliver to Landlord a statement in writing certifying that (a) this Lease is unmodified and in full force and effect, (b) Tenant has no defenses, offsets or counterclaims against its obligations to pay the rent and other monies hereunder and to perform its other covenants under this Lease, or (c) if there have been any modifications that the Lease is in full force and effect as modified and stating the modifications and, if there are any defenses, offsets, counterclaims or defaults, setting them forth in reasonable detail, and (d) the dates to which the rent has been paid and the amount of any prepaid rent. Any such statement delivered pursuant to this Section 8.7 may be relied upon by any prospective pruchaser, or mortgagee or encumbrancer of the Building or Lot or any prospective assignee of any mortgage or encumbrance upon the Building or Lot. 8.8 SUBORDINATION. This Lease shall be subject and subordinate to any first mortgage now or 10 11 hereafter on the Lot or Building or both and to each advance made or to be made under any first mortgage and to all renewals, modifications, consolidations, replacements, and extensions thereof, and all substitutions therefor. This Section shall be self-operative and no further instrument of subordination shall be required. In confirmation of such subordination, Tenant shall execute and deliver promptly any certificate that Landlord or any first mortgagee may request. In the event that any first mortgagee or its respective successor in title shall succeed to the interest of Landlord, then, at the option of such first mortgagee or successor, this Lease shall nevertheless continue in full force and effect and Tenant shall and does hereby agree to attorn to such first mortgagee or successor and to recognize such first mortgagee or successor as its Landlord. Any such first mortgagee may subordinate its first mortgage or encumbrances to this Lease, without Tenant's consent, by notice in writing to Tenant, and thereupon this Lease shall be deemed prior in lien to such first mortgage or encumbrance without regard to their respective dates of execution and delivery, and such first mortgagee shall have the same rights with respect to this Lease as though it had been executed and delivered prior to the execution and delivery of the first mortgage and had been assigned to such first mortgagee. 8.9 EXAMINATION OF LEASE. Submission of this instrument for examination or signature by Tenant does not constitute a reservation of or option to Lease, and it is not effective as a lease or otherwise until execution and delivery by both Landlord and Tenant. 8.10 LENDERS REQUIREMENTS. Tenant hereby agrees to make any reasonable revisions to this Lease which may be required in good faith by a bona fide construction, interim or permanent lender in connection with the financing of the Building. 8.11 EASEMENTS AND ACCESS THROUGH PROPERTY. The Landlord shall have the right to grant easements in areas of the leased property for the installation of utilities, provided that the use of such easement areas for such purposes does not interfere with the operation of the Tenant's business. The Tenant shall not be entitled to any compensation or abatement of rent if the use of such easement areas does not interfere with the operation of the Tenant's business. 11 12 IN WITNESS WHEREOF, the parties have hereunto executed this lease of the day and year first above written. WITNESS: LANDLORD: EQUITY PROPERTY ASSOCIATES, I Carol Garabedian BY: /s/ John W. Merchant - ------------------------- ------------------------------- WITNESS: TENANT: HADCO CORPORATION /s/ Timothy S. Mathews BY: /s/ Timothy P. Losik - ------------------------- ---------------------------------- 12 13 EXHIBIT C RENEWAL OPTION At the end of the initial term, the Tenant may elect to extend the lease for an additional three years at the Annual Fixed Rental rate adjusted by the increase of the Consumer Price Index dated November 1, 1995 and the Consumer Price Index dated October 31, 2000. At the end of the first three year option, the Tenant may elect to extend the Lease for an additional three years at the Annual Fixed Rental rate effective October 31, 2003 adjusted by the increase of the Consumer Price Index dated November 1, 2000 and the Consumer Price Index dated October 31, 2003. 13 EX-10.3 4 LEASE DATED NOVEMBER 1, 1995 1 EXHIBIT 10.3 LEASE Lease of space in 12A Manor Parkway, Salem, New Hampshire (hereinafter the "Building"). Dated for reference purposes as of November 1, 1995. ARTICLE I. TERMS DEFINED Each reference in this Lease to any of the following terms shall mean: 1.1 Landlord: Equity Property Associates I C/O JWM Properties, Inc. 12B Manor Parkway Salem, NH 03079 1.2 Tenant: HADCO Corporation 12A Manor Parkway Salem, NH 03079 1.3 Building Floor Space: 30,000 sq. ft. 1.4 Tenant's Floor Space: 30,000 sq. ft. 1.5 Term: 5 years 1.5.1 Schedule Term Commencement Date: November 1, 1995 1.6 Annual Fixed Rent: $205,500.00 1.6.1 Included Operating Expense Share: $16,500.00 1.6.2 Included Tax Expense Share: $31,500.00 1.7 Permitted Uses: Office 1.8 Security Deposit: None 1.9 Exhibits: Exhibit A - Description of Premises Exhibit B - Plan Exhibit C - Renewal Option 2 ARTICLE II. PREMISES, TERM AND RENT 2.1 PREMISES. Landlord hereby leases to Tenant, subject to and with the benefit of the provisions of this Lease, the premises described in the Description (the "Premises"), attached as Exhibit A. 2.2 COMMON AREAS. Tenant shall have, as appurtenant to the premises, rights to use in common, subject to reasonable rules from time to time made by Landlord of which Tenant is given notice; (a) BUILDING COMMON AREA. The common accessways loading docks and platforms and any passageways thereto, and the common pipes, ducts, conduits, wires and appurtenant equipment serving the Premises; and (b) LAND COMMON AREA. Common walkways, sidewalks and driveways necessary for access to the Building and parking spaces or area from time to time maintained on the real property upon which the building is situated ("Lot"). 2.3 LANDLORD'S RESERVED RIGHTS IN COMMON AREA. Landlord reserves the right from time to time, without unreasonable interference with Tenant's use: (a) BUILDING CHANGES. To install, use, maintain, repair and replace pipes, ducts, conduits, wires and appurtenant meters and equipment for service to other parts of the building above the ceiling surfaces, below the floor surfaces, within the walls and in the central core areas, and to relocate any pipes, ducts, conduits, wires and appurtenant meters and equipment included in the premises which are so located or located elsewhere outside the premises. (b) BOUNDARY CHANGES. To change the lines of the lot. (c) FACILITY CHANGES. To alter or relocate any other common facility; provided, however, that substitutions are substantially equivalent or better in quality. 2.4 TERM. The term shall commence on the Scheduled Term Commencement Date as it may be extended pursuant to Section 3.1, and shall continue until terminated as herein provided. 2.5 RENT/MONTHLY PAYMENT. Tenant shall pay fixed rent of one-twelvth (1/12) of the Annual Fixed Rent, in advance on the first day of each calendar month, for each full calendar month of the term and for the appropriate fraction of a calendar month at the beginning and end of the term. 2 3 ARTICLE III. CONSTRUCTION 3.1 COMPLETION OF PREMISES. Tenant agrees to lease the premises "as is". 3.2 ALTERATIONS. (a) RIGHT TO MAKE ALTERATIONS. Tenant may, from time to time make non-structural alterations and additions to the interior of premises in accordance with plans and specifications first approved by Landlord in writing, the granting of said approval to be in the sole discretion of Landlord. Tenant shall indemnify and hold harmless Landlord from and against any loss, cost, damage, injury or expenses suffered by Landlord as a result of said work. (b) TITLE TO IMPROVEMENTS. All improvements and additions existing as of the commencement of this Lease shall be pan of the building except such items as, by writing at the time of approval, the parties agree shall be removed by Tenant on termination of this Lease, or Landlord agrees that Tenant may then elect to remove or leave. 3.3 NO LIENS. Tenant shall within five (5) days after the attachment of any lien or claim of lien pay and discharge or secure the release from the building and/or lot of any lien or claim of lien arising out of or in connection with construction work by or for the account of Tenant; and Tenant shall promptly indemnify Landlord from and against all loss, cost, damage, injury or expense in connection with any such lien or claim of lien, including without limitation, reasonable attorney's fees. 3.4 QUALITY OF CONSTRUCTION. All work shall be done in a good and workmanlike manner and in compliance with all applicable laws and lawful ordinances, by-laws, regulations and orders of governmental authority and of the insurers of the premises. Landlord assumes no liability for special, consequential or incidental damages of any kind. There are no representations, warranties of merchantability or use of the premises, except as are expressly set forth herein. Tenant hereby waives the benefit of any rule that disclaimers of warranty shall be construed against Landlord and agrees that the disclaimers in this Lease shall be construed liberally in favor of Landlord. 3 4 ARTICLE IV. SERVICES AND REPAIRS 4.1 LANDLORD'S REPAIRS. Landlord agrees during the term hereof, after written notice from Tenant, unless occasioned by Tenant's misuse or negligence, to repair any structural defects in the roof and bearing walls, and to commence promptly and proceed diligently with any repair or restoration required. 4.2 INTERRUPTION. There shall be no rental abatement for nor shall Landlord be liable for interruption of any service due to accident, making of repairs, alterations or improvements, unusually severe weather, unusual difficulty or inability in obtaining services or supplies from sources usually used for the Building, labor difficulties, governmental regulations, or other causes beyond Landlord's reasonable control. ARTICLE V. TENANT'S COVENANTS 5.1 UTILITIES PAYMENT. Tenant agrees to pay all charges for utilities, including but not limited to, electricity, fuel services and service inspections therefor, which are metered and/or charged directly to the Tenant. 5.2 OPERATING EXPENSE ESCALATION. If Tenant's share of Landlord's Operating Expenses for the Building and Lot exceeds Tenant's Included Operating Expense Share for any year or part thereof of the Term, Tenant shall pay to Landlord as additional rent the amount of such excess upon demand. Tenant's Share of Landlord's Operating Expenses for the Lot is hereby defined to be that proportion of such expenses which Floor Space within Tenant's Premises bears to the Total Floor Space of the Buildings on the Lot. Landlord's Operating Expenses for the Building and Lot shall be insurance, management, exterior maintenance costs, including without limitation, exterior repainting and refurbishing, keeping roofs, exterior windows and doors watertight, snowplowing of drives and parking lots, maintenance of roadway, walks and parking and loading areas, fertilization, mowing and watering of lawns, care of shrubbery and general grounds upkeep, rubbish removal, and cost of utilities for providing common services such as parking lot lighting, security systems, and property identification signs. Landlord's determination as to whether such expenses are attributable to the Building or to the Lot shall be conclusive and binding upon the parties hereto. 5.3 TAX EXPENSE EXCALATION. (a) If Tenant's Share of Landlord's Tax Expenses for the Building and Lot exceed Tenant's Included Tax Share for any year or part thereof of the Term, Tenant shall pay to Landlord as Additional Rent the amount of such excess upon demand. Tenant's Share of Landlord's Tax Expenses for the Building is hereby defined to be that proportion of 4 5 such expenses which Floor Space within Tenant's Premises bears to Building Floor Space. Landlord's Tax Expenses for the Building and Lot shall mean any form of real estate tax, assessment, license fee, levy, penalty or tax imposed by any authority or agency having the direct or indirect power to tax. Landlord's determination as to whether such expenses are attributable to the Building or to the Lot shall be conclusive and binding upon the parties hereto. (b) Tenant shall also pay all personal property taxes for personal property on the Premises or used in connection therewith. (c) Tenant shall pay when due taxes levied or assessed against Landlord by reason of this lease on the rental or any other payment required to be made hereunder whether said taxes are assessed solely on the rental payment hereunder or jointly with other rentals collected pursuant to law or ordinance existing or hereinafter enacted (other than taxes levied on the net income to Landlord derived herefrom as part of a state or federal income tax law applicable to Landlord's income generally) and all costs, expenses and attorney's fees paid as incurred by Landlord in connection with the imposition, contest, or collection of the foregoing. 5.4 MAINTENANCE AND REPAIR. Except as provided in Sections 4.1 and 6.1, Tenant shall keep the Premises and all fixtures and equipment thereon and therein in good repair, operating condition and working order, and shall make all structural repairs necessitated by Tenant's misuse or negligence, and all exterior and interior repairs, renewals and replacements necessary to that end, including without limitation by their inclusion, interior repainting, replacement of glass damaged or broken and of floor and wall coverings worn or damaged, and shall keep all plumbing, lighting, heating, air-conditioning, sprinkler and other utility and mechanical systems in the Premises properly maintained and operated and in good operating condition. 5.5 NO SUBLEASE OR ASSIGNMENT. Without on each occasion obtaining a prior written consent of Landlord, Tenant shall not assign this Lease, or make any sublease (any purported assignment or sublease without such consent shall be void). Tenant shall reimburse Landlord promptly for reasonable legal and other expenses incurred by Landlord in connection with any request for such a consent. Prior to such approval by Landlord, which approval shall not be unreasonably withheld, Tenant shall provide Landlord with information concerning the proposed assignee's or subtenant's financial responsibility. Further, if for any proposed assignment or sublease Tenant receives rent or other consideration either initially or over the term of the assignment or sublease, in excess of the rent called for hereunder, or in case of the sublease of a portion of the Premises in excess of such rent fairly allocable to such portion, after appropriate adjustments to assure that all other payments called for hereunder are taken into account, Tenant shall pay to Landlord as additional rent hereunder one-half of the excess of each such payment of rent or other consideration received by Tenant promptly after its receipt. Tenant agrees to remain primarily and directly liable on all Tenant obligations hereunder notwithstanding any assignment or sublease, or any indulgences, waivers or extensions of time granted by Landlord to any assignee, or failure to take action against any assignee, hereby waiving notice of any default by any assignee, and agrees that Landlord may at its option 5 6 proceed against Tenant without having taken action against or joined any assignee, except that Tenant shall have the benefit of indulgences, waivers and extensions of time granted to any assignee. 5.6 INDEMNITY. Tenant shall indemnify Landlord from and against any liability for injury, loss, accident, or damage to any person or property, and from any claims, actions, proceedings and costs in connection therewith, including reasonable attorney's fees, arising from omission, fault, negligence or other misconduct of Tenant, or arising from any use made or thing done or occurring in the Premises, and to keep all Tenant's employees working in the Premises covered by workmen's compensation insurance, furnishing Landlord with certificate thereof. 5.7 HAZARDOUS MATERIALS. Tenant shall not (either with or without negligence) cause or permit the escape, disposal or release of any biologically or chemically active or other hazardous substances, or materials. Tenant shall not allow the storage or use of such substances or materials in any manner not sanctioned by law or by the highest standards prevailing in the industry for the storage and use of such substances or materials, nor allow to be brought into the Project any such materials or substances except to use in the ordinary course of Tenant's business. Without limitation, hazardous substances and materials shall include those described in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section 9601 et seq., the Resource Conservation and Recovery Act, as amended, 42 U.S.C. Section 6901 et seq., any applicable state or local laws and the regulations adopted under these acts. If any lender or governmental agency shall ever require testing to ascertain whether or not there has been any release of hazardous materials, then the reasonable costs thereof shall be reimbursed by Tenant to Landlord upon demand as additional charges if such requirement applies to the Premises. In addition, Tenant shall execute affidavits, representations and the like from time to time at Landlord's request concerning Tenant's best knowledge and belief regarding the presence of hazardous substances or materials on the Premises. In all events, Tenant shall indemnify Landlord in the manner elsewhere provided in this lease from any release of hazardous materials on the Premises occurring while Tenant is in possession, or elsewhere if caused by Tenant or persons acting under Tenant. The within covenants shall survive the expiration or earlier termination of the lease term. 5.8 COMPREHENSIVE LIABILITY INSURANCE. Tenant shall keep and maintain with insurance carriers acceptable to Landlord, comprehensive liability insurance applying to the activities of Tenant in and in connection with the Premises, with limits or liability of not less than Five Hundred Thousand ($500,000.00) Dollars for injury to or death of a single person, One Million ($1,000,000) Dollars per occurrence and One Hundred Thousand ($100,000) Dollars for property damage. Tenant shall furnish Landlord with a certificate of such insurance which shall name Landlord and any mortgagee of the Lot and/or Building, as any additional insureds and shall provide for noncancellation without thirty (30) days' prior written notice to Landlord and said mortgagee. Failure on the part of Tenant to renew such insurance at least thirty (30) days prior to the expiration date thereof, from time to time, shall constitute an event of default equivalent to a failure to pay an installment of rent due hereunder. 5.9 OTHER INSURANCE. Tenant shall assume the risk of damage to any fixtures, goods, inventory, 6 7 merchandise, equipment, furniture and leasehold improvements which remain the property of Tenant or as to which Tenant retains the right of removal from the Premises, and Tenant shall maintain reasonable insurance coverage with respect to such items during the Term of this Lease. Landlord shall maintain insurance on the Building (excluding any fixtures and items installed or paid for by Tenant which Tenant is entitled to or required to remove) against damage by fire and the perils now specified in the most current standard extended coverage endorsement in an amount equal to at least ninety percent (90%) or replacement cost of the Building as determined by Landlord, exclusive of escavations and foundations and Landlord's comprehensive liability coverage. 5.10 INSURANCE SUBROGATION. Any insurance carried by either party with respect to the Premises and property therein or occurrence thereon shall include a clause or endorsement denying to the insurer right of subrogation against the other party, its successors or any mortgagee thereof to the extent rights have been waived by the insured prior to occurrence of injury or loss. Each party, notwithstanding any provisions of this Lease to the contrary, hereby waives any rights of recovery against the other, its successors or its mortgagee for injury or loss due to hazards covered by insurance containing such clause or endorsement to the extent of the injury or loss covered thereby. 5.11 SIGNS. Tenant shall not, without the prior written consent of Landlord (a) paint or place any signs on the Premises or anywhere on or in the Building or (b) place any curtains, blinds, shades, awnings, aerials or flagpoles, or the like, in the Premises or anywhere on or in the Building visible from outside the Premises. Landlord reserves the right to disapprove of signs, curtains, blinds, shades, and awnings on wholly aesthetic grounds. Tenant shall pay the expenses involved in the erection of any sign and obtaining of a permit therefor. Tenant warrants that it shall obtain all necessary permits prior to erecting any such sign and Tenant shall remove said sign on the termination of this lease. 5.12 ENTRY AND INSPECTION. Tenant shall permit Landlord and Landlord's agents to examine the Premises at reasonable times, and if Landlord shall so elect, to make any repairs or replacements Landlord may deem necessary. Landlord may show the Premises to prospective purchasers and tenants during the one hundred eighty (180) days preceding expiration of the Term. 5.13 PERMITTED USES. Tenant agrees during the Term and so long as Tenant's occupancy continues: To use the Premises only for the Permitted Uses stated in Article I above, and to procure any governmental licenses and permits from time to time required therefor; and to require loading and unloading, and parking of cars for employees, customers and visitors, in connection with Tenant's business, to be done so far as practicable in the areas reserved therefor, and not on adjacent streets; 7 8 ARTICLE VI. CASUALTY AND TAKING 6.1 TERMINATION OR RECONSTRUCTION. If during the Term, the Premises, Building or Lot, or any substantial part thereof 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 receive compensable damage by reason of anything lawfully done under color of public or other authority, this Lease shall terminate at either Landlord's or Tenant's election by written notice given thirty (30) days after the casualty or taking has occurred. If in any such case the Lease is not so terminated, a just portion of the rent according to the nature and extent of the injury shall be abated until the Premises (or in case of taking what may remain thereof), excluding any fixtures or items installed or paid for by Tenant which Tenant is entitled or required to remove pursuant hereto, shall have been put by Landlord into proper condition. In case of a taking which permanently reduces the area of the Premises, a just proportion of the fixed rent shall be abated for the remainder of the term, and Tenant's share of Operating Expenses and Tenant's Share of Tax Expenses shall be adjusted as determined by Landlord. Notwithstanding the foregoing provisions, if insurance is not carried against the damage as above provided or if the insurance proceeds, in Landlord's sole reasonable judgment would be insufficient to cover the cost of repair of the Premises or the building, Landlord shall either repair the damage as above provided or terminate this Lease by giving Tenant, within thirty (30) days apter the damage, at least fifteen (15) days' prior notice specifying the termination date. 6.2 LANDLORD RESERVES COMPENSATION. Landlord reserves all rights to compensation for damages to the Premises, the Building, the Lot and the leasehold hereby created, accruing by reason of exercise of eminent domain or by reason of anything lawfully done by public authority. ARTICLE VII. DEFAULT 7.1 EVENTS OF DEFAULT. If Tenant (i) fails to pay any rent or other sum of money due Landlord hereunder when due and such failure continues for a period often (10) days after notice, provided that if Landlord has given two (2) such notices within the prior twelve (12) months' period, no further notice shall be required and any failure to pay monies within ten (10) days after due shall constitute an event of default, (ii) vacates the Premises or permits the same to be unoccupied, (iii) fails to observe or perform any of the other Tenant's agreements herein contained, and within thirty (30) days of written notice of the same from Landlord, Tenant has not cured such default or, in the alternative where in the normal course such cure would require more than Thirty (30) days, has undertaken all steps necessary or possible to commence such cure, (iv) makes any assignment for the benefit of creditors, (v) commits any act of bankruptcy or files a petition under any bankruptcy or insolvency 8 9 law, or if such a petition filed against Tenant is not dismissed within ninety (90) days, or if a receiver or similar officer becomes entitled to this leasehold and it is not returned to Tenant within ninety (90) days, or if substantially all of Tenant's assets or Tenant's interest in this Lease is taken on execution or other process of law in any action against Tenant, then, Tenant shall be deemed to be in default hereunder; and Landlord may immediately or at any time while such defaults exists and without further notice, terminate this Lease by notice to Tenant, specifying a date not less than ten (10) days after the giving of such notice on which this Lease shall terminate and this Lease shall come to an end on the date specified therein as fully and completely as if such date were the date herein originally fixed for the expiration of the Term, and Tenant will then quit and surrender the Premises to Landlord, but Tenant shall remain liable as hereinabove provided. In case of such termination, or termination by legal proceedings for default, Tenant shall indemnify Landlord during the remaining period before this Lease would otherwise expire against all loss or damage suffered by reason of the termination, the loss or damage, if any, for each lease month to be paid at the end thereof. Nothing herein contained shall, however, limit or prejudice the right of Landlord to exercise any or all rights and remedies available to Landlord or 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. 7.2 RIGHT TO CURE. In addition to the foregoing remedies and so long as this Lease is not terminated, Landlord shall have the right but not the obligation to remedy any default of Tenant and to add to the rent payable hereunder all of Landlord's reasonable costs in so doing, with interest at the rate of two percentage points over the then prevailing prime rate in Boston (as determined by Landlord). Landlord's proceeding under the rf ights reserved to Landlord under this Section shall not in any way prejudice any rights Landlord might otherwise have against Tenant by reason of Tenant's default, and whether or not Tenant shall be in default hereunder shall be determined as if Landlord had not proceeded. ARTICLE VIII. MISCELLANEOUS 8.1 SURRENDER. Upon the expiration of the Term or early termination thereof, Tenant shall promptly surrender the Premises in good and clean condition, and remove any signs, fixtures, or equipment. 8.2 NOTICES. Whenever any notice, approval, consent, request or election is given or made pursuant to this Lease it shall be in writing sent by certified mail, return receipt requested or 9 10 registered mail, or it shall be delivered personally. Notices and payments shall be addressed to Landlord's address and Tenant's address or at such other address as may have been specified by prior notice. Notices properly given by mail shall be deemed sufficiently served four (4) days after the date of mailing thereof. Notices given by personal delivery shall be deemed sufficiently served as of the date of delivery thereof. 8.3 SUCCESSORS AND ASSIGNS. 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, except that only the Landlord named herein shall be liable for obligations accruing before the beginning of the Term, and thereafter each successive owner of the Premises shall be liable only for obligations accruing during the period of its ownership, said liability terminating upon termination of such ownership and passing to the successor in ownership. 8.4 LIMITATION OF LANDLORD'S LIABILITY. The obligations of Landlord under this lease shall be binding upon Landlord's trust estate, but not upon any trustee or beneficiary of the trust individually. 8.5 NO WAIVER. The failure of Landlord or of Tenant to seek redress for violation, or to insist upon the strict performance of any covenant or condition of this Lease, shall not be deemed a waiver of such violation nor prevent a subsequent act, which would have originally constituted a violation, from having all the force and effect of an original violation. The receipt by Landlord of monthly rent or other monies due hereunder with knowledge of the breach of any covenant of this Lease shall not be deemed a waiver of such breach. 8.6 SEVERABILITY. If any term of this Lease, or the application thereof, to any person or circumstances shall, to any extent, be invalid or unenforceable, the remainder of this Lease, or the application of such term to persons or circumstances other than those as to which it is invalid or unenforceable, shall not be affected thereby, and each term of this Lease shall be valid and enforceable to the fullest extent permitted by law. 8.7 OFFSET STATEMENTS. Tenant agrees from time to time within fifteen (15) days of receipt of written request by Landlord, to execute, acknowledge and deliver to Landlord a statement in writing certifying that (a) this Lease is unmodified and in full force and effect, (b) Tenant has no defenses, offsets or counterclaims against its obligations to pay the rent and other monies hereunder and to perform its other covenants under this Lease, or (c) if there have been any modifications that the Lease is in full force and effect as modified and stating the modifications and, if there are any defenses, offsets, counterclaims or defaults, setting them forth in reasonable detail, and (d) the dates to which the rent has been paid and the amount of any prepaid rent. Any such statement delivered pursuant to this Section 8.7 may be relied upon by any prospective purchaser, or mortgagee or encumbrancer of the Building or Lot or any prospective assignee of any mortgage or encumbrance upon the Building or Lot. 8.8 SUBORDINATION. This Lease shall be subject and subordinate to any first mortgage now or 10 11 hereafter on the Lot or Building or both and to each advance made or to be made under any first mortgage and to all renewals, modifications, consolidations, replacements, and extensions thereof, and all substitutions therefor. This Section shall be self-operative and no further instrument of subordination shall be required. In confirmation of such subordination, Tenant shall execute and deliver promptly any certificate that Landlord or any first mortgagee may request. In the event that any first mortgagee or its respective successor in title shall succeed to the interest of Landlord, then, at the option of such first mortgagee or successor, this Lease shall nevertheless continue in full force and effect and Tenant shall and does hereby agree to attorn to such first mortgagee or successor and to recognize such first mortgagee or successor as its Landlord. Any such first mortgagee may subordinate its first mortgage or encumbrances to this Lease, without Tenant's consent, by notice in writing to Tenant, and thereupon this Lease shall be deemed prior in lien to such first mortgage or encumbrance without regard to their respective dates of execution and delivery, and such first mortgagee shall have the same rights with respect to this Lease as though it had been executed and delivered prior to the execution and delivery of the first mortgage and had been assigned to such first mortgagee. 8.9 EXAMINATION OF LEASE. Submission of this instrument for examination or signature by Tenant does not constitute a reservation of or option to Lease, and it is not effective as a lease or otherwise until execution and delivery by both Landlord and Tenant. 8.10 LENDER'S REQUIREMENTS. Tenant hereby agrees to make any reasonable revisions to this Lease which may be required in good faith by a bona fide construction, interim or permanent lender in connection with the financing of the Building. 8.11 EASEMENTS AND ACCESS THROUGH PROPERTY. The Landlord shall have the right to grant easements in areas of the leased property for the installation of utilities, provided that the use of such easement areas for such purposes does not interfere with the operation of the Tenant's business. The Tenant shall not be entitled to any compensation or abatement of rent if the use of such easement areas does not interfere with the operation of the Tenant's business. 11 12 IN WITNESS WHEREOF, the parties have hereunto executed this lease of the day and year first above written. WITNESS: LANDLORD: EQUITY PROPERTY ASSOCIATES, I /s/ Carol Garabedian BY: /s/ John W. Merchant - ------------------------ ------------------------------- WITNESS: TENANT: HADCO CORPORATION /s/ Timothy S. Mathews BY: /s/ Timothy P. Losik - ------------------------ ------------------------------- 12 13 EXHIBIT C RENEWAL OPTION At the end of the initial term, the Tenant may elect to extend the lease for an additional three years at the Annual Fixed Rental rate adjusted by the increase of the Consumer Price Index dated November 1, 1995 and the Consumer Price Index dated October 31, 2000. At the end of the first three year option, the Tenant may elect to extend the Lease for an additional three years at the Annual Fixed Rental rate effective October 31, 2003 adjusted by the increase of the Consumer Price Index dated November 1, 2000 and the Consumer Price Index dated October 31, 2003. 13 EX-10.4 5 AMENDMENT TO LEASE DATED MARCH 1, 1992 1 EXHIBIT 10.4 Amendment to Lease The Lease by and between Equity Property Associates I (Landlord) and HADCO Corporation (Tenant) dated March 1, 1992 as amended May 1, 1995 is hereby amended as follows: I. Tenant is hereby exercising its rights per Exhibit E - Right of First Refusal to lease the additional 21,105 square feet of space under the following terms: a) Effective April 1, 1996 Tenant will occupy 14,802 square feet of lease area and will occupy the remaining 6,303 additional square feet once the existing Tenant, Xircom, Inc. vacates said lease area. b) Effective April 1, 1996 the following Articles of the original Lease are amended. 1. Tenant Floor Space will be 53,697 square feet (Article 1.4) 2. The Annual Fixed Rent will be $323,254.84 (Article 1.6) 3. The Included Operating Expense Share will be $29,385.47 (Article 1.6) 4. The Included Tax Expense Share will be $54,253.97 (Article 1.6) c) Effective upon the written notice by Landlord of the availability of the remaining 6,303 square feet the following Articles of the original Lease will be amended. 1. Tenant Floor Space will be 60,000 square feet (Article 1.4) 2. The Annual Fixed Rent will be $361,200.00 (Article 1.6) 3. The Included Operating Expense Share will be $30,600.00 (Article 1.6) 4. The Included Tax Expense Share will be $60,600.00 (Article 1.6) 2 The effective date of this Amendment will be April 1, 1996. All other provisions of the Lease are hereby ratified and confirmed. In Witness Whereof, the parties have executed this Amendment to Lease this 1st day of April, 1996. WITNESS: LANDLORD: Equity Property Associates, I Carol Garabedian John W. Merchant, General Partner - ----------------------------- --------------------------------------- WITNESS: TENANT: HADCO Corporation Carol Walton Timothy P. Losik, V.P. - ----------------------------- --------------------------------------- EX-27 6 FINANCIAL DATA SCHEDULE
5 1,000 U.S. DOLLARS 3-MOS OCT-26-1996 JAN-28-1996 APR-27-1996 1 13,815 8,170 41,970 900 17,194 88,186 213,464 122,389 181,488 49,650 1,670 519 0 0 121,080 181,488 88,096 88,096 66,203 75,393 0 0 (234) 12,937 5,042 7,895 0 0 0 7,895 .71 0
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