<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC
Form 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 1999
-------------
Commission file number 0-21018
-------
TUFCO TECHNOLOGIES, INC.
Delaware 39-1723477
---------------------------------- --------------------
(State of other jurisdiction (IRS Employer ID No.)
of incorporation of organization)
4800 Simonton Road, Dallas, Texas 75244
---------------------------------------
(Address of principal executive offices)
(972) 789-1079
--------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------ ------
Indicate the number of shares outstanding of each or the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
Class Outstanding at August 16, 1999
----- -------------------------------
<S> <C>
Common Stock, par value $0.01 per share 3,788,748
Non-Voting Common Stock, par value $.01 per share 709,870
</TABLE>
1
<PAGE> 2
TUFCO TECHNOLOGIES, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page
Number
<S> <C> <C>
PART I: CONDENSED FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
Condensed Consolidated Balance Sheets as of
June 30, 1999 (Unaudited) and September 30, 1998 3
Condensed Consolidated Statements of Income for the
three months and nine months ended June 30, 1999 and 1998
(Unaudited) 4
Condensed Consolidated Statements of Cash Flows for the
nine months ended June 30, 1999 and 1998 (Unaudited) 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II: OTHER INFORMATION 12
SIGNATURES 13
</TABLE>
2
<PAGE> 3
TUFCO TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, September 30,
1999 1998
------------ ------------
Assets
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents .............................................. $ 1,515,244 $ 1,006,110
Restricted cash ........................................................ -- 20,328
Accounts receivable, net ............................................... 12,131,784 10,351,740
Inventories ............................................................ 7,971,461 8,956,949
Prepaid expenses and other current assets .............................. 730,879 303,605
Deferred income taxes .................................................. 596,678 596,678
------------ ------------
Total current assets ............................................. 22,946,046 21,235,410
PROPERTY, PLANT AND EQUIPMENT - Net ....................................... 16,813,948 17,360,302
GOODWILL - Net ............................................................ 18,107,243 18,423,999
OTHER ASSETS - Net ........................................................ 1,105,396 1,747,486
------------ ------------
TOTAL ..................................................................... $ 58,972,633 $ 58,767,197
============ ============
Liabilities and Stockholders' Equity
CURRENT LIABILITIES:
Current portion of long-term debt ...................................... $ 1,675,218 $ 1,670,810
Accounts payable ....................................................... 6,104,987 4,559,341
Accrued payroll, vacation and payroll taxes ............................ 1,347,485 681,236
Other current liabilities .............................................. 1,375,518 1,629,519
Income taxes payable ................................................... 743,693 64,367
------------ ------------
Total current liabilities ........................................ 11,246,901 8,605,273
LONG-TERM DEBT - Less current portion ..................................... 11,522,600 16,025,796
DEFERRED INCOME TAXES ..................................................... 1,885,653 1,885,653
STOCKHOLDERS' EQUITY
Voting Common Stock; $.01 par value; 9,000,000 shares authorized;
3,788,748 and 3,786,223 shares issued, respectively ................ 37,887 37,862
Nonvoting Common Stock; $.01 par value; 2,000,000 shares authorized;
709,870 shares issued and outstanding .............................. 7,099 7,099
Additional paid-in capital ............................................. 23,973,017 23,961,301
Retained earnings ...................................................... 10,928,716 8,878,453
Treasury stock at cost, 78,497 voting common shares .................... (534,045) (534,045)
Stock purchase plan notes .............................................. (95,195) (100,195)
------------ ------------
Total stockholders' equity ........................................ 34,317,479 32,250,475
------------ ------------
TOTAL .................................................................. $ 58,972,633 $ 58,767,197
============ ============
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 4
TUFCO TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
June 30, June 30,
------------------- --------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET SALES.......................... $19,415,717 19,921,451 $ 56,275,511 55,617,979
COST OF SALES....................... 15,922,718 16,819,674 47,007,109 47,274,137
---------- ---------- ------------ ----------
GROSS PROFIT........................ 3,492,999 3,101,777 9,268,402 8,343,842
OPERATING EXPENSES:
Selling, general and
administrative .................. 1,660,982 1,680,082 5,441,930 5,040,162
Amortization and other post-
acquisition expenses.............. 265,698 203,543 744,585 672,263
---------- ---------- ------------ ----------
OPERATING INCOME..................... 1,566,319 1,218,152 3,081,887 2,631,417
OTHER INCOME (EXPENSE):
Interest expense.................. (289,784) (357,483) (851,776) (875,212)
Interest and other income......... 7,325 12,597 19,452 28,174
Gain on sale of equipment............ 18,249 4,000 349,563 4,473
Gain on sale of assets............... 658,280 ---- 658,280 ----
---------- ---------- ------------ ----------
INCOME BEFORE INCOME TAXES........... 1,960,389 877,266 3,257,406 1,788,852
INCOME TAX EXPENSE................... 714,277 311,718 1,207,143 656,590
---------- ---------- ------------ ----------
NET INCOME .......................... $ 1,246,112 $ 565,548 $2,050,263 $1,132,262
=========== ========= ========== ==========
EARNINGS PER SHARE:
Basic............................ $ 0.28 $ 0.13 $ 0.46 $ 0.26
Diluted.......................... $ 0.28 $ 0.13 $ 0.46 $ 0.25
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING:
Basic............................ 4,420,121 4,418,929 4,418,438 4,416,220
Diluted.......................... 4,511,374 4,493,008 4,468,570 4,553,310
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 5
TUFCO TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
June 30,
------------------------
1999 1998
----------- ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net Income...................................................... $2,050,263 $1,132,262
Noncash items net income:
Depreciation and amortization.......................... 2,106,288 1,913,595
Increase in allowance for doubtful accounts............ 14,495 3,020
Gain on sale of equipment ................................ (349,563) (4,473)
Gain on sale of assets ................................... (658,280) --
Changes in operating working capital:
Accounts receivable .................................... (1,894,539) (1,607,178)
Inventories............................................. (587,373) (620,634)
Prepaid expenses and other assets....................... (401,853) (398,508)
Accounts payable ....................................... 1,545,646 2,440,947
Accrued and other current liabilities................... 412,248 (632,047)
Income taxes payable.................................... 679,326 (968,941)
----------- ------------
Net cash provided by operations.............................. 2,916,658 1,258,043
INVESTING ACTIVITIES
Additions to property, plant and equipment................... (1,847,875) (2,795,628)
Proceeds from disposition of property, plant and equipment... 454,551 9,513
Advances to directors and former owners...................... (38,667) (16,666)
Acquisition of Foremost Manufacturing, Inc................... (142,000) (5,250,000)
Decrease in restricted cash.................................. 20,328 60,128
Proceeds from sale of assets, net of transaction cost........ 3,628,186 --
----------- ------------
Net cash provided by (used in)investing activities........... 2,074,523 (7,992,653)
FINANCING ACTIVITIES
Repayment of long-term debt.................................. (4,498,788) (1,595,022)
Proceeds from issuance of notes payable...................... ---- 8,097,289
Decrease in stock purchase plan notes........................ 5,000 314,857
Purchase of treasury stock................................... ---- (184,674)
Net proceeds from issuance of common stock................... 11,741 172,405
----------- ------------
Net cash provided by (used in) financing activities.......... (4,482,047) 6,804,855
----------- ------------
NET INCREASE (DECREASE) IN CASH EQUIVALENTS..................... 509,134 70,245
CASH AND CASH EQUIVALENTS:
Beginning of period............................................ 1,006,110 747,404
----------- ------------
End of period.................................................. $1,515,244 $ 817,649
========= ============
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE> 6
TUFCO TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JUNE 30, 1999 AND 1998
1. INTERIM FINANCIAL STATEMENTS
The unaudited interim financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and Rule 10-01 of Regulation S-X. In the opinion
of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation have been
included. Some adjustments involve estimates which may require revision
in subsequent interim periods or at year-end. The unaudited financial
statements and footnotes should be read in conjunction with the
Company's financial statements for the year ended September 30, 1998
that are included in Form 10-K that was filed with the Securities and
Exchange Commission on December 22, 1998. Operating results for the
nine-month period are not necessarily indicative of results expected
for the remainder of the year.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
2. INVENTORIES
Inventories consist of the following:
June 30, September 30,
1999 1998
----------- ------------
Raw materials...................... $ 4,468,641 $ 4,766,165
Finished products.................. 3,502,820 4,190,784
----------- ------------
Total ............................. $ 7,971,461 $ 8,956,949
============ ============
</TABLE>
3. ACQUISITION OF FOREMOST MANUFACTURING, INC.:
On November 13, 1997, the Company purchased all of the outstanding
stock of Foremost Manufacturing, Inc. (Foremost) for $5.25 million in
cash and $0.25 million in the Company's common stock (25,907 shares),
plus $642,000 under an earn-out provision. Goodwill of $5.4 million was
recorded as a result of the acquisition. Foremost manufactures and
distributes products similar to those produced and distributed by the
Company in its Paint Sundries market sector. The results of operation
for Foremost have been included since the date of acquisition.
6
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL INFORMATION:
Tufco Technologies, Inc. (formerly Tufco Holding Company, the
"Company") was organized in 1992 to acquire Tufco Industries, Inc.
(located in Green Bay, WI) which was incorporated in Wisconsin in 1974.
Executive Converting Corporation (located in Dallas, TX) was acquired
in 1994. Hamco, Industries, Inc. (located in Newton, NC) was acquired
in 1995. Foremost Manufacturing, Inc. (located in St. Louis, Missouri)
was acquired November 13, 1997.
The Company, through its wholly owned subsidiaries, manufactures and
distributes business imaging paper products and provides diversified
contract manufacturing, packaging and specialty printing services, and
distributes paint sundry products used in home improvement projects.
The Company normally operates at lower operating levels during the
first and second quarters of its fiscal year which ends September 30.
This occurs because of the seasonal demand for certain printed products
displaying a holiday theme as well as products which are used by
customers in conjunction with end-of-year activities. These products
are normally shipped during the Company's third and fourth fiscal
quarters. Demand for its paint sundry products is generally lower
during the first and second fiscal quarters as cold weather restricts
the amount of new construction and remodeling projects that require the
Company's products.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS --CONTINUED
RESULTS OF OPERATIONS:
CONDENSED OPERATING DATA, PERCENTAGES OF NET SALES AND YEAR-TO-YEAR CHANGES IN
THESE ITEMS ARE AS FOLLOWS: ($000s)
<TABLE>
<CAPTION>
Three Months Ended Period-to-Period Nine Months Ended Period-to-Period
June 30, Change June 30, Change
------------------ ---------------- ----------------- ----------------
1999 1998 $ % 1999 1998 $ %
---- ---- ---- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales $19,416 $19,921 -505 -3 $56,276 $55,618 658 1
Gross Profit 3,493 3,102 391 13 9,268 8,344 924 11
18.0% 15.6% 16.5% 15.0%
Operating Expenses 1,927 1,884 43 2 6,186 5,712 474 8
9.9% 9.5% 11.0% 10.3%
Operating Income 1,566 1,218 348 29 3,082 2,631 451 17
8.1% 6.1% 5.5% 4.7%
Interest Expense 290 357 -67 -19 852 875 -23 -3
1.5% 1.8% 1.5% 1.6%
Net Income $ 1,246 $ 566 680 120 2,050 1,132 918 81
6.4% 2.8% 3.6% 2.0%
</TABLE>
ANALYSIS OF NET SALES, PERCENTAGES OF TOTAL NET SALES, AND YEAR-TO-YEAR CHANGES
IN THE COMPANY'S PRIMARY MARKET SECTORS ARE AS FOLLOWS:
($000s)
<TABLE>
<CAPTION>
Three Months Ended Period-to-Period Nine Months Ended Period-to-Period
June 30, Change June 30, Change
------------------ ---------------- ----------------- ----------------
1999 1998 $ % 1999 1998 $ %
----- ---- --- ---- ---- ---- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Business Imaging
Products $ 5,897 $ 7,830 -1933 -25 18,596 23,979 -5383 -22
30% 39% 33% 43%
Contract Manufac-
turing & Specialty
Printing $ 7,076 4,738 2,338 49 17,452 12,823 4,629 36
37% 24% 31% 23%
Paint Sundry
Products $ 5,630 5,398 232 4 15,730 13,730 2,000 15
29% 27% 28% 25%
Away-From-Home
Products $ 813 1,955 -1,142 -58 4,498 5,086 -588 -12
4% 10% 8% 9%
Total Net Sales $19,416 $19,921 -505 -3 56,276 55,618 658 1
</TABLE>
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS --CONTINUED
NET SALES:
Net sales declined $0.5 million (3%) for the three month period, but remained
ahead of the prior year for the nine month period (up 1%). The Company's
Business Imaging sales sector continued to decline due to a combination of lost
volume and decreased selling prices as competition for customers in the sector
remained intense. Company management is continuing to trim costs in the Business
Imaging sector in order to enhance profitability on the lower sales volume.
Additionally, the Company is pursuing opportunities to utilize its Business
Imaging production assets to secure Contract Manufacturing arrangements with
companies that sell and service Business Imaging printing equipment.
The Company's Contract Manufacturing and Specialty Printing sector continued to
post strong sales increases, up 49% and 36% for the three and nine month periods
respectively. In fiscal 1998, Company management targeted this sector as the key
strategic growth opportunity for the Company's future. New manufacturing
agreements with customers such as Procter & Gamble Manufacturing and Hallmark
Cards, Inc. continue to produce strong increase in sales volume. It is also
important to note that the majority of the Contract Manufacturing sales are
billed as services, not as a finished product. The key delineation is that with
service revenue, the Company does not invoice the customer for the cost of raw
materials which are typically 40% to 60% of the selling price for product sales.
As such, service sales are generally more profitable for the Company than
product sales.
Sales in the Away-From-Home (AFH) sector declined $1.1 million (58%) for the
three month period. Company management elected to discontinue sales of its AFH
products due to increasing costs and decreased availability of raw materials
coupled with the relatively small market share which the Company occupied. On
June 25, 1999 the Company sold the equipment used to produce its AFH products
and the related inventory to Green Bay Converting, Inc., a company in which a
former Vice President of Tufco is a majority shareholder, for a net price of
$3.6 million. The transaction resulted in a pre-tax gain of $0.7 million or
$0.09 per fully diluted share. Net sales of AFH products for fiscal 1998 were
$7.3 million with a gross margin of approximately 7%. Despite the loss of sales
in future periods, management does not anticipate any material decline in total
operating profit because the space formerly used for AFH production will be used
to support the growth of Contract Manufacturing and Specialty Printing in Green
Bay. As referenced later in this report the Company has committed to lease a $4
million flexographic printing press which is to be installed during the second
quarter of fiscal 2000 in the space previously occupied by AFH equipment.
Proceeds from the sale were used to reduce debt under the Company's credit
agreement with its principal lender.
Finally, sales of the Company's Paint Sundry products increased $0.2 million
(4%) during the three month period. Adjusted for the acquisition date of
Foremost, normalized sales for the nine month period were up $1.1 million (8%).
The sector continues to gain market share, primarily through its sales to The
Home Depot, Inc.
GROSS PROFIT:
Gross profit increased $0.4 million (13%) and $0.9 million (11%) for the three
and nine month periods, and gross profit margins increased 2.4 points and 1.5
points for the respective periods. As noted above, sales increases in the
Contract Manufacturing Sector were due to sales of services which are typically
at higher margins due to low material cost. Therefore, the loss of gross profit
on product sales in Business Imaging and Away-From-Home was more than offset by
the additional gross profit produced by sales of Contract Manufacturing
services. While Management
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS -CONTINUED
GROSS PROFIT (CONTINUED):
is optimistic that growth in Contract Manufacturing will continue to offset
profit declines in Business Imaging, it cannot forecast the future competitive
environment in the Business Imaging market sector, and cannot therefore provide
assurances that this positive trend will continue.
OPERATING EXPENSES:
Operating expenses increased only $43,000 (2%) for the three period and were up
$474,000 (8%) for the nine month period. Adjusted for the Foremost acquisition,
operating expenses are up $362,000 (6%) for the nine month period.
Higher compensation costs and trade show expenses account for the increase.
OPERATING INCOME:
Operating income increased $0.3 million (29%) and $0.5 million (17%) for the
three and nine month periods, primarily due to higher gross profit from Contract
Manufacturing services.
INTEREST EXPENSE:
Interest expense declined $67,000 (19%) and $23,000 (3%) for the three and nine
month periods. Reduced borrowings during the most recent three month period
accounted for the decrease in interest expense for the three month and nine
month periods.
NET INCOME AND EARNINGS PER SHARE:
Net income increased $0.7 million (120%) and $0.9 million (81%) for the three
and nine month periods respectively. Earnings per share for the three and nine
month periods increased to $0.28 and $0.46 (basic and diluted) compared to $0.13
(basic and diluted) and $0.26 (basic) and $0.25 (diluted) in the prior year. As
noted earlier, the Company recognized a gain resulting from the sale of AFH
equipment and inventory. This gain resulted in net income of approximately $0.4
million and earnings per share of $0.09 (basic) and $0.08 (diluted) for the
three month period of fiscal 1999. For the nine month period, net income for
gains on the sale of all equipment and AFH inventory totaled $0.6 million in
fiscal 1999 resulting in earnings per share of $0.14 (basic) and $0.13
(diluted).
LIQUIDITY AND CAPITAL RESOURCES:
For the nine month period ended June 30, 1999, the Company generated $2.9
million in cash from operations compared to $1.3 million one year ago. In
addition to net income, the primary sources for the increase were increases in
certain accrued liabilities resulting from the timing of payments due for
employee compensation and income taxes.
Net cash provided by investing activities was $2.1 million for the nine month
period of fiscal 1999, primarily due to the proceeds received from the sale of
AFH fixed assets and inventory. For the same period one year ago, the
acquisition of Foremost accounted for the majority of the $8.0 million used in
investing activities. Purchases of property, plant and equipment declined $0.9
million from one year ago as the Company has had less need for such investment.
Net cash used in financing activities was $4.5 million for the nine months of
fiscal 1999 which resulted from the repayment of debt. The Company used the
proceeds from the sale of AFH assets,
10
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS --CONTINUED
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED):
as well as the additional cash provided by operations, to accelerate the
repayment of its term debt and to reduce borrowings under its revolving debt.
For the same period of fiscal 1998, increased borrowings used to fund the
Foremost acquisition contributed to the $6.8 million in cash provided by
financing activities.
In July 1999, the Company signed a commitment to enter into a 10 year operating
lease for a $4 million Windmoeller & Hoelscher flexographic printing press to be
installed in its Green Bay facility. Due to certain enhancements made at the
Company's request, the press is not scheduled to become operational until the
second quarter of fiscal 2000. Management believes that this new technology will
enhance the profitability and service levels of existing printing contracts
while enabling the Company to pursue new printing opportunities, especially in
the area of flexible packaging.
Company management believes that cash flow from operations will be sufficient to
fund its capital needs for fiscal 1999 and fiscal 2000, and does not anticipate
any significant increase in borrowings.
As of August 5, 1999, the Company had approximately $3.2 million available under
its revolving credit line.
FORWARD LOOKING STATEMENTS:
Management's discussion of the Company's 1999 quarterly periods in comparison to
1998, contains forward-looking statements regarding current expectations, risks
and uncertainties for future periods. The actual results could differ materially
from those discussed here. As well as those factors discussed in this report,
other factors that could cause or contribute to such differences include, among
other items, significant changes in the cost of base paper stock, competition in
the Company's product areas, or an inability of management to successfully
reduce operating expenses in relation to net sales without damaging the
long-term direction of the Company. Therefore, the condensed financial data for
the periods presented may not be indicative of the Company's future financial
condition or results of operations.
11
<PAGE> 12
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
<S> <C>
A. Exhibits
10.1 Asset Purchase Agreement dated as of June 25, 1999, by and between
Tufco and Green Bay Converting, Inc.
10.2 License Agreement dated as of June 25, 1999, by and between Tufco and
Green Bay Converting, Inc.
27 Financial Data Schedule
</TABLE>
12
<PAGE> 13
SIGNATURES
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.
TUFCO TECHNOLOGIES, INC.
<TABLE>
<S> <C> <C>
Date: August 16, 1999 /s/ Louis LeCalsey, III
--------------------------------------------
Louis LeCalsey, III
Chief Executive Officer
Date: August 16, 1999 /s/ Greg Wilemon
--------------------------------------------
Greg Wilemon
Chief Financial Officer/Chief Operating Officer,
Secretary, Treasurer and Vice President - Finance
</TABLE>
13
<PAGE> 14
INDEX TO EXHIBIT
EXHIBIT NO. DESCRIPTION
10.1 Asset Purchase Agreement dated as of June 25, 1999, by and
between Tufco and Green Bay Converting, Inc.
10.2 License Agreement dated as of June 25, 1999, by and between
Tufco and Green Bay Converting, Inc.
27 Financial Data Schedule
<PAGE> 1
EXHIBIT 10.1
EXECUTION COPY
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made this 25th day of June, 1999 by and among Green
Bay Converting, Inc., a Wisconsin corporation (the "Buyer"); Tufco, LP, a
Delaware limited partnership (the "Seller"); and the Tufco Technologies, Inc., a
Delaware corporation ("Tufco") .
R E C I T A L S
WHEREAS, Seller is engaged in the business of manufacturing and
distributing a line of tissues, towels, and wipes (the "AFH Business");
WHEREAS, Tufco is the ultimate parent organization of Seller;
WHEREAS, Seller desires to sell and assign to Buyer and Buyer desires
to purchase from Seller certain of the assets of Seller used in and related to
the operation of the AFH Business upon the terms and conditions set forth
herein; and
WHEREAS, Tufco and the partners of Seller consent to such sale of
assets to Buyer.
NOW, THEREFORE, in consideration of the Recitals and the mutual
covenants and agreements contained herein, the parties agree as follows:
1. Purchase of Assets. Subject to the terms and conditions of this Agreement,
Seller agrees to sell and deliver to Buyer and Buyer agrees to purchase and
accept from Seller as of the Closing Date (as defined herein) all of the right,
title and interest of the AFH Business in and to only the assets set forth in
this Section 1 (sometimes collectively referred to as the "Purchased Assets").
The assets of Seller described in Section 2 of this Agreement and all other
assets of Seller not listed in Section 1 or the schedules to Section 1 are
specifically excluded from the purchase and sale contemplated hereunder. The
Purchased Assets are as follows:
A. Machinery and Equipment. The Seller's machinery, equipment, spare
parts, tools, and other personal property, including, but not limited
to, case packers, conveyors, and other downstream equipment used solely
in the AFH Business, as listed on the schedule to this Section (the
"Equipment").
B. Inventory. The Seller's inventories, including raw materials, work
in process and finished goods, as well as supplies, spare parts,
product samples, shipping contracts, and shipping containers used
solely in the AFH Business which are listed on the schedule to this
Section (the "Inventory").
<PAGE> 2
C. Records and Documents. The following records and documents of Seller
related solely to the AFH Business wherever located, including, without
limitation, engineering drawings and specifications, and supplier and
customer lists (the "Documents"); provided Seller may maintain a record
and copy of all Documents.
D. Intangible Assets. The limited exclusive license to use rights to
the name "Execuline" for a 25 year period solely in connection with the
AFH Business, subject to the license agreement between Buyer and Seller
dated evendate herewith, and any technical information, programming,
embossing and patterns used solely in connection with the Equipment to
the extent assignable without consent (the "Intangible Assets").
2. Assets Excluded from Sale. All of the Seller's assets (the "Excluded Assets")
other than those specifically included in the Purchased Assets shall be retained
by Seller including, without limitation, the following assets:
A. All accounts receivable, arising in the AFH Business;
B. Cash, cash equivalents, certificates of deposit, money market
instruments, commercial paper and marketable securities of the AFH
Business;
C. Seller's rights under any policies of insurance, or any benefits,
proceeds or premium refunds payable or paid thereunder or with respect
thereto, relating to the AFH Business;
D. All rights to any income tax refunds, credit or claims, whether or
not relating to the AFH Business;
E. Arrangements with registered agents relating to foreign
qualifications, taxpayer and other identification numbers, tax returns
and other tax records, federal and other records, seals, minute books,
stock transfer books, and similar documents of Seller, relating to the
AFH Business.
3. Exclusion of Liabilities and Obligations.
A. Post-Closing Liabilities. Buyer shall be liable for and agrees to
pay, perform and discharge all liabilities, obligations and commitments of any
kind, character or description, whether absolute, contingent, threatened or
otherwise, and whether or not reflected on Buyer's financial statements, books
or records, arising from, or incurred in connection with acts or omissions of
Buyer, occurring after the Closing Date respecting the Purchased Assets or the
AFH Business (the "Post- Closing Liabilities").
2
<PAGE> 3
B. Exclusion. Buyer does not assume, and shall not be obligated to pay,
perform, or discharge any debts, liabilities, or obligations of Seller
or Tufco of any kind or nature, whether actual, contingent, or accrued,
known or unknown (collectively, the "Excluded Liabilities"), including,
without limitation, any violation of the Environmental Laws (as defined
herein) or the presence of any Hazardous Substances (as defined
herein).
C. Definitions
(i) "Environmental Laws" mean any current federal, state,
and/or local laws, statutes, regulations, rules, ordinances,
codes, or other governmental restrictions or requirements
pertaining to (a) the pollution or protection of human health
or the environment, including ambient air, surface water,
ground water, soils, land surface or subsurface strata and
waters of the United States, or (b) the use, generation,
transportation, storage, treatment, proceeding, disposal, or
release of solid waste or Hazardous Substances.
(ii) "Hazardous Substances" mean, without limitation, any
flammables, explosives, radon, radioactive materials,
asbestos, urea formaldehyde foam insulation, polychlorinated
biphenyls, petroleum and petroleum products, methane,
hazardous materials, hazardous wastes, hazardous or toxic
substances, or related materials as currently defined in the
Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended (42 U.S.C. Section 9601, et
seq.), The Resource Conservation and Recovery Act, as amended
(42 U.S.C. Section 6901, et seq.), The Toxic Substances
Control Act, as amended (15 U.S.C. Section 2601, et seq.), or
any other currently applicable Environmental Law and
regulations promulgated thereunder which provide a definition
of hazardous substance or hazardous waste.
4. Purchase Price.
A. Amount. In consideration of Seller's sale, assignment, and transfer
of the Purchased Assets and the performance by it of all the terms,
covenants, and provisions of this Agreement on its part to be kept and
performed, Buyer shall pay to Seller on the Closing Date by wire
transfer in immediately available funds, an amount equal to
$3,860,371.90, which amount represents (x) Two Million Three Hundred
Thousand Dollars ($2,300,000.00) (the "Base Purchase Price") plus (y),
$1,560,371.90 which represents the Inventory Value of Seller (as
hereinafter defined in Section 4.B., below) as of the Closing Date (the
"Inventory Purchase Price," and together with the Base Purchase Price,
the "Purchase Price").
B. Inventory. Seller and Buyer hereby agree prior to the Closing Date
they will jointly conduct a physical inventory of the Inventory,
pursuant to which a duly authorized representative of each of Seller
and Buyer shall be present. Immediately following such
3
<PAGE> 4
physical inventory, Seller and Buyer shall mutually agree upon the
inventory value (" Inventory Value").
C. Allocation of Purchase Price. The Purchase Price shall be assigned
and allocated to the Purchased Assets as set forth on the schedule to
this Section. The parties acknowledge that the allocations set forth in
this Section reflect the fair market values of the Purchased Assets and
agree that they will file any reports (including, without limitation,
I.R.S. Form 8594) under Section 1060 of the Internal Revenue Code of
1986, as amended, consistent with the provisions of this Section and
that they will not for income tax purposes take a position inconsistent
with this Agreement unless so imposed by the Internal Revenue Service,
or Buyer or Seller, as the case may be, receives a written legal
opinion (and a copy is provided to the other party), that an allocation
inconsistent with the provisions of this Agreement is more likely than
not to be imposed by the Internal Revenue Service.
5. Closing. Subject to the conditions precedent set forth herein, the closing
(the "Closing") of the transactions pursuant to this Agreement shall take place
at 9:00 a.m. on or before June 25, 1999 ("Closing Date") at the offices of
Seller or such other time and place as Seller and Buyer may agree.
6. Seller's and Tufco's Obligations Prior to or at Closing. Seller and Tufco
hereby agree that they shall, prior to or at Closing, deliver or convey to
Buyer:
A. Bill of Sale. The Bill of Sale, in the form attached as Exhibit A,
duly executed by Seller.
B. Consents. Copies of executed consents, waivers, authorizations, and
approvals required in connection with the execution, delivery, and
performance of this Agreement and the transfer of the Purchased Assets.
C. Certified Copies of Resolutions. Copies of resolutions certified by
the General Partner of Seller duly and adopted by the General Partner
(and, if necessary, Seller's limited partners) authorizing the sale of
the Purchased Assets to Buyer in accordance with the terms hereof.
D. Legal Opinion. The written legal opinion dated as of the Closing
Date of Battle Fowler, LLP, counsel for Seller and Tufco, addressed to
Buyer in the form of Exhibit B.
E. Miscellaneous. Assignments, estoppel certificates, consents, and
such other documentation and instruments as Buyer shall reasonably
request.
4
<PAGE> 5
7. Buyer's Obligations Prior to or at Closing. Buyer hereby agrees that it
shall, prior to or at Closing, deliver or cause to be delivered to Seller:
A. Purchase Price. The Purchase Price to be paid at Closing in the form
described in Section 4.A., above.
B. Certified Copy of Resolutions. Copies of the resolutions duly
adopted by Buyer's Board of Directors and certified by Buyer's
Secretary authorizing the purchase of the Purchased Assets from Seller
in accordance with this Agreement.
C. Legal Opinion. The written legal opinion dated as of the Closing
Date of Blumenfeld, Rose & deJong, S.C., counsel for Buyer, addressed
to Seller in the form of Exhibit C.
8. Warranties and Representations of Seller and Tufco. The Seller and Tufco,
jointly and severally, warrant and represent to Buyer, as follows:
A. Authority; Binding Effect. Seller has the partnership power and
authority to execute and deliver this Agreement, and the Bill of Sale
to be executed and delivered by it in connection with this Agreement
(the "Ancillary Documents") and to perform its obligations hereunder
and thereunder. The execution, delivery, and performance of this
Agreement and the Ancillary Documents by Seller has been duly
authorized by all necessary partnership action of Seller, including the
consent of all of Limited Partners, if required. Tufco has the full
corporate power and authority to enter into and perform this Agreement
in accordance with its terms. This Agreement has been duly executed and
delivered by Seller and Tufco and constitutes, and the Ancillary
Documents when duly executed and delivered shall each constitute, the
valid, legal, and binding obligations of the Seller and Tufco
enforceable against the Seller and Tufco in accordance with their
respective terms, except as such enforceability may be limited by
applicable bankruptcy, moratorium, insolvency or other similar laws
affecting the rights of creditors generally and by general equitable
principles (whether enforcement is sought by proceedings in equity or
at law).
B. Organization; Standing. Seller is a limited liability partnership,
duly organized, validly existing, and in good standing under the laws
of the State of Delaware and is qualified as a foreign limited
partnership authorized to transact business in the State of Wisconsin.
5
<PAGE> 6
C. No Conflicts. Except as otherwise set forth on the schedule to this
Section, the execution, delivery and performance of this Agreement and
the Ancillary Documents by the Seller and Tufco will not result in:
(i) any breach or violation of or default under Seller's
limited partnership agreement or other organizational
documents, or any statute, law, rule, regulation, judgment,
decree, or order to which Seller or Tufco is subject, or any
mortgage, deed of trust, indenture, or agreement to which it
is a party or by which Purchased Assets are bound, the result
of which would have a material adverse effect upon the
Purchased Assets; or
(ii) the creation or imposition by Seller of any lien, charge,
pledge, or encumbrance on the Purchased Assets, the result of
which would have a material adverse effect upon the Purchased
Assets.
D. Intellectual Property. To the knowledge of Seller and Tufco:
(i) except as set forth on the schedule to this Section, the
AFH Business has the exclusive right to use the Intangible
Assets as being owned by it; and
(ii) the Seller has not received any written notice which has
asserted a claim against Seller alleging that Seller does not
have the right to use any of the Intangible Assets.
E. Litigation. Except as set forth on the schedule to this Section,
there is not any litigation, proceeding, investigation, or other legal
or administrative proceeding (governmental or otherwise) pending or, to
Seller's and Tufco's knowledge, threatened against or relating to the
Seller, with respect to the AFH Business or the Purchased Assets.
F. Consents. Except as set forth on the schedule to this Section, there
are no material consents of third parties required by Seller for Seller
to consummate the transactions contemplated by this Agreement.
G. Tax Matters. There are no tax liens on any of the Purchased Assets
and to the best of Seller's or Tufco's knowledge, pending or threatened
examinations or tax claims asserted therefor.
H. Title to Purchased Assets. Except as set forth on the schedule to
this Section, as of the date hereof, Seller has good and marketable
title to all of the Purchased Assets, free and clear of all security
interests, liens, encumbrances, and restrictions; except those that do
not have a material adverse effect on the Purchased Assets.
I. Condition of Purchased Assets, Compliance with Laws. Buyer agrees
that the Purchased Assets shall be sold by Seller "as is." Seller
represents that all of Seller's
6
<PAGE> 7
currently scheduled maintenance or upgrades to the Equipment have been
completed, in all material respects, prior to Closing. To the best of
Seller's and Tufco's knowledge, neither the AFH Business nor any of the
Purchased Assets or the ownership, or operation thereof, are in
material violation of any law or any zoning, environmental, or other
ordinance, code, rule, or regulation, including, without limitation,
the Occupational Safety and Health Administration Act and the
regulations promulgated thereunder.
J. Material Contracts. [Intentionally deleted]
K. Licenses and Permits. To the best of Seller's knowledge, all
material licenses, permits, and governmental authorities that regulate
the AFH Business are listed on the schedule to this Section. To the
best of Sellers and Tufco's knowledge, each of such licenses and
permits is valid and in full force and effect, and is not subject to
any pending administrative or judicial proceeding to revoke, cancel, or
declare such license invalid in any material respect.
L. No Brokers. The Seller has not retained, employed or used any broker
or finder in connection with the purchase of the Purchased Assets
pursuant to this Agreement.
9. Warranties and Representations of Buyer. Buyer warrants and represents to the
Seller, as follows:
A. Organization. Buyer is a corporation, duly organized and validly
existing under the laws of the State of Wisconsin. The execution,
delivery, and performance of this Agreement has been duly authorized by
the Board of Directors of Buyer and the execution of this Agreement,
and the consummation of the transactions contemplated thereby are valid
and binding obligations of Buyer enforceable against Buyer in
accordance with their terms. No other proceedings on the part of Buyer
are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby.
B. No Broker. Buyer has not retained, employed, or used any broker or
finder in connection with the acquisition of the Purchased Assets or
the AFH Business.
C. Insurance and Licenses. Buyer has obtained all permits and licenses
necessary to commence operations of the AFH Business after the Closing
Date, and has obtained worker's compensation insurance for all of its
employees and has obtained general public liability insurance in
amounts which are commensurate to its business operations.
7
<PAGE> 8
10. Conduct After Closing.
A. Further Assurances. The Seller and Tufco shall, at any time and from
time to time after the Closing upon the request of Buyer and its
successors or assigns, at Buyer's reasonable out of pocket expense, use
its reasonable efforts to deliver to Buyer such further instruments of
conveyance, assignment, transfer, powers of attorney, and consents, and
shall take such other action as Buyer may reasonably request to convey,
assign, transfer, and deliver the Purchased Assets.
B. Confidentiality of Buyer. Buyer acknowledges and agrees that all (i)
information and strategic plans discussed at any Seller leadership team
meetings attended by Buyer, including, without limitation, any
information of Seller relating to printing, laminating and special
packaging of Seller or any of its affiliates, and (ii) information
disclosed to Buyer and its affiliates, representatives and agents
concerning or relating to each of Seller, its partners and Tufco
Technologies, Inc. (except with respect to the AFH Business and unless
it its in the public domain), is proprietary and confidential (the
information in (i) and (ii) hereinafter collectively referred to as
"Confidential Information"). On and after the Closing Date, Buyer
agrees to, and shall cause its directors, officers, stockholders,
representatives, and agents to keep confidential all of the
Confidential Information, unless required to be disclosed by law.
C. Confidentiality of Seller. Seller acknowledges and agrees that all
information primarily related to the AFH Business is proprietary and
confidential unless in the public domain, and that on and after the
Closing Date, Seller agrees to, and shall direct its directors,
officers, partners, stockholders, representatives, and agents to keep
confidential all of the Confidential Information, unless required to be
disclosed by law.
D. Non-Solicitation. On or about the Closing Date, Buyer and Seller
will make an announcement of the transaction contemplated herein to the
employees of the AFH Business, and Buyer will offer employment to such
employees. To the extent that such employees accept such employment
within three (3) days after the announcement, Seller agrees to pay any
vacation pay due, if any, to such employees. If any employees who have
failed to accept such employment with Buyer during such three (3) day
period, become employed with Buyer within six (6) months following the
Closing Date, Buyer agrees to pay (or reimburse Seller upon demand for)
any vacation pay owed to and claimed by such employee.
E. Repair of Equipment. Multi-folder No. 2, one of the Purchased
Assets, is in the process of being repaired. Seller agrees that it will
pay up to $100,000 for the repairs for such equipment at its own cost
and expense. Seller makes no representation or warranty as to the
condition or quality of such repairs, but Seller will assign any
warranty relating to such repairs. If the cost of the repairs is less
than $100,000, Seller agrees to reimburse Buyer one-half of such lower
amount.
8
<PAGE> 9
11. Buyer's and Seller's Mutual Agreement Not to Compete.
A. Non-Competition Agreement.
(i) Seller and Tufco, jointly and severally, agree that for a
period of two (2) years, they will not, directly or
indirectly, without the prior written consent of the Buyer:
(a) As an agent, partner, shareholder, consultant or
in any other capacity sell or convert the following
products for sale in the Away From Home industrial
marketplace: (i) multi-fold and single fold towels;
(ii) C-fold towels; (iii) center-pull towels; (iv)
hard roll and kitchen towels; (v) jumbo roll tissue;
(vi) single roll tissue (one- and two-ply) and (vii)
untreated facial tissue (collectively, "AFH
Marketplace Products");
(b) As an agent, partner, shareholder, consultant, or
in any other capacity canvas, contact, solicit, or
accept any of the Buyer's (including the customers
described in this Agreement) AFH Marketplace Products
customers for the purpose of providing AFH Business
services or selling AFH Business goods (for purposes
of this Agreement, "customers" shall include, on any
given date, any customer who has been invoiced by or
done business with the Buyer for products or services
rendered to or by the Buyer or who has transacted any
business with the Buyer with respect to products or
services provided at that time by the Buyer
including, but not limited to, contractual agreements
during the twelve (12) months immediately preceding
such date, or any potential customer who, as of such
date, is being actively solicited by the Buyer); or
(ii) Buyer agrees it will not, and agrees to cause its
stockholders, directors, officers, employees, representatives,
and agents not to, directly or indirectly, for a period of two
(2) years, without the prior written consent of the Seller:
(a) Except solely for the sale and conversion of AFH
Marketplace Products, and other products sold or
services provided exclusively for the AFH marketplace
or customers (ie. products and services used in
connection with washrooms, restrooms and work
stations outside of the home) as an agent, partner,
shareholder, consultant or in any other capacity own,
manage, operate, join, control, or participate in the
ownership management, operation, or control of, or be
connected as a director, officer, or employee with,
any business or organization that competes with
manufactures, markets, distributes any existing
products and/or services of Seller and its
affiliates, including, without limitation, Tufco
Technologies, Inc.;
9
<PAGE> 10
(b) Except solely for the sale and conversion of AFH
Marketplace Products or for products or services
provided exclusively for the Away From Home
marketplace or customers (ie. products and services
used in connection with washrooms, restrooms and work
stations outside the home), as an employee, agent,
partner, shareholder, consultant, or in any other
capacity canvas, contact, solicit, or accept any of
the Seller's (including the customers described in
this Agreement) customers for the purpose of
providing services or selling goods (for purposes of
this Agreement, "customers" shall include, on any
given date, any customer who has been invoiced by or
done business with the Seller for products or
services rendered to or by the Seller or who has
transacted any business with the Seller with respect
to products or services provided at that time by the
Seller including, but not limited to, contractual
agreements during the twelve (12) months immediately
preceding such date, or any potential customer who,
as of such date, is being actively solicited by the
Seller); or
B. Severability of Agreement. Each of Buyer and Seller acknowledges and
agrees that the Non-Competition Agreement is reasonable and valid in
geographic and temporal scope and in all other respects. If any court
determines the Non-Competition Agreement, or any part thereof, is
invalid or unenforceable, the remainder of the Non-Competition
Agreement shall not thereby be affected and shall be given full effect,
without regard to the invalid portions.
C. Blue-Penciling. If any court determines that the Non-Competition
Agreement, or any part thereof, is unenforceable because of the
duration or geographic scope of such provision, such court shall have
the power to reduce the duration or scope of such provision, as the
case may be, and, in its reduced form, such provision shall then be
enforceable.
D. Enforceability. If the courts of any one or more jurisdictions hold
the Non- Competition Agreement unenforceable by reason of the breadth
of its scope, it is the Buyer's and Seller's intention that such
determination not bar or in any way affect the rights of any party
hereto to relief in the courts of any other jurisdiction with respect
to the geographical scope of such agreement, as to breaches of such
agreement in such other respective jurisdictions. Such agreement as it
relates to each jurisdiction shall, for this purpose, be severable into
diverse and independent agreements.
E. Relief for Violation. Each of Buyer and Seller covenants and agrees
that if either violates the Non-Competition Agreement, the other party
shall be entitled to an accounting and repayment of all profits,
compensation, commissions, remuneration, or benefits which the party
directly or indirectly has realized and may realize as the result of
arising out of or in connection with any such violation. Each of Buyer
and Seller acknowledges that an irreparable injury may result to the
other party and its business in the event of his breach of the
Non-Competition Agreement. Each of Buyer and Seller also acknowledges
and agrees
10
<PAGE> 11
that the damages or injuries which the other party may sustain as a
result of any breach of this Section of this Agreement are difficult to
ascertain and money damages alone may not be an adequate remedy to the
other party. Each of Buyer and Seller therefore agrees that if a
controversy arises concerning the rights or obligations of a party
under this Section, such rights or obligations shall be enforceable in
a court of equity by decree of specific performance and the other party
shall also be entitled to any injunctive relief necessary to prevent or
restrain any violation of the provisions of this Section of this
Agreement. Such relief, however, shall be cumulative and non-exclusive
and shall be in addition to any other remedy to which the parties may
be entitled. In addition, the other party shall also be entitled to its
actual attorneys' fees and costs incurred in any action in which it is
successful in establishing a violation of this Section.
12. Severance Agreement. To induce the Buyer to enter into this Agreement and to
provide transitional market direction in both the Tufco Away From Home and
Business Imaging (Hamco) market sectors, the Seller shall continue to pay
Gregory P. Santaga, an executive employee of Seller ("Santaga"), the salary,
benefits, and bonus as set forth on his current employment contract, as listed
on the schedule to this Section (the "Severance") for a period of three (3)
months after the Closing Date. Effective on the Closing Date, Santaga shall
tender his resignation to the Seller and a termination of said employment
agreement (subject to this Agreement) without any obligation, monetary or
otherwise on the part of Seller except as set forth herein.
13. Agreement to Provide Services. Commencing with the Closing Date and to
continue until such time that the Purchased Assets are removed from the property
of Seller, but not to exceed a period of One Hundred Twenty (120) days following
the Closing Date, Seller shall grant Buyer the option to license certain of
Seller's assets and obtain the services of certain of Seller generally on the
terms and conditions below:
A. Services. Seller agrees to provide Buyer with labor to operate
machinery sufficient to continue normal operation of the AFH Business
consistent with past practice following the Closing for a period of up
to 120 days. Buyer may terminate such services at any time upon notice
to Seller prior to the termination of the 120 day period. Buyer agrees
to pay Seller, an amount equal to the amounts set forth on the schedule
to this Section for such services. On the first day of each month
during the term of this Agreement, Seller shall invoice Buyer for the
costs and expenses directly associated with the services provided by
Seller in connection with this provision. Payment is due within fifteen
(15) days upon receipt of invoice and Seller may terminate its services
if payment is not timely made. Such services shall include the use of
the business premises currently used in connection with the AFH
Business as of the Closing Date, with the intent that Seller will
provide such services which will allow for the continued operation of
the AFH Business consistent with past practice without interruption.
B. Material Handling. Seller shall assess handling and storage changes
to Buyer pursuant to the terms outlined in the schedule to this
Section. Handling and storage services
11
<PAGE> 12
may continue for up to One Hundred Twenty (120) days, after which
Seller will have no further obligation to provide these services. The
Seller shall also provide continued material handling and storage and
transfer of inventory as currently provided in connection with the AFH
Business and Seller shall invoice Buyer for such handling and storage
charges at a cost set forth on the schedule to this Section. Such
handling and storage services shall be provided at locations currently
used in connection with the AFH Business. The Buyer shall have the
right to terminate such services at any time prior to the end of the
120 day term upon notice to Seller.
14. Indemnification.
A. Survival. All of the representations and warranties made by or on
behalf of Seller, Tufco and Buyer in this Agreement shall survive the
Closing Date for a period of twelve (12) months. Except as provided
above, twelve (12) months after the Closing Date, representations and
warranties made by or on behalf of Seller, Tufco and Buyer in this
Agreement shall terminate and expire, and shall cease to be of any
force and effect, and all liability of Seller and Buyer under this
Agreement with respect to such representations and warranties shall
thereupon be extinguished (except for any claims made by Buyer in
writing prior to such termination date). Buyer, shall not have any
claim under Section 14.B(i), below for breach or inaccurate
representation if Buyer had actual knowledge of the breach or
inaccuracy as of the Closing Date.
B. Seller's Indemnification. Seller and Tufco, jointly and severally,
shall indemnify and hold harmless Buyer, and its officers, affiliates,
directors, shareholders, agents, successors and assigns (the "Buyer
Group"), from and against and in respect of any and all demands,
claims, losses, costs, fines, liabilities, damages (direct or indirect)
(including, without limitation, any damages or injury to persons,
property or the environment) and expenses (including, without
limitation, reasonable legal and accounting fees and other expenses
incurred in the investigation and defense of claims and actions)
(collectively, "Damages") resulting from, in connection with or arising
out of:
(i) any incorrect representation or warranty made by the
Seller or Tufco herein in any closing document delivered by
Seller or Tufco in connection herewith or therewith;
(ii) the failure of Seller or Tufco to comply with, or the
breach by Seller or Tufco of, any of the covenants of this
Agreement (including, without limitation, this Section), or
any of the additional agreements or documents delivered
pursuant to this Agreement;
(iii) the Excluded Liabilities; or
12
<PAGE> 13
(iv) any claim that Seller has not conveyed to Buyer good and
marketable title to the Purchased Assets, free and clear of
all security interests, liens, encumbrances and restrictions
(except for any software licenses related to the Intangible
Assets).
C. Buyer's Indemnification. Buyer shall indemnify and hold harmless
Seller and its respective officers, partners, directors, agents,
successors and assigns (the "Seller Group"), from and against and in
respect of any and all Damages resulting from, in connection with or
arising out of:
(i) any incorrect representation or warranty made by Buyer
herein or in any closing document delivered by Buyer in
connection herewith or therewith;
(ii) the failure of Buyer to comply with, or the breach of
Buyer of, any of the covenants of this Agreement; or
(iii) the operation of the AFH Business on and after the
Closing Date, including, without limitation, the Post-Closing
Liabilities; or
(iv) the physical damage caused by Buyer not covered by
insurance to the business premises of Seller arising from the
services and material handling described in Section 13, above.
D. Third Party Claims. In the event that any person or entity not a
party to this Agreement (including a government authority) shall levy
an assessment or commence or file, or threaten to commence or file, any
lawsuit or proceeding, which pending or threatened lawsuit or
proceeding or assessment may result in any Damages subject to
indemnification under this Agreement (collectively, the "Proceedings"),
then the indemnified party will give prompt written notice of such
Proceeding to the indemnifying party, and the indemnifying party shall
have the right to undertake the defense thereof by representatives
chosen by it; provided, however, that the failure to give such prompt
written notice shall not rescind or revoke the indemnifying party's
obligation to indemnify but shall only reduce the amount of the
indemnification to the extent that the indemnifying party is damaged by
such delay.
(i) If the indemnifying party undertakes the defense of any
such Proceeding, (A) the indemnifying party will not be liable
to the indemnified party for legal or other expenses incurred
by the indemnified party in connection with such defense
(other than as provided in the following clause (B)), (B) the
indemnified party shall, to the best of its ability, assist
the indemnifying party, at the expense of the indemnifying
party, in the defense of such Proceeding, and shall promptly
send to the indemnifying party, at the expense of the
indemnifying party, copies of any documents received by the
indemnified party which relate to such Proceedings and (C) the
indemnified party shall have the right to participate in the
defense of such Proceeding, at its own cost and expense;
13
<PAGE> 14
(ii) If the indemnifying party, within a reasonable time after
notice of any such Proceeding, fails to elect to defend the
indemnified party against which such Proceeding has been
asserted, the indemnified party shall (upon further written
notice to the indemnifying party) have the right to undertake
the defense, compromise, or settlement of such Proceeding on
behalf of and for the account and risk of the indemnifying
party, subject to the right of the indemnifying party to
assume the defense of such Proceeding at any time prior to
settlement, compromise, or final determination thereof; and
(iii) Anything in this Section 14 to the contrary
notwithstanding, whether or not the indemnifying party shall
have assumed the defense thereof, the indemnified party shall
not without the written consent of the Indemnifying party
(which consent shall not be unreasonably withheld or delayed),
settle or compromise any Proceeding or consent to the entry of
any judgment.
E. Monetary Limitation of Liability.
(i) A claim for indemnity for Damages under Sections 14.B. and
14.C. hereof, as the case may be, shall be effective only
after the aggregate amount of all Damages suffered by Buyer
Group or Seller Group, as the case may be, exceeds Twenty Five
Thousand Dollars ($25,000.00) and then only to the extent of
such excess;
(ii) The aggregate liability for each of Buyer and Seller for
claims by the Buyer Group or the Seller Group, or any member
thereof, as the case may be, for indemnity for Damages
pursuant to Sections 14.B. and 14.C. hereof, as the case may
be, is limited to the Purchase Price.
F. Sole Remedy. Buyer and Seller acknowledge and agree that their sole
and exclusive remedies with respect to any and all claims relating to
the subject matter of this Agreement (including without limitation
claims for breaches or representations, warranties, covenants, and
agreements contained in this Agreement) shall be pursuant to the
indemnification provisions set forth in this Section, except for claims
under the Agreement not to compete in which the parties seek to obtain
specific performance or any form of injunctive relief. In furtherance
of the foregoing, Buyer and Seller hereby waive, to the fullest extent
permitted under the applicable law, any and all rights, claims, and
causes of action of either of them against the other or any of their
respective affiliates as a matter of equity or under or based upon any
federal, state, local, or foreign statute, law, ordinance, rule or
regulation, or arising under or based upon common law or otherwise,
except to the extent provided in this Section 14.
14
<PAGE> 15
15. Miscellaneous:
A. Expenses. The parties hereto shall pay their own expenses,
including, without limitation, accounting and attorneys' fees incurred
in connection with the negotiation, preparation, and consummation of
this Agreement.
B. Notices. All notices, requests, demands, and other communications
hereunder shall be in writing and shall be deemed to have been duly
given when personally delivered or facsimiled with confirmation of
receipt, or two business days following deposit in the United States
mail, by certified or registered mail, first-class postage paid, return
receipt requested, and addressed to the appropriate party or parties as
follows:
If to the Seller
or Partners: Louis LeCalsey, CEO
Tufco, LP
3161 South Ridge Road
Green Bay, WI 54305
(920) 336-0054
With a copy to: Carl A. de Brito, Esq.
Battle Fowler, LLP
75 East 55th Street
New York, NY 10022
(212) 856-7817
If to the Buyer: Gregory P. Santaga, President
Green Bay Converting, Inc.
3480 Country Winds Court
Green Bay, WI 54311
(920) 983-9095
With a copy to: Jeffrey A. Santaga, Esq.
BLUMENFELD, ROSE & deJONG, S.C.
16620 West Bluemound Road, Suite 500
Brookfield, WI 53005
(414) 789-0111
or to such other address or to such other person as any party hereto
shall have last designated by notice to the other parties.
C. Right to Specific Performance. The Seller and Tufco agree that the
Purchased Assets as a going concern constitute unique property and that
there is no adequate remedy at law for the damage which Buyer might
sustain for the failure of any of the Seller and Tufco to
15
<PAGE> 16
consummate this Agreement, and, accordingly, Buyer is entitled to the
remedy of specific performance to enforce such consummation.
D. Public News Announcements. Except as Buyer and Seller shall mutually
agree in writing to the contrary, except as required by law, and except
for notices to Seller's employees, no announcement shall be made by any
party hereto prior to the Closing; provided, that nothing in this
Section 15.C. shall be deemed to prohibit Seller or any of its
affiliates from making any disclosure which it deems necessary or
advisable in order to satisfy its respective disclosure obligations
imposed by the law.
E. Entire Agreement. All understandings and agreements and the
transactions contemplated hereby concerning this Agreement heretofore
had between the parties are merged in this Agreement, the exhibits and
the schedules attached hereto, which alone fully and completely express
their agreement.
F. Binding Effect. This Agreement shall be binding upon each of the
parties hereto and their respective heirs, legal representatives,
successors and assigns. If Buyer shall assign or transfer the Purchased
Assets to an affiliate or a third party or otherwise within two (2)
years of Closing, then Buyer agrees that it shall also assign and
transfer its indemnification obligations set forth under Section 14.C.
hereof.
G. Applicable Law. This Agreement and all questions relating to its
interpretation, performance, enforcement and the rights and remedies of
the parties hereto shall be construed and determined in accordance with
the laws of and in the courts of the State of Wisconsin.
H. Severability. If any provision, clause or part of this Agreement, or
the application thereof under certain circumstances, is held invalid,
the remainder of this Agreement, or the applications of each provision,
clause or part under other circumstances, shall not be affected
thereby.
I. Headings. The section headings are for convenience and reference
only, and in no way define and limit the scope and content of this
Agreement or in any way affect its provisions.
J. Sales Tax. Except as specifically set forth herein, any sales tax or
other taxes levied by the State of Wisconsin or any other governmental
unit upon this transaction shall be paid by Buyer, and Buyer shall
deliver to Seller on the Closing Date a resale certificate in such form
satisfactory to Seller.
K. Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original and all of which together shall
constitute but one and the same instrument.
16
<PAGE> 17
L. Facsimile Signatures. The parties agree that facsimile signatures of
the parties to this Agreement or any of the instruments, documents or
certificates referred to herein shall be valid and binding. Each party
agrees that upon sending any instrument, document or certificate to any
other party by facsimile, the sending party will send the original
instrument to the recipient of the facsimile.
M. No Third party Beneficiaries. Nothing herein expressed or implied is
intended or shall be construed to confer upon or to give to any other
person or entity, other than the parties hereto and their successors
and permitted assigns, any rights or remedies under or by reason of
this Agreement.
N. Exhibits and Schedules. If a document or matter is disclosed in any
Exhibit or Schedule to this Agreement, it shall be deemed to be
disclosed for all purposes of this Agreement without the necessity of
repetition or specific cross-reference. All capitalized terms used in
any Exhibit or Schedule to this Agreement which are not otherwise
defined shall have the definitions specified in this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day, month and year first above written.
BUYER:
Green Bay Converting, Inc.
By: /s/ GREGORY P. SANTAGA
--------------------------------------------
Gregory P. Santaga, President
SELLER:
Tufco, LP
By: Tufco Tech, Inc., its General Partner
/s/ LOUIS LECALSEY 6/25/99
--------------------------------------------
Louis LeCalsey, Chief Executive Officer
TUFCO:
Tufco Technologies, Inc.
By: /s/ LOUIS LECALSEY
----------------------------------------
Name: Louis LeCalsey
--------------------------------------
Its: President & CEO
---------------------------------------
17
<PAGE> 1
EXHIBIT 10.2
LICENSE AGREEMENT
This LICENSE AGREEMENT (the "Agreement"), dated as of June 25, 1999, is
by and between TUFCO, LP, a Delaware limited partnership ("Licensor") and GREEN
BAY CONVERTING, INC., a Wisconsin corporation ("Licensee").
WHEREAS, Licensor and Licensee have entered into that certain Asset
Purchase Agreement, dated as of the date hereof (the "Asset Purchase
Agreement"), pursuant to which, among other things, Licensee has agreed to
purchase from Licensor and assume certain of Licensor's assets, liabilities and
obligations, upon the terms and conditions set forth in the Asset Purchase
Agreement;
WHEREAS, Licensor is the owner of the trademark "EXECULINE" (the
"Trademark") and of the pending application to register the Trademark in the
United States Patent and Trademark Office, Serial No.: 75/395,814;
WHEREAS, as a condition to the consummation of the transactions
contemplated by the Asset Purchase Agreement, Licensor has agreed to license to
Licensee, on an exclusive, royalty-free basis solely in the Away From Home
industrial marketplace, the Trademark for use on the Licensed Products (as
hereinafter defined) the Licensee manufactures, distributes, converts and sells
in its AFH Business (as hereinafter defined).
NOW, THEREFORE, for good and sufficient consideration, the sufficiency
of which is hereby acknowledged, the parties hereto agree as follows:
1. DEFINITIONS
1.1 "AFH Business" means the business of manufacturing and distributing
the Products.
1.2 "Products" mean the following products in the "Away From Home"
industrial marketplace: (i) multifold and single fold towels; (ii) C-fold
towels; (iii) center-pull towels; (iv) hard roll and kitchen towels; (v) jumbo
roll tissue; (vi) single roll tissue (one- and two-ply); (vii) untreated facial
tissue; and (viii) other products and services provided or supplied in the Away
From Home industrial marketplace (i.e., products and services used in washrooms
and workstations outside the home).
1.3 "Licensed Products" means Products which use or incorporate the
Trademark.
1.4 "Term" means the period beginning on the date hereof, and ending on
June 30, 2024, except as otherwise provided for in this Agreement.
2. General Terms And Conditions.
2.1 Description of Rights Granted. During the Term of this Agreement,
Licensor grants to the Licensee, and the Licensee accepts from Licensor, the
exclusive, royalty-free, right, license and privilege of using the Trademark
solely on the Products in the Away From Home Business. The rights granted in
this Section 2.1 are subject to all other terms and conditions contained in this
Agreement, including, without limitation, Section 7.4 below. Licensee shall have
no other rights in and to the Trademark except as described in this Agreement.
Nothing in this Agreement shall be construed to
<PAGE> 2
prevent Licensor from granting any other licenses for the use of the Trademark,
or from using the Trademark in any manner whatsoever, outside the Away from Home
Business.
2.2 Quality Control. Licensee hereby covenants and agrees to maintain
the highest standards of quality of the Licensed Products that have heretofore
been maintained by Licensor and associated with the Trademark. During the Term,
and upon delivery of written notice to the Licensee, Licensor shall have the
right, from time to time, to demand that Licensee provide Licensor with a
reasonable quantity of samples of the Licensed Products for Licensor's review.
If following such review, Licensor shall determine, in its reasonable judgment,
that the Licensed Products do not meet those high standards of quality, then
Licensor shall notify the Licensee in writing of such fact, and the Licensee
shall have thirty (30) days within which to deliver to Licensor Licensed
Products that meet such standards. If the Licensee fails to deliver Licensed
Products that meet such standards within such thirty (30) day period (provided
that if Licensee has commenced efforts in good faith to correct such standards
but such correction is not capable of being completed within said 30-day notice
period, said 30 days shall be extended to 90 days, provided Licensee continues
to make such efforts), the Licensor shall have the unilateral right, upon
delivery of written notice to Licensee, to terminate this Agreement.
3. Additional Representations, Warranties and Covenants Given by Licensee.
3.1 Licensed Products in Compliance with Applicable Laws. Licensee
agrees that the Licensed Products shall be manufactured, sold and distributed in
accordance with all applicable laws and regulations of the United States and any
other jurisdiction or territory in which the Licensed Products may be
manufactured, sold and/or distributed.
3.2 Manufacturing Operations in Compliance with Applicable Laws. (a)
Licensee agrees that the manufacturing operations used to make the Licensed
Product shall comply with all applicable laws, including but not limited to
legal requirements related to (i) the use of force labor or child labor, (ii)
environmental laws, or (iii) the transshipment of products for the purpose of
reducing tariffs or evading quota or country-of-origin restrictions. At
Licensor's request, Licensee agrees to provide written reports and/or completed
questionnaires that relate to Licensee's compliance with this Section 3.2(a).
Licensee shall immediately notify Licensor in writing if and when Licensee
becomes aware of a violation under this Section 3.2(a).
(b) Licensee agrees that Licensor and/or its designated agents
(including third parties) shall have the right to engage in reasonable
monitoring activities to confirm compliance with this Section 3.2(b). Licensor
shall limit such monitoring activities to no more than two inspections per
manufacturing site per year.
3.3 Licensor's Continuing Rights in the Trademark. Licensee agrees to
cooperate fully and in good faith with Licensor, at Licensor's expense, for the
purpose of preserving Licensor's rights in and to the Trademark. The parties
agree that nothing in this Agreement shall be construed as an assignment or
grant to the Licensee of any right, title or interest in or to the Trademark or
Licensor's name except as specifically provided for in this Agreement, and that
all other rights in the Trademark are retained by Licensor. The parties hereto
agree that at the expiration or earlier termination of this Agreement, Licensee
will be deemed to have assigned, transferred and conveyed to Licensor any trade
rights, equities, goodwill, titles or other rights in and to the Trademark which
may have been obtained by Licensee or which may have vested in Licensee, and
that Licensee will execute any instruments requested by Licensor to
2
<PAGE> 3
accomplish or confirm the foregoing. Any such assignment, transfer or conveyance
shall be without consideration other than the mutual covenants and
considerations of this Agreement.
4. Additional Representations, Warranties and Covenants Given by Licensor.
4.1 Licensor's Representations of Ownership Rights in the Trademark.
Licensor represents, warrants and covenants that it is the owner of the
Trademark and of the pending application to register the Trademark in the in the
United States Patent and Trademark Office, under the Serial No.: 75/395,814.
5. Licensee's Agreement to Indemnify Licensor. Licensee agrees to indemnify
Licensor, its directors, officers, stockholders, affiliates, agents and
employees (collectively the "Indemnitees") and agrees to defend the Indemnitees
against and hold them harmless from any claims, suits, loss and damage arising
out of any allegedly unauthorized use of any patent, process, idea, method,
device, trademark, or design by Licensee (other than the use of the Trademark as
provided for in this Agreement) in connection with the Licensed Products and
also from any claims, suits, loss and damage arising out of any alleged defects
in the Licensed Products. Licensee agrees that it will obtain, at its own
expense, product liability insurance from a recognized insurance company
authorized to do business in the United States, including contractual liability
endorsement, providing adequate protection (at least in the unencumbered amount
of $1,000,000 combined single limit) for the Indemnitees (as well as for
Licensee) against any claims, suits, loss or damage arising out of any alleged
defects in the Licensed Products. As proof of such insurance, a fully paid
certificate of insurance naming the Indemnitees as additional insured parties
will be submitted to Licensor by Licensee before any Licensed Product is
distributed or sold.
6. Breach of the Agreement; Effects of the Expiration or Termination of the
Agreement.
6.1 Party's Right to Terminate Agreement Upon Breach by the Other
Party. If the Licensee or Licensor materially breaches any of its obligations
under this Agreement, the non-breaching party shall have the right to terminate
this Agreement upon thirty days' written notice to the breaching party, and such
notice of termination shall become effective unless the breaching party shall
cure the breach within the thirty-day notice period (provided that if within
said 30-day period, Licensee has commenced efforts in good faith to cure such
breach, and the breach is not capable of being cured within said 30-day notice
period, said 30 days shall be extended to 60 days, provided Licensee continues
to make such efforts). The above notwithstanding, the License shall terminate
immediately upon a breach of Sections 2.1, 5 and/or 7.4 hereof.
7. Miscellaneous Provisions.
7.1 Excuse for Nonperformance. Licensee and Licensor shall be
temporarily relieved from their obligations under this Agreement in the event
that governmental regulations or other causes arising out of a state of national
emergency or war or causes beyond the reasonable control of the parties render
performance impossible. The relief shall last as long as such conditions last.
If such conditions last for more than ninety days, either party may, at its
option, terminate the Agreement by providing the other party with thirty days'
prior written notice.
7.2 Notices. All notices, demands, and other communications required by
this Agreement, and all payments to be made pursuant to this Agreement, shall be
sent to the addresses set forth below unless and until a notification of a
change of address is given in writing. All notices, demands, payments
3
<PAGE> 4
and other communications shall be deemed to have been duly given or made (i)
when delivered personally, (ii) when sent by telefax to the telefax number on
the address shown below, (iii) the second day following the day of delivery
prepaid to a national air courier service, or (iv) three business days after
deposit in the U.S. mails, certified or registered, postage prepaid, in each
case addressed to the party to whom notice is being given at the addresses set
forth below.
If to the Licensor: Louis LeCalsey, CEO
Tufco, LP
3161 South Ridge Road
Green Bay, WI 56305
(920) 336-0054
With a copy to: Carl A. de Brito, Esq.
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
(212) 856-7817
If to the Licensee: Gregory P. Santaga, President
Green Bay Converting, Inc.
3480 County Winds Court
Green Bay, WI 56311
(920) 983-9095
With a copy to: Jeffrey A. Santaga, Esq.
Blumenfeld, Rose & deJong, S.C.
16620 West Blueground Road, Suite 500
Brookfield, WI 56005
(414) 789-0111
7.3 No Joint Venture. Nothing contained in this Agreement shall be
construed to place the parties in the relationship of partners or joint
venturers, and neither party shall have any power to obligate or bind the other
party in any manner. Consistent with a licensing arrangement, and without
limiting or otherwise affecting any term or condition of this Agreement,
Licensee acknowledges its responsibility to, among other things, manufacture
and/or source, package, transport, promote, advertise, distribute and sell the
Licensed Products as provided for under this Agreement.
7.4 No Sublease, Assignment, Etc. by Licensee. This Agreement, and all
rights and duties hereunder, are personal to the Licensee and shall not, without
Licensor's prior written consent, be assigned, mortgaged sublicensed, liened or
otherwise sold, transferred or encumbered.
7.5 Governing Law. This Agreement shall be construed in accordance with
the laws of the State of Wisconsin.
4
<PAGE> 5
7.6 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute a one and the same instrument.
7.7 Interpretation of the Agreement. The language of all parts of this
Agreement shall in all cases be construed as a whole, according to its fair
meaning and not strictly for or against either of the parties. Section headings
herein are for convenience of reference only and are without substantive
significance.
7.8 Survival of Obligations. The respective obligations of the parties
under this Agreement, which by their nature would continue beyond the expiration
or termination date of this Agreement, including but not limited to
indemnification, shall survive the expiration or termination of this Agreement
7.9 Severability of Provisions. The terms of this Agreement are
severable and the invalidity of any term of this Agreement shall not affect the
validity of any other term.
7.10 Exhibits. The various Exhibits referred to in this Agreement and
attached hereto are an integral part of this Agreement and are incorporated
herein by this reference.
7.11 Waiver; Entire Agreement. None of the terms of this Agreement can
be waived or modified except by an express agreement in writing signed by both
parties. The failure of either party to enforce, or delay in enforcing, any of
its rights under this Agreement shall not be deemed a continuing waiver or a
modification, and either party may, within the time provided by applicable law,
commence appropriate legal proceedings to enforce any or all of such rights.
This Agreement represents the entire understanding of the parties, and there are
no representations, promises, warranties, covenants or undertakings other than
those contained in this Agreement. No person, firm, group or corporation other
than Licensee and Licensor shall be deemed to have acquired any rights by reason
of anything contained in this Agreement.
[SIGNATURE PAGES FOLLOW]
5
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day, month and year first above written.
LICENSOR:
GREEN BAY CONVERTING, INC.
By: /s/ GREGORY P. SANTAGA
----------------------------------------
Gregory P. Santaga
President
LICENSEE:
TUFCO, LP
By: Tufco Tech, Inc., its General Partner
By: /s/ LOUIS LECALSEY
----------------------------------
Louis LeCalsey
Chief Executive Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,515,244
<SECURITIES> 0
<RECEIVABLES> 12,131,784
<ALLOWANCES> 0
<INVENTORY> 7,971,461
<CURRENT-ASSETS> 22,946,046
<PP&E> 16,813,948
<DEPRECIATION> 0
<TOTAL-ASSETS> 58,972,633
<CURRENT-LIABILITIES> 11,246,901
<BONDS> 0
0
0
<COMMON> 44,986
<OTHER-SE> 34,272,493
<TOTAL-LIABILITY-AND-EQUITY> 58,972,633
<SALES> 56,275,511
<TOTAL-REVENUES> 56,275,511
<CGS> 47,007,109
<TOTAL-COSTS> 47,007,109
<OTHER-EXPENSES> 6,186,515
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 851,776
<INCOME-PRETAX> 3,257,406
<INCOME-TAX> 1,207,143
<INCOME-CONTINUING> 2,050,263
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,050,263
<EPS-BASIC> .46
<EPS-DILUTED> .46
</TABLE>
