SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 [Fee Required] for the
Fiscal Year Ended September 28, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of
the Securities
Exchange Act of 1934 [No Fee Required] for the Transition
Period from _________________________ to
_________________________
Commission File Number 0-2052
GODDARD INDUSTRIES, INC.
(Exact name of registrant as specified in its
charter)
Massachusetts 04-2268165
(State or other juris- (I.R.S. Employer Identifi-
diction of incorporation cation No.)
or organization)
705 Plantation Street, Worcester, Massachusetts,
01605
(Address of principal executive offices) (Zip
Code)
Issuer's telephone number, including area code (508)
852-2435
Securities registered under Section 12(b) of the Act:
Name of Each
Exchange
Title of Each Class On Which Registered
None N/A
Securities registered under Section 12(g) of the Act:
Common Stock $.01 par value
(Title of class)
Check whether the issuer: (1) filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange
Act during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the
past 90 days. Yes X No _____
Check if there is no disclosure of delinquent filers in
response to Item 405 of Regulation S-B contained in this
form, and if no disclosure will be contained, to the best of
the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III
of this Form 10-KSB or any amendment to this Form 10-KSB []
The registrant's revenues for its most recent fiscal year
are $8,300,167.
The aggregate market value of the registrant's Common Stock,
par value $.01 per share, held by non-affiliates of the
registrant at December 13, 1996 was approximately
$1,945,850, based on the mean of the high and low sale
prices on that date as reported by the National Quotation
Bureau, Inc.
As of December 13, 1996, there were outstanding 2,040,129
shares of Common Stock, par value $.01 per share.
Transitional Small Business Disclosure Format:
Yes No X
-2-
PART I
ITEM 1. Business.
General.Goddard Industries, Inc. (which together with
its wholly-owned subsidiaries is hereinafter referred to as
the "Company") is primarily engaged in the design,
manufacture, distribution and sale of cryogenic valves for
industrial and commercial use and in the distribution of
plumbing goods, valves and fittings for residential and
commercial use.
The Company's Goddard Valve subsidiary designs,
manufactures and sells cryogenic gate, globe and check
valves and control devices required for the handling of
liquefied natural gas, liquid oxygen and other liquefied
gases. The principal markets for Goddard Valve's cryogenic
valves historically have been public utility companies
involved with liquefied natural gas and manufacturers of
cryogenic tanks and transport trailers. In more recent
years, markets for special cryogenic valves have developed
for use on tanks required by the semi-conductor
manufacturing and medical technology industries. Goddard
Valve's cryogenic valves are distributed domestically both
by direct sales to customers and through independent sales
representatives. Goddard Valve also makes direct sales of
the valves to customers in Canada, Europe and Asian
countries.
The Company's Webstone subsidiary is an importer of
brass, stainless steel and plastic plumbing products, as
well as valves for the gas industry, all of which are
manufactured and packaged to Webstone's specifications in
the Far East and in Europe, and marketed under the Webstone
name nationally through sales representatives and in Canada
through distributors. In addition, Webstone also
manufactures and distributes nationally certain domestic
plumbing products, some of which have been designed by the
Goddard Valve subsidiary. The principal markets for
Webstone's plumbing products are plumbing supply and
hardware wholesalers who redistribute products to plumbers
and contractors involved in new construction or home
alterations, and to retail hardware outlets.
The Company is a Massachusetts corporation organized in
1959. Its executive offices are located at 705 Plantation
Street, Worcester, Massachusetts 01605.
Sources of Supply; Foreign Suppliers.
Raw materials for the Goddard Valve business consist of
stainless steel, aluminum and bronze castings and bar stock,
which are available from a variety of regular and
competitive suppliers. The Company does not anticipate
difficulty in obtaining sufficient raw materials for that
business.
Webstone purchases substantially all of the products
for its plumbing supply business from a variety of sources
in foreign countries. Webstone's name is stamped or cast
into the part as well as its brand name being included in
the packaging. These foreign operations involve hazards
shared by most enterprises doing business in foreign
countries, such as political risks, currency controls and
fluctuations, tariffs and import controls. To date,
Webstone has not been adversely affected by these matters.
Webstone has alternative sources of supply in each country
and does not anticipate problems in maintaining adequate
sources of supply.
-3-
Dependence Upon Principal Customers.
During fiscal 1996 the Goddard Valve division sold a
substantial majority of its products to three customers,
manufacturers of cryogenic vessels. It was dependent on one
customer for 46% of its cryogenic valve business
(approximately 28% of the Company's total revenue), and any
loss or significant decrease in business from this customer
would have a material adverse effect on the business of the
Company. In addition, two other customers accounted for
approximately 14% and 12%, respectively, of the Goddard
Valve division's cryogenic valve revenues during fiscal
1996, and the loss of either of those customer could have a
material adverse effect upon the Company.
No single customer accounts for 10% of the revenues of
the Webstone plumbing supply subsidiary.
Backlog.
The dollar amount of backlog of orders believed to be
firm for the Company's cryogenic valve subsidiary was
approximately $1,846,000 as of the end of the 1996 fiscal
year, as compared with approximately $776,000 at the end of
the preceding fiscal year. The dollar amount of orders
believed to be firm in the Company's plumbing supply
subsidiary as of the end of the 1996 fiscal year was
approximately $110,000, as compared with approximately
$98,000 as of the end of the preceding fiscal year.
No part of the backlog of either business is seasonal,
and all backlog is expected to be shipped within the current
fiscal year. Backlog varies according to business
conditions within the industry for both businesses.
Competition.
All aspects of the Company's business are highly
competitive. The Company believes there are between six and
eight principal competitors in its cryogenic valve business.
Goddard Valve competes on the basis of product performance
and dependability. The Company believes that its
competitive position within that industry has improved
during the past couple of years, although there can be no
assurance that that situation will continue.
The Company believes there are approximately eight to
ten other major importers of foreign plumbing supplies which
distribute nationally and which compete with the Company's
plumbing supply subsidiary. The Company does not believe
that there have been any changes in competitive conditions
in the plumbing supply business or in the competitive
position of Webstone in that industry during the past fiscal
year. Webstone competes on the basis of price and delivery.
Research and Development.
During the last fiscal year, the Company spent
approximately $175,000 and had seven employees working full
or part time on Company-sponsored research and development,
all of which was spent on cryogenic valve development.
During the previous year the Company spent approximately
$138,000 for research and development. This increase
reflected the effort on development of valves for the
cryogenic business.
-4-
The Company has obtained a number of patents and has
additional patent applications pending with respect to
certain of the products of its cryogenic valve subsidiary.
There can be no assurance that any of the pending patent
applications will be granted or that existing patents will
be enforceable. While the Company believes the patents have
value, it believes that the success of the cryogenic valve
subsidiary depends more upon the technical competence and
manufacturing skills of its employees than upon patents.
Employees.
The Company employs approximately 50 people, of whom 45
are full-time.
ITEM 2. Properties.
The Company's executive offices and the business of
both the cryogenic valve subsidiary and the plumbing
products subsidiary are located at 703-705 Plantation
Street, Worcester, Massachusetts in a building on a main
thoroughfare owned by Goddard Valve. The building is a one-
story masonry building erected in 1961, containing 27,000
square feet. It is owned by Goddard Valve. The Company
anticipates that as a result of the growth of both divisions
over the past couple of years, it will be necessary to
acquire approximately 10,000 additional square feet of
warehouse and manufacturing space for its business. It is
presently contemplated that this will be done by an addition
to the existing building in the near future. With that
addition, the facility should be adequate to meet Company
needs.
The Company believes that its existing facilities and
equipment are well maintained and in good operating
condition.
ITEM 3. Legal Proceedings.
In 1987, the Company notified the Massachusetts
Department of Environmental Protection ("DEP") of the fact
that an environmental site assessment performed at its
facility at 705 Plantation Street, Worcester for a proposed
bank financing had revealed that there may have been a
release or threat of release of oil or hazardous materials.
In 1989, the DEP designated the site as a disposal site
under the Massachusetts Oil and Hazardous Material Release,
Prevention and Response Act (popularly known as Chapter
21E). In 1991, the Company submitted a Phase One Limited
Site Investigation report to DEP. The site has been
designated as a Tier 1C Site under the Massachusetts
Contingency Plan and further site investigation is required
to be performed.
Separately, in 1990, the Town of Shrewsbury commenced
a lawsuit against the Company and Neles-Jamesbury, Inc. in
Massachusetts Superior Court, alleging that they had caused
Shrewsbury to incur response costs for assessment,
containment and removal of oil and hazardous materials in
relation to the town's Home Farm water wells. Shrewsbury
sought damages for environmental response costs and
injunctive relief. The Company filed an answer generally
denying the allegations and joined eight other businesses
located in the same industrial park area as third-party
defendants. During 1992-93 some but not all counts of
Shrewsbury's complaint were dismissed.
-5-
The Company gave notice to its comprehensive general
liability insurance carriers of the DEP claim and the
Shrewsbury litigation and asked the carriers to defend and
indemnify the Company against the claims. One of the
carriers, St. Paul Fire and Marine Insurance Co., assumed
primary responsibility for the defense of the litigation and
two other carriers agreed to each pay a portion of defense
costs, while reserving their right to contest coverage under
the policies. In 1992, St. Paul filed suit in the Federal
District Court of Massachusetts for a declaratory judgment
that it had no duty to defend or indemnify the Company under
its liability policies. That suit was dismissed without
prejudice pending disposition of the Town of Shrewsbury
litigation.
In January 1997 the Company and five of the other
defendants reached a settlement of the Shrewsbury litigation
with the Town of Shrewsbury. The Company agreed to pay a
total of $750,000 by March 31, 1997 as its share of the
settlement, and other defendants agreed to pay additional
amounts. In addition, the Company reached an agreement with
its three insurance carriers. In exchange for a release of
certain further claims, they will pay a total of $715,000 of
the $750,000 amount Goddard is obligated to pay the Town of
Shrewsbury. One of the insurance carriers has also agreed
to pay $70,000 in full settlement of any claim for insurance
coverage with respect to the Company's facility, to be used
as the Company determines in defense of the DEP proceeding.
ITEM 4. Submission of Matters to a Vote of Security
Holders.
No matters were submitted to the stockholders of the
Company during the fourth quarter of the 1996 fiscal year.
-6-
PART II
ITEM 5. Market for Registrant's Common Equity and Related
Stockholder
Matters.
The Company's Common Stock is traded in the over-the-
counter market in the "pink sheets". As of December 13,
1996, there were 911 holders of the Company's Common Stock.
The quarterly high and low bid prices of the Company's
Common Stock for the two fiscal years ending September 30,
1995 and September 28, 1996 are set forth below. Prices are
based upon quotations from the National Quotation Bureau,
Inc.
FISCAL 1995 BID PRICES
High
Low
Quarter Ending: 12/31/94 $.310
$.250
3/31/95 $.310
$.180
6/30/95 $.250
$.220
9/30/95 $.625
$.250
FISCAL 1996 BID PRICES
High
Low
Quarter Ending: 12/31/95 $ .937 $
.312
3/31/96 1.000
.531
6/30/96 1.000
.812
9/28/96 1.250
.812
The Company has never declared a cash dividend,
although it has declared stock dividends from time to time.
ITEM 6. Management's Discussion and Analysis or Plan of
Operation.
Results of Operations - 1996 Compared to 1995
Consolidated sales for fiscal 1996 were a record
$8,300,000. This was a 22.6% increase over consolidated
sales in fiscal 1995. The 34% increase in sales in the
Valve division resulted from substantially larger orders for
both standard and newly designed product lines. The 8.5%
increase in Webstone division revenues resulted from larger
orders in a newly acquired faucet line and from an increased
market share of standard catalog items. At year-end, the
backlog of orders in the Valve division was approximately 2
times higher than it was at last year-end.
The Company's gross profit margins increased slightly
to 36.4% from 35.8%, reflecting the efficiencies resulting
from increased sales volume, while sales and administrative
expenses declined as a percentage of sales from 23.8% to
22.0% for the same reason.
Interest expense declined 32.1% for fiscal 1996 as a
result of lower interest rates and somewhat lower borrowing
levels.
As a result of the above, the Company's net income
increased 59.3% to $685,000 ($.33 per share), compared to
$430,000 ($.21 per share) in fiscal 1995.
-7-
Results of Operations - 1995 Compared to 1994
Consolidated sales for fiscal 1995 were a record
$6,771,000, a 34.8% increase compared to 1994 sales of
$5,024,000. The sales increase was shared by the Valve and
Webstone divisions, both of which met their early sales
forecasts for fiscal 1995. Sales increases in the Valve
division reflected an increased level of orders for more
sophisticated, higher priced products. Sales increases in
the Webstone division reflected increased orders from
geographic areas not previously serviced and the replacement
of some less productive sales representatives with new, more
productive ones. At the end of the fiscal year the order
backlog was higher in both divisions compared to the
previous year.
Gross profit margins improved from 33.8% to 35.8%,
reflecting efficiencies gained from increased volume and
larger average order sizes in the Goddard division. Sales
and administrative expenses declined as a percentage of
sales from 28.7% to 23.8%, reflecting efficiencies gained
from larger volume as well as certain operating efficiencies
achieved.
Interest expense increased by $60,000 as a result of an
increase in interest rates and larger borrowings throughout
the year to support increased inventory needs.
As a result of the foregoing, consolidated net income
for the year was a record $430,000 ($.21 per share). This
represents a 350% increase over fiscal 1994.
Liquidity and Capital Resources
Historically, the Company has funded operations
primarily through earnings and bank borrowings. At
September 28, 1996, the Company had working capital of
approximately $3,679,000, including $66,000 in cash. The
Company also had a line of credit of $1,750,000 with The
First National Bank of Boston collateralized by
substantially all of the assets of the Company. On
September 28, 1996, approximately $884,000 had been drawn
under that line of credit, which bears interest at a rate
equal to the bank's prime rate plus 3/4 of 1%.
During fiscal 1996, the operations of the Company
produced $417,000 of cash. The major sources of cash were
net income ($685,000), accrued environmental settlement
($795,000), depreciation ($208,000), and increases in
accrued expenses ($143,000). Principal uses of cash were
the other receivables related to the environmental costs
($785,000), additional investment in inventories ($401,000)
and increased accounts receivable ($181,000).
During fiscal 1996, the Company used approximately
$140,000 in investment activities for the purchase of
machinery and equipment, compared to $132,000 in the prior
year. Financing activities consumed approximately $287,000
as the Company paid down long term debt.
-8-
The Company plans to add an additional 10,000 square
feet of manufacturing and warehouse space to the rear of its
existing building in Worcester and to finance the addition
using moneys available under the First National Bank of
Boston line of credit. After the use of a portion of the
line of credit for that purpose, the Company believes that
the remaining amounts available under line of credit should
still provide sufficient liquidity to handle the normal
working capital requirements of its present business,
although there can be no assurance that that will be the
case.
The Company borrows funds for periods of up to five years
for the purchase of new machinery and meets the required
amortization and interest payments from its current working
capital. The Company believes that its future capital
requirements for equipment can be met from the cash flow
from operations, bank borrowings and other available
sources.
As more fully described under Item 3 and in Note 8 to the
financial statements, the Company has been a party to two
lawsuits and an administrative proceeding relating to
environmental matters. In January, 1997, the Company
reached a settlement with the Town of Shrewsbury and the
other defendants and third party defendants in the
Shrewsbury litigation under which it is obligated to pay
$750,000 by March 31, 1997. However, under settlements
reached with its insurers, those insurers will pay $715,000
of that total. The Company expects that it will have to pay
at least $45,000 for additional testing in connection with
the DEP proceeding. One of the insurers will also pay the
Company $70,000 for a release of any further Company claim
against it related to that proceeding. Based upon presently
available information, the Company does not anticipate that
the resolution of all previously pending environmental
matters will have a material adverse affect on the Company's
financial resources.
The Company's results of operations have not been
materially affected by seasonality.
ITEM 7. Financial Statements and Supplementary Data.
The financial statements and supplementary data are
listed under
Part III, Item 13 in this report.
ITEM 8. Changes In and Disagreements with Accountants on
Accounting and Financial Disclosures.
There have not been any changes in the Company's
auditors in more than two fiscal years.
-9-
PART III
ITEM 9. Directors, Executive Officers, Promoters and
Control
Persons; Compliance With Section 16(a) of the
Exchange Act.
Information As To Officers, Directors and Beneficial Owners
The following table sets forth certain information, as
of November 30, 1996, with respect to each director, all
officers and directors as a group (6 persons) and each
person owning five percent or more of the Company's Common
Stock. This table is based on information furnished by such
persons.
Number of
Shares of
Common Stock
Year Term
Name, Age and Principal Director Beneficially
Percent Would
Occupation Since Owned (1) of
Expire
Class
and Class
Dr. Jacky Knopp, Jr., 74 1972 77,000 (2) 3.8%
1999
President, Crosby Research
Class 3
Associates
(marketing and management
consultants)
211 Delamere Road, Buffalo, NY;
Account Executive, Moors &
Cabot, Inc.
(stock brokerage firm)
4575 Main Street, Amherst, NY;
Professor Emeritus of Canisius
College,
Buffalo, NY
Saul I. Reck, 78 1959 321,955 (3) 15.2%
1997
President of the Company
Class 1
Lyle E. Wimmergren, 65 1978 5,000 (4) *
1998
Professor Emeritus of
Class 2
Management
Worcester Polytechnic Institute
55 Liberty Hill Road, Henniker,
NH
Robert E. Humphreys, 54 1997 457,950 (5) 22.5%
1998
President of Antigen Express,
Class 2
Inc., a company focused on
creating drugs for auto-immune
diseases, August 1995-present;
Professor and Interim Chair,
Department of Pharmacology,
University of Massachusetts
Medical School prior to August
1995
64 Alcott Street, Acton, MA
All executive officers and -- 939,805 (6) 44.4%
- --
directors as a group
(6 persons)
-10-
Joseph A. Lalli -- 183,550 (7) 9.0%
- --
6 Middlemont Way, Stow, MA
*Less than one percent
(1) Unless otherwise noted, each person identified
possesses
sole voting and investment power.
(2) Includes 36,000 shares owned Dr. Knopp's wife,
as to which
he disclaims beneficial interest, and an option
to acquire
5,000 shares held by Dr. Knopp.
(3) Includes 5,250 shares held by Mr. Reck's wife,
as to which
he disclaims beneficial interest. Also includes
an option
to purchase 75,000 shares held by Mr. Reck.
(4) Consists of option to acquire 5,000 shares held
by Mr.
Wimmergren.
(5) Includes 217,650 shares as to which Mr.
Humphreys has sole
voting and dispositive power and 225,300 shares
as to which
Mr. Humphreys' shares voting and dispositive
power by virtue
of a power of attorney over the investment
accounts of seven
persons. Mr. Humphreys and certain other
persons, acting as
a group, beneficially own an aggregate of
457,950 shares.
(6) In addition to the matters noted above in (2)-
(5), includes
19,900 shares owned by an executive officer
jointly with his
wife and options on 10,000 shares held by the
officer.
(7) Mr. Lalli has reported to the Company that a
Schedule 13D,
Amendment No. 6, was filed with the Securities
and Exchange
Commission indicating that he has sole voting
and
dispositive power of 154,050 shares and shared
voting and
dispositive power with his wife of 29,500
shares.
All of the directors other than Mr. Humphreys have had
the same principal occupation for the last five years,
except that the Amherst, New York office of Moors & Cabot,
Inc. at which Dr. Knopp is an account executive was
previously owned by other brokerage firms, and each of Dr.
Knopp and Mr. Wimmergren has become a professor emeritus at
his institution. Saul I. Reck is the father of Joel M.
Reck, Clerk of the Company.
The Board of Directors of the Company held three
meetings during the fiscal year ended September 28, 1996.
Each present director attended at least 75% of the meetings
of the Board of Directors and of all committees of which he
was a member.
The Board of Directors has an Audit Committee and a
Compensation Committee, both composed of Dr. Knopp and Mr.
Wimmergren. The Audit Committee, which met twice during the
last fiscal year, is charged with recommending to the Board
of Directors retention of a firm of independent accountants
and with reviewing the Company's internal audit and
accounting controls, the report of the independent
accountants and the financial statements of the Company.
The Compensation Committee, which met twice during the last
fiscal year, is responsible for recommending salary and
bonus levels of officers and key employees. There is no
Nominating Committee of the Board of Directors. The Board
of Directors as a whole will consider nominees for director
submitted to it in writing by any shareholder.
-11-
Executive Officers of the Company.
The executive officers of the Company are as
follows:
Name Age Position Officer
Since
Saul I. Reck 78 Chairman of the Board 1959
President and Treasurer
Donald R. Nelson 61 Vice President 1973
The term of office for all officers is from one annual
meeting of the Board of Directors to the next, subject to
the right of the Board of Directors to remove an officer at
any time, subject to the provisions of Mr. Reck's Employment
Agreement described under item 10 below.
Saul I. Reck and Donald R. Nelson have been employed by
the Company in the above-described capacities for more than
five years.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934,
as amended, requires the Company's executive officers and
directors, and persons who own more than 10% of the
Company's Common Stock, to file reports of ownership and
changes in ownership on Forms 3, 4 and 5 with the Securities
and Exchange Commission. Executive officers, directors and
greater than 10% stockholders are required to furnish the
Company with copies of all Forms 3, 4 and 5 they file.
Based solely on the Company's review of the copies of
such forms it has received and written representations from
certain reporting persons that they were not required to
file Forms 5 for specified fiscal years, the Company
believes that all of its executive officers, directors and
greater than 10% stockholders complied with all Section
16(a) filing requirements applicable to them during the
Company's fiscal year ended September 28, 1996, except that
in January 1997 Messrs. Nelson, Wimmergren and Knopp filed
Form 4s reflecting the grant of options for the purchase of
shares of Common Stock to them on December 17, 1995.
ITEM 10. Executive Compensation.
SUMMARY COMPENSATION TABLE
Annual
Compensation
Other Annual
Name and Fiscal Year Salary Bonus (1)
Compensation
(2)
Principal Ended ($) ($)
($)
Position
Saul I. Reck 9/28/96 $115,000 $108,700
$10,000
President & 9/30/95 115,000 55,000
10,000
Treasurer 10/1/94 115,000 0
10,000
(1) Under the terms of his Employment Agreement with
the Company described below, Mr. Reck is entitled to receive
a bonus equal to 10% of the amount by which Company pre-tax
profits exceed specified base amounts.
-12-
(2) Consists of cash payments to Mr. Reck to be used
for purchase of retirement benefits.
The following table shows information concerning the
exercise of stock options during fiscal 1996 and the fiscal
year-end value of unexeercised options and stock
appreciation rights.
AGGREGATED OPTION/SAR EXERCISES IN LAST
FISCAL YEAR AND FY-END OPTION/SAR VALUES
Number of
Value of
Securities
Unexercised
Underlying
In-the Money
Unexercised
Options/SARs at
Options/SARs
9/28/96
Shares 9/28/96
Acquired
on Exercise Value Exercisable
Exercisable
Realized
Name (#) ($) (#)
($)
Saul I. -- -- 75,000
$65,625
Reck
Under an Employment Agreement with Saul I. Reck entered
into in 1989, as amended in 1992 and again in 1994, Mr. Reck
has agreed to be employed by the Company as Chairman of the
Board and President on a full time basis. Mr. Reck received
a base salary of $115,000 in fiscal 1996, plus $10,000 to be
used to purchase a retirement benefit. In addition, Mr.
Reck receives a bonus equal to 10% of the amount by which
the Company's pre-tax profits exceed a base amount. After
he retires, Mr. Reck will be entitled to receive an unfunded
annuity of $60,000 per year for his life and his surviving
spouse will be entitled to an annuity of $30,000 per year
for life, with both amounts payable under these annuities
subject to adjustment based upon cost of living increases
after October 1, 1993.
Compensation of Directors
Each director who is not also an officer or employee of
the Company receives a base fee of $2,400 per year. Each
director who is not also an officer or employee of the
Company and who lives in the greater Worcester area receives
$500 for each directors meeting he attends. Each director
who is not also an officer or employee of the Company and
who lives outside the greater Worcester area receives $600
for each such meeting, plus travel expenses to and from
Worcester. No extra compensation is paid for attendance at
meetings of committees. All non-employee directors as a
group were paid $10,200 for services rendered during fiscal
year 1996. During fiscal 1996, options to purchase 5,000
shares of Common Stock were granted to each of the Company's
then non-employee directors, including Messrs. Knopp and
Wimmergren.
-13-
The Board of Directors has a Severance Compensation
Plan for certain officers and all directors in the event
that there is a "change in control" of the Company not
approved by the Board of Directors resulting in the
termination of employment or reduction in the duties and
responsibilities of the President, Vice-Presidents and
Treasurer (as determined by the Board of Directors) and/or a
termination of service as director of the Company. The plan
provides that such President, Vice Presidents and Treasurer
will continue to receive the compensation being paid to them
at the time of the termination or change in the nature of
employment, for a period of five years following such
termination or change, and the non-employee directors will
continue to receive directors' fees of $500 or $600 per
fiscal quarter, depending on whether or not the director
lives in the greater Worcester area, for such five year
period. At the current rate of compensation this would
entail an aggregate payment of $1,668,500 to the executive
officers as a group and a payment of $34,000 to the non-
employee directors as a group.
ITEM 11. Security Ownership of Certain Beneficial Owners
and
Management.
Information concerning security ownership of certain
beneficial owners and management required by this Item 11 is
hereby incorporated by reference to the information
contained under the heading "Information As To Officers,
Directors and Beneficial Owners" in Item 9 above
ITEM 12. Certain Relationships and Related Transactions.
None.
ITEM 13. Exhibits and Reports on Form 8-K.
(a)(1) Financial Statements.
1. Report of Greenberg, Rosenblatt, Kull & Bitsoli, P.C.
dated
November 19, 1996 and January 31, 1997. (See page 18
hereof.)
2. Consolidated Balance Sheet as of September 28, 1996
and September
30, 1995. (See page 19 hereof.)
3. Consolidated Statement of Income for the fifty-two
weeks ended
September 28, 1996, the fifty-two weeks ended
September 30, 1995
and fifty-two weeks ended October 1, 1994. (See page
20 hereof.)
4. Consolidated Statement of Stockholders' Equity for the
fifty-two
weeks ended September 28, 1996, the fifty-two weeks
ended
September 30, 1995 and fifty-two weeks ended October
1, 1994.
(See page 21 hereof.)
5. Consolidated Statement of Cash Flows for the fifty-two
weeks ended
September 28, 1996, the fifty-two weeks ended
September 30, 1995
and fifty-two weeks ended October 1, 1994. (See page
22 hereof.)
6. Notes to the Consolidated Financial Statements. (See
pages
23 to 33 hereof.)
(a)(2) Exhibits.
-14-
(3) Articles of Incorporation and By-Laws:
(a) Articles of Organization. (Filed as Exhibit 3 to
the
Company's Registration Statement on Form S-1
(Registration
No. 2-16854 of Reva Enterprises, Inc., now
Goddard
Industries, Inc.))*
Articles of Amendment to the Articles of
Organization, dated
December 14, 1962. (Filed as Exhibit 3 to the
Company's Form
10-K for the fiscal year ended September 28,
1985.)*
Articles of Merger and Consolidation, dated July
29, 1968.
(Filed as Exhibit 3 to the Company's Form 10-K
for the fiscal
year ended September 28, 1985.)*
Restated Articles of Organization, dated March
31, 1971.
(Filed as Exhibit 3 to the Company's Form 10-K
for the fiscal
year ended September 28, 1985.)*
Articles of Amendment to Restated Articles of
Organization,
dated June 1, 1972. (Filed as Exhibit 3 to the
Company's
Form 10-K for the fiscal year ended September 28,
1985.)*
Articles of Amendment to Restated Articles of
Organization,
dated October 11, 1985. (Filed as Exhibit 3 to
the Company's
Form 10-K for the fiscal year ended September 28,
1985.)*
Articles of Amendment to Restated Articles of
Organization
dated March 13, 1987. (Filed as Exhibit 3 to the
Company's
Form 10-Q for the quarter ended March 28, 1987.)*
(b)(1) By-Laws (filed as Exhibit 19 to the Company's
Form 10-Q for
the quarter ended March 31, 1984.)*
(b)(2) By-Law Amendment dated as of September 28, 1990.
(Filed as
Exhibit 3(b)(2) to the Company's Form 10-K for
the fiscal
year ended September 29, 1990.)*
(4) Instruments Defining the Rights of Security
Holders:
(a) Specimen certificate of common stock.
(Filed as
Exhibit 4(a) of Registration Statement on Form S-
1
Registration No. 2-16854 of Reva Enterprises,
Inc., now
Goddard Industries, Inc.))*
(10) Material Contracts:
(a) Consolidating Revolving and Term Credit and
Security
Agreement dated as of January 3, 1991 among
subsidiaries of
the Company and The First National Bank of
Boston (the
"Bank"). (Filed as Exhibit 10(h) to the
Company's Form 10-Q
for the quarter ended March 31, 1991.)*
(b) $1,600,000 revolving loan note and $383,124 term
loan note,
both dated January 3, 1991 from subsidiaries of
the Company
to the Bank. (Filed as Exhibit 10(i) to the
Company's Form
10-Q for the quarter ended March 31, 1991.)*
-15-
(c) Unlimited guaranty to the Bank by the Company of
the
obligations of the subsidiaries to the Bank.
(Filed as
Exhibit 10(v) to the Company's Form 10-Q for the
quarter
ended March 31, 1991.)*
(d) Letter agreement between the Company's
subsidiaries and the
Bank dated April 27, 1992 modifying banking
arrangements.
(Filed as Exhibit (10) to the company's Form 10-
Q for the
quarter ended June 30, 1992.)*
(e) Amended and Restated Employment Agreement
between the
Company and Saul I. Reck effective as of October
1, 1991 and
executed May 1, 1992. (Filed as Exhibit 10(c)
to the
Company's Form 10-Q for the quarter ended June
30, 1992.)*
(f) Restated Non-Qualified Stock Option Agreement
between the
Company and Saul I. Reck. (Filed as Exhibit
10(d) to the
Company's Form 10-K for the fiscal year ended
September 30,
1989.)*
(g) Adoption Agreement (Non-Standardized Code 401(k)
Profit Sharing Plan) dated July 31, 1991, together with
related Defined Contribution Prototype Plan and Trust
Agreement. (Filed as Exhibit 10(h) to the Company's Form
10-K for the fiscal year ended September 28, 1991.)*
(h) Employee Stock Purchase Plan dated December 9,
1993.
(Filed as Exhibit 10(h) to the Company's Form 10-
KSB for
the fiscal year ended October 1, 1994.)*
(i) (A) Settlement Agreement and Release between
the Company,
and St. Paul Fire and Marine Insurance Company
dated July,
1996.
(B) Amendment to Settle Agreement and Release
executed
December 3, 1996.
(j) Form of Settlement Agreement and Release between
the
Company, and Gibralter Casualty Company dated
January 31,
1997.
(k) Form of Settlement Agreement and Release between
the
Company and Lexington Insurance Company dated
January 31, 1997.
(l) Form of Settlement Agreement among the Town of
Shrewsbury,
the Company and certain defendants and third-
party
defendants dated January 31, 1997.
(11) Statement Re Computation of Per Share Earnings. The
Statement Re
Computation of Per Share Earnings is set forth in Note
14 to the
Company's Consolidated Financial Statements.
(21) Subsidiaries of the Registrant. (Filed as Exhibit 22
to the
Company's Form 10-K for the fiscal year ended
September 30,
1989.)*
-16-
(27) Financial Statement Schedule.
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K
during the last
quarter of its fiscal year ended September 28, 1996.
______________________
*Not filed herewith. In accordance with Rule 12b-23 under
the Securities Exchange Act of 1934, as amended, reference
is made to the documents previously filed with the
Commission.
SIGNATURES
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, thereunto duly authorized.
GODDARD INDUSTRIES, INC.
Dated: January 31, 1997 By: /s/ Saul I.
Reck
Saul I. Reck,
President
In accordance with the Exchange Act, 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
/s/ Saul I. Reck Director, Principal Executive
January 31, 1997
Saul I. Reck Officer, Principal Financing
Officer and Principal Accounting
Officer
/s/ Jacky Knopp, Jr. Director
January 31, 1997
Jacky Knopp, Jr.
/s/ Lyle Wimmergren Director
January 31, 1997
Lyle Wimmergren
_________________________Director
Robert E. Humphreys
-17-
GODDARD INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 28, 1996 AND SEPTEMBER 30, 1995
Independent Auditors' Report
The Shareholders and Board of Directors
Goddard Industries, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets
of Goddard Industries, Inc. and Subsidiaries as of September
28, 1996 and September 30, 1995 and the related consolidated
statements of income, shareholders' equity and cash flows
for each of the three years in the period ended September
28, 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 consolidated financial statements
referred to above present fairly, in all material respects,
the consolidated financial position of Goddard Industries,
Inc. and Subsidiaries as of September 28, 1996 and September
30, 1995 and the consolidated results of their operations
and cash flows for each of the three years in the period
ended September 28, 1996, in accordance with generally
accepted accounting principles.
/s/ GREENBERG, ROSENBLATT,
KULL & BITSOLI, P.C.
Worcester, Massachusetts
November 19, 1996, except for Note 8,
as to which the date is January 31, 1997
-18-
GODDARD INDUSTRIES, INC. AND
SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 28, 1996 AND SEPTEMBER 30,
1995
1996
1995
ASSETS (All pledged, Note 4)
Current assets:
Cash $ 65,951
$ 74,937
Accounts receivable (less allowance for doubtful
accounts of $27,600 in 1996 and $28,600 in
1995) 1,154,871
973,477
Other receivable (Note 8) 785,000
- -
Inventories (Note 2) 3,312,449
2,911,234
Prepaid expenses 33,809
23,018
Deferred income taxes (Note 7) 82,000
56,000
Total current assets 5,434,080
4,038.666
Property, plant and equipment (Note 3) 1,052,566
950,734
Other assets:
Excess of cost of investment in subsidiaries over
equity in net assets acquired (less accumulated
amortization of $121,905 in 1996 and
$118,149 in 1995) 18,380
22,136
Deferred income taxes (Note 7) 167,000
139,000
Total other assets 185,380
161,136
Total assets $6,672,026
$5,150,536
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt (Note 4)$ 51,000
$ 109,191
Accounts payable 317,321
305,655
Accrued expenses 399,861
256,631
Accrued environmental costs (Note 8) 795,000
- -
Income taxes payable 191,771
222,626
Total current liabilities 1,754,953
894,103
Long-term debt (Note 4) 1,026,398
1,092,503
Deferred compensation (Note 9) 551,000
513,000
Shareholders' equity: (Notes 5 and 13)
Common stock - par value $.01 per share;
authorized 3,000,000 shares, issued and
outstanding 2,040,129 shares in 1996 and
2,032,804 in 1995 20,401
20,328
Additional paid in capital 399,353
395,763
Retained earnings (Note 4) 2,919,921
2,234,839
Total shareholders' equity 3,339,675
2,650,930
Total liabilities and shareholders' equity $6,672,026
$5,150,536
The accompanying notes are an integral part
of the consolidate financial statements.
-19-
GODDARD INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED SEPTEMBER 28, 1996,
SEPTEMBER 30, 1995 AND OCTOBER 1, 1994
1996 1995
1994
Sales $8,300,167 $6,770,841
$5,023,858
Cost of sales (Note 10) 5,280,654 4,343,329
3,326,064
Gross profit 3,019,513 2,427,512
1,697,794
Selling and administrative expenses
(Notes 8, 11 and 12) 1,822,502 1,614,656
1,443,436
Operating profit 1,197,011 812,856
254,358
Other income (expense):
Interest expense (102,529) (151,009)
(91,491)
Other income 55,600 47,241
24,273
Total other income (expense)(46,929) (103,768)
(67,218)
Income before income taxes 1,150,082 709,088
187,140
Income taxes (benefit): Note (7)
Current 519,000 296,000
85,000
Deferred (54,000) (17,000)
(16,000)
Total income taxes 465,000 279,000
69,000
Net income $ 685,082 $ 430,088
$ 118,140
Net income per share: (Note 14)
Primary $ 0.33 $ 0.21
$ 0.06
Fully diluted $ 0.32 $ 0.21
$ 0.06
The accompanying notes are an integral part
of the consolidated financial statements
-20-
GODDARD INDUSTRIES, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS'
EQUITY
YEARS ENDED SEPTEMBER 28,1 996
SEPTEMBER 30, 1995 AND OCTOBER 1, 1994
Shares of Additional
common Common paid-in
Retained
stock stock capital
earnings Total
Balance at
October 2, 1993 2,030,698 $20,307 $ 394,862 $1,686,611
$2,101,780
Net income - - - 118,140
118,140
Stock issued under
employee stock
purchase plan
(Note 13) 2,106 21 901 -
922
Balance at
October 1, 1994 2,032,804 20,328 395,763 1,804,751
2,220,842
Net income - - - 430,088
430,088
Balance at
September 30,1995 2,032,804 20,328 395,763 2,234,839
2,650,930
Net income - - - 685,082
685,082
Stock issued under
employee stock
purchase plant
(Note 13) 7,325 73 3,590 -
3,663
Balance at
September 28, 2,040,129 $20,401 $399,353 $2,919,921
$3,339,675
1996
The accompanying notes are an integral part
of the consolidated financial statements
-21-
GODDARD INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 28, 1996,
SEPTEMBER 30, 1995 AND OCTOBER 1, 1994
1996 1995
1994
Operating activities:
Net income $ 685,082 $ 430,088
118,140
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 207,740 205,708
197,200
Provision for losses on accounts (1,000) 12,000
15,621
receivable
Changes in assets and liabilities:
Accounts receivable (180,394)
(235,272) (99,859)
Other receivables (785,000) -
- -
Inventories (401,215)
(333,017) (663,121)
Prepaid expenses and other (10,790) 52,098
(53,784)
Accounts payable 11,666
(68,768) 265,817
Accrued expenses 143,230 99,484
(48,962)
Accrued environmental costs 795,000 -
- -
Income taxes payable (30,855) 222,626
(27,214)
Deferred income taxes (54,000)
(17,000) (16,000)
Deferred compensation 38,000 38,000
68,106
Net cash provided by (used in)
operating activities 417,464 405,947
(244,056)
Investing activities:
Property, plant and equipment (139,817)
(131,717) (133,364)
additions
Financing activities:
Proceeds from long-term debt 2,900,000 1,909,000
1,740,003
Repayments of long-term debt (3,190,296) (2,170,927)
(1,420,459)
Issuance of common stock 3,663 -
922
Net cash provided by (used in)
financing activities (286,633) (261,927)
320,466
Net increase (decrease) in cash (8,986) 12,303
(56,954)
Cash - beginning 74,937 62,634
119,588
Cash - ending $ 65,951 $ 74,937
$ 62,634
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid during the year:
Interest $ 105,108 $ 150,069
$ 83,543
Income taxes $ 549,855 $ 46,945
$ 164,980
The accompanying notes are an integral part
of the consolidated financial statements
-22-
GODDARD INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATE FINANCIAL STATEMENTS
SEPTEMBER 28, 1996, SEPTEMBER 30, 1995 AND OCTOBER 1,
1994
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation:
The consolidated financial statements include the
accounts of
Goddard Industries, Inc. and its wholly-owned
subsidiaries. All
material intercompany transactions have been
eliminated.
Fiscal year:
The Company's fiscal year ends on the Saturday
nearest to
September 30. The years ended September 28, 1996,
September 30,
1995 and October 1, 1994 each contain 52 weeks.
Inventories:
Inventories are valued at the lower of cost or
market. Cost is
determined by the first-in, first-out method.
Property, Plant and Equipment:
Property, plant and equipment are carried at cost and
depreciated
using the straight - line method over the following
estimated
useful lives:
YEARS
Building and improvements 10 - 35
Machinery, equipment and tools 3 - 10
Office equipment and fixtures 5 - 10
Intangible Assets:
The excess of cost of investment in subsidiaries
over equity in
net assets acquired is being amortized on a straight-
line basis
over 40 years.
Advertising:
Advertising costs are expensed when incurred.
Income taxes:
Taxes are provided for items entering into the
determination of
net income for financial reporting purposes,
irrespective of
when such items are reported for income tax
purposes.
Accordingly, deferred income taxes have been
provided for all
temporary differences. Tax credits are accounted
for on the
flow-through method, whereby credits earned during
the year are
used to reduce the current income tax provision.
Estimates:
The preparation of financial statements inconformity
with
generally accepted accounting principles requires
the company
management to make estimates and assumptions that
affect certain
reported amounts and disclosures. Although these
estimates are
based on management's knowledge of current events
and actions to
be undertaken in the future, they may differ from
actual
results.
-23-
GODDARD INDUSTRIES, INC. AND
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 28, 1996, SEPTEMBER 30, 1995 AND OCTOBER
1, 1994
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Forward Exchange Contracts:
The Company periodically enters into forward
exchange contracts
in foreign currencies to hedge against anticipated
foreign
currency commitments with respect to inventory
purchases. The
gains or losses on these contracts are included as
part of the
inventory costs.
(2) INVENTORIES
Inventories consist of the following:
1996
1995
Finished goods $3,003,898
$2,705,283
Work in process 21,687
11,003
Raw materials 286,864
194,948
$3,312,449
$2,911,234
(3) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the
following:
1996
1995
Land $ 12,865 $
12,865
Building and improvements 665,658
651,344
Machinery, equipment and 2,821,028
2,543,826
tools
Office equipment and 142,267
127,966
fixtures
3,641,818
3,336,001
Accumulated depreciation (2,589,252)
(2,385,267)
$1,052,566 $
950,734
Depreciation expense charged to income was $203,984,
$201,952 and
$193,443 in 1996, 1995 and 1994, respectively.
-24-
GODDARD INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 28, 1996, SEPTEMBER 30, 1995 AND OCTOBER 1,
1994
(4) LONG-TERM DEBT
Long-term debt consists of the following:
1996
1995
Revolving line of credit of $1,750,000 of
which a maximum of $300,000 may be used for
letters of credit, due to expire March 31
1998. Advances are limited by a formula
applied to eligible receivables and inventory
and are secured by all assets of the Company.
The agreement carries interest at the bank's
prime rate plus 3/4% (9.0% and 9.5% for 1996 and
1995 respectively) and provides for a commitment
fee of 1/2% of any unused balance. $884,503
$1,057,503
Capital lease obligation, payments of $5,273
per month including interest at 9%, 157,895
- -
due in 1999
Notes due 1998, unsecured, interest payable
monthly at 10%, due to related parties. 35,000
35,000
Term note repaid in 1996 -
35,360
Capital lease obligations repaid in -
73,831
1,077,398
1,201,694
Current maturities 51,000
109,191
1,026,398
1,092,503
Minimum estimated principal payments are as follows:
1997 $51,000
1998 976,000
1999 50,398
$1,077.398
The above principal payments include amounts due under
the capital
lease obligation of $63,000 in 1997 and 1998 and
$53,300 in 1999,
including amounts representing interest of $21,400.
The Company entered into the above reference lease
agreements for
certain machinery and equipment. Assets directly
financed through
leases totaling $166,000 for 1996 and $248,000 for 1995
are
included in property plant and equipment. Amortization
of these
assets totaling $8,300 in 1996, $24,864 in 1995 and
$21,280 in
1994, is included in depreciation expense and
accumulated
depreciation.
Under the revolving line of credit and term note
agreements, the
Company is subject to a number of convenants, the most
restrictive
of which relate to maintenance of minimum working
capital, tangible
net worth, and profitability levels. These agreements
also
restrict payment of cash dividends to 10% of the
immediately
preceding year's net income which represents
unrestricted
consolidated retained earnings.
-25-
GODDARD INDUSTRIES, INC. AND
SUBSIDIARIES
NOTES TO CONSOLIDATE FINANCIAL
STATEMENTS
SEPTEMBER 28, 1996, SEPTEMBER 30, 1995 AND OCTOBER
1, 1994
(5) COMMON STOCK OPTIONS
In 1989 the Company granted options to its chairman for
75,000
shares of common stock. In 1996 the Company granted
options for
5,000 shares to each non-employee director and in
varying amounts
to certain employees, for an aggregate of 30,000 shares
of common
stock. The exercise price of each option equals the
market price
of the Company's stock on the date of grant and the
option's
maximum term is between five and ten years.
The fair value of each option is estimated on the date
of grant
using the Black-Scholes option-pricing model with the
following
weighted average assumptions used for grants in 1996:
Dividend yield None
Expected volatility 62.12%
Risk free interest rate 6.12%
Expected lives 5 years
A summary of the status of the Company's outstanding
options as of
September 28, 1996, September 30, 1995 and October 1,
1994 and the
changes during the years ending on those date is
presented below:
September 28, 1996 September 30, 1995
October 1, 1994
Weighted- Weighted-
Weighted-
Average Average
Average
Exercise Exercise
Exercise
Shares Price Shares Price
Shares Price
Outstanding at beginning
of years: 75,000 $.25 75,000 $.25
85,000 $.32
Granted 30,000 $.50 - -
- - -
Exercised - - - -
- - -
Forfeited - - - -
(10,000) $.84
Outstanding at end
of year: 105,000 $.32 75,000 $.25
75,000 $.25
Options exerciseable
at year end 105,000 75,000
75,000
Weighted average fair
value of options
granted during
the year $.28 $ - $
- -
-26-
GODDARD INDUSTRIES INC AND SUBSIDIARIES
NOTES TO CONSOLIDATE FINANCIAL STATEMENTS
SEPTEMBER 28, 1996, SEPTEMBER 30, 1995 AND OCTOBER 1,
1994
(5) COMMON STOCK OPTIONS (continued)
The following summarizes information about fixed stock
options
outstanding at September 28, 1996:
Options Outstanding Options
Exercisable
Weighted-
Average Weighted
Weighted
Number Remaining Average Number
Average
Exercise Outstanding Contractual Exercise
Exercisable Exercise
Price at 9/28/96 Life Price at
9/28/96 Price
$.25 75,000 3.25 years $.25 75,000
$.25
$.50 30,000 4.25 years $.50 30,000
$.50
105,000 105,000
The Company applies APB Opinion 25 in accounting for
employee stock
options. Accordingly, no compensation cost has been
recognized.
Had compensation costs been determined on the basis of
FASB
Statement 123 in 1996, net income would have been
reduced to
$680,065 which would have decreased primary net income
per share by
$.01 and would have had no affect on fully diluted net
income per
share.
(6) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts reflected in the consolidated
balance sheets
for cash, accounts receivable, accounts payable and
accrued
expenses approximate fair value due to the short
maturities of
these instruments. The carrying value of long term
debt
approximate fair value since the rates and terms of
these
instruments are substantially equivalent to those the
Company would
offer or obtain at the balance sheet date.
(7) INCOME TAXES
The following is a reconciliation of income tax expense
computed at
the Federal statutory income tax rate to the provision
for income
taxes:
1996 1995
1994
Federal income taxes at
the statutory rate $ 391,000 $241,000
$ 66,500
State income taxes net of
federal income tax benefit 72,100 44,000
9,200
Surtax exemption - -
(10,100)
Nondeductible expenses 5,500 4,900
3,400
Other (3,600) (10,900)
- -
Income taxes $ 465,000 $279,000
$ 69,000
-27-
GODDARD INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 28, 1996, SEPTEMBER 30, 1995 AND OCTOBER
1, 1994
(7) INCOME TAXES (continued)
The provision for income taxes is summarized as
follows:
1996 1995
1994
Current:
Federal $ 400,000 $ 227,000 $
62,500
State 119,000 69,000
22,500
519,000 296,000
85,000
Deferred:
Federal (42,000) (12,800)
(12,300)
State (12,000) (4,200)
(3,700)
(54,000) (17,000)
(16,000)
$ 465,000 $ 279,000
$ 69,000
The tax effects of the principal temporary differences
giving rise
to the net current and non-current deferred tax assets
totaling
$249,000 at September 28, 1996 and $195,000 at
September 30, 1995
are as follows:
1996
1995
Deferred tax assets:
Deferred compensation $ 220,400 $
205,200
Inventory valuation 60,800
39,000
Accrued salaries 6,200
5,800
Environmental settlement 4,000
- -
Bad debts 11,000
11,000
Total gross deferred tax assets 302,400
261,000
Deferred tax liabilities:
Depreciation 53,400
66,000
Net deferred income tax assets $ 249,000 $
195,000
Management does not believe that any valuation
allowance is
necessary.
(8) ENVIRONMENTAL MATTERS
The Company is involved in the following environmental
matters:
Shrewsbury matter:
In 1990, the Town of Shrewsbury, Massachusetts
commenced a
lawsuit in Massachusetts Superior Court against the
Company and
another Corporation, Neles-Jamesbury, alleging that
they had
caused the Town to incur response costs for
assessment,
containment, and removal of oil and hazardous
materials in
relation to the Town's Home Farm water wells. The
Town sought
damages for environmental response costs and
injunctive relief.
The Company filed an answer generally denying the
allegations and joined, as third party defendants,
eight other
-28-
GODDARD INDUSTRIES, INC. AND
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 28, 1996, SEPTEMBER 30, 1995 AND
OCTOBER 1, 1994
(8) ENVIRONMENTAL MATTERS (continued)
businesses located in the same industrial park area.
During 1992
and 1993 some, but not all, counts of the Shrewsbury
complaint
were dismissed. The Company gave notice to its
comprehensive
general liability insurance carriers of the
Shrewsbury litigation
and the DEP claim (see below) and asked the carriers
to defend
and indemnify the Company against the claims. One of
the
carriers, St. Paul Fire and Marine Insurance Co.,
assumed primary
responsibility for the defense of the litigation on
behalf of all
of the carriers while reserving their right to
contest coverage
under the policies. In 1992, St. Paul filed suit in
the Federal
District court of Massachusetts for a declaratory
judgment that
it had no duty to defend or indemnify the Company
under its
liability policies. That suit was dismissed without
prejudice
pending disposition of the Town of Shrewsbury
litigation.
In January 1997, the Company and five of the other
defendants
reached a settlement of the Shrewsbury litigation
with the Town
of Shrewsbury. The Company agreed to pay a total of
$750,000 by
March 31, 1997 as its share of the settlement, and
other
defendants agreed to pay additional amounts. In
addition, the
Company reached an agreement with its three insurance
carriers.
In exchange for a release of certain claims, they
will pay a total of $715,000 of the $750,000 amount
the Company
is obligated to pay the Town of Shrewsbury.
DEP matter:
In connection with a proposed bank financing in 1987,
the Company
retained an environmental engineering firm to perform
a site
assessment at its corporated headquarters. The
results of that
assessment revealed that there may have been a
release or threat
of release of oil or hazardous materials and that an
off-site
source may be introducing the contaminants. As
required by law,
the Company notified the Massachusetts Department of
Environmental Protection (DEP). In 1989 the DEP
designated the
site as a priority disposal site. A Phase One
Limited Site
Investigation report has been submitted to the DEP.
In 1995, the
Company received a Tier I Transition Classification
and Permit
Statement Cover Letter designating the site as a Tier
IC Site
under the Massachusetts Contingency Plan. Under DEP
regulations,
the Company must complete further site investigation
by November
1997.
One of the Company's insurance carriers has agreed to
pay the
Company $70,000 to be used as the Company determines
in defense
of the DEP proceeding in exchange for a release of
any further
claim with respect to this matter. In addition,
environmental
engineers employed by the Company estimate that the
required
remediation costs will be a minimum of $45,000.
-29-
In the accompanying financial statements other
receivables represents
amounts due from insurance carriers with respect to the
above
environmental matters and accrued environmental costs
represents
amounts due the Town of Shrewsbury and the minimum
estimated
remediation costs related to the DEP matter. The net
amount
($10,000) is reported in selling and administrative
expense.
(9) COMMITMENTS AND CONTINGENCIES
Employment Agreements:
The Company extended, on a year to year basis, the
employment
agreement with its President and Chairman of the
Board. In
connection with the contract, the President is
entitled to
incentive compensation equal to 10% of pretax
earnings exceeding
$200,000. Upon his retirement, the Company must pay
an annuity
which is being amortized over the period of the
employment
contract. Accordingly $38,000 has been charged to
operations in
1996 and 1995, and $68,106 in 1994.
-30-
GODDARD INDUSTRIES, INC. AND
SUBSIDIARIES
NOTES TO CONSOLIDATE FINANCIAL
STATEMENTS
SEPTEMBER 28, 1996, SEPTEMBER 30, 1995 AND OCTOBER
1, 1994
(9) COMMITMENTS AND CONTINGENCIES (continued)
The Company has employment agreements with certain
key executive
officers and directors that become operative only
upon a change
in control of the Company without the approval of the
Board of
Directors. Compensation which might be payable under
these
agreements has been reflected in the consolidated
financial
statements of the Company as of September 28, 1996,
since a
change in control, as defined, has not occurred.
Other Commitments:
At September 28, 1996 and September 30, 1995, the
Company had
approximately $88,000 and $118,000 in letters of
credit
outstanding.
(10) RESEARCH AND DEVELOPMENT COSTS
Research and development costs charged to operations in
1996, 1995,
and 1994 were approximately $175,000, $138,000 and
$115,000,
respectively.
(11) ADVERTISING COSTS
Advertising costs charged to operations in 1996, 1995
and 1994
were approximately $41,000, $47,000 and $40,000,
respectively.
(12) PROFIT SHARING PLAN
The Company has a profit sharing plan covering
substantially all
employees. The Company's contribution is determined
annually by
the Board of Directors. The amount approved for 1996,
1995, and
1994 was $50,000, $30,000 and $24,000, respectively.
(13) EMPLOYEE STOCK PURCHASE PLAN
The Company has a qualified employee stock purchase
plan covering
all employees except officers and directors. Employees
participating in the plan are granted options semi-
annually to
purchase common stock of the Company. The number of
full shares
available for purchase is a function of the employee's
accumulated
payroll deductions at the end of each six month
interval. The
option price is the lesser of 85% of the fair value
of the Company's common stock on the first day of the
payment
period or 85% of the fair value of the Company's common
stock on
the last day of the payment period. As of September
28,1 996,
September 30, 1995 and October 1, 1994 there were no
options
outstanding under the plan.
(14) NET INCOME PER SHARE
Net income per share is computed on the weighted
average number of
shares outstanding.
-31-
GODDARD INDUSTRIES, INC. AND
SUBSIDIARIES
NOTES TO CONSOLIDATE FINANCIAL
STATEMENTS
SEPTEMBER 28, 1996, SEPTEMBER 30, 1995 AND
OCTOBER 1, 1994
(15) INDUSTRY SEGMENT INFORMATION
The Company produces and sells cryogenic valves
(industrial valves)
and imports and distributes plumbing supplies for use
in households,
industry and agriculture (plumbing supplies).
The financial information relating to foreign and
export sales is
not presented as those items are not material.
Summarized segment financial information for the years
ended
September 28, 1996, September 30, 1995 and October 1,
1994 is
summarized as follows:
For the year ended Industrial Plumbing
September 28, 1996 Valves Supplies
Consolidated
Sales to unaffiliated customers $5,009,952 $3,290,215
$8,300,167
Operating profit $1,102,708 $ 94,303
$1,197,011
Interest expense
(102,529)
Other income, net
55,600
Income before income taxes
$1,150,082
Assets September 28, 1996 $4,519,965 $2,152,061
$6,672,026
Depreciation expense $ 194,276 $ 9,708
$ 203,984
Acquisition of property,
plant and equipment $ 126,014 $ 13,803
$ 139,817
For the year ended Industrial Plumbing
September 30, 1995 Valves Supplies
Consolidated
Sales to unaffiliated customers $3,738,962 $3,031,879
$6,770,841
Operating profit $ 669,752 $ 143,104
$ 812,856
Interest expense
(151,009)
Other income, net
47,241
Income before income taxes
$ 709,088
Assets September 30, 1995 $2,840,762 $2,309,774
$5,150,536
Depreciation expense $ 192,862 $ 9,090
$ 201,952
Acquisition of property,
plant and equipment $ 123,777 $ 7,940
$ 131,717
-32-
GODDARD INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 28, 1996, SEPTEMBER 30, 1995 AND
OCTOBER 1, 1994
(15) INDUSTRY SEGMENT INFORMATION (continued)
For the year ended Industrial Plumbing
October 1, 1994 Valves Supplies
Consolidated
Sales to unaffiliated customers $2,774,434 $2,249,424
$5,023,858
Operating profit $ 213,402 $ 40,956
$ 254,358
Interest expense
(91,491)
Other income, net
24,273
Income before income taxes
$ 187,140
Assets October 1, 1994 $2,590,475 $2,100,558
$4,691,033
Depreciation expense $ 181,461 $ 11,982
$ 193,443
Acquisition of property,
plant and equipment $ 191,838 $ 2,972
$ 194,810
The industrial valve segment of the Company sells a
majority of its
products to a limited number of customers,
predominantly
manufacturers of cryogenic vessels. Sales in thousands
of
dollars, to individual customers constituting 10% or
more of total
sales of the industrial valve segment were as follows:
1996 1995
1994
Customer A $2,317 46% $1,025 27%
$ 491 18%
Customer B $ 594 12% $ 426 11%
$ 325 12%
Customer C $ 703 14% $ - 0%
$ 313 11%
$3,614 72% $1,451 38%
$1,129 41%
-33-
EXHIBITS
-34-
EXHIBIT INDEX
Exhibit
Number
Page
(3) Articles of Incorporation and By-Laws:
(a) Articles of Organization. (Filed as Exhibit 3 to
the
Company's Registration Statement on Form S-1
(Registration
No. 2-16854 of Reva Enterprises, Inc., now
Goddard
Industries, Inc.))*
Articles of Amendment to the Articles of
Organization, dated
December 14, 1962. (Filed as Exhibit 3 to the
Company's Form
10-K for the fiscal year ended September 28,
1985.)*
Articles of Merger and Consolidation, dated July
29, 1968.
(Filed as Exhibit 3 to the Company's Form 10-K
for the fiscal
year ended September 28, 1985.)*
Restated Articles of Organization, dated March
31, 1971.
(Filed as Exhibit 3 to the Company's Form 10-K
for the fiscal
year ended September 28, 1985.)*
Articles of Amendment to Restated Articles of
Organization,
dated June 1, 1972. (Filed as Exhibit 3 to the
Company's
Form 10-K for the fiscal year ended September 28,
1985.)*
Articles of Amendment to Restated Articles of
Organization,
dated October 11, 1985. (Filed as Exhibit 3 to
the Company's
Form 10-K for the fiscal year ended September 28,
1985.)*
Articles of Amendment to Restated Articles of
Organization
dated March 13, 1987. (Filed as Exhibit 3 to the
Company's
Form 10-Q for the quarter ended March 28, 1987.)*
(b)(1)By-Laws (filed as Exhibit 19 to the Company's
Form 10-Q for
the quarter ended March 31, 1984.)*
(b)(2)By-Law Amendment dated as of September 28,1990.
(Filed as
Exhibit 3(b)(2) to the Company's Form 10-K for
the fiscal
year ended September 29, 1990.)*
(4) Instruments Defining the Rights of Security
Holders:
(a) Specimen certificate of common stock. (Filed as
Exhibit 4(a)
of Registration Statement on Form S-1
Registration No. 2-
16854 of Reva Enterprises, Inc., now Goddard
Industries,
Inc.))*
-35-
Page
(10) Material Contracts:
(a) Consolidating Revolving and Term Credit and
Security
Agreement dated as of January 3, 1991 among
subsidiaries of
the Company and the First National Bank of Boston
(the
"Bank"). (Filed as Exhibit 10(h) to the Company's
Form 10-Q
for the quarter ended March 31, 1991.)*
(b) $1,600,000 revolving loan note and $383,124 term
loan note,
both dated January 3, 1991 from subsidiaries of
the Company to
the Bank. (Filed as Exhibit 10(i) to the
Company's Form 10-Q
for the quarter ended March 31, 1991.)*
(c) Unlimited guaranty to the Bank by the Company of
the
obligations of the subsidiaries to the Bank.
(Filed as
Exhibit 10(v) to the Company's Form 10-Q for the
quarter ended
March 31, 1991.)*
(d) Letter agreement between the Company's
subsidiaries and the
Bank dated April 27, 1992 modifying banking
arrangements.
(Filed as Exhibit (10) to the company's Form 10-Q
for the
quarter ended June 30, 1992.)*
(e) Amended and Restated Employment Agreement between
the Company
and Saul I. Reck effective as of October 1, 1991
and executed
May 1, 1992. (Filed as Exhibit 10(c) to the
Company's Form
10-Q for the quarter ended June 30, 1992.)*
(f) Restated Non-Qualified Stock Option Agreement
between the
Company and Saul I. Reck. (Filed as Exhibit 10(d)
to the
Company's Form 10-K for the fiscal year ended
September 30,
1989.)*
(g) Adoption Agreement (Non-Standardized Code 401(k)
ProfitSharing Plan) dated July 31, 1991, together with
related Defined Contribution Prototype Plan and Trust
Agreement. (Filed as Exhibit 10(h) to the Company's Form 10-
K for the fiscal year ended September 28, 1991.)*
(h) Employee Stock Purchase Plan dated December 9, 1993.
(Filed as Exhibit 10(h) to the Company's Form 10-
KSB for the fiscal year ended October 1, 1994.)*
(i) (A) Settlement Agreement and Release between the
38
Company, and St. Paul Fire and Marine Insurance
Company dated July, 1996.
(B) Amendment to Settlement Agreement and
44
Release executed December 3, 1996.
(j) Form of Settlement Agreement and Release between
the 47
Company and Gibralter Casualty Company dated
January 31, 1997.
(k) Form of Settlement Agreement and Release between
the 51
Company and Lexington Insurance Company dated
January 31, 1997.
-36-
Page
(l) Settlement Agreement among the Town of
55
Shrewsbury, the Company and certain defendants
and third-party defendants dated January 31,
1997.
(11) Statement Re Computation of Per Share Earnings. The
Statement Re
Computation of Per Share Earnings is set forth in Note
13 to the
Company's Consolidated Financial Statements.
(21) Subsidiaries of the Registrant. (Filed as Exhibit 22
to the
Company's Form 10-K for the fiscal year ended
September 30,
1989.)*
(27) Financial Statement Schedule.
61
-37-
EXHIBIT 10 (i) (A)
SETTLEMENT AGREEMENT AND RELEASE
This Settlement Agreement and Release
("Agreement") is entered into in July 1995, by and between
Goddard Industries, Inc. and Goddard Valve Corp., for
themselves, as well as for their predecessors in interest,
and their successors in interest, current parents,
subsidiaries, divisions, affiliates, directors, officers,
shareholders, partners, agents and employees, heirs and
assigns, all other insureds or additional named insureds
under the Policies and all persons and entities acting
through or under any of them (collectively "Goddard") and
St. Paul Fire and Marine Insurance Company, for itself and
for its predecessors in interest, successors in interest,
current and former parents, subsidiaries, divisions,
affiliates, directors, officers, shareholders, agents,
attorneys, employees, heirs, assigns and all persons and
entities acting through or under any of them (collectively
"St. Paul");
RECITALS
WHEREAS, St. Paul is alleged to have issued
primary and/or excess and/or umbrella liability insurance
policies to Goddard, including but not necessarily limited
to those listed in Exhibit A hereto (hereinafter the
"Alleged Policies");
WHEREAS, St. Paul has filed suit against Goddard
entitled St. Paul Fire and Marine Insurance Company v.
Goddard Industries, Inc. No. 92-40075-NMG (D.Mass.) (the
"Coverage Action"), which the court dismissed sua sponte
without prejudice but which may be reopened, wherein it has
sought a declaration that it is not responsible under the
Alleged Policies to defend or indemnify Goddard for various
suits or claims that have been filed or asserted or that may
be filed or asserted against Goddard (the "Underlying Suits
and Claims") involving or arising out of Goddard's facility
and operations at 705 Plantation Street, Worcester,
Massachusetts (the "Site");
WHEREAS the Underlying Suits and Claims include,
but are not limited to, the following:
1. Town of Shrewsbury v. Neles-Jamesbury Inc.,
Civil No. 90-
3751-B (Super. Ct. Mass., Worcester County)
("Shrewsbury
Action"); and
2. Massachusetts Department of Environmental
Protection
("DEP") March 30, 1989 Notice of Responsibility
letter
pursuant to M.G.L. c.21E and the Massachusetts
Contingency
Plan, 310 CMR 40.000, and further orders,
agreements, and
actions proceeding therefrom ("DEP Action").
WHEREAS, St. Paul has defended Goddard against
certain Underlying Suits and Claims;
WHEREAS, there is a dispute between Goddard and
St. Paul with respect to the obligations of St. Paul under
the Alleged Policies to indemnify Goddard with respect to
the Underlying Suits and Claims;
WHEREAS, St. Paul has denied that it has any
obligation to provide coverage for the Underlying Suits and
Claims;
-38-
WHEREAS, the parties believe that it is in their
mutual interest to reach an amicable resolution with respect
to the Coverage Action, without admission of any issue of
fact or law, and to resolve all past, present or future
disputes relating to any obligations of St. Paul to Goddard
with respect to any claims for property damage or personal
injury arising out of or allegedly arising out of the Site;
WHEREAS, the parties specifically intend to
exclude from this Agreement any potential claims for bodily
injury arising out of the Site, of which none are currently
known to exist;
NOW, THEREFORE, in consideration of the mutual
promises contained herein and other good and valuable
consideration, Goddard and St. Paul hereby agree as follows:
1. In full and final settlement of all claims for
property damage or personal injury (but excluding bodily
injury) that Goddard has or may have, nor or in the future,
known or unknown, against St. Paul with respect to the Site,
arising out of the Site, and with respect to the Underlying
Suits and Claims, St. Paul with contribute fifty percent
(50%) of any amount up to three hundred thousand dollars
($300,000) and seventy five percent (75%) of any amount over
three hundred thousand dollars ($300,000) and up to five
hundred thousand dollars ($500,000) towards any settlement
Goddard can negotiate with the Town of Shrewsbury in the
Shrewsbury Action. Under this formula, St. Paul's maximum
contribution to any settlement of the Shrewsbury Action
would be three hundred thousand dollars ($300,000),
consisting of 50% of the first $300,000 (i.e., $150,000)
plus 75% of the next $200,000 (i.e., $150,000).
2. In addition to the amount to be paid by St.
Paul pursuant to Paragraph 1, in full and final settlement
of all claims for property damage or personal injury (but
excluding bodily injury) that Goddard has or may have, now
or in the future, known or unknown, against St. Paul with
respect to the Site, arising out of the Site, and with
respect to the Underlying Suits and Claims, St. Paul will
pay to Goddard seventy thousand dollars ($70,000) to be used
by Goddard, as Goddard determines, in its defense of the DEP
Action.
3. In consideration of the payments referred to
in Paragraphs 1 and 2 and as of the date both payments are
made by St. Paul, Goddard fully, absolutely and
unconditionally releases and for all purposes forever
discharges St. Paul from any and all claims, liabilities,
obligations, demands, rights, actions and causes of action
of every kind and nature, known and unknown, past, present
and future, for property damage or personal injury (but
excluding bodily injury) arising out of any alleged past,
present or future duty or obligation with respect to the
Site, arising out of the Site, and with respect to the
Underlying Suits and Claims.
4. Infurther consideration of the payments
referred to in Paragraphs 1 and 2, Goddard also agrees that
it will be responsible for fifty percent (50%) of any amount
up to three hundred thousand dollars ($300,000) and twenty
five percent (25%) of any amount over three hundred thousand
dollars ($300,000) and up to five hundred thousand dollars
($500,000) towards any settlement Goddard can negotiate with
the
-39-
Town of Shrewsbury in the Shrewsbury Action. Under this
formula, Goddard's maximum responsibility in a settlement of
the Shrewsbury Action would be two hundred thousand dollars
($200,000), consisting of 50% of the first $300,000 (i.e.,
$150,000) plus 25% of the next $200,000 (i.e., $50,000). It
as agreed that Goddard can fulfill its responsibility under
this Paragraph with funds from third-party sources and is
free to pursue third-parties, including insurers other than
St. Paul, for said amounts.
5. As of the date St. Paul makes the payments
referred to in Paragraphs 1 and 2, Goddard forever fully and
completely covenants not to sue or to tender any claim to
St. Paul with respect to property damage or personal injury
(but excluding bodily injury) at or arising out of the Site
and with respect to the Underlying Suits and Claims.
6. It is agreed that all obligations under this
Agreement are fully contingent upon Goddard successfully
negotiating a settlement of the claims asserted against it
in the Shrewsbury Action for five hundred thousand dollars
($500,000) or less. If Goddard is unable to reach a
settlement in principle of the claims against it in the
Shrewsbury Action for five hundred thousand dollars
($500,000) or less by the time the court in the Shrewsbury
Action holds the pretrial conference in that matter, this
Agreement is null and void in its entirety. It is agreed
that the time deadline recited in this Paragraph for
settlement of the Shrewsbury Action by Goddard can be
extended only by written agreement signed by the parties to
this Agreement.
7. Within thirty (30) days of St. Paul's receipt
of an executed settlement agreement by Goddard and the Town
of Shrewsbury in settlement of the Shrewsbury Action within
the parameters set forth in Paragraph 6 above, St. Paul will
issue a check to Goddard for seventy thousand dollars
pursuant to Paragraph 2 above and a separate check to
Goddard's counsel, Brown, Rudnick, Freed & Gesmer, as
trustee for Goddard in the full amount as determined under
the formula set forth in Paragraph 1. Goddard's counsel, as
trustee, will deposit the check issued pursuant to Paragraph
1 in a trust account (the "Goddard/Shrewsbury Trust"), which
at Goddard's option may bear interest to the benefit of
Goddard. The parties agree that the money in the
Goddard/Shrewsbury Trust is to be used solely for payment of
the settlement by Goddard of the Shrewsbury Action.
8. In settling the Shrewsbury Action within the
parameters set forth in Paragraph 6, Goddard is at liberty
to arrange for payments of the settlement amount in that
action to take place over a period of time or in
installments. Any such provision in the settlement of the
Shrewsbury Action will not affect the time period for St.
Paul to make its payments as set forth in Paragraph 7 above.
9. As of the date St. Paul makes the payments
referred to in Paragraph 7, Goddard shall defend St. Paul in
connection with, indemnify St. Paul for and hold St. Paul
harmless from, all claims that have been or might be made or
suits that have been or might be filed against St. Paul with
respect to property damage or personal injury (but excluding
suits or claims solely involving bodily injury) at or
arising out of the Site, including but not limited to direct
actions, garnishment actions, third-party actions, and
claims for contribution, indemnification, equitable
allocation, equitable subrogation, or quantum meruit. In
exercise of this obligation, Goddard shall have the right in
its sole
-40-
discretion to settle or otherwise compromise each judgment,
claim or suit arising from each such claim or suit and to
use counsel of its own choosing. However, should Goddard
undertake the defense of St. Paul pursuant to this
paragraph, St. Paul shall have the right of prior approval
with respect to selection of counsel and with respect to the
interpretation of the Alleged Policies. As a condition to
Goddard's rights and obligations set forth in this
paragraph, St. Paul shall have the duty to provide Goddard
with prompt written notice of each claim or suite against it
involving or arising out of the Site.
10. This Agreement shall be solely binding upon
and inure to the benefit of the parties hereto and their
respective successors and assigns. Nothing in this
Agreement is intended nor shall it be construed to confer
any benefit whatsoever on any persons other than the
parties. No persons or entities are intended to be, nor
will they be construed to be, third-party beneficiaries to
this Agreement.
11. This Agreement does not constitute an
admission by St. Paul of an obligation to defend or
indemnify Goddard with respect to any policy or any suit or
claim.
12. This Agreement is not intended to be and is
not to be construed as a contract of insurance.
13. This Agreement shall not be admissible in any
legal proceeding except to enforce its terms.
14. The terms of this Agreement shall remain
confidential and shall not be disclosed to any person or
entity without the prior written consent of all parties,
except as required in the normal course of business for such
purposes as audits, accounting and reinsurance. Should this
Agreement be disclosed, the party making such disclosure
shall use its best efforts to get a confidentiality
agreement in keeping with this paragraph from the person or
entity to which disclosure is made. Should a court order
the disclosure of the terms of this Agreement to any other
person, the parties shall use their best efforts to maintain
its terms under seal.
15. Each of the parties has entered into this
Agreement after consulting with counsel. Therefore, the
language of this Agreement shall not presumptively be
construed in favor or against either party.
16. This Agreement represents the entire
understanding between the parties and, without limitation,
the parties expressly agree that any previous
communications, correspondence, memorialization of agreement
and previous agreements are excluded from this Agreement and
are not to be employed to construe this Agreement. Any
other provisions of this Agreement to the contrary
notwithstanding, this Agreement can only be modified by a
writing signed by all parties and this provision cannot be
orally waived.
17. Goddard has not assigned any of its rights
pursuant to the Alleged Policies, and Goddard agrees that it
will not attempt prospectively to assign any such rights
that are to be released under this Agreement.
-41-
18. Goddard warrants that it has made reasonable
inquiry of its officers and management, and as of its
execution of this Agreement, it is unaware of any bodily
injury claims or suits at or arising out of the Site that
exist, that have been asserted or alleged, or that have been
threatened. It is agreed that this warranty is an essential
part of this Agreement, without which and for breach of
which this Agreement fails in its entirety.
19. Goddard and St. Paul respectively warrant and
represent that they are authorized to enter into this
Agreement on their own behalf and on behalf of their
respective shareholders, directors, officers, partners,
employees, agents, heirs, subsidiaries, divisions,
affiliates, predecessors in interest, successors in
interest, assigns and all persons or entities acting through
or under any of them and that they respectively have the
authority to bind such persons and entities to the terms of
this Agreement. Goddard and St. Paul also represent and
warrant that the persons who signatures are affixed hereto
are authorized to sign this Agreement on their behalf and
have the legal authority to bind them hereto.
20. If any provision of this Agreement or any
portion of any provision of this Agreement is declared null
and void or unenforceable by any court or tribunal having
jurisdiction, then such provision or such portion of a
provision shall be considered separate and apart from the
remainder or this Agreement which shall remain in full force
and effect.
21. All notices or other communications which any
party desires or is required to give shall be given in
writing and shall be deemed to have been given if hand-
delivered, sent by facsimile or mailed by depositing in the
United States mail, prepaid to the party at the address
noted below or such other person or address as either party
may designate in writing from time to time:
If to Goddard Saul I. Reck
President
Goddard Industries, Inc.
705 Plantation Street
Box 765
Worcester, MA 01613-0765
If to St. Paul: David E. Nanzig
Environmental Claim
Manager
The St. Paul Companies
385 Washington Street
St. Paul, MN 55102
22. This Agreement shall be executed in two
duplicate originals, with Goddard to retain one original and
St. Paul to retain one original.
IN WITNESS WHEREOF, the parties, by their duly
authorized representatives, affix their signatures hereto.
-42-
By:
/s/ Saul I. Reck
President
Goddard Industries, Inc.
By:
/s/ David E. Nanzig
Environmental Claim Manager
St. Paul Fire and Marine Insurance Company
St. Paul Mercury Insurance Company
-43-
EXHIBIT
10 (i) (B)
AMENDMENT TO
SETTLEMENT AGREEMENT AND RELEASE
Pursuant to Paragraph 16 of the Settlement Agreement
and Release ("Agreement")(Attached hereto as Exhibit A)
entered into in July 1995, by and between Goddard
Industries, Inc. and Goddard Valve corp., for themselves, as
well as for their predecessors in interest, and their
successors in interest, current parents, subsidiaries,
divisions, affiliates, directors, officers, shareholders,
partners, agents and employees, heirs and assigns, all other
insureds or additional named insureds under the Policies and
all persons and entities acting through or under any of them
(collectively "Goddard") and St. Paul Fire and Marine
Insurance Company, for itself and for its predecessors in
interest, successors in interest, current and former
parents, subsidiaries, divisions, affiliates, directors,
officers, shareholders, agents, attorneys, employees, heirs,
assigns and all persons and entities acting through or under
any of them (collectively "St.Paul"), Goddard and St. Paul
hereby, for good and valuable consideration which is
acknowledged, amend and modify the Agreement as follows:
1. Paragraph number 1 of the Agreement is replaced
with the
following language:
In full and final settlement of all claims
for property
damage or personal injury (but excluding
bodily injury)
that Goddard has or may have, now or in the
future, known
or unknown, against St. Paul with respect to
the Site,
arising out of the Site, and with respect to
the
Underlying Suits and Claims, St. Paul will
contribute
fifty percent (50%) of any amount up to three
hundred
thousand dollars ($300,000), seventy five
percent (75%)
of any amount over three hundred thousand
dollars
($300,000) and up to five hundred thousand
dollars
($500,000), ninety percent (90%) of any
amount over
five hundred thousand dollars ($500,000) and
up to six
hundred fifty thousand dollars ($650,000),
and sixty
five percent (65%) of any amount over six
hundred fifty
thousand dollars ($650,000) and up to seven
hundred fifty
thousand dollars ($750,000) towards any
settlement
Goddard can negotiate with the Town of
Shrewsbury in the
Shrewsbury Action. Under this formula, St.
Paul's
maximum contribution to any settlement of the
Shrewsbury
Action would be five hundred thousand dollars
($500,000),
consisting of 50% of the first $300,000
(i.e., $150,000)
plus 75% of the next $200,000 (i.e.,
$150,000) plus 90%
of the next $150,000 (i.e., $135,000) plus
65% of the
next $100,000 (i.e., $65,000).
2. Paragraph number 4 of the Agreement is replaced
with the
following language:
4. In further consideration of the payments
referred to
in Paragraphs 1 and 2, Goddard also agrees
that it will
be responsible for fifty percent (50%) of any
amount up
to three hundred thousand dollars ($300,000),
twenty five
percent (25%) of any amount over three
hundred thousand
-44-
dollars ($300,000) and up to five hundred
thousand
dollars ($500,000), ten percent (10%) of any
amount over
five hundred thousand dollars ($500,000) and
up to six
hundred fifty thousand dollars ($650,000),
and thirty
five percent (35%) of any amount over six
hundred fifty
thousand dollars ($650,000) and up to seven
hundred and
fifty thousand dollars ($750,000) towards any
settlement
Goddard can negotiate with the Town of
Shrewsbury in
the Shrewsbury Action. Under this formula,
Goddard's
maximum responsibility in a settlement of the
Shrewsbury
Action would be two hundred fifty thousand
dollars
($250,000), consisting of 50% of the first
$300,000
(i.e., $150,000) plus 25% of the next
$200,000 (i.e.,
$50,000) plus 10% of the next $150,000 (i.e.,
$15,000) plus 35% of the next $100,000 (i.e.,
$35,000).
It is agreed that Goddard can fulfill its
responsibility
under this Paragraph with funds from third-
party sources
and is free to pursue third-parties,
including insurers
other than St.Paul, for said amounts.
3. paragraph number 6 of the Agreement is replaced
with the
following language:
6. It is agreed that all obligations under this
Agreement are
fully contingent upon Goddard successfully
negotiating a
settlement of the claims asserted against it
in the
Shrewsbury Action for seven hundred fifty
thousand dollars
($750,000) or less. If Goddard is unable to
reach a
settlement in principle of the claims against
it in the
Shrewsbury Action for seven hundred fifty
thousand dollars
($750,000) or less by the time the court in
the Shrewsbury
Action holds the pretrial conference in that
matter, this
Agreement is null and void in its entirety.
It is agreed
that the time deadline recited in this
Paragraph for
settlement of the Shrewsbury Action by Goddard
can be
extended only by written agreement signed by
the parties
to this Agreement.
4. All other terms and conditions of the Agreement
remain
unchanged and binding on the parties.
5. Goddard and St. Paul respectively warrant and
represent that
they are authorized to enter into this Amendment
to the
Agreement on their own behalf and on behalf of
their
respective shareholders, directors, officers,
partners,
employees, agents, heirs, subsidiaries, divisions,
affiliates,
predecessors in interest, successors in interest,
assigns and
all persons or entities acting through or under
any of them
and that they respectively have the authority to
bind such
persons and entities to the terms of this
Amendment to the
Agreement. Goddard and St. Paul also represent
and warrant
that the persons whose signatures are affixed
hereto are
authorized to sign this Amendment to the Agreement
on their
behalf and have the legal authority to bind them
hereto.
6. This Amendment to the Agreement shall be executed
in two
duplicate originals, with Goddard to retain one
original and
St. Paul to retain one original.
-45-
IN WITNESS WHEREOF, the parties, by their duly
authorized representatives, affix their signatures hereto.
By: _/s/ Saul I. Reck Dated:
12/3/96
Saul I. Reck
President
Goddard Industries, Inc.
By: _/s/ David E. Nanzig Dated:
______________
David E. Nanzig
Environmental Claim Manager
St. Paul Fire and Marine Insurance Company
St. Paul Mercury Insurance Company
-46-
EXHIBIT 10 (j)
SETTLEMENT AGREEMENT AND RELEASE
This Settlement Agreement and Release ("Agreement") is made
on this 31st day of January, 1997, by and between Goddard
Industries, Inc. and Goddard Valve Corp. ("Policyholder")
and Gibralter Casualty Company ("Insurer").
RECITALS
WHEREAS, Insurer issued Insurance Policy No. GSL00619 to
Policyholder, effective for the period of 4/18/83-4/18/84
(the "Policy");
WHEREAS, a coverage dispute has arisen between Policyholder
and Insurer, relating to coverage for various suits or
claims that have been filed or asserted against Policyholder
(the "Underlying Suits and Claims") involving or arising out
of Policyholder's facility and operations at 705 Plantation
Street, Worcester, Massachusetts (the "Site");
WHEREAS, the Underlying Suits and Claims are:
Town of Shrewsbury v. Neles-Jamesbury, Inc., Civil Action 90-
3751-B (Super. Ct. Mass., Worcester County) ("Shrewsbury
Action"); and
Massachusetts Department of Environmental Protection ("DEP")
March 30, 1989 Notice of Responsibility letter pursuant to
G.L. c.21E and the Massachusetts Contingency Plan, 310 CMR
40.000, and further orders, agreements, and actions
proceeding therefrom (the "DEP Action").
WHEREAS, Insurer has provided a partial defense for
Policyholder against the Underlying Suits and Claims;
WHEREAS, there is a dispute between Policyholder and Insurer
with respect to the obligations of Insurer under the policy
to indemnify Policyholder with respect to the Underlying
Suits and Claims;
WHEREAS, Insurer has denied that it has any obligation to
provide coverage for the Underlying Suits and Claims;
WHEREAS, the parties believe that it is in their mutual
interest to reach an amicable resolution with respect to the
coverage action, without admission of any issue of fact or
law;
NOW, THEREFORE, in consideration of the foregoing recitals,
covenants, conditions and payment hereinafter described, and
for other good and valuable consideration, the receipt
whereof is hereby acknowledged, the parties hereby agree as
follows:
In full and final settlement of all environmental
claims for property damage or personal injury that
Policyholder has or may have, now or in the future, known or
unknown, against Insurer with respect to the Site, arising
out of the Site, and with respect to the Underlying Suits
and Claims, Insurer will contribute One Hundred Twenty-Five
Thousand Dollars ($125,000.00) toward a settlement that
Policyholder negotiates with the Town of Shrewsbury in the
Shrewsbury Action.
-47-
In consideration of the payment referred to in
Paragraph 1, and as of the date the payment is made by
Insurer, Policyholder fully, absolutely and unconditionally
releases and for all purposes forever discharges Insurer
from any and all environmental claims, liabilities,
obligations, demands, rights, actions and causes of action
of every kind and nature, known and unknown, past, present
and future, for property damage or personal injury arising
out of any alleged past, present or future duty or
obligation with respect to the Site, arising out of the
Site, and with respect to the Underlying Suits and Claims.
As of the date Insurer makes the payments referred to
in Paragraphs 1, Policyholder forever fully and completely
covenants not to sue or to tender any environmental claim to
Insurer with respect to property damage or personal injury
at or arising out of the Site and with respect to the
Underlying Suits and Claims.
Within ten (10) days of Insurer's receipt of an executed
settlement agreement by Policyholder and the Town of
Shrewsbury in settlement of the Shrewsbury Action, Insurer
will issue a check to Policyholder for One Hundred Twenty-
Five Thousand Dollars ($125,000.00) pursuant to Paragraph 1
above.
The parties agree that the money paid by Insurer is to be
used solely for payment of the settlement by Policyholder of
the Shrewsbury Action, but Policyholder is at liberty to
arrange for payments of the settlement amount in that action
to take place over a period of time or in installments. Any
such provision in the settlement of the Shrewsbury Action
will not affect the time period for the Insurer to make its
payment as set forth in Paragraph 4 above.
This Agreement shall be solely binding upon and inure to
the benefit of the parties hereto and their respective
successors and assigns. Nothing in this Agreement is
intended nor shall it be construed to confer any benefit
whatsoever on any persons other than the parties. No
persons or entities are intended to be, nor will they be
construed to be, third-party beneficiaries to this
Agreement,.
This Agreement does not constitute an admission by
Insurer of an obligation to defend or indemnify Policyholder
with respect to any policy or any suit or claim.
This Agreement is not intended to be and is not to be
construed as a contract of insurance.
This Agreement shall not be admissible in any legal
proceeding except to enforce its terms.
Each of the parties has entered into this Agreement after
consulting with counsel. Therefore, the language of this
Agreement shall not presumptively be construed in favor or
against either party.
This Agreement represents the entire understanding
between the parties and, without limitation, the parties
expressly agree that any previous communications,
correspondence, memorialization of agreement and previous
agreements are excluded from this Agreement and are not to
be employed to construe this Agreement. Any other
provisions of this Agreement to the contrary
notwithstanding, this Agreement can only be modified by a
writing signed by all parties and this provision cannot be
orally waived.
-48-
Policyholder has not assigned any of its rights pursuant
to the alleged Policy, and Policyholder agrees that it will
not attempt prospectively to assign any such rights that are
to be released under this Agreement.
Policyholder and Insurer respectively warrant and
represent that they are authorized to enter into this
Agreement on their own behalf and on behalf of their
respective shareholders, directors, officers, partners,
employees, agents, heirs, subsidiaries, divisions,
affiliates, predecessors in interest, successors in
interest, assigns and all persons or entities acting through
or under any of them and that they respectively have the
authority to bind such persons and entities to the terms of
this Agreement. Policyholder and Insurer also represent and
warrant that the persons whose signatures are affixed hereto
are authorized to sign this Agreement on their behalf and
have the legal authority to bind them hereto.
If any provision of this Agreement or any portion of any
provision of this Agreement is declared null and void or
unenforceable by any court or tribunal having jurisdiction,
then such provision or such portion of a provision shall be
considered separate and apart from the remainder or this
Agreement which shall remain in full force and effect.
All notices or other communications which any party
desires or is required to give shall be given in writing and
shall be deemed to have been given if hand-delivered, sent
by facsimile or mailed by depositing in the United States
mail, prepaid to the party at the address noted below or
such other person or address as either party may designate
in writing from time to time.
If to Policyholder: Saul I. Reck
President
Goddard Industries, Inc.
705 Plantation Street
Box 765
Worcester, MA 01613-0765
If to Insurer: Mr. Anthony Leanza
Gibralter Insurance Company
Eight Center Drive
Jamesburg, NJ 08831
This Agreement shall be executed in two duplicate
originals, with Policyholder to retain one original and
Insurer to retain one original.
IN WITNESS WHEREOF, the parties, by their duly
authorized representatives, affix their signatures hereto.
GODDARD INDUSTRIES, INC.
By: _______________________________
Saul I. Reck, President
-49-
Gibralter CASUALTY COMPANY
By: _______________________________
-50-
EXHIBIT 10 (k)
SETTLEMENT AGREEMENT AND RELEASE
This Settlement Agreement and Release ("Agreement") is made
on this 31st day of January, 1997, by and between Goddard
Industries, Inc. and Goddard Valve Corp. ("Policyholder")
and Lexington Insurance Company ("Insurer").
RECITALS
WHEREAS, Insurer issued Insurance Policy No. 8632097 to
Policyholder, effective for the period of 1984-1985 (the
"Policy");
WHEREAS, a coverage dispute has arisen between Policyholder
and Insurer, relating to coverage for various suits or
claims that have been filed or asserted against Policyholder
(the "Underlying Suits and Claims") involving or arising out
of Policyholder's facility and operations at 705 Plantation
Street, Worcester, Massachusetts (the "Site");
WHEREAS, the Underlying Suits and Claims are:
1. Town of Shrewsbury v. Neles-Jamesbury, Inc., Civil
Action 90-3751-B
(Super. Ct. Mass., Worcester County) ("Shrewsbury
Action"); and
2. Massachusetts Department of Environmental Protection
("DEP") March
30, 1989 Notice of Responsibility letter pursuant to
G.L. c.21E and
the Massachusetts Contingency Plan, 310 CMR 40.000, and
further
orders, agreements, and actions proceeding therefrom
(the "DEP
Action").
WHEREAS, Insurer has provided a partial defense for
Policyholder against the Underlying Suits and Claims under a
reservation of rights.
WHEREAS, there is a dispute between Policyholder and Insurer
with respect to the obligations of Insurer under the policy
to indemnify Policyholder with respect to the Underlying
Suits and Claims;
WHEREAS, Insurer has denied that it has any obligation to
provide coverage for the Underlying Suits and Claims;
WHEREAS, the parties believe that it is in their mutual
interest to reach an amicable resolution with respect to the
coverage action, without admission of any issue of fact or
law;
NOW, THEREFORE, in consideration of the foregoing recitals,
covenants, conditions and payment hereinafter described, and
for other good and valuable consideration, the receipt
whereof is hereby acknowledged, the parties hereby agree as
follows:
1. In full and final settlement of all environmental
claims for property damage, bodily injury, or personal
injury that Policyholder has or may have, now or in the
future, known or unknown, against Insurer with respect to
the Site or any other known sites, arising out of the Site,
and with respect to the Underlying Suits and Claims, Insurer
will contribute Ninety Thousand Dollars ($90,000.00) toward
a settlement that Policyholder negotiates with the Town of
Shrewsbury in the Shrewsbury Action.
-51-
2. In consideration of the payment referred to in
Paragraph 1, and as of the date the payment is made by
Insurer, Policyholder fully, absolutely and unconditionally
releases and for all purposes forever discharges Insurer
from any and all environmental claims, liabilities,
obligations, demands, rights, actions and causes of action
of every kind and nature, known and unknown, past, present
and future, for property damage or personal injury arising
out of any alleged past, present or future duty or
obligation with respect to the Site, arising out of the
Site, and with respect to the Underlying Suits and Claims.
3. As of the date Insurer makes the payments referred to
in Paragraphs 1, Policyholder forever fully and completely
covenants not to sue or to tender any environmental claim to
Insurer with respect to property damage or personal injury
at or arising out of the Site and with respect to the
Underlying Suits and Claims.
4. Within thirty (30) days of Insurer's receipt of an
executed settlement agreement by Policyholder and the Town
of Shrewsbury in settlement of the Shrewsbury Action,
Insurer will issue a check to Policyholder for Ninety
Thousand Dollars ($90,000.00) pursuant to Paragraph 1 above.
5. The parties agree that the money paid by Insurer is
to be used solely for payment of the settlement by
Policyholder of the Shrewsbury Action, but Policyholder is
at liberty to arrange for payments of the settlement amount
in that action to take place over a period of time or in
installments. Any such provision in the settlement of the
Shrewsbury Action will not affect the time period for the
Insurer to make its payment as set forth in Paragraph 4
above.
6. This Agreement shall be solely binding upon and inure
to the benefit of the parties hereto and their respective
successors and assigns. Nothing in this Agreement is
intended nor shall it be construed to confer any benefit
whatsoever on any persons other than the parties. No
persons or entities are intended to be, nor will they be
construed to be, third-party beneficiaries to this
Agreement,.
7. This Agreement does not constitute an admission by
Insurer of an obligation to defend or indemnify Policyholder
with respect to any policy or any suit or claim.
8. This Agreement is not intended to be and is not to be
construed as a contract of insurance.
9. This Agreement shall not be admissible in any legal
proceeding except to enforce its terms.
10. Each of the parties has entered into this Agreement
after consulting with counsel. Therefore, the language of
this Agreement shall not presumptively be construed in favor
or against either party.
11. This Agreement represents the entire understanding
between the parties and, without limitation, the parties
expressly agree that any previous communications,
correspondence, memorialization of agreement and previous
agreements are excluded from this Agreement and are not to
be employed to construe this Agreement. Any other
provisions of this Agreement to the contrary
notwithstanding, this Agreement can only be modified by a
writing signed by all parties and this provision cannot be
orally waived.
-52-
12. Policyholder has not assigned any of its rights
pursuant to the alleged Policy, and Policyholder agrees that
it will not attempt prospectively to assign any such rights
that are to be released under this Agreement.
13. Policyholder and Insurer respectively warrant and
represent that they are authorized to enter into this
Agreement on their own behalf and on behalf of their
respective shareholders, directors, officers, partners,
employees, agents, heirs, subsidiaries, divisions,
affiliates, predecessors in interest, successors in
interest, assigns and all persons or entities acting through
or under any of them and that they respectively have the
authority to bind such persons and entities to the terms of
this Agreement. Policyholder and Insurer also represent and
warrant that the persons whose signatures are affixed hereto
are authorized to sign this Agreement on their behalf and
have the legal authority to bind them hereto.
14. If any provision of this Agreement or any portion of
any provision of this Agreement is declared null and void or
unenforceable by any court or tribunal having jurisdiction,
then such provision or such portion of a provision shall be
considered separate and apart from the remainder or this
Agreement which shall remain in full force and effect.
15. All notices or other communications which any party
desires or is required to give shall be given in writing and
shall be deemed to have been given if hand-delivered, sent
by facsimile or mailed by depositing in the United States
mail, prepaid to the party at the address noted below or
such other person or address as either party may designate
in writing from time to time.
If to Policyholder: Saul I. Reck
President
Goddard Industries, Inc.
705 Plantation Street
Box 765
Worcester, MA 01613-0765
If to Insurer: Timothy Potvin
Lexington Insurance Co.
200 State Street,3rd Floor
Boston, MA 02109
16. This Agreement shall be executed in two duplicate
originals, with Policyholder to retain one original and
Insurer to retain one original.
IN WITNESS WHEREOF, the parties, by their duly
authorized representatives, affix their signatures hereto.
GODDARD INDUSTRIES, INC.
By: _______________________________
Saul I. Reck, President
-53-
LEXINGTON INSURANCE COMPANY
By: _______________________________
Timothy Potvin
-54-
[Confidentiality Treatment of Paragraph 14]
EXHIBIT 10 (l)
SETTLEMENT AGREEMENT
This Settlement Agreement, entered into as of the 31st
day of January, 1997 ("the Agreement") between and among the
Town of Shrewsbury, Neles-Jamesbury, Inc., Goddard
Industries, Inc., Sprague Electric Company, which has been
merged with and into American Annuity Group, Inc., Micro
Tech Manufacturing, Inc., Worcester Sand & Gravel Company,
Custom Coating & Laminating Corporation and Edward Garrepy
Platers is for the release and settlement of all claims and
causes of action that were or could have been raised between
and among the parties, as that term is defined below, and
Allegro Microsystems, Inc. in the civil action known as Town
of Shrewsbury v. Neles-Jamesbury et al., Worcester Superior
Court, Civil Action No. 90-3751B, including but not limited
to claims related to the contamination of the Home Farm
Wells, all as more specifically set forth below.
I. DEFINITIONS
1. "The Town" means the Town of Shrewsbury and its
boards, departments, elected and appointed officials,
employees, agents, attorneys and other representatives.
2. "Neles-Jamesbury" means Neles-Jamesbury, Inc. and
its parent, subsidiary, predecessor and successor
corporations and related entities, including Jamesbury
Corp., and their respective officers, directors,
shareholders, employees, insurers, agents, attorneys or
other representatives.
3. "Goddard" means Goddard Industries, Inc. and its
parent, subsidiary, predecessor and successor corporations
and related entities, including Goddard Valve Corporation
and Webstone Industries, Inc., and their respective
officers, directors, shareholders, employees, insurers,
agents, attorneys or other representatives.
4. "Sprague" means Sprague Electric Company, which
has been merged with and into American Annuity Group, Inc.,
and its parent, subsidiary, predecessor and successor
corporations and related entities and their respective
officers, directors, shareholders, employees, insurers,
agents, attorneys or other representatives.
5. "Micro Tech" means Micro Tech Manufacturing,
Inc., and its parent, subsidiary, predecessor and successor
corporations and related entities and their respective
officers, directors, shareholders, employees, insurers,
agents, attorneys or other representatives.
6. "Worcester Sand" means Worcester Sand and Gravel
Company, Incorporated and its parent, subsidiary,
predecessor and successor corporations and related entities
and their respective officers, directors, shareholders,
employees, insurers, agents, attorneys or other
representatives.
7. "Custom Coating" means Custom Coating &
Laminating Corporation and its parent, subsidiary,
predecessor and successor corporations and related entities
and their respective officers, directors, shareholders,
employees, insurers, agents, attorneys or other
representatives.
-55-
8. "Garrepy Platers" means Edward Garrepy Platers
and its parent, subsidiary, predecessor and successor
corporations and related entities and their respective
officers, directors, shareholders, employees, insurers,
agents, attorneys or other representatives.
9. "Allegro" means Allegro MicroSystems, Inc. and
its parent, subsidiary, predecessor and successor
corporations and related entities and their respective
officers, directors, shareholders, employees, insurers,
agents, attorneys or other representatives.
10. "The defendants" means Neles-Jamesbury, Goddard,
Sprague, Micro Tech, Custom Coating, Worcester Sand and
Garrepy Platers.
11. "The parties" means the Town and the defendants,
except where indicated below.
12. "The Action" means the civil action filed by the
Town in Worcester Superior Court and designated "Town of
Shrewsbury v. Neles-Jamesbury. Inc., et al, Worcester
Superior Court, Civil Action No. 90-3751B.
II. SETTLEMENT OF THE ACTION
13. By entering into this Agreement, the parties make
no admissions as to liability in the Action. This Agreement
is a compromise of disputed claims.
14. The defendants and Allegro agree to pay the Town
the sum of Three Million, Six Hundred Thousand Dollars
($3,600,000). The contribution (also referred to herein as
"share") by or on behalf of the individual defendants shall
be as follows:
a. Neles-Jamesbury: $ [
]
b. Goddard: $
750,000
c. Sprague/Allegro/Micro Tech: $ [
]
d. Worcester Sand: $ [
]
e. Custom Coating: $ [
]
f. Garrepy Platers: $ [
]
TOTAL: $3,600,000
15. In consideration of these payments, and for other
good and valuable consideration, the Town agrees to (a)
enter into this Agreement, (b) execute a Mutual Release with
each of the defendants and Allegro in the form attached as
Exhibit A, and (c) dismiss the Action, with prejudice and
without costs, as to all defendants by its execution of
Stipulations of Dismissal in the form attached as Exhibit C.
16. In consideration thereof, and in consideration of
entering this Agreement and making payments to the Town as
set forth herein, each of the defendants and Allegro agree
to (a) enter this Agreement, (b) execute a Mutual Release
with the Town in the form attached as Exhibit A and (c)
execute Mutual Releases for the benefit of each of the other
parties in the form attached as Exhibit B, and each of the
defendants agree to the dismissal, with prejudice and
without costs, of all claims between and among the parties
in the action, by its execution of Stipulations of Dismissal
in the form attached as Exhibit C.
-56-
17. Duplicate originals shall be executed for each
release referred to in paragraphs 15 and 16, above.
18. Each of Neles-Jamesbury, Sprague, Allegro, Micro
Tech, Custom Coating and Garrepy Platers shall pay its
entire contribution towards the $3,600,000, in accordance
with paragraph 14, above, on or before February 3, 1997.
19. Each of Worcester Sand and Goddard have entered
into an agreement with the Town with respect to the terms
and conditions under which each will pay its contribution
towards the $3,600,000 (the "Payment Agreements") in
accordance with Paragraph 14 above. Said Payment Agreements
shall be consistent with the terms of this Agreement.
20. Worcester Sand shall make an initial payment of
$50,000 and Goddard shall make an initial payment of
$500,000 on or before February 3, 1997.
21. The payments described in paragraphs 18, 19 and
20 may be in the form of a cashier's check, certified check
or check drawn on an attorney's client's trust account.
22. By February 3, 1997, the Town shall receive
payments under paragraphs 19 and 20, above, totaling no less
than $2,925,000. In the event that the Town does not
receive payments totaling $2,925,000 by February 3, 1997,
this Agreement, along with all Mutual Releases and
Stipulations of Dismissal executed pursuant to paragraphs 15
and 16 of this Agreement shall be null and void, and the
case shall proceed to trial on April 7, 1997.
23. Each of Worcester Sand and Goddard shall make any
remaining payment to the Town, in accordance with their
respective Payment Agreements, until each has paid its
entire contribution.
24. On February 3, 1997, counsel for the parties
shall meet at a mutually agreed time and place for the
purpose of the Town receiving the payments described in
paragraphs 19 and 21, above, and for counsel to deliver to
each other the Mutual Releases as follows: .
(a) between the Town and each of Neles-Jamesbury,
Sprague, Allegro, Micro Tech, Custom Coating, Worcester Sand
and Garrepy Platers;
(b) between Neles-Jamesbury and each of Sprague,
Allegro, Micro Tech, Custom Coating, Goddard, Worcester Sand
and Garrepy Platers;
(c) between Sprague and each of Neles-Jamesbury,
Allegro, Micro
Tech, Custom Coating, Goddard, Worcester Sand and
Garrepy Platers;
(d) between Allegro and each of Sprague, Neles-
Jamesbury, Micro
Tech, Custom Coating, Goddard, Worcester Sand and
Garrepy Platers;
(e) between Micro Tech and each of Sprague, Allegro,
Neles-Jamesbury,
Custom Coating, Goddard, Worcester and Garrepy
Platers;
-57-
(f) between Custom Coating and each of Sprague,
Allegro, Micro Tech,
Neles-Jamesbury, Goddard, Worcester Sand and Garrepy
Platers;
(g) between Garrepy Platers and each of Sprague,
Allegro, Micro Tech,
Custom Coating, Goddard, Worcester and Neles-
Jamesbury; and
(h) between Goddard and each of Neles-Jamesbury,
Sprague, Allegro, Micro
Tech, Custom Coating, Goddard, Worcester and Garrepy
Platers.
Releases between the Town and Goddard shall be delivered in
accordance with the Payment agreement between those two
parties.
25. At or before the February 3, 1997 meeting
described in paragraph
24, above, counsel for the parties shall execute
Stipulations of
Dismissal for all claims by and against the parties
and file said
Stipulations with the Worcester Superior Court.
26. At or before the February 3, 1997 meeting
described in paragraph
24, above, counsel for the parties shall provide
their written assent
to Motions for the Entry of Separate Judgment in Civil
Action No. 90-
3751B, file said Motions with the Worcester Superior
Court.
IV. MISCELLANEOUS PROVISIONS
27. In the event of ambiguity or conflict
between this Agreement and a
Mutual Release, the terms of the Mutual Release
shall govern as to the
parties entering into that Mutual Release.
28. For purposes of paragraphs 24, above and 29, 30,
31, 32 and 33 below, the terms "party", "parties" and
"defendant" shall also include and mean Allegro.
29. Each defendant shall be responsible to pay only
its share, as specified above, of the settlement amount.
Failure by one defendant to pay its share shall not effect
the rights and liabilities of any other defendant under this
Agreement.
30. In any action by the Town to collect a
defendant's share of the settlement amount, the Town shall
be entitled to recover all costs of collection, including
reasonable attorneys' fees, from that defendant.
31. Except to the extent necessary to enforce the
obligations assumed under and imposed by this Agreement,
neither the Agreement nor any Payment Agreement shall be
admissible in evidence in any action for any purpose. The
terms and conditions of the Agreement and the Payment
Agreements shall not be disclosed to any third parties to
the Agreement or to the Payment Agreements except:
-58-
(a) the total sum to be paid to the Town
(i.e., $3,600,000);
(b) as necessary to comply with applicable
laws, including without limitation, laws and regulations
regarding disclosures to the Securities and Exchange
Commission and other financial regulations;
(c) to any parties' accountants or attorneys;
(d) to any parties' insurers; or
(e) by written agreement of all of the Parties.
32. The parties specifically agree that the
individual contribution amounts of each party as set forth
in paragraph 14, above, and in the Payment Agreements, shall
remain confidential, except to the extent necessary to
consider, agree to, execute and enforce the obligations of
the parties; provided, however, that this paragraph shall be
subject to disclosures which the Town may be required to
make under M.G.L. c. 66, 10 and M.G.L. c. 4, 7, clause
twenty-sixth.
33. Each of the undersigned specifically represents
and warrants that he or she is authorized to sign this
Agreement and bind the party for which he or she executes
this Agreement.
34. This Agreement may be executed in multiple
original counterparts, which collectively will constitute
one agreement.
35. This Agreement shall be effective as an
instrument under seal and shall be governed by and
construed in accordance with the Laws of the Commonwealth of
Massachusetts.
36. Promptly upon signing this Agreement, and prior
to February 3, 1997, the parties agree to seek judicial
approval of the provisions of this Agreement with respect to
the Stipulations of Dismissal referred to in paragraphs 15
and 16, above.
TOWN OF SHREWSBURY
by:____________________________Witnessed
by:__________________
Richard Carney
Address:
Town Manager
NELES-JAMESBURY, INC.
by:____________________________Witnessed
by:__________________
William Rawstron
Address:
Vice President
GODDARD INDUSTRIES, INC.
by:____________________________Witnessed
by:__________________
Saul I. Reck
Address:
President
-59-
SPRAGUE ELECTRIC COMPANY,
WHICH HAS BEEN MERGED WITH
AND INTO AMERICAN ANNUITY
GROUP, INC.
by:____________________________Witnessed
by:__________________
Name
Address:
Position
MICRO TECH MANUFACTURING, INC.
by:____________________________Witnessed
by:__________________
Theodore Jasiewicz
Address:
President
WORCESTER SAND AND GRAVEL
COMPANY INCORPORATED
by:____________________________Witnessed
by:__________________
Matteo Trotto
Address:
President
CUSTOM COATING & LAMINATING CORP.
by:____________________________Witnessed
by:__________________
Roger Plourde
Address:
President
EDWARD GARREPY PLATERS
by:____________________________Witnessed
by:__________________
David Barlow
Address:
President
Dated: ________________________
ALLEGRO MICROSYSTEMS, INC.
by:____________________________Witnessed
by:__________________
Fred Windover
Address:
Vice President and General Counsel
Dated: ________________________
-60-
EXHIBIT (27)
This schedule contains summary financial information
extracted from Form 10-KSB and is qualified in its entirety
by reference to such financial statements.
12
MOS
Fiscal year end Sep 28 1996
Period start Oct 01 1995
Period end Sep 28 1996
CASH 65,951
SECURITIES 0
RECEIVABLES 1,182,471
ALLOWANCE 27,600
INVENTORY 3,312,449
CURRENT ASSETS 5,434,080
PP&E 3,641,818
DEPRECIATION 2,589,252
TOTAL ASSETS 6,672,026
CURRENT LIABILITIES 1,754,953
COMMON 20,401
OTHER 3,319,174
TOTAL LIABILITY 6,672,026
AND EQUITY
SALES 8,300,167
TOTAL REVENUES 3,019,513
COS 5,280,654
TOTAL COSTS 1,822,502
INTEREST EXPENSES 102,529
LOSS PROVISION 3,000
INCOME PRETAX 1,150,082
INCOME TAX 465,000
NET INCOME 685,082
EPS .33
-61-
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-28-1996
<PERIOD-END> SEP-28-1996
<CASH> 65951
<SECURITIES> 0
<RECEIVABLES> 1182471
<ALLOWANCES> 27600
<INVENTORY> 3312449
<CURRENT-ASSETS> 5434080
<PP&E> 3641818
<DEPRECIATION> 2589252
<TOTAL-ASSETS> 6672026
<CURRENT-LIABILITIES> 1754953
<BONDS> 0
0
0
<COMMON> 20401
<OTHER-SE> 3319174
<TOTAL-LIABILITY-AND-EQUITY> 6672026
<SALES> 8300167
<TOTAL-REVENUES> 3019513
<CGS> 5280654
<TOTAL-COSTS> 1822502
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 3000
<INTEREST-EXPENSE> 102529
<INCOME-PRETAX> 1150082
<INCOME-TAX> 465000
<INCOME-CONTINUING> 0
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<EXTRAORDINARY> 0
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