-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Udgp1pF1hInQB5WZ4YZ0BL1qnIUHNUFaLjYUf1P3uhWcqFPPh0dLg0hTGwP9gRSF CS8HL+NACWEcEH/5oj/r5A== 0000950146-96-001146.txt : 19970514 0000950146-96-001146.hdr.sgml : 19970514 ACCESSION NUMBER: 0000950146-96-001146 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960716 SROS: BSE SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALDEN ELECTRONICS INC CENTRAL INDEX KEY: 0000003398 STANDARD INDUSTRIAL CLASSIFICATION: 3661 IRS NUMBER: 042156392 STATE OF INCORPORATION: MA FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-07404 FILM NUMBER: 96595141 BUSINESS ADDRESS: STREET 1: FORTY WASHINGTON ST CITY: WESTBORO STATE: MA ZIP: 01581-0500 BUSINESS PHONE: 5083668851 MAIL ADDRESS: STREET 1: 40 WASHINTON STREET CITY: WESTBOROUGH STATE: MA ZIP: 01581-0500 FORMER COMPANY: FORMER CONFORMED NAME: ALDEN ELECTRONIC & IMPULSE RECORDING EQUIPMENT CO INC DATE OF NAME CHANGE: 19830622 FORMER COMPANY: FORMER CONFORMED NAME: ALFAX PROGRAMS INC DATE OF NAME CHANGE: 19680109 10-K 1 ALDEN ELECTRONICS, FORM 10-K FORM 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended: March 31, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to ___________ Commission file number: 1-7404 ALDEN ELECTRONICS, INC. (Exact name of Registrant as specified in its charter) MASSACHUSETTS 04-2156392 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) Washington Street, Westboro, Massachusetts 01581 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 508-366-8851 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of Exchange on Which Registered -------------------- ------------------------------------ Class A Common Stock Boston Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] 1 The Index to Exhibits appears at Page 45. 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 10-K or any amendment to this Form 10-K. [ X ] No shares of the Class B Common Stock of the Registrant are held by non-affiliates. The aggregate market value of the Class A Common Stock held by non-affiliates of the Registrant as of June 19, 1996 was $1,132,829 based on the last traded price of such stock ($.875) as reported on the NASDAQ System. See Note 5 to the Financial Statements (Item 8 below) for an explanation of the respective voting rights of each class of the Registrant's Common Stock. Number of shares outstanding of each of the Registrant's classes of Common Stock as of June 19, 1996: Class A Common Stock 2,010,410 Class B Common Stock 25,000 Documents Incorporated by Reference: None. -2- PART I ITEM 1. Business. A. Products. Alden Electronics, Inc. (the "Company") designs, assembles, sells and leases communications equipment, computerized graphic display systems, imaging equipment and related supplies. The Company also operates communications networks, making use of both satellite and terrestrial technologies, to facilitate the delivery of meteorological and other data to customers. The Company's communications equipment is used primarily for meteorological applications. The meteorological communications equipment, graphic display systems and data are used by various users of weather information including professional weather forecasters, commercial airlines, radio and television stations, colleges and universities, private pilots, mariners as well as various domestic (local, state and federal) and foreign governmental agencies. Data distributed through the Company's communications networks are primarily acquired from governmental agencies such as the National Oceanic & Atmospheric Administration, National Weather Service ("NWS") and the Federal Aviation Administration ("FAA"). This information is either distributed centrally from Company facilities or by providing customers direct access to NWS and FAA weather radar information through proprietary access devices installed by the Company at or near government radar installations. The Company's imaging products include its CTP continuous tone thermal printer, which provides high resolution images on various media, thermal paper and plastic materials. Subsequent to March 31, 1996, the Company divested itself of substantially all of its marine electronics products. The Company's marine electronics products consisted of communication products either manufactured by the Company or manufactured by others and sold through the Company's marine distribution network. These marine communication products included the SATFIND-406(TM) SURVIVAL EPIRB (Emergency Position Indicating Radio Beacon) which transmits radio signals to allow search and rescue authorities to locate distressed vessels. On June 11, 1996, the Company completed the divestiture of its marine electronics products with the sale of its manufacturing and distribution rights for its SATFIND-406(TM) SURVIVAL EPIRB to Northern Airborne Technology Inc., an affiliate of Chelton Ltd, a UK company. -3- During each of the three years in the period ended March 31, 1996, the Company incurred substantial losses. The Company continues to implement cost containment measures with the objective of maintaining revenues and reducing costs. Concurrently, the Company is reviewing strategic alternatives with respect to all of its product lines and assets. The alternatives under consideration include divestiture of some or all of its product lines and liquidation of some or all of its assets. The Company has retained Argus Management Corporation, a management consulting firm, to assist the Company in its review of strategic alternatives and general operational matters. B. Sales and Leasing. The Company's sales of equipment, parts, supplies and services accounted for approximately 94.4% of the Company's revenues for the year ended March 31, 1996, and income from leased equipment accounted for approximately 5.6% of the Company's revenues for the year. A majority of the Company's leasing business is with governmental agencies. Most of the Company's leases with governmental agencies are for one year and, generally, give the agency a right to extend the term of the lease for additional terms, subject to appropriation of funds by Congress. During the year ended March 31, 1996, no single customer accounted for more than 10% of total revenues. C. Backlog of Orders. As of March 31, 1996, there was a backlog of orders believed to be firm of approximately $1,422,754. As of March 31, 1995, the amount of backlog was approximately $1,049,000. Because the amount of backlog may at any given time reflect nonrecurring orders with extended delivery schedules, the Company does not consider the amount of its backlog to be indicative of anticipated sales for a fiscal year. D. Competition. Most of the business areas in which the Company is involved are competitive and require highly skilled and experienced technical personnel. There are other companies which compete in these business areas, some of which have greater resources than the Company. As such, there can be no assurance that the Company will compete successfully in the future. The Company believes the skills and experience that its personnel have with the products that it markets are the key to its growth and competitive position. -4- E. Patents, Licenses, Product Development and Employees. Although the Company holds a number of patents in the field of facsimile and instant graphic recording, the Company's reliance on these patents is diminishing as the products related to these patents constitute a declining share of the Company's product mix. Moreover, the Company believes that its accumulated experience and know-how in these areas are as important as the underlying patents. The Company expended approximately $574,000 during the year ended March 31, 1996, for the development of new products and improvements of existing products. The Company employs 57 persons. ITEM 2. Properties The Company owns approximately 26.1 acres of land in Westborough, Massachusetts near the intersection of Routes 9 and 495. Situated on this land are approximately 85,500 square feet of building space the Company utilizes for office, manufacturing, service, engineering and warehouse purposes. The Company has entered into an agreement, which contains standard closing conditions, to sell a portion of its real estate holdings. The Company's real estate holdings are subject to a mortgage granted to the Company's prinicpal lender as collateral for its credit facility. The Company also has one lease for approximately 2,500 square feet of floor space in Epsom, England. Leased equipment in the field had a depreciated book value of approximately $118,206 as of March 31, 1996. ITEM 3. Legal Proceedings. There were no pending legal proceedings, other than ordinary routine litigation incidental and not material to the business of the Company, to which the Company is party or to which any of its property is subject. ITEM 4. Submission of Matters to a Vote of Security Holders. The Company did not submit any matters to a vote of security holders during the fourth quarter of the fiscal year ended March 31, 1996. -5- PART II ITEM 5. Market For The Registrant's Common Equity and Related Stockholder Matters. (a) The Company's Class A Common Stock is principally traded over the counter on the NASDAQ System under the symbol ADNEA. Such stock is also traded on the Boston Stock Exchange under the symbol ADN. The following table shows the market range of the Company's Class A Common Stock based upon the high and low bid as reported by NASD. 1995/1996 1994/1995 --------- ---------- Period High Low High Low - - ------ ----------- ------------ First Quarter 2 3/4 2 2 7/8 2 5/8 Second Quarter 2 5/8 2 1/4 2 3/4 2 1/2 Third Quarter 2 3/8 1 1/4 2 5/8 2 1/4 Fourth Quarter 1 3/8 3/4 2 1/4 2 (b) As of June 19, 1996, there were 1,510 holders of record of the Company's Class A Common Stock and six (6) holders of record of the Company's Class B Common Stock. (c) The Company did not declare a dividend for the 1995 fiscal year or the 1996 fiscal year. Under the terms of the Company's Loan Agreement with its principal lender entered into on August 5, 1994, the Company is prohibited from paying cash dividends on any class of its capital stock. -6- ITEM 6. SELECTED FINANCIAL DATA.
March 31 March 31 March 31 March 27 March 28 1996 1995 1994 1993 1992 Total sales $12,806,700 $18,227,312 $16,803,966 $15,396,877 $18,781,238 and revenues Net earnings (loss) (3,088,722) (3,347,542) (1,838,024) (374,296) 205,980 Net earnings (loss) per share of Class A Common Stock (1.41) (1.53) (.84) (.17) .10 Cash dividends per share of Class A and Class B Common Stock ------- ------ ------- .05 .08 Total assets $7,364,342 $10,680,163 $12,880,102 $14,219,081 $14,793,867 Long-term obligations -0- $330,290 -0- -0- $583,350
-7- ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS. A. Results of Operations - 1996 compared to 1995. Revenues for the year ended March 31, 1996 were $12,806,700 compared to $18,227,312 for the year ended March 31, 1995, while a net loss of $3,088,722 ($1.41 per share) was posted for 1996 compared to a net loss of $3,347,542 ($1.53 per share) for 1995. Decreased revenues for 1996 reflect reduced sales from three Marine products discontinued during the year, including the ALDENSART(TM) (search and rescue transponder), the Alden SATPHONE(TM) (satellite telephone) and the TRIV MARINEFAX recorder. The Company also had reduced sales of the 9315CTP continuous tone printer and paper products. Revenues from the three Marine products in 1996 were $900,000 compared to $3,500,000 in 1995. Revenues from the sales of the Company's 9315CTP continuous tone printer were $900,000 less in 1996 when compared to 1995. Revenues from the sale of paper products were $900,000 less in 1996 when compared to 1995. The Company also had a decline of $400,000 in revenues from equipment lease and service contracts. Gross profit of 15% in 1996 is comparable to that of the prior year; however, both levels are below historical levels. In 1996, gross profit margins were adversely affected by reduced margins on weather display systems relating to continuing development efforts, losses relating to custom systems produced during the year, increased costs of providing weather data and the continued decline of highly profitable lease and service revenues. Selling, General and Administrative expenses were $1,800,000 less in 1996 when compared to 1995. This decline was primarily related to declines in revenue, cost containment measures implemented by the Company and non-reoccurrence of costs experienced in 1995 associated with new product introductions. B. Results of Operations - 1995 compared to 1994. Revenues for the year ended March 31, 1995 were $18,227,312 compared to $16,803,966 for the year ended March 31, 1994, while a net loss of $3,347,542 ($1.53 per share) was posted for 1995 compared to a net loss of $1,838,024 ($0.84 per share) for 1994. -8- Increased revenues for 1995 reflect sales for two Marine products introduced in the first quarter of 1995, the ALDENSART(TM) (search and rescue transponder) and the Alden SATPHONE(TM) (satellite telephone). Revenues from the sales of these two products were $2,700,000 in 1995. These increases offset decreased revenues from sales of the Company's AE-900 NAVTEX(TM) Receiver of $1,200,000 when compared to 1994. Increases in sales of equipment used in the ingest and display of weather data amounting to $900,000 offset decreases in revenue from leased equipment, equipment service and data services. Gross profit declined from 21% in 1994 to 15% in 1995. The decline was attributable to less than expected gross profit performance of the ALDENSART(TM) and Alden SATPHONE(TM) which reduced overall gross profits by 3.25%, the decline of highly profitable lease revenues on older equipment, the provision for costs relating to the December 19, 1994 recall of the SATFIND-406(TM) SURVIVAL EPIRB ($464,000) and the provision of $363,000 for the write-down of inventory related to discontinued products in 1995. In late fiscal 1995, the Company discontinued the ALDENSART(TM) and Alden SATPHONE(TM) product lines. Selling, General and Administrative expenses for 1995 exceeded those of 1994 by $900,000. This increase was primarily related to additional costs associated with the introduction of new products (approximately $600,000) and the payment of commissions and sales incentives in excess of historical rates (approximately $300,000). C. Liquidity and Sources of Capital. The ratio of current assets to current liabilities was 1.1 to 1 at March 31, 1996, compared to 1.8 to 1 at March 31, 1995 and 3.4 to 1 at March 31, 1994. The decrease in working capital during 1996 reflects decreases in accounts receivable and inventories of approximately $2,500,000 relating to the Company's reduced revenues for the year, efforts by the Company to improve inventory turnover without a corresponding reduction in accounts payable and the repayment and reclassification of certain obligations. During 1996, the Company experienced a net increase in cash and cash equivalents of $66,200 compared to net decreases in cash and cash equivalents of $1,297,000 and $821,000 in 1995 and 1994, respectively. During 1996, operating activities provided $1,158,000 in cash primarily attributable to reduction in investments in inventories of $1,715,000, and net reductions in other working capital amounting to $678,000. These sources along with non-cash charges of $1,874,000 for depreciation and amortization and impairment of assets and restructuring charges offset the net loss of $3,089,000 for the year. -9- Investing activities during 1996 consisted exclusively of additions to property, plant and equipment of $677,000. Financing activities during 1996 used $395,000 in cash, primarily for the repayment of debt to the Company's bank. During 1995, operating activities used $1,421,000 in cash primarily attributable to the net loss of $3,348,000. These activities were offset by non-cash charges included in operating costs (such as depreciation and provisions for inventory write-downs of $1,360,000). Investing activities during 1995 consisted exclusively of additions to property, plant and equipment of $530,000. Financing activities in 1995 provided $633,000 in cash, primarily from short-term borrowings of $700,000. As indicated above, the Company has incurred substantial losses in each of the three years ended March 31, 1996. On June 12, 1995 the Company secured a commitment from its bank to forebear from collection of certain amounts due under its credit facility with the Company until June 30, 1996. This commitment was contingent upon the Company making scheduled payments of interest and principal and to continued compliance with existing covenants, as amended. The Company is currently in default of its payment obligations and certain existing covenants, including covenants relative to minimum cash flows and tangible net worth levels. The Company has informed the bank that it intends to reduce these balances under its credit facility with the proceeds from an impending real estate sale and the collection of receivables related to certain discontinued product lines. With respect to operating results, the Company continues to implement cost containment measures with the objective of maintaining revenues and reducing costs. Concurrently, the Company is reviewing strategic alternatives with respect to all of its product lines and assets. The alternatives under consideration include divestiture of some or all of its product lines and liquidation of some or all of its assets. The Company has retained Argus Management Corporation, a management consulting firm, to assist the Company in its review of strategic alternatives and general operational matters. -10- D. Impact of Inflation and Price Changes. In recent years, the Company has not experienced significant inflation in the cost of its products. In those cases where the Company experiences increased costs, it seeks ways to cope with the impact of those increases so as not to materially impact profit margins. Substantially all of the Company's revenue decrease in 1996 and increases in 1995 and 1994 were the result of fluctuations in sales volume from existing products and new product introductions. A portion of the Company's products are purchased from foreign suppliers. When it is practical, the Company enters into foreign exchange contracts to minimize the risk of foreign exchange losses on the purchase of products. During fiscal 1996, changes in exchange rates affecting the gross profit margins of the Company's products were not material. ITEM 8. Financial Statements and Supplementary Data. See the next page for financial statements and supplementary data. -11- Report of Independent Auditors Board of Directors Alden Electronics, Inc. and Subsidiaries We have audited the accompanying consolidated balance sheets of Alden Electronics, Inc. and subsidiaries (the Company) as of March 31, 1996 and 1995, and the related consolidated statements of operations and retained earnings, and cash flows for each of the three years in the period ended March 31, 1996. Our audits also included the financial statement schedule listed in the Index at Item 14(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Alden Electronics, Inc. and subsidiaries at March 31, 1996 and 1995, and the consolidated results of their operations and their cash flows for each of the three years in the period ended March 31, 1996, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. The accompanying financial statements have been prepared assuming that Alden Electronics, Inc. will continue as a going concern. As more fully described in Note 1, the Company has incurred recurring operating losses. In addition, the Company has not complied with certain covenants of loan agreements with its bank. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regards to these matters are also described in Note 1. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty. ERNST & YOUNG LLP Boston, Massachusetts June 21, 1996 -12- Alden Electronics, Inc. and Subsidiaries Consolidated Balance Sheets
March 31 1996 1995 ---------------------------------- Assets Current assets: Cash and cash equivalents $ 209,438 $ 143,238 Trade accounts receivable, less allowance of $113,000 in 1996 and $42,000 in 1995 for doubtful accounts 2,087,215 2,552,994 Refundable income taxes 98,000 Inventories: Finished products 435,153 440,086 Work in process 1,080,012 2,410,033 Parts and materials 207,606 587,386 ---------------------------------- 1,722,771 3,437,505 Prepaid expenses 132,941 170,543 Deferred tax assets 20,000 53,000 ---------------------------------- Total current assets 4,172,365 6,455,280 Property, plant and equipment: Land and buildings 3,731,776 3,715,654 Equipment on lease 282,176 5,768,450 Other machinery and equipment 7,748,327 7,666,017 ---------------------------------- 11,762,279 17,150,121 Less allowance for depreciation 8,600,223 12,979,112 ---------------------------------- 3,162,056 4,171,009 Other assets 29,921 53,874 ---------------------------------- $7,364,342 $10,680,163 ==================================
-13-
March 31 1996 1995 ---------------------------------- Liabilities and stockholders' equity Current liabilities: Accounts payable $1,480,823 $ 1,204,026 Accrued expenses 714,433 1,044,936 Accrued warranty expenses 348,323 Notes payable to bank 400,000 700,000 Deferred revenues 109,736 73,224 Other current liabilities 327,697 400,222 Current portion of long-term debt 330,155 96,672 ---------------------------------- Total current liabilities 3,711,167 3,519,080 Deferred income taxes 25,000 103,000 Long-term debt 330,290 Stockholders' equity Class A Common Stock, par value $1 per share--authorized 2,500,000 shares, issued 2,010,385 shares in 1996 and 1995 2,010,385 2,010,385 Class B Common Stock, without par value--authorized and issued 25,000 shares 75 75 Additional paid-in capital 1,611,418 1,611,418 Retained earnings 83,176 3,171,898 Treasury shares (2,086) Currency translation adjustment (76,879) (63,897) ---------------------------------- 3,628,175 6,727,793 ================================== $7,364,342 $10,680,163 ==================================
See accompanying notes. -14- Alden Electronics, Inc. and Subsidiaries Consolidated Statements of Operations and Retained Earnings
Year ended March 31 ---------------------------------------------------- 1996 1995 1994 ---------------------------------------------------- Revenues: Net sales and service revenues $12,043,785 $17,237,843 $15,257,731 Income from leased equipment 723,114 967,012 1,504,873 Interest 25,631 22,457 41,362 Other 14,170 ---------------------------------------------------- 12,806,700 18,227,312 16,803,966 Cost and expenses: Cost of products sold and expenses of leasing equipment 10,796,073 15,433,663 13,240,327 Selling, administrative and general 4,212,109 5,995,422 5,089,886 Loss on impairment of assets and restructuring charge 766,886 455,751 Interest 130,354 135,769 59,026 ---------------------------------------------------- 15,905,422 21,564,854 18,844,990 ---------------------------------------------------- Loss before income taxes (3,098,722) (3,337,542) (2,041,024) Income taxes (benefit) (10,000) 10,000 (203,000) ---------------------------------------------------- Net loss (3,088,722) (3,347,542) (1,838,024) Retained earnings at beginning of year 3,171,898 6,519,440 8,357,464 ---------------------------------------------------- Retained earnings at end of year $ 83,176 $ 3,171,898 $ 6,519,440 ==================================================== Net loss per share $ (1.41) $ (1.53) $ (.84) ====================================================
See accompanying notes. -15- Alden Electronics, Inc. and Subsidiaries Consolidated Statements of Cash Flows
Year ended March 31 ---------------------------------------------------- 1996 1995 1994 ---------------------------------------------------- Operating activities Net loss $(3,088,722) $(3,347,542) $(1,838,024) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 1,004,754 997,446 1,143,487 Loss on disposal of equipment 13,488 Provision for losses on accounts receivable 147,596 47,000 15,000 Deferred income tax benefit (45,000) (16,000) (139,000) Provisions for impairment of assets, restructuring and related charges 766,886 363,000 1,355,751 Changes in operating assets and liabilities: Accounts receivable 303,779 (293,076) (227,614) Refundable income taxes 98,000 154,000 (46,000) Inventories 1,714,734 (284,914) (1,032,220) Prepaid expenses 37,602 (49,623) (44,119) Other assets (20,000) Deferred revenue 36,512 40,654 9,282 Accounts payable, accrued expenses and other current liabilities 222,092 960,921 457,172 Other (20,261) (6,730) 2,285 ---------------------------------------------------- Net cash provided (used) by operating activities 1,157,972 (1,421,376) (344,000) Investing activities Proceeds from sale of equipment 20,000 Purchases of property, plant and equipment (676,880) (550,499) (364,741) ---------------------------------------------------- Net cash used in investing activities (676,880) (530,499) (364,741)
-16- Alden Electronics, Inc. and Subsidiaries Consolidated Statements of Cash Flows (continued)
Year ended March 31 ---------------------------------------------------- 1996 1995 1994 ---------------------------------------------------- Financing activities Proceeds from issuance of common stock $ 83,800 Principal payments on long-term debt $ (96,807) $ (64,725) (91,663) Issuance (payments) of notes payable to bank (300,000) 700,000 Sale (purchase) of treasury stock 2,086 (2,086) Dividends paid (100,769) ---------------------------------------------------- Net cash provided (used) by financing activities (394,721) 633,189 (108,632) Effect of exchange rate changes on cash and cash equivalents (20,171) 21,699 (3,482) ---------------------------------------------------- Increase (decrease) in cash and cash equivalents 66,200 (1,296,987) (820,855) Cash and cash equivalents at beginning of year 143,238 1,440,225 2,261,080 ---------------------------------------------------- Cash and cash equivalents at end of year $ 209,438 $ 143,238 $1,440,225 ==================================================== Supplemental Cash Flow Information Interest paid $ 130,000 $ 136,000 $ 37,000 ================ ================ ================
See accompanying notes. -17- Alden Electronics, Inc. and Subsidiaries Notes to Consolidated Financial Statements March 31, 1996 1. The Company, Operations and Liquidity The Company designs, assembles, sells and leases computer-based weather display systems, color weather radar terminals, weather satellite ground receiving systems and a variety of printers and supplies. The Company also manufactures and distributes specialized communication and safety equipment used in marine applications and operates communication networks to facilitate the delivery of meteorological and other data to its customers. The Company markets its products worldwide. During each of the three years in the period ended March 31, 1996, the Company incurred substantial losses. On June 12, 1995, the Company obtained a commitment from its bank to forebear from collection of certain amounts due under its credit facility with the Company until June 30, 1996. This commitment was contingent upon the Company making scheduled payments of interest and principal and to continued compliance with existing covenants, as amended. The Company has informed the bank that it does not anticipate the repayment of remaining principal on June 30, 1996, but intends to reduce these balances with proceeds of an impending real estate sale and the sale of certain assets relating to its marine product lines during the first quarter of fiscal 1997 (see Note 10). With respect to operating results, the Company continues to implement cost containment measures with the objective of maintaining revenues and reducing costs. Concurrently, the Company is reviewing strategic alternatives with respect to all of its product lines and assets. The alternatives under consideration include divestiture of some or all of its product lines and liquidation of some or all of its assets. The Company has retained Argus Management Corporation, a management consulting firm, to assist the Company in its review of strategic alternatives and general operational matters. -18- Alden Electronics, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 2. Accounting Policies Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries: Alden International, Inc., Alfax Paper & Engineering Company, Inc. and Alfax Paper of United Kingdom Limited. All intercompany accounts and transactions have been eliminated upon consolidation. Foreign Currency Translation Balance sheet accounts of the Company's foreign subsidiary are translated into United States dollars at fiscal year-end exchange rates. Operating accounts are translated at weighted average exchange rates for each year. Net translation gains or losses are adjusted directly to a separate component of stockholders' equity. Inventories The Company's inventories are carried at the lower of cost (first-in, first-out method) or market. Research and Development Costs Costs of research and development ($574,000 in 1996; $1,026,000 in 1995; $731,000 in 1994) have been charged to expense and are included in the consolidated statements of operations and retained earnings under the caption "Cost of products sold and expenses of leasing equipment." Property, Plant and Equipment The Company's property, plant and equipment is stated at historical cost. Expenditures for maintenance, repairs and renewals are charged to expense; betterments are capitalized. The Company provides for depreciation based on the estimated useful lives of the assets, which range from three to 30 years. An accelerated method is used to provide for depreciation of substantially all equipment on lease; the straight-line method is used for other plant and equipment. The Company routinely removes fully depreciated assets from its books and records. -19- Alden Electronics, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 2. Accounting Policies (continued) Revenues Revenues for product sales are recognized when equipment is shipped to customers. The Company leases equipment generally for terms of one year or less; rental revenue is recognized over the lease term. Income Taxes The Company accounts for income taxes under the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (Statement No. 109). Under Statement No. 109, deferred tax assets and liabilities are recorded for decreases and increases in taxes payable or refundable in future years as a result of temporary differences between the tax bases of assets or liabilities and their reported amounts in the financial statements. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply in periods in which the deferred tax asset or liability is expected to be realized or settled. Net Loss Per Share Net loss per share has been computed on the basis of the weighted-average number of shares of Class A Common Stock outstanding, plus the effect of common stock equivalents when dilutive, added to the equivalent number of shares that would have been issued if the Class B Common Stock were converted. The number of shares used in calculating net loss per share was 2,185,385 in 1996 and 1995 and 2,177,988 in 1994. Cash and Cash Equivalents The Company considers all highly liquid financial instruments which have an original maturity of three months or less to be cash equivalents. The Company invests its excess cash in short-term government securities and certificates of deposit. These investments are recorded at cost, which approximates market value. Concentration of Credit Risk Financial instruments which potentially subject the Company to a concentration of credit risk principally consist of cash on deposit with a major bank and trade receivables. -20- Alden Electronics, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 2. Accounting Policies (continued) The Company sells its products and services to Government agencies and commercial enterprises. To reduce credit risk, the Company performs ongoing credit evaluations of the financial condition of its customers. Although the Company is directly affected by the overall financial condition of weather data and marine products industries, management does not believe significant credit risk exists at March 31, 1996. Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Impairment of Long-Lived Assets In March 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," which establishes criteria for the recognition and measurement of impairment of loss associated with long-lived assets. Assets that are impaired are written down to their fair value based on the future cash flows expected to be generated, discounted at a market rate of interest. Effective April 1, 1995, the Company adopted this standard and recognized a loss on impairment of certain assets used in its operations by $766,886 in fiscal 1996 (see Note 3). Stock-Based Compensation The Company has elected to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25), in accounting for its stock-based compensation plans, rather than the alternative fair value accounting method provided for under Financial Accounting Standards Board Statement No. 123, "Accounting for Stock-Based Compensation," as this alternative requires the use of option valuation models that were not developed for use in valuing employee stock options. Since the exercise price of options granted under these plans equals the market price of the underlying stock on the date of grant, no compensation expense is required under APB 25. -21- Alden Electronics, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 3. Impairment of Assets, Restructuring and Related Charges During 1996, 1995 and 1994, the Company, as disclosed in Notes 1 and 10, has discontinued certain unprofitable product lines and services and entered into agreements to sell certain assets which, combined with cost reductions initiated in late fiscal 1995, are intended to allow the Company to improve its operating results. In connection with these initiatives, in fiscal 1994, the Company charged operations $1,355,751 of which $455,751 related to the disposal of equipment and $900,000 related to write-downs of inventories related to the discontinued product lines. The disposal of the equipment has been recognized as a restructuring charge, and the inventory write-down has been charged to cost of products sold and expenses of leasing equipment. During 1995, the Company discontinued additional unprofitable product lines, which resulted in inventory write-downs of $363,000. In addition, the Company provided $464,000 in connection with a recall of a defective product attributable to a component not manufactured by the Company. During 1996, the Company recovered $223,933 in a settlement related to the recall which was credited to costs of products sold and expenses of leasing equipment. The Company provides weather data services to various government agencies through the use of equipment placed at various locations throughout the United States. During 1996, the Company determined that that service would not generate sufficient cash flows to support the ongoing operating costs and the value of the capitalized equipment. The Company recognized an impairment loss of $766,886 on this equipment which represents the entire carrying value of the equipment (see Note 3). 4. Financing Arrangements During 1995, the Company entered into an agreement with its bank to provide a revolving line of credit which had a maximum availability of $1,500,000 through August 31, 1995 and a term loan in an amount of $483,354. On June 12, 1995, the Company secured a commitment letter and entered into a forebearance agreement dated June 12, 1995 in which the bank agreed to extend amounts then outstanding under the line of credit ($700,000) and to forebear from calling the term loan through June 30, 1996. These loans are secured by the assets of the Company and contain certain restrictive covenants, including that the Company generate minimum cash flows, maintain tangible net worth above specific levels and restrict the payment of dividends. As previously disclosed in Note 1, at March 31, 1996, the Company was in violation of covenants relative to minimum cash flows and tangible net worth levels. The terms of the commitment letter provide for interest on all borrowings to bear interest at the bank's base rate (8.25% at March 31, 1996) plus 2%. -22- Alden Electronics, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 4. Financing Arrangements (continued) Borrowings under the term loan require that the Company continue to make monthly payments of $8,083 plus interest through June 30, 1996, at which time the remaining balance will be due. Borrowing under the forebearance agreement require that the Company repay $200,000 of the amount outstanding under the revolving line of credit by July 31, 1995, make additional repayments of $50,000 per quarter beginning October 31, 1995 and repay any remaining balance by June 30, 1996. The forebearance agreement also requires the Company's compliance with existing covenants, as amended. The weighted-average interest rate on revolving debt for the year ended March 31, 1996 was 9.96%. During fiscal 1996 all payments required under the forebearance agreement were made on a timely basis. The Company has informed the bank that it does not anticipate the repayment of remaining principal on June 30, 1996, but intends to reduce these balances from proceeds of an impending real estate sale and the sale of certain assets relating to its marine product lines during the first quarter of fiscal 1997 (see Note 10). Long-term debt consists of the following: March 31 1996 1995 ----------------------------- Term loan payable to a bank in monthly principal installments of $8,083 plus interest with the remaining balance due on June 30, 1996 $330,155 $426,962 Less current portion 330,155 96,672 ----------------------------- $ 0 $330,290 ============================== The fair value of the Company's debt obligations approximates the outstanding principal balances based on the short repayment period and variable interest rate. 5. Stockholders' Equity The Class A and Class B Common Stocks are entitled to dividends based on a share-for-share basis. Each share of Class B Common Stock may be converted into seven shares of Class A Common Stock. Class B Common Stock has sole voting rights unless more than 5,000 shares of Class B Common Stock are converted into Class A Common Stock, at which time the holders of Class A Common Stock will have sole voting rights. At -23- Alden Electronics, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 5. Stockholders' Equity (continued) March 31, 1996, 175,000 shares of Class A Common Stock were reserved for issuance in connection with the conversion rights of Class B Common Stock. 6. Stock Options Under terms of the Incentive Stock Option Plan, options may be granted to key employees to purchase shares of Class A Common Stock at prices not less than the fair market value at date of grant. The options, subject to termination of employment, expire five years after date of grant; however, the term may be extended up to ten years at the discretion of the Stock Option Plan Committee. Options are nontransferable other than upon death. On April 15, 1994, the Class B Common Stockholders voted to increase the maximum number of shares available to 250,000 shares. Options become exercisable at the discretion of the Stock Option Plan Committee. Stock option information is as follows: Stock Option Stock Option Shares Price Per Share ------------------------------------ Outstanding at March 31, 1994 155,032 $3.12-$4.19 Granted 22,500 $2.00 Exercised Expired 10,000 $4.19 ------------------------------------ Outstanding at March 31, 1995 167,532 $2.00-$3.19 Granted 15,000 $2.16 Exercised - - Expired 15,000 $3.19 ------------------------------------ Outstanding at March 31, 1996 167,532 $2.00-$3.19 ==================================== Exercisable at March 31, 1996 91,749 $2.00-$3.19 ==================================== During fiscal 1996, the Company issued nonqualified stock options for 30,000 shares of the Company's common stock at an exercise price of $2.25. At March 31, 1996, 13,333 nonqualified stock option shares were exercisable. -24- Alden Electronics, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 7. Employee Benefit Plans The Company has a qualified contributory Profit Sharing Retirement Plan (the Profit Sharing Plan) for all employees who have completed six months of service. Contributions to the Profit Sharing Plan are made at the discretion of the Board of Directors, provided that the total amount contributed for any plan year does not exceed the maximum amount allowable under the Internal Revenue Code. There was no employer contribution to the Profit Sharing Plan during the years ended March 31, 1996, 1995 and 1994. On April 18, 1991, the Company entered into agreements with three executives which provide for retirement, death and severance benefits. The agreements provide for retirement benefits equal to 1 2/3 times annual salary at retirement payable over five years. Pursuant to these agreements, the Company provided $62,700 of retirement expense during 1994. The retirement, death and severance benefits were fully accrued at March 31, 1994. At March 31, 1996 and 1995, the deferred compensation liability amounted to $250,675 and $339,380, respectively, and is included in accrued expenses in the accompanying balance sheet. 8. Transactions with Affiliated Companies The Company, in the ordinary course of business, purchases from and sells products and services to companies in which certain Company directors own an interest. Purchases of such products and services amounted to approximately $124,000 in 1996, $220,000 in 1995 and $373,000 in 1994; sales to affiliated companies were less than $10,000 in each year. -25- Alden Electronics, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 9. Income Taxes Significant components of the Company's deferred tax assets and liabilities are as follows:
1996 1995 ---------------------------------- Deferred tax assets and liabilities (current and noncurrent): Current: Inventory valuation allowance $ 248,000 $ 319,000 Deferred compensation accruals 101,000 137,000 Accruals for compensated absences 28,000 28,000 Doubtful accounts 46,000 17,000 Other 3,000 9,000 ---------------------------------- Total deferred tax assets (current) 426,000 510,000 Valuation allowance for deferred tax assets (current) 406,000 457,000 ---------------------------------- Net deferred tax assets (current) $ 20,000 $ 53,000 ================================== Noncurrent: Deferred tax assets (noncurrent): Federal net operating loss carryforward $2,311,000 $1,690,000 State net operating loss carryforward 392,000 289,000 Other 10,000 10,000 ---------------------------------- Total deferred tax assets (noncurrent) 2,713,000 1,989,000 Valuation allowance for deferred tax assets (noncurrent) 2,713,000 1,782,000 ---------------------------------- Net deferred tax assets (noncurrent) 0 207,000 Deferred tax liabilities (tax depreciation in excess of book depreciation) 25,000 310,000 ---------------------------------- Net deferred tax liability (noncurrent) $ 25,000 $ 103,000 ==================================
-26- Alden Electronics, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 9. Income Taxes (continued) Income tax provisions (benefit) consist of the following:
1996 1995 1994 ------------------------------------------- Current: Federal $ 15,000 $ (79,000) Foreign $ 35,000 11,000 15,000 ------------------------------------------- 35,000 26,000 (64,000) Deferred (45,000) (16,000) (139,000) ------------------------------------------- $(10,000) $ 10,000 $(203,000) ===========================================
A reconciliation of income taxes computed at the statutory federal income tax rate to the income tax provision follows:
1996 1995 1994 ------------------------------------------- Income tax benefit at statutory federal income tax rate $(1,038,000) $(1,135,000) $(694,000) Tax benefit from foreign sales corporation (38,000) (43,000) Net operating loss without benefit 907,000 1,152,000 399,000 Foreign dividend 102,000 Other, net 121,000 31,000 33,000 ------------------------------------------- $ (10,000) $ 10,000 $(203,000) ===========================================
The Company recorded refundable income taxes of $79,000 in 1994 from the carryback of net operating losses. No income tax payments were made in 1996, 1995 and 1994. The Company has federal net operating loss carryforwards of $6,796,000 to offset future taxable income. These carryforwards expire as follows: $822,000 in the year 2009, $3,306,000 in the year 2010 and $2,668,000 in the year 2011. For financial reporting purposes, valuation allowances have been recognized to offset deferred tax assets related to net operating loss carryforwards and certain other reserves. Valuation allowances amounted to $880,000, $1,572,000 and $667,000 in 1996, 1995 and 1994, respectively. -27- Alden Electronics, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 10. Subsequent Events Subsequent to March 31, 1996, the Company entered into agreements to sell a portion of its real estate holdings and equipment and inventory related to its marine product line to separate buyers. These sales of assets are not expected to result in the recognition of any significant gains or losses. The Company also entered into termination agreements with two senior executives. Compensation and termination benefits amount to approximately $210,000 which will be recognized in fiscal 1997. 11. Major Customer and Segment Information Sales and leases to the United States Government and its agencies accounted for approximately 42%, 30%, and 38% of the Company's revenue for 1996, 1995 and 1994, respectively. Foreign operations generated earnings before income taxes of $103,000, $44,000, and $67,000 in 1996, 1995 and 1994, respectively. In addition, the Company had export sales from the United States of $1,583,000, $2,942,000, and $2,115,000 in 1996, 1995 and 1994, respectively. 12. Quarterly Results of Operations (Unaudited)
Year ended March 31, 1996 First Quarter Second Quarter Third Quarter Fourth Quarter - - --------------------------------------------------------------------------------------- Revenues $3,843,487 $3,453,983 $2,914,414 $2,603,816 Gross profit 1,154,927 719,244 (156,196) 292,652 Net loss (7,263) (384,062) (1,990,859) (706,538) Net loss per share $ (.00) $ (.18) $ (.91) $ (.32)
Year ended March 31, 1995 First Quarter Second Quarter Third Quarter Fourth Quarter - - --------------------------------------------------------------------------------------- Revenues $3,821,077 $4,845,729 $ 4,629,292 $4,931,214 Gross profit 1,185,736 1,501,238 (246,905) 353,580 Net loss (72,763) (258,820) (1,862,896) (1,153,063) Net loss per share $ (.03) $ (.12) $ (.85) $ (.53)
-28- ITEM 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure. None. PART III ITEM 10. Directors and Executive Officers. (a) Identification of Directors. Year Since Expiration Other Named Person Date of Positions Has Contin- Term of with the uously Been Name Office (1) Company Age a Director - - ---- ---------- ------- --- ---------- Elizabeth J. Alden (2) None 42 1989 William L. Alden (3)(4) None 70 1971 Arnold A. Kraft President 52 1994 & Chief Executive Officer J. David Luening (3) None 61 1994 George P. Bauer (2) None 65 1995 (1) The Expiration Date of the term of office of each Director is the Deferred Annual Meeting of Stockholders scheduled for July 23, 1996. (2) Member of the Audit Committee. (3) Member of the Compensation Committee. (4) William L. Alden was also a Director during the years 1952-1955. -29- (b) Identification of Executive Officers. The following table sets forth certain information concerning each executive officer of the Company. The principal occupation of each executive officer, unless otherwise indicated in the table, has remained unchanged during the past five years. Executive Other Positions Name Office Held Age with the Company ---- ----------- --- ---------------- Arnold A. Kraft (1) President & 52 Director Chief Executive Officer Robert J. Chief Operating Wentworth (2) Officer, Treasurer 41 Clerk & Vice President of Finance and Administration John L. Vice President of Alexanderson (3) Marketing 57 None (1) Prior to joining the Company in January, 1994, Mr. Kraft served as the President and Chief Executive Officer of Bachman Information Systems, Inc., a software products and services company, for at least the preceding five years. Mr. Kraft intends to leave the Company by September 8, 1996, and it is expected that Mr. Wentworth will assume his duties and responsibilities at that time. (2) Mr. Wentworth was elected Vice President of Finance and Administration in March, 1994, and Treasurer and Clerk in September, 1993. Mr. Wentworth was elected Chief Operating Officer in June, 1996. Prior to joining the Company as Senior Controller in May, 1993, Mr. Wentworth served as an Audit Executive with Ernst & Young LLP in Boston, Massachusetts, for at least the preceding five years. (3) Mr. Alexanderson managed his own marketing firm from July, 1993 until joining the Company in May, 1994. Mr. Alexanderson also held various positions with Digital Equipment Corporation, including Vice President of Sales Training from July, 1991 to July, 1993, and Vice President of Direct Marketing for at least the preceding five years. As of July 1, 1996, Mr. Alexanderson is engaged on a part-time basis, and is expected to remain with the Company until September 1, 1996. -30- (c) Identification of Certain Significant Employees. Not Applicable. (d) Family Relationships. William L. Alden is the uncle of Elizabeth J. Alden. (e) Business Experience. Unless described in (a) or (b) above, the principal occupations and employment during the past five years of each person identified in (a) and (b) above are set forth in the following paragraphs. For at least the preceding five years, William L. Alden has been the President of a film development company, Pilgrim Productions, Ltd. For at least the preceding five years, Elizabeth J. Alden has been the President, Treasurer and Assistant Clerk of Alden Products Co., a manufacturer of components for OEM electronic equipment and a supplier of the Company. (See Item 13). For at least the preceding five years, J. David Luening has been a principal in the international management consulting firm, Marakon Associates, and from 1990 to 1993, Mr. Luening served as guest lecturer and advisor in the Graduate School of Business Administration of New York University and a Director of its Management Decision Laboratory. A former executive with IBM whose positions included Group Director of Business Systems for Europe, Africa and the Middle East, George P. Bauer has managed his own investment banking firm, G.P.B. Group, Ltd. for at least the preceding five years. Mr. Bauer also consults with profit and non-profit institutions in the United States and Europe in the area of corporate and information systems planning. He is a trustee of Yale Divinity School in New Haven, Connecticut, and a Director of Pinellas Community Bank in St. Petersburg, Florida. (f) Involvement in Certain Legal Proceedings. None. -31- (g) Compliance with Section 16(a) of the Securities Exchange Act of 1934. Section 16(a) of the Securities Exchange Act of 1934 requires officers and directors of the Company and persons who own more than ten percent of a registered class of the Company's equity securities (collectively, "Reporting Persons") to file reports of ownership and changes in ownership of the Company's Class A Common Stock with the Securities and Exchange Commission, and to furnish the Company with copies of all such reports. Based solely on its review of the copies of such reports furnished to the Company by such Reporting Persons or on the written representations of such Reporting Persons that no reports were required, the Company believes that during the fiscal year ended March 31, 1995, all of the Reporting Persons complied with their Section 16(a) filing requirements with respect to their ownership of the Company's Class A Common Stock. ITEM 11. Executive Compensation. (a) Summary Compensation Table. The Summary Compensation Table sets forth individual compensation information on the Chief Executive Officer and other executive officers of the Company and its subsidiaries whose total compensation exceeded $100,000 for services rendered in all capacities during the fiscal year ended March 31, 1996. Annual Name and Principal Compensation Options/ All Other Position Year Salary Bonus SARS (4) Compensation - - ------------------- ---- ------ ----- -------- ------------ Arnold A. Kraft (1) 1996 $180,000 1,179 (5) Chief Executive 1995 180,075 $20,000 7,241 (6) Officer 1994 31,154 110,032 John L. Alexanderson (2) 1996 $125,000 $20,000 15,000 Vice President of Marketing 1995 103,440 Robert J. Wentworth (3) 1996 $105,000 $20,000 Chief Operating Officer 1995 100,229 5,000 1994 78,489 15,000 (1) Mr. Kraft joined the Company as President and Chief Executive Officer on January 24, 1994. (2) Mr. Alexanderson joined the Company in May, 1994, and was elected a Vice President of Marketing in July, 1995. -32- (3) Mr. Wentworth joined the Company as Senior Controller in May, 1993. (4) Awards in fiscal years 1996, 1995 and 1994 represent the granting of stock options under the Company's Amended and Restated 1987 Incentive Stock Option Plan. (5) The amount reported includes $1,179 of term life insurance premiums paid by the Company on behalf of Mr. Kraft. (6) The amount reported includes a reimbursement of $6,062 for health insurance coverage maintained by Mr. Kraft's former employer, and $1,179 of term life insurance premiums paid by the Company on behalf of Mr. Kraft. (b) Individual Option Grants in Last Fiscal Year. The following table sets forth, with respect to the Executive Officers named in the Summary Compensation Table, information with respect to the aggregate number of options granted during the last fiscal year. Percentage of Total Options Granted to Employees Options in Fiscal Exercise Expiration Granted (1) Year Price Date ------- ----------- ----- ---- John L. Alexanderson 15,000 100% $2.16 5/17/05 (1) Options for 4,200 shares of the Company's Class A Common Stock vested on May 17, 1995, and options for 300 additional shares vest on the first day of each calendar month thereafter commencing July 1, 1995. (c) Aggregated Option Exercises and Fiscal Year End Option Values. The following table sets forth, with respect to the Executive Officers named in the Summary Compensation Table, information with respect to the aggregate amount of options exercised during the last fiscal year, any value realized thereon, the number of unexercised options at the end of the fiscal year (exercisable and unexercisable) and the value with respect thereto. -33- Shares Number of Unexercised Acquired on Value Options at Fiscal Exercise Realized Year End (1) ----------- -------- --------------------- Exercisable Unexercisable ----------- ----------- Arnold A. Kraft ___ ___ 67,849 42,183 John L. Alexanderson ___ ___ 6,900 8,100 Robert J. Wentworth ___ ___ 9,200 10,800 (1) As of the fiscal year end, the exercise price of such options equalled or exceeded the market price of the underlying security. (d) Compensation of Directors. The Company generally compensates outside Directors, who are not employed by the Company, at $1,000 per meeting attended. On July 25, 1995, Mr. Luening, a Director of the Company, received non-qualified stock options for 30,000 shares of the Company's Class A Common Stock at an exercise price of $2.25 per share. As of March 31, 1996, options for 13,333 shares were exercisable, and 833 1/3 shares become exercisable on the first day of each calendar month thereafter. The term of the options expires July 24, 2005. (e) Employment Contracts, Termination of Employment and Change in Control Arrangements. On April 18, 1991, the Company entered into Employment and Severance Benefits Agreements with Joseph H. Girouard and other former executive officers of the Company, Messrs. Lawrence A. Farrington and S. Charles Sviokla. The Agreements generally defined the compensation received by each of the individuals as well as the scope and term of employment. Provisions were made for severance benefits payable upon death, disability, retirement, involuntary termination without cause, and termination following change in control. Amounts paid in fiscal 1996 under these Agreements totalled $113,388. Mr. Farrington retired on May 21, 1993, and Messrs. Sviokla and Girouard retired on December 31, 1993. Under their respective Agreements, Messrs. Girouard, Farrington and Sviokla are entitled to 1 2/3 times the individual's annual salary on the date of his retirement payable over five (5) years, and, during such period, health insurance -34- coverage and a death benefit equal to the remaining payments due the individual at the time of his death. In January, 1994, the Company entered into an Employment Agreement with Arnold A. Kraft, providing for a minimum annual salary of $180,000, and a performance bonus beginning with the 1995 fiscal year. The Employment Agreement provides for, among other things, the grant of options to purchase 110,032 shares of the Company's Class A Common Stock pursuant to the Company's Amended and Restated 1987 Incentive Stock Option Plan, and severance payments in the event of a change in control. Upon a termination of Mr. Kraft's employment following a change in control, the Company is obligated to continue fringe benefits made available to Mr. Kraft during the term of the Employment Agreement and his annual salary for a period not to exceed three years following the date of his employment termination. Severance payments, including fringe benefits and salary for a one year period, are payable to Mr. Kraft should the Company terminate his employment without cause, or Mr. Kraft terminates his employment following the Company's breach of the Employment Agreement, a change in Mr. Kraft's title or a diminution of his duties, the failure of the Board to nominate Mr. Kraft for election to the Board of Directors, or to recommend to the stockholders his election to the Board of Directors, a change in the Company's principal place of business, or a change in control which is not approved by the Board of Directors. On June 10, 1996, the Company elected to terminate Mr. Kraft's employment without cause by issuing a ninety day termination notice pursuant to the terms of the Employment Agreement. Mr. Kraft will be entitled to the continuation of his salary and fringe benefits for a period of one year following expiration of the interim ninety day period. On November 15, 1995, the Company granted Robert J. Wentworth certain severance benefits, payable if the Company terminates his employment without cause. The severance benefits include the payment of base pay and certain fringe benefits for a minimum period of six months. If Mr. Wentworth remains unemployed at the end of the six month period, he will continue to receive severance benefits until the earlier of the expiration -35- of an additional three month period or the date Mr. Wentworth gains new employment. The Company's severance commitment to Mr. Alexanderson is the continuation of base pay and certain fringe benefits for a minimum of three months. If Mr. Alexanderson remains unemployed at the end of the three month period, he will continue to receive severance benefits until the earlier of the expiration of an additional three month period or the date Mr. Alexanderson gains new employment. Mr. Alexanderson and the Company have agreed that Mr. Alexanderson will receive his initial three month severance over a four month period, commencing July 1, 1996, in exchange for Mr. Alexanderson working on a part-time basis until September 1, 1996. The remainder of this page is intentionally left blank. -36- ITEM 12. Security Ownership of Certain Beneficial Owners and Management. (a) Security Ownership of Certain Beneficial Owners. The following is a table showing those who own, beneficially, more than 5% of the outstanding shares of Class B Common Stock of the Company as of June 19, 1996. Name and Amount and Percent Address of Nature of of Beneficial Owner Beneficial Ownership Class - - ----------------- -------------------- ------- Elizabeth J. Alden 7,000 Shares. (1) 28% 68 Dover Road Sole voting and Wellesley, MA 02181 investment power. 9,000 Shares. (2) 36% Shared voting and investment power. Joan K. Alden 7,000 Shares. (1) 28% 380 Grove Street Needham, MA 02192 William L. Alden 9,000 Shares. (2) 36% 40 Washington Street Shared voting and Westboro, MA 01581 investment power. Henry C. Horner 4,500 Shares. (3) 18% 370 Main Street Sole voting and Worcester, MA 01608 investment power. John Sands 1,500 Shares. 6% 5 Carpenter Lane Sole voting and Marshfield, MA 02054 investment power. Priscilla Beck 1,500 Shares. 6% 37 Oldham Road Sole voting and Pembroke, MA 02359 investment power. Janet Samson 1,500 Shares. 6% 12715 Fredericksburg Drive Sole voting and Saratoga, CA 95070 investment power. The Bank of Boston 9,000 Shares. (2) 36% 100 Federal Street Shared voting and Boston, MA 02210 investment power. -37- Frances H. Nolan 7,000 Shares. (l) 28% Miller, Wachman & Co. 40 Broad Street Boston, MA 02109 (1) Held as Trustee of the John M. Alden GST Exempt Qualified Terminable Interest Marital Deduction Trust. Elizabeth J. Alden exercises sole voting and investment control of the shares of Class B Common Stock held by the Trust. Joan K. Alden is the sole beneficiary of the Trust. (2) Held as Trustee of the Trust under Article Fifth of the Milton Alden Trust-1960. (3) These shares are held by Henry C. Horner as Trustee of the Judith G. Alden Irrevocable Trust-1986 of which William L. Alden, a Director of the Registrant, is the sole beneficiary. The remainder of this page is intentionally left blank. -38- (b) Security Ownership of Management. The following is a table showing the ownership as of June 19, 1996, by each Director of the Registrant and each Executive Officer identified in the Summary Compensation Table under Item 11 above and by all Directors and Executive Officers of the Registrant as a group of each class of equity securities of the Registrant: Name of Directors, Title Executive Officers Of Amount and Nature of Percent or Identity of Group Class Beneficial Ownership of Class - - -------------------- ------ -------------------- -------- Elizabeth J. Alden Class B (i) 9,000 Shares. 36% Shared voting and investment power. (ii) 7,000 Shares. 28% Sole voting and investment power. Class A (i) 194,612 Shares. (4) 9% (2) Shared voting (3) and investment power. (ii) 158,620 Shares. (1) 7% 2) Sole voting (3) and investment power. William L. Alden (5) Class B 9,000 Shares. 36% Shared voting and investment power. Class A 194,612 Shares. (4) 9% (2) Shared Voting (3) and investment power. J. David Luening Class A 10,000 Shares. Sole Less than voting (3) and 1% (2) investment power. George P. Bauer Class A 284,000 Shares 13% (2) Sole voting (3) and investment power. -39- All Directors & Class B (i) 9,000 Shares. 36% Officers as a Group (5) Shared voting (3) and investment power. (ii) 7,000 Shares. 28% Sole voting (3) and investment power. Class A (i) 452,620 Shares. (1) 21% (2) Sole voting (3) and investment power. (ii) 195,212 Shares. 9% (2) (4) Shared voting (3) and investment power. (1) This amount includes 49,000 shares which may be acquired upon conversion of Class B Common Stock. (2) This percentage is based upon issued shares and assumes the conversion of all shares of Class B Common Stock (25,000 shares) into the Class A Common Stock (175,000 shares). (3) See Note 5 to Financial Statements (Item 8 above) for an explanation of the voting rights of the holders of the Class A Common Stock and the Class B Common Stock. (4) This amount includes 63,000 shares which may be acquired upon conversion of Class B Common Stock. (5) Amounts shown in this table do not include 83,910 shares of Class A Common Stock and 4,500 shares of Class B Common Stock held by Henry C. Horner as Trustee of the Judith G. Alden Irrevocable Trust-1986 of which William L. Alden, a Director of the Company, is sole beneficiary. (c) Changes in Control. The Company's Class B Common Stock has sole voting rights unless more than 5,000 shares of the Class B Common Stock are converted into Class A Common Stock, at which time the holders of Class A Common Stock will have sole voting rights. ITEM 13. Certain Relationships and Related Transactions. (a) Transactions with Management and Others. Alden Products Co. may be considered a related or affiliated company to the Registrant. -40- The voting common stock of Alden Products Co. is wholly owned by Elizabeth J. Alden. Alden Products Co. is a manufacturer, and a supplier to the Company, of some of the mechanical portions of recorders and of certain other component parts. During fiscal 1996 the Company engaged in various transactions with Alden Products Co., all of which transactions have been on terms which the Company believes are no less favorable to the Company than were otherwise available on the market. Purchases from Alden Products Co. amounted to approximately $123,981 in fiscal 1996. (b) Certain Business Relationships. None, except as may be described in (a) above. (c) Indebtedness of Management. None required to be reported. (d) Transactions with Promoters. Not applicable. PART IV ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. (a) 1. Financial Statements. The following consolidated financial statements of the Registrant are included in Item 8: Report of Independent Auditors Consolidated balance sheets--March 31, 1996 and March 31, 1995. Consolidated statements of operations and retained earnings--Years ended March 31, 1996; March 31, 1995; and March 31, 1994. Consolidated statements of cash flows--Years ended March 31, 1996; March 31, 1995; and March 31, 1994. Notes to consolidated financial statements. -41- 2. Financial Statement Schedules. The following financial statement schedule of the Registrant is included in Item 14(d): Schedule II - Valuation and Qualifying Accounts. All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and, therefore, have been omitted. 3. Listing of Exhibits. A Listing of Exhibits filed as part of this Form 10-K is included on Page 45 hereof. (b) Reports on Form 8-K. There have been no filings on Form 8-K during the three months ended March 31, 1996. On June 26, 1996, the Company filed a Report on Form 8-K regarding the disposition of certain assets which occurred on June 11, 1996. (c) Exhibits. The Company hereby files as part of this Form 10-K the exhibits listed in Item 14(a)3 above. (d) Financial Statement Schedule. See next page for financial statement schedule. -42- Alden Electronics, Inc. Schedule II - Valuation and Qualifying Accounts March 31, 1996
Col. A Col. B Col. C Col. D Col. E - - ----------------------------------------------------------------------------------------------------------------------------------- Additions (1) (2) Balance at Beginning Charged to Charged to Other Deductions Balance at End Description of Period Costs & Expenses Accounts (describe) (describe) of Period - - ----------------------------------------------------------------------------------------------------------------------------------- Allowance for Doubtful Accounts: Year Ended March 31, 1996 $ 42,000 $ 140,402 $ 69,402 (A) $ 113,000 Year Ended March 31, 1995 $ 40,000 $ 22,515 $ 20,515 (B) $ 42,000 Year Ended March 31, 1994 $ 36,000 $ 15,000 $ 11,000 (C) $ 40,000
(A) This amount represents amounts charged off as uncollectible of $69,402 (B) This amount represents amounts charged off as uncollectible of $20,515 (C) This amount represents amounts charged off as uncollectible of $11,000 -43- SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ALDEN ELECTRONICS, INC. /s/ Robert J. Wentworth ------------------------------ Robert J. Wentworth, Treasurer & Chief Financial Officer Date: July 15, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. SIGNATURE TITLE DATE - - --------- ----- ----- /s/ Arnold A. Kraft President & Chief July 15, 1996 - - ------------------------ Executive Officer Arnold A. Kraft (Principal Executive Officer), Director /s/ William L. Alden - - -------------------- Director July 11, 1996 William L. Alden /s/ Elizabeth J. Alden Director July 12, 1996 - - ---------------------- Elizabeth J. Alden - - -------------------- Director -------------- J. David Luening /s/ George P. Bauer Director July 12, 1996 - - ------------------- George P. Bauer -44- LIST AND INDEX OF EXHIBITS Item Incorporated By Number Description Reference To 3.1 Restated Articles Form 10-K for fiscal of Organization year ended March 27, 1982 3.2 Amendment to Form 10-K for fiscal Articles of year ended Organization March 26, 1983 effective June 13, 1983 3.3 Amendment to Form 10-K for fiscal Articles of year ended March 28, Organization 1987 effective March 30, 1987 3.4 By-Laws, as Form 10-K for fiscal amended to date year ended March 31, 1994 4.1 Specimen Stock Form 10, Exhibit 3; Certificate, Class S-1 Registration A Common Stock Statement (No. 2-27991) Exhibit 4(A) 10.1 Amended and Restated Form 10-K for fiscal 1987 Incentive year ended March 31, 1994 Stock Option Plan 10.2 Loan Agreement Form 10-K for with Shawmut fiscal year ended Bank, N.A. dated March 31, 1995 August 5, 1994 10.3 $483,354 Secured Term Form 10-K for Note dated August 5, fiscal year ended 1994 to Shawmut March 31, 1995 Bank, N.A. 10.4 $1,500,000 Secured Form 10-K for Revolving Time Note fiscal year ended to Shawmut Bank, N.A. March 31, 1995 dated August 5, 1994 -45- 10.5 Financing Commitment Form 10-K for Letter from Shawmut fiscal year ended Bank dated June 12, March 31, 1995 1995 10.6 Modification Agreement dated November 21, 1995 with Shawmut Bank, N.A. 10.7 Employment and Form 10-K for fiscal Severance Benefits year ended March 30, Agreement with 1991 Joseph H. Girouard, dated April 18, 1991. 10.8 Employment and Form 10-K for fiscal Severance Benefits year ended March 30, Agreement with 1991 Lawrence A. Farrington dated April 18, 1991. 10.9 Employment and Form 10-K for fiscal Severance Benefits year ended March 30, Agreement with 1991 S. Charles Sviokla dated April 18, 1991. 10.10 Employment Agreement Form 10-K for fiscal with Arnold A. Kraft year ended March 31, 1994 dated January 24, 1994 10.11 Severance Agreement with Robert J. Wentworth dated November 15, 1995 10.12 Severance Agreement with John L. Alexanderson dated May 19, 1994 11 Statement re: Note 2 to the Financial Computation of Statements in Item 8 per share earnings of this Form 10-K -46- 21 Subsidiaries of Form 10-K for fiscal the Registrant year ended March 28, 1987 23 Consent of Independent Auditors 27 Financial Data Schedule 30641 -47-
EX-10.6 2 MATERIAL CONTRACTS MODIFICATION AGREEMENT This Modification Agreement (the "Agreement"), dated as of November 21, 1995 between Alden Electronics, Inc. (the "Borrower"), a duly organized and existing Massachusetts corporation with a place of business at 40 Washington Street, Westborough Massachusetts 01581 and Shawmut Bank, N.A. (the "Bank"), a national banking association with a place of business at One Federal Street, Boston Massachusetts 02211. RECITAL OF FACTS WHEREAS, the Borrower entered into a Loan Agreement dated August 5, 1994 pursuant to which the Bank advanced the Borrower a total of $1,983,354. The sums advanced under the Loan Agreement are evidenced by (i) a Secured Term Note dated August 5, 1994 in the original principal amount of $483,354 made by the Borrower payable to the Bank (the "$483,354 Note"); and (ii) a Secured Revolving Time Note dated August 5, 1994 in the original principal amount of $1,500,000 made by the Borrower payable to the Bank(the "$1.5 Million Note"). The $483,354 Note and the $1.5 Million Note are together referred to herein as the "Notes"; and WHEREAS, the Notes are secured by, among other things, a Security Agreement (All Assets) dated August 5, 1994 (the "Borrower Security Agreement") covering all of the assets of the Borrower; and WHEREAS, the Borrower's obligations under the Notes were guaranteed by (i) the Unlimited Guaranty of Alfax Paper & Engineering Company, Inc. ("Alfax") dated August 5, 1994 (the "Alfax Guaranty"), (ii) the Unlimited Guaranty of Alden International, Inc. ("Alden International") dated August 5, 1994 (the "Alden International Guaranty"), (iii) and the Unlimited Guaranty of Zephyr Weather Information Service, Inc. ("Zephyr") dated August 5, 1994 (the "Zephyr Guaranty"). Alfax, Alden International and Zephyr are collectively referred to herein as the "Guarantors." The Alfax Guaranty, Alden International Guaranty and the Zephyr Guaranty are collectively referred to herein as the "Guaranties"; and WHEREAS, the Alfax Guaranty is secured by a certain Security Agreement (All Assets) dated August 5, 1994 (the "Alfax Security Agreement") covering all of the assets of Alfax, the Alden International Guaranty is secured by a certain Security Agreement (All Assets) dated August 5, 1994 (the "Alden International Security Agreement") covering all of the assets of Alden -1- International, and the Zephyr Guaranty is secured by a certain Security Agreement (All Assets) dated August 5, 1994 (the "Zephyr Security Agreement") covering all of the assets of Zephyr. The Alfax Security Agreement, Alden International Security Agreement and Zephyr Security Agreement are collectively referred to herein as the "Guarantor Security Agreements". The Loan Agreement, Notes, Borrower Security Agreement, Guaranties and the Guarantor Security Agreements and any and all documents executed in connection therewith or incidental thereto are collectively referred to herein as the "Loan Documents"; and WHEREAS, the Borrower has not complied with certain financial covenants as set forth in the Loan Agreement and the $483,354 Note and therefore is in default of the $483,354 Note. As a result, the balance of the $483,354 Note is due and payable immediately. The $1.5 Million Note matured on September 1, 1995 and the balance thereof was fully due and payable on that date. As a result of the Borrower's failure to pay the balance of the $1.5 Million Note upon maturity the Borrower is in default under the $1.5 Million Note. As a consequence of the Borrower's defaults the Bank may exercise all of its rights and remedies under the Loan Documents, including, foreclosing upon its collateral; and WHEREAS, as of November 21, 1995 the unpaid balances of (i) the $483,354 Note equaled $362,514 in principal and $1,812.57 in accrued but unpaid interest, and (ii) the $1.5 Million Note equaled $450,000.00 in principal and $2,401.39 in accrued but unpaid interest. Thus, the Borrower's and the Guarantors' total indebtedness to the Bank under the Notes as of November 21, 1995 equaled $816,727.96 (the "Indebtedness"); and WHEREAS, the Borrower has requested that the Bank refrain from exercising its rights and remedies and modify certain terms of the Loan Documents and the Bank has agreed to do so, subject to the terms and provisions set forth herein, which include, among other things, an extension of the maturity date of the $1.5 Million Note and an acceleration of the maturity date of the $483,354 Note. NOW THEREFORE, in consideration of the foregoing recitals and the mutual covenants and agreements contained herein, and in reliance upon the representations and warranties set forth below and for good and valuable consideration, the Borrower, Guarantors and the Bank hereby agree as follows: -2- 1. Incorporation of Recitals. The above recitals are incorporated herein by reference and are expressly made a part hereof. 2. Ratification of Obligations. The Borrower and the Guarantors, as applicable, hereby ratify and confirm in all respects and without condition all of the terms and provisions of the Loan Documents, as modified herein and each agrees that said terms and provisions, except to the extent expressly modified herein or therein, continues in full force and effect. Without limiting the foregoing, the Borrower and the Guarantors, as applicable, expressly acknowledge that the Borrower Security Agreement and the Guarantor Security Agreements, as applicable, constitute valid liens on the assets described therein. With respect to the payment and performance of any obligation under the Loan Documents, as modified herein, the Borrower and the Guarantors acknowledge and agree that as of the date hereof they do not have any defense, right of setoff, recoupment or counterclaim against the Bank, all of which together are hereby waived. 3. Modification of $483,354 Note. The Borrower hereby agrees that the $483,354 Note shall be modified and repaid as follows notwithstanding anything contained in the $483,354 Note to the contrary: (a) Maturity Date - The maturity date of the $483,354 Note, as amended, upon which all unpaid principal, accrued and unpaid interest, fees, and other costs relating thereto shall be due and payable, shall be June 30, 1996; and (b) Interest Rate - Commencing as of the date of this Agreement, interest shall accrue on the outstanding principal balance of the $483,354 Note, as amended, at a variable rate per year of two (2%) percentage points in excess of the Base Rate of interest in effect from time to time at the Bank. The Bank's "Base Rate" shall mean the rate of interest announced by the Bank from time to time as its Base Rate. Interest shall be computed on the basis of a 360-day year and on actual days elapsed; and (c) Monthly Payments - The outstanding indebtedness due under the $483,354 Note shall be payable in the total number of 8 payments of principal and interest, with each of the first 7 payments to consist of principal in the amount of $8,083 plus interest, and the final payment to consist of the entire unpaid principal balance plus accrued interest thereon. The first of said payments of principal and interest is to be made on December 1, 1995 and the remainder of said payments are payable on the -3- corresponding day of each succeeding month, with the final payment, unless sooner paid, to be made on the maturity date of June 30, 1996; and (d) Default Rate - Upon the first to occur of (i) the maturity date of the $483,354 Note, unless extended in writing by the Bank, or (ii) an Event of Default under any of the Loan Documents or hereunder, without notice or demand, the same being expressly waived, the aggregate per annum rate of interest charged pursuant to the $483,354 Note shall be increased, at the option of the Bank, to the greater of a rate which is equal to eighteen percent (18%) per annum (or the maximum amount permitted by law, if lesser) until such Event of Default is cured to the satisfaction of the Bank and waived in writing by the Bank. Further, the Bank may collect a late charge not to exceed five percent (5%) of any installment of interest or principal, or any other amount due to the Bank which is not paid or reimbursed by the Borrower within fifteen (15) days of the due date thereof to defray the extra cost and expense involved in handling such delinquent payment and the increase risk of noncollection. The minimum late charge shall be Fifteen Dollars ($15.00). Except as expressly modified herein, all of the terms and conditions of the $483,354 Note and the Loan Agreement shall remain in full force and effect. 4. Modification of $1.5 Million Note. The Borrower hereby agrees that the $1.5 Million Note shall be modified and repaid as follows notwithstanding anything contained in the $1.5 Million Note to the contrary. (a) Maturity Date - The maturity date of the $1.5 Million Note, upon which all unpaid principal, accrued and unpaid interest, fees, and other costs relating thereto shall be due and payable, shall be June 30, 1996; and (b) Interest Rate - Commencing as of the date of this Agreement, interest shall accrue on the outstanding principal balance of the $1.5 Million Note at a variable rate per year of two (2%) percentage points in excess of the Base Rate of interest (as defined in the $1.5 Million Note) in effect from time to time at the Bank; and (c) Monthly Payments - The Borrower shall make monthly payments to the Bank in an amount equal to the monthly accrued interest (at the rate set forth above) on the unpaid balance of the $1.5 Million Note, payable in arrears on the first day of each calendar month, commencing on December 1, 1995 until -4- maturity on June 30, 1996 whereupon all unpaid principal, accrued and unpaid interest, fees and other costs relating thereto shall be due and payable. In addition to the payments due under the $1.5 Million Note as set forth above, the Borrower also agrees that it shall also make the following payments to the Bank on or before the corresponding dates referenced below, which shall be applied first to any outstanding accrued interest under the $1.5 Million Note, and then to the principal balance thereof: Date of Payment Payment Amount --------------- -------------- February 1, 1996 $50,000 May 1, 1996 $50,000 The Borrower acknowledges and agrees that notwithstanding anything contained in the Loan Agreement to the contrary, the Borrower's ability to obtain advances under its line of credit are hereby terminated and the Bank shall not be obligated to advance or readvance any additional amounts to the Borrower under the Loan Agreement or the $1.5 Million Note. (d) Default Rate - Upon the first to occur of (i) the maturity date of the $1.5 Million Note, unless extended in writing by the Bank, or (ii) an Event of Default under any of the Loan Documents or hereunder, without notice or demand, the same being expressly waived, the aggregate per annum rate of interest charged pursuant to the $1.5 Million Note shall be increased, at the option of the Bank, to the greater of a rate which is equal to eighteen percent (18%) per annum (or the maximum amount permitted by law, if lesser) until such Event of Default is cured to the satisfaction of the Bank and waived in writing by the Bank. Further, the Bank may collect a late charge not to exceed five percent (5%) of any installment of interest or principal, or any other amount due to the Bank which is not paid or reimbursed by the Borrower within fifteen (15) days of the due date thereof to defray the extra cost and expense involved in handling such delinquent payment and the increase risk of noncollection. The minimum late charge shall be Fifteen Dollars ($15). Except as specifically modified herein, all of the terms and conditions of the $1.5 Million Note and the Loan Agreement shall remain in full force and effect. 5. Additional Security for Notes. Prior to the execution of this Agreement and as a condition precedent hereto, (i) the Borrower shall execute and deliver to the Bank a first mortgage -5- in form and substance satisfactory to the Bank covering the premises known as 40 Washington Street, Westborough, Massachusetts (the "40 Washington Street Premises"); and (ii) Alfax shall execute and deliver to the Bank a first mortgage in form and substance satisfactory to the Bank covering the premises known as 35 Washington Street, Westborough, Massachusetts (the "35 Washington Street Premises"). The 40 Washington Street Premises and the 35 Washington Street Premises are together referred to herein as the "Mortgaged Premises". 6. Fees Payable to Bank. In consideration of the Bank agreeing to enter into this Agreement, the Borrower shall pay the Bank following fees (in addition to the amounts otherwise due under the Notes) on or before the corresponding dates referenced below: Date of Fee Payment Fee Amount ------------------- ---------- November 21, 1995 $4,500 (i.e. one percent (1%) of balance due under $1.5 Million Note as of the date hereof). December 31, 1995 An amount equal to one percent (1%) of the then outstanding balance due under the $483,354 Note. December 31, 1996 An amount equal to one percent (1%) of the then outstanding balance due under the $1.5 Million Note. March 31, 1996 An amount equal to one percent (1%) of the then outstanding balance due under the $483,354 Note. March 31, 1996 An amount equal to one percent (1%) of the then outstanding balance due under the $1.5 Million Note. 7. Reimbursement of Legal Fees. Prior to the execution of this Agreement, the Borrower shall reimburse the Bank for legal fees and expenses in the amount of $6,388.95 (the "Legal Fee") which have been incurred by the Bank in connection with the preparation and negotiation of this Agreement, provided however, -6- that the payment of the Legal Fee does not constitute a waiver of the Bank's right to obtain reimbursement for legal fees incurred after the date hereof to the extent provided in the Loan Documents. 8. Conditions. The following conditions constitute conditions precedent to the effectiveness of this Agreement and shall be performed prior to the execution hereof. (a) The Borrowers shall pay the costs of obtaining a title insurance policy insuring that the mortgages to be taken on the Mortgaged Premises are valid and perfected first priority liens. (b) The Borrower and Alfax shall provide the Bank with evidence, satisfactory to the Bank, that all real property taxes due and payable with respect to each of the Mortgaged Premises have been paid in full. (c) The Borrower and Alfax shall provide the Bank with evidence, satisfactory to the Bank, that the Mortgaged Premises are satisfactorily insured in accordance with the terms of the Mortgages to be taken and that the Bank is named as mortgagee/loss payee. (d) The Borrower and the Guarantors shall provide the Bank with the following authority documents in form and substance satisfactory to the Bank, which certify that they are legally authorized to execute this Agreement and perform the undertakings described herein on behalf of the Borrower. (i) Secretary's Certificate of incumbency and Authorization with Articles of Organization and By Laws; (ii) Certificate of Legal Existence and Good Standing. (e) The Guarantors shall execute ratifications of their Guaranties in form and substance satisfactory to the Bank. 9. Covenants. Without any prejudice or impairment whatsoever to any of the Bank's rights and remedies contained in the Loan Documents, the Borrower and the Guarantors, as applicable, covenant and agree with the Bank as follows: (a) The Borrower and Guarantors shall comply with all the terms, covenants and provisions contained in the Loan Documents, except as such terms, covenants and provisions are -7- expressly modified by this Agreement upon the terms set forth herein. (b) The covenant regarding the Borrower's Maximum Debt to Tangible Net Worth Ratio as set forth in Section 4.9 of the Loan Agreement is hereby amended such that the reference to the phrase "fifty (50%) percent" therein shall be deleted and replaced with "sixty five (65%) percent". (c) The Borrower shall not permit its Current Ratio to fail below 1.75 to 1.00 at the end of any calendar month during the term of the Notes. "Current Ratio" means the ratio of Total Current Assets to Total Current Liabilities. "Total Current Assets" means total current assets determined in accordance with GAAP. "Total Current Liabilities" means the total current indebtedness under the Notes as determined in accordance with GAAP. (d) Upon request, the Guarantors shall provide to the Bank annually, (i) financial statements; (ii) tax returns; and (iii) credit reports in form and substance satisfactory to the Bank which must demonstrate to the Bank's satisfaction that there has been no material adverse change in the Borrower's and Guarantors' consolidated financial condition. (e) The Borrower shall at any time or from time to time execute and deliver such further instruments, and take such action as the Bank may reasonably request, in each case further to effect the purpose of this Agreement and the Loan Documents. 10. Default. The occurrence of any one or more of the following events shall constitute an event of default under this Agreement: (a) The failure of the Borrower to pay any amounts required to be paid under the Notes, as amended, or this Agreement as and when due, including, payments due under the Notes upon maturity, it being expressly agreed that time is of the essence; (b) The failure of the Borrowers to comply with each and every term of this Agreement as and when due, it being expressly agreed that time is of the essence; or (c) The occurrence of any default or event of default under either the Notes, as amended, the mortgages, or any of the Loan Documents or any other document, instrument or agreement -8- evidencing the loan arrangements between the Bank and the Borrower, it being expressly agreed that time is of the essence. Upon the occurrence of any such event of default, the Notes, as amended shall become immediately due and payable in full without further demand, notice, or protest, all of which are hereby expressly waived by the Borrower, and the Bank may immediately commence enforcing its rights and remedies under the Loan Documents, including, without limitation, the commencement of foreclosure proceedings against its collateral. 11. Representation and Warranties. The Borrower and the Guarantors, as applicable, hereby warrant and represent to the Bank as follows: (a) The liens evidenced by the Borrower's Security Agreement and the Guarantor Security Agreements constitute valid and duly perfected liens on the collateral described therein. Further, no person or entity has a lien on the collateral or any of the Bank's other collateral covered by the Loan Documents and neither the Borrower nor the Guarantors shall take any action to impair the Bank's liens. (b) The Borrowers and the Guarantors' obligations, indebtedness and liabilities to the Bank under the Loan Documents are joint and several. (c) The Borrower and the Guarantors have no counterclaims, rights of setoff or defenses of any kind with respect to their obligations, liabilities and indebtedness. 12. Release of Bank. The Borrower and Guarantors remit, release and forever discharge the Bank and each of the Bank's present, future and former officers, directors, employees and agents from any and all claims, losses, liabilities, demands and causes of action of any kind whatsoever, if any, whether absolute or contingent, known or unknown, matured or unmatured that the Borrower and the Guarantors may now have or ever have as of the date hereof, and related to the Borrower's and Guarantors' lending relationship with the Bank, in whatever capacity, against the Bank or its present, future or former officers, directors, employees and agents. 13. Waiver of Jury Trial. THE BORROWER AND GUARANTORS KNOWINGLY, VOLUNTARILY, INTENTIONALLY AND IRREVOCABLY WAIVE ANY RIGHT THEY MAY HAVE OR HEREAFTER HAVE TO A TRIAL BY JURY IN ANY PROCEEDING HEREAFTER INSTITUTED BY OR AGAINST ANY OF THEM IN RESPECT OF THE LOAN DOCUMENTS OR THIS AGREEMENT OR THE UNDERLYING -9- TRANSACTIONS. THE BORROWER AND GUARANTORS CERTIFY THAT NEITHER THE BANK NOR ANY OF ITS REPRESENTATIVES, AGENTS OR COUNSEL HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE BANK WOULD NOT, IN THE EVENT OF ANY SUCH PROCEEDING, SEEK TO ENFORCE THIS WAIVER OF RIGHT TO TRIAL BY JURY. 14. No Waiver. Except as otherwise expressly provided for in this Agreement, upon the maturity of the Notes, a default under the Loan Documents, or upon the Borrower's failure to fulfill any of its obligations hereunder (including but not limited to a violation of the covenants, warranties or representations contained herein), the Bank shall be free in its sole and absolute discretion to proceed to enforce any and all of its rights and remedies under or in respect of the Loan Documents, as amended pursuant to this Agreement, or applicable law. All of the Borrower's and the Guarantors' obligations and liabilities to the Bank under the Loan Documents and hereunder, including, without limitation, the Borrower's payment obligations, are confirmed and ratified in all respects and all of such obligations shall continue to be secured as provided for in the Loan Documents. Except as specifically provided for herein, nothing in this Agreement shall in any way affect any of the Borrowers or the Guarantors' obligations or any of the rights and remedies of the Bank arising under the Loan Documents, and the Bank shall not be deemed to waive any or all of such rights or remedies with respect to any default which has occurred (except with respect to the Borrower's default of certain financial covenants, which defaults occurring through the date hereof but not after the date hereof, are hereby waived) or shall occur under the Loan Documents, or of any condition which, with notice or the lapse of time, or both, would become an event of default under the Loan Documents and which, upon the Borrower's execution and delivery of this Agreement might otherwise exist or which might hereafter occur. 15. Headings. All headings contained in this Agreement are for reference purposes only and are not intended to affect in any way the meaning or interpretation of this Agreement. 16. Governing Law. This Agreement shall be governed by the laws of the Commonwealth of Massachusetts and the Borrower and the Guarantors specifically and irrevocably consent to the jurisdiction and venue of the Commonwealth of Massachusetts with respect to all matters concerning this Agreement or the Loan Documents or the enforcement of any of the foregoing. 17. Binding Affect. This Agreement shall inure to, and be binding upon, the parties hereto in the same manner and to the -10- same extent as is set forth in the Loan Documents. In any case where the provisions of this Agreement differ from the provisions of the Loan Documents, then the provisions of this Agreement shall have effect over those in the Loan Documents. 18. Voluntary Agreement. The Borrower and Guarantors represent and warrant that they are represented by counsel and that they are fully aware of the terms contained in this Agreement and have voluntarily and without coercion of any kind, entered into this Agreement and the documents executed in connection with this Agreement. IN WITNESS WHEREOF, the undersigned have each caused this Agreement to be duly executed and delivered as an instrument under seal effective as of the date first written above. WITNESS: SHAWMUT BANK, N.A. - - --------------------------- By: /s/ Robert Foley --------------------------- Robert Foley, Vice President ALDEN ELECTRONICS, INC. - - ---------------------------- By: /s/ Robert Wentworth --------------------------- Robert Wentworth, Treasurer GUARANTORS: ALFAX PAPER & ENGINEERING COMPANY, INC. - - ---------------------------- By: /s/ Robert Wentworth --------------------------- Robert Wentworth, Treasurer ALDEN INTERNATIONAL, INC. - - ---------------------------- By: /s/ Robert Wentworth --------------------------- Robert Wentworth, Treasurer -11- ZEPHYR WEATHER INFORMATION SERVICE, INC. - - ----------------------------- By: /s/ Robert Wentworth --------------------------- Robert Wentworth, Treasurer COMMONWEALTH OF MASSACHUSETTS Suffolk, ss. November 21, 1996 Then personally appeared the above named Robert Foley, Vice President, Shawmut Bank, N.A. and acknowledged the foregoing instrument to be the free act and deed of said Bank, before me. /s/ Kim M. Viera ---------------------------------- Notary Public My Commission Expires: June 18, 1999 COMMONWEALTH OF MASSACHUSETTS Suffolk, ss. November 21, 1996 Then personally appeared the above named Robert Wentworth, Treasurer, Alden Electronics, Inc. and acknowledged the foregoing instrument to be the free act and deed of the Company, before me. /s/ Kim M. Viera ----------------------------------- Notary Public My Commission Expires: June 18, 1999 -12- COMMONWEALTH OF MASSACHUSETTS Suffolk, ss. November 21, 1996 Then personally appeared the above named Robert Wentworth, Treasurer, Alfax Paper & Engineering, Inc. and acknowledged the foregoing instrument to be the free act and deed of the Company, before me. /s/ Kim M. Viera ------------------------------------ Notary Public My Commission Expires: June 18, 1999 COMMONWEALTH OF MASSACHUSETTS Suffolk, ss. November 21, 1996 Then personally appeared the above named Robert Wentworth, Treasurer, Alden International, Inc. and acknowledged the foregoing instrument to be the free act and deed of the Company, before me. /s/ Kim M. Viera ------------------------------------ Notary Public My Commission Expires: June 18, 1999 COMMONWEALTH OF MASSACHUSETTS Suffolk, ss. November 21, 1996 Then personally appeared the above named Robert Wentworth, Treasurer, Zephyr Weather Information Service, Inc. and acknowledged the foregoing instrument to be the free act and deed of the Company, before me. /s/ Kim M. Viera ----------------------------------- Notary Public My Commission Expires: June 18, 1999 -13- EX-10.11 3 MATERIAL CONTRACTS November 15, 1995 Mr. Robert W. Wentworth 21 Holt Street Hopkinton, MA 01748 Dear Bob: In recognition of your continuing contributions to Alden Electronics, we are pleased to extend to you a severance arrangement as follows, should one ever be needed. In the event of Alden terminating your employment for other than good cause, we agree to pay 6 months of base pay as severance, payable monthly; and an additional 3 months of base pay payable monthly, until the sooner of you gain new employment or the additional 3 months is over. Alden Electronics will also pay your insurance costs in the amounts that would normally be paid to you as an employee until you find new employment or the total of 9 months is up. Sincerely, /s/ Arnold A. Kraft - - ------------------- Arnold A. Kraft President & CEO EX-10.12 4 MATERIAL CONTRACTS Thursday, May 19, 1994 Mr. John Alexanderson 61 Bartlett Hill Concord, MA 01742 Dear John: Alden is pleased to offer to you the position of Manager, Weather Division, of Alden Electronics, Inc. The salary will be $125,000 base and $25,000 incentive per year. The incentive portion will be payable based on a set of mutually agreed upon goals and objectives. Subject to Board of Director's approval, we will grant to you 15,000 stock options that vest as follows: 4200 at the end of 12 months and 300 per month for the next 36 months. These options have a 10 year term. Alden offers a choice of medical and dental insurance coverage plans. Attached is the descriptive literature for our 3 choices. You will need to pay a portion of the cost of coverage, per the attached schedule. There is a non-contributory 401k plan, details attached. We are in the process of revising our vacation and sick day policy and will forward a copy of those updated policies as soon as they are completed, which is expected to be in 2 to 3 weeks. In the event of Alden terminating your employment for other than good cause, we agree to pay 3 months of base pay as severance, payable monthly; and an additional 3 months of base pay payable monthly, until the sooner of you gain new employment or the additional 3 months is over. We understand and agree that you have a long standing commitment to assist a company in the area in an advisory capacity and wish to continue to do so for about 2 hours per month. It is understood that this is not a competitive situation. We look forward to your joining the Alden Electronics team in the very near future. Sincerely, /s/ Arnold A. Kraft - - ------------------- Arnold A. Kraft President & CEO EX-23 5 CONSENT OF ERNST & YOUNG LLP CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statement (Form S-8, No. 33-17434) pertaining to the 1987 Incentive Stock Option Plan and Registration Statement (Form S-8, No. 33-81928-3) pertaining to the Amended and Restated Alden Electronics, Inc. 1987 Incentive Stock Option Plan and in the related Prospectuses of our report dated June 21, 1996 with respect to the consolidated financial statements and schedule of Alden Electronics, Inc. included in the Annual Report (Form 10-K) for the year ended March 31, 1996. ERNST & YOUNG LLP Boston, Massachusetts July 11, 1996 31848 EX-27 6 FINANCIAL DATA SCHEDULE
5 1000 U.S. Dollars 12-MOS MAR-31-1996 APR-01-1995 MAR-31-1995 1000 209 0 2200 113 1723 4172 11762 8600 7364 3711 0 0 0 2010 1618 7364 12767 12807 10796 15008 767 0 130 0 (10) (3089) 0 0 0 (3089) (1.41) (1.41)
-----END PRIVACY-ENHANCED MESSAGE-----