- 17 -
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
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive proxy statement for
the registrant's 1997 annual meeting involving the election of
directors (the "Definitive Proxy Statement"), which is expected
to be filed with the Commission within 120 days after the end of
the registrant's fiscal year, are incorporated by reference in
Part III of this Report.
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.
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.
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.
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.
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 two and one half 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
59.2% to $685,000 ($.33 per share), compared to $430,000 ($.21
per share) in fiscal 1995.
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.
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.
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
deseases, 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)
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,
Admendment 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.
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% sotkcholders 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 purchse 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
$10,000
President & 9/30/95 115,000 55,000
10,000
Treasurer 10/1/94 115,000 0
10,000
(1) Under the terms of his Employment Agreement with the
Company described below, Mr. Reck is entitled to receive a bonus
equal to 10% of the amount by which Company pre-tax profits
exceed specified base amounts.
(2) Consists of cash payments to Mr. Reck to be used for
purchase of retirement benefits.
The following table shows information concerning the
exercise of stock options during fiscal 1996 and the fiscal year-
end value of unexeercised options and stock appreciation rights.
AGGREGATED OPTION/SAR EXERCISES IN LAST
FISCAL YEAR AND FY-END OPTION/SAR VALUES
Number of
Value of
Securities
Unexercised
Underlying
In-the Money
Unexercised
Options/SARs at
Options/SARs
9/28/96
Shares 9/28/96
Acquired
on Exercise Value Exercisable
Exercisable
Realized
Name (#) ($) (#)
($)
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.
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 __, 1997.
(See page F-1 hereof.)
2. Consolidated Balance Sheet as of September 28,
1996 and September 30, 1995. (See page F-2
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 F-3 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
F-4 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 F-5
hereof.)
6. Notes to the Consolidated Financial Statements.
(See pages 22 - F-6 to F- hereof.)
(a)(2) Exhibits.
(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 subsi
diaries 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)
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) Settlement Agreement and Release between the
Company, and Gibralter Casualty Company dated
January , 1997.
(k) Settlement Agreement and Release between the
Company and Lexington Insurance Company dated
January , 1997.
(l) Settlement Agreement among the Town of
Shrewsbury, the
Company and certain defendants and third-party
defendants
dated January , 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.)*
(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 __, 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
________________________ Director, Principal Executive
January , 1997
Saul I. Reck Officer, Principal Financing
Officer and Principal Accounting
Officer
________________________ Director
January __, 1997
Jacky Knopp, Jr.
________________________ Director
January __, 1997
Lyle Wimmergren
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 consoslidated
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 , 1997
GODDARD INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 28, 1996 AND SEPTEMBER 30, 1995
1996
1995
ASSETS (All pledged, Note 4)
Current assts:
Cash $ 65,951
$ 74,937
Accounts receivabale (less allowance for doubtful
accounts of $27,600 in 1996 and $28,600 in 1995) 1,154,871
973,477
Other receivables (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.
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
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, 1996 2,040,129 $20,401 $399,353
$2,919,921 $3,339,675
The accompanying notes are an integral part
of the consolidated financial statements
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 receivable(1,000)
12,000 15,621
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 additions (139,817)
(131,717) (133,364)
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
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.
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
Propertry, plant and equipment consists of the following:
1996
1995
Land $ 12,865 $
12,865
Building and improvements 665,658
651,344
Machinery, equipment and tools 2,821,028
2,543,826
Office equipement and fixtures 142,267
127,966
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.
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%, due in 1999 157,895
- -
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 imeediately preceding year's net
income which
represents unrestricted consolidated retained earnings.
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 $ - $
- -
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 Reamining 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
expeneses
approximate fiar 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
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 summariezed 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
ncessary.
(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 Twon 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
allgegations and joined, as third party defendants, eight
other
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 Shrewssbury
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
judgement 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.
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.
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
agareements has been
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 wqere
approximately $41,000, $47,000 and $40,000, respectively.
(12) PROFIT SHARING PLANT
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 purchse 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.
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 suppies for use in
households, industry
and agriculture (plubming 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 Plubming
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 equipemtn $ 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
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. Sale,s 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%
EXHIBITS
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.))*
(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) 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 Settlement Agreement
and
Release executed December 3, 1996.
(j) Settlement Agreement and Release
between the
Company and Gibralter Cvasuality
Company dated
January , 1997.
(k) Settlement Agreement and Release
between the
Company and Lexington Insurance Company
dated
January , 1997.
(l) Settlement Agreement among the Town of
Shrewsbury, the Company and certain
defendants
and third-party defendants dated
January ,
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.
SETTLEMENT AGREEMENT AND RELEASE
This Settlement Agreement and Release ("Agreement") is
made on this day of 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;
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 determins, 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 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 aagree 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,
equit5able allocation, equitable subrogation, or quantum meruit.
In exercise of this obligation, Goddard shall have the right in
its sole 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 espective
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.
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, employ3ees, 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 whoc 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 tirbunal 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
fasimile 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.
By:
/s/ Saul I. Reck
President
Goddard Industires, Inc.
By:
/s/ David E. Nanzig
Environmental Claim Manager
St. Paul Fire and Marine Insurance Company
St. Paul Mercury Insurance Company
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 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
respecctively 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.
IN WITNESS WHEREOF, the parties, by their duly authorized
representatives, affix their signatures hereto.
By: ______________________________________ Dated:
______________
Saul I. Reck
President
Goddard Industries, Inc.
By: ______________________________________ Dated:
______________
David E. Nanzig
Environmental Claim Manager
St. Paul Fire and Marine Insurance Company
St. Paul Mercury Insurance Company
SETTLEMENT AGREEMENT AND RELEASE
This Settlement Agreement and Release ("Agreement") is made
on this ____ 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;
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 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 Ninety Thousand Dollars ($90,000.00) toward a
settlement that Policyholder negotiates with the Town of
Shrewsbury in the Shrewsbury Action.
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 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 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.
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: Kenneth Lakin, Esq.
Bradhurst, Lakin & Lakin
One Elm Square
Andover, MA 01810
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
LEXINGTON INSURANCE COMPANY
By: _______________________________
Kenneth Lakin, Esq.
#541969 v1 - REINERNB - bm6p01!.DOC - 1170/2
SETTLEMENT AGREEMENT AND RELEASE
This Settlement Agreement and Release ("Agreement") is made
on this ____ day of January, 1997, by and between Goddard
Industries, Inc. and Goddard Valve Corp. ("Policyholder") and
Gilbratar 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:
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;
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 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.
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 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.
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.
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: Mr. Anthony Leanza
Gilbratar Insurance Company
Eight Center Drive
Jamesburg, NJ 08831
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
GILBRATAR CASUALTY COMPANY
By: _______________________________
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Independent Auditors' Report
_______________________________
1
