UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended July 3, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file No. 00-19800
GIBRALTAR PACKAGING GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 47-0496290
(State of incorporation) (IRS Employer Identification No.)
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2000 SUMMIT AVENUE
HASTINGS, NEBRASKA 68901
(Address of principal executive offices) (Zip Code)
(402) 463-1366
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(Title of class)
Indicate by check mark whether the registrant (1) has filed 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 |_|
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 the Form 10-K. |X|
The aggregate market value of voting stock held by nonaffiliates of the
registrant on September 14, 1999 was $2,823,743 (based upon the September 14,
1999 closing sale price of the common stock as reported on the NASDAQ
Over-The-Counter Bulletin Board).
The number of shares of common stock of the registrant outstanding as
of September 14, 1999 was 5,041,544 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Items 10, 11, 12 and 13 of Part III are incorporated by reference to
the definitive proxy statement relating to the registrant's Annual Meeting of
Stockholders for fiscal 1999, which definitive proxy statement will be filed
within 120 days of the end of the registrant's fiscal year.
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TABLE OF CONTENTS
PART I
Page
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Item 1 Business.............................................................................................1
Item 2. Properties...........................................................................................8
Item 3. Legal Proceedings....................................................................................8
Item 4. Submission of Matters to a Vote of Security Holders..................................................9
PART II
Item 5. Market for the Registrant's Common Equity
and Related Stockholder Matters.....................................................................10
Item 6. Selected Financial Data.............................................................................11
Item 7. Management's Discussion and Analysis of
Financial Conditions and Results of Operations......................................................12
Item 8. Financial Statements and Supplementary Data.........................................................18
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure..............................................................18
PART III
Item 10. Directors and Executive Officers of the Registrant..................................................19
Item 11. Executive Compensation..............................................................................19
Item 12. Security Ownership of Certain
Beneficial Owners and Management....................................................................19
Item 13. Certain Relationships and Related Transactions......................................................19
PART IV
Item 14. Exhibits, Financial Statement
Schedules, and Reports on Form 8-K..................................................................20
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PART I
ITEM 1. BUSINESS
GENERAL
Gibraltar Packaging Group, Inc. ("Gibraltar," or the "Company") designs,
manufactures and markets packaging products for a number of consumer and
industrial markets. The Company is the combination of several previously
independent packaging companies, each with its own distinctive products,
customer base and geographic focus. The acquisitions of Standard Packaging &
Printing Corp. ("Standard Packaging"), Niemand Industries, Inc. ("Niemand"), and
GB Labels, Inc. ("GB Labels") in 1993 expanded the Company's products from
folding cartons and specialty laminated containers to include tubular,
spiral-wound paper packaging, flexible poly-film packaging, contract packaging
and filling and pressure-sensitive labels. In August 1998 the Company announced
its strategy to refocus on its core capabilities in folding cartons. In April
1999 the Company sold the assets of the container portion of Niemand to Robinson
JDM Ltd. as a part of this strategy. In August 1999, the Company continued to
implement its revised strategy with the sale of the assets of GB Labels to
J.I.T. Manufacturing, Inc. The Company will complete its refocus when it sells
the remaining assets of the Niemand business, which is expected by the end of
the second quarter of fiscal 2000. Although most of the Company's sales are made
to customers located in the central and southern regions of the United States,
the Company sells its products to customers throughout the nation. The Company
derives its sales from a diverse market base, primarily comprised of the
following markets: textiles, food, pharmaceutical, auto aftermarket parts,
office supplies and paper products, household and industrial products, cosmetics
and personal care and toys.
In fiscal 1999, the Company served approximately 900 customers from five
divisions: Gibraltar Packaging Group, Inc. (dba "Great Plains Packaging", or
"Great Plains") in Hastings, Nebraska; RidgePak Corporation (dba "Flashfold
Carton") in Fort Wayne, Indiana; Niemand in Marion, Alabama; Standard Packaging
in Mount Gilead, North Carolina and GB Labels in Burlington, North Carolina.
When Gibraltar has finalized implementation of its refocused strategy, the
Company estimates the resulting customer base to be approximately 650. The
Company believes the three folding carton divisions are situated to enhance its
competitive position by providing broader geographic coverage, enabling the
Company to serve customers that operate from several locations. The Company
intends to focus on the folding carton business and increase sales and
profitability of these packaging products.
Gibraltar's predecessor was incorporated under the name GPC Co. in
Nebraska in 1967 and subsequently changed its name to Great Plains Packaging Co.
in 1986. In 1991, Great Plains Packaging Co. was reincorporated in Delaware, and
its name was changed to Gibraltar Packaging Group, Inc. As previously announced,
Gibraltar relocated its executive offices from Westport, Connecticut to
Hastings, Nebraska in November 1998, which are now located at 2000 Summit
Avenue, Hastings, Nebraska 68901. The Company's telephone number is (402)
463-1366.
MANUFACTURING PRODUCTS AND PROCESSES
As a result of the sale of certain divisions as described above, the
Company now offers five types of packaging products. The Company had previously
offered its customers seven types of packaging products, all of which are
described below.
FOLDING CARTONS
The Company designs, manufactures and markets a variety of printed
folding cartons, which are purchased by customers in a variety of consumer and
industrial markets. The
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Company's customers use folding cartons for both the shipment and retail display
of the customers' products. Sales of folding cartons represented approximately
63% of the Company's net sales for the year ended July 3, 1999, approximately
62% of the Company's net sales for the year ended June 27, 1998 and
approximately 59% of the Company's net sales for the year ended June 28, 1997.
The Company believes that recent trends in the folding carton market
favor manufacturers that can produce creative graphics to enhance visual
presentation, point-of-sale appeal and product differentiation. Specialty
packaging designed to address these needs often includes graphics with
high-resolution print, more colors and innovative designs. The Company's
internal design teams have won numerous industry awards, due, in part, to the
Company's emphasis on product design. The Company believes that its design
resources enhance its competitiveness in the folding carton market, and results
in increased profitability.
Folding cartons are produced at the Company's production facilities in
Hastings, Nebraska; Fort Wayne, Indiana; and Mount Gilead, North Carolina. After
a customer's order is received, paperboard purchased from outside suppliers in
rolled form is converted into sheets with sheeting equipment, in sizes specified
by the customer. The Company's customers supply graphic disks, artwork or film.
The Company then creates specialized printing plates which are used in the
printing of paperboard sheets on multicolor offset printing presses. The printed
board is then cut, creased, embossed, folded and glued into individual cartons
and packaged for shipment to customers.
In June 1996, the Company's Hastings, Nebraska facility became the sixth
folding carton plant in the United States to achieve ISO 9001 certification, the
rigorous international quality standard. In January 1998 the Company's Fort
Wayne, Indiana facility also achieved ISO 9001 certification. The facility in
Mount Gilead, North Carolina is currently working toward certification, although
a completion date has yet to be determined. ISO (International Organization for
Standardization) is steadily becoming a worldwide standard for quality
management. It requires a company to codify its quality program by defining and
documenting its quality system.
FLEXIBLE POLY-FILM PACKAGING
Flexible packaging sales represented approximately 9% of the Company's
net sales for each of the years ended July 3, 1999 and June 27, 1998 and
approximately 8% of the Company's net sales for the year ended June 28, 1997.
Flexible packaging offers light-weight, low-bulk, resource-conserving
packaging that also protects perishable products by creating a barrier against
air and moisture. For consumer marketing purposes, flexible packaging combines
high-quality, multicolor graphics, similar to folding carton graphics, with a
see-through feature that enables the consumer to see the product itself along
with the package graphics. Although the Company sells most of its flexible
packaging for use in the textile, food and household products markets, flexible
packaging is also used for many other products, including pharmaceuticals, other
medical products and toys.
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Flexible packaging is produced at the Standard Packaging plant in Mount
Gilead, North Carolina from polyethylene, polypropylene and similar plastic
materials. The Company purchases its plastic films from film manufacturers
rather than producing its own plastic films. The film is printed at the
Company's facilities using multicolor printing presses that are similar to those
used in folding carton manufacture. The printed rolls are then slit into smaller
rolls. Some printed film is shipped in roll form to customers who then convert
it into its final package form (for example, bags, pouches or overwrap). The
Company also converts the printed film into bags or pouches, and then ships the
final package forms to its customers. The Company has additional capabilities
which can be incorporated into poly-film packaging, which include affixing
pressure-sensitive labels, attaching hanging display hooks, grommets, zip-lock
closures and tape seals.
SPECIALTY LAMINATED CARTONS
At the Hastings, Nebraska facility, the Company manufactures specialty
laminated cartons, which it markets to customers throughout the United States,
primarily in the automotive aftermarket, frozen food and toy markets. Laminated
cartons are used for the retail sale of products and offer customers a number of
visual marketing benefits. Specialty laminated carton sales represented
approximately 6% of the Company's net sales for the year ended July 3, 1999 and
approximately 5% of the Company's net sales for each of the years ended June 27,
1998 and June 28, 1997. During the manufacturing process, laminated sheets,
which are composed of a printed paperboard folding carton sheet glued onto
single face corrugate, are die cut, glued and folded into cartons. Laminated
packaging offers a structurally stronger package suitable for packaging heavier
contents, protecting products during shipping or meeting other package
performance needs, while at the same time providing high-resolution graphics.
The Company believes that the resolution of the print and graphics enhances the
product's appeal, and that the lamination provides increased product visibility
with a large, exposed graphics area.
CORRUGATED CONTAINERS
The Company's Hastings, Nebraska facility also designs and manufactures
printed corrugated containers, which it markets to customers located in the
mid-western United States, primarily in the automotive aftermarket, marine and
agricultural markets. Corrugated container sales represented approximately 3% of
the Company's net sales for the year ended July 3, 1999, approximately 4% of the
Company's net sales for the year ended June 27, 1998 and approximately 3% of the
Company's net sales for the year ended June 28, 1997. Corrugated sheets are
purchased from outside suppliers, then printed, cut, creased folded and glued
into individual containers. The Company also manufactures corrugated inserts,
which require specialty die-cutting and gluing, and are used to provide
additional strength and protection of packaged products. Corrugated containers
offer a structurally strong package, suitable for protecting products during
shipping, or meeting other packaging performance needs.
CONTRACT PACKAGING AND FILLING
The Company's facility in Marion, Alabama currently provides contract
packaging and filling services, which represented approximately 6% of the
Company's net sales for the year ended July 3, 1999, approximately 3% of the
Company's net sales for the year ended June 27, 1998 and approximately 2% of the
Company's net sales for the year ended June 28, 1997. The Company intends to
discontinue contract packaging and filling as it focuses on the folding carton
industry.
The Company fills, and in some cases, manufactures tubular spiral-wound
paper containers. Contract packaging and filling can provide a cost-effective
alternative for customers with small in-house purchasing departments, with the
Company taking responsibility for obtaining materials
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as well as packaging the product. The Company fills spices as well as other food
products, including non-dairy creamer; household products such as carpet
freshener and wildflower seeds; and other types of dry granular products using a
similar process. The Company may formulate, procure, blend and fill the
container or it may package product supplied by a customer. Machines using
gravity or vacuum-based filling techniques are used to fill the containers. Once
the containers are filled, the Company packs them in shipping containers for
delivery to its customers.
The Company also packages products for the candy industry. The process
requires feeding the product, which is supplied by the customer, into equipment
developed specifically for a co-packing process. The product is then sealed into
individually wrapped pieces, and shipped to the customer for retail sale.
In connection with its filling operations, the Company maintains an
environmentally controlled work area for food packaging and other services that
must meet specific cleanliness and quality standards.
DISCONTINUED MANUFACTURING PRODUCTS
TUBULAR, SPIRAL-WOUND PAPER PACKAGING
Tubular paper packaging products represented approximately 10% of the
Company's net sales for the year ended July 3, 1999, approximately 14% of the
Company's net sales for the year ended June 27, 1998 and approximately 17% of
the Company's net sales for the year ended June 28, 1997. In August 1998, the
Company announced its strategy to refocus on its core capabilities in folding
cartons. Although Niemand held a strong presence in tubular spiral-wound paper
packaging and contract packaging, the operations, as well as target markets,
were distinctly different from the folding carton business. In March 1999, the
Company announced the sale of the container portion of its Niemand division, and
as a result manufactures tubular paper packaging products only as requested by
some of its contract fill customers, with one exception. Niemand still
manufactures, and holds the patent for the spiral wound applicator used for
products that treat yeast infections. The percentage of net sales that tubular
paper packaging products comprised for the year ended July 3, 1999 was lower
than previous years due to decreased production resulting from the removal of
equipment starting in April 1999.
Tubular packaging is structurally strong, high-quality, spiral-wound
paper packaging that is suitable for direct labeling with high-quality graphics.
Tubular paper packaging offers a biodegradable product that is, in smaller
quantities, generally cheaper than plastic alternatives. Tubular paper packaging
is used widely for personal care products (talcum powders, bath powders and
scented products), for food products (spices and non-dairy creamer) and for
household products (carpet freshener and wildflower seeds). Additionally, these
products are used as gift boxes, as well as having uses in the toy and game
industry.
PRESSURE-SENSITIVE LABELS
Pressure-sensitive labels accounted for approximately 3% of the Company's
net sales for each of the years ended July 3, 1999 and June 27, 1998 and
approximately 5% of the Company's net sales for the year ended June 28, 1997.
The labels are backed with adhesive, mounted on paper backing and typically
shipped in rolls to customers. Customers use these labels for a variety of
applications, including product promotions, packaging modifications, clothing
packaging and labeling and other applications.
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Labels provide a cost-effective means of altering other packaging (for
example, folding cartons or flexible packaging) in connection with product
promotions or tie-ins. Labels also may be used to highlight pricing or product
features or for other purposes. Labels themselves, typically in the form of
adhesive-backed bands, can be used as a form of packaging. Socks and hosiery
represent the most common application for label packaging.
In August 1999, in connection with the Company's strategy to refocus on
its core business, the Company sold all of the assets of its GB Labels division,
and no longer manufactures pressure-sensitive labels.
COMPETITION
The packaging markets in which the Company competes are highly fragmented
and increasingly competitive. The Company competes with numerous small,
non-integrated companies that produce one or more packaging products and, to a
lesser extent, with divisions or subsidiaries of large integrated packaging
producers as well as in-house packaging operations. The vertically integrated
paperboard, oil and chemical companies that the Company competes with may have
many lines of business and produce their own raw materials. In general, the
integrated companies focus primarily on producing large quantities of basic,
commodity packaging and often provide their products to large companies
nationwide. The non-integrated manufacturers generally operate only one or two
production facilities and emphasize higher-margin, value-added packaging, often
with specialized or customized graphics. Unlike the integrated manufacturers,
these manufacturers produce smaller orders of packaging with quick turnaround,
in many cases also working with the customer in designing the packaging.
Competition among the non-integrated packaging manufacturers, against
which the Company primarily competes, is based on product quality, service,
timeliness of delivery, manufacturing capabilities and, to a lesser extent than
with commodity packaging, price. The Company believes that its expertise and
reputation within the packaging industry for providing timely service and
high-quality packaging enables it to compete effectively with other
non-integrated packaging companies.
The Company's largest competitors in the flexible poly-film packaging
market operate as vertically integrated divisions or subsidiaries of large oil
and chemical companies. If the supply of oil-based resins or plastic films
should tighten in the future, large vertically integrated producers may have an
advantage over the Company, as such competitors could allocate scarce resin
resources to their own flexible packaging units or transfer them at advantageous
prices to their own flexible packaging units. Other competitors in the flexible
packaging market are part of diversified packaging companies like the Company,
and offer both paper-based and film-based packaging. Some of the Company's other
flexible packaging competitors are smaller packaging companies that offer only
flexible film packaging.
Competition in the contract filling market is highly fragmented. Contract
filling is provided not only by a large number of relatively small competitors,
but also internally by goods and food producers themselves.
The Company has also been impacted by the increasing trends of customers
to increase their buying power by consolidating the number of vendors they
maintain, as well as entering into alliances with their direct competitors to
use their competitors' excess packaging capacity.
Many of the Company's competitors have greater resources, financial and
otherwise than the Company. In addition, to the extent that packaging methods
are developed and successfully marketed as alternatives to the Company's
products, the Company may compete with producers of such alternative packaging
methods.
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RAW MATERIALS
Raw materials used in the Company's production process include
paperboard, inks, flexible films, resin and adhesives, all of which the Company
purchases from more than one supplier. Pricing for raw materials throughout the
Company remained stable through the first and second quarters of fiscal 1999.
Raw material pricing has increased over the third and fourth quarters of fiscal
1999, and the Company anticipates these increases to continue through the first
and second quarters of fiscal 2000. Although the Company has been able to pass
these increases on to its customers, any future price increases would have an
adverse impact on the Company's results of operations if the Company is unable
to continue to pass these increases on to its customers.
The supply of materials such as polyethylene, polypropylene, other
plastic films and plastic resins used in the Company's flexible packaging and
contract packaging products is subject to the disruptions generally associated
with the petroleum and petroleum product markets. The supply of plastic
materials depends upon factors beyond the control of the Company, including,
directly or indirectly, changes in the economy, price levels and seasons, the
level of domestic oil production, the availability of imports and the actions of
OPEC.
Although the Company's supply of raw materials is presently sufficient,
its business could be adversely affected by a prolonged shortage of raw
materials, the resulting higher costs or diminished availability of such
materials.
CUSTOMERS
The Company derives its sales from a diverse market base. In fiscal 1999,
the Company sold its products throughout the United States to over 900 different
customers for use in a variety of industries. The table below sets forth the
Company's percent of net sales by market for each of the years indicated:
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JULY 3 JUNE 27 JUNE 28
1999 1998 1997
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Textile 17% 17% 17%
Food 16% 12% 12%
Pharmaceutical 14% 15% 17%
Auto aftermarket parts and hardware 13% 14% 14%
Office supplies and paper products 13% 12% 16%
Household and industrial 11% 13% 7%
Cosmetics and personal care 6% 6% 7%
Toy 1% 2% 4%
Other 9% 9% 6%
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Total net sales 100% 100% 100%
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Sales to the Company's top three customers accounted for approximately
21% of the Company's net sales for the year ended July 3, 1999. This compares to
approximately 17% and 18% for the years ended June 27, 1998 and June 28, 1997
respectively. Sales to one customer, Smead
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Manufacturing, represented approximately 12% of net sales in fiscal year 1999,
and approximately 11% in both the 1998 and 1997 fiscal years.
The Company believes that developing long-term relationships with
customers is critical to its success in the packaging industry. Customers
generally purchase products and services under firm purchase orders rather than
long-term contracts, although the Company does have several customers with
contracts ranging from one to three years.
PATENTS
Niemand holds several patents which cover proprietary technology and
packaging solutions, including a patent for the spiral-wound applicator used for
products that treat yeast infections. Although the Company believes these
patents to be economically valuable in the conduct of its business, the Company
does not believe that expiration or invalidation of any of these patents would
have a material adverse effect on the Company.
EMPLOYEES
As of July 3, 1999, the Company employed approximately 671 full-time
employees, 127 salaried and 544 hourly. The Graphics Communication Union, No.
19-M, represents approximately 89 hourly employees at Fort Wayne, Indiana and
their union contract expires in November 1999. Management for the Company and
union representatives are currently in negotiations concerning the renewal of
the union contract. The Retail, Wholesale and Department Store Workers Union
represents approximately 124 hourly employees at Niemand's Marion, Alabama
plant, and their union contract expires in August 2000. None of the Hastings,
Nebraska; Mount Gilead, North Carolina or Burlington, North Carolina employees
are covered by union contracts or collective bargaining agreements.
The Company markets its products and services primarily through
approximately 15 employee salesmen, as well as several commissioned brokers or
agents.
The Company considers its relationship with its employees and unions to
be generally satisfactory. The Company is unable to forecast the future outcome
of negotiations between the Company and any union, or the potential impact any
dispute could have on the Company's financial position or results of operations.
REGULATION
The Company's activities are subject to various environmental, health and
worker safety laws. The Company has expended resources, both financial and
managerial, to comply with applicable environmental, health and worker safety
laws in its operations and at its facilities, and anticipates that it will
continue to do so in the future. Compliance with environmental laws has not
generally had a material effect on the Company's capital expenditures, earnings
or competitive position. However, as part of the environmental due diligence
carried out in fiscal 1995 in connection with a proposed merger, the Company
became aware of groundwater contamination at its GB Labels facility in
Burlington, North Carolina.
Groundwater testing performed in 1995 revealed the presence of
tetrachlorethelene ("PCE") and related compounds in the groundwater at the site,
and in three of the neighboring properties' wells. The Company notified the
North Carolina Division of Environmental Management and the County Health
Department, provided bottled water to affected residents, and offered to
connect, at its cost, any resident wishing to be connected to the municipal
water supply.
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In February 1997 the North Carolina Division of Water Quality ("DWQ")
asked Gibraltar to conduct a follow-up assessment of the GB Labels facility. The
Company arranged with its environmental consultants to install additional
groundwater monitoring wells, conduct additional investigative work at the GB
Labels site and prepare an updated report. The Comprehensive Assessment Report
was filed with the DWQ in June 1998. To date, the DWQ has requested no further
updates.
In May 1998 two separate lawsuits were brought against GB Labels and the
Company, alleging property damage and personal injury arising from the
contamination. For further discussion, see "Item 3. Legal Proceedings."
Following the August 1995 preliminary site assessment, the Company had
its environmental consultants prepare an estimate of likely remediation costs
based on all of the information known at that time. These estimated costs ranged
from $750,000 to $1.1 million over a period of seven to ten years. Accordingly,
the Company recorded a liability for such remediation costs of $750,000 in
fiscal year 1995. This estimate may be affected by new information learned, any
modifications to any remediation plan that may be proposed by the DWQ and the
actual costs incurred as part of evaluation and remediation. The reduction in
the accrual for such remediation costs to $475,000 from $578,000 at July 3, 1999
and June 27, 1998 respectively, reflects legal and environmental consulting
expenses incurred in fiscal 1999. Incurred expenses as of July 3, 1999 related
to remediation totaled $275,000. Management believes that the ultimate
resolution of this and other environmental matters will not materially affect
the financial position or results of future operations and cash flows of the
Company.
ITEM 2. PROPERTIES
The Company owns offices and manufacturing facilities in Hastings,
Nebraska; Fort Wayne, Indiana; Mount Gilead, North Carolina; Burlington, North
Carolina; and Marion, Alabama. It leases warehouse facilities in Hastings,
Nebraska; Fort Wayne, Indiana; Marion, Alabama and Mebane, North Carolina. The
Company's manufacturing facilities consist of a total of more than 600,000
square feet. The Company owns and leases vehicles for use by management, sales
and delivery personnel and also owns and leases various manufacturing, computer
and other equipment used for product development, customer technical support
services and administrative purposes. The Company's products are distributed to
customers primarily utilizing commercial transportation and, to a limited
extent, Company-owned trucks.
The Company's facilities have been expanded in prior years through its
capital expenditure program. No facilities expansions occurred in fiscal 1999 or
in fiscal 1998. The total expenditures for fiscal 1997 approximated $0.2
million.
The Company's facilities and equipment are generally in good operating
condition, are suitable for their respective uses and are adequate for current
needs.
The Company maintains business property and other insurance, covering its
facilities and its operations, in amounts and covering such risks as are
generally consistent with industry practice for companies of similar size.
ITEM 3. LEGAL PROCEEDINGS
From time to time, the Company is a party to certain lawsuits and
administrative proceedings that arise in the conduct of its business. While the
outcome of these lawsuits and proceedings cannot be predicted with certainty,
management believes that, if adversely
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determined, the lawsuits and proceedings, either singularly or in the aggregate,
would not have a material adverse effect on the financial condition, results of
operations or net cash flows of the Company.
In May 1998, two lawsuits, captioned Monroe B. Moorefield et al v.
Bernard H. Oakley, Sr., et al, File Number 98CVS 990-; and Harold L. Fogleman et
al v. Bernard H. Oakley, Sr., et al, File Number 98 CVS 989, were filed in
Alamance County, State of North Carolina, alleging property damage and personal
injury arising from the groundwater contamination at GB Labels. The Company and
GB Labels, among others, were also named as defendants in the lawsuits. The
plaintiffs are all property owners, or their family members, residing near the
GB Labels facility.
In November 1998, the Moorefield plaintiffs dismissed their entire
complaint against the Company without prejudice. Although no Moorefield claims
are pending against the company, there can be no assurance that they will not
re-file their claims at a later date.
In September 1999, the Fogleman plaintiffs entered into a settlement
agreement with the Company and dismissed their entire complaint with prejudice.
On April 28, 1999, the Company filed a lawsuit captioned Gibraltar
Packaging Group, Inc. v. Anthem Health Plans, d.b.a. Anthem Blue Cross and Blue
Shield of Connecticut ("Anthem"), Case No. 3:99DV00785, in the United States
District Court for the District of Connecticut. The Company is seeking damages
for Anthem's alleged breach of a contract for health insurance for employees of
the Company. While the Company initiated this action, it anticipates that Anthem
will file a counterclaim for unpaid premiums. The amount of the anticipated
counterclaim is presently unknown, and there can be no assurances that the
outcome of a potential counterclaim would not have an adverse impact on the
Company. The case is scheduled for a settlement mediation in October 1999.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of stockholders of Gibraltar during
the fourth quarter of Gibraltar's fiscal year ended July 3, 1999.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
PRICE RANGE OF COMMON STOCK
The Company's common stock was quoted on the NASDAQ National Market
System after the Company's initial public offering on March 5, 1992. In February
1999, the Company announced that it had been de-listed from the NASDAQ National
Market, and the Company's stock is currently traded on the NASDAQ
Over-The-Counter Bulletin Board. The trading symbol for the Company's common
stock is "PACK." The following table sets forth, for the periods indicated, the
high and low sale prices for the Company's common stock as reported by NASDAQ:
HIGH LOW
FISCAL 1999
First Quarter $ 2 7/8 $ 1 1/8
Second Quarter 1 1/2 3/4
Third Quarter 1 3/8 3/4
Fourth Quarter 1 3/16 9/16
FISCAL 1998
First Quarter $ 3 1/2 $ 2 5/8
Second Quarter 3 1/4 2 1/8
Third Quarter 3 9/16 2 13/32
Fourth Quarter 4 5/8 1 3/4
There were approximately 140 shareholders of record of the Company's
common stock as of September 14, 1999. The Company believes that the number of
beneficial owners of its common stock is greater than 1,500.
DIVIDEND POLICY
The Company has never paid cash dividends on its common stock. Any
payment of cash dividends in the future will depend upon the terms of the
Company's debt instruments, the financial condition, capital requirements and
earnings of the Company, as well as other factors the Board of Directors may
deem relevant. In addition, the Company's credit facility with First Source
Financial LLP restricts the ability of the Company to pay dividends.
RECENT SALES OF UNREGISTERED SECURITIES
None.
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<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following selected historical financial information has been derived
from the Company's audited consolidated financial statements. This information
should be read in connection with the Company's Consolidated Financial
Statements and the Notes thereto, as well as "Management's Discussion and
Analysis of Financial Condition and Results of Operations," included elsewhere
in this Annual Report.
<TABLE>
<CAPTION>
GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
YEARS ENDED
JULY 3 JUNE 27 JUNE 28 JUNE 29 JULY 1
1999(1) 1998(2) 1997(3) 1996 1995
------- ------- ------- ---- ----
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net Sales $76,514 $75,890 $74,710 $74,384 $76,456
Cost of Goods Sold 65,711 64,138 59,396 58,328 64,045
Gross Profit 10,803 11,752 15,314 16,056 12,411
Operating Expenses 21,802 26,411 11,362 11,481 14,061
Income (Loss) From Operations (10,999) (14,659) 3,952 4,575 (1,650)
Other Expense - Net 3,324 3,989 3,061 3,208 3,652
Provision (Benefit) for Income Taxes (751) (1,435) 559 666 (1,617)
Income (Loss) before Extraordinary Item (13,572) (17,213) 332 701 (3,685)
Net Income (Loss) (13,572) (17,213) 225 701 (3,685)
Basic and Diluted Per Common Share Amounts:
Income (Loss) before Extraordinary Item (2.69) (3.41) 0.07 0.14 (0.73)
Net Income (Loss) (2.69) (3.41) 0.05 0.14 (0.73)
Weighted Average Shares Outstanding 5,042 5,042 5,042 5,042 5,040
BALANCE SHEET DATA:
Working Capital 3,357 4,969 6,078 6,455 5,940
Total Assets 43,338 59,371 75,058 74,045 79,036
Long-Term Debt (net of current portion) 27,943 27,872 27,382 27,834 31,527
Stockholders' Equity 446 14,018 31,100 31,006 30,305
</TABLE>
(1) Includes impairment write-downs of long-lived assets related to
Flashfold Carton and GB Labels of $11,861 and $352, respectively, and
restructuring charges of $235 related to the relocation of the
Company's corporate offices.
(2) Includes a charge for severance and relocation costs of approximately
$500 and a restructuring charge of $170 consisting of severance costs
for divisional personnel. Results also include an impairment write-down
of long-lived assets related to Niemand of approximately $14,083 and a
write-off of unamortized finance costs related to the Harris Bank
refinancing of approximately $854.
(3) Includes an extraordinary after-tax loss of $107 reflecting the
write-off of unamortized finance costs of a previous refinancing.
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<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Unless otherwise stated in this Annual Report, references to the fiscal
years 1999, 1998 and 1997 relate to the fiscal years ended July 3, 1999, June
27, 1998 and June 28, 1997, respectively.
RESULTS OF OPERATIONS
The following table presents, for the periods indicated, the percentage
relationship that certain items in the Company's Consolidated Statement of
Operations bear to net sales. This information should be read in conjunction
with the Company's Consolidated Financial Statements and the Notes thereto
included elsewhere in this Annual Report.
<TABLE>
<CAPTION>
YEARS ENDED
------------------------------------------
JULY 3 JUNE 27 JUNE 28
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Net Sales 100.0% 100.0% 100.0%
Cost of Goods Sold 85.9 84.5 79.5
Gross Profit 14.1 15.5 20.5
Operating Expenses 28.5 34.8 15.2
Income (Loss) from Operations (14.4) (19.3) 5.3
Other Expense - Net 4.3 5.3 4.1
Provision (Benefit) for Income Taxes (1.0) (1.9) 1.0
Income (Loss) before Extraordinary Item (17.7) (22.7) 0.4
Net Income (Loss) (17.7)% (22.7)% 0.3%
</TABLE>
FISCAL YEAR 1999 VS. 1998
In fiscal 1999, the Company's net sales were $76.5 million compared with
$75.9 million in fiscal 1998. Net sales increased $0.6 million or 0.8% in fiscal
1999 compared with fiscal 1998. Sales of folding cartons and flexible packaging
increased $1.7 million in fiscal 1999 over fiscal 1998, primarily at Great
Plains. Sales of spiral wound paper packaging decreased compared with prior year
levels, primarily as a result of the removal of equipment related to the sale of
the container business of Niemand, which started in April 1999. Sales of
pressure sensitive labels decreased compared with prior year levels.
Cost of goods sold increased $1.6 million or 2.5% to $65.7 million in
fiscal 1999 compared with $64.1 million in fiscal 1998. Expressed as a
percentage of net sales, cost of goods sold increased to 85.9% for fiscal 1999
compared to 84.5% in fiscal 1998. Margins at Flashfold Carton were below plan
and compared to the prior year. Niemand suffered adverse product mix changes as
sales of their higher margin products declined. Standard Packaging experienced
increased manufacturing costs primarily attributable to higher labor costs
associated with servicing customer demands, and higher repair and maintenance
costs. These increased costs were partially offset by certain cost improvements.
Raw material costs continued to decline at Standard Packaging as a result of
renegotiated prices with suppliers and the internalization of the die making and
ink mixing processes. Labor costs at Great Plains and Flashfold Carton also
decreased due to less overtime and more emphasis placed on reducing labor costs.
In addition, depreciation expense has been reduced in fiscal 1999 at Niemand and
Flashfold Carton, as a result of long-lived asset impairment write-downs.
Selling expenses decreased $0.7 million or 15.2% to $3.4 million in
fiscal 1999 from $4.1 million in fiscal 1998. Expressed as a percentage of net
sales, selling expenses decreased to 4.5% in fiscal 1999 compared with 5.4% in
fiscal 1998, primarily as a result of reorganizing the
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<PAGE>
Company's sales force and internalizing previously out-sourced functions within
its marketing programs. These reductions are a direct result of cost savings
following the Company's organizational and facility consolidations implemented
in the second quarter of fiscal 1998.
General and administrative expenses decreased $1.9 million or 25.9% to
$5.6 million in fiscal 1999 from $7.5 million in fiscal 1998. Expressed as a
percentage of net sales, general and administrative expenses decreased to 7.3%
in fiscal 1999 compared with 9.9% in fiscal 1998. The Company continues to
realize the cost savings benefits of the second quarter fiscal 1998
restructuring program. In addition, general and administrative expenses were
lower as a result of the relocation of the Company's corporate functions from
Westport, Connecticut to its Hastings, Nebraska facility in the second quarter
of fiscal 1999. Included in general and administrative expenses in the second
quarter of fiscal 1998 is a charge for severance and relocation costs of
approximately $0.5 million.
In the second quarter of fiscal 1999, the Company recorded a
restructuring charge of $0.2 million consisting of severance costs for corporate
personnel, the write-off of leasehold improvements and moving costs associated
with relocating the corporate functions to its Hastings, Nebraska facility.
At the end of the third quarter of fiscal 1999, as a result of the
Company's evaluation of the recoverability of long-lived assets not held for
sale, the Company recorded a pre-tax non-cash charge of $11.8 million to
write-down the carrying amount of goodwill and fixed assets of Flashfold Carton
to estimated fair value. Estimated fair value was determined based on
discounting estimated future cash flows associated with Flashfold Carton. The
impairment loss resulted in completely writing-off the Flashfold Carton goodwill
and reducing the carrying value of fixed assets.
In connection with the Company's strategic plan, the Company decided to
sell the machinery, equipment, accounts receivable, inventory and accounts
payable of GB Labels. As a result, the Company recorded a pre-tax non-cash
charge of $82,000 in the fourth quarter of fiscal 1999 to write down the
carrying amount of goodwill and the fixed assets sold of GB Labels to estimated
fair value less cost to sell. Additionally, the Company recorded a pre-tax
non-cash charge of $0.3 million to write-down the carrying amount of the
retained real property of GB Labels to estimated fair value.
Interest expense for fiscal 1999 decreased $0.7 million or 16.9% to $3.3
million from $4.0 million in fiscal 1998. In the fourth quarter of fiscal 1998,
the Company wrote-off $0.9 million in unamortized refinancing costs related to
the previous credit agreement with Harris Trust and Savings Bank. This reduction
in cost was partially offset by increased interest expense in fiscal 1999 as a
result of higher average borrowings of approximately $2.4 million, coupled with
higher interest rates.
The income tax benefit as a percentage of pre-tax loss for fiscal 1999
was 5.2%, which differs from the statutory rate primarily as a result of
non-deductible amortization of excess of purchase price over net assets
acquired, and because a significant portion of the impairment charge is a
write-off of goodwill, which will provide no current or future tax benefit. The
equivalent tax rate was 7.7% for the corresponding period in the prior year.
FISCAL YEAR 1998 VS. 1997
In fiscal 1998 the Company's net sales were $75.9 million compared with
$74.7 million in fiscal 1997. Net sales increased $1.2 million or 1.6% in fiscal
1998 compared with fiscal 1997. Sales of spiral wound paper packaging and
pressure sensitive labels decreased compared with prior year levels while sales
of folding cartons and flexible packaging increased $3.9 million in fiscal 1998
over fiscal 1997.
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<PAGE>
Cost of goods sold increased $4.7 million, or 8.0% to $64.1 million in
fiscal 1998 compared with $59.4 million in fiscal 1997. Cost of goods sold
expressed as a percentage of net sales increased to 84.5% for fiscal 1998
compared to 79.5% for fiscal 1997. The increase in the costs of products sold
over the comparable period in fiscal 1998 is primarily attributable to the
following events. Standard Packaging incurred higher manufacturing costs
associated with both gearing up and servicing new customers in the second half
of 1998. Additionally, Standard Packaging and Niemand suffered some adverse mix
changes as sales of its higher margin products declined. Flashfold Carton
incurred unusually high costs related to preventative maintenance and
modifications made to its presses in order to add capacity in the third quarter
of fiscal 1998. Flashfold Carton also experienced higher manufacturing costs
related to increased production in anticipation of new business in the first
quarter of fiscal 1999. In addition, during the second quarter of fiscal 1998,
the Company changed from a self-insured medical plan to a new fully insured
plan, and experienced a number of large claims under the old plan, which
significantly increased medical costs for the period.
Selling expenses decreased $0.2 million or 5.5% in fiscal 1998 from $4.3
million in fiscal 1997. Selling expenses for the second half of fiscal 1998
decreased $0.5 million compared to the corresponding period in fiscal 1997 as a
direct result of realized cost savings associated with the Company's
organizational and facility consolidations implemented in the second quarter of
fiscal 1998.
General and administrative expenses expressed as a percentage of net
sales increased to 9.9% for fiscal 1998 compared with 8.7% for fiscal 1997, an
increase of $1.0 million or 16.0%. Included in the second quarter of fiscal 1998
is an increase in receivable, inventory and other reserves of $0.6 million and a
charge for severance and relocation costs of approximately $0.5 million. The
Company began to realize the cost saving benefits of the second quarter
restructuring program as general and administrative expenses for the second half
of fiscal 1998 decreased $0.3 million compared to the corresponding period in
fiscal 1997.
Included in the second quarter of fiscal 1998 is a restructuring charge
of $0.2 million consisting of severance costs for divisional personnel. Other
costs relating to the reorganization are included in general and administrative
expenses and consist of severance and relocation costs.
In connection with a modification of the Company's strategic plan, the
Company decided to divest one of its subsidiaries, Niemand Industries. As a
result, the Company recorded a charge of $14,083,000 in the fourth quarter of
fiscal 1998 to write down the carrying amount of goodwill and fixed assets of
Niemand to estimated fair value less cost to sell. In prior years, the Company
evaluated the recoverability of long-lived assets at Niemand using estimated,
undiscounted cash flows. By deciding to sell that business, recoverability now
must be based on estimated fair value less cost to sell. The impairment loss
resulted in completely writing-off the Niemand goodwill and reducing the
carrying value of fixed assets.
Interest expense for fiscal 1998 increased $1.0 million or 32.4% to $4.0
million from $3.0 million for fiscal 1997. The increase is primarily
attributable to the Company writing-off the unamortized financing costs of $0.9
million related to the credit agreement with Harris Bank as a result of the
acceleration of the maturity date of such credit agreement to July 1998.
The benefit for income taxes as a percentage of pre-tax loss for fiscal
1998 was 7.7%, which differed from the statutory rate primarily as a result of
non-deductible amortization in excess of purchase price over net assets acquired
and the effect of disallowed losses with respect to the impaired asset
write-down as discussed in Note 1 to the Company's Consolidated Financial
Statements included elsewhere in this Annual Report. This compared with an
effective tax rate of 62.7% in the prior year.
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<PAGE>
FINANCIAL CONDITION
At the end of fiscal 1998, the Company and Harris Trust and Savings Bank
agreed to accelerate the maturity of the Company's bank credit agreement to
August 10, 1998. The Company's bank credit agreement with Harris Bank consisted
of a $25 million term loan and a $10 million revolving credit facility.
On July 31, 1998, the Company refinanced its debt. The Company's new
credit facility with First Source Financial LLP ("First Source") provides for a
five year $25 million term loan and a five year $15 million working capital
revolving line of credit ("Revolver"). The term loan requires quarterly
principal payments of $562,500 in the first year of the loan, beginning October
15, 1998. As amended, the balance of the term loan is due in quarterly
installments of $625,000 through October 1999, in monthly installments of
$208,333 through July 2000 and $229,167 through April 2003, with the balance of
$12,687,500 due on July 31, 2003.
The proceeds from the credit facility were used to refinance the Harris
Bank credit facility, to repay a note payable related to the Alabama facility,
to pay the related transactions costs, and to fund the working capital and
capital expenditure needs of the Company. The credit facility is secured by a
first priority perfected security interest in and lien on all assets (real and
personal, tangible and intangible) of the Company excluding the Burlington,
North Carolina property.
The Revolver provides for a revolving line of credit under a borrowing
base commitment subject to certain loan availability requirements. Loan
availability under the Revolver may not exceed the lesser of (1) $15 million or
(2) the sum of (a) up to 85% of the Company's eligible accounts receivable plus
(b) up to 60% of the Company's eligible inventory. At no time may the sum of
aggregated loan advances outstanding under the Revolver plus the aggregate
amount of extended Letter of Credit guarantees exceed loan availability.
As of July 3, 1999, all outstanding letters of credit are guaranteed by
First Source. The Company pays a letter of credit fee of 2.75% to guarantee
availability under the Revolver. Outstanding letters of credit at July 3, 1999
amounted to $222,000 and relate to workman's compensation insurance policies.
The First Source credit facility contains certain restrictive covenants
including financial covenants related to Net Worth, Minimum Interest Coverage
Ratio, Capital Expenditures, Debt Ratio and Fixed Charge Coverage. As of July 3,
1999, the Company was not in compliance with its financial covenants. First
Source has waived the covenant violations relating to Net Worth, Minimum
Interest Coverage Ratio, Capital Expenditures, Debt Ratio and Fixed Charge
Coverage as of July 3, 1999.
The Revolver currently bears interest at First Source's prime rate plus
1.25%, while the term loan currently bears interest at First Source's prime rate
plus 1.75%. The Company also pays a commitment fee of 0.5% on the difference
between the average daily loan balance and the amount of the Revolver. First
Source's prime rate was 8% at July 3, 1999. Effective January 25, 1999, the
LIBOR option was suspended.
At July 3, 1999, the Company had working capital of $3.4 million, as
compared to $5.0 million at June 27, 1998. Historically, the Company's liquidity
requirements have been met by a combination of funds provided by operations and
its revolving credit agreements. Funds provided by operations totaled $0.5
million in fiscal 1999 and $2.8 million in fiscal 1998. The Company had
available to it unused borrowing capacity of $1.8 million and $0.7 million at
July 3, 1999 and June 27, 1998, respectively. The decrease in operating cash
flow for fiscal 1999 was primarily attributable to the paydown of accounts
payable to better coincide with vendors' terms, partially offset by better
inventory management.
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<PAGE>
During fiscal 1999, capital expenditures totaled $1.3 million compared
with $2.1 million in fiscal 1998, and consisted primarily of additions to
machinery and equipment as well as improvements to existing facilities. The
Company makes capital improvements to increase efficiency and product quality,
and periodically upgrades its equipment by purchasing or leasing new or
previously used equipment.
The Company's current strategy is to leverage the success of the
Company's Great Plains division to improve the performance of the Company's
other folding carton divisions. The Company has identified opportunities for
profit enhancement at Standard Packaging. After the write-down at Flashfold
Carton, the Company will continue to strive to identify opportunities for profit
enhancement at that facility. Additionally, in the second quarter of fiscal
1999, the Company relocated its corporate office, and consolidated the Company's
administrative functions with the Great Plains' operation in Hastings, Nebraska.
As part of the strategy of focusing on folding cartons, the Company sold the
container portion of Niemand and is in negotiations for the sale of the
remaining assets of Niemand. The Company anticipates completing this divestiture
in the second quarter of fiscal 2000. Additionally, the Company sold the assets
of its GB Labels division effective August 30, 1999.
Under the current strategy, management believes that future funds
generated by operations and borrowings available under its credit facility with
First Source will be sufficient to meet working capital and capital expenditure
requirements in the near term.
IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, SFAS No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND
HEDGING ACTIVITIES, was issued. This statement will become effective in fiscal
2001. The Company has not quantified the impact, if any, resulting from the
adoption of this standard.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company's primary market risk is fluctuation in interest rates. All
of the Company's debt at July 3, 1999 is at variable interest rates, and the
Company has in the past utilized interest rate caps to reduce the impact of
changes in interest rates. A hypothetical 10% change in interest rates would
have had a $0.3 million impact on interest expense for the fiscal year ended
July 3, 1999.
YEAR 2000 COMPLIANCE
The Year 2000 issue is the result of computer systems that use two digits
rather than four to define the applicable year, which may prevent such systems
from accurately processing dates ending in the Year 2000 and after. This could
result in system failures or in miscalculations causing disruption of
operations, including, but not limited to, an inability to process transactions,
to send and receive electronic data, or to engage in routine business activities
and operations.
The Company's goal is to be Year 2000 compliant, meaning critical
systems, devices, applications or business relationships have been evaluated and
are expected to be suitable for continued use into and beyond the Year 2000. The
folding carton divisions of the Company (Great Plains, Flashfold Carton and
Standard Packaging) have installed AmTech's Imaginera software for their
manufacturing and accounting IS systems. These information systems are certified
by the vendor to be Year 2000 Compliant.
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<PAGE>
The Company began in fiscal 1998 evaluating personal computer hardware
and software outside of the Company's IS systems. The Company's expectations are
to complete any upgrade requirements or modifications by the end of calendar
1999.
Year 2000 Costs: Niemand Industries is currently upgrading all of its
manufacturing and financial software and hardware systems to be Year 2000
Compliant. The upgrades will be completed by the end of October 1999. Budgeted
costs for these upgrades were set at $90,000, and currently Niemand anticipates
they will stay within budget. All other costs incurred as a result of ensuring
Year 2000 compliance, to date, have been expensed or capitalized as software
purchases in the normal course of operations of the Company. Any remaining costs
for the Year 2000 project will be reflected as general and administrative costs
incurred in the normal course of operations, due to the Company's internal IS
department managing the project.
Risk Assessment: At this time, the Company believes its most reasonably
likely worst case scenarios are: (1) that principal suppliers are not Year 2000
ready and cannot timely deliver their products; (2) that the Company could
experience an extended interruption in any one of its utility, communication or
transportation systems. Although the Company does not believe that any of these
scenarios will occur, it has assessed the effects of such events and does not
expect that they would have a material adverse effect on the Company's financial
condition and results of operations.
In addition to reviewing its internal systems, the Company has contacted
all of its significant vendors and customers to ensure their Year 2000
compliance. The Company currently has many suppliers, and believes this will
help mitigate any adverse impact. Although all outside company responses have
indicated Year 2000 compliance, there can be no assurance that the systems of
other companies that interact with the Company will be sufficiently Year 2000
compliant so as to avoid an adverse impact on the Company's operations,
financial condition and results of operations. In the event that a temporary
disruption does occur, the Company does not expect that it would have a material
adverse effect on its financial condition and results of operations.
Contingency Plans: Although the Company expects its internal systems to
be Year 2000 compliant as described above, contingency plans are being prepared
so that the Company's critical business processes can be expected to continue to
function on January 1, 2000 and beyond. The Company's contingency plans will be
structured to address both remediation of systems and their components and
overall business operating risk. These plans are intended to mitigate both
internal risks and potential risks in the supply chain of the Company's
suppliers. These plans will also address the potential risks of power outages,
communication interruptions and transportation delays. The Company expects to
complete its contingency plan during calendar year 1999.
FORWARD-LOOKING STATEMENTS
Statements that are not historical facts, including statements about our
confidence in the Company's prospects and strategies and our expectations about
the Company's sales expansion, are forward-looking statements that involve risks
and uncertainties. These risks and uncertainties include, but are not limited
to, (1) market acceptance risks, including whether or not the Company will be
able to successfully gain market share against competitors many of which have
greater financial and other resources than the Company and the increasing trends
of customers to enhance their buying power by consolidating the number of
vendors they maintain; (2) manufacturing capacity constraints, including whether
or not as the Company increases its sales it will be able to successfully
integrate its new customers into its existing manufacturing and distribution
system; (3) whether the Company will be able to pass on to its customers price
increases for paper and paperboard products in fiscal 2000; (4) continued
stability in other raw material prices, including oil-based resin and plastic
film; (5) the impact of government regulation on the Company's manufacturing,
including whether or not additional capital expenditures will be needed to
comply
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<PAGE>
with applicable environmental laws and regulations as the Company's production
increases; (6) pressure on prices from competition or purchasers of the
Company's products; (7) the introduction of competing products by other firms;
(8) whether the proposed sale of the product fill portion of Niemand Industries
will be successful; (9) whether the Company will be able to comply with the
Credit Agreement covenants or obtain waivers if it is unable to do so; (10)
whether the Company will be adversely affected by its inability or the inability
of other companies whose systems interact with the Company to be fully Year 2000
compliant in a timely manner; and (11) whether Anthem will file a counterclaim
against the Company. Investors and potential investors are cautioned not to
place undue reliance on these forward-looking statements, which reflect the
Company's analysis only as of the date hereof. Gibraltar undertakes no
obligation to publicly revise these forward-looking statements to reflect events
or circumstances that arise after the date hereof. These risks and others that
are detailed in this Form 10-K and other documents that the Company files from
time to time with the Securities and Exchange Commission, including quarterly
reports on Form 10-Q and any current reports on Form 8-K must be considered by
any investor or potential investor in the Company.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to the financial statements, the report thereon, the
notes thereto, and supplementary data commencing at page F-1 of this Annual
Report on Form 10-K which financial statements, report, notes, and data are
incorporated herein by reference.
ITEM 9. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
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<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information relating to the identification, business experience and
directorships of each director and nominee for director of Gibraltar and the
information relating to the identification and business experience of
Gibraltar's executive officers, required by Item 401 of Regulation S-K, will be
presented in the sections entitled "Election of Directors - Nominees for
Director" and "Executive Compensation and Other Information Executive Officers"
of Gibraltar's definitive proxy statement for the Annual Meeting of Stockholders
for fiscal 1999, and is hereby incorporated by reference. If the definitive
proxy statement for the 1999 annual meeting is not filed with the Securities and
Exchange Commission within 120 days of the end of Gibraltar's 1999 fiscal year,
Gibraltar will amend this Annual Report and include such information in the
amendment.
ITEM 11. EXECUTIVE COMPENSATION
The information relating to the cash compensation of directors and
officers required by Item 402 of Regulation S-K will be presented in the
sections entitled "Election of Directors - Director Compensation" and "Executive
Compensation and Other Information" of Gibraltar's definitive proxy statement
for the Annual Meeting of Stockholders for fiscal 1999 and is hereby
incorporated by reference. If the definitive proxy statement for the 1999 annual
meeting is not filed with the Securities and Exchange Commission within 120 days
of the end of Gibraltar's 1999 fiscal year, Gibraltar will amend this Annual
Report and include such information in the amendment.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information relating to security ownership required by Item 403 of
Regulation S-K will be presented in the section entitled "Voting Securities and
Principal Stockholders" of Gibraltar's definitive proxy statement for the Annual
Meeting of Stockholders for fiscal 1999 and is hereby incorporated by reference.
If the definitive proxy statement for the 1999 annual meeting is not filed with
the Securities and Exchange Commission within 120 days of the end of Gibraltar's
1999 fiscal year, Gibraltar will amend this Annual Report and include such
information in the amendment.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information relating to certain relationships and transactions
required by Item 404 of Regulation S-K will be presented in the section
"Executive Compensation and Other Information - Certain Transactions" of
Gibraltar's definitive proxy statement for the Annual Meeting of Stockholders
for fiscal 1999 and is hereby incorporated by reference. If the definitive proxy
statement for the 1999 annual meeting is not filed with the Securities and
Exchange Commission within 120 days of the end of Gibraltar's 1999 fiscal year,
Gibraltar will amend this Annual Report and include such information in the
amendment.
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<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) Financial Statements
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report F-1
Consolidated Balance Sheets,
July 3, 1999 and June 27, 1998 F-2
Consolidated Statements of Operations,
Years Ended July 3, 1999, June 27, 1998 and June 28, 1997 F-3
Consolidated Statements of Stockholders' Equity,
Years Ended July 3, 1999, June 27, 1998 and June 28, 1997 F-4
Consolidated Statements of Cash Flows,
Years Ended July 3, 1999, June 27, 1998 and June 28, 1997 F-5
Notes to Consolidated Financial Statements F-6
</TABLE>
All schedules of the Registrant for which provision is made in the
applicable accounting regulations of the Securities and Exchange Commission are
not required under the related instructions, are inapplicable, or have been
disclosed in the Notes to Consolidated Financial Statements and, therefore, have
been omitted.
(2) Exhibits
EXHIBITS
3.1 Certificate of Incorporation, as amended, of Gibraltar Packaging
Group, Inc. (incorporated by reference to Exhibit 3.1 to
Gibraltar's Registration Statement on Form S-1 (File No. 33-44965),
as amended, filed January 9, 1992).
3.2 By-Laws of Gibraltar Packaging Group, Inc. (incorporated by
reference to Exhibit 3.2 to Gibraltar's Registration Statement on
Form S-1 (File No. 33-44965), as amended, filed January 9, 1992).
4.1 Specimen Common Stock Certificate (incorporated by reference to
Exhibit 4.1 to Gibraltar's Registration Statement on Form S-1 (File
No. 33-44965), as amended, filed January 9, 1992).
10.1 Agreement and Plan of Reorganization, dated as of January 7, 1992,
among Gibraltar Packaging Group, Inc., RidgePak Acquisition
Corporation, RidgePak Corporation, and the Shareholders of RidgePak
Corporation (incorporated by reference to Exhibit 10.1 to
Gibraltar's Registration Statement on Form S-1 (File No. 33-44965),
as amended, filed January 9, 1992).
10.2 Registration Rights Agreement, dated March 4, 1992, by and among
Gibraltar Packaging Group, Inc. and certain stockholders of
Gibraltar Packaging Group, Inc. (incorporated by reference to
Exhibit 4.2 to Gibraltar's Annual Report on Form 10-K for the year
ended June 30, 1992 (File No. 00-19800)).
-20-
<PAGE>
** 10.3 Employment Agreement, dated February 10, 1992, between Gibraltar
Packaging Group, Inc. and Deke C. Abbott, Jr. (incorporated by
reference to Exhibit 10.6 to Gibraltar's Registration Statement on
Form S-1 (File No. 33-44965), as amended, filed January 9, 1992).
** 10.4 Gibraltar Packaging Group, Inc. 1992 Incentive Stock Option Plan,
dated March 5, 1992 and amended as of April 28, 1994 (incorporated
by reference to Exhibit 10.5 to Gibraltar's Annual Report on Form
10-K for the year ended July 2, 1994 (File No. 00-19800)).
** 10.5 Gibraltar Packaging Group, Inc. Director Stock Option Plan dated
July 13, 1992 and amended as of April 28, 1994 (incorporated by
reference to Exhibit 10.6 to Gibraltar's Annual Report on Form 10-K
for the year ended July 2, 1994 (File No. 00-19800)).
** 10.6 Employment Agreement, dated December 1, 1992, between Gibraltar
Packaging Group, Inc. and Richard Hinrichs (incorporated by
reference to Exhibit 28.1 to Gibraltar's Quarterly Report on Form
10-Q for the period ended December 31, 1992 (File No. 00-19800)).
10.7 Stock Purchase Agreement, dated January 28, 1993, by and among
Gibraltar Packaging Group, Inc., Standard Packaging and Printing
Corp. and each of the shareholders of Standard Packaging and
Printing Corp. (incorporated by reference to Exhibit 2.1 to
Gibraltar's Current Report on Form 8-K dated January 28, 1993 (File
No. 00-19800)).
10.8 Registration Rights Agreement, dated as of January 28, 1993,
between Gibraltar Packaging Group, Inc. and Brady W. Dickson and
Joan H. Dickson (incorporated by reference to Exhibit 28.1 to
Gibraltar's Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 1993 (File No. 00-19800)).
10.9 Agreement and Plan of Reorganization, dated April 28, 1993, by and
among Gibraltar Packaging Group, Inc., Niemand Acquisition
Corporation, Niemand Holdings, Inc., Niemand Industries, Inc., and
each of the stockholders of Niemand Holdings, Inc. (incorporated by
reference to Exhibit 2.1 to Gibraltar's Current Report on Form 8-K
dated April 28, 1993 (File No. 00-19800)).
10.10 Registration Rights Agreement, dated April 28, 1993, by and among
Gibraltar Packaging Group, Inc. and the former stockholders of
Niemand Holdings, Inc. listed on Schedule I thereto (incorporated
by reference to Exhibit 28.1 to Gibraltar's Current Report on Form
8-K dated April 28, 1993 (File No. 00-19800)).
10.11 Stock Sale Agreement, dated November 8, 1993, between Gibraltar
Packaging Group, Inc. and Golden Belt Manufacturing Company
(incorporated by reference to Exhibit 10.35 to Gibraltar's Annual
Report on Form 10-K for the year ended July 2, 1994 (File No.
00-19800)).
10.12 Agreement and Plan of Merger, dated as of March 17, 1995, as
extended by letter agreement dated June 15, 1995 and as terminated
by letter agreement dated August 3, 1995, among Caraustar
Industries, Inc., GibPac Acquisition Company and Gibraltar
Packaging Group, Inc. (incorporated by reference to Exhibit 10.37
to Gibraltar's Annual Report on Form 10-K for the year ended July
1, 1995 (File No. 00-19800)).
-21-
<PAGE>
** 10.13 Gibraltar Packaging Group, Inc. 1996 Non-Qualified Stock Option
Plan (incorporated by reference to Exhibit 10.39 to Gibraltar's
Annual Report 10-K for the year ended June 29, 1996 (File No.
00-19800)).
** 10.16 Letter Agreement, dated December 18, 1997 between Gibraltar
Packaging Group, Inc. and Richard D. Hinrichs regarding employment
(incorporated by reference to Exhibit 10.16 to Gibraltar's Annual
Report on Form 10-K for the year ended June 27, 1998 (File No.
00-19800)).
10.17 Secured Credit Agreement, dated July 31, 1998, among Gibraltar
Packaging Group, Inc., various financial institutions and First
Source Financial LLP, Individually and as Agent ("The Credit
Agreement") (incorporated by reference to Exhibit 10.17 to
Gibraltar's Annual Report on Form 10-K for the year ended June 27,
1998 (File No. 00-19800)).
10.18 Term Note, dated July 31, 1998, in favor of First Source Financial
LLP, executed by Gibraltar Packaging Group, Inc. In the principal
amount of $25,000,000 (incorporated by reference to Exhibit 10.18
to Gibraltar's Annual Report on Form 10-K for the year ended June
27, 1998 (File No. 00-19800)).
10.19 Revolving Note, dated July 31, 1998, in favor of First Source
Financial LLP, executed by Gibraltar Packaging Group, Inc. In the
principal amount of $15,000,000 (incorporated by reference to
Exhibit 10.19 to Gibraltar's Annual Report on Form 10-K for the
year ended June 27, 1998 (File No. 00-19800)).
10.20 Security Agreement executed by GB Labels, Inc., dated July 31,
1998, in favor of First Source Financial LLP (incorporated by
reference to Exhibit 10.20 to Gibraltar's Annual Report on Form
10-K for the year ended June 27, 1998 (File No. 00-19800)).
10.21 Security Agreement executed by RidgePak Corporation, dated July 31,
1998, in favor of First Source Financial LLP (incorporated by
reference to Exhibit 10.21 to Gibraltar's Annual Report on Form
10-K for the year ended June 27, 1998 (File No. 00-19800)).
10.22 Security Agreement executed by Standard Packaging and Printing
Corp., dated July 31, 1998, in favor of First Source Financial LLP
(incorporated by reference to Exhibit 10.22 to Gibraltar's Annual
Report on Form 10-K for the year ended June 27, 1998 (File No.
00-19800)).
10.23 Security Agreement executed by Niemand Holdings, Inc., dated July
31, 1998, in favor of First Source Financial LLP (incorporated by
reference to Exhibit 10.23 to Gibraltar's Annual Report on Form
10-K for the year ended June 27, 1998 (File No. 00-19800)).
10.24 Security Agreement executed by Niemand Industries, Inc., dated July
31, 1998, in favor of First Source Financial LLP (incorporated by
reference to Exhibit 10.24 to Gibraltar's Annual Report on Form
10-K for the year ended June 27, 1998 (File No. 00-19800)).
10.25 Pledge Agreement executed by Niemand Holdings, Inc., dated July 31,
1998, in favor of First Source Financial LLP (incorporated by
reference to Exhibit 10.25 to Gibraltar's Annual Report on Form
10-K for the year ended June 27, 1998 (File No. 00-19800)).
-22-
<PAGE>
10.26 Deed of Trust Security Agreement, executed by Gibraltar Packaging
Group, Inc., dated July 31, 1998, in favor of First Source
Financial LLP (incorporated by reference to Exhibit 10.26 to
Gibraltar's Annual Report on Form 10-K for the year ended June 27,
1998 (File No. 00-19800)).
10.27 Deed of Trust Security Agreement, executed by Standard Packaging
and Printing Corp., dated July 31, 1998, in favor of First Source
Financial LLP (incorporated by reference to Exhibit 10.27 to
Gibraltar's Annual Report on Form 10-K for the year ended June 27,
1998 (File No. 00-19800)).
10.28 Security Agreement executed by Gibraltar Packaging Group, Inc.,
dated July 31, 1998, in favor of First Source Financial LLP
(incorporated by reference to Exhibit 10.28 to Gibraltar's Annual
Report on Form 10-K for the year ended June 27, 1998 (File No.
00-19800)).
10.29 Pledge Agreement executed by Gibraltar Packaging Group, Inc., dated
July 31, 1998, in favor of First Source Financial LLP (incorporated
by reference to Exhibit 10.29 to Gibraltar's Annual Report on Form
10-K for the year ended June 27, 1998 (File No. 00-19800)).
10.30 Guaranty, dated July 31, 1998 among Gibraltar Packaging Group,
Inc., RidgePak Corporation, Standard Packaging and Printing Corp.,
Niemand Holdings, Inc., Niemand Industries Inc., GB Labels, Inc.
And First Source Financial LLP (incorporated by reference to
Exhibit 10.30 to Gibraltar's Annual Report on Form 10-K for the
year ended June 27, 1998 (File No. 00-19800)).
10.31 Mortgage Security Agreement executed by RidgePak Corporation, dated
July 31, 1998 in favor of First Source Financial LLP (incorporated
by reference to Exhibit 10.31 to Gibraltar's Annual Report on Form
10-K for the year ended June 27, 1998 (File No. 00-19800)).
10.32 Mortgage Security Agreement executed by Niemand Industries, Inc.,
dated July 31, 1998 in favor of First Source Financial LLP
(incorporated by reference to Exhibit 10.32 to Gibraltar's Annual
Report on Form 10-K for the year ended June 27, 1998 (File No.
00-19800)).
**10.33 Gibraltar Packaging Group, Inc.1998 Stock Appreciation Rights Plan,
dated November 30, 1998 (incorporated by reference to Exhibit 10.33
to Gibraltar's Quarterly Report on Form 10-Q for the period ended
December 31, 1998 (File No. 00-19800)).
**10.34 Employment Agreement, dated January 15, 1999, between Gibraltar
Packaging Group, Inc. and John W. Lloyd (incorporated by reference
to Exhibit 10.34 to Gibraltar's Quarterly Report on Form 10-Q for
the period ended December 31, 1998 (File No. 00-19800)).
**10.35 Employment Agreement, dated January 15, 1999, between Gibraltar
Packaging Group, Inc. and Richard D. Hinrichs (incorporated by
reference to Exhibit 10.35 to Gibraltar's Quarterly Report on Form
10-Q for the period ended December 31, 1998 (File No. 00-19800)).
-23-
<PAGE>
**10.36 Stock Appreciation Rights Agreement, dated January 15, 1999,
between Gibraltar Packaging Group, Inc. and John W. Lloyd
(incorporated by reference to Exhibit 10.36 to Gibraltar's
Quarterly Report on Form 10-Q for the period ended December 31,
1998 (File No. 00-19800)).
**10.37 Stock Appreciation Rights Agreement, dated January 15, 1999,
between Gibraltar Packaging Group, Inc. and Richard D. Hinrichs
(incorporated by reference to Exhibit 10.37 to Gibraltar's
Quarterly Report on Form 10-Q for the period ended December 31,
1998 (File No. 00-19800)).
10.38 First Amendment to Secured Credit Agreement, dated September 1,
1998, among Gibraltar Packaging Group, Inc., various financial
institutions and First Source Financial LLP, Individually and as
agent (incorporated by reference to Exhibit 10.38 to Gibraltar's
Quarterly Report on Form 10-Q for the period ended December 31,
1998 (File No. 00-19800)).
10.39 Second Amendment to Secured Credit Agreement, dated November 15,
1998, among Gibraltar Packaging Group, Inc., various financial
institutions and First Source Financial LLP, Individually and as
agent (incorporated by reference to Exhibit 10.39 to Gibraltar's
Quarterly Report on Form 10-Q for the period ended December 31,
1998 (File No. 00-19800)).
10.40 Third Amendment to Secured Credit Agreement, dated February 11,
1999, among Gibraltar Packaging Group, Inc., various financial
institutions and First Source Financial LLP, Individually and as
agent (incorporated by reference to Exhibit 10.40 to Gibraltar's
Quarterly Report on Form 10-Q for the period ended December 31,
1998 (File No. 00-19800)).
10.41 Fourth Amendment to Secured Credit Agreement, dated May 15, 1999,
among Gibraltar Packaging Group, Inc., various financial
institutions and First Source Financial LLP, Individually and as
agent (incorporated by reference to Exhibit 10.41 to Gibraltar's
Quarterly Report on Form 10-Q for the period ended March 31, 1999
(File No. 00-19800)).
* 10.42 Asset Purchase Agreement, dated February 25, 1999, between Robinson
JDM Ltd. (Buyer) and Niemand Industries, Inc. (Seller).
* 10.43 Escrow Agreement, dated March 29, 1999, among Robinson JDM Ltd.
(Buyer), Niemand Industries, Inc. (Seller) and Chicago Title
Insurance Company.
* 10.44 First Amendment to Asset Purchase Agreement, dated April 20, 1999,
between Robinson JDM Ltd. (Buyer) and Niemand Industries, Inc.
(Seller).
* 10.45 Non-Competition and Non-Solicitation Agreement, dated May 28, 1999,
among Robinson JDM Ltd., Gibraltar Packaging Group, Inc. and
Niemand Industries, Inc.
* 10.46 Asset Purchase Agreement, dated September 1, 1999, between JIT
Manufacturing, Inc. (Buyer) and GB Labels, Inc. (Seller).
* 10.47 Non-Competition Agreement, dated September 1, 1999, between JIT
Manufacturing, Inc. and Gibraltar Packaging Group, Inc.
* 10.48 Guaranty Agreement, dated September 1, 1999, between JIT
Manufacturing, Inc. and Gibraltar Packaging Group, Inc.
-24-
<PAGE>
* 10.49 Fifth Amendment to Secured Credit Agreement, dated September 29,
1999, among Gibraltar Packaging Group, Inc., various financial
institutions and First Source Financial LLP, Individually and as
agent.
* 21.1 Subsidiaries of Gibraltar Packaging Group, Inc.
* 23.1 Consent of Deloitte & Touche LLP.
* 27.1 Financial Data Schedule.
- -----------------
*Filed herewith.
**Indicates management contract or compensatory plan.
(b) Reports on Form 8-K.
The Company filed a Form 8-K on March 5, 1999, referencing its
de-listing from the Nasdaq National Market. The de-listing took
effect at close of business on February 23, 1999.
-25-
<PAGE>
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.
GIBRALTAR PACKAGING GROUP, INC.
By: /s/ John W. Lloyd
------------------------
John W. Lloyd
Chief Financial Officer
Date: September 30, 1999
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.
/s/ Walter E. Rose /s/ John W. Lloyd
------------------------------ --------------------------
Walter E. Rose John W. Lloyd
Chief Executive Officer and Chief Financial Officer
Chairman of the Board (Principal Financial and
(Principal Executive Officer) Accounting Officer)
September 30, 1999 September 30, 1999
/s/ David G. Chandler /s/ Robert G. Shaw
------------------------------ --------------------------
David G. Chandler Robert G. Shaw
Director Director
September 30, 1999 September 30, 1999
/s/ John D. Strautnieks
------------------------------
John D. Strautnieks
Director
September 30, 1999
-26-
<PAGE>
INDEPENDENT AUDITORS' REPORT
BOARD OF DIRECTORS
GIBRALTAR PACKAGING GROUP, INC.
HASTINGS, NEBRASKA
WE HAVE AUDITED THE ACCOMPANYING CONSOLIDATED BALANCE SHEETS OF GIBRALTAR
PACKAGING GROUP, INC. AND ITS SUBSIDIARIES AS OF JULY 3, 1999 AND JUNE 27, 1998,
AND THE RELATED CONSOLIDATED STATEMENTS OF OPERATIONS, STOCKHOLDERS' EQUITY, AND
CASH FLOWS FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JULY 3, 1999. THESE
FINANCIAL STATEMENTS ARE THE RESPONSIBILITY OF THE COMPANY'S MANAGEMENT. OUR
RESPONSIBILITY IS TO EXPRESS AN OPINION ON THESE FINANCIAL STATEMENTS BASED ON
OUR AUDITS.
WE CONDUCTED OUR AUDITS IN ACCORDANCE WITH GENERALLY ACCEPTED AUDITING
STANDARDS. THOSE STANDARDS REQUIRE THAT WE PLAN AND PERFORM THE AUDIT TO OBTAIN
REASONABLE ASSURANCE ABOUT WHETHER THE FINANCIAL STATEMENTS ARE FREE OF MATERIAL
MISSTATEMENT. AN AUDIT INCLUDES EXAMINING, ON A TEST BASIS, EVIDENCE SUPPORTING
THE AMOUNTS AND DISCLOSURES IN THE FINANCIAL STATEMENTS. AN AUDIT ALSO INCLUDES
ASSESSING THE ACCOUNTING PRINCIPLES USED AND SIGNIFICANT ESTIMATES MADE BY
MANAGEMENT, AS WELL AS EVALUATING THE OVERALL FINANCIAL STATEMENT PRESENTATION.
WE BELIEVE THAT OUR AUDITS PROVIDE A REASONABLE BASIS FOR OUR OPINION.
IN OUR OPINION, SUCH CONSOLIDATED FINANCIAL STATEMENTS PRESENT FAIRLY, IN ALL
MATERIAL RESPECTS, THE FINANCIAL POSITION OF GIBRALTAR PACKAGING GROUP, INC. AND
SUBSIDIARIES AT JULY 3, 1999 AND JUNE 27, 1998, AND THE RESULTS OF THEIR
OPERATIONS AND THEIR CASH FLOWS FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED
JULY 3, 1999 IN CONFORMITY WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES.
/S/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
OMAHA, NEBRASKA
SEPTEMBER 24, 1999
(SEPTEMBER 29, 1999 AS TO NOTE 4)
F-1
<PAGE>
GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JULY 3 JUNE 27
1999 1998
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 198 $ 114
Accounts receivable (NET OF ALLOWANCE FOR DOUBTFUL ACCOUNTS OF $194
AND $162, RESPECTIVELY) 7,287 7,820
Inventories 8,027 10,667
Deferred income taxes 972 892
Prepaid and other current assets 350 483
--------- ---------
Total current assets 16,834 19,976
PROPERTY, PLANT AND EQUIPMENT - Net 21,182 25,362
EXCESS OF PURCHASE PRICE OVER NET ASSETS ACQUIRED
(NET OF ACCUMULATED AMORTIZATION OF $1,794 AND
$3,368, RESPECTIVELY) 4,543 13,775
OTHER ASSETS (NET OF ACCUMULATED AMORTIZATION OF $191 AND
$1,199, RESPECTIVELY) 779 258
--------- ---------
TOTAL $ 43,338 $ 59,371
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Checks not yet presented $ 976 $ 1,119
Current portion of long-term debt 2,891 2,034
Accounts payable 6,502 9,310
Accrued expenses 3,001 2,344
Income taxes payable 107 200
--------- ---------
Total current liabilities 13,477 15,007
LONG-TERM DEBT - Net of current portion 27,943 27,872
DEFERRED INCOME TAXES 834 1,659
OTHER LONG-TERM LIABILITIES 638 815
--------- ---------
Total liabilities 42,892 45,353
--------- ---------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; 1,000,000 shares authorized; none issued
Common stock, $.01 par value; 10,000,000 shares
authorized; 5,041,544 issued and outstanding 50 50
Additional paid-in capital 28,162 28,162
Accumulated deficit (27,766) (14,194)
-------- ---------
Total stockholders' equity 446 14,018
--------- ---------
TOTAL $ 43,338 $59,371
========= =========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-2
<PAGE>
GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JULY 3, 1999, JUNE 27, 1998 AND JUNE 28, 1997
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
NET SALES $ 76,514 $ 75,890 $ 74,710
COST OF GOODS SOLD 65,711 64,138 59,396
---------- ---------- ----------
GROSS PROFIT 10,803 11,752 15,314
---------- ---------- ----------
OPERATING EXPENSES:
Selling 3,448 4,065 4,301
General and administrative 5,561 7,508 6,475
Amortization of excess of purchase price
over net assets acquired 345 585 586
Restructuring charges 235 170 -
Impairment of long-lived assets 12,213 14,083 -
---------- ---------- ----------
Total operating expenses 21,802 26,411 11,362
---------- ---------- ----------
INCOME (LOSS) FROM OPERATIONS (10,999) (14,659) 3,952
---------- ----------- ----------
OTHER (INCOME) EXPENSE:
Interest expense 3,336 4,016 3,033
Other (income) expense - net (12) (27) 28
---------- ----------- ----------
Other expense - net 3,324 3,989 3,061
---------- ---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM (14,323) (18,648) 891
PROVISION (BENEFIT) FOR INCOME TAXES (751) (1,435) 559
----------- ---------- ----------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM (13,572) (17,213) 332
EXTRAORDINARY ITEM (net of tax effect of $66)
(Write-off of finance charges as a result of debt repayment) - - (107)
---------- ---------- ----------
NET INCOME (LOSS) ($13,572) ($17,213) $ 225
=========== =========== ==========
BASIC AND DILUTED PER COMMON SHARE AMOUNTS:
Income (Loss) Before Extraordinary Item ($2.69) ($3.41) $ 0.07
========== ========== ==========
Net Income (Loss) ($2.69) ($3.41) $ 0.07
========== ========== ==========
WEIGHTED AVERAGE SHARES OUTSTANDING 5,041,544 5,041,544 5,041,544
========== ========== ===========
(basic and diluted)
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-3
<PAGE>
GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JULY 3, 1999, JUNE 27, 1998 AND JUNE 28, 1997
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL RETAINED
NUMBER OF PAID-IN EARNINGS
SHARES AMOUNT CAPITAL (DEFICIT) OTHER TOTAL
<S> <C> <C> <C> <C> <C> <C>
BALANCE, June 29, 1996 5,041,544 $ 50 $ 28,162 $ 2,794 $ - $ 31,006
Net income 225 225
Adjustment for minimum
pension liability (131) (131)
----------- --------- --------- -------- -------- ---------
BALANCE, June 28, 1997 5,041,544 50 28,162 3,019 (131) 31,100
Net loss (17,213) (17,213)
Adjustment for minimum
pension liability 131 131
----------- --------- --------- -------- -------- ---------
BALANCE, June 27, 1998 5,041,544 50 28,162 (14,194) - 14,018
Net loss (13,572) (13,572)
----------- --------- --------- ------- -------- ---------
BALANCE, July 3, 1999 5,041,544 $ 50 $ 28,162 ($27,766) $ - $ 446
========= ========= ========= ======= ======== =========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-4
<PAGE>
GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JULY 3, 1999, JUNE 27, 1998 AND JUNE 28, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($13,572) ($17,213) $ 225
Adjustments to reconcile net income (loss) to
net cash flows from operating activities:
Extraordinary item - write-off of finance charges - - 173
Impairment write-down of long-lived assets 12,213 14,083 -
Depreciation and amortization 3,062 4,993 3,977
(Gain) loss on sale of property, plant and equipment (12) (27) 32
Deferred income taxes (905) (1,849) -
Changes in operating assets and liabilities:
Accounts receivable - net 422 1,020 (1,980)
Inventories 1,927 (1,661) 166
Prepaid expenses and other assets 7 (197) 213
Accounts payable (2,951) 4,477 (421)
Income taxes payable (93) (492) 424
Accrued expenses and other liabilities 412 (306) 275
---------- ---------- ----------
Net Cash Flows from Operating Activities 510 2,828 3,084
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property, plant and equipment 693 103 28
Purchases of property, plant and equipment (1,245) (2,143) (2,640)
---------- ---------- ----------
Net Cash Flows from Investing Activities (552) (2,040) (2,612)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under revolving credit facility 2,998 3,149 356
Net principal repayments of long-term debt (32,943) (3,801) (30,557)
Net repayments under capital leases (39) (137) (103)
Proceeds from issuance of long-term debt 30,830 - 31,050
Refinancing costs (720) - (1,173)
----------- ---------- ----------
Net Cash Flows from Financing Activities 126 (789) (427)
---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH 84 (1) 45
CASH AT BEGINNING OF YEAR 114 115 70
---------- ---------- ----------
CASH AT END OF YEAR $ 198 $ 114 $ 115
========== ========== ==========
SUPPLEMENTAL DISCLOSURE:
Income taxes paid $ 247 $ 899 $ 62
========== ========== ==========
Interest paid $ 3,116 $ 2,997 $ 2,376
========== ========== ==========
SCHEDULE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES:
Capital lease obligations $ 82 $ 61 $ 198
========== ========== ==========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-5
<PAGE>
GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED JULY 3, 1999, JUNE 27, 1998 AND JUNE 28, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION - The accompanying consolidated financial statements
include the accounts of Gibraltar Packaging Group, Inc. (the "Company") and its
wholly owned subsidiaries; RidgePak Corporation (dba "Flashfold Carton"),
Standard Packaging & Printing Corporation ("Standard Packaging"), Niemand
Industries, Inc. ("Niemand") and GB Labels, Inc. ("GB Labels"). All significant
intercompany accounts and transactions have been eliminated.
DESCRIPTION OF BUSINESS - The Company designs and manufactures high quality
specialty packaging products in facilities located in Nebraska, Indiana, Alabama
and North Carolina, and markets these products primarily to customers throughout
the United States. The Company's products include folding cartons, specialty
laminated containers, flexible packaging, tubular packaging and contract
packaging and filling for a wide range of businesses. Based on the nature of the
product, the production processes, types of customers, and methods used to
distribute products, the Company operates in one reportable segment.
FISCAL YEAR - The Company ends its fiscal year on the Saturday closest to June
30.
CASH AND CASH EQUIVALENTS - The Company considers all highly liquid financial
instruments purchased with a maturity of three months or less to be cash
equivalents. The Company utilizes a cash management system that includes zero
balance accounts. Negative cash balances for such accounts, resulting from
outstanding checks, are reclassified to checks not yet presented in the
consolidated financial statements.
ACCOUNTS RECEIVABLE - The changes in the allowance for doubtful accounts
receivable consist of the following (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED
----------------------------------------------
JULY 3 JUNE 27 JUNE 28
1999 1998 1997
<S> <C> <C> <C>
Allowance, Beginning of Year $ 162 $ 127 $ 231
Provision for Uncollectible Accounts 122 184 74
Write-off of Uncollectible Accounts (90) (149) (178)
---------- ---------- ----------
Allowance, End of Year $ 194 $ 162 $ 127
========== ========== ==========
</TABLE>
INVENTORIES - Inventories are stated at the lower of cost (first-in, first-out
method) or market.
PROPERTY, PLANT AND EQUIPMENT - Depreciation is provided using the straight-line
method over the following estimated useful lives:
Buildings 30 years
Machinery and equipment 2-20 years
Vehicles 3-8 years
Furniture and fixtures 3-10 years
F-6
<PAGE>
EXCESS OF PURCHASE PRICE OVER NET ASSETS ACQUIRED - The excess of the purchase
price over the net assets acquired is being amortized over a forty-year period
on a straight-line basis. The carrying value of goodwill is evaluated in
relation to the operating performance and future undiscounted net cash flows of
the related acquired businesses.
IMPAIRMENT OF LONG-LIVED ASSETS - Recoverability of long-lived assets not held
for sale are evaluated by measuring the carrying amount of the assets against
the estimated undiscounted future cash flows associated with them. Based on
these evaluations, there were no adjustments to the carrying value on long-lived
assets in fiscal 1997.
At the end of the third quarter of fiscal 1999, the Company recorded a charge of
$11.8 million to write-down the carrying amount of goodwill and fixed assets of
Flashfold Carton to estimated fair value. Estimated fair value was determined by
discounting future cash flows.
The Flashfold Carton facility has been experiencing declining sales and
profitability for the past three years. In the first quarter of fiscal 1999, the
facility was put under the operating control of the Gibraltar Packaging Group,
Inc. (dba "Great Plains Packaging", or "Great Plains") management team in an
attempt to improve operating results. Management's projections of future
operating cash flows during the first two quarters of fiscal 1999 continued to
reflect planned operating improvements. During the third quarter of fiscal 1999,
it was determined that the planned operating improvements could not be realized
in the time period or to the degree estimated. The impairment loss resulted in a
complete write-off of goodwill and reducing the carrying value of fixed assets
at Flashfold Carton.
In connection with a modification of the Company's strategic plan, the Company
has or is in the process of divesting of the assets of two of its subsidiaries,
GB Labels and Niemand. The evaluation of the recoverability of long-lived assets
held for sale are based on comparing the assets carrying amount with its fair
value less cost to sell. The sale of the assets of GB Labels was effective
August 30, 1999. The Company recorded a pre-tax non-cash charge of $82,000 in
the fourth quarter of fiscal 1999 to write-down the carrying amount of GB
Labels' fixed assets sold to fair value less cost to sell. No gain or loss will
be recorded on the sale in fiscal 2000. Additionally, the Company recorded a
pre-tax non-cash charge of $0.3 million to write-down the carrying amount of the
retained real property of GB Labels to estimated fair value.
In the fourth quarter of fiscal 1998, the Company recorded a pre-tax non-cash
charge of $14.1 million to write-down the carrying amount of goodwill and fixed
assets of Niemand to estimated fair value less cost to sell. Due to
uncertainties inherent in the estimation process, it is reasonably possible that
the ultimate loss on the sale of Niemand may vary from the current estimate. The
sale of the container business of Niemand was finalized in the fourth quarter of
fiscal 1999. The Company is in negotiations with Niemand management for the sale
of the remaining assets of Niemand. The Company anticipates completing the
divestiture of the remaining assets of Niemand by the end of the second quarter
of fiscal 2000.
OTHER ASSETS - Costs associated with obtaining financing arrangements are
included in other assets. At June 27, 1998, unamortized financing costs of $0.9
million related to the credit agreement with Harris Trust and Savings Bank
("Harris Bank") were amortized as a result of the acceleration of the maturity
date of such credit agreement to August 1998. In July 1998, the Company
capitalized approximately $0.8 million, representing the cost of refinancing its
debt under a new credit facility as described in Note 4.
REVENUE RECOGNITION - Sales and related cost of sales are recognized upon the
earlier of shipment of products or acceptance by the customer.
F-7
<PAGE>
EARNINGS PER SHARE - Basic earnings per share data are based on the weighted
average outstanding common shares during the period. Diluted earnings per share
data are based on the weighted average outstanding common shares and the effect
of all dilutive potential common shares, including stock options.
NEW ACCOUNTING PRONOUNCEMENTS - In June 1998, SFAS No. 133, ACCOUNTING FOR
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, was issued. This statement will
become effective in fiscal 2001. The Company has not quantified the impact, if
any, resulting from the adoption of this standard.
USE OF ESTIMATES - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
RECLASSIFICATION - Certain amounts in the fiscal 1998 and 1997 financial
statements have been reclassified to conform with the fiscal 1999 presentation.
2. INVENTORIES
Inventories consisted of the following (in thousands):
JULY 3 JUNE 27
1999 1998
Finished goods $ 5,060 $ 6,506
Work in process 913 1,396
Raw materials 1,699 2,319
Manufacturing supplies 355 446
---------- ----------
$ 8,027 $ 10,667
========== ==========
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment (at cost) consisted of the following (in
thousands):
JULY 3 JUNE 27
1999 1998
Land $ 707 $ 699
Buildings 11,846 11,558
Machinery, equipment
and vehicles 25,243 28,023
Furniture and fixtures 2,032 2,191
Construction-in-progress 371 808
---------- -----------
40,199 43,279
Less accumulated depreciation 19,017 17,917
---------- -----------
$ 21,182 $ 25,362
========== ==========
4. FINANCING AGREEMENTS
F-8
<PAGE>
Long-term debt consisted of (columnar amounts in thousands):
<TABLE>
<CAPTION>
JULY 3 JUNE 27
1999 1998
<S> <C> <C>
First Source term loan, quarterly principal payments of $562,500 through July
1999, $625,000 through October 1999, monthly principal payments of $208,333
through July 2000 and $229,167 through April 2003, with the balance of
$12,687,500 due on July 31, 2003, interest is payable monthly. $ 22,579 $ -
Revolving credit facility, matures July 31, 2003, interest is payable
monthly. 8,150 -
Harris Bank term loan, monthly principal payments of $312,500 through
August 1, 1998, paid off on August 10, 1998. - 20,000
Revolving credit facility, paid off on August 10, 1998. - 9,099
Note payable, for capital expansion of Marion, Alabama facility, due in monthly
principal and interest installments, paid off on August 10, 1998. - 746
Capital lease obligations 105 61
------------ ------------
Total 30,834 29,906
Less current portion 2,891 2,034
------------ ------------
Long-term debt $ 27,943 $ 27,872
============ ============
</TABLE>
Through various amendments of the credit agreement during fiscal 1998, the
Company and Harris Bank agreed to accelerate the maturity of the Company's bank
credit agreement to August 10, 1998, and to eliminate all financial covenants as
of June 27, 1998. The Company's bank credit agreement with Harris Bank consisted
of a $25 million term loan and a $10 million revolving credit facility. At June
27, 1998, both facilities bore interest at the bank's prime rate plus 1%. The
banks prime rate was 8.5% at June 27, 1998.
On July 31, 1998, the Company refinanced its debt. The Company's new credit
facility with First Source Financial LLP ("First Source") provides for a five
year $25 million term loan and a five year $15 million working capital revolving
line of credit ("Revolver").
The proceeds from the credit facility were used to refinance the Harris Bank
credit facility, to repay a note payable related to the Alabama facility, to pay
the related transactions costs, and to fund the working capital and capital
expenditure needs of the Company. The credit facility is secured by a first
priority perfected security interest in and lien on all assets (real and
personal, tangible and intangible) of the Company excluding the Burlington,
North Carolina property.
The Revolver provides for a revolving line of credit under a borrowing base
commitment subject to certain loan availability requirements. Loan availability
under the Revolver may not exceed the lesser of (1) $15 million or (2) the sum
of (a) up to 85% of the Company's eligible accounts receivable plus (b) up to
60% of the Company's eligible inventory. At no time may the sum of aggregated
loan advances outstanding under the Revolver plus the aggregated amount of
extended letter of credit guarantees exceed loan availability.
As of July 3, 1999, all outstanding letters of credit are guaranteed by First
Source. The Company pays a letter of credit fee of 2.75% to guarantee
availability under the Revolver. Outstanding letters of credit at July 3, 1999
amounted to $222,000 and relate to workman's compensation
F-9
<PAGE>
insurance policies.
The First Source credit facility contains certain restrictive covenants
including financial covenants related to Net Worth, Minimum Interest Coverage
Ratio, Capital Expenditures, Debt Ratio and Fixed Charge Coverage. As of July 3,
1999, the Company was not in compliance with certain financial covenants. First
Source has waived the covenant violations relating to Net Worth, Minimum
Interest Coverage Ratio, Capital Expenditures, Debt Ratio and Fixed Charge
Coverage as of July 3, 1999.
The Revolver currently bears interest at First Source's prime rate plus 1.25%,
while the term loan currently bears interest at First Source's prime rate plus
1.75%. The Company also pays a commitment fee of 0.5% on the difference between
the average daily loan balance and the amount of the Revolver. First Source's
prime rate was 8% at July 3, 1999.
During fiscal 1997, the Company purchased an interest rate cap agreement to
reduce the impact of changes in interest rates. The cap agreement entitled the
Company to receive from the counterparty (a major bank) the notional amount
multiplied by the differences between the variable 1-month LIBOR and cap rates
when the 1-month LIBOR exceeds the quoted cap rate of 10%. The above agreement
matured on June 30, 1998 and the related premium was fully amortized at June 27,
1998.
Anticipated maturities of long-term debt subsequent to July 3, 1999, pursuant to
the credit facility and future minimum payments under finance leases, are as
follows (in thousands):
AMOUNTS
2000 $ 2,891
2001 2,751
2002 2,773
2003 2,312
2004 20,107
-----------
Total $ 30,834
===========
5. INCOME TAXES
The provision (benefit) for income taxes consists of the following (in
thousands):
JULY 3 JUNE 27 JUNE 28
1999 1998 1997
Current:
Federal $ 71 $ 50 $ 478
State 83 364 31
Deferred (905) (1,849) 50
---------- ---------- ----------
($751) ($1,435) $ 559
========== ========== ==========
F-10
<PAGE>
The following represents a reconciliation between the actual income tax expense
and income taxes computed by applying the statutory federal income tax rate to
income (loss) before income taxes:
<TABLE>
<CAPTION>
JULY 3 JUNE 27 JUNE 28
1999 1998 1997
<S> <C> <C> <C>
Statutory rate ($4,870) ($6,341) $ 303
State income tax effect (215) (84) 33
Increase in valuation allowance 1,176 - -
Disallowed losses with respect
to impaired asset writedown 3,023 4,788 -
Amortization of excess of purchase price over
net assets acquired 117 199 199
Other - net 18 3 24
--------- ---------- ----------
Total ($751) ($1,435) $ 559
--------- --------- ----------
</TABLE>
Deferred income tax (liabilities) assets result from reporting income and
expenses in different periods for tax and financial reporting purposes. The
deferred tax liabilities and assets are comprised of the following (in
thousands):
JULY 3 JUNE 27
1999 1998
Deferred income tax assets:
Difference in basis of amortizable assets $ 961 $ 1,006
Non-deductible accrued liabilities 1,258 1,121
Net operating loss carryforwards of
a subsidiary company 812 812
State net operating loss carryforwards 1,492 937
State tax credits carryforward 986 930
Federal net operating loss carryforward 2,457 1,812
AMT credit carryforward 385 385
Differences in the basis of inventory
for tax purposes 179 241
Other - net 27 --
------- -------
Total 8,557 7,224
Deferred tax asset valuation allowance (4,325) (3,149)
------- -------
Net 4,232 4,095
------- -------
Deferred tax liabilities:
Difference in basis of property, plant
and equipment (3,597) (4,491)
Other (497) (371)
------- -------
Total (4,094) (4,862)
------- -------
Net deferred income tax asset (liability) $ 138 ($ 767)
======= =======
F-11
<PAGE>
At July 3, 1999, the Company had the following tax net operating loss
carryfowards for federal income tax purposes (in thousands):
EXPIRATION AMOUNTS
2007 $ 447
2008 665
2009 930
2010 2,037
2011 409
2012 267
2013 3,271
2019 1,242
-----------
Total $ 9,268
===========
Approximately $2.0 million of such losses relate to a subsidiary company, which
are available to be utilized only against future taxable income of such
subsidiary.
At July 3, 1999, the Company had a state investment tax credit carryforward of
approximately $1.0 million which expires if unutilized by the year 2005. These
credits are available to offset both Nebraska state income tax and Nebraska
sales tax on qualifying purchases.
6. EMPLOYEE BENEFIT PLANS
The Company maintains a noncontributory defined benefit pension plan (the
"benefit plan") covering substantially all of the RidgePak Corporation hourly
employees fulfilling participation requirements. Benefits are based on the
employee's years of credited service. The Company's funding policy is to
contribute annually the minimum amount required under ERISA. Plan assets are
held by an independent trustee and consist of U.S. Government securities, time
deposits, common stocks, corporate bonds and collective investment funds.
The change in benefit obligation and plan assets and the reconciliation of
funded status for the years presented included the following components (dollars
in thousands):
<TABLE>
<CAPTION>
JULY 3 JUNE 27
1999 1998
<S> <C> <C>
Change in benefit obligations:
Benefit obligation at beginning of year $ 536 $ 467
Service cost 58 49
Interest cost 32 34
Actuarial (gain)/loss (70) 53
Benefits paid (27) (67)
----------- -----------
Benefit obligation at end of year 529 536
----------- -----------
Change in plan assets:
Fair value of plan assets at beginning of year 592 428
Actual return on plan assets 37 98
Employer contribution - 133
Benefits paid (27) (67)
----------- -----------
Fair value of plan assets at end of year 602 592
----------- -----------
Reconciliation of funded status:
Plan assets in excess of projected benefit obligation 73 57
Unrecognized loss 51 117
----------- -----------
Prepaid pension cost recognized on balance sheet $ 124 $ 174
=========== ===========
Discount rate used to calculate the above liability 7.50% 6.50%
</TABLE>
F-12
<PAGE>
The net periodic pension cost and assumptions used for the years presented
included the following components (dollars in thousands):
<TABLE>
<CAPTION>
JULY 3 JUNE 27 JUNE 28
1999 1998 1997
<S> <C> <C> <C>
Service cost-benefits earned during the period $ 58 $ 49 $ 43
Interest cost on projected benefit obligation 32 34 30
Expected return on plan assets (44) (38) (33)
Amortization of loss 5 6 5
----------- ----------- -----------
Net periodic pension cost $ 51 $ 51 $ 45
=========== =========== ===========
Discount rate used to calculate expense 6.50% 7.50% 7.75%
Expected long-term rate of return on plan assets 8.00% 8.00% 8.00%
</TABLE>
The Company also sponsors a defined contribution 401(k) plan (the "Gibraltar
Plan"). Employees are eligible to participate in the Gibraltar Plan upon
completion of six months of credited service. Participants fully vest in Company
contributions after five years with partial vesting after one year. An employee
may contribute up to 15% of his or her earnings on a pre-tax basis subject to
IRS limitations. The Company matches 25% of an employee's contribution up to a
maximum of 4% of eligible compensation. The Company also makes a quarterly
profit sharing contribution when the earnings per share of Gibraltar stock is
$0.15 per share or higher in any fiscal quarter. The profit sharing portion of
each participant's account is invested in Gibraltar stock.
The Company's contributions to the Gibraltar Plan for the years ended July 3,
1999, June 27, 1998 and June 28, 1997 were approximately $115,000, $94,000 and
$77,000, respectively.
7. STOCK OPTION PLANS
The 1992 Incentive Stock Option Plan (the "1992 Plan") provides for grants to
key employees of the Company of options to purchase in the aggregate up to
300,000 shares of the Company's common stock with exercise prices equal to or
greater than the market price at the date of grant. Options granted under the
1992 Plan are exercisable no earlier than six months and no later than ten years
from the grant date.
The Director Stock Option Plan (the "Directors Plan") provides for each
independent director to receive a grant of an option to purchase 3,000 shares of
the Company's common stock at an exercise price equal to the market price at the
date such person is elected to the board. Options granted under the Directors
Plan are exercisable no earlier than six months and no later than ten years from
the grant date.
Effective November 30, 1998, the Company's 1996 Non-Qualified Stock Option Plan
was terminated. There were 225,000 shares granted under that plan in fiscal
1997, with vesting based on meeting certain financial criteria. This termination
was the direct result of the adoption of the 1998 Stock Appreciation Rights Plan
(referenced below).
On November 30, 1998, the Company established the 1998 Stock Appreciation Rights
Plan (the "Plan") to be administered by the Compensation Committee of the
Company's Board of Directors. The Plan provides for the discretionary granting
of stock appreciation rights ("SAR") to key employees of the Company. SARs held
by grantees under the Plan entitle the holder to cash payments only.
Effective January 15, 1999, 150,000 SARs valued at $2.25 each and 150,000 SARs
valued at $3.00 each were granted to officers of the Company. The SARs vest at
20% per year through the maturity date of June 30, 2003. No compensation expense
has been recorded related to this plan,
F-13
<PAGE>
since the value of the SARs exceed the current trading price of the stock.
A summary of stock option transactions under the Company's employee option plans
and the Director's stock plan for each of the three years in the period ended
July 3, 1999 is as follows:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
SHARES EXERCISE PRICE
------ --------------
<S> <C> <C>
Outstanding at June 29, 1996 139,334 $ 7.54
Granted 225,000 4.00
Exercised - -
Canceled or Lapsed (47,500) 7.91
------------ -----------
Outstanding at June 28, 1997 316,834 4.97
Granted - -
Exercised - -
Canceled or Lapsed (36,000) 6.85
------------ -----------
Outstanding at June 27, 1998 280,834 4.73
Granted - -
Exercised - -
Canceled or Lapsed (228,000) 4.07
------------ -----------
Outstanding at July 3, 1999 52,834 $ 7.59
============ ===========
Shares exercisable at June 28, 1997 127,334 $ 6.04
Shares exercisable at June 27, 1998 100,834 $ 6.03
Shares exercisable at July 3, 1999 52,834 $ 7.59
</TABLE>
The following table summarizes information about stock options outstanding at
July 3, 1999:
<TABLE>
<CAPTION>
Weighted
Range of Avg. Remaining Weighted Weighted
Exercise Number Contractual Average Number Average
Prices Outstanding Life Exercise Price Exercisable Exercisable
------ ----------- ---- -------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
$6.00 - $6.50 22,334 3.0 years $ 6.02 22,334 $ 6.02
$8.00 - $9.00 30,500 4.7 years 8.74 30,500 8.74
------ --------- ---- ------ ----
52,834 4.0 Years $ 7.59 52,834 $ 7.59
</TABLE>
F-14
<PAGE>
The Company accounts for its stock-based compensation under the provisions of
APB Opinion 25, "Accounting for Stock Issued to Employees," which utilizes the
intrinsic value method. No compensation cost has been recognized related to the
Company's stock option plans. Had compensation cost been determined based on the
fair value of the options at the date of grant consistent with the requirements
of Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," the Company's net income (loss) and earnings per
share would have been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
JULY 3 JUNE 27 JUNE 28
1999 1998 1997
<S> <C> <C> <C>
Net income (loss) applicable to common shareholders
As reported ($13,572) ($17,213) $ 225
Pro forma ($13,572) ($17,242) $ 199
Net income (loss) per basic and diluted common share
As reported ($2.69) ($3.41) $0.05
Pro forma ($2.69) ($3.42) $0.04
</TABLE>
The fair value of stock options granted in fiscal 1997 was estimated at the date
of grant using the Black-Scholes option pricing model with the following
weighted-average assumptions:
JUNE 28
1997
Risk free interest rate 6.1%
Expected life of option grants 4
Expected volatility 32.0%
Expected dividend yield 0
At July 3, 1999, the stock option exercise prices for the two existing plans
exceeded the market value of the Company's common stock and therefore the
options are excluded from the Company's earnings per share calculation.
8. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES - The Company leases office and manufacturing space,
manufacturing equipment, computer equipment, vehicles and warehouse space under
non-cancelable operating leases. Rent expense for the years ended July 3, 1999,
June 27, 1998 and June 28, 1997 under such lease agreements was approximately
$1,584,000, $1,396,000 and $960,000, respectively. As of July 3, 1999,
approximate minimum future lease commitments were as follows (in thousands):
AMOUNTS
2000 $ 1,377
2001 1,204
2002 834
2003 562
2004 391
Thereafter 171
-----------
Total $ 4,539
===========
F-15
<PAGE>
LEGAL PROCEEDINGS - From time to time, the Company is a party to certain
lawsuits and administrative proceedings that arise in the conduct of its
business. While the outcome of these lawsuits and proceedings cannot be
predicted with certainty, management believes that, if adversely determined, the
lawsuits and proceedings, either singularly or in the aggregate, would not have
a material adverse effect on the financial condition, results of operations, or
net cash flows of the Company.
ENVIRONMENTAL MATTERS - In May 1995, the Company discovered groundwater
contamination at its Burlington, North Carolina facility. Based on work
performed by its environmental consultants, the Company established a reserve of
$750,000 for such remediation costs in fiscal 1995. The Company's accrual for
such remediation costs included in other long-term liabilities on the
Consolidated Balance Sheet approximates $475,000 and $578,000 as of July 3, 1999
and June 27, 1998, respectively. Incurred expenses as of July 3, 1999 related to
remediation totaled $275,000. In June of 1998, the Company completed a follow-up
assessment of the facility which was then filed with the Division of Water
Quality ("DWQ"). The Company is awaiting a reply from the DWQ. Management
believes that the ultimate resolution of this and other environmental matters
will not materially affect the financial position or results of future
operations and cash flows of the Company.
9. RELATED PARTY TRANSACTIONS
Certain officers of the Company hold an equity interest in Rostra Technologies,
Inc. ("Rostra"), a related party. During fiscal years 1999, 1998 and 1997, the
Company paid $158,000, $452,000 and $389,000, respectively, to Rostra in
management fees for services provided by the Company's CEO and CFO. Effective
October 1997, the Company ceased paying management fees to Rostra for the
Company's CEO. Effective January 1999, the Company ceased paying management fees
to Rostra for the Company's CFO. At July 3, 1999 and June 27, 1998, the Company
owed Rostra $0 and $66,029, respectively, for unpaid fees.
10. SEVERANCE, OFFICE MOVING AND RESTRUCTURING CHARGES
In recent years, the Company has restructured its corporate headquarters and
certain aspects of its business in an effort to reduce its cost structure and
remain competitive in its markets. Restructuring charges primarily involve the
separation of employees, moving costs and similar actions. Costs for
restructuring activities are limited to incremental costs that directly result
from the restructuring activities and provide no future benefit to the Company.
In the second quarter of fiscal 1998, the Company approved a plan to reduce
costs through a series of organizational and facility consolidations. A
restructuring charge of $170,000 was recorded relating to severance costs for
divisional personnel. Other costs of approximately $500,000 relating to the
reorganization are included in general and administrative expenses and consist
of severance and relocation costs.
In the second quarter of fiscal 1999, the Company approved a plan to further
reduce costs by closing the Company's corporate office and moving the Company's
corporate functions to its Hastings, Nebraska facility. The move was completed
on November 2, 1998. A restructuring charge of $235,000 was recorded consisting
of severance costs for two corporate personnel ($74,000), the write-off of
leasehold improvements ($61,000) and moving costs ($100,000) associated with
relocating the corporate functions to its Hastings, Nebraska facility.
At July 3, 1999, June 27, 1998 and June 28, 1997, accrued liabilities and other
long-term liabilities included approximately $169,000, $222,000 and $300,000,
respectively, in restructuring charges, primarily relating to severance costs.
The change in these reserves is the result of direct cash outflows related to
the restructuring.
F-16
<PAGE>
11. MAJOR CUSTOMERS
Sales to one customer represented approximately 11.8%, 11.1% and 11.0% of net
sales in fiscal years 1999, 1998 and 1997, respectively.
12. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of cash, accounts receivable and accounts payable
approximates fair value because of the short-term maturity of these instruments.
The carrying value of the Company's borrowings under its long-term revolving
credit agreement and other long-term borrowings approximates fair value based on
quoted market prices for the same or similar instruments.
The fair value of the Company's letters of credit is based on fees currently
charged for similar agreements or on the estimated cost to terminate or settle
the obligations. As of July 3, 1999, the fair value of the letters of credit was
$222,000.
13. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of the quarterly results of operations for the years
ended July 3, 1999 and June 27, 1998 (in thousands, except per share data):
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------------------------------------
1999 SEPTEMBER 30 DECEMBER 31(1) MARCH 31(2) JULY 3(3) YEAR
<S> <C> <C> <C> <C> <C>
Net Sales $ 20,185 $ 18,980 $ 19,015 $ 18,334 $ 76,514
Gross Profit 3,221 2,958 1,917 2,707 10,803
Net Loss (177) (237) (12,634) (524) (13,572)
Per Common Share Amounts:
(basic and diluted)
Net Income (Loss) $ (0.04) $ (0.05) $ (2.51) $ (0.10) $ (2.69)
QUARTER ENDED
------------------------------------------------------------------------
1998 SEPTEMBER 30 DECEMBER 31(4) MARCH 31 JUNE 27(5) YEAR
Net Sales $ 19,328 $ 18,619 $ 18,954 $ 18,989 $ 75,890
Gross Profit 3,547 2,224 3,164 2,817 11,752
Net Income (Loss) 14 (1,877) (137) (15,213) (17,213)
Per Common Share Amounts:
(basic and diluted)
Net Income (Loss) $ - $ (0.37) $ (0.03) $ (3.01) $ (3.41)
</TABLE>
(1) The second quarter of fiscal 1999 net loss includes a $235
restructuring charge consisting of severance costs for corporate
personnel, the write-off of leasehold improvements and moving costs
associated with relocating the corporate functions to its Hastings,
Nebraska facility.
F-17
<PAGE>
(2) The third quarter of fiscal 1999 net loss includes an impairment
write-down of long-lived assets related to Flashfold Carton of $11,861.
Gross margins at Flashfold Carton were below the prior year.
(3) The fourth quarter of fiscal 1999 net loss includes an impairment
write-down of long-lived assets related to GB Labels of $352.
(4) Included in the second quarter of fiscal 1998 net loss is a charge for
severance and relocation costs of $500 and a restructuring charge of
$170 consisting of severance costs for divisional personnel.
(5) The fourth quarter of fiscal 1998 net loss includes an impairment write
down of long-lived assets related to Niemand of $14,083, and a
write-off of unamortized finance costs related to the Harris Bank
refinancing of $854.
F-18
EXHIBIT No. 10.42
ASSET PURCHASE AGREEMENT
BETWEEN
ROBINSON JDM LTD.
("BUYER")
AND
NIEMAND INDUSTRIES, INC.
("SELLER")
FEBRUARY 25, 1999
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
1. Sale and Purchase of Assets and Liabilities................................1
1.1 Sale and Purchase of Assets.......................................1
1.2 Liabilities.......................................................3
2. The Interim Period; Delivery of the Assets; Etc............................4
3. Purchase Price4
3.1 Purchase Price....................................................4
3.2 Payment of the Purchase Price.....................................5
3.3 Allocation of the Purchase Price..................................7
4. Preliminary Closing and Closing; Time and Place............................7
5. Representations and Warranties by Seller...................................8
5.1 Organization and Standing.........................................8
5.2 Authorization by Seller...........................................8
5.3 Approvals, Consents, Etc..........................................8
5.4 Compliance With Other Instruments.................................9
5.5 Title to Assets; Absence of Liens and Encumbrances................9
5.6 Inventory.........................................................9
5.7 Tangible Property................................................10
5.8 Contracts........................................................10
5.9 Brokers..........................................................10
5.10 No Suit, Etc.....................................................11
5.11 Compliance With Laws.............................................11
5.12 Ordinary Course..................................................11
5.13 Representations and Warranties on Closing Date...................11
6. Representations and Warranties by Buyer...................................11
6.1 Organization and Standing of Buyer...............................11
6.2 Authorization by Buyer...........................................12
6.3 Approvals, Consents, Etc.........................................12
6.4 Compliance With Other Instruments................................12
6.5 Brokers..........................................................13
7. Additional Covenants......................................................13
7.1 Access 13
7.2 Collection of Accounts Receivable................................13
7.3 Further Assurances...............................................13
7.4 Lien Releases....................................................14
i
<PAGE>
7.5 Warranty Service.................................................14
7.6 Cooperation With Customers.......................................15
7.7 Non-Competition..................................................15
7.8 New Contracts....................................................15
8. Conditions Precedent to the Obligations of Buyer..........................15
8.1 Accuracy of Representations and Warranties.......................16
8.2 Performance of Agreements........................................16
8.3 Legal Proceedings................................................16
8.4 Transfer Documents...............................................16
8.5 No Liens.........................................................17
9. Conditions Precedent to the Obligations of Seller.........................17
9.1 Accuracy of Representations and Warranties.......................17
9.2 Performance of Agreements........................................17
9.3 Legal Proceedings................................................17
10. Termination...............................................................17
10.1 Termination......................................................17
10.2 Effect of Termination............................................18
11. General...................................................................18
11.1 Survival of Representations, Warranties, Etc.....................18
11.2 Expenses.........................................................19
11.3 Waivers..........................................................19
11.4 Notices..........................................................19
11.5 Binding Effect; Benefits.........................................20
11.6 Bulk Transfers...................................................20
11.7 Assignment.......................................................20
11.8 Headings.........................................................20
11.9 Counterparts.....................................................20
11.10 Construction.....................................................20
11.11 Governing Law and Jurisdiction...................................21
11.12 Arbitration......................................................21
11.13 Separability.....................................................23
11.14 Entire Agreement; Amendments.....................................23
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LIST OF SCHEDULES
-----------------
Exhibit A Container Business Definition
Preliminary Schedule 1.1(a) Raw Material Inventory
Schedule 1.1(a) Raw Material Inventory
Preliminary Schedule 1.1(b) Finished Goods
Schedule 1.1(b) Finished Goods
Schedule 1.1(c) Machinery and Equipment
Schedule 1.1(d) Molds
Preliminary Schedule 1.1(e) Contracts
Schedule 1.1(e) Contracts
Schedule 1.1(f) Customer List
Schedule 3.3 Allocation of the Purchase Price
Schedule 11.4 Notices
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ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT ("Agreement") dated as of February 25,
1999, by and between ROBINSON JDM LTD., an Ontario corporation ("Buyer") and
NIEMAND INDUSTRIES, INC., a Delaware corporation ("Seller").
RECITALS:
WHEREAS, Seller and Buyer desire to enter into this Agreement pursuant
to which Seller will sell to Buyer and Buyer will buy from Seller certain assets
of Seller which Seller has used exclusively in connection with a particular
segment of the business of Seller which is referred to hereinafter as the
"Container Business". The Container Business is defined on Exhibit A hereto.
NOW, THEREFORE, in consideration of the respective representations,
warranties, covenants, agreements and conditions contained herein, Seller and
Buyer agree as follows:
1. Sale and Purchase of Assets and Liabilities.
--------------------------------------------
1.1 Sale and Purchase of Assets. At the "Preliminary Closing",
during the AInterim Period@ and at the "Closing" (as such terms are hereinafter
defined), on the terms and subject to the conditions set forth in this
Agreement, Seller shall sell to Buyer and Buyer shall purchase from Seller all
of Seller's right, title and interest in and to the following assets of the
Container Business (each, an "Asset", and, collectively, the "Assets"):
(a) The raw material inventory (including, without limitation,
container closures, split paper stock and punched disks) of the Container
Business at the time of the Closing (the "RM"); as soon as practicable after the
date of this Agreement, Seller shall deliver a listing of the raw material
inventory which is on hand as of the date hereof to Buyer; at the Preliminary
Closing, Seller shall deliver Preliminary Schedule 1.1(a) to Buyer, which will
show the raw material inventory of the Container Business at the time of the
Preliminary Closing, and as to which Buyer and Seller shall have reached
agreement, acting in good faith and reasonably,
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prior to the Preliminary Closing; the parties will cooperate in conducting a
physical review of the inventory of the RM as late as practicable prior to the
Closing, and a listing of the RM resulting therefrom, showing the value thereof,
will be delivered at the Closing and will be labeled Schedule 1.1(a). RM shall
be valued at Seller's actual original purchase cost (excluding any storage and
transport costs and any taxes paid or payable thereon); provided, however, that
container closures shall be valued at the lesser of actual original purchase
cost and selling price.
(b) The finished goods inventory of the Container Business at the
time of the Closing which relate to "Contracts" (as hereinafter defined) (the
"FG"); the RM and the FG are sometimes referred to collectively hereinafter as
the "Inventory"; as soon as practicable after the date of this Agreement, Seller
shall deliver a listing of the finished goods inventory which is on hand as of
the date hereof to Buyer; at the Preliminary Closing, Seller shall deliver
Preliminary Schedule 1.1(a) to Buyer, which will show the finished goods
inventory of the Container Business at the time of the Preliminary Closing; the
parties will cooperate in conducting a physical review of the FG as late as
practicable prior to the Closing, and a listing of the FG resulting therefrom,
valued at Seller's price to its customer pursuant to the pending purchase order
therefor (excluding any separately delivered enclosures) reduced by fifteen
percent (15%), will be delivered at the Closing and will be labeled Schedule
1.1(b).
(c) The machinery and equipment of the Container Business at the
Preliminary Closing (the "M&E"); the M&E is listed, and the price of each item
of M&E is set forth, on Schedule 1.1(c); and, in connection therewith, any
related tools and accessories, and any spare parts which relate uniquely to the
M&E, engineering, product, manufacturing and assembly specifications, warranties
from the manufacturer, drawings, blueprints and related data and materials used
in the Container Business.
(d) The molds used in the Container Business at the Preliminary
Closing (the "Molds"); the Molds are listed on Schedule 1.1(d).
(e) The rights of the Container Business under the existing
purchase orders
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from customers of Seller (the "Contracts") which are in effect as of the
Closing. The Buyer will deliver as soon as possible following the execution
hereof Preliminary Schedule 1.1(e) being a list of all of the currently
outstanding Contracts together with a good faith estimate by the Buyer of those
Contracts which will no longer be outstanding at the time of Closing. At the
time of the Closing, the Buyer will deliver the definitive Schedule 1.1(e) which
will list all of the Contracts to be assigned at the Closing. Each of the
Contracts shall be duly assigned to Buyer, provided, however, that to the extent
that the assignment of any of the foregoing requires the consent of the other
party thereto, this Agreement shall not constitute an agreement to assign the
same if an attempted assignment would constitute a breach thereof, but Seller
agrees that it will use its best efforts to obtain the written consent of the
other parties to the assignment thereof to Buyer, and if such consent is not
obtained, Seller will cooperate with Buyer in any reasonable arrangement
designed to provide for Buyer the benefits under any such agreement, contract,
commitment and purchase or sales order.
(f) The goodwill, the customer lists, a list of current suppliers,
and the patents, copyrights, research and development records, technical
drawings and registered designs related exclusively to the Container Business,
if any; the customer list and current suppliers list will be attached at the
Closing as Schedule 1.1(f).
1.2 Liabilities. Buyer does not assume or agree to be responsible
for any debts, obligations, liabilities or expenses of Seller whatsoever other
than liabilities arising out of the Contracts, but only as to which shipments or
deliveries shall not have been made or as to which services shall not have been
rendered as of the Closing, all of which were transferred to Buyer pursuant to
Section 1.1(e) above.
2. The Interim Period; Delivery of the Assets; Etc.. The parties
intend that, during a transition period of approximately thirty days beginning
on the date of the Preliminary Closing and extending through the Closing (the
"Interim Period"), Seller will continue to produce finished goods in order to
satisfy its customer demand, and Seller will continue to sell to its
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customers, thereby reducing the amount of raw materials and finished goods to be
included in the Inventory and generating additional accounts receivable for the
Seller. Seller will also continue the collection of its receivables during the
Interim Period. From time to time during the Interim Period, Seller will
determine that certain of the M&E and Molds are no longer needed by Seller for
Interim Period production. Seller shall so notify Buyer, and Buyer will promptly
arrange to take delivery of those items of the M&E and Molds from Seller, as
hereinafter provided. The Closing will take place at the end of the Interim
Period. At the Closing, Buyer will take title to and possession of any Assets
which then remain in the possession of Seller.
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3. Purchase Price.
---------------
3.1 Purchase Price. Subject to the terms and conditions of this
Agreement, Buyer will pay the following amounts to Seller, the aggregate of
which shall be referred to hereinafter as the "Purchase Price":
(a) The value of the RM, as shown on Schedule 1.1(a); plus
(b) The value of the FG, as shown on Schedule 1.1(b); plus
(c) Four Hundred and Eighty One Thousand Three Hundred Dollars
($481,300.00) for the M&E; plus
(d) Two Hundred Thousand Dollars ($200,000.00) for the Molds; plus
(e) One Hundred Dollars ($100.00) for the goodwill and customer
lists.
3.2 Payment of the Purchase Price. The Purchase Price shall be
paid in the manner set forth below. All payments shall be in U.S. Dollars, and
in cash, by certified or bank check, or by wire transfer of immediately
available funds.
(a) At the Preliminary Closing, Buyer shall deliver to Chicago
Title Company in Cleveland, Ohio or such other escrow agent as the parties may
agree upon (the "Escrow Agent"), (i) the amount shown on Preliminary Schedule
1.1(a) as the value of the raw material inventory at the Preliminary Closing,
plus (ii) the amount shown on Preliminary Schedule 1.1(b) as the value of the
finished goods inventory at the Preliminary Closing, plus (iii) the $681,400
price for the M&E, Molds, goodwill and customer list, as described in
subsections (c), (d) and (e) of Section 3.1. Such amounts shall be distributed
by the Escrow Agent in accordance with the terms set forth below and an escrow
agreement effectuating such terms and such additional terms as the parties may
require, acting reasonably and in good faith. The parties will negotiate the
escrow agreement in good faith and will cause it to be executed and delivered by
the parties hereto and the Escrow Agent on or before the Preliminary Closing
("Escrow Agreement").
(b) The parties contemplate that (i) during the Interim Period,
Seller will use RM in its production, will purchase additional RM in fulfilling
the Contracts, will produce FG
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and will sell FG to its customers, (ii) from time to time during the Interim
Period, Seller will complete production of certain products and will fill all
orders of certain products, and, as a result, will have no further need for
particular items of M&E, Molds, RM and/or FG, (iii) as a result of the
foregoing, the composition of the Inventory at Closing, and the value thereof,
will vary from the composition and value shown on Preliminary Schedules 1.1(a)
and (b), and (iv) Seller shall purchase all of the Inventory, the amount of
which shall not have increased between the Preliminary Closing and Closing,
unless such increase is directly related to a firm customer order or is in
accordance with the prior agreement of Buyer. To address these expectations, the
parties have established the procedure set forth hereinafter for the use and
delivery of, and payment for, the Inventory.
(c) The Escrow Agent shall hold the funds delivered to it in a
readily accessible, interest bearing account. In the event that Seller
determines that it no longer requires particular items of M&E, Molds, RM or FG
during the Interim Period, it shall so notify Buyer and the Escrow Agent of the
items in question and their value as set out in the Schedules to this Agreement.
Within seven business days thereafter, but in no event more than once in any
calendar week during the Interim Period, (i) Buyer shall remove such items from
Seller's premises, and (ii) the Escrow Agent shall remit the value of such items
to Seller. The Escrow
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Agreement shall provide that such transfers shall be subject to the prior or
contemporaneous release of any liens on such Assets.
(d) At the Closing, (i) the Purchase Price shall be computed, (ii)
possession and title to any of the Assets which had not been delivered and paid
for pursuant to subsection (c) above shall be delivered to Buyer, (iii) the
Escrow Agent shall pay to Seller from the escrow funds the amount by which the
Purchase Price exceeds the amount it had delivered to Seller during the Interim
Period pursuant to subsection (c) above; if the amount in the escrow account is
insufficient, Buyer shall pay the balance of the Purchase Price to Seller; if
the amount in the escrow account exceeds the balance of the Purchase Price, the
Escrow Agent shall deliver the balance of the escrow account to Buyer.
(e) The parties shall each be responsible for fifty percent (50%)
of the fees and expenses of the Escrow Agent.
3.3 Allocation of the Purchase Price. The parties agree that the
Purchase Price is allocated among the Assets in the manner reflected on Schedule
3.3. Such allocation of the Purchase Price to each of the Assets was arrived at
by arms-length negotiations, and the judgment of the parties properly reflects
the fair market value of the items transferred pursuant to this Agreement. It is
further agreed that the allocations set forth on Schedule 3.3 hereto shall be
binding on the parties for federal and state income tax purposes in connection
with this purchase and sale of the Assets, and that each party will cause its
federal and state income tax returns to be completed and filed in a manner
consistent with the allocations and valuations contained in or reflected on
Schedule 3.3 hereto.
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4. Preliminary Closing and Closing; Time and Place. On the terms and
subject to the conditions set forth in this Agreement, a preliminary closing of
he transactions contemplated hereby (the "Preliminary Closing") shall take
place at the offices of Kohrman Jackson & Krantz P.L.L., One Cleveland Center,
1375 East Ninth Street, 20th Floor, Cleveland, Ohio 44114, on March 29, 1999,
commencing at 10:00 A.M., local time, or as soon as practicable thereafter, and
a final closing of such transactions (the "Closing") shall take place at the
same time and location on April 29, 1999 or at such other place, time and/or
date as the parties hereto may agree (the date of the Closing being hereinafter
referred to as the "Closing Date"). The Closing shall be deemed to have occurred
at the close of business on the Closing Date.
5. Representations and Warranties by Seller. As a material inducement
to Buyer to execute this Agreement and perform its obligations hereunder, Seller
represents and warrants to Buyer as follows:
5.1 Organization and Standing. Seller is a corporation duly
incorporated, organized, validly existing and in good standing under the laws of
the State of Delaware and has the requisite corporate power and authority to
enter into this Agreement, to perform its obligations hereunder and to carry out
the transactions contemplated hereby. Seller is duly qualified to do business
and is in good standing in each jurisdiction in which it is presently conducting
business and has the requisite corporate power and authority to own, lease and
utilize its assets, properties and business and to carry on the Container
Business as such business is presently being conducted.
5.2 Authorization by Seller. The execution, delivery and
performance by Seller of this Agreement, and the consummation by Seller of the
transactions contemplated hereby, has been duly authorized by all requisite
corporate action. This Agreement has been duly and validly executed and
delivered by Seller and constitutes a valid and binding obligation of Seller
enforceable against Seller in accordance with its terms, except insofar as
enforceability thereof may be limited by bankruptcy, insolvency or other similar
laws affecting the
8
<PAGE>
enforceability of creditors' rights, or by limitations in the availability of
the remedy of specific performance or injunctive relief, or by general equity
principles.
5.3 Approvals, Consents, Etc. Except for the consent of Seller's
lender(s), which consent will be in writing and will be obtained by Seller prior
to its delivery of any of the Assets, no consent, authorization or approval of,
or waiver or exemption by, or filing with, any other person is required in
connection with the execution, delivery or performance by Seller of this
Agreement or the consummation by Seller of the transactions contemplated hereby.
5.4 Compliance With Other Instruments. The execution, delivery and
performance by Seller of this Agreement will not violate any provision of
Seller's Certificate of Incorporation or Bylaws, or any amendment thereof or any
resolution of Seller, or the provisions of any applicable law, order or
regulation of any governmental authority having jurisdiction over Seller and
will not conflict with or result in a breach of the terms, conditions or
provisions of any agreement or instrument to which Seller is now a party or by
which Seller is now bound or constitute a default thereunder or result in the
imposition of any lien, charge or encumbrance of any nature whatsoever on the
Assets.
5.5 Title to Assets; Absence of Liens and Encumbrances. Except for
the lien(s) in favor of Seller's lenders, which liens will be released in
accordance with Section 7.4
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below, Seller owns outright and has good and marketable title to all of the
Assets, free and clear of all liens, charges and encumbrances.
5.6 Inventory. All of the Inventory is suitable and usable or
salable in the ordinary course of the Container Business to its current
customers. None of the Inventory is held on consignment and, without limiting
the generality of any representation and warranty contained in this Agreement,
Seller owns the Inventory free and clear of all liens, charges and encumbrances
except for the liens contemplated in Section 7.4. The Inventory is labeled and
stored in the manner that it has been historically stored and labeled. At the
time of their transfer to Buyer, the finished goods will have been completed in
a good and workmanlike manner, free from any material defects and made in
compliance with the requirements of the customer for whom such finished goods
have been manufactured. There will have been no increase in the raw materials
forming the Inventory between the date hereof and the Closing save and except in
connection with a firm order placed by a customer of the Container Business or
pursuant to the written agreement of Buyer.
5.7 Tangible Property. Buyer has had an opportunity to inspect the
M&E, molds and any other tangible personal property which is being sold to Buyer
hereunder (the "Tangible Property"). Buyer acknowledges that Seller makes no
representation or warranty as to the condition of the Tangible Property, and
that such Tangible Property is being transferred on an "as is where is" basis.
At the time of the M&E and Molds delivery they will be materially in the same
condition as when they were inspected by Buyer prior to the execution of this
Agreement, subject to reasonable wear and tear.
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5.8 Contracts. The selling price under each Contract is such that,
had Seller completed the Contract, its variable costs (being all labour and
benefit costs (where benefit costs are 27% of the labour costs) plus all
material costs) for completing each such Contract would not have exceed the
selling price thereunder. The Buyer has not received and is not entitled to
receive any deposits, prepayments or staged payments under any of the Contracts.
None of the Contracts has any manufacturing specifications or requirements which
require the use of machinery, equipment or molds other than those included among
the M&E and Molds being transferred pursuant to this Agreement, with the
exception of tubes requiring a seamed on metal end. The schedule for completion
and delivery under each of the Contracts is consistent with the past practice of
the Container Business and had the Seller completed the Contract in the ordinary
course of business, the Contract would have been fulfilled on time by the Seller
using the M&E and the Molds and a seamer.
5.9 Brokers. Except for Cook Associates, Inc., no broker, finder
or other person hired, retained or contacted by Seller is entitled to receive
any brokerage fee, finder's fee or the like by reason of the consummation of the
transactions contemplated by this Agreement. Seller confirms that it is solely
responsible for the payment of any obligations to Cook Associates, Inc. in
connection with the transactions contemplated in this Agreement and Seller
hereby indemnifies and saves harmless the Buyer, its officers, directors,
shareholders, employees and agents in connection with any payment that Cook
Associates, Inc. may claim from any of them in connection with the transactions
contemplated herein.
5.10 No Suit, Etc. There is no suit, action, dispute, civil or
criminal litigation, arbitration, legal, administrative or other proceeding or
governmental investigation, including appeals and applications for review, in
progress, pending or, to the knowledge of Seller, threatened against the Seller
and relating to the Container Business.
5.11 Compliance With Laws. Seller has carried on the container
Business in compliance with all applicable laws.
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5.12 Ordinary Course. The Seller has carried on the Container
Business in the ordinary course for the past 12 months.
5.13 Representations and Warranties on Closing Date. The
representations and warranties contained in this Article 5 shall be true in all
material respects on and as of date of any transfer of any of the Assets to
Buyer, and on and as of the Closing Date, with the same force and effect as
though such representations and warranties had been made on and as of such date
of transfer and on and as of the Closing Date.
6. Representations and Warranties by Buyer. Buyer, to induce Seller to
sell the Assets as set forth herein, represents and warrants as follows:
6.1 Organization and Standing of Buyer. Buyer is a corporation
duly incorporated, organized, validly existing and in good standing under the
laws of the Province of Ontario, and has the requisite corporate power and
authority to enter into this Agreement, to perform its obligations hereunder and
to carry out the transactions contemplated hereby.
6.2 Authorization by Buyer. The execution, delivery and
performance by Buyer of this Agreement, and the consummation by Buyer of the
transactions contemplated hereby, has been duly authorized by all requisite
corporate action. This Agreement has been duly and validly executed and
delivered by Buyer and constitutes a valid and binding obligation of Buyer
enforceable against Buyer in accordance with its terms, except insofar as
enforceability thereof may be limited by bankruptcy, insolvency or other similar
laws affecting the enforcement of creditors' rights, or by limitations in the
availability of the remedy of specific performance or injunctive relief, or by
general equity principles.
6.3 Approvals, Consents, Etc. No consent, authorization or
approval of, or waiver or exemption by, or filing with, any other person is
required in connection with the execution, delivery or performance by Buyer of
this Agreement or the consummation by Buyer of the transactions contemplated
hereby.
6.4 Compliance With Other Instruments. The execution, delivery and
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performance by Buyer of this Agreement will not violate any provision of Buyer's
Articles of Incorporation or Bylaws, or any amendment thereof or any resolution
of Buyer, or the provisions of any applicable law, order or regulation of any
governmental authority having jurisdiction over Buyer and will not conflict with
or result in a breach of the terms, conditions or provisions of any agreement or
instrument to which Buyer is now a party or by which Buyer is now bound or
constitute a default thereunder.
6.5 Brokers. No broker, finder or other person hired, retained or
contracted by Buyer is entitled to receive any brokerage fee, finder's fee or
the like by reason of the consummation of the transactions contemplated by this
Agreement.
7. Additional Covenants.
---------------------
7.1 Access. Seller shall give to Buyer and to its counsel,
accountants and other representatives full access to its premises, to the Assets
and to the personnel of Seller related thereto during normal business hours upon
reasonable notice, and shall furnish to Buyer and such representatives such
additional documents, financial information and information with respect to any
of the Assets as Buyer may from time to time reasonably request; provided,
however, that neither the furnishing of copies of contracts, agreements and
other documents or information to such persons nor any investigation by such
persons or otherwise on behalf of Buyer shall affect Buyer's right to rely on
the representations and warranties of Seller contained in this Agreement.
7.2 Collection of Accounts Receivable. The parties acknowledge
that accounts receivable from customers (i) for goods purchased prior to the
Closing belong to Seller, and (ii) for goods purchased on or after the Closing
belong to Buyer. Each party agrees to deliver to the other party without delay
any payments of accounts receivable which belong to such other party and which
the customer delivers to it.
7.3 Further Assurances. At or after the transfer of any Assets
hereunder, Seller, at the request of Buyer, shall promptly execute and deliver,
or cause to be executed and
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delivered, to Buyer all such assignments, bills of sale, endorsements, powers of
attorney and other documents, in addition to those otherwise required by this
Agreement, in form and substance satisfactory to Buyer, as Buyer may reasonably
request in order to (a) vest at the time of transfer or confirm after transfer
good and marketable title of the Assets with the Buyer and, (b) perfect and
record, if necessary, the sale, transfer, assignment, conveyance and delivery to
Buyer of the Assets and (c) otherwise carry out or evidence the terms of this
Agreement.
7.4 Lien Releases. In connection with each transfer of an Asset to
Buyer hereunder, Seller shall obtain releases of the liens of Seller's lenders
which encumber such Asset, effective at the time of transfer. Seller shall
deliver to Buyer at the time of the transfer and the
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payment of the Purchase Price for the Asset, the appropriate UCC termination
statement, in form suitable for filing. Buyer shall be entitled to file such
termination statement, at its own expense.
7.5 Warranty Service. Seller represents and warrants that the
products sold by Seller prior to the Closing were warranted by Seller against
defects in material and workmanship, and that warranty claims do not, on an
annual basis, represent a material cost to Seller. In recognition of the fact
that after the Closing Seller will no longer be in the business of manufacturing
and assembling the products, Buyer agrees to attend to the repair or replacement
of such products as Seller identifies to Buyer as being subject to a valid
warranty claim, in an amount in the aggregate under all warranty claims not to
exceed $5,000, as a one time deductible (the "Warranty Deductible"). Buyer shall
not assume any of Seller's warranty obligations, but shall be responsible for
providing warranty service up to the amount of the Warranty Deductible. Once
Buyer's cost of resolving warranty claims has exceeded the amount of the
Warranty Deductible, Seller agrees to pay to Buyer an amount equal to Buyer's
cost of providing warranty service; provided, however, that Buyer shall not
undertake the provision of warranty service if the cost thereof exceeds the
customer's purchase price of the item without first obtaining written approval
of Seller. Buyer shall have no obligation to perform any warranty services work
in excess of the Warranty Deductible unless it is assured of full reimbursement
of the cost therefor by the Seller. Seller shall, in its sole discretion, (i)
determine the validity of any warranty claim, and (ii) decide whether the
defective product should be repaired or replaced. Seller shall indemnify Buyer
in respect of any warranty claims which are outside of the scope of this
provision.
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7.6 Cooperation With Customers. During the Interim Period, Seller
will, and will cause its salespeople to, cooperate with Buyer in their dealings
with the customers of the Container Business.
7.7 Non-Competition. At the Closing, Seller and Gibraltar
Packaging Group, Inc. ("Gibraltar") will execute non-competition and
non-solicitation agreements, to the effect that neither Seller nor Gibraltar or
its affiliates will compete with Buyer, directly or indirectly, in the Container
Business within North America for a period of two (2) years after the Closing.
7.8 New Contracts. Seller agrees that, during the period from the
date hereof through the Closing, Seller will not enter into any new agreements
with customers which would fall within the definition of Contracts without first
obtaining Buyer's consent, which consent will not be unreasonably withheld.
8. Conditions Precedent to the Obligations of Buyer. The obligations of
Buyer under this Agreement are subject to the satisfaction, on or before the
Closing Date, of each of the conditions set forth in this Article 8. Each such
condition is inserted herein solely for the benefit of Buyer, and Buyer may
waive any such condition at any time.
8.1 Accuracy of Representations and Warranties. The
representations and warranties of Seller contained in this Agreement shall be
true on and as of the Closing Date with the same effect as if they were made on
and as of the Closing Date.
8.2 Performance of Agreements. Seller shall have performed all
obligations and agreements and complied with all covenants contained in this
Agreement to be performed and with which it must comply on or before the Closing
Date.
8.3 Legal Proceedings. There shall be no law, and no order shall
have been entered and not vacated by a court or administrative agency of
competent jurisdiction in any litigation, which (a) enjoins, restrains, makes
illegal or prohibits consummation of the transactions contemplated hereby; (b)
requires separation of more than five percent (5%) of the
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Assets after the Closing; or (c) restricts or interferes with, in any material
way, the Assets after the Closing or materially or adversely affects the
financial condition, results of operations, properties, business or prospects of
Seller's business, or restricts Buyer's ability to remove the Assets from
Seller's premises and transport them to Ontario; and there shall be no
litigation pending before a court or administrative agency of competent
jurisdiction, or threatened, seeking to do, or which, if successful, would have
the effect of, any of the foregoing.
8.4 Transfer Documents. Seller shall have executed and
delivered to Buyer such bills of sale, assignments, endorsements, UCC releases
(to the extent then required pursuant to Section 7.4) and other instruments of
conveyance and transfer, satisfactory in form and substance to Buyer and its
counsel, as shall be effective to vest title to the Assets in Buyer, in
accordance with the terms of this Agreement.
8.5 No Liens. There shall be no liens on any of the Assets at
the time that they are transferred to Buyer and Seller shall provide proof
(including UCC termination statements) satisfactory to Buyer, acting reasonably,
that any liens have been released at the time of the transfer. The filing of UCC
termination statements shall be the responsibility of Buyer.
9. Conditions Precedent to the Obligations of Seller. The obligations
of Seller under this Agreement are subject to the satisfaction, on or before the
Closing Date, of each of the
17
<PAGE>
conditions set forth in this Article 9. Each such condition is inserted herein
solely for the benefit of Seller, and Seller may waive any such condition at any
time.
9.1 Accuracy of Representations and Warranties. The
representations and warranties of Buyer contained in this Agreement shall be
true on and as of the Closing Date with the same effect as if they were made on
and as of the Closing Date.
9.2 Performance of Agreements. Buyer shall have performed all
obligations and agreements and complied with all covenants contained in this
Agreement to be performed and with which it must comply on or before the Closing
Date.
9.3 Legal Proceedings. There shall be no law, and no order shall
have been entered and not vacated by a court or administrative agency of
competent jurisdiction in any litigation, which enjoins, restrains, makes
illegal or prohibits consummation of the transactions contemplated hereby.
10. Termination.
------------
10.1 Termination. This Agreement may be terminated prior to the
Closing in accordance with subsections (a) through (c) below.
(a) At the election of Seller, if Buyer has breached any material
representation, warranty, covenant or agreement contained in this Agreement,
which breach cannot be or is not cured by the Closing Date, or if any of the
conditions precedent set forth in Article 8 has not been satisfied by the
Closing Date.
(b) At the election of Buyer, if Seller has breached any material
representation, warranty, covenant or agreement contained in this Agreement,
which breach
18
<PAGE>
cannot be or is not cured by the Closing Date, or if any of the conditions
precedent set forth in Article 7 has not been satisfied by the Closing Date.
(c) At any time on or prior to the Closing Date, by mutual written
consent of Seller and Buyer.
10.2 Effect of Termination. In the event this Agreement is
terminated pursuant to Section 10.1 hereof, the parties shall use all reasonable
efforts to return to STATUS QUO ANTE, and, upon achieving such status, all other
obligations of the parties hereunder shall terminate.
11. General.
--------
11.1 Survival of Representations, Warranties, Etc. (a) The
representations and warranties contained in this Agreement shall survive the
Closing until the one hundred eightieth (180th) day after the Closing Date (and
shall thereafter terminate), except for those relative to title of the Assets,
or any of them, which representations and warranties shall survive without
limitation as to time.
(b) The agreements and covenants set forth in this Agreement shall
survive the Closing and shall continue until all obligations set forth therein
shall have been performed and satisfied or until such agreements and covenants
shall have terminated in accordance with their terms.
11.2 Expenses. Except as otherwise provided herein, whether the
transactions contemplated by this Agreement are consummated or fail to be
consummated for any reason whatsoever, each of the parties hereto shall pay its
own expenses and the fees and expenses of its counsel and accountants and other
experts.
19
<PAGE>
11.3 Waivers. No action taken pursuant to this Agreement,
including any investigation by or on behalf of any party hereby, shall be deemed
to constitute a waiver by the party taking such action of compliance with any
representation, warranty, covenant or agreement contained herein. The waiver by
any party hereto of any condition or of a breach of any other provision of this
Agreement shall not operate or be construed as a waiver of any other condition
or subsequent breach. The waiver by any party of any of the conditions precedent
to its obligations under this Agreement shall not preclude it from seeking
redress for breach of this Agreement other than with respect to the condition so
waived.
11.4 Notices. Any notice or other communication required or
permitted hereunder shall be in writing and shall be either (i) delivered
personally, (ii) sent by telegraph or telex, (iii) sent by facsimile
transmission, (iv) delivered by nationally recognized overnight courier service
against a receipt therefor, or (v) sent by certified, registered or express
mail, postage prepaid. Any such notice shall be deemed given (A) when so
delivered personally, telegraphed, telexed or sent by facsimile transmission if
applicable; (B) when delivered by courier if applicable; or (C) if mailed,
fifteen days after the date of deposit in the mail if applicable, to the parties
identified on Schedule 11.4 hereto. Any party may, by notice given in accordance
with this Section to the other parties, designate another address or person for
receipt of notices hereunder.
11.5 Binding Effect; Benefits. This Agreement shall inure to the
benefit of and shall be binding upon the parties hereto and their respective
heirs, legal representatives, successors and permitted assigns.
20
<PAGE>
11.6 Bulk Transfers. The parties hereto waive compliance with the
requirements of the Bulk Transfer and/or Bulk Sales Laws of any jurisdiction in
connection with the sale of the Assets to Buyer hereunder.
11.7 Assignment. This Agreement shall not be assignable without
the prior written consent of each non-assigning party. Nothing in this
Agreement, express or implied, is intended to confer upon any person other than
the parties hereto and their successors and permitted assigns, any rights or
remedies under or by reason of this Agreement.
11.8 Headings. The section and other headings contained in this
Agreement are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
11.9 Counterparts. This Agreement may be executed by the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument. The execution of counterparts shall not be deemed to constitute
delivery of this Agreement by a party until the other party has also executed
and delivered his/its counterparts.
11.10 Construction. In this Agreement, unless the context
otherwise requires, words in the singular or in the plural shall each include
the singular and the plural, and words of the masculine gender shall include the
feminine and the neuter, and, when the sense so indicates, words of the neuter
gender may refer to any gender.
11.11 Governing Law and Jurisdiction.
-------------------------------
(a) The validity, performance and enforcement of this Agreement
shall be governed by the laws of the State of Delaware, U.S.A.
21
<PAGE>
(b) Any legal action, suit or proceeding arising out of or
relating to this Agreement or the transactions contemplated hereby may be
instituted in a court of proper jurisdiction in Delaware, and each party agrees
not to assert, by way of motion, as a defense, or otherwise, in any such action,
suit or proceeding, any claim that he or it is not subject personally to the
jurisdiction of such court, that the action, suit or proceeding is brought in an
inconvenient forum, that the venue of the action, suit or proceeding is improper
or that this Agreement or the subject matter hereof may not be enforced in or by
such court. Each party further irrevocably submits to the jurisdiction of such
ourt in any such action, suit, or proceeding. Any and all service of process
and any other notice in any such action, suit or proceeding shall be effective
against any party if served or delivered as provided by the rules of the court
in which such legal action, suit or proceeding has been instituted. Nothing
herein contained shall be deemed to affect the right of any party to serve
process in any manner permitted by law or, subject to the provisions of Section
11.12 below, to commence legal proceedings or otherwise proceed against any
other party in any other jurisdiction.
11.12 Arbitration.
------------
(a) Any dispute or controversy arising out of or related to this
Agreement, or the breach thereof, shall be submitted to binding arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association ("AAA") and this provision. In the event of a conflict between the
AAA rules and this provision, the terms of this provision shall govern.
(b) Either party may invoke this arbitration procedure by giving
written notice to that effect by certified mail to the other party. The parties
will attempt to agree upon a single arbitrator. If agreement regarding selection
of a single arbitrator is not reached within thirty (30) days after the initial
demand for arbitration, each party shall, within thirty (30) days thereafter,
name an arbitrator. Those two arbitrators shall, within thirty (30) days after
they both have been named, select a third arbitrator, who shall serve as the
Chair of the arbitration panel. If the two
22
<PAGE>
party-selected arbitrators are unable to agree upon a third arbitrator, then the
AAA shall appoint a person who is neutral to the parties to act as the Chair of
the arbitration panel. None of the arbitrators may be former or current partner,
principal, director, officer, shareholder, employee or agent of either of the
parties.
(c) Each of the parties shall file a written submission with
supporting documents to the single arbitrator or, if applicable, to the
arbitration panel (hereinafter, references to "arbitration panel" shall include
a single arbitrator agreed upon by the parties or the three member panel
selected in accordance herewith, as applicable) within ninety (90) days after
appointment of the last member of the arbitration panel, which period may be
extended by the arbitration panel. At the same time, each party shall also serve
a copy of such submission on the other party.
(d) The arbitration hearing shall be held in Cleveland, Ohio, USA,
at a site and at a time designated by the arbitration panel.
(e) The parties shall have at their disposal the same pre-trial
discovery rights available under the Federal Rules of Civil Procedure and the
Local Rules of the United States District Court for the Northern District of
Ohio; provided, that the arbitration panel may shorten the time permitted by
those Rules for any discovery procedure in light of the ninety (90) day
23
<PAGE>
timetable for the parties' submissions specified above, and provided further
that any dispute regarding discovery shall be submitted for decision to the
arbitration panel.
(f) At the arbitration hearing, each party shall have the
opportunity to present witnesses and to cross-examine the witnesses presented by
the other party. The arbitration panel shall be relieved of judicial formality
and need not adhere to formal rules of evidence.
(g) The majority of the arbitration panel shall issue a written
decision resolving the controversy within thirty (30) days after the close of
the hearing, which decision will state the facts reviewed, conclusions reached
and reasons for the conclusions. The decision will be binding upon the parties
in any court of competent jurisdiction and will not be subject to appeal. The
arbitration panel also shall allocate the fees and expenses of the arbitration
panel between the parties.
11.13 Separability. Any term or provision of this Agreement which
is invalid or unenforceable shall be ineffective to the extent of such
invalidity or unenforceability without rendering invalid or unenforceable the
remaining terms and provisions of this Agreement.
11.14 Entire Agreement; Amendments. This Agreement embodies the
entire agreement between the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings, oral or written,
with respect thereof. This Agreement may not be changed orally, but only by an
agreement in writing signed by the party or parties against whom any waiver,
change, amendment, modification or discharge may be sought.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first above written.
NIEMAND INDUSTRIES, INC.
By: /s/ John W. Lloyd
24
<PAGE>
Its: Secretary
ROBINSON JDM LTD.
By: /s/ Ian Tippen
Its: President
25
<PAGE>
EXHIBIT A
THE CONTAINER BUSINESS
----------------------
The "Container Business" is the manufacture and sale of the following products:
Any spiral wound paper container, except (i) those currently produced and filled
at the Niemand facility, (ii) the vaginal applicator tube (Applicade), and (iii)
the patented Entherm tube.
26
<PAGE>
SCHEDULE 3.3
ALLOCATION OF THE PURCHASE PRICE
--------------------------------
The Purchase Price Shall be allocated among the Assets as follows:
Asset Price
- ---------------------------------------------------
Machinery and Equipment $481,300
Molds $200,000
Inventory [To be inserted at Closing]
Goodwill and Customer Lists $100.00
<PAGE>
SCHEDULE 11.4
NOTICES
-------
To Buyer: Robinson JDM Ltd.
Chesterfield S40 1YJ
United Kingdom
Attn: President
Fax: 011-44-1246-505-350
With copy to: John Atchison, Esquire
Gardiner, Roberts
40 Kings Street West, Suite 3100
Toronto, Ontario
Canada M5H 3Y2
Fax: 416-865-6636
To Seller: Niemand Industries, Inc.
c/o John W. Lloyd
270 Warner Hill Road
Southport, Connecticut 06490
Fax: 203-319-8025
With copy to: Gibraltar Packaging Group, Inc.
2000 Summit Avenue
Hastings, Nebraska 68902-2148
Attn: President
Fax: 402-463-1661
and
Alan M. Rauss, Esquire
Kohrman Jackson & Krantz P.L.L.
One Cleveland Center, 20th Floor
1375 East Ninth Street
Cleveland, Ohio 44114
Fax: 216-621-6536
EXHIBIT No. 10.43
ESCROW AGREEMENT
----------------
THIS ESCROW AGREEMENT (this "Escrow Agreement") is entered into as of
this 29th day of March, 1999, by and among ROBINSON JDM LTD., an Ontario
corporation ("Buyer"), NIEMAND INDUSTRIES, INC., a Delaware corporation
("Seller"), and CHICAGO TITLE INSURANCE COMPANY, an Ohio corporation (the
"Chicago Title").
RECITALS:
A. Buyer and Seller have entered into an Asset Purchase Agreement dated
as of February 25, 1999 (the "Asset Purchase Agreement"). The Asset Purchase
Agreement provides, among other things, for the payment by Buyer of certain
funds to an escrow agent, and for the escrow agent to disburse such funds in
accordance with an escrow agreement. Capitalized terms used in this Escrow
Agreement without definition shall be defined in the manner set forth in the
Asset Purchase Agreement.
B. Buyer and Seller now desire to appoint Chicago Title as the escrow
agent described in the Asset Purchase Agreement, and Chicago Title desires to
accept such appointment, upon the terms and conditions set forth herein.
C. In order to implement the foregoing, the parties desire to enter
into this Escrow Agreement, and to hereinafter describe the manner in which the
funds deposited with the Escrow Agent are to be disbursed.
ACCORDINGLY, in consideration of the premises and the mutual covenants
set forth herein, the parties hereto agree as follows:
1. APPOINTMENT OF ESCROW AGENT. In accordance with the terms and
conditions of this Escrow Agreement, Buyer and Seller hereby appoint Chicago
Title as the escrow agent hereunder (the "Escrow Agent"). Chicago Title hereby
accepts such appointment. The duties and obligations of the Escrow Agent shall
be determined solely by the express provisions of this Escrow Agreement.
2. ESCROW FUNDS. Pursuant to Section 3.2 of the Asset Purchase
Agreement, Buyer shall deliver certain amounts of cash to the Escrow Agent. Such
amounts, and any earnings thereon, shall constitute the funds to be held by the
Escrow Agent hereunder. All of the funds held by the Escrow Agent pursuant to
this Escrow Agreement are collectively referred to hereinafter as the "Escrow
Funds".
3. ESCROW ACCOUNT. The Escrow Agent shall hold the Escrow Funds in a
readily accessible, interest bearing account at a financial institution in which
deposits are insured by the Federal Deposit Insurance Corporation or similar
entity (the "Escrow Account"), upon terms and conditions satisfactory to the
parties hereto. The Escrow Account shall be set up in the name of the Escrow
Agent, as agent for Buyer and Seller. The Escrow Agent shall continue to hold
the Escrow Funds in escrow until such time as all of the Escrow Funds have been
disbursed in
<PAGE>
accordance with the terms and conditions of this Escrow Agreement.
4. TERMS OF THE ESCROW.
--------------------
(a) From time to time during the period from March 29, 1999
through the later of April 29, 1999 or the date of the actual Closing pursuant
to the Asset Purchase Agreement (the "Interim Period"), but in no event more
than once in any calendar week during the Interim Period, Seller shall have the
right to notify Buyer and the Escrow Agent, in writing, that Seller no longer
requires particular items of Machinery and Equipment, Molds, Raw Materials
and/or Finished Goods. In addition to identifying the particular Asset which it
no longer requires, Seller shall set forth in the notice the value of such Asset
as set forth in the Schedules to the Asset Purchase Agreement. Along with each
such notice, Seller shall also deliver or cause to be delivered to the Escrow
Agent an executed release of any and all security interests with respect to each
such Asset (a "UCC Termination Statement"), in form suitable for filing. Unless
Buyer submits a written objection to Seller and the Escrow Agent within seven
days of Buyer's receipt of Seller's notice (an "Objection Notice"), on the
eighth day after the date of such receipt (i) the Escrow Agent shall remit the
value of such Assets, as set forth in the notice, to Seller payable in the
manner set forth in Section 4(d) below, and (ii) as soon as practicable
thereafter, the Escrow Agent shall file the corresponding UCC Termination
Statement(s) with the office of the Secretary of State of Alabama and the
appropriate filing officer in Perry County, Alabama. If Buyer submits a timely
Objection Notice, the matter will be resolved in accordance with subparagraph
(c) below.
(b) At the Closing pursuant to the Asset Purchase Agreement, (i)
Buyer and Seller shall deliver to the Escrow Agent a schedule, executed by Buyer
and Seller, setting forth the final Purchase Price, determined in accordance
with the terms of the Asset Purchase Agreement, and (ii) Seller shall deliver to
the Escrow Agent executed UCC Termination Statements with respect to all of the
Assets (other than those with respect to which UCC Termination Statements were
delivered pursuant to subparagraph (a) above during the Interim Period). The
Escrow Agent shall pay to Seller from the Escrow Account the amount by which the
Purchase Price exceeds the amount the Escrow Agent had delivered to Seller
during the Interim Period pursuant to subparagraph (a) above (hereinafter, "the
balance of the Purchase Price"). If the amount in the Escrow Account is less
than the balance of the Purchase Price, the Escrow Agent shall deliver all of
the Escrow Funds to Seller, and Buyer shall pay the balance of the Purchase
Price to Seller at the Closing. If the amount in the Escrow Account exceeds the
balance of the Purchase Price, the Escrow Agent shall deliver an amount equal to
the balance of the Purchase Price to Seller, and shall deliver the amount then
remaining in the Escrow Account to Buyer.
(c) In the event that the Escrow Agent receives a timely Objection
Notice from Buyer, the Escrow Agent shall continue to hold the Escrow Funds
until it receives either (i) joint instructions from Buyer and Seller, or (ii) a
final and binding order of an arbitrator or court of competent jurisdiction
resolving the matter in accordance with paragraph 5, as applicable (each, a
"Resolution Notice"). The Resolution Notice shall describe the manner in which
the matter has been resolved and shall set forth instructions as to the
disposition of the portion of the Escrow Funds involved in such dispute. The
Escrow Agent shall then distribute the Escrow
<PAGE>
Funds (or portion thereof, if applicable) in accordance with the Resolution
Notice.
(d) Any and all amounts which the Escrow Agent is to remit, pay,
distribute or otherwise deliver to Seller pursuant to this Agreement shall be
sent by the Escrow Agent in accordance with the following routing instructions:
Account Number: 258-185-8; Account Name: FSFP Collateral Account for Gibraltar
Packaging Group, Inc.; ABA Number: 071000288; Bank Name and Location: Harris
Bank, Chicago, Illinois.
5. DISPUTE RESOLUTION. In the event Buyer submits a timely Objection
Notice pursuant to paragraph 4 above, or in the event of any other dispute
arising out of or related to this Escrow Agreement, the parties shall first
endeavor to resolve the dispute directly, through negotiation. If they are
unable to resolve it, such dispute shall be settled by arbitration in Cleveland,
Ohio, pursuant to the rules then obtaining of the American Arbitration
Association. Either party may initiate arbitration proceedings. The arbitration
shall be governed by the United States Arbitration Act, 9 U.S.C. Sections 1-16,
and judgment upon any award in arbitration may be entered by any court having
jurisdiction thereof.
6. TERMINATION. The term of the Escrow Agreement shall commence on the
date hereof and shall continue until all of the Escrow Funds have been
distributed pursuant to the terms of this Agreement.
7. UNFORESEEN CONTINGENCIES. In the event of the happening of any
contingency not provided for hereunder, the Escrow Agent shall be under no duty
to act until it is clearly directed by written instructions signed jointly or in
counterparts by duly authorized officers of Seller and Buyer, or until so
directed by an arbitrator or by a court of competent jurisdiction.
8. INDEMNIFICATION. Buyer and Seller, jointly and severally, agree to
indemnify and hold harmless the Escrow Agent from and against any and all loss,
damage, liability or expense incurred, arising out of or in connection with the
acceptance and administration of this Escrow Agreement (including the costs and
expenses of defending against any claim in connection with the performance of
any of its duties hereunder) except to the extent that any such loss, damage,
liability or expense is the result of the Escrow Agent's negligence or willful
misconduct.
9. ESCROW AGENT'S LIABILITY LIMITED. The Escrow Agent shall not be
liable to anyone whatsoever by reason of any error of judgment, any act done or
step taken or omitted by them, any mistake of fact or law, or anything which it
may do or refrain from doing, in connection herewith and in good faith, unless
caused by or arising out of its negligence or willful misconduct.
10. RELIANCE BY ESCROW AGENT ON DOCUMENTS, ETC. The Escrow Agent shall
be entitled to rely and shall be protected in acting in reliance upon any
instructions or directions furnished to it in writing or pursuant to any
provisions of this Escrow Agreement and shall be entitled to treat as genuine,
and as the document it purports to be, any letter, paper or other document
furnished to it and reasonably believed by it to be genuine and to have been
signed and presented by the proper party or parties. If at any time the Escrow
Agent shall receive conflicting notices, claims, demands or instructions and
cannot determine the proper course of
<PAGE>
action, it may refuse to make any payment and may retain all funds in its
possession until it shall have received instructions in writing concurred in by
duly authorized officers of Buyer and Seller, or until directed by a final order
or judgment of a court of competent jurisdiction, whereupon the Escrow Agent
shall distribute the Escrow Funds in accordance with such instructions, order or
judgment.
11. LEGAL COUNSEL FOR ESCROW AGENT. The Escrow Agent may consult with
legal counsel to be selected and employed by it and shall be fully protected
with respect to any action under this Escrow Agreement taken or suffered in good
faith by the Escrow Agent in accordance with the opinion of such counsel.
12. COMPENSATION. The Escrow Agent shall be entitled to receive
compensation in the form of escrow fees, in accordance with Exhibit A hereto, in
consideration of its services hereunder. In addition, the Escrow Agent shall be
entitled to be reimbursed for all out-of-pocket expenses incurred in connection
with its services hereunder. Buyer and Seller shall each be responsible for the
payment of fifty percent (50%) of the fees and expenses of the Escrow Agent.
13. RESIGNATION. The Escrow Agent shall have the right to resign upon
giving thirty (30) days written notice by mailing said written notice thereof to
the other parties hereto. In the event of such resignation, a successor or
successors to the Escrow Agent may be appointed by mutual consent of Seller and
Buyer. The Escrow Agent shall thereupon deliver the Escrow Funds and any
documents related hereto to such appointed Escrow Agent. If a successor Escrow
Agent is not appointed within thirty (30) days after the mailing of such notice
of resignation, the resigning Escrow Agent may petition the appropriate court
having jurisdiction to appoint a successor Escrow Agent.
14. NOTICES. Any notice or other communication required or permitted
under this Escrow Agreement shall be in writing and shall be either (i)
delivered personally, (ii) sent by telegraph or telex, (iii) sent by facsimile
transmission, (iv) delivered by nationally recognized overnight courier service
against a receipt therefor, or (v) sent by certified, registered or express
mail, postage prepaid. Any such notice shall be deemed given (A) when so
delivered personally, telegraphed, telexed or sent by facsimile transmission if
applicable; (B) when delivered by courier if applicable; or (C) if mailed, five
days after the date of deposit in the mail if applicable, to the parties at the
address set forth below. Any party may, by notice given in accordance with this
Section to the other parties, designate another address or person for receipt of
notices hereunder.
<PAGE>
To Buyer: Robinson JDM Ltd.
Chesterfield S40 1YJ
United Kingdom
Attn: President
Fax: 011-44-1246-505-350
With copy to: John Atchison, Esquire
Gardiner, Roberts
40 Kings Street West, Suite 3100
Toronto, Ontario
Canada M5H 3Y2
Fax: 416-865-6636
To Seller: Niemand Industries, Inc.
c/o John W. Lloyd
270 Warner Hill Road
Southport, Connecticut 06490
Fax: 203-319-8025
With copy to: Gibraltar Packaging Group, Inc.
2000 Summit Avenue
Hastings, Nebraska 68902-2148
Attn: President
Fax: 402-463-1661
and
Alan M. Rauss, Esquire
Kohrman Jackson & Krantz P.L.L.
One Cleveland Center, 20th Floor
1375 East Ninth Street
Cleveland, Ohio 44114
Fax: 216-621-6536
To Escrow Agent: Chicago Title Insurance Company
113 St. Clair Avenue, NE
Cleveland, Ohio 44114
Fax: 216-696-810
15. AMENDMENT AND WAIVER. This Escrow Agreement may not be changed
orally, but may be amended, superseded, canceled, renewed or extended, and the
terms hereof may be waived, only by an instrument in writing signed by each of
the parties or, in the case of a waiver, signed by the party against whom
enforcement of such waiver is being sought. No action taken pursuant to this
Escrow Agreement, including any investigation by or on behalf of any party
hereby, shall be deemed to constitute a waiver by the party taking such action
of compliance with any agreement contained herein.
<PAGE>
16. BINDING EFFECT AND BENEFITS. This Escrow Agreement shall inure to
the benefit of and shall be binding upon the parties hereto and their respective
heirs, legal representatives, successors and permitted assigns.
17. COUNTERPARTS. This Escrow Agreement may be executed in several
counterparts, each of which shall be deemed an original, but such counterparts
together shall constitute one and the same instrument.
18. GOVERNING LAW. This Escrow Agreement shall be governed by the laws
of the State of Ohio.
19. ENTIRE AGREEMENT. This Escrow Agreement embodies the entire
agreement among the parties hereto with regard to the subject matter hereof and
supersedes all prior or contemporaneous agreements and understandings, whether
oral or written, with respect hereto.
IN WITNESS WHEREOF, Buyer, Seller and the Escrow Agent have each caused
this Escrow Agreement to be executed as of the day and year first above written.
ROBINSON JDM LTD.
("Buyer")
By: /s/ Ian Tippen
--------------------
Its: President
-----------------
NIEMAND INDUSTRIES, INC.
('Seller")
By: /s/ John W. Lloyd
----------------------------
Its: Secretary
-------------------------
CHICAGO TITLE INSURANCE COMPANY
("Escrow Agent")
By: /s/ Charles W. Cashin III
-----------------------------
Its: Vice President
----------------------------
EXHIBIT NO. 10.44
FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT
THIS FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT (the "Amendment") is
executed as of this 20th day of April, 1999, by and between ROBINSON JDM LTD.,
an Ontario corporation ("Buyer"), and NIEMAND INDUSTRIES, INC., a Delaware
corporation ("Seller").
RECITALS:
Buyer and Seller are parties to an Asset Purchase Agreement dated as of
February 25, 1999 (the "Agreement"). Capitalized terms used herein without
definition shall be defined in the manner set forth in the Agreement.
As a result of certain events since the date of execution of the
Agreement, the parties now desire to make certain modifications to the Agreement
and to provide certain additional agreements, as hereinafter set forth.
Accordingly, the parties agree that the Agreement shall be and hereby
is amended to incorporate the following provisions, notwithstanding any
provision of the Agreement to the contrary:
1. PRELIMINARY CLOSING. The Preliminary Closing shall take place, by
exchange of documents, as of the date of this Amendment, and Preliminary
Schedule 1.1(a) shall be delivered at this time.
2. CLOSING. The Closing shall take place on May 28, 1999.
3. INVENTORY. With respect to the Inventory:
(a) RM shall not include (i) labels which are for specific
customer orders but for which there are inadequate current open orders, or (ii)
items which are specifically for Avon orders ("Avon RM"), except to the extent
of the lesser of (A) the amount of Avon RM received by Seller on or after April
16, 1999, and (B) the total Avon RM which is on hand at the Closing; and
(b) FG shall not include any items which have been produced for
Avon.
3. CONTRACTS. The Contracts shall not include any purchase orders
from Avon.
4. ADDITIONAL ITEMS. At the Closing, Seller will deliver to Buyer a
list of items of raw material and finished goods of the Container Business which
have not been included within
<PAGE>
the definition of Inventory in the Agreement, as amended by this Amendment (the
"Additional Items"). Buyer agrees that, in the event it obtains orders which
enable Buyer to use any of the raw materials included among the Additional Items
or to sell any of the finished goods included among the Additional Items within
one year after the Closing, Buyer shall purchase such items from Seller in lieu
of obtaining them from an alternate source. The purchase price for each of the
Additional Items shall be the price set forth on the list provided at the
Closing.
5. COMPENSATION FOR AVON TUBES. In order to compensate Seller for
agreeing to retain the obligation to produce the 2,400,000 75 gram canisters
which had been ordered by Avon prior to February 26, 1999 ("Avon Tubes"), and to
compensate Seller for increased expenses in connection therewith, Buyer shall
pay Seller an amount equal to $20.00 for each one thousand of such Avon Tubes
which Seller ships to Avon (maximum aggregate amount payable hereunder:
$48,000). The payment shall be made directly to Seller, in U.S. Dollars, within
five (5) days after receipt of Seller's invoice, which invoice shall be issued
no earlier than the date of shipment.
6. FULL FORCE AND EFFECT. Except as set forth in this Amendment, each
and every other provision of the Agreement shall remain in full force and
effect.
NIEMAND INDUSTRIES, INC.
By: /s/ John W. Lloyd
------------------
Its: Secretary
---------------------
ROBINSON JDM LTD.
By: /s/ Ian Tippen
-------------------------
Its: President
------------------
EXHIBIT NO. 10.45
NON-COMPETITION AND NON-SOLICITATION AGREEMENT
----------------------------------------------
THIS AGREEMENT dated as of the 28th day of May, 1999
A M O N G:
NIEMAND INDUSTRIES, INC., a corporation incorporated under the laws of
the State of Delaware
(hereinafter referred to as "Seller")
OF THE FIRST PART
- and -
GIBRALTAR PACKAGING GROUP, INC., a corporation incorporated under the
laws of the State of Deleware
(hereinafter referred to as "Gibraltar")
OF THE SECOND PART
- and -
ROBINSON JDM LTD., a corporation incorporated under the laws of the
Province of Ontario
(hereinafter referred to as the "Buyer")
OF THE THIRD PART
WHEREAS:
I. Pursuant to an asset purchase agreement made between the Buyer
and the Seller dated as of February 25, 1999, as amended (the "Purchase
Agreement"), the Buyer has purchased certain assets of the Seller which
the Seller has used in connection with the Container Business (as
hereinafter defined);
II. Gibraltar is the sole shareholder of the Seller and will derive
substantial benefit from the transaction described in the foregoing
recital; and
III. Pursuant to the Purchase Agreement, the Seller covenanted to
execute and deliver, and to cause Gibraltar to execute and deliver, a
non-competition and non-solicitation agreement with the Buyer;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the sum
of Ten Dollars ($10.00) and other good and valuable consideration (the receipt
and sufficiency of which the Seller and Gibraltar hereby acknowledge) the
<PAGE>
parties hereto covenant and agree as follows:
1. DEFINITIONS. Where used in this agreement, unless the context or
subject matter otherwise requires, the following words and phrases have the
meaning set forth below:
(a) "AFFILIATE" of any party means any other entity that, directly or
indirectly, controls, is under common control with or is controlled by
that party. For purposes of this definition and this agreement,
"CONTROL" (including, with correlative meaning, the terms "CONTROLLED
BY" and "UNDER COMMON CONTROL WITH"), as used with respect to any
entity, shall mean the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of such
entity, whether through the ownership of voting securities or by
contract or otherwise;
(b) "CONTAINER BUSINESS" means the business of manufacturing and/or selling
any spiral wound paper container, except (i) those currently produced
and filled at the Niemand facility, (ii) the vaginal applicator tube
(Applicade), and (iii) the patented Entherm tube;
(c) "CUSTOMER" means any Person who is at the date hereof, or who was at
any time during the 2 years prior to the date hereof, a customer of the
Seller in the Container Business;
(d) "PERSON" means an individual, partnership, unincorporated association,
organization, syndicate, corporation, limited liability company,
trustee, executor, administrator, or other legal or personal
representative;
(e) "TERRITORY" means North America; and
(f) "TIME PERIOD" means the period of 2 years commencing on the date of
this agreement.
2. NON-COMPETITION. Each of the Seller and Gibraltar covenants and
agrees that it will not at any time during the Time Period, anywhere within the
Territory, individually or in partnership or jointly or in conjunction with any
Person, whether as principal, agent, shareholder, consultant, trustee or in any
other manner whatsoever, whether directly or indirectly, invest in, undertake,
carry on or be engaged in or concerned with the Container Business or have a
financial interest in or advise, lend money to, guarantee the debts or
obligations of, or permit its name or any part thereof to be used or employed by
or associated with, any Person, which is, directly or indirectly through an
Affiliate or otherwise, engaged in, concerned with or interested in the
Container Business.
3. NON-SOLICITATION. Each of the Seller and Gibraltar covenants and
agrees with the Buyer that it shall not, at any time during the Time Period,
directly or indirectly, in
<PAGE>
any way:
(a) persuade or attempt to persuade any Customer to restrict, limit or
discontinue purchasing any products of the Container Business supplied
by the Buyer or any of its Affiliates to such Customer or to reduce the
amount of business which any such Customer has customarily done or
contemplates doing with the Buyer in the Container Business or
endeavour to entice away from the Buyer any of its Customers in the
Container Business; or
(b) solicit, hire or engage the services of any employee of the Buyer, or
pursuade or attempt to persuade any such individual to terminate his or
her employment with the Buyer.
4. RESTRICTIONS REASONABLE. Each of the Seller and Gibraltar
acknowledges that the provisions hereof are reasonable in order to protect the
business and proprietary interests of the Buyer both as to the duration of time
and any geographic limitation herein provided.
5. ENFORCEMENT AND SEVERABILITY. If any provision of this agreement as
applied to any party or to any circumstance shall be adjudged by a court of
competent jurisdiction to be invalid or unenforceable, the same shall not affect
any other provision of this agreement, the application of such provision in any
other circumstances, or the validity or enforceability of this agreement. The
parties hereto agree that the provisions hereof are reasonable and intend this
agreement to be enforced as written. However, if any provision, or part thereof
is held to be unenforceable because of the duration thereof, the area covered
thereby, or the types of activities restricted thereby, the parties hereto agree
that a court of competent jurisdiction making such determination shall have the
power to reduce the duration of the provision, the geographic area of the
provision, the types of activities specified and to delete specific words or
phrases and in its reduced form, such provision shall then be enforceable.
6. REMEDIES. Each of the Seller and Gibraltar acknowledges that a
breach or threatened breach by it or the non-performance of certain of the
covenants or promises contained herein by it may cause serious and irreparable
harm to the Buyer and that any remedy at law, including any award of money
damages, may be inadequate. Accordingly, each of the Seller and Gibaltar agrees
and accepts that the Buyer may, in addition to any other claim for relief,
enforce the provisions of this agreement by injunction, restraining order or
other equitable relief and the Seller and Gibraltar agree not to plead
sufficiency of damages as a defense in any proceeding for injunctive or other
equitable relief and agree that such equitable relief may be sought in any
proceedings to enforce the provisions of this agreement.
7. NON-WAIVER. The failure of the Buyer to require the performance of
any term or condition of this agreement, or the waiver by the Buyer of any
breach of this
<PAGE>
agreement, shall not prevent a subsequent enforcement of such term or any other
term and shall not be deemed to be a waiver of any subsequent breach.
8. SURVIVAL. The covenants of the Seller and Gibraltar contained in
this agreement shall survive the closing of the Purchase Agreement and shall
continue in full force and effect for the benefit of the Buyer until the
termination of the Time Period.
9. ENTIRE AGREEMENT. This agreement shall constitute the entire
agreement between the parties with respect to the subject matter hereof, and may
not be amended or modified except by written instrument signed by each of the
parties.
10. GOVERNING LAW. This agreement shall be interpreted and construed in
accordance with, and the rights and obligations of the parties hereunder shall
be governed by, the laws of the Province of Ontario.
11. SUCCESSORS AND ASSIGNS. The provisions of this agreement shall
enure to the benefit of the Buyer and its successors and assigns and shall be
binding upon the Seller and Gibraltar, and their respective successors and
assigns.
IN WITNESS WHEREOF the parties hereto have duly executed this
agreement.
NIEMAND INDUSTRIES, INC.
Per: /s/ John W. Lloyd c/s
-------------------------------
John W. Lloyd, Secretary
I have authority to bind the Corporation.
GIBRALTAR PACKAGING GROUP INC.
Per: /s/ John W. Lloyd c/s
-------------------------------
John W. Lloyd, Vice President
I have authority to bind the Corporation.
ROBINSON JDM LTD.
Per: /s/ Ian Tippen c/s
-----------------------------------
Ian Tippen, President
I have authority to bind the Corporation.
EXHIBIT NO. 10.46
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT ("Agreement") dated as of September 1, 1999 among G B
LABELS, INC., a Delaware corporation with its principal office and place of
business in Burlington, North Carolina (the "Seller") and JIT MANUFACTURING,
INC., a North Carolina corporation, with its principal office and place of
business in Greensboro, North Carolina (the "Buyer").
WITNESSETH:
-----------
WHEREAS, Seller is engaged in the business of manufacturing pressure
sensitive flexo-printed labels (the "Business"); and
WHEREAS, Seller desires to sell and Buyer desires to purchase the
assets utilized in the operation of the Business, including but not limited to,
certain machinery, equipment, inventory, and other tangible and intangible
assets of Seller, on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants hereinafter set forth, the parties hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
1.1 Acquired Assets. Subject to the terms and conditions of this
Agreement, at Closing (as defined herein) and effective at 12:01 a.m. on August
30, 1999 ("Effective Date"), Seller hereby agrees to sell, assign, convey and
deliver to Buyer, or cause to be sold, assigned, transferred, conveyed and
delivered to Buyer, and Buyer agrees to purchase and accept from Seller all of
Seller's right, title and interest in any of the following assets as are owned
by Seller on the Effective Date, whether or not carried or reflected on the
books and records of Seller (collectively the "Acquired Assets"):
(a) All of the manufacturing and operating assets associated with
or benefiting the Business including, without limitation, all
trucks, automobiles, trailers, rolling stock, machinery,
equipment, printing cylinders, cutting dies, computers,
tooling, accessories, dies, patterns, working and design
drawings, materials handling and support equipment, supplies,
tools, replacement and spare parts together with all related
operation or repair manuals and applicable warranties of each
manufacturer of such items;
(b) All inventory including, without limitation, finished goods
("Finished Goods"), work-in-process ("Work-in-Process"), raw
materials ("Raw Materials"), replacement
-1-
<PAGE>
and spare parts, new and used tool inventory, packaging
materials and operating supplies (collectively the
"Inventory");
(c) All accounts receivable of Seller (collectively "Accounts
Receivable");
(d) All records related to Seller's customers, suppliers and
products, as well as other information owned by Seller which
will enable Buyer to continue the operations of the Business
as they are currently being conducted;
(e) All permits, licenses and approvals and authorizations by
governmental authorities held by Seller at the Effective Date
which are transferable by Seller;
(f) Subject to any approval requirements, supplier, customer and
other contracts designated by Seller and related to the
operation of Seller's Business;
(g) All Seller's rights in, to and under all domestic and foreign
patents, patent applications, patent licenses, software
licenses, know-how licenses, trade names, the name "G B
Labels, Inc.", trademarks, copyrights, unpatented inventions,
service marks, trademark and service mark registrations and
applications, all trade secrets, know-how (including, without
limitation, proprietary know-how and use and application
know-how), manufacturing, engineering and other drawings,
formulae, process and material specifications, product/process
test specifications and test methods, technology, technical
information, engineering data, design and engineering
specifications, if any (the "Intellectual Property");
(h) All promotional literature, customer and supplier lists
(including, without limitation, all lists of customers of the
Business maintained by Seller) and similar written data;
(i) All current customer and work-in-process records,
correspondence and other files and records of Seller,
manufacturing and quality control and product development
records, and any financial information and other files and
records of Seller pertaining solely to the Business, wherever
located on the Effective Date;
(j) Such rights as Seller has to use its present telephone and
facsimile transmission numbers and its post office box, from
and after the Effective Date;
(k) All other tangible or intangible assets used directly or
indirectly in the operation of the Business or benefiting the
Business, including, but not limited to goodwill, not
otherwise described in this Section 1.1 except for the
excluded assets described in Section 1.2 below.
The Acquired Assets shall also include all of Seller's right, title and interest
in the items described on Schedule 1.1(l) which have been leased to Seller (the
"Leased Assets"), and Buyer shall assume
-2-
<PAGE>
all of Seller's obligations pursuant to the leases of the Leased Assets as of
the Effective Date. Each of the parties shall use its best efforts to cause each
lease governing a Leased Asset to be assigned to Buyer as of the Effective Date,
or as soon as practicable thereafter.
The sale and transfer of the Acquired Assets shall be made free and clear of all
liabilities, obligations, security interests, liens and encumbrances, except
those specifically assumed by Buyer described in Section 1.3 below.
1.2 Excluded Assets. Buyer shall not acquire the following assets
of Seller:
(a) Seller's land and building (including fixtures associated
therewith) located on South River Drive, Burlington, North
Carolina from which Seller currently operates its Business
(the "Property");
(b) Cash and cash equivalents, prepaid expenses, securities and
bank deposits;
(c) Tax refunds and tax benefits; and
(d) Corporate seals, minute books, stock books, tax returns,
financial and tax records to the extent not expressly acquired
by Buyer, and any other records related to the corporate
organization of Seller.
1.3 Assumed Obligations. At Closing Buyer shall assume Seller's
liability for the following (the "Assumed Obligations"):
(a) All trade accounts payable of Seller existing and identified
on the Effective Date as identified in the Assumption
Agreement, which have arisen in the ordinary course of
business ("Trade Accounts Payable");
(b) The contracts listed on Schedule 1.3-(b); and
(c) The leases of the Leased Assets listed on Schedule 1.1(l).
The Assumed Obligations will be transferred to Buyer at Closing pursuant to an
assumption agreement in the form of Exhibit 1.3 attached hereto (the Assumption
Agreement"). Except as provided above or as otherwise expressly provided in this
Agreement or in any other agreement executed and delivered by Buyer incident to
the consummation of the transactions contemplated hereby, Buyer does not assume
and shall not be bound by any obligations or liabilities of Seller of any kind
or nature, known or unknown, contingent or otherwise which liabilities shall
remain the obligation of Seller.
ARTICLE II
PURCHASE PRICE AND PAYMENT
-3-
<PAGE>
2.1 Purchase Price. The parties have agreed that the purchase price for
the machinery, equipment and other tangible and intangible assets of Seller
other than Accounts Receivable, Finished Goods, Raw Materials and
Work-in-Process shall be $625,000.00. The purchase price for such other assets
shall be calculated as follows:
(a) Accounts Receivable. The purchase price of the Accounts
Receivable shall equal their face amount, as set forth in
Seller's books and records, as maintained in accordance with
Seller's regular business practices. Seller shall guarantee
the collection of all Accounts Receivable to Buyer. To the
extent an Account Receivable acquired hereunder remains
uncollected ninety (90) days after Closing, Buyer shall assign
the uncollected Account Receivable to Seller and shall deliver
to Seller all of the records relating to the generation of
such Account Receivable and Buyer's efforts to collect it;
Seller shall pay Buyer the face amount thereof from the
escrowed funds described below, and to the extent no funds
remain in escrow Seller shall pay Buyer the balance thereof
within five (5) days after receiving notice that the escrowed
funds have been depleted.
(b) Finished Goods. The purchase price of Finished Goods shall
equal 85% of Seller's most recent selling price for such
items.
(c) Raw Materials and Work-in-Process. The purchase price of Raw
Materials and Work-in-Process shall equal Seller's verifiable
cost in such items.
Buyer and Seller agree to use their respective best efforts to review and reach
agreement upon the purchase price calculations for the various assets described
above in a four (4) day period prior to Closing. To the extent there is a
disagreement on the calculation of purchase price which cannot be resolved prior
to closing, neither party shall be obligated to close but the Closing may be
extended by mutual agreement of the parties.
2.2 Payment of Purchase Price. Upon calculation of the purchase price
for the Acquired Assets by the parties immediately prior to Closing, the
purchase price shall be paid by Buyer to Seller as follows:
(a) Buyer will pay $50,000.00 into an interest bearing trust
account to be held and disbursed by an escrow agent pursuant
to the escrow agreement in the form of Exhibit 2.2(a) (the
"Escrow Agreement");
(b) Buyer will assume the trade accounts payable of Seller as of
the effective date;
(c) Buyer will pay Seller the balance of the purchase price in
cash at Closing;
(d) Personal property taxes for the current year will be
appropriately allocated at Closing between Buyer and Seller,
with the portion allocated to Buyer to be added to the amount
due from Buyer to Seller at Closing, and Seller will pay the
full 1999
-4-
<PAGE>
personal property taxes on the Acquired Assets to the
appropriate taxing authorities when such taxes are due.
A closing statement reflecting the calculation and payment of the purchase price
will be executed at Closing.
2.3 Allocation of Purchase Price. Buyer and Seller agree to cooperate
in the allocation of the Purchase Price incident to the applicable provisions of
the Internal Revenue Code and to file Form 8594 as required thereby. The value
of the Accounts Receivable and Inventory will be allocated based upon the method
set forth herein. A value of $625,000.00 shall be allocated to machinery,
equipment and all tangible and intangible assets other than Accounts Receivable,
Work-in-Process, Finished Goods and Raw Materials inventory which shall be
valued as provided in Section 2.2 above.
ARTICLE III
CLOSING
3.1 Closing. The Closing of the sale and purchase of the Assets shall
take place as soon as possible, but no later than 10:00 a.m. Eastern Daylight
Savings Time on September 1, 1999 at the offices of Tuggle Duggins & Meschan,
P.A., 228 West Market Street, Greensboro, North Carolina 27401 or on such other
date as may be mutually agreed upon in writing by Buyer and Seller. The
transactions described herein shall all be effective as of the Effective Date,
except that all income and expenses of the business incurred after 12:01 a.m. on
August 30, 1999 shall be for the benefit or responsibility of the Buyer, as
further set forth in Section 6.18 below.
3.2 Items to be Delivered at Closing. At the Closing and subject to the
terms and conditions herein contained:
(a) Seller shall deliver to Buyer such bills of sale with
covenants of warranty, assignments, endorsements or other good
and sufficient instruments and documents of conveyance and
transfer, in form and substance satisfactory to Buyer and its
counsel, as shall be necessary and effective to transfer and
assign to and vest in Buyer all of Seller's right, title and
interest in and to the Acquired Assets and Business, including
without limitation:
(i) good and valid title in and to all the Acquired
Assets owned by Seller;
(ii) all vehicle titles;
(iii) good and valid leasehold interest in and to the
personal property leased by Seller as lessee and
acquired hereunder;
-5-
<PAGE>
(iv) to the extent assumed by Buyer, all of Seller's
rights under all agreements, contracts, commitments,
leases, plans, bids, quotations, proposals,
instruments and other documents to which a Seller is
a party or by which it has rights at the Effective
Date;
(v) a mutually satisfactory, and executed, lease for the
Property (the "Burlington Lease");
(vi) A non-competition agreement executed by Seller;
(vii) A non-competition agreement executed by Gibraltar
Packaging Group, Inc. ("Gibraltar");
(viii) A Guaranty Agreement executed by Gibraltar.
Simultaneously with such delivery, all such steps will be
taken as may be required to place Buyer in actual possession
and control of the Acquired Assets;
(b) Buyer shall deliver to the Escrow Agent Fifty Thousand Dollars
($50,000.00) in cash or certified funds as required under the
Escrow Agreement;
(c) Buyer shall deliver the balance of the Final Purchase Price to
Seller in cash or certified funds; and
(d) At or prior to Closing, the parties shall deliver to each
other the agreements, opinions, certificates and other
documents and instruments referred to in Articles VII and VIII
hereof.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
4. Representations and Warranties of Seller. Seller represents and
warrants to Buyer as follows:
4.1 Due Incorporation and Authority. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Seller is qualified to transact business in North Carolina and
Delaware which are the only states in which qualification is necessary for
Seller to conduct its Business as such is presently being conducted. Seller has
all requisite corporate power and authority to own, lease and operate its
properties and assets and to carry on the Business as presently conducted.
Gibraltar owns all of the issued and outstanding capital stock of Seller and
there exists no options, warrants or rights to such stock vested in any third
party. North Carolina is the only state in which Seller is required to file
state income tax or sales tax returns and is the only state where Seller is
required to qualify to do business.
-6-
<PAGE>
4.2 Validity of Agreement. Seller has full legal right and all
requisite power, legal capacity and authority to enter into this Agreement, and
any other agreement contemplated hereunder, and to perform its obligations
hereunder and thereunder. This Agreement has been duly executed and delivered by
Seller and is a valid and legally binding obligation of Seller, enforceable
against Seller in accordance with its terms and conditions. The execution,
delivery and performance of this Agreement by Seller has been duly authorized by
all requisite corporate action.
4.3 Intentionally Omitted.
----------------------
4.4 No Approvals or Notices Required; No Conflict with Other
Instruments. Except as described in Schedule 4.4 hereto, the execution, delivery
and performance of this Agreement by Seller and the consummation by Seller of
the transactions contemplated hereby will not violate (with or without the
giving of notice or the lapse of time or both), or require any consent,
approval, filing or notice under any law applicable to Seller, and will not
require any consent, approval or notice under and will not conflict with, or
result in the breach or termination of any provision of, or constitute a default
under, or result in acceleration of the performance of the obligations of Seller
under, or result in the creation of a lien, charge or encumbrance upon any of
the properties or assets of Seller pursuant to Seller's charter or bylaws or any
mortgage, deed of trust, indenture, lease, contract, instrument or other
agreement, or any order, judgment or decree, to which Seller is a party or by
which it or any of its assets or properties are bound. The consents, approvals,
filings or notices listed on Schedule 4.4 are referred to herein as the
"Required Consents."
4.5 Financial Statements. The audited financial statement of Seller as
of the end of its 1996, 1997 and 1998 fiscal years, copies of which have been
previously delivered to Buyer, in each case prepared by Seller's accountants,
fairly present the financial position of Seller as at such dates and the results
of operations of Seller for such periods, in each case in accordance with GAAP
consistently applied for the periods covered thereby, but recognizing that
Seller is part of a consolidated group of affiliated companies and that such
statements were part of the consolidated audited financial statements for such
companies (the foregoing financial statements are collectively referred to as
the "Audited Financial Statements"). The financial statements dated July 31,
1999 (the "Balance Sheet Date"), prepared by Seller and reviewed by Seller's
accountants, were previously delivered to Buyer, are attached hereto as Schedule
4.5 (the "July, 1999 Financial Statements"), and fairly present the financial
position of Seller as at such date and the results of operations of Seller for
such period, in accordance with GAAP applied on a basis consistent with that of
the Audited Financial Statements; subject, however, to changes resulting from
normal year-end audit adjustments that will not in the aggregate be material.
4.6 No Undisclosed Liabilities. Except as and to the extent disclosed
in the Audited Financial Statements or the July, 1999 Financial Statements,
Seller has no liabilities or obligations of any kind, whether accrued, absolute,
contingent or otherwise, of a kind required to be disclosed on a balance sheet
prepared in accordance with GAAP.
4.7 No Material Adverse Change. Since the Balance Sheet Date, there has
been no material adverse change in the assets, liabilities, properties,
business, prospects, results of operations
-7-
<PAGE>
or financial condition of Seller, nor has there been any material damage,
destruction or loss since the date of a certain appraisal of personal property
prepared by AccuVal and dated June 22, 1998 (the "Appraisal Date") to any of the
properties or assets of Seller, whether or not covered by insurance.
4.8 Tax Matters. Buyer shall have no liability for any federal, state
or local tax of any type due and payable by Seller.
4.9 Ownership and Adequacy of Acquired Assets. Seller has good and
marketable title to the Acquired Assets, free and clear of all mortgages, deeds
of trust, claims, liens, security interests and other encumbrances, except (i)
as specifically set forth in Schedule 4.9 hereto and (ii) liens for personal
property taxes not yet due and payable.
4.10 Acquired Assets. Seller has delivered to Buyer a list of all
Acquired Assets owned by Seller as of the Appraisal Date (such list of Acquired
Assets being set forth in Schedule 4.10(a) hereto), together with such additions
thereto and deletions therefrom as shall have occurred in the ordinary course of
business prior to the Effective Date, which list is correct and complete in all
material respects. Seller has also delivered to Buyer a list of all leased
personal property ("Leased Personal Property") utilized by Seller as of the
Effective Date which leases are listed in Schedule 4.10(b). The operation and
maintenance of the Acquired Assets and Leased Personal Property in the ordinary
course of Seller's business does not violate any restrictive covenant or any
federal, state or local law, ordinance, code, rule or regulation including, but
not limited to, infringement of any patent or proprietary intellectual property
of any other party. During the past three (3) years, there has not been any
significant interruption in the operations of Seller due to a failure of any
such property to operate or to operate properly.
4.11 Inventory. All Inventory is useable in the ordinary course of
business and is not defective. Seller is not aware of any adverse conditions
affecting the supply of materials available to Seller and consummation of the
transactions provided for herein will not adversely affect such supply.
4.12 Patents, Trademarks, Etc. Other than Seller's corporate name,
Seller does not own any patents, trademarks, copyrights, service marks, or trade
names, and none of the foregoing is necessary in order to operate the Seller's
business as presently conducted. Seller has the right to use its corporate name,
free and clear of any claims or rights of others. Any software utilized by
Seller is validly licensed for use by the Seller.
4.13 Actions and Proceedings. Except as set forth on Schedule 4.13,
there are no outstanding orders, judgments, injunctions, awards or decrees of
any court, arbitrator or governmental or regulatory body against Seller and
there are no actions, suits, investigations, claims or proceedings, including
arbitration proceedings, whether or not the defense thereof or liabilities in
respect thereof are covered by insurance, pending, threatened against or
involving Seller or any of its properties or assets, and, there is no reasonable
basis for any such action or proceeding. All notices required to have been given
to any insurance company which insures against any action, suit, investigation,
claim or proceeding set forth on Schedule 4.13 have been timely and duly given.
Except as set forth on
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<PAGE>
Schedule 4.13, there have been no claims of any type against Seller which have
been settled, adjudicated or other otherwise disposed of within the two (2)
years prior to the date of this Agreement, including but not limited to,
employee claims, product claims, or patent, trademark, copyright, service mark
infringement claims, against or involving of Seller or any product manufactured,
marketed or distributed by Seller.
4.14 Contracts and Other Agreements. Schedule 4.14 sets forth a correct
and complete list and brief description of the following agreements (including
any renewal or escalation terms) concerning the Business of Seller, or the
Acquired Assets being acquired by Buyer pursuant to this Agreement, and
specifically identifies those agreements which are not terminable by Seller
without penalty upon thirty (30) days or less notice:
(i) All purchase orders (whether between Seller and its suppliers
or Seller and its customers) which require future payments,
performance of services or delivery of goods and/or materials
to or on behalf of the Business;
(ii) All mortgages, deeds of trust, indentures, agreements,
contracts, arrangements, commitments, instruments,
understandings or obligations, oral and written, to which
Seller is a party and to which any of the Acquired Assets are
subject and which are to be performed by any party in whole or
in part on or after the date hereof;
(iii) Intentionally Omitted.
----------------------
(iv) Intentionally Omitted.
----------------------
(v) Intentionally Omitted.
----------------------
(vi) All contracts and other agreements with any person to sell,
distribute or otherwise market any products manufactured or
distributed by Seller;
(vii) All contracts and other agreements with any person for the
manufacture of any products sold or distributed by Seller;
(viii) Any contract or other agreement containing covenants or
agreements of Seller not to compete in any line of business or
with any person in any geographical area or covenants or
agreements of any other person not to compete with Seller in
any line of business or in any geographical area;
(ix) All leases for Leased Personal Property;
(x) All relationships wherein Seller is holding a deposit for a
third party or such Seller has deposited funds with a third
party; and
(xi) Intentionally Omitted. .
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There have been made available to Buyer true and complete copies of all
contracts and other agreements set forth on Schedule 4.14. All of such contracts
and other agreements are valid and binding upon Seller, and neither Seller nor
any other party, is in default thereunder in any material respect. Schedule 4.14
also lists all contracts and other agreements currently in negotiation or
proposed by Seller of a type which if entered into by Seller would be required
to be listed on Schedule 4.14. Seller has made available to Buyer true and
correct drafts or summaries of all such contracts and other agreements in
negotiation or proposed and true and complete copies of all documents in the
custody or control of Seller relating thereto. Except as set forth in Schedule
4.14, none of the rights of Seller under any of the contracts and agreements set
forth on Schedule 4.14 will be adversely affected by consummation of the
transactions provided for in this Agreement and all rights of Seller are
assignable to Buyer at Closing without penalty.
4.15 Compliance with Laws. Except as set forth on Schedule 4.15 hereto,
to the best of Seller's knowledge, Seller is in compliance in all material
respects with all applicable federal, state, local and foreign laws, ordinances,
regulations, orders, judgments and decrees, including, without limitation, all
Environmental Laws (as defined below), and all federal, state and local labor
and employment laws, and Seller has not received notice nor is aware that
violation of any such law, ordinance, regulation, order, judgment or decree is
being alleged. To the best of Seller's knowledge, there are no proposed laws,
ordinances or regulations that, if enacted, would materially and adversely
affect the business of Seller.
4.16 Environmental Compliance.
4.16.1
(a) As used in this Agreement, "Environmental Laws" shall mean any
and all federal, state and local laws, regulations,
ordinances, administrative rules, orders, decrees, decisions
and the like, and all other requirements under law relating to
pollution or protection of the environment, including, without
limitation, laws, regulations and requirements relating to the
ownership, possession, storage and/or control of the
Facilities (as defined below) and to emissions, discharges,
releases or threatened releases of storm water, pollutants,
contaminants, toxic or hazardous chemicals, materials, or
substances, or solid or hazardous wastes into the environment
(including without limitation ambient air, surface water,
groundwater or land), or otherwise relating to the
manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of pollutants,
contaminants, toxic or hazardous substances, or solid or
hazardous wastes. The Environmental Laws include, without
limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, and any
comparable applicable state law. To the best of Seller's
knowledge, Seller is in possession of all records and
documents required to be retained under applicable laws and
all rules and regulations thereunder.
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(b) As used herein, the term "Hazardous Materials" means any
pollutant, chemical, substance, material or waste which is or
becomes regulated as hazardous, toxic or unsafe under any
federal, state or local law or regulation, including, without
limitation:
(i) designated as a hazardous material pursuant to the
Hazardous Materials Transportation Act, 49 U.S.C.
ss. 5102;
(ii) listed as a "hazardous substance" as defined in the
Comprehensive Environmental Response, Compensation
and Liability Act (42 U.S.C. ss.ss. 9601-9674);
(iii) designated a "hazardous substance" pursuant to ss.ss.
307 and 311 of the Federal Water Pollution Control
Act as amended (33 U.S.C. ss.ss. 1251-1387);
(iv) listed as a "hazardous air pollutant" pursuant to ss.
7412 of the Clean Air Act (42U.S.C.ss.ss.7401-7671);
(v) defined as a "hazardous waste" pursuant to ss. 1004
of the Resource Conservation Recovery Act (42 U.S.C.
ss.ss. 6901-6992k);
(vi) regulated under the Solid Waste Disposal Act
(42 U.S.C.ss.ss. 6901-6992);
(vii) subject to rules promulgated under the Toxic
Substance Control Act (15 U.S.C. ss.ss. 2601-2671),
including, but not limited to, PCBs and
asbestos-containing materials; and
(viii) any amendments now existing or hereinafter enacted to
the above-described statutes, rules and regulations.
(c) As used in this Agreement, the term "Environmental Condition"
means any set of circumstances (physical, chemical or
otherwise) in, on, under or affecting the Facilities that: (i)
constitutes the presence of Hazardous Materials; or (ii)
otherwise constitutes a threat to or endangerment to the
environment.
(d) As used in this Agreement, the term "Facilities" means the
real property and all buildings, improvements and
appurtenances owned by Seller at South Riverview Drive,
Burlington, North Carolina.
4.16.2 Seller has made Buyer aware of certain environmental
conditions which exist at the Facilities, and of existing
claims related thereto (the "Litigation"). At the present time
(a) there are no Hazardous Materials (including, without
limitation, oil and petroleum products) which are currently
being used at the Facilities in a manner which does not comply
with the Environmental Laws; and (b) Seller is presently
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conducting its activities at the Facilities in compliance with
any and all Environmental Laws and in a manner designed to
manage, store, treat, transport and dispose of any Hazardous
Material and the constituents thereof, on and off-site, in
compliance with any and all Environmental Laws.
4.16.3 Intentionally Omitted.
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4.16.4 Intentionally Omitted.
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4.16.5 Intentionally Omitted.
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4.16.7 Seller has not used the Facilities for a landfill or solid
waste disposal site.
4.16.8 Intentionally Omitted.
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4.16.9 Intentionally Omitted.
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4.16.10 There are no transformers, capacitors, or other appliances or
equipment, in use upon or at or stored upon or at the Facilities, which contain
PCBs.
4.16.11 There are no asbestos-containing materials in use at, or
stored at, the Facilities.
4.16.12 No lead paint or similar material is used at, or stored at,
the Facilities.
4.16.13 Seller agrees to indemnify and hold Buyer harmless from any
claims or causes of action related to the Litigation or to the violation of any
other Environmental Laws by the Seller prior to closing.
4.16.14 Intentionally Omitted.
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4.16.15 Intentionally Omitted.
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4.16.16 Intentionally Omitted.
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4.17 Governmental Licenses, Permits and Related Approvals. Seller has
obtained and presently maintains all licenses, permits, consents, approvals,
authorizations, qualifications and orders of governmental authorities
(collectively, the "Permits") that are required to enable Seller to own, occupy,
operate the Facilities and to conduct the Business as presently conducted,
including without limitation all Permits required under the Environmental Laws.
All such permits are valid and in full force and effect and freely transferable
by Seller, and upon the Closing, Buyer will have all right, title and interest
as the holder thereof. No proceeding is pending or threatened to limit, suspend
or revoke any Permit, and the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby will not
violate or result in the revocation, suspension or limitation of any Permit. To
the best of Seller's knowledge, there are no
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limitations on the continued and future use, occupation, operations or expansion
of the Business at its present Facilities.
4.18 Labor Matters. There are no controversies pending or threatened
between Seller and any of its employees or former employees, job applicants or
any association or group of such persons and such Seller has not taken or failed
to take any action which would provide a reasonable basis for such a
controversy. Seller has complied with all laws applicable to it relating to the
employment of labor, including any provisions thereof relating to wages, hours,
collective bargaining and the payment of social security, Medicare, unemployment
compensation and similar taxes. During the five (5) year period preceding the
date of this Agreement, there has not been any union activity involving persons
employed by Seller.
4.19 Customer and Suppliers. Schedule 4.19 lists, by dollar volume paid
for the prior twelve (12) months ended on June 30, 1999, (i) the ten largest
customers of Seller, (ii) the ten largest suppliers of Seller, and (iii) any
other supplier which is Seller's sole supplier of a product of which Seller
purchased in excess of $5,000 of such product during such twelve (12)-month
period and (iv) any contracts with suppliers that cannot be terminated without
penalty on thirty (30) days notice. To the best of Seller's knowledge, no entity
or person listed on Schedule 4.19 (A) intends or within the last twelve (12)
months has threatened to cancel or otherwise terminate the relationship of such
person with Seller, or (B) intends to modify materially its relationship with
Seller or to decrease materially or limit materially services, supplies or
materials to Seller or its usage or purchase of the products or services of a
Seller, as the case may be. To the best of Seller's knowledge, there are no
material customer disputes or dissatisfaction related to Seller's Business.
4.20 Employee Benefit Plans. Seller shall indemnify Buyer for any claim
or causes of action made under ERISA (including but not limited to COBRA)
related to any employee benefit plans maintained by Seller whether such claims
arise before or the Effective Date.
4.21 Insurance. During each of the past five (5) fiscal years, Seller
has been insured with respect to occurrences normally insured against in amounts
normally carried by companies similarly situated and in the same business as
Seller and there are no outstanding material unpaid claims under any such policy
or binder.
4.22 Operations of Seller. Since the Balance Sheet Date Seller has
not:
(a) incurred any material obligation or liability (contingent or
otherwise) except (i) normal trade or business obligations
incurred in the ordinary course of business, the performance
of which will not, individually or in the aggregate, have an
adverse effect on Seller's Business, prospects, financial
condition or results of operations, and (ii) obligations under
contracts and agreements described in this Agreement or the
Schedules hereto, the performance of which will not,
individually or in the aggregate, have an adverse effect on
Seller's Business, prospects, financial condition or results
of operations;
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(b) incurred any indebtedness for borrowed money;
(c) sold, assigned, transferred, leased or otherwise disposed of
or agreed to sell, assign, transfer, lease or otherwise
dispose of, any of its properties or assets, except for a fair
consideration in the ordinary course of business;
(d) acquired or leased any material assets or property, except for
the purchase of inventory in the ordinary course of business;
(e) paid any bonus or similar payment or made or granted any
general wage or salary increase (whether effective before or
after Closing) or entered into any employment contract, or
adopted any increase in any bonus, incentive compensation,
pension, profit sharing or other employee benefit plan or
arrangement;
(f) suffered any material casualty loss or damage, whether or not
such loss or damage shall have been covered by insurance;
(g) lost any supplier or suppliers, which loss or losses,
individually or in the aggregate, has or may have an adverse
effect on its results of operations; or
(h) lost any customer or customers, which loss or losses,
individually or in the aggregate, has or may have an adverse
effect on its results of operations.
4.23 Intentionally Omitted.
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4.24 Leased Real Property. Upon the execution by Buyer and Seller of
the Burlington Lease, Buyer shall be entitled to utilize the realty of Seller
located at 1070 South Riverview Drive, Burlington, North Carolina (the "Leased
Real Property") in the same manner as Seller, which use shall not result in the
violation of any law or ordinance.
4.25 Full Disclosure. All documents and other papers delivered by or on
behalf of Seller in connection with this Agreement and the transactions
contemplated hereby are true and complete in all material respects. No
representation or warranty of Seller contained in this Agreement contains an
untrue statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements made, in the context in
which made, not materially false or misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
5. Buyer represents and warrants to Seller as follows:
5.1 Due Incorporation and Authority. Buyer is a corporation duly
organized, validly existing under the laws of the State of North Carolina and
has all requisite corporate power
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and authority to own, lease and operate its properties and assets and to carry
on its business as presently conducted.
5.2 Authorization and Validity of Agreement. Buyer has all requisite
corporate power and authority to enter into this Agreement and to perform its
obligations hereunder. The execution, delivery and performance of this Agreement
by Buyer and the consummation by Buyer of the transactions contemplated hereby
have been duly and effectively authorized by all requisite corporate action.
This Agreement has been duly executed and delivered by Buyer and constitutes a
valid and legally binding obligation of Buyer.
5.3 No Approvals or Notices Required: No Conflict with Instruments to
which Buyer is a Party. The execution, delivery and performance of this
Agreement by Buyer and the consummation by Buyer of the transactions
contemplated hereby will not violate (with or without the giving of notice or
the lapse of time or both), or require any consent, approval, filing or notice
under any provision of law applicable to Buyer, and will not require any
consent, approval or notice under and will not conflict with, or result in the
breach or termination of any provision of, or constitute a default under, or
result in the acceleration of the performance of Buyer's obligations under, or
result in the creation of a lien, charge or encumbrance upon any of the
properties, assets or business of Buyer pursuant to Buyer's charter or bylaws or
any indenture, mortgage, deed of trust, lease, contract, instrument or other
agreement, or any order, judgment or decree, to which Buyer is a party or by
which Buyer or any of its properties or assets is bound.
ARTICLE VI
COVENANTS AND AGREEMENTS
6. The parties covenant and agree as follows:
6.1 Conduct of Business. From the date hereof through the Effective
Date, Seller shall conduct its Business in the ordinary course, consistent with
past practice, and, without the prior written consent of Buyer, Seller will not
take any action that would cause the representations and warranties contained in
Section 4.22 hereof not to be true and correct immediately after the taking of
such action. From the date hereof through the Effective Date, Seller will
conduct its business in such a manner so that the other representations and
warranties contained in Article IV hereof, in addition to those contained in
Section 4.22, shall continue to be true and correct on and as of the Effective
Date as if made on and as of the Effective Date.
6.2 Maintenance of Assets: Casualty Loss. From the date hereof through
the Effective Date, Seller will maintain its assets in customary repair, order
and condition, reasonable wear and tear accepted, and, in the event of a
casualty, loss or damage prior to the Effective Date to any of such assets for
which Seller is insured, Seller will, at the option of Buyer, and subject to the
requirements of any applicable loss payee or mortgagee clauses, either repair or
replace such damaged assets or to transfer the proceeds of such insurance to
Buyer on the Effective Date.
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6.3 Notice of Certain Events. Seller hereby agree to give Buyer prompt
notice of (i) any event, condition or circumstances occurring from the date
hereof through the Effective Date that would constitute a violation or breach of
any representation, warranty or covenant of Seller contained in this Agreement,
or (ii) any event, occurrence, transaction or other item which would have been
required to have been disclosed in this Agreement or any Schedule or statement
delivered hereunder, had such event, occurrence, transaction or item existed on
the date hereof.
6.4 Corporate Examinations and Investigations. Prior to the Effective
Date, Buyer shall be entitled, through its employees, representatives and
contractors, including, without limitation, Tuggle Duggins & Meschan, P.A., and
Buyer's accountants to make such investigation of the assets, Facilities,
properties, employees, business and operations of Seller, and such examination
of the books, records and financial condition of Seller as it wishes; provided,
however, that each such person or entity shall keep such information provided
confidential. Any such investigation and examination shall be conducted at
reasonable times and under reasonable circumstances and Seller shall cooperate
fully therein. No investigation by or on behalf of Buyer, however, shall
diminish or obviate any of the representations, warranties, covenants or
agreements of Seller under this Agreement; provided, however, that Buyer agrees
to inform Seller, in writing, prior to the Closing, of any information it may
obtain which might cast doubt upon the accuracy of any representation or
warranty of Buyer contained herein (hereinafter, a "Negative Disclosure"). In
order that Buyer may have full opportunity to make such physical, business,
accounting and legal review, examination or investigation as it may wish of the
business and affairs of Seller, Seller shall make available to the
representatives of Buyer during such period all such information and copies of
such documents concerning the affairs of Seller as such representatives may
reasonably request, shall permit the contractors and representatives of Buyer
access to the properties of Seller and all parts thereof and shall cause
Seller's officers, employees, advisors, staff, consultants, agents, accountants
and attorneys to cooperate fully with such contractors and representatives in
connection with such review and examination.
6.5 Expenses. The parties to this Agreement shall bear their own
respective expenses incurred in connection with the negotiation, preparation,
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby, including, without limitation, all fees
and expenses of agents, brokers, representatives, counsel and accountants.
6.6 Indemnification of Brokerage. Seller represents and warrants to
Buyer that if a broker, finder, agent or similar intermediary has acted on
behalf of Seller in connection with this Agreement or the transactions provided
for herein, Seller shall be responsible for any brokerage commissions, finder's
fees or similar fees or commissions payable with respect to this Agreement or
such transactions based on any agreement, arrangement or understanding with
Seller, or any action taken by Seller. Seller agrees to indemnify and save Buyer
harmless from any claim or demand for commission or other compensation by any
broker, finder, agent or similar intermediary employed by or on behalf of
Seller, and to bear the cost of legal expenses incurred in defending against any
such claim.
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Buyer represents and warrants to Seller that there are no brokerage
commissions, finder's fees or similar fees or commissions payable in connection
with this Agreement or the transactions provided for herein based on any
agreement, arrangement or understanding with Buyer, or any action taken by
Buyer. Buyer agrees to indemnify and save Seller harmless from any claim or
demand for commission or other compensation by any broker, finder, agent or
similar intermediary employed by or on behalf of Buyer and to bear the cost of
legal expenses incurred in defending against any such claim.
6.7 Exclusive Dealing. From the date hereof through the Effective Date
Seller agrees that it will not, directly or indirectly, encourage, initiate or
engage in discussions or negotiations with, or provide any information to, any
corporation, partnership, person or other entity or group, other than Buyer,
concerning any purchase of any equity interest in Seller, or any merger, sale of
substantial assets or similar transaction involving Seller.
6.8 Third Party Consents. To the extent that Seller's rights under any
agreement, contract, commitment, lease or other Acquired Asset to be assigned to
Buyer hereunder may not be assigned without the consent of another person which
consent has not been obtained, this Agreement shall not constitute an agreement
to assign such contract(s) if an attempted assignment would constitute a breach
thereof or be unlawful, and Seller, at its expense, shall use its best effort to
obtain any such required consents as promptly as possible. If any such consent
shall not be obtained or if any attempted assignment would be ineffective or
would impair Buyer's rights in an Acquired Asset in question so that Buyer would
not acquire the benefit of all such rights, to the maximum extent permitted by
law Seller shall act after the Closing as Buyer's agent in order to obtain for
Buyer the maximum benefits thereunder and shall cooperate with Buyer and any
other reasonable arrangement designed to provide such benefits to Buyer.
6.9 Change in Name. As soon as practicable after the Closing, Seller
shall amend its name to another name bearing no similarity to the name "G B
Labels, Inc."
6.10 Further Assurances. Each of the parties hereto shall execute such
agreements, certificates, documents and other instruments and take such further
action as may be reasonably necessary or appropriate to carry out the provisions
hereof and the transactions provided for herein. Each such party shall use its
best commercially reasonable efforts to fulfill or obtain the fulfillment of all
conditions to the Closing. After the Closing, at Buyer's request Seller will
execute, acknowledge and deliver to Buyer such other instruments of conveyance
and transfer and will take such other actions and execute and deliver such other
documents, certifications and further assurances as Buyer may reasonably require
in order to vest more effectively in Buyer, or to put Buyer more fully in
possession of any of the Acquired Assets, or to better enable Buyer to complete,
perform or discharge any of the Assumed Liabilities. Each of the parties hereto
will cooperate with the other and execute and deliver to the other parties
hereto such other instruments and documents and take such other actions as may
be reasonably requested from time to time by any other party hereto as necessary
to carry out, evidence and confirm the intended purposes of this Agreement.
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6.11 Transfer Taxes. Seller will pay all sales, transfer and
documentary taxes, if any, payable in connection with the sales to be made
hereunder.
6.12 Bulk Transfer Laws. Buyer hereby waives compliance by Seller with
the provisions of any bulk transfer laws of any jurisdiction in connection with
the sale of the Assets to Buyer. Seller shall indemnify and hold harmless Buyer
against any and all liabilities which may be asserted by third parties against
Buyer as a result of Seller's noncompliance with any such bulk transfer law.
6.13 Sale Announcement. The parties hereto agree that upon the Closing
of this transaction, the parties shall agree upon and issue a mutually
acceptable announcement to be sent to all of Seller's customers.
6.14 Printing Press. Seller agrees to be responsible for the cost of
freight, and no other cost, associated with returning the printing press located
in Hastings, Nebraska to Alamance County, North Carolina in its present
disassembled condition (such press being included in the Acquired Assets).
6.15 Future Business. Seller will use its best efforts to provide Buyer
(directly and/or through the direction of business from customers of Seller for
other products) with pressure sensitive flexo label business in an amount of not
less than $200,000 per year for two (2) years following the Closing, and shall
exclusively use Buyer to meet its pressure sensitive flexo label requirements
for such two (2) year period.
6.16 Intentionally Blank.
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6.17 Collection of Receivables. Buyer shall use all reasonable efforts
to collect the Accounts Receivable during the first ninety (90) days after the
Closing, and such efforts shall be no less than the efforts Buyer expends in the
collection of other accounts receivable. Payments made to designated Accounts
Receivable will be credited to such Accounts. In the event that an account
debtor who is both the debtor with respect to an Account Receivable and with
respect to an account generated with Buyer after the Closing, makes an
unallocated payment of funds, such unallocated funds will be deemed to be made
first on the oldest outstanding invoice (including Accounts Receivable). Any
amount paid to Buyer which is a payment of an Account Receivable (including
payments to any lockbox) or which is allocable to any of the Accounts Receivable
pursuant hereto will be delivered by Buyer to Seller, in the form received,
without delay.
6.18 Interim Period Operations. During the period from the Effective
Date through the Closing (the "Interim Period"), Buyer hereby engages Seller as
its agent for the purpose of operating the Business for Buyer's account, and
Seller accepts such engagement. During the Interim Period, Seller shall continue
to occupy the Facilities, and shall use the Assets to produce and ship products.
Buyer shall be responsible for (i) the reimbursement to Seller of any and all
documented costs and expenses incurred by seller in such endeavor, computed in a
manner consistent with Seller's past practices, and, (ii) to the extent
applicable, the direct payment of any documented costs and expenses arising out
of or related to Seller's Interim Period operations as may be charged to buyer's
account,
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if any. Buyer shall reimburse Seller for the costs and expenses incurred by
Seller as soon as practicable after receipt of Seller's invoices.
ARTICLE VII
CONDITIONS PRECEDENT TO THE OBLIGATION OF BUYER TO CLOSE
7. The obligation of Buyer to enter into and complete the Closing is
subject, at the option of Buyer acting in accordance with the provisions of this
Agreement with respect to termination hereof, to the fulfillment on or prior to
the Effective Date of the following conditions, any one or more of which may be
waived by it:
7.1 Accuracy of Representations and Warranties. The representations and
warranties of Seller contained in this Agreement shall be true on and as of the
Effective Date, with the same force and effect as though made on and as of the
Effective Date.
7.2 Performance of Agreements. Seller shall have performed and complied
with all covenants and agreements required by this Agreement to be performed or
complied with or Seller on or prior to the Effective Date.
7.3 Certificates of Seller. Buyer shall have received a certificate,
dated the Effective Date, of Seller to the effect set forth in Sections 7.1 and
7.2 above.
7.4 Permits and Required Consents. All Permits and Required Consents
necessary to operate the Business shall have been assigned to Buyer or obtained
by Buyer and shall be in full force and effect.
7.5 Opinions of Counsel to Seller. Buyer shall have received the
opinion of Kohrman Jackson & Krantz P.L.L., counsel to Seller , dated the date
of the Closing, addressed to Buyer, substantially in the form of Exhibit 7.5
attached hereto.
7.6 No Adverse Change. Since the date of this Agreement, there shall
have been no material adverse change in the financial condition, results of
operations, business or prospects of Seller.
7.7 No Casualty. Since the date of this Agreement, no damage,
destruction or loss, whether or not covered by insurance, adversely affecting in
any material respect any of the properties or assets of Seller shall have
occurred.
7.8 Other Documents. Seller shall deliver to Buyer the following
agreements or documentation:
(a) the Assumption Agreement;
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(b) Non-Competition Agreements for Seller and Gibraltar;
(c) the Escrow Agreement;
(d) vehicle titles and Bill of Sale;
(e) Intentionally omitted;
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(f) the Guaranty Agreement of Gibraltar;
(g) A Certificate of Good Standing from the Secretaries of State
of Delaware and North Carolina;
(h) the Burlington Lease;
(i) A Tax Certificate from the North Carolina Department of
Revenue; and
(j) UCC termination statements terminating all liens and
encumbrances on the Assets not being assumed hereunder.
7.9 No Proceeding or Litigation. No action, suit, claim, proceeding or
investigation before any federal or state court or any federal or state
governmental or regulatory authority shall have been commenced, and no action,
suit, claim or proceeding by any such governmental or regulatory authority shall
have been threatened, against Seller seeking to restrain, prevent or change the
transactions contemplated by this Agreement or seeking material damages in
connection with any of such transactions.
7.10 Employees. Through the Effective Date, Seller shall pay or accrue
to all employees all due and proper allowances for wages, commissions, salaries,
holiday and vacation pay, bonuses and past service claims; and shall have made
and remitted (or will be holding in trust for the beneficiaries thereof and at
the Closing shall make and remit) all proper deductions, remittances and
contributions for employees' wages, commissions and salaries required of them
under all contracts and statutes (including without limitation for health,
hospital and medical insurance, group life insurance, pension plans, workmen's
compensation, unemployment insurance, income tax, FICA taxes and the like) and,
wherever required by such contracts and/or statutes, all proper deductions and
contributions from its own funds for such purposes. Seller agrees to perform all
reporting duties in respect of all such wages, commissions, salaries and other
compensation and in respect of all such deductions and contributions. Buyer
assumes no liability for any amounts which have been paid or should have been
paid to or for the benefit of, or withheld from, any employee of Seller.
ARTICLE VIII
CONDITIONS PRECEDENT TO THE OBLIGATION OF SELLER TO CLOSE
8. The obligation of Seller to enter into and complete the Closing is
subject, at the
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option of Seller acting in accordance with the provisions of this Agreement with
respect to termination hereof, to the fulfillment on or prior to the Effective
Date of the following conditions, any one or more of which may be waived by it:
8.1 Accuracy of Representations and Warranties. The representations and
warranties of Buyer contained in this Agreement shall be true on and as of the
Effective Date, with the same force and effect as though made on and as of the
Effective Date.
8.2 Performance of Agreements. Buyer shall have performed and complied
with all covenants and agreements required by this Agreement to be performed or
complied with by Buyer on or prior to the Effective Date.
8.3 Certificates of Buyer. Seller shall have received a certificate,
dated the Effective Date, of Buyer to the effect set forth in Sections 8.1 and
8.2 above.
8.4 Opinion of Counsel to Buyer. Seller shall have received the opinion
of Tuggle Duggins & Meschan, P.A., counsel to Buyer dated the date of the
Closing, addressed to Seller, substantially in the form of Exhibit 8.4 attached
hereto.
8.5 Other Documents. Buyer shall deliver to Seller the following
Agreements:
(a) the Assumption Agreement; and
(b) the Escrow Agreement.
ARTICLE IX
INDEMNIFICATION
9.1 Survival of Representations and Agreements. Notwithstanding any
right of Buyer fully to investigate the affairs of Seller and subject to the
provisions of Section 6.4 related to Negative Disclosures, Buyer has the right
to rely fully upon the representations, warranties, covenants and agreements of
Seller contained in this Agreement or in any certificate deliverable pursuant to
this Agreement. All such representations, warranties, covenants and agreements
shall survive the execution and delivery of this Agreement and the Closing
hereunder and shall continue in full force and effect thereafter subject however
to the following:
(a) All representations and warranties, of Seller and Buyer
contained in this Agreement or made pursuant hereto shall
terminate and expire one (1) year after the Effective Date and
all covenants and agreements shall expire three (3) years
after the Effective Date provided, however (i) the
representations and warranties of Seller in respect of title
to the Acquired Assets in Section 4.9 shall be unlimited as to
duration and (ii) any indemnification claim related to Section
4.8 (Tax Matters), Section 4.16 (Environmental Compliance) and
Section 4.20 (Employee Benefit
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Plans) shall expire upon the expiration of the applicable
statute of limitations.
(b) With respect to any matter as to which a Claims Notice (as
defined in Section 9.4.1) is given prior to expiration of the
applicable limitation period described in Section 9.1(a)
above, any and all rights of a party hereto related to said
Claims Notice shall continue in full force and effect and
shall not terminate until final resolution of the matter in
question.
9.2 Obligation of Seller to Indemnify. Seller agrees to indemnify,
defend and hold harmless Buyer (and its directors, officers, affiliates,
successors and assigns) from and against all losses, liabilities, damages,
deficiencies, costs or expenses (including interest, penalties and reasonable
attorneys' fees and disbursements) (a "Loss" or "Losses") based upon, arising
out of or otherwise in respect of
(i) any inaccuracy in or any breach of any representation,
warranty, covenant or agreement of Seller contained in this
Agreement or in any agreement, certificate, document or other
instrument delivered by Seller pursuant to this Agreement;
(ii) any obligation, liability, action, claim, suit or proceeding
arising out of any action or inaction by Seller or the
operations or business of Seller or the Environmental
Condition of the Facilities, prior to the Effective Date
whether or not disclosed in this Agreement; or
(iii) any claims made against Buyer or any of the Acquired Assets
for violation of any applicable Bulk Sales statute.
Provided, however, except with regard to any payment which may be due Buyer from
Seller under any of the Assumed Obligations, Seller shall have no indemnity
obligation hereunder to Buyer with respect to any liability or obligation
assumed by Buyer pursuant to the Assumption Agreement.
9.3 Obligation of Buyer to Indemnify. Buyer agrees to indemnify,
defend and hold harmless Seller (and its directors, officers, affiliates,
successors and assigns) from and against any Losses based upon, arising out of
or otherwise in respect of any inaccuracy in or any breach of any
representation, warranty, covenant or agreement of Buyer contained in this
Agreement or in any agreement, certificate, document or other instrument
delivered by Buyer pursuant to this Agreement.
9.4 Notice and Opportunity to Defend.
9.4.1 Notice of Asserted Liability. Promptly after receipt by any party
hereto (the "Indemnitee") of notice of any demand, claim or circumstances which,
with the lapse of time, would or might give rise to a claim or the commencement
(or threatened commencement) of any
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<PAGE>
action, proceeding or investigation (an "Asserted Liability") that may result in
a Loss, the Indemnitee shall give notice thereof (the "Claims Notice") to any
other party (or parties) obligated to provide indemnification pursuant to
Section 9.2 or 9.3 (the "Indemnifying Party"). The Claims Notice shall describe
the Asserted Liability in reasonable detail, and shall indicate the amount
(estimated, if necessary and to the extent feasible) of the Loss that has been
or may be suffered by the Indemnitee.
9.4.2 Opportunity to Defend. The Indemnifying Party may elect to
compromise or defend, at its own expense and by its own counsel, any Asserted
Liability. If the Indemnifying Party elects to compromise or defend such
Asserted Liability, it shall within thirty (30) days (or sooner, if the nature
of the Asserted Liability so requires) notify the Indemnitee of its intent to do
so, and the Indemnitee shall cooperate, at the expense of the Indemnifying
Party, in the compromise of, or defense against, such Asserted Liability. If the
Indemnifying Party elects not to compromise or defend the Asserted Liability,
fails to notify the Indemnitee of its election as herein provided or contests
its obligation to indemnify under this Agreement, the Indemnitee may pay,
compromise or defend such Asserted Liability and seek repayment from the
Indemnifying party. Notwithstanding the foregoing, neither the Indemnifying
Party nor the Indemnitee may settle or compromise any claim over the objection
of the other; provided, however, that consent to settlement or compromise shall
not be unreasonably withheld. If the Indemnifying Party chooses to defend any
claim, the Indemnitee shall make available to the Indemnifying Party any books,
records or other documents within its control that are necessary or appropriate
for such defense.
9.4.3 Disputes with Customers, Distributors, Sales Agents or Suppliers.
Anything in Section 9.4.2 to the contrary notwithstanding, in the case of any
Asserted Liability by any supplier, distributor, sales agent or customer of
Seller with respect to the business conducted by Seller prior to the Closing in
connection with which Buyer may make a claim against Seller for indemnification
pursuant to Section 9.2, Buyer shall give a Claims Notice with respect thereto
but, unless Buyer and Seller otherwise agree, Buyer shall have the exclusive
right at its option to defend any such matter subject to the duty of Buyer to
consult with the Indemnifying Party and its attorneys in connection with such
defense and provided that no such matter shall be compromised or settled by
Buyer without the prior consent of Seller, which consent shall not be
unreasonably withheld. Seller shall have the right to recommend in good faith to
Buyer proposals to compromise or settle claims brought by a supplier,
distributor, sales agent or customer, and Buyer agrees to present such proposed
compromise or settlements to such supplier, distributor or customer. All amounts
required to be paid in connection with any such Asserted Liability under this
Section 9.4.3 shall be borne and paid by Seller . The parties agree to cooperate
fully with one another in the defense, compromise or settlement of any Asserted
Liability.
ARTICLE X
TERMINATION OF AGREEMENT
10.1 Termination. This Agreement may be terminated prior to the Closing
as follows:
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(a) At the election of Seller if any one or more of the conditions
to the obligation of Seller to close has not been fulfilled as
of the scheduled Effective Date and such noncompliance shall
not have been caused by Seller;
(b) At the election of Buyer, if any one or more of the conditions
to its obligation to close has not been fulfilled as of the
scheduled Effective Date and such noncompliance shall not have
been caused by Buyer;
(c) At the election of Seller, if Buyer has breached any material
representation, warranty, covenant or agreement contained in
this Agreement, which breach cannot be or is not cured by the
Effective Date;
(d) At the election of Buyer, if Seller has breached any material
representation, warranty, covenant or agreement contained in
this Agreement, which breach cannot be or is not cured by the
Effective Date; or
(e) At any time on or prior to the Effective Date, by mutual
written consent of Seller and Buyer. If this Agreement so
terminates, it shall become null and void and have no further
force or effect, except as provided in Section 10.2
10.2 Survival. If this Agreement is terminated and the transactions
contemplated hereby are not consummated as described above, this Agreement shall
become void and of no further force and effect, except for the provisions of
Section 6.4 and Exhibit 6.4 (Confidentiality [tbd]), Section 6.5 (Expenses) and
6.6 (Indemnification of Brokerage). Nothing herein shall relieve either party
for any willful breach of this Agreement.
ARTICLE XI
MISCELLANEOUS
11.1 Publicity. No publicity release or announcement concerning this
Agreement or the transactions provided for herein shall be made without written
advance approval thereof by Seller and Buyer.
11.2 Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, sent by
facsimile transmission, or sent by certified, registered or express mail, or
sent by Federal Express (or similar overnight delivery service), postage or
other charges prepaid. Any such notice shall be deemed given when so delivered
personally, sent by facsimile transmission or, if mailed, two days after the
date of deposit in the United States mails, as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
If to Buyer to: With a copy to:
JIT Manufacturing, Inc. TUGGLE DUGGINS & MESCHAN, P.A.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
PO Box 1339 H. Vaughn Ramsey
Graham, North Carolina 27253 228 West Market Street (27401)
Post Office Box 2888 (27402)
Greensboro, North Carolina
Telephone: Telephone: (910) 378-1431
Facsimile: Facsimile: (910) 274-1148
If to Seller to: With a copy to:
Gibraltar Packaging Group, Inc. KOHRMAN JACKSON & KRANTZ
P.L.L. G B Labels Division Alan M. Rauss, Esq.
2000 Summit Avenue 1375 East Ninth Street, 20th Floor
Hastings, NE 68901 Cleveland, OH 44114-1793
Telephone: (802) 463-1366 Telephone: (216) 696-8700
Facsimile: (802) 463-1661 Facsimile: (216) 621-6536
</TABLE>
Any party may by notice given in accordance with this Section to the other
parties designate another address or person for receipt of notices hereunder.
11.3 Entire Agreement. This Agreement (including the Exhibits and
Schedules hereto) and the collateral agreements executed in connection with the
consummation of the transactions provided for hereby contain the entire
agreement among the parties with respect to the purchase of certain assets
described in Article I hereof and supersedes all prior agreements, written or
oral, if any there be, with respect thereto.
11.4 Waivers and Amendments: Non-Contractual Remedies: Preservation of
Remedies. This Agreement may be amended, superseded, cancelled, renewed or
extended, and the terms hereof may be waived, only by a written instrument
signed by Buyer and Seller, or in the case of a waiver, by the party waiving
compliance. No delay on the part of any part in exercising any right, power or
privilege hereunder shall operate as a waiver thereof. Nor shall any waiver on
the part of any party of any such right, power or privilege, nor any single or
partial exercise of any such right, power or privilege, preclude any further
exercise thereof or the exercise of any other such right, power or privilege.
The rights and remedies herein provided are cumulative and are exclusive of any
rights or remedies that any party may otherwise have at law or in equity except
rights and remedies in respect of claims for fraud. The rights and remedies of
any party based upon, arising out of or otherwise in respect of any inaccuracy
in or breach of any representation, warranty, covenant or agreement contained in
this Agreement shall in no way be limited by the fact that the act, omission,
occurrence or other state of facts upon which any claim of any such inaccuracy
or breach is based may also be the subject matter of any other representation,
warranty, covenant or agreement contained in this Agreement (or in any other
agreement between the parties) as to which there is no inaccuracy or breach.
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11.5 Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of North Carolina.
11.6 Binding Effect; No Assignment. This Agreement shall be binding
upon and shall inure to the benefit of the parties and its respective personal
representatives, heirs, successors and assigns; provided, however, that Seller
may not assign its rights hereunder without Buyer's prior written consent.
11.7 Variations in Pronouns. All pronouns and any variations thereof
refer to the masculine, feminine or neuter, singular or plural, as the context
may require.
11.8 Counterparts. This Agreement may be executed by the parties hereto
in any number of counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute one
and the same instrument. Each counterpart may consist of a copy hereof
containing multiple signature pages, each signed by less than all, but together
signed by all of the parties hereto.
11.9 Schedules and Exhibits. The Schedules and Exhibits are a part of
this Agreement as if fully set forth herein. All references herein to sections,
subsections, clauses, Exhibits and Schedules shall be deemed references to such
parts of this Agreement, unless the context shall otherwise require.
11.10 Headings. The headings in this Agreement are for reference only
and shall not affect the interpretation of this Agreement.
11.11 Severability of Provisions. If any provision or any portion of
any provision of this Agreement or the application of any such provision or any
portion thereof to any person or circumstance shall be held invalid or
unenforceable, the remaining portion of such provision and the remaining
provisions of this Agreement, or the application of such provision or portion of
such provision as is held invalid or unenforceable to persons or circumstances
other than those as to which it is held invalid or unenforceable, shall not be
affected thereby.
11.12 Venue/Jurisdiction. This Agreement shall be governed in all
respects, including as to validity, interpretation and effect, by the internal
laws of the State of North Carolina, without giving effect to the conflict of
laws rules thereof. Buyer and Seller hereby irrevocably submit to the
jurisdiction of the courts of the State of North Carolina and the Federal courts
of the United States of America located in the County of Guilford of the State
of North Carolina in respect of the interpretation and enforcement of the
provisions of this Agreement and of the documents referred to in this Agreement,
and hereby waive, and agree not to assert, as a defense in any action, suit or
proceeding for the interpretation or enforcement hereof or of any such document,
that it is not subject thereto or that such action, suit or proceeding may not
be brought or is not maintainable in said courts or that the venue thereof may
not be appropriate or that this Agreement or any of such document may not be
enforced in or by said courts, and the parties hereto
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<PAGE>
irrevocably agree that all claims with respect to such action or proceeding
shall be heard and determined in such a North Carolina State or Federal court.
Buyer and Seller hereby consent to and grant any such court jurisdiction over
the person of such parties and over the subject matter of any such dispute and
agree that mailing of process or other papers in connection with any such action
or proceeding in the manner provided in Section 11.2, or in such other manner as
may be permitted by law, shall be valid and sufficient service thereof.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement under seal
as of the date first above written.
G B LABELS, INC.
By: /s/ John W. Lloyd
-----------------------------
John W. Lloyd, Secretary
JIT MANUFACTURING, INC.
By: /s/ David F. Laughlin
-----------------------------
David F. Laughlin, President
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EXHIBIT NO. 10.47
NONCOMPETITION AGREEMENT
------------------------
This Noncompetition Agreement (the "Agreement") is made as of the 1st
day of September, 1999, between JIT MANUFACTURING, INC., a North Carolina
corporation headquartered in Greensboro, North Carolina ("JIT") and GIBRALTAR
PACKAGING GROUP, INC. a Delaware corporation, doing business, either directly or
through one or more subsidiary companies, in North Carolina ("Gibraltar").
WITNESSETH:
WHEREAS, JIT is purchasing substantially all of the operating assets of
G B Labels, Inc., a Delaware corporation ("GBL") pursuant to the Asset Purchase
Agreement of even date herewith ("Asset Purchase Agreement");
WHEREAS, GBL is engaged in the business of manufacturing and selling
pressure sensitive flexo printed labels (the "Business");
WHEREAS, GBL is a wholly owned subsidiary of Gibraltar and Gibraltar
acknowledges it will receive substantial benefits from the transaction
contemplated in the Asset Purchase Agreement;
WHEREAS, JIT is engaged in the business of manufacturing printed labels
and related services in the Geographic Area (as defined herein) and intends to
expand its services and products into other geographic areas;
WHEREAS, Gibraltar has agreed to enter into this Agreement in
consideration of the purchase by JIT of substantially all of the assets of GBL
and as a condition to closing the Asset Purchase Agreement;
WHEREAS, JIT was in part induced to enter into the Asset Purchase
Agreement in consideration of the execution and delivery of this Agreement by
Gibraltar;
WHEREAS, Gibraltar's execution and delivery of this Agreement is one of
the conditions of JIT's obligation to consummate the Asset Purchase Agreement;
NOW, THEREFORE, JIT and Gibraltar hereby agree as follows:
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<PAGE>
1. Covenant Not to Compete. For and in consideration of the amounts to
be paid by JIT to Gibraltar pursuant to Section 4 hereunder and other good and
valuable consideration described above, Gibraltar covenants and agrees that for
a period of two (2) years from the date hereof (the "Non-Competition Period"),
Gibraltar will not directly or indirectly, either for Gibraltar or for any other
person, partnership, corporation or company engage in the manufacturing,
marketing, sale, or provision of pressure sensitive flexo labels (hereinafter
all activities set forth in this Section are individually referred to as a
"Covered Activity" and collectively referred to as the "Covered Activities")
with those customers of GBL listed on the attached Exhibit A. The term "engage
in" shall include having any direct or indirect interest in any enterprise,
whether as an officer, director, employee, investor, partner, joint venturer,
sole proprietor, principal, agent, representative, independent contractor,
shareholder, or owner (other than by passive ownership of less than 5% of the
stock or other securities of a publicly held corporation whose stock is traded
on a national securities exchange or in an over-the-counter market).
The parties acknowledge and agree that the covenants described
herein were arrived at as a result of arms length bargaining, that the
consideration arrived at herein being paid to Gibraltar in exchange for such
agreement is reasonable and the parties hereby waive the right to assert the
unreasonableness of such restrictions.
2. Confidentiality.
(a) Gibraltar recognizes and acknowledges that it has been privy
to confidential, proprietary and non-public information much
of which GBL has agreed to sell to JIT pursuant to the Asset
Purchase Agreement and which will be acquired by JIT,
including, but not limited to, information relating to GBL's
operations, plans and activities, proprietary and trade secret
information, and other commercial aspects of the Business
("Confidential Information"). Accordingly, Gibraltar covenants
for itself and its officer, director, employees, agents, and
consultants that it will hold such Confidential Information in
a fiduciary capacity for the benefit of JIT and will not,
either directly or indirectly, use for its own benefit or
divulge, disclose or communicate such Confidential Information
to any person, firm, corporation, association or other entity
except with the knowledge and consent of JIT and except for
any disclosure made by Gibraltar to Gibraltar's attorneys and
accountants or as otherwise may be required by law. Gibraltar
shall take all reasonable and appropriate steps to safeguard
such Confidential Information against disclosure, misuse, loss
or theft.
(b) JIT and Gibraltar agree that such Confidential Information to
which Gibraltar had or may have access shall not be considered
confidential if and to the extent that the information is, or
becomes through no fault or action of Gibraltar, published or
part of the public domain.
3. Inducement of Employees and Business Relations. For a period of two
(2) years from the date hereof, Gibraltar shall not, directly or indirectly, (i)
induce, attempt to induce or aid others in inducing an employee of JIT to leave
the employ of JIT or in any way interfere with the
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<PAGE>
relationship between JIT and an employee of JIT, or (ii) in connection with the
Business only, induce or attempt to induce any customer, supplier, licensee or
other business relation of JIT to cease doing business with JIT, or in any way
interfere with the relationship between any customer or business relation with
JIT. For a period of two (2) years from the date hereof, JIT shall not, directly
or indirectly, (i) induce, attempt to induce or aid others in inducing an
employee of the Standard Packaging and Printing Corp. subsidiary of Gibraltar
("Standard") to leave the employ of Standard or in any way interfere with the
relationship between Standard and an employee of Standard.
4. Consideration. As consideration for the agreements of Gibraltar
under Sections 1, 2, and 3 hereinabove, JIT shall pay Gibraltar the sum of One
Thousand Dollars ($1,000.00) payable in cash at closing (the "Noncompete
Payment").
5. Term. The term of this Agreement shall commence on the date hereof
and terminate on the second anniversary of the date hereof.
6. Remedies. The parties hereto agree that JIT would suffer irreparable
harm that would not be adequately remedied by money damages from a breach by
Gibraltar of any of the covenants or agreements contained in this Agreement.
Therefore, in the event of the actual or threatened breach by Gibraltar of any
of the provisions of Sections 1, 2 or 3 of this Agreement, JIT or its successors
or assigns may, in addition and supplementary to any other rights and remedies
existing in its favor, apply to any court of law or equity of competent
jurisdiction for specific performance or injunctive relief in order to enforce
or prevent any violation of the provisions of Sections 1, 2, or 3 hereof. In the
event of any alleged breach or violation by Gibraltar of any of the provisions
of Section 1 of this Agreement, the non-competition period described in Section
1 will be tolled until such alleged breach or violation is resolved. Gibraltar
agrees that these restrictions are reasonable. This Section is not intended to
limit in any way the availability of additional equitable or legal relief for
the types of breaches discussed in this Section where circumstances and
applicable legal principles support such relief, nor limit in any way the
availability of any legal or equitable relief for the breach of any other
provisions of this Agreement.
7. Severability. If any provision or clause of this Agreement, or
portion thereof, shall be held by any court or other tribunal of competent
jurisdiction to be illegal, void or unenforceable in such jurisdiction, the
remainder of such provisions shall not thereby be affected and shall be given
full effect, without regard to the invalid portion. It is the intention of the
parties, and the parties agree that as an essential part of the bargained for
consideration of this Agreement, if any court construes any provision or clause
of this Agreement, or any portion thereof, to be illegal, void or unenforceable
because of the duration of such provision or the area or matter covered thereby,
such court shall reduce the duration, area, or matter of such provision, and in
its reduced form, such provision shall then be enforceable to the greatest
extent permitted by law, and shall be enforced.
8. Binding Effect; Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. This Agreement and all rights hereunder are personal to
Gibraltar and shall not be assignable by Gibraltar. Any person, firm or
corporation succeeding to the business of JIT by merger, purchase, consolidation
or otherwise may assume by contract or operation of law all obligations of JIT
hereunder
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<PAGE>
for which consent of Gibraltar is not required.
9. No-Waiver. Failure by either JIT or Gibraltar to exercise any remedy
available to either in the event of a default by the other hereunder shall not
be deemed to be a waiver of any other default, or of any repetition of the
initial default.
10. Amendments. No amendment or modification of this Agreement shall be
deemed effective unless and until executed in writing by both parties hereto.
11. Governing Law and Choice of Forum. This Agreement shall be deemed
to have been made in Guilford County, North Carolina, regardless of the place
where the parties each in fact execute said instruments and regardless of the
order in which the signatures of the parties shall be affixed hereto, (and
regardless of who is deemed to be the offeror and the offeree); and this
Agreement shall be interpreted and the rights and liabilities of the parties
determined in accordance with the substantive laws of the State of North
Carolina, without giving effect to its choice of law rules; and the parties
consent and agree that any dispute, claim, suit or other legal action arising
out of this Agreement shall only be commenced and prosecuted in North Carolina
State Court or a United States Federal District Court for the Middle District of
North Carolina sitting in Guilford County. The parties agree that this Section
11 is an essential part of the bargained for consideration of this Agreement.
12. Representation and Warranty. The parties each warrant and represent
to the other that this Agreement is duly authorized and constitutes a valid and
legally binding obligation, enforceable in accordance with its respective terms,
except as such enforcement may be limited by: (i) applicable bankruptcy,
insolvency, fraudulent conveyance, moratorium or other similar laws presently in
effect concerning the enforcement of creditors' rights generally, and (ii) the
effect of rules of law governing the availability of equitable remedies
including, without limitation, injunction and specific performance.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above.
SELLER:
GIBRALTAR PACKAGING GROUP, INC.
By: /s/ John W. Lloyd
-------------------------------
John W. Lloyd, Secretary
BUYER:
JIT MANUFACTURING, INC.
By: /s/ David F. Laughlin
-------------------------------
David F. Laughlin, President
EXHIBIT NO. 10.48
NORTH CAROLINA
GUARANTY AGREEMENT
------------------
GUILFORD COUNTY
THIS GUARANTY AGREEMENT is made and given this 1st day of September,
1999, by GIBRALTAR PACKAGING GROUP, INC., a Delaware corporation (hereinafter
referred to as Gibraltar), to JIT MANUFACTURING, INC. (hereinafter sometimes
referred to as "Secured Party").
W I T N E S S E T H:
WHEREAS, Secured Party is acquiring substantially all of the assets of
G B Labels, Inc. ("GBL"), a wholly owned subsidiary of Gibraltar, pursuant to an
Asset Purchase Agreement and ancillary documents (such Asset Purchase Agreement
and all documents and agreements related thereto are hereinafter collectively
referred to as the "Asset Purchase Agreement"); and
WHEREAS, Gibraltar's unconditional and continuing guarantee of the
obligations of GBL is a condition to closing the Asset Purchase Agreement.
NOW, THEREFORE, in consideration of the premises and of other good and
valuable consideration, and in order to induce Secured Party to accept and close
the Asset Purchase Agreement, Gibraltar hereby absolutely and unconditionally
guaranties to Secured Party and its successors and assigns, the due and punctual
performance and payment of all obligations due Secured Party under the Asset
Purchase Agreement including any amendments, modifications, replacements,
substitutes and supplements thereto and any renewals or extensions thereof
agreed to by GBL and the Secured Party (all liabilities to pay money to or
perform obligations for Secured Party under the Asset Purchase Agreement being
hereinafter termed "Obligations of GBL").
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<PAGE>
In the event this guaranty is placed with an attorney for collection,
Gibraltar agrees to pay all costs of collection including, without limitation,
court costs and the reasonable attorneys' fees of Secured Party.
In order to implement the foregoing and as additional inducements to
Secured Party, Gibraltar further covenants and agrees:
1. This guaranty is and shall remain an unconditional and continuing
guaranty of performance and payment and not of collection and shall remain in
full force and effect irrespective of any interruption(s) and shall apply to and
guarantee the due and punctual payment of all Obligations of GBL due by GBL to
Secured Party. To that end, Gibraltar hereby expressly waives any right to
require Secured Party to bring any action against GBL or any other party or to
require that resort be had to any security, if any, in favor of GBL or any other
party. Gibraltar acknowledges that its liabilities and obligations hereunder are
primary rather than secondary. To that end and, without limiting the generality
of the foregoing, Gibraltar expressly waives any rights or defenses it otherwise
might have had under any applicable law to require Secured Party to attempt to
recover against GBL or any other party or against any collateral, if any, as a
condition to enforcement of this Guaranty.
2. Gibraltar acknowledges that the termination of liability of GBL
under the Obligations of GBL [(i) including, but not limited to termination by
reason of discharge in bankruptcy, receivership, stay in bankruptcy or any other
proceeding at law or in equity, (ii) but not including termination by reason of
failure of consideration, full performance by GBL, settlement between GBL and
Secured Party, or the release of GBL by Secured Party] shall not release
Gibraltar from full liability under the Obligations of GBL hereby guaranteed and
then in
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<PAGE>
existence or from any renewals or extensions thereof made by the Secured Party
and GBL, in whole or in part, whether such renewals or extensions are made
before or after the effective date of such termination and with or without
notice to Gibraltar.
3. This Guaranty Agreement constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof, and no waivers or
modifications shall be valid unless they are reduced to writing, duly executed
by the party to be charged thereby, and expressly approved in writing by Secured
Party.
4. Gibraltar further hereby consents and agrees that Secured Party and
GBL, may at any time, or from time to time: (i) extend or change the time of
payment, and/or the manner, place or terms of payment of any or all of the
Obligations of GBL; and (ii) subordinate the payment of any and all of the
Obligations of GBL, and/or any part of the same, to the payment of any other
debts or claims, which may at any time(s) be due or owing to Secured Party and
GBL, and/or any other party in such manner and upon such terms as Secured Party
and GBL may deem proper and/or desirable, and without notice to or further
assent from Gibraltar, it being agreed that Gibraltar shall be and remain bound
by, under and upon this Guaranty Agreement, irrespective of the existence, value
or condition of any collateral, if any, and notwithstanding any such change,
exchange, sale or other disposition, application, renewal or extension.
5. Gibraltar hereby waives: (i) notice of acceptance of this Guaranty;
(ii) notice(s) of entering into and engaging in business transactions and/or
contractual relationships and any other dealings between GBL and Secured Party;
(iii) presentment and/or demand for payment of any of the Obligations of GBL;
(iv) protest or notice of dishonor or default to Gibraltar or to any other
person or entity with respect to any of the Obligations of GBL including,
without limitation, no-
-3-
<PAGE>
tice of acceleration; and (v) any demand for payment or performance under this
Guaranty Agreement.
6. Gibraltar expressly warrants and represents to Secured Party, that
Gibraltar is a corporation organized and existing under the laws of the State of
Delaware, that Gibraltar is in good standing under the laws of that State and
that all necessary corporate action has been taken to authorize the execution
and delivery by Gibraltar of this Guaranty and that this Guaranty constitutes
the legal, valid and binding obligation of Gibraltar enforceable in accordance
with its terms.
7. No waiver by Secured Party of any default(s) by Gibraltar and/or GBL
shall operate as a waiver of any other default or of the same default on a
future occasion.
8. This Guaranty shall be deemed to have been made in Greensboro, North
Carolina, regardless of the place where Gibraltar in fact executed this
instrument and where this instrument was delivered to the Secured Party; and
this Guaranty shall be interpreted, and the rights and liabilities of the
Secured Party and Gibraltar determined in accordance with the substantive laws
of the State of North Carolina, without giving effect to its choice of law
rules; and this Guaranty is given by Gibraltar subject to any dispute, claim,
suit or other legal action arising out of this Guaranty being commenced and
prosecuted only in a North Carolina State Court or a United States Federal
District Court sitting in Guilford County, North Carolina.
IN WITNESS WHEREOF, Gibraltar has caused this instrument to be executed
in its corporate name by its undersigned duly authorized corporate officer as of
the day and year first above written.
GIBRALTAR PACKAGING GROUP, INC.
a Delaware corporation
-4-
<PAGE>
By: /s/ John W. Lloyd
-------------------------------
John W. Lloyd, Vice President
-5-
EXHIBIT NO. 10.49
FIFTH AMENDMENT TO SECURED CREDIT AGREEMENT
-------------------------------------------
This Fifth Amendment to Secured Credit Agreement (this
"AGREEMENT") is dated as of September 29, 1999 by and among Gibraltar Packaging
Group, Inc., a Delaware corporation (the "BORROWER"), the financial institutions
parties to the Credit Agreement (as defined herein) (collectively, the "LENDERS"
and individually, a "LENDER") and First Source Financial LLP, as Agent for the
Lenders (the "AGENT").
RECITALS
--------
WHEREAS, the Borrower, the Agent and the Lenders are parties
to that certain Secured Credit Agreement, dated as of July 31, 1998 (the
"ORIGINAL CREDIT AGREEMENT"), as amended by that certain First Amendment to
Secured Credit Agreement, dated as of September 1, 1998 (the "FIRST AMENDMENT"),
that certain Second Amendment to Secured Credit Agreement, dated as of November
13, 1998 (the "SECOND AMENDMENT"), that certain Third Amendment to Secured
Credit Agreement, dated as of February 12, 1999 (the "THIRD AMENDMENT") and that
certain Fourth Amendment to Secured Credit Agreement, dated as of May 14, 1999
(the "FOURTH AMENDMENT"); the Original Credit Agreement, as amended by the First
Amendment, the Second Amendment, the Third Amendment and the Fourth Amendment,
is collectively referred to herein as the "SECURED CREDIT AGREEMENT"), among the
Borrower, the Agent and the Lenders;
WHEREAS, the Borrower wishes, and the Agent and the Lenders
are willing, to amend certain provisions of the Secured Credit Agreement and to
waive compliance with certain provisions of the Secured Credit Agreement, all on
the terms and conditions set forth in this Agreement.
WHEREAS, First Source Financial LLP and LaSalle Business
Credit, Inc. are the only Lenders which are parties to the Secured Credit
Agreement as of the date hereof; and
NOW, THEREFORE, in consideration of the mutual agreements
contained herein, the parties hereto agree as follows:
AGREEMENT
---------
1. Definitions. Capitalized terms used but not otherwise defined herein
shall have the meanings as set forth in the Secured Credit Agreement.
2. Waiver. The Lenders hereby waive any Unmatured Event of Default or Event
of Default caused by the Borrower's failure to comply with the Net Worth, Debt
to EBITDA Ratio, Interest Coverage Ratio, Fixed Charge Coverage Ratio and the
Gross Capital Expenditures covenants set forth in Sections 11.32(a), (b), (c),
(d) and (e) of the Secured Credit Agreement
<PAGE>
through July 3, 1999; provided, however, that the Borrower may not incur or
continue any LIBOR Rate Loans (or convert any Prime Rate Loans into LIBOR Loans)
from the date hereof until the date occurring on or after December 31, 1999 on
which the Borrower demonstrates to the Agent and the Lenders, by delivery of a
Compliance Certificate and the financial statements required under Section
11.1(b), its compliance with the financial covenant set forth in Section
11.32(d).
3. Amendments to Secured Credit Agreement.
(a) Section 2.5(a) of the Secured Credit Agreement is hereby amended by
deleting it in its entirety and replacing it with the following:
(a) The aggregate principal balance of the Term Loans
shall be payable to the Agent, for the benefit of the Lenders, as follows:
(i) in five (5) quarterly installments on the 15th
day of January, April, July and October of each year, commencing October
15, 1998 and ending on October 15, 1999 as follows:
Payment Date Installment Amount
------------ ------------------
October 15, 1998 through
July 15, 1999 $ 562,500
October 15, 1999 $ 625,000
(ii) in forty-two (42) monthly installments on the
15th day of each month, commencing on November 15, 1999, and on the
Final Maturity Date as follows:
Payment Date Installment Amount
------------ ------------------
November 15, 1999 through
July 15, 2000 $ 208,333.33
August 15, 2000 through
April 15, 2003 $ 229,166.67
July 31, 2003 $12,687,500.00
-2-
<PAGE>
(b) Section 11.32(a) of the Secured Credit Agreement is hereby amended
by (i) deleting the phrase "July 4, 1999 through July 2, 2000" appearing
therein and replacing it with the phrase "December 31, 1999 through July 2,
2000" and (ii) adding the following sentence at the end thereof. "Borrower
shall maintain a Net Worth at all times during the Fiscal Quarter ending
September 30, 1999 of an amount at least equal to the Net Worth on July 3,
1999."
(c) Sections 11.32(b), (c) and (d) of the Secured Credit Agreement are
hereby amended by deleting them in their entirety and replacing them with
the following:
(b) Debt to EBITDA Ratio. Not permit the Debt to
EBITDA Ratio for any period set forth below to be more than the ratio
listed below opposite such period:
<TABLE>
<CAPTION>
MAXIMUM
PERIOD(S) (ALL DATES ARE INCLUSIVE) RATIO
<S> <C> <C> <C> <C>
Fiscal Quarter ending September 30, 1999 7.00:1.0
Fiscal Quarters ending December 31, 1999 through July 1, 3.50:1.0
2000
Each Fiscal Quarter of Fiscal Year 2001 3.00:1.0
Each Fiscal Quarter of Fiscal Year 2002 2.50:1.0
Fiscal Quarter ending on June 29, 2002 and each Fiscal 2.50:1.0
Quarter thereafter
</TABLE>
(c) Interest Coverage Ratio. Not permit the Interest
Coverage Ratio measured on the last day of any month for any twelve (12)
month period (or, in the case of months ending before July 1, 2000, for the
period from and including July 4, 1999, to and including the last day of
such month) ending on the last day of such month to be less than the ratio
listed below opposite the period including such month:
<TABLE>
<CAPTION>
MINIMUM
PERIOD(S) (ALL DATES ARE INCLUSIVE) RATIO
<S> <C> <C> <C> <C>
Fiscal Quarter ending September 30, 1999 1.50:1.0
December 31, 1999 through July 2, 2000 2.25:1.0
July 3, 2000 through June 30, 2001 2.50:1.0
July 1, 2001 through June 29, 2002 2.50:1.0
June 30, 2002 and thereafter 2.50:1.0
</TABLE>
(d) Fixed Charge Coverage Ratio. Not permit the Fixed
Charge Coverage Ratio measured on the last day of any month for any
twelve (12) month period (or, in the case of months ending before July
1, 2000, for the period from and including July 4, 1999, to and
including the last day of each month) ending on the last day of such
month to be less than the ratio listed below opposite the period
including such month:
-3-
<PAGE>
<TABLE>
<CAPTION>
MINIMUM
PERIOD(S) (ALL DATES ARE INCLUSIVE) RATIO
<S> <C> <C> <C> <C>
September 30, 1999 1.00:1.0
December 31, 1999 through July 2, 2000 1.05:1.0
July 3, 2000 through June 30, 2001 1.10:1.0
July 1, 2001 through June 29, 2002 1.10:1.0
June 30, 2002 and thereafter 1.10:1.0
</TABLE>
4. Representations and Warranties. To induce the Agent and the Lenders to
enter into this Agreement and to make all future Loans under the Secured Credit
Agreement, the Borrower represents and warrants to the Agent and the Lenders
that:
(a) Due Authorization, etc. The execution, delivery and
performance by the Borrower of this Agreement executed as of the date
hereof are within its corporate powers, have been duly authorized by
all necessary corporate action (including without limitation,
shareholder approval, if any shall be required), have received all
necessary governmental approval (if any shall be required), and do not
and will not contravene or conflict with any Requirement of Law or
Contractual Obligation binding upon such entity. This Agreement is the
legal, valid, and binding obligation of the Borrower enforceable
against the Borrower in accordance with its respective terms.
(b) Certain Agreements. To the best of the Borrower's
knowledge, on the date hereof all warranties of the Borrower thereto
set forth in the Secured Credit Agreement, as amended hereby, are true
and correct in all material respects, without any waiver or
modification thereof and no default of any party exists under the
Secured Credit Agreement or any Related Document.
(c) Financial Information. All balance sheets, all statement
of operations, of shareholders' equity and of changes in financial
position, and other financial data which have been or shall hereafter
be furnished to the Agent for the purposes of or in connection with
this Agreement have been and will be prepared in accordance with GAAP
consistently applied throughout the periods involved and do and will,
present fairly the financial condition of the entities involved as of
the dates thereof and the results of their operations for the periods
covered thereby.
(d) Litigation. No material litigation (including, without
limitation, derivative actions), arbitrations, governmental
investigation or proceeding or inquiry shall, on the date hereof, be
pending which was not previously disclosed in writing to the Agent and
no material adverse development shall have occurred in any litigation
(including, without limitation, derivative actions), arbitration,
government investigations, or proceeding or inquiry previously
disclosed to the Agent in writing.
5. Conditions to Effectiveness. This Agreement shall be effective as of
July 3, 1999 upon the satisfaction of the conditions set forth in this Section 5
and delivery of the following documents to the Agent on or prior to the date
hereof (unless another date is specified), in form and substance satisfactory to
the Agent and the Lenders:
-4-
<PAGE>
(a) Agreement. The Borrower shall have delivered to the
Agent executed originals of this Agreement.
(b) Consents and Acknowledgments. The Borrower shall have
obtained all consents, approvals and acknowledgments which may be
required with respect to the execution, delivery and performance of
this Agreement.
(c) No Default. As of the date hereof after giving effect to
this Agreement and the waiver set forth in Section 2 hereof, no
Unmatured Event of Default or Event of Default under any Related
Document shall have occurred and be continuing.
(d) Amendment Fee. The Borrower shall have delivered to the
Agent for the benefit of the Lenders, on or before September 30, 1999,
an amendment fee of $40,000.
6. Affirmation of Guaranties.
Each Guarantor (i) consents to and approves the execution and delivery
of this Agreement by the Borrower, the Agent and the Lenders, (ii) agrees that
this Agreement does not and shall not limit or diminish in any manner its
obligations under its Guaranty or under any of the other Related Documents to
which it is a party, (iii) agrees that this Agreement shall not be construed as
requiring the consent of any Guarantor in any other circumstance, (iv) reaffirms
its obligations under its Guaranty and all of the other Related Documents to
which it is a party, and (v) agrees that its Guaranty and such other Related
Documents remain in full force and effect and are each hereby ratified and
confirmed.
7. Miscellaneous.
(a) Captions. Section captions used in this Agreement are
for convenience only, and shall not affect the construction of this
Agreement.
(b) Governing Law. This Agreement shall be a contract made
under and governed by the laws of the State of Illinois, without regard
to conflict of laws principles. Wherever possible each provision of
this Agreement shall be interpreted in such manner to be effective and
valid under applicable law, but if any provision of this Agreement
shall be prohibited by or invalid under such law, such provision shall
be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provisions or the remaining
provision of this Agreement.
(c) Counterparts. This Agreement may be executed in any
number of counterparts and by the different parties on separate
counterparts, and each such counterpart shall be deemed to be an
original, but all such counterparts shall together constitute one and
the same Agreement. Delivery of an executed counterpart of a signature
page to this Agreement by telecopy shall be effective as delivery of a
manually executed counterpart of this Agreement.
(d) Successors and Assignees. This Agreement shall be
binding upon the Borrower, the Agent, the Lenders and their respective
successors and assignees, and shall
-5-
<PAGE>
inure to the sole benefit of the Borrower, the Agent, the Lenders and
their successors and assignees.
(e) References. Any reference to the Secured Credit
Agreement contained in any notice, request, certificate, or other
document executed concurrently with or after the execution and delivery
of this Agreement shall be deemed to include this Agreement unless the
context shall otherwise require.
(f) Continued Effectiveness. Notwithstanding anything
contained herein, the terms of this Agreement are not intended to and
do not serve to effect a novation as to the Secured Credit Agreement,
any Note or any of the Collateral Documents provided to furnish
security therefor. The parties hereto expressly do not intend to
extinguish the Secured Credit Agreement, any Note or the Collateral
Documents. Instead, it is the express intention of the parties hereto
to reaffirm the existence of the indebtedness created under the Secured
Credit Agreement which is evidenced by Notes and secured by the various
Collateral Documents. The Secured Credit Agreement and each of the
Related Documents as amended hereby remain in full force and effect.
The execution, delivery and effectiveness of this Agreement shall not
operate as a waiver of any right, power or remedy of the Lenders or the
Agent under the Secured Credit Agreement or any Related Document to
which the Lenders and the Agent are a party nor, except as set forth in
Section 2 hereof, constitute a waiver of any provision in or Event of
Default or Unmatured Event of Default (now or hereafter existing) under
the terms of the Secured Credit Agreement or any Related Document.
(g) Fees and Expenses. In accordance with Section 14.4 of
the Secured Credit Agreement, the Borrower agrees to pay on demand all
fees, costs and expenses incurred by the Agent and the Lenders in
connection with the preparation, execution and delivery of this
Agreement.
* * * * *
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
GIBRALTAR PACKAGING GROUP, INC., as Borrower
By: /s/ John W. Lloyd
Name Printed: John W. Lloyd
Title: Executive Vice President
FIRST SOURCE FINANCIAL LLP,
as Agent and a Lender
By: First Source Financial, Inc.
Its: Manager
By: /s/ John P. Thacker
Name Printed: John P. Thacker
Title: Senior Vice President
LASALLE BUSINESS CREDIT, INC.,
as a Lender
By: /s/ Ellen Cook
Name Printed: Ellen Cook
Title: Vice President
RIDGEPAK CORPORATION, as a Guarantor
By: /s/ John W. Lloyd
Name Printed: John W. Lloyd
Title: Secretary
NIEMAND HOLDINGS, INC., as a Guarantor
By: /s/ John W. Lloyd
Name Printed: John W. Lloyd
Title: Secretary
[TO FIFTH AMENDMENT]
S-1
<PAGE>
NIEMAND INDUSTRIES, INC., as a Guarantor
By: /s/ John W. Lloyd
Name Printed: John W. Lloyd
Title: Secretary
BURLINGTON HOLDINGS, INC., as a Guarantor
By: /s/ John W. Lloyd
Name Printed: John W. Lloyd
Title: Secretary
STANDARD PACKAGING AND PRINTING CORP., as a
Guarantor
By: /s/ John W. Lloyd
Name Printed: John W. Lloyd
Title: Secretary
[TO FIFTH AMENDMENT]
S-2
EXHIBIT NO. 21.1
SUBSIDIARIES OF GIBRALTAR PACKAGING GROUP, INC.
RidgePak Corporation, an Illinois corporation
Standard Packaging and Printing Corp., a North Carolina corporation
Niemand Holdings, Inc., a Delaware corporation
Niemand Industries, Inc., a Delaware corporation
Burlington Holdings, Inc., a Delaware corporation
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
33-66790 and 33-66844 of Gibraltar Packaging Group, Inc. on Form S-8 of our
report dated September 24, 1999, appearing in this Annual Report on Form 10-K of
Gibraltar Packaging Group, Inc. for the year ended July 3, 1999.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Omaha, Nebraska
September 24, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-03-1999
<PERIOD-START> JUN-28-1998
<PERIOD-END> JUL-03-1999
<CASH> 198
<SECURITIES> 0
<RECEIVABLES> 7,481
<ALLOWANCES> 194
<INVENTORY> 8,027
<CURRENT-ASSETS> 16,834
<PP&E> 40,199
<DEPRECIATION> 19,017
<TOTAL-ASSETS> 43,338
<CURRENT-LIABILITIES> 13,060
<BONDS> 0
0
0
<COMMON> 50
<OTHER-SE> 396
<TOTAL-LIABILITY-AND-EQUITY> 43,338
<SALES> 76,514
<TOTAL-REVENUES> 76,514
<CGS> 65,711
<TOTAL-COSTS> 65,711
<OTHER-EXPENSES> 21,790
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,336
<INCOME-PRETAX> (14,323)
<INCOME-TAX> (751)
<INCOME-CONTINUING> (13,572)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (13,572)
<EPS-BASIC> (2.69)
<EPS-DILUTED> (2.69)
</TABLE>
