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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
December 2, 1996
Date of report (Date of earliest event reported)
SCHMITT INDUSTRIES, INC.
(Exact Name of Registrant as Specified in Its Charter)
Oregon 0-23996 93-1151989
State or Other (Commission File Number) (IRS Employer
Jurisdiction of Incorporation) Identification Number)
2765 N.W. Nicolai Street
Portland, Oregon 97210
(Address of Principal Executive Offices) (Zip Code)
(503) 227-7908
(Registrant's Telephone Number,
Including Area Code)
Former Name or Former Address, if Changed Since Last Report: N/A
The total number of pages contained in this filing is 0010
Exhibit Index is located on page 00004
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ITEM 5. OTHER EVENTS.
Schmitt Industries, Inc. (the "Company") has entered into an agreement,
effective December 2, 1996, pursuant to which it has acquired the assets of the
grinding wheel balancer division (the "balancer division") of Hofmann
Maschinenbau GmbH of Pfungstadt, Germany ("Hofmann"). The balancer division of
Hofmann designs, assembles and markets automatic grinding wheel balancers,
vibration analysis equipment and related miscellaneous balancing devices for the
grinding industry. Current annualized sales of the balancer division total
approximately $2.8 million. The division employs 15 employees and distribution
agents throughout Europe, Asia and Africa.
The Company will operate the newly acquired balancer division through a
wholly owned German subsidiary, established December 2, 1996 and located in
Pfungstadt, Germany, named "Schmitt Hofmann Systems GmbH." The Company expects
to continue to manufacture and market the balancer division's products,
including the Hofmann Hydrokompenser, internal spindle balancers and ring
balancers, as well as market the Company's existing SBS external balancer, from
Germany.
The Company paid $496,000 cash for the balancer division's assets
including, but not limited to, drawings, designs, trademarks, trade secrets,
customer lists, patents, inventory, furniture and miscellaneous shop equipment,
open sales orders and a worldwide distribution network. The Company initially
capitalized its new subsidiary with $67,000 and expects to loan the subsidiary
on a short-term basis additional modest amounts during the next [12] months.
Hofmann Maschinenbau GmbH was founded in 1935 and produced a variety of
balancing equipment during its many years of operations. The Company purchased
the balancer division from the trustees of Hofmann who have owned and operated
Hofmann since October 1995 when Hofmann (with approximately 125 employees) was
placed in bankruptcy due primarily to poor economic conditions in Germany.
ITEM 7. FINANCIAL STATEMENT AND EXHIBITS.
(c) Exhibits.
Exhibit 99.2 - Sales Agreement, dated November 19, 1996, between Herr Dirk
Pfeil and BUR-Vermogensverwaltung GmbH (Schmitt Hofmann Systems GmbH).
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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 hereunto duly authorized.
SCHMITT INDUSTRIES, INC.
Date: December 2, 1996 /s/ Wayne A. Case
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Wayne A. Case
President and Chief Executive Officer
/s/ Annie Windsor
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Annie Windsor, Chief Financial Officer
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EXHIBIT INDEX
Number Description Page Number
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99.2 Sales Agreement, dated November 19, 1996, between
Herr Dirk Pfeil and BUR-Vermogensverwaltung
GmbH (Schmitt Hofmann Systems GmbH).
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SALES CONTRACT
between
Herr Dirk Pfeil
receiver of
Hofmann Maschinenbau GmbH
Werner-von-Siemens-Strasse 2, 64319 Pfungstadt
Eschersheimer Landstrasse 60
60332 Frankfurt/Main
-Seller-
and
B U R - Vermogensverwaltung GmbH
(registered at the court of Mannheim under HRB 16085)
in future registered under the name
Schmitt Hofmann Systems GmbH
represented by its Geschaftsfuhrer Wayne Case
who has the right for exclusive representation
Mannheimer Strasse 66
68782 Bruhl
-Buyer-
PRELIMINARY STATEMENT
On 1 October 1996 the follow up bancruptcy proceedings were initiated against
Hofmann Maschinenbau GmbH (Common Debtor) in Pfungstadt.
The Amtsgericht Darmstadt appointed seller as the trustee in bancruptcy.
Buyer knows that within the framework of the bancruptcy proceedings seller
continues with the business of the common debtor.
The section "Schwingungsmesstechnik" which buyer intends to take over forms part
of the business of the common debtor.
Subject of this sales contract are the rights and items which are in direct
connection with the division "Schwingungsmesstechnik" of the business of the
common debtor in Pfungstadt respectively which are located there.
Buyer knows that the common debtor does not own any real estate. The present
locality is rented from Wegmann & Co and therefore is not part of the sales
contract.
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Furthermore buyer knows that seller obtained his knowledge only within the
period of carrying on the business within the framework of the bancruptcy
proceedings. Seller will not make further guarantees which are not mentioned in
this contract.
On the basis of these prerequisites the two parties made the following
arrangements:
1. Buyer acquires the following rights and items which are in connection with
the course of business of the common debtor in Pfungstadt for the division
"Schwingungsmesstechnik":
a. Complete machinery, tools and pieces of furniture according to
enclosed list annex I.
As far as single items are not mentioned in the list, they are
nevertheless considered to be sold to buyer as far as they have been
used exclusively for this division by seller.
b. Raw material, auxiliary material and factory supplies as well as
unfinished goods and finished goods as mentioned in the enclosed list
annex II.
c. Know-how available by handing over all documents, plans, technical
drawings, piece lists, work plans, list of customers, purchasing
documents, calculations, customer documents etc. available in
Pfungstadt with the common debtor according to the enclosed list annex
III.
d. Commercial patent rights which can be transferred and which are in
possession of the common debtor according to the enclosed list annex V.
For the case that a formal transfer of the patent rights to buyer is
not possible seller grants buyer an unlimited, irrevocable and
exclusive usufractuary right. In this case buyer bears the costs for
the maintenance of the patent rights.
Seller ensures that all items and rights sold are at his free disposal and
can be transferred free from rights of third parties.
However, seller points out that with respect to the patent rights the
employee inventors have a legal preemptive right.
2. The purchase price for the objects and rights mentioned under 1. is
DM 750.000,00
plus 15% value-added tax, in case this tax has to be paid.
The net purchase price of DM 750.000,00 is payable at 2 December 1996.
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The purchase price will be paid in the bancruptcy deposit account
Number: 26 001008
with: B H F Bank AG, Frankfurt/Main
bank code number: 500 202 00.
It is the opinion of both parties that all items are sold within the
framework of a sale of a whole business according to Section 1 Sec. 1 a
of the VAT-law and that consequently no VAT has to be paid. For the case
that this opinion should not be correct buyer obliges himself to pay the
VAT at the rate valid at the moment, which is 15% on the purchase price to
seller.
Seller only has to pay VAT if and as far as the financial authorities
in charge of buyer's affairs accept VAT as an reimbursement for buyer. In
this case seller will make out an invoice on which VAT is shown
separately for buyer.
Under the condition that the financial authorities do not have any
counterclaims which can be set off against seller, buyer transfers his
right for VAT-refund against the financial authorities, which exists
because of this sales contract, to seller. Consequently seller can set off
the transferred right for VAT-refund against his VAT liability to the
financial authorities due to this sales contract according to Section 46
Sec. 2 AO.
The rights are to be transferred on an official form-sheet.
In case that the financial authorities do not agree with the transfer or
for the case that a transfer may not be possible for other reasons the
whole amount for value-added tax has to be paid to seller until 15. January
1997.
In case that buyer does not pay the complete purchase price in time
accumulated interest of 10% p.a. have to be paid from the date when payment
was due.
3. The acquired rights and items are taken over by the buyer as inspected; he
knows about their condition. Warranty claims, defects and other warranties
of any kind are excluded. The buyer renounces on any possible warranties
for cancellation, reduction of the sales price, compensation payment or an
eventual right of rescission from this contract.
The right of rescission mentioned in Section 16 of this contract is not
affected hereby.
4. The transfer is valid retroactive from 1 December 1996 on, as far as the
seller received the net sales price of DM 750.000,00 by 2 December 1996.
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Seller retains title to the items sold until complete payment of the sales
price has been effected.
Buyer has the right to assemble the goods in stock in the ordinary course
of business and to sell them as long as he did not delay payment.
Assembly or change always takes place for seller as a producer, however,
without obligation for him.
Already now buyer completely transfers the claims resulting from reselling
goods under reservation of ownership to the seller.
5. Seller will make sure that the normal course of business is continued until
the date of transfer.
Buyer obliges himself to deal with the orders received until the date of
transfer and to carry out the orders properly.
This is also valid for orders submit to suppliers by seller etc.
Seller will be reimbursed by buyer for eventual prepayments for goods which
have not yet been delivered or services which have not yet been rendered.
Incoming invoices for services already rendered at the date of transfer or
goods already received will be settled by the seller.
6. Immediately after having signed this contract both parties will talk about
all present contracts. They will decide which contracts will be terminated
by seller before the date of transferral.
As far as seller already made payments resulting from present contracts
which also concern the period after the transferral buyer will pay back
these amounts to the seller.
7. Buyer takes over those warranty and guarantee obligations (reworking and
delivery of spare parts) which result from orders dealt with after the
opening of the bancruptcy proceedings or of orders which had been in
process.
8. Seller states the received orders of the division "Schwingungsmesstechnik"
as of 18 November 1996 according to the enclosed list annex IV a) and b).
Orders which had been carried out at the date of the transfer and services
which had been rendered at that time will be dealt with between seller and
customer. Deliveries and services which took place after the transferral
will be dealt with between buyer and customer.
Both parties will do their best in order to transfer the orders received
until the date of transferral from seller to buyer in accordance with the
customer.
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9. Seller is obliged to continue the initiated legal proceedings against Herr
Dionys Hofmann respectively his companies concerning
"Schwingungsmesstechnik and to support buyer also in future in similar
conflicts with Herr Dionys Hofmann or one of his companies to the best of
his abilities.
10. Buyer knows that the common debtor employs 20 persons in the division
"Schwingungsmesstechnik" in Pfungstadt.
However, buyer is only willing to employ 14 persons maximum.
Therefore buyer is granted the right to ask seller for paying DM 35.000,00
for each more person buyer has to employ according to the regulations of
Section 613 a BGB.
Buyer may decide about the employees he intends to take over.
Seller obliges himself to regulate all claims of taken over employees
existing at the date of transfer within the framework of the bancruptcy
proceedings so that for buyer no obligations may result from this.
All claims arising after the date of transfer will be dealt with by buyer.
Holiday entitlements and holiday pay of the employees taken over will be
demarcated as of the date of transferral.
Seller has no pension obligations to the employees taken over.
11. Buyer has the right to make use of the localities used until now by the
division "Schwingungsmesstechnik" until 31 January 1997 at the latest
against payment of a monthly flat rate of DM 10.000,00 plus VAT.
Seller does assume any warranty obligations for these localities.
12. In future, buyer will pass orders to seller for part "zerspanende
Fertigung". Buyer or third persons named by buyer will have the
possibility to observe the execution of these orders in order to get
fabrication-know-how.
Hereby, seller will help buyer and will make sure that competitors of buyer
do not have access to this know-how as to other know-how.
13. Both parties will charge an external EDP-company to transfer the technical
and trading data concerning the objects sold to buyer and delete them in
the EDP-system of seller.
The costs herefore are borne by buyer.
Existing backup copies will be handed over to buyer.
14. Buyer is allowed to take out tools of a value of maximum DM 5.000,00 from
the tools in stock in Pfungstadt in accordance with seller.
15. Seller has the right to withdraw from this sales contract for the case that
the buyer delays payment for more than three days.
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Withdrawal from the contract has to be carried out by written notice to
buyer.
16. Buyer has the right to withdraw from this contract if Mr. Menigat does not
renounce on his preemptive right according to the employee invention law.
The right for withdrawal has to be carried out until 26 November 1996 by
written notice to seller.
17. If single regulations of this contract were or become invalid, the validity
of the whole contract is not affected.
Both parties will do their best to come to a new agreement which
economically comes as close as possible to the invalid regulations and is
legally valid.
18. Place of performance and jurisdiction is Frankfurt/Main.
Frankfurt/Main, 19 November 1996
/s/ Dirk Pfeil /s/ Wayne A. Case
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- - Seller - - Buyer -
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