UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: December 31, 1999
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Commission File Number: 00-19800
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GIBRALTAR PACKAGING GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 47-0496290
(State of incorporation) (I.R.S. Employer Identification Number)
2000 SUMMIT AVENUE
HASTINGS, NEBRASKA 68901
(Address of principal executive offices) (Zip Code)
(402) 463-1366
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [X] Yes [_] No
As of December 31, 1999, there were 5,041,544 shares of the Company's
common stock, par value $0.01 per share, issued and outstanding.
<PAGE>
GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
INDEX
Page Number
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PART I. FINANCIAL INFORMATION
- ------- ---------------------
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets 1
As of December 31, 1999 and July 3, 1999
Consolidated Statements of Operations for the 2
Three Months Ended December 31, 1999 and 1998
Six Months Ended December 31, 1999 and 1998
Consolidated Statements of Cash Flows for the 3
Six Months Ended December 31, 1999 and 1998
Notes to Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial 5
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk 10
PART II. OTHER INFORMATION
- -------- -----------------
Item 1. Legal Proceedings 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 6. Exhibits and Reports on Form 8-K 12
Signature 12
<PAGE>
GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
December 31, July 3,
1999 1999
--------- ---------
ASSETS
CURRENT ASSETS:
Cash $ 109 $ 198
Accounts receivable (NET OF ALLOWANCE FOR
DOUBTFUL ACCOUNTS OF $186 AND $194, RESPECTIVELY) 6,444 7,287
Inventories 7,591 8,027
Deferred income taxes 972 972
Prepaid and other current assets
431 350
-------- --------
Total current assets 15,547 16,834
PROPERTY, PLANT AND EQUIPMENT - NET 19,743 21,182
EXCESS OF PURCHASE PRICE OVER NET
ASSETS ACQUIRED (NET OF ACCUMULATED
AMORTIZATION OF $1,875 AND $1,794,RESPECTIVELY) 4,463 4,543
OTHER ASSETS (NET OF ACCUMULATED AMORTIZATION
OF $229 AND $191, RESPECTIVELY) 755 779
-------- --------
TOTAL $ 40,508 $ 43,338
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Checks not yet presented $ 361 $ 976
Current portion of long-term debt 2,641 2,891
Accounts payable 6,889 6,502
Accrued expenses 2,035 3,001
Income taxes payable 107 107
-------- --------
Total current liabilities 12,033 13,477
LONG-TERM DEBT - Net of current portion 25,881 27,943
DEFERRED INCOME TAXES 1,167 834
OTHER LONG-TERM LIABILITIES 558 638
-------- --------
Total liabilities 39,639 42,892
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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
Retained deficit (27,343) (27,766)
-------- --------
Total stockholders' equity 869 446
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TOTAL $ 40,508 $ 43,338
======== ========
See notes to unaudited consolidated financial statements.
1
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GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
------------ ------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET SALES $ 16,678 $ 18,980 $ 34,251 $ 39,165
COST OF GOODS SOLD 13,600 16,022 27,896 32,986
----------- ----------- ----------- -----------
GROSS PROFIT 3,078 2,958 6,355 6,179
----------- ----------- ----------- -----------
OPERATING EXPENSES:
Selling 712 856 1,485 1,743
General and administrative 1,170 1,284 2,464 2,833
Amortization of excess of purchase price
over net assets acquired 45 104 81 206
Restructuring charges -- 235 -- 235
----------- ----------- ----------- -----------
Total operating expenses 1,927 2,479 4,030 5,017
----------- ----------- ----------- -----------
INCOME FROM OPERATIONS 1,151 479 2,325 1,162
OTHER EXPENSE (INCOME):
Interest expense 766 799 1,580 1,705
Other income - net (14) (5) (14) (7)
----------- ----------- ----------- -----------
Other expense - net 752 794 1,566 1,698
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES 399 (315) 759 (536)
INCOME TAX PROVISION (BENEFIT) 178 (78) 336 (122)
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ 221 $ (237) $ 423 $ (414)
=========== =========== =========== ===========
BASIC AND DILUTED PER COMMON SHARE AMOUNTS:
Net Income (Loss) $ 0.04 $ (0.05) $0.08$ (0.08)
=========== =========== =========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING:
(basic and diluted) 5,041,544 5,041,544 5,041,544 5,041,544
=========== =========== =========== ===========
</TABLE>
See notes to unaudited consolidated financial statements.
2
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GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended
December 31,
------------
1999 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 423 $ (414)
Adjustments to reconcile net income (loss) to
net cash flows from operating activities:
Depreciation and amortization 1,225 1,493
Gain on sale of property, plant and equipment (24) (1)
Write-down of long-lived assets -- 61
Changes in operating assets and liabilities:
Accounts receivable - net 843 670
Inventories 436 (994)
Prepaid expenses and other assets (175) (85)
Accounts payable (228) (1,511)
Income taxes payable 333 (396)
Accrued expenses and other liabilities (1,046) (360)
-------- --------
Net Cash Flows from Operating Activities 1,787 (1,537)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property, plant and equipment 652 4
Changes in restricted funds -- (229)
Purchases of property, plant and equipment (216) (532)
-------- --------
Net Cash Flows from Investing Activities 436 (757)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (payments) under revolving credit facility (39) 3,513
Net principal repayments of long-term debt (2,259) (31,085)
Proceeds from issuance of long-term debt -- 30,830
Refinancing costs -- (830)
Net activity under capital leases (14) 19
-------- --------
Net Cash Flows from Financing Activities (2,312) 2,447
-------- --------
NET (DECREASE) INCREASE IN CASH (89) 153
CASH AT BEGINNING OF PERIOD 198 114
-------- --------
CASH AT END OF PERIOD $ 109 $ 267
======== ========
</TABLE>
See notes to unaudited consolidated financial statements.
3
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GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
A. GENERAL
The accompanying unaudited consolidated financial statements of
Gibraltar Packaging Group, Inc. ("Gibraltar" or the "Company") have
been prepared in accordance with Rule 10-01 of Regulation S-X for
interim financial statements required to be filed with the Securities
and Exchange Commission and do not include all information and
footnotes required by generally accepted accounting principles for
complete financial statements. However, in the opinion of management,
the accompanying unaudited consolidated financial statements contain
all adjustments, consisting only of normal recurring adjustments,
necessary to present fairly the financial position of the Company as of
December 31, 1999, and the results of its operations and cash flows for
the periods presented herein. Results of operations for the six months
ended December 31, 1999 are not necessarily indicative of the results
to be expected for the full fiscal year. The financial statements
should be read in conjunction with the audited financial statements for
the year ended July 3, 1999 and the notes thereto contained in the
Company's Annual Report on Form 10-K.
B. INVENTORIES
Inventories consisted of the following (IN THOUSANDS):
December 31, July 3,
1999 1999
------------- --------------
Finished goods $ 4,933 $ 5,060
Work in process 1,018 913
Raw materials 1,057 1,699
Manufacturing supplies 583 355
------------- --------------
$ 7,591 $ 8,027
============= ==============
C. SALE OF GB LABELS AND NIEMAND
In connection with the Company's strategic plan, the Company sold the
operating assets of two of its subsidiaries, GB Labels, Inc. ("GB
Labels") and Niemand Industries, Inc. ("Niemand"). The sale of the
operating 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 was
recorded on the sale in fiscal 2000.
The sale of the container business of Niemand was finalized in the
fourth quarter of fiscal 1999. Effective February 1, 2000, the Company
completed the sale of the remaining operating assets of Niemand. 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.
No material gain or loss was recorded on either sale.
4
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GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RECENT EVENTS
In connection with the Company's strategic plan to refocus on its core
capabilities in folding cartons, the Company finalized the sale of the
remaining operating assets of Niemand, effective February 1, 2000, to
TEKPAK, Inc., a company formed by Niemand's former president.
RESULTS OF OPERATIONS
Three Months Ended December 31, 1999 Compared to
Three Months Ended December 31, 1998
------------------------------------
In the second quarter of fiscal 2000, the Company had net sales of
$16.7 million compared with $19.0 million in the corresponding period
of fiscal 1999, a decrease of $2.3 million or 12.1%. The sale of the
operating assets of GB Labels in August 1999 and the container portion
of Niemand in June 1999 accounted for $2.0 million of the decrease.
Sales also declined slightly at Great Plains, primarily due to changes
in the customer and product mix.
Cost of goods sold decreased $2.4 million or 15.1% to $13.6 million in
the second quarter of fiscal 2000 compared to $16.0 million in the
second quarter of fiscal 1999. Expressed as a percentage of net sales,
cost of goods sold decreased in the second quarter of fiscal 2000 to
81.5% compared to 84.4% in the corresponding period of fiscal 1999. As
a result of the Company's continuing cost control efforts, cost of
goods sold in actual dollars and as a percentage of net sales continues
to decline for the folding carton divisions. The sale of the operating
assets of GB Labels in August 1999 and the container portion of Niemand
in June 1999 accounted for $1.9 million of the decrease. Labor costs in
general also decreased as productivity improved (as measured by
throughput per employee) and overtime was reduced, most notably at two
of the Company's subsidiaries; RidgePak Corporation (dba "Flashfold
Carton") and Standard Packaging & Printing Corp. ("Standard
Packaging"). In addition, depreciation expense has been reduced at
Flashfold Carton, as a result of the long-lived asset impairment
write-down at the end of the third quarter of fiscal 1999.
Selling expenses decreased $0.2 million or 16.8% to $0.7 million in the
second quarter of fiscal 2000 from $0.9 million in the corresponding
period of fiscal 1999. Expressed as a percentage of net sales, selling
expenses decreased slightly to 4.3% in the second quarter of fiscal
2000, compared with 4.5% in the corresponding period of fiscal 1999.
Selling expenses decreased primarily as a result of reorganizing the
Company's sales force and internalizing previously out-sourced
functions within its marketing programs. An additional $0.1 million in
reductions came from the sale of the operating assets of GB Labels in
August 1999 and the container portion of Niemand in June 1999.
5
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GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
General and administrative expenses decreased $0.1 million or 8.9% to
$1.2 million in the second quarter of fiscal 2000 from $1.3 million in
the corresponding period of fiscal 1999. The decrease is primarily the
result of the sale of the operating assets of GB Labels in August 1999
and the container portion of Niemand in June 1999. Expressed as a
percentage of net sales, general and administrative expenses increased
slightly to 7.0% in the second quarter of fiscal 2000, compared with
6.8% in the corresponding period of fiscal 1999.
In connection with the Company's strategic plan, the Company sold the
operating assets of GB Labels, 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 was
recorded on the sale in fiscal 2000.
Total interest expense remained relatively constant at $0.8 million in
the second quarter of fiscal 2000 compared to the corresponding period
of fiscal 1999. This is the result of a blend of $5.0 million in lower
average borrowings coupled with slightly higher average interest rates
of 1.2%.
The income tax provision as a percentage of pre-tax income for the
three months ended December 31, 1999 is 44.6%, which differs from the
statutory rate primarily as a result of non-deductible amortization of
excess of purchase price over net assets acquired. The equivalent tax
rate was an income tax benefit of 24.8% for the corresponding period in
the prior year.
Six Months Ended December 31, 1999 Compared to
Six Months Ended December 31, 1998
----------------------------------
In the first six months of fiscal 2000, the Company had net sales of
$34.3 million compared with $39.2 million in the corresponding period
of fiscal 1999, a decrease of $4.9 million or 12.5%. The sale of the
operating assets of GB Labels in August 1999 and the container portion
of the Company's Niemand subsidiary in June 1999 accounted for $4.0
million of the decrease. Sales of folding cartons declined slightly,
primarily due to changes in the customer and product mix, as well as,
product changes made by existing customers.
Cost of goods sold decreased $5.1 million or 15.4% to $27.9 million in
the first six months of fiscal 2000 compared to $33.0 million in the
first six months of fiscal 1999. Expressed as a percentage of net
sales, cost of goods sold decreased in the first six months of fiscal
2000 to 81.4% compared to 84.2% in the corresponding period of fiscal
1999. As a result of the Company's continuing cost control efforts,
cost of goods sold in actual dollars and as a percentage of net sales
continues to decline for the folding carton divisions. The sale of the
operating assets of GB Labels in August 1999 and the container portion
of Niemand in June 1999 accounted for $3.8 million of the decrease.
Standard Packaging continues to benefit from renegotiated prices with
suppliers and the internalization of the die making and ink mixing
processes. Labor costs in general also decreased as productivity
improved (as measured by throughput per employee) and overtime was
reduced, most notably at Flashfold Carton and Standard Packaging. In
addition, depreciation expense has been reduced at Flashfold Carton, as
a result of the long-lived asset impairment write-down at the end of
the third quarter of fiscal 1999. These cost improvements were
partially offset by certain cost increases. The folding carton
divisions incurred a slight increase in raw material prices. Standard
Packaging incurred higher overhead costs due to higher than anticipated
costs for
6
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GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
payment of run-out claims relating to its previous medical plan and
previous years' workers compensation claims, and increased repair and
maintenance costs as a result of the overall timing of necessary
equipment repairs.
Selling expenses decreased $0.2 million or 14.8% to $1.5 million in the
first six months of fiscal 2000 from $1.7 million in the corresponding
period of fiscal 1999. Expressed as a percentage of net sales, selling
expenses decreased slightly to 4.3% in the first six months of fiscal
2000, compared with 4.5% in the corresponding period of fiscal 1999.
Selling expenses decreased primarily as a result of reorganizing the
Company's sales force and internalizing previously out-sourced
functions within its marketing programs. An additional $0.1 million in
reductions came from the sale of the operating assets of GB Labels in
August 1999 and the container portion of Niemand in June 1999.
General and administrative expenses decreased $0.3 million or 13.0% to
$2.5 million in the first six months of fiscal 2000 from $2.8 million
in the corresponding period of fiscal 1999. Expressed as a percentage
of net sales, general and administrative expenses remained level at
7.2%. General and administrative expenses decreased primarily as a
result of the relocation of the corporate headquarters in the second
quarter of fiscal 1999 and the continued cost reduction efforts of
Flashfold Carton. An additional $0.1 million in reductions came from
the sale of the operating assets of GB Labels in August 1999 and the
container portion of Niemand in June 1999.
Effective August 30, 1999, as discussed in the three-month analysis,
the Company sold the operating assets of GB Labels.
Total interest expense decreased $0.1 million or 7.3% to $1.6 million
in the first six months of fiscal 2000 from $1.7 million in the
corresponding period of fiscal 1999. The decrease is primarily the
result of $2.9 million in lower average borrowings.
The income tax provision as a percentage of pre-tax income for the six
months ended December 31, 1999 was 44.3%, which differs from the
statutory rate primarily as a result of non-deductible amortization of
the excess of purchase price over net assets acquired. The equivalent
tax rate was an income tax benefit of 22.8% for the corresponding
period in the prior year.
FINANCIAL CONDITION
The Company's 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"). As
amended on September 29, 1999, the remaining balance of the term loan
is due in monthly installments of $208,333 through July 2000 and
$229,167 through April 2003, with the balance of $11,299,435 due on
July 31, 2003.
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 its Burlington, North Carolina
property.
7
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GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
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 letter of
credit guarantees then extended, exceed loan availability.
As of December 31, 1999, all outstanding letters of credit were
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 December 31, 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 December 31, 1999, the Company was in compliance with
all financial covenants.
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 unused portion of the Revolver. First Source's prime rate was
8.50% at December 31, 1999.
At December 31, 1999, the Company had working capital of $3.5 million,
as compared to $3.4 million at July 3, 1999. 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 during the six months ended December 31, 1999
were $1.8 million compared with funds used of $1.5 million in the
corresponding period in fiscal 1999. The cash outflow from operations
in the six months ended December 31, 1998 was largely due to the
significant amount of payables paid during that time period, as a
result of the refinancing. The Company had available to it unused
borrowing capacity of $0.7 million as of December 31, 1999.
During the six months ended December 31, 1999, capital expenditures
totaled $0.2 million compared with $0.5 million in the corresponding
period in fiscal 1999, and consisted primarily of additions to
machinery and equipment and capital improvements. The Company makes
capital improvements to improve 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 continue 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 and is pursuing opportunities for profit enhancement at both
Standard Packaging and Flashfold Carton. As part of the strategy of
focusing on folding cartons, the Company has sold the operating assets
of two of its subsidiaries, GB Labels and Niemand. GB Labels was sold
in August 1999, while Niemand was divested in two stages; the container
portion in June 1999 and the remainder in February 2000.
8
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GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
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.
YEAR 2000
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 these 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 has successfully made the transition to the year 2000
subsequent to the second fiscal quarter ended December 31, 1999, and it
appears that the Company's major IT and non-IT systems are compliant
with the Year 2000 requirements. The Company has experienced no adverse
consequences as a result of third parties or external factors being
non-compliant. Pursuant to the Company's Year 2000 contingency plan, it
will continue to monitor the status of all its systems over the year
for any potential delayed or suppressed Year 2000 problems.
The Company's Niemand division incurred costs totaling approximately
$90,000 in upgrading all of its manufacturing and financial software
and hardware systems to be Year 2000 compliant. All other costs
incurred as a result of ensuring Year 2000 compliance were expensed or
capitalized as software purchases in the normal course of operations of
the Company. Any additional costs for the Year 2000 project were
reflected as general and administrative costs incurred in the normal
course of operations, due to the Company's internal IT department
managing the project.
FORWARD-LOOKING STATEMENTS
Statements that are not historical facts, including statements about
the Company's confidence in its prospects and strategies, are
forward-looking statements that involve risks and uncertainties. These
risks and uncertainties include, but are not limited to: (1) the
Company's ability to execute its business plan to leverage the success
of the Company's Great Plains division; (2) 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 increase their buying power by consolidating the number of
vendors they maintain; (3) 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; (4) the introduction of
competing products by other firms; (5) pressure on prices from
competition or purchasers of the Company's products; (6) continued
stability in other raw material prices, including oil-based resin and
plastic film; (7) whether the Company will be able to pass on to its
customers price increases for paper and paperboard products in fiscal
2000; (8) whether or not management will be successful in sufficiently
improving sales and profitability at Flashfold Carton and Standard
Packaging; (9) the impact of government regulation on the Company's
manufacturing, including whether or not
9
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GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
additional capital expenditures will be needed to comply with
applicable environmental laws and regulations as the Company's
production increases; (10) the Company's ability to continue to comply
with the restrictive covenants in its credit facility or to obtain
waivers if it is not in compliance in the future and (11) the outcome
of the Company's lawsuit against Anthem Health Plans. 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. The Company 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-Q and other documents that the
Company files from time to time with the Securities and Exchange
Commission, including its annual report on Form 10-K and any current
reports on Form 8-K and must be considered by any investor or potential
investor in the Company.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's primary market risk is fluctuation in interest rates. All
of the Company's debt at December 31, 1999 was at variable interest
rates. A hypothetical 10% change in interest rates would have had a
$0.2 million impact on interest expense for the six months ended
December 31, 1999.
10
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GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
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. In December 1999, the parties participated in a
settlement mediation at which it was determined that additional
information should be gathered through depositions. A second settlement
mediation will be scheduled before the end of the fourth quarter of
fiscal year 2000.
From time to time, the Company is a party to certain other 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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's Annual Meeting of Stockholders' on November 10, 1999,
a total of 4,560,930 shares, or 90.47%, of outstanding shares were
represented and entitled to vote.
The following members were elected to the Board of Directors:
FOR WITHHOLD
David G. Chandler 4,301,786 259,144
John W. Lloyd 4,392,177 168,753
Walter E. Rose 4,292,215 268,715
Robert G. Shaw 4,392,177 168,753
John D. Strautnieks 4,301,786 259,144
The following proposal was approved:
Ratification of Deloitte & Touche LLP as the independent
auditors for the Company for the 2000 fiscal year.
Affirmative Votes: 4,558,516
Negative Votes: 1,800
Abstentions: 614
11
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GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
10.51 Seventh Amendment to Secured Credit Agreement, dated November
19, 1999, among Gibraltar Packaging Group, Inc., various
financial institutions and First Source Financial LLP,
Individually and as agent.
10.52 Further Agreement Concerning Employment, dated January 23,
2000, between Gibraltar Packaging Group, Inc. and John W.
Lloyd.
10.53 Asset Purchase Agreement, dated November 3, 1999, among
TEKPAK, Inc., Niemand Industries, Inc. and Gibraltar Packaging
Group, Inc.
27.1 Financial Data Schedule
(b) Reports on Form 8-K:
None
SIGNATURE
Pursuant to the requirements 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.
Date: February 11, 2000 By: /s/ John W. Lloyd
------------------- ------------------------------
John W. Lloyd, Chief Financial Officer
Signing on behalf of the registrant and
as principal financial officer
12
EXHIBIT NUMBER 10.51
SEVENTH AMENDMENT TO SECURED CREDIT AGREEMENT
---------------------------------------------
This Seventh Amendment to Secured Credit Agreement (this
"AGREEMENT") is dated as of November 19, 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"), that
certain Fourth Amendment to Secured Credit Agreement, dated as of May 14, 1999
(the "FOURTH AMENDMENT"), that certain Fifth Amendment to Secured Credit
Agreement, dated as of September 29, 1999 (the "FIFTH AMENDMENT") and that
certain Sixth Amendment to Secured Credit Agreement, dated as of October 26,
1999 (the "SIXTH AMENDMENT"); the Original Credit Agreement, as amended by the
First Amendment, the Second Amendment, the Third Amendment, the Fourth
Amendment, the Fifth Amendment and the Sixth 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:
<PAGE>
AGREEMENT
---------
1. Definitions. Capitalized terms used but not otherwise defined herein
shall have the meanings as set forth in the Secured Credit Agreement.
2. Amendments to Secured Credit Agreement. Section 11.32 of the Secured
Credit Agreement is hereby amended as follows:
(a) Section 11.32(a) of the Secured Credit Agreement is hereby
amended by deleting the phrase "December 31, 1999 through July 2,
2000" appearing therein and the corresponding minimum Net Worth
requirement therefor and replacing it with the following:
MINIMUM
PERIODS (ALL DATES ARE INCLUSIVE) NET WORTH
October 1, 1999 through December 31, 1999 $ 700,000
January 1, 2000 through March 31, 2000 $ 900,000
April 1, 2000 through July 1, 2000 $ 1,100,000
(b) 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>
<S> <C>
MAXIMUM
PERIOD(S) (ALL DATES ARE INCLUSIVE) RATIO
Fiscal Quarter ending September 30, 1999 7.00:1.0
Fiscal Quarter ending December 31, 1999 6.00:1.0
Fiscal Quarter ending March 31, 2000 4.75:1.0
Fiscal Quarter ending July 1, 2000 4.00:1.0
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 30, 2002 and each Fiscal 2.50:1.0
Quarter thereafter
(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:
<CAPTION>
<S> <C>
MINIMUM
PERIOD(S) (ALL DATES ARE INCLUSIVE) RATIO
</TABLE>
-2-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
MINIMUM
PERIOD(S) (ALL DATES ARE INCLUSIVE) RATIO
Fiscal Quarter ending September 30, 1999 1.50:1.0
Fiscal Quarter ending December 31, 1999 2.00:1.0
Fiscal Quarters ending March 31, 2000 and July 1, 2000 2.10:1.0
July 2, 2000 and thereafter 2.50:1.0
(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:
<CAPTION>
<S> <C>
MINIMUM
PERIOD(S) (ALL DATES ARE INCLUSIVE) RATIO
September 30, 1999 through July 1, 2000 1.00:1.0
July 2, 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>
3. 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
-3-
<PAGE>
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.
4. Conditions to Effectiveness. This Agreement shall be effective as of
November___, 1999 upon the satisfaction of the conditions set forth in this
Section 4 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:
(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, no Unmatured Event of Default or Event of Default under any
Related Document shall have occurred and be continuing.
5. 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.
6. 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
-4-
<PAGE>
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 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 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.
* * * * *
-5-
<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/ Kathi J. Inorio
Name Printed: Kathi J. Inorio
Title: Vice President
LASALLE BUSINESS CREDIT, INC.,
as a Lender
By: /s/ Ellen T. Cook
Name Printed: Ellen T. 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
S-1
[TO SEVENTH AMENDMENT]
<PAGE>
NIEMAND INDUSTRIES, INC., as a Guarantor
By: /s/ John W. Lloyd
Name Printed: John W. Lloyd
Title: Secretary
BURLINGTON HOLDINGS, INC. (f/k/a GB
Labels, 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
S-2
[TO SEVENTH AMENDMENT]
EXHIBIT NUMBER 10.52
FURTHER AGREEMENT CONCERNING EMPLOYMENT
---------------------------------------
THIS FURTHER AGREEMENT CONCERNING EMPLOYMENT (the "Agreement") is made
and entered into this 23 day of January, 2000, at Hastings, Nebraska, by and
between GIBRALTAR PACKAGING GROUP, INC., a Delaware corporation (hereinafter
referred to as "Gibraltar"), and JOHN W. LLOYD, an individual residing at 270
Warner Hill Rd., Southport, CT 06490 (hereinafter referred to as "Lloyd").
RECITALS:
A. Lloyd is an employee of Gibraltar, has been elected by Gibraltar to
the offices of Executive Vice President and Chief Financial Officer, and has
been serving in such capacities.
B. The parties hereto are also parties to a certain Agreement
Concerning Employment dated January 15, 1999 (the "Original Agreement") and a
certain Stock Appreciation Rights Agreement dated January 15, 1999 (the "SAR
Agreement").
C. The parties now desire to make certain changes to the terms and
conditions of Lloyd's employment, and to formalize and modify their
understandings related thereto and to the Original Agreement and the SAR
Agreement, as set forth below.
ACCORDINGLY, the parties hereto agree as follows:
1. COMPENSATION. Paragraph 1(a) of the Original Agreement shall be and
hereby is amended to provide that, effective as of November 1, 1999, Lloyd shall
receive a salary at an annual rate of One Hundred Five Thousand Three Hundred
Eighty Seven Dollars and Ninety Six Cents ($105,387.96; hourly rate: $101.335),
payable not less frequently than monthly. Such amount may be modified at six
month intervals thereafter pursuant to paragraph 2(c) below, or by agreement of
the parties from time to time. The computation of any bonus to which Lloyd may
be entitled for fiscal year 2000, and for any fiscal year thereafter, if
applicable, which is
<PAGE>
based upon Lloyd's compensation shall be based upon the amount set forth in this
paragraph. Lloyd's right to participate in all corporate employee benefit
programs offered to employees by Gibraltar, as set forth in paragraph 1(d) of
the Original Agreement, shall continue until the Employment Period has been
terminated.
2. DUTIES.
(a) Paragraph 2 of the Original Agreement shall be deleted in its
entirety and shall be replaced by the following new Paragraph 2:
2. DUTIES. During the Employment Period, Lloyd's job
assignments, duties and responsibilities shall be consistent
with those of executive vice presidents and chief financial
officers of companies of a size comparable to Gibraltar;
provided, however, that it is expressly understood and agreed
that Lloyd shall only be required to devote an average of
twenty (20) hours per week to those duties.
The number of hours which Lloyd may be required to devote to Gibraltar pursuant
to this paragraph is sometimes referred to hereinafter as the "Required Hours."
(b) In the event that, during any three month period beginning on
November 1, 1999, February 1, 2000, May 1, 2000 or August 1, 2000, or on the
first day of any subsequent November, February, May or August, Lloyd is required
to devote more than two hundred sixty (260) hours to the performance of the
duties described in paragraph 2 of the Original Agreement, as amended by
paragraph 2(a) of this Agreement, Gibraltar will pay additional compensation to
Lloyd at the rate of $100 per hour for each hour in excess of 260 spent by Lloyd
in the performance of such duties during such three (3) month period.
(c) Beginning on or about May 1, 2000, and continuing at six month
intervals thereafter, the parties agree to re-evaluate in good faith whether the
Required Hours are sufficient to meet their respective needs. If the parties
agree to revise the Required Hours, Lloyd's compensation pursuant to paragraph
1(a) above, and the number of hours which Lloyd must work before he is entitled
to earn additional compensation pursuant to paragraph 2(b) above,
2
<PAGE>
shall be adjusted to reflect the revised Required Hours. If either (i) Gibraltar
desires to modify the Required Hours, but Lloyd is not willing to do so, or (ii)
Lloyd desires to modify the Required Hours, and Gibraltar is not willing to do
so, upon written notice of termination submitted by either party, Lloyd's
employment will be deemed terminated pursuant to paragraph 3(a) below.
3. TERMINATION OF THE EMPLOYMENT PERIOD. The Employment Period (which
is defined in the Original Agreement as the period of Lloyd's employment with
Gibraltar) may be terminated in accordance with the following provisions:
(a) Lloyd may elect to terminate his employment at any time,
by providing Gibraltar with at least thirty (30) days' prior written notice. The
notice of termination shall set forth a specific termination date, and Lloyd's
employment shall be deemed terminated for all purposes (including, without
limitation, for purposes of the Original Agreement and the SAR Agreement) on the
termination date set forth in such notice of termination. In the event of a
termination pursuant to this paragraph, (i) Lloyd shall be entitled to receive
the unpaid balance (if any) of the severance compensation described in paragraph
4(b) below, and (ii) Lloyd shall not be entitled to any other severance
compensation hereunder (i.e., he shall forfeit the unpaid balance of the maximum
severance compensation described in paragraph 4(a) below).
(b) Gibraltar may elect to terminate Lloyd's employment at any
time, by providing Lloyd with at least thirty (30) days' prior written notice.
The notice of termination shall set forth a specific termination date, and
Lloyd's employment shall be deemed terminated for all purposes (including,
without limitation, for purposes of the Original Agreement and the SAR
Agreement) on the termination date set forth in such notice of termination. In
the event of a termination pursuant to this paragraph, Lloyd shall be entitled
to receive all of the then unpaid severance compensation described in paragraph
4(a) below, which shall be paid to Lloyd at the annual rate of One Hundred Five
Thousand Three Hundred Eighty Seven Dollars and Ninety Six
3
<PAGE>
Cents ($105,387.96), payable not less frequently than monthly. In addition, the
benefits described in paragraph 1(d) of the Original Agreement, and such other
benefits as Gibraltar had been providing to Lloyd immediately prior to issuance
of the notice of termination, shall continue for a period of one (1) full year
following the termination date.
4. PROVISIONS RELATED TO SEVERANCE COMPENSATION. The parties hereby
agree that, notwithstanding any provision of the Original Agreement to the
contrary, the reduction in the duties required of Lloyd and his salary, as
described above, shall entitle Lloyd to severance compensation, in accordance
with the following:
(a) The maximum aggregate severance compensation to which Lloyd
shall be entitled, pursuant to the Original Agreement and this Agreement, shall
be $210,775.92, and shall be payable (during the time when it is payable
pursuant to this Agreement) not less frequently than monthly.
(b) Throughout the twelve month period beginning on November 1,
1999, Gibraltar shall pay severance compensation to Lloyd at the annual rate of
One Hundred Five Thousand Three Hundred Eighty Seven Dollars and Ninety Six
Cents ($105,387.96), payable not less frequently than monthly.
(c) In the event that the parties agree, pursuant to paragraph 2(c)
above, to reduce the Required Hours below the level currently established
pursuant to paragraph 2(a) above, which agreement also causes a corresponding
reduction in the amount of Lloyd's salary, then Lloyd shall receive, in addition
to such salary, severance compensation in an amount which, when added to the
salary then being paid to Lloyd, will result in Lloyd receiving total salary and
severance compensation in an amount equal to an annual rate of One Hundred Five
Thousand Three Hundred Eighty Seven Dollars and Ninety Six Cents ($105,387.96).
The amount of such severance compensation shall be charged against the maximum
amount described in paragraph
4
<PAGE>
4(a) above, and the payment thereof shall be discontinued when such maximum
amount has been paid in full.
(d) In the event of the occurrence of an event which, pursuant to
paragraph 4 or paragraph 5 of the Original Agreement, would cause the payment of
severance compensation to Lloyd, Lloyd shall be entitled to severance
compensation pursuant to this Agreement or pursuant to the Original Agreement,
whichever would result in the larger periodic payment, but in each case subject
to the limitation set forth in paragraph 4(a) hereof.
(e) Nothing contained in this Agreement is intended to modify in any
way the intention of the parties, as set forth in paragraph 5 of the Original
Agreement, that Lloyd shall not be entitled to any severance compensation in the
event of the termination of his employment as a result of (i) Lloyd's death,
(ii) Lloyd's "Disability" (as defined in paragraph 5(b) of the Original
Agreement), (iii) Lloyd's "Retirement" (as defined in paragraph 5(c) of the
Original Agreement), or (iv) Lloyd's termination by Gibraltar for "Cause" (as
defined in paragraph 5(d) of the Original Agreement).
5. PROVISIONS RELATED TO SAR AGREEMENT.
(a) The SAR Agreement remains in full force and effect in accordance
with its terms.
(b) Notwithstanding the terms of paragraph 5(a) above, the parties
agree that the change in duties described above, including the reduction in the
number of hours which Lloyd will be required to devote to the business of
Gibraltar, shall not constitute a "Termination of Employment" as defined in
Section 8 of the 1998 Stock Appreciation Rights Plan to which the SAR Agreement
is related.
6. CONTINUING FORCE AND EFFECT. Except as expressly modified by the
terms of this Agreement, the Original Agreement and the SAR Agreement continue
in full force and effect in accordance with the original terms thereof.
5
<PAGE>
7. BINDING EFFECT. This Agreement shall inure to the benefit of and be
binding upon the parties hereto, their heirs, representatives and successors.
8. SEVERABILITY. In case any one or more of the provisions contained in
this Agreement shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect by a court of competent jurisdiction, such
invalidity, illegality or unenforceability shall not affect any other provision
of this Agreement, but this Agreement shall be construed as if such invalid,
illegal, or unenforceable provision had never been contained herein.
9. EFFECT OF CAPTIONS. The captions in this Agreement are included for
convenience only and shall not in any way effect the interpretation or
construction of any provision hereof.
10. NOTICES. All notices, requests, demands or other communications
hereunder shall be sent by registered or certified mail to:
To Employer: Gibraltar Packaging Group, Inc.
2000 Summit Avenue
Hastings, NE 68902-2148
Attn: President
Copy to: Alan M. Rauss, Esquire
Kohrman Jackson & Krantz P.L.L.
1375 East Ninth Street
20th Floor, One Cleveland Center
Cleveland, Ohio 44114
To Lloyd: John W. Lloyd
270 Warner Hill Rd.
Southport, CT 06490
11. GOVERNING LAW; JURISDICTION. This Agreement shall be governed by
and construed in accordance with the substantive law of the State of Delaware.
The parties intend to and hereby do confer jurisdiction upon the courts of any
jurisdiction within the State of Delaware to determine any dispute arising out
of or related to this Agreement, including the enforcement and the breach
hereof.
6
<PAGE>
12. ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
understanding between Employer and Lloyd and supersedes all prior agreements and
understandings relating to the subject matter hereof.
7
<PAGE>
IN WITNESS WHEREOF, the undersigned have hereunto set their hands on
the date first hereinabove mentioned.
GIBRALTAR PACKAGING GROUP, INC.
("Gibraltar")
By:
Walter E. Rose, Chairman
/s/ Walter E. Rose
JOHN W. LLOYD ("Lloyd")
/s/ John W. Lloyd
8
EXHIBIT NUMBER 10.53
ASSET PURCHASE AGREEMENT
AMONG
TEKPAK, INC., NIEMAND INDUSTRIES, INC.
AND
GIBRALTAR PACKAGING GROUP, INC.
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE NO.
--------
1. PURCHASE AND SALE OF ASSETS 1
1.1 Transferred Assets and Excluded Assets 1
1.2 Liabilities 2
1.3 Assumed Liabilities 2
1.4 Purchase Price and Adjustment of Purchase Price 3
1.5 Allocation of Consideration for Reporting Purposes 5
1.6 Real Estate Lease-Option Agreement 5
1.7 Noncompete Covenants 5
1.8 Seller's Access to Records and Tax Matters 5
1.9 Closing 5
2. REPRESENTATIONS AND WARRANTIES OF SELLER AND PARENT 6
2.1 Status and Authority 6
2.2 Taxes 6
2.3 Title to Assets 6
2.4 Commission and Finder's Fee 6
2.5 No Defaults 6
2.6 Environment 7
2.7 Labor and Benefit Programs 7
2.8 Litigation 7
3. REPRESENTATIONS AND WARRANTIES OF BUYER 7
3.1 Status and Authority 8
3.2 No Defaults 8
3.3 Consents 8
3.4 Commission and Finder's Fee 8
3.5 Ability to Close 8
3.6 WARN Act 9
3.7 No Knowledge of Seller's and Parent's Violations of
Representation, Warranties or Covenants 9
4. COVENANTS OF SELLER AND PARENT 9
4.1 Operation of the Business 9
4.2 No Negotiations 9
4.3 Access to Facilities, Files and Records 9
4.4 Representations and Warranties 10
4.5. Consummation of Agreement 10
<PAGE>
5. COVENANTS OF BUYER 10
5.1 Confidentiality 10
5.2 WARN Act 10
5.3 Robinson Inventory 10
5.4 Collection of Receivables 11
5.5 Assistance With Litigation 11
5A. JOINT COVENANT 11
5A.1 Joint Covenant 11
6. CONDITIONS TO THE OBLIGATIONS OF SELLER 11
6.1 Representations, Warranties, and Covenants 12
6.2 Proceedings 12
6.3 Deliveries 12
6.4 Opinion 12
6.5 Consents and Approvals 12
6.6 Payment of Purchase Price 12
6.7 Waiver of Compensation and Benefits by Ketchum 13
6.8 Failure To Obtain Financing 13
7. CONDITIONS TO THE OBLIGATIONS OF BUYER 13
7.1 Representations, Warranties and Covenants 13
7.2 Proceedings 13
7.3 Deliveries 14
7.4 Tax Certificate 14
7.5 Consents 14
7.6 Release of Claims 14
7.7 Survey and Title Insurance 14
7.8 Opinion 14
7.9 Financing 14
8. ITEMS TO BE DELIVERED AT THE CLOSING 14
8.1 Deliveries by Seller 14
8.2 Deliveries by Buyer 15
9. SURVIVAL; INDEMNIFICATION 15
9.1 Survival 15
9.2 Seller's Indemnity Obligations 15
9.3 Buyer's Indemnity Obligations 16
9.4 Method of Asserting Claims 16
9.4.1 Notice of Claim 16
9.4.2 Payment of Claims 17
9.4.3 Third Party Claims 17
9.5 Limitations on Payments 17
3
<PAGE>
10. TERMINATION 18
10.1 Termination of Agreement 18
10.2 Liabilities on Termination or Breach 18
11. GENERAL PROVISIONS 18
11.1 Expenses 18
11.2 Further Assurances 18
11.3 Notices 18
11.4 Benefit and Assignment 19
11.5 Publicity 19
11.6 Governing Law 20
11.7 Entire Agreement 20
11.8 Waiver of Terms 20
11.9 Amendment of Agreement 20
11.10 Severability 20
11.11 Counterparts 20
11.12 No Third Party Beneficiaries 20
11.13 Other Rules of Construction 20
4
<PAGE>
ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made as of the 3rd
day of November, 1999, among TEKPAK, INC., an Alabama corporation ("Buyer"),
NIEMAND INDUSTRIES, INC., a Delaware corporation ("Seller"), and GIBRALTAR
PACKAGING GROUP, INC., a Delaware corporation ("Parent").
RECITALS:
WHEREAS, Seller is a wholly owned subsidiary of Niemand Holdings, Inc.,
a Delaware corporation, which in turn is a wholly owned subsidiary of Parent.
WHEREAS, Seller owns a paper products manufacturing facility located at
1410 S. Washington Street, Marion, Alabama (the "Facility"). Seller desires to
sell and Buyer desires to purchase certain assets required, used or useful in
the operation of the business presently operated by Seller at the Facility, on
the terms and conditions described in this Agreement.
WHEREAS, Merrell A. Ketchum ("Ketchum") is currently the President of
the Seller and has held such office since January of 1999; he was the Vice
President of Manufacturing for Seller prior to becoming its President.
WHEREAS, Ketchum has intimate knowledge of the operation and financial
condition of the business of Seller, and of the nature and condition of the
assets used by Seller in connection therewith.
WHEREAS, Ketchum is the President of Buyer and owns or controls all of
the issued and outstanding stock of Buyer.
NOW, THEREFORE, in consideration of the foregoing premises and the
agreements of the parties set forth hereinafter, and intending to be legally
bound, the parties agree as follows:
1. PURCHASE AND SALE OF ASSETS.
1.1 Transferred Assets and Excluded Assets . On the terms and
subject to the conditions contained in this Agreement, Seller agrees to sell to
Buyer and Buyer agrees to purchase from Seller at the "Closing" and on the
"Closing Date" (as each is defined in ss. 1.9 below), all of Seller's right,
title and interest in and to the following assets and properties used in
connection with the operation of the business of Seller as presently conducted
at the Facility (except for the "Excluded Assets" described below): (a)
equipment, furniture, fixtures, supplies, and other tangible personal property,
including but not limited to those described in attached Exhibit 1.1(a)
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(the "Equipment"); (b) all inventories, consisting of raw materials,
work-in-process, finished goods and supplies, as set forth in the "Inventory
Schedule" attached as Exhibit 1.1(b) ("Inventory"); (c) the contracts listed on
Exhibit 1.1(c) (the "Transferred Contracts"); (d) patents, trademarks,
copyrights, permits, designs, sketches, drawings, specifications, know-how, and
other intangible rights (the "Intangible Property"); (e) deposits, reserves and
prepaid expenses, to the extent they confer a benefit to and are assignable to
Buyer; provided, however, that the amount thereof does not exceed $10,000; if
the amount is in excess thereof, Buyer shall pay the amount of such excess (the
"Excess Prepayments") to Seller; (f) all of Seller's trade receivables
(excluding any non-trade intercompany receivables) as the same may exist at the
Closing as set forth on the "Accounts Receivable Schedule" attached as Exhibit
1.1(f) (the "Receivables"); and (g) all books, records and files of Seller. The
assets to be sold to Buyer under this Agreement are referred to as the "Assets"
and shall include, but are not limited to, the assets set forth in this ss. 1.1
and the exhibits and schedules referred to in this ss. 1.1. Notwithstanding
anything to the contrary contained in this Agreement, the assets described on
Exhibit 1.1(x) (the "Excluded Assets") will not be sold to Buyer and all of the
Excluded Assets will be retained by Seller.
1.2 Liabilities . Except as otherwise disclosed in and
permitted by this Agreement, the Assets shall be sold to Buyer free and clear of
all mortgages, liens, deeds of trust, security interests, pledges, restrictions,
prior assignments, charges, claims, defects in title and encumbrances of any
kind or type whatsoever (collectively "Security Interests").
1.3 Assumed Liabilities . At the Closing, the Buyer will
assume and agree to perform and discharge when and as due the following
liabilities and obligations, as the same may exist at or accrue following the
Closing Date, and no others (the "Assumed Liabilities"):
(a) obligations arising after the Closing under the
Transferred Contracts;
(b) accounts payable and accrued liabilities of
Seller incurred in the ordinary course of the business and properly
classified as liabilities in accordance with generally accepted
accounting principles, which accounts payables and accrued liabilities
are set forth on the "Accounts Payable Schedule" attached as Exhibit
1.3(b) (the "Accounts Payable");
(c) obligations to provide continuation coverage
under life insurance, medical, health or dental benefits to any former
employee of Seller, or to current employees whose employment ends
during the period from the date of this Agreement through the Closing
Date, as required by the Consolidated Omnibus Budget Reconciliation Act
of 1985 ("COBRA"); provided, however, that this obligation is subject
to the indemnification provision set forth in Section 9.3(e) below; and
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(d) obligations arising out of the operation by the
Buyer of the business acquired pursuant to this Agreement after the
Closing (including, without limitation, the obligation to pay for goods
ordered by Seller in the ordinary course of its business prior to the
Closing but received by Seller subsequent thereto).
Seller shall remain liable for and pay and discharge all liabilities,
obligations, debts or commitments of Seller except for the Assumed Liabilities.
1.4 Purchase Price and Adjustment of Purchase Price .
(a) The Buyer agrees to pay, and the Seller agrees to
accept, as the "Purchase Price" the amount computed as (i) the sum of (A) One
Million Two Hundred Sixty Thousand Dollars ($1,260,000) for the Assets other
than the Receivables and Inventory (the "Fixed Assets") which were owned by
Seller as of March 31, 1999; (B) an amount equal to the cost of any additional
Fixed Assets acquired by Seller on or after April 1, 1999 and prior to the
Closing Date; (C) an amount equal to the amount of the Receivables assigned by
Seller to Buyer under ss. 1.1(f) above; (D) the value of the Inventory at
Closing, computed on a First-In First-Out ("FIFO") basis, assigned by Seller to
Buyer under ss. 1.1(b) above; and (E) the amount of the Excess Prepayments, if
any; (ii) which sum shall be reduced by the amount of the Accounts Payable
assumed by Buyer under ss. 1.3(b) above.
(b) The Purchase Price will be payable in cash at
Closing by wire transfer of immediately available funds to such account as
Seller has designated to Buyer prior to or at the Closing.
(c) The Purchase Price will be subject to adjustment
following the Closing in the manner as described below.
(i) As soon as reasonably practicable after
the 90th day following the Closing Date and in any event no later than the 100th
day following the Closing Date, Buyer will prepare and present to Seller a
schedule reflecting the uncollected Receivables assigned to Buyer under Section
1.1 above (the "Uncollected Receivables Schedule"). At such time, Buyer shall
assign to Seller all of its right, title and interest in the Receivables listed
on the Uncollected Receivables Schedule (the "Uncollected Receivables") and
shall deliver to Seller all of the books, records and/or work papers held by
Buyer or its agents in connection with the creation and collection of the
Uncollected Receivables. Seller will pay in cash to Buyer an amount equal to the
sum of the amount shown on the Uncollected Receivables Schedule within fifteen
(15) days after receipt of the Uncollected Receivables Schedule; provided,
however, that in the event Seller disputes the validity of any item set forth on
the Uncollected Receivables Schedule, it shall so advise Buyer within such
fifteen (15) days, and the dispute shall be resolved pursuant to ss. 1.4(d)
below.
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(ii) The parties will cooperate in
conducting a physical inventory of the Inventory as late as practicable prior to
the Closing, and in preparing a listing of the Inventory resulting therefrom,
valued on a FIFO basis, which will be delivered at the Closing. That listing,
along with any adjustments thereto to which the parties may agree, shall
constitute the value of the Inventory; provided, however, that in the event that
either party disputes the validity of any item set forth therein, it shall so
advise the other party within such fifteen (15) days, and the dispute shall be
resolved pursuant to ss. 1.4(d) below.
(iii) In the event merchandise that was sold
by Seller prior to Closing is returned after Closing by the purchaser of such
merchandise within ninety (90) days after the Closing, and such returned
merchandise is not saleable by Buyer in the ordinary course of its business
(such returned merchandise being referred to hereinafter as "Returns for
Seller's Account"), Buyer shall notify Seller in writing of each such Return for
Seller's Account within ten days of receipt, provide Seller with any information
in connection with such return as may be requested by Seller, and request an
adjustment to the Purchase Price in an amount equal to the amount of its refund
or credit to the customer, or the original selling price to the customer of the
items returned, whichever is less. Unless Seller disputes the appropriateness of
the Return for Seller's Account within fifteen days after receipt of the
foregoing information from Buyer, the Purchase Price shall be adjusted by an
amount equal to the aggregate selling price of all Returns for Seller's Account.
In the event Seller disputes the appropriateness of any item designated by Buyer
as a Return for Seller's Account, it shall so advise Buyer within fifteen (15)
days after its receipt of the required and/or requested information, and the
dispute shall be resolved pursuant to ss. 1.4(d) below.
(d) Any disputes concerning the adjustments to the
Purchase Price described in subsection (c) of this ss. 1.4 shall be resolved in
the following manner: Either party may submit to the other party, within the
time period described in the applicable subsection of ss. 1.4(c) above, a
written report setting forth the adjustment(s) it proposes. If the other party
disagrees, it must deliver written objections within fifteen days after its
receipt of the proposed adjustments. The parties will then attempt to resolve
the matter by way of negotiation in good faith. If they are unable to reach a
resolution within thirty (30) days after the delivery of the last of the written
objections described above, either party may refer the dispute to a nationally
recognized accounting firm mutually acceptable to Seller and Buyer, or to the
Birmingham, Alabama office of the accounting firm of Deloitte & Touche if no
such firm is so mutually acceptable, on the basis that such accounting firm
shall cause an audit partner who is not engaged in providing services to either
Seller or Buyer (the "Arbitrator") to decide the dispute. Prior to so referring
the dispute for decision, Seller and Buyer shall agree on the procedures to be
followed by the Arbitrator including procedures with regard to presentation of
evidence. If they are unable to agree upon such procedures within twenty (20)
days after the referral, the Arbitrator shall establish procedures, which may be
those proposed by either Seller or Buyer or otherwise. The Arbitrator's decision
on any matter so referred to him, including his decision on the merits of the
dispute, shall
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be final and binding. The cost of the Arbitrator of and relating to the making
of any such decision shall be borne equally by the parties, unless the
Arbitrator decides, based on his determination of the good faith of the parties,
that the fee should be borne in some other manner.
1.5 Allocation of Consideration for Reporting Purposes . The
"Consideration" shall be allocated among the Assets, other than the Receivables
and Inventory, in an amount equal to their respective book values at Closing, as
set forth on Exhibit 1.5. The "Consideration" allocated to the Receivables and
Inventory shall be equal to their values as reflected on the "Accounts
Receivable Schedule" and the "Inventory Schedule," respectively. The
"Consideration" shall be the sum of (i) the Purchase Price under ss. 1.4 above
and (ii) the amount of the Accounts Payable at Closing. The parties agree that
the allocation provided for in this ss. 1.5 will be used by them and respected
for all purposes, including income tax purposes, and that the parties will
follow such allocation for all reporting purposes.
1.6 Real Estate Lease-Option Agreement . At the Closing,
Seller and Buyer agree to enter into a lease agreement with an option to
purchase the tract of real estate described on Exhibit 1.6(a) (the "Plant Site"
or "Real Estate") in the form attached to this Agreement as Exhibit 1.6(b) (the
"Real Estate Lease-Option Agreement").
1.7 Noncompete Covenants . At the Closing, Seller and Parent,
respectively, shall enter into noncompete agreements with Buyer in substantially
the form as provided in Exhibit 1.7 attached hereto and made a part hereof (the
"Noncompete Agreements").
1.8 Seller's Access to Records and Tax Matters . Upon request,
the Seller shall have reasonable access to and the right to reproduce all or any
portion of the books, records and files assigned to Buyer, as set forth in ss.
1.1(g) above, during regular business hours for a period of eight (8) years
commencing on the day following the Closing Date. Buyer agrees to maintain and
store such books, records and files and provide reasonable assistance to Seller
in locating and producing any such books, records or files as requested by
Seller. The Buyer and Seller agree to furnish or cause to be furnished to each
other, upon request, as promptly as practicable, such information (including
access to books, records, computer files and personnel) and assistance relating
to tax matters as is reasonably necessary for the filing of any return, for the
preparation for any audit, or for the prosecution or defense of any action with
respect to taxes. The Buyer and Seller shall cooperate with each other in the
conduct of any audit or other proceeding involving Seller or Buyer for any tax
purpose and shall each execute and deliver such powers of attorney and other
documents as are necessary to carry out the intent of this ss. 1.8.
1.9 Closing . The consummation of the transactions provided
for in this Agreement (the "Closing") shall occur on or before November 30, 1999
at such time and place as the parties may agree upon in writing (the "Closing
Date").
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2. REPRESENTATIONS AND WARRANTIES OF SELLER AND PARENT. Seller and
Parent, jointly and severally represent to Buyer as follows:
2.1 Status and Authority . Seller is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware and has full power and authority to own, lease, and operate the
business which it currently operates at the Facility and to carry on such
business as it has historically been conducted. Seller is a wholly owned
subsidiary of Niemand Holdings, Inc., a Delaware corporation, which in turn is a
wholly owned subsidiary of Parent. The execution and delivery of this Agreement
by Seller and the consummation by Seller of the transactions contemplated hereby
have been duly and validly authorized by all necessary corporate action. This
Agreement constitutes the legal, valid and binding obligation of Seller and
Parent enforceable against them in accordance with its terms.
2.2 Taxes . Seller has properly filed all tax returns required
to be filed as of the date hereof, and has paid all taxes, interest, penalties,
and assessments due to any taxing authority as of the date hereof. Seller has
not been advised that any of its tax returns have been or are being audited as
of the date hereof.
2.3 Title to Assets . On the Closing Date, Seller will have
good, valid, and marketable fee simple title to all of the Assets in each case
free and clear of all Security Interests.
EXCEPT AS SPECIFICALLY SET FORTH IN ss. 2 OF THIS AGREEMENT,
NEITHER SELLER NOR PARENT MAKES ANY WARRANTIES, EXPRESS OR IMPLIED, AND EACH
HEREBY DISCLAIMS ANY SUCH WARRANTIES, INCLUDING, WITHOUT LIMITATION, IMPLIED
WARRANTIES OR MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF ANY OF THE
ASSETS. BUYER IS PURCHASING THE ASSETS "AS IS, WHERE IS."
2.4 Commission and Finder's Fee . Seller represents and
warrants that it has not retained or used the services of any individual, firm
or corporation other than Cook Associates, Inc. in such a manner as to entitle
such individual, firm or corporation to any compensation for brokers' or
finders' fees with respect to the transactions contemplated by this Agreement,
and agrees to indemnify Buyer for any claims for any such compensation arising
out of any actual or alleged retention or usage by Seller.
2.5 No Defaults . To the best of Seller's knowledge, Seller is
not in default under any material contract of Seller or any order or law, and
Seller has operated and currently operates the business which it currently
operates at the Facility in compliance with all laws. Neither the execution and
delivery of this Agreement nor the consummation by Seller of the transactions
contemplated hereby is an event that, of itself or with the giving of notice or
the passage of time or both, will: (a) constitute a breach of any contract of
Seller; or (b) violate any order or law.
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2.6 Environment . Except as set forth on Exhibit 2.6, (i)
Seller and its affiliates have complied with all environmental laws and Seller
has received no notice from any person alleging noncompliance with any
environmental law or releases of hazardous substances into the environment; (ii)
neither Seller nor its affiliates have handled or disposed of any substance,
arranged for the disposal of any substance, or owned or operated any property or
facility in violation of any environmental laws, or in any manner that could
form the basis for any present or future claim against any of them or Buyer;
(iii) all properties and equipment used in the business of Seller have been and
are free of hazardous substances; and (iv) no underground or aboveground storage
tanks are or have been located at the Facility. Seller has provided complete and
correct copies of all inspections, reports, and other materials regarding
Seller's compliance with any applicable environmental law.
2.7 Labor and Benefit Programs . Except for the agreement
between Seller and Parent and the Retail, Wholesale & Department Store Union,
AFL-CIO (the "Union"), about which Seller has full knowledge, there are no
collective bargaining agreements or contracts relating to Seller's employees,
and all employees of Seller other than those covered by the agreement between
the company and the Union are employees at will. Seller is not engaged in any
unfair labor practice or unlawful employment practice with respect to any of its
employees. Except as set forth on Exhibit 2.7, there is no (a) unfair labor
practice charge or other employee related complaint, grievance, or arbitration
pending or threatened against Seller, (b) strike, picketing, slowdown, or work
stoppage by or concerning Seller's employees, or (c) any other labor dispute
pending against or involving Seller. Except as described on Exhibit 2.7, Seller
has no pension, profit sharing, disability, life or health insurance, or other
benefit plan or arrangement ("Benefit Plans"). None of Seller's Benefit Plans is
a "multi-employer plan" (within the meaning of Section 3(37) of ERISA). Seller
has not engaged in any act or omission with respect to any of Seller's Benefit
Plans which could subject Buyer, Seller, or Seller's Benefit Plans to a penalty
tax, excise tax, other tax, penalty, or other liability or obligation. Seller
(i) has never contributed to a multi-employer pension plan; and (ii) has never
incurred any liability under Title IV of ERISA to the Pension Benefit Guaranty
Corporation or to a multi-employer pension plan. Seller does not maintain, has
never maintained, does not contribute to, has never contributed to, and has
never been required to contribute to, a plan providing medical, health, life
insurance, or other welfare benefits for current or future retired or terminated
employees at the Facility, their spouses, or their descendants, except as
required under Section 4980B of the Internal Revenue Code or Part 6 of Title I
of the Employee Retirement Income Security Act of 1974, as amended.
2.8 Litigation . Except as set forth on Exhibit 2.8, there are
no suits, arbitrations, or other proceedings pending against, or to the best of
Seller's knowledge threatened against, the Facility or Seller.
3. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and
warrants to Seller as follows:
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3.1 Status and Authority . Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Alabama and has all requisite power and authority to own or hold under lease its
properties and assets and to carry on its business as now conducted. Buyer has
all necessary power and authority to make, execute and deliver this Agreement
and all other agreements and documents to be executed and delivered by it
pursuant to this Agreement; and Buyer has taken all necessary actions required
to be taken to authorize it to execute and deliver this Agreement and such other
agreements, and to perform all of its obligations, undertakings and agreements
to be observed and performed by it hereunder and thereunder. This Agreement has
been duly executed and delivered by Buyer, and constitutes the legal, valid and
binding obligation of Buyer enforceable against it in accordance with its terms.
3.2 No Defaults . Neither the execution and delivery of this
Agreement nor the consummation by Buyer of the transactions contemplated hereby
is an event that, of itself or with the giving of notice or the passage of time
or both, will: (a) constitute a violation of, or be in conflict with, or result
in a cancellation of, or constitute a default under, or create (or cause the
acceleration of the maturity of) any debt, obligation or liability affecting, or
result in the creation or imposition of any Security Interest upon any of the
assets owned or used by, or any of the capital stock of Buyer under: (i) any
term or provision of the certificate of incorporation or by-laws (or other
organizational document) of Buyer; (ii) any judgment, decree, order, regulation
or rule of any court or governmental authority; (iii) any law or regulation;
(iv) any contract, agreement, indenture, lease or other commitment to which
Buyer is a party or by which it is bound; or (b) cause any material change in
the rights or obligations of any party under any such contract, agreement,
indenture, lease or commitment.
3.3 Consents . No consent of any federal, state or local
authority, or any private person or entity, is required to be obtained, no
notice is required to be given to any such authority, person or entity, by Buyer
in connection with the execution, delivery or performance of this Agreement or
any other agreement or document to be executed, delivered or performed hereunder
by Buyer or the consummation of the transactions contemplated hereby.
3.4 Commission and Finder's Fee . Buyer represents and
warrants that it has not retained or used the services of any individual, firm
or corporation, in such a manner as to entitle such individual, firm or
corporation to any compensation for brokers' or finders' fees with respect to
the transactions contemplated by this Agreement, and agrees to indemnify Seller
for any claims for any such compensation arising out of any alleged retention or
usage by Buyer.
3.5 Ability to Close . On the Closing Date, Buyer will have
readily available the funds necessary to consummate the transactions herein
contemplated.
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3.6 WARN Act . Buyer shall not cause a plant closing or mass
layoff (as those terms are defined in the Worker Adjustment and Retraining
Notification Act of 1988) with respect to the business operation and workers of
the Facility when the events that occurred pre-Closing (while Facility was under
the Seller's control) are aggregated and considered together with the events
that occur post-Closing.
3.7 No Knowledge of Seller's and Parent's Violations of
Representation, Warranties or Covenants . As of the date of this Agreement, and
at the Closing, Ketchum does not have, and will not have, any actual knowledge,
that (i) any of Seller's or Parent's representations, warranties and/or
covenants is or was not true or correct in all material respects as of the date
when made, or on the Closing Date, and (ii) Seller or Parent did not, or could
not, perform or comply in all material respects with each and every covenant and
agreement required by this Agreement.
4. COVENANTS OF SELLER AND PARENT. Seller and Parent, jointly and
severally covenant and agree that from the date hereof until the completion of
the Closing:
4.1 Operation of the Business .
(a) Seller shall operate the business which it
currently operates at Facility in the ordinary course of business and consistent
with past practices (subject to the requirements of ss.ss. 4.4 and 4.5) and
maintain its current level of insurance coverage on the Assets.
(b) Except in the ordinary course of business and
consistent with past practices, Seller shall not, without the prior written
consent of Buyer: (i) sell, lease, transfer, or agree to sell, lease or
transfer, any of the Assets; (ii) enter into, renew or amend any collective
bargaining agreement; (iii) enter into, renew or amend any Transferred Contract;
or (iv) make any change in the Facility's buildings, improvements, or fixtures.
4.2 No Negotiations . Unless and until this Agreement is
terminated pursuant to the terms of ss. 10.1, neither Seller nor Parent shall
(a) actively pursue negotiations, respond to proposals or offers from any other
person or entity with respect to the sale of the business which it currently
operates at the Facility, the Facility, or the Assets, (b) enter into any
agreement with any other person or entity with respect to the sale of the
business which it currently operates at the Facility, the Facility, or the
Assets, or (c) meet with prospective purchasers of the business which it
currently operates at the Facility, the Facility, or the Assets, in each case,
other than Buyer.
4.3 Access to Facilities, Files and Records . At the
reasonable request of Buyer, Seller shall give Buyer: (a) full access to the
Facility and the Assets and to key management and engineering employees of the
Facility; and (b) full information concerning the Assets and the Facility.
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4.4 Representations and Warranties . Seller shall notify Buyer
promptly upon learning of any event that would cause or constitute a breach of
any representations or warranties of Seller or Parent contained in this
Agreement.
4.5. Consummation of Agreement . Seller and Parent shall use
their best efforts to cause the transactions contemplated by this Agreement to
be fully carried out.
5. COVENANTS OF BUYER.
5.1 Confidentiality . Buyer will not disclose any information
obtained under ss. 4.3 of this Agreement other than to those assisting Buyer in
evaluating and closing this transaction. Buyer's confidentiality obligations
shall not apply to information which (a) is already in the possession of Buyer
and not subject to restrictions on confidentiality (which shall not include
information in the possession of Ketchum in his capacity as an employee and/or
executive of Seller), (b) becomes generally available to the public other than
as a result of its disclosure by Buyer, (c) becomes available to Buyer on a
non-confidential basis from a source other than Seller or its advisors, or (d)
which is required to be disclosed by law or pursuant to legal process. If this
Agreement is terminated, Buyer will destroy or deliver to Seller upon request,
all documents and other materials, and all copies thereof, obtained under ss.
4.3 of this Agreement.
5.2 WARN Act . Buyer agrees and covenants that immediately
following the Closing it will hire and retain the Facility's workers for so much
time as is and to the extent necessary, when considered together with the
Facility's workers discharged prior to Closing, to not cause a plant closing or
mass layoff (as those terms are defined in the Worker Adjustment and Retraining
Notification Act of 1988) with respect to the business operation of the
Facility.
5.3 Robinson Inventory . For a period of twelve months after
the Closing, Buyer agrees to serve as agent for Seller in connection with the
sale by Seller of all or any portion of the Robinson Inventory, as further
described on Exhibit 5.3. As Seller's agent for this purpose, Buyer agrees to
properly store and maintain the Robinson Inventory at the premises of the
Facility in the same or similar manner that Seller currently stores and
maintains the Robinson Inventory, and to process orders from Robinson for the
purchase of items of the Robinson Inventory (including order taking, order
filling, packing, shipping, billing and collection). Buyer and Seller agree to
cooperate with each other to the fullest extent and agree to provide each other
with all reasonable assistance, as requested by either party, in connection with
any sale or proposed sale of all or any portion of the Robinson Inventory. At
any time prior to the end of the twelve month period, Seller shall advise Buyer
as to the disposition of the remaining Robinson Inventory, and Buyer shall
cooperate in such disposition. For its services as Seller's agent and for its
storage and disposal of the Robinson Inventory pursuant to this ss. 5.3, Seller
shall pay in cash to Buyer, upon receipt of Buyer's invoice, (i) an
administrative fee of $250.00 for each sale transaction, regardless of the
amount
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of product sold in connection with such sale transaction, and (ii) an amount
equal to the direct cost incurred by Buyer to unrelated third parties in
connection with the disposal of Robinson Inventory which (A) is remaining at the
Facility at the end of such twelve month period, and/or (B) was disposed of at
the direction of Seller prior to the end of such period.
5.4 Collection of Receivables . Buyer shall use all reasonable
efforts to collect the Receivables 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. In the event that an account debtor who
is both the debtor with respect to a Receivable and with respect to an account
generated with Buyer after the Closing, payments by such account debtor which
have not been allocated by the customer to a specific invoice will be deemed to
be made on the oldest amount owed first. Neither party will take any steps to
influence a customer to allocate any payment in any particular way. Any amount
paid to Buyer which is allocable to any of the Receivables will be delivered by
Buyer to Seller, in the form received, without delay. Within five (5) business
days after the end of each calendar month which falls during the first ninety
(90) days after the Closing, Buyer shall send to Seller an accounts receivable
aging report showing, among other things, the amount collected from each account
debtor during such calendar month, and the balance outstanding for each such
account debtor.
5.5 Assistance With Litigation . The parties acknowledge that,
while Seller shall remain responsible for the litigation described on Exhibit
2.8, it will be difficult for Seller to defend such litigation without the
involvement of Ketchum and/or certain employees of Seller who may be, after the
Closing, employees of Buyer. Accordingly, Ketchum and Buyer each agrees to use
all reasonable efforts to assist Seller in the defense of claims for which
Seller remains responsible, including, without limitation, making records and
employees available to Seller and its counsel from time to time, at reasonable
times and places.
5A. JOINT COVENANT.
5A.1 Joint Covenant . The parties jointly covenant to use
their respective best efforts to jointly prepare all of the exhibits and
schedules required by this Agreement, and to reach agreement on the provisions
thereof prior to the Closing. If they are unable to reach agreement as to any
particular exhibit or schedule, the disputed portion shall be subject to
resolution in the manner described in Section 1.4(d) above.
6. CONDITIONS TO THE OBLIGATIONS OF SELLER. The obligations of Seller
under this Agreement are, at its option, subject to the fulfillment of the
following conditions prior to or on the Closing Date:
15
<PAGE>
6.1 Representations, Warranties, and Covenants .
(a) Each of the representations and warranties of
Buyer contained in this Agreement shall have been true and correct in all
material respects as of the date when made and shall be deemed to be made again
on and as of the Closing Date and shall then be true and correct in all material
respects. Buyer shall have performed and complied in all material respects with
each and every covenant and agreement required by this Agreement to be performed
or complied with by it prior to or on the Closing Date.
(b) Buyer shall have furnished Seller with a
certificate, dated as of the Closing Date and duly executed by an officer
authorized on behalf of Buyer to give such a certificate to the effect that the
conditions set forth in ss. 6.1(a) have been satisfied.
6.2 Proceedings . No party hereto shall be subject to any
restraining order or injunction restraining or prohibiting the consummation of
the transactions contemplated by this Agreement. No action or proceeding shall
have been instituted before any court or governmental body to restrain or
prohibit, or to obtain damages in respect of, the consummation of the
transactions contemplated by this Agreement or any matters related to or arising
out of the transactions contemplated by this Agreement; and none of the parties
to this Agreement shall have received notice from any person, entity or
governmental body of (i) its intention to institute any action or proceeding to
restrain or prohibit, or to obtain damages in respect of, this Agreement, the
transactions contemplated hereby, or any matters related to or arising out of
the transactions contemplated by this Agreement, or to commence any
investigation into any of the foregoing, or (ii) the actual commencement of such
an investigation.
6.3 Deliveries . Buyer shall have complied with each and every
one of its obligations set forth in ss.8.2.
6.4 Opinion . Seller will have received from counsel to Buyer
an opinion of such counsel, dated the Closing Date, in the form attached as
Exhibit 6.4.
6.5 Consents and Approvals . All material authorizations,
consents, waivers or approvals or other action required in connection with the
execution, delivery and performance of this Agreement by Buyer, and the
consummation by Buyer of the transactions contemplated hereby, all as so
indicated in Exhibit 6.5 attached hereto, will have been obtained and Buyer will
have obtained any authorizations, consents, waivers, approvals or other action
required in connection with the execution, delivery and performance of this
Agreement to prevent a material breach or default by Seller under any contract
to which Seller is a party.
6.6 Payment of Purchase Price . Buyer shall have paid the
Purchase Price of the Assets as provided in ss.1.4 above.
16
<PAGE>
6.7 Waiver of Compensation and Benefits by Ketchum . On or
before the Closing Date, Ketchum shall deliver to Seller a waiver of any and all
of his right to, and a release of the Seller from any claim for, compensation,
benefits, severance pay or any other remuneration that is or may be due to
Ketchum from Seller for any period before or after the Closing Date, in the form
attached to this Agreement as Exhibit 6.7.
6.8 Failure To Obtain Financing . In the event that Buyer has
not obtained the financing described in Section 7.9 below, and advised Seller
thereof, on or before November 30, 1999, at any time after November 30, 1999
Seller may elect to terminate this Agreement.
7. CONDITIONS TO THE OBLIGATIONS OF BUYER. The obligations of Buyer
under this Agreement are, at its option, subject to the fulfillment of the
following conditions prior to or on the Closing Date:
7.1 Representations, Warranties and Covenants .
(a) Each of the representations and warranties of
Seller and Parent contained in this Agreement shall have been true and
correct in all material respects as of the date when made and shall be
deemed to be made again on and as of the Closing Date and shall then be
true and correct in all material respects. Seller and Parent shall have
performed and complied in all material respects with each and every
covenant and agreement required by this Agreement to be performed or
complied with by them prior to or on the Closing Date.
(b) Seller and Parent shall have furnished Buyer with
a certificate, dated the Closing Date and duly executed by an officer
authorized on behalf of Seller to give such a certificate and by
Parent, to the effect that the conditions set forth in ss. 7.1(a) have
been satisfied.
7.2 Proceedings . No party hereto shall be subject to any
restraining order or injunction restraining or prohibiting the consummation of
the transactions contemplated by this Agreement. No action or proceeding shall
have been instituted before any court or governmental body to restrain or
prohibit, or to obtain damages in respect of, the consummation of the
transactions contemplated by this Agreement or any matters related to or arising
out of the transactions contemplated by this Agreement; and none of the parties
to this Agreement shall have received notice from any person, entity or
governmental body of (i) its intention to institute any action or proceeding to
restrain or prohibit, or to obtain damages in respect of, this Agreement, the
transactions contemplated hereby, or any matters related to or arising out of
the transactions contemplated by this Agreement, or to commence any
investigation into any of the foregoing, or (ii) the actual commencement of such
an investigation.
17
<PAGE>
7.3 Deliveries . Seller shall have complied with each one of
its obligations set forth in ss. 8.1.
7.4 Tax Certificate . Seller shall have furnished Buyer with a
certificate from the Alabama Department of Revenue showing that all Alabama
state taxes and unemployment compensation contributions have been paid for
periods through and including the Closing Date.
7.5 Consents . All material consents, approvals, permits and
waivers of or from other persons or entities as may be required for the
consummation of the transactions contemplated by this Agreement and Buyer's
operation of the Facility following the Closing, all as so indicated in Exhibit
7.5, shall have been obtained.
7.6 Release of Claims . Parent and Seller shall have executed
and delivered a release, in form and substance acceptable to Buyer, of all
claims and/or causes of actions Parent and Seller have or might have against
Buyer and Ketchum except for claims arising out of or related to (i) Buyer's
breach of this Agreement, and (ii) Ketchum's embezzlement, fraud, or misconduct
of which Parent or Seller has no knowledge as of the Closing.
7.7 Survey and Title Insurance . Seller shall have obtained
and delivered to Buyer a survey of the Real Estate, in form and substance
reasonably acceptable to Buyer, certified to Buyer and a title insurance company
selected by Buyer (the "Title Company"). The Title Company shall be obligated to
issue an owner's leasehold title insurance policy with respect to the Real
Estate owned by Seller, in form and substance reasonably acceptable to Buyer
insuring title to the Real Estate at not less than its fair market value.
7.8 Opinion . Buyer will receive from Kohrman Jackson & Krantz
P.L.L., counsel to Seller, an opinion of such counsel, dated the Closing Date,
in the form attached as Exhibit 7.8.
7.9 Financing . Buyer shall have obtained sufficient
financing, on terms satisfactory to Buyer, to allow it to consummate the
transactions contemplated by this Agreement; provided, however, that if Buyer
has not advised Seller, in writing, or before November 30, 1999, that Buyer has
been unable to obtain such financing and elects not to proceed to a closing,
this financing contingency shall be of no further force or effect.
18
<PAGE>
8. ITEMS TO BE DELIVERED AT THE CLOSING.
8.1 Deliveries by Seller . At the Closing, Seller and Parent
shall deliver to Buyer duly executed by Seller or such other signatory as may be
required by the nature of the document: (a) bills of sale, deeds, leases and
other instruments of transfer conveying the Assets to Buyer in form and
substance reasonably satisfactory to Buyer; (b) the required consents under ss.
7.5, if any; (c) certified copies of resolutions of the Board of Directors and
shareholder of Seller authorizing the execution, delivery, and performance of
this Agreement and the consummation of the transactions contemplated thereby;
(d) the certificate referred to in ss. 7.1(b); (e) the Real Estate Lease-Option
Agreement; (f) an opinion from counsel as required under ss. 7.8; (g) a
certificate or affidavit in the form prescribed by the Internal Revenue Service
under the Foreign Investment in Real Property Tax Act stating its office address
and tax identification number and stating that it is not a foreign corporation
for U.S. income tax purposes; (h) the survey and title insurance policy referred
to in ss. 7.7; and (i) the noncompete agreements referred to in ss. 1.7.
8.2 Deliveries by Buyer . At the Closing, Buyer shall deliver
to Seller: (a) the Purchase Price, which shall be paid in the manner specified
in ss. 1.3; (b) the Real Estate Lease-Option Agreement; (c) an instrument or
instruments of assumption of the Transferred Contracts, in accordance with the
terms hereof; (d) certified copies of resolutions of the Board of Directors and
shareholders of Buyer authorizing the execution, delivery, and performance of
this Agreement and the consummation of the transactions contemplated thereby;
(e) the certificate referred to in ss. 6.1(b); (f) the consents and approvals
required under ss. 6.5; and (g) an opinion from Buyer's counsel as required
under ss. 6.4.
9. SURVIVAL; INDEMNIFICATION.
9.1 Survival . Except for the representation concerning title
set forth in ss.2.3, all representations and warranties contained in this
Agreement, or in any exhibit, schedule, certificate, agreement, document, or
statement delivered pursuant hereto, shall survive for twelve (12) months
following the Closing. The representations and warranties of title set forth in
ss. 2.3 shall survive Closing without temporal limitation.
9.2 Seller's Indemnity Obligations . Seller and Parent shall
jointly and severally indemnify, defend, and hold Buyer, its affiliates, and its
or their officers, directors, employees, agents, successors and assigns harmless
from and against any and all claims, actions, causes of action, orders,
arbitrations, proceedings, losses, damages, liabilities, judgments, and expenses
(including, without limitation, all legal expenses and the costs and expenses of
enforcing this Agreement or collecting any amounts due under this Agreement)
(collectively referred to as "Losses"), arising from or as a result of any of
the following: (a) any material breach of or material misrepresentation in any
of the representations and warranties made by or on behalf of Seller and Parent
in this Agreement or in any exhibit, schedule, certificate, agreement,
19
<PAGE>
document, or statement delivered pursuant hereto; (b) any material violation or
material breach by Seller or Parent of or material default by Seller or Parent
of any of the covenants or agreements contained in this Agreement or in any
exhibit, schedule, certificate, agreement, document, or statement delivered
pursuant hereto; (c) any liabilities, obligations, debts, or commitments of
Seller or Parent whatsoever, whether accrued now or hereafter, whether fixed or
contingent, whether known or unknown, other than the Assumed Liabilities; and
(d) "Excess Insurance Premiums" (as hereinafter defined). However, Buyer will be
deemed to have waived its indemnification rights under this Agreement with
respect to Losses arising in connection with (i) any of Seller's or Parent's
representations, warranties and/or covenants to the extent that Ketchum knew
that any such representation, warranty or covenant was not true or correct in
all material respects as of the date when made or on the Closing Date, and (ii)
Seller's and Parent's performance or compliance with each and every covenant and
agreement required by this Agreement to the extent that Ketchum knew that Seller
or Parent did not, or could not, perform or comply in all material respects with
any such covenant or agreement. "Excess Insurance Premiums" shall mean the
amount (if any) by which the cost of Buyer's life, medical, health and/or dental
insurance premiums for Buyer's employees and covered dependents has increased
during the three year period beginning on the Closing Date solely because of the
inclusion of the "COBRA Participants" (as hereinafter defined) in the group of
persons covered by Buyer's insurance plans. The "COBRA Participants" are the
former employees of Seller, and the dependents thereof, identified on Exhibit
9.2(d) hereto. Notwithstanding any provision of this Agreement to the contrary,
with respect to claims for indemnification pursuant to Section 9.2(d) only, (i)
Buyer shall have the burden of proving that covered Losses were caused directly
and solely because of providing coverage to the COBRA Participants, (ii)
insurance premiums for coverage for the COBRA Participants, to the extent paid
to Buyer or the insurance carrier by the COBRA Participants, shall not be
included among the Losses, (iii) claims shall be made annually, (iv) all claims
must be asserted prior to the anniversary of the Closing Date in 2003, and (v)
the limitations on payments set forth in Section 9.5 below shall not apply to
claims under Section 9.2(d).
9.3 Buyer's Indemnity Obligations . Buyer shall indemnify,
defend, and hold Seller and Parent, their affiliates, and their officers,
directors, employees, agents, successors and assigns harmless from and against
any and all Losses arising from or as a result of any of the following: (a) any
material breach of or material misrepresentation in any of the representations
and warranties made by or on behalf of Buyer in this Agreement or in any
exhibit, schedule, certificate, agreement, document, or statement delivered
pursuant hereto; (b) any material violation or material breach by Buyer of or
material default by Buyer of any of the covenants or agreements contained in
this Agreement or in any exhibit, schedule, certificate, agreement, document, or
statement delivered pursuant hereto; (c) any Assumed Liabilities; and (d) any
liabilities relating to the operation of the Facility conducted by Buyer arising
after the Closing Date.
9.4 Method of Asserting Claims .
20
<PAGE>
9.4.1 Notice of Claim . If any legal proceedings are
instituted or any claim or demand given by any person, in respect of
which payment may be sought by any party or parties from any other
party or parties under the provisions of ss.ss. 9.2 or 9.3, the party
or parties seeking indemnification (collectively, the "Indemnitee")
shall cause written notice of any claim of which it has knowledge which
is covered by this Agreement to be forwarded promptly to the party or
parties from which indemnification is sought (collectively, the
"Indemnitor"). Such notice shall specify the amount and nature of the
claim and the reason why it constitutes an indemnified liability, it
being understood that failure to provide notice shall not relieve the
other party from liability except to the extent damages or prejudice
results from such failure.
9.4.2 Payment of Claims . In the event of a Loss
other than a third party claim, the Indemnitor shall remit the amounts
due, as indicated in such notice, within 30 days of receipt thereof
unless the Indemnitor asserts in a writing delivered to the Indemnitee
that the claim is not an indemnified liability or disputes the amount
of the Loss. The failure by the Indemnitor to respond within 30 days of
receipt of such notice shall be deemed to be an acknowledgment of the
correctness of the amounts due as set forth in the notice.
9.4.3 Third Party Claims . If any action is brought
by a third party against any Indemnitee with respect to which such
Indemnitee is entitled to indemnification hereunder and notice of such
action to the Indemnitor has been given pursuant to ss. 9.4.1, the
Indemnitor will be entitled to participate therein, and to the extent
it may elect by written notice delivered to the Indemnitee within 30
days after receiving the notice from Indemnitee, to assume the defense
thereof with counsel reasonably satisfactory to Indemnitee. Indemnitee
shall cooperate with respect to any such participation or defense.
Notwithstanding the foregoing, the Indemnitee shall have the right to
employ its own counsel in any such case but the fees and expenses of
such counsel shall be at the expense of such Indemnitee, unless (i) the
employment of such counsel at the expense of the Indemnitor shall have
been authorized in writing by the Indemnitor, or (ii) the Indemnitor
shall not have employed counsel reasonably satisfactory to such
Indemnitee to have charge of the defense of such action within thirty
days after notice of commencement of the action, or (iii) such
Indemnitee shall have reasonably concluded, based upon written advice
of counsel, that there may be defenses available to it which are
different from or additional to those available to the Indemnitor (in
which case the Indemnitor shall not have the right to direct the
defense of such action on behalf of the Indemnitee with respect to such
different defenses), in any of which events such fees and expenses of
one additional counsel shall be borne by the Indemnitor.
Notwithstanding anything in this ss. 9 to the contrary, an Indemnitor
shall not be liable for any settlement of any claim or action effected
without its written consent; provided, however, that such consent is
not unreasonably withheld. Upon payment of indemnification by the
21
<PAGE>
Indemnitor, the Indemnitee, if requested in writing by the Indemnitor,
will assign to Indemnitor its rights against any applicable account
debtor or other responsible person to the extent of the indemnification
payment.
9.5 Limitations on Payments . Notwithstanding anything to the
contrary herein, the parties agree that (i) the Indemnitee shall not be entitled
to receive any payment from the Indemnitor until such time as the Indemnitee has
sustained Losses in excess of Five Thousand Dollars ($5,000), and the Indemnitor
shall not be required to pay that amount, and (ii) the aggregate liability of
any Indemnitor under ss.ss. 9.2 or 9.3 shall not exceed an amount equal to the
Purchase Price. The limitations contained in this ss. 9.5 shall not apply to a
Loss resulting from any Indemnitor's willful misconduct, intentional
misrepresentation or fraud.
10. TERMINATION.
10.1 Termination of Agreement . This Agreement may be
terminated: (a) at any time on or prior to the Closing Date by the mutual
consent of the parties; (b) by Buyer if on the Closing Date Seller has failed to
satisfy the conditions set forth in ss. 7; or (c) by Seller if on the Closing
Date Buyer has failed to satisfy the conditions set forth in ss. 6.
10.2 Liabilities on Termination or Breach . Except for the
obligations contained in ss. 5 with respect to confidentiality, upon termination
of this Agreement pursuant to ss. 10.1, this Agreement shall be null and void,
and no party hereto shall have any rights, liabilities, or obligations under
this Agreement.
11. GENERAL PROVISIONS.
The parties further covenant and agree as follows:
11.1 Expenses . Each party hereto shall bear all of its
expenses incurred in connection with the transactions contemplated by this
Agreement, including without limitation, accounting and legal fees incurred in
connection herewith; provided, however, that Seller shall pay, or reimburse
Buyer for, all sales and transfer taxes arising from the transfer of the Assets
to Buyer.
11.2 Further Assurances . From time to time prior to, on and
after the Closing Date, each party will take all actions as are reasonably
requested, without payment of further consideration, to carry out the purpose of
this Agreement.
11.3 Notices . All notices and other communications required
or permitted under this Agreement shall be in writing (which shall include
notice by facsimile transmission) and shall be deemed to have been made and
received when personally served, or when delivered by Federal Express or a
similar overnight courier
22
<PAGE>
service, expenses prepaid, or, if sent by facsimile communications equipment,
delivered by such equipment, addressed as set forth below:
If to Buyer: TEKPAK, Inc.
1410 South Washington St.
Marion, AL 36756
TELEPHONE:
FACSIMILE:
If to Seller: Niemand Industries, Inc.
c/o President, Gibraltar Packaging Group, Inc.
2000 Summit Avenue
P. O. Box 2148
Hastings, NE 68901
TELEPHONE: 402-463-1366
FACSIMILE: 402-463-1661
and
Kohrman Jackson & Krantz, P.L.L.
Attn: Alan M. Rauss, Esq.
1375 East Ninth Street, 20th Floor
Cleveland, OH 44122-1793
TELEPHONE: 216-696-8700
FACSIMILE: 216-621-6536
If to Parent: Gibraltar Packaging Group, Inc.
2000 Summit Avenue
P. O. Box 2148
Hastings, NE 68901
TELEPHONE: 402-463-1366
FACSIMILE: 402-463-1661
Any party may change the address, or facsimile number to which communications
are to be sent by giving notice of such change in accordance with the provisions
of this section providing for the giving of notice.
11.4 Benefit and Assignment . This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns as permitted hereunder. No person or entity other than
the parties hereto is or shall be entitled to bring any action to enforce any
provision of this Agreement against any of the parties hereto, and the covenants
and agreements set forth in this Agreement shall be solely for the benefit of,
and shall be enforceable only by, the parties hereto or their respective
successors and assigns as permitted hereunder. No party to this Agreement may
assign this Agreement or any rights hereunder without the prior written consent
of the parties hereto. Notwithstanding the foregoing, Buyer may
23
<PAGE>
assign any of its rights and delegate its duties hereunder to any person,
corporation, partnership or other entity that directly or indirectly owns or
controls, is owned or controlled by, or is under common ownership or control
with, Buyer or any of its shareholders or affiliates.
11.5 Publicity . Neither party hereto will issue any press
release or otherwise make any public statement with respect to this Agreement
and the transactions contemplated hereby without the prior written consent of
the other, except as may be required by applicable laws, in which event the
party required to make the release or announcement shall, if possible, allow the
other party reasonable time to comment on such release or announcement in
advance of such issuance.
11.6 Governing Law . This Agreement and all questions relating
to its validity, interpretation, performance and enforcement shall be governed
by and construed in accordance with the laws of the State of Alabama, excluding
any choice of law rules which may direct the application of the laws of another
jurisdiction.
11.7 Entire Agreement . This Agreement, and the schedules and
exhibits to this Agreement, constitute the entire agreement among the parties
with regard to the sale of the Assets, and supersede all prior agreements,
understandings, inducements or conditions, express or implied, oral or written,
relating to the subject matter of this Agreement.
11.8 Waiver of Terms . Any of the terms or conditions of this
Agreement may be waived at any time by the party or parties entitled to the
benefit thereof but only by a written notice signed by the party or parties
waiving such terms or conditions.
11.9 Amendment of Agreement . This Agreement may be amended,
supplemented or interpreted at any time only by written instrument duly executed
by each of the parties hereto.
11.10 Severability . If any of the provisions contained in
this Agreement is invalid, illegal or unenforceable in any respect for any
reason, the validity, legality and enforceability of any such provision in every
other respect and of the remaining provisions of this Agreement will not be in
any way impaired.
11.11 Counterparts . This Agreement may be executed in two or
more counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
11.12 No Third Party Beneficiaries . Nothing in this Agreement
is intended nor will it be construed to give any person, firm, corporation or
other entity, other than the parties hereto and their respective successors and
permitted assigns, any right, remedy or claim under or in respect of this
Agreement or any provisions hereof.
24
<PAGE>
11.13 Other Rules of Construction . References in this
Agreement to sections, schedules and exhibits are to sections of, and schedules
and exhibits to this Agreement unless otherwise indicated. Words in the singular
include the plural and in the plural include the singular. The word "or" is not
exclusive. The word "including" shall mean including, without limitation. The
section and other headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their duly authorized signatories, all as of the day and year first
above written.
TEKPAK, INC.
By: /s/ Merrell A. Ketchum
As Its: President
-----------
NIEMAND INDUSTRIES, INC.
By: /s/ Merrell A. Ketchum
As Its: President
------------
GILBRALTAR PACKAGING GROUP, INC.
By: /s/ John W. Lloyd
As Its: Executive Vice President
---------------------------
25
<PAGE>
26
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