-----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, VWeMHxzYf4it3+VVFfDiomzNV5YPQTiy+2HHKpfaj54Da7JhNDesmERKLxDkYNRB 8ye7Ffv4Gggbjns2BZHIZw== 0000950135-96-003914.txt : 19960910 0000950135-96-003914.hdr.sgml : 19960910 ACCESSION NUMBER: 0000950135-96-003914 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960727 FILED AS OF DATE: 19960906 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: 96626575 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 QUARTERLY REPORT ON FORM 10-Q 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 July 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 10,367,793 shares of Common Stock, $0.05 Par Value, outstanding at September 3, 1996. 2 HADCO CORPORATION AND SUBSIDIARIES INDEX Part I. Page Financial Information: Consolidated Condensed Balance Sheets as of July 27, 1996 and October 28, 1995 ........................................ 3 Consolidated Condensed Statements of Income for the Quarters ended July 27, 1996 and July 29, 1995, and nine months ended July 27, 1996 and July 29, 1995, respectively ............... 4 Consolidated Condensed Statements of Cash Flows for the nine months ended July 27, 1996 and July 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 ................................................... 17 2 3 HADCO CORPORATION AND SUBSIDIARIES ---------------------------------- CONSOLIDATED CONDENSED BALANCE SHEETS ------------------------------------- (In thousands, except share data)
ASSETS ------ July 27, October 28, 1996 1995 -------- -------- (unaudited) Current Assets: Cash and cash equivalents $ 26,926 $ 21,307 Short-term investments 5,632 15,167 Accounts receivable, net of allowance for doubtful accounts of $898,000 in 1996 and $850,000 in 1995, respectively 40,087 35,797 Inventories 17,190 13,304 Prepaid expenses 7,931 7,984 -------- -------- Total Current Assets 97,766 93,559 -------- -------- Property, Plant and Equipment, at cost 223,288 183,760 Less - Accumulated depreciation and amortization 127,155 116,068 -------- -------- 96,133 67,692 -------- -------- Other Assets 2,319 1,740 -------- -------- $196,218 $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 38,628 34,342 Accrued Payroll and related expenses 16,185 16,031 -------- -------- Total Current Liabilities 56,400 52,516 -------- -------- Long-Term Debt and Capital Lease Obligations 1,152 2,387 -------- -------- Long-Term Liabilities (Note 5) 9,019 7,314 -------- -------- Stockholders' Investment: Common stock, $.05 par value - Authorized 25,000,000 shares Issued and outstanding 10,365,898 in 1996 and 9,903,236 in 1995 519 497 Paid-in Capital 30,721 25,077 Deferred Compensation Resulting from the Granting of Non-qualified Stock Options (280) (407) Retained Earnings 98,687 75,607 -------- -------- Total Stockholders' Investment 129,647 100,774 -------- -------- $196,218 $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 Nine Months Ended ------------------------ ------------------------ July 27, July 29, July 27, July 29, 1996 1995 1996 1995 ----------- ----------- ----------- ----------- Net Sales $ 88,225 $ 67,752 $ 252,799 $ 192,214 Cost of Sales 66,774 50,212 189,975 147,121 ----------- ----------- ----------- ----------- Gross Profit 21,451 17,540 62,824 45,093 Selling, General and Administrative Expenses 8,541 7,719 25,682 22,160 ----------- ----------- ----------- ----------- Income from Operations 12,910 9,821 37,142 22,933 Interest Income 276 481 959 1,186 Interest Expense (82) (134) (270) (403) ----------- ----------- ----------- ----------- Income Before Provision for Income Taxes 13,104 10,168 37,831 23,716 Provision for Income Taxes 5,110 4,016 14,752 9,368 ----------- ----------- ----------- ----------- Net Income $ 7,994 $ 6,152 $ 23,079 $ 14,348 =========== =========== =========== =========== Net Income Per Common and Common Equivalent Share $ .72 $ .56 $ 2.08 $ 1.34 =========== =========== =========== =========== Weighted Average Common and Common Equivalent Shares Outstanding 11,100,474 11,034,118 11,111,441 10,716,761 =========== =========== =========== ===========
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)
Nine Months Ended ------------------------- July 27, July 29, 1996 1995 --------- --------- Total Cash Provided From Operations $ 34,012 $ 26,759 --------- --------- Cash Flows From Investing Activities: Net sales (purchases) of short-term investments 9,535 (4,222) Purchases of property, plant and equipment (42,066) (17,294) Proceeds from sale of property, plant and equipment 255 299 --------- --------- Cash Used In Investing Activities (32,276) (21,217) --------- --------- Cash Flows From Financing Activities: Principal payments under capital lease obligations (1,722) (1,972) Principal payments of long-term debt (69) (2,069) Proceeds from issuance of common stock 5,674 2,210 Purchase and retirement of common stock - (1,018) --------- --------- Cash used in Financing Activities 3,883 (2,849) --------- --------- Increase in Cash and Cash Equivalents 5,619 2,693 Cash and Cash Equivalents Beginning of Period 21,307 19,064 --------- --------- Cash and Cash Equivalents End of Period $ 26,926 $ 21,757 ========= ========= Supplemental disclosure of cash flow information: Cash paid during the respective periods for: Interest $ 207 $ 450 ========= ========= Income taxes $ 8,312 $ 8,701 ========= =========
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 July 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 July 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 $ 1,000 $ 997 within 1 year Debt securities issued by states of the US 1,500 1,500 within 1 year Corporate debt securities 3,132 3,083 within 1 year ------- ------- $ 5,632 $ 5,580 ======= =======
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:
July 27, October 28, 1996 1995 ------- ---------- (In thousands) Raw Materials $ 9,333 $ 6,318 Work-in-process 7,857 6,986 ------- ------- Total $17,190 $13,304 ======= =======
4. Significant Customers --------------------- One customer accounted for 15%, and another customer accounted for 10% of net sales for the quarter ended July 27, 1996. For the quarter ended July 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 $9.9 million and $8.2 million at July 27, 1996 and October 28, 1995, respectively. The current portion of these costs as of July 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 $9.0 million and $7.3 million as of July 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 from 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 effort to resolve the lawsuit. 9 10 HADCO CORPORATION AND SUBSIDIARIES ---------------------------------- NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS ---------------------------------------------------- (unaudited) ----------- 5. Environmental Matters (Continued) --------------------------------- 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. In this quarterly report, the words "anticipates," "believes," "expects," "intends," "future," "could," and similar words or expressions (as well as other words or expressions referencing future events, conditions or circumstances) identify forward looking statements. Results of Operations - --------------------- Third Quarter - ------------- Net sales for the third quarter of 1996 increased 30.2% over the same period in 1995. The change was due to a 13.8% 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 third quarter last year. Average pricing per unit increased 4.7% for the third quarter of 1996 over the third quarter of 1995. Sales of backplane and other electronic assemblies increased to 19% of the Company's net revenues for the quarter ended July 27, 1996, versus 7% 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 decreased from 25.9% in the third quarter of 1995 to 24.3% in the third quarter of 1996. The decrease is a result of higher costs due to the implementation of new production processes, and the increase in the volume of shipments for backplane and other electronic assemblies which have lower gross margins than printed circuit sales. Selling, general and administrative (SG&A) expenses, as a percent of net sales, decreased to 9.7% in the third quarter of 1996 as compared to 11.4% in the third quarter of 1995 due to increased revenue. SG&A expenses increased from $7.7 million in the third quarter of 1995 to $8.5 million in the third 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 third quarter of 1996 and 1995, the Company made, and charged to SG&A expenses, actual payments of approximately $149,000 and $391,000, respectively, for 11 12 environmental matters. In the third quarter of 1996 and 1995, the Company also accrued and charged to SG&A expenses approximately $451,000 and $689,000, respectively, as cost estimates relating to known environmental matters. To the extent and in amounts Hadco 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 third quarter of 1996 as compared to the third quarter of 1995 due to lower average cash balances available for investing. Interest expense decreased in the third quarter of 1996 as compared to the third quarter of 1995 due to a decrease in outstanding debt. Year-to-Date - ------------ Net sales for the first nine months of 1996 increased 31.5% above the same period in 1995. The increase is the result of a 14% 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 7.0% increase in average pricing. Sales of backplanes and other electronic assemblies increased to 15% of the Company's net revenues for the first nine months of 1996 versus 6% for the same period last year. The gross profit margin increased from 23.5% to 24.9% from the first nine months of 1995 to the first nine months of 1996. The increase is a direct result of higher volume of shipments, an increase in the technology level of product mix, and an increase in average pricing. SG&A expenses decreased as a percent of net sales, from 11.5% to 10.2% from the first nine months of 1995 to the first nine months of 1996. This resulted from increased revenue. The SG&A expenses increased from $22.2 million for the first nine months of 1995 to $25.7 million for the first nine months 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 first nine months of 1996 and 1995, the Company made, and charged to SG&A expenses, actual payments of approximately $674,000 and $978,000, respectively, for environmental matters. In the first nine months of 1996 and 1995, the Company also accrued and charged to SG&A cost estimates approximately $1,335,000 and $1,706,000, respectively, as cost estimates relating to know environmental matters. 12 13 Interest income decreased in the first nine months of 1996 as compared to the same period in 1995 due to lower yields on investments. Interest expense decreased in the first nine months of 1996 as compared to the third 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 third 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 July 27, 1996, the Company's working capital was $41.7 million, including cash, cash equivalents and held-to-maturity securities of $32.6 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. On July 10, 1996, the Company executed an unsecured Revolving Credit Agreement with a bank. The agreement provides for up to $15,000,000 in revolving credit until June 30, 1997. During this period the Company can designate the rate of interest at either the Eurodollar Rate plus 60 basis points (0.60%) or the banks's Base Rate. As of July 27, 1996 no amounts were outstanding under this line of credit.
(in thousands) -------------- Leasing Line of Credit $ 4,661 Revolving Line of Credit 15,000 ------- Total Credit Available $19,661 =======
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. 13 14 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 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 14 15 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 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 can be unrelated to operating performance. 15 16 PART II - OTHER INFORMATION Item 6. Exhibits and reports on Form 8-K (a) Exhibits 10.1 Revolving Credit Agreement dated July 10, 1996 between Registrant and The First National Bank of Boston. 27 Financial Data Schedule (b) Reports on Form 8-k There were no reports on Form 8-k filed for the quarter ended July 27, 1996. 16 17 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 Date: September 03, 1996 By: /s/ Timothy P. Losik ------------------------------- Timothy P. Losik Chief Financial Officer, Vice President 17 EX-10.1 2 REVOLVING CREDIT AGREEMENT 1 Exhibit 10.1 - -------------------------------------------------------------------------------- REVOLVING CREDIT AGREEMENT -------------------------- DATED as of July 10, 1996 between HADCO CORPORATION and THE FIRST NATIONAL BANK OF BOSTON - -------------------------------------------------------------------------------- 2 TABLE OF CONTENTS ----------------- 1. DEFINITIONS: ......................................................... 1 2. REVOLVING CREDIT FACILITY ............................................ 7 2.1. Commitment to Lend ........................................ 7 2.2. Requests for Loans ........................................ 7 2.3. Conversion Options ........................................ 9 2.3.1. Conversion to Different Loan Type .............. 9 2.3.2. Continuation of Loan Type ...................... 9 2.4. Interest .................................................. 9 2.5. Repayments and Prepayments ................................10 3. CHANGES IN CIRCUMSTANCES, ETC ........................................12 3.1. Inability to Determine LIBOR Rate .........................12 3.2. Illegality ................................................12 3.3. Change in Circumstances ...................................13 3.4. Certificate ...............................................13 3.5. Indemnity .................................................13 4. FEES AND PAYMENTS ....................................................14 5. REPRESENTATIONS AND WARRANTIES .......................................14 6. CONDITIONS PRECEDENT .................................................16 7. COVENANTS ............................................................16 7.1. Affirmative Covenants .....................................16 7.2. Negative Covenants ........................................18 7.3. Financial Covenants .......................................19 8. EVENTS OF DEFAULT; ACCELERATION ......................................19 9. SETOFF ...............................................................21 10. MISCELLANEOUS .......................................................21 3 REVOLVING CREDIT AGREEMENT -------------------------- This REVOLVING CREDIT AGREEMENT (this "Agreement") is made as of July 10, 1996, by and between HADCO CORPORATION (the "Borrower"), a Massachusetts corporation having its principal place of business at 12A Manor Parkway, Salem, New Hampshire 03709, and THE FIRST NATIONAL BANK OF BOSTON (the "Bank"), a national banking association with its head office at 100 Federal Street, Boston, Massachusetts 02110. 1. DEFINITIONS: ----------- Certain capitalized terms are defined below: AGREEMENT: See preamble, which term shall include this Agreement and the Schedules hereto, all as amended and in effect from time to time. BANK: See preamble. BASE RATE: The higher of (i) the annual rate of interest announced from time to time by the Bank at its head office as the Bank's "base rate" and (ii) one-half of one percent (1/2%) above the Federal Funds Effective Rate. BASE RATE LOANS: Loans bearing interest calculated by reference to the Base Rate. BORROWER: See preamble. BUSINESS DAY: Any day on which banks in Boston, Massachusetts, are open for business generally and, in the case of LIBOR Rate Loans, also a day which is a LIBOR Business Day. CAPITALIZED LEASES: Leases under which the Borrower is the Lessee or obligor, the discounted, future rental payment obligations under which are required to be capitalized on the balance sheet of the Borrower in accordance with GAAP. CHARTER DOCUMENTS: In respect of any entity, the certificate or articles of incorporation or organization and the by-laws of such entity, or other constitutive documents of such entity. COMMITMENT: The obligation of the Bank to make Loans to the Borrower up to an aggregate outstanding principal amount not to exceed 4 -2- $15,000,000.00, as such amount may be reduced from time to time or terminated hereunder. CONSENT: In respect of any person or entity, any permit, license or exemption from, approval, consent of, registration or filing with any local, state or federal governmental or regulatory agency or authority, required under applicable law. CONSOLIDATED NET INCOME: The Consolidated Net Income (or net deficit) of the Borrower, after deduction of all expenses, interest, and other proper charges and provisions for taxes determined in accordance with GAAP. CONVERSION REQUEST: A notice given by the Borrower to the Bank of the Borrower's election to convert or continue a Loan in accordance with [Section]2.3 hereof. COST OF FUNDS: For any Interest Period with respect to a Fixed Rate Loan, the rate of interest quoted by the Bank and determined by it in its sole discretion based upon its "cost of funds" with respect to the purchase of U.S. dollar deposits in an amount equal to the proposed Fixed Rate Loan, for a period equal to that of the Interest Period applicable to such Fixed Rate Loan. CURRENT ASSETS: All assets of the Borrower that in accordance with GAAP are properly classified as current assets, with adequate reserves for the Borrower's business operations. CURRENT LIABILITIES: All liabilities of the Borrower payable on demand or maturing within one (1) year from the date as of which current liabilities are to be determined, and such other liabilities that in accordance with GAAP are properly classified as current liabilities. DEFAULT: An event or act which with the giving of notice and/or the lapse of time, would become an Event of Default. DOMESTIC LENDING OFFICE: Initially the office of the Bank designated as such by notice to the Borrower; thereafter, such other office of the Bank, if any, located within the United States that will be making or maintaining Base Rate Loans. DRAWDOWN DATE: In respect of any Loan, the date on which such Loan is made to the Borrower. 5 -3- EBIT: The Consolidated Net Income but before payment or provision for any income taxes or interest expense for such period, determined in accordance with GAAP. ENVIRONMENTAL LAWS: All laws pertaining to environmental matters, including without limitation, the Resource Conservation and Recovery Act, the Comprehensive Environmental Response Compensation and Liability Act of 1980, the Superfund Amendments and Reauthorization Act of 1986, the Federal Clean Water Act, the Federal Clean Air Act, the Toxic Substances Control Act, in each case as amended, and all rules, regulations, judgments, decrees, orders and licenses arising under all such laws. ERISA: The Employee Retirement Income Security Act of 1974, as amended, and all rules, regulations, judgments, decrees, and orders arising thereunder. EUROCURRENCY RESERVE RATE: For any day with respect to a LIBOR Rate Loan, the maximum rate (expressed as a decimal) at which any lender subject thereto would be required to maintain reserves under Regulation D of the Board of Governors of the Federal Reserve System (or any successor or similar regulations relating to such reserve requirements) against "Eurocurrency Liabilities" (as that term is used in Regulation D), if such liabilities were outstanding. The Eurocurrency Reserve Rate shall be adjusted automatically on and as of the effective date of any change in the Eurocurrency Reserve Rate. EVENT OF DEFAULT: Any of the events listed in [Section]8 hereof. FEDERAL FUNDS EFFECTIVE RATE: For any day, the rate per annum equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day on such transactions received by the Bank from three funds brokers of recognized standing selected by the Bank. FINANCIALS: In respect of any period, the balance sheet of any person or entity as at the end of such period, and the related statement of income and statement of cash flow for such period, each setting forth in comparative form the figures for the previous comparable fiscal period, all in reasonable detail and prepared in accordance with GAAP. 6 -4- FIXED RATE LOAN: Loans bearing interest calculated by reference to the Bank's Cost of Funds. FUNDED DEBT: For any period, the sum of (i) the principal amount of all Loans and accrued, but unpaid, interest thereon and (ii) all other interest bearing Indebtedness outstanding during such period. GAAP: Generally accepted accounting principles consistent with those adopted by the Financial Accounting Standards Board and its predecessor, (i) generally, as in effect from time to time, and (ii) for purposes of determining compliance by the Borrower with its financial covenants set forth herein, as in effect for the fiscal year therein reported in the most recent Financials submitted to the Bank prior to execution of this Agreement. INDEBTEDNESS: In respect of any entity, all obligations, contingent and otherwise, that in accordance with GAAP should be classified as liabilities, including without limitation (i) all debt obligations, (ii) all liabilities secured by Liens, (iii) all guarantees and (iv) all liabilities in respect of bankers' acceptances or letters of credit. INTEREST PAYMENT DATE: (i) As to any Base Rate Loan, the last day of the calendar month which includes the Drawdown Date thereof; and (ii) as to any LIBOR Rate Loan in respect of which the Interest Period is 90 days or less, the last day of such Interest Period, and, in addition, the last day of such Interest Period. INTEREST PERIOD: With respect to each Loan, (i) initially, the period commencing on the Drawdown Date of such Loan and ending (A) with respect to any Base Rate Loan, on the last day of such calendar month, and (B) with respect to any LIBOR Rate Loan, 30, 60 or 90 days thereafter, as selected by the Borrower in a Loan Request, and (C) with respect to any Fixed Rate Loan, any period up to and including six (6) months thereafter, as selected by the Borrower in a Loan Request; and (ii) thereafter, each period commencing on the last day of the immediately preceding Interest Period applicable to such Loan and ending on the last day of one of the periods set forth above, as selected by the Borrower in a Conversion Request; PROVIDED that all of the foregoing provisions relating to Interest Periods are subject to the following: (a) if any Interest Period with respect to a LIBOR Rate Loan would otherwise end on a day that is not a LIBOR Business Day, that Interest Period shall be extended to the next succeeding LIBOR Business Day unless the result of such extension would be to carry such Interest Period into another calendar month, in which 7 -5- event such Interest Period shall end on the immediately preceding LIBOR Business Day; (b) if the Borrower shall fail to give notice as provided in [Section]2.3, as the case may be, the Borrower shall be deemed to have requested a conversion of the affected LIBOR Rate Loan or Fixed Rate Loan to a Base Rate Loan and the continuance of all Base Rate Loans as Base Rate Loans on the last day of the then current Interest Period with respect thereto; (c) any Interest Period that begins on the last LIBOR Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last LIBOR Business Day of a calendar month; and (d) any Interest Period relating to any LIBOR Rate Loan or a Fixed Rate Loan that would otherwise extend beyond the Maturity Date shall end on the Maturity Date. LIBOR BUSINESS DAY: Any day on which commercial banks are open for international business (including dealings in U.S. dollar deposits) in London. LIBOR LENDING OFFICE: Initially, the office of the Bank designated as such by notice to the Borrower; thereafter, such other office of the Bank, if any, that shall be making or maintaining LIBOR Rate Loans. LIBOR RATE: For any Interest Period with respect to a LIBOR Rate Loan, the rate of interest equal to (i) the rate determined by the Bank at which U.S. dollar deposits for such Interest Period are offered based on information presented on Telerate Page 3750 as of 11:00 a.m. London time on the second LIBOR Business Day prior to the first day of such Interest Period, divided by (ii) a number equal to 1.00 minus the Eurocurrency Reserve Rate, if applicable. LIBOR RATE LOANS: Loans bearing interest calculated by reference to the LIBOR Rate. LIBOR RATE MARGIN: With respect to any LIBOR Rate Loan, six-tenths of one percent (0.6%) per annum. Liens: Any encumbrance, mortgage, pledge, hypothecation, charge, restriction or other security interest of any kind securing any obligation of any entity or person. 8 -6- LOAN: Any loan made or to be made to the Borrower pursuant to [Section]2 hereof. LOAN DOCUMENTS: This Agreement and the Note, in each case as from time to time amended or supplemented. LOAN REQUEST: See [Section]2.1. MATERIALLY ADVERSE EFFECT: Any materially adverse effect on the financial condition or business operations of the Borrower or material impairment of the ability of the Borrower to perform its obligations hereunder or under any of the other Loan Documents. MATURITY DATE: June 30, 1997 or such earlier date on which all Loans may become due and payable pursuant to the terms hereof. MAXIMUM DRAWING AMOUNT: The maximum aggregate amount from time to time that beneficiaries may draw under outstanding Letters of Credit, as such aggregate amount may be reduced from time to time pursuant to the terms of the Letters of Credit. NEGATIVE SPREAD: See [Section]2.5. NOTE: See [Section]2.1. OBLIGATIONS: All indebtedness, obligations and liabilities of the Borrower to the Bank, existing on the date of this Agreement or arising thereafter, direct or indirect, joint or several, absolute or contingent, matured or unmatured, liquidated or unliquidated, secured or unsecured, arising by contract, operation of law or otherwise, arising or incurred under this Agreement or any other Loan Document or in respect of any of the Loans or the Note or other instruments at any time evidencing any thereof. REINVESTMENT RATE: See [Section]2.5. REQUIREMENT OF LAW: In respect of any person or entity, any law, treaty, rule, regulation or determination of an arbitrator, court, or other governmental authority, in each case applicable to or binding upon such person or entity or affecting any of its property. SUBSIDIARY: Any entity a majority of whose Voting Stock or equity interests is, directly or indirectly, owned or controlled by the Borrower. TANGIBLE NET WORTH: The excess of (i) all assets of the Borrower determined in accordance with GAAP, over (ii) all liabilities of the 9 -7- Borrower determined in accordance with GAAP, MINUS (iii) the sum of (A) the book value all intangibles determined in accordance with GAAP, including good will and intellectual property, and (B) any write-up in the book value of assets since the most recent audited Financials in existence on the date hereof TOTAL DEBT SERVICE: For any period, the aggregate liability of the Borrower for interest on Indebtedness, whether expensed or capitalized including payments consisting of interest in respect of Capitalized Leases, for principal payments in respect of Indebtedness and for commitment fees, financing fees, and other fees and expenses in connection with the borrowing of money or obtaining of credit, determined in accordance with GAAP. TOTAL LIABILITIES: All liabilities of the Borrower that in accordance with GAAP are properly classified as liabilities. TOTAL OUTSTANDING: At any time of reference thereto, the sum of (i) Loans outstanding at such time, and (ii) the Maximum Drawing Amount at such time. TYPE: As to any Loan, its nature as a Fixed Rate Loan, a Base Rate Loan or a LIBOR Rate Loan. VOTING STOCK: Stock or similar interests, of any class or classes (however designated), the holders of which are at the time entitled, as such holders to vote for the election of directors (or persons performing similar functions) of a corporation, association, trust or other entity, whether or not the right to vote exists by reason of the happening of a contingency. 2. REVOLVING CREDIT FACILITY. ------------------------- 2.1 COMMITMENT TO LEND. Upon the terms and subject to the conditions of this Agreement, the Bank agrees to lend to the Borrower such sums as the Borrower may request, from the date hereof until but not including the Maturity Date, PROVIDED that the sum of the outstanding principal amount of all Loans (after giving effect to all amounts requested) shall not exceed the Commitment. 2.2 REQUESTS FOR LOANS. (a) The Borrower shall give to the Bank written notice in form and substance satisfactory to the Bank (or telephonic notice confirmed in writing in form and substance satisfactory to the 10 -8- Bank) of each Loan requested hereunder (a "Loan Request") (i) no later than 10:00 a.m., Boston time, on the proposed Drawdown Date of any Base Rate Loan or any Fixed Rate Loan and (ii) no less than three (3) LIBOR Business Days prior to the proposed Drawdown Date of any LIBOR Rate Loan. Each such notice shall specify (A) the principal amount of the Loan requested, (B) the proposed Drawdown Date of such Loan, (C) the Interest Period for such Loan and (D) whether such Loan shall be a Base Rate Loan, a LIBOR Rate Loan or a Fixed Rate Loan. Each such notice shall be irrevocable and binding on the Borrower and shall obligate the Borrower to accept the Loan requested from the Bank on the proposed Drawdown Date. Each request for a LIBOR Rate Loan shall be in a minimum aggregate amount of $100,000 or an integral multiple thereof. Each request for a Fixed Rate Loan shall be in a minimum amount of $500,000 or an integral multiple thereof. (b) Notwithstanding the notice requirements set forth in [Section]2.2(a), Loans may be made from time to time in the following manner: the Bank may make Loans to the Borrower by entry of credits (i) if applicable, to the Borrower's controlled disbursement account (the "Disbursement Account") with the Bank to cover checks or other charges which the Borrower has drawn or made against such Disbursement Account or (ii) such other account of the Borrower maintained at the Bank's head office as the Borrower may designate. The Borrower hereby requests and authorizes the Bank to make from time to time such Loans by means of appropriate entries of such credits sufficient to cover checks and other charges then presented. The Borrower and the Bank may also agree to effect such other controlled disbursement arrangements as may be mutually satisfactory. The Borrower acknowledges and agrees that the making of such Loans in accordance with this [Section]2.2(b) shall, in each case, be subject in all respects to provisions of this Agreement as if they were Loans covered by a Loan Request including, without limitation, the limitations set forth in [Section]2.1 and the requirement that the applicable provisions of [Section]7 be satisfied. All actions taken by the Bank pursuant to the provisions of this [Section]2.2(b) shall be conclusive and binding on the Borrower. (c) The obligation of the Borrower to repay to the Bank the principal of the Loans and interest accrued thereon shall be evidenced by a promissory note (the "Note") in the maximum aggregate principal amount of $15,000,000.00 executed and delivered by the Borrower and payable to the order of the Bank, in form and substance satisfactory to the Bank. 11 -9- 2.3 CONVERSION OPTIONS. 2.3.1 CONVERSION TO DIFFERENT LOAN TYPE. The Borrower may elect from time to time to convert any outstanding Loan from one Type to another, PROVIDED that (i) with respect to any such conversion of a LIBOR Rate Loan or a Fixed Rate Loan into a Base Rate Loan, such conversion shall only be made on the last day of the Interest Period with respect thereto; (ii) with respect to any such conversion of a Base Rate Loan or a Fixed Rate Loan to a LIBOR Rate Loan, the Borrower shall give the Bank at least three (3) LIBOR Business Days' prior written notice of such election, and (iii) no Loan may be converted into a LIBOR Rate Loan or a Fixed Rate Loan when any Default or Event of Default has occurred and is continuing. On the date on which such conversion is being made the Bank shall take such action as is necessary to transfer such Loans to its Domestic Lending Office or its LIBOR Lending Office, as the case may be. All or any part of outstanding Loans may be converted as provided herein, PROVIDED that (A) partial conversions of any Loan into a LIBOR Rate Loan shall be in an aggregate principal amount of $100,000 or an integral multiple thereof, and (B) partial conversions of any Loan into a Fixed Rate Loan shall be in an aggregate principal amount of $500,000 or an integral multiple thereof. Each Conversion Request relating to the conversion of a Loan to a LIBOR Rate Loan or a Fixed Rate Loan shall be irrevocable by the Borrower. 2.3.2 CONTINUATION OF LOAN TYPE. Any Loan may be continued as such upon the expiration of an Interest Period with respect thereto by compliance by the Borrower with the notice provisions contained in [Section]2.3.1; PROVIDED that no LIBOR Rate Loan or Fixed Rate Loan may be continued as such when any Default or Event of Default has occurred and is continuing, but shall be automatically converted to a Base Rate Loan on the last day of the first Interest Period relating thereto ending during the continuance of any Default or Event of Default of which the officers of the Bank active upon the Borrower's account have actual knowledge. In the event that the Borrower fails to provide any such notice with respect to the continuation of any LIBOR Rate Loan or Fixed Rate Loan as such, then such Loan shall be automatically converted to a Base Rate Loan on the last day of the first Interest Period relating thereto. 2.4 INTEREST. So long as no Event of Default is continuing, (i) each Base Rate Loan shall bear interest for the period commencing with the 12 -10- Drawdown Date thereof and ending on the last day of the Interest Period with respect thereto at a rate per annum equal to the Base Rate, (ii) each LIBOR Rate Loan shall bear interest for the period commencing with the Drawdown Date thereof and ending on the last day of the Interest Period with respect thereto at a rate per annum equal to the sum of (A) the LIBOR Rate, PLUS (B) the LIBOR Rate Margin, and (iii) each Fixed Rate Loan shall bear interest for the period commencing with the Drawdown Date thereof and ending on the last day of the Interest Period with respect thereto at a rate per annum equal to the Cost of Funds quoted by the Bank with respect to such Fixed Rate Loan. While an Event of Default is continuing, amounts payable under any of the Loan Documents shall bear interest (compounded monthly and payable on demand in respect of overdue amounts) at a rate per annum which is equal to the sum of (i) the Base Rate, and (ii) three percent (3%) until such amount is paid in full or (as the case may be) such Event of Default has been cured or waived in writing by the Bank (after as well as before judgment). Each payment of interest hereunder shall be due and payable in arrears on the last Business Day of each month and, with respect to any Fixed Rate Loan and any LIBOR Rate Loan, on the last day of the Interest Period with respect thereto. 2.5 REPAYMENTS AND PREPAYMENTS. The Borrower hereby agrees to pay the Bank on the Maturity Date the entire unpaid principal of and interest on all Loans. The Borrower may elect to prepay the outstanding principal of all or any part of any Loan, without premium or penalty, provided that the full or partial prepayment of the outstanding amount of any LIBOR Rate Loans or any Fixed Rate Loans pursuant to this [Section]2.5 may be made only on the last day of the Interest Period relating thereto (it being understood that no such restriction shall exist with respect to the prepayment of any Base Rate Loan). The Borrower shall give the Bank no later than 10:00 a.m. Boston time, at least three (3) LIBOR Business Days prior written or telephonic notice, of any proposed prepayment pursuant to this [Section]2.5 of any LIBOR Rate Loan; and on the date of such prepayment pursuant to this [Section]2.5 of any Base Rate Loan or any Fixed Rate Loans, in each case specifying the proposed date of such prepayment and the amount to be prepaid. The Borrower shall be entitled to reborrow before the Maturity Date such amounts, PROVIDED that no Default or Event of Default has occurred and is continuing and subject to the other terms and conditions of this Agreement. Each repayment or prepayment of principal of any Loan shall be accompanied by payment of the unpaid interest accrued to such date on the principal being repaid or prepaid. If at any time the total amount of all Loans then outstanding shall exceed the Commitment, the Borrower shall immediately pay the amount of such excess to the Bank for application to the Loans. The 13 -11- Borrower may elect to reduce or terminate the Commitment by a minimum principal amount of $1,000,000, upon written notice to the Bank given by 10:00 a.m. Boston time at least two (2) Business Days prior to the date of such reduction or termination. The Borrower shall not be entitled to reinstate the Commitment following such reduction or termination. All prepayments of Fixed Rate Loans which are made on any day other than the last day of the Interest Period with respect thereto (whether in whole or in part and whether voluntarily or by acceleration of the maturity thereof by the Bank in accordance with the terms hereof) shall be accompanied by a prepayment premium in an amount determined by the Bank in the following manner: (i) FIRST, the Bank shall determine the amount of interest the Bank would have received on each subsequent interest payment date during the Interest Period applicable to the Fixed Rate Loan so prepaid if such principal prepayment were not being made. (ii) SECOND, the Bank shall determine the Reinvestment Rate applicable to each originally scheduled interest payment hereunder based on the principal amount of the Fixed Rate Loan that would otherwise be outstanding on each subsequent scheduled interest payment date during the applicable Interest Period if such principal prepayment were not being made. The "Reinvestment Rate" applicable to the amount of any such interest payment shall mean the rate of interest on any readily marketable bond or other obligation of the United States, designated by the Bank in its sole discretion, in an amount equal (as nearly as may be) to the total amount of principal to be prepaid and having a term that most closely matches the period beginning on the date of such prepayment and ending on the date on which such interest payment would otherwise be due if such principal prepayment were not being made. The Reinvestment Rate shall reflect the amortization of any discount from par or accretion of premium above par at which such United States obligation is selling at the time of the Bank's designation. (iii) THIRD, the Bank shall determine the excess, if any, of the amount produced by the calculation referred to in paragraph (i) above over the amount produced by the calculation referred to in paragraph (ii) above (the "Negative Spread") as to each payment of interest that would otherwise be due hereunder in respect of the Fixed Rate Loan if such 14 -12- principal prepayment were not being made. The Bank shall then determine the present value of the Negative Spread of each such installment of interest, using as a discount factor the Reinvestment Rate applicable to such interest installment determined pursuant to paragraph (ii) above. (iv) FOURTH, the Bank shall determine the sum of the present values of the Negative Spreads for all such installments of interest. The resulting sum shall be the prepayment premium payable by the Borrower with respect to such principal prepayment of the Fixed Rate Loan. 3. CHANGES IN CIRCUMSTANCES, ETC. ----------------------------- 3.1 INABILITY TO DETERMINE LIBOR RATE. In the event, prior to the commencement of any Interest Period relating to any LIBOR Rate Loan, the Bank shall determine that adequate and reasonable methods do not exist for ascertaining the LIBOR Rate that would otherwise determine the rate of interest to be applicable to any LIBOR Rate Loan during any Interest Period, the Bank shall forthwith give notice of such determination (which shall be conclusive and binding on the Borrower) to the Borrower. In such event (i) any Loan Request or Conversion Request with respect to any LIBOR Rate Loan shall be automatically withdrawn and shall be deemed a request for a Base Rate Loan, unless the Borrower requests a Fixed Rate Loan, in which case the Loan Request shall be deemed amended accordingly, (ii) each LIBOR Rate Loan will automatically, on the last day of the then current Interest Period thereof, become a Base Rate Loan or, if requested by the Borrower, a Fixed Rate Loan, and (iii) the obligation of the Bank to make LIBOR Rate Loans shall be suspended until the Bank determines that the circumstances giving rise to such suspension no longer exist, whereupon the Bank shall so notify the Borrower. 3.2 ILLEGALITY. Notwithstanding any other provisions herein, if any present or future law, regulation, treaty or directive or in the interpretation or application thereof shall make it unlawful for the Bank to make or maintain LIBOR Rate Loans, the Bank shall forthwith give notice of such circumstances to the Borrower and thereupon (i) the commitment of the Bank to make LIBOR Rate Loans or convert Base Rate Loans or Fixed Rate Loans to LIBOR Rate Loans shall forthwith be suspended and (ii) the Loans then outstanding as LIBOR Rate Loans, if any, shall be converted automatically to Base Rate Loans or, if requested by the Borrower, to a Fixed Rate Loan, on the last day of each Interest Period applicable to such LIBOR Rate Loans or within such earlier period 15 -13- as may be required by law. The Borrower hereby agrees promptly to pay the Bank, upon demand by the Bank, any additional amounts necessary to compensate the Bank for any costs incurred by the Bank in making any conversion in accordance with this [Section]3.2, including any interest or fees payable by the bank to lenders of funds obtained by it in order to make or maintain its LIBOR rate loans hereunder. 3.3 CHANGE IN CIRCUMSTANCES. If, on or after the date hereof the Bank determines that (i) the adoption of, or any change in, any applicable law, rule, regulation or guideline or the interpretation or administration thereof (whether or not having the force of law), or (ii) compliance by the Bank or its parent holding company with any guideline, request or directive (whether or not having the force of law), (A) shall subject the Bank to any tax, duty or other charge with respect to any LIBOR Rate Loan, any Fixed Rate Loan or any Note, or shall change the basis of taxation of payments to the Bank of the principal of or interest on LIBOR Rate Loans or Fixed Rate Loans or in respect of any other amounts due under this Agreement in respect of LIBOR Rate Loans or Fixed Rate Loans (other than with respect to taxes based upon the Bank's net income), or (B) shall impose, modify or deem applicable any reserve, special deposit or similar requirement (including, without limitation, any imposed by the Board of Governors of the Federal Reserve System, but excluding with respect to any LIBOR Rate Loan any such requirement included in an applicable Eurocurrency Reserve Rate) against assets of, deposits with or for the account of, or credit extended by, the Bank, or shall impose on the Bank or the London interbank market any other condition affecting LIBOR Rate Loans, Fixed Rate Loans or the Note, and the result of any of the foregoing is to increase the cost to the Bank of making or maintaining any LIBOR Rate Loan or any Fixed Rate Loan, or to reduce the amount of any sum received or receivable by the Bank under this Agreement or under any Note with respect to any Loan, by an amount reasonably deemed by the Bank to be material, then, upon demand by the Bank, the Borrower agrees to pay to the Bank such additional amount or amounts as will compensate the Bank for such increased cost or reduction. 3.4 CERTIFICATE. A certificate setting forth any additional amounts payable pursuant to [Section]3.3 and a brief explanation of such amounts which are due, submitted by the Bank to the Borrower, shall be conclusive, absent manifest error, that such amounts are due and owing. 3.5 INDEMNITY. The Borrower agrees to indemnify and hold the Bank harmless from and against any loss, cost or expense (including loss of anticipated profits) the Bank may sustain as a consequence of the Borrower's failure to pay the principal amount of any LIBOR Rate Loan or 16 -14- Fixed Rate Loan as and when due or the payment of any LIBOR Rate Loan or Fixed Rate Loan on a date that is not the last day of the Interest Period applicable thereto, including interest or fees payable by the Bank to lenders of funds obtained by it in order to maintain any such Loans. 4. FEES AND PAYMENTS. ----------------- The Borrower shall pay to the Bank, on the first day of each calendar quarter hereafter, and upon the Maturity Date or the date upon which the Commitment is no longer in effect, a commitment fee calculated at a rate per annum which is equal to one-eighth of one percent (0.125%) of the average daily difference by which the Commitment amount exceeds the aggregate sum of the outstanding Loans during the preceding calendar quarter or portion thereof. All payments to be made by the Borrower hereunder or under any of the other Loan Documents shall be made in U.S. dollars in immediately available funds at the Bank's head office at 100 Federal Street, Boston, Massachusetts 02110, without set-off or counterclaim and without any withholding or deduction whatsoever. The Bank shall be entitled to charge any account of the Borrower with the Bank for any sum due and payable by the Borrower to the Bank hereunder or under any of the other Loan Documents. If any payment hereunder is required to be made on a day which is not a Business Day, it shall be paid on the immediately succeeding Business Day, with interest and any applicable fees adjusted accordingly. All computations of interest or of the commitment fee payable hereunder shall be made by the Bank on the basis of actual days elapsed and on a 360-day year. 5. REPRESENTATIONS AND WARRANTIES. ------------------------------ The Borrower represents and warrants to the Bank on the date hereof, on the date of any Loan Request, and on each Drawdown Date that: (a) the Borrower is duly organized, validly existing, and in good standing under the laws of The Commonwealth of Massachusetts and is duly qualified and in good standing in the State of New Hampshire and in every other jurisdiction where it is doing business, and the execution, delivery and performance by the Borrower of the Loan Documents (i) are within its corporate authority, (ii) have been duly authorized, (iii) do not conflict with or contravene its Charter Documents; (b) upon execution and delivery thereof, each Loan Document shall constitute the legal, valid and binding obligation of the Borrower, enforceable in accordance with its terms; 17 -15- (c) the Borrower has good and marketable title to all its material properties, subject only to Liens permitted hereunder, and possesses all assets, including intellectual properties, franchises and Consents, adequate for the conduct of its business as now conducted, without known conflict with any rights of others. The Borrower maintains insurance with financially responsible insurers, copies of the policies for which have been previously delivered to the Bank, covering such risks and in such amounts and with such deductibles as are customary in the Borrower's business and are adequate; (d) the Borrower has provided to the Bank its audited Financials as at October 28, 1995 and for the fiscal period then ended, and its unaudited Financials for fiscal period ending April 27, 1996, and such Financials are complete and correct and fairly present the position of the Borrower as at such date and for such period in accordance with GAAP consistently applied. The Borrower has also provided to the Bank its forecast of the operations of the Borrower for the fiscal years ending in October of 1996 and 1997, and such forecasts have been prepared in good faith based upon reasonable assumptions; (e) since October 28, 1995, there has been no materially adverse change of any kind in the Borrower which would have a Materially Adverse Effect; (f) there are no legal or other proceedings or investigations pending or threatened against the Borrower before any court, tribunal or regulatory authority which would, if adversely determined, alone or together, have a Materially Adverse Effect; (g) the execution, delivery, performance of its obligations, and exercise of its rights under the Loan Documents by the Borrower, including borrowing under this Agreement (i) do not require any Consents; and (ii) are not and will not be in conflict with or prohibited or prevented by (A) any Requirement of Law, or (B) any Charter Document, corporate minute or resolution, instrument, agreement or provision thereof, in each case binding on it or affecting its property; (h) the Borrower is not in violation of (i) any Charter Document, corporate minute or resolution, (ii) any instrument or agreement, in each case binding on it or affecting its property, or (iii) any Requirement of Law, in a manner which could have a Materially Adverse Effect, including, without limitation, all 18 -16- applicable federal and state tax laws, ERISA and Environmental Laws; and (i) Schedule 5(i) to this Agreement contains a list of each of the Borrower's Subsidiaries. 6. CONDITIONS PRECEDENT. -------------------- In addition to the making of the foregoing representations and warranties and the delivery of the Loan Documents and such other documents and the taking of such actions as the Bank may require at or prior to the time of executing this Agreement, the obligation of the Bank to make any Loan to the Borrower hereunder is subject to the satisfaction of the following further conditions precedent: (a) each of the representations and warranties of the Borrower to the Bank herein, in any of the other Loan Documents or any documents, certificate or other paper or notice in connection herewith shall be true and correct in all material respects as of the time made or claimed to have been made; (b) no Default or Event of Default shall be continuing; (c) all proceedings in connection with the transactions contemplated hereby shall be in form and substance satisfactory to the Bank, and the Bank shall have received all information and documents as it may have reasonably requested; and (d) no change shall have occurred in any law or regulation or in the interpretation thereof that in the reasonable opinion of the Bank would make it unlawful for the Bank to make such Loan. 7. COVENANTS. --------- 7.1 AFFIRMATIVE COVENANTS. The Borrower agrees that so long as there are any Loans outstanding and until the termination of the Commitment and the payment and satisfaction in full of all the Obligations, the Borrower will comply with its obligations as set forth throughout this Agreement and to: (a) furnish the Bank: (i) as soon as available but in any event within ninety (90) days after the close of each fiscal year, its audited Financials for such fiscal year, certified by the Borrower's accountants; (ii) as soon as available but in any event within forty-five (45) days after the end of each fiscal quarter its unaudited 19 -17- Financials for such quarter, certified by its chief financial officer; (iii) together with the quarterly and annual audited Financials, a certificate of the Borrower setting forth computations demonstrating compliance with the Borrower's financial covenants set forth herein, and certifying that no Default or Event of Default has occurred, or if it has, the actions taken by the Borrower with respect thereto; (b) keep true and accurate books of account in accordance with GAAP, maintain its current fiscal year and permit the Bank or its designated representatives to inspect the Borrower's premises during normal business hours, to examine and be advised as to such or other business records upon the request of the Bank, and to permit the Bank's commercial finance examiners to conduct periodic commercial finance examinations; (c) (i) maintain its corporate existence, business and assets, (ii) keep its business and assets adequately insured, (iii) maintain its chief executive office in the United States, (iv) continue to engage in the same lines of business, and (v) comply with all Requirements of Law, including ERISA and Environmental Laws; (d) notify the Bank promptly in writing of (i) the occurrence of any Default or Event of Default, (ii) any noncompliance with ERISA or any Environmental Law or proceeding in respect thereof which could have a Materially Adverse Effect, (iii) any change of address, (iv) any threatened or pending litigation or similar proceeding affecting the Borrower or any material change in any such litigation or proceeding previously reported and (v) claims against any assets or properties of the Borrower encumbered in favor of the Bank; (e) use the proceeds of the Loans solely for working capital purposes, and not for the carrying of "margin security" or "margin stock" within the meaning of Regulations U and X of the Board of Governors of the Federal Reserve System, 12 C.F.R. Parts 221 and 224; (f) deliver to the Bank, as soon as practicable after the date hereof, certificates from each of the Secretaries of State of the States of New Hampshire, New York and California to the effect that the Borrower is qualified to do business and is in good standing in such State; and 20 -18- (g) cooperate with the Bank, take such action, execute such documents, and provide such information as the Bank may from time to time request in order further to effect the transactions contemplated by and the purposes of the Loan Documents, including without limitation, the delivery at the Borrower's expense of additional security, appraisals, title insurance, surveys, or environmental assessments. 7.2 NEGATIVE COVENANTS. The Borrower agrees that so long as there are any Loans outstanding and until the termination of the Commitment and the payment and satisfaction in full of all the Obligations, the Borrower will not: (a) create, incur or assume any Indebtedness other than (i) Indebtedness to the Bank, (ii) Indebtedness in respect of the acquisition of property which does not exceed $20,000,000.00 in the aggregate at any given time, (iii) current liabilities of the Borrower not incurred through the borrowing of money or the obtaining of credit except credit on an open account customarily extended, (iv) Indebtedness in respect of taxes or other governmental charges contested in good faith and by appropriate proceedings and for which adequate reserves have been taken; and (v) Indebtedness not included above and listed on SCHEDULE 7.2(a) hereto; (b) create or incur any Liens on any of the property or assets of the Borrower except (i) Liens securing the Obligations; (ii) Liens securing taxes or other governmental charges not yet due; (iii) deposits or pledges made in connection with social security obligations; (iv) Liens of carriers, warehousemen, mechanics and materialmen, less than 120 days old as to obligations not yet due; (v) easements, rights-of-way, zoning restrictions and similar minor Liens which individually and in the aggregate do not have a Materially Adverse Effect; (vi) purchase money security interests in or purchase money mortgages on real or personal property securing purchase money Indebtedness permitted by [Section]7.2(a)(ii), covering only the property so acquired; and (vii) other Liens existing on the date hereof and listed on SCHEDULE 7.2(b) hereto; (c) make any investments other than investments in (i) marketable obligations of the United States maturing within one (1) year, (ii) certificates of deposit, bankers' acceptances and time and demand deposits of United States banks having total assets in excess of $1,000,000,000 (iii) repurchases, using the Borrower's own cash, of the Borrower's own capital stock, not to exceed $10,000,000 21 -19- in amount in any single fiscal quarter investments, or (iv) such other investments as the Bank may from time to time approve in writing; (d) make any distributions on or in respect of its capital of any nature whatsoever, if a Default or Event of Default then exists or would result from the making of such a distribution; or (e) become party to a merger, consolidation or sale-leaseback transaction, or to effect any disposition of assets other than in the ordinary course, or to purchase, lease or otherwise acquire assets other than in the ordinary course. 7.3 FINANCIAL COVENANTS. The Borrower agrees that so long as there are any Loans outstanding and until the termination of the Commitment and the payment and satisfaction in full of all the Obligations, the Borrower will not: (a) permit Tangible Net Worth to be less than the sum of (A) $100,000,000 PLUS (B) fifty percent (50%) of Consolidated Net Income for the relevant fiscal period PLUS (C) one hundred percent (100%) of the net proceeds of any sale by the Borrower in the relevant period of any equity securities issued by the Borrower or any warrants or subscription rights for any equity securities issued by the Borrower; (b) permit, as at the end of any period of four consecutive fiscal quarters of the Borrower, the ratio of Funded Debt to EBIT to be greater than 2.5 to 1; (c) permit the ratio of EBIT to interest expense as at the end of any fiscal quarter to be less than 3.5 to 1. 8. EVENTS OF DEFAULT; ACCELERATION. ------------------------------- If any of the following events ("Events of Default") shall occur: (a) the Borrower shall fail to pay when due and payable any principal of the Loans when the same becomes due; (b) the Borrower shall fail to pay interest on the Loans, any Reimbursement Obligations not funded by a Loan pursuant to [Section]2.1(c), or any other sum due under any of the Loan Documents within two (2) Business Days after the date on which the same shall have first become due and payable; 22 -20- (c) the Borrower shall fail to perform any term, covenant or agreement contained in [Sections]7.1(a), 7.1(d) through (f), 7.2 and 7.3; (d) the Borrower shall fail to perform any other term, covenant or agreement contained in the Loan Documents within fifteen (15) days after the Bank has given written notice of such failure to the Borrower; (e) any representation or warranty of the Borrower in the Loan Documents or in any certificate or notice given in connection therewith shall have been false or misleading in any material respect at the time made or deemed to have been made; (f) the Borrower shall be in default (after any applicable period of grace or cure period) under any agreement or agreements evidencing Indebtedness owing to the Bank or any affiliates of the Bank or any other lender in excess of $500,000.00 in aggregate principal amount, or shall fail to pay such Indebtedness when due, or within any applicable period of grace; (g) any of the Loan Documents shall cease to be in full force and effect; (h) the Borrower (i) shall make an assignment for the benefit of creditors, (ii) shall be adjudicated bankrupt or insolvent, (iii) shall seek the appointment of, or be the subject of an order appointing, a trustee, liquidator or receiver as to all or part of its assets, (iv) shall commence, approve or consent to, any case or proceeding under any bankruptcy, reorganization or similar law and, in the case of an involuntary case or proceeding, such case or proceeding is not dismissed within forty-five (45) days following the commencement thereof, or (v) shall be the subject of an order for relief in an involuntary case under federal bankruptcy law; (i) the Borrower shall be unable to pay its debts as they mature; (j) there shall remain undischarged for more than thirty (30) days any final judgment or execution action against the Borrower that, together with other outstanding claims and execution actions against the Borrower exceeds $500,000.00 in the aggregate. 23 -21- (k) THEN, or at any time thereafter: (1) In the case of any Event of Default under clause (h) or (i), the Commitment shall automatically terminate and the Bank shall be relieved of all further obligations to make Loans, and the entire unpaid principal amount of the Loans, all interest accrued and unpaid thereon and all other amounts payable under the other Loan Documents shall automatically become forthwith due and payable, without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived by the Borrower; and (2) In the case of any Event of Default other than (h) and (i), the Bank may, by written notice to the Borrower, terminate the Commitment and/or declare the unpaid principal amount of the Loans, all interest accrued and unpaid thereon, and all other amounts payable hereunder and under the other Loan Documents to be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower. No remedy herein conferred upon the Bank is intended to be exclusive of any other remedy and each and every remedy shall be cumulative and in addition to every other remedy hereunder, now or hereafter existing at law or in equity or otherwise. 9. SETOFF. ------ Regardless of the adequacy of any collateral for the Obligations, any deposits or other sums credited by or due from the Bank to the Borrower may be applied to or set off against any principal, interest and any other amounts due from the Borrower to the Bank at any time without notice to the Borrower, or compliance with any other procedure imposed by statute or otherwise, all of which are hereby expressly waived by the Borrower. 10. MISCELLANEOUS. ------------- The Borrower agrees to indemnify and hold harmless the Bank and its officers, employees, affiliates, agents, and controlling persons from and against all claims, damages, liabilities and losses of every kind arising out of the Loan Documents, including without limitation, against those in respect of the application of Environmental Laws to the Borrower absent the gross negligence or willful misconduct of the Bank. The Borrower shall pay to the Bank promptly on demand all costs and expenses 24 -22- (including any taxes and reasonable legal and other professional fees and fees of its commercial finance examiner) incurred by the Bank in connection with the preparation, negotiation, execution, amendment, administration or enforcement of any of the Loan Documents. Any communication to be made hereunder shall (i) be made in writing, but unless otherwise stated, may be made by telex, facsimile transmission or letter, and (ii) be made or delivered to the address of the party receiving notice which is identified with its signature below (unless such party has by five (5) days' written notice specified another address), and shall be deemed made or delivered, when dispatched, left at that address, or five (5) days after being mailed, postage prepaid, to such address. This Agreement shall be binding upon and inure to the benefit of each party hereto and its successors and assigns, but the Borrower may not assign its rights or obligations hereunder. This Agreement may not be amended or waived except by a written instrument signed by the Borrower and the Bank, and any such amendment or waiver shall be effective only for the specific purpose given. No failure or delay by the Bank to exercise any right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege preclude any other right, power or privilege. The provisions of this Agreement are severable and if any one provision hereof shall be held invalid or unenforceable in whole or in part in any jurisdiction, such invalidity or unenforceability shall affect only such provision in such jurisdiction. This Agreement, together with all Schedules hereto, expresses the entire understanding of the parties with respect to the transactions contemplated hereby. This Agreement and any amendment hereby may be executed in several counterparts, each of which shall be an original, and all of which shall constitute one agreement. In proving this Agreement, it shall not be necessary to produce more than one such counterpart executed by the party to be charged. THIS AGREEMENT AND THE NOTE ARE CONTRACTS UNDER THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND SHALL BE CONSTRUED IN ACCORDANCE THEREWITH AND GOVERNED THEREBY. THE BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF ANY OF THE LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS OR ANY FEDERAL COURT SITTING THEREIN. The Borrower, as an inducement to the Bank to enter into this Agreement, hereby waives its right to a jury trial with respect to any action arising in connection with any Loan Document. 25 -23- IN WITNESS WHEREOF, the undersigned have duly executed this Revolving Credit Agreement as a sealed instrument as of the date first above written. HADCO CORPORATION By: /s/ Timothy P Losik ----------------------------- Name: Timothy P Losik Title: Chief Financial Officer and Treasurer Address: 12A Manor Parkway Salem, New Hampshire 03709 Tel: 603-898-8000 ---------------------------- Fax: 603-893-0025 ---------------------------- THE FIRST NATIONAL BANK OF BOSTON By: /s/ Gregory G. O'Brien ----------------------------- Name: Gregory G. O'Brien Title: Managing Director Address: 100 Federal Street Boston, Massachusetts 02110 Tel: 617-434-2548 Fax: 617-434-8206 26 SCHEDULE 5(i) ------------- SUBSIDIARIES ------------ 1. Hadco Foreign Sales Corporation 100% owned by Hadco Corporation Incorporated in the U.S. Virgin Islands 27 SCHEDULE 7.2(a) --------------- OUTSTANDING INDEBTEDNESS ------------------------ (as of June 29, 1996) Creditor, Description Amount - --------------------- ------ 1. New York State Urban Development Corporation: -------------------------------------------- a. Loan Agreement dated as of April 10, 1991 ($1,100,000) Loan, secured by all machinery, equipment and other personal property purchased with the proceeds, and by an irrevocable letter of credit). $ 825,000.57 b. Loan Agreement dated as of April 10, 1991 ($150,000) Loan, secured by all machinery, equipment and other personal property located at the Company's Owego, NY facility). $ 113,477.62 2. Chase Equipment Leasing: ----------------------- Capital lease obligations, net of deferred interest of $30,964.83. Unsecured: equipment is owed by Lessor. If title is taken by Company, any outstanding indebtedness will be secured by the equipment. $ 375,614.09 3. BTM Capital Corp.: ----------------- (Formerly known as Bank of Tokyo Financial) Capital lease obligations, net of deferred interest of $4,599.86. Unsecured: equipment is owed by Lessor. If title is taken by Company, any outstanding indebtedness will be secured by the equipment. $ 30,443.60 4. BayBanks Equipment Financing & Leasing: -------------------------------------- Capital lease obligations, net of deferred interest of $130,721.40. Unsecured: equipment is owed by Lessor. If title is taken by Company, any outstanding indebtedness will be secured by the equipment. $1,700,243.31 28 SCHEDULE 7.2(b) --------------- PERMITTED LIENS --------------- 1. New York State Urban Development Corporation: -------------------------------------------- First Security Interest in and to all fixtures located at the "inner layer" of the Company's Owego, NY facility. Mortgage on real property located at the Owego, NY facility and known as the "inner layer". 2. Chase Equipment Leasing: ----------------------- Capital lease obligations to be secured by leased equipment upon transfer of tittle. 3. BTM Capital Corp.: ----------------- (Formerly known as Bank of Tokyo Financial) Capital lease obligations to be secured by leased equipment upon transfer of tittle 4. BayBanks Equipment Financing & Leasing: -------------------------------------- Capital lease obligations to be secured by leased equipment upon transfer of tittle EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 U.S. DOLLARS 3-MOS OCT-26-1996 APR-28-1996 JUL-27-1996 1 26,926 5,632 40,985 898 17,190 97,766 223,288 127,155 196,218 56,400 1,152 519 0 0 129,128 196,218 88,225 88,225 66,774 75,315 0 0 82 13,104 5,110 7,994 0 0 0 7,994 .72 0
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