UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[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 30, 1995.
OR
[ ] TRANSITION REPORT PURSUANT OF SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
Commission file number: 1-4433.
ARMATRON INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter).
Massachusetts 04-1052250
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2 Main Street, Melrose MA 02176
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 321-2300
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Stock, $1 Par American Stock Exchange
-------------------- ------------------------
Securities registered pursuant to Section 12(g) of the Act: None.
[X] Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of
this form 10K or any amendment to this Form 10K.
[ ] Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirement for the past 90
days. Yes [X] No [ ].
The aggregate market value of common stock held by nonaffiliates on
December 1, 1995 was $866,755.
The number of shares of the Registrant's common stock outstanding on
December 1, 1995 was 2,606,481.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive proxy statement for the Annual
Meeting of Stockholders to be held on January 25, 1996, to be filed pursuant
to Regulation 14A not later than 120 days after the end of the fiscal year
(September 30, 1995) are incorporated by reference in Part III. Portions of
the Registrant's Annual Report to Stockholders for the fiscal year ended
September 30, 1995 are incorporated by reference in Parts I, II, and III.
PART I
Item 1. Business
- -------------------
(a) General Development of Business:
Armatron International (the "Company") was organized in 1920 as
Automatic Radio. Until 1978, the Company was primarily involved
in the design and manufacture of automobile radios.
In 1978 the Company began to concentrate its efforts primarily in
manufacturing electronic insect killing devices in the Flowtron
Outdoor Products Division which continued until fiscal 1984.
Between 1984 and 1987 the Company acquired several companies in
order to grow and diversify. By the end of fiscal 1987 the
Company had divested itself of these acquisitions.
The Company's Automatic Radio Division supplied AMC/Chrysler
Corp. from 1986 to 1990 with radios for its JEEP. During fiscal
1990 the Company was notified by Chrysler Corporation that they
would terminate their supply agreement for radios. In 1994 this
Division completed field testing of its ultrasonic collision
avoidance/obstacle detection system for automotive applications
which is to be marketed under the trademark "ECHOVISION".
Production is expected to begin in the first quarter of 1996.
The Company's main Division, Flowtron Outdoor Products
manufactures and distributes bugkillers, leaf-eaters, compost
bins, biomisters, yard carts and storage sheds for consumer use.
(b) Financial Information about Industry Segments:
The information required by this item is incorporated herein by
reference to Note 11 of the Notes to Consolidated Financial
Statements on page 12 of the Company's 1995 Annual Report to
Stockholders.
(c) Narrative Description of Business:
(1)(i) The Company operates principally in two segments, the
Consumer Products segment and the Industrial Products segment.
The Consumer Products segment involves the manufacture and
distribution of Flowtron leaf-eaters, bugkillers, compost bins
and biomisters. Two new products for the lawn and garden
industry, a yard cart and a storage shed, were introduced for the
1995 season. The Company distributes its products primarily to
major retailers throughout the United States, with some products
distributed under customer labels. Substantially all of the
Company's sales in fiscal 1995 and accounts receivable as of
September 30, 1995 related to business activities with such
retailers.
Net sales to one customer accounted for approximately $2,441,000
or 20% of consolidated net sales in fiscal 1995, as compared to
net sales to one customer of $4,125,000 or 31% in fiscal 1994 and
net sales to one customer of $4,652,000 or 29% in fiscal 1993.
The Industrial Products segment consisted primarily of final
testing and initial marketing of its ECHOVISION collision
avoidance/obstacle detection system.
(ii) All Flowtron Division products distributed in fiscal 1995
are in full production. These products undergo periodic model
changes and product improvements.
The Company began initial marketing of its collision
avoidance/obstacle detection system in 1995. Production is expected
to begin in the first quarter of 1996.
(iii) The raw materials used by the Company vary widely with
many sources available to meet normal product requirements.
(iv) Although the Company owns a number of design and mechanical
patents in the U.S. and foreign countries relative to its consumer
products division, these patents are not believed to be material
to the operations of the Company. The Company has been awarded
three patents relative to the self test function of its obstacle
detection system. We believe this self test will be important when
customers consider alternatives.
(v) Heavy shipments in spring and early summer of electronic
insect killing devices, yard carts and biomisters complement
Flowtron leaf-eaters which are shipped primarily in the late
summer and fall.
(vi) In an effort to counteract seasonal tendencies and to level
production requirements, the Company follows the industry trade
practice of offering its customers extended payment terms when
shipments are accepted during certain limited periods, which
results in seasonal fluctuations of working capital. Sales terms
for the Company's other products are 30 days, net.
(vii) The Company's largest customers, Sears, Roebuck and Co.,
accounted for $2,441,000, or 20%, of consolidated net sales in
fiscal 1995. The Company anticipates that sales to this customer
will increase in fiscal 1996.
(viii) Shipment backlog is not a significant factor in the
Company's operations.
(ix) Not applicable.
(x) Active competition exists in all product lines in the
consumer products division, each with a number of well-established
companies which manufacture and sell products similar to those of
the Company. Price, service, warranty and product performance are
the bases of competition, with price becoming increasingly more
important. With reference to the industrial products division the
company expects active competition and expects price and product
performance will be the basis of such competition.
(xi) The amount spent on Company-sponsored research and
development was not significant in any of the three years in the
period ended September 30, 1995.
(xii) The Company's compliance with federal, state and local
environmental regulations had no material effect upon the
expenditures, earnings or competitive position of the Company and
its subsidiaries.
In January 1991, the California Department of Health Services
(DHS) issued a Corrective Action Order (CAO) against the Company
and a former subsidiary. The CAO required the Company to comply
with a Cleanup and Abatement Order which had been issued in 1990
against the Company for soil contamination at the site of the
former subsidiary. To date, no determination has been made with
regard to the extent of any environmental damage and who may be
liable. The Company does not believe, based on the information
available at this time, that the outcome of this matter will have
a material adverse effect on its financial position or results of
operations.
(xiii) The number of persons employed by the Company varies from
60 to 130 due to the seasonal production cycle of the Company's
products. Management believes relations with employees are
satisfactory.
(d) Financial Information about Foreign and Domestic Operations
and Export Sales:
The Company's export sales were not significant in any of the
three years in the period ended September 30, 1995.
Item 2. Properties
- ---------------------
The Company's principal executive offices and main manufacturing
plant are leased facilities located at 2 Main Street, Melrose,
Massachusetts, a Boston suburb. Most of the Company's products
are manufactured at this facility. The Company leases 84,000 sq.
ft. of this facility, which has been occupied by the Company
since 1964. The lease for the operating facility expires in
September 2000.
Item 3. Legal Proceedings
- ----------------------------
There are no material outstanding legal proceedings at this time.
Item 4. Submission of Matters to a Vote of Security Holders.
- ---------------------------------------------------------------
Not applicable.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters.
- ----------------------------------------------------------------------------
The information required by this item is set forth under the
captions "Selected Financial Data" and "Common Stock Information"
on page 18 of the Company's 1995 Annual Report to Stockholders,
and is incorporated herein by reference. Under its new financing
agreement, as set forth in Footnote 6 on Page 9 of the Company's
1995 Annual Report to Stockholders, the Company is restricted
from paying dividends for the two-year term of the agreement.
The Company currently intends to retain earnings rather than pay
cash dividends.
Item 6. Selected Financial Data
- ----------------------------------
The information required by this item is set forth under the
caption "Selected Financial Data" on page 18 of the Company's
1995 Annual Report to Stockholders, and is incorporated herein by
reference.
Item 7. Management's Discussion and Analysis of Financial Conditions and
Results of Operations
- ----------------------------------------------------------------------------
The information required by this item is set forth under the
caption "Management's Discussion and Analysis of Financial
Condition and Results of Operations" on pages 16 through 17 of
the Company's 1995 Annual Report to Stockholders, and is
incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
- -------------------------------------------------------
The following financial statements and supplementary data of the
Company are located on pages 2 through 15 of the Company's 1995
Annual Report to Stockholders and are incorporated herein by
references:
Consolidated Balance Sheets September 30, 1995 and 1994.
Statements of Consolidated Operations for the Years Ended
September 30, 1995, 1994 and 1993.
Statements of Consolidated Cash Flows for the Years Ended
September 30, 1995, 1994 and 1993.
Consolidated Statements of Stockholders' Equity for the Years
Ended September 30, 1995, 1994 and 1993.
Notes to Consolidated Financial Statements.
Reports of Independent Accountants.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
- ---------------------------------------------------------------------------
The Company previously disclosed in Form 10-Q for the quarter
ended March 31, 1994 its decision to change accountants. On
October 5, 1994 the Company filed two Form 8-K's with the
Commission disclosing that its newly engaged auditing firm had
been dissolved due to a merger and that the newly merged firm had
been engaged as principal accountant.
PART III
Item 10. Directors and Executive Officers of the Registrant
- -------------------------------------------------------------
The information required by this item is set forth under the
captions "Election of Directors; Security Ownership of
Management" and "Other Executive Officers" on pages 2 through 4,
of the Company's Proxy Statement dated January 10, 1996, and is
incorporated herein by reference.
Item 11. Executive Compensation
- ---------------------------------
The information required by this item is set forth under the
captions "Executive Compensation" and "Benefit Plans" on
pages 6 through 7 of the Company's Proxy Statement dated
January 10, 1996 and is incorporated herein by reference.
Item 12. Security Ownership of certain Beneficial Owners and Management.
- ---------------------------------------------------------------------------
The information required by this item is set forth under the
captions "Election of Directors' Security Ownership of
Management" and "Principal Shareholder" on pages 2 through 4 of
the Company's Proxy Statement dated January 10, 1996, and is
incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
- ----------------------------------------------------------
The information required by this item is set forth under the
caption, "Certain Transactions" on page 8 of the Company's Proxy
Statement dated January 10, 1996, and in Footnote 6 to the
Company's 1995 Annual Report to Stockholders on page 9 and is
incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
- ---------------------------------------------------------------------------
(a) The following documents are filed as part of this report:
(1) Financial Statements
All financial statements of the Registrant as set forth under
Item 8 of this report on Form 10-K.
(2) Financial Statement Schedules
<TABLE>
<CAPTION>
SCHEDULE PAGE
NUMBER DESCRIPTION NUMBER
-------------------------------------------------------------
<S> <S> <C>
Report of Independent Accountants 7 - 8
VIII Valuation & Qualifying Accounts 9
</TABLE>
All other financial statement schedules not listed have been
omitted because they are either not required, not applicable, or
the information has been included elsewhere in the financial
statements or notes thereto.
Columns omitted from schedules filed have been omitted because
the information is not applicable.
(3) Exhibits (numbered in accordance with Item 601 of
Regulation S-K):
<TABLE>
<CAPTION>
PAGE NUMBER OR
EXHIBIT INCORPORATION BY
NUMBER DESCRIPTION REFERENCE TO
---------------------------------------------------------------------------------
<C> <S> <C>
3.1 Restated Articles of Organization of January 23, 1984 ***
3.2 By-laws, as amended, through December 20, 1989 ***
10.1 Revolving Line of Credit *****
10.2 1981 Non-qualified Stock Option Plan ***
10.7 Loan and Security Agreement *
10.8 Armatron International Inc./Dreyfus 401(k) Profit
Sharing Plan and Trust: Summary Plan Description
10.9 Facility Lease
11.0 Not Applicable
13.0 Annual Report to Stockholders for FY1995
16.0 Letter regarding change in certifying accountant ****
19.1 $7,000,000 Line of Credit with a Related Party **
21.0 List of Subsidiaries
23.0 Consent of Independent Accountants
<FN>
<F1> * Filed as an Exhibit to the Company's Annual Report on Form 10K for
the fiscal year ended September 30, 1994.
<F2> ** Filed as an Exhibit to the Company's Form 10-Q for the quarter ended
March 31, 1990.
<F3> *** Filed as an Exhibit to the Company's Annual Report on Form 10-K for
the fiscal year ended September 30, 1990 and incorporated herein by
reference.
<F4> **** Filed as an Exhibit to the Company's Form 8-K dated February 28,
1994 and incorporated herein by reference.
<F5> ***** Filed as an Exhibit to the Company's annual report on Form 10-K for
the fiscal year ended September 30, 1993 and incorporated herein by
reference.
</TABLE>
(b) Reports on Form 8-K
No reports were filed on Form 8-K for the last quarter of the
Company's fiscal year ended September 30, 1995.
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Board of Directors and Stockholders
of Armatron International, Inc.:
Our report on the consolidated financial statements of Armatron
International, Inc. has been incorporated by reference in this Form 10-K
from page 15 of the 1995 Annual Report to Stockholders of Armatron
International, Inc. In connection with our audits of such financial
statements, we have also audited the related financial statement schedules
listed in the index on page 6 of this Form 10-K.
In our opinion, the financial statement schedules referred to above,
when considered in relation to the basic financial statements taken as a
whole, present fairly, in all material respects, the information required to
be included therein.
Needham, Massachusetts
December 1, 1995 R. J. GOLD & COMPANY P.C.
January 5, 1996 as to Note 13
| Coopers | certified public accountants
| &Lybrand |
| |
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Directors of
Armatron International, Inc.:
We have audited the accompanying consolidated balance sheet of Armatron
International, Inc. as of September 30, 1993 and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of
the two years in the period ended September 30, 1993. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opionion 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 misstatements. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Armatron
International, Inc. as of September 30, 1993 and the consolidated results of
its operations and its cash flows for each of the two years in the period
ended September 30, 1993, in conformity with generally accepted accounting
principles.
/s/ COOPERS & LYBRAND
Coopers & Lybrand
Boston, Massachusetts
November 24, 1993
ARMATRON INTERNATIONAL, INC.
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
Balance at Charged to Balance at
Beginning Costs and End of
of Period Expenses Deductions Period
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Year Ended September 30, 1993:
Allowance for doubtful accounts $295,000 $ 16,000 $ 19,000 $292,000
Warranty costs 106,000 5,000 21,000 90,000
-------- --------- -------- --------
$401,000 $ 21,000 $ 40,000 $382,000
======== ========= ======== ========
Year Ended September 30, 1994:
Allowance for doubtful accounts $292,000 $(146,000) $ 46,000 $100,000
Warranty costs 90,000 (34,000) 43,000 40,000
-------- --------- -------- --------
$382,000 $(180,000) $ 89,000 $140,000
======== ========= ======== ========
Year Ended September 30, 1995:
Allowance for doubtful accounts $100,000 $ 65,000 $(14,000) $179,000
Warranty costs 40,000 71,000 47,000 64,000
-------- --------- -------- --------
$140,000 $ 136,000 $ 33,000 $243,000
======== ========= ======== ========
</TABLE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
ARMATRON INTERNATIONAL, INC.
January 10, 1996 By:/s/ Charles J. Housman
Charles J. Housman
Chairman of the Board,
President and Director
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant on January 10, 1996, in the capacities indicated.
By: /s/ Edward L. Housman By: /s/ Charles J. Housman
Edward L. Housman Charles J. Housman
Director Chairman of the Board,
President and Director
By: /s/ Elliot J. Englander
Elliot J. Englander
Director
EXHIBIT INDEX
<TABLE>
<CAPTION>
PAGE NUMBER OR SEQUENTIAL
EXHIBIT INCORPORATION BY PAGE
NUMBER DESCRIPTION REFERENCE TO NUMBER
------------------------------------------------------------------------------------------
<C> <S> <C>
3.1 Restated Articles of Organization as of ***
January 23, 1989
3.2 By laws, as amended, through December 20, 1989 ***
10.1 Revolving Line of Credit *****
10.2 1981 Non-qualified Stock Option Plan ***
10.7 Loan and Security Agreement *
10.8 Armatron International, Inc./Dreyfus 401(k)
Profit Sharing Plan and Trust: Summary Plan
Description
10.9 Facility Lease
13.0 Annual Report to Stockholders for FY 1995
16.0 Letter regarding change in certifying accountant ****
19.1 $7,000,000 Line of Credit with a Related Party **
21.0 List of Subsidiaries
23.0 Consent of Independent Accountants
25.0 Not Applicable
<FN>
<F1> * Filed as an Exhibit to the Company's Annual Report on Form 10-K for
the fiscal year ended September 30, 1994 and incorporated herein by
reference.
<F2> ** Filed as an Exhibit to the Company's Form 10-Q for the quarter ended
March 31, 1990.
<F3> *** Filed as an Exhibit to the Company's Annual Report on Form 10-K for
the fiscal year ended September 30, 1990 and incorporated herein by
reference.
<F4> **** Filed as an Exhibit to the Company's Form 8-K dated February 28, 1994
and incorporated herein by reference.
<F5> ***** Filed as an Exhibit to the Company's Annual Report on Form 10-K for
the fiscal year ended September 30, 1993 and incorporated herein by
reference.
</TABLE>
EXHIBIT 10.8
ARMATRON INTERNATIONAL, INC/DREYFUS 401(K) PROFIT
SHARING PLAN AND TRUST
SUMMARY PLAN DESCRIPTION
TABLE OF CONTENTS
SUMMARY PLAN DESCRIPTION
ARMATRON INTERNATIONAL, INC./DREYFUS 401(K) PROFIT
SHARING PLAN AND TRUST
<TABLE>
<CAPTION>
TOPIC PAGE
- ------------------------------------------------------------------
<S> <C>
INTRODUCTION 1
I. ABOUT THE PLAN 2
1. General Plan Information 2
2. Plan Sponsor Information 2
3. Plan Administrator Information 3
4. Plan Trustee Information 3
5. Service of Legal Process 3
6. Investments 3
II. SERVICE 4
III. PARTICIPATION IN YOUR PLAN 5
1. Eligible Employees 5
2. Participation Requirements 5
IV. CONTRIBUTIONS 5
1. Employer Discretionary Contributions 6
2. Electric Deferrals 6
3. Matching Contributions 6
4. Qualified Non-Elective Contributions 6
5. Transfers and Rollovers 7
6. Forfeitures 7
V. COMPENSATION 7
VI. VESTING 7
VII. TOP-HEAVY PROVISIONS 9
VIII. LOANS 9
IX. IN-SERVICE WITHDRAWALS 10
1. Withdrawals at age 59 1/2 10
2. Hardship Withdrawals 10
3. Age 70 1/2 Distribution 11
X. BENEFITS UPON SEPARATION FROM SERVICE, RETIREMENT,
OR DEATH 11
1. Separation from Service 11
2. Forms of Benefit Payments 12
XI. ASSIGNMENT OF RIGHTS 12
XII. AMENDMENT AND TERMINATION 13
XIII. CLAIMS PROCEDURE 13
XIV. YOUR RIGHTS UNDER ERISA 13
</TABLE>
INTRODUCTION
This Summary Plan Description (SPD) has been specifically prepared for
you, the employee participating in The Armatron International, Inc./Dreyfus
401(k) Profit Sharing Plan and Trust (the "Plan"). It offers you a general
outline of the major features of your Plan and your rights, obligations, and
benefits, under the Plan. We have attempted to answer the questions
participants most frequently ask.
Although every effort has been made to describe the essential provisions
of the Plan as accurately as possible, this SPD is not intended to detail
every plan provision and every situation that may arise. If there is any
conflict between the wording of this SPD and the Plan document, the terms and
conditions of the Plan document will control. The Plan and all documents
relating to it may be examined by you, your beneficiaries or your legal
representatives, during regular business hours.
Please read this SPD carefully so that you will better understand how
the Plan can work for you. In the following pages you will find a number of
important plan details including several names and addresses that you may
refer to should you have any questions about your plan and your benefits.
I. ABOUT THE PLAN
There is certain general information that is important for you to know
about your Plan. This information has been summarized for you in this Section.
1. General Plan Information
The official name of the Plan is The Armatron International,
Inc./Dreyfus 401(k) Profit Sharing Plan and Trust. It is a profit-sharing
and 401(k) plan intended to qualify under Section 401 of the Internal Revenue
Code. Your employer has assigned Plan Number 001 to your Plan.
The Plan was originally made effective as of July 1, 1989. Since that
time the plan has been amended to comply with changes in the law. Most
recently, the plan has been amended and restated effective November 1, 1994,
to comply with the Tax Reform Act of 1986 and subsequent legislation.
Your employer has appointed an administrative committee ("the
Committee") to administer the Plan on a day to day basis.
All Plan transactions, records and reports are maintained on a twelve-
month period of time known as the "Plan Year". The Plan Year coincides with
the calendar year.
Your accounts will be valued on a daily basis. You will receive a
detailed individual statement of your account(s) quarterly. The statement
will reflect all transactions and account valuations for the reporting
period. It will show you how much money has been allocated to your account(s)
and how your investments are performing.
Neither the establishment of this plan, nor your participation
constitutes an employment contract between Armatron International, Inc. and
yourself. It does not provide you with the right to continue as an employee
or in any way limit your employer's right to discharge any employee.
Since the Plan is a defined contribution plan, benefits under the Plan
are not insured by the Pension Benefit Guaranty Corporation (PBGC).
2. PLAN SPONSOR INFORMATION
The name, address, and Employer Identification Number of your Plan's
Sponsor is:
Name: Armatron International, Inc.
Address: 2 Main Street
Melrose, MA 02176
Employer ID Number: 04-1052250
3. Plan Administrator Information
The address and business telephone number of your Plan's Administrative
Committee are:
Address: 2 Main Street
Melrose, MA 02176
Telephone Number: (617) 321-23000
4. Plan Trustee Information
The assets of the plan are held in a trust fund. The trustee of the
Plan is:
The Dreyfus Trust Company
EAB Plaza
144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0155
5. Service of Legal Process
Service of process may be made upon the Committee of any of its members
at the Committee's address indicated above. Service of process may also be
made upon the Plan's trustee.
6. Investments
You direct the investment of all amounts contributed into the Plan on
your behalf. You may choose to invest in one or more mutual funds or other
investment products offered by Dreyfus Service Corporation, an affiliate of
The Dreyfus Corporation, made available to you under the Plan. You choose
the investment option or options that are appropriate for you. You may
invest all of the assets in your account in one of the available options, or
you may invest your assets in two or more of the available options so long
as you invest a least 10% of your account in each option selected.
If and when your investment goals change, you may on a daily basis,
transfer part or all of your existing account balance in an investment option
to one or more of the other available options and/or change the way that you
invest future allocations to your account.
II. SERVICE
The concept of "years of service", "service break", and "hours of
service" are important for purposes of eligibility and vesting under the Plan.
For purposes of eligibility and vesting, you will be credited with a
year of service if you work at least 1,000 hours during the 12 consecutive
month period commencing on the date you begin working for the employer and
anniversaries thereof. You will incur a service break for eligibility
purposes if you work 500 hours or less during such a 12 month period.
You will be credited with an hour os service for the following:
-- each hour for which you are paid or entitled to be paid by your
employer for your services,
-- each hour for which you are paid or entitled to be paid by your
employer on accounts of a period of time in which you performed no
services due to vacation, holiday, illness, incapacity (including
disability), layoff, jury duty, military duty or leave of absence,
-- each hour for which back pay has been awarded or agreed to by your
employer.
Solely for purposes of determining whether you have incurred a service
break, you will receive credit for hours of service with which you would have
otherwise been credited in the event you are absent from work for maternity
or paternity reasons. You are considered absent from work for maternity or
paternity reasons if you are absent:
-- by reason of your pregnancy,
-- by reason of the birth of your child,
-- by reason of the placement of a child with you in connection with
your adoption of such child,
-- for purposes of caring for such child for a period beginning
immediately following such birth or placement
You will be credited with hours of service based on the actual hours
for which you are paid or entitled to payment.
III. PARTICIPATION IN YOUR PLAN
Before you become a member or a "participant" in the Plan, there are
certain eligibility and participation rules which you must meet. These rules
are described in this section.
1. Eligible Employees
All employees of Armatron International, Inc. are eligible to
participate in the Plan except non-resident aliens who receive no income from
Armatron International, Inc. which constitutes income from sources within the
United States.
A change in your eligibility status may affect your participation in
the Plan. The Plan document sets forth the rules to follow in such
situations. If and when such rules affect you, you will be notified.
2. Participation Requirements
If you are an eligible employee, you will become a participant in the
Plan as of the entry date coincident with or next following the date you
reach age 21 and, in the case of discretionary contributions complete one
year of Service, and in the case of all other contributions complete one
year of service.
The "entry date" is defined in the Plan as the first day of the Plan
Year and the first day of the fourth, seventh and tenth month of the Plan
Year.
IV. CONTRIBUTIONS
Your benefits under the Plan are provided by several types of
contributions that are or may be made to the Plan o your behalf each year.
The various types of contributions that may be made to your plan are
described in this section.
Due to certain limitations imposed by the Internal Revenue Code, the
sum of all contributions credited to your account(s) may not exceed the
lesser of $30,000 or 25% of your annual compensation. The law also limits
contributions made on behalf of highly compensated employees in relation to
contributions of non-highly compensated employees. Furthermore, if you
participate in this plan and another plan we sponsor, the contribution
credited to your accounts may be subject to further limitations. You will
be notified by the Committee in the event that any of these limitations
affect you.
1. Employer Discretionary Contributions
Each year, your employer will decide whether it wishes to make a
contribution to the Plan on behalf of you and your fellow participants. If
your employer decides to make a contribution to the Plan in a particular
year, it will contribute a percentage of your compensation to the Employer
Discretionary Contribution Account maintained for you under the Plan. The
percentage of compensation contributed on your behalf will be the same as the
percentage contributed on behalf of other participants in the Plan."
2. Elective Deferrals
Upon meeting the Plan's eligibility and participation requirements, you
may sign an agreement with us as of the first day of any month after you
have met the requirements. This agreement will allow you to have your salary
reduced by up to 20% (up to a maximum of $9,240 in 1994) on a pre-tax basis
contributed to the elective deferral account maintained for you under the
plan. The maximum contribution amount is adjusted annually for cost-of-living.
Your salary will continue to be deferred by this percentage until you decide
to change the amount or to stop making such elective deferrals. You may
modify the amount of your elective deferrals as of any January 1st, April 1st,
July 1st or October 1st. You may terminate your election to make elective
deferrals at any time. Forms for all of these purposes are available from
the Committee.
3. Matching Contributions
If you make: Elective Deferrals, your employer may make matching
contributions to the Plan on your behalf. The Matching contribution shall be
an amount or a percentage of the Elective Deferrals fixed by appropriate
action of your Employer. Your employer will not match Elective Deferrals in
excess of 6% of your Compensation.
Matching contributions are made monthly by your employer. All matching
contributions are made to a separate matching contribution account maintained
for you under the Plan.
4. Qualified Non-Elective Contributions
Your employer may, in its discretion, make qualified non-elective
contributions on your behalf. Qualified non-elective contributions will be
made on your behalf only if you are a non-highly compensated employee who
makes Elective Deferrals. The total amount of qualified non-elective
contributions will be determined each year by your employer and will be
allocated to participants' accounts on the basis of compensation.
Qualified non-elective contributions will be contributed to the
qualified non-elective contribution account maintained for you under the Plan.
5. Transfers and Rollovers
At the discretion of the Committee, you may be permitted to deposit into
your Plan distributions received from other qualified plans. Such deposits,
usually referred to as a "rollover", will be placed in a separate account.
You will always be 100% vested in your rollover account. The concept of
"vesting" is explained in the Section in this Summary entitled "Vesting."
6. Forfeitures
Forfeitures occur when any Plan participant terminates employment
before becoming entitled to his or her full benefits under the plan. Any
forfeitures will be used by the Plan to reduce Plan expenses.
V. COMPENSATION
Your "compensation" for purposes of the Plan refers to all of your wages
and other payments reported for you on Form W-2.
Compensation shall include contributions made by your employer pursuant
to a salary reduction agreement with you which are not included in your gross
income.
For Plan Years beginning on or after January 1, 1994, the annual
Compensation of each Participant taken into account for determining all
benefits provided under the Plan for any Plan Year shall not exceed $150,000,
as adjusted for increases in the cost-of-living in accordance with section
401(a)(17)(B) of the Code.
VI. VESTING
Vesting means having a non-forfeitable right to amounts in your
accounts. At all times, you are fully vested in your elective deferral
account, qualified non-elective contribution account and rollover account,
if any. You will become vested in your Employer Discretionary Account and
Matching Contribution Account in accordance with the following schedule:
<TABLE>
<CAPTION>
Years of Service Vested Percentage
--------------------------------------
<C> <C>
5 or more 100%
</TABLE>
In addition, you will become fully vested in your Employer Discretionary
Account and Matching Contribution Account upon reaching normal retirement age,
65, or upon your death or total and permanent disability.
A Year of Service and service break have previously been discussed in
the Section titled "Participation In Your Plan."
It should also be noted that if you have five or more consecutive one
year service breaks, all years of service after the service breaks will be
disregarded for purposes of determining your vested interest in employer
contributions that accrue before such service breaks. Your years of service
before the service breaks will count for purposes of determining your vested
interest in employer contributions that accrue after such service breaks if:
-- you had any vested interest in employer contributions at the time
of the service breaks; or
-- at the time you return to service, the number of consecutive one
year service breaks is less than the number of your years of
service.
In no event, however, will your years of service before the service
break be taken into account until you complete a year of service after
returning to our employ. If you receive a distribution and later resume
employment with us, your account balance attributable to employer
contributions will be restored to the amount on the date of distribution if
you repay to the Plan the full amount of your distribution attributable to
employer contributions before the earlier of:
-- five years after you begin working for us again, or
-- the date you incur five consecutive one year service breaks
following the date of distribution.
VII. TOP-HEAVY PROVISIONS
A retirement plan that primarily benefits "key employees" is called a
top heavy plan. Key employees are certain owners or officers of your employer.
The Plan will be considered "top-heavy" for any year in which the sum of
the account balances of certain "key employees" exceeds 60% of the sum of the
account balances of all Plan participants.
Each year, the Plan Administrator is responsible for determining whether
your plan is top heavy. If the Plan is top-heavy in any year, your employer
may be required to contribute a minimum amount on your behalf if you are not a
key employee equal to an amount up to 3% of your compensation for that year.
However, if the highest amount contributed for a key employee is less than 3%
of compensation, the minimum contribution your employer will make will not be
greater than that amount.
If the Plan is top-heavy in any plan year, the following vesting
schedule will be substituted for the vesting schedule set forth in the section
entitled "Vesting" above for such year:
<TABLE>
<CAPTION>
Years of Service Vested Percentage
------------------------------------------
<C> <C>
2 20%
3 40%
4 60%
5 80%
6 100%
</TABLE>
VIII. LOANS
You may apply to the Committee for a loan using a form that will be
supplied to you upon request. If you are married, your spouse must consent in
writing to the loan. In deciding whether to grant your request for a loan,
the Committee will consider only those factors which would be considered in a
normal commercial setting by an entity in the business of making similar types
of loans. Such factors may include your credit worthiness and financial need.
Such factors will be applied by the Committee in a uniform and non-
discriminatory manner.
The minimum amount you may borrow is $1,000. The maximum amount you may
borrow is the less of (i) $50,000 (subject to certain adjustments), or (ii)
one-half (1/2) of your vested account balance. The interest rate on your loan
is determined by the Committee and, because it is considered a plan
investment, will be commensurate with the interest rates charged by persons
in the business of lending money for loans which would be made under similar
circumstances. Your loan will be secured by an assignment of a portion (not
to exceed 50%) of your vested account balance.
When you borrow from the Plan, you generally must repay the loan within
five years with interest and principal payments at least quarterly. Interest
that you pay on the loan is not deductible for federal income tax purposes.
Your loan generally will be repaid through automatic payroll deductions. Both
the principal and interest portions of your repayments are allocated to your
accounts under the Plan from which the loan was made and are then allocated
according to your current investment elections.
In the event you default on your loan, the Committee will not attach
that portion of your vested account balance pledged as security for the loan
until your account is otherwise distributable under the terms of the Plan.
IX. IN-SERVICE WITHDRAWALS
In-service withdrawals, that is the withdrawal of some portion of your
vested account balances while you are employed, is possible under your plan as
described below. It should be noted that in-service withdrawals may only be
made at such times as the Committee may designate. No single withdrawal may
be for less than $500.
1. Withdrawals at age 59 1/2
You may make withdrawals of vested Employer Discretionary Contributions,
vested Employer Matching Contributions, Elective Deferrals, Qualified Non-
Elective Contributions, and Transfers allocated to your accounts for any
reason after reach age 59 1/2 even though you continue to work for your
employer.
2. Hardship Withdrawals
Withdrawals from your elective deferral account (only amounts
contributed; income is excluded) on account of financial hardship are
permitted if the distribution of your funds is necessary in light of your
immediate and heavy financial needs. A distribution on account of financial
hardship may not exceed the amount required to meet the immediate financial
need created by the hardship (including amounts needed to pay any federal,
state or local income tax or penalties reasonably anticipated to result from
the distribution). The Committee will be responsible for determining, in a
uniform and nondiscriminatory manner, whether a financial hardship exists and
the amount required to meet your immediate financial needs.
The Committee will consider the following to be immediate and heavy
financial needs:
-- certain medical care expenses incurred by you, your spouse or your
dependents, or necessary for these persons to obtain such care,
-- the purchase (excluding mortgage payments) of your principal
residence,
-- the payment of tuition and related educational fees for the next 12
months of post-secondary education for you, your spouse or your
dependents,
-- The need to prevent your eviction from your principal residence or
the foreclosure of the mortgage of your principal residence.
Before making a hardship withdrawal, you must obtain all distributions,
other than hardship distributions, and all loans available under all plans,
including this Plan, maintained by us. Once you make a hardship withdrawal,
your right to make contributions of any kind to this Plan or other plans
maintained by us will be suspended for 12 months. In addition, a hardship
withdrawal will reduce the amount of elective deferrals that you may make in
the tax year following the year in which you make such withdrawal.
You should note that in most cases you will be subject to a 10% early
withdrawal penalty tax in addition to regular income tax in the event that you
make a hardship withdrawal.
3. Age 70 1/2 Distribution
If you continue working after your normal retirement age, 65, you are
still eligible to participate. However, if you are still employed when you
reach age 70 1/2, you must begin to receive your benefits by April 1st of the
year following the year in which you attain age 70 1/2.
X. BENEFITS UPON SEPARATION FROM SERVICE,
RETIREMENT, OR DEATH
1. Separation from Service
If you terminate your employment with us for any reason, you will be
entitled to receive the value of the vested portion of your accounts as soon
as administratively feasible after the date of your termination of employment.
The value of the vested portion of your accounts will be determined as of the
valuation date coincident with or immediately subsequent to your termination
of employment. If the value of the vested portion of your accounts is greater
than $3,500, your accounts will not be distributed to you prior to age 65, the
Normal Retirement Age under the Plan, unless you consent to the distribution.
If the value of the vested portion of your accounts is not greater than
$3,500, you will receive a distribution of the value of the entire vested
portion of your accounts.
2. Forms of Benefit Payments
The vested portion of your accounts will be paid to you in the form of a
lump sum distribution. In lieu of a lump sum distribution, you or your
beneficiary may elect to receive installment payments payable monthly,
quarterly, semi-annually or annually.
When you die, your account balance will be paid to your designated
beneficiary. If you have not designated a beneficiary or your beneficiary
does not survive you, your account balance will be paid to your estate.
Your spouse, if any, will be deemed to be your designated beneficiary unless
your spouse consents in writing to the designation of another party as your
beneficiary. If you establish to the satisfaction of the Committee that you
are not married or that your spouse cannot be located, spousal consent to your
beneficiary designation will not be required. Spousal consent to your
beneficiary designation must meet several specific requirements. The
Committee will provide you with the necessary forms to ensure that these
requirements are satisfied. Death benefits may be paid in any form of benefit
provided for under the Plan (see above) as elected by you or your beneficiary.
You should be aware that effective January 1, 1993, a new law affecting
distributions from qualified plans requires 20% withholding on distributions
from plans which are eligible to be rolled over but are not paid directly to
another qualified plan or Individual Retirement Accounts (IRA). To avoid this
20% withholding, a "direct rollover" must be made on distributions received
after December 31, 1992 into another qualified plan or IRA.
When you request a distribution of the vested portion of your account
from this plan, your employer will provide you with a Tax Notice Regarding
Plan Payments which explains consequences of not choosing a direct rollover.
You should, of course, discuss this matter with your own tax advisors prior
to making a decision.
XI. ASSIGNMENT OF RIGHTS
You cannot assign your rights or interest in this Plan to anyone else.
In addition, you cannot pledge or assign your plan benefits as security for a
loan. An exception may be made to this non-assignment rule in the case of
certain divorced participants. If a court issues a "Qualified Domestic
Relations Order" (QDRO) regarding your plan benefits, the Plan is required by
law to follow that order. Accordingly, the judge or other arbitrator of your
divorce may assign a portion of your retirement benefits to your spouse as
part of your property settlement or to your children as payment of child
support. Payments made pursuant to a QDRO may be made prior to the time your
plan would normally make payments to you.
XII. AMENDMENT AND TERMINATION
We retain the right to amend or terminate the Plan at any time. In no
event will an amendment to the Plan reduce the amount that has been credited
to your accounts under the Plan. If the Plan is terminated, you will become
100% vested in all amounts held for your benefit under the Plan.
XIII. CLAIMS PROCEDURE
The Committee will endeavor to administer the Plan fairly and
consistently and to pay all benefits to which you are entitled.
You may file a written claim for benefits with the Committee. If you
claim is denied in whole or in part, the Committee will inform you in writing
of its decision and the reasons for such decision within 90 days of receiving
your claim. You or your representative will be permitted to review pertinent
documents and, within 60 days of receiving a notice denying your claim for
benefits, to request to appear before the Committee or to submit further
information or comments to the Committee. The Committee will issue its final
decision and the reasons for such decision within 60 days after receiving your
appeal, unless special circumstances require an extension of the 60-day
period. If a final decision is not issued within such period, your claim for
benefits will be considered denied.
XIV. YOUR RIGHTS UNDER ERISA
As a participant in the Plan, you are entitled to certain rights and
protection under the Employee Retirement Income Security Act of 1974 (ERISA).
ERISA provides that you shall be entitled to:
-- Examine, without charge, at the plan administrator's office all
plan documents filed by the plan with the U.S. Department of Labor,
such as detailed annual reports and plan descriptions
-- Obtain copies of all plan documents and other plan information upon
written request to the plan administrator. The administrator may
make a reasonable charge for the copies.
-- Receive a summary of the Plan's annual financial report. We are
required by law to furnish each participant with a copy of this
summary annual report.
-- Obtain a statement telling you whether you have a right to receive
a pension at normal retirement age (65) and if so, what your
benefits would be at normal retirement age if you stop working
under the plan now. If you do not have a right to a pension, the
statement will tell you how many more years you have to work to
get a right to a pension. This statement must be requested in
writing and is not required to be given more than once a year.
The plan must provide the statement free of charge.
ERISA imposes duties upon the people who are responsible for the
operation of the Plan. The people who operate your plan are called
"fiduciaries". They have a duty to act prudently and in the interest of you
and other plan participants and beneficiaries. No one may fire you or
otherwise discriminate against you in any way to prevent you from obtaining a
pension benefit or exercising your rights under ERISA. If your claim for a
pension benefit is denied in whole or in part you must receive a written
explanation of the reason for the denial. You have the right to have the plan
review and reconsider your claim. Under ERISA, there are steps you can take
to enforce the above rights. For instance, if you request materials from the
plan and do not receive them within 30 days, you may file suite in a federal
court. In such a case, the court may require the plan administrator to
provide the materials and pay you up to $100 a day until you receive the
materials, unless the materials were not sent because of reasons beyond the
control of the administrator. If you have a claim for benefits which is
denied or ignored, in whole or in part, you may file suit in a federal court.
If it should happen that plan fiduciaries misuse the plan's money, or if you
are discriminated against for asserting your rights, you may seek assistance
from the U.S. Department of Labor, or you may file suit in a federal court.
The court will decide who should pay court costs and legal fees. If you are
successful the court may order the person you have sued to pay these costs
and fees. If you lose, the court may order you to pay these costs and fees,
for example, if it finds your claim is frivolous. If you have any questions
about your plan, you should contact the plan administrator. If you have any
questions about this statement or about your rights under ERISA, you should
contact the nearest Area Office of the U.S. Labor-Management Services
Administration, Department of Labor.
EXHIBIT 10.9
LEASE
This Lease (this "Lease") made as of the 30th day of September, 1995
by and between Fidelity Properties, Inc., a Massachusetts corporation of 7
Water Street, Boston, Massachusetts (hereinafter referred to as "Landlord"),
as successor-by-merger to CON-DEV Management Co., Inc., and Armatron
International, Inc., a Massachusetts corporation, of Two Main Street,
Melrose, Massachusetts (hereinafter referred to as "Tenant").
RECITALS
WHEREAS CON-DEV Management Co., Inc. (the "Original Landlord") and the
Tenant entered into a certain lease dated as of March 1, 1992, which lease
demised certain space at the building known as and numbered Two Main Street,
Melrose, Massachusetts to the Tenant subject to and with the benefit of the
terms, covenants, conditions and provisions of said lease, and which lease
was amended by First Amendment (the "First Amendment") dated July 29, 1994
(as so amended, the "Original Lease"); and
WHEREAS the Original Landlord and the Tenant entered into a certain Tenancy
at Will Agreement dated as of March 1, 1992 (the "TAW"), which TAW demised
certain space at the building known as and numbered Two Main Street,
Melrose, Massachusetts and the building known as and numbered 1080 Main
Street, Malden, Massachusetts and Landlord; and
WHEREAS Landlord and Tenant now wish to terminate the TAW and vacate the
space in the Two Main Street building which remains occupied by Tenant
pursuant to the TAW to the space occupied by the Tenant pursuant to the
Lease such that all space occupied by Tenant will be governed by the Lease;
and
WHEREAS the TAW was terminated as to the 1080 Main Street building by notice
given by Tenant to Landlord, and Tenant's rights to occupy said premises
have thereby been terminated; and
WHEREAS the Landlord and the Tenant now wish to amend certain provisions of
the Original Lease.
WITNESSETH THAT:
In consideration of the mutual covenants herein set forth to be paid,
performed and observed, the parties hereto agree as follows:
1. Leased Premises. Landlord hereby leases to Tenant approximately
89,949 square feet of floor area consisting of approximately 70,263 square
feet of first floor warehouse space, approximately 7,754 square feet of
first floor office space, and approximately 11,932 square feet of second
floor office space for use by Tenant and its current affiliated companies,
including toilet facilities accessible to both office and warehouse space in
a certain building which is located partially in Melrose and partially in
Malden, Massachusetts, known as and numbered Two Main Street, Melrose,
Massachusetts (the "Building"), as well as parking facilities for forty (40)
automobiles or more as may be reasonably necessary and reasonably available
in Landlord's sole judgment (the "Leased Premises"). The Leased Premises
are a portion of the premises conveyed by A R T Corp., an affiliated of
Tenant, to Original Landlord by deed dated September 30, 1986, which
premises contain approximately 13.26 acres of land with the buildings and
improvements thereon, as more particularly described in said deed (the
"Conveyed Premises"). At the outset of the term of this Lease, the Leased
Premises will consist of the area marked by cross-hatching on Exhibit A
attached hereto and made a part hereof. Landlord reserves the right from
time to time (i) to enter the Leased Premises to inspect the same, (ii) to
show the Leased Premises to other, (iii) to use (and repair, maintain and
replace, in Landlord's sole discretion, except as required to be repaired,
maintained and replaced by Landlord in Section 6(b) below) those portions of
the Building components, systems and structural elements which are located
within the Leased Premises and which serve (a) the Building as a whole or
(b) any portion of the Building or the Conveyed Premises which are not
included in the Leased Premises, including without limitation, any utilities
and any security or public safety systems such as sprinkler systems and
emergency lighting systems and (iv) otherwise to exercise its rights
hereunder. It is understood by the parties hereto that the Leased Premises
are being leased to Tenant in an "as is" condition, except as set forth in
Section 6(b) below, and at no time shall the Landlord be required to install
a new roof or repair or replace any portion of the present roof on the
Leased Premises, or, except as set forth in Section 6(b) below, to repair,
replace or rebuild the Leased Premises or any structural components or any
systems, or any other portion of the Leased Premises or the Building or
utility lines serving the same.
2. Term: Option to Extend. The term of this Lease commences on
October 1, 1995 (the "Commencement Date") and expires on September 30, 2000
(the "Term Expiration Date"), unless sooner terminated as herein provided.
This lease shall supersede the previous Leases between Landlord and Tenant
dated September 30, 1986 and May 1, 1987 (together with the Original Lease,
the "Prior Leases") and shall superseded the Original Lease and the TAW, all
of which Prior Leases and TAW shall be deemed terminated as of the
Commencement Date; provided, however, that notwithstanding the foregoing, if
Tenant has not surrendered by portion of the Building which is not included
in the Leased Premises under this Lease on or before October 15, 1995, then
the provisions of the Prior Leases and said TAW, as the case may be,
regarding (a) additional fees to be paid upon failure to surrender and (b)
all other default and remedy provisions thereof shall apply and remain in
full force and effect and said failure to surrender shall constitute a
default under this Lease.
3. Earlier Termination of Lease. Landlord and Tenant shall have
certain rights to terminate this Lease in advance of the expiration of the
term hereof by giving written notice of termination to the other party at
least six (6) months prior to any anniversary of the Commencement Date of
this Lease, upon which notice the term of this Lease shall expire on the
next succeeding anniversary date from which such 6-month period was
measured. If any such notice of termination is given by Tenant, such notice
shall be accompanied by a payment to Landlord as Additional Rent hereunder
of an amount equal to three (3) months' Fixed Rent for the whole of the
Leased Premises at the rate of $3.50 per square foot as liquidated damages
for such early termination.
4. Rent. Tenant shall pay the following rent which shall be
absolutely net (except as otherwise provided herein) to Landlord:
(a) Tenant shall pay Fixed Rent during the term of this Lease at the
annual rate for each square foot of rented space, which space, both parties
agree, consists of 89,949 square feet, of (a) $0 per square foot for the
period from October 1, 1995 through December 31, 1995; (b) $3.25 per square
foot for the period from January 1, 1996 through September 30, 1996; and (c)
$3.50 per square foot for the period from October 1, 1996 through
September 30, 2000.
All Fixed Rent shall be paid in equal monthly installments of 1/12 of
the annual rate then applicable from time to time in advance on or before
the first day of each calendar month, and proportionately with respect to
any calendar month in which the term of this Lease may begin or end.
(b) Tenant shall pay to Landlord as Additional Rent the following:
(i) forty percent (40%) of all real estate taxes, including,
without limitation, all public, special or betterment assessments, water and
sewer charges and other governmental levies, imposed against the Building,
prorated with respect to any portion of a fiscal year in which the term of
this Lease begins or ends. Such payments shall be due and payable within
fifteen (15) days after Tenant shall have received a copy of a tax bill
evidencing such taxes; provided, however, that Tenant shall not be obligated
to pay such percentage of taxes more than ten (10) days in advance of when
such payment is due to the governmental authority:
(ii) forty percent (40%) of all utility and energy charges for
the Building (unless separately metered in which case Tenant shall pay one
hundred percent (100%) of all utility and energy charges which are
separately metered and billed to Tenant directly by the utility or energy
company); and
(iii) forty percent (40%) of all expenses necessary or
appropriate in connection with the ordinary repair, replacement, operation
and maintenance of the Building or any structural components or systems
(provided that any capital expenditure shall be amortized over a period of
five (5) years) and utility lines serving the same (or one hundred percent
(100%) of such repair, replacement, operation, maintenance or utility line
cost if said costs benefit only the Leased Premises), except (w) any repair,
operation or maintenance cost for the Building which does not benefit the
Leased Premises in any manner directly or indirectly, (x) any interest and
amortization on mortgages encumbering the fee title at any time, (y) any
estate, inheritance, income or other personal taxes of Landlord, and (z) the
initial repair or replacement of the roof over the Leased Premises as may
occur in accordance with Section 6(b) below.
(iv) one hundred percent of all costs and expenses incurred by
the Landlord for repairs, operation, maintenance and other obligations which
Tenant is required to perform hereunder but which is performed by Landlord
in Landlord's discretion, after reasonable prior written notice except that
no notice is required in an emergency.
Notwithstanding any other provision of this Lease to the contrary,
Tenant shall also pay as Additional Rent forty percent (40%) of all costs
and expenses related to snow plowing, landscaping, and maintenance and
repair of the grounds of the Conveyed Premises: provided, however, that if
in the exercise of its reasonable judgment, Tenant determines by obtaining
binding written bids for work from reputable and bonded service companies
that landscaping or snow plowing can be conducted at a cost equal to eighty-
five percent (85%) or less of the cost being charged to Landlord for their
services, and Tenant provides said bids to Landlord, Landlord shall only
charge Tenant Additional Rent for such services based upon the lower cost
set forth in said bids. If any such bid is more than eighty-five percent
(85%) of the cost being charged to Landlord, Landlord shall have no
obligation to adjust Additional Rent for such services.
Although no Fixed Rent is due from October 1, 1995 through December
31, 1995, Additional Rent shall be due and payable during said period.
Fixed Rent and Additional Rent are together sometimes referred to
hereinafter as "Rent."
Landlord reserves the right to install meters to separately meter the
utility and energy charges for the Leased Premises for the purpose of
determining Tenant's proportionate share more accurately.
5. Insurance. Tenant shall procure, keep in force and pay for (i)
so-called "contents and improvements" property insurance insuring all of
Tenant's Property, as defined in Section 6(c) below, and (ii) comprehensive
public liability (including without limitation, contractual liability and
so-called fire legal liability) insurance insuring Landlord and Tenant
against all claims and demands for injury or death of persons or damage to
property which may be claimed to have occurred upon the Leased Premises, in
amounts which shall at all times be not less than $1,000,000 for injury or
death of one person in a single accident, $3,000,000 for injury or death of
more than one person in a single accident, and $1,000,000 for damages to
property in a single accident, or such higher amounts, if procurable, as may
be reasonably required by Landlord and customarily carried by responsible,
similarly situated tenants in the locality of the Leased Premises. Landlord
shall be named as an additional insured on all of Tenant's insurance
policies required herein.
Such insurance shall be effected with responsible insurers under valid
and enforceable policies which may not be canceled without at least ten (10)
days prior written notice to each insured named therein. At or prior to the
commencement of the term of this Lease, and thereafter not less than five
(5) days after the expiration date of each expiring policy, original copies
or certificates of the policies required hereunder, setting forth in full
the provisions thereof, together with satisfactory evidence of the payment
of all premiums then due therefor, shall be delivered by Tenant to Landlord
and shall, upon request of Landlord, also be delivered by Tenant to the
holder of any mortgage affecting the Leased Premises. Tenant shall not
acquire as insured under any insurance carried on the Leased Premises by
Landlord any right to participate in the adjustment of loss or to receive
insurance proceeds and agree upon request promptly to endorse and deliver to
Landlord any checks or other instruments in payment of loss in which Tenant
is name as payee.
With respect to property loss or damage only, each party hereby
releases the other from any and all liability to such party or anyone
claiming through such party by way of subrogation or otherwise for any loss
or damage to property, caused by fire or any other perils insured in
policies of insurance covering such property, even if such loss or damage
shall have been caused by the fault or negligence of the other party, or
anyone for whom such other party may be responsible, provided, however, that
this release shall be applicable and in force only with respect to loss or
damage occurring, during such times as the releasor's policies shall contain
a clause or endorsement to the effect that any such release shall not
adversely affect or impair said policies or prejudice the right of this
releasor to recover thereunder and then only to the extent of the insurance
proceeds payable under such policies. Tenant agrees that it will include
such a clause or endorsement in all insurance policies required to be
obtained by Tenant hereunder, and Landlord agrees that it will include such
a clause or endorsement in all insurance policies which it may carry which
cover the Building.
6. Maintenance of Leased Premises.
(a) Tenant shall, at its sole cost and expense, maintain, repair and
replace the Leased Premises (including without limitation, those portions of
the structural, mechanical, heating, plumbing, air conditioning and
electrical components and systems of the Building excluding the roof, which
serve only the Leased Premises), and utility lines serving only the Leased
Premises if not maintained by a utility company, in the same condition as
they are in at the commencement of the term of this Lease or as they may be
put in thereafter, damage by fire and other casualty only excepted. Tenant
also shall pay all costs associated with damage to any portion of the
Building or Building components and systems caused by Tenant's failure to
maintain and repair as required.
(b) Landlord shall only be obligated to maintain, repair and replace
those Building components and systems which serve both (i) a portion of the
Leased Premises and (ii) other portions of the Building which are not part
of the Leased Premises, all of which costs (other than replacement costs)
shall be included as an expense to be included in Section 4(b)(ii) upon
which Additional Rent will be calculated hereunder, and all of which
replacement costs will only be so included in section 4(b)(ii) if the
replaced Building component, system or portion thereof is located within or
benefits the Leased Premises; provided, however, that Landlord shall not be
obligated to conduct any maintenance, repair or replacement relating to any
eminent domain taking or any casualty (each of which shall be governed by
Section 13 hereof) or any roof (except as set forth below in this Section
6(b)(1) below) or other structural maintenance, repair or replacement.
Notwithstanding the foregoing and any other provision of this Lease to the
contrary, (1) Landlord shall have no obligation to maintain, repair or
replace the roof and other portions of the Building structure, except that
Landlord agrees that it shall either repair the current roof over the Leased
Premises portion of the Building so as to render the same watertight or
install a new roof thereon, which repair or installation shall be commenced
by the Commencement Date and may be suspended or terminated by Landlord if
Tenant defaults under this Lease; and (2) if Landlord has repaired the
current roof or installed a new roof pursuant to Subsection 6(b)(1) above,
then such initial repair or installation shall not be included in
determining Additional Rent as aforesaid, and thereafter Landlord shall be
obligated to repair and maintain the same during the term hereof, and such
on-going repair and maintenance obligation shall be included in determining
Additional Rent as aforesaid. Landlord agrees that during the roof repair
contemplated hereunder Landlord shall not unreasonably interfere with
Tenant's operations, and Tenant agrees to cooperated with Landlord to the
extent reasonably necessary in order to effectuate said roof repair.
(c) All merchandise, furniture, fixtures, effects and property of
every kind, nature and description owned by or leased by Tenant and located
on the Leased Premises (the "Tenant's Property") shall be at the sole risk
and hazard of Tenant, and if the whole or any part thereof shall be
destroyed or damaged by fire, water or otherwise, or by the leakage or
bursting of water pipes, steam pipes or other pipes, by theft or from any
other cause, no part of any resulting loss is to be charged to or be borne
by Landlord.
7. Assignment, Subletting, Etc. Tenant shall not assign or sublet
this Lease or the Leased Premises or permit any other party to use the
Leased Premises in whole or in part without first obtaining on each occasion
the consent in writing of Landlord, which consent may be denied at the sole
discretion of Landlord. No such assignment, subletting or use shall in any
way impair the continuing primary liability of Tenant hereunder, and no
consent to any assigning, subletting or use in a particular instance shall
be deemed to be a waiver of the obligation to obtain the Landlord's approval
in the case of any other assignment, subletting or use.
8. Compliance with Law. Tenant shall, at its sole cost and expense,
conform to and comply with all federal, sate and municipal laws, including
without limitation, all laws relating to health, safety, disposal of
hazardous wastes and regulations promulgated thereunder, and all
requirements of any public body or officers having jurisdiction of the
Leased Premises and all requirements or regulations of any Board of Fire
Underwriters or insurance company insuring the Leased Premises at the time
with respect to the care, maintenance, use and alteration of the Leased
Premises. To the extent that any failure to comply with such laws,
requirements and regulations relates to the Building as a whole rather than
to the Leased Premises alone or to the operations of the Tenant alone, then
if Landlord incurs costs, in its sole discretion, in order to so comply,
such costs shall be included as an expense in Section 4(b)(ii) in
determining the amount upon which Additional Rent will be calculated
hereunder. Upon any violation of such laws or regulations, Landlord shall
have the right to immediately terminate this Lease.
9. Alterations and Additions. Tenant shall not make any structural
alterations or additions to the Leased Premises unless Landlord consents
thereto in writing, and all such allowed alterations or additions shall be
at Tenant's expense and shall be of good and workmanlike quality. Tenant
shall at no time permit any mechanics' liens, or similar liens, to remain
upon the Leased Premises for labor and material furnished to Tenant or
claimed to have been furnished to Tenant in connection with work of any
character performed or claimed to have been performed at the direction of
Tenant and shall cause any such lien to be released of record forthwith
without cost to Landlord. Any alterations or additions made by Tenant at
its expense and directly related in the nature of a trade fixture to
functions carried on in the Leased Premises by Tenant may be removed by
Tenant thereafter, so long as Tenant restores the Leased Premises to their
condition prior to making such alterations or additions and provided that
Tenant is not then in default under this Lease, and all other equipment,
fixtures and alterations and additions made by Tenant shall be removed if so
requested by Landlord within a reasonable time on or after the expiration or
other termination of this Lease.
10. Use of Leased Premises. Subject to the provisions of this Lease,
Tenant may use the office portion of the Leased Premises only for general
office use and may use the warehouse portion of the Lease Premises only for
light manufacturing and general warehouse purposes to store the products of
Tenant or any affiliated companies of Tenant. The Leased Premises may not
be used to store hazardous substances of any kind, except that the warehouse
portion of the Leased Premises may be used to store cutting oil, waste oil,
paint and paint thinner, all of which shall be used, stored and disposed of
in accordance with all federal, state and local laws and regulations. Other
than as set forth in the preceding sentence, Tenant shall not cause or
permit any hazardous substances to be brought upon, kept or used in or about
the Leased Premises by Tenant, its agents, employees, contractors, invitees
or affiliates.
If Tenant breaches the obligations stated in the preceding paragraph,
or if the presence of hazardous substances on the Leased Premises caused or
permitted by Tenant or Tenant's agents, employees, contractors, invitees or
affiliates since September 30, 1986 results in, or has resulted in,
contamination of the Leased Premises, or contamination of any of the
Conveyed Premises or any other property owned by Landlord or any affiliate
of Landlord (together with the Conveyed Premises, the "Other Property"), or
if contamination of the Leased Premises or Other Property by hazardous
substances otherwise occurs, or has occurred since September 30, 1986, for
which Tenant or Tenant's agents, employees, contractors, invitees or
affiliates is legally liable to Landlord for damage resulting therefrom,
then Tenant shall indemnify, defend and hold Landlord harmless from any and
all claims, judgments, damages, penalties, fines, costs, liabilities or
losses (including, without limitation, diminution in value of the Leased
Premises or Other Property, damages for the loss or restriction on use of
rentable or usable space or of any amenity of the Leased Premises or Other
Property, damages arising from any adverse impact on marketing of space, and
sums paid in settlement of claims, attorneys' fees, consultant fees and
expert fees) which arise or arose (i) after September 30, 1986, (ii) during
the term of this Lease or after the term of the Lease as a result of
contamination which occurs or occurred after September 30, 1986 or during
the term of this Lease and which was cause or permitted by Tenant or
Tenant's agents, employees, contractors, invitees or affiliates. This
indemnification of Landlord by Tenant includes, without limitation, costs
incurred in connection with any investigation of site conditions or any
clean-up, remedial, removal or restoration work required by any federal,
state or local governmental agency or political subdivision because of
hazardous substances present in the soil or groundwater on or under the
Leased Premises or the Other Property, but excludes all costs relating to
hazardous substances which were present prior to September 30, 1986.
Without limiting the foregoing, if the presence of any hazardous substances
on the Leased Premises caused or permitted by Tenant or Tenant's agents,
employees, contractors, invitees or affiliates results in any contamination
of the Leased Premises or Other Property or resulted in any contamination of
the Leased Premises or Other Property after September 30, 1986, Tenant shall
promptly take all actions at its sole expense as are necessary to return the
Leased Premises to the condition existing prior to the introduction of any
such hazardous substances to the Leased Premises; provided that Landlord's
approval of such actions shall first be obtained. The foregoing indemnity
shall survive the expiration or earlier termination of this Lease. This
indemnification shall exclude any asbestos located at the Leased Premises
prior to September 30, 1986, but shall not exclude any matters which relate
to, are caused by, or derive from the disturbance, during the term of this
Lease, of such (pre-September 30, 1986) asbestos by the Tenant or Tenant's
agents, employees, contractors, invitees or affiliates.
The term "hazardous substances" as used in this section means (i) any
"hazardous substance" or "hazardous waste" under any federal, state or local
statute, regulation or ordinance including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act (42
U.S.C. 9601, et seq.) and/or the Resource Conservation and Recovery Act (42
U.S.C. 6901, et seq.); (ii) any material which is toxic, explosive,
corrosive, flammable, radioactive, carcinogenic, mutagenic or otherwise
hazardous and is regulated by any government authority, agent, department,
commission, board, agency or instrumentality of the United States,
Commonwealth of Massachusetts or any political subdivision thereof or
municipality; (iii) any gasoline, diesel fuel or other petroleum
hydrocarbons; or (iv) any polychlorinated biphenyls or asbestos.
Each of Landlord and Tenant hereby represents that it has no actual
knowledge of any contamination of the Leased Premises or the Other Property
with hazardous substances, which was caused or permitted by Tenant or
Tenant's agents, employees, contractors, invitees or affiliates, and which
occurred after September 30, 1986.
In no event shall any use be made of the Leased Premises which will be
unlawful, improper, noisy or offensive, or contrary to any law (as set forth
in Section 8) or which will make voidable any insurance on the Leased
Premises or which will cause an increase in insurance premiums unless such
increase is paid in full (not pro rata) by Tenant. Tenant shall comply with
all reasonable rules and regulations imposed by Landlord or its managing
agents or designees for use and occupancy of the Leased Premises, provided
that Tenant shall have been given notice thereof.
11. Indemnification and Liability. Tenant will defend, indemnify and
hold Landlord harmless against all liabilities, claims, costs, damages and
other expenses, including without limitation reasonable attorneys' fees,
which may be imposed upon, incurred by or asserted against Landlord by
reason of Landlord's enforcing its rights and protecting its interests under
this Agreement and by reason of any of the following occurring during the
term of this Lease:
(a) any negligence on the part of Tenant or its agents,
contractors, licensees or invitees:
(b) any failure on the part of Tenant to perform or comply with
any covenant required to be performed or complied with by Tenant under this
Lease:
(c) any injury to person (including without limitation employees
and guests of Tenant) or loss of or damage to property sustained or
occurring on the Leased Premises on account of or based upon the act,
omission, fault, negligence or misconduct of any person whomsoever other
than Landlord and those persons for whose conduct Landlord is legally
responsible; or
(d) any injury to person or loss of or damage to property
sustained or occurring in connection with Landlord's removal of Tenant's
Property or the property of others upon tenant's failure to vacate the
Leased Premises whether or not such injury, loss or damage occurs on the
Conveyed Property.
12. Surrender. Tenant shall at the expiration or other termination
of this Lease remove all Tenant's Property from the Leased Premises and
deliver the Leased Premises to Landlord in broom clean condition, free of
all Tenant's Property and in the same condition as they are in at the
commencement of the term of this Lease or as they may be put in thereafter,
reasonable wear and tear and damage by fire or other casualty only excepted.
If, on the date on which this Lease expires or otherwise terminates, Tenant
shall fail to vacate the Leased Premises and to remove from the Leased
Premises all of Tenant's Property and to deliver the Leased Premises in said
condition and free of all of Tenant's Property, Tenant shall pay to Landlord
an additional fee at an annual rate of $4.00 per square foot of space not so
vacated for each day during the first month of such failure and an
additional fee at an annual rate of $12.00 per square foot per day
thereafter for each day Tenant fails to so vacate and/or remove.
13. Eminent Domain or Casualty.
(a) In the event that the Leased Premises or over 20,000 square
feet thereof shall be taken by any public authority or for any public use,
or shall be destroyed or damaged by fire or casualty or any other cause, or
by the action of any public authority, and Landlord elects, in its sole
discretion, not to repair or otherwise restore the Leased Premises, then
this Lease may be terminated at the election of Landlord notwithstanding any
other provisions of this Lease. Such election shall be made by the giving
of written notice by Landlord to Tenant with six (6) months after such
taking, damage or destruction. If any portion of the Leased Premises is
taken, destroyed or damaged, and Landlord does not elect, in its sole
discretion to repair or otherwise restore the Leased Premises, and does not
elect to terminate this Lease as provided above, Tenant shall have the right
to vacate such taken, destroyed or damaged space and remove all of Tenant's
Property therefrom, and when such vacating and removal is complete, the Rent
payable by Tenant hereunder shall be abated with respect to those portions
of the Leased Premises. If greater than 20,000 square feet of the Leased
Premises is taken, destroyed or damaged, and Landlord does not elect, in its
sole discretion, to repair or otherwise restore the Leased Premises and has
not elected to terminate this Lease within said six-month period, then
Tenant shall have the right to terminate this Lease upon six months' notice,
during which six-month period Tenant shall have the right to vacate such
space and remove all of Tenant's Property from such portions of the Leased
Premises so taken, damaged or destroyed, and when such vacating and removal
is completed, the Rent payable by Tenant hereunder shall be abated with
respect to those portions of the Leased Premises. Notwithstanding any
provisions of this Lease to the contrary, in no event shall Landlord be
obligated upon an eminent domain taking or casualty to repair or rebuild the
Leased Premises, the roof, any systems, components or structural elements of
the Building or any other portion of the Leased Premises or the Building or
the utility lines serving the same.
(b) Irrespective of the form in which recovery may be had by
law, all rights to damages or compensation shall belong to Landlord in all
cases. Tenant hereby grants to Landlord all Tenant's rights to such damages
and compensation, and covenants to deliver such further assignments thereof
as Landlord may from time to time repair.
14. (Intentionally omitted).
15. Default. If (a) Tenant shall default in the performance of any
of its obligations set forth in this Lease relating to the payment of money
and if such default shall continue for ten(10) days after written notice
from Landlord to Tenant designating such default; or (b) for a period of
thirty (30) days after written notice from Landlord to Tenant specifying any
other default or defaults, Tenant has not commenced diligently to correct
the default or defaults so specified or has not thereafter diligently
pursued such correction to completion; or (c) any assignment shall be made
by Tenant or any guarantor of Tenant's obligations hereunder for the benefit
of creditors; or (d) Tenant's leasehold interest shall be taken on
execution; or (e) a petition is filed by Tenant for adjudication as a
bankrupt, or for reorganization or an arrangement under any provision of any
bankruptcy or insolvency law as then in force and effect; or (f) any
involuntary petition under any of the provisions of any such bankruptcy or
insolvency law is filed against Tenant and such involuntary petition is not
dismissed within thirty (30) days thereafter; then, and in any of such
cases, Landlord may lawfully, immediately or at any time thereafter, and
without further notice or demand, and without prejudice to any and all other
remedies provided or recognized by applicable law, including without
limitation, remedies which might otherwise be used for arrears of rent or
other default, declare the term of this Lease ended and undertake
appropriate proceedings to take complete possession of the Leased Premises
and to remove all goods and effects of Tenant therefrom at Tenant's expense
and without liability for loss or damage to Tenant's property. Tenant
shall, in case of any such termination forthwith pay to Landlord as damages
a sum equal to the amount by which the rent and other payment called for
hereunder for the remainder of the term of this Lease exceed the fair rental
value of the Leased Premises for said period, and in addition thereto will
furthermore promptly indemnify Landlord during said period against all loss
of such rent and other payments which Landlord may incur by reason of such
termination, however caused, first deducting any damages paid as above
provided. If Tenant shall default, after notice thereof, in the observance
or performance of any conditions or covenants on Tenant's part to be
observed or performed under or by virtue of any of the provisions in any
part of this Lease, Landlord, without being under any obligation to do so
and without thereby waiving such default, may remedy such default for the
account and at the expense of Tenant. If Landlord makes any expenditures or
incurs any obligations for the payment of money in connection with any such
default, including but not limited to reasonable attorneys' fees in
instituting, prosecuting or defending any action or proceeding, such sums
paid or obligations incurred shall be paid to Landlord by Tenant as
Additional Rent (notwithstanding that the terms of this Lease may have
ended). In the event that any payment of rent or any other sum due
hereunder is not made within five (5) days of the date due, Tenant shall pay
a later charge equal to two percent (2%) of the amount of such payment with
respect to each month (or portion thereof) during which such payment remains
outstanding.
16. Building Alteration. It is understood by both parties that
Landlord may be performing work on the Building, including without
limitation, the roof of the Building during the Term of this Lease.
Landlord may make any and all alterations and additions to the Building as
it deems necessary or desirable. However, during such work Landlord shall
not unreasonably, materially interfere with the business of tenant.
17. Miscellaneous.
(a) Any consent or permission by Landlord to any act or
omission which otherwise would be a breach of any covenant or condition
herein, shall not in any way be held or construed (unless expressly so
declared) to operate so as to impair the continuing obligation of any
covenant or condition herein, or otherwise, except as to the specific
instance, operate to permit similar acts or omissions. Any acceptance of
rent by Landlord hereunder shall not in any way be held or construed (unless
expressly so declared) to operate so as to impair the ability of the
Landlord to evict the Tenant or to exercise any other rights it may have
under this Lease or the law.
(b) Tenant shall at the request of Landlord, and within fifteen
(15) days of any and all such requests from time to time, (i) execute and
deliver to Landlord a subordination of this Lease to any mortgage placed
upon the Leased Premises by Landlord, and Tenant agrees to recognize any
holder of such a mortgage or any other person acquiring title to the Leased
Premises as Landlord, and (ii) execute and deliver to Landlord a certificate
which acknowledges tenancy and possession of the Leased Premises and recites
any other facts relating to this Lease and the payments made hereunder which
a mortgagee, lender, purchaser or prospective purchaser may require, which
certificate shall be addressed to such party if so requested. Tenant agrees
to execute and deliver any appropriate instruments necessary to carry out
the terms in this Section contained. Any such mortgage to which this Lease
shall be subordinated may contain such terms,. provisions and conditions as
the mortgagee deems usual or customary.
(c) The agreements and conditions in this Lease contained to be
performed and observed by Tenant shall be binding upon tenant and its
successors and assigns and shall enure to the benefit of Landlord and its
successors and assigns, and the agreements and conditions in this Lease
contained on the part of Landlord to be performed and observed by Landlord,
shall be binding upon Landlord and its successors and assigns and shall
enure to the benefit of Tenant and its successors and assigns (subject to
the provisions of Section 7). Tenant agrees that the Landlord named herein
and any subsequent landlord shall be liable hereunder only for obligations
occurring while owner of the Leased Premises. No holder of a mortgage of
the Landlord's interest shall be deemed to be the owner of the Leased
Premises until such holder shall have acquired indefeasible title to the
Leased Premises.
(d) Tenant shall no longer arrange for security for the whole
Building, and shall, in Tenant's discretion, arrange for security for the
Leased Premises with no obligation on the part of Landlord to contribute any
portion of the costs thereof and Tenant shall not make any deductions from
Rent therefor.
(e) All notices to Landlord shall be addressed to Landlord at 7
Water Street, Boston, Massachusetts 02109, Attention: Mr. Francis Crocetti,
Senior Vice President, with a copy to Anne L. Gero, Esq., Senior Legal
Counsel, FMR Corp., 82 Devonshire Street, Boston, MA 02109 and with a copy
to Michael F. Burke, Esq., Peabody & Arnold, 50 Rowes Wharf, Boston,
Massachusetts 02110, or to such other place as may be designated by written
notice to Tenant; and all notices to Tenant shall be addressed to Tenant at
the Leased Premises, Attention: Mr. Charles Housman, with a copy to Elliot
Englander, Esq., Englander, Finks, Ross & Cohen, 55 summer Street, Boston,
Massachusetts 02110, or to such other place as may be designated by written
notice to Landlord. All notices shall be sent to the respective party by
registered or certified mail, postage prepaid. Unless otherwise directed in
writing, all rents and other payments shall be payable to Landlord at the
Landlord's address as above stated.
EXECUTED as a sealed instrument on the day and year first above
written.
LANDLORD:
Fidelity Properties, Inc.
TENANT:
Armatron International, Inc.
By: /s/ Charles J. Housman, Pres.
By: /s/ Charles J. Housman, Treas.
1995
Annual Report
ARMATRON INTERNATIONAL INC.
ARMATRON INTERNATIONAL, INC. AND SUBSIDIARY
- -------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Years Ended September 30,
1995 1994 1993
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------
Net Sales $ 12,017,000 $ 13,286,000 $ 16,174,000
- ---------------------------------------------------------------------------------------
Operating Loss $ (1,159,000) $ (934,000) $ (1,106,000)
- ---------------------------------------------------------------------------------------
Net Loss $ (1,557,000) $ (1,212,000) $ (1,548,000)
- ---------------------------------------------------------------------------------------
Stockholders' Equity $ 724,000 $ 2,281,000 $ 3,493,000
- ---------------------------------------------------------------------------------------
Stockholders' Equity Per Common Share $ .29 $ .93 $ 1.42
- ---------------------------------------------------------------------------------------
Weighted Average Number of Common
Shares Outstanding 2,459,749 2,459,754 2,459,754
- ---------------------------------------------------------------------------------------
Loss Per Share of Common Stock:
Net Loss $ (.63) $ (.49) $ (.63)
============================================
- ---------------------------------------------------------------------------------------
</TABLE>
TO OUR STOCKHOLDERS
Sales in the lawn and garden market decreased during the 1995 fiscal
year. Sales were down 9.6%, $12,017,000 compared to $13,286,000 in the
1994 fiscal year, and the consolidated loss increased to $1,557,000
compared to $1,212,000 for the prior fiscal year.
A significant contributing cause of lower sales was precipitated by
tooling delays for the lawn and garden storage shed resulting in an
inability to capture the major portion of the selling season. Our first
shipment occurred in August and the acceptance in the market place has
been strong. We anticipate the new shed will make a major contribution to
the 1996 fiscal year. We will introduce additional lawn and garden
products during this year which augurs well for the current period.
Production of the ECHOVISION automotive obstacle detection system will
commence in January of 1996. The expanded and continued testing by various
customers has resulted in the acceptance of the program by a major
national company which will be integrated into a significant portion of
their fleet of trucks. The product is in various stages of testing with
other major fleet users and based on the results, as reported by
customers, it appears that this product has a significant future. We are
confident as we enter into the production and sales stage and wind down
the development except for an on-going continuing program for improvements
and for special use customers. Certain proprietary rights integrated into
this product line could enable Armatron to capture a major share of the
market for this new technology.
Experiencing another loss year has caused our Company to fall below
certain eligibility requirements for listing on the American Stock
Exchange; therefore, we will not renew our membership. We expect the stock
will continue to be publicly traded.
Your Management is disappointed with the results of the year but is
encouraged and confident in the potential growth for the future of our
Company.
/s/ CHARLES J. HOUSMAN
Charles J. Housman
President & Chairman of the Board
ARMATRON INTERNATIONAL, INC. AND SUBSIDIARY
- --------------------------------------------
ASSETS (Note 6)
<TABLE>
<CAPTION>
September 30,
1995 1994
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents (Note 1) $ 1,322,000 $ 3,006,000
Trade accounts receivable (less allowance for doubtful
accounts of $179,000 in 1995 and $100,000 in 1994) 2,189,000 2,414,000
Current portion of other receivable 32,000 14,000
Inventories (Note 2) 2,225,000 2,937,000
Deferred tax asset (Note 8) 165,000 165,000
Prepaid and other current assets 122,000 266,000
--------------------------
Total Current Assets 6,055,000 8,802,000
PROPERTY AND EQUIPMENT, net (Note 3) 952,000 599,000
OTHER ASSETS (Note 4) 249,000 198,000
--------------------------
$ 7,256,000 $ 9,599,000
==========================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
September 30,
1995 1994
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of long-term debt $ -- $ 1,000
Accounts payable 1,112,000 1,387,000
Accrued liabilities (Note 5) 705,000 790,000
--------------------------
Total Current Liabilities 1,817,000 2,178,000
--------------------------
LONG-TERM DEBT including $4,715,000 due to related
parties in 1995 and $5,140,000 in 1994 (Note 6) 4,715,000 5,140,000
--------------------------
COMMITMENTS AND CONTINGENCIES (Note 10)
STOCKHOLDERS' EQUITY (Note 7):
Common stock, par value $1 per share; authorized
6,000,000 shares; issued 2,606,481 shares in
1995 and 1994 2,606,000 2,606,000
Additional paid-in capital 6,770,000 6,770,000
Accumulated deficit (8,266,000) (6,709,000)
--------------------------
1,110,000 2,667,000
Less:
Treasury stock at cost--146,732 shares in 1995
and 146,727 in 1994 386,000 386,000
--------------------------
Total Stockholders' Equity 724,000 2,281,000
--------------------------
$ 7,256,000 $ 9,599,000
==========================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
ARMATRON INTERNATIONAL, INC. AND SUBSIDIARY
- --------------------------------------------
STATEMENTS OF CONSOLIDATED OPERATIONS
For the Years Ended September 30, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Net Sales $ 12,017,000 $ 13,286,000 $ 16,174,000
Cost of products sold 10,570,000 11,253,000 13,428,000
-----------------------------------------------
Gross margin 1,447,000 2,033,000 2,746,000
Selling, general and administrative expenses 2,541,000 3,113,000 3,836,000
Provision for (recovery of) bad debts 65,000 (146,000) 16,000
-----------------------------------------------
Operating Loss (1,159,000) (934,000) (1,106,000)
-----------------------------------------------
Other Income (Expense):
Interest expense--third parties (41,000) (6,000) (7,000)
Interest expense--related party (488,000) (494,000) (548,000)
Other income--net 131,000 57,000 113,000
-----------------------------------------------
Other income (expense)--net (398,000) (443,000) (442,000)
-----------------------------------------------
Loss before income taxes (1,557,000) (1,377,000) (1,548,000)
Income tax benefit (Note 8) -- (165,000) --
Net Loss $ (1,557,000) $ (1,212,000) $ (1,548,000)
===============================================
Net Loss per Share of Common Stock $ (.63) $ (.49) $ (.63)
===============================================
Weighted Average Number of Common Shares
Outstanding 2,459,749 2,459,754 2,459,754
===============================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
STATEMENT OF CONSOLIDATED CASH FLOWS
For the Years Ended September 30, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,557,000) $ (1,212,000) $ (1,548,000)
Adjustments to reconcile net loss to net cash
flows from operating activities:
Depreciation and amortization 453,000 616,000 744,000
Deferred tax benefit -- (165,000) --
Provision (recovery) for bad debts 65,000 (146,000) 16,000
Loss on disposal of equipment -- 35,000 --
(Increase) decrease in:
Accounts receivable 160,000 (42,000) 540,000
Inventories 712,000 315,000 2,255,000
Prepaid and other current assets 144,000 (124,000) 32,000
Other assets (32,000) (105,000) --
Increase (decrease) in:
Accounts payable (275,000) 576,000 (124,000)
Other current liabilities (85,000) (37,000) (287,000)
--------------------------------------------
Net Cash Flow from (used for) Operating Activities (415,000) (289,000) 1,628,000
--------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payment for purchases of equipment and patents (780,000) (146,000) (348,000)
--------------------------------------------
Net Cash Flow used for Investing Activities (780,000) (146,000) (348,000)
--------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on long-term debt--related party -- -- 250,000
Payments on long-term debt--third parties (1,000) (16,000) (13,000)
Payments on long-term debt--related party (425,000) (110,000) (1,000,000)
Loan origination costs (63,000) -- --
--------------------------------------------
Net Cash Flow used for Financing Activities (489,000) (126,000) (763,000)
--------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,684,000) (561,000) 517,000
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 3,006,000 3,567,000 3,050,000
--------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 1,322,000 $ 3,006,000 $ 3,567,000
============================================
SUPPLEMENTAL INFORMATION:
Interest paid--third parties $ 41,000 $ 6,000 $ 8,000
Interest paid--related party $ 528,000 $ 454,000 $ 548,000
Income taxes paid $ -- $ -- $ --
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
ARMATRON INTERNATIONAL, INC. AND SUBSIDIARY
- --------------------------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
For the Years Ended September 30, 1995, 1994 and 1993
<TABLE>
<CAPTION>
Common Treasury
Stock Stock Total
--------------------- Paid-In Accumulated --------------------- Stockholders'
Shares Amount Capital Deficit Shares Amount Equity
------ ------ ------- ----------- ------ ------ -------------
<C> <C> <C> <C> <C> <C> <C> <C>
Balance,
September 30, 1992 2,606,481 $2,606,000 $6,770,000 $(3,949,000) (146,727) $(386,000) $ 5,041,000
Net loss -- -- -- (1,548,000) -- -- (1,548,000)
- ------------------------------------------------------------------------------------------------------------------------
Balance,
September 30, 1993 2,606,481 2,606,000 6,770,000 (5,497,000) (146,727) (386,000) 3,493,000
Net loss -- -- -- (1,212,000) -- -- (1,212,000)
- ------------------------------------------------------------------------------------------------------------------------
Balance,
September 30, 1994 2,606,481 2,606,000 6,770,000 (6,709,000) (146,727) (386,000) 2,281,000
Increase in treasury stock -- -- -- -- (5) -- --
Net loss -- -- -- (1,557,000) -- -- (1,557,000)
- ------------------------------------------------------------------------------------------------------------------------
Balance,
September 30, 1995 2,606,481 $2,606,000 $6,770,000 $(8,266,000) (146,732) $(386,000) $ 724,000
========================================================================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of
Armatron International, Inc. and its wholly owned subsidiary. All
intercompany balances and transactions have been eliminated in
consolidation.
Revenue Recognition
Revenue from product sales is recognized at the time the products
are shipped. Following industry trade practice, the Company offers
extended payment terms for delivery of seasonal items.
Cash and Cash Equivalents
The Company considers all highly liquid instruments purchased with
an original maturity of less than three months to be cash
equivalents. The Company invests excess funds in short-term,
interest-bearing obligations, including reverse repurchase
agreements and commercial paper. On September 30, 1994, the Company
purchased $475,000 of U.S. Government securities under agreements to
resell on October 3, 1994. At September 30, 1994, the Company held
$2,500,000 in commercial paper which matured in October 1994. Due to
the short-term nature of these investments, the Company did not take
possession of the securities, which were instead held in the
Company's safekeeping account at a bank.
The Company has no requirements for compensating balances. The
Company maintains its cash in bank deposit accounts which, at times,
may exceed federally insured limits and in deposit accounts at its
commercial finance company. The Company has not experienced any
losses in such accounts. The Company believes it is not exposed to
any significant credit risk on cash and cash equivalents.
Inventories
Inventories are stated on a first-in, first-out (FIFO) basis at the
lower of cost or market.
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed
based upon the estimated useful lives of the various assets using
the straight-line method with annual rates of depreciation of 10 to
33-1/3%. Capitalized tooling costs are amortized over three years.
Depreciation expense was $426,000, $616,000 and $744,000 for fiscal
1995, 1994 and 1993, respectively. Tooling and molding costs are
charged to a deferred cost account as incurred, prepaid tooling,
until the tool or mold is completed. Upon completion the costs are
transferred to a property/equipment account.
Maintenance and repairs are charged to operations as incurred.
Renewals and betterments which materially extend the life of assets
are capitalized and depreciated. Upon disposal, the asset cost and
related accumulated depreciation are removed from their respective
accounts. Any resulting gain or loss is reflected in earnings.
Advertising
The Company expenses advertising as incurred. Advertising expense
was $295,000, $248,000 and $354,000 for fiscal 1995, 1994 and 1993,
respectively.
Income Taxes
Effective October 1, 1993 the Company adopted Financial Accounting
Standard No. 109 (SFAS No. 109) "Accounting for Income Tax". SFAS
No. 109 changes the Company's method of accounting for income taxes
from the income statement approach, recognized by Accounting
Principles Board No. 11 to an asset and liability approach. As
permitted by SFAS No. 9 the Company opted not to restate the
financial statements for prior periods.
Deferred income taxes are provided for temporary differences between
financial statement and income tax reporting principally from the
carryforward of unused net operating losses, tax credits, and
alternative minimum taxes.
Earnings (Loss) Per Share
Earnings (loss) per share of common stock is computed on the basis
of weighted average number of common shares outstanding in each
year.
Changes in Presentation
Certain reclassifications have been made to prior year amounts to
conform with the 1995 presentation with no effect on net income.
2. INVENTORIES
Inventories consist of the following at September 30:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Raw Materials $ 1,606,000 $ 1,959,000
Work in Process 84,000 160,000
Finished Goods 535,000 818,000
--------------------------
$ 2,225,000 $ 2,937,000
==========================
</TABLE>
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following at September 30:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Land and buildings $ 80,000 $ 80,000
Furniture and fixtures 391,000 391,000
Machinery and equipment 1,902,000 2,404,000
Capitalized tooling costs 3,773,000 5,852,000
--------------------------
6,146,000 8,727,000
Less accumulated depreciation and amortization 5,194,000 8,128,000
--------------------------
$ 952,000 $ 599,000
==========================
</TABLE>
The capitalized cost of equipment under capital leases was $125,000
at September 30, 1995 and 1994 with related accumulated amortization
of $125,000 and $122,000, respectively.
4. OTHER ASSETS
Other assets consists of the following at September 30:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Other receivable, net of current portion $ 104,000 $ 91,000
Note receivable--employee, due under terms of an
annual renewable note, interest payable monthly
at an annual rate of 6%, secured by a second
mortgage 100,000 100,000
Other 45,000 7,000
---------------------
$ 249,000 $ 198,000
=====================
</TABLE>
5. ACCRUED LIABILITIES
Accrued liabilities consist of the following as of September 30:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Salaries, commissions and benefits $ 321,000 $ 355,000
Professional fees 52,000 119,000
Warranty costs 64,000 40,000
Advertising costs 135,000 177,000
Other 133,000 99,000
----------------------
$ 705,000 $ 790,000
======================
</TABLE>
6. DEBT
Long-term debt consists of the following as of September 30:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Notes payable to related parties $ 4,715,000 $ 5,140,000
Equipment notes, at interest rates ranging
from 11-1/8% to 12-3/4% -- 1,000
--------------------------
4,715,000 5,141,000
Less amount due within one year -- 1,000
--------------------------
$ 4,715,000 $ 5,140,000
==========================
</TABLE>
The Company has a $7,000,000 line of credit with a realty trust
operated for the benefit of the Company's principal shareholders.
This line of credit, with interest payable at 10%, requires monthly
payments of interest only, is payable in full in October 1997 and is
collateralized by all assets of the Company. The Company had
$4,715,000 outstanding under this line of credit at September 30,
1995. The maximum borrowings against this line during fiscal 1995
were $5,140,000. Repayment of this line of credit is subordinate to
the repayment of any and all balances outstanding on the revolving
line of credit described below. Interest expense incurred in the
years ended September 30, 1995 and 1994 were $488,000 and $494,000,
respectively.
The Company has a revolving line of credit with a commercial finance
company which permits combined borrowings of up to $3,500,000 in
cash and letters of credit. This line of credit expires in December
1996 and is collateralized by all assets of the Company. The terms
of this agreement include a borrowing limit which fluctuates
depending on the levels of account receivable and inventory which
collateralize the borrowings. Interest on amounts outstanding is
payable on a monthly basis at an annual rate of 2-1/4% over the
prime rate which was 8-3/4% at September 30, 1995. As of September
30, 1995 the Company had outstanding letters of credit amounting to
approximately $146,000 under this agreement. The loan agreement
contains various covenants pertaining to the maintenance of working
capital, net worth and other conditions. The Company is required to
maintain continuing working capital of $4,800,000 and net worth of
$400,000. At September 30, 1995, working capital was $4,238,000,
which is in violation of the loan agreement. On January 5, 1996 the
Company received a waiver for the covenant violation. (See Note 13.)
The Company had a revolving line of credit with a bank which
permitted borrowings of up to $1,000,000 in cash and allowed the
Company to have a maximum of $1,500,000 of letters of credit
outstanding which expired January 1, 1995. Interest on amounts
outstanding was payable at a rate of 1% over the commercial base
rate. The commercial base rate was 7-3/4% at September 30, 1994. As
of September 30, 1994, the Company had outstanding letters of credit
amounting to approximately $304,000 under this credit agreement.
A summary of borrowings on commercial finance company and bank
revolving credit agreements and unused lines of credit for the years
ended September 30, 1995, 1994 and 1993 is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Average borrowings during year $ 394,129 $ -- $ --
Average interest rate during year 11.25% 7.5% 7.0%
Maximum borrowings during year $1,330,000 $ -- $ --
Unused line of credit at September 30 $3,354,000 $2,196,000 $2,236,000
</TABLE>
7. STOCK OPTIONS
The Company's incentive stock option plan terminated December 1,
1990. Options were granted to officers and key employees to purchase
common shares at prices not less than the fair market value on the
date of grant. Options are exercisable in varying installments and
expire in varying periods which may not exceed ten years from the
date of the grant.
Information concerning stock options for the years ended September
30, 1995, 1994 and 1993 is summarized below:
<TABLE>
<CAPTION>
Options Outstanding
Shares Price Range
<C> <C> <C>
September 30, 1993 25,500 $1.75--$2.50
Granted -- --
Exercised -- --
Canceled 5,500 $2.50
--------------------------
September 30, 1994 20,000 $1.75--$2.50
Granted -- --
Exercised -- --
Canceled -- --
--------------------------
September 30, 1995 20,000 $1.75--$2.50
==========================
</TABLE>
At September 30, 1995 and 1994, options for 20,000 shares were
exercisable. The expiration dates of the options range from 1995 to
1999. The average exercise price of outstanding options is $2.27.
8. INCOME TAXES
As discussed in the summary of significant accounting policies the
Company adopted Statement of Financial Accounting Standards No. 109
as of October 1, 1993. The adoption of this change did not have a
cumulative effect on the financial position or the net results of
operations.
The provision for income taxes for continuing operations consists of
the following:
<TABLE>
<CAPTION>
(000's)
Year Ended September 30,
1995 1994 1993
<S> <C> <C> <C>
CURRENT TAX PROVISION
Federal $ -- $ -- $ --
State -- -- --
--------------------------
TOTAL CURRENT PROVISION -- -- --
--------------------------
DEFERRED TAX BENEFIT
Federal -- (127) --
State -- (38) --
--------------------------
TOTAL DEFERRED BENEFIT $ -- $ (165) $ --
--------------------------
INCOME TAXES BENEFIT $ -- $ (165) $ --
==========================
</TABLE>
The following significant components of deferred tax assets and
liabilities are included on the balance sheet at September 30, 1995:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Doubtful Receivables $ 80,000 $ 45,000
Inventory Obsolescence and Shrinkage 177,000 312,000
Sales Allowances 26,000 99,000
Warranties 28,000 18,000
Non-qualified Executive Retirement Plan 130,000 135,000
Tax Loss Carryforwards 6,381,000 5,600,000
Tax Credit Carryforwards 459,000 439,000
Less Valuation Allowance (7,116,000) (6,483,000)
--------------------------
NET DEFERRED TAX ASSETS $ 165,000 $ 165,000
==========================
</TABLE>
For income tax purposes the Company has unused Federal operating
loss carryforwards of $15,997,000 expiring through 2009 and State
operating loss carryforwards of $13,304,000 expiring through 2000.
In addition to the loss carryforwards the Company has research and
development and investment tax credit carryovers of $124,000 and
$335,000 respectively through 2001 which are available to reduce
future tax liabilities.
9. BENEFIT PLANS
The Company has a 401(k) Savings Plan whereby employees may
voluntarily defer a portion of their compensation and the Company
matches a portion of the employee deferral. All employees with at
least one year of continuous service are eligible for the plan.
Company contributions vest 100% after five years. For fiscal 1995,
1994 and 1993, the Company's contributions amounted to $0, $22,000
and $63,000, respectively.
The Company also has a retirement plan for certain senior
executives. The benefits payable under this retirement plan are
based upon a formula which allows for the offset of benefits under
other offered retirement plans and Social Security benefits. At
September 30, 1995, the unfunded benefit obligation of this
retirement plan was approximately $291,000. The Company has made no
contributions to this retirement plan in each of the three years
ended September 30, 1995.
10. COMMITMENTS AND CONTINGENCIES
The Company was obligated at September 30, 1995 under certain
operating leases for various types of equipment and the Company's
operating facility. The lease for the operating facility expires in
September 2000. Rental expense for fiscal 1995, 1994 and 1993 was
$450,000, $625,000, and $569,000, respectively. The future minimum
lease commitments total $1,547,000 as follows: $261,000 in fiscal
1996, $332,000 in 1997, $324,000 in 1998, $315,000 in 1999, and
$315,000 in 2000.
In January 1991, the California Department of Health Services (DHS)
issued a Corrective Action Order (CAO) against the Company and a
former subsidiary. The CAO requires the Company and a former
subsidiary to comply with a Cleanup and Abatement Order which had
been issued in 1990 against the Company for soil contamination at
the site of the former subsidiary. To date, no determination has
been made with regard to the extent of any environmental damage and
who may be liable. The Company does not believe, based on the
information available at this time, that the outcome of this matter
will have a material adverse effect on its financial position or
results of operations.
11. BUSINESS SEGMENT INFORMATION
The Company operates principally in two segments, the Consumer
Products segment and the Industrial Products segment. Operations in
the Consumer Products segment involve the manufacture and
distribution of Flowtron leaf-eaters, bugkillers, yard carts and
storage sheds. The Company distributes its consumer products
primarily to major retailers throughout the United States, with some
products distributed under customer labels. Substantially all of
this segment's sales and accounts receivable related to business
activities with such retailers. The Industrial Products segment has
developed an electronic obstacle avoidance system for automotive
applications. This product completed field testing in fiscal 1994
and is ready for distribution. There are no intercompany sales
between segments. Operating profit is total revenue less operating
expenses excluding interest expense, general corporate expenses and
income taxes. Identifiable assets by industry segment are those
assets that are identified in the operation of each of the Company's
segments. Corporate assets are principally cash and other assets.
The Company export sales are not significant. Net sales to a single
customer accounted for $2,441,000, or 20%, of net sales in fiscal
1995, $4,125,000, or 31%, of net sales in fiscal 1994, and
$4,652,000, or 29% of net sales in fiscal 1993.
<TABLE>
<CAPTION>
For the Years Ended September 30,
1995 1994 1993
<S> <C> <C> <C>
Net sales to unaffiliated customers:
Consumer Products $ 11,920,000 $ 13,223,000 $ 16,125,000
Industrial Products 97,000 63,000 49,000
--------------------------------------------
Total net sales $ 12,017,000 $ 13,286,000 $ 16,174,000
============================================
Operating profit (loss)
Consumer Products $ (25,000) $ 542,000 $ 753,000
Industrial Products (410,000) (341,000) (411,000)
--------------------------------------------
(435,000) 201,000 342,000
General corporate expenses (724,000) (1,135,000) (1,448,000)
--------------------------------------------
Consolidated operating loss (1,159,000) (934,000) (1,106,000)
Interest expense (529,000) (500,000) (555,000)
Other income--net 131,000 57,000 113,000
--------------------------------------------
Loss before income taxes $ (1,557,000) $ (1,377,000) $ (1,548,000)
============================================
Identifiable assets:
Consumer Products $ 5,766,000 $ 6,412,000 $ 7,129,000
Industrial Products 61,000 74,000 163,000
Corporate 1,429,000 3,113,000 3,106,000
--------------------------------------------
Total assets $ 7,256,000 $ 9,599,000 $ 10,398,000
============================================
Depreciation:
Consumer Products $ 422,000 $ 610,000 $ 737,000
Industrial Products 4,000 6,000 7,000
Corporate -- -- --
--------------------------------------------
Total depreciation and amortization $ 426,000 $ 616,000 $ 744,000
============================================
Capital expenditures:
Consumer Products $ 780,000 $ 146,000 $ 348,000
Industrial Products -- -- --
--------------------------------------------
Total capital expenditures $ 780,000 $ 146,000 $ 348,000
============================================
</TABLE>
12. INTERIM FINANCIAL REPORTING
The aggregate impact on the "Net Income" resulting from fourth
quarter adjustments relating to the reversal of reserves in the
amount of $77,000 which was material and had the effect of
increasing Net Income by $77,000 in the fourth quarter.
13. SUBSEQUENT EVENT
On January 5, 1996 the Company received a waiver from the commercial
finance company for the violation of certain loan covenants (Note 6).
The working capital requirements for the period from October 1, 1995
through May 31, 1996 were adjusted to a minimum level of $3,100,000.
These statements are presented on the basis that the Company is a
going concern which contemplates the realization of assets and
satisfaction of liabilities in the normal course of business. The
accompanying financial statements show a loss from the consolidated
results of operations of $1,557,000 for the year ended September 30,
1995, and the Company has a consolidated accumulated deficit of
$8,266,000 at September 30, 1995.
On January 5, 1996 the Company's principal stockholder issued a
letter of guaranty to the Company pledging to advance any amounts
which may be required to maintain and support the Company's working
capital needs throughout the term of the Loan and Security Agreement
between the Company and its commercial lender which expires
December 19, 1996.
In this regard, certain assets of the principal shareholder have
been designated and set aside for purposes of satisfying the
obligations under the guaranty in an amount believed to exceed the
forecasted cash flow needs for the upcoming fiscal year.
REPORT OF INDEPENDENT ACCOUNTANTS
Stockholders and Directors of ARMATRON INTERNATIONAL, INC.:
We have audited the accompanying consolidated balance sheets of Armatron
International, Inc. as of September 30, 1995 and 1994, and the related
consolidated statements of operations, cash flows and stockholders'
equity, for the years ended September 30, 1995 and 1994. 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 audit. The consolidated statements of operations, cash flows
and stockholders' equity for the year ended September 30, 1993 were
audited by other independent accountants whose report dated November 24,
1993 expressed an unqualified opinion on those statements.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are
free of material misstatements. 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 financial position of
Armatron International, Inc. as of September 30, 1995 and 1994 and the
results of its operations and its cash flows for the years ended September
30, 1995 and 1994, in conformity with generally accepted accounting
principles.
As discussed in Note 1 to the consolidated financial statements, the
Company changed its method of accounting for income taxes during the year
ended September 30, 1994.
/s/ R. J. GOLD & COMPANY, P.C.
R. J. GOLD & COMPANY, P.C.
Needham, Massachusetts
December 1, 1995
January 5, 1996 as to Note 13.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
In fiscal 1995, operating activities consumed $415,000 in cash, which was
due primarily to a net loss of $1,557,000 and a decrease of $360,000 in
accounts payable and other current liabilities. These were partially
offset by reductions in: accounts receivable of $160,000, inventories of
$712,000 and other current and non-current assets of $112,000. Investing
activities consumed $780,000 for equipment purchases. Financing
activities consumed $426,000 for the payment of long-term debt and $63,000
for the payment of loan orgination costs. As a result primarily of these
factors, cash and cash equivalents decreased $1,684,000.
In fiscal 1995, 1994 and 1993, purchases of equipment amounted to
$780,000, $146,000, and $348,000 respectively. These expenditures were
mainly for tooling and dies used in production of the Company's lawn and
garden products. The Company plans to spend approximately $133,000 for
capital expenditures in fiscal 1996. These expenditures will be mainly
for tooling and dies for the Company's lawn and garden products.
In December 1994, the Company obtained from a commercial finance company a
revolving line of credit which allows aggregate borrowings of $3,500,000
to be used as working capital and which expires in December 1996. The
interest rate on loans shall be 2 1/4% over the prime rate which was 8
3/4% at September 30, 1995. Borrowings made against this line of credit
are collateralized by all assets of the Company. As of September 30,
1995, the Company was contingently liable for outstanding letters of
credit of approximately $146,000 under this line of credit agreement.
The Company has a $7,000,000 line of credit from a realty trust operated
for the benefit of the Company's principal shareholders. This line of
credit, with interest at 10%, requires monthly payments of interest only,
is payable in full in October 1997 and is collateralized by all assets of
the Company. The Company had $4,715,000 outstanding under this line of
credit at September 30, 1995. The maximum borrowings against this line
during fiscal 1995 were $5,140,000. Repayment of this line of credit is
subordinate to the repayment of any and all balances outstanding on the
revolving line of credit with the commercial finance company.
Following industry trade practice, the Company offers extended payment
terms for delivery of seasonal items such as the Flowtron leaf-eater,
bugkiller, chipper/shredder, and compost bin, resulting in seasonally
fluctuating requirements for working capital.
Production of the ECHOVISION automotive obstacle detection system will
commence in January 1996. The Company believes that the financial
requirements for the program have been adequately provided for within the
credit lines available.
At September 30, 1995, the Company had unused operating loss carryforwards
of approximately $15,997,000 which are available to be applied against
taxable income for the years 1996 through 2009. As noted in Footnote 7
Income Taxes, the Company recorded a Net Deferred Tax Asset of $165,000.
The Company expects to realize this asset through improved operating
performance achieved through the anticipated contribution of its new and
expanded product lines. Taxable Income for fiscal 1996 must increase to
approximately $400,000 in order to fully realize the recorded net deferred
tax asset.
In January 1991, the California Department of Health Services (DHS) issued
a Corrective Action Order (CAO) against the Company and a former
subsidiary. The CAO requires the Company and a former subsidiary to
comply with a Cleanup and Abatement Order which had been issued in 1990
against the Company for soil contamination at the site of the former
subsidiary. To date, no determination has been made with regard to the
extent of any environmental damage and who may be liable. The Company
does not believe, based on the information available at this time, that
the outcome of this matter will have a material adverse effect on its
financial position or results of operation.
Management is of the opinion that, unless there is a significant rise in
interest rates, inflation will not be an important factor in fiscal 1996.
The Company believes that its present working capital, lines of credit
from a commercial finance company and related party, and other sources of
financing will be sufficient to finance its seasonal borrowing needs,
operations and investments in capital expenditures in fiscal 1996. Other
sources of financing, provided by the Company's principal stockholder, are
available to finance any working capital deficiencies.
RESULTS OF OPERATIONS
Conditions contributing to the 9% decrease in sales are active competition
and a maturing product line which resulted in a decrease of approximately
2% in the average selling price and a reduction of 7% in sales volume.
Net sales to one customer accounted for approximately $2,441,000, or 20%,
of consolidated net sales in fiscal 1995, as compared to net sales to one
customer of $4,125,000, or 31%, in fiscal 1994, and $4,652,000, or 29%, in
fiscal 1993.
In fiscal 1995, selling, general and administrative expenses decreased
$572,000, or 18%, as compared to fiscal 1994, primarily due to the
decrease in sales. Selling, general and administrative expenses
decreased $723,000, or 19%, in fiscal 1994 as compared to fiscal 1993,
primarily due to the decrease in sales and our active expense reduction
program.
In fiscal 1995, the operating loss increased $225,000 to $1,159,000 when
compared to fiscal 1994. The operating loss in fiscal 1994 was $934,000,
a decrease of $172,000 when compared to the operating loss of $1,106,000
in fiscal 1993.
Interest expense during fiscal 1995 increased $29,000 to $529,000 when
compared to fiscal 1994, and decreased $55,000 between fiscal 1994 and
fiscal 1993, as a result of more expensive borrowing terms related to the
new credit line.
Other income of $131,000 in fiscal 1995, $57,000 in fiscal 1994 and
$113,000 in fiscal 1993 consists primarily of income earned on short-term
investments.
The aggregate effect of all fourth quarter adjustments as described in
Footnote 12. of the financial statements, on current years reported
operations resulting from the reversal of reserves for accrued expenses
amount to $77,000. These reversals are not expected to have an impact
upon future operations.
The Company believes inflation did not have a material effect on its
results of operations for fiscal 1995, 1994 or 1993.
FIVE-YEAR FINANCIAL SUMMARY
SELECTED FINANCIAL DATA:
<TABLE>
<CAPTION>
Years Ended September 30,
1995 1994 1993 1992 1991
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Net Sales $ 12,017 $ 13,286 $ 16,174 $ 18,562 $ 23,624
Operating Income (Loss) $ (1,159) $ (934) $ (1,106) $ (929) $ 664
Income (Loss) before Extraordinary Item $ (1,557) $ (1,212) $ (1,548) $ (1,432) $ 166
Extraordinary Item $ -- $ -- $ -- $ -- $ 40
Net Income (Loss) $ (1,557) $ (1,212) $ (1,548) $ (1,432) $ 206
Earnings (Loss) Per Share of Common Stock:
Operating Income (Loss) $ (.47) $ (.38) $ (.45) $ (.38) $ .27
Income (Loss) before Extraordinary Item $ (.63) $ (.49) $ (.63) $ (.58) $ .06
Extraordinary Item $ -- $ -- $ -- $ -- $ .02
--------------------------------------------------------
Net Income (Loss) $ (.63) $ (.49) $ (.63) $ (.58) $ .08
========================================================
Total Assets $ 7,256 $ 9,599 $ 10,398 $ 13,120 $ 15,359
Long-Term Obligations $ 4,715 $ 5,140 $ 5,251 $ 6,016 $ 6,030
</TABLE>
There were no dividends paid on common shares during any of the above
years. Under the financing agreement, as set forth in footnote 6 to the
company's financial statements the Company is restricted from paying
dividends for the two-year term of that agreement.
- ------------------------------------------------------------------------------
Common Stock Information:
The approximate number of shareholders of record at December 1, 1995 was 1,135.
The following table indicates the quarterly high and low prices for the
Company's common stock on the American Stock Exchange for the last two
years:
<TABLE>
<CAPTION>
1995 1994
Quarter High Low High Low
<S> <C> <C> <C> <C>
First 1- 1/16 11/16 1-3/4 15/16
Second 1- 1/18 3/4 1-5/16 15/16
Third 1- 1/16 13/16 1-5/16 1
Fourth 15/16 9/16 1-1/4 15/16
</TABLE>
BOARD OF DIRECTORS
Charles J. Housman
President, Treasurer & Chairman of the Board
Edward L. Housman
President, Automatic Radio International
Elliot J. Englander
Member, Englander, Finks, Ross, Cohen & Brander, P.C.
Attorneys at Law
Craig Spangenberg
Partner, Spangenberg, Shibley, Traci & Lancione
Attorneys at Law
William Welsh
Retired, former partner, Clayton Dubilier, Inc.
Financial Consultants
OFFICERS
Charles J. Housman, President, Treasurer
Sal DeYoreo, Vice President
Elliot J. Englander, Clerk
AUDITORS
R. J. Gold & Company, P.C.
GENERAL COUNSEL
Englander, Finks, Ross, Cohen & Brander, P.C.
TRANSFER AGENT
American Stock Transfer & Trust Co.
STOCK EXCHANGE
American Stock Exchange
FORM 10-K
A copy of the Company's Fiscal 1995 Annual Report on Form 10-K
to the Securities and Exchange Commission is available to
Stockholders, without charge, upon written request to the Company:
Armatron International, Inc.
Two Main Street
Melrose, MA 02176
ARMATRON
INTERNATIONAL INC.
EXHIBIT 21.0
LIST OF SUBSIDIARIES
Subsidiaries and Divisions
FLOWTRON OUTDOOR PRODUCTS DIVISION
VORNADO POWER PRODUCTS DIVISION
AUTOMATIC RADIO DIVISION
AUTOMATIC RADIO INTERNATIONAL CORP.
ECHOVISION
CORPORATE OFFICES
2 Main Street
Melrose, MA 02176
EXHIBIT 23.0
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of Armatron International, Inc.:
We consent to the incorporation by reference in the Registration
Statements on Form S-3 (SEC File No. 2-80846 and SEC File No. 2-80950) and
in the Registration Statement on Form S-8 (SEC File No. 2-80846) of Armatron
International, Inc. of our reports dated December 1, 1995, on our audit of
the consolidated financial statements and financial statement schedules of
Armatron International, Inc. as of September 30, 1995 and 1994 and for the
year ended September 30, 1995 and 1994, which report is incorporated by
reference or included in this Annual Report on Form 10-K.
Needham, Massachusetts /s/ R. J. GOLD & COMPANY P.C.
January 10, 1996 R. J. GOLD & COMPANY P.C.
Consent of Independent Accountants
To the Board of Directors and Stockholders
of Armatron International, Inc.:
We consent to the incorporation by reference in the registration statements
on Form S-3 (SEC File Nos. 2-80846 and 2-80950) and in the registration
statements on Form S-8 (SEC File No. 2-80846) of Armatron International,
Inc., of our reports dated November 24, 1993, on our audits of the
consolidated financial statements and financial statement schedules of
Armatron International, Inc., as of September 30, 1993 and for the years
ended September 30, 1993 and 1992, which reports are incorporated by reference
or included in this annual report on Form 10-K.
/s/ COOPERS & LYBRAND, L.L.P.
COOPERS & LYBRAND, L.L.P.
Boston, Massachusetts
December 30, 1994
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<CASH> 1,322
<SECURITIES> 0
<RECEIVABLES> 2,368
<ALLOWANCES> (179)
<INVENTORY> 2,225
<CURRENT-ASSETS> 6,055
<PP&E> 6,146
<DEPRECIATION> 5,194
<TOTAL-ASSETS> 7,256
<CURRENT-LIABILITIES> 1,817
<BONDS> 4,715
0
0
<COMMON> 2,606
<OTHER-SE> (1,882)
<TOTAL-LIABILITY-AND-EQUITY> 7,256
<SALES> 12,017
<TOTAL-REVENUES> 12,017
<CGS> 10,570
<TOTAL-COSTS> 2,541
<OTHER-EXPENSES> (131)
<LOSS-PROVISION> 65
<INTEREST-EXPENSE> 529
<INCOME-PRETAX> (1,557)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,557)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,557)
<EPS-PRIMARY> (.63)
<EPS-DILUTED> (.63)
</TABLE>
