-----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, FO3tI8L51Cs7ec/k68mL+SxHpYbo3dW+v0zrYm92ObCc3Qz2al+9/+ba3ycPoc3O uIh6VOKmfRty+afDeYzIlw== 0000950130-96-004071.txt : 19961030 0000950130-96-004071.hdr.sgml : 19961030 ACCESSION NUMBER: 0000950130-96-004071 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 19960731 FILED AS OF DATE: 19961029 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CABLE DESIGN TECHNOLOGIES CORP CENTRAL INDEX KEY: 0000913142 STANDARD INDUSTRIAL CLASSIFICATION: DRAWING AND INSULATING NONFERROUS WIRE [3357] IRS NUMBER: 363601505 STATE OF INCORPORATION: DE FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-22724 FILM NUMBER: 96649068 BUSINESS ADDRESS: STREET 1: 661 ANDERSON DR STREET 2: FOSTER PLZ 7 CITY: PITTSBURGH STATE: PA ZIP: 15220 BUSINESS PHONE: 4129372300 MAIL ADDRESS: STREET 1: FOSTER PLAZA 7 STREET 2: 661 ANDERSEN DRIVE CITY: PITTSBURGH STATE: PA ZIP: 15220 10-K 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) [X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended July 31, 1996 or [_] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ________ to _________ Commission File No. 0-22724 CABLE DESIGN TECHNOLOGIES CORPORATION (Exact Name of Registrant as Specified in Its Charter) Delaware 36-3601505 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) Foster Plaza 7 661 Andersen Drive Pittsburgh, PA 15220 (Address of Principal Executive Offices and Zip Code) (412) 937-2300 (Registrant's Telephone Number, Including Area Code) Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange Title of Each Class on Which Registered ------------------- ------------------- Common Stock, $.01 par value National Association of Securities Dealers Automated Quotation System (National Market System) ("NASDAQ / NMS") Securities registered pursuant to Section 12(g) of the Act: None 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 proceeding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days. Yes [X] No [_] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of regulation S-K is not contained herein, and will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [_] ________________________________________________________________________________ Exhibit Index on Page 16 ------ The aggregate market value of the registrant's voting stock held by non- affiliates of the registrant at September 30, 1996, is $516,772,935. The number of shares outstanding of the registrant's Common Stock at September 30, 1996, is 18,188,210. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Cable Design Technologies Corporation Proxy Statement for the Annual Meeting of Shareholders to be held on December 12, 1996, (the "Proxy Statement") are incorporated by reference into Part III. Portions of the 1996 Cable Design Technologies Corporation Annual Report to Shareholders (the "1996 Annual Report") are incorporated by reference into Parts I, II and IV. CABLE DESIGN TECHNOLOGIES CORPORATION Table of Contents
PART I Page Item 1. Business........................................................ 2 Item 2. Properties...................................................... 6 Item 3. Legal Proceedings............................................... 6 Item 4. Submission of Matters to a Vote of Security Holders............. 6 Item 4.1. Executive Officers of the Registrant............................ 7 PART II Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters................................. 8 Item 6. Selected Financial Data......................................... 8 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations................... 8 Item 8. Financial Statements and Supplementary Data..................... 8 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.......................... 8 PART III Item 10. Directors and Executive Officers of the Registrant.................................................. 8 Item 11. Executive Compensation.......................................... 9 Item 12. Security Ownership of Certain Beneficial Owners and Management........................................... 9 Item 13. Certain Relationships and Related Transactions.................. 9 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K......................................... 9 Signatures...................................................... 14
PART I. ITEM 1. BUSINESS (a). General Description of Business Cable Design Technologies Corporation (the "Company", the "Registrant" or "CDT") was incorporated on May 18, 1988 under the laws of the State of Delaware with its principal office located at 661 Andersen Drive, Pittsburgh, Pennsylvania 15220 (Telephone: 412-937-2300). CDT is a designer and manufacturer of technologically advanced electronic data transmission cables and connectors made of copper, fiber optics and copper/fiber optic composites for network structured wiring systems; automation, sound & safety; computer interconnect, and communications applications. The Company, as it exists today, was incorporated on May 18, 1988, but was conceived in 1985 by its current President and Chief Executive Officer, Paul Olson, together with other members of current management, shortly after acquiring the West Penn Wire Corporation ("West Penn/CDT"). In 1988, the Company underwent a recapitalization pursuant to which GTC Fund II purchased a controlling interest in the Company. On July 14, 1988, the Company acquired all of the outstanding capital stock of Cable Design Technologies Inc. (formerly Intercole Inc.). In March 1986, the Company acquired Mohawk Wire & Cable Corporation ("Mohawk/CDT") , a cable manufacturer with established relationships with companies involved in the early stages of computer cable network development. In December 1988, the Company purchased Montrose Products Company ("Montrose/CDT"), a specialty electronic cable company with established relationships with IBM and other major purchasers of computer interconnect products. In August 1990, the Company formed CDT International Inc. ("CDT International") to respond to increasing demand for data transmission cable products in international markets. In May 1991, the Company expanded its international presence by purchasing Anglo-American Cable Ltd. ("Anglo/CDT"), a European cable distributor. In March 1993, the Company established Phalo/CDT to further increase its production capabilities and broaden its product line. In May 1994, the Company acquired all the outstanding stock of Nya NEK Kabel AB ("NEK/CDT"), located near Gothenburg, Sweden, to enter the sophisticated broadcast, Cable Television (CATV) and antenna cable markets and to expand network systems cable manufacturing capacity into Europe. In June 1995, the Company purchased all of the operating assets of Manhattan Electric Cable Corporation ("Manhattan/CDT") based in Rye, New York to enhance sales of specialty electronic cables for industrial automation and robotic applications. Subsequently, in August 1995, the Company purchased Cole-Flex Corporation of West Babylon, New York to combine its sleeving and tubing capabilities with Manhattan/CDT. In September 1995, the Company purchased the operating assets of the Raydex Division of Volex Group, p.l.c. ("Raydex/CDT") (United Kingdom) to provide additional international manufacturing capabilities of specialty and high performance electronic cables for computer network systems, telecommunications, aerospace, CATV, and industrial applications. Effective February 2, 1996, the Company acquired the assets of Northern Telecom Limited's ("Nortel") communications cables and IBDN network structured wiring products businesses ("NORDX/CDT") (Canada). On June 4, 1996, the Company acquired the stock of Cekan A/S ("Cekan/CDT") (Denmark), a manufacturer of high performance, telecommunications connectors, and on June 24, 1996, the Company acquired, in exchange for shares of its common stock, X-Mark Industries ("X-Mark/CDT") (Washington, PA), a manufacturer of specialized metal enclosures for network systems. 2 (b). Products The markets served by the Company principally involve products for computer local area networks (LANS) and wide area networks (WANS), structured wiring products, computer interconnect, automation, sound & safety applications and communications cable applications. Network Structured Wiring - This product group encompasses the cables, ------------------------- connectors, racks, panels, outlets and interconnecting hardware to complete the end-to-end network system requirements of LANS and WANS. Additional capital expenditures and new acquisitions have greatly increased the Company's capacity in this product area. Sales of network structured wiring products were $73.2 million in fiscal 1994, $102.4 million in fiscal 1995 and $186.2 million in fiscal 1996. Sales of these products represented approximately 50%, 54% and 52% of the Company's total sales for the fiscal years ending July 31, 1994, 1995 and 1996, respectively. Automation, Sound & Safety - Automation, sound & safety encompasses three -------------------------- distinct applications for data and signal transmission cables. Automation applications include climate control and sophisticated security and signal systems involving motion detection, electronic card and video surveillance technologies. Sound includes voice activation, evacuation and other similar systems and safety cable refers to certain attributes of data transmission cable that improve the safety and performance of such cable under hazardous conditions, particularly in buildings for advanced fire alarm and safety systems. The Company's sales in this market were $39.7, $47.2 and $68.7 million in fiscal 1994, 1995 and 1996, respectively. Sales of these products represented 27%, 25% and 19% of the Company's total sales in fiscal 1994, 1995 and 1996, respectively. Computer Interconnect - Computer interconnect refers to a family of data --------------------- transmission cables used to internally connect components of computers, telecommunication switching and related electronic equipment, and to externally connect large and small computers to a variety of peripheral devices. Sales of these products were $18.5, $22.9 and $18.8 million for fiscal 1994, 1995 and 1996, respectively. Sales of these products represented approximately 13%, 12% and 5% of the Company's total sales for the years ending July 31, 1994, 1995 and 1996, respectively. Communications - Through the acquisition of NORDX/CDT, the Company entered -------------- the market for outside communications, switchboard and equipment cable. This product group is primarily manufactured by its Kingston, Ontario facility, which is the largest communications cable operation in Canada. Sales of this product group were $49.4 million for the six month post-acquisition period in fiscal 1996 and represented approximately 14% of the Company's total sales. Other - The Company also manufactures products for a variety of other ----- electronic wire and cable applications and markets, including broadcast, CATV, microwave antenna, medical electronics, electronic testing equipment, automotive electronics, robotics, electronically controlled factory equipment, copiers, home entertainment and appliances. A business unrelated to the Company's core business manufactures precision molds used by major tire manufacturers. 3 (c). Raw Materials The principal raw materials used by CDT are copper and insulating compounds. Raw materials are purchased on a consolidated basis whenever possible to reduce costs and improve supplier service levels. Copper is purchased from several domestic suppliers. Price terms are generally producers' prices at time of shipment. The Company generally does not engage in hedging transactions for the purchase of copper. Currently, world stocks of and capacity for copper are adequate to meet the Company's requirements. CDT purchases insulating compounds from many suppliers. The inability of one of such suppliers to supply such insulating material could have an adverse effect on CDT's business until a replacement supplier is found or substitute materials are approved for use. Other raw materials used by CDT include, Teflon(R), Lexan(R) reels, tapes, optical fiber, textiles, chemicals and other insulating materials. Currently, supplies of these other raw materials are adequate to meet the Company's needs and are expected to remain so for the foreseeable future. (d). Customers The Company sells its products directly to original equipment manufacturers (OEMs), regional Bell operating companies and established distributors. The Company supports over 9,000 customers, with no single customer representing more than 10% of its sales. (e). Competition The specialty electronic data transmission cable market is highly competitive. Although some of the Company's competitors are substantially larger and have greater resources than the Company, management believes that it competes successfully in its markets due to its experienced management team, large sales force, established reputation, large number of customer approved specifications and emphasis on quality. The principal competitive factors in all product markets are availability, customer support, distribution strength, price and product features. The relative importance of each of these factors varies depending on the specific product category. As products mature, competitive forces often tend to make the products more of a commodity and subject to greater price competition. In the market for computer network structured wiring products, the Company competes with a large number of competitors, several of which are significantly larger than the Company. The Company competes in the network structured wiring market by adapting to shifting customer demand for new products, and in the case of NORDX/CDT, by offering complete, certified network structured wiring systems. Product price and engineering capabilities are principal factors which affect competition in the computer interconnect market. In the automation, sound & safety market, the Company competes against a relatively large number of companies, most of which are smaller in size than the Company. Product prices, company reputation and product integrity are principal factors which affect competition in the automation, sound & safety market. In the markets for communications, switchboard and equipment cable, price, reputation, production quality and availability are principal competitive factors. (f). Inventory and Backlog As of July 31, 1996, working capital was $135.8 million compared to $41.5 million at July 31, 1995. Backlog was $45.6 million at July 31, 1996, compared to $63.8 million at July 31, 1995. 4 The $18.2 million decrease in backlog during the fiscal year ended July 31, 1996, was primarily the result of the disruption in the Category 5 Teflon(R) plenum network cable market early in the third quarter of fiscal 1996 due to a build-up of distributor inventories of these products and a greater availability of Teflon(R) raw material. As a result of this disruption, order input for Category 5 Teflon(R) plenum network cables was reduced and the outstanding protective orders which had been placed by distributors for these products were canceled. Increases in the backlog for other products and the addition of the backlog for acquired business partially offset this decrease. The Company believes that substantially all of the backlog is shippable within the next twelve months. Generally, customers may cancel orders for standard cable products without penalty upon thirty days notice. (g). Environment The Company is subject to numerous United States and Canadian federal, state, provincial, local and foreign laws and regulations relating to the storage, handling, emission and discharge of materials into the environment, including the United States Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), the Clean Water Act, the Clean Air Act, the Emergency Planning and Community Right-To-Know Act and the Resource Conservation and Recovery Act. Regulations of particular significance to the Company include those pertaining to handling and disposal of solid and hazardous waste, discharge of process wastewater and storm water and release of hazardous chemicals. Although the Company believes it is in substantial compliance with such laws and regulation, the Company may from time to time not be in full compliance and may be subject to fines or other penalties for noncompliance. The Company does not currently anticipate any material adverse effect on its results of operations, financial condition or competitive position as a result of compliance with federal, state, provincial, local or foreign environmental laws or regulations. However, some risk of environmental liability and other costs is inherent in the nature of the Company's business, and there can be no assurance that material environmental costs will not arise. Moreover, it is possible that future developments, such as promulgation of implementing regulations for the 1990 amendments to the Clean Air Act and other increasingly strict requirements of environmental laws and enforcement policies thereunder, could lead to material costs of environmental compliance and cleanup by the Company. (h). Employees As of July 31, 1996, the Company had approximately 2,178 full time employees, of which approximately 796 were represented by labor unions. The Company has not experienced any work stoppages at its plants and believes its current relations with its employees are good, however, there can be no assurance that conflicts will not arise with such unions or other employee groups or that such conflicts would not have a material adverse effect on the Company's business. (i). Foreign Operations See Footnote #14 as presented in the Company's Notes to Consolidated Financial Statements. 5 ITEM 2. PROPERTIES The Company uses various owned or leased properties as manufacturing facilities, warehouses and sales office facilities. The Company believes that current facilities, together with planned expenditures for normal maintenance, capacity and technological improvements and the expenditures for the facilities described in the next paragraph will provide adequate production capacity to meet expected demand for its products. Listed below are the principal manufacturing and sales facilities operated by the Company. In addition, the Company also leases approximately 65,000 square feet of other warehouse and sales facilities.
Owned or Approx. Location Use Leased Sq. Feet - -------------------------------------------------------------------------------------------- Auburn, MA Manufacturing, Sales and Administration Owned 146,000 Gjern, Denmark Manufacturing, Sales and Administration Owned 13,000 Gothenburg, Sweden Manufacturing, Sales and Administration Owned 58,000 Houston, TX Warehousing Leased 21,700 Kingston, Canada Manufacturing Owned 525,000 Leominster, MA Manufacturing, Sales and Administration Leased 162,000 Littleborough, United Kingdom Manufacturing Leased 35,000 Manchester, CT Warehousing Leased 70,000 Manchester, CT Manufacturing Leased 55,000 Manchester, CT Manufacturing Leased 40,000 Manchester, CT Warehousing Leased 80,000 Montreal, Canada Manufacturing Leased 416,000 Montreal, Canada Administration and Sales Leased 35,000 Saybrook, CA Warehousing Leased 28,000 Skelmersdale, United Kingdom Manufacturing, Sales and Administration Leased 95,000 Wadsworth, OH Manufacturing, Sales and Administration Owned 39,000 Waynesburg, PA Manufacturing Owned 42,000 Washington, PA Manufacturing, Sales and Administration Owned 80,000 Washington, PA Manufacturing, Sales and Administration Owned 123,000 Washington, PA Warehousing Leased 30,000 Washington, PA Manufacturing Leased 83,000
ITEM 3. LEGAL PROCEEDINGS The Company is a party to various legal proceedings and administrative actions, all of which are of an ordinary or routine nature incidental to the operations of the Company. In the opinion of the Company's management, such proceedings and actions should not, individually or in the aggregate, have a material adverse effect on the Company's results of operations or financial condition. AT&T has asserted certain intellectual property claims against certain intellectual property owned or used by NORDX/CDT. AT&T has claimed that both NORDX/CDT's IBDN Copper Cable (Land Lines) and BIX (Category 5) Modular Connectors are covered by U.S. patents currently held by AT&T. In addition, AT&T has forwarded to Nortel a cease and desist letter objecting to NORDX/CDT's use of the trademark Optimax. The Company does not believe that resolution of such claims would have a material adverse effect on its results of operations. Superior Modular Products, Inc., has offered NORDX/CDT a non-exclusive license under a patent it contends applies to certain NORDX/CDT patch panels. The matter is currently under negotiation and, at the present time, the Company does not believe a resolution would have a material adverse effect on its results of operations. Berk-Tek, Inc. ("Berk-Tek"), has offered the Company a non-exclusive license under a patent it contends applies to certain cables sold by Mohawk/CDT. The Company's special patent counsel has provided an opinion that its products do not infringe any valid claims, and, consequently, the offer has been declined. Berk-Tek has filed an application to reissue the patent in consideration of relevant prior art which has been identified by the Company and others, and has re-offered a non-exclusive license. Currently, the probability that Berk-Tek's application to reissue the patent will be granted cannot be determined and, therefore, based upon the opinion of the Company's special patent counsel, at this time, the Company does not believe a resolution of this matter would have a material adverse effect on its results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS During the fourth quarter of the fiscal year covered by this report no matter was submitted to a vote of security holders. 6 ITEM 4.1. EXECUTIVE OFFICERS OF THE REGISTRANT Age Present Office and Experience - --- ----------------------------- 63 Paul M. Olson has been President and a director of the Company since 1985, and Chief Executive Officer of the Company since 1993. From 1972 to 1984 Mr. Olson was the President of Phalo Corporation, a wire and cable manufacturer, and directed sales and marketing at Phalo Corporation from 1967 to 1972. From 1963 to 1967, Mr. Olson was employed at General Electric and from 1960 to 1963, at General Cable, in wire and cable related sales and marketing positions. 54 George C. Graeber has been an Executive Vice President of the Company and President of Montrose/CDT since 1994. From 1992 to 1994, Mr. Graeber was Executive Vice President of the Company and President of Phalo/CDT. From 1990 to 1992 Mr. Graeber was a Vice President and General Manager at Anixter Brothers, Inc., a private international distributor of cable and communications equipment. From 1989 to 1990 Mr. Graeber was a consultant for Manhattan Electric Cable, a wire and cable company. From 1983 to 1989 he was President and from 1979 to 1983 he was Vice President-General Manager of Brand Rex Cable, a wire and cable company. Mr. Graeber has a Masters degree in Electrical Engineering from the University of Connecticut in 1968. 54 Michael A. Dudley has been an Executive Vice President of the Company and President - CDT International since 1991. From 1988 to 1991 he was the President of Superior Optics, a division of Superior Teletec, Inc., a publicly traded company that manufactures communications cable. Mr. Dudley has a doctorate degree in Material Science from The National College of Rubber Technology in London, England. 46 Normand R. Bourque has been an Executive Vice President of the Company and President and Chief Executive Officer of NORDX/CDT since its acquisition. Prior to the acquisition, Mr. Bourque was Vice President-Cable Group at Nortel from 1991 to 1995 and Vice President, Operations-Cable Group from 1989 to 1991. From 1985 to 1988, Mr. Bourque was Vice President and General Manager-Transmission Networks at Nortel, and prior to that, held a number of positions in general management and finance at Nortel. Mr. Bourque has a Bachelor's Degree in Business Administration from the Ecole des Hautes Etudes Commerciales in Montreal, Canada. 57 Dave R. Harden has been a Senior Vice President of the Company since 1988. He founded West Penn Wire in 1971, with Donald Hastings, and operated that company until 1984 when it was acquired by the Company. From 1984 until 1988 he was an Executive Vice President of West Penn. 62 Donald J. Hastings has been a Senior Vice President of the Company since 1988. He founded West Penn in 1971 with Dave Harden and operated that company until 1984 when it was acquired by the Company. From 1984 until 1988, he was an Executive Vice President of West Penn/CDT. 46 Kenneth O. Hale has been Vice President, Chief Financial Officer and Secretary of the Company since 1987. Mr. Hale holds a Certified Public Accountant's certificate and an MBA in finance from the University of Missouri. 7 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS As of October 18, 1996, there were 118 holders of record of the Company's Common Stock. Additional information required by this item is set forth under the heading "Directors, Officers, and Corporate Information" on page 40 of the 1996 Annual Report and is incorporated herein by reference. ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA Information required by this item is set forth under the heading "Selected Historical Consolidated Financial Data" on page 39 of the 1996 Annual Report and is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management's Discussion and Analysis of Financial Condition and Results of Operations appears on pages 9-13 of the 1996 Annual Report to Stockholders and is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Information required by this item is set forth on pages 15 through 38 of the 1996 Annual Report and is incorporated herein by reference and filed electronically herewith as Exhibit 13. Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None PART III. Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT a. Information concerning the Registrant's directors is set forth in the Registrant's definitive proxy statement to be filed with the Securities and Exchange Commission on or before November 20, 1996. Such information is incorporated herein by reference. b. Information concerning executive officers of the Registrant is set forth in Item 4.1 of Part I at page 7 of this Report under the heading "Executive Officers of the Registrant". 8 Item 11. EXECUTIVE COMPENSATION Information concerning executive officers of the Registrant is set forth in the Registrant's definitive proxy statement to be filed with the Securities and Exchange Commission on or before November 20, 1996. Such information is incorporated herein by reference. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information concerning security ownership of certain beneficial owners and management is set forth in the Registrant's definitive proxy statement to be filed with the Securities and Exchange Commission on or before November 20, 1996. Such information is incorporated herein by reference. Item 13. CERTAIN RELATIONSHIPS AND TRANSACTIONS Information concerning certain relationships and related transactions is set forth in the Registrant's definitive proxy statement to be file with the Securities and Exchange Commission on or before November 20, 1996. Such information is incorporated herein by reference. PART IV. Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K 1. The following documents are included in the 1996 Annual Report, pages 15 through 38, and are incorporated herein by referenced: a. Consolidated Statements of Income for the years ended July 31, 1996, 1995 and 1994. b. Consolidated Balance Sheets as of July 31, 1996 and 1995 c. Consolidated Statements of Cash Flow for the years ended July 31, 1996, 1995 and 1994. d. Consolidated Statements of Stockholder Equity for the years ended July 31, 1996, 1995 and 1994. e. Notes to Consolidated Financial Statements. 2. The following documents are filed as part of this report: a. Report of Independent Public Accountants on Schedules. b. Financial Statement Schedules for the three years ended July 31, 1996. c. Schedule VII Valuation and Qualifying Accounts. 3. List of Exhibits 2.1 - Asset Purchase Agreement, dated as of September 15, 1995, among Broomco (915) Limited, Volex Group plc and Cable Design Technologies Corporation 9 ("CDT") (with respect to Section 12 thereof only). Incorporated by reference to Exhibit 2.1 to CDT's Report on Form 8-K filed with the Commission on October 10, 1995. 2.2 - Asset Purchase Agreement by and among Cable Design Technologies (CDT) Canada Inc., Cable Design Technologies Corporation and Northern Telecom Limited, dated as of December 19, 1995. Incorporated by reference to Exhibit 10.16 CDT's Registration Statement on Form S-3 (File No. 333-00554). 3.1 - Amended and Restated Certificate of Incorporation of CDT, as amended to date. Incorporated by reference to Exhibit 3.1 to CDT's registration statement on Form S-1 (File No. 33-69992). 3.2 - By-Laws of CDT, as amended to date, incorporated by reference to Exhibit 3.2 to CDT's registration statement on Form S-1 (File No. 33-69992). 4.1 - Form of certificate representing shares of the Common Stock of CDT. Incorporated by reference to Exhibit 4.1 to CDT's registration statement on Form S-1 (File No. 33-69992). 10.1 - Amended and Restated Credit Agreement, dated as of May 13, 1994, among CDT, CDT Inc., The First National Bank of Boston, Banque Paribas, Chicago Branch, Continental Bank N.A. and other lenders party thereto. Incorporated by reference to Exhibit 10.1 to CDT's Quarterly Report on Form 10-Q, as filed on June 13, 1994. 10.2 - First Amendment to Amended and Restated Credit Agreement, dated as of August 31, 1994, among CDT, CDT Inc., The First National Bank of Boston, Banque Paribas, Chicago Branch, Continental Bank N.A. and other lenders party thereto. Incorporated by reference to Exhibit 10.2 to CDT's Annual Report on Form 10-K, as filed on October 31, 1994. 10.3 - Agreement (Call and Put Option related to Lease) among Peter Alan Jarman, Prudence Anne Jarman and Anglo-American. Incorporated by reference to Exhibit 10.9 to CDT's registration statement on Form S-1 (File No. 33-69992). 10.4 - CDT Long-Term Performance Incentive Plan (adopted on September 23, 1993). Incorporated by reference to Exhibit 10.18 to CDT's registration statement on Form S-1 (File No. 33-69992). 10.5 - CDT Stock Option Plan. Incorporated by reference to Exhibit 4.3 to CDT's registration statement on Form S-8 as filed on December 22, 1993. 10.6 - Cable Design Technologies Corporation Management Stock Award Plan (adopted on September 23, 1993). Incorporated by reference to Exhibit 4.3 to CDT's registration statement on Form S-8, as filed on May 2, 1994. 10 10.7 - Agreement between Admiral and International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (UAW), Amalgamated Local No. 70, dated as of August 3, 1990, and subsequent agreement dated as of August 3, 1993. Incorporated by reference to Exhibit 10.19 to CDT's registration statement on Form S-1 (File No. 33-69992). 10.8 - Description of CDT Bonus Plan. Incorporated by reference to Exhibit 10.20 to CDT's registration statement on Form S-1 (File No. 33-69992). 10.9 - Stock Appreciation Rights Agreement between CDT and Paul M. Olson, dated as of March 17, 1992. Incorporated by reference to Exhibit 10.22 to CDT's registration statement on Form S-1 (File No. 33-69992). 10.10 - Lease Agreement between Phalo and First Hartford Realty Corp., dated as of November 9, 1992. Incorporated by reference to Exhibit 10.23 to CDT's registration statement on Form S-1 (File No. 33-69992). 10.11 - Lease Agreement between Mohawk and 9 Mohawk Drive Realty Trust, dated as of March 24, 1986. Incorporated by reference to Exhibit 10.24 to CDT's registration statement on Form S-1 (File No. 33-69992). 10.12 - Lease Agreement between Anglo-American, Peter Alan Jarman and Prudence Anne Jarman, dated as of July 12, 1991. Incorporated by reference to Exhibit 10.25 to CDT's registration statement to Form S-1 (File No. 33-69992). 10.13 - Consulting Agreement, dated as of July 14, 1988, and amendment thereto, dated as of July 14, 1988, between Golder, Thoma, Cressey & Rauner and CDT. Incorporated by reference to Exhibit 10.13 to CDT's Annual Report on Form 10-K, as filed on October 31, 1994. 10.14 - Consulting Agreement, dated as of July 14, 1988, and amendment thereto, dated as of July 14, 1994, between Northern Investment Ltd. Partnership II and CDT. Incorporated by reference to Exhibit 10.14 to CDT's Annual Report on Form 10- K, as filed on October 31, 1994. 10.15 - Registration Agreement among CDT, GTC Fund II, The Prudential Insurance Company of America and Pruco Life Insurance Company, dated as of July 14, 1988, as amended. Incorporated by reference to Exhibit 10.21 to CDT's registration statement on Form S-1 (File No. 33-69992). 10.16 - Bank Commitment Letter dated January 22, 1996, among CDT, The First National Bank of Boston, Banque Paribas, Chicago Branch, Bank of America Illinois, Bank of America Canada and other lenders party thereto. Incorporated by reference to Exhibit 10.17 to CDT's Registration Statement on Form S-3 (File No. 333-00554). 10.17 - Second Amended and Restated Loan Agreement dated February 2, 1996, among CDT, The First National Bank of Boston, Banque Paribas, Chicago Branch, Bank of America Illinois, Bank of America Canada and other lenders party thereto. Incorporated by reference to Exhibit 10.16 to CDT's Report on Form 8-K, as filed on February 20, 1996. 11 10.18 - Employment Agreement dated February 2, 1996, among CDT, NORDX/CDT and Normand Bourque. Incorporated by reference to Exhibit 10.17 to CDT's Report on Form 8-K as filed on February 20, 1996. 10.19 - Collective Labour Agreement dated June 10, 1996, between NORDX/CDT and Canadian Union of Communications Workers Unit 4.** 10.20 - Lease Agreement between NORDX/CDT and Northern Telecom Limited dated February 2, 1996, governing the Lachine, Quebec facility.** 10.21 - Lease Agreement between NORDX/CDT and Northern Telecom Limited dated February 2, 1996, governing the St. Laurent, Quebec facility.** 10.22 - Lease Agreement between NORDX/CDT and Northern Telecom Limited dated February 2, 1996, governing the Kingston, Ontario facility.** 10.23 - 1996 Amendment of Lease between Mohawk and 9 Mohawk Drive Realty, dated as of September 3, 1996.** 10.24 - First Amendment to Second Amended and Restated Loan Agreement dated July 31, 1996 among CDT, The First National Bank of Boston, Banque Paribas, Chicago Branch, Bank of America Illinois, Bank of America Canada and other Lenders party thereto.** 10.25 - Second Amendment to Second Amended and Restated Loan Agreement dated July 31, 1996 among CDT, The First National Bank of Boston, Banque Paribas, Chicago Branch, Bank of America Illinois, Bank of America Canada and other Lenders party thereto.** 11.1 - Computation of Earnings per Share.** 13.1 - CDT 1996 Annual Report to stockholders, including financial statements, portions of which are incorporated herein by reference.** 21.1 - List of Subsidiaries of CDT.** 23.1 - Consent of Arthur Andersen LLP.** 99.1 - Legal Charge, dated as of September 22, 1995, between Broomco (915) Limited, as Charger, and Volex Group plc. Incorporated by reference to Exhibit 99.1 to CDT's Report on Form 8-K filed with the Commission on October 10, 1995. 99.2 - Agreement for the Granting of Leases, dated as of September 15, 1995, among Volex Group plc, Broomco (915) Limited and Cable Design Technologies Corporation. Incorporated by reference to Exhibit 99.2 to CDT's Report on Form 8-K filed on October 10, 1995. 99.3 - Lease of property known as Python Mill, Church Street, Littleborough, dated as of September 27, 1995, among Volex Group plc, Broomco (915) Limited and Cable Design Technologies Corporation. Incorporated by reference to Exhibit 99.3 to CDT's Report on Form 8-K filed on October 10, 1995. 12 99.4 - Lease of property known as land lying to the south of Railway Road, Skelmersdale, dated as of September 27, 1995, among Volex Group plc, Broomco (915) Limited and Cable Design Technologies Corporation. Incorporated by reference to Exhibit 99.4 to CDT's Report on Form 8-K filed on October 10, 1995. ** Filed Herein (b) Reports on Form 8-K No reports on Form 8-K were filed during the 4th Quarter of the Year Ended July 31, 1996. 13 Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized. Cable Design Technologies Corporation By: Paul M. Olson October 29, 1996 /s/ Paul M. Olson President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE Bryan C. Cressy Chairman of the Board October 29, 1996 /s/ Bryan C. Cressey Director Paul M. Olson Director, President Chief October 29, 1996 /s/ Paul M. Olson Executive Officer (Principal Executive Officer) Kenneth O. Hale Vice President, Chief Financial October 29, 1996 /s/ Kenneth O. Hale Officer, Secretary (Principal Financial and Principal Accounting Officer) Bernard J. Bannan Director October 29, 1996 /s/ Bernard J. Bannan Myron S. Gelbach, Jr. Director October 29, 1996 /s/ Myron S. Gelbach, Jr. Michael F. O. Harris Director October 29, 1996 /s/ Michael F. O. Harris Glenn Kalnasy Director October 29, 1996 /s/ Glenn Kalnasy Richard C. Tuttle Director October 29, 1996 /s/ Richard C. Tuttle
14 CABLE DESIGN TECHNOLOGIES CORPORATION SCHEDULE VII VALUATION AND QUALIFYING ACCOUNTS FOR THE YEAR ENDED JULY 31, 1996, 1995, 1994
Additions to Additions Balance Balance at Reserve from Charged to at Beginning of Acquisitions Costs and Reduction End of Period in FY 1996 Expenses from Reserve Period - ------------------------------------------------------------------------------------------------------ (Dollars in thousands) Year Ended July 31, 1994 Inventory reserves $1,297 $ 176 $(301) $1,172 Allowance for uncollectible accounts/sales returns 1,277 284 (505) 1,056 Year Ended July 31, 1995 Inventory reserves $1,172 $ 219 $ ---- $1,391 Allowance for uncollectible accounts/sales returns 1,056 952 (455) 1,553 Year Ended July 31, 1996 Inventory reserves $1,391 $4,877 $2,108 $(215) $8,161 Allowance for uncollectible accounts/sales returns 1,553 89 1,542 (524) 2,660
15 CABLE DESIGN TECHNOLOGIES CORPORATION INDEX TO EXHIBITS FILED HEREIN JULY 31, 1996
EXHIBIT NUMBER EXHIBIT PAGE 10.19 Collective Labour Agreement, dated June 10, 1996, between NORDX/CDT and Canadian Union of Communications Workers Unit 4. 10.20 Lease Agreement between NORDX/CDT and Northern Telecom Limited dated February 2, 1996, governing the Lachine, Quebec facility. 10.21 Lease Agreement between NORDX/CDT and Northern Telecom Limited dated February 2, 1996, governing the St. Laurent, Quebec facility. 10.22 Lease Agreement between NORDX/CDT and Northern Telecom Limited dated February 2, 1996, governing the Kingston, Ontario facility. 10.23 1996 Amendment of Lease between Mohawk and 9 Mohawk Drive Realty, dated as of September 3, 1996. 10.24 First Amendment to Second Amended and Restated Loan Agreement dated July 31, 1996 among CDT, The First National Bank of Boston, Banque Paribas, Chicago Branch, Bank of America Illinois, Bank of America Canada and other Lenders party thereto. 10.25 Second Amendment to Second Amended and Restated Loan Agreement dated July 31, 1996 among CDT, The First National Bank of Boston, Banque Paribas, Chicago Branch, Bank of America Illinois, Bank of America Canada and other Lenders party thereto. 11.1 Computation of Earnings per share 13.1 1996 Annual Report to Stockholders 21.1 List of Subsidiaries of Cable Design Technologies Corporation 23.1 Consent of Arthur Andersen LLP
16 -- EX-10.19 2 COLLECTIVE LABOUR AGREEMENT EXHIBIT 10.19 COLLECTIVE LABOUR AGREEMENT ENTERED INTO BY NORDX/CDT, INC. AND CANADIAN UNION OF COMMUNICATION WORKERS UNIT 4 EFFECTIVE FROM JUNE 10, 1996 TO JUNE 9, 2001 INDEX - ARTICLES Article 1 - Recognition 7 Article 2 - General purpose 7 Article 3 - Management rights 8 Article 4 - Non-discrimination 9 * Article 5 - Representation 9 Article 6 - Complaints and grievances 11 Article 7 - Arbitration 15 Article 8 - Union activities during working hours 17 Article 9 - Access to personnel cards 17 Article 10 - Information to Union Head Office 18 Article 11 - Bulletin boards 20 Article 12A - Union and continuous service 20 * Article 12B - Promotion, Bumping & Layoff 26 Article 13 - Supplementary Unemployment Benefits 34 Article 14 - Notices 39 Article 15 - Safety and health 39 Article 16 - Uninterrupted production 44 * Article 17 - Job evaluation 44 * Article 18 - Leaves of absence 46 Article 19 - Validity 56 Article 20 - Deduction of regular dues 57 Article 21 - Work performed by supervisors 58 Article 22 - Disciplinary action 58 * Article 23 - Hours of work 59 Article 24 - Overtime general provisions 67 Article 25 - Overtime 68 Article 26 - Sickness Day Credit 72 Article 27 - Offshift differential 73 Article 28 - Minimum compensation 73 Article 29 - Plant holidays 74 * Article 30 - Vacations 77 Article 31 - Pension plan and other benefits 82 Article 32 - Production standards 82 * Article 33 - Cost of living allowance 82 Article 34 - Wage administration plan - Levels 2-4 inclusively - Montreal area 85 Article 35 - Production Technicians 86 Article 36 - Wage administration plan - Apprentices A1 and A2 - Montreal area 86 Article 37 - Rate protection 88 * Article 38 - Skilled trades 89 * Article 39 - Rates of pay - Grades 23-30 inclusively - Montreal area 96 Article 40 - Rates of pay - Trades classification - Montreal area 97 Article 41 - Rates of pay - Level 1 - Montreal area 98 Article 42 - Rates of pay - Levels 2-4 - Montreal area 99 Article 43 - Protection for employees on workforce restructuring 100 Article 44 - Modification, renewal and termination 106 Appendix A Pension/Benefits 122 * See Letters of intent ALPHABETICAL INDEX Article 9 - Access to personnel cards 17 Article 7 - Arbitration 15 Article 11 - Bulletin boards 20 Article 6 - Complaints and grievances 11 * Article 33 - Cost of living allowance 82 Article 20 - Deduction of regular dues 57 Article 22 - Disciplinary action 58 Article 2 - General purpose 7 * Article 23 - Hours of work 59 Article 10 - Information to Union Head Office 18 * Article 17 - Job evaluation 44 * Article 18 - Leaves of absence 46 Article 3 - Management rights 8 Article 28 - Minimum compensation 73 Article 44 - Modification, renewal and termination 106 Article 4 - Non-discrimination 9 Article 14 - Notices 39 Article 27 - Offshift differential 73 Article 24 - Overtime - general provisions 67 Article 25 - Overtime 68 Appendix A Pension/Benefits 122 Article 31 - Pension plan and other benefits 82 Article 29 - Plant holidays 74 Article 32 - Production standards 82 Article 35 - Production Technicians 86 * Article 12B - Promotion, Bumping & Layoff 26 Article 43 - Protection for employees on workforce restructuring 100 * Article 39 - Rates of pay - Grades 23-30 inclusively - Montreal area 96 Article 41 - Rates of pay - Level 1 - Montreal area 98 Article 42 - Rates of pay - Levels 2-4 - Montreal area 99 Article 40 - Rates of pay - Trades classification - Montreal area 97 Article 37 - Rate protection 88 Article 1 - Recognition 7 * Article 5 - Representation 9 Article 15 - Safety and health 39 Article 26 - Sickness Day Credit 72 * Article 38 - Skilled trades 89 Article 13 - Supplementary Unemployment Benefits 34 Article 16 - Uninterrupted production 44 Article 8 - Union activities during working hours 17 Article 12A - Union and continuous service 20 * Article 30 - Vacations 77 Article 19 - Validity 56 Article 36 - Wage administration plan - Apprentices A1 and A2 - Montreal area 86 Article 34 - Wage administration plan - Levels 2-4 inclusively - Montreal area 85 Article 21 - Work performed by supervisors 58 * See Letters of Intent INDEX - LETTERS Letter 1 - Definition of "Level" 109 Letter 2 - Representation 110 Letter 3 - Funds 111 Letter 4 - Retirement Terms 111 Letter 5 - Gainsharing 112 Letter 6 - Students 113 Letter 7 - Pre-retirement program 113 Letter 8 - Movement In and Out of Various Shift Patterns 115 Letter 9 - Surplus machine operator 116 Letter 10 - Investment Guarantee 116 Letter 11 - New Facility 117 Letter 12 - Level 1 Employees 118 Letter 13 - Rate adjustment for employees on disability 118 Letter 14 - Definition of terms 119 Letter 15 - Vacation calculations 120 COLLECTIVE AGREEMENT MEMORANDUM OF AGREEMENT made BETWEEN: NORDX/CDT, INC. a corporation organized and existing under the laws of Canada Hereinafter called the "Company" OF THE FIRST PART AND: CANADIAN UNION OF COMMUNICATION WORKERS, a body corporate duly incorporated under the provisions of the Professional Syndicates Act of the Province of Quebec. Hereinafter called the "Union" OF THE SECOND PART ARTICLE 1 - RECOGNITION 1.01 Whereas the Canadian Union of Communication Workers was duly certified under the Labour Relations Act by the Labour Relations Board of the Province of Quebec on July l3th, l945, the Company recognizes the Union as the exclusive bargaining agency for all shop clerks, production and skilled trades hourly rated non-supervisory employees in the Province of Quebec excluding Plant Security Staff and janitorial services. This Agreement applies to Unit No.4 of the Union. 1.02 Under this Agreement, "employee" shall mean: A person who is actively employed by NORDX/CDT in the capacity of a non- supervisory hourly rated employee as described above. Actively employed refers to a person on the active payroll and paid a wage for work performed for the Company. A person on the active payroll (except for layoff allowance) absent because of illness, injury or other causes which do not interrupt accumulation of service with the Company is considered an employee. During the term of this collective agreement, should the Company establish new plant facilities in Quebec to manufacture products currently being produced in any of its present manufacturing location on the island of Montreal, the Company will acknowledge the Canadian Union of Communication Workers as the exclusive bargaining agency for employees described above. ARTICLE 2 - GENERAL PURPOSE 2.01 The purpose of this Agreement is to maintain a harmonious relationship between the Company and its employees and to provide an amicable method of settling any differences or grievances which may arise with respect to matters covered by this Agreement. 2.02 The Company and the Union are committed to meet upon request of one or both parties to identify and discuss matters of mutual interest. When both parties find it appropriate, working committees will be implemented with a mandate to analyze certain problems and suggest appropriate solutions. These committees will be composed of both Union and Company representatives and any other appropriate person convened by one of the parties. The parties will be informed in advance, as far as it is practicable, of the names of the people who will participate in these committees. Changes resulting from the working committees may form part of the present collective labour agreement. ARTICLE 3 - MANAGEMENT RIGHTS 3.01 The Union acknowledges that it has been and still is the exclusive right of the Management of the Company to: hire, lay-off, discharge, classify, transfer, promote, demote or discipline employees, subject to the provisions of this Agreement. 3.02 The Union acknowledges the exclusive right of the Company to operate and manage its business in all respects in accordance with its obligations and generally to manage the enterprise in which the Company is engaged, and without restricting the generality of the foregoing to determine the number and location of work areas, the methods to be used in operations, schedules, kinds and location of machines and tools to be used, processes of repairing, warehousing and installing and the control of material and parts to be used. 3.03 The functions outlined above will be exercised in a manner not inconsistent with the terms of this Agreement. ARTICLE 4 - NON-DISCRIMINATION 4.01 The Company agrees that there shall be no discrimination or intimidation by the Company or any of its agents against any employee or group of employees because of membership or non-membership in the Union. 4.02 The Company also agrees that representatives of the Union shall be free to discharge their duties in an independent manner without fear that their individual relations with the Company may be affected in the least degree by any action taken by them in good faith in their representative capacity. 4.03 The Union agrees that neither its officers nor its members will intimidate, discriminate against or coerce any employee or group of employees for the reason that they are or are not members of the Union. 4.04 There shall be no discrimination against any employee because of sex, race, religious creed, colour, national origin, sexual orientation, marital status, civil status, handicap or age, except to the extent that legislation so permits. 4.05 In this Collective Agreement, words using the masculine gender include the feminine and the feminine masculine; the singular includes the plural, and the plural singular, where the text so indicates. * ARTICLE 5 - REPRESENTATION 5.01 The number of "District Representatives" necessary to carry out the provisions of this agreement on the Company premises shall be as mutually agreed upon from time to time between the Company and the Union. The number of Group Representatives shall be one (1) per approximately one hundred (100) employees in the bargaining unit. 5.02 The Union agrees to furnish the Company with the names of its duly elected officers and representatives appointed to perform any act in connection with the carrying out of this Agreement, and undertakes to promptly notify the Company of any change in the membership of officers or representatives. 5.03 The Company agrees that Group Representatives will not be transferred from their voting group, except for upgrading, promotional opportunities or for effect of lack of work. 5.04 For the purpose of an effect of lack of work, a Group Representative will not be downgraded or transferred laterally from his voting group while there are junior service employees retained on the same grade or lower graded jobs which the Group Representative can perform within his own voting group. 5.05 For the purpose of an effect of lack of work, a Group Representative who has served for four (4) or more years consecutively and has fifteen (15) years continuous service shall be deemed to have the most seniority within his voting group. 5.06 For the purpose of an effect of lack of work, a District Representative who has served for four (4) or more years consecutively and has fifteen (15) years continuous service shall be deemed to have the most seniority within his voting district. * See also letter of intent #2. ARTICLE 6 - COMPLAINTS AND GRIEVANCES 6.01 For the purpose of this agreement, a grievance shall mean any dispute involving the following paragraphs: a) Wages, hours of work or other working conditions as contained in this agreement. b) Charges or allegations that an employee or group of employees has been treated unfairly or discriminated against by the Company concerning conditions contained in this agreement. 6.02 The Company agrees that any employee or Representative thereof may approach Management through supervisory line organization concerning matters which deserve consideration, modification or improvement. 6.03 It is the mutual desire of the parties hereto that complaints and grievances of the employees be adjusted as quickly as possible. 6.04 A grievance shall be presented as soon as practicable following the circumstances which caused the grievance to become known to the grievor or the Union. 6.05 Any differences, disputes or grievances that may arise with respect to the interpretation, application or alleged violation of any provisions of this agreement shall be dealt with in accordance with the grievance procedure which follows: 6.05.01 - STEP 1 It is generally understood that an employee having a complaint shall first give the first-level manager concerned an opportunity of adjusting the condition causing the complaint. The employee may request the assistance of a Union Representative when taking up a complaint with the first-level manager. The first-level manager concerned shall give a verbal answer within two (2) working days. If an employee or the Union desires to lodge a grievance, he must inform the first-level manager concerned. The latter shall convene a meeting within five (5) working days with the employee, the Union Representative and the Employee Relations Specialist. If the grievance has been submitted in writing, he shall give a written answer to the Union within five (5) working days after the meeting. The written answer must indicate the name of the responsible person at the second step for this grievance. 6.05.02 - STEP 2 Failing satisfactory settlement at the first step, within five (5) working days following the answer, the grievance shall be submitted, in writing to the second-level manager with a copy to the first-level manager concerned. The second-level manager shall convene a meeting within ten (10) working days with the District Representative and/or his delegate, the HR Director and/or his delegate and any other appropriate person convened by one of the parties; the parties shall be informed in advance of the names of the people invited to this meeting. Following this meeting, the management representative shall send a written answer within five (5) working days after the meeting. 6.05.03 - Any period of time specified in the grievance procedure may be extended by mutual agreement. 6.05.04 - GRIEVANCES CONCERNING EMPLOYEES LAID OFF The Company and the Union agree that grievances arising from any layoff shall be submitted in writing at the second step by the Union to the designated management representative of the business unit within ten (10) working days after the Union is in receipt of notification of layoff. The designated management representative must submit his written answer within five (5) working days. 6.05.05 - GRIEVANCES CONCERNING DISMISSALS AND SUSPENSIONS Any grievance involving a dismissal shall commence at Step 2 of the Grievance Procedure within ten (10) days after the Union has been notified in writing of such disciplinary action. Any grievance involving a suspension shall commence at Step 1 of the Grievance Procedure within ten (10) days after the Union has been notified in writing of such disciplinary action. 6.05.06 - GRIEVANCES RELATIVE TO JOB DESCRIPTIONS AND EVALUATIONS In the event that an employee believes his job write-up does not reflect his assignment, he must discuss and review his job description with the first-level manager and if the problem is not resolved within a delay of thirty (30) days, a grievance may be processed in accordance with the grievance procedure commencing at the second step. Job Evaluation grievances shall be processed in accordance with the grievance and arbitration provisions of this agreement. In the event of arbitration proceedings of a job evaluation grievance, the Union will, upon request, be allowed to have the job reviewed by a Union Representative for a reasonable period of time accompanied by a member of the Job Evaluation Committee. 6.05.07 - JOB POSTING GRIEVANCES Any grievance related to a job posting must be submitted within three (3) days of the posting of the employee's name selected for the job, in accordance with the grievance procedure commencing at the first step. In the event that the selection for a job vacancy is in dispute, the grievor and the incumbent shall be the only ones considered for the position in contention. The right to grieve shall be restricted to employees who apply for the vacancy. Following a grievance, the names of all applicants shall be made available to the designated Union Representative, if requested. 6.05.08 - REFERRAL TO ARBITRATION Any grievance concerning the interpretation or alleged violation of this agreement which is not satisfactorily settled in accordance with this Article may be referred to arbitration as provided in Article 7. The request for arbitration shall be forwarded to the designated management representative and must be made within twenty-one (2l) days after the final decision of the Company has been given at Step 2, or when the time limits mutually agreed upon have expired. 6.06 DISPOSITION 6.06.01 - An employee, if he so desires, may take up a grievance as an individual, through the regular line of organization without recourse to the grievance procedure, up to and including the designated second-level manager as the final step. The Company, however, undertakes that it will not attempt to settle any grievance directly with the employee involved if his grievance has already been discussed with the Company by a Union Representative pursuant to the grievance procedure. 6.06.02 - The Union Representative may intercede on behalf of his members at any time on matters covered by the Agreement which, in his opinion, may affect the employees, either as individuals or as a group, regardless of whether his action is taken as a result of a complaint by an individual or a group or as a result of personal observation. ARTICLE 7 - ARBITRATION 7.01 Should the Company and the Union fail to reach an agreement in regard to any differences concerning the interpretation or alleged violation of this Agreement, the matter may be submitted to a single Arbitrator. 7.02 The parties shall attempt to agree on the choice of an arbitrator within twenty (20) working days following the serving of the notice, or within the period of time agreed upon by both parties. Failing agreement by the parties on an arbitrator, an arbitrator shall be appointed by the Minister of Labour at the request of either of the parties. 7.03 The arbitrator, however, shall not have jurisdiction to alter or change any of the provisions of this Agreement or to substitute any new provisions in lieu thereof, nor to give any decisions inconsistent with the terms and provisions of this Agreement. 7.04 A grievance submitted within fifteen days of the date on which the cause of the action was initiated, cannot be rejected by the arbitrator for the sole reason that the expected delay in this collective agreement has not been respected. 7.05 A grievance claiming an employee has been unjustly discharged or suspended may be settled by one of the following steps: a) Confirming Management's action in discharging or suspending the employee, or b) Re-instating the employee with full compensation for time lost, less earnings from other sources, or c) Any other penalty which is just and equitable in the opinion of the arbitrator. 7.06 a) The conferring parties may have the assistance of the employee or employees concerned and any necessary witnesses and all reasonable arrangements will be made to permit the conferring parties to have access to work areas to view operations and to confer with the necessary witnesses. b) Both parties agree to disclose to each other documentation which may be used in arbitration. 7.07 The Company shall not reimburse employees for pay lost in connection with arbitration proceedings. 7.08 Both parties hereto will bear equally the expense of the arbitrator appointed. 7.09 The arbitrator must render a decision within thirty (30) days after he has heard the parties on the grievance. ARTICLE 8 - UNION ACTIVITIES DURING WORKING HOURS 8.01 Representatives shall be permitted to leave their regular work for a reasonable length of time to perform their duties in connection with this Agreement subject to the approval of their immediate supervisor or manager of the department where they are employed. 8.02 The Company agrees to pay employees at their hourly rate (except those on leave of absence) who are Union Representatives for reasonable time spent in the proper administration of this Agreement, during regular working hours. 8.03 The Company reserves the right to prohibit soliciting of membership in the Union during working hours or on Company premises. 8.04 Newly hired employees will be introduced by their immediate manager to their District Representative or Group Representative. The Representative may meet with the new employee for 15 minutes. ARTICLE 9 - ACCESS TO PERSONNEL CARDS 9.01 Any employee, upon request, shall have the right to review his own personnel and/or attendance record card, either individually or jointly with the District Representative in the presence of the employee's immediate supervisor or a representative of the Human Resources Department. 9.02 The personnel card and/or attendance record card of any employee in the representative's constituency shall also be made available to the Union District Representative for the purpose of review, if information is required from such records as a result of a complaint or grievance. 9.03 In the case of a grievance, the employee's representative will have access to documents concerning the employee which are pertinent to the issue. Such documents will include, but will not be limited to, information related to education, job performance, training and experience. 9.04 Review of such information will take place in the presence of the employee's immediate supervisor or a representative of the Human Resources Department. 9.05 The Company will provide, upon request, to the district representative a copy of the employee's employment history and any other information needed as far as the law permits. ARTICLE 10 - INFORMATION TO UNION (HEAD OFFICE AND DISTRICT REPRESENTATIVE) 10.01 The Company agrees to provide lists of hourly rated employees eligible for membership in the Union entering the service of the Company, and also to provide, within one week, lists of hourly rated employees covered by this Agreement whose employment with the Company is terminated. 10.02 The Company will provide the Union, through the Human Resources organization, a weekly list of hourly rated employees covered by this Agreement who are either hired, returning to work, transferred, laid-off, terminated, placed on maternity and/or parental leave of absence, on leave of absence, on long-term disability, pensioned or have resigned. 10.03 The Company agrees to provide monthly to the Union lists by name and employee number of all employees covered by this Agreement. The lists shall be compiled by department in order of Union service date with the Company together with the analysis number of the job and the job code to which the employee is assigned. The Company shall also supply the Union service dates of employees being laid off. 10.04 The Company agrees to provide to the Union semi-annually, in August and February, a list of the names, employee numbers, department numbers and addresses of all hourly rated employees coming under its jurisdiction. 10.05 The Company agrees to notify the Union in writing of those cases in which an employee has been given a final review letter - L.A.R.C. 10.06 The Company agrees to provide to the Union, through the Human Resources organization, a copy of published Organizational Notices/Lists. In addition, the Company will inform the Union when an employee is assigned to a temporary manager position as well as the anticipated duration. 10.07 The Company agrees to provide to the Union, monthly, a list showing names and overtime hours paid during the preceding month. 10.08 For the purpose of this article, the word Union refers to the Union's head office and District Representative. 10.09 Upon the Union's request, the Company agrees to provide, through the Human Resources organization, a copy of the preferred hiring list. 10.10 The Company will provide the Union Representative with information in any specific case where an employee has resigned and the Union Representative feels the resignation was not totally voluntary, so that the Union may investigate the matter before the employee leaves the premises and, if deemed advisable, request the appropriate manager concerned for a prompt review and, where deemed appropriate, a modification of the case. ARTICLE 11 - BULLETIN BOARDS 11.01 The Company will furnish, install and maintain a reasonable number of glassed-in and locked bulletin boards as is mutually agreeable, and in locations satisfactory to the Company and the Union. 11.02 The Bulletin Boards may be used for any and all of the following purposes concerning the bargaining unit covered by this Agreement as may be determined by the Union: a) Notices of Union meetings and the reasons therefor. b) Notices of nomination elections or referendums. c) Results of elections or referendums. d) Official records and reports relating to the operation of the Union. e) Copies of agreements between the Company and the Union. f) Notices of recreational and social affairs. 11.02.01 All such notices shall be approved by the Director of the location or his delegate and the District Representative advised, before being posted. 11.03 When Company notices which refer to the Union are to be posted, the Company agrees to advise the Union of the contents before such notices are posted. ARTICLE 12A - UNION AND CONTINUOUS SERVICE 12.01 Continuous credited service and Union service shall be based on the date established on the Company records. The continuous credited service and the Union service in the Company shall accumulate from the employee's date of hiring subject to the following conditions: 12.01.01 Continuous credited service and Union service shall terminate for the following reasons: a) Voluntary resignation. b) Discharge for just cause if not reversed through the grievance procedure. c) Absence from work for three (3) or more consecutive working days without the Company being notified. It is considered in such circumstances that the employee has resigned voluntarily unless exceptional conditions, recognized by the Company as such, are involved. After the second (2nd) consecutive working day of absence, the Company will advise the District Representative. d) Inability to return to work within two (2) years after sick benefits (if any) have expired; except where an employee is eligible for Company pension. e) Inability to return to work within three (3) years from the first full day of absence due to a work accident disability, as recognized by the CSST. In cases where there has been a return to work and a relapse, as recognized by the CSST, from the same work accident occurs, the aforementioned three (3) year period will be calculated as if it were a new accident. f) Failure to return to work from layoff within one (l) week after having been notified to report; or within two (2) weeks after having been notified and given satisfactory explanation for not returning at the end of the first week. It is agreed that laid off employees being recalled will be permitted to give their present employer reasonable notice of termination in order to accept recall. g) Failure to return from layoff within the "Union and Continuous service maintains" times, outlined in 12.01.03. 12.01.02 Deductions from continuous service shall be made for the following reasons: a) When an employee with less than three (3) full calendar months of continuous service is absent without pay due to sickness, that period of absence up to one (1) month only in any consecutive twelve (12) month period, will be granted upon return to work. b) Any period of leave of absence in excess of one (1) month in any consecutive twelve (12) months for which approval is granted without credit for continuous service. 12.01.03 An employee shall maintain recall rights following layoff in accordance with provisions set out below; his continuous service and Union service shall be accumulated and/or maintained as follows: UNION SERVICE RECALL RIGHTS CONTINUOUS CONTINUOUS AT DATE OF SERVICE SERVICE LAYOFF ACCUMULATES MAINTAINS UNION SERVICE ACCUMULATES AND MAINTAINS Probation completed and less than 1 year 12 months * 12 months * 12 months 1 year but less than 5 years 48 months * 18 months * 48 months 5 years or more 60 months * 24 months * 60 months * NOTE: If employee returns from layoff within above periods. 12.01.04 Continuous service shall be bridged for the following reasons: An employee whose term of employment has been broken and who is subsequently re-employed shall be credited with previous continuous service in the following manner, provided that the employee had six (6) months or more of previous continuous credited service when the term of employment was broken. PERIOD OF SERVICE BREAK PREVIOUS CONTINUOUS SERVICE CREDITED 1 month or less at time of re-employment greater than 1 month but less after completing a period of continuous than 1 year service equivalent to the period elapsed since recall rights expired or since the event causing the service break occurred 1 year or more after completing 1 year of continuous service 12.01.05 Union service shall be adjusted for the following reasons: a) Employees returning to the bargaining unit, without continuous service break, following an absence of less than three (3) years shall have all their Union service immediately credited on the basis of full Company service acquired. b) Employees returning to the bargaining unit, without continuous service break, following an absence of more than three (3) years, shall be immediately credited with prior Union service in the bargaining unit. After one (1) year in the bargaining unit, the Union service of employees affected will be adjusted on the basis of full Company service acquired. c) Employees from C.O.E.U. shall be credited only with the Union service they acquire while in the bargaining unit. After three (3) years in the bargaining unit, the Union service of employees so affected will be adjusted on the basis of full Company service acquired. d) Employees whose recall rights within the bargaining unit have expired and who are subsequently rehired shall have their Union service immediately credited less the period which exceeds the time limit stipulated in paragraph 12.01.03 to maintain the Union service. e) Employees of the bargaining unit whose term of employment has been broken, other than for expiry of recall rights, and are subsequently rehired shall have their previous Union service credited after one (1) year in the bargaining unit. f) An employee's Union service will cease when the employee leaves the bargaining unit. 12.02 A newly hired employee shall be considered as a probationary employee and shall hold no rights as specified in article 12 of this agreement for the first regular eighteen (18) weeks worked. The eighteen (18) weeks worked probationary period shall be accumulated within not more than one (1) year. After this date, his Union service rights will be retroactive to the hiring date. A probationary employee is eligible to become a member of the Union and to be covered by all of the provisions of the agreement except when the employee's service is terminated during the probationary period. Such termination of employment shall be subject to the grievance procedure, up to the second step. In the event of lack of work, a probationary employee will be laid off in reverse order of the number of regular days worked (Monday to Friday) and shall have precedence over any other hiring from outside the Company, if he submits an application for employment at the time of leaving. A list of these probationary laid off employees who have submitted an application of employment will be given to the Union. * ARTICLE 12B PROMOTION, BUMPING AND LAYOFF 12.03 PROMOTIONS 12.03.01 In making permanent promotions at level 3 and higher, the Company shall take into consideration ability, skill, experience (excluding experience acquired on temporary assignments) and Union service. Where the first three factors are relatively equal, Union service shall prevail. Job vacancies at levels 1 and 2 shall be filled on the basis of Union service from among those employees who apply. i) Subject to the provisions of paragraph 12.03.01, selections for filling vacancies will be made, amongst others, from qualified employees in the same grade and qualified employees in a higher grade than that of the vacancy. 12.03.02 (a) The Company will post notices of job vacancies, excluding temporary assignments, in all levels for a period of three (3) working days. Selections will be made in accordance with paragraph 12.03.01. i) Employees who are assigned to a 6 or 7-day work schedule may apply up to three (3) days following the posting period of paragraph 12.03.02_a) if their work schedule is such that they are absent during the three (3) days of posting. (b) A vacancy which is to be filled by the reinstatement of an employee to his former job from which he was downgraded, need not be posted. (c) A vacancy in level 1 which is to be filled by an employee returning to the bargaining unit within one (1) year will not be posted, providing there is no employee with more Union service on the recall list. (d) Following a job posting, the selection will be made as early as it is practical. If the selection is not made within thirty (30) days following the end of the posting period, the job posting will be cancelled. Within three (3) working days after the selection, the name of the successful candidate will be posted on the notice boards for a period of three (3) working days and also forwarded to the Union head office and district representative in writing. 12.04 For level 3 and higher jobs, the qualifications evaluation process for applicants will be subject to consultations between the Company and the district representative. 12.05 EFFECT OF LACK OF WORK When a business faces a layoff, the Company and the Union will meet, during the notice period, to discuss solutions that could reduce the number of employees affected. The parties have agreed to the following specific rules to facilitate the handling of surplus employees: . Surplus procedure . Bumping procedure . Layoff procedure 12.05.01 When lack of work necessitates decreasing the workforce, employees having the least Union service shall be selected as surplus from the analysis number in level 2 and higher or by the least Union service in level 1 in the second level manager's total organization affected. The Company reserves the right to maintain an efficient staff and consequently ability will also be considered. 12.05.02 Such surplus employees shall be transferred laterally by Union service at level 1 and, if qualified at level 2 and higher, to fill any existing vacancies. 12.05.03 a) If there are no such vacancies, then level 4 surplus employees shall be placed on jobs for which they are qualified in the same level as that which was surplus or if they are qualified down to level 2, displacing shorter Union service employees. b) If there are no such vacancies, then level 3 surplus employees shall be placed on jobs for which they are qualified in the same level as that which was surplus or if they are qualified down to level 2, displacing shorter Union service employees. c) If there are no such vacancies, then level 2 surplus employees shall be placed on jobs for which they are qualified in the same level as that which was surplus, they will displace shorter Union service employees. d) Level 1 surplus employees will displace level 1 employees with less Union service. e) Surplus employees, as described in paragraphs a), b) and c) who cannot be placed on a job for which they are qualified, will displace level 1 employees with less Union service. 12.05.04 If surplus employees cannot be placed according to clause 12.05.03, such employees shall be laid off. 12.05.05 Should an employee be on the point of being laid off and there exists employees with less Union service at level 2, the following conditions apply: a) The position of the most junior employee at level 2, will be posted. Level 1 employees will be allowed to apply, with the most senior Union service applicant being deemed to be the successful candidate. The employee with the least Union service at level 2 will be laid off and the surplus employee will fill the position vacated by the selected candidate. b) Subsequent to (a) above, should an employee with greater than five (5) years of Union service still be on the point of being laid off, the position of the employee, with the least Union service at level 3, will be posted. All employees will be allowed to apply, with the most senior Union service applicant being deemed to be the successful candidate. The employee with the least Union service at level 3 will be laid off and the surplus employee will fill the position vacated by the selected candidate. c) Only after an employee fails to find a position, through (a) and (b) above, will he/she be laid off. 12.05.06 The Company will guarantee all employees, including employees on probation, a minimum of one (1) week advance notice prior to layoff. 12.05.07 Written notification of layoff will also be given to the Union's district representative fifteen (15) days prior to the date of layoff. Should this fifteen (15) day notice prove impossible, the designated management representative will consult with the Union. In addition, a copy of notification of layoff, as mentioned in 12.05.06, will be given to the Union's district representative at the same time it is given to the employee. 12.05.08 The Company agrees to notify the Union head office and district representative by letter when an employee refuses to exercise his bumping rights. 12.05.09 An employee who is on Sickness and Accident or Long-Term Disability benefits, on maternity or parental leave, at the time that a notice of layoff would have applied to him had he been at work, will be deemed to have received such notice at that time. His records will be adjusted to reflect the period of time he has been on the Sickness and Accident or Long-Term Disability benefits, on maternity or parental leave, from the time the layoff would have occurred until the employee is considered fit to resume work. 12.05.10 When a lack of work of short duration necessitates a reduction in manpower, the Company may offer a voluntary leave to all employees having the same analysis number in the business affected by the lack of work. This leave will be granted, based on union service, to those so interested for a period not to exceed three (3) months. The Company will inform the Union prior to employees proceeding on this leave. During this leave, the employee shall accumulate continuous service and have the right to those benefits normally granted to laid-off employees. He will not be entitled to neither a notice period nor supplementary unemployment benefits. Return to Work -------------- The employee will be returned to work and will be assigned to the position he held prior to his leave and/or will exercise his bumping rights, in accordance with article_12. 12.06 FORCE MAJEURE The following conditions shall apply for a situation arising beyond the control of the Company and necessitating the layoff, within any period of one month, of more than 50% of any business work force, as defined in article 43. i) Employees affected by such lack of work will not be subject to the bumping procedure, as per paragraph 12.05, for a period not exceeding three (3) months. ii) The Company will offer the most senior Union service qualified employees the option of performing the remaining work available or electing to be laid off for a maximum of three (3) months and receive only the supplementary unemployment benefit. iii) Employees laid off will be recalled as per the requirements of the work available and in keeping with the provisions of the collective agreement. 12.07 RECALLS The Union recognizes the right of the Company normally to hire additional people according to the needs of the business, subject to the provisions of this article. 12.07.01 Before recalling at levels 1 and 2, rate protected employees will be considered by reverse order of Union service. When recalling at levels 1 and 2, the Company will give first consideration to laid-off employees, in order of Union service. Such consideration is subject to the following: a) Employees laid off, refusing a recall, will waive their recall rights. b) A recalled employee who has failed to meet job requirements on a specific function will return on the Recall List and shall not be recalled for the said function. 12.07.02 When recalling at level 3 and higher, the Company shall give first consideration to laid-off qualified employees, in order of Union service. 12.07.03 The Company and the Union shall review the records of laid-off employees to determine if they have the potential to be trained to fill existing vacancies, prior to the hiring of new employees. 12.07.04 Employees must keep the Company informed of any change of address. The Company agrees that it shall send a registered notice or telegram to the last recorded address. 12.07.05 When the employment offered following recall is of a duration of two (2) months or less and the employee is employed by another company, the refusal of recall by said employee will not result in the termination of his continuous service. 12.08 REHIRING 12.08.01 A laid-off employee shall be given preferred hiring consideration for a period of time equivalent to his recall period from the date such period ceases (maximum six [6] years, including layoff period) if he makes application in writing to the Company and presents himself for employment. Failure to accept an offer of employment shall terminate this preference. 12.08.02 The Company agrees to advise a laid-off individual whose recall rights are about to expire, of his preferred hiring consideration as described in 12.08.01. 12.09 TRANSFERS Before making transfers to locations outside of the Island of Montreal, the Company will give due consideration to the wishes of the employees involved. * See also letters of intent # 9 and 14. ARTICLE 13 - SUPPLEMENTARY UNEMPLOYMENT BENEFITS 13.01 For purposes of application of this article, a layoff can mean a temporary layoff, including one on account of market fluctuations or caused by a phase-out in a manufacturing location or business unit. 13.02 SCHEDULE OF SUPPLEMENTARY UNEMPLOYMENT BENEFITS (SUB) An employee who is laid off for a period in excess of two (2) weeks solely due to lack of work shall be granted SUB based on his continuous service at the date of layoff in accordance with the following schedule except as provided for in paragraphs 13.13 and 13.14: CONTINUOUS SERVICE AT DATE OF LAYOFF SUPPLEMENTARY UNEMPLOYMENT BENEFITS
PERIOD BUT NO. OF COMPLETED LESS THAN WEEKS' PAY 0 year 1 year 0 week 1 2 years 5 weeks 2 years 3 6 3 4 7 4 5 8 5 6 11 6 7 12 7 8 13 8 9 14 9 10 15 10 11 18 11 12 20 12 13 22 13 14 24 14 15 26
Three (3) weeks additional pay for each full year of continuous service thereafter. 13.03 CALCULATION OF SUPPLEMENTARY UNEMPLOYMENT BENEFITS SUB payments shall be based on the employee's regular work week hours (excluding overtime) in effect as of the date of layoff. The rate of pay used in such computations shall be the employee's equivalent weekly rate, including COLA, in effect at the date of layoff. 13.04 Each week, the employee shall receive SUB equivalent to 90% of his weekly pay, less Unemployment Insurance Benefit entitlement, provided he has requested and obtained the Unemployment Insurance Benefits. After Unemployment Insurance Benefits have been exhausted, a laid-off employee shall be entitled to a payment of 60% of his regular weekly pay until total SUB entitlement, under 13.02, is exhausted. 13.05 For purposes of application of paragraph 13.04, the total combination of Unemployment Insurance Benefits entitlement, SUB and other compensation shall not exceed, in any event, 90% of the employee's weekly pay. 13.06 SUB cease when : a) the employee resigns, b) SUB expire, c) the employee refuses to report to work after recall (in accordance with article 12.01.01 f). In view of this article, the employee has no acquired right to SUB, except during periods of unemployment which are mentioned in paragraphs 13.04 and 13.09. 13.07 a) An employee who has been re-employed following a period of layoff and is again laid off shall be granted SUB based on his overall continuous service after deducting the amount he received from his previous layoff. b) An employee who has been re-employed following a period of layoff and who, after being back at work for a period of one (1) or more years, is again laid off, shall be granted SUB based on his overall continuous service. 13.08 a) The Company shall provide the following benefits for six (6) months following the month of layoff as long as laid off employees continue to contribute to those plans to which they are required to make contributions: - Supplementary Hospital Plan - Extended Health Care Plan - Vision Care Plan - Dental Plan - Group Insurance Plan - Part I - Group Insurance Plan - Part II - Dependent Life Plan - Survivor Transition Benefit Plan b) Laid off employees with ten (10) or more years of continuous service shall continue to receive the following benefits for the remaining SUB payment periods: - Extended Health Care Plan - Group Life Part I The cost of this extended coverage shall be deducted from SUB entitlement. 13.09 Employees eligible to SUB shall not receive SUB during the UIC stoppage period. However, if the layoff persists for more than two weeks, employees shall receive two (2) weeks SUB, upon their return to work, provided they have not exceeded the total amount of SUB in that time. In such event, the SUB payment shall be considered as being made during the UIC stoppage period of two weeks. 13.10 In the case of an employee who, within ten (10) working days, is recalled from a layoff from where he was laid off, he shall be reimbursed for the layoff period as if he had been actively employed. 13.11 In the case of a laid-off employee's death, the provisions of paragraph 43.07 of this agreement shall apply to the estate. 13.12 Employees must apply and receive layoff allowance before any SUB payments become effective. 13.13 LAYOFF ALLOWANCE AND LUMP SUM PAYMENT a) An employee with fifteen (15) or more years of continuous service may elect to receive a layoff allowance in a single payment. This option is not subject to qualification for UIC. The entitlement for this single payment will be as follows:
CONTINUOUS SERVICE AT DATE OF LAYOFF LAYOFF ALLOWANCE PERIOD BUT NO. OF COMPLETED LESS THAN WEEKS' PAY 15 years 16 years 22 weeks
Three (3) weeks additional allowance for each full year of continuous service thereafter. b) The payment will be based on the employee's regular work week hours (excluding overtime) and on his equivalent weekly rate of pay at the date of layoff excluding COLA. c) The layoff allowance shall be based on the employee's overall continuous service after deducting the amount received as a result of previous layoff excluding the layoff allowance received prior to 1988. d) Should this individual be later recalled within a time interval shorter than that covered by the number of weeks of layoff allowance granted, the amount of layoff allowance paid to the employee for the excess number of weeks shall be considered as an advance in pay by the Company and repayable through payroll deductions at the rate of 10% of such employee's wages per pay period. e) In subsequent layoffs, the layoff allowance of an employee who previously elected a lump sum payment shall be based on his overall continuous service after deducting the amount received as a result of previous layoffs. Furthermore, his layoff allowance entitlement at any future date shall not be restored. f) An employee electing to receive Supplementary Unemployment Benefits forfeits selection of a single payment on any subsequent layoff. g) Should a situation arise, beyond the control of the Company, which necessitates the layoff of more than 50% of the workforce, employees affected may elect only the SUB plan. 13.14 An employee having at least five (5) years of continuous service can forfeit his recall rights and receive a layoff allowance in a lump sum. The layoff allowance shall be one (1) week of salary for each full year of continuous service. 13.15 LAYOFF ALLOWANCE AND SUPPLEMENTARY UNEMPLOYMENT BENEFITS It is agreed that in the event of major changes to the Unemployment Insurance regulations negatively impacting the payment under the Supplementary Unemployment Benefit Plan, the Company agrees to revert to the former layoff allowance plan, with the schedule of the 1988-91 Nortel collective labour agreement, if so requested by the Union. ARTICLE 14 - NOTICES 14.01 The Company agrees that before any non-supervisory office vacancies, either for clerks or technicians (including time study, manufacturing process layout and skill training), are filled by transfer of an hourly employee or by outside hiring, the Company shall consider only those employees who have applied to a notice of vacancy. Notices shall be posted on bulletin boards visible to all hourly employees. When qualifications are equal, employees having the greater union service will be given preference, when the selection is made from the applicants. 14.02 The Company agrees, when an opening in management occurs, to consider employees who have expressed their desire to become part of management. ARTICLE 15 - SAFETY AND HEALTH 15.01 The Company and the Union recognize that they must endeavour jointly to maintain high standards of safety and health in the workplace. The Company shall take the necessary measures to ensure the safety and health of the employees and will provide information and training, when necessary. 15.02 The Company shall maintain adequate health facilities in the work areas and will provide adequate safety devices. 15.03 No employee shall be required to operate or use any machinery, tool, die or other piece of equipment in defective order. 15.04 In case of equipment considered dangerous, the Union may immediately meet with the Health & Safety Committee in order to check the equipment. 15.05 In the case where an employee sustains an injury at work or incurs an occupational sickness during his period of employment, and as a result is permanently unable to perform work similar to that performed prior to his employment injury, he may fill a job vacancy or exercise his bumping rights, as per article 12, on a job corresponding to his physical restriction. An employee, after completing his probation period, downgraded in accordance with article 15.05, will have his rate of pay frozen until the rate of his new grade reaches this rate of pay. An employee with five (5) years or more of continuous service, downgraded in accordance with article 15.05 from a grade to which he has been assigned, will maintain the rate of pay in effect at time of downgrade during the life of this agreement. 15.06 An employee who is permanently unable to perform work similar to that performed prior to his sickness, shall be transferred to fill existing vacancies at the same grade level, corresponding to his physical restriction and for which he possesses the qualifications, within the bargaining unit. 15.07 An employee with fifteen (15) years or more of union service, who cannot be placed in accordance with 15.05 and 15.06, shall be placed on a job corresponding to his physical restriction at the same grade level or lower, by displacing shorter union service employees within the business unit. The employee shall receive a one (1) week familiarization period. If unable to place the employee, he will be given appropriate work until he is placed on the next suitable opening, taking into account his qualifications, union service and physical restriction. 15.08 An employee with twenty-five (25) years or more of continuous service, downgraded in accordance with article 15.07 from a grade to which he has been assigned, will maintain the rate of pay in effect at time of downgrade during the life of this agreement. 15.09 Should suitable employment not be available, as indicated in paragraphs 15.05, 15.06 or 15.07 or should the employee be unable to meet the requirement of such employment, the designated third-level manager, as identified in paragraph 6.06.03, and the District Representative shall meet to discuss the pertinent data related to the problem, with an aim to attempt to retain and gainfully employ the individual concerned, before any action is taken by the Company. 15.10 The Company and the Union agree to establish a Health and Safety Committee structured to conform with existing legislation. 15.11 For reasons of safety, when an employee is assigned to perform work in an isolated area and where it may not be possible for him to request assistance, the Company agrees to set up proper surveillance in order to provide help and/or assistance as may be necessary. 15.12 The Company will provide to the district representative a copy of the Employer's accident reports and, if necessary, a copy of the temporary assignments. 15.13 EMPLOYEE REHABILITATION The Company and the Union acknowledge their joint responsibility to ensure that employees who are disabled as a result of illness or injury are given every available opportunity to participate in rehabilitation programs, including rehabilitative employment. In order to facilitate access to such programs, members of the Joint Rehabilitation Committee and appropriate resources shall meet to identify rehabilitation opportunities. The Committee shall determine the possibilities for rehabilitation and provide assistance to employees to ensure a successful integration into the work environment. The Company will make every effort to facilitate access to rehabilitation which could involve modifications to the work schedule, the tools and/or the organization of work. However, such modifications must not be damaging for the health and safety of other workers. No privilege granted in this article can have the effect of giving an employee recall and layoff rights which he would not have had if he had been at work in regular conditions. It is agreed that when opportunities for rehabilitation become apparent, the employee and/or his personal physician shall be advised of these opportunities. The employee and his physician shall then assess whether the employee should benefit from the opportunity. If the employee and his physician decide to take advantage of the opportunity, the treating physician and/or the employee must consult the Health Centre to discuss a rehabilitation program. The Health Centre representative shall meet with the members of the Joint Comittee to identify rehabilitation opportunities and design a personalized progressive program. If a rehabilitation program does not involve rehabilitative employment, the current conditions for continued S & A or LTD shall be applicable. If a rehabilitation program involves rehabilitative employment, the employee will continue to draw Sickness and Accident (S&A) or Long Term Disability (LTD) Benefits, as the case may be. Earnings from such employment will be paid in addition to S&A or LTD benefits up to a level equal to 100% of the base rate plus COLA which the employee would have earned had he been at work on a full-time basis. If income from all sources exceed such levels, then S&A or LTD benefits will be reduced by the amount of income that exceed such 100% level. When an employee on rehabilitation is at work, he will retain the rights and privileges that he would normally have as if he would be on his regular job. It is understood that these rights and privileges must not be contradictory to the objective and provisions of his personalized rehabilitation program. An employee on rehabilitation will have the right to a plant holiday, in accordance with article 29, so long as the plant holiday falls on a day when the employee would normally have been at work as per his personalized rehabilitation program. In the event that an employee on rehabilitation takes his vacations, these vacations will be treated as if this employee was normally at work. Those employees receiving LTD benefits and participating in a Rehabilitation Program which entails receipt of rehabilitation earnings from rehabilitative employment will accrue vacation in connection with their continuous service and rehabilitation earnings on the following basis: Less than three years service 4% of earnings from hours worked Three (3) to ten (10) years service 6% of earnings from hours worked Ten (10) to nineteen (19) years service 8% of earnings from hours worked Nineteen (19) to twenty-nine (29) years service 10% of earnings from hours worked Twenty-nine (29) years service and above 12% of earnings from hours worked ARTICLE 16 - UNINTERRUPTED PRODUCTION 16.01 During the term of this Agreement and during the period when negotiations for a further Agreement are in progress, the Company agrees that there shall be no lockouts, and the Union agrees that there shall be no slowdown, strike or any other stoppage or interference with work which would cause any interruption in production. * ARTICLE 17 - JOB EVALUATION 17.01 The Union agrees that the classification of employees within the established grades for the various occupations will be in accordance with the Job Evaluation Plan presently in use in the Company. (a) A copy of the Hourly Evaluation Plan and all modifications will be supplied to the Union. (b) The employee involved and the District Representative will review the job write-up with the immediate manager to ensure that all important duties are included, before submission to the Grading Committee for evaluation. (c) The Company will supply the Union with the same job write-up data which is submitted by supervision to the Grading Committee, prior to the evaluation. (d) The evaluation will be completed within thirty (30) working days following completion of the job description. (e) Substantiation data of evaluated jobs will be supplied to the Union. (f) When a job is re-evaluated, existing job rates shall continue in effect until the evaluation is completed. Any rate increase resulting from the evaluation shall be retroactive to the date of submission of the revised write-up to the Grading Committee or from the date of the submission of a grievance, whichever is earlier. (g) The Company agrees to advise the Union in writing, thirty (30) days in advance of any reduction in the grade level of an existing job resulting from evaluation. (h) The Company agrees to meet with the Union to discuss any modifications to the Evaluation Plan prior to their introduction. * See also article 6. * ARTICLE 18 - LEAVES OF ABSENCE 18.01 MATERNITY Maternity leave of absence shall be granted to employees subject to the following conditions: PRIOR NOTICE a) The employee must notify the Company of her intention to proceed on maternity leave, in writing, at least three (3) weeks prior to the commencement of such leave. This notice must be accompanied by a medical certificate attesting to the state of the pregnancy and the expected date of birth. The period of notice may be less than three (3) weeks in cases of emergency substantiated by a medical certificate. TERM OF LEAVE b) As of the sixth (6th) week preceding the expected date of birth, the Company may request the pregnant employee who is still at work to produce a medical certificate attesting to the fact that she is fit to work. c) If the employee refuses or fails to supply the Company with the said certificate within eight (8) days, the Company may oblige her to take her maternity leave immediately by giving her a written notice to this effect. d) Maternity leave shall be granted for a period of eighteen (18) weeks or any other period provided by law. e) Extension of the leave of absence as covered in (d) may be granted for an additional period of up to thirteen (13) weeks on the advice of the Company Medical Department. MATERNITY LEAVE ALLOWANCE f) Maternity leave allowance will only be paid to those employees who have continuous service of thirteen (13) weeks or more. g) The employee who provides proof that she is receiving unemployment insurance benefits shall be paid for up to fifteen (15) weeks maternity leave allowance equivalent to 75% of the employee's weekly base rate less unemployment insurance benefits received by the employee. Payment of this allowance will cease after the employee ceases to qualify for unemployment insurance benefits. h) The employee who is not entitled to receive unemployment insurance benefits for all or a portion of the fifteen (15) weeks of maternity benefits, due to having been previously laid off by the Company shall be paid maternity leave allowance during Maternity Leave for up to fifteen (15) weeks at a rate equivalent to 75% of the employee's weekly base rate, less any unemployment insurance benefits received. i) The employee who, while employed by the Company, has received unemployment insurance benefits in connection with maternity leave and who is subsequently laid off by the Company without having worked sufficient time to permit maximum entitlement to unemployment insurance benefits, shall be paid an amount equivalent to the difference between the remaining amount of unemployment insurance benefit payable in the 52 week unemployment insurance entitlement period, and the maximum amount of unemployment insurance benefit entitlement had the employee not collected unemployment insurance benefits while on maternity leave, plus layoff allowance top up. RETURN TO WORK j) The employee must be cleared by the Company Medical Department before starting work. k) When an employee is ready to return from a maternity leave of absence, reinstatement will be in accordance with the appropriate following procedures: (i) Employee with a planned maternity leave of absence of up to eighteen (18) full weeks, or any other period provided by law, will be reinstated in her former position with all rights to which she would have been entitled if she had continued to work. (ii) If the employee's former position no longer exists upon her return to work, she shall exercise her bumping rights as if she had been at work. l) After re-employment, the employee will be credited with her maternity leave of absence service, prescribed by legislation as mentioned in_d). m) An employee who fails to return to work at the end of her leave shall be considered as having resigned from the Company, effective her last day of work. 18.02 PARENTAL LEAVE a) PARENTAL LEAVE FOR CHILDBIRTH Parental leave of absence shall be granted subject to the following conditions: i) Applicable to parents of a newborn child. Leave shall not exceed thirty-four (34) weeks. ii) It will commence no earlier than the date of birth. Such leave shall terminate no later than one (1) year after the date of birth. b) PARENTAL LEAVE FOR ADOPTION Parental leave of absence shall be granted subject to the following conditions: i) Applicable to parents of an adopted child who is not of school age. Leave will not exceed thirty-four (34) weeks. ii) It is understood that the employee will furnish evidence of adoption. The parental leave is not available for the adoption of a child of the spouse. iii) It will commence no earlier than the date that the child comes into custody, care and control of the employee for the first time and must not terminate later than one (1) year from such date. However, in the event that the employee must be away from work, to travel outside of Quebec, in order to gain custody of the child, his adoption leave may commence at that time. c) PRIOR NOTICE The employee must notify the Company of his intention and duration of parental leave in writing at least three (3) weeks prior to the commencement of such leave. d) PARENTAL LEAVE ALLOWANCE FOR CHILDBIRTH i) The following provisions apply to parental leaves, pursuant to article 18.02_a), for the period of such leave. ii) Parental leave allowance will only be paid to those employees who have continuous service of nine (9) months or more. iii) The employee who provides proof that he is receiving unemployment insurance benefits shall be paid for up to ten (10) weeks parental leave allowance equivalent to 75% of the employee's weekly base rate less unemployment insurance benefits received by the employee. Payment of this allowance will cease after the employee ceases to qualify for unemployment insurance benefits. iv) The employee who is not entitled to receive unemployment insurance benefits for all or a portion of the ten (10) weeks of parental benefits, due to having been previously laid off by the Company, shall be paid parental leave allowance during Parental Leave for up to ten (10) weeks at a rate equivalent to 75% of the employee's weekly base rate, less any unemployment insurance benefits received. v) The employee who, while employed by the Company, has received unemployment insurance benefits in connection with parental leaves and who is subsequently laid off by the Company without having worked sufficient time to permit maximum entitlement to unemployment insurance benefits, shall be paid an amount equivalent to the difference between the remaining amount of unemployment insurance benefit payable in the 52 week unemployment insurance entitlement period, and the maximum amount of unemployment insurance benefit entitlement had the employee not collected unemployment insurance benefits while on maternity and/or parental leave, plus layoff allowance top up. e) PARENTAL LEAVE ALLOWANCE FOR ADOPTION i) Parental leave allowance will only be paid to those employees who have continuous service of nine (9) months or more. ii) The employee who provides proof that he is receiving unemployment insurance benefits shall be paid for up to ten (10) weeks parental leave allowance equivalent to 75% of the employee's weekly base rate less unemployment insurance benefits received by the employee. Payment of this allowance will cease after the employee ceases to qualify for unemployment insurance benefits. iii) The employee who is not entitled to receive unemployment insurance benefits for all or a portion of the ten (10) weeks of parental benefits, due to having been previously laid off by the Company, shall be paid parental leave allowance during Parental Leave for up to ten (10) weeks at a rate equivalent to 75% of the employee's weekly base rate, less any unemployment insurance benefits received. iv) The employee who, while employed by the Company, has received unemployment insurance benefits in connection with parental leaves and who is subsequently laid off by the Company without having worked sufficient time to permit maximum entitlement to unemployment insurance benefits, shall be paid an amount equivalent to the difference between the remaining amount of unemployment insurance benefit payable in the 52 week unemployment insurance entitlement period, and the maximum amount of unemployment insurance benefit entitlement had the employee not collected unemployment insurance benefits while on maternity and/or parental leave, plus layoff allowance top up. v) In the instances described in ii) and iii) above, the Company shall pay during the adoption leave exceeding ten (10) weeks when no unemployment benefits are being paid, up to five (5) additional weeks at 75% of the employee's weekly base rate. f) RETURN TO WORK i) If the parental leave is for a duration of eighteen (18) weeks or less, the employee will be reinstated in his former position with all rights to which he would have been entitled if he had continued to work, including credit for service. ii) If the leave is for more than eighteen (18) weeks, upon return, the employee will be assigned to a similar position or if the position does not exist, he will exercise his bumping rights in accordance with article 12. For the purpose of service accumulation, the employee will be credited with his parental leave of absence. iii) The employee who does not return to work at the end of his parental leave is presumed to have resigned effective his last day at work. 18.03 JURY DUTY OR COURT ATTENDANCE Leave of absence with pay shall be granted by the Company to employees summoned for jury or court attendance (not as plaintiffs, defendants or voluntary witnesses). Employees shall report for regular duties while temporarily excused from attendance at court. 18.04 BEREAVEMENT (i) When a death occurs in the immediate family of an employee and the employee attends the funeral, such employee shall, on request, be granted a leave of absence not to exceed five (5) consecutive regular working days during his standard Monday to Friday work schedule. An employee's immediate family shall be considered as husband, wife, spouse, son, daughter, mother, father, mother-in-law, father-in-law, sister, brother, brother-in-law, sister-in-law, son- in-law, daughter-in-law, grandparents, grandchildren, foster parents, step-brother, step-sister, step-child, step-parents, child of current spouse and legal guardian. Other relatives residing with the employee shall also be considered as immediate family. The Company will grant, in accordance with the above, a bereavement pay allowance, of up to a maximum of three (3) days during the employee's regular Monday to Friday working schedule and restricted to the period from the date of death to the day immediately following the funeral inclusively. (ii) In the event the employee is unable to attend the funeral of a member of his immediate family, as described in 18.04 i, and a memorial service is held, he shall be granted, on request, a one (1) day leave of absence with pay to attend the memorial service. (iii) Extension to the leave of absence may be granted when an employee has difficult travel arrangements, long distances to travel, or all of the responsibility for funeral arrangements. (iv) Where interment of a deceased member of an employee's immediate family is delayed, the employee may elect to take up to one (1) working day from his five (5) day bereavement leave entitlement to attend the interment. 18.05 QUARANTINE An employee required to be absent due to quarantine imposed by duly constituted health authorities shall be paid for such absence which shall be treated as absence due to personal sickness. 18.06 SPECIAL LEAVE An employee who must serve a period of incarceration as a result of being found guilty of an offence under the "Code de la Route" will be granted a leave of absence without pay of up to ninety (90) calendar days in order to serve the period of incarceration. An extension may be granted by the Company. Only one (1) such leave may be granted during the life of the agreement. 18.07 EDUCATIONAL LEAVE OF ABSENCE 1. This paragraph allows an employee to take an authorized educational leave of absence without pay to further their knowledge of telecommunications or related technology, particularly as it applies to the Company's operations. 2. Such leave shall be granted as deemed appropriate by the Company and taking into account production requirements. 3. To be eligible, an employee must have a minimum of two (2) years of continuous service and shall apply in writing, no later than August 1st of each year, stating the reasons for such a request. 4. Normally only one (1) application per twelve-month period shall be granted. 5. The Company reserves the right to determine the number of leaves granted to each employee. 6. The duration of each leave of absence granted shall be to a maximum of twelve (12) months. 7. Employees who successfully complete their courses will be eligible under the Company's Tuition Refund, with the following exceptions: o Maximum of $3000 per year. o Employees will be reimbursed upon successful completion of courses. 8. BENEFITS o Employees who take an authorized educational leave of absence without pay will have access to the benefits available under the existing plan applicable to the authorized leave of absence without pay. 9. RETURN TO WORK o Upon return to work, the Union service shall be credited immediately for the period of the educational leave of absence. o Upon return, the employee shall be assigned to a similar position or if the position does not exist, he shall exercise his bumping rights in accordance with article 12 or 38. * Refer to articles # 12 and 30. ARTICLE 19 - VALIDITY 19.01 If for any reason any portion of this Agreement shall be held to be void and unlawful, it shall not affect the validity of the rest of the Agreement. 19.02 The Company agrees that existing general privileges not included in this Agreement will not be withdrawn during the life of this Agreement without due and sufficient cause and the Company undertakes to advise the Union of any contemplated changes. ARTICLE 20 - DEDUCTION OF REGULAR DUES 20.01 During the term of this Agreement, the Company will deduct the regular Union dues from the wages of all employees covered by this Agreement in installments. 20.02 When sufficient pay is not available for all other deductions during the period when deductions are made, no deductions shall be made for Union dues. 20.03 The Union agrees to keep the Company harmless from any claims against it by an employee, which arise out of deduction under this Article. 20.04 Dues deduction shall be suspended during the period of an employee's leave of absence without pay. When the employee is returned to the payroll, deduction of Union dues shall be automatically resumed. 20.05 Amounts deducted for dues shall be remitted to the Secretary Treasurer of the Canadian Union of Communication Workers as soon as possible after the end of each fiscal month. Each remittance shall be accompanied by a statement showing the amounts of the deductions for each employee. 20.06 Any change in the amount of monthly Union dues will be certified to the Company by the Secretary-Treasurer of the Canadian Union of Communication Workers. A certification in a form acceptable to the Company which changes the dues shall become effective thirty (30) days following the date the Company receives such certification. 20.07 Deduction of dues from the employee's paycheque shall commence upon completion of the first full week of employment with the Company. ARTICLE 21 - WORK PERFORMED BY SUPERVISORS 21.01 The Company agrees that supervisors and salaried employees will not normally perform work ordinarily assigned to hourly employees, except for instructional or experimental purposes, or when competent non-supervisory employees are not available, or in cases when abnormal conditions arise. ARTICLE 22 - DISCIPLINARY ACTION 22.01 No employee covered by this Agreement shall be disciplined in any manner, demoted, suspended or discharged except for just cause. 22.02 An employee who is being disciplined, suspended or discharged may, if he so requests, have his Union Representative present as an observer, during the disciplinary interview. The Union Representative may ask for clarification of Company statements and facts related to the discipline. 22.03 A formal warning is in effect for a period of fifteen (15) months. A final warning expires after twelve (12) months of acceptable performance. 22.04 (a) The Company agrees to submit to the Union a copy of the formal or final warning within three (3) days following the issuing of the warning. Specific reasons for the warning will be included, e.g. frequency and dates of tardiness, etc. (b) With prevention as our objective, the Company agrees to furnish the Union with a copy of the counselling. 22.05 The Company agrees to notify the Union by telephone, to be confirmed by letter, of those cases in which an employee is being suspended or separated from the Company. Specific reasons for the suspension or separation will be included in identifiable brief details as shown under paragraph 22.04_(a). * ARTICLE 23 - HOURS OF WORK 23.01 The regular hours of work for all operating locations shall be forty (40) hours per week. 23.01.01 The standard hours of work shall be as follows: REGULAR SHIFT OPERATIONS 8 hours - 1/2 hour lunch TWO SHIFT OPERATIONS Day Shift: 8 hours - 1/2 hour lunch Swing Shift: 7 1/2 hours - 1/2 hour lunch MULTIPLE SHIFT OPERATIONS 1st shift - 8 hours - 1/2 hour lunch 2nd shift - 7 1/2 hours - 1/2 hour lunch 3rd shift - 7 1/2 hours - 1/2 hour lunch CONTINUOUS PROCESSES 1st shift - 8 hours - no lunch hour 2nd shift - 8 hours - no lunch hour 3rd shift - 8 hours - no lunch hour NIGHT SHIFT 8 hours - 1/2 hour lunch 23.01.02 The Company reserves the right to change from time to time the starting and stopping time of any regular shift; it is however agreed to consult with the Union before putting any such changes into effect. 23.01.03 When extensive workforce reductions would otherwise be required, it may be found desirable to reduce the scheduled hours of work below the standard weekly work schedule to minimize such workforce reductions. Any action taken in this respect shall be the subject of negotiations between the Company and the Union. Negotiations thereon shall take place when requested by either party to this Agreement and in the event of such negotiations, the new schedule proposed by the Company may be placed in effect pending Agreement between the parties. 23.01.04 a) Except in the case of emergency, the Company will give its employees a forty-eight (48) hour notice for all shift changes. b) Overtime hours leading to a shift change will be governed by article 24.02. 23.02 SEVEN-DAY CONTINUOUS SHIFT CONFIGURATION The conditions under which the parties agree to implement a schedule of working hours, designated as twelve (12) hour shifts. 23.02.01 HOURS OF WORK i) The term "working day" as used in this Collective Agreement means a regularly scheduled work day of twelve (12) hours. ii) The standard schedule for employees on a twelve (12) hour seven (7) day shift schedule is comprised of twelve (12) hours of work in a twenty-four (24) hour period. The standard weekly schedule for employees on this shift is comprised of days of twelve (12) hours on a three (3) or four (4) day work week depending on the employee's work schedule. iii) The regular payroll week for employees on a twelve (12) hour shift schedule will commence at 7:00 p.m. on Sunday and terminate at 7:00 p.m. on the following Sunday. 23.02.02 RATES OF PAY Regular hours scheduled and worked, in accordance with the twelve (12) hour shift schedule, will be paid at straight time rates. The weekly average standard schedule is forty-two (42) regular hours worked. A premium of $3.50 per hour will be paid for all scheduled hours worked during the regular shift on Saturdays, provided that such hours are not paid on an overtime basis. A premium of $5.00 per hour will be paid for all scheduled hours worked during the regular shift on Sundays, provided that such hours are not paid on an overtime basis. 23.02.03 OFF-SHIFT DIFFERENTIAL Off-shift differential will be paid for all the hours worked between 3:00 p.m. and 7:00 a.m. 23.02.04 COLA PREMIUM COLA premium is paid based on forty-two (42) hours. 23.02.05 OVERTIME PAYMENT a) A rate of 1 1/2 times the hourly rate shall be paid: i) for the first eight (8) hours worked if an employee is notified that he is required to work on his designated day of rest, double time will be paid for the following hours worked. This provision shall not apply in the case where an employee's schedule is changed to another shift or to a new working schedule which provides alternative day(s) of rest. b) A rate of double time will be paid: i) for the first four (4) hours worked in excess of twelve (12) regular hours during the twenty-four (24) hour interval from the beginning of an employee's schedule shift. ii) for all hours worked on a plant holiday, as described in Article 29. 23.02.06 BEREAVEMENT In accordance with article 18.04. PLANT HOLIDAYS (AS DEFINED IN ARTICLE 29). Employees on a twelve (12) hour work schedule will be paid twelve (12) hours for each statutory holiday, as per Article 29. Between Christmas and New Year however, employees will be paid an equivalent of eight (8) hours for each of the five (5) plant holidays during this period. 23.02.07 VACATION Vacation will be calculated on the basis of twelve (12) hours: 2 weeks = _7_days of 12 hours 3 weeks = 10_days of 12 hours 4 weeks = 14_days of 12 hours 5 weeks = 17_days of 12 hours 6 weeks = 20_days of 12 hours 23.02.08 SICKNESS AND ACCIDENT PLAN Those employees with less than ten (10) years service will be treated according to the 8-8 rule. For the first day of sickness, all shall receive the equivalent of four (4) hours paid. If an employee works more than six (6) hours, he/she shall be paid for those hours worked and that day will not be treated as a day of absence. If an employee works less than six (6) hours and must leave due to sickness and/or accident, he/she will be paid for those hours worked and that day will be treated as a day of absence. If an employee works less than four (4) hours and must leave due to accident and/or sickness, he/she shall be paid the equivalent of four (4) hours worked. 23.03 SIX-DAY CONTINUOUS SHIFT CONFIGURATION The conditions under which the parties agree to implement a schedule of working hours, designated as twelve (12) hour shifts. 23.03.01 HOURS OF WORK i) The term "working day" as used in this Collective Agreement means a regularly scheduled work day of twelve (12) hours. ii) The standard schedule for employees on a twelve (12) hour shift schedule is comprised of twelve (12) hours of work in a twenty-four (24) hour period. The standard weekly schedule for employees on this shift is comprised of three (3) days of twelve (12) hours: (Monday, Tuesday, Wednesday) and (Thursday, Friday, Saturday). iii) The regular payroll week for employees on a twelve (12) hour shift schedule will commence at 7:00 p.m. on Sunday and terminate at 7:00 p.m. on Saturday. 23.03.02 RATES OF PAY Regular hours scheduled and worked, in accordance with the twelve (12) hour shift schedule, will be paid at straight time rates. The weekly standard schedule is thirty-six (36) regular hours worked. A premium of $3.50 per hour will be paid for all scheduled hours worked during the regular shift on Saturdays, provided that such hours are not paid on an overtime basis. 23.03.03 OFF-SHIFT DIFFERENTIAL Off-shift differential will be paid for all the hours worked between 3:00 p.m. and 7:00 a.m. 23.03.04 COLA PREMIUM COLA premium is paid based on thirty-six (36) hours. 23.03.05 OVERTIME PAYMENT a) A rate of 1 1/2 times the hourly rate shall be paid: i) for the first eight (8) hours worked if an employee is notified that he is required to work on his designated day of rest, double time will be paid for the following hours worked. This provision shall not apply in the case where an employee's schedule is changed to another shift or to a new working schedule which provides alternative day(s) of rest. b) A rate of double time will be paid: i) for the first four (4) hours worked in excess of twelve (12) regular hours during the twenty-four (24) hour interval from the beginning of an employee's schedule shift. ii) for all hours worked on Sunday (outside the standard schedule), that is from Saturday 7:00 p.m. to Sunday 7:00 p.m. iii) for all hours worked on a plant holiday, as described in Article 29. 23.03.06 BEREAVEMENT In accordance with article 18.04. PLANT HOLIDAYS (AS DEFINED IN ARTICLE 29). Employees on a twelve (12) hour work schedule will be paid twelve (12) hours for each statutory holiday, as per Article 29. Between Christmas and New Year however, employees will be paid an equivalent of eight (8) hours for each of the five (5) plant holidays during this period. 23.03.07 VACATION The vacation entitlement will be calculated in terms of twelve (12) hours, i.e.: 2 weeks = 2 x 3 days of 12 hours 3 weeks = 3 x 3 days of 12 hours 4 weeks = 4 x 3 days of 12 hours 5 weeks = 5 x 3 days of 12 hours 6 weeks = 6 x 3 days of 12 hours For the purpose of vacation entitlement, thirty-six (36) hours is equivalent to thirty-eight (38) hours paid. 23.03.08 SICKNESS AND ACCIDENT PLAN Those employees with less than ten (10) years service will be treated according to the 8-8 rule. For the first day of sickness, all shall receive the equivalent of four (4) hours paid. If an employee works more than six (6) hours, he/she shall be paid for those hours worked and that day will not be treated as a day of absence. If an employee works less than six (6) hours and must leave due to sickness and/or accident, he/she will be paid for those hours worked and that day will be treated as a day of absence. If an employee works less than four (4) hours and must leave due to accident and/or sickness, he/she shall be paid the equivalent of four (4) hours worked. See also letter of intent #8. ARTICLE 24 - OVERTIME GENERAL PROVISIONS 24.01 Employees shall receive regular holiday pay in addition to double time for all hours worked on a plant holiday. 24.02 Except in the case of emergency, employees may request to be excused from working overtime providing such employees have a legitimate reason for being excused. Such legitimate reasons shall not be unreasonably denied and the Company agrees that, except in the case of emergency, employees who are required to work overtime, shall be so advised at least twenty-four (24) hours prior to the start of the overtime to be worked. When possible, the Company will schedule overtime on a voluntary basis. Overtime in excess of eight (8) hours per week is voluntary. Saturday overtime in any one week is voluntary for any employee who has already worked six (6) hours or more overtime in that week; this is not to be construed as circumventing the employee's right to request consideration to be excused from working overtime. 24.03 Every effort will be made to avoid the necessity for working overtime on Plant Holidays and employees will not be obligated to work on such days. When it is considered necessary to schedule holiday work, the Union will be notified as soon as possible. This does not apply to employees whose normal schedule requires them to work on a holiday. 24.04 The opportunity for overtime work shall be offered equally to those employees normally engaged on the work involved insofar as it is practical. 24.05 In the case of a grievance, the Union Representative shall have access to the records in respect of overtime hours. In the event that an inequity is discovered, the grieving employee will be given the opportunity to work the lost overtime hours within a period of six (6) weeks. This six (6) week period will commence upon receipt of a written grievance at the second step. In a case where this is not possible, the employee will be compensated for hours lost at the applicable rate. Should it be that because the employee is normally required to work overtime during that same period of time, and as a consequence, the make-up overtime cannot be offered to the individual, then the overtime lost will be paid to the individual. If a similar oversight occurs again, with any employee, within a period of three (3) months, within the same first-level managers' organization, the employee shall be compensated for hours lost at the applicable rate as soon as the inequity is discovered. 24.06 When by mutual agreement, working conditions are changed so that there shall be an extended shutdown of operations in conjunction with a plant holiday or for some other special reason, it is understood and agreed that all time worked to provide for loss of production, as a result of such shutdown, shall be at straight time rates and that no overtime shall be paid irrespective of any agreement made as contained in all other paragraphs of this Article. The signature of one of the officers of the Union and the designated management representative on the Company notice announcing such change, shall constitute agreement in accordance with the above. ARTICLE 25 - OVERTIME 25.01 This article applies to all employees except for employees on a twelve (12) hour schedule. 25.01.01 The number of straight time hours in any one shift shall not exceed eight (8) hours. 25.01.02 Overtime shall be paid for all time worked in excess of the standard hours of the assigned shift (not including overtime hours) in any twenty-four (24) hours, Monday to Saturday inclusive. Overtime will be paid for all hours worked in excess of the standard hours of the assigned shift during the interval of time from 7:00 a.m., 7:30 a.m. or 8:00 a.m. depending on the start of the shift of any one day to the end of the third shift of the same day. An employee who is required to report to work prior to the start of his regular shift, will be given the opportunity to work the full hours of his regular shift. 25.01.03 Employees shall be paid for overtime. a) One and one-half times their hourly rate for hours worked in excess of the standard hours of their assigned shift but not in excess of twelve (12) hours on any one shift. b) Twice their hourly rate for hours worked in excess of twelve (12) hours on any one shift. c) One and one-half times their hourly rate for all time worked (double (2) time after 8 hours) in the twenty-four (24) hours of Saturday. i) For first and second shift employees, Saturday will be from midnight Friday to midnight Saturday. ii) For third shift employees whose work-week commences Monday night, Saturday will be from 7:00 a.m., 7:30 a.m. or 8:00 a.m. Saturday to 7:00 a.m., 7:30 a.m. or 8:00 a.m. Sunday depending on the shift start time. iii) For third shift employees whose work-week commences on Sunday night, Saturday will be from 11:00 p.m., 11:30 p.m. or midnight Friday to 11:00 p.m., 11:30 p.m. or midnight Saturday, depending on the shift start time. d) Twice their hourly rate for all time worked in the twenty-four (24) hours of Sunday. i) For first and second shift employees, Sunday will be from midnight Saturday to midnight Sunday. ii) For third shift employees, whose work-week commences Monday night, Sunday will be from 7:00 a.m., 7:30 a.m. or 8:00 a.m. Sunday to 7:00 a.m., 7:30 a.m., or 8:00 a.m. Monday depending on the shift start time. iii) For third shift employees whose work-week commences on Sunday night, Sunday will be from 11:00 p.m., 11:30 p.m. or midnight Saturday to 11:00 p.m., 11:30 p.m. or midnight Sunday, depending on the shift start time. 25.01.04 An employee who commences work on an assignment during the hours of his regular shift and continues to work without interruption into the hours of his regular shift of the following day shall continue to be paid on an overtime basis. Periods of less than four (4) hours will not be considered as an interruption. 25.01.05 ADMINISTRATION It is understood and agreed by both parties that the Company intends administering the provisions of the second paragraph of this article as follows: a) Reference to voluntary overtime in excess of eight (8) hours per week applies to work performed on Saturdays only. b) Overtime worked during the regular work week is understood to be limited to six (6) hours per week, i.e., three (3) overtime hours on any two (2) regular work days. c) In the case of overtime required on continuous process operations, the number of overtime hours on any shift will be four (4) hours. 25.01.06 BREAK PERIODS The Company agrees that employees will not be required to take a lunch break prior to commencement of overtime following completion of their regular shift. This agreement is dependent on the requirements that uniformity of application must exist in order to enable the Company to maintain an efficient operation. Should for any reasons, employees demand a lunch break in a specific department, then it will be necessary to terminate this agreement as it applies to such department. 25.01.07 CANCELLED OVERTIME In the case where scheduled overtime is cancelled, and subsequently another employee, who does not normally work on the specific job, is requested to carry out the overtime work, then the lost overtime shall be paid to the employee who normally would have performed the work. Such payment shall be made within the pay period following the discovery of the inequity. ARTICLE 26 - SICKNESS DAY CREDIT 26.01 Effective December 1st of each year, employees will be allowed two (2) days to use as a reimbursement for the penalty days following the Sickness and Accident Plan. Days not used for this purpose will be paid to the employee on or right after December 20 of the next year. For the first year of this Agreement, the two (2) days will be available for use, beginning at the collective agreement's signature and will be paid, if not used, on or right after December 20, 1996. 26.02 For employees who are not active employees on December 1st, the payment will be calculated as per the weeks worked after December 1st of each year. ARTICLE 27 - OFFSHIFT DIFFERENTIAL 27.01 The offshift differential will be $0.88 per hour from date of ratification. Employees working on second or third shift operations shall receive offshift differential for hours worked. ARTICLE 28 - MINIMUM COMPENSATION 28.01 When an employee is called during his offtime to report for a work assignment outside his standard daily or weekly work schedule, it shall be considered a "called-in" emergency. However, when an employee is requested to remain late on a day on which he has reported for work or, when prior to leaving work, an employee is requested to report for work on a subsequent day at either his standard or non-standard starting time, it shall not be considered a "called-in" emergency. 28.02 When an employee is required to make extra trips from his residence to place of work and returns as a result of a "called-in" emergency, he shall be paid for two (2) hours' travelling time at straight time rates and shall receive overtime for any time worked. When an employee reports to work on a "called-in" emergency, he shall receive overtime for any time worked, or a minimum of four (4) hours' pay at the employee's base rate whichever is greater. 28.03 When the "called-in" emergency does not require extra trips but does involve reporting earlier than the starting time of his standard daily work schedule, one (1) hour's travelling time shall be paid and the employee shall receive overtime for time worked prior to his standard starting time. 28.04 Any employee who reports to work as usual and is sent home because no work is available shall be paid the equivalent of four (4) hours' work at his daywork rate provided such lack of work is not caused by power failure or any other event beyond the control of the Company. 28.05 Any employee required to work overtime on annual inventory will be guaranteed four (4) continuous hours of overtime work. 28.06 An employee loaned out on a job assignment outside of the Montreal area and vicinity, and travelling with the Company's authorization will: a) Travel during regular working hours. b) When job requirements demand that the employee travels out of regular working hours, he will be paid at straight time rates for all travel time between 6:00 a.m. and midnight. c) Authorized trips home while on assignment should be planned to give the employee maximum time at home, (i.e. arrive at home 6:00 p.m. Friday - leave home 6:00 a.m. Monday). 28.07 Whenever a major snowstorm occurs and the Company is unable to operate in a normal manner because a limited number of employees have reported for work and there is no power failure, employees who report for their scheduled shift will be assigned, at the discretion of the Company, to any available work at their regular rate of pay for the balance of their shift. If the Company does not assign them to work but sends them home, they shall be paid four (4) hours of their regular rate of pay. ARTICLE 29 - PLANT HOLIDAYS 29.01 Employees who are not required to work on the undernoted Plant Holidays will be paid for eight (8) hours at their hourly rate, provided that these holidays are officially observed on a day on which an employee would normally work, and provided that the employee receives pay for the working day preceding or the working day following a holiday. This shall not apply where an employee receives pay from the Company for such day for any other reason. Different provisions for plant holidays are in Article 23. 29.01.01 - In l996, the Plant Holidays will be fourteen (14) days as follows: Good Friday April 05 Victoria Day May 20 National Holiday June 24 Canada Day July 01 Labour Day September 02 Thanksgiving October 14 December 24, 25, 26, 27, 30, 31, January 1 and 2, 1997. 29.01.02 - In l997, the Plant Holidays will be as follows: Good Friday March 28 Victoria Day May 19 National Holiday June 24 Canada Day July 01 Labour Day September 01 Thanksgiving October 13 December 24, 25, 26, 29, 30, 31, January 1 and 2, 1998. 29.01.03 - In l998, the Plant Holidays will be as follows: Good Friday April 10 Victoria Day May 18 National Holiday June 24 Canada Day July 01 Labour Day September 07 Thanksgiving October 12 December 24, 25, 28, 29, 30, 31, Jan.1, 1999 and Feb.8*, 1999. 29.01.04 - In l999, the Plant Holidays will be as follows: Good Friday April 02 Victoria Day May 17 National Holiday June 24 Canada Day July 01 Labour Day September 06 Thanksgiving October 11 December 24, 27, 28, 29, 30, 31, Jan. 3, 2000 and Feb.14*, 2000. 29.01.05 - In 2000, the Plant Holidays will be as follows: Good Friday April 21 Victoria Day May 15 National Holiday June 24 Canada Day July 01 Labour Day September 04 Thanksgiving October 09 December 22, 25, 26, 27, 28, 29, January 1 and 2, 2001. *_If Federal/Provincial Governments proclaim any new legal holiday (e.g. Heritage Day), such day will supplant the fourteenth day. 29.02 When any of the above plant holidays falls on a Saturday or a Sunday, a compensating day off will be granted on the first succeeding work day. 29.03 When a plant holiday falls on an employee's day off on any day Monday to Friday inclusive, such employee shall either receive an extra day off with pay or pay in lieu thereof at the discretion of the Company. Plant Holidays falling on Saturday shall be treated as ordinary days for pay purposes. 29.04 When a plant holiday occurs on a regular working day during an employee's vacation, the employee shall be entitled to one extra day as vacation with pay. 29.05 In order to determine plant holiday pay treatment, the day on which a shift starts shall govern all the hours of that shift. 29.06 The conditions for the six (6) and seven (7) day schedules are covered in Article 23. * ARTICLE 30 - VACATIONS 30.01 Employees will become eligible for vacation with pay each year based on their continuous service with the Company as of June 30th of the current year, as follows: One (1) full working month but less than two (2) full working months 1 day Two (2) months three (3) 2 days Three (3) four (4) 3 Four (4) five (5) 4 Five (5) six (6) 5 Six (6) seven (7) 6 Seven (7) eight (8) 7 Eight (8) nine (9) 8 Nine (9) ten (10) 9 Ten (10) twelve (12) 10 30.02 Vacation pay, under this section, for employees with less than one (1) year of continuous service, shall be computed on the basis of eight (8) hours at the employee's rate for each day of vacation. 30.03 Employee's rate in effect on the eighth (8th) Friday prior to the Standard Vacation Period (May 31 in 1996, May 30 in 1997, May 29 in 1998, May 28 in 1999 and May 26 in 2000) shall be used when employees with less than one (1) year of continuous service take their vacation on or after July_1st or their rate in effect four (4) weeks prior to the actual vacation period where employees take their vacation prior to July_1st. 30.04 After 3 years of continuous service but less than 10 years service - three (3) wks After 10 years of continuous service but less than 19 - four_(4) wks After 19 years of continuous service but less than 29 - five_(5) wks After 29 years of continuous service - six (6) weeks. 30.04.01 Employees who complete service of: three (3) years, ten (10) years, nineteen (19) years, twenty-nine (29) years, after June 30th in the calendar year shall be entitled to vacations in accordance with paragraph 30.04. 30.05 When an employee has been absent without pay for an accumulated period in excess of sixty (60) days, his vacation shall be reduced in accordance with the following table for each thirty (30) days of absence in excess of sixty (60) days: REDUCTION IN CONTINUOUS SERVICE VACATION CREDIT Twelve (12) months but less than three ( 3) years 1 day Three ( 3) years but less than ten (10) 1-1/2 days Ten (10) years but less than nineteen (19) 2 days Nineteen (19) years but less than twenty-nine (29) 2-1/2 days Twenty-nine (29) years and over 3 days 30.06 Former employees who are laid off and recalled during the vacation year shall have their vacation entitlement calculated, as per letter of understanding # 15. However, if the accumulated vacation credits from their return to work are less than those which the employees would be entitled to, according to continuous service as at June 30th of the reference year, such employees will be given the opportunity to take the difference as time off without pay. 30.07 When a weekly or monthly rated employee is transferred to an hourly rate, the vacation period shall be based on his status as of June 30th in the current year. 30.08 The weekly rate of pay for vacation for employees shall be computed as follows: 30.08.01 For employees taking their vacation on or after July lst, pay shall be based on the employee's average weekly earnings for the thirteen (13) weeks ending May 31 in 1996, May 30 in 1997, May 29 in 1998, May 28 in 1999 and May 26 in 2000. 30.08.02 For employees taking their vacation prior to July 1st, the pay shall be based on the employee's average weekly earnings for the thirteen (13) weeks ending on the fourth Friday prior to their vacation period. 30.09 The last two weeks that fall completely in July shall be considered as the Standard Vacation Period during which the plant will be shut down insofar as possible, but wherever practical, the Company will provide work for those employees who are not eligible for vacation under this plan. 30.09.01 Wherever practical, vacations will be given during the last two (2) weeks in July and the first two (2) weeks in August. The Company reserves the right to select employees from_those eligible for vacation to work during this period, such_employees will take their vacation at such other time as may_be arranged. In circumstances other than emergency, when an_employee is required to take his vacation outside the Standard Vacation Period, he shall be notified at least ninety (90) days prior to the commencement of the Standard Vacation Period. 30.09.02 Employees entitled to more than two (2) weeks of vacation in the current year may be permitted to take such additional weeks of vacation in the succeeding year, provided such action does not interfere with the Company's operations. Any such delayed vacation must be completed not later than May 31st of such succeeding year. 30.10 VACATION ALLOWANCE TO EMPLOYEES ON TERMINATION OF SERVICE Employees whose service is terminated, except in the case of discharged employees, will receive their accrued vacation pay with C.O.L.A. under the Company's plan at time of termination of service. However, when an employee proceeds on vacation immediately prior to pension, but after the following dates, pay shall be based on the employee's average weekly earnings for the thirteen (13) weeks ending May 31 in 1996, May 30 in 1997, May 29 in 1998, May 28 in 1999 and May 26 in 2000. 30.11 The following rules relating to vacation shall apply: A) RESCHEDULING OF VACATION AT THE COMPANY'S REQUEST When vacation has been scheduled and then rescheduled at Company's request and where an employee has been unable to take the rescheduled vacation because of sickness or accident disability, the Company may buy back the unused rescheduled vacation at straight time rates, or grant such vacation after May 31st of the succeeding year, provided such delayed vacation is completed not later than June 30th of such succeeding year. B) RESCHEDULING OF VACATION DUE TO DISABILITY If, while on vacation, an employee is hospitalized for a period of over 3 vacation days (Monday to Friday) or suffers a major disability which incapacitates him for over 3 vacation days (Monday to Friday), the employee may request a re-scheduling of vacation days lost. Upon submission of satisfactory proof by the employee, such as a written hospital report or a written medical report by the treating physician, the Company Health Centre may approve the request based on the review of circumstances of the case. If approved, the Company Health Centre will advise the employee's supervisor who will arrange the new vacation schedule dates. C) ACCRUED VACATION - EMPLOYEE RECALLED In the case where an employee is laid-off and recalled to work before receiving a pay cheque for accrued vacations, the Company shall take the necessary steps to cancel the said cheque, unless the employee expresses the desire to accept it. 30.12 For purposes of application of Article 30.08, the Company agrees to maintain the existing practice, as described in the following Administrative Procedure 802.04, paragraph 4.1: "If the 13 weeks used for average earnings include Company sickness and accident disability benefits at the rate of 66-2/3%, such benefits are built up to the equivalent of 8_hours times base rate for each day of such benefits before computing average weekly earnings." Moreover, the Company agrees that for the application of paragraph 4.1 of this administrative practice, the same treatment will be applied for short-term disability employees at the rate of 90%. Any other more advantageous modification brought to this administrative practice will have precedence over the preceding practice. * See also letter of understanding # 15. ARTICLE 31 - PENSION PLAN AND OTHER BENEFITS 31.01 The Company will provide a Pension Plan and Other Benefits as fully described in the Pension/Benefits Appendix to this Agreement. 31.02 The Company agrees that, during the life of the current Agreement, there will be no reduction in the benefits provided by certain Company-wide programs. ARTICLE 32 - PRODUCTION STANDARDS 32.01 When an employee fails to meet the output rates established in new or revised production standards, the Company practice of adjusting staff and re-examining lay-out, methods, materials and other related factors will be followed in an attempt to correct the problem. Should the employee continue to be unable to meet the required output, the Company will arrange a meeting with the Union Representative to discuss the pertinent data related to the problem before any further action is taken by the Company. * ARTICLE 33 - COST OF LIVING ALLOWANCE 33.01 The Statistics Canada February 1994 Consumer Price Index (1986 base) published in March 1994 (130.3) will be the base for all calculations of the cost of living allowance. 33.02 The amount of the Cost of Living Allowance will be calculated on changes, upward or downward, in the Consumer Price Index (1986). This calculation will be in accordance with the following schedule: PUBLISHED IN (AND PAYABLE IN THE CP INDEX FOR FIRST PAY PERIOD THE MONTH OF THEREAFTER) COLA FORMULA 1996 May June $0.01 for each 0.087 August September change in the CPI November December (1986 base) 1997 February March 1997 May June $0.01 for each 0.087 August September change in the CPI November December (1986 base) 1998 February March 1998 May June $0.01 for each 0.087 August September change in the CPI November December (1986 base) 1999 February March 1999 May June $0.01 for each 0.087 August September change in the CPI November December (1986 base) 2000 February March 2000 May June $0.01 for each 0.087 August September change in the CPI November December (1986 base) 2001 February March May June The adjusted Cost of Living Allowance will be paid from the beginning of the pay period following publication of the index. In no event will a decline in the Consumer Price Index (1986) below the base figure published in March 1994 (130.3) result in a reduction in the negotiated wage scales. Furthermore, no change, retroactive or otherwise, will be made due to any revision in any published Statistics Canada Consumer Price Index figures. 33.03 The cost of living allowance payable under the prior agreement has been folded into all wage schedules as follows: a) Effective date of ratification, $0.20 of the $0.39 (May 1996) has been folded into all schedule rates and the remaining $0.19 per hour shall continue to be paid in addition to wage rates. b) Effective June 9, 1997, an additional $0.19 of the $0.39 has been folded into all schedule rates. 33.04 Continuation of the allowance is dependent upon the availability of the official monthly Statistics Canada Consumer Price Index (1986 base) calculated on the same basis and in the same form as that published in March 1994. 33.05 Employees shall receive Cost of Living Allowance for all hours worked. The following are considered as worked hours: - Straight time hours worked - Overtime hours actually worked (excluding overtime allowance hours) - Plant Holidays - Vacation Hours paid for - Bereavement time paid for - Jury Duty or Court Attendance time paid for. 33.06 a) The "average weekly earnings" referred to in Article 30 "Vacations", clause 30.08 of the Collective Agreement will not include cost of living allowance. b) Employees will receive vacation pay based on their "average weekly earnings" as defined in clauses 30.08.01 and 30.08.02 plus, for each week of vacation, forty (40) hours times the cost of living allowance in effect at the time they take their vacation. * See also article 30. ARTICLE 34 - WAGE ADMINISTRATION PLAN LEVELS 2-4 INCLUSIVELY MONTREAL AREA 34.01 HIRING RATE 34.01.01 A newly hired employee will be started at the minimum rate for the assigned level and will follow the progression schedule of the level as per Article 41. 34.02 RERATING AFTER UPGRADING 34.02.01 An employee who is upgraded will be placed on the level or grade rate of the new job effective at the beginning of the payroll period immediately subsequent to the date of the upgrade. 34.02.02 An employee upgraded to fill a temporary vacancy, caused through vacation, emergency requirements, or temporary fluctuations in workload, will be rerated to the level or grade rate of the new job effective at the beginning of the payroll period immediately subsequent to the date of such temporary assignment to the higher level or grade. (When the temporary assignment is completed, the employee will be downgraded and derated in accordance with paragraph 34.03.02). 34.02.03 An employee reinstated or upgraded to a former level or grade will be rerated to the level or grade rate, effective at the beginning of the payroll period immediately subsequent to the date of reinstatement. 34.03 RERATING AFTER DOWNGRADING 34.03.01 When an employee is downgraded, he will be derated to the level or grade rate of the lower level or grade at the beginning of the payroll period one month after the date of downgrading. 34.03.02 An employee downgraded following a temporary assignment will be derated to the level or grade rate of his former level or grade at the beginning of the payroll period immediately subsequent to the date of downgrading. ARTICLE 35 - PRODUCTION TECHNICIANS If during the life of the collective labour agreement the Company hires production technicians, the Company and the Union shall negotiate the working conditions and salaries for this group of employees. ARTICLE 36 - WAGE ADMINISTRATION PLAN APPRENTICES A1 AND A2 - MONTREAL AREA 36.01 Apprentices A1 and A2 will commence at the rate to be determined by means of entrance qualifying exams administered by an independent source and will advance on a progression schedule, (defined in article 40). Progression through the grades will take place by means of qualifying exams (practical and theoretical). 36.02 A new employee who passes the qualifying exams for a grade A3 level job for which he applies, will start at grade A1. After 2,000 hours, he will be reclassified at A2 and after 4000 hours, he will be reclassified at grade A3, if he possesses the licences, or when he possesses them. 36.03 Apprentices A1 and A2 who have reached a progression step shall remain at their current grade level until they have passed the qualifying exams for the next grade level as outlined in the job description for their trade. 36.04 Apprentices A1 and A2 who have passed their qualifying exams as in paragraph 36.03 above, will be rerated to the appropriate trades classification retroactively to the date of their reaching the progression step providing such qualifying exams are passed under normal circumstances within three (3) months of said date. 36.05 Apprentices A1 and A2 who have been at a progression step rate for three (3) months and have failed the qualifying exams, as outlined in paragraph 36.03 above, shall be granted a three (3) month extension in order to pass the qualifying exams. An extension could be given to an employee who, for reasons out of his control, cannot meet the delays prescribed. Apprentices A1 and A2 who pass the qualifying exams during the extension period shall be rerated to the appropriate trades classification retroactive to the start of their extension period. Failure to pass the qualifying exams during the extension period_could result in removal of these employees from the apprentice A1 or A2 category and these employees could either be relieved or transferred to a_non-trade assignment if vacancies are available. The Company will arrange a meeting with the Union representative to discuss the pertinent data related to the problem before any action is taken by the Company. ARTICLE 37 - RATE PROTECTION 37.01 RATE PROTECTION DUE TO THE EFFECT OF LACK OF WORK OR JOB RE-EVALUATION Employees with five (5) years or more of continuous service downgraded through no fault of their own, from a level or grade to which they were assigned, will maintain the rate of pay in effect at time of downgrade during the life of this agreement. During the protection period, employees will be granted rate adjustments resulting from contract negotiations based on the level or grade held prior to the downgrade. 37.02 RATE PROTECTION WILL ONLY CEASE UNDER THE FOLLOWING CONDITIONS: a) Downgrade to any level or grade level at employee's own request. b) Refusal to take a higher graded similar job up to the protected level or grade where the incumbent possesses the qualifications for that job. c) Failure to meet job requirements, if assigned to a similar job and given a period of orientation. d) Refusal to accept his former job(s) or failure to meet the job requirements of his former job(s) up to the protected grade level. 37.03 Prior to the removal of rate protection from an employee under sub- sections (b), (c) or (d), the Company will arrange a meeting with the Union Representative to discuss the pertinent data related to the problem before any further action is taken by the Company. 37.04 RATE PROTECTION - RECALL Employees with ten (10) years or less of continuous service who return from a lay-off in excess of one (1) year shall return to the rate of pay for the assigned level or grade. Employees with more than ten (10) years of continuous service who return from a lay-off in excess of two (2) years shall return to the rate of pay for the assigned level or grade. Employees returning from elected lay-off shall return to the rate of pay for the assigned level or grade. * ARTICLE 38 - SKILLED TRADES 38.00 This article is aimed to complete and clarify the work conditions related to skilled trades group but not to restrict or reduce the impact of the rest of the collective agreement for this group. 38.01 When found necessary, the Company will establish in consultation with the Union an evaluation and training program, in any of the following skilled trade competency fields: Toolmaking-Machining Electro-Electrical Mechanical Plumbing, HVAC 38.02 For purposes of filling a skilled trades vacancy, a trades employee who transfers back to the bargaining unit, after an absence of less than three (3) years, shall have his service with the Company credited as Union service immediately. If the trades employee returns to the bargaining unit, after an absence of more than three (3) years, he will be credited immediately with prior Union service in the bargaining unit. After one (1) year in the bargaining unit, the Union service of the trades employee affected will be adjusted on the basis of full Company continuous service. 38.03 When lack of work necessitates decreasing the skilled trades work force, A3 trades employees will be retained first in preference to apprentices, A1 and A2 employees in that sequence. 38.04 The Company will provide opportunities, when the need arises, to all available trades employees to keep abreast of technological advances in their trades. The opportunity for such training will be given to those employees provided they are willing and have the prerequisite academic qualifications or the relevant experience to be so trained. Trades employees who require specialized training will be chosen at the Company's discretion. Other employees of the same trade group will receive the same training within a reasonable amount of time not exceeding six (6) months. If necessary, a six (6) month extension period will be granted to complete such training following prior discussion between the Company and the Union. A letter will be sent to the Union listing the names of the candidates selected prior to them proceeding on course; such a list will also include the names of those employees who refused offered training. 38.05 The Company shall limit the use of outside contractors and will advise weekly (on Thursday) for the next week, in writing, the district representative. Such notice will describe the nature of work and the number of outside contractors by trade. Outside contractors will not perform work normally performed by trades employees while any such trades employees immediately available to do the work are surplus, about to be laid off or are on layoff. This restriction will not apply to work assignments of limited duration (5 days). No contractor (journeyman) will get a job in the bargaining unit before it is offered to employees laid off or about to be laid off. * See also article 24 re: overtime. 38.05.01 Whenever possible, the Company will endeavour to have skilled trades work performed by Company skilled tradesmen. Consequently, work requests initiated by technology or engineering of manufacturing groups will be channeled through a designated trades department manager, prior to such work being contracted to outside suppliers. The Union must be advised prior to such work being sent outside. 38.06 EMERGENCY "CALL-IN" In reference to articles 28.02 and 28.03: i) When a trades employee reports to work on a "called-in" emergency, he shall receive overtime for any time worked, or a minimum of four (4) hours pay at the employee's base rate whichever is greater. ii) A trades employee who is called in, due to emergency, to work outside his regular shift and continues to work into his regular shift shall continue to be paid at his overtime rate until the completion of the work on the emergency assignment and will then revert back to his standard hourly rate for the balance of his regular shift. 38.07 The Company will repair or replace tools which the trades employee can show were broken, damaged or worn during the proper use of such tools in the performance of Company duties. In addition, the Company will replace stolen tools provided that the tradesman has taken reasonable precautions to prevent such losses. 38.07.01 The Company will continue to provide annually appropriate wearing apparel to tradesmen. Damaged wearing apparel will be repaired or replaced by the Company provided that trades employees can show that it was damaged during proper use in the performance of their duties. 38.08 a) Company employees, other than skilled trades personnel, shall not perform work normally assigned to trades employees. b) The Company agrees to consult with the Union, wherever any changes to skilled trades work is contemplated. 38.09 An apprentice A1, A2 or A3 who is obligated to pass an examination to qualify as a trades employee or a trades employee who is obligated by law to renew his licence or applies for an additional specialization may do so, on Company time, without loss of pay. Payment shall be made after submission of proof by the employee indicating that he has passed the examination. 38.10 When an employee returns to a production grade from a trades classification as a result of lack of work, his salary rate will be adjusted according to the provisions of article 34.03.01 or 37. 38.11 EFFECT OF LACK OF WORK 38.11.01 - SELECTION OF SURPLUS When lack of work necessitates decreasing the work force, the employee with the least acquired service in his actual trade group shall be selected from the declared surplus job; ability also being considered and provided that the Company shall have the right to maintain an efficient work force. It is understood that the term acquired service in this article is defined as the number of years worked in a specific trade within the skilled trades group. It is also understood that an employee who changes trade will see the acquired service in his former trade added for bumping purposes. 38.11.02 - BUMPING/LAYOFF PROCEDURE a) A surplus employee shall bump in the same trade the employee with the less acquired service. b) If the surplus employee is about to be laid off and was originally transferred to the trades classification from production grades, he shall have the right to fill any production vacancy subject to the provisions of article 12. c) If unable to fill a vacancy under (b) above, and if such surplus employee was transferred from production, he shall have the right to displace the employee having the less seniority within production, as per the provisions of article 12. d) The employee placed under (b) and (c) above will be paid according to the provisions of article 34.03.01 or 37. e) If the surplus employee about to be laid off has had no prior production experience in the Company, but has the qualifications to fill a production vacancy, he shall have the right to fill such a vacancy subject to the provisions of article 12 and shall be paid as in (d) above. 38.11.03 In the event that an employee of the trades group faces a layoff, after having exercised all bumping rights according to the collective labour agreement, the latter will be able to bump within the trades group by Union service in a trade he has already occupied. 38.12 WAGE ADMINISTRATION TRADES EMPLOYEES, APPRENTICES A1, A2 AND A3 38.12.01 The Wage Administration Plan covering Levels 1, 2, 3, 4 and grades 23-30 also applies to trades employees, apprentices A1, A2 and A3. 38.12.02 The Company will post notices of job vacancies for trades employees (A3 Grade), apprentices A1 and A2. The Company agrees that written applications outlining their qualifications for the job received from employees within three (3) working days will be considered before any hirings are made. 38.12.03 a) A vacant position that is filled by the reinstatement of an employee in the prior position he had been demoted from, because of a lack of work, will not be posted. b) An employee who takes a vacant position posted for a trade for which he does not have the appropriate analysis number will be considered as a new employee, as defined in article_36. In the event that there are surplus employees in the trades group, the selection of the employee will be at first within the skilled trades group. Failure to qualify in the new trade, the employee shall exercise his bumping rights in accordance with article 38.11 for the trades job in which the employee is qualified. c) The selection of an employee to fill a vacant position for which he possesses the analysis number will be done by acquired service. 38.13 The Company agrees to post an overtime list of all trades employees. This list will be updated weekly and will include refusals. Such list shall also be forwarded weekly to the Union head office. * See also letter of intent # 14 . * ARTICLE 39 - RATES OF PAY GRADES 23-30 INCLUSIVELY - MONTREAL AREA - -------------------------------------------------------------------------------- EFFECTIVE EFFECTIVE EFFECTIVE EFFECTIVE EFFECTIVE GRADE RATIFICATION JUNE 9 JUNE 8 JUNE 7 JUNE 5 DATE 1997 1998 1999 2000 - -------------------------------------------------------------------------------- 01W23 19.88 20.07 20.47 20.78 21.09 01W24 20.33 20.52 20.93 21.24 21.56 01W25 20.53 20.72 21.13 21.45 21.77 01W26 20.96 21.15 21.57 21.89 22.22 01W27 21.55 21.74 22.17 22.50 22.84 01W28 21.91 22.10 22.54 22.88 23.22 01W29 22.13 22.32 22.77 23.11 23.46 01W30 22.36 22.55 23.00 23.35 23.70 - -------------------------------------------------------------------------------- * See also letter of intent # 13. ARTICLE 40 - RATES OF PAY TRADES CLASSIFICATION - MONTREAL AREA - ----------------------------------------------------------------- PROGRESSION SCHEDULE IN HOURS WORKED GRADE 2000 4000 6000 8000 - ----------------------------------------------------------------- EFFECTIVE DATE OF RATIFICATION Apprentice 18.94 A1 20.21 A2 24.56 A3 25.78 EFFECTIVE JUNE 9, 1997 Apprentice 19.13 A1 20.40 A2 24.75 A3 25.97 EFFECTIVE JUNE 8, 1998 Apprentice 19.51 A1 20.81 A2 25.25 A3 26.49 EFFECTIVE JUNE 7, 1999 Apprentice 19.80 A1 21.12 A2 25.63 A3 26.89 EFFECTIVE JUNE 5, 2000 Apprentice 20.10 A1 21.43 A2 26.01 A3 27.29 ARTICLE 41 - RATES OF PAY ------------------------- LEVEL 1 MONTREAL AREA - -------------------------------------------------------------------------------- EFFECTIVE EFFECTIVE EFFECTIVE EFFECTIVE EFFECTIVE RATIFICATION JUNE 9 JUNE 8 JUNE 7 JUNE 5 DATE 1997 1998 1999 2000 - -------------------------------------------------------------------------------- LEVEL 1 15.20 15.39 15.70 15.94 16.18 - -------------------------------------------------------------------------------- ARTICLE 42 - RATES OF PAY LEVELS 2-4 MONTREAL AREA EFFECTIVE EFFECTIVE EFFECTIVE EFFECTIVE EFFECTIVE RATIFICATION JUNE 9 JUNE 8 JUNE 7 JUNE 5 DATE 1997 1998 1999 2000 - ----------------------------------------------------------------------- LEVEL 2 16.20 19.08 21.57 21.89 22.22 LEVEL 3 17.20 19.68 22.17 22.50 22.84 LEVEL 4 18.20 20.48 22.54 22.88 23.22 - ----------------------------------------------------------------------- ARTICLE 43 - PROTECTION FOR EMPLOYEES ON WORKFORCE RESTRUCTURING 43.01 In the event the Company decides to: a) fully close its plant facility or, b) do any or all of the following: i) transfer work out of the bargaining unit to another Company location, ii) transfer work out of the bargaining unit iii) purchase components or parts, currently being produced by employees in the bargaining unit, from sources outside NORDX/CDT, iv) permanently eliminate jobs for reasons other than market fluctuations, and as a direct result either: . 10% or more of employees in the bargaining unit (including those on S&A benefits and Workers Compensation but excluding employees laid off and on L.T.D. benefits), or . 10% or more of all bargaining unit employees within an individual skill group, as set out in the "NOTE" below. are given, during any period of ninety (90) days, Workforce Restructuring notices, the provisions set out below will apply, as specified. c) do what is set out in Article 15.1 of the COEU salaried agreement and, as a direct result, employees in the hourly bargaining unit at the same facility or business are to be given layoff notices within the same ninety (90) day period. For the purposes of determining whether the percentages in paragraph 43.01_b) have been reached, all notices, as described, which have not been cancelled during the operative ninety (90) day period will be counted. Notices which have been counted in the determination that the percentages in paragraph 43.01_b) have been reached cannot be counted again. 43.02 The Company will meet with the Union thirty-five (35) weeks in advance of the date of the plant facility closure, or eighteen (18) weeks in advance of layoff occuring as a result of business closure or circumstances set out in paragraph 43.01_b) above. Following this meeting, the parties will meet again to discuss opportunities to retain or replace work with the aim of minimizing the reduction of employees, including using attrition to manage the extent of such reductions. It is understood that such discussions are to be conducted on a confidential basis and the Union undertakes to guard the confidentiality of them. 43.03 The Company will advise the Union and the employees at least sixteen (16) weeks in advance of layoffs or as legislation dictates whichever is greater. This obligation will not apply retroactively to the layoffs which did not, at the time notices were given, meet the percentages set out in paragraph 43.01_b) but together with subsequent layoffs, resulted in these percentages being met within the ninety (90) day period. This obligation will not apply to employees given notice of layoff due to the circumstances set out in paragraph 43.01_b) which occur in another skill group within the same ninety (90) day period but do not meet the percentage set out in paragraph 43.01_b). 43.04 In the circumstances set out in paragraph 43.01b) above and during the first thirty (30) days of the notice period under paragraph 43.03 above, employees within each affected skill group will be offered the opportunity to retire early with a lump sum calculated in accordance with the VOLUNTARY RETIREMENT OPTION set out in paragraph 43.08 below and in accordance with the following: a) Employees who are eligible for an early retirement with a Class A or B pension will be offered, in descending order of Union service, the first opportunity and, if the number set out in 43.04_b) below has not been exceeded, employees eligible for an early retirement with a Class C pension will be offered in the same way the remaining opportunity, if any. After this, employees who qualify for bridging, in accordance with Company practice (for a maximum of 104 weeks) to any of the above Classes, will be offered in the same order of Class and in the same way any opportunity which was not taken. b) The total number of those retiring under 43.04_a) shall not exceed 100% of the number of employees within each affected skill group: i) who have been given notice(s), pursuant to paragraph 43.03, ii) who have contributed to the percentages in paragraph 43.01b) being reached, iii) who have received notices of Restructuring in the circumstances set out in paragraph 43.01_b) within the prior portion of the particular ninety (90) day period and are within the same business or skill group. c) Pension dates shall be no later than the end of the notice period, except in the circumstances set out in paragraph 43.01_a) when unused vacation credits may be used to reach a pension date. d) The affected skill groups will be those included for the purposes of paragraph 43.01_b). 43.05 In the circumstances described in paragraph 43.01, the affected employees who have received notice pursuant to paragraph 43.03 may request a transfer to a job vacancy within the bargaining unit and selection shall be made as per Article 12. The Company shall provide the appropriate training where required for the employee to perform the job in a satisfactory manner. 43.06 In the event that the Company moves an operation pursuant to 43.01 or a job to another Company location outside of the bargaining unit, the following procedure will apply: a) An employee on an affected job will exercise his bumping rights in accordance with the Collective Agreement. b) If the employee is unable to maintain his grade under (a) above, he may request to be transferred at the same or another Company location, if a vacancy is available and local collective agreements permit. The Company will provide job training where required for the transferred employee to perform the job in a satisfactory manner. c) In the event the Company moves a plant facility to any other location in Quebec during the life of this Agreement, the Company agrees that employees will have a preferred right to be transferred with their job to the new location. d) If, as a result of such a move of operation or job, the employee is required to move to a location greater than eighty (80) kilometers from his present location, the Company will pay reasonable moving costs. e) The Company will give sixty (60) days notice, whenever possible, to employees who are to be transferred to a new location. 43.07 All employees, laid off pursuant to notices given under paragraph 43.03 or pursuant to notices within the same skill group(s) as a result of the circumstances set out in paragraph 43.01_b) within the particular ninety (90) day notice period, will be entitled to choose to take the Supplementary Unemployment Benefits (SUB) to which they are entitled under Article 13 or to elect to be terminated and forfeit their recall rights by receiving severance pay allowance in accordance with the following table: CONTINUOUS SERVICE SEVERANCE PAY ------------------ ------------- - ----------------------------------------------------------------- 1 year but less than 2 years 1 week 2 years but less than 3 years 2 weeks 3 years but less than 4 years 3 weeks 4 years but less than 5 years 4 weeks 5 years but less than 6 years 7 weeks 6 years but less than 7 years 8 weeks 7 years but less than 8 years 9 weeks 8 years but less than 9 years 10 weeks 9 years but less than 10 years 11 weeks 10 years but less than 11 years 14 weeks 11 years but less than 12 years 17 weeks Three weeks additional pay for each full year of continuous service thereafter. In the event the Company decides to fully close the plant facility, the above Severance table will be modified to reflect the entitlements contained in the Layoff Allowance table in Article 13.02. An employee who elects to be terminated and forfeit recall rights after the end of the notice period and who is in receipt of the Supplementary Unemployment Benefits (SUB) will be subject to the following penalty: PENALTY TABLE WEEK AFTER EXPIRATION BENEFIT GROUPS OF NOTICE PERIOD COMPLETED 1 2 3 1 0 0 0 2 0 0 0 3 270 310 390 4 540 620 780 5 810 930 1170 Thereafter, each subsequent week's penalty will increase by: 270 310 390 --- --- ---- until 52 weeks 470 490 540 NOTE_: The above listed table will be adjusted by the Company each quarter to reflect changes in COLA and base rates. In the circumstances described in paragraph 43.01_a), employees may, if eligible and upon Company approval, proceed on pension prior to the commencement of layoff. They will be entitled to receive a lump sum payment in accordance with the formula set out in paragraph 43.08. 43.08 VOLUNTARY RETIREMENT OPTION The lump sum paid in connection with the exercise of the Voluntary Retirement Option will be as follows: a) Employees eligible for an early retirement with a Class A, B or C pension will be paid twenty-six (26) weeks of regular weekly wages, except those employees having thirty (30) years of pensionable service prior to the end of the notice period who shall be paid $27,000 or twenty-six (26) weeks of regular wages, whichever is greater. b) Employees who qualify for bridging to the above Classes will be entitled to sixteen (16) weeks of regular weekly salary. NOTE: Skill groups shall be defined as follows: - Production - Skilled trades ARTICLE 44 - MODIFICATION, RENEWAL AND TERMINATION 44.01 This Agreement shall become effective on June 10, 1996 and shall remain in full force and effect up to and inclusive of June 9, 2001. The terms of this agreement, may be changed or amended by mutual consent of the parties hereto, such changes or amendments shall take the form of Appendices to the original agreement. 44.02 Either party may give to the other party a written notice of its desire to amend, modify or terminate the Agreement, said notice to be sent not more than ninety (90) days prior to the date of termination. Within ten (10) days after such notice is given, a conference shall be held for negotiations. 44.03 After written notice of modification or termination has been given by either party within ninety (90) days preceding the date of termination indicating the parties' desire to negotiate for a new agreement or for the revision of the present agreement, all the conditions contained in the present agreement shall be considered as remaining in force during such time as may elapse before it is found that the parties are unable to reach agreement and the right to strike or lock-out has been acquired or until a new or modified agreement is completed. 44.04 Collective bargaining concerning the modification and/or renewal of this Agreement shall be conducted by the duly authorized bargaining representatives of the Company and the duly authorized bargaining representatives of the Union. The parties to such bargaining shall notify each other of the names of such representatives and of any subsequent changes which may occur. IN WITNESS thereof the parties thereto have executed this Agreement on June 21, 1996 in the City of Montreal, County of Hochelaga. FOR THE COMPANY FOR THE UNION ------------------------ -------------------------- Normand Durocher Giuseppe Giarrusso ------------------------ -------------------------- Denis Lecompte George Pilafidis ------------------------ -------------------------- Sylvie Destroismaisons Gary Carter -------------------------- Daniel Berardelli -------------------------- Jean-Pierre Bombardier # 1 - LETTER OF INTENT DEFINITION OF "LEVEL" For the purpose of the application of the Collective Labour Agreement, the "Level" applies for all employees hired after February 2, 1996. The level structure will never apply for the employees who were part of the transaction between Nortel and NORDEX. Also, for those employees, the old grade structure including the working conditions and salary scale of the grades will apply. For clarification of this letter, the following will reflect the equivalence between levels and grades: JOB DESCRIPTION ANALYSIS # GRADE LEVEL Assembly Operator 26149 23 1 Jacketing Line Helper 03852 24 1 Utility forklift truck 10380 24 1 Twister-Rewinder 29935 24 1 Trucker 29937 24 1 Strander-Operator 03801 25 1 Lead hands/Twister 10561 25 1 PVC Blending Helper 11966 25 1 No.1 Locate 11968 25 1 Reel Repair Operator 12311 25 1 Twister-Rewinder Insulating & Jacketing lines floor man 29923 25 1 Coiler/Spooler Reelex & Steel server Oper. 29936 25 1 Braider Operator 29953 25 1 Wire/Drawing Bekaert 10005 26 2 Wire/Drawing Heavies 10045 26 2 No.6 Tinning & Bekaert 10042 26 2 Insulating Line Operator 10378 26 2 No.26 Strander Operator 12456 26 2 Team Leader 26013 26 2 Bix DVO Machine Setter Operator 26124 26 2 Selector - Shipping/Receiving 26159 26 2 Fiber Optic Connectors Assy. Operator 26165 26 2 Shipping/Receiving 29159 26 2 Bruderer/Stamping Setter 29667 26 2 Dry Test 12034 27 2 Jacketing line Operator 10457 26 3 Shipping Coordinator 11576 27 3 PVC Blending Operator 11967 27 3 Auditing 12038 27 3 Quality Assurance Auditor 12725 27 3 Setter & Operator Teladapt line 26131 27 3 Plastic Molding Operator 29533 27 3 Jacketing line Operator 29917 27 3 Skunk R&D 29927 27 3 Tool Gauge Inspector New 27 3 Jacketing & Tandem Packaging Operator New 27 3 Blue Room 29885 28 3 Leadhand Jacketing & Insulation New 28 3 Oiler and toll cleaning New # 2 - LETTER OF INTENT REPRESENTATION The Company agrees that any elected District Representative shall be assigned to no less than grade 27 (maximum rate) provided however, should he cease to be a District Representative, he shall revert to the job and grade (or its equivalent) which he held prior to his election. Reference: article 5. # 3 - LETTER OF AGREEMENT FUNDS ONE CENT PER HOUR PAID The Company and the Union will meet to discuss and mutually agree on the use of the one cent ($0.01) per hour, per employee, for all hours paid from February_2, 1996 onward. CHARITABLE FUND Effective on the date of ratification, the Company shall make quarterly contributions to the Charitable Fund equal to $0.02/hour for each straight time hour worked. All contributions shall be forwarded to registered Canadian charitable organizations, such as St. Justine Hospital and Montreal Children's Hospital. # 4 - LETTER OF INTENT RETIREMENT TERMS For purposes of the application of Article 43 and Letter # 7, the Company agrees to interpret the following retirement terms as follows: MALE FEMALE Class A Age 60 + Service 20 Age 60 + Service 20 Age 55 + Service 20 if employed by Nortel in May 1973 Class B Age 55 + Service 30 Age 55 + Service 25 Class C Service 30 Service 30 # 5 - LETTER OF INTENT GAINSHARING 1996 06 10 Mr. G. Giarrusso President Canadian Union of Communication Workers 502 - 90e avenue LaSalle (Quebec) H8R 2Z7 Dear Mr. Giarrusso, In order to improve the performance of the plant, both the Company and the Union agree to introduce a Gainsharing Incentive Program based on factors which impact the profitability and/or proper functioning of the plant. The elements and payout schedules will be determined by the Company on an annual basis. The Company agrees to communicate the cumulative results of the program on a periodic basis. Information required for the proper understanding of the program will be shared with the Union and a joint committee will be formed to monitor and communicate the results of the program. The Company will annually revise the contents of the program and will communicate it to the Union by August 15 of the current year. Yours truly, Normand Durocher Director, Human Resources # 6 - LETTER OF INTENT STUDENTS Summer students' hiring will be allowed between May 15 and August 15 of each year. Those students will not accumulate continuous service nor Union service. No students' hiring will be allowed when there are employees of any level on layoff. The summer students' salary will be $10.00 per hour for the duration of the Collective Labour Agreement. # 7 - LETTER OF INTENT PRE-RETIREMENT PROGRAM 1. DEFINITION An employee who is eligible for pension (class A or B) or will be eligible within the next twelve (12) months may request to participate on a voluntary basis in the pre-retirement program. After a period of twelve (12) months maximum, he shall proceed on pension. The Company will not refuse such requests without valid reason and will inform the Union when employees proceed on this program. 2. CONDITIONS a) The employee will be requested to work three (3) or more regular work days per week and will have such work days scheduled two (2) weeks in advance. b) For the duration of the program, continuous service will be accumulated as if the employee was working regular hours. c) For the duration of the program, the employee will be requested to work on a job at the same grade level, or lower to that which he held prior to his participation in the program and for which he is qualified or possesses the qualifications. The employee will maintain the rate of pay in effect at the time of his participation. d) An employee who participates in the pre-retirement program will be entitled to all Company benefits including sickness and accident. For the purpose of calculating sickness and accident benefits, the first day of absence will be the employee's first scheduled work day. e) Vacation pay will be calculated as if the employee was normally at work. f) An employee who is selected for a job vacancy must terminate his participation in the pre-retirement program. g) If mutually agreed to, this program may be extended only once for an additional twelve (12) months. 3. RE-INSTATEMENT a) The employee must notify his immediate manager if he wishes to terminate his participation in the pre-retirement program. He will be reinstated within three (3) weeks of such request to his former job or exercise his bumping rights in accordance with article 12. b) An employee who terminates his participation in the pre-retirement program may not re-apply. # 8 - LETTER OF INTENT MOVEMENT IN AND OUT OF VARIOUS SHIFT PATTERNS 1996 06 10 Mr. G. Giarrusso President Canadian Union of Communication Workers 502 - 90e avenue LaSalle (Quebec) H8R 2Z7 Dear Sir, The following describes the understanding between the Company and the Union with reference to shift pattern changes. The Company may implement a five (5), six (6) or seven (7) day shift pattern whenever it effectively addresses the Company's business/customers' needs. Should business needs require more than a 15 shift operation, the Company will normally first move to a 6-day pattern prior to a 7-day pattern. Should production schedules warrant a 7-day pattern immediately, the Company will meet with the Union to verify if the demands of the operation are being met. The expected duration of shift pattern changes will be for a minimum of three (3) calendar months. The Company will give thirty (30) days advance notice to the Union before implementing such changes. The Union will be given the opportunity for full discussions and will have the opportunity to suggest alternatives. The Company will consider these alternatives prior to making the changes. Yours truly, Normand Durocher Director, Human Resources # 9 - LETTER OF INTENT SURPLUS MACHINE OPERATOR As a clarification of the application of clauses 12.05.02 and 12.05.03, in the case of a surplus machine operator level 2 and above, before filling a vacancy: a) The most junior machine operator on the job analysis in the department affected will displace a shorter Union service employee, on a job for which he is qualified, down to level 2. b) When the operator is unable to displace at level 2, he will be allowed to displace a shorter Union service helper at level 1 within his department before displacing a shorter Union service helper at level 1 in the business unit. Reference: article 12B. # 10 - LETTER OF INTENT INVESTMENT GUARANTEE PREAMBLE -------- Following an agreement between the Company and the Union (CUCW Unit # 4) on a new labor contract and the decision to build a new facility in the Montreal area, both parties agree to the following: 1) Should the Company thereafter decide not to purchase or lease the land upon which to build the new facility by June 30 1997, the Company agrees to revert to all the terms and conditions of the current collective labour agreement expiring February 28, 1997; however, if the said agreement expires, these terms and conditions will remain in force until such time as the subsequent negotiated collective labour agreement comes into force. As a result, the Company is prepared to repay the members of CUCW Unit #4 for the economic benefit it enjoyed under the new collective labour agreement. 2) An amount will be reimbursed to the members of CUCW Unit #4; these payments will be made based on the amounts that were paid under the new contract versus what would have been paid under the current CLA agreement expiring February 28, 1997. The following items are impacted: a) Savings of the new wage and benefits scale of Levels 1-4 b) New six (6) day premium/seven (7) day premium c) Salary freeze. 3) The Company and Union (members of CUCW Unit #4) agree to review together the manner in which the monies owing to each employee will be calculated. The Company will not be responsible for any disputes arising out of the method of payout so determined. 4) This letter of agreement will become null and void in the event the new collective agreement would be denounced and rejected by the Union. # 11 - LETTER OF INTENT NEW FACILITY As a result of the recent contract between the Company and the Union CUCW Unit #4 and its members, in the event of a complete plant closure, the Company agrees to the following: 1) Should, after June 30th, 1997, and after the Company has moved into its new facility in the Montreal area, the Company subsequently closes its Montreal operations to move into another facility outside of the province of Quebec: a) The Company agrees to offer re-employment to certain employees, to the extent permitted by law, at its new facility outside of the Province of Quebec, based on their job qualifications and seniority. If, as a result of such a move of operations, the employee is required to move to a location outside the Province of Quebec, the Company will pay reasonable moving costs. b) In addition to the Severance Pay Allowance, as defined in Article 43.07, the Company agrees to the following: CONTINUOUS SERVICE ADDITIONAL AMOUNT ------------------ ----------------- 0 - 5 years $ 1,000 6 - 10 years $ 5,000 11 years and above $12,000 The amounts may, if an employee so desires, be used by the Company to provide for new job training. 2) The Company and the Union agree to establish a "reclassification committee" as per Article 45 of "La loi de la formation professionnelle". This agreement becomes null and void no later than December 31st, 2000. # 12 - LETTER OF UNDERSTANDING LEVEL 1 EMPLOYEES The total number of Level 1 employees shall not exceed 35% of the total employees. # 13 - LETTER OF INTENT - RATE ADJUSTMENT FOR EMPLOYEES ON DISABILITY Rate adjustments resulting from contract negotiations will also be applied to employees who are receiving disability benefits in accordance with the Company's Plan, at the time these rate adjustments become effective. Reference: article 39. # 14 - LETTER OF INTENT DEFINITION OF TERMS In order to ensure the correct understanding of this Collective Agreement, the following definitions shall prevail: a) SIMILAR A similar job means a job in which 50% or more of the content corresponds to the content of a job for which the incumbent is qualified. b) ORIENTATION Orientation refers to training of the type given on a promotion in order to complete the qualifications required for a job similar to the one previously held. c) POSSESSES THE QUALIFICATIONS Possesses the qualifications refers to an employee having the skills, ability and experience to do a job. d) QUALIFIED Qualified refers to an employee having satisfactorily performed the job previously, excluding temporary assignments. e) CONSULT It is understood that in application of this Collective Agreement the wording "Agreed to consult with the Union" is defined as: "Agreement to inform, discuss with and consider the opinion of the Union and/or the District Representative". f) FAMILIARIZATION The following clarification applies to all references to familiarization periods contained in this collective agreement: It is understood that by the end of the familiarization period, the employee should have achieved, or through continuous and progressive improvement must have demonstrated the potential to achieve, the rates as defined in the production standards. g) TEMPORARY ASSIGNMENTS A "temporary assignment" means an assignment due to a workload increase for a period of less than a month or an assignment to replace an employee on a leave of absence. Reference: articles 12B and 38. # 15 - LETTER OF UNDERSTANDING VACATION CALCULATIONS It is understood that, in the application of article 30.06, employees who are laid off and recalled during the period of July lst to June 30th of the following year shall have their vacation entitlement calculated as follows. The actual number of days on layoff will be calculated and sixty (60) days will be subtracted from this total. The difference will be divided by thirty (30) and each such complete thirty (30) day period will reduce the employees' vacation entitlement by the appropriate amount, as outlined in the article 30.05 vacation reduction table. Examples of the above application are as follows: EXAMPLE A LAYOFF DATE RECALL DATE DAYS ABSENT Jan. 15 Feb.27 Jan. = 16 Feb. = 26 -- Total = 42 April 26 May 16 April = 04 May = 15 -- Total = 19 Total days absent = 61 Subtract 60 days = - 60 -- Difference = 1 day Thirty (30) day periods = 0, therefore, no reduction in vacation entitlement. EXAMPLE B Employee with eleven (11) years of continuous service. LAYOFF DATE RECALL DATE DAYS ABSENT Jan. 14 Mar. 28 Jan. = 17 Feb. = 28 March = 27 -- Total = 72 April 22 June 20 April = 08 May = 31 June = 19 -- Total = 58 Total days absent = 130 Subtract 60 days = -60 ------- Difference = 70 days Thirty (30) day periods = 2, therefore, vacation entitlement reduction would be: Two 30-day periods x 2 days each = 4 days reduction. Therefore, in this example, the employee would have a potential vacation of 20 days Vacation paid on layoff (July 1-Jan.14) would have been -12 ------- Difference 8 Reduction as per above - 4 ------- Remaining paid vacation entitlement 4 days Reference: article 30. APPENDIX "A" - PENSION BENEFITS FOR EMPLOYEES LEVELS 1, 2, 3, 4, GRADES 23-30 AND TRADES 1. PREAMBLE 1.1 This appendix, which shall form part of the Collective Labour Agreement (hereinafter called the "Agreement"), describes amendments to those plans which shall be in effect for active employees during the term of the Agreement, information relating to cost sharing, and reference to preservation of those Company plans which are not contractually covered. 1.2 The effective dates of amendments of these plans, where applicable, are noted in the relevant paragraphs hereafter. 1.3 The term applicable shall be as defined for the Agreement, except with respect to the Pension Plan which shall be for the term from February 3, 1996 to the end of the collective agreement. 1.4 Agreements with respect to the plans described in this appendix may be changed or amended by mutual consent of the parties hereto, with such changes or amendments to be in the form of appendices to the Agreement. The benefits payable under these Company plans will remain unchanged in the event of changes in Government plans. If legislation is introduced to increase the level of coverage to be provided, benefit design may be changed to maintain the current cost sharing level. Any changes to these plans must be cost neutral to the employer. The duration of the Agreement cannot be affected by such changes or amendments. 1.5 The plans, hereinafter called the "Plan(s)" covered by this appendix shall be continued automatically at the expiry of the Agreement until a new agreement is ratified or until the Union is entitled by law to commence legal strike or the Company is permitted to lockout. 1.6 For the purposes of this appendix, the following definitions shall prevail: 1.6.1 Benefit Group shall mean the categories of job classifications or grades determined as follows: BENEFIT GROUP LEVEL GRADE 1 1 23 to 24 2 2,3 25 to 28 3 4 29, 30 & Trades 1.6.2 "Eligible dependents" shall mean, for purposes of paragraphs 2, 3, 4, 5, 9 and 10 of this appendix: (i) "Spouse" means the individual of the opposite sex or same sex who is legally married to the employee and not living separate and apart from the employee or, if the employee so elects, who is not living with the employee at the time of the employee's death; or if neither of these is applicable a person of opposite sex or same sex who is not married to the employee, but is an individual with whom the employee has been cohabiting for a period of one year immediately preceding the employee's death and who had been publicly represented as the domestic partner of the employee. (ii) Unmarried natural or legally adopted, dependent children of the employee or spouse who are: 1) living or deemed to be living with the employee including those where support for benefit coverage has been dictated by a court order; and 2) (a) under age 21, or (b) over age 21, but not over age 25, and are full-time students at an accredited college or university; and, 3) (a) Canadian citizens, or (b) landed immigrants; (iii) physically or mentally handicapped financially dependent children, regardless of age, provided: a) they were handicapped and dependent prior to age 21, or b) they were handicapped and dependent between age 21 and age 25 and were full-time students at an accredited college or university at the time they became handicapped and dependent. (c) (i) Canadian citizens, or (ii) landed immigrants; (iv) Dependent parents. The above eligible dependents shall be ranked in descending order of priority. 1.7 "Spouse" shall mean, for the purpose of paragraph 11 of this appendix: a) the person of the opposite sex who is legally married to the employee or, if the employee so elects, is not living with the employee at the time of the employee's death; or b) the individual of the opposite sex who is not married to the employee, but is an individual with whom the employee has been cohabiting for a period of one year immediately preceding the employee's death and who had been publicly represented as the domestic partner of the employee; or c) such other individual who is required to be recognized as the spouse of the employee pursuant to the Quebec Supplemental Pension Plans Act, for the application of particular provisions of the Plan. 1.8 All employees hired after February 2, 1996 shall become eligible for coverage under the Plans referred to in paragraphs 2, 3, 4, 5, 8 and 9 on the first day of the month following the month in which the employee completes 12 months' continuous service. 2. QUEBEC BLUE CROSS SUPPLEMENTARY HOSPITAL PLAN The Company will continue to provide the Quebec Blue Cross Supplementary Hospital Plan as in effect immediately prior to the term of the Agreement. The cost of this Plan will be paid by the employees, including any increases in premiums during the term of the Agreement. 3. QUEBEC BLUE CROSS EXTENDED HEALTH CARE PLAN The Company will continue to provide the Quebec Blue Cross Extended Health Care Plan as in effect immediately prior to the term of the Agreement. The cost of this Plan will be paid by the Company, including any increases during the term of the Agreement relating to the services covered by the Plan. 4. QUEBEC BLUE CROSS VISION CARE PLAN The Company will continue to provide the Quebec Blue Cross Vision Care Plan as in effect immediately prior to the term of the Agreement. The cost of this Plan will be paid by the Company. 5. QUEBEC BLUE CROSS DENTAL PLAN 5.1 The Company will continue to provide a Dental Plan as in effect immediately prior to the term of the Agreement, with coverage for expenses incurred up to December 31, 1996, on the basis of the 1995 Quebec Dental Association Schedule for General Practitioners for the services covered by such Plan. The cost of this Plan, including any increases during the term of the Agreement, will be paid by the Company. 5.2 Effective January 1, 1997, the 1996 Quebec Dental Association Schedule for General Practitioners will apply. 5.3 Effective January 1, 1998, the 1997 Quebec Dental Association Schedule for General Practitioners will apply. 5.4 Effective January 1, 1999, the 1998 Quebec Dental Association Schedule for General Practitioners will apply. 5.5 Effective January 1, 2000, the 1999 Quebec Dental Association Schedule for General Practitioners will apply. 5.6 Effective January 1, 2001, the 2000 Quebec Dental Association Schedule for General Practitioners will apply. 6. SICKNESS AND ACCIDENT PLAN 6.1 The Company will continue to provide a Sickness and Accident (S&A) Plan as in effect immediately prior to the term of the Agreement. 6.2 For the purpose of determining eligibility for payment under this Plan, hospitalization shall mean treatment as an in-patient or on admission to a Day Surgery Unit for procedures conducted under a general anesthetic or either under intravenous anesthetic or local anesthetic where such procedures had been formerly required to be done under general anesthetic. 7. LONG TERM DISABILITY PLAN 7.1 The Company will continue to provide the Long Term Disability (LTD) Plan as in effect immediately prior to the term of the Agreement. 7.2 Effective June 10, 1996, this Plan will provide monthly income benefits in accordance with the following schedule for those eligible employees whose S&A Plan benefits expire after May 31, 1996. BENEFIT GROUP MONTHLY INCOME 1 $1650 2 $1775 3 $2050 7.3 During the period for which an employee is eligible to receive LTD Plan benefits, participation will continue in the following Plans: . Supplementary Hospital . Health Care . Dependent Life . Retiring Allowance Plan . Pension . Group Life Insurance - Parts I and II . Survivor Transition Benefit Coverage for Group Life Insurance - Parts I & II and the Survivor Transition Benefit in effect at the date of disability will prevail during the period for which an employee is eligible to receive LTD Plan benefits. 7.4 For those eligible employees whose S&A Plan benefits expire after date of ratification, for the purposes of determining eligibility for the first twelve (12) month period under the LTD Plan, disability shall mean that an employee is unable to perform the duties of any job in the bargaining unit on a full-time basis. Following expiry of such period, disability shall mean that an employee is disabled to an extent preventing performance of any job for which the employee is reasonably suited by education, training and experience. Notwithstanding the above definition, if it is confirmed that an employee is eligible for primary disability benefits under the Canada/Quebec Pension Plan, this employee will then be also eligible for benefits under the LTD Plan. 7.5 LTD Plan benefits shall not be terminated without at least one (1) month's notice to the recipient unless the employee returns to work. 8. GROUP LIFE INSURANCE PLAN 8.1 The Company will continue to provide, on an optional basis to employees, life insurance through Group Life Insurance Plan - Part I, hereinafter called "Part I", as in effect immediately prior to the term of the Agreement except as indicated in 8.1.1 and 8.1.2 below. 8.1.1 The entire cost of the Plan will be paid by the Company. 8.1.2 The Plan will provide insurance coverage under Part I in accordance with the following schedule for those eligible employees whose insurance coverage is in effect on the date of ratification. BENEFIT GROUP INSURANCE COVERAGE 1 $29,500 2 $31,000 3 $33,500 8.1.3 Employees retiring with a pension date on or after the date of ratification, will continue to have insurance coverage under Part 1 in accordance with the following schedule: BENEFIT GROUP INSURANCE COVERAGE 1 $24,500 2 $26,000 3 $28,500 and will continue to have the reduction formula in effect as of the date of ratification. 8.2 The Company will continue to provide, on an optional basis to employees, life insurance through Group Life Insurance Plan - Part II, hereinafter called "Part II", as in effect immediately prior to the term of the Agreement, except as indicated herein below. The premium rates for Part II for each $1000 of coverage will be as follows: MONTHLY COST MALE FEMALE AGE SMOKER NON-SMOKER SMOKER NON-SMOKER to 35 $0.16 $0.08 $0.07 $0.04 36-45 $0.32 $0.16 $0.15 $0.09 46-55 $0.76 $0.42 $0.36 $0.23 56-60 $1.45 $0.84 $0.69 $0.47 61-64 $2.20 $1.29 $1.02 $0.71 The smoker rates apply to anyone who has smoked a cigarette or used any tobacco product one time in the past year. These rates will be adjusted as per renewal arrangements made with the carrier. 8.3 The Company will continue to provide, on an optional basis to employees, life insurance through the Dependent Life Plan as in effect immediately prior to the term of the Agreement, except as indicated herein below. The premium rates for Dependent Life will continue to be: SPOUSE CHILD MONTHLY RATE $ 5,000 $ 2,500 $1.65 $10,000 $ 5,000 $3.30 $25,000 $10,000 $7.65 These rates will be adjusted as per renewal arrangements made with the carrier. 8.4 The other terms and conditions of this Plan will remain in full force and effect as reflected in the applicable insurance contract. 9. SURVIVOR TRANSITION BENEFIT PLAN 9.1 The Company will continue to provide a Survivor Transition Benefit Plan as in effect immediately prior to the term of the Agreement subject to paragraph 1.6.2. 9.2 During the period which an eligible dependent is in receipt of STB, participation will continue in the following Plans but the cost will be paid by the Company: . Extended Health Care Plan . Dental Plan . Vision Care Plan 10. RETIREMENT ALLOWANCE PLAN 10.1 The Company will continue to provide a Retirement Allowance Plan as in effect immediately prior to the term of the Agreement subject to paragraph 1.6.2. The Retirement Allowance Schedules and formulae will be based on the following: 10.1.1 The amounts set out in the schedules in effect immediately prior to this agreement will be increased by 3% on the 1996 schedule on June 10 of each of the years 1998, 1999 and 2000. 10.1.2 The scheduled amounts in effect immediately prior to this agreement will be prorated so that the retirement allowance will be based on completed calendar years and months of service and age. 10.2 Employees will be entitled to payment under the Plan if, as of their pension date, they have at least ten (10) years of continuous service. The amounts set out in the Schedules will be payable monthly commencing with the month in which the pension date falls and continuing until the month age 65 is reached, except that for retirement at age 65 there will be only one payment. 10.3 An employee entitled to the Retirement Allowance Plan may elect to receive, either as a lump sum or as monthly payments during any period up to age 71, the present value of the scheduled amount discounted at the rate prescribed for the first fifteen (15) years for non-indexed pensions, for the month in which the payment of the benefits commences under the Canadian Institute of Actuaries Recommendations for the computation of transfer values from registered pension plans effective June 1, 1996. 10.4 If a retired employee who is entitled to a retirement allowance dies prior to all payments being made, the remaining payments will be paid monthly on the same basis to eligible dependents. 10.5 Where employees retire with a class E pension and are entitled to a retirement allowance, the amount as set out in the Schedule will be reduced actuarially for each month by which the employee's age is less than 65. 11. PENSION PLAN 11.1 Effective February 3, 1996, the Company will replace the Northern Telecom Negotiated Pension Plan by a defined contribution pension plan. The defined contribution pension plan will include, subject to the approval of the supervisory pension authorities, the provisions specified below during the applicable term stated in paragraph 1.3 above. 11.2 All employees will be eligible to participate to the defined contribution pension plan. 11.3 Service under the defined contribution pension plan will be defined as continuous service with the Company, including the continuous service with Northern Telecom up to February 2, 1996. 11.4 Base earnings under the defined contribution pension plan will be defined as the basic remuneration, exclusive of such items as overtime pay, special bonus, Company contributions to any benefit plan, or other extra earnings. Basic remuneration will mean the employee's standard hourly wages determined by multiplying his hourly base rate of pay by the number of regularly scheduled hours assigned to his job classification. Base earnings in respect of any period of absence from work will mean the rate in effect immediately prior to such absence. 11.5 Employees participating to the defined contribution pension plan will be able to contribute through payroll deduction and/or make lump sum contributions subject to the limitations of the Income Tax Act and Regulations. Such employee contributions will be voluntary. 11.6 The Company contributions to the defined contribution pension plan will be determined as follows: i) Basic Contributions ------------------- The Company will contribute a percentage of the employee's base earnings. For a given calendar year, such percentage will be determined in accordance with the following schedule which is based on the sum of the employee's age and service on January 1st of the said calendar year. Sum of Age and Service Basic Company Contributions __(in completed years) ____(% of base earnings) less than 40 2.5% 40 to 49 3.0% 50 to 59 3.5% 60 to 69 4.0% 70 to 79 4.5% 80 to 89 5.5% 90 and more 6.5% ii) Matching Contributions ---------------------- The Company will also contribute an amount equal to one half (50%) of the employee's contributions, up to a maximum of 1% of his base earnings. iii) Grandfathering Employees ------------------------ Instead of the contributions provided for in i) and ii) above, for 59 employees, to be called "grandfathered" employees, the Company will contribute a fixed percentage of their base earnings during the applicable term stated in paragraph 1.3 above. Therefore, the Company will not match the contributions made by the "grandfathered" employees, if any. Such percentage will be determined individually so as to replicate ------------ the benefits that would have been provided by the Northern Telecom Negotiated Pension Plan if the grandfathered employee had continued participation in that plan until retirement. It will be determined as of February 2, 1996 and will not thereafter be re-adjusted. More specifically, such percentage will be determined on the basis of the following: a) Provisions of the Northern Telecom Negotiated Pension Plan ---------------------------------------------------------- Those in effect as of February 2, 1996, except for the benefit rates which are deemed to increase over the next five (5) years by 5% the first year, 3% the second and third years and 2.5% the fourth and fifth years, resulting in a cumulative increase which is a function of the number of years until retirement as follows: Years until Retirement Increase __(in completed years) 1 or less 5.00% 2 8.15% 3 11.39% 4 14.18% 5 or more 17.03% The automatic post-retirement indexation provisions and the joint and survivor form of payment of the Northern Telecom Negotiated Pension Plan will therefore be taken in account in determining the Company contribution intended to replicate its benefits. b) Assumptions ----------- Earnings' increases None Investment return 8.00% per year Annuity purchase rates 8.00% per year CPI increases 3.75% per year Assumed retirement age Earliest age the employee would have qualified for an unreduced pension under conditions A, B or C or, if later, attained age as of Feb.2/96 plus one year iv) Period of Absence ----------------- The Company will contribute in accordance with the above during any period of absence with pay or any period of absence without pay resulting from a disability, parental leave or maternity leave, subject to the limitations of the Income Tax Act and Regulations. However, the Company will not contribute during any other period of absence without pay. 11.7 The normal retirement age under the defined contribution pension plan will be 65 whereas the earliest retirement age will be 50. 11.8 The Company contributions to the defined contribution pension plan will be fully vested after two years of service. 11.9 On retirement, termination of employment or death of the employee, the benefits provided by the defined contribution pension plan will be equal to the accumulated value of the employee's and vested Company contributions. Such value will be subject to the locking-in requirements of the applicable provincial pension legislation. 11.10 The defined contribution pension plan will be a separate pension plan registered with the Regie des rentes du Quebec. It will therefore be administered by a pension committee. 11.11 The pension committee of the defined contribution pension plan will be made up of the following seven (7) members: a) four (4) representatives of the Company; b) two (2) representatives of the employees; c) a third party to be designated by the Company. 11.12 The administration expenses of the defined contribution pension plan will be paid by the Company whereas the custody and investment expenses will be assumed by the employees. 11.13 Any remaining details regarding the operation of the defined contribution pension plan, e.g. the selection of the custodian, administrator and investment manager(s), the allowed number of changes in investment directions per calendar year, the frequency of employee statements, etc. will be decided by the pension committee. 12. OTHER COMPANY PLANS 12.1 The Company proposes to continue the following during the term of the Agreement. . Travel Accident Insurance . Registered Retirement Savings Plan 12.2 While the Company will not reduce the level of benefits of the Plans referred to in 12.1 above during the term of the Agreement, it reserves the right to amend the terms and conditions of such Plans in order to conform to existing or future legislation, to ensure that they may best meet the objectives for which they were established, and to enable their administration to be carried out with prudence and economy in the interest of all participants therein. 13. GENERAL 13.1 The Company shall furnish the Plan text(s), as soon as practicable, after signing the Agreement, for review and comment by the Union. The other documents referred to below will be furnished at appropriate times for review and comment by the Union. 13.2 The Company will furnish the Union with copies of the administrative procedures, benefits description and approved authorized texts covering the employee benefit Plans referred to in paragraphs 2 to 12 of this appendix. 13.3 As soon as it is practicable hereafter, the Company will provide each employee with a benefits description referred to in this appendix. 13.4 The Company will ensure that all the Plans covered by this appendix are adjusted to reflect legislation precluding discrimination with respect to age, sex, and marital status, except to the extent that such legislation so permits. 13.5 The Company confirms its intention to maintain its present practices with respect to the handling of statutory and Company benefits as these apply to retirees. In the event a change appears desirable, the Company will discuss such changes in advance with the Union. 13.6 Procedures shall be determined on a basis which is mutually acceptable to the Union and the Company. Items for discussion shall in general be limited to those matters pertaining to the benefits covered by this appendix and may include application thereof to future retirees. 13.7 The Company will furnish the Union with such information with respect to the operations of applicable benefit plans as shall be mutually acceptable to the parties or required by legislation, including: . Copy of the annual information return to the province of registration for the Pension Plan. 13.8 The Union consents to the application by the Company, through partial funding of the latter's costs in providing improved employee benefits in accordance with the Agreement and with prior Collective Labour Agreements between the Union and the Company, of the reductions equal to at least 5/12th that have been or may be granted to the Company as to employer's premiums under the Unemployment Insurance Act. 13.9 The Company shall have the exclusive right to determine and change the method and terms of financing the Company Health Care Plans, Group Life Insurance -Parts I and II and the Dependent Life Plan provided under the Agreement, subject to the following conditions: a) no change will take place without at least 3 months prior notice to the Union, b) no change will have the effect of reducing the value of any benefit, c) no change will affect the method of claims settlement except as shall be mutually agreed between the parties, and d) the Company shall furnish the Union with a full accounting as to the disposition of any surplus or deficit attributable to employee contributions. EX-10.20 3 LEASE AGMT BTWN NORDX/CDT & NORTHERN TELECOM EXHIBIT 10.20 - -------------------------------------------------------------------------------- LEASE - -------------------------------------------------------------------------------- LANDLORD: NORTHERN TELECOM LIMITED TENANT: NORDX/CDT, INC. (FORMERLY CABLE DESIGN TECHNOLOGIES (CDT) CANADA INC.) PREMISES: 150 Montreal-Toronto Blvd. Lachine, Quebec AGREEMENT OF LEASE made as of the 2nd day of February, 1996 Between: NORTHERN TELECOM LIMITED, a Canadian corporation (hereinafter called the "Landlord") And: NORDX/CDT, INC., a Canadian corporation (formerly Cable Design Technologies (CDT) Canada Inc.) (hereinafter called the "Tenant") SECTION I DEFINITIONS ----------- In this Lease, "APPLICABLE LAWS" means all statutes, laws, by-laws, regulations, ordinances and requirements of governmental or other public authorities having jurisdiction and any applicable regulation or order of the Canadian Fire Underwriters' Association or any body having similar functions, or of any fire insurance company by which the Landlord or the Tenant may be insured, and all amendments thereto at any time and from time to time in force which are applicable in the circumstances; "ARCHITECT" means a third party architect or engineer named by the Landlord from time to time and acceptable to the Tenant; "ASSET PURCHASE AGREEMENT" means the Asset Purchase Agreement by and among the parties and Cable Design Technologies Corporation, made as of December 19, 1995; "RENT" means the rent payable by the Tenant pursuant to section 4. 1; "BUILDING" means the building and all improvements, facilities and appurtenances situated on the Lands, municipally known as 150 Montreal-Toronto Blvd., Lachine, Quebec, HBS IB6, and having a gross rentable area of approximately nine hundred and ninety-eight thousand, nine hundred and sixty (998,960) square feet; "BUSINESS" shall have the same meaning as in the Asset Purchase Agreement but restricted to the Business carried on or about the Property; "CLOSING DATE" shall have the same meaning as in the Asset Purchase Agreement; "COMMENCEMENT DATE" shall have the meaning ascribed thereto in section 3. 1; "COMMON AREAS AND FACILITIES" means those common areas and facilities which serve the Building including, without limitation, the landscaped areas, parking areas, yard, common corridors, halls, stairways and passageways, common lavatories, cafeteria area and such other areas and facilities which are designated from time to time by the Landlord (but in a way not to obstruct Tenant's use of the Leased Premises) for the common use and enjoyment or benefit of the Tenant 2 and the Landlord, their employees, agents and invitees; "ENVIRONMENTAL LAWS" means all applicable foreign, federal, provincial, municipal or local statutes, regulations or by-laws, common law, civil law and orders of any Government Entity, to the extent relating to the Environment but in each case solely to the extent having the force of law; "INITIAL TERM" means the period specified in section 3. 1; "LANDS" means the lands owned by the Landlord on which the Building is situated, being Part of Lots 914, 915 and 1025, Parish of Lachine; "LEASE" means this lease as it may be amended from time in accordance with the provisions hereof; "LEASED PREMISES" means the premises leased to the Tenant under this Lease; "PROPERTY" means the Lands and Building; "RENEWAL PERIOD" shall have the meaning ascribed thereto in section 3.2; "RENT" means basic rent; "REPORTS" shall have the meaning ascribed thereto in section 2.2; "TERM" means the Initial Term as it may be extended or renewed by the Tenant or earlier terminated in accordance with the provisions hereof; Capitalized terms used herein which are not defined in this Lease but which are defined in the Asset Purchase Agreement shall have the same meaning as in the Asset Purchase Agreement. SECTION 2 LEASED PREMISES --------------- 2.1 AREA OF LEASED PREMISES ----------------------- The Landlord hereby leases to the Tenant hereby accepting, upon the terms and conditions herein contained, that portion of the Building shown cross- hatched on the floor plans attached as Schedule A attached hereto having a gross rentable area of approximately four hundred and seventy thousand (470,000) square feet, it being acknowledged that such rentable area includes the Tenant's proportionate share of the Common Areas and Facilities. The floor plans are subject to review and modification by the Landlord and the Tenant, if necessary, to reflect the Business carried on in the Building at the Closing Date. 2.2 SEPARATION OF LEASED PREMISES, CONDITION ---------------------------------------- The Tenant acknowledges having examined the Building and the Leased Premises and accepts same in their actual "as is" condition, it being understood that their present environmental condition, including without limitation as described more specifically in the ADS-Golder environmental assessment report (1994) and SNC-Lavalin Environment Inc. environmental assessment report (1995) (the "Reports") remains entirely the responsibility of the Landlord, as well as any environmental condition caused by, arising or 3 resulting from the said condition. The Landlord acknowledges being fully aware of the contents of the Reports. The Landlord shall construct demising partitions as soon as practicable and in any event no later than three (3) months after the Closing Date, as required, to separate the Leased Premises from the Landlord's premises and premises of other tenants in the Building, by erecting partitions and fencing as appropriate. Both parties shall agree on such demising partitions and shall not unreasonably withhold their consent thereto. Landlord and Tenant shall each pay one half of the cost of such demising partitions, with such cost to the Tenant not to exceed Two Hundred Thousand Dollars ($200,000). 2.3 COMMON AREAS AND FACILITIES --------------------------- Subject to the Landlord's security procedures with respect to the Property, the Landlord hereby grants to the Tenant, its employees, agents, visitors and other persons transacting business with it, in common with the Landlord, the right to use the Common Areas and Facilities including the parking lot, washrooms, cafeteria and shipping area, for their intended purpose. SECTION 3 TERM ---- 3.1 INITIAL TERM ------------ The initial term of this Lease shall be a period of two (2) years, commencing on the Closing Date ("Commencement Date"). 3.2 RENEWAL PERIOD -------------- The Tenant shall have the option to renew the Lease for two (2) successive periods of One (1) year (the "Renewal Period") each upon the same terms and conditions as contained herein, except that the Rent payable during the Renewal Periods shall be as set forth in section 4. 1. The Tenant may exercise each renewal option by giving written notice to the Landlord at least six (6) months prior to the end of the Term, failing which the option to renew shall be null and void. 3.3 THE TENANT'S RIGHT OF TERMINATION --------------------------------- The Tenant shall have the right to terminate the Lease effective any time on or after eighteen (18) months after the Closing Date on at least twelve (12) months prior written notice. SECTION 4 RENT ---- 4.1 RENT ---- The Tenant covenants to pay to the Landlord as Rent for the Leased Premises during the Initial Term, Two Million, Five Hundred Thousand Dollars ($2,500,000) in equal monthly installments of Two Hundred and Eight Thousand, Three Hundred and Thirty Three Dollars and Thirty Three Cents ($208,333.33), payable in advance on the first day of each month. 4 The Rent for each Renewal Period shall be negotiated and agreed upon by Landlord and Tenant at the latest seven (7) months before the expiration of the Term; failing agreement, the Rent for each Renewal Period shall be equal to Five Million Dollars ($5,000,000) payable in equal monthly installments of Four Hundred and Sixteen Thousand, Six Hundred and Sixty Six Dollars and Sixty Six Cents ($416,666.66) payable in advance on the first day of each month during each Renewal Period. 4.2 PAYMENT OF RENT --------------- All payments by the Tenant to the Landlord, of whatsoever nature, required or contemplated by this Lease, shall be made when due hereunder, without prior demand therefor and without any abatement, compensation or deduction whatsoever (except for any abatement under section 11 of this Lease), at the office of the Landlord as set out in section 15.2 or at such other address as the Landlord may designate, in writing, from time to time to the Tenant. SECTION 5 USE OF PREMISES --------------- 5.1 PERMITTED USE ------------- The Tenant covenants to use the Leased Premises only for the purposes of offices, warehousing, manufacturing, and related uses to carry on business substantially the same as that carried on by the Landlord immediately prior to the Closing Date, comprising the manufacturing, sale and service of structured wire and copper wire and cable products. 5.2 COMPLIANCE WITH LAWS -------------------- Subject to the construction work, repairs, conditions and services for which the Landlord is responsible, as provided hereunder, including without limitation the construction work, repairs, conditions and services mentioned in sections 2.2, 6, 7 and 14, the Tenant shall promptly comply with and conform to all Applicable Laws including Environmental Laws affecting the Leased Premises and the business carried on therein (it being understood that Tenant shall have no obligation with respect to any environmental condition contained in the Reports). 5.3 RULES AND REGULATIONS --------------------- The Landlord shall have the right to make (after prior consultation with the Tenant) such reasonable rules and regulations as it considers necessary or desirable related to the operation, maintenance, security or safety in respect of the Property. Such rules and regulations shall not be amended without the consent of the Tenant, such consent not to be unreasonably withheld. The Tenant shall comply, and cause every person over whom it has control to comply, with such rules and regulations. SECTION 6 UTILITIES AND SERVICES ---------------------- The Landlord shall, subject to interruption beyond its control, provide and permit the Tenant to use the electricity, domestic water, sewage disposal and other utility services serving the Building at no additional cost and provided that the Tenant uses said services for the purpose for which they are intended. 5 The Landlord shall heat and air condition the Leased Premises to a reasonable temperature at the appropriate times of the year. The Landlord shall consult with and cooperate with the Tenant in respect of all services provided to the Leased Premises. Any special services required by the Tenant from the Landlord, such as office rearrangement and moving of equipment, shall be at Tenant's sole expense. SECTION 7 MAINTENANCE AND REPAIR ---------------------- 7.1 LANDLORD'S OBLIGATIONS ---------------------- Except to the extent the Tenant is responsible therefor as provided in the Lease, the Landlord shall, at its expense, maintain the Property in a good state of repair and in compliance with applicable Laws, including Environmental Laws. Without limiting the generality of the foregoing, the Landlord shall effect all necessary structural repairs and repairs and maintenance to the roof, the heating, air conditioning, electrical, plumbing, lighting and sprinkler and other building systems. 7.2 TENANT'S OBLIGATIONS -------------------- The Tenant shall, at its expense, maintain all leasehold improvements added by the Tenant during the Term in the Leased Premises in a good state of repair, reasonable wear and tear excepted; provided that the Tenant shall be responsible for any maintenance or repairs caused as a result of the negligence of the Tenant, its employees, agents or invitees, and provided further that Tenant shall be responsible for the cost of all interior decorations, fixtures, carpeting and any improvements in the Leased Premises as may be required by the Tenant. SECTION 8 ALTERATIONS ----------- The Tenant may, at its expense, and with the prior written consent of the Landlord, not to be unreasonably withheld or delayed, make such changes, alterations and additions in the Leased Premises which it may reasonably require from time to time for the conduct of its business. At the expiry of the Term, the Tenant may remove all such changes, additions and leasehold improvements from the Leased Premises, provided that the Tenant shall repair any damage to the Leased Premises or Building caused by such removal. At the expiry of the Term, the Landlord shall also have the right (other than with respect to initial installations and in the event that the Lease is terminated by Landlord pursuant to a sale of the Building) to require the Tenant to remove from the Leased Premises any leasehold improvements and, in such event, the Tenant shall be obligated, at its expense, to restore the Leased Premises to their condition at the Commencement Date, reasonable wear and tear, any repairs arising from the removal on departure of assets purchased from the Landlord that are in some manner attached or affixed to the Leased Premises (except to the extent repairs are necessary because of negligence of the Tenant, its employees or agents effecting such removal), damage by fire and other insured perils excepted. 6 SECTION 9 SUBLET AND ASSIGNMENT --------------------- The Tenant shall not have any right to assign the Lease or sublet all or any part of the Leased Premises without the Landlord's consent, such consent not to be unreasonably withheld. However, the Tenant shall have the right to hypothecate its right in the Lease as security for the fulfillment of its obligations. SECTION 10 INSURANCE, LIABILITY -------------------- 10.1 LANDLORD'S INSURANCE -------------------- The Landlord shall maintain throughout the Term: (a) "all risks" property insurance upon the Building and all property owned therein by the Landlord (other than leasehold improvements effected in respect of the Leased Premises); (b) comprehensive general liability insurance with a limit of not less than Five Million Dollars ($5,000,000) per occurrence with respect to injuries to or death of persons and damage to tangible property; and (c) broad form boiler and machinery insurance. The Landlord waives any right of recovery against the Tenant, its employees and agents for any loss or damage caused by or resulting from the perils to be insured against under paragraph (a) above and covenants to have its insurers waive all rights of recovery against the Tenant for any such loss. The insurance described in paragraph (b) above shall name the Tenant as an additional insured. The Landlord shall, on request, provide to the Tenant certificates evidencing the insurance described above. 10.2 TENANT'S INSURANCE ------------------ The Tenant shall maintain throughout the Term: (a) "all risks" property insurance in respect of all property of the Tenant in or about the Leased Premises; (b) comprehensive general liability insurance with a limit of not less than Five Million Dollars ($5,000,000) per occurrence for its operations with respect to injuries to or death of persons and damage to tangible property; and 7 The Tenant waives any right of recovery against the Landlord, its employees and agents for any loss or damage caused by or resulting from the perils to be insured against under paragraph (a) above and covenants to have its insurers waive all rights of recovery against the Landlord for any such loss. 10.3 LIMITATION OF LIABILITY ----------------------- Unless caused by the negligence of a party, its employees or agents, or the inexecution of its obligations hereunder, such party shall not be liable for (a) any damage to or destruction or loss of the other party, its employees or agents or any property in the Building or the Leased Premises; or (b) any bodily injury (including death), personal injury, damages for personal discomfort sustained by either party, its employees or agents. In no circumstances (including the negligence of a party, its employees or agents) shall such party be liable for any indirect or consequential damages sustained by the other party, its employees, agents or visitors. SECTION 11 DAMAGE OR DESTRUCTION --------------------- If during the Term, the Building or the Leased Premises shall be damaged by fire, lightning, tempest, impact of aircraft, acts of God or the Queen's enemies, riots, insurrections or explosion or other similar cause, the following provisions shall have effect: (a) if, in the opinion of the Architect, the Leased Premises are fit for tenancy in whole, the Lease shall continue in full force and effect without abatement or diminution of any Rent; (b) if, in the opinion of the Architect, the Leased Premises are rendered partly unfit for tenancy, this Lease shall continue in full force and effect, except that the Rent will abate to the extent the Architect determines that the Leased Premises cannot reasonably be used for their intended purposes; (c) if the Architect determines that the Leased Premises are rendered wholly unfit for tenancy, this Lease shall continue in full force and effect, except that the Rent will fully abate to zero; (d) all abatements will occur from the date of the damage or destruction until the date that the Leased Premises are delivered to the Tenant fit for the Tenant's occupancy and the conduct of its business; . (e) the Landlord will commence and proceed diligently to reconstruct, rebuild or repair any damage to the Building and Leased Premises to meet the Landlord's base building criteria for the Building which the Landlord may modify to be consistent with the plans, specifications and design criteria for the rebuilding of the Building and/or the Leased Premises, chosen by the Landlord acting reasonably, provided same are at least as high quality as the original construction; (f) whether or not the damage to the Leased Premises may have been caused by the Tenant's negligence or fault, the Tenant shall commence to repair, rebuild or reconstruct, at its own cost, all 8 Leasehold improvements, fixtures and equipment in the Leased Premises within fifteen (15) days from the Landlord's notice that the Landlord has completed its work and the Tenant shall complete said work with all due diligence; (g) the Tenant shall not be entitled to any allowance, inducement, payment or other consideration from the Landlord in connection with the Tenant's work described in subparagraph (f); (h) notwithstanding any provision herein to the contrary, if the Building is totally or partially damaged or destroyed (whether the Leased Premises are affected or not), and in the Architect's opinion, the damaged or destroyed portions cannot reasonably be repaired, restored or rebuilt within one hundred and eighty (180) days following the occurrence, the Landlord or the Tenant may, at its option, to be exercised by written notice to the other party within ninety (90) days following any such occurrence elect to terminate this Lease, in which case the following will apply: (i) if the Leased Premises have been rendered wholly unfit for tenancy, the termination will take effect from the date of damage or destruction and all Rent will only apply through to that date; (ii) if the Leased Premises have been rendered only partly unfit for tenancy and the Tenant has occupied any part of the Leased Premises from the date of the damage or destruction, the Lease will terminate at least sixty (60) days from the Landlord's notice. All unabated Rent will be adjusted to the date of termination. Rent will abate from the date of the damage and destruction until the date of termination to the extent the Leased Premises cannot reasonably be used for their intended purposes; (iii) if the Building is totally or partially damaged or destroyed and neither the Landlord nor the Tenant elects to terminate this Lease, the Landlord, at its sole cost, shall commence and proceed diligently to reconstruct, rebuild or repair, as necessary, those portions of the Building which have been so damaged or destroyed in accordance with the Landlord's base building criteria for the Building, substantially to the same standard as prior to the destruction. SECTION 12 RIGHT OF INSPECTION AND REPAIR ------------------------------ The Tenant agrees to permit the Landlord, its employees or agents, upon prior notice (except in case of emergency), to enter upon the Leased Premises at any time and from time to time, for the purposes of (i) inspecting and making necessary repairs, alterations or improvements to the Leased Premises or to the Building; (ii) access to monitoring wells and pumps located in the Leased Premises; and (iii) showing the Leased Premises to prospective purchasers or lessees. The Landlord covenants to act in a reasonable manner and to use all due diligence in the exercise of its rights hereunder. The Tenant shall not be entitled to any compensation for any inconvenience, nuisance or discomfort occasioned thereby unless the Tenant is prevented or materially hindered from carrying on its business in the Leased Premises. 9 SECTION 13 DEFAULT ------- If the Tenant shall be in default of any of its covenants hereunder, the Landlord shall give to the Tenant notice in writing stating that the said default is to be remedied and that if such default is not remedied by the Tenant within thirty (30) days after the receipt of such notice, or such longer period as may be reasonably necessary in view of the nature of the default, the Landlord may, at its option, enter either into and upon the said Leased Premises or any part thereof in the name of the whole, and this Lease shall be terminated, or the Landlord itself may take such steps and do or cause to be done such things as may be necessary to remedy and correct such defaults and may thereupon charge its total reasonable costs and expenses incurred in respect thereof to the Tenant who hereby covenants and agrees to pay the same forthwith, and the Tenant hereby covenants that any and all such costs and expenses incurred by the Landlord and unpaid by the Tenant shall be recoverable by the Landlord as if the same were and in the same manner as rental reserved and in arrears under the ten-ns of this Lease. SECTION 14 SPECIAL PROVISIONS ------------------ 14.1 PARKING ------- The Tenant shall have access to and use of, in common with other occupants of the Building, the parking areas associated with the Building. The Landlord shall cooperate with the-Tenant to provide an appropriate number of reserved and visitor parking spaces, taking into account the number of reserved parking spaces used by the Business at the Closing Date. 14.2 SECURITY -------- The Tenant shall comply with security measures in place for the Building. The Landlord shall consult with Tenant in the establishment or changes to such requirements for the Building including the Leased Premises, provided that any special requirements of the Landlord or the Tenant shall be at such party's costs. 14.3 SIGNAGE ------- The Tenant shall have the right to install, at its expense, its signage at the entrance of the Building, subject to the Landlord's reasonable approval, it being acknowledged that Landlord's signage at the main entrance shall remain as at the Closing Date. 14.4 CAFETERIA --------- The Tenant's employees and visitors shall have the right to use the cafeteria during its normal business hours. 10 14.5 JANITORIAL SERVICES ------------------- The Landlord, at its sole cost, shall provide janitorial services to the Building and the Leased Premises. Such services shall be provided irrespective of whether the Landlord shall vacate the Building, provided that Landlord shall discuss with the Tenant in a timely manner and before it vacates the Building, the provision of such services prior to vacating the Building. The Landlord and the Tenant shall cooperate with a view to agreeing on a common supplier for janitorial services, provided that any special requirements of the Landlord or the Tenant shall be at such party's costs. 14.6 GARBAGE REMOVAL --------------- The Tenant shall ensure that materials subject to Environmental Laws, in particular hazardous waste regulations, are disposed of by Tenant as required by such Environmental Laws and where so prohibited, not as part of the regular garbage. 14.7 MAIL, COURIER SERVICE --------------------- The Landlord shall provide, at its sole cost, receiving and delivery services for incoming mail and courier to the Building and the Leased Premises. Such services shall be provided irrespective of whether the Landlord shall vacate the Leased Premises, provided that the Landlord shall discuss with the Tenant in a timely manner and before it vacates the Building, the provision of such services prior to vacating the Building. The Tenant shall provide for itself as required outgoing mail and courier service. 14.8 HVAC. ELECTRICAL EQUIPMENT -------------------------- The Landlord shall be responsible, at its sole expense, for the operation, maintenance and repair of all HVAC, mechanical and electrical equipment in or serving the Building. Any such equipment installed by the Tenant after initial occupancy and solely for the Tenant's use shall be the Tenant's responsibility. Such services shall be provided irrespective of whether the Landlord shall vacate the Building, provided that the Landlord shall discuss with the Tenant in a timely manner, the provision of such services prior to vacating the Building. 14.9 OTHER SERVICES -------------- The Landlord shall provide, at its sole cost, building and land maintenance and repair services, as well as main lobby reception, 24 hour security and adequate elevator services and access thereto in respect of the Building and the Leased Premises. Such services shall be provided irrespective of whether the Landlord shall vacate the Building, provided that the Landlord shall discuss with the Tenant in a timely manner and before it vacates the Building, the provision of such services prior to vacating the Building. 14.10 LEVEL AND QUALITY OF SERVICES ----------------------------- The level and quality of services to be provided by Landlord hereunder shall be substantially the same as existing immediately prior to the Closing Date. 14.11 ENVIRONMENT ----------- The Tenant shall be responsible for the remediation of any environmental contamination (beyond the contamination contained in the Reports or otherwise existing on the Closing Date or caused by, arising 11 or resulting thereafter from the said contamination) caused by the Tenant's negligence, misconduct or carrying on of its business outside of the ordinary course as conducted prior to the Closing Date, provided that the Tenant shall take all due care in the carrying on of its business in the ordinary course to minimize any such contamination, it being understood that this shall not entail any capital expenditures by the Tenant in excess of Twenty Five Thousand Dollars ($25,000) for the duration of the Initial Term, except for such equipment as may be voluntarily purchased by the Tenant or required by the Tenant as a result of any changes to Tenant's processes or operations from that carried on at the Closing Date. The Landlord shall have the right to have capital expenditures related to such contamination in excess of Twenty-Five Thousand Dollars ($25,000) effected by. the Tenant at the Landlord's sole cost. The Landlord shall lease to Tenant, at no additional cost, two compartments and adjacent areas of the existing hazardous waste storage area (North Yard) as agreed between Landlord and Tenant, and permit access to such compartments and adjacent areas, subject to arrangements reasonably acceptable to both parties, it being acknowledged the hazardous waste storage area is surrounded by a locked fence. The Landlord shall remove all wastes in the said compartments as soon as reasonably practicable and in any event no later than five (5) business days after the Closing Date. Both parties shall conduct all their operations within the hazardous waste storage area in accordance with applicable Environmental Law and good industrial practices. The Tenant shall, prior to the expiry of the Lease, remove all wastes generated by the Tenant from the said two compartments of the hazardous waste storage area and adjacent areas and return it in the same condition as at the commencement of the Lease, reasonable wear and tear excepted. Upon noticing any Discharge of a Substance in the said hazardous waste storage area, the party having noticed the Discharge shall inform forthwith the other party and shall cooperate in any Remedial Work which may be necessary, the costs of which shall be borne by the party responsible for the said Discharge. The Landlord shall remain owner of and responsible for any and all pollution abatement or treatment equipment used in the Building at the Closing Date and the Landlord shall, at its own costs, purchase and install any other pollution abatement or treatment equipment required by any Government Entity as a result of any default by the Landlord under the representations and warranties provisions contained in the Asset Purchase Agreement and the Landlord shall remain owner of and responsible for any such equipment. The Landlord shall cooperate in securing or transferring to the Tenant Environmental Permits which are necessary in respect of the Business as at the Closing Date, provided that to the extent not contemplated in the Asset Purchase Agreement, the same shall be at the cost of the Tenant. Within thirty (30) days following the expiration of the Lease, the Tenant will provide the Landlord with an environmental audit prepared by a reputable consultant identifying and delineating the existence of any environmental condition on or from the Lachine Space, all to be satisfactory to the Landlord, acting reasonably. The Landlord will advise the Tenant within thirty (30) days of any dispute it has, based on the information the Landlord possesses, as to the conclusions of such report. Except for any matters of contamination for which the Landlord claims the Tenant is responsible and which are identified by Landlord to the Tenant, in writing, within three (3) years of the termination of the Lease, the Tenant shall be deemed to be released from any and all liability in connection with any environmental contamination of the Property. The Tenant shall not assume any liability for the wire drawing solution tanks present in Block C of the Building. The Tenant shall not be liable with regard to existing contamination of groundwater or soil in or under the Property. 12 The Tenant shall not be responsible for any contamination covered by the environmental indemnification provisions contained in the Asset Purchase Agreement (to the extent that the Landlord has liability therefor under the Asset Purchase Agreement) and the Landlord agrees that nothing in this Lease shall be interpreted as limiting in any way the representations and warranties as well as the environmental indemnification provisions contained in the Asset Purchase Agreement. 14.12 SALE OF PROPERTY ---------------- This Lease may be terminated by Landlord effective any time on or after the expiry of the Initial Term upon twelve (12) months prior written notice in the event that the Landlord sells the Building in an arm's length transaction to a third party. The Landlord shall give the Tenant reasonable notice (not less than 72 hours) of any visit to the Leased Premises by a potential purchaser or prospective tenant, including the identity of the prospective purchaser or tenant if known to the Landlord. One of the conditions of any sale of the Property by the Landlord shall be that the purchaser of the Property assumes the obligations of the Landlord hereunder and agrees to be bound by this Lease as if such purchaser had been a party to this Lease. 14.13 NON-DISCRIMINATION ------------------ The Landlord shall provide all facilities and services described herein in a reasonable and non-discriminatory manner. SECTION 15 MISCELLANEOUS ------------- 15.1 WAIVER ------ The failure of the Landlord or the Tenant to insist upon the strict performance of any covenants and conditions hereof shall not operate as a waiver of the Landlord's or the Tenant's rights hereunder in respect of any continuing or subsequent nonperformance and no waiver shall be inferred from or implied by anything done or omitted by the Landlord or the Tenant, save only an express waiver in writing. 15.2 NOTICES ------- All demands, notices or communications and reports provided for in this Lease will be in writing and will be either sent by facsimile with confirmation to the number specified below or personally delivered or sent by reputable overnight courier service (delivery charges prepaid) to the party at the address specified below, or at such address, to the attention of such other person, and with such other copy, as the recipient party has specified by prior written notice to the sending party pursuant to the provisions of this section 15. 13 If to the Landlord at: Northern Telecom Limited 3 Robert Speck Parkway Mississauga, Ontario, Canada L4Z 3C8 Telecopy: (905) 566-3457 Attn: A. J. Lafleur, Vice President and Associate General Counsel with copies. which do not constitute notice, to: - ----------------------------------------------- Northern Telecom Limited 2920 Matheson Blvd. East Mississauga, Ontario, Canada L4W 4M7 Telecopy: (905) 238-7096 Attn: Martin A. Macdonald Director of Real Estate If to the Tenant at: Nordx/CDT, Inc. 661 Andersen Drive Foster Plaza 7 Pittsburgh, PA 15220 Telecopy: (412) 937-9690 Attn: Paul M. Olson Chief Executive Officer with copies, which do not constitute notice, to: - ----------------------------------------------- Kirkland & Ellis Citicorp Center 153 East 53rd Street New York, NY 10022-4675 Telecopy: (212) 446-4900 Attn: Charles B. Fromm and Desjardins Ducharme Stein Monast 600 de la Gauchetiere rue Suite 2400 Montreal, Quebec H3B 4L8 Telecopy: (514) 878-9092 Attn: Paul Marcotte Any such demand, notice, communication or report will be deemed to have been given pursuant to this Lease when delivered personally or by means other than facsimile or overnight courier, when confirmed if by facsimile or on the business day after deposit with a reputable overnight courier service, as the case may be. 14 In the event the Landlord gives to the Tenant notice in writing of any default under the Lease, the Landlord shall also give notice of such default to any lender to whom the Tenant has requested, in writing, that such notice of default be given. 15.3 ENTIRE AGREEMENT ---------------- This Lease and the documents it refers to constitute the entire agreement between the Landlord and the Tenant with respect to the Leased Premises and may not be modified except by subsequent agreement in writing duly signed by the Landlord and the Tenant. Neither the Landlord nor the Tenant shall be bound by any representation, warranty, promise or agreement not contained in this Lease or in the other documents it refers to. For greater certainty, this Lease does not in any way affect the obligations of the Landlord under the Asset Purchase Agreement. 15.4 FORCE MAJEURE ------------- Except as provided in section 1 1, if and to the extent that any party shall be prevented, delayed or restricted by reason of an act of God, strikes or other labour disputes, or any other cause beyond the reasonable control of the party affected thereby, in the fulfillment of any obligation hereunder, then such party shall be deemed not to be in default in the performance of such covenant or obligation and any period necessary for the performance of such obligation shall be extended accordingly, and the Tenant shall not be entitled to compensation for any loss, inconvenience, nuisance or discomfort thereby occasioned, provided that in no event will the Tenant be relieved of its obligation to pay Rent as it becomes due. 15.5 HEADINGS -------- The headings used in this Lease are for purposes of reference only and will not affect the meaning or interpretation of any provisions of this Lease. 15.6 INTEREST ON ARREARS ------------------- If the Tenant fails to pay Rent when due, the Tenant shall pay interest on the unpaid amount from the due date until the date paid at the annual rate equal to The Royal Bank of Canada's reference rate of interest then in effect for commercial loans in Canada and commonly referred to by such bank as its Canadian "prime rate", plus two percent (2%), without prejudice to and in addition to any other remedy available to the Landlord under this Lease or at law. 15.7 HOLDING OVER ------------ If at the expiration or earlier termination of the Term, the Tenant shall remain in possession without any further written agreement it shall be as a monthly tenant only. In such event, the Rent payable for each month thereafter shall be equal to one hundred and fifty percent (150%) of the Rent payable for the month immediately prior to the expiration of the Term, and all other terms and conditions of this Lease shall remain the same. 15.8 REGISTRATION ------------ The parties hereby agree a short form of this Lease shall be executed between them for purposes of registration. In the event of a conflict between the terms of this Lease and the term of the said short form of agreement, the terms of this Lease shall prevail. 15 15.9 SUBORDINATION ------------- One of the conditions of any hypothec: granted by the Landlord shall be that the holder of such hypothec: agrees not to disturb the enjoyment and occupancy of the Leased Premises by the Tenant (or its authorized successors), as long as the Tenant (or its authorized successors) complies with all conditions, obligations and agreements hereof. 15.10 GOVERNING LAW ------------- This Lease shall governed by and construed in accordance with the laws of the Province of Quebec and the laws of Canada applicable therein. 15.11 ENGLISH LANGUAGE ---------------- The parties have requested that this Lease be prepared in the English language. Les parties ont demande que la presente convention de bail soit redigee en anglais. IN WITNESS WHEREOF the parties have executed this Agreement of Lease as of the date first written above. NORTHERN TELECOM LIMITED Per: /s/Anthony J. Lafleur --------------------- Anthony J. Lafleur Vice-President and Associate General Counsel Per: /s/Peter G. Kastner ------------------- Peter G. Kastner Assistant Vice-President Financial Planning & Analysis NORDX/CDT, INC. (FORMERLY CABLE DESIGN TECHNOLOGIES (CDT) CANADA INC.) Per: /s/Kenneth O. Hale ------------------ Kenneth O. Hale Vice-President 16 EX-10.21 4 LEASE AGMT BTWN NORDX/CDT & NORTHERN TELECOM EXHIBIT 10.21 LEASE LANDLORD: NORTHERN TELECOM LIMITED TENANT: NORDX/CDT, INC. (FORMERLY CABLE DESIGN TECHNOLOGIES (CDT) CANADA INC.) PREMISES: 105 Marcel Laurin Blvd. St Laurent, Quebec AGREEMENT OF LEASE made as of the 2nd day of February, 1996 Between: NORTHERN TELECOM LIMITED, a Canadian corporation (hereinafter called the "Landlord") And: NORDX/CDT, INC., a Canadian corporation (formerly Cable Design Technologies (CDT) Canada Inc.) (hereinafter called the "Tenant") SECTION I DEFINITIONS In this Lease, "APPLICABLE LAWS" means all statutes, laws, by-laws, regulations, ordinances and requirements of governmental or other public authorities having jurisdiction and any applicable regulation or order of the Canadian Fire Underwriters' Association or any body having similar functions, or of any fire insurance company by which the Landlord or the Tenant may be insured, and all amendments thereto at any time and from time to time in force which are applicable in the circumstances; "ARCHITECT" means a third party architect or engineer named by the Landlord from time to time and acceptable to the Tenant; "ASSET PURCHASE AGREEMENT" means the Asset Purchase Agreement by and among the parties and Cable Design Technologies Corporation, made as of December 19, 1995; "BUILDING" means the building and all improvements, facilities and appurtenances situated on the Lands, municipally known as 105 Marcel Laurin Blvd., St. Laurent, Quebec, and having a gross rentable area of approximately two hundred and ninety-two thousand, six hundred and fifty (292,650) square feet; "BUSINESS" shall have the same meaning as in the Asset Purchase Agreement but restricted to the Business carried on on or about the Property; "CLOSING DATE" shall have the same meaning as in the Asset Purchase Agreement; "COMMENCEMENT DATE" shall have the meaning ascribed thereto in section 3. 1; "COMMON AREAS AND FACILITIES" means those common areas and facilities which serve the Building including, without limitation, the landscaped areas, parking areas, common corridors, halls, stairways and passageways, common lavatories, cafeteria area and such other areas and facilities which are designated from time to time by the Landlord (but in a way not to obstruct Tenant' s use of the Leased Premises) for the common use and enjoyment or benefit of the Tenant and the Landlord, their employees, agents and invitees; "ENVIRONMENTAL LAWS" means all applicable foreign, federal, provincial, municipal or local statutes, regulations or by-laws, common law, civil law and orders of any Government Entity, to the extent relating to the Environment but in each case solely to the extent having the force of law; "INITIAL TERM" means the period specified in section 3. 1; "LANDS" means the lands owned by the Landlord on which the Building is situated; "LEASE" means this lease as it may be amended from time in accordance with the provisions hereof; "LEASED PREMISES" means the premises leased to the Tenant under this Lease; "PROPERTY" means the Lands and Building; "RENEWAL PERIOD" shall have the meaning ascribed thereto in section 3.2; "RENT" means basic rent; "REPORTS" shall have the meaning ascribed thereto in section 2.2; "TERM" means the Initial Term as it may be extended or renewed by the Tenant or earlier terminated in accordance with the provisions hereof. Capitalized terms used herein which are not defined in this Lease but which are defined in the Asset Purchase Agreement shall have the same meaning as in the Asset Purchase Agreement. -2- SECTION 2 LEASED PREMISES 2.1 AREA OF LEASED PREMISES ----------------------- The Landlord hereby leases to the Tenant hereby accepting, upon the terms and conditions herein contained, that portion of the Building shown cross- hatched on the floor plan attached as Schedule A attached hereto having a gross rentable area of thirty five thousand (35,000) square feet, it being acknowledged that such rentable areas includes the Tenant's proportionate share of the Common Areas and Facilities. The floor plan is subject to review and modification by the Landlord and the Tenant, if necessary, to reflect the Business carried on in the Building at the Closing Date. The Tenant shall have the right, upon Siecor Corp. vacating the premises leased by it in the Building, upon written notice to the Landlord, to include as part of the Leased Premises, the main conference room and the "salle des Robots" occupied by Siecor Corp. at the Closing Date, at a gross annual rental of eleven thousand dollars ($1 1,000), and twenty-four thousand, nine hundred and ninety dollars ($24,990), respectively, payable in equal monthly installments of nine hundred and sixteen dollars and sixty six cents ($916.66), and two thousand and eighty-two dollars and fifty cents ($2,082.50), respectively. 2.2 SEPARATION OF LEASED PREMISES, CONDITION ---------------------------------------- The Tenant acknowledges having examined the Building and the Leased Premises and accepts same in their actual "as is" condition, subject to its right to proceed at its discretion after reasonable prior notice to the Landlord, to an environmental site assessment and subject to the Landlord providing the Tenant a copy of any and all environmental site assessment reports or audit reports concerning the Property. The Landlord shall construct derfflsing partitions as soon as practicable and in any event no later than three (3) months after the Closing Date, as required, to separate the Leased Premises from the Landlord's premises and premises of other tenants in the Building, by erecting partitions and fencing as appropriate. Both parties shall agree on such demising partitions and shall not unreasonably withhold their consent thereto. The Landlord and the Tenant shall each pay one half of the cost of such dernising partitions. 2.3 COMMON AREAS AND FACILITIES --------------------------- Subject to the Landlord's security procedures with respect to the Property, the Landlord hereby grants to the Tenant, its employees, agents, visitors and other persons transacting business with it, in common with the Landlord, the right to use the Common Areas and Facilities including the parking lot, washrooms, cafeteria and shipping area, for their intended purpose. -3- SECTION 3 TERM ---- 3.1 INITIAL TERM ------------ The initial term of this Lease shall be a period of two (2) years, commencing on the Closing Date ("Commencement Date"). 3.2 RENEWAL PERIOD -------------- The Tenant shall have the option to renew the Lease for two (2) successive periods of one (1) year (the "Renewal Period") each upon the same terms and conditions as contained herein, except that the Rent payable during the Renewal Periods shall be as set forth in section 4. 1. The Tenant may exercise each renewal option by giving written notice to the Landlord at least six (6) months prior to the end of the Tenn, failing which the option to renew shall be null and void. 3.3 THE TENANT'S RIGHT OF TERMINATIOM --------------------------------- Tenant shall have the right to terminate the Lease effective any time on or after eighteen (18) months after the Closing Date on at least twelve (12) months prior written notice. SECTION 4 RENT ---- 4.1 RENT ---- The Tenant covenants to pay to the Landlord as Rent for the Leased Premises during the Initial Term, Five Hundred Thousand Dollars ($500,000) payable in equal monthly installments of Forty One Thousand, Six Hundred and Sixty Six Dollars and Sixty Six Cents ($41,666.66) payable in advance on the first day of each month. The Rent for each Renewal Period shall be negotiated and agreed upon by the Landlord and Tenant at the latest seven (7) months before the expiration of the Term; failing agreement, the Rent for each renewal period shall be equal to Five Hundred Thousand Dollars ($500,000) payable in equal monthly installments of Forty One Thousand, Six Hundred and Sixty Six Dollars and Sixty Six Cents ($41,666.66) payable in advance on the first day of each month during each Renewal Period, plus the same rental rates for the main conference room and "salle des Robots" as stipulated in section 2.1 -4- 4.2 PAYMENT OF RENT --------------- All payments by the Tenant to the Landlord, of whatsoever nature, required or contemplated by this Lease shall be made when due hereunder, without prior demand therefor and without any abatement, compensation or deduction whatsoever (except for any abatement under section I 1 of this Lease), at the office of the Landlord as set out in section 15.2 or at such other address as the Landlord may designate, in writing, from time to time to the Tenant. SECTION 5 USE OF PREMISES --------------- 5.1 PERMITTED USE ------------- The Tenant covenants to use the Leased Premises only for the purposes of offices, warehousing, laboratory purpose, and related uses to carry on business substantially the same as that carried on by the Landlord immediately prior to the Closing Date. 5.2 COMPLIANCE WITH LAWS -------------------- Subject to the construction work, repairs and services for which the Landlord is responsible, as provided hereunder, including without limitation the construction work, repairs and services mentioned in sections 2.2, 6, 7 and 14, the Tenant shall, at its expense, promptly comply with and conform to all Applicable Laws including Environmental Laws affecting the Leased Premises and the business carried on therein. 5.3 RULES AND REGULATIONS --------------------- The Landlord shall have the right to make (after prior consultation with the Tenant) such reasonable rules and regulations as it considers necessary or desirable related to the operation, maintenance, security or safety in respect of the Property. Such rules and regulations shall not be amended without the consent of the Tenant, such consent not to be unreasonably withheld. The Tenant shall comply, and cause every person over whom it has control to comply, with such rules and regulations. SECTION 6 UTILITIES AND SERVICES ---------------------- The Landlord shall, subject to interruption beyond its control, provide and pern-dt the Tenant to use the electricity, domestic water, sewage disposal and other utility services serving -5- the Building at no additional cost and provided that the Tenant uses said services for the purpose for which they are intended. The Landlord shall heat and air condition the Leased Premises to a reasonable temperature at the appropriate times of the year. The Landlord shall consult with and cooperate with the Tenant in respect of all services provided to the Leased Premises. Any special services required by the Tenant from the Landlord, such as office rearrangement and moving of equipment, shall be at Tenant's sole expense. SECTION 7 MAINTENANCE AND REPAIR ---------------------- 7.1 LANDLORD'S OBLIGATIONS ---------------------- Except to the extent the Tenant is responsible therefor as provided in the Lease, the Landlord shall, at its expense, maintain the Property in a good state of repair and in compliance with applicable Laws, including Environmental Laws. Without limiting the generality of the foregoing, the Landlord shall effect all necessary structural repairs and repairs and maintenance to the roof, the heating, air conditioning, electrical, plumbing, lighting and sprinkler and other building systems. 7.2 TENANT'S OBLIGATIONS -------------------- The Tenant shall, at its expense, maintain all leasehold improvements added by the Tenant during the Term in the Leased Premises in a good state of repair, reasonable wear and tear excepted; provided that the Tenant shall be responsible for any maintenance or repairs caused as a result of the negligence of the Tenant, its employees, agents or invitees, and provided further that Tenant shall be responsible for the cost of all interior decorations, fixtures, carpeting and any improvements in the Leased Premises as may be required by the Tenant. SECTION 8 ALTERATIONS ----------- The Tenant may, at its expense and with the prior written consent of the Landlord, not to be unreasonably withheld or delayed, make such changes, alterations and additions in the Leased Premises which it may reasonably require from time to time for the conduct of its business. At the expiry of the Term, the Tenant may remove all such changes, additions and leasehold -6- improvements from the Leased Premises, provided that the Tenant shall repair any damage to the Leased Premises or Building caused by such removal. At the expiry of the Term, the Landlord shall also have the right (other than with respect to initial installations and in the event that the Lease is terminated by the Landlord pursuant to a sale of the Building) to require the Tenant to remove from the Leased Premises any leasehold improvements and, in such event, the Tenant shall be obligated, at its expense, to restore the Leased Premises to their condition at the Commencement Date, reasonable wear and tear, any repairs arising from the removal on departure of assets purchased from the Landlord that are in some manner attached or affixed to the Leased Premises (except to the extent repairs are necessary because of negligence of the Tenant, its employees or agents effecting such removal), damage by fire and other insured perils excepted. SECTION 9 SUBLET AND ASSIGNMENT --------------------- The Tenant shall not have any right to assign the Lease or sublet all or any part of the Leased Premises without the Landlord's consent, such consent not to be unreasonably withheld. However, the Tenant shall have the right to hypothecate its right in the Lease as security for the fulfillment of its obligations. SECTION 10 INSURANCE, LIABILITY -------------------- 10.1 LANDLORD'S INSURANCE -------------------- The Landlord shall maintain throughout the Term: (a) "all risks" property insurance upon the Building and all property owned therein by the Landlord (other than leasehold improvements effected in respect of the Leased Premises); (b) comprehensive general liability insurance with a limit of not less than Five Million Dollars ($5,000,000) per occurrence with respect to injuries to or death of persons and damage to tangible property; and (c) broad form boiler and machinery insurance. The Landlord waives any right of recovery against the Tenant, its employees and agents for any loss or damage caused by or resulting from the perils to be insured against under paragraph (a) above and covenants to have its insurers waive all rights of recovery against the Tenant for any such loss. -7- The insurance described in paragraph (b) above shall name the Tenant as an additional insured. The Landlord shall, on request, provide to the Tenant certificates evidencing the insurance described above. 10.2 TENANT'S INSURANCE ------------------ The Tenant shall maintain throughout the Term: (a) "all risks" property insurance in respect of all property of the Tenant in or about the Leased Premises; (b) comprehensive general liability insurance with a limit of not less than Five Million Dollars ($5,000,000) per occurrence for its operations with respect to injuries to or death of persons and damage to tangible property; and The Tenant waives any right of recovery against the Landlord, its employees and agents for any loss or damage caused by or resulting from the perils to be insured against under paragraph (a) above and covenants to have its insurers waive all rights of recovery against the Landlord for any such loss. The insurance described in paragraph (b) above shall name the Landlord as an additional insured. The Tenant shall, on request, provide to the Landlord certificates evidencing the insurance described above. 10.3 LIMITATION OF LIABILITY ----------------------- Unless caused by the negligence of a party, its employees or agents, or the inexecution of its obligations hereunder, such party shall not be liable for (a) any damage to or destruction or loss of the other party, its employees or agents or any property in the Building or the Leased Premises; or (b) any bodily injury (including death), personal injury, damages for personal discomfort sustained by either party, its employees or agents. In no circumstances (including the negligence of a party, its employees or agents) shall such party be liable for any indirect or consequential damages sustained by the other party, its employees, agents or visitors. -8- SECTION 11 DAMAGE OR DESTRUCTION --------------------- If during the Term, the Building or the Leased Premises shall be damaged by fire, lightning, tempest, impact of aircraft, acts of God or the Queen's enemies, riots, insurrections or explosion or other similar cause, the following provisions shall have effect: (a) if, in the opinion of the Architect, the Leased Premises are fit for tenancy in whole, the Lease shall continue in full force and effect without abatement or diminution of any Rent; (b) if, in the opinion of the Architect, the Leased Premises are rendered partly unfit for tenancy, this Lease shall continue in full force and effect, except that the Rent will abate to the extent the Architect determines that the Leased Premises cannot reasonably be used for their intended purposes; (c) if the Architect determines that the Leased Premises are rendered wholly unfit for tenancy, this Lease shall continue in full force and effect, except that the Rent will fully abate to zero; (d) all abatements will occur from the date of the damage or destruction until the date that the Leased Premises are delivered to the Tenant fit for the Tenant's occupancy and the conduct of its business; (e) the Landlord will commence and proceed diligently to reconstruct, rebuild or repair any damage to the Building and Leased Premises to meet the Landlord's base building criteria for the Building which the Landlord may modify to be consistent with the plans, specifications and design criteria for the rebuilding of the Building and/or the Leased Premises, chosen by the Landlord acting reasonably, provided same are at least as high quality as the original construction; (f) whether or not the damage to the Leased Premises may have been caused by the Tenant's negligence or fault, the Tenant shall commence to repair, rebuild or reconstruct, at its own cost, all Leasehold improvements, fixtures and equipment in the Leased Premises within fifteen (15) days from the Landlord's notice that the Landlord has completed its work and the Tenant shall complete said work with all due diligence; (g) the Tenant shall not be entitled to any allowance, inducement, payment or other consideration from the Landlord in connection with the Tenant's work described in subparagraph (f); (h) notwithstanding any provision herein to the contrary, if the Building is totally or partially damaged or destroyed (whether the Leased Premises are affected or not), and in the Architect's opinion, the damaged or destroyed portions cannot reasonably be repaired, -9- restored or rebuilt within one hundred and eighty (I 80) days following the occurrence, the Landlord or the Tenant may, at its option, to be exercised by written notice to the other party within ninety (90) days following any such occurrence elect to terrr@inate this Lease, in which case the following will apply: (i) if the Leased Premises have been rendered wholly unfit for tenancy, the termination will take effect from the date of damage or destruction and all Rent will only apply through to that date; (ii) if the Leased Premises have been rendered only partly unfit for tenancy and the Tenant has occupied any part of the Leased Premises from the date of the damage or destruction, the Lease will terminate at least sixty (60) days from the Landlord's notice. All unabated Rent will be adjusted to the date of termination. Rent will abate from the date of the damage and destruction until the date of termination to the extent the Leased Premises cannot reasonably be used for their intended purposes; (iii) if the Building is totally or partially damaged or destroyed and neither the Landlord nor the Tenant elects to terminate this Lease, the Landlord, at its sole cost, shall commence and proceed diligently to reconstruct, rebuild or repair, as necessary, those portions of the Building which have been so damaged or destroyed in accordance with the Landlord's base building criteria for the Building. SECTION 12 RIGHT OF INSPECTION AND REPAIR ------------------------------ The Tenant agrees to permit the Landlord, its employees or agents, upon prior notice (except in case of emergency), to enter upon the Leased Premises at any time and from time to time, for the purposes of (i) inspecting and making necessary repairs, alterations or improvements to the Leased Premises or to the Building and (ii) showing the Leased Premises to prospective purchasers or lessees. The Landlord covenants to act in a reasonable manner and to use all due diligence in the exercise of its rights hereunder. The Tenant shall not be entitled to any compensation for any inconvenience, nuisance or discomfort occasioned thereby unless the Tenant is prevented or materially hindered from carrying on its business in the Leased Premises. -10- SECTION 13 DEFAULT ------- If the Tenant shall be in default of any of its covenants hereunder, the Landlord shall give to the Tenant notice in writing stating that the said default is to be remedied and that if such default is not remedied by the Tenant within thirty (30) days after the receipt of such notice, or such longer period as may be reasonably necessary in view of the nature of the default, the Landlord may, at its option, enter either into and upon the said Leased Premises or any part thereof in the name of the whole, and this Lease shall be terminated, or the Landlord itself may take such steps and do or cause to be done such things as may be necessary to remedy and correct such defaults and may thereupon charge its total reasonable costs and expenses incurred in respect thereof to the Tenant who hereby covenants and agrees to pay the same forthwith, and the Tenant hereby covenants that any and all such costs and expenses incurred by the Landlord and unpaid by the Tenant shall be recoverable by the Landlord as if the same were and in the same manner as rental reserved and in arrears under the terms of this Lease. SECTION 14 SPECIAL PROVISIONS ------------------ 14.1 PARKING ------- The Tenant shall have access to and use of, in common with other occupants of the Building, the parking areas associated with the Building. The Landlord shall cooperate with the Tenant to provide an appropriate number of reserved and visitor parking spaces, taking into account the number of reserved parking spaces used by the Business at the Closing Date. 14.2 SECURITY -------- The Tenant shall comply with security measures in place for the Building. The Landlord shall consult with Tenant in the establishment or changes to such requirements for the Building including the Leased Premises, provided that any special requirements of the Landlord or the Tenant shall be at such party's costs. 14.3 SHIPPING AND RECEIVING ---------------------- It is acknowledged that Tenant will receive shipping and receiving services from Siecor Corp. for such period of time as it occupies the premises leased in the Building; after such time, the Landlord and Tenant shall negotiate mutually satisfactory arrangements. -11- 14.4 SIGNAGE ------- The Tenant shall have the right to install, at its own expense, its signage at the entrance of the Leased Premises, subject to the Landlord's reasonable approval. 14.5 CAFETERIA --------- The Tenant's employees and visitors shall have the right to use the cafeteria during its normal business hours. 14.6 JANITORIAL SERVICES ------------------- The Landlord, at its sole cost, shall provide janitorial services to the Building and the Leased Premises. Such services shall be provided irrespective of whether Landlord shall vacate the Building, provided that the Landlord shall discuss with the Tenant in a timely manner and before it vacates the Building, the provision of such services prior to vacating the Building. 14.7 MAIL, COURIER SERVICE --------------------- The Landlord shall provide, at its sole cost, receiving and delivery services for incoming mail and courier to the Building and the Leased Premises. Such services shall be provided irrespective of whether the Landlord shall vacate the Building, provided that the Landlord shall discuss with the Tenant in a timely manner and before it vacates the Building, the provision of such services prior to vacating the Building. The Tenant shall provide for itself as required outgoing mail and courier service. 14.8 HVAC. ELECTRICAL EQUIPMENT --------------------------- The Landlord shall be responsible, at its sole expense, for the operation, maintenance and repair of all HVAC, mechanical and electrical equipment in or serving the Building. Such services shall be provided irrespective of whether the Landlord shall vacate the Building, provided that the Landlord shall discuss with the Tenant in a timely manner, the provision of such services prior to vacating the Building. 14.9 OTHER SERVICES -------------- The Landlord shall provide, at its sole cost, building and land maintenance and repair services, as well as main lobby reception, 24 hour security and adequate elevator services and access thereto in respect of the Building and the Leased Premises. Such services shall be provided irrespective of whether the Landlord shall vacate the Building, provided that the Landlord shall discuss with the Tenant in a timely manner and before it vacates the Building, the provision of such services prior to vacating the Building. -12- 14.10 LEVEL AND QUALITY OF SERVICES ----------------------------- The level and quality of services to be provided by Landlord hereunder shall be substantially the same as existing immediately prior to the Closing Date. 14.11 ENVIRONMENT ----------- The Landlord shall remain responsible for any and all damages, claims, complaints, orders or notices resulting or arising from any environmental state or condition of the Property not caused by or on behalf of the Tenant notwithstanding the Tenant's use of the Leased Premises. 14.12 SALE OF PROPERTY ---------------- This Lease may be terminated by the Landlord effective any time on or after the expiry of the Initial Term upon twelve (12) months prior written notice in the event that the Landlord sells the Building in an arm's length transaction to a third party. The Landlord shall give the Tenant reasonable notice (not less than 72 hours) of any visit to the Leased Premises by a potential purchaser or prospective tenant, including the identity of the prospective purchaser or tenant if known to the Landlord. One of the conditions of any sale of the Property by the Landlord shall be that the purchaser of the Property assumes the obligations of the Landlord hereunder and agrees to be bound by this Lease as if such purchaser had been a party to this Lease. 14.13 NON-DISCRIMINATION ------------------ The Landlord shall provide all facilities and services described herein in a reasonable and non-discriminatory manner. SECTION 15 MISCELLANEOUS ------------- 15.1 WAIVER ------ The failure of the Landlord or the Tenant to insist upon the strict performance of any covenants and conditions hereof shall not operate as a waiver of the Landlord's or the Tenant's rights hereunder in respect of any continuing or subsequent nonperformance and no waiver shall be inferred from or implied by anything done or omitted by the Landlord or the Tenant, save only an express waiver in writing. 15.2 NOTICES ------- -13- All demands, notices or communications and reports provided for in this Lease will be in writing and will be either sent by facsimile with confirmation to the number specified below or personally delivered or sent by reputable overnight courier service (delivery charges prepaid) to the other party at the address specified below, or at such address, to the attention of such other person, and with such other copy, as the recipient party has specified by prior written notice to the sending party pursuant to the provisions of this section 15. If to the Landlord at: Northern Telecom Limited 3 Robert Speck Parkway Mississauga, Ontario, Canada L4Z 3C8 Telecopy: (905) 566-3457 Attn: A. J. Lafleur, Vice President and Associate General Counsel with copies, which do not constitute notice, to: - ------------------------------------------------ Northern Telecom Limited 2920 Matheson Blvd. East. Mississauga, Ontario, Canada L4W 4M7 Telecopy: (905) 238-7096 Attn: Martin A. Macdonald Director of Real Estate If to the Tenant at: Nordx/CDT, Inc. 661 Andersen Drive Foster Plaza 7 Pittsburgh, PA 15220 Telecopy: (412) 937-9690 Attn: Paul M. Olson Chief Executive Officer with copies, which do not constitute notice, to: - ------------------------------------------------ Kirkland & Ellis Citicorp Center 153 East 53rd Street New York, NY 10022-4675 Telcopy: (212) 446-4900 Attn: Charles B. Fromm -14- and Desjardins Ducharme Stein Monast 600 de la Gauchetiere rue Suite 2400 Montreal, Quebec 113B 4L8 Telecopy: (514) 878-9092 Attn: Paul Marcotte Any such demand, notice, communication or report will be deemed to have been given pursuant to this Lease when delivered personally or by means other than facsimile or overnight courier, when confirmed if by facsimile or on the business day after deposit with a reputable overnight courier service, as the case may be. In the event the Landlord gives to the Tenant notice in writing of any default under the Lease, the Landlord shall also give notice of such default to any lender to whom the Tenant has requested, in writing, that such notice of default be given. 15.3 ENTIRE AGREEMENT ---------------- This Lease and the documents it refers to constitute the entire agreement between the Landlord and the Tenant with respect to the Leased Premises and may not be modified except by subsequent agreement in writing duly signed by the Landlord and the Tenant. Neither the Landlord nor the Tenant shall be bound by any representation, warranty, promise or agreement not contained in this Lease or in the other documents it refers to. For greater certainty, this Lease does not in any way affect the obligations of the Landlord under the Asset Purchase Agreement. 15.4 FORCE MAJEURE ------------- Except as provided in section I 1, if and to the extent that any party shall be prevented, delayed or restricted by reason of an act of God, strikes or other labour disputes, or any other cause beyond the reasonable control of the party affected thereby, in the fulfillment of any obligation hereunder, then such party shall be deemed not to be in default in the performance of such covenant or obligation and any period necessary for the performance of such obligation shall be extended accordingly, and the Tenant shall not be entitled to compensation for any loss, inconvenience, nuisance or discomfort thereby occasioned, provided that in no event will the Tenant be relieved of its obligation to pay Rent as it becomes due. 15.5 HEADINGS -------- The headings used in this Lease are for purposes of reference only and will not affect the meaning or interpretation of any provisions of this Lease. -15- 15.6 INTEREST ON ARREARS ------------------- If the Tenant fails to pay Rent when due, the Tenant shall pay interest on the unpaid amount from the due date until the date paid at the annual rate equal to The Royal Bank of Canada's reference rate of interest then in effect for commercial loans in Canada and commonly referred to by such bank as its Canadian "prime rate", plus two percent (2%), without prejudice to and in addition to any other remedy available to the Landlord under this Lease or at law. 15.7 HOLDING OVER ------------ If at the expiration or earlier ten-nination of the Term, the Tenant shall remain in possession without any further written agreement it shall be as a monthly tenant only. In such event, the Rent payable for each month thereafter shall be equal to one hundred and fifty percent (150%) of the Rent payable for the month immediately prior to the expiration of the Term, and all other terms and conditions of this Lease shall remain the same. 15.8 REGISTRATION ------------ The parties hereby agree a short form of this Lease shall be executed between them for purposes of registration. In the event of a conflict between the terms of this Lease and the term of the said short form of agreement, the terrns of this Lease shall prevail. 15.9 SUBORDINATION ------------- One of the conditions of any hypothec granted by the Landlord shall be that the holder of such hypothec agrees not to disturb the enjoyment and occupancy of the Leased Premises by the Tenant (or its authorized successors), as long as the Tenant (or its authorized successors) complies with all conditions, obligations and agreements hereof. 15.10 GOVERNING LAW ------------- This Lease shall governed by and construed in accordance with the laws of the Province of Quebec and the laws of Canada applicable therein. 15.11 ENGLISH LANGUAGE ---------------- The parties have requested that this Lease be prepared in the English language. Les parties ont demands que la pr6sente convention de bail soit r6dig6e en anglais. -16- IN WITNESS WHEREOF the parties have executed this Agreement of Lease as of the date first written above. NORTHERN TELECOM LIMITED Per: /s/Anthony J. Lafleur --------------------- Anthony J. Lafleur Vice-President and Associate General Counsel Per: /s/Peter G. Kastner ------------------- Peter G. Kastner Assistant Vice-President Financial Planning & Analysis NORDX/CDT, INC. (FORMERLY CABLE DESIGN TECHNOLOGIES (CDT) CANADA INC.) Per: /s/Kenneth O. Hale ------------------ Kenneth O. Hale Vice-President -17- EX-10.22 5 LEASE AGMT BTWN NORDX/CDT & NORTHERN TELECOM EXHIBIT 10.22 ___________________________________________________ LEASE ___________________________________________________ LANDLORD: NORDX/CDT, INC. TENANT: NORTHERN TELECOM LIMITED PREMISES: 700 Gardiners Road, Kingston, Ontario AGREEMENT OF LEASE made as of the 2nd day of February l996 Between: NORDX/CDT, INC., a Canadian corporation (hereinafter called the "Landlord") And: NORTHERN TELECOM LIMITED, a Canadian corporation (hereinafter called the "Tenant") SECTION I DEFINITIONS ----------- In this Lease, "APPLICABLE LAWS" means all statutes, laws, by-laws, regulations, ordinances and requirements of governmental or other public authorities having jurisdiction and any applicable regulation or order of the Canadian Fire Underwriters' Association or any body having similar functions, or of any fire insurance company by which the Landlord or the Tenant may be insured, and all amendments thereto at any time and from time to time in force which are applicable in the circumstances; "ASSET PURCHASE AGREEMENT" means the asset purchase Agreement dated December 19, 1995 among Cable Design Technologies Corporation, the Landlord (formerly Cable Design Technologies (CDT) Canada Inc.) and the Tenant; "ARCHITECT" means the third party architect or engineer named by the Landlord from time to time; "ASSET PURCHASE AGREEMENT" means the Asset Purchase Agreement by and among the parties and Cable Design Technologies Corporation, made as of December 19, 1995; "BASIC RENT" means the rent payable by the Tenant pursuant to section 4.1; "BUILDING" means the building and all improvements, facilities and appurtenances situate on the Lands, municipally known as 700 Gardiners Road, Kingston, Ontario, and having a gross rentable area of approximately five hundred and twenty-eight thousand (528,000) square feet; "BUSINESS" shall have the same meaning as in the Asset Purchase Agreement but restricted to the Business carried on or about the Property; "CLOSING DATE" shall have the same meaning as in the Asset Purchase Agreement; "COMMENCEMENT DATE" shall have the meaning ascribed thereto in section 3.1; "COMMON AREAS AND FACILITIES" means those common areas and facilities which serve the Building including, without limitation, the landscaped areas, parking areas, common corridors, halls, stairways and passageways, common lavatories, cafeteria area and such other areas and facilities which are designated from time to time by the Landlord (but in a way not to obstruct Tenant's use of the Leased Premises) for 2 the common use and enjoyment or benefit of the Tenant and the Landlord, their employees, agents and invitees; "ENVIRONMENTAL LAWS" means all applicable foreign, federal, provincial, municipal or local statutes, regulations or by-laws, common law, and orders of any Government Entity, to the extent relating to the Environment but in each case solely to the extent having the force of law; "INITIAL TERM" means the period specified in section 3.1; "LANDS" means the lands owned by the Landlord on which the Building is situated, being those Parts of Lots 10, 11, and 12, Concession 2, in the Township of Kingston, in the County of Frontenac, designated as Part I on Reference Plan 13R-13052; "LEASE" means this lease as it may be amended from time in accordance with the provisions hereof; "LEASED PREMISES" means the premises leased to the Tenant under this Lease, and described in section 2.1; "PROPERTY" means the Lands and Building; "RENT" means Basic Rent; and "TERM" means the Initial Term as it may be extended or renewed by the Tenant or earlier terminated in accordance with the provisions hereof. Capitalized terms used herein which are not defined in this Lease but which are defined in the Asset Purchase Agreement shall have the same meaning as in the Asset Purchase Agreement. SECTION 2 LEASED PREMISES --------------- 2.1 DEMISE OF LEASED PREMISES ------------------------- The Landlord hereby leases to the Tenant hereby accepting, upon the terms and conditions herein contained, that portion of the Building shown cross- hatched on the floor plan attached as Schedule A hereto (the "Leased Premises") having a gross rentable area of sixty one thousand, four hundred (61,400) square feet, it being acknowledged that such rentable area includes the Tenant's proportionate share of the Common Areas and Facilities. 2.2 SEPARATION OF LEASED PREMISES, CONDITION ---------------------------------------- The Tenant acknowledges having examined the Building and the Leased Premises and accepts same in their actual "as is" condition. The parties acknowledge that the Leased Premises are currently separated from the remainder of the premises in the Building. 3 2.3 COMMON AREAS AND FACILITIES --------------------------- Subject to the Landlord's security procedures, the Landlord hereby grants to the Tenant, its employees, agents, visitors and other persons transacting business with it, in common with Landlord, the right to use the Common Areas and Facilities including the parking lot, washrooms, cafeteria and shipping area, for their intended purpose. SECTION 3 TERM ---- 3.1 INITIAL TERM ------------ The initial term of this Lease (the "Initial Term") shall commence on the day following the Closing Date ("Commencement Date") and terminate on June 30, 1996. 3.2 RENEWAL TERMS ------------- The Tenant shall have the option to renew the Lease for three (3) successive periods of one (1) month each upon the same terms and conditions as contained herein, except that the Basic Rent shall be as set forth in section 4. 1. The Tenant may exercise each renewal option by giving written notice to the Landlord at least thirty (30) days prior to the beginning of each Renewal Tenn, failing which the option to renew shall be null and void. SECTION 4 RENT ---- 4.1 RENT ---- The Tenant covenants to pay to the Landlord as rent (the "Basic Rent") for the Leased Premises during the Initial Term, Seven Hundred and Seventy Six Thousand Dollars ($776,000.00) per annum, in equal monthly installments of Sixty Four Thousand, Six Hundred and Sixty Six Dollars and Sixty Seven Cents ($64,666.67) payable in advance on the first day of each month during the Initial Term. The Basic Rent for each Renewal Period shall be Sixty Four Thousand, Six Hundred and Sixty Six Dollars and Sixty Seven Cents ($64,666.67) payable in advance on the first day of the month during each Renewal Period. 4.2 PAYMENT OF RENT --------------- All payments by the Tenant to the Landlord, of whatsoever nature, required or contemplated by this Lease shall be made when due hereunder, without prior demand therefor and without any abatement, compensation, set-off or deduction whatsoever (except for any abatement under section 1 1 of this Lease), at the office of the Landlord as set out in section 15.2 or at such other address as the Landlord may designate from time to time to the Tenant and in lawful money of Canada. 4 SECTION 5 USE OF PREMISES --------------- 5.1 PERMITTED USE ------------- The Tenant covenants to use the Leased Premises only for the purposes of offices, warehousing, manufacturing, and related uses to carry on business substantially the same as that carried on by the Tenant immediately prior to the Commencement Date. 5.2 COMPLIANCE WITH LAWS -------------------- The Tenant shall, at its expense, promptly comply with and conform to all Applicable Laws including Environmental Laws affecting the Leased Premises and the business carried on therein. 5.3 RULES AND REGULATIONS --------------------- The Landlord shall have the right to make (after prior consultation with the Tenant) such reasonable rules and regulations as it considers necessary or desirable related to the operation, maintenance, security or safety in respect of Building and Lands including the Leased Premises. Such rules and regulations shall not be amended without the consent of the Tenant, such consent not to be unreasonably withheld. The Tenant shall comply, and cause every person over whom it has control to comply, with such rules and regulations. SECTION 6 UTILITIES AND SERVICES ---------------------- The Landlord shall, subject to interruption beyond its control, provide and permit the Tenant to use the electricity, domestic water, sewage disposal and other utility services serving the Building, at no additional cost and provided that the Tenant uses said services for the purpose for which they are intended. The Landlord shall heat and air condition the Leased Premises to a reasonable temperature at the appropriate times of the year. The Landlord shall consult with and cooperate with the Tenant in respect of all services provided to the Leased Premises. SECTION 7 MAINTENANCE AND REPAIR ---------------------- 7.1 LANDLORD'S OBLIGATIONS ---------------------- Except to the extent the Tenant is responsible therefor as provided in the Lease or the Asset Purchase Agreement, the Landlord shall, at its expense and in compliance with Applicable Laws including Environmental Laws, maintain the Lands and Building including the Leased Premises and all Common Areas and Facilities in a good state of repair. Without limiting the generality of the foregoing, the 5 Landlord shall effect all necessary structural repairs and repairs and maintenance to the roof, the heating, air conditioning, electrical, plumbing and sprinkler systems. 7.2 TENANT'S OBLIGATIONS -------------------- The Tenant shall, at its expense, maintain the Leased Premises and all leasehold improvements added by the Tenant during the Term in the Leased Premises in a good state of repair, reasonable wear and tear, damage by fire and other insured perils excepted; provided that the Tenant shall be responsible for any maintenance or repairs to the Lands or the Building caused as a result of the acts or negligence of the Tenant, its employees, agents or invitees, and provided further that Tenant shall be responsible for the cost of all interior decorations, fixtures, carpeting and any improvements in the Leased Premises as may be required by the Tenant. SECTION 8 ALTERATIONS ----------- The Tenant may, at its sole expense, and with the prior written consent of the Landlord, not to be unreasonably withheld or delayed, make such changes, alterations and additions in the Leased Premises which it may reasonably require from time to time for the conduct of its business, provided that such work is performed in a good and workmanlike manner, subject to the reasonable regulation and supervision of the Landlord and at such time or times, as required by the Landlord, acting reasonably, and in any event in such a manner so as to minimize any disruption to the Landlord's operations at the Building. At the expiry of the Term, the Tenant will remove all the Tenant's assets, including, without limitation, leasehold improvements and the Tenant shall restore the Leased Premises at its sole cost and expense to their condition at the Commencement Date, reasonable wear and tear excepted. SECTION 9 SUBLET AND ASSIGNMENT --------------------- The Tenant shall not have any right to assign the Lease or sublet all or any part of the Leased Premises. SECTION 10 INSURANCE, LIABILITY -------------------- 10.1 LANDLORD'S INSURANCE -------------------- The Landlord shall maintain throughout the Term: (a) "all risks" property insurance upon the Building and all property owned therein by the Landlord (other than leasehold improvements effected in respect of the Leased Premises); 6 (b) comprehensive general liability insurance with a limit of not less than Five Million Dollars ($5,000,000) per occurrence with respect to injuries to or death of persons and damage to tangible property; and (c) broad form boiler and machinery insurance. The Landlord waives any right of recovery against the Tenant, its employees and agents for any loss or damage caused by or resulting from the perils to be insured against under paragraph (a) above and covenants to have its insurers waive all rights of recovery against the Tenant for any such loss. 10.2 Tenant's Insurance The Tenant shall maintain throughout the Term: (a) "all risks" property insurance in respect of all property of the Tenant, moveable and immovable, located in or about the Leased Premises; and (b) comprehensive general liability insurance with a limit of not less than Five Million Dollars ($5,000,000) per occurrence for its operations with respect to injuries to or death of persons and damage to tangible property. The Tenant waives any right of recovery against the Landlord, its employees and agents for any loss or damage caused by or resulting from the perils to be insured against under paragraph (a) above and covenants to have its insurers waive all rights of recovery against the Landlord for any such loss. The insurance described in paragraph (b) above shall name the Landlord as an additional insured. The Tenant shall, on request, provide to the Landlord certificates evidencing the insurance described above. 10.3 LIMITATION OF LIABILITY ----------------------- Unless caused by the negligence of a party, its employees or agents, such party shall not be liable for (a) any damage to or destruction or loss of the other party, its employees or agents or any property in the Building or the Leased Premises; or (b) any bodily injury (including death), personal injury, damages for personal discomfort sustained by either party, its employees or agents. In no circumstances (including negligence of a party, its employees or agents) shall such party be liable for any indirect or consequential damages sustained by the other party, its employees, agents or visitors. 7 SECTION 11 DAMAGE OR DESTRUCTION --------------------- If during the Term, the Building or the Leased Premises shall be damaged by fire, lightning, tempest, impact of aircraft, acts of God or the Queen's enemies, riots, insurrections or explosion or other similar cause, the following provisions shall have effect: (a) if, in the opinion of the Architect, the Leased Premises are fit for tenancy in whole, the Lease shall continue in full force and effect without abatement or diminution of any Rent, provided that the Landlord will have no obligation to reconstruct, rebuild or repair any damage to the Building; (b) if, in the opinion of the Architect, the Leased Premises are rendered partly unfit for tenancy, this Lease shall continue in full force and effect, except that the Rent will abate to the extent the Architect determines that the Leased Premises cannot reasonably be used for their intended purposes, provided that the Landlord will have no obligation to reconstruct, rebuild or repair any damage to the Building; (c) if the Landlord determines that the Leased Premises are rendered wholly unfit for tenancy, this Lease shall, unless otherwise agreed between the parties, be terminated with effect from the date of damage or destruction. SECTION 12 RIGHT OF INSPECTION AND REPAIR ------------------------------ The Tenant agrees to permit the Landlord, its employees or agents, upon prior notice (except in case of emergency), to enter upon the Leased Premises at any time and from time to time, for the purposes of (i) inspecting and making necessary repairs, alterations or improvements to the Leased Premises or to the Building and (ii) showing the Leased Premises to prospective purchasers or lessees. The Landlord covenants to act in a reasonable manner and to use all due diligence in the exercise of its rights hereunder. The Tenant shall not be entitled to any compensation for any inconvenience, nuisance or discomfort occasioned thereby unless the Tenant is prevented from carrying on its business in the Leased Premises. SECTION 13 DEFAULT ------- If the Tenant shall be in default of any of its covenants hereunder, the Landlord shall give to the Tenant notice in writing stating that the said default is to be remedied and that if such default is not remedied by the Tenant within thirty (30) days after the receipt of such notice, or such longer period as may be reasonably necessary in view of the nature of the default, the Landlord may, at its option, enter either into and upon the said Leased Premises or any part thereof in the name of the whole, and this Lease shall be terminated, or the Landlord itself may take such steps and do or cause to be done such things as may be necessary to remedy and correct such defaults and may thereupon charge its total reasonable costs and expenses incurred in respect thereof to the Tenant who hereby covenants and agrees to pay the same forthwith and the Tenant hereby covenants that any and all such costs and expenses incurred by the Landlord and unpaid by the Tenant shall be recoverable by the Landlord as if the same were and in the 8 same manner as rental reserved and in arrears under the terms of this Lease. SECTION 14 SPECIAL PROVISIONS ------------------ 14.1 PARKING ------- The Tenant shall have access to and use of, in common with other occupants of the Building, the parking areas associated with the Building. The Landlord shall cooperate with the Tenant to provide an appropriate number of reserved and visitor parking spaces. 14.2 SECURITY -------- The Tenant shall comply with security measures in place for the Building. The Landlord shall consult with Tenant in the establishment or changes to such requirements for the Building including the Leased Premises, provided that any special requirements of the Landlord or the Tenant shall be at such party's costs. 14.3 SHIPPING AND RECEIVING ---------------------- During the Term, the Tenant shall have the non-exclusive right to use the shipping and receiving facilities located in the Building. The Landlord shall cooperate with the Tenant so as to provide satisfactory shipping and receiving services to the Leased Premises. The Tenant shall use the shipping and receiving facilities in such a manner so as to minimize any disruption to the Landlord's operations at the Building. 14.4 SIGNAGE ------- The Tenant shall have the right to install, at its own expense, its signage at the entrance of the Leased Premises, subject to the Landlord's reasonable approval. 14.5 CAFETERIA --------- The Tenant's employees and visitors shall have the use of the cafeteria during its normal business hours. The Tenant shall pay its proportionate share (based on headcount) of any subsidies granted by the Landlord to the cafeteria operator, within ten (10) days of receipt of an invoice therefor from the Landlord. 14.6 JANITORIAL SERVICES ------------------- The Landlord shall provide janitorial services to the Building and the Leased Premises, provided that any special requirements of the Tenant shall be at its sole cost. 9 14.7 MAIL, COURIER SERVICE --------------------- The Landlord shall provide receiving and sorting services for incoming mail and courier to the Building and Leased Premises. The Tenant shall provide for itself as required outgoing mail and courier service. 14.8 HVAC, ELECTRICAL EQUIPMENT -------------------------- The Landlord shall be responsible for the operation, maintenance and repair of all HVAC, mechanical and electrical equipment in or serving the Building. Any such equipment installed by the Tenant after the Commencement Date shall be the Tenant's responsibility. 14.9 OTHER SERVICES -------------- The Landlord shall provide building and land maintenance and repair services, as well as main lobby reception and 24 hour security services in respect of the Building and the Leased Premises. The Tenant shall provide the following services for itself as required: (i) shipping and receiving, (ii) telephone service and maintenance; and (iii) medical services. SECTION 15 MISCELLANEOUS ------------- 15.1 WAIVER ------ The failure of the Landlord or the Tenant to insist upon the strict performance of any covenants and conditions hereof shall not operate as a waiver of the Landlord's or the Tenant's rights hereunder in respect of any continuing or subsequent nonperformance and no waiver shall be inferred from or implied by anything done or omitted by the Landlord or the Tenant, save only an express waiver in writing. 15.2 NOTICES ------- All demands, notices or communications and reports provided for in this Lease will be in writing and will be either sent by facsimile with confirmation to the number specified below or personally delivered or sent by reputable overnight courier service (delivery charges prepaid) to the other party at the address specified below, or at such address, to the attention of such other person, and with such other copy, as the recipient party has specified by prior written notice to the sending party pursuant to the provisions of this section 15.2. If to Tenant at: Northern Telecom United 3 Robert Speck Parkway Mississauga, Ontario, Canada L4Z 3C8 Telecopy: (905) 566-3457 Attn: A. J. Lafleur, Vice President and Associate General Counsel 10 with copies, which do not constitute notice, to: - ----------------------------------------------- Northern Telecom Limited 2920 Matheson Blvd. East. Mississauga, Ontario, Canada L4W 4M7 Telecopy: (905) 238-7096 Attn: Martin A. Macdonald Director of Real Estate If to Landlord at: Cable Design Technologies Corporation 661 Andersen Drive, Foster Plaza 7 Pittsburgh, PA 15220 Telecopy: (412) 937-9690 Attn: Paul M. Olson Chief Executive Officer and Nordx/CDT, Inc. 700 Gardiners Road Kingston, Ontario K7M 3Y1 with copies, which do not constitute notice, to: - ----------------------------------------------- Kirkland & Ellis Citicorp Center 153 East 53rd Street New York, NY 10022-4675 Telecopy: (212) 446-4900 Attn: Charles B. Fromm Any such demand, notice, communication or report will be deemed to have been given pursuant to this Agreement when delivered personally or by means other than facsimile or overnight courier, when confirmed if by facsimile or on the business day after deposit with a reputable overnight courier service, as the case may be. 15.3. ENTIRE AGREEMENT ---------------- This Lease constitutes the entire agreement between the Landlord and the Tenant with respect to the Leased Premises and may not be modified except by subsequent agreement in writing duly signed by the Landlord and the Tenant. Neither the Landlord nor the Tenant shall be bound by any representation, warranty, promise or agreement not contained in this Lease. 15.4 FORCE MAJEURE ------------- Except as provided in section I 1, if and to the extent that any party shall be prevented, delayed or restricted by reason of an act of God, strikes or other labour disputes, or any other cause beyond the 11 reasonable control of the party affected thereby, in the fulfillment of any obligation hereunder, then such party shall be deemed not to be in default in the performance of such covenant or obligation and any period necessary for the performance of such obligation shall be extended accordingly, and the Tenant shall not be entitled to compensation for any loss, inconvenience, nuisance or discomfort thereby occasioned, provided that in no event will the Tenant be relieved of its obligation to pay Rent as it becomes due. 15.5 HEADINGS -------- The headings used in this Lease are for purposes of reference only and will not affect the meaning or interpretation of any provisions of this Lease. 15.6 INTEREST ON ARREARS ------------------- If the Tenant fails to pay Rent when due, the Tenant shall pay interest on the unpaid amount from the due date until the date paid at the annual rate equal to The Royal Bank of Canada's reference rate of interest then in effect for commercial loans in Canada and commonly referred to by such bank as its Canadian "prime rate", plus two percent (2%), without prejudice to and in addition to any other remedy available to the Landlord under this Lease or at law. 15.7 HOLDING OVER ------------ If at the expiration or earlier termination of the Term, the Tenant shall remain in possession without any further written agreement it shall be as a monthly tenant only. In such event, the Rent payable for each month thereafter shall be equal to one hundred and fifty percent (150%) of the Rent payable for the month immediately prior to the expiration of the Term, and all other terms and conditions of this Lease shall remain the same. 15.8 GOVERNING LAW ------------- This Lease shall be governed by and construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein. 12 IN WITNESS WHEREOF the parties have executed this Agreement of Lease as of the date first written above. NORTHERN TELECOM LIMITED Per: /s/Anthony J. Lafleur -------------------------- Anthony J. Lafleur Vice-President and Associate General Counsel Per: /s/Peter G. Kastner -------------------------- Peter G. Kastner Assistant Vice-President Financial Planning & Analysis NORDX/CDT, INC. (FORMERLY CABLE DESIGN TECHNOLOGIES (CDT) CANADA INC.) Per: /s/Kenneth O. Hale -------------------------- Kenneth O. Hale Vice-President 13 EX-10.23 6 AMENDMENT TO MOHAWK LEASE EXHIBIT 10.23 1996 AMENDMENT OF LEASE ----------------------- This 1996 Amendment of Lease dated as of September 3, 1996 between Stephen C. Rice and H. Brune Levering, as Trustees of 9 Mohawk Drive Realty Trust ("Landlord") and Cable Design Technologies Inc. "CDT"), formerly known as Intercole Inc. and doing business as Mohawk Wire and Cable Corporation ("Tenant"). W I T N E S S E T H: WHEREAS, Landlord and Mohawk Wire and Cable Corporation entered into a lease dated March 24, 1986 (the "Lease") as amended by Notice of Amendment to Lease dated July 20, 1989 wherein Landlord leased to Tenant the premises in Leominster, Massachusetts consisting of 9.66 acres of land (the "Land") more particularly described in Exhibit "Legal Description" attached hereto and the --------------------------- 118,440 square foot building (the "Building") located thereon (the Land and Building are collectively referred to as the "Property"); and WHEREAS, pursuant to that certain Amendment of Lease dated August 18, 1993 between Landlord and Tenant, and that certain Confirmatory Amendment of Lease dated as of December 1, 1993 between Landlord and Tenant, Landlord constructed two additions adding a total of 40,000 square feet to the Building (the Building with said two additions being referred to herein as the "1994 Building"); and WHEREAS, the parties desire to further expand the Building by Landlord's construction of a third addition comprising 42,880 square feet (the "Addition"), to add the Addition to the Property demised under the Lease, and to modify the Base Rent, Lease Term and certain other terms of the Lease; NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which the parties hereby acknowledge, the parties agree as follows: 1. Landlord shall commence construction of the Addition promptly upon completion of the closing of the financing for the same. Landlord anticipates that construction shall commence on or about September 15, 1996 but in no event (except by reason of force majeure) shall construction commence later than September 30, 1996. 2. Landlord shall construct the Addition (the "Work") substantially in accordance with the plans and specifications referenced in Exhibit "Addition ----------------- Plans and Specifications" attached hereto. The Work contemplated by the - ------------------------- Addition Plans and Specifications shall be performed in a good and workmanlike manner using new materials and in compliance with all laws, ordinances and regulations (including without limitation applicable building and zoning codes). Landlord anticipates that said construction shall be completed within five months of the commencement thereof. Landlord shall use commercially reasonable best efforts to complete said construction within said five-month period. 3. Landlord shall have the right of access to the Property to perform the construction of the Addition (including, without limitation, the right to take all material into and upon the Property that may be required to complete the Work). Landlord may, upon reasonable advance notice, temporarily use discrete portions of the Property to the extent reasonably necessary to perform the Work or to ensure the safety of Tenant's personnel and may, from time to time, but only when reasonably necessary and not less than 24 hours prior notice to Tenant, temporarily stop the supply of certain utilities and services referenced in Section 4.03 of the Lease; provided, however, Landlord shall not unreasonably interfere with the normal conduct of Tenant's business and Tenant's use and occupancy of the Property. Tenant shall reasonably cooperate with Landlord in order to permit the Work to proceed without delays or interference. In determining the extent of the Landlord's aforementioned access to the Property and Tenant's obligation to cooperate therewith, due regard shall be given to the nature and scope of the Work and that such work is expressly contemplated by the parties hereto. 4. Effective upon the earlier of "substantial completion" of the Addition or the use and occupance thereof by Tenant for business purposes (said earlier date being referred to herein as the "Addition Completion Date"), the Lease shall be deemed amended as follows, without the necessity of any further amendment thereof: A. The figure "158,440" is deleted from Section 1.04 and the figure "201,320" is substituted therefor. B. Section 1.05 is deleted and there is substituted therefor the following: "Section 1.05 LEASE TERM: The period (sometimes referred to herein as the "Original Term") commencing on March 24, 1986 and ending on the day preceding the tenth anniversary of the Addition Completion Date (as defined in the 1996 Amendment of Lease), subject to Tenant's Options to Extend as set forth in this Lease." C. Subparagraph (a) of Section 1.13 is deleted and there is substituted therefor the following: -2- "(a) BASE RENT (being the total of (1) and (2) below: (1) For the space included in the 1994 Building: Forty-Four Thousand ------------------------------------------- Two Hundred Thirty-One and 00/100 Dollars ($44,231.00) per month, said amount to be increased, commencing on January 1, 1999, for the balance of the Original Term in accordance with the increase in the United States Department of Labor, Bureau of Labor Statistics, Consumer Price Index for Urban Wage Earners and Clerical Workers (all items for the Boston, Massachusetts Statistical Area on the basis of 1987=100 (the "Index"), as provided in Section 3.02, provided, however, that in no event shall the Base Rent for the period from January 1, 1999 through the balance of the Original Term be less than Forty-Nine Thousand Five Hundred Twelve and 00/100 Dollars ($49,512.00) per month. (1) For the space included in the Addition: Eleven Thousand Nine -------------------------------------- Hundred Seventy and 00/100 Dollars ($11,970.00) per month, said amount to be increased, commencing on the fifth anniversary of the Addition Completion Date, for the balance of the Original Term in accordance with the increase in the United States Department of Labor, Bureau of Labor Statistics, Consumer Price Index for Urban Wage Earners and Clerical Workers (all items for the Boston, Massachusetts Statistical Area on the basis of 1987=100 (the "Index"), as provided in Section 3.02, provided, however, that in no event shall the Base Rent for the period from the fifth anniversary of the Addition Completion Date through the balance of the Original Term be less than Thirteen Thousand Four Hundred and 00/100 ($13,400.00) per month." The term "the 1994 Building" and the term "the Addition" shall have the meanings set forth in the 1996 Amendment of Lease. D. Section 3.02 is amended by deleting the first sentence thereof and substituting the following: "The Base Rent shall be increased at the times specified in Paragraph 1.13(a) above, in proportion to the increase in the Index -3- which has occurred, (i) in the case of Base Rent for the 1994 Building, between January 1, 1994 and the month in which the rent is to be increased, and (ii) in the case of the Base Rent for the Addition, between the month in which the Addition Completion Date shall occur and the month in which the rent is to be increased." E. Clause 4 on page 2A is deleted and there is substituted therefor the following: "Notwithstanding the foregoing, the Base Rent for the 1994 Building and the Base Rent for the Addition, as increased in accordance with this Section 3.02, shall not in any event be at a rate less than #3.75 per square foot per year." F. The term "substantial completion" as used herein shall mean completion of the Work to be performed by Landlord pursuant to Exhibit "Addition Plans and --------------------------- Specifications" and the issuance of a certificate of occupancy (or its - -------------- equivalent) for the Addition by the appropriate governmental authorities with the exception of: (a) minor punch list items (the "Punch List Items") which can be fully completed without material interference with the use of the Addition by Tenant for the Permitted Uses referred to in Section 1.06 of the Lease and Tenant's actual and intended use of the Property and the Addition, provided that the Punch List Items are completed within thirty (30) days after the Addition Completion Date, and (b) other items which, because of the season or weather or the nature of the item, are not practicable to do at the time and the absence of which do not interfere with Tenant's actual and intended use of the Property and the Addition. Landlord shall achieve substantial completion of the Addition on or before April 30, 1997, except by reason of force majeure. If Landlord fails to achieve substantial completion by such date and is not diligently prosecuting the completion of the Addition, Tenant may, upon written notice to Landlord given not later than May 10, 1997, terminate this 1996 Amendment of Lease and Tenant shall have no further obligation or liability under the 1996 Amendment of Lease nor right to occupy the Addition. Upon achieving substantial completion, Landlord shall assign to Tenant any warranties (including without limitation the roof warranty) provided to Landlord by any subcontractors performing the Work or manufacturers supplying materials to complete the Work. 5. No trustee of 9 Mohawk Drive Realty Trust shall be personally liable hereunder, it being understood that execution -4- of this document by any such Trustee is in its capacity as a Trustee of said Trust, and not in its individual capacity. EXECUTED as a sealed instrument as of the date and year first above written. LANDLORD: -------- /s/ H. Brune Levering ----------------------------------------------- H. Brune Levering, as Trustee of 9 Mohawk Drive Realty Trust, for self and Co-Trustee, but not individually TENANT: ------ CABLE DESIGN TECHNOLOGIES INC., doing business as Mohawk Wire and Cable Corporation By: /s/ Barry Gelf ------------------------------------------ Its: E. V. P. ------------------------------------- hereunto duly authorized -5- EXHIBIT ------- Legal Description That certain parcel of land, together with the buildings and improvements thereon, situated in Leominster, Worcester County, Massachusetts, as shown on a plan of land entitled "Plan of Land in Leominster, Mass." dated December 8, 1979, by Hayes Engineering, Inc., Civil Engineers and Land Surveyors, recorded with Worcester Northern District Registry of Deeds in Plan Book 238, Page 16, bounded and described as follows: Commencing at a point at the intersection of Nashua Street and Mohawk Drive as shown on said plan, thence South 53 degrees 15' 47" West by Mohawk Drive as shown on said plan four hundred and eight and 32/100 (408.32) feet; thence by a curve to the right with a radius by Scott Drive as shown on said plan of twenty feet an arc distance of thirty and 56/100 (30.56) feet; thence North 39 degrees 10' 29" West by said Scott Drive and by other land of owners unknown, as shown on said plan, seven hundred eighty seven and 94/100 (787.94) feet and eighty nine and 73/100 (89.73) feet, respectively; thence North 50 degrees 49' 31" East by land of owners unknown four hundred and fifty and 00/100 (450.00) feet; thence South 39 degrees 10' 29" East by State Highway Route 2 four hundred eighty nine and 73/100 (489.73) feet; thence South 77 degrees 40' 07" East by said State Highway Route 2 one hundred seventy seven and 14/100 (177.14) feet; thence By a curve to the left with a radius by Nashua Street ninety nine and of eight hundred and fifty feet 39/100 (99.39) feet; thence South 24 degrees 10' 19" West by said Nashua Street sixty and 88/100 (60.88) feet; thence -6- South 31 degrees 48' 13" East by said Nashua Street one hundred seventy eight and 67/100 (178.67) feet to the point of beginning. There is appurtenant to the above described premises the right to pass and repass in common with others over said Mohawk Drive by vehicles or on foot. -7- EXHIBIT ------- Addition Plans and Specifications A. Plans prepared by Hayes Engineering, Inc., consisting of the following sheets: 1. Locus Plan Revision Date 7/12/96 2. Site Plan Revision Date 7/12/96 B. Plans prepared by BKA Associates, consisting of the following sheets: 1. A1 Floor Plan Schedules & Notes 8/19/96 2. A2 Office Floor Plan 8/19/96 3. A3 Office Reflect. Ceiling Plan 8/19/96 4. A4 Roof Plan & Details 8/19/96 5. A5 Exterior Elevations 8/19/96 6. A6 Building Sections 8/19/96 7. A7 Wall Sections 8/19/96 8. A8 Wall Sections 8/19/96 9. A9 Schedules & Details 8/19/96 10. S-1 Foundation Plan and Sections 8/08/96 11. S-2 Roof Framing Plan and Sections 8/08/96 12. S-3 General Notes and Typical Details 8/08/96 C. Construction Specifications for Mohawk Wire and Cable, 9 Mohawk Drive, Leominster, MA, dated August 19, 1996, the index of which is attached hereto. -8- EX-10.24 7 FIRST AMENDMENT TO CREDIT AGREEMENT EXHIBIT 10.24 FIRST AMENDMENT TO SECOND AMENDED AND RESTATED LOAN AGREEMENT ------------------------------------------------------------- This First Amendment to Second Amended and Restated Loan Agreement is made as of this 31st day of July, 1996 by and among: CABLE DESIGN TECHNOLOGIES CORPORATION, a Delaware corporation (the "Parent"); and CABLE DESIGN TECHNOLOGIES, INC., a Washington corporation and wholly owned subsidiary of Parent (the "US Borrower"); and NORDX/CDT, INC., a corporation incorporated under the federal laws of Canada (the "CAN Borrower"); The LENDERS and other financial institutions parties hereto (individually, a "Lender" and collectively, the "Lenders"); and THE FIRST NATIONAL BANK OF BOSTON, BANQUE PARIBAS, CHICAGO BRANCH, PARIBAS BANK OF CANADA, BANK OF AMERICA ILLINOIS AND BANK OF AMERICA CANADA, as Agents for the Lenders (in such capacity, the "Agents") in consideration of the mutual covenants herein contained and the benefits to be derived herefrom. W I T N E S S E T H: ------------------- WHEREAS, on February 5, 1996, the Parent, the US Borrower, the CAN Borrower, the Lenders and the Agents entered into a Second Amended and Restated Credit Agreement pursuant to which revolving credit and term loan facilities were established in favor of the US Borrower and the CAN Borrower; and WHEREAS, the parties desire to amend the Agreement on the terms set forth herein. NOW, THEREFORE, it is hereby agreed as follows: 1. All capitalized terms used herein and not otherwise defined shall have the same meaning herein as in the Agreement. 2. The definition of "CAN Borrowing Base" is hereby amended by adding the following after the words "and its Subsidiaries" appearing in clause (b) in the fifth line of such definition: "and Nordx/CDT Corp." 3. The definition of "US Borrowing Base" is hereby amended by adding the following after the words "and its Domestic Subsidiaries" appearing in clause (b) in the fifth line of such definition: "(other than Nordx/CDT Corp.)" 4. The definition of "Discretionary Capex" is hereby amended by adding the following new subparagraphs at the end thereof: "and (e) in a sum not to exceed US$865,000.00 for the purchase of certain wire and cable machinery from American Telephone and Telegraph Company; and (f) in a sum not to exceed US$2,750,000.00 for the purchase or lease of a building for Raydex/CDT's operations in Littleborough, England." 5. The provisions of Section 12.1(a) of the Agreement are hereby amended by deleting the following language which appears immediately after "(B)" on page 105 of the Agreement: "a report of sales and operating profit by division or operating unit; and (C)" 6. The provisions of Section 12.1(l) of the Agreement are hereby amended by o adding the following at the end of each of clauses (i) and (ii) thereof: provided, however, that for the Fiscal Year commencing August 1, 1996 only, such forecast shall be furnished not later than September 30, 1996; o deleting the words "a projection of the sales and operating profit by division and operating unit and" appearing in clause (iii) thereof. 7. The provisions of Section 12.17 of the Agreement are hereby deleted in their entirety. 8. The provisions of (S)13.1 of the Agreement are hereby amended by deleting the number .025 appearing in the "Amount" column for each "Period", and substituting in its stead the number .030. 9. The provisions of (S)13.2 of the Agreement are hereby amended by adding the following new subparagraph: "(g) Liens upon any Real Estate or machinery and equipment of any Domestic Subsidiary which is an Acquired -2- Person, which Liens secure DS Assumed Debt and were outstanding at the time of the Acquisition." 10. The provisions of (S)13.3(i) of the Agreement are hereby amended by adding the words "(including letters of credit)" immediately after the word "lines" appearing as the first word in the second line thereof. 11. The provisions of (S)13.4(f) of the Agreement are hereby amended by adding the following at the end thereof: "and Investments of CDT International in the stock of the CAN Borrower evidenced by the contribution of cash and property described in Schedule 13.4(f) hereof;" 12. The provisions of (S)13.4(p) of the Agreement are hereby amended by adding the following at the end thereof: ", other than Investments of property described in Schedule 13.4(f) hereof;" 13. The provisions of (S)13.4(g) of the Agreement are hereby amended by adding the following at the end thereof: "and Investments by the Parent or the US Borrower in Noslo Limited evidenced by the contribution of the capital stock of NEK Kabel AB to Noslo Limited;" 14. The provisions of (S)13.5 of the Agreement are hereby amended by adding the following new subparagraphs: "(m) any transfer of assets from the Parent to the US Borrower or the US Borrower to any Domestic Subsidiary, or the CAN Borrower to any of the CAN Borrower's Subsidiaries; (n) the transfer by the US Borrower or the Parent of the capital stock of NEK Kabel AB to Noslo Limited; (o) the transfer of the capital stock of Noslo Limited from the Parent to CDT International." 15. Schedule 15.1(d) to the Agreement is hereby amended by deleting NEK Kabel AB as a Subsidiary of CDT International and including it as a Subsidiary of Noslo Limited. 16. The Agreement is hereby amended by adding thereto Schedule 13.4(f) in the form annexed hereto. 17. The Agents and the Lenders acknowledge and agree that the stock of NEK Kabel AB is not considered a "material portion -3- of the Collateral" for purposes of clause (ii) to the sixth provision of (S)16.2(c) of the Agreement. 18. Except as provided herein, all terms and conditions of the Agreement remain in full force and effect. IN WITNESS WHEREOF, the parties have hereunto set their hands and seals as of the date first above written. CABLE DESIGN TECHNOLOGIES CORPORATION By: /s/Kenneth O. Hale ---------------------- Name: Kenneth O. Hale Title: Vice President CABLE DESIGN TECHNOLOGIES, INC. By: /s/Kenneth O. Hale ---------------------- Name: Kenneth O. Hale Title: Vice President NORDX/CDT, INC. By: /s/Kenneth O. Hale ---------------------- Name: Kenneth O. Hale Title: Vice President THE FIRST NATIONAL BANK OF BOSTON, AS AGENT AND US LENDER By: /s/Maura C. Wadlinger ---------------------- Name: Maura C. Wadlinger Title: Vice President -4- BANQUE PARIBAS, CHICAGO BRANCH, AS AGENT AND US LENDER By: /s/Mark A. Radzik --------------------- Name: Mark A. Radzik Title: Vice President PARIBAS BANK OF CANADA, AS AGENT AND CAN LENDER By: /s/Michael Gosselin ---------------------- Name: Michael Gesselin Title: Vice President BANK OF AMERICA ILLINOIS, AS AGENT AND US LENDER By: /s/Sandra S. Ober --------------------- Name: Sandra S. Ober Title: Vice President BANK OF AMERICA CANADA, AS AGENT AND CAN LENDER By: /s/Stephen Baker -------------------- Name: Stephen Baker Title: Vice President FLEET NATIONAL BANK, AS US LENDER By: /s/Mark A. Siegel --------------------- Name: Mark A. Siegel Title: Assist. Vice President -5- GIRO-CREDIT BANK, AS US LENDER By: /s/Timothy Dailender --------------------- /s/John Redding ----------------- Name: Timonthy Dailender/ John Redding Title: Asst. Vice President Vice President THE BANK OF NOVA SCOTIA, AS CAN LENDER By: /s/F. Carone ---------------- Name: F. Carone Title: Account Manager HARRIS TRUST AND SAVINGS BANK, AS US LENDER By: /s/John M. Dillon ------------------ Name: John M. Dillon Title: Vice President BANK OF MONTREAL, AS CAN LENDER By: /s/Lester Fernandes ---------------------- Name: Lester Fernandes Title: Managing Director LaSALLE NATIONAL BANK, AS US LENDER By: ---------------------- Name: ---------------------- Title: ---------------------- -6- ABN-AMRO BANK OF CANADA, AS CAN LENDER By: /s/R. Dupuis ------------- /s/B. Marchand --------------- Name: R. Dupuis B. Marchand Title: Vice President Assistant Vice President MELLON BANK, N.A., AS US LENDER By: /s/Mark T. Latterner ----------------------- Name: Mark T. Lutterner Title: Assist. Vice President MELLON BANK (CANADA), AS CAN LENDER By: /s/Joseph L. Cavanaugh ---------------------- Name: Joseph L. Cavanaugh Title: Vice President NATIONAL BANK OF CANADA, AS US LENDER By: /s/Donald P. Haddad ----------------------- Name: Donald P. Haddad Title: Vice President NATIONAL BANK OF CANADA, AS CAN LENDER By: /s/William Goseland -------------------- Name: William Goseland Title: Manager 131634.5 -7- EX-10.25 8 SECOND AMENDMENT TO CREDIT AGREEMENT EXHIBIT 10.25 SECOND AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT ---------------------------------------------------------------- This Second Amendment to Second Amended and Restated Credit Agreement is made as of this 31st day of July, 1996 by and among: CABLE DESIGN TECHNOLOGIES CORPORATION, a Delaware corporation (the "Parent"); and CABLE DESIGN TECHNOLOGIES INC., a Washington corporation and wholly owned subsidiary of Parent (the "US Borrower"); and NORDX/CDT, INC., a corporation incorporated under the federal laws of Canada (the "CAN Borrower"); The LENDERS and other financial institutions parties hereto (individually, a "Lender" and collectively, the "Lenders"); and THE FIRST NATIONAL BANK OF BOSTON, BANQUE PARIBAS, CHICAGO BRANCH, PARIBAS BANK OF CANADA, BANK OF AMERICA ILLINOIS AND BANK OF AMERICA CANADA, as Agents for the Lenders (in such capacity, the "Agents") in consideration of the mutual covenants herein contained and the benefits to be derived herefrom. W I T N E S S E T H: ------------------- WHEREAS, on February 5, 1996, the Parent, the US Borrower, the CAN Borrower, the Lenders and the Agents entered into a Second Amended and Restated Credit Agreement pursuant to which revolving credit and term loan facilities were established in favor of the US Borrower and the CAN Borrower as amended by a certain First Amendment to Second Amended and Restated Credit Agreement dated as of July 31, 1996 (the "Agreement"); and WHEREAS, the parties desire to amend the Agreement on the terms set forth herein. NOW, THEREFORE, it is hereby agreed as follows: 1. All capitalized terms used herein and not otherwise defined shall have the same meaning herein as in the Agreement. 2. Section 13.18 of the Agreement is hereby amended to read as follows: (S)13.18. CAN Plans. (a) Cause, allow or permit any CAN Plan to be --------- other than duly qualified and administered in all material respects in compliance with all applicable laws (including regulations, orders and directives) and the terms of the CAN Plan and any agreements relating thereto, (b) cause, allow or permit any CAN Plan to have any material unfunded liability or contribution due and not paid which does or is capable of giving rise to any trust or Lien, (c) fail to ensure that all amounts required to be paid by it under or in connection with any CAN Plan are paid when due and, notwithstanding the foregoing, that written notice is provided to the CAN Collateral Agent of any amount due and unpaid under or in connection with any CAN Plan, (d) cause, allow or permit any liability upon it or Lien on any of its Property to arise in respect of any CAN Plan, (e) cause, allow or permit any Termination Event to occur in respect of any CAN Plan which could reasonably be expected to have a Material Adverse Effect on the Parent and its Subsidiaries, (f) make any payments in respect of any CAN Plan in excess of any minimum amounts required to be made by law and the terms of the CAN Plan, (g) after the Closing Date, except as contemplated under the Bigfoot Acquisition Agreement, amend or create any CAN Plan, if the result thereof is to increase the payment obligations in respect of any CAN Plan or the amounts of any solvency deficiencies or liabilities on wind up (in whole or in part) of any CAN Plan which could reasonably be expected to have a Material Adverse Effect on the Parent and its Subsidiaries, (h) maintain any new trust accounts for payments or contributions in respect of any CAN Plan other than those opened initially in connection with the CAN Plans in substitution for existing trust accounts or as required in connection with any new or amended CAN Plan, and (i) fail to ensure that all contributions in respect of any CAN Plan are actually paid to the trustee under such CAN Plan prior to the date when due except to the extent no Material Adverse Effect would result. The CAN Borrower hereby irrevocably directs the trustee under the CAN Plans to apply an appropriate amount of any current credits then existing to reduce and eliminate (to the extent of available surpluses under the CAN Plans) any CAN Plan contributions or payments not made by the Parent or its Subsidiaries when due. 3. Section 15.19 of the Agreement is hereby amended to read as follows: (S)15.19. CAN Plans. (a) All CAN Plans, which will be maintained by the --------- Parent or its Subsidiaries, are consistent with those maintained by the seller under the Bigfoot Purchase Agreement, with such changes negotiated by the CAN Borrower; (b) no CAN Plan which is a registered pension plan has been terminated (in whole or in part) nor have any proceedings been instituted or threatened to terminate (in whole or in part) any such CAN Plan; (c) neither the Parent nor any -2- of its Subsidiaries has ceased to participate (in whole or in part) as a participating employer in any CAN Plan which is a registered pension plan; (d) except as disclosed in EXHIBIT 15.19, neither the Parent nor any of its Subsidiaries has any material unfunded liability (including contingent unfunded liability) on wind up (in whole or in part) to any CAN Plan which is a registered pension plan or any solvency deficiency in any such CAN Plan; (e) except as disclosed in EXHIBIT 15.19, neither the Parent nor any of its Subsidiaries has any material liability in respect of any CAN Plan other than for required insurance premiums or contributions or remittances which have been paid, contributed and remitted when due; (f) all contributions have been made to the CAN Plans as required by law or the terms thereof to be made when due and neither the Parent nor any of its Subsidiaries is in arrears in the payment of any contribution, payment, remittance or assessment or in default in filing any reports, returns, statements and similar documents in respect of the CAN Plans required to be made or paid pursuant to any CAN Plan, any law, act, regulation, directive or order or any employment, union, pension, deferred profit sharing, benefit, bonus or other similar agreement or arrangement, except to the extent no Material Adverse Effect would result; (g) neither the Parent nor any of its Subsidiaries is liable or, to the best of its knowledge, alleged to be liable, to any employee or former employee, director or former director, officer or former officer resulting from any violation or alleged violation of any CAN Plan which is a registered pension plan, any fiduciary duty, any law or agreement in relation to any such CAN Plan and, except as disclosed in EXHIBIT 15.19, does not have any unfunded pension or like obligations or solvency deficiency (including any past service or experience deficiency funding liabilities), other than accrued obligations not yet due, for which it has made full provision in its books and records; (h) without limiting the foregoing, all of the CAN Plans are, and have been since their inception, administered in all material respects in accordance with their terms and all applicable laws and are duly registered where required by, and are in compliance and good standing in all material respects under, all applicable laws, acts, statutes, regulations, orders, directives and agreements, including, without limitation, the Income Tax Act of -------------- Canada, and the Pension Benefits Act of Ontario, any successor -------------------- legislation thereto, and other applicable laws of any jurisdiction, and (i) except for claims for benefit payments in the normal course, there are no outstanding or pending or threatened investigations, claims, suits or proceedings in respect -3- of any CAN Plans (including to assert rights or claims to benefit payment other than in the normal course or that could give rise to any material liability). 4. The Lenders hereby waive any Events of Default under Sections 13.18 and 15.19 of the Credit Agreement as a result of the CAN Borrower's failure to pay approximately CD $970,000.00 in monthly contributions in connection with the CAN Plans. 5. Except as provided herein, all terms and conditions of the Agreement remain in full force and effect. IN WITNESS WHEREOF, the parties have hereunto set their hands and seals as of the date first above written. CABLE DESIGN TECHNOLOGIES CORPORATION By: /s/Kenneth O. Hale ---------------------- Name: Kenneth O. Hale Title: Vice President CABLE DESIGN TECHNOLOGIES INC. By: /s/Kenneth O. Hale ---------------------- Name: Kenneth O. Hale Title: Vice President NORDX/CDT, INC. By: /s/Kenneth O. Hale ---------------------- Name: Kenneth O. Hale Title: Vice President -4- THE FIRST NATIONAL BANK OF BOSTON, AS AGENT AND US LENDER By: /s/Maura Wadlinger -------------------------- Name: Maura Wadlinger Title: Vice President BANQUE PARIBAS, CHICAGO BRANCH, AS AGENT AND US LENDER By: /s/Mark A. Radzik --------------------- Name: Mark A. Radzik Title: Vice President PARIBAS BANK OF CANADA, AS AGENT AND CAN LENDER By: /s/Michael Gosselin ----------------------- Name: Michael Gesselin Title: Vice President BANK OF AMERICA ILLINOIS, AS AGENT AND US LENDER By: /s/Sandra S. Ober --------------------- Name: Sandra S. Ober Title: Vice President BANK OF AMERICA CANADA, AS AGENT AND CAN LENDER By: /s/Stephen Baker -------------------- Name: Stephen Baker Title: Vice President -5- FLEET NATIONAL BANK, AS US LENDER By: /s/Mark A. Siegel --------------------- Name: Mark A. Siegel Title: Assist. Vice President GIRO-CREDIT BANK, AS US LENDER By: /s/Timothy Dailender --------------------- /s/John Redding --------------------- Name: Timonthy Dailender/ John Redding Title: Asst. Vice President Vice President BANK OF NOVA SCOTIA, AS CAN LENDER By: /s/F. Carone ------------- Name: F. Carone Title: Account Manager HARRIS TRUST AND SAVINGS BANK, AS US LENDER By: /s/John M. Dillon ------------------ Name: John M. Dillon Title: Vice President BANK OF MONTREAL, AS CAN LENDER By: /s/Lester Fernandes -------------------- Name: Lester Fernandes Title: Managing Director -6- LaSALLE NATIONAL BANK, AS US LENDER By: __________________________ Name: ________________________ Title: _______________________ ABN-AMRO BANK OF CANADA, AS CAN LENDER By: /s/R. Dupuis ------------- /s/B. Marchand --------------- Name: R. Dupuis B. Marchand Title: Vice President Assistant Vice President MELLON BANK, N.A., AS US LENDER By: /s/Mark Latterner ------------------ Name: Mark Latterner Title: Assistant Vice President MELLON BANK (CANADA), AS CAN LENDER By: /s/Joseph L. Cavanaugh ---------------------- Name: Joseph L. Cavanaugh Title: Vice President NATIONAL BANK OF CANADA, AS US LENDER By: /s/Donald P. Haddad -------------------- Name: Donald P. Haddad Title: Vice President Manager -7- NATIONAL BANK OF CANADA, AS CAN LENDER By: /s/William Goseland -------------------- Name: William Goseland Title: Manager 174733.2 -8- EX-11.1 9 COMPUTATION OF EARNINGS PER SHARE EXHIBIT 11.1 CABLE DESIGN TECHNOLOGIES CORPORATION COMPUTATION OF EARNINGS PER SHARE (Thousands, except per share amounts)
Year Ended July 31, -------------------------------------- 1996 1995 1994 ----------- ----------- ----------- Primary: Income before extraordinary items $ 15,881 $ 14,713 $ 10,138 Extraordinary loss (596) ---- (3,998) ----------- ----------- ----------- Net income $ 15,285 $ 14,713 $ 6,140 =========== =========== =========== Average number of shares of common stock outstanding 15,977,334 14,582,915 12,896,418 Assumed exercise of stock options and warrants 2,649,453 2,499,635 2,586,678 ----------- ----------- ----------- Total shares 18,626,792 17,082,550 15,483,096 =========== =========== =========== Primary earnings before extraordinary items per common share $ 0.85 $ 0.86 $ 0.65 Primary loss from extraordinary items (0.03) ---- (0.25) ----------- ----------- ----------- Primary earnings per common share $ 0.82 $ 0.86 $ 0.40 Year Ended July 31, -------------------------------------- 1996 1995 1994 ----------- ----------- ----------- Fully Diluted: Income before extraordinary items $ 15,881 $ 14,713 $ 10,138 Extraordinary loss (596) (3,998) ----------- ----------- ----------- Net income $ 15,285 $ 14,713 $ 6,140 =========== =========== =========== Average number of shares of common stock outstanding 15,977,339 14,582,915 12,896,418 Assumed exercise of stock options and warrants 2,649,453 2,589,933 2,640,126 ----------- ----------- ----------- Total shares 18,626,792 17,172,848 15,536,544 =========== =========== =========== Fully Diluted earnings before extraordinary items per common share $ 0.85 $ 0.86 $ 0.65 Fully Diluted loss from extraordinary items (0.03) ---- (0.25) ----------- ----------- ----------- Fully Diluted earnings per common share $ 0.82 $ 0.86 $ 0.40
EX-13.1 10 1996 ANNUAL REPORT TO STOCKHOLDERS EXHIBIT 13.1 CDT 1996 Annual Report connectivity [Photo of Electronic wire and cable on reels.] [Photo of Room with person watching computer monitors.] [Photo of Montage of electronic wire and cables computer and digital readouts.] [Photo of Offshore oil platform.] [Photo of Spray of fiber optic conductors.] [Photo of Video camera.] [Logo of CDT] cable design technologies annual report 1996 company profile [Photo of Modern office building.] [Photo of High performance multiconductor cable test equipment.] [Photo of Factory floor with various cable manufacturing equipment] [Photo of Man working in network communications wiring closet.] [Photo of Array of various electronic wire and cable products.] [Photo of Factory floor with various cable manufacturing equipment.] cable design technologies is a leading designer and manufacturer of technologically advanced electronic data transmission cables for network, computer interconnect, and automation, sound & safety applications. Its NORDX/CDT subsidiary is a supplier of complete voice and data wiring solutions, telecommunications distribution cables, the DynaTraX(TM) automated electronic cross-connect switch, fiber optic solutions and other components required to build high performance telecommunications infrastructures. table of contents 1 Financial Summary 2 Letter to Stockholders 4 Network Structured Wiring Products 5 Automation, Sound & Safety Products 6 Computer Interconnect Products 7 Communications/Multimedia Products 8 NORDX/CDT 9 Management's Discussion and Analysis 14 Report of Independent Public Accountants 15 Consolidated Financial Statements 39 Selected Historical Consolidated Financial Data 40 Directors, Officers and Corporate Information Foldout Operations at a Glance 1 ----------------- financial summary financial summary (Dollars in thousands, except per share information)
Income Statement Data: 1996/1/ 1995 - -------------------------------------------------------------------------------- Sales $ 357,352 $188,941 - -------------------------------------------------------------------------------- Gross profit 111,819 63,164 Gross margin 31.3% 33.4% - -------------------------------------------------------------------------------- Operating profit 31,527/2/ 29,613 Operating margin 8.8% 15.7% - -------------------------------------------------------------------------------- Income before extraordinary items 15,881 14,713 Income per common share before extraordinary items .85 .86 - -------------------------------------------------------------------------------- Net income 15,285/3/ 14,713 Net income per common share .82 .86 - -------------------------------------------------------------------------------- Balance Sheet Data: - -------------------------------------------------------------------------------- Total assets $ 320,105 $118,976 Current assets 208,456 74,341 Long-term debt (excluding current maturities) 73,068 52,696 Stockholders' equity 165,457 31,865 - --------------------------------------------------------------------------------
/1/Includes the post-acquisition results of businesses acquired during fiscal year 1996. /2/Includes $16.7 million of non-recurring charges, see Note 19 to the Financial Statements. Excluding these non-recurring charges, the operating margin was 13.5%. /3/Excluding non-recurring and extraordinary charges, net income and net income per common share for fiscal year 1996 would have been $26.4 million and $1.42, respectively. - -------------------------------------------------------------------------------- more than a decade of growth. . . [Chart with background of various pictures displayed on cover and inside cover. Chart title: more than a decade of growth. Data points: Sales, in millions: 1985 $27.1 and 1996 $357.4. Chart x-axis is years 1985 through 1996 with diagonal line connecting the 1985 and 1996 data points.] 2 - ---------------------- letter to stockholders Dear Fellow Stockholders: By any measure, fiscal 1996 was a landmark year for CDT. Sales rose 89.1% to $357.4 million, while net income, excluding non- recurring and extraordinary charges, jumped 79.5% to $26.4 million. We completed a highly successful common stock offering, split the stock 3-for-2 and by fiscal year-end our stock price had appreciated 95%. And that's only half the story. In fiscal 1996 we continued our aggressive acquisition strategy and completed five acquisitions including the purchase in February 1996 of Northern Telecom Limited's structured wiring and communications cable businesses. This new Canadian subsidiary -- NORDX/CDT -- will be discussed in greater detail later in this report, however, it is important to highlight what it brings to our Company. As a result of the NORDX/CDT purchase we have doubled our revenues, added outstanding senior managers and gained one of the industry's most comprehensive R&D facilities. We now have over 2,000 new products that will allow us to offer customers complete, certified network systems installations. In August 1995 we purchased Cole-Flex Corporation and combined it with Manhattan/CDT, adding the competitive advantage of tubing and sleeving to our product lines and distribution capabilities. In September we acquired the British-based Raydex Cable Division of Volex Group p.l.c., which expanded sales in the European market of specialty cable for network, CATV, military and industrial applications. In June 1996 we purchased Denmark-based Cekan A/S, a manufacturer of high performance telecommunications connectors, and in July we acquired X-Mark Industries, a highly regarded manufacturer of specialized metal enclosures for network systems. Concurrent with our common stock offering, CDT negotiated a new $200 million credit agreement. As a result of the common stock offering and after the acquisition of five businesses in fiscal 1996, we ended the fiscal year with a stronger balance sheet than a year ago. At July 31, 1996, CDT had over 2,100 employees and approximately 2.3 million square feet of manufacturing space and warehousing facilities. We have emerged as a true industry leader in the specialty cable and connectivity markets worldwide. [Graphic of Background is picture of spray of optic conductors. Data +89%. Caption: sales.] RESULTS . . . Net sales for the fiscal year ended July 31, 1996 were a record $357.4 million versus $188.9 million for fiscal 1995 with the addition of sales by CDT's recently acquired NORDX/CDT, Raydex/CDT, X-Mark/CDT and Cekan/CDT operations. Operating income, excluding certain non-recurring charges, was $48.3 million compared to $29.6 million in fiscal 1995. Net income, excluding non- recurring and extraordinary charges, was $26.4 million ($1.42 per share) compared to net income of $14.7 million ($0.86 per share) in fiscal 1995. Net income for fiscal 1996, including non-recurring and extraordinary charges, was $15.3 million ($0.82 per share). Results for fiscal 1996 reflect increased profits in three of our primary business groups: network structured wiring; automation, sound & safety; and communications/multimedia products. Sales outside of North America 3 ---------------------- letter to stockholders rose 191.4%, including acquisitions, especially at Raydex/CDT (United Kingdom) and NEK/CDT (Sweden) where the addition of high-speed production equipment and capacity expansions were completed during the year. A disruption in the Level 5 Teflon(R) FEP plenum cable marketplace during the third and fourth quarters and the unusual drop in copper prices, precipitated by the Sumitomo situation in June 1996, negatively impacted fiscal 1996 earnings. [Graphic Background is earth picture with electronic cable around it. Data: +65%. Caption: Earnings per Share**] WORLDWIDE EXPANSION . . . Global demand for information and higher speed communication links are providing CDT with excellent opportunities. In a rapidly growing market, geographic expansion is critical to developing a leadership position and we have been doing just that -- expanding our international base. In fiscal 1995, 16% of CDT's total sales came from overseas. In fiscal 1996 that number had grown to 24%. Adding in the strong market share that NORDX/CDT brings to us, the Company is targeting 50% international sales by the end of the decade. CDT is aggressively pursuing European business through its NEK/CDT, Raydex/CDT and Anglo/CDT (United Kingdom) operations. Sales to the former eastern bloc countries, Latin America and the Pacific Rim should increase in fiscal 1997. THE YEAR AHEAD . . . Today, CDT is truly a worldwide presence in the high-growth specialty cable and connectivity marketplace. We are at a strategic crossroads in our history. The demand for high performance cable and connectivity products continues to be strong. Growth of the Internet, acceptance of asynchronous transfer mode (ATM) technology, higher speed and bandwidth requirements and the fast-growing multimedia markets -- all of these developments point to an expanding market for CDT's products. [Graphic Background is picture of Montage of electronic wire and cables computer and digital readouts. Data + 79%. Caption: Earnings per Share*] In fiscal 1997, we have four principal objectives: . To grow both internally and externally by broadening the Company into growth categories of electronic connectivity like factory automation, robotics, medical care and specialty niche markets. . To integrate our NORDX/CDT acquisition and its four operating divisions and implement a management initiative to reduce costs and streamline operations over the next 24 months. . To incent and rationalize the CDT sales forces worldwide to cross-sell the expansive product offerings that we now have available. . To continue to aggressively develop and market high-performance products like the DynaTraX(TM) automated electronic network system switch, which represents the new product innovation essential to maintaining global growth. Underlying all the exciting accomplishments discussed in this Letter are the talented and highly-motivated employees who have helped make CDT a recognized leader in its markets. To our stockholders, customers and employees, I extend my gratitude for an outstanding year. /s/ Paul M. Olson Paul M. Olson President and CEO *Excluding non-recurring charges October 9, 1996 4 [Graphic of Two segment pie chart. Proportions: 52 and 48.] - ---------------------------------- network structured wiring products In fiscal 1996, network structured wiring products accounted for 52% of CDT's total sales. Network structured wiring products remains one of the fastest growing and profitable CDT product groups. With the addition of NORDX/CDT, we are now in a position to reach 40% of the connectivity network market that was previously unavailable. The reason is simple: end-to-end certified solutions. CDT is now one of only a few manufacturers in North America that can offer customers a complete, warranted and certified, end-to-end network structured wiring system including cables, connecting hardware and a group of certified installers to put it all in place. The Mohawk/CDT, Montrose/CDT and Phalo/CDT divisions also now supply certified, end-to-end systems in conjunction with connectivity partners. Fueling the demand for network structured wiring products has been the unprecedented technological advances in computers and software that have necessitated faster data speeds without diminishing data integrity. The move to Category 5 cable is expected to continue to increase as office buildings are upgraded to accommodate advanced network requirements. The demand for greater speed has been driven by the evolution of multimedia computing -- the integration of video images, high fidelity sound, synthesized human speech and data. Multimedia needs are expected to fuel continued growth in the PC markets, thereby creating an expanding base for computer networks to link them. left to right starting top left: [Photo of Man working in network communications wiring closet] [Photo of Four electron wire and cable products.] [Photo of Modern office building] [Photo of Factory floor with various cable manufacturing equipment.] highlights . Fiscal 1996 sales were $186.2 million, an 82% increase over 1995 sales of $102.4 million. . A new addition was completed to double our fiber optic cable capacity and broaden product offerings. . International sales continue to grow with additional opportunities for CDT opening up in the Pacific Rim and Eastern Europe. . CDT recently opened a 40,000 sq. ft. manufacturing facility at Phalo/CDT for the production of shielded and unshielded high speed data cables capable of 622 Mbps. [Graphic of Two segment pie chart. Proportions: 19 and 81. 5 ----------------------------------- automation, sound & safety products Automation, sound & safety products accounted for 19% of fiscal 1996 sales. Automation, sound & safety encompasses three distinct applications for data and signal transmission cables. Automation applications include climate control and sophisticated security systems involving motion detection and video surveillance. Sound includes voice activation, evacuation and similar systems, and safety cable refers to certain attributes of data transmission cable that improve its performance under hazardous conditions like fires and environmental difficulties. Opportunities for CDT's products exist in Europe as a result of growing demand for zero halogen cables and for cables that maintain circuit integrity in a building fire. Also, the change from analog to digital systems is creating demand for specialized shielded cables to replace existing unshielded twisted pair products. Finally, demand is growing for more sophisticated "intelligent building" applications in locations like hospitals, schools and major buildings. left to right, starting top left: [Photo of Factory floor with various cable manufacturing equipment.] [Photo of Five electronic wire and cable products.] [Photo of Offshore oil platform.] [Photo of Factory floor with various cable manufacturing euqipment.] highlights . Fiscal 1996 sales were $68.7 million, an increase of 46% over 1995 sales of $47.2 million. . CDT has developed prototype composite cables that integrate climate control, security, video, sound, communications and power. . Like the workplace, the anticipated growth of multimedia applications for the "smart house" should create a strong demand for advanced cables that can combine CATV, telephone, entertainment and automation. CDT is currently developing cables to address this marketplace. . Products in this group continue to receive an excellent reception. These products include Aquaseal(R), multimedia composite cables and flexible plenum cables. 6 [Graphic of Two segment pie chart. Proportions: 5 and 95.] - ------------------------------ computer interconnect products In fiscal 1996, computer interconnect products accounted for 5% of CDT's total sales. Demand for more complex and efficient data computation has led to a corresponding demand for both faster and smaller computing and switching equipment with advanced cable requirements. Computer interconnect products refers to CDT's family of data transmission cables used to internally connect components of computer, telecommunication switching and related electronic equipment, as well as to externally connect large and small computers to a variety of peripheral devices. These cables are usually customized to meet computer original equipment manufacturers (OEM) specifications as well as international standards agency requirements. The close working relationship between CDT's engineering personnel and OEM component engineers during the product design and development process has enabled us to establish an excellent supplier relationship with our OEMs with respect to new products. left to right, starting top left: [Photo of factory floor with various cable manufacturing equipment.] [Photo of Array of 4 electronic wire and cable products.] [Photo of Room with person watching computer monitors.] [Photo of Cable processing machine.] highlights . CDT added new machinery to expand product offerings of flat, flexible cable. . With the acquisition of NORDX/CDT, we expanded our product offering of foamed, high-speed electronic interconnect mainframe cables. . Looking ahead to fiscal 1997, we expect further penetration of the shielded cable markets, increased sales of our specialty OEM product lines and introduction of high performance cables to the automotive industry. . With the acquisition of Raydex/CDT we enhanced European sales by offering PTFE foamed, tape computer cables and we also added a European sales force to address the specialty cable markets. [Graphic of Two segment pie chart. Proportions: 14 and 86] 7 ---------------------------------- communications/multimedia products Communications/multimedia products accounted for 14% of fiscal 1996 sales. With the acquisition of NORDX/CDT, the Company added a fourth product grouping communications/multimedia products. In fiscal 1996, this business group was primarily communications-oriented, however, three separate CDT divisions are currently working on multimedia product offerings for this growing marketplace. Through the newly organized NORCOM Division of NORDX/CDT in Kingston, Ontario, CDT now has the largest communications cable operations in Canada. Its state-of-the-art, computer-driven facility has been meeting the demand for communications cable, switchboard cable and equipment cable. This demand is being partially driven by the household demand for additional phone lines to carry fax and PC applications and to satisfy growing home Internet usage and home office and telecommuting needs. left to right, starting top left: [Photo of Multimedia control console.] [Photo of Work-in-process communication cable.] [Photo of Man working in network communications wiring closet.] [Photo of Video camera.] highlights . Since joining CDT, this group recorded fiscal 1996 sales of $49.4 million. . NORDX's SuperPIC(R) cable for broadband multimedia applications is in the process of being field-trialed with three major telephone companies. This high bandwidth cable can carry 52 Mbps over distances of one kilometer in conjunction with advanced electronics equipment. . NEK/CDT, West Penn/CDT and Mohawk/CDT are working on the development of a variety of multimedia products to bring cable into the home. . Replacement and upgrade to the existing base of communications cable is long overdue. CDT's communications cable group should be a direct beneficiary of this replacement market. 8 - --------- NORDX/CDT Introducing NORDX/CDT [Photo of Various Nordx/CDT IBDN network structured wiring products.] NORDX/CDT -- a new name in the marketplace -- is a company with a 100-year history in the design and manufacture of products for the communications industry. NORDX/CDT was created in February 1996 when Cable Design Technologies purchased Northern Telecom Limited's communications cable and IBDN network structured wiring products businesses. NORDX/CDT currently manufactures and markets over 2,000 different products including cables, connectors and patch panels of the IBDN structured wiring system, the DynaTraX(TM) wiring closet automation product line and communications cables for outside plant needs. These products are manufactured at facilities in Lachine, Quebec, Kingston, Ontario and Mexico. NORDX/CDT maintains one of the industry's most sophisticated in- house research and development laboratories dedicated to the design and development of communications products for data, voice and video. [Photo of DynaTraX automated electronic cross-connect switch.] [Photo of Fireworks celebration commemorating 25 years of excellence at the Kingston Communications cable plant.] highlights . Through its Certified Systems Vendors (CSVs) and Factory Authorized Contractors (FACs), NORDX/CDT can offer complete, end-to-end, certified systems to its customers. . In 1996, NORDX/CDT introduced the industry's first large-scale automated network cabling management solution: DynaTraX(TM). This is a unique, high- performance electronic cross-connect switch that is installed in the wiring closet and operated from a desktop PC. . NORDX/CDT recently engineered an innovative broadband communications PIC cable and drop wire that offers a six-fold increase in available bandwidth over existing outside telephone distribution cabling. . In June 1996, CDT purchased Denmark-based Cekan A/S, a high performance telecommunications connector manufacturer. Reporting directly to NORDX/CDT, Cekan/CDT greatly enhances the Company's capability in the areas of engineering, manufacturing and design of connectors and plastic molded components. 9 - -------------------------------------------------------------------------------- management's discussion and analysis of financial condition and results of operations General The following discussion of the Company's consolidated historical results of operations and financial condition should be read in conjunction with the Consolidated Financial Statements of the Company and the Notes thereto included elsewhere in this report. Results of Operations The following table presents, for the periods indicated, the percentage relationship to net sales of certain items in the Company's statement of operations.
Percentage of Net Sales For Fiscal Year Ended July 31, 1996 1995 1994 --------------------------------- Net sales 100.0% 100.0% 100.0% Cost of sales 68.7 66.6 66.3 Gross profit 31.3 33.4 33.7 Selling, general and administrative costs 17.8 17.8 18.7 Non-recurring charges 4.7 -- -- Income from operations 8.8 15.7 15.0 Income before extraordinary item 4.4 7.8 7.0 Net income 4.3 7.8 4.2
Year Ended July 31, 1996 Compared with Year Ended July 31, 1995 Net Sales. Net sales increased $168.4 million, or 89.1%, to $357.4 million for the year ended July 31, 1996 ("fiscal 1996") compared to $188.9 million for the year ended July 31, 1995 ("fiscal 1995"). The increase in fiscal 1996 net sales includes $143.1 million of post-acquisition sales by recently acquired businesses. Sales of network structured wiring products increased $83.8 million, or 82.0%, primarily as a result of the addition of the post-acquisition sales of these products by NORDX/CDT and other recently acquired businesses, as well as an increase in network cable products sales by the Company's existing operating units during the first half of fiscal 1996. A disruption in the Category 5 Teflon(R) plenum network cable market early in the third quarter of fiscal 1996 due to a build-up of distributor inventories of these products and a greater availability of Teflon(R) raw material resulted in reduced sales volume and lower selling prices for these products by the Company's existing operating units during the second half of fiscal 1996. The negative effect of the reduced sales of Category 5 Teflon(R) plenum network cables was partially offset by increased sales of fiber optic network cables and continued sales of non-plenum Category 5 network cables during the period. Sales of automation, sound & safety cable products increased $21.5 million, or 45.6%, primarily as a result of the addition of the post-acquisition sales of these products by the recently acquired businesses, Raydex/CDT in the United Kingdom and Manhattan/CDT in the U.S., as well as a solid increase in sales by the Company's principal domestic manufacturing division for these products, West Penn/CDT. As a part of the Company's acquisition of NORDX/CDT, the Company acquired a new primary business group, communications cable products. NORDX/CDT's post-acquisition sales of communications cable products accounted for 29% of the Company's overall increase in net sales for fiscal 1996. Sales of computer interconnect cable products, which accounted for approximately 5% of fiscal 1996 overall sales, decreased $4.1 million in fiscal 1996 primarily as a result of lower sales of certain mid-range computer system interconnect cables which have been phased out by hardware designers in favor of Category 5 twisted pair and patch cable technology. International sales (outside of North America) increased $55.9 million, or 191.4%, to $85.1 million in fiscal 1996 compared to $29.2 million in fiscal 1995 due primarily to the addition of the post-acquisition international sales by the recently acquired businesses, Raydex/CDT and NORDX/CDT, as well as increased international sales by the Company's existing businesses. ------------------------------------------------------ CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES 10 - -------------------------------------------------------------------------------- management's discussion and analysis of financial condition and results of operations (continued) Year Ended July 31, 1996 Compared with Year Ended July 31, 1995 continued Gross Profit. Gross profit increased $48.7 million, or 77.0%, to $111.8 million in fiscal 1996 compared to $63.2 million for fiscal 1995. The increase in fiscal 1996 gross profit includes the post-acquisition gross profit generated by recently acquired businesses of $37.1 million. The gross profit from the sales of network structured wiring products accounted for approximately 62% of the increase in gross profit for fiscal 1996. Gross profit from the sales of communications cable products and automation, sound & safety cable products represented approximately 25% and 10% of the overall increase in gross profit, respectively. The significant drop in the market prices of copper in June 1996 due primarily to the news of the alleged Sumitomo trading scandal resulted in a reduction in the selling prices for communication cables which negatively impacted earnings in the fourth fiscal quarter. The negative effect on gross profit because of the reduction in the selling prices for communications cables is temporary and should be neutralized when the higher cost copper raw material on hand for communication cables has been worked out of inventory. The gross margin for fiscal 1996 was 31.3% compared to a gross margin of 33.4% for fiscal 1995. The decrease in the gross margin for fiscal 1996 was due primarily to the comparatively lower gross margin of certain of the recently acquired businesses, primarily NORDX/CDT's communication cables business and Raydex/CDT's non-network cable products sales. Selling, General and Administrative Expense. Selling, general and administrative expense ("SG&A") increased $30.0 million, or 89.4%, to $63.6 million, for fiscal 1996 compared to $33.6 million for fiscal 1995. The increase in fiscal 1996 SG&A was primarily the result of the addition of $25.9 million post-acquisition SG&A of the recently acquired businesses, principally NORDX/CDT. As a percentage of sales, SG&A of 17.8% for fiscal 1996 was unchanged as compared to 17.8% for fiscal 1995. Non-Recurring Charges. In connection with the NORDX/CDT acquisition, the Company engaged an independent appraisal firm to prepare a valuation of the assets acquired to serve as a basis for allocation of the purchase price. As a result of the valuation, the fair market value of the purchased in-process research and development relating to the development of the DynaTraX(TM) automated network cross-connect switch was determined to be $9.8 million. In accordance with generally accepted accounting practices this amount was charged to operations upon the acquisition of NORDX/CDT in the third quarter of fiscal year 1996. In addition, stock appreciation rights of $6.9 million vested upon the completion of the February 28, 1996 Common Stock Offering (the "Offering"). Income from Operations. Income from operations excluding non-recurring charges for fiscal 1996 increased $18.6 million, or 63.0%, to $48.3 million compared to $29.6 million for fiscal 1995. Including non-recurring charges, income from operations for fiscal 1996 was $31.5 million. The operating margin for fiscal 1996, derived by dividing operating income excluding non-recurring charges by net sales, was 13.5% compared to 15.7% for fiscal 1995. The decrease in the operating margin in fiscal 1996 was due primarily to the comparatively lower gross margin of certain of the recently acquired businesses discussed above under Gross Profit. Net Income. Fiscal 1996 net income was $15.3 million, or $0.82 per share, compared to net income of $14.7 million, or $0.86 per share, for fiscal 1995. Excluding the non-recurring charges (of $10.5 million, net of tax) discussed above under Non-Recurring Charges and an extraordinary charge (of $0.6 million, net of tax) due to the early extinguishment of debt in the third quarter of fiscal 1996, net income for fiscal 1996 was $26.4 million, or $1.42 per share. - ------------------ ANNUAL REPORT 1996 11 - -------------------------------------------------------------------------------- management's discussion and analysis of financial condition and results of operations (continued) Year Ended July 31, 1995 Compared with Year Ended July 31, 1994 Net Sales. Net sales increased $43.6 million, or 30.0%, to $188.9 million for the year ended July 31, 1995 compared to $145.4 million for the year ended July 31, 1994 ("fiscal 1994") primarily as a result of an increase in demand for network systems cable products as well as an increase in prices of Teflon(R) FEP Level 5 cable products. Significant growth in sales of network systems cable products of $29.2 million, or 39.9%, was driven by the strong demand for higher speed communication networks, the growth of networked high-speed workstations and personal computers and the favorable pricing environment for Category 5 Teflon(R) FEP cable products. The sales of automation, sound & safety cable products continued to grow as a result of the strong domestic economy, increasing $7.5 million, or 18.9%, over sales of these products for fiscal 1994. In fiscal 1995, sales of computer interconnect cable products increased $4.3 million, or 23.1%, primarily as a result of higher sales of zero halogen products. International sales increased $10.8 million, or 52.7%, primarily as a result of increased sales by the Company's foreign subsidiaries, NEK/CDT in Sweden and Anglo/CDT in the U.K. and greater export sales of network systems cable products. Gross Profit. Gross profit increased $14.2 million, or 29.0%, to $63.2 million in fiscal 1995 from $49.0 million for fiscal 1994. Approximately 60% of the increase in gross profit is attributable to network systems cable sales as a result of higher sales volume and improved product pricing. The gross profit attributable to sales of automation, sound & safety products and computer interconnect products represented approximately 22% and 13%, respectively, of the overall increase in gross profit. Gross margin for fiscal 1995 was 33.4% compared to 33.7% for fiscal 1994. The Company's Swedish subsidiary acquired in May 1994, NEK/CDT, emerged from its post-acquisition turnaround period in the second half of fiscal 1995, generating 67.4% of its year-to-date gross profit in the last two quarters. Excluding NEK/CDT's gross margin, which was not comparable to that of the Company's other operations, the gross margin for fiscal 1995 would have been 34.0%. Selling, General and Administrative Expense. SG&A increased by $6.4 million, or 23.5%, to $33.6 million in fiscal 1995 from $27.2 million in fiscal 1994. The increase in SG&A was primarily the result of higher sales related items, such as commissions and delivery expenses, and the incremental SG&A attributable to recent acquisitions. As a percentage of sales, SG&A in fiscal 1995 decreased to 17.8% compared to 18.7% in fiscal 1994. Income from Operations. Income from operations increased $7.8 million, or 35.8%, in fiscal 1995 to $29.6 million compared to $21.8 million for fiscal 1994. The Company's operating margin, improved to 15.7% in fiscal 1995 compared to 15.0% in fiscal 1994. Net Income. Net income increased $4.1 million, or 39.2%, to $14.7 million for fiscal 1995 compared to pro forma net income before extraordinary item of $10.6 million for fiscal 1994. Pro forma income before extraordinary items for fiscal 1994 reflects adjustments to interest expense indicating what these amounts would have been had the Company's initial public offering occurred on August 1, 1993. ------------------------------------------------------ CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES 12 - -------------------------------------------------------------------------------- management's discussion and analysis of financial condition and results of operations (continued) Financial Condition Liquidity and Capital Resources. Based on the Company's current expectations for its business, management believes that its cash flow from operations and the available portion of its revolving credit facilities and foreign credit facility will provide it with sufficient liquidity to meet the current liquidity needs of the Company. On February 2, 1996, the Company entered into a new U.S. and Canadian credit agreement (the "New Credit Agreement"). The New Credit Agreement, pursuant to its provision for the adjustment of the loan structure upon the debt reductions required as a result of the Offering is comprised of a $102.1 million revolver loan (the "U.S. Revolver"), a CDN $48.1 million Canadian term loan and a CDN $53.3 million Canadian revolver loan (the "Canadian Revolver"). The New Credit Agreement specifies interest at varying margins over bank prime, London Inter- Bank Offered Rate, Eurodollar, or bankers acceptances interest rates based on certain financial ratios. The initial applicable margin of 1.75% was reduced to 1% after the completion of the Offering. A commitment fee of 3/8% to 1/2% will be accrued on the unused portion of the U.S. Revolver and Canadian Revolver. The initial proceeds provided by the New Credit Agreement were used to retire the debt outstanding under the previous credit agreement and to purchase the net assets of NORDX/CDT. On July 31, 1996, the Company had approximately $107.2 million of availability under the U.S. and Canadian Revolver loans and $4.7 million of availability under its $12.0 million foreign demand credit line. As of February 2, 1996, the Company completed the acquisition of Northern Telecom Limited's structured wiring systems and communication cables businesses, now NORDX/CDT, for approximately $86 million. On February 28, 1996, the Company effected the Offering, which involved a primary and secondary offering of the Company's common stock. The net proceeds received by the Company from the Offering were approximately $113.9 million based on a public offering price of $40.50 per share. Approximately $94.8 million of the net proceeds were used to repay certain existing indebtedness under the New Credit Agreement. Working Capital. During fiscal 1996 operating working capital increased $24.1 million, excluding increases resulting from the initial recording of the working capital of acquired businesses. The change in operating working capital was primarily the result of increases in accounts receivable ($28.0 million) and inventories ($13.0 million) which were partially offset by increases in accounts payable ($5.3 million) and other accrued liabilities ($11.7 million). The change in operating working capital excludes changes in cash and current maturities of long-term debt. Cash Flow. After providing for the increase in working capital, the Company generated $4.7 million of net cash from operating activities during fiscal 1996. The net cash used by investing activities during fiscal 1996 of $120.6 million included $104.7 million for the acquisition of businesses (principally NORDX/CDT and Raydex/CDT) and $15.9 million for capital projects. Net cash provided by financing activities of $129.8 million included $116.3 million from the issuance of common stock and $13.5 million (net) from debt sources. The net increase in cash for fiscal 1996 was $13.9 million. - ------------------ ANNUAL REPORT 1996 13 - -------------------------------------------------------------------------------- management's discussion and analysis of financial condition and results of operations (continued) Financial Condition continued Capital Expenditures. During fiscal 1996 and fiscal 1995, the Company expended $15.9 million and $5.7 million, respectively, for capital projects. The expenditures for fiscal 1996 were made to increase manufacturing efficiencies and to expand the Company's overall production capacity of new and existing product lines, particularly for the production of high performance network systems cable products, including: the purchase of new production and testing equipment for a new facility at Phalo/CDT to manufacture network cables that exceed Level 5 performance standards; the construction of a new sales, training and administration facility and the purchase of equipment for coaxial cable production at West Penn/CDT; the purchase of additional production equipment for the recently acquired Raydex/CDT and NORDX/CDT operations; and the expansion of NEK/CDT's manufacturing plant and production capacity. The Company expects to spend approximately $27.1 million for capital projects for the year ending July 31, 1997 without regard to potential acquisitions. Effects of Inflation The Company does not believe that inflation had a significant impact on the Company's results of operations for the periods presented. On an ongoing basis, the Company attempts to minimize any effects of inflation on its operation results by controlling operation costs and, whenever possible, seeking to insure that selling prices reflect increases in costs due to inflation. New Accounting Standards In March 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long- Lived Assets and for Long-Lived Assets to Be Disposed of." This statement requires review and measurement methods to calculate impairment of long-lived assets, including certain identifiable intangibles and goodwill, whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. The Company does not believe that adoption of the new statement will have a material impact on the Company's financial results. The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," ("SFAS No. 123") in October 1995. This statement establishes a "fair value based method" of financial accounting and related reporting standards for stock-based employee compensation plans, such as the Company's 1993 Stock Incentive Plan (see Note 10). SFAS No. 123 becomes effective for the year ending July 31, 1997 ("Fiscal 1997") and provides for adoption in the income statement or through disclosure. The Company anticipates continuing to account for its 1993 Stock Incentive Plan under APB Opinion No. 25, "Accounting for Stock Issued to Employees," as permitted by SFAS No. 123, but will provide the required disclosure in the footnotes to the fiscal 1997 financial statements. Forward-Looking Statements -- Under the Private Securities Litigation Act of 1995 Certain of the statements in this annual report are forward-looking statements. These statements are subject to various risks and uncertainties, many of which are outside the control of the Company, including the level of market demand for the Company's products, competitive pressures, the ability to achieve reductions in operating costs and to continue to integrate acquisitions, price fluctuations of raw materials and the potential unavailability thereof, foreign currency fluctuations, technological obsolescence, environmental matters and other specific factors discussed in the Company's Prospectus, dated February 27, 1996, and other Securities and Exchange Commission filings. The information contained herein represents management's best judgment as of the date hereof based on information currently available; however, the Company does not intend to update this information to reflect developments or information obtained after the date hereof and disclaims any legal obligation to the contrary. ------------------------------------------------------ CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES 14 - -------------------------------------------------------------------------------- report of independent public accountants To the Board of Directors of Cable Design Technologies Corporation and Subsidiaries: We have audited the accompanying consolidated balance sheets of Cable Design Technologies Corporation (a Delaware corporation) and Subsidiaries as of July 31, 1996 and 1995 and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended July 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Cable Design Technologies Corporation and Subsidiaries as of July 31, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended July 31, 1996 in conformity with generally accepted accounting principles. /s/ Arthur Andersen LLP Pittsburgh, Pennsylvania September 11, 1996 - ------------------ ANNUAL REPORT 1996 15 - -------------------------------------------------------------------------------- consolidated statements of income (Dollars in thousands, except per share information)
Year Ended July 31, 1996 1995 1994 ------------------------------- Net sales $ 357,352 $188,941 $145,389 Cost of sales 245,533 125,777 96,415 - ----------------------------------------------------------------------------------------------- Gross profit 111,819 63,164 48,974 Selling, general and administrative expenses 63,562 33,551 27,173 Non-recurring charges 16,730 -- -- - ----------------------------------------------------------------------------------------------- Income from operations 31,527 29,613 21,801 Interest expense, net 5,362 5,111 5,247 Other (income) expense, net 271 (5) (342) - ----------------------------------------------------------------------------------------------- Income before income taxes and extraordinary items 25,894 24,507 16,896 Income tax provision 10,013 9,794 6,758 - ----------------------------------------------------------------------------------------------- Income before extraordinary items 15,881 14,713 10,138 - ----------------------------------------------------------------------------------------------- Extraordinary loss on the early extinguishment of debt (596) -- (3,998) - ----------------------------------------------------------------------------------------------- Net income $ 15,285 $ 14,713 $ 6,140 - ----------------------------------------------------------------------------------------------- Income per share of common stock: Primary: Income before extraordinary items $ 0.85 $ 0.86 $ 0.65 Extraordinary loss (0.03) -- (0.25) - ----------------------------------------------------------------------------------------------- Net income $ 0.82 $ 0.86 $ 0.40 - -----------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial statements. ------------------------------------------------------ CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES 16 - -------------------------------------------------------------------------------- consolidated balance sheets (Dollars in thousands, except share information)
July 31, -------------------- 1996 1995 ASSETS Current Assets: Cash and cash equivalents $ 16,097 $ 2,210 Accounts receivable, net of allowance for uncollectible accounts of $2,660 and $1,553, respectively 96,490 32,925 Inventories 90,618 35,377 Prepaid expenses and other 1,965 1,654 Deferred income taxes 3,286 2,175 - ----------------------------------------------------------------------------------------------------------------------- Total current assets 208,456 74,341 - ----------------------------------------------------------------------------------------------------------------------- Property, plant and equipment, net 89,519 30,147 Intangible assets 4,321 1,534 Goodwill, net of accumulated amortization of $3,263 and $2,785, respectively 16,692 12,212 Other assets 1,117 742 - ----------------------------------------------------------------------------------------------------------------------- Total assets $ 320,105 $118,976 - ----------------------------------------------------------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Current maturities of long-term debt $ 7,536 $ 8,829 Accounts payable 31,279 11,421 Accrued payroll and related benefits 11,689 4,630 Accrued taxes 6,346 1,625 Other accrued liabilities 15,832 4,365 - ----------------------------------------------------------------------------------------------------------------------- Total current liabilities 72,682 30,870 - ----------------------------------------------------------------------------------------------------------------------- Long-term debt 73,068 52,696 Other non-current liabilities 4,815 -- Deferred income taxes 4,083 3,545 - ----------------------------------------------------------------------------------------------------------------------- Total liabilities 154,648 87,111 - ----------------------------------------------------------------------------------------------------------------------- Contingencies (Note 16) Stockholders' Equity: Preferred stock, par value $.01 per share -- authorized 1,000,000 shares, no shares issued -- -- Common stock, par value $.01 per share -- authorized 25,000,000 shares, issued and outstanding 18,054,498 and 14,615,855 shares, respectively 181 98 Paid-in capital 152,864 35,973 Deferred compensation (208) (330) Retained earnings (accumulated deficit): Retained earnings 64,840 48,848 Recapitalization distribution on July 14, 1988 (52,656) (52,656) - ----------------------------------------------------------------------------------------------------------------------- Retained earnings (accumulated deficit), net 12,184 (3,808) Currency translation adjustment 436 (68) - ----------------------------------------------------------------------------------------------------------------------- Total stockholders' equity 165,457 31,865 - ----------------------------------------------------------------------------------------------------------------------- Total liabilities and stockholders' equity $ 320,105 $118,976 - -----------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial statements. - ------------------ ANNUAL REPORT 1996 17 - -------------------------------------------------------------------------------- consolidated statements of cash flows (Dollars in thousands)
Year Ended July 31, 1996 1995 1994 -------------------------------- Cash flow from operating activities: Net income $ 15,285 $ 14,713 $ 6,140 Adjustments for noncash items to reconcile net income to cash provided by operating activities: Depreciation 4,523 2,423 1,864 Amortization 1,465 1,392 1,496 Gain on termination of capital lease -- -- (332) Extraordinary loss on early extinguishment of debt 596 -- 3,998 Tax benefit on extraordinary loss -- -- 2,754 Purchased in-process research and development 9,826 -- -- Deferred income taxes (2,550) (114) 43 Changes in assets and liabilities net of effects of business acquired: Accounts receivable (27,972) (6,460) (4,260) Inventories (13,037) (2,855) (6,237) Prepaid expenses and other (90) (264) 17 Accounts payable 5,255 2,479 1,235 Accrued payroll and related benefits 5,542 1,411 232 Accrued taxes 4,718 283 (541) Other accrued liabilities 1,469 1,882 (1,142) Other non-current assets (333) (9) 64 - ---------------------------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 4,697 14,881 5,331 - ---------------------------------------------------------------------------------------------------------------------------------- Cash flow from investing activities: Purchases of property, plant and equipment (15,898) (5,686) (3,984) Acquisition of businesses, including transaction costs, net of cash acquired (104,681) (3,211) (1,490) - ---------------------------------------------------------------------------------------------------------------------------------- Net cash used in investing activities (120,579) (8,897) (5,474) - ---------------------------------------------------------------------------------------------------------------------------------- Cash flow from financing activities: Change in restricted cash -- 1,485 99 Net change in revolving note borrowings 24,021 (8,044) (24,650) Funds provided by long-term debt 82,517 7,612 124,500 Funds used to reduce long-term debt (90,950) (7,238) (116,704) Net proceeds from issuance of common stock 116,291 187 29,221 Payments of deferred financing fees (2,121) -- (6,110) Repurchase of common stock and warrants -- -- (4,260) - ---------------------------------------------------------------------------------------------------------------------------------- Net cash provided by (used in) financing activities 129,758 (5,998) 2,096 - ---------------------------------------------------------------------------------------------------------------------------------- Effect of currency translation on cash 11 (18) (1) - ---------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in cash 13,887 (32) 1,952 Cash, beginning of year 2,210 2,242 290 - ---------------------------------------------------------------------------------------------------------------------------------- Cash, end of year $ 16,097 $ 2,210 $ 2,242 - ----------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial statements. ------------------------------------------------------ CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES 18 - -------------------------------------------------------------------------------- consolidated statements of stockholders' Equity For The Years Ended July 31, 1996, 1995 and 1994 (Dollars in thousands, except share information)
Class B Common Stock Common Stock Retained Total ---------------- ----------------- Earnings Currency Deferred Stock- Shares Par Shares Par Paid-In (Accumulated Translation Compen- holders' Issued Value Issued Value Capital Deficit) Warrants Adjustments sation Equity - ------------------------------------------------------------------------------------------------------------------------------ BALANCE, July 31, 1993 6,161,379 $ 62 693,697 $ 7 $ 8,818 $(24,661) $ -- $(546) $ -- $ (16,320) Net income -- -- -- -- -- 6,140 -- -- -- 6,140 Repurchase and cancellation of Class B common stock -- -- (693,697) (7) (4,253) -- -- -- -- (4,260) Warrants issued on subordinate debt -- -- -- -- -- -- 1,500 -- -- 1,500 Initial public offering and conversion of warrants 3,500,000 35 -- -- 30,681 -- (1,500) -- -- 29,216 Exercise of options 4,727 -- -- -- 5 -- -- -- -- 5 Deferred compensation -- stock grant plan 43,670 -- -- -- 513 -- -- -- (513) -- Deferred compensation -- stock option plan -- -- -- -- 23 -- -- -- (23) -- Amortization of deferred compensation -- -- -- -- -- -- -- -- 41 41 Change in currency translation adjustments -- -- -- -- -- -- -- (79) -- (79) - ------------------------------------------------------------------------------------------------------------------------------ BALANCE, July 31, 1994 9,709,776 97 -- -- 35,787 (18,521) -- (625) (495) 16,243 Net income -- -- -- -- -- 14,713 -- -- -- 14,713 Exercise of options 34,127 1 -- -- 186 -- -- -- -- 187 Amortization of deferred compensation -- -- -- -- -- -- -- -- 165 165 Change in currency translation adjustments -- -- -- -- -- -- -- 557 -- 557 - ------------------------------------------------------------------------------------------------------------------------------ BALANCE, July 31, 1995 9,743,903 98 -- -- 35,973 (3,808) -- (68) (330) 31,865 Net income -- -- -- -- -- 15,285 -- -- -- 15,285 Exercise of options 255,100 3 -- -- 2,406 -- -- -- -- 2,409 Stock grants 2,250 -- -- -- 45 -- -- -- -- 45 Amortization of deferred compensation -- -- -- -- -- -- -- -- 122 122 Stock split 4,871,934 48 -- -- -- (48) -- -- -- -- Stock offering 2,970,000 30 -- -- 113,850 -- -- -- -- 113,880 Pooling of interest 211,311 2 -- -- 590 755 -- -- -- 1,347 Change in currency translation adjustments -- -- -- -- -- -- -- 504 -- 504 - ------------------------------------------------------------------------------------------------------------------------------ BALANCE, July 31, 1996 18,054,498 $181 -- $-- $152,864 $ 12,184 $ -- $ 436 $(208) $ 165,457 - ------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial statements. - ------------------ ANNUAL REPORT 1996 19 - -------------------------------------------------------------------------------- notes to consolidated financial statements 1. Operations Cable Design Technologies Corporation (the "Company") is a leading designer and manufacturer of technologically advanced electronic data transmission cables and passive components for network structured wiring; automation, sound & safety; computer interconnect; and communications applications. On July 14, 1988, the Company acquired all of the outstanding capital stock of Cable Design Technologies Inc. The controlling stockholders of Cable Design Technologies Inc. immediately prior to its acquisition by the Company were also the controlling stockholders of the Company; therefore, the accompanying consolidated financial statements have been prepared using Cable Design Technologies Inc.'s historical cost basis of accounting, and the consideration paid to stockholders of Cable Design Technologies Inc. of $52,656,000, was charged to stockholders' equity as a recapitalization distribution in a manner similar to a dividend distribution. 2. Significant Accounting Policies The consolidated financial statements reflect the application of the following significant accounting policies: Principles of Consolidation The consolidated financial statements include the accounts of the Company and its subsidiaries. All material intercompany transactions and balances have been eliminated in consolidation. Inventories Inventories are stated at the lower of first-in, first-out (FIFO) cost or market. Inventory costs include material, labor and manufacturing overhead. The Company's products contain significant amounts of certain raw materials, such as copper and Teflon(R). The Company believes that adequate sources are available for these commodities; however, any disruption of the supplies or significant deviations in market prices could impact the Company's operations. Accounts Payable Accounts Payable includes bank overdraft facilities which represent outstanding checks of the Company's foreign subsidiaries of $658,000 and $287,000 at July 31, 1996 and 1995, respectively. Property, Plant and Equipment Property, plant and equipment are carried on the cost basis. Provisions for depreciation and amortization are computed using the straight-line method based upon the estimated useful lives of the assets. Maintenance and repair costs are charged to operations as incurred. Major replacements or betterments are capitalized. Cost and accumulated depreciation of property sold or retired are removed from the accounts and any resulting gain or loss is included in operations. ------------------------------------------------------ CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES 20 - -------------------------------------------------------------------------------- notes to consolidated financial statements (continued) 2. Significant Accounting Policies continued Translation of Foreign Currency Financial Statements The financial statements of foreign subsidiaries are translated using the exchange rate in effect at year end for balance sheet accounts and the average exchange rate in effect during the year for income and expense accounts. Translation gains and losses are reported as a currency translation adjustment component of stockholders' equity. Although the acquisition of NORDX/CDT (see Note 13) resulted in a substantial increase in operations outside of the United States, the Company does not believe that its exposure to foreign currency fluctuations is significant for the following reasons: (i) United States export sales are denominated in United States dollars and (ii) the Company's foreign subsidiaries are located in countries with stable economies. Goodwill Goodwill represents the excess of the purchase price over the fair market value of identifiable net assets acquired in connection with various business acquisitions and combinations. Goodwill is being amortized using the straight- line method over periods of between 20 to 40 years. The Company continually evaluates the carrying value of goodwill on the basis of whether goodwill is fully recoverable from projected undiscounted net income, before the effects of goodwill amortization, over the remaining amortization period. Loan Origination Fees In connection with the issuance of the Company's debt instruments, the Company defers related credit acquisition costs. These costs are amortized using the straight-line method over the life of the debt instruments. Income Taxes The Company records income taxes in accordance with the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("FAS No. 109"). Under this standard, deferred tax assets or liabilities are computed based on the difference between the financial statement and income tax bases of assets and liabilities using the enacted marginal tax rate. These differences are classified as current or non-current based upon the classification of the related asset or liability. For temporary differences that are not related to an asset or liability, classification is based upon the expected reversal date of the temporary difference. Deferred income tax expense or benefit is based on the changes in the assets and liabilities from period to period. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. - ------------------ ANNUAL REPORT 1996 21 - -------------------------------------------------------------------------------- notes to consolidated financial statements (continued) 2. Significant Accounting Policies continued Statement of Cash Flows Supplemental disclosure of cash flow information.
Year Ended July 31, 1996 1995 1994 --------------------------- (Dollars in thousands) Cash paid during the year for: Interest $5,759 $5,266 $5,533 Income taxes $8,965 $9,537 $4,394
Research and Development Research and development costs are charged to expense as incurred. Research and development costs incurred were approximately $4,813,000, $1,815,000 and $1,709,000 for the years ended July 31, 1996, 1995 and 1994, respectively. Fiscal 1996 includes the post acquisition research and development costs of NORDX/CDT. In connection with the acquisition of NORDX/CDT, $9.8 million of the purchase price was allocated to in-process research and development costs related to the DynaTraX(TM) high performance cross-connect switch based on an independent appraisal of the assets acquired. These costs were immediately charged to operations in accordance with generally accepted accounting practices. Reclassifications Certain reclassifications have been made to the prior year statements to conform with the current year presentation. New Accounting Standards In March 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long- Lived Assets and for Long-Lived Assets to Be Disposed of." This statement requires review and measurement methods to calculate impairment of long-lived assets, including certain identifiable intangibles and goodwill, whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. The Company does not believe that adoption of the new statement will have a material impact on the Company's financial results. The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," ("SFAS No. 123") in October 1995. This statement establishes a "fair value based method" of financial accounting and related reporting standards for stock-based employee compensation plans, such as the Company's 1993 Stock Incentive Plan (see Note 10). SFAS No. 123 becomes effective for the year ending July 31, 1997 ("Fiscal 1997") and provides for adoption in the income statement or through disclosure. The Company anticipates continuing to account for its 1993 Stock Incentive Plan under APB Opinion No. 25, "Accounting for Stock Issued to Employees," as permitted by SFAS No. 123, but will provide the required disclosure in the footnotes to the fiscal 1997 financial statements. ------------------------------------------------------ CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES 22 - -------------------------------------------------------------------------------- notes to consolidated financial statements (continued) 3. Stockholders' Equity Prior to August 20, 1993, the Company had two classes of outstanding common stock (Class A and Class B) possessing identical rights with the exception that Class B common stock was nonvoting. In connection with the August 20, 1993 debt refinancing (further described in Note 7), all of the outstanding warrants for and shares of Class B common stock were repurchased by the Company for a net cash price of $4,260,000. Contemporaneously with this repurchase, the Company amended its Certificate of Incorporation to create a single class of common stock,with authorized shares of 25,000,000 and a par value of $.01 per share. Subsequent to the amendment discussed above, the Company further amended the Certificate of Incorporation to authorize 1,000,000 shares of preferred stock, par value $.01 per share. No preferred shares have been issued. On November 24, 1993, the Company completed the sale of 3,243,288 shares of common stock to the public at a price of $10.00 per share. The net proceeds of $29,216,000 were utilized to reduce debt. On December 29, 1995, the Company effected a 3-for-2 stock split in the form of a common stock dividend. Prior period share information presented in the financial statements and related notes have been adjusted to reflect the effect of the split. On February 28, 1996, the Company effected a public offering of 5,700,000 shares (the "Offering") of its common stock, of which 2,730,000 were sold by selling stockholders and 2,970,000 were sold by the Company. The net proceeds received by the Company from the Offering were approximately $113,850,000 based on the public offering price of $40.50 per share. Approximately $94,800,000 of the net proceeds were used to repay certain indebtedness under the New Credit Agreement, a substantial portion of which was incurred to finance the acquisition of NORDX/CDT, and approximately $6,900,000 of the net proceeds were used to make the payment in connection with the vesting of outstanding stock appreciation rights. The remaining net proceeds, to the extent not already utilized, will be used for general corporate purposes, including acquisitions. 4. Inventories Inventories of the Company consist of the following:
July 31, 1996 1995 ---------------------- (Dollars in thousands) Raw materials $24,004 $11,271 Work-in-process 21,981 6,971 Finished goods 44,633 17,135 - -------------------------------------------------------- $90,618 $35,377 - --------------------------------------------------------
- ------------------ ANNUAL REPORT 1996 23 - -------------------------------------------------------------------------------- notes to consolidated financial statements (continued) 5. Property, Plant and Equipment Property, plant and equipment of the Company consist of the following:
July 31, 1996 1995 ---------------------- (Dollars in thousands) Asset (asset lives): Land $ 5,443 $ 1,562 Buildings and improvements (10-40 years) 19,119 11,368 Machinery and equipment (3-15 years) 83,385 31,117 Furniture and fixtures (5-15 years) 4,472 1,744 - ----------------------------------------------------------------------- Total 112,419 45,791 Less: accumulated depreciation (22,900) (15,644) - ----------------------------------------------------------------------- $ 89,519 $ 30,147 - -----------------------------------------------------------------------
6. Intangible Assets Intangible assets of the Company consist of the following:
July 31, 1996 1995 ---------------------- (Dollars in thousands) Asset (amortization period): Loan origination fees, net of accumulated amortization of $362,000 and $298,000, respectively (term of related loans) $1,785 $ 945 Customer list, net of accumulated amortization of $4,800,000 and $4,508,000, respectively (7 years) 297 589 Non-compete agreements, net of accumulated amortization of $216,000 and $0, respectively (5-7 years) 2,239 -- - ----------------------------------------------------------------------------------------------- $4,321 $1,534 - -----------------------------------------------------------------------------------------------
------------------------------------------------------ CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES 24 - -------------------------------------------------------------------------------- notes to consolidated financial statements (continued) 7. Long-Term Debt Long-term debt consists of the following:
July 31, 1996 1995 ---------------------- (Dollars in thousands) Canadian term loan with interest at LIBOR plus 1.0% (5.5625% at July 31, 1996) and payable in quarterly installments ending January 31, 2002 $ 34,398 $ -- Canadian revolver with interest at LIBOR plus 1.0% (5.5625% at July 31, 1996) and due January 31, 2002 32,458 -- Old term loan -- 43,481 Old revolving credit facility -- 8,456 Old acquisition loan -- 7,574 Other indebtedness 13,748 2,014 - ----------------------------------------------------------------------------------------- 80,604 61,525 Less: current portion 7,536 8,829 - ----------------------------------------------------------------------------------------- $ 73,068 $ 52,696 - -----------------------------------------------------------------------------------------
On May 13, 1994, the Company entered into a credit agreement (the "Old Credit Agreement"). The Credit Agreement consisted of (i) a $48.0 million term loan (the "Old Term Loan"), (ii) a $30.0 million revolving credit facility (the "Old Revolving Credit Facility") and (iii) a separate $15.0 million credit line that is available to finance permitted acquisitions (the "Old Acquisition Loan"). Proceeds from this debt refinancing were used to retire all of the Company's previous outstanding term and revolver debt. On February 2, 1996, the Company entered into a new credit agreement (the "New Credit Agreement") which was subsequently reconfigured as a result of the proceeds applied against debt resulting from the Offering (see Note 3) on February 28, 1996. The New Credit Agreement permits borrowings at applicable margins above prime and LIBOR and is comprised of a $102.1 million revolver (the "U.S. Revolver"), a CDN $48.1 million Canadian term loan and a CDN $53.3 million Canadian revolver (the "Canadian Revolver"). The New Credit Agreement includes a provision whereby the applicable margins over prime or LIBOR are based on the attainment of certain performance factors. A commitment fee of 3/8% to 1/2% will be applied to the unused portion of the U.S. Revolver and Canadian Revolver. Proceeds from the New Credit Agreement were utilized to retire the debt outstanding under the previous credit agreement and to purchase the net assets of Northern Telecom Limited's communications cable and IBDN network structured wiring products businesses ("NORDX/CDT"). The terms of the Credit Agreement contain various customary financial and non-financial covenants including the maintenance of minimum consolidated net worth and restrictions on payment of dividends. The Company is in compliance with all applicable covenants. - ------------------ ANNUAL REPORT 1996 25 - -------------------------------------------------------------------------------- notes to consolidated financial statements (continued) 7. Long-Term Debt continued On September 18, 1995, certain of the Company's foreign subsidiaries entered into a new credit agreement (the "Foreign Credit Agreement") to support the financing needs of its new and existing subsidiaries located in the United Kingdom and Sweden. The Foreign Credit Agreement is comprised of a sterling overdraft, multi currency short-term cash advance, a multi currency letter of credit and a multi currency bank guarantee demand facility in an aggregate amount of approximately $12.0 million. Terms of the facility permit borrowings based on a percentage of certain accounts receivable and inventory at applicable margins above the London Inter-Bank Offered Rate ("LIBOR") interest rate. On July 31, 1996, the Company had approximately $107.2 million of availability under the U.S. and Canadian Revolver loans and $4.7 million of availability under its foreign demand credit line. Included in other indebtedness are notes and commitments of approximately $7.0 million due to Volex Group p.l.c. of Manchester, England related to the purchase of Raydex/CDT (see Note 13). The scheduled aggregate annual principal payments of long-term debt as of July 31, 1996 are as follows:
Long-Term Debt - --------------------------------------------------- Year Ended: (Dollars in thousands) 1997 $ 7,536 1998 9,691 1999 9,839 2000 9,862 2001 8,444 Thereafter 35,232 - --------------------------------------------------- $80,604 - ---------------------------------------------------
In connection with the August 1993 and May 1994 debt refinancings and the net proceeds of the Offering in fiscal year 1994, the Company recognized $6,752,000 (net of income tax $3,998,000) of extraordinary expense related to the early extinguishment of debt. The pre-tax extraordinary charge of $6,752,000 was comprised of the writeoff of $5,711,000 of deferred loan acquisition costs and $1,041,000 of prepayment penalties. As a result of the February 1996 debt refinancing and the net proceeds of the Offering in fiscal year 1996, the Company recognized $993,000 (net of income tax $596,000) of extraordinary expense related to the early extinguishment of debt. - ------------------------------------------------------ CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES 26 - -------------------------------------------------------------------------------- notes to consolidated financial statements (continued) 8. Retirement and Other Employee Benefits The Company and its subsidiaries have various defined contribution and defined benefit pension plans covering substantially all of its employees. In connection with the acquisition of NORDX/CDT, the Company established certain new defined benefit plans. Benefits provided under the Company's defined benefit pension plans are primarily based on years of service and the employee's compensation. The defined contribution plans provide benefits primarily based on compensation levels. Defined Benefit Plan (U.S.) For the U.S. defined benefit plan (the "U.S. Plan"), the Company's funding policy is to annually contribute an amount based upon actuarial and economic assumptions designed to achieve adequate funding of projected benefit obligations. The components of pension credit for fiscal 1996, 1995 and 1994 are as follows:
Year Ended July 31, 1996 1995 1994 --------------------------------- (Dollars in thousands) Service cost for benefits earned during the year $ 28 $ 23 $ 25 Interest cost on projected benefit obligation 127 126 124 Less: actual return on assets (347) (171) (174) Net amortization and deferral 185 3 -- - -------------------------------------------------------------------------------------------------------------- Net periodic pension credit $ (7) $ (19) $ (25) - --------------------------------------------------------------------------------------------------------------
The funded status of the U.S. Plan as of July 31, 1996 and 1995 was as follows:
July 31, 1996 1995 ---------------------- (Dollars in thousands) Actuarial present value of benefit obligations: Vested $1,753 $1,744 Non vested 48 36 - --------------------------------------------------------------------------------------------------------------------- Accumulated benefit obligation $1,801 $1,780 - --------------------------------------------------------------------------------------------------------------------- Projected benefit obligation $1,801 $1,780 Plan assets (consisting principally of guaranteed deposit accounts, fixed-income securities and equity securities managed by CIGNA) at fair value 2,073 1,928 - --------------------------------------------------------------------------------------------------------------------- Plan assets in excess of projected benefit obligation 272 148 Unrecognized net asset at transition (64) (76) Unrecognized net loss 231 360 - --------------------------------------------------------------------------------------------------------------------- Prepaid pension costs $ 439 $ 432 - ---------------------------------------------------------------------------------------------------------------------
The assumed discount rate used for the U.S. Plan and the expected rate of return on plan assets were 7.5% and 9.5%, respectively, for all years presented. - ------------------ ANNUAL REPORT 1996 27 - -------------------------------------------------------------------------------- notes to consolidated financial statements (continued) 8. Retirement and Other Employee Benefits continued Defined Benefit Plans (Canadian) For the Canadian defined benefit plans (the "Canadian Plans"), government regulations require the Company to monthly fund contributions based upon actuarial and economic assumptions designed to achieve adequate funding of projected benefit obligations. The components of pension expense for fiscal 1996 are as follows:
Year Ended July 31, 1996 ---------------------- (Dollars in thousands) Service cost for benefits earned during the year $ 696 Interest cost on projected benefit obligation 62 - ---------------------------------------------------------------------------------------------------------- Net periodic pension expense $ 758 - ----------------------------------------------------------------------------------------------------------
The funded status of the Canadian Plans as of July 31, 1996 was as follows:
July 31, 1996 ---------------------- (Dollars in thousands) Actuarial present value of benefit obligations: Vested $ 496 Non vested 936 - ---------------------------------------------------------------------------------------------- Accumulated benefit obligation $1,432 - ---------------------------------------------------------------------------------------------- Projected benefit obligation $1,610 Plan assets at fair value -- - ---------------------------------------------------------------------------------------------- Projected benefit obligation in excess of plan assets recognized in the consolidated balance sheet $1,610 - ----------------------------------------------------------------------------------------------
On September 18, 1996, the Company funded a contribution to the Canadian Plans in the amount of $537,000. The assumed discount rate was 8.0%; the assumed growth rate of compensation was 5.0%; and the expected rate of return on plan assets was 8.0%. ------------------------------------------------------ CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES 28 - -------------------------------------------------------------------------------- notes to consolidated financial statements (continued) 8. Retirement and Other Employee Benefits continued The Company also maintains defined contribution profit-sharing plans for all eligible employees. Certain contributions are made under the matching provisions of a 401(k) plan, while the remainder are made at the discretion of the Company's Board of Directors. Expenses incurred by the Company in connection with these profit-sharing plans were $2,450,000, $1,737,000 and $1,324,000 for the years ended July 31, 1996, 1995 and 1994, respectively. The Company also provides performance based and discretionary incentive payments to senior management and other key employees subject to the approval of the Compensation Committee of the Board of Directors. Expenses incurred by the Company as a result of these incentive payments were $3,791,000, $2,374,000 and $1,365,000 for the years ended July 31, 1996, 1995 and 1994, respectively. 9. Postretirement Benefits Other Than Pensions In connection with the acquisition of NORDX/CDT the Company assumed certain postretirement health and life insurance benefits under unfunded plans. The components of expense in fiscal 1996 were as follows:
(Dollars in thousands) Service cost of benefits earned during the period $ 97 Interest cost on accumulated postretirement benefit obligation 132 - ---------------------------------------------------------------------------------------- Net postretirement benefit expense $229 - ----------------------------------------------------------------------------------------
The following sets forth the plans' funded status reconciled with the amount recognized in the Company's Consolidated Balance Sheets: Accumulated postretirement benefit obligation $3,441 - ---------------------------------------------------------------------------------------- Plan assets at fair value -- - ---------------------------------------------------------------------------------------- Accumulated benefit obligation in excess of plan assets 3,441 - ---------------------------------------------------------------------------------------- Accrued postretirement benefit liability $3,441 - ----------------------------------------------------------------------------------------
Future benefit costs were estimated assuming medical costs would increase at approximately a 10% annual rate for 1996, 8.25% for 1997, 6.50% for 1998 and then remain at a 5% annual growth rate thereafter. A 1% increase in this annual trend would have increased the accumulated postretirement benefit obligation at July 31, 1996, by $449,000 and increased the fiscal 1996 postretirement benefit expense by $37,000. The weighted average discount rate used to estimate the accumulated postretirement benefit obligation was 8%. - ------------------ ANNUAL REPORT 1996 29 - -------------------------------------------------------------------------------- notes to consolidated financial statements (continued) 10. Stock Benefit Plans The Company maintains a Stock Purchase and Option Plan (the "Former Plan") which was terminated as to future grants effective upon completion of the Company's initial public offering on November 24, 1993 (the "Initial Public Offering.") As of the grant termination date, 2,777,696 options had been granted under the Former Plan to directors, executives and other key employees of the Company. Options issued under the Former Plan have an exercise price equal to the fair market value of the common stock on the date of grant (July 1988 through September 1992) and expire on the earlier of ten years after date of grant or ten days after termination of employment. Substantially all of the outstanding options became fully vested as of the date of the Initial Public Offering. A new Long-Term Performance Incentive Plan (the "Stock Option Plan") was adopted September 23, 1993 and provides for the granting to employees and other key individuals the following types of incentive stock awards: stock options, stock appreciations rights, restricted stock, performance units and grants and other types of awards. The Stock Option Plan is scheduled to terminate in ten years from the date of adoption but may be extended another five years by the Company's Board of Directors for the grant of awards other than incentive stock options. Employee rights to grants pursuant to the Stock Option Plan are forfeited if a recipient's employment terminates within a specified period following the grant. An aggregate of 436,722 shares of common stock are reserved for issuance pursuant to the Stock Option Plan. On September 15, 1994, 150,000 non-qualified stock options were granted to various employees representing an aggregate of 150,000 shares of common stock, which represent the only outstanding awards under the Stock Option Plan as of such date. The terms of the stock options include ratable vesting over five years and an exercise price equal to the fair market value of the stock at the date of grant. A new Supplemental Long Term Performance Incentive Plan (the "Supplemental Plan") was adopted in December 1995 and authorizes the grant of awards with respect to 800,000 shares of common stock. 500,000 shares are to be reserved for grants only to new members of the Company's management who are employed in connection with acquisitions by the Company. Under the Supplemental Plan, and in conjunction with acquisitions completed by the Company in fiscal 1996, the Company granted 565,000 options under the Supplemental Plan in fiscal 1996. Additionally, in December 1995 the Company adopted the Non-Employee Director Stock Plan (the "Non-Employee Plan"). The Non-Employee Plan provides 15,000 shares of common stock to be granted annually to non-employee directors each August 1. There were 2,250 shares granted under the Non-Employee Plan in fiscal 1996. ------------------------------------------------------ CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES 30 - -------------------------------------------------------------------------------- notes to consolidated financial statements (continued) 10. Stock Benefit Plans continued Certain information regarding stock options issued by the Company is summarized below:
Year Ended July 31, 1996 1995 1994 ---------------------------------------- Outstanding, beginning of year 2,863,414 2,770,605 2,766,777 Granted 670,013 150,000 10,919 Exercised (255,100) (57,191) (7,091) - -------------------------------------------------------------------------------------------------- Outstanding, end of year 3,278,327 2,863,414 2,770,605 - -------------------------------------------------------------------------------------------------- Exercise prices $0.67 - $39.25 $0.67 - $9.33 $0.67 -$4.58 - --------------------------------------------------------------------------------------------------
As of July 31, 1996, 2,447,564 options were exercisable. On May 1, 1994 the Company awarded 65,505 shares of common stock grants to certain key employees under a management stock award plan for a nominal amount per share. The fair market value of the Company's common stock on the award date was $7.83 per share. These grants vest ratably over a four year period. The aggregate market value of the shares of common stock granted under this plan is considered unearned compensation at the time of grant and compensation is earned ratably over the stipulated period. At July 31, 1996, the Company had no additional shares reserved for issuance under this particular plan. In fiscal 1992, the Company granted 184,940 stock appreciation rights ("SARs") to an officer/stockholder. Each SAR entitles the holder to a payment equal to the excess of the fair value of the SAR upon vesting over a base of $1.33 per SAR. As a result of the Initial Public Offering and the Offering, SARs totaling 2,743 and 182,197 vested, respectively. The related expense recognized in fiscal 1994 and fiscal 1996 was $12,806 and $6,904,000 respectively. - ------------------ ANNUAL REPORT 1996 31 - -------------------------------------------------------------------------------- notes to consolidated financial statements (continued) 11. Income Taxes The Company accounts for income taxes in accordance with FAS No. 109. Except for the effects of the reversal of net deductible temporary differences, the Company is not aware of any factors which would cause any significant differences between book and taxable income in future years. Although there can be no assurances that the Company will generate any earnings or specific level of continuing earnings in future periods, management believes that it is more likely than not that the net deductible differences will reverse during periods when the Company generates sufficient net taxable income. Income before income taxes, as shown in the accompanying consolidated statements of income, includes the following components:
Year Ended July 31, 1996 1995 1994 --------------------------- (Dollars in thousands) Domestic $25,751 $23,750 $16,390 Foreign 143 757 506 - ---------------------------------------------------------------------------------------------------------- Income before income taxes and extraordinary items $25,894 $24,507 $16,896 - ----------------------------------------------------------------------------------------------------------
Taxes on income, as shown in the accompanying consolidated statements of income, include the following components:
Year Ended July 31, 1996 1995 1994 --------------------------- (Dollars in thousands) Current provision: Federal $ 8,525 $ 7,518 $ 5,183 State 2,261 2,154 1,327 Foreign 1,777 236 205 - -------------------------------------------------------------------------------------------------------- Total current provision 12,563 9,908 6,715 Deferred provision (benefit), predominantly foreign (2,550) (114) 43 - -------------------------------------------------------------------------------------------------------- Income tax provision $10,013 $ 9,794 $ 6,758 - --------------------------------------------------------------------------------------------------------
------------------------------------------------------ CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES 32 - -------------------------------------------------------------------------------- notes to consolidated financial statements (continued) 11. Income Taxes continued The effective rate differs from the statutory rate for the following reasons:
Year Ended July 31, 1996 1995 1994 --------------------------- (Dollars in thousands) Tax provision based on the U.S. federal statutory tax rate $ 9,063 $ 8,577 $ 5,914 State income taxes, net of federal income tax benefit 1,470 1,400 862 Amortization of excess cost over net assets acquired 186 117 117 Effect of capital loss -- -- (228) Research and development tax credit (470) -- -- All other, net (236) (300) 93 - --------------------------------------------------------------------------------------------------------------------------------- Income tax provision $10,013 $ 9,794 $ 6,758 - ---------------------------------------------------------------------------------------------------------------------------------
As a result of acquisitions during fiscal 1996 net deferred tax liabilities of $1,977,000 were recorded. The components of the deferred tax assets and liabilities recorded in the accompanying balance sheets at July 31, 1996 and 1995 were as follows:
Year Ended July 31, 1996 1995 ---------------------- (Dollars in thousands) Deferred tax assets Reserves recorded for: Accruals $ 1,134 $ 354 Insurance programs 1,980 598 Asset valuations 1,767 1,339 Contingent liabilities 342 143 Unicap 410 127 Net operating loss carryforward of foreign subsidiary -- 481 Other 44 5 - ---------------------------------------------------------------------------------------- Total deferred tax assets $ 5,677 $ 3,047 - ---------------------------------------------------------------------------------------- Deferred tax liabilities: Excess of book basis over tax basis of fixed assets $(6,221) $(3,648) Pension (183) (173) Qualification costs (42) (155) Other (28) (15) - ---------------------------------------------------------------------------------------- Total deferred tax liabilities (6,474) (3,991) - ---------------------------------------------------------------------------------------- Net deferred taxes before valuation allowance (797) (944) Valuation allowance -- (426) - ---------------------------------------------------------------------------------------- Net deferred taxes $ (797) $(1,370) - ---------------------------------------------------------------------------------------- Reconciliation to the balance sheets -- Current portion of deferred taxes, net $ 3,286 $ 2,175 Long-term deferred taxes, net (4,083) (3,545) - ---------------------------------------------------------------------------------------- Net deferred taxes $ (797) $(1,370) - ----------------------------------------------------------------------------------------
- ------------------ ANNUAL REPORT 1996 33 - -------------------------------------------------------------------------------- notes to consolidated financial statements (continued) 12. Net Income Per Share of Common Stock Primary net income per share of common stock is calculated by dividing net income by the weighted average number of shares of common stock plus incremental common stock equivalent shares (shares issuable upon exercise of options and warrants). Incremental common stock equivalent shares are calculated for each measurement period based on the treasury stock method. The repurchases are assumed to be made at the average fair market value price per share of the Company's common stock during the measurement period. Fully diluted net income per share of common stock assumes similar conversions as discussed above, except that the incremental weighted average common stock equivalent shares based upon the treasury stock method are assumed to be repurchased at the higher of the average market price per share during the measurement period or the period end market value of the Company's common stock. The weighted average number of shares of common stock outstanding and common stock equivalents were as follows:
July 31, 1996 1995 1994 ---------------------------------- Primary 18,626,792 17,082,550 15,483,096 Fully diluted 18,626,792 17,172,848 15,536,544
13. Business Acquisitions Business acquisitions during the fiscal year 1996 were as follows: On September 22, 1995, the Company purchased the operating assets of the Raydex Cable division of Volex Group p.l.c. of Manchester, England ("Raydex/CDT"). On February 2, 1996 the Company completed the acquisition of Northern Telecom Ltd's communication cable and IBDN network structured wiring products businesses ("NORDX/CDT"). Both acquisitions were accounted for using the purchase method (APB 16) and, subject to final purchase adjustments, the assets acquired and liabilities assumed were as follows:
Raydex/CDT NORDX/CDT ---------- --------- (Dollars in Thousands) Assets acquired $15,149 $112,271 Liabilities assumed (4,950) (26,134) Notes issued (7,199) -- - --------------------------------------------- Cash paid $ 3,000 $ 86,137
The pro forma information related to the acquisition of Raydex/CDT and NORDX/CDT presented below assumes the transactions had occurred on August 1, 1994. The pro forma information also includes the effect of the Offering (see Note 3) which occurred concurrently with the acquisition of NORDX/CDT, and excludes the effect of non-recurring and extraordinary charges related to the acquisitions and the Offering.
(Pro Forma, unaudited) Year Ended July 31, 1996 1995 ---------------------- (Dollars in thousands) Net sales $462,915 $387,532 Income before extraordinary items 29,211 20,073 Net income 29,211 20,073 Net income per common share $ 1.44 $ 1.00
------------------------------------------------------ CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES 34 - -------------------------------------------------------------------------------- notes to consolidated financial statements (continued) 13. Business Acquisitions continued The pro forma financial information presented above does not purport to present what the Company's results of operations would actually have been if the acquisition of Raydex/CDT and NORDX/CDT had occurred on August 1, 1994, or to project the Company's results of operations for any future period. On June 4, 1996, the Company acquired the outstanding stock of Cekan A/S, of Arhus, Denmark. The acquisition was accounted for under the purchase method (APB 16). The prior results are not material; therefore, pro forma financial information is not presented. On July 25, 1996, the company purchased X-Mark Industries of Washington, Pennsylvania in a pooling-of-interest transaction for 211,311 shares of the Company's common stock. The transaction is not material to the consolidated financial statements and accordingly, prior period financial statements have not been restated. Under APB No. 16, the Company has up to one year to finalize the purchase adjustments related to its acquisitions. 14. Geographic Segments and Export Sales The following summarizes the revenues and income generated by, and the identifiable assets of, the Company's businesses located predominantly in each geographic segment:
North America Europe Consolidated ----------------------------------------- (Dollars in thousands) Segment Data: Year ended 1996: Revenues $308,254 $49,098 $357,352 Income from operations 29,017 2,510 31,527 Identifiable assets 270,028 50,077 320,105 Year ended 1995: Revenues 174,822 14,119 188,941 Income from operations 28,230 1,383 29,613 Identifiable assets 102,381 16,595 118,976 Year ended 1994: Revenues 137,744 7,645 145,389 Income from operations 20,984 817 21,801 Identifiable assets 90,124 12,595 102,719
- ------------------ ANNUAL REPORT 1996 35 - -------------------------------------------------------------------------------- notes to consolidated financial statements (continued) 14. Geographic Segments and Export Sales continued The breakdown of total export sales (sales of products manufactured in the United States and sold to customers outside of the United States) by geographical location was:
Year Ended July 31, 1996 1995 1994 ------------------------- (Dollars in thousands) Export Sales: Europe* $19,877 $13,631 $11,689 Other 9,140 6,965 4,471 - ----------------------------------------------------------------- Total export sales $29,017 $20,596 $16,160 - -----------------------------------------------------------------
*Includes intercompany sales to the Company's U.K., Canadian and Swedish subsidiaries of $3,674,000, $3,262,000 and $3,206,000 for the years ended July 31, 1996, 1995 and 1994, respectively. 15. Lease Commitments Rental expense under all leases was approximately $3,721,000, $1,642,000 and $1,159,000 for the years ended July 31, 1996, 1995 and 1994, respectively. Operating leases relate principally to manufacturing, warehouse, office space and various manufacturing and office equipment. Minimum annual rent payable under noncancelable leases in each of the next five years and thereafter are as follows:
Year Ending July 31, Total - ------------------------------------ (Dollars in thousands) 1997 $ 5,537 1998 3,969 1999 2,296 2000 1,907 2001 1,250 Thereafter 2,695 - ------------------------------------ $17,654 - ------------------------------------
------------------------------------------------------ CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES 36 - ------------------------------------------------------------------------------- notes to consolidated financial statements (continued) 16. Commitments and Contingencies Certain claims have been asserted against the Company in connection with industrial accidents which are being administered by the Company's insurance carriers. Other claims have been asserted in connection with patent matters. In management's opinion, any liability that might be incurred in connection with these claims would not have a material effect upon the Company's financial position or results of operations. As of July 31, 1996, the Company had outstanding letters of credit of $1,257,000 under its workers' compensation policy. The Company also maintains a $2,000,000 bond as excess worker's compensation insurance in the state of Massachusetts. 17. Related Party Transactions The Company has an agreement to pay management fees of $12,500 per quarter to each of two beneficial stockholders. Selling, general and administrative expenses include $100,000 in 1996, 1995 and 1994 for fees paid under this agreement. In the normal course of business the Company enters into transactions for the purchase of materials, equipment and services with entities that are affiliated with or owned by an officer/stockholder. Such transactions totaled $1,840,370, $1,729,000 and $1,481,000 for the years ended July 31, 1996, 1995 and 1994, respectively. 18. Nature of Business and Disclosures About Fair Value of Financial Instruments Concentrations of credit risk with respect to trade receivables are limited due to the Company's wide variety of customers and the many markets into which the Company's products are sold, as well as the many different geographic areas in which such customers and markets are located. As a result, at July 31, 1996 the Company does not believe it has any significant concentrations of credit risk. No single customer in the year ended July 31, 1996, 1995 or 1994 accounted for more than 10% of revenues. The estimated fair values of the Company's significant financial instruments are as follows:
July 31 1996 1995 ----------------------------------- Carrying Fair Carrying Fair Amount Value Amount Value ---------------- ---------------- (Dollars in Thousands) Money market investments $ 9,723 $ 9,723 $ -- $ -- Term loan 34,398 34,398 43,481 43,481 Revolving loans 32,458 32,458 8,456 8,456 Acquisition loan -- -- 7,574 7,574 Other indebtedness 13,748 13,748 2,014 1,970
The fair value and carrying amounts of the Company's Money Market Investments, Term Loans, Revolving Loans and Acquisition Loan are deemed to be approximately equivalent as they bear interest at floating rates which are based upon current market rates. - ------------------ ANNUAL REPORT 1996 37 - -------------------------------------------------------------------------------- notes to consolidated financial statements (continued) 19. Non-recurring Charges In connection with the NORDX/CDT acquisition, the Company engaged an independent appraisal firm to prepare a valuation of the assets acquired to serve as a basis for allocation of the purchase price. As a result of the valuation, the fair market value of the purchased in-process research and development relating to the development of the DynaTraX(TM) automated network cross-connect switch was determined to be $9.8 million. In accordance with generally accepted accounting practices this amount was charged to operations upon the acquisition of NORDX/CDT in the third quarter of fiscal year 1996. In addition, stock appreciation rights of $6.9 million vested upon the completion of the Offering. 20. Initial Public Offering The unaudited pro forma income statement data in the following table gives effect to the occurrence of the Initial Public Offering (see Note 3) as if it had occurred on August 1, 1993. Proceeds from the Initial Public Offering were utilized to retire a portion of the outstanding debt of the Company. The adjustment to interest expense represents the effect of the reduction of debt as if it had it occurred on August 1, 1993. Pro forma taxes are applied at an effective tax rate of 40.0% of taxable income. The unaudited pro forma income statement data does not purport to represent what the Company's results of operations actually would have been if the foregoing had in fact occurred on such date. See Note 13, Business Acquisitions, for the pro forma presentation of the Company's February 28, 1996 common stock offering.
(Unaudited) Year Ended July 31, 1994 (In thousands, except per share data) Actual Adjustments Pro Forma - ------------------------------------------------------------------------------------------- Operating income $21,801 $ -- $21,801 Interest expense 5,247 (723) 4,524 Other (income) expense, net (342) -- (342) - ------------------------------------------------------------------------------------------- Income before income taxes and extraordinary items 16,896 723 17,619 Income tax provision (6,758) (289) (7,047) - ------------------------------------------------------------------------------------------- Income before extraordinary items 10,138 434 10,572 Extraordinary item (3,998) -- 3,998 - ------------------------------------------------------------------------------------------- Net income $ 6,140 $ 434 $ 6,574 - ------------------------------------------------------------------------------------------- Income per common share: Income before extraordinary items $ 0.65 $ 0.62 Extraordinary items (0.25) (0.23) - ------------------------------------------------------------------------------------------- Net income $ 0.40 $ 0.39 - ------------------------------------------------------------------------------------------- Weighted average number of common shares and common stock equivalents 15,483,096 16,982,363
------------------------------------------------------ CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES 38 - -------------------------------------------------------------------------------- notes to consolidated financial statements (continued) 21. Quarterly Financial Information (Unaudited) Quarterly financial data are summarized as follows: (In thousands, except per share data)
Fiscal Year 1996 First Second Third Fourth - ---------------------------------------------------------------------------------- Revenues $65,054 $67,243 $112,222 $112,833 Gross profit 20,951 21,726 34,944 34,198 Income from operations 10,755 10,345 (3,422) 13,849 Net income before extraordinary items 5,708 5,378 (3,357) 8,152 Net income 5,708 5,378 (3,953)/1/ 8,152 Per share information: Income per common share before extraordinary items 0.33 0.31 (0.20)/1/ 0.40 Net income per common share 0.33 0.31 (0.24) 0.40 Fiscal Year 1995 - ---------------------------------------------------------------------------------- Revenues $44,918 $44,386 $ 47,935 $ 51,702 Gross profit 14,643 14,292 15,606 18,623 Income from operations 6,820 6,227 7,495 9,071 Net income 3,420 2,930 3,710 4,653 Per share information: Net income per common share 0.20 0.17 0.22 0.27
/1/Excluding non-recurring and extraordinary charges (see Notes 7 and 19), net income was $7.2 million, or $0.37 per share. - ------------------ ANNUAL REPORT 1996 39 - -------------------------------------------------------------------------------- selected historical consolidated financial data
For the Fiscal Year Ended July 31, (In thousands, except per share data) 1996 1995 1994 1993 1992 - ------------------------------------------------------------------------------------------------------------------ Income Statement Data: Net sales $ 357,352 $188,941 $145,389 $ 126,650 $ 119,563 Income from operations 31,527/3/ 29,613 21,801 19,577 18,030/1/ Income before extraordinary items 15,881 14,713 10,138 6,026/2/ 4,648 Extraordinary item (net of tax): Loss on early extinguishment of debt (596) -- (3,998) -- -- Net income 15,285/4/ 14,713 6,140 6,026 4,648 Net income per share of common stock: Primary 0.82 0.86 0.39 0.45 0.35 Fully diluted 0.82 0.86 0.39 0.41 0.35 Weighted average number of shares of stock outstanding: Primary 18,627 17,082 15,483 13,488 13,424 Fully diluted 18,627 17,174 15,537 14,586 13,424 As of July 31, 1996 1995 1994 1993 1992 - ------------------------------------------------------------------------------------------------------------------ Balance Sheet Data: Total assets $ 320,105 $118,976 $102,719 $ 83,749 $ 80,527 Long-term debt 73,068 52,696 63,828 77,472 80,762
/1/Effective August 1, 1991 the Company revised the estimated useful lives of certain machinery and equipment from 5-10 years to 5-15 years. The effect of this change was to increase fiscal 1992 income from operations by $780,000. /2/Includes a non-recurring charge of $650,000 related to an acquisition of a European manufacturer which was not consummated. /3/Includes $16.7 million of non-recurring charges (see Note 19). /4/Excluding non-recurring and extraordinary charges (see Notes 7 and 19), net income would have been $26.4 million, or $1.42 per share. ------------------------------------------------------ CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES 40 - -------------------------------------------------------------------------------- directors, officers and corporate information Directors Bernard J. Bannan President and Chief Executive Officer Binley Inc. Bryan C. Cressey* Partner Golder, Thoma, Cressey, Rauner Inc. Myron S. Gelbach Jr. Independent Financial Consultant Michael F. O. Harris Managing Director NGI, Inc. Glenn Kalnasy Managing Director NGI, Inc. Paul M. Olson President and Chief Executive Officer Cable Design Technologies Corp. Richard C. Tuttle Executive Vice President Health Care and Retirement Corp. *Chairman of the Board of Directors Cable Design Technologies Corporation Executive Officers Paul M. Olson President and Chief Executive Officer George C. Graeber Executive Vice President President, Montrose/CDT Michael A. Dudley Executive Vice President President, CDT International Normand R. Bourque Executive Vice President President, NORDX/CDT David R. Harden Senior Vice President President, West Penn/CDT Donald M. Hastings Senior Vice President Executive Vice President, West Penn/CDT Kenneth O. Hale Vice President Chief Financial Officer and Secretary Annual Meeting Tuesday, December 10, 1996 9:00 A.M. (Eastern Time) DoubleTree Hotel 1000 Penn Avenue Pittsburgh, Pennsylvania 15222 A copy of the Company's annual report to the Securities and Exchange Commission on Form 10-K for fiscal 1996 is available without charge to stockholders upon written request to Investor Relations at the Company's headquarters. Stock Transfer Agent & Registrar Questions regarding stock certificates, replacement of lost certificates, address changes, account consolidation and transfer procedures should be addressed to: The Bank of Boston Investor Relations Mail Stop 45-02-09 P.O. Box 644 Boston, Massachusetts 02102-0644 (617) 575-3120 Allow three weeks for a reply. Inquiries Cable Design Technologies Corporation both welcomes and encourages questions and comments from its stockholders, potential investors, financial professionals, institutional investors and security analysts. Interested parties should contact the Company's headquarters by telephone at (412) 937-2300. CDT maintains a Web site on the Internet at http://www.cdtc.com Common Stock The Company's common stock is listed for trading on the National Association of Securities Dealers Automated Quotation System (National Market System) under the symbol "CDTC." The following table sets forth the high and low sales price per share of the common stock during the fiscal periods indicated. The Company did not pay cash dividends on the common stock during the periods set forth.
Fiscal 1996 Fiscal 1995 - --------------------------------------------- High Low High Low - --------------------------------------------- First 22 14-7/8 12-5/8 8-3/8 Second 44 21-1/8 13-1/8 10-3/8 Third 51 30 12-1/8 9-5/8 Fourth 49-1/4 24-3/4 15-3/8 11-1/2
- ------------------ ANNUAL REPORT 1996 - ---------------------- operations at a glance [Photo of Anglo/CDT facility in Leeds, United Kingdom.] [Photo of Mohawk/CDT facility in Leominster, MA.] [Photo of West Penn/CDT satellite facility in Washington, PA.] [Photo of Montrose/CDT facility in Auburn, MA.] a history of successful acquisitions 1985 1986 1988 1991 West Penn/CDT Mohawk/CDT Montrose/CDT Anglo/CDT West Penn/CDT manufactures specialty electronic wire and cable products which it sells through a comprehensive catalog to over 4,000 customers. West Penn is a leading supplier of electronic cables for the automation, sound & safety markets and has established preferred specification positions with OEMs, sound and security companies and building architects. Mohawk/CDT manufactures high-performance network cables, many of which are copper, fiber optic and composite constructions for use in local area networks, multimedia ATM and WAN applications. Mohawk's ISO 9001 certification has been a big asset to international sales. Approximately 10% of Mohawk's shipments are for the international marketplace. Montrose/CDT manufactures specialty electronic cables. For over 50 years, Montrose has designed products and obtained specification approvals for the computer OEM marketplace, including high data speed specialty cables for ATM, medical electronics, PC memory cards markets and large communications mainframe switches. In 1990, the Company formed CDT International to serve markets in Europe and the Pacific Rim. In 1991, CDT purchased Anglo American Cables, Ltd., a cable systems distributor, to enhance its international business. This operation specializes in European growth markets for network systems cables and for the electronic cable marketplace. Phalo/CDT was formed by the Company in 1993 to expand production capacity of its Mohawk, Montrose and West Penn product lines and to utilize a well-established trade name. Phalo has its own production capabilities, from base copper drawing machinery to high-speed extrusion and cabling equipment for computer network cable products. [Photo of Manhattan/CDT facility in Manchester, CT.] [Photo of NORDX/CDT facility in Kingston, Ontario.] [Photo of Phalo/CDT facility in Manchester, CT.] [Photo of Raydex/CDT facility in Skelsmerdale, United Kingdom.] [Photo of NEK/CDT facility in Kinna, Sweden.] [Photo of X-Mark/CDT facility in Washington, PA.] 1993 1994 1995 1995 1996 1996 Phalo NEK/CDT Manhattan/CDT Raydex/CDT NORDX/CDT X-Mark/CDT Purchased in May 1994, NEK/CDT in Sweden is an important link to expanded overseas sales of CDT's products. NEK provides the Company with a state-of-the-art manufacturing facility for the production of coaxial cable for both European and U.S. markets for CATV/broadcast systems and for specialized computer inter-connect products for LANs and WANs. Established in June, 1995, Manhattan/CDT comprises two recent acquisitions, Manhattan Electric Cable and Cole-Flex Corporation. This operation now combines a well-recognized supplier of cable products to the electrical and electronic distribution industry with a leading provider of tubing and sleeving product offerings. Raydex/CDT, established in September 1995, is a highly regarded manufacturer of electrical and high performance wire and cable products to the electronic, electrical OEM and distribution industry in both the UK and overseas. This operation maintains two manufacturing plants in England along with an existing distribution system throughout Europe. Acquired in February 1996, NORDX/CDT is a leading manufacturer of LAN and network structured wiring systems products. NORDX/CDT currently manufactures over 2,000 different products including cables, connectors and patch panels of the OBDN structured wiring system, the DynaTraX(TM) wiring closet automation product line and communications cables for outside plant needs. Acquired in July 1996, X-Mark/CDT is a highly regarded manufacturer of specialized metal enclosures and wiring panels for use in computer and network systems. X-Mark/CDT's products are manufactured using newly installed state-of-the-art laser cutting technology which, together with its recent facility expansion, will double production capacity. HEADQUARTERS Foster Plaza 7, 661 Andersen Drive, [Logo of CABLE DESIGN TECHNOLOGIES] Pittsburgh, PA 15220 Telephone: (412) 937-2300 FAX: (412) 937-9690 CDT INTERNATIONAL Zeal Court, Moorfield Road, Yeadon Leeds LS19 7BN, United Kingdom [Photo of Electronic wire and cable on reels.] [Photo of Room with person watching computer monitors.] [Photo of Montage of electronic wire and cables computer and digital readouts.] [Photo of Offshore oil platform.] [Photo of Spray of fiber optic conductors.] [Photo of Video camera.] [On inside cover and outside cover last page.] [Logo of WEST PENN WIRE] WEST PENN/CDT P.O. Box 762, 2833 West Chestnut Street, Washington, PA 15301 [Logo of MOHAWK] MOHAWK/CDT 9 Mohawk Drive, Leominster, MA 01453 [Logo of Montrose] MONTROSE/CDT 28 Sword Street, Auburn Industrial Park, Auburn, MA 01501 [Logo of PHALO] PHALO/CDT 90 Progress Drive, Manchester, CT 06040 [Logo of ANGLO] ANGLO/CDT Moorfield Industrial Estate, Moorfield Road, Zeal Court Yeadon Leeds LS19 7BN, United Kingdom [Logo of NEK] NEK/CDT Skene Skog Ind-omr, Box 208, S-511 22 Kinna, Sweden [Logo of ADMIRAL] ADMIRAL/CDT 931 Seville Road, P.O. Box 1003, Wadsworth, OH 44281 [Logo of Manhattan] MANHATTAN/CDT 203 Progress Drive, Manchester, CT 06040 [Logo of RAYDEX] RAYDEX/CDT Gladden Place, West Gillibrands, Skelmersdale Lancashire WN8 9SX, United Kingdom [Logo of NORDX] NORDX/CDT 105 Marcel-Laurin Boulevard, Saint Laurent, Quebec Canada H4N 2M3 [Logo of CEKAN] CEKAN/CDT Videhojvej 4, DK-8883 Gjern, Denmark [Logo of X-MARK] X-MARK/CDT 2001 N. Main Street Washington, PA 15301 EX-21.1 11 SUBSIDIARIES OF CABLE DESIGN TECH. CORP. EXHIBIT 21.1 CABLE DESIGN TECHNOLOGIES CORPORATION SUBSIDIARIES OF THE REGISTRANT LIST OF SUBSIDIARIES OF CABLE DESIGN TECHNOLOGIES CORPORATION Anglo-American Cables Limited (Incorporated - United Kingdom) Cable Design Technologies, Inc. (Incorporated - State of Washington) CDT International Holdings, Inc. (Incorporated - Delaware) Cekan A/S (Incorporated - Denmark) NEK Kabel AB (Incorporated - Sweden) NORDX/CDT Asia Limited (Incorporated - Hong Kong) NORDX/CDT, Corp. (Incorporated - Delaware) NORDX/CDT, Limited (Incorporated - United Kingdom) NORDX/CDT, Inc. (Incorporated - Canada) NORDX/CDT - IP Corp. (Incorporated - Delaware) Noslo Limited (Incorporated - United Kingdom) Raydex/CDT Limited (Incorporated - United Kingdom) Wire Group International, Limited (Incorporated - United Kingdom) X-Mark/CDT Inc. (Incorporated - Pennsylvania) EX-23.1 12 CONSENT OF ARTHUR ANDERSEN LLP EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANT As independent public accountants, we hereby consent to the incorporation by reference in this Form 10-K of our reports dated September 11, 1996, included in Cable Design Technologies Corporation and Subsidiaries' annual report for the year ended July 31, 1996, and of our reports, included or incorporated by reference in this Form 10-K, into the Company's previously filed Form S-8 Registration Statements File No. 33-78418, File No. 33-73272, File No. 333-2450, and File No. 333-06743, and Form S-3 Registration Statement File No. 333-00554. ARTHUR ANDERSEN LLP Pittsburgh, Pennsylvania October 28, 1996 EX-27 13 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED CONSOLIDATED FINANCIAL BALANCE SHEETS AND STATEMENTS OF INCOME AS OF JULY 31, 1996 AND THE TWELVE MONTH PERIOD THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR YEAR JUL-31-1996 JUL-31-1995 AUG-01-1995 AUG-01-1994 JUL-31-1996 JUL-31-1995 16,097 2,210 0 0 96,490 32,925 0 0 90,618 35,377 208,456 74,341 89,519 30,147 0 0 320,105 118,976 72,682 30,870 0 0 0 0 0 0 181 98 0 0 320,105 118,976 357,352 188,941 0 0 245,533 125,777 325,825 159,328 271 (5) 0 0 5,362 5,111 25,894 24,507 10,013 9,794 15,881 14,713 0 0 596 0 0 0 15,285 14,713 .82 .86 .82 .86
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