<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
For Quarter Ended Commission File Number
March 31, 1998 1-13906
BALLANTYNE OF OMAHA, INC.
-------------------------
(Exact name of Registrant as specified in its charter)
Delaware 47-0587703
-------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
4350 McKinley Street, Omaha, Nebraska 68112
-------------------------------------------
(Address of principal executive offices including zip code)
Registrant's telephone number, including area code:
(402) 453-4444
Indicate by check mark whether 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 of the Registrant's
classes of common stock as of the latest practicable date:
Class Outstanding as of April 9, 1998
- ------------------
Common Stock, $.01 9,215,101 shares
par value
<PAGE>
BALLANTYNE OF OMAHA, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Part I. Financial Information
Item 1. Consolidated Financial Statements Page
<S> <C>
Consolidated Balance Sheets-March 31, 1998 and December 31, 1997 . . . . . . . 2
Consolidated Statements of Income- Three Months ended
March 31, 1998 and 1997. . . . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Stockholders' Equity-
Three Months ended March 31, 1998 . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows- Three Months ended
March 31, 1998 and 1997 . . . . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Consolidated Financial Statements
Three Months ended March 31, 1998 . . . . . . . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition. . . . . . . . . . . . . . . . . . . .10
Part II. Other Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
</TABLE>
1
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Ballantyne of Omaha, Inc. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
------------- ------------
(Unaudited)
Assets
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 4,901,266 $ 7,701,507
Accounts receivable, net 11,306,850 11,728,231
Inventories 19,431,146 17,445,632
Recoverable income taxes - 490,766
Deferred income taxes 626,133 626,133
Other current assets 88,575 118,028
------------- ------------
Total current assets 36,353,970 38,110,297
Plant and equipment, net 8,124,458 7,399,990
Other assets, net 1,410,837 1,242,211
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Total assets $ 45,889,265 $ 46,752,498
------------- ------------
------------- ------------
Liabilities and Stockholders' equity
Current liabilities:
Current installments of long-term debt $ 70,000 $ 70,000
Accounts payable 5,210,101 8,351,392
Accrued expenses 2,119,943 2,286,001
Income taxes payable 550,765 -
------------- ------------
Total current liabilities 7,950,809 10,707,393
Deferred income taxes 250,315 250,315
Long-term debt, excluding current installments 130,204 171,761
Stockholders' equity:
Preferred stock, par value $.01 per share;
authorized 1,000,000 shares, none outstanding - -
Common stock, par value $.01 per share;
authorized 25,000,000 shares; issued
and outstanding 9,040,896 shares at
March 31, 1998 and 9,032,396 shares
at December 31, 1997 90,409 90,324
Additional paid-in capital 22,820,078 22,786,673
Retained earnings 14,647,450 12,746,032
------------- ------------
Total stockholders' equity 37,557,937 35,623,029
------------- ------------
Total liabilities and stockholders' equity $ 45,889,265 $ 46,752,498
------------- ------------
------------- ------------
See accompanying notes to consolidated financial statements
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Ballantyne of Omaha, Inc. and Subsidiaries
Consolidated Statements of Income
Three Months Ended March 31, 1998 and 1997
(Unaudited)
1998 1997
------------ ------------
<S> <C> <C>
Net revenues $ 17,271,887 $ 14,724,814
Cost of revenues 11,963,465 10,368,767
------------ ------------
Gross profit 5,308,422 4,356,047
Operating expenses:
Selling 862,235 563,544
General and administrative 1,570,673 1,377,224
------------ ------------
Total operating expenses 2,432,908 1,940,768
------------ ------------
Income from operations 2,875,514 2,415,279
Interest income 73,170 64,363
Interest expense (4,190) (11,183)
------------ ------------
Net interest income 68,980 53,180
------------ ------------
Income before income taxes 2,944,494 2,468,459
Income taxes 1,043,076 900,259
------------ ------------
Net income $ 1,901,418 $ 1,568,200
------------ ------------
------------ ------------
Net income per share:
Basic $ 0.21 $ 0.18
------------ ------------
------------ ------------
Diluted $ 0.20 $ 0.17
------------ ------------
------------ ------------
Weighted average shares outstanding:
Basic 9,036,535 8,569,785
------------ ------------
------------ ------------
Diluted 9,491,104 9,311,987
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE>
<TABLE>
<CAPTION>
Ballantyne of Omaha, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
Three Months Ended March 31, 1998
(Unaudited)
Additional
Preferred Common paid-in- Retained
stock stock capital earnings Total
--------- ------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1997 - $90,324 $22,786,673 $12,746,032 $35,623,029
Net income 1,901,418 1,901,418
Issuance of 8,500 shares of
common stock upon exercise
of stock options - 85 33,405 - 33,490
--------- ------- ----------- ----------- -----------
Balance at March 31, 1998 - $90,409 $22,820,078 $14,647,450 $37,557,937
--------- ------- ----------- ----------- -----------
--------- ------- ----------- ----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE>
<TABLE>
<CAPTION>
Ballantyne of Omaha, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Three Months Ended March 31, 1998 and 1997
(Unaudited)
1998 1997
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,901,418 $ 1,568,200
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 262,130 188,172
Changes in assets and liabilities, net
of assets acquired:
Accounts receivables 421,381 747,493
Inventories (1,963,514) (1,769,463)
Other current assets 29,453 71,492
Accounts payable (3,141,291) (311,840)
Accrued expenses (166,058) (277,316)
Income taxes 1,041,531 829,502
Other assets (215,343) (18,623)
------------ ------------
Net cash provided by (used in)
operating activities (1,830,293) 1,027,617
------------ ------------
Cash flows from investing activities:
Purchase of net assets (575,000) -
Capital expenditures (378,438) (353,200)
------------ ------------
Net cash used in investing
activities (953,438) (353,200)
------------ ------------
Cash flows from financing activities:
Repayments of long-term debt and
revolving credit facility (50,000) (458,302)
Proceeds from exercise of stock options 33,490 -
------------ ------------
Net cash used in financing activities (16,510) (458,302)
------------ ------------
Net increase (decrease) in cash
and cash equivalents (2,800,241) 216,115
Cash and cash equivalents at beginning of period 7,701,507 6,042,593
------------ ------------
Cash and cash equivalents at end of period $ 4,901,266 $ 6,258,708
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements
5
<PAGE>
Ballantyne of Omaha, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
Three Months Ended March 31, 1998
1. Company
Ballantyne of Omaha Inc., a Delaware corporation ("Ballantyne" or the
"Company"), and its wholly-owned subsidiaries, Strong Westrex, Inc.,
Ballantyne Fabricators, Inc., Xenotech Rental Corp. and Flavor Crisp of
America, Inc., design, develop, manufacture and distribute commercial motion
picture projection equipment, lighting systems and restaurant equipment. The
Company's products are distributed worldwide through a domestic and
international dealer network and are sold to major movie exhibition
companies, sports arenas, auditoriums, amusement parks, special venues,
restaurants, supermarkets and convenience food stores. Approximately 22.8%
of the Company's common stock is owned by Canrad of Delaware, Inc. ("Canrad")
which is an indirect wholly-owned subsidiary of ARC International Corporation.
2. Summary of Significant Accounting Policies
The principal accounting policies upon which the accompanying consolidated
financial statements are based are summarized as follows:
a. Basis of Presentation
The consolidated financial statements include the accounts of the Company and
its subsidiaries. All significant intercompany balances and transactions have
been eliminated in consolidation. The consolidated financial statements have
been prepared in conformity with generally accepted accounting principles and
include all adjustments which are, in the opinion of management, necessary for a
fair presentation of the results for the periods presented. All such
adjustments are, in the opinion of management, of a normal, recurring nature.
While the Company believes that the disclosures presented are adequate to make
the information not misleading, it is suggested that these consolidated
financial statements be read in connection with the consolidated financial
statements and related notes included in the Company's latest annual report on
Form 10-K.
b. Stock Splits
The Company's Board of Directors declared a 3-for-2 stock split of the
Company's common stock on April 21, 1998. The stock split was in the form of
a 50% common stock dividend payable June 12, 1998 to shareholders of record
on May 29, 1998. Share information and per share prices in the accompanying
financial statements have not been adjusted for this stock split.
The Company's Board of Directors declared a 3-for-2 stock split of the Company's
common stock on January 29, 1997. The stock split was in the form of a 50%
common stock dividend payable March 5, 1997 to shareholders of record on
February 10, 1997. Per share data reflect this stock split as of the earliest
period presented.
6
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c. Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market and
include appropriate elements of material, labor and manufacturing overhead.
d. Revenue Recognition
The Company recognizes revenue from product sales upon shipment to the customer.
Revenues related to equipment rental and services are recognized as earned over
the terms of the contracts.
e. Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these consolidated financial
statements in conformity with generally accepted accounting principles. Actual
results could differ from those estimates.
f. Earnings Per Common Share
Earnings per share of common stock have been computed on the basis of the
weighted average number of shares of common stock outstanding after giving
effect to equivalent common shares from dilutive stock options. In February
1997, the Financial Accounting Standards Board ("FASB") issued SFAS No. 128
"Earnings Per Share" which revised the calculation and presentation provisions
of Accounting Principles Board ("APB") Opinion 25 and related interpretations.
SFAS No. 128, which was effective for periods ending after December 15, 1997,
requires companies to present both currently and retroactively, basic earnings
per share and diluted earnings per share instead of primary and fully-diluted
earnings per share which was previously required under APB Opinion 25.
Accordingly, earnings per share for all periods presented have been restated to
apply the provisions of SFAS No. 128. Diluted earnings per share includes an
increase in the weighted average shares outstanding for dilutive stock options
of 454,569 and 742,202 for the three months ended March 31, 1998 and 1997,
respectively. Share information and per share prices have been adjusted for the
stock split in 1997 but not for the stock split declared on April 21, 1998.
g. Reclassifications
Certain of the 1997 amounts have been reclassified to conform with the 1998
presentation.
3. Equity Offerings
On June 30, 1997, the Company completed a public offering pursuant to a
Registration Statement on Form S-3 (the "Offering"). Pursuant to the Offering,
Canrad sold 1,932,860 shares of Ballantyne common stock to the public at the
price of $16.875 per share. In addition, Canrad granted the Underwriters an
option to purchase an aggregate of up to 333,729 additional shares of common
stock at $16.875 per share less underwriting discounts and commissions to cover
over-allotments, if any. The Underwriters purchased all 333,729 shares. While
the Company did not offer any shares or pay any expenses incurred in the
Offering, the Company did receive approximately $1,146,000 from the exercise
7
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of a warrant and certain stock options, which in aggregate totaled 280,750
shares and were sold in connection with the Offering.
Share information and per share prices have not been adjusted for the stock
split declared on April 21, 1998 for the above Offering.
4. Inventories
Inventories consist of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
------------- -------------
<S> <C> <C>
Raw materials and supplies $ 14,229,569 $ 13,857,783
Work in process 3,107,635 2,451,078
Finished goods 2,093,942 1,136,771
------------- -------------
$ 19,431,146 $ 17,445,632
------------- -------------
------------- -------------
</TABLE>
5. Acquisitions
During January of 1998, the Company purchased substantially all of the net
assets of Sky-Tracker of Florida, Inc. ("Sky-Tracker of Florida") for cash of
$575,000. Sky-Tracker of Florida is a rental agent and distributor of high
intensity promotional searchlights. If this business combination had occurred on
January 1, 1997, the pro forma operations of the Company would not have been
materially different than that reported in the accompanying consolidated
statements of income.
During September of 1997, the Company acquired certain assets of Sky-Tracker
of America, Inc. ("Sky-Tracker") for cash of approximately $400,000. In
connection with the purchase, the Company recorded approximately $167,000 of
Goodwill which will be amortized over 5 years. In addition, the Company
entered into a 3 year non-compete agreement with the owner of Sky-Tracker.
The agreement is for a total of $60,000 payable in equal installments and is
included in other assets and long-term debt in the accompanying consolidated
balance sheets.
Effective April 1, 1997, the Company purchased certain net assets, primarily
accounts receivable, inventories and fixed assets of Xenotech, Inc.
("Xenotech") for cash of $750,000. The Company also assumed liabilities of
$1,175,897. The purchase price has been assigned to the assets acquired and
liabilities assumed based upon the fair market value of such assets and
liabilities. No Goodwill was recorded in connection with the acquisition.
Xenotech produces, sells and rents a complete line of stationary searchlights
and computer operated lighting systems for the motion picture production,
television, live entertainment, theme parks and architectural industries. In
addition, the Company entered into a 5-year non-compete agreement with
Xenotech's founder and sole proprietor. The agreement is for a total of
$250,000 payable by the Company in equal installments of $50,000. The
present value of the non-compete payments has been included in other assets
and long-term debt in the accompanying consolidated balance sheets.
These acquisitions have been accounted for as purchases and, accordingly, the
Company's consolidated financial statements reflect the operations of the
acquired companies subsequent to the effective date of the acquisitions.
8
<PAGE>
6. Subsequent Event
Effective April 1, 1998, the Company purchased substantially all of the net
assets of Design and Manufacturing, Ltd. ("Design") for cash and stock of
approximately $5.5 million. The Company also assumed liabilities of
approximately $207,000. The cash portion of the purchase price was financed
through operating cash flows. The purchase price was assigned to the assets
acquired and liabilities assumed based upon the fair market value of such
assets and liabilities. In connection with the acquisition, Goodwill of
approximately $2.5 million was recorded. Design is a leading supplier of film
platter systems to the motion picture exhibition industry and was a vendor of
the Company.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This 10-Q report contains certain forward-looking statements and
information relating to the Company that are based on the beliefs of Company
management. Such statements reflect the current view of the Company with respect
to future events and are subject to certain risks, uncertainties and
assumptions. Should one or more of such risk or uncertainties materialize, or
should underlying assumptions prove incorrect, actual results may vary
materially from those described herein as believed, estimated or expected.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THE THREE MONTHS
ENDED MARCH 31, 1997
Net revenues for the three months ended March 31, 1998 (the "1998 Period")
increased $2.5 million or 17.3% to $17.3 million from $14.7 million for the
three months ended March 31, 1997 (the "1997 Period"). The following table shows
comparative net revenues of theatre and lighting and restaurant products for the
respective periods:
<TABLE>
<CAPTION>
Three Months Ended March 31,
---------------------------------
1998 1997
------------- -------------
<S> <C> <C>
Theatre and lighting $ 16,740,047 $ 14,112,115
Restaurant 531,840 612,699
------------- -------------
Total net revenues $ 17,271,887 $ 14,724,814
------------- -------------
------------- -------------
</TABLE>
The increase for the 1998 Period reflects higher revenues from the sale
of theatre products and the sale and rental of lighting products. The
increase in theatre products reflects increased sales of commercial motion
picture projector equipment which rose $1.1 million or 10.1%. This increase
was mainly attributable to increased sales of such equipment to domestic
customers. Also contributing to the increase in theatre sales were higher
sales of ISCO-Optic lenses and theatre replacement parts. Sales of
ISCO-Optic lenses increased approximately $119,000 or 9.4% to $1.4 million
from $1.3 million in the 1997 Period, while sales of replacement parts
increased approximately $307,000 or 19.0% to $1.9 million from $1.6 million
in the 1997 Period. ISCO-Optic is a trademark of ISCO-Optic GmbH. These
increases reflect the continued demand for theatre products and a higher
installed base of motion picture projectors. Net revenues from lighting
products increased $1.1 million or 190.8% from $599,000 in the 1997 Period to
$1.7 million in the 1998 Period. The increase primarily reflects the
acquisition of Xenotech, Inc. in the second quarter of 1997, the acquisition
of Sky-Tracker of America, Inc. in the third quarter of 1997 and the
acquisition of Sky-Tracker of Florida, Inc. in the 1998 Period. The
remaining increase in lighting products was attributable to an increase in
sales of follow spotlights which increased approximately $41,000 over the
1997 Period.
Net sales of restaurant products decreased approximately $81,000 or 13.2%,
mainly due to a decrease in the sales of pressure fryers and accessories.
Gross profit as a percentage of net revenues increased from 29.6% in the
1997 Period to 30.7% in the 1998 Period. The increase was attributable to
improved efficiencies realized by purchasing and
10
<PAGE>
manufacturing due to an increase in production volume and also to higher
sales of lighting products which generally carry a higher margin.
Operating expenses in the 1998 Period increased approximately $492,000 or
25.4% from the 1997 Period. As a percentage of net revenues, such expenses
increased to 14.1% for the 1998 Period from 13.2% for the 1997 Period. These
increases were attributable to costs incurred relating to the two acquisitions
made during 1998. In addition, the 1997 amounts did not include any operating
expenses relating to Xenotech, Inc. and Sky-Tracker of America, Inc. since they
were not purchased until the second and third quarters of 1997, respectively.
Interest expense decreased to $4,190 from $11,183 in the 1997 Period
reflecting the payoff of debt during the 1997 Period and the absence of
borrowings under the Company's line of credit. Interest income rose $8,807 to
$73,170 for the 1998 Period compared to $64,363 in the 1997 Period and was
attributable to the Company having more excess cash.
The Company's effective tax rate for the 1998 Period was 35.4% compared to
36.5% for the 1997 Period. The decrease from the 1997 Period reflects a lower
state income tax related to the state of Nebraska's "Throwback" law in which
only a portion of the Company's revenues are subject to Nebraska taxes. The
difference between the Company's effective tax rate and the Federal statutory
rate of 34% reflects the non-deductibility of certain intangible assets,
principally goodwill and the impact of state income taxes.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1998, the Company had approximately $200,000 of long-term
debt. The debt relates entirely to non-compete agreements set up to be paid
in installments.
As of March 31, 1998, the Company has a $10 million line of credit with
Norwest Bank, N.A. (the "Norwest Facility"). There were no borrowings on the
line of credit as of March 31, 1998 and 1997. Borrowings outstanding under the
Norwest Facility bear interest, payable monthly, at a rate equal to Norwest
Bank's National Money Market Rate as announced from time to time (8.5% at March
31, 1998). All of the Company's assets secure the Norwest Facility. The
Norwest Facility agreement contains certain restrictive covenants which include,
among other things, a prohibition on the payment of cash dividends and
requirements relating to current debt, current debt service coverage and total
debt to tangible net worth ratios and tangible net worth. The Company was in
compliance with such covenants at March 31, 1998 and December 31, 1997.
Historically the Company has funded its working capital requirements
through cash flow generated by its operations, however, net cash used in
operating activities for the 1998 Period was $1,830,293 compared to net cash
provided by operating activities for the 1997 Period of $1,027,617. The
decrease in net cash provided by operating activities was due primarily to a
$3.1 million decrease in accounts payable related to the buildup of
inventories in the fourth quarter of 1997 for the Christmas movie season in
which amounts were accrued in 1997 and paid in 1998.
The Company anticipates that internally generated funds and borrowings under
the Norwest Facility will be sufficient to meet its working capital needs. The
Company expects that it will have capital expenditures of approximately $1.2
million in 1998.
Net cash used in investing activities was $953,438 for the 1998 Period
compared to $353,200 in the 1997 Period. Investing activities for the 1998
Period reflect the acquisition of Sky-Tracker of
11
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Florida, Inc. during January of 1998 for cash of $575,000.
Net cash used in financing activities was $16,510 for the 1998 Period
compared to $458,302 in the 1997 Period. The decrease in cash used mainly
relates to the repayment of the Company's Industrial Revenue Bonds in the 1997
Period.
The Company does not engage in any currency hedging activities in connection
with its foreign operations and sales. To date, all of the Company's
international sales have been denominated in U.S. dollars, exclusive of Westrex
sales, which are denominated in Hong Kong dollars.
SEASONALITY
Generally, the Company's business exhibits a moderate level of seasonality as
sales of theatre products typically increase during the third and fourth
quarters. The Company believes that such increased sales reflect seasonal
increases in the construction of new motion picture screens in anticipation of
the Christmas movie season.
INFLATION
The Company believes that the relatively moderate rates of inflation in
recent years have not had a significant impact on its net revenues or
profitability. Historically, the Company has been able to offset any
inflationary effects by either increasing prices or improving cost efficiencies.
YEAR 2000
During 1997, the Company developed a plan to deal with the Year 2000
problem and began converting its computer systems to be Year 2000 compliant. The
plan provides for the conversion efforts to be completed by the end of 1999. The
Year 2000 problem is the result of computer programs being written using two
digits rather than four to define the applicable year. The total cost of the
project is being funded through operating cash flows. The Company is expensing
all costs associated with these systems changes as the costs are incurred. As of
March 31, 1998, an immaterial amount has been expensed and the total estimated
costs of the Year 2000 problem is expected to be immaterial.
RECENT ACCOUNTING PRONOUNCEMENTS
Also in June of 1997, the FASB issued Statement No. 131, "Disclosures
about Segments of an Enterprise and Related Information" which establishes
standards for the way that public business enterprises report information
about operating segments in annual financial statements and requires these
enterprises report selected information about operating segments in interim
financial reports issued to shareholders. It also establishes standards for
related disclosures about products and services, geographic areas, and major
customers. This statement is effective for financial statements for fiscal
periods beginning after December 15, 1997. In the initial year of
application, comparative information for earlier years is to be restated.
The Company may be required to disclose additional information with regard to
segments relating to this statement.
12
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PART II. OTHER INFORMATION
ITEM 16. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
2.8 Asset Purchase Agreement between the Company and
Design & Manufacturing, Ltd.
11 Computation of net earnings per share
27 Financial Data Schedule (for SEC information only)
(b) Reports on Form 8-K filed for the three months ended
March 31, 1998
No reports on Form 8-K were filed during the three months ended
March 31, 1998.
13
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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, thereunto duly authorized.
BALLANTYNE OF OMAHA, INC.
<TABLE>
<CAPTION>
<S> <C>
By: /s/ John Wilmers By: /s/ Brad French
----------------------------- -----------------------------------
John Wilmers, President, Brad French, Secretary, Treasurer,
Chief Executive Officer, and Director and Chief Financial Officer
Date: April 29, 1998 Date: April 29, 1998
</TABLE>
14
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Exhibit 2.8
ASSET
PURCHASE AGREEMENT
PARTIES:
This Agreement is made and entered into as of the 29th day of March, 1998,
by and between DESIGN AND MANUFACTURING, LTD., of 301 West Division Street,
Fisher, Illinois 61843, an Illinois corporation (hereinafter referred to as the
"Seller"), JACK E. SPITZ, of 53 Meadow Lane, Fisher, Illinois 61843 (hereinafter
referred to as "Spitz"), and BALLANTYNE OF OMAHA, INC., 4350 McKinley Street,
Omaha, Nebraska 68112, a Delaware corporation (the "Buyer").
RECITALS:
A. Seller is engaged in the business of the design, manufacture,
marketing, distribution, sale and service of film handling equipment
and is also engaged in the custom job shop machining business.
B. Spitz and his family own and control all of the 3,000 issued and
outstanding common stock of Seller as follows:
Jack E. Spitz - 1,016 shares
Brenda Spitz - 1,016 shares
Eric Spitz - 132 shares
Staci Spitz - 132 shares
Eric Spitz Trust - 352 shares
Staci Spitz Trust - 352 shares
C. Spitz owns the land and buildings located at 301 West Division Street,
Fisher, Illinois 61843 (hereinafter referred to as the "Real
Property"), which house the offices and manufacturing facilities of
Seller. Simultaneously herewith, Buyer and Spitz have entered into a
separate Real Estate Purchase Agreement (the "Real Estate Purchase
Agreement") whereby Spitz has agreed to sell to Buyer, and Buyer has
agreed to buy from Spitz, all of the Real Property.
D. Buyer desires to purchase from Seller, and Seller desires to sell to
Buyer, substantially all of the assets and business of Seller upon the
terms and conditions hereinafter set forth.
<PAGE>
AGREEMENT:
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
I. DEFINITIONS
For all purposes of this Agreement, the following terms shall have the
following definitions:
A. "Accounts Receivable" shall mean all open, unpaid invoices and
unapplied credit memos of Seller and all amounts due from customers of
Seller (whether billed or unbilled) as of the effective date of the
Closing. A true and correct list of Accounts Receivable items as of
March 1, 1998, specifically identifying any accounts or amounts in
dispute, is attached hereto as Exhibit 1. Seller shall provide to
Buyer at Closing a true and correct list of Accounts Receivable items
as of the effective date of Closing, specifically identifying any
accounts or amounts known to be in dispute.
B. "Assumed Liabilities" shall mean:
1. All open purchase orders of Seller as of the effective date of
Closing; provided, however, that Buyer shall not assume any open purchase
orders for equipment, parts or supplies entered into after March 1, 1998,
not in the ordinary course of business. A true and correct list of
Seller's Purchase Orders as of March 1, 1998, is set forth in Exhibit 2
attached hereto.
2. All express Warranty obligations on any film handling equipment
and makeup tables sold by Seller. True and correct copies of Seller's
Warranty Agreements are attached hereto as Exhibit 3.
3. All trade accounts payable of Seller as of the effective date of
Closing. Seller shall provide Buyer with a true and correct list of its
trade accounts payable as of the effective date of Closing, at Closing.
4. Notwithstanding any other provision contained herein, Assumed
Liabilities shall not include:
a. Any federal, state or local income, sales, use, franchise,
employment, or any other tax payable with respect to the
Purchased Assets (as hereafter defined), or operations of
Seller.
b. Any liability or obligation related to any Assets of Seller
not being purchased by Buyer.
c. Any liability or obligation of Seller or Spitz arising in
connection with the negotiation, preparation and execution
of this Agreement and the transactions contemplated hereby.
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d. Any liability or obligation with respect to any of Seller's
employees, agents or independent contractors, whether or not
subsequently employed by Buyer.
e. Any claim for injury to persons or property of any nature
whatsoever in connection with the business or operations of
Seller, or relating to any products sold by Seller.
f. Any liability or obligation arising out of any breach by
Seller or Spitz of any provision of any agreement, contract
or other commitment.
g. Any liability, obligation, cost, expense, or claim owed by
Seller or claimed to be owed by Seller to Spitz or any other
stockholder of D&M, including but not limited to any
liability of Seller to Spitz in connection with Seller's
lease of the Real Property from Spitz.
h. Any liabilities other than those expressly assumed by Buyer
hereby.
C. "Balance Sheet" shall mean the unaudited Balance Sheet of Seller as of
September 30, 1997, a copy of which is attached hereto as Exhibit 4, which
Balance Sheet has been prepared in accordance with generally accepted accounting
principles applied on a consistent basis.
D. "Contract" shall mean only any of Seller's open purchase orders and
sales orders that shall exist as of the effective date of Closing. A true and
correct list of Seller's Contracts as of March 1, 1998 is attached hereto as
Exhibit 5. At Closing, Seller will provide Buyer with a complete list of its
Contracts existing as of the effective date of Closing.
E. "Fixtures and Equipment" shall mean all of the furniture and fixtures,
office equipment, manufacturing equipment, test equipment, other plant and
equipment, including tooling, dies and all other special equipment used in the
manufacturing business of Seller, a true and correct list of which is attached
hereto as Exhibit 6.
F. "Inventory" shall mean all of Seller's inventories of parts,
materials, supplies, work in process, and finished goods which are held for
resale to Seller's customers or for use in Seller's manufacturing business, in
the ordinary course of Seller's business, which together aggregate the amount
listed as Inventory on Seller's Balance Sheet, as adjusted to the effective date
of Closing in the ordinary course of business.
G. "Purchased Assets" shall mean all of the following Assets of Seller as
of the effective date of the Closing, except those Assets specifically excluded
herein:
1. All Accounts Receivable;
2. All Contract rights of Seller, including all cash deposits
received by Seller in connection with its open sales orders;
3. All Fixtures and Equipment;
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4. All Inventory;
5. True and correct copies of all Books and Records of Seller
pertaining to the Purchased Assets, including, but not limited to:
accounting records, invoices, customer lists, customer contracts, customer
files, and marketing materials pertaining to present and prospective
customers;
6. All trademarks, trade names, including the name, Design &
Manufacturing, LTD. patents, patent applications, all improvements thereto
and interests thereunder, licenses, including patent licenses, copyrights,
copyright licenses and all other intellectual property of Seller, including
all modifications and additions thereto, pertaining to Seller's business
and the Purchased Assets, a true and correct list of which is attached
hereto as Exhibit 7;
7. All inventions, processes, know-how, formulas, drawings,
blueprints, specifications, flow-sheets, manuals, data, trade secrets,
plans, files, software, computer programs, related documentation, and all
other intangible Assets of any nature whatsoever, all of which pertain to
Seller's business;
8. The goodwill of Seller; and
9. Any and all other of Seller's assets of any kind or nature
whatsoever related to the business of Seller, except any assets
specifically excluded herein.
Notwithstanding any provision of this Agreement to the contrary, the
Purchased Assets shall exclude all cash, bank accounts, liquid assets and Bank
deposits and prepaid income taxes of Seller except customer deposits, other
prepaid expenses, and security deposits.
H. "Warranty" shall mean all warranty obligations of Seller, pertaining
to film handling equipment and makeup tables sold by Seller, which are based on
express warranties only. Buyer does not assume any liability with respect to
any implied warranty or any liability which shall be in the nature of personal
injury or property damage or other consequential damages, except as stated
herein.
I. "Financial Statements" shall mean the Balance Sheet, Income Statements
and all other exhibits and representations herein containing financial
information pertinent to the Purchased Assets.
II. SALE OF ASSETS
A. At Closing, Seller shall sell, assign, transfer, convey and deliver to
Buyer the Purchased Assets, free and clear of all liabilities, obligations,
liens, security interests and encumbrances of any kind, except those liabilities
expressly assumed by Buyer herein.
B. At Closing, Buyer agrees that it will accept and assume the Assumed
Liabilities.
C. At Closing, Buyer shall: (i) wire transfer the cash portion of the
Purchase Price to Seller's bank account, subject to any amounts required to
discharge any liens or encumbrances against the Purchased Assets, or required by
law to be withheld to pay any obligations of Seller; and
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(ii) transfer and assign to Seller the portion of the Purchase Price payable
to Seller in the common stock of the Buyer.
III. CLOSING
The Closing of the sale (the "Closing") shall take place at Seller's
offices on or before April 3, 1998, or as soon thereafter as all of the
conditions of this Agreement shall be complied with by the parties; provided,
however, that the effective date of the Closing shall be March 29, 1998, and all
business conducted after said date shall be for the account of Buyer. At the
Closing, Seller shall deliver to Buyer such bills of sale, endorsements,
assignments, and other good and sufficient instruments of transfer and
conveyance as shall be effective to vest in the Buyer good and marketable title
to the Purchased Assets as provided in this Agreement.
IV. PURCHASE PRICE
The Purchase Price shall be Six Million Five Hundred Thousand Dollars
($6,500,000), subject to adjustment as herein set forth, and payable as follows:
A. Three Million Seven Hundred Thousand Dollars ($3,700,000), the cash
portion of the Purchase Price, adjusted as hereinafter provided, in cash; and
B. Two Million Eight Hundred Thousand Dollars ($2,800,000) in the common
stock of Ballantyne of Omaha, Inc. Any shares of the common stock of Ballantyne
of Omaha, Inc. issued to Seller pursuant to this provision shall be hereinafter
referred to as "Buyer Shares." For purposes of determining the number of Buyer
Shares to be transferred to Seller hereunder, said Buyer Shares shall be valued
at a price per share which shall be equal to the average daily closing price of
the publicly traded common stock of the Ballantyne of Omaha, Inc. for the ten
(10) trading days immediately preceding the actual date of Closing. All Buyer
Shares issued to Seller hereunder shall be subject to the restrictions and
limitations set forth in Article VIII hereinafter.
C. The cash portion of the Purchase Price payable by Buyer to Seller
hereunder shall be adjusted as follows:
1. There shall be a reduction in the cash portion of the Purchase
Price in an amount equal to the trade accounts payable of Seller, and any
other specific liabilities of Seller, assumed by the Buyer hereunder.
2. To the extent that the Inventory of Seller on the effective date
of Closing shall be less than or greater than the amount of Inventory of
Seller reported on the Balance Sheet, the cash portion of the Purchase
Price shall be decreased or increased (as the case may be) to reflect the
change in the amount of Inventory.
3. To the extent that the Accounts Receivable of Seller on the
effective date of Closing shall be less than or greater than the amount of
Accounts Receivable of Seller reported on the Balance Sheet, the cash
portion of the Purchase Price shall be decreased or increased (as the case
may be) to reflect the change in the amount of Accounts Receivable.
4. The property, plant, and equipment of Seller (which includes the
Fixtures
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and Equipment) shall be valued at the sum of their net book value
on the effective date of Closing plus $800,000. To the extent that the net
book value of such property, plant, and equipment of Seller as of the
effective date of Closing shall be less than or greater than the property,
plant, and equipment of Seller reported on the Balance Sheet, the cash
portion of the Purchase Price shall be decreased or increased (as the case
may be) to reflect the change in the amount of the property, plant, and
equipment. Notwithstanding the foregoing, the net book value of the
property, plant and equipment shall only be increased to reflect actual
purchases of such property, plant and equipment by Seller after September
30, 1997.
D. The parties agree and acknowledge that in determining the Purchase
Price hereunder, the goodwill of the Seller, being purchased by Buyer hereunder,
shall be Two Million Five Hundred Twenty Thousand Dollars ($2,520,000), which is
the amount assigned to the goodwill of Seller on the Balance Sheet.
V. ALLOCATION OF PURCHASE PRICE
The allocation of the Purchase Price among the Purchased Assets is set
forth on Exhibit 8 attached hereto. Such allocation has been made in accordance
with the provisions of Section 1060 of the Internal Revenue Code of 1986, as
amended (the "Code"), and shall be binding upon Buyer and Seller for all
purposes (including financial accounting purposes, financial and regulatory
reporting purposes, and tax purposes). Buyer and Seller also each agree to file
IRS Form 8594 consistent with the foregoing and in accordance with Section 1060
of the Code.
VI. FURTHER ASSURANCES
From time to time, at the request of any party hereto, whether at or after
the Closing and without further consideration, Buyer, Seller and/or Spitz will
execute and deliver such further instruments of conveyance and transfer and take
such other action as the requesting party reasonably may require more
effectively to convey and transfer to Buyer any of the Purchased Assets, or to
more effectively fulfill any other obligation of any party hereunder.
VII. PAYMENT OF SALES AND SIMILAR TAXES
Buyer will pay all sales, transfer, and documentary taxes, if any, payable
in connection with the sale, transfer, and deliveries to be made to Buyer
hereunder.
VIII. BUYER SHARES; INVESTMENT PROVISIONS
A. Each certificate representing any Buyer Shares shall be stamped or
otherwise imprinted with a legend substantially in the following form:
THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER ANY
SECURITIES LAWS AND MAY ONLY BE SOLD IN COMPLIANCE WITH ANY APPLICABLE
SECURITIES LAWS. IN PARTICULAR, THE SHARES EVIDENCED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
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AMENDED, AND MAY NOT BE TRANSFERRED OR OTHER-WISE DISPOSED OF (1) UNLESS
A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
WITH RESPECT TO SUCH SHARES SHALL THEN BE IN EFFECT, OR UNLESS THE
CORPORATION SHALL HAVE RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO
THE CORPORATION THAT ANY PROPOSED TRANSFER OR DISPOSITION OF SUCH SHARES
IS EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED; AND (2) EXCEPT IN ACCORDANCE WITH THE ASSET PURCHASE AGREEMENT
DATED MARCH ___, 1998, BETWEEN THE CORPORATION AND DESIGN &
MANUFACTURING, LTD., A COPY OF WHICH IS ON FILE WITH THE CORPORATION AT
ITS PRINCIPAL OFFICE.
B. Seller and Spitz hereby represent and acknowledge that Seller intends
to distribute all of the Buyer Shares to its stockholders in liquidation or
partial liquidation of Seller within thirty (30) days of the Closing of the
transactions contemplated by this Asset Purchase Agreement. Seller hereby
covenants that it shall give written notice to Buyer immediately upon the making
of such distribution of the Buyer Shares to its stockholders. Seller further
covenants that any such distribution of the Buyer Shares shall be made with
respect to all of the Buyer Shares, and shall be made on the same date. Buyer
agrees that such distribution of the Buyer Shares shall be permitted
notwithstanding the restrictive legend set forth in Paragraph A above. The
certificates distributed to the shareholder of Seller hereunder shall bear the
restrictive legend set forth in paragraph A above.
C. Notwithstanding any other provision of this Asset Purchase Agreement,
except as otherwise provided in Paragraphs B and D of this Article VIII, Seller
and the stockholders of Seller shall be prohibited from transferring or
otherwise disposing of the Buyer Shares for a period of one (1) year from and
after the later of (i) the date of Closing; (ii) the date on which the Buyer
Shares are issued to Seller; or (iii) the date on which the Buyer Shares are
distributed by Seller to its stockholders in accordance with Paragraph B above.
D. Beginning on a date which shall be the date following the lapse of the
transferability restriction set forth in Paragraph C above, and ending on a date
which shall be one (1) year following said date, Seller or the stockholders of
Seller, as the case may be, shall have the right to notify Buyer in writing that
it or they desire to sell all of the Buyer Shares. Within fifteen (15) days
after receipt of said written notice, Buyer shall have the option to either (i)
purchase all of the Buyer Shares from Seller or the stockholders of Seller, for
a purchase price of Two Million Eight Hundred Thousand Dollars ($2,800,000), or
the fair market value of the Buyer Shares, whichever is greater (for purposes of
this paragraph, the term "fair market value" shall mean the closing price of the
Buyer Shares on the New York Stock Exchange on the date that Buyer receives such
written notice), or (ii) require that Seller or the stockholders of Seller, as
the case may be, sell all of the Buyer Shares through the New York Stock
Exchange on the open market. If the Buyer Shares are sold on the open market as
provided in clause (ii) above, and if the net sales proceeds therefrom shall be
less than Two Million Eight Hundred Thousand Dollars ($2,800,000), Buyer shall
pay to Seller or the stockholders of Seller, as the case may be, the amount by
which such net sales proceeds are less than $2,800,000, within thirty (30) days
after receipt of written notice and documentation of the sale from Seller or the
stockholders of Seller. In the event that the Buyer Shares are sold on the open
market as provided in clause (ii) above, and if the net sales proceeds therefrom
shall be equal to or greater than Two Million Eight Hundred Thousand Dollars
($2,800,000), Buyer shall have no further obligation to Seller or the
stockholders of Seller hereunder. Immediately upon any such sale on the open
market, Seller or the stockholders of Seller
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shall provide Buyer with documentation verifying the occurrence of the sale
of all of the Buyer Shares and verifying the actual amount received therefor.
In the event that Buyer shall require the Seller or the stockholders of
Seller to sell the Buyer Shares on the open market in accordance with this
provision, Buyer shall, at its option, either provide Seller or stockholders
of Seller with an opinion from its securities counsel that the Buyer Shares
are exempt from registration under federal and state securities laws; or
Buyer shall, at its expense, take all actions necessary to register the Buyer
Shares in accordance with federal and state securities laws.
E. In the event that Seller or the stockholders of Seller, as the case
may be, shall own the Buyer Shares after the one (1) year period referred to in
Paragraph D of this Article VIII herein and shall not have given Buyer notice of
its or their desire to sell the same within the time periods specified in said
Paragraph D, Seller or the stockholders of Seller shall continue to be subject
to the restrictions as specified on the legend on the Buyer Shares as required
under Paragraph A above. In the event that Seller or the stockholders of Seller
shall desire to sell the Buyer Shares, or any portion thereof, after said one
(1) year period, it or they shall give written notice to the Buyer indicating
such desire. Within a reasonable time after the receipt of such written notice,
Buyer shall, at its option, provide Seller or the stockholders of Seller with an
opinion from its securities counsel that the Buyer Shares are exempt from
registration under federal and state securities laws; or Buyer shall, at its
expense, take all actions necessary to register the Buyer Shares in accordance
with federal and state securities laws, or Buyer shall have the right to
purchase such Buyer Shares which Seller or the stockholders of Seller propose to
sell for the fair market value thereof on the date Buyer receives notice of
desire to sell the same.
F. In the event, after the date hereof, the Buyer Shares are affected by
a reclassification, recapitalization, reduction of capital stock, stock split,
or otherwise, or a stock dividend is declared, or there is a merger,
consolidation, or other reorganization, or the like, then the number and price
of the Buyer Shares and any securities issued in respect thereof shall be
appropriately adjusted.
G. Seller represents and understands, and Spitz represents and
understands (on his own behalf and on behalf of all of the stockholders of
Seller), that (i) the Buyer Shares being acquired by Seller pursuant to this
Agreement have not been registered under the Securities Act of 1933, as amended,
and are being issued in reliance upon the exemption afforded by Section 4(2)
thereof for transactions by an issuer not involving any public offering, (ii)
such Buyer Shares must be held indefinitely unless a subsequent disposition
thereof is registered under the Securities Act of 1933, as amended, or is exempt
from such registration, (iii) such Buyer Shares will bear a legend to such
effect, and (iv) Buyer will make a notation on its transfer books to such
effect. Seller further represents that (i) such Buyer Shares are being acquired
for investment and without any present view toward distribution thereof to any
other person, (ii) they will not sell or otherwise dispose of such Buyer Shares
except in compliance with the registration requirements or exemption provision
under the Securities Act of 1933, as amended, the rules and regulations
thereunder, and as otherwise set forth by the Securities and Exchange
Commission, (iii) they have such knowledge and experience in financial and
business matters and that they are capable of evaluating the risks and merits of
and investment in such Buyer Shares, (iv) they have consulted with counsel, to
the extent deemed necessary, as to all matters covered by this Agreement and
have not relied upon Buyer for any explanation of the application of the various
federal or state securities laws with regard to the acquisition of such Buyer
Shares, (v) they have investigated and are familiar with the affairs, financial
condition and prospects of Buyer, and have been given sufficient access to and
have acquired sufficient information about Buyer to reach an informed and
knowledgeable decision to acquire such Buyer Shares, and (vi) they are able to
bear the economic risks of such an investment.
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IX. EMPLOYMENT OF SPITZ; EMPLOYEES OF SELLER
A. Buyer shall employ Spitz effective immediately upon the Closing of the
transactions herein contemplated, on the terms and conditions of the Employment
Agreement which is attached hereto as Exhibit 9. Spitz shall be employed by
Buyer for a term of five (5) years at an annual base salary of One Hundred
Twenty-five Thousand Dollars ($125,000). During the first year of the term of
his employment with Buyer hereunder, Spitz shall be guaranteed a bonus of
Twenty-five Thousand Dollars ($25,000). At Closing, Buyer and Spitz shall enter
into a written Employment Agreement in the form and of the content of Exhibit 9
attached hereto, the terms and conditions of which are incorporated herein by
this reference.
B. It is Buyer's intention to retain in the employment of Buyer certain
employees of Seller at the present rate of compensation of such employees;
provided, however, that such expression of the Buyer's intention shall not be
construed as imposing any binding legal obligation on the Buyer to retain any
employee or employees of Seller in the employ of Buyer upon and after the
Closing, nor as to the terms of such employment.
X. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller and Spitz represent, warrant, and covenant to and with Buyer as
follows:
A. Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of Illinois, and has full corporate power
and authority to conduct
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its business as it is presently being conducted and to own, sell and convey
its properties and Assets.
B. Copies of Seller's Certificate of Incorporation and all amendments
thereof to date, certified by the Secretary of State of Illinois, and of
Seller's Bylaws as amended to date, have been delivered to Buyer and are
complete and correct as of the date of this Agreement. At the Closing, Seller
shall deliver to Buyer a Certificate of Good Standing certified by the Secretary
of State of Illinois.
C. Seller has all necessary corporate power and authority and has taken
all corporate action necessary to enter into this Agreement, to consummate the
transactions contemplated hereby and to perform its obligations hereunder. This
Agreement has been duly executed and delivered by Seller and constitutes a
legal, valid and binding obligation of Seller, enforceable against Seller in
accordance with its respective terms.
D. Neither the execution and delivery of this Agreement, nor the
consummation of the transactions contemplated hereby will result in (1) a
violation of or a conflict with any of the provisions of the Certificate of
Incorporation or Bylaws of Seller, (2) a breach of, or a default under, any term
or provision of any contract, agreement, indebtedness, lease, commitment,
license, franchise, permit, authorization or concession to which Seller is a
party, which breach or default would have a material adverse effect on the
business or financial condition of Seller or its ability to consummate the
transactions contemplated hereby, or (3) a violation by Seller of any statute,
rule, regulation, ordinance, code, order, judgment, writ, injunction, decree or
award, which violation would have a material adverse effect on the business or
financial condition of Seller or its ability to consummate the transactions
contemplated hereby.
E. Neither Seller nor Spitz knows of, and has not been informed of, any
consent, approval or authorization of, or declaration, filing or registration
with any governmental or regulatory authority, or any other person or entity
which is required to be made or obtained by Seller in connection with the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby.
F. Neither Seller, Spitz, nor any affiliate of Seller has entered into or
will enter into any contract, agreement, arrangement, or understanding with any
person or firm which will result in the obligation of Buyer to pay any finder's
fee, brokerage commission or similar payment in connection with the transactions
contemplated hereby. Any amounts payable to Vine Street Partners, Inc. of
Hinsdale, Illinois in connection with the transactions contemplated hereby shall
be the sole responsibility of Seller and Spitz, and Buyer shall have no
obligation or liability therefor.
G. Seller currently has and will have and will transfer to Buyer at
Closing, good and marketable title to all of the Purchased Assets, free and
clear of all mortgages, pledges, liens, security interests, conditional sales
agreements, charges, encumbrances, restrictions and equities, except those
mortgages, pledges, liens, security interests and other liabilities expressly
assumed by Buyer hereunder.
H. Except as described in Exhibit 10, there are no material actions,
suits, claims, proceedings or investigations pending or, to the best knowledge
of Seller or Spitz, threatened against or affecting the Purchased Assets, at law
or in equity, or before or by any federal, state, municipal or other
governmental court, department, commission, board, bureau, agency or
instrumentality. Prior to the Closing, either (1) Seller shall have resolved
the matters disclosed in Exhibit 10, or (2) Buyer and Seller shall agree as to
how such matters will be handled.
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I. The Assets being purchased hereunder by Buyer constitute substantially
all of the Assets of Seller pertaining to its business, and the goodwill
thereof, except those assets of Seller specifically excluded in this Agreement.
J. Other than as set forth in this Agreement or the Exhibits hereto,
there are no material liabilities or obligations, secured or unsecured,
whether accrued, absolute, contingent, unasserted or otherwise, affecting the
Purchased Assets. Unless consented to by Buyer in writing, no liabilities
have been or will be incurred since March 1, 1998, except in the ordinary
course of business. Seller has no liabilities or obligations whatsoever,
either accrued, absolute, contingent or otherwise, which are not reflected or
provided for in the Financial Statements except (i) those arising after the
date of the Balance Sheet which are in the ordinary course of business, in
each case in normal amounts and none of which is materially adverse, and (ii)
as and to the extent specifically described in the Schedules hereto.
K. Seller and Spitz have disclosed to Buyer all facts known by Seller and
Spitz to be material to the Assets and business to be acquired by Buyer pursuant
to this Agreement. No written representation or warranty by the Seller or Spitz
in this Agreement or any written statement or certificate furnished or to be
furnished to the Buyer pursuant hereto, contains or will contain any untrue
statement of a material fact known to Seller or Spitz, or omits or will omit to
state a material fact known to Seller or Spitz necessary to make the statements
contained therein not misleading. During the period from the date of this
Agreement to the Closing date, Seller represents and covenants that its business
shall in all respects continue to be operated only in the ordinary course.
Seller and Spitz shall give prompt notice to Buyer with respect to any material
changes in the operation of Seller's business and any matter or event which
comes to the attention of Seller or Spitz and which, if it had occurred as of
the date hereof, would constitute a material breach of the representations and
warranties of Seller and/or Spitz contained in this Agreement.
L. All Financial Statements provided to Buyer pursuant to this Agreement
and all Exhibits hereto are accurate in all material respects; and all other
financial data relating to the Purchased Assets given by Seller and Spitz to
Buyer is accurate in all material respects as to what it was represented to be
when given to Buyer.
M. The Accounts Receivable reflected in the Balance Sheet and all
Accounts Receivable arising after the Balance Sheet date through Closing arose
from bona fide transactions in the ordinary course of business, and to the best
of Seller's knowledge and belief are valid.
N. Seller and Spitz warrant that the products which it manufactures and
sells do not violate or infringe upon any valid patent, trade secret or
proprietary rights of others and that Buyer may continue to manufacture such
products without violating any patents, trade secrets or proprietary rights of
others, or of Seller or Spitz. Seller and Spitz shall defend any action brought
against Buyer based upon a claim that any of such items infringe upon a patent,
trade secret or other proprietary right. Seller and Spitz further agree to
indemnify Buyer and hold Buyer harmless from any or all of judgments, decrees,
costs or expenses resulting from such action.
O. The execution and delivery of this Agreement to Buyer and the
consummation of the transactions contemplated hereby have been duly authorized
by Seller's Board of Directors, and by Seller's Shareholders in accordance with
the business corporation laws of the State of Illinois.
P. Exhibit 11 sets forth a complete and correct list and description of
all of the policies
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of liability, property, and all other forms of insurance or bonds carried by
Seller for the benefit of or in connection with the Purchased Assets and the
business of Seller.
Q. All tangible personal property, Equipment and Fixtures included within
the Purchased Assets or required to be used in the ordinary course of Seller's
business are in good and merchantable condition and are suitable for the
purposes for which they are being used. All of the Equipment is well-maintained
and in good operating condition.
R. Seller is not a party to any collective bargaining agreement. There
are no controversies between Seller and any of its employees which might
reasonably be expected to materially adversely affect the conduct of its
business, or any unresolved labor union grievances or unfair labor practice or
labor arbitration proceedings pending or threatened relating to its business,
and there are not any organizational efforts presently being made or threatened
involving any of Seller's employees. Seller has not received notice of any
claim that Seller has not complied with any laws relating to the employment of
labor, including any provisions thereof relating to wages, hours, collective
bargaining, the payment of social security and similar taxes, equal employment
opportunity, employment discrimination and employment safety, or that Seller is
liable for any arrears of wages or any taxes or penalties for failure to comply
with any of the foregoing.
S. Seller is not a party to any contract of employment, either expressed
or implied, with any of its existing employees.
T. All representations and warranties contained in this Article X shall
be construed as being made jointly and severally by Seller and Spitz.
XI. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller and Spitz as follows:
A. Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has full corporate power
and authority to conduct its business as it is presently being conducted and to
own and lease its properties and Assets.
B. Copies of Buyer's Certificate of Incorporation and all amendments
thereof to date, certified by the Secretary of State of Delaware, and of Buyer's
Bylaws as amended to date, have been delivered to Seller and are complete and
correct as of the date of this Agreement.
C. Buyer has all necessary corporate power and authority to enter into
this Agreement, to consummate the transactions contemplated hereby and to
perform its obligations hereunder. This Agreement has been duly executed and
delivered by Buyer and constitutes a legal, valid and binding obligation of
Buyer, enforceable against Buyer in accordance with its respective terms,
subject to the approval of the Board of the Directors of the Buyer.
D. Neither the execution and delivery of this Agreement, nor the
consummation of the transactions contemplated hereby will result in (1) a
violation of or a conflict with any of the provisions of the Certificate of
Incorporation or Bylaws of Buyer, (2) a breach of, or a default under, any term
or provision of any contract, agreement, indebtedness, lease, commitment,
license, franchise, permit, authorization or concession to which Buyer is a
party, which breach or default
-12-
<PAGE>
would have a material adverse effect on the business or financial condition
of Buyer or its ability to consummate the transactions contemplated hereby,
or (3) a violation by Buyer of any statute, rule, regulation, ordinance,
code, order, judgment, writ, injunction, decree or award, which violation
would have a material adverse effect on the business or financial condition
of Buyer or its ability to consummate the transactions contemplated hereby.
E. Buyer knows of no and has not been informed of any consent, approval
or authorization of, or declaration, filing or registration with any
governmental or regulatory authority, or any other person or entity which is
required to be made or obtained by Buyer in connection with the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby.
F. Neither Buyer nor any affiliate of Buyer has entered into or will
enter into any contract, agreement, arrangement, or understanding with any
person or firm which will result in the obligation of Seller or Spitz to pay any
finder's fee, brokerage commission or similar payment in connection with the
transactions contemplated hereby.
XII. COVENANTS OF SELLER AND BUYER
Seller covenants with Buyer and Buyer covenants with Seller as follows:
A. Seller shall assign to Buyer all transferable manufacturer, supplier
or contractor warranties or guaranties respecting any of the Purchased Assets.
B. Effective upon the Closing of the transactions contemplated hereby,
Seller shall no longer use, in any respect, the name "Design & Manufacturing,
Ltd." or any similar name, without the express written consent of Buyer. Within
thirty (30) days after Closing, Seller shall change its corporate name to a name
which bears no resemblance to the name "Design & Manufacturing Ltd." and
thereafter shall never use a name or names which shall be similar to such name.
C. Seller shall not use, in any respect, the name, terms, or items listed
in Exhibit 6 hereto without the express written consent of Buyer.
D. Except as otherwise requested by Buyer, and without making any
commitment on its behalf, Seller will use its best efforts to preserve its
business intact; and preserve for Buyer the goodwill of the suppliers,
customers, and others having business relations with Seller prior to Closing.
In addition, until Closing, Seller shall make no purchases or sales of Inventory
items, or enter into any contract or transaction, without the consent of Buyer
in writing, except in the ordinary course of its business.
E. At the Closing, Seller and Spitz shall execute and deliver to Buyer a
Guaranty in the form set forth as Exhibit 15 hereto (the "Guaranty"), under the
terms of which Seller and Spitz shall unconditionally guarantee that all
indebtedness represented by the Accounts Receivable of Seller as of the Closing
date will be paid by the respective debtors to Buyer. In the event such net
indebtedness is not paid on or before one hundred twenty (120) days after the
Closing date, Seller and/or Spitz shall within ten (10) days following receipt
from Buyer of notice to such effect make payment to Buyer of an amount in cash
equal to the difference between the amount collected by Buyer and the net
receivables as shown on the Balance Sheet, whereupon Buyer shall promptly
-13-
<PAGE>
assign or cause to be assigned to Seller and/or Spitz (as the case may be)
all rights, claims, actions or causes of action which Buyer may have relating
to such unpaid receivables.
-14-
<PAGE>
F. Buyer shall have the right to approve any public announcement and/or
press release concerning this transaction. No public announcement shall be made
by any party to this Agreement until after the transactions contemplated herein
have been closed.
XIII. COVENANT NOT TO COMPETE
At the Closing, Seller and Spitz will execute a Non-Competition Agreement
in the form of Exhibit 12 hereto. The effectiveness of this Agreement and of
the Non-Competition Agreement will be contingent upon the execution of each
other.
XIV. ACTIONS BY SELLER AND BUYER AFTER THE CLOSING
A. Seller and Buyer agree that so long as any books, records and files
relating to the business, Assets or operations of the Seller remain in existence
and available, Buyer (at its expense) shall have the right to inspect and to
make copies of the same at any time during business hours for any proper purpose
with reasonable advance notice. Seller further agrees that it shall preserve
and maintain all of its existing books and records relating to the Purchased
Assets for a period of at least five (5) years following the date of Closing.
B. On and after the Closing date, Seller, Spitz, and Buyer will take all
appropriate action and execute all documents, instruments or conveyances of any
kind which may be reasonably necessary or advisable to carry out any of the
provisions hereof.
C. Buyer will assume all express Warranty obligations, as defined herein.
XV. INDEMNIFICATIONS
A. BY SELLER AND SPITZ: It is specifically acknowledged that Buyer does
not assume and will not be responsible for any liabilities of Seller and Spitz,
except as may be expressly stated herein. Effective as of the effective date of
Closing, Seller and Spitz shall indemnify and hold harmless Buyer against and in
respect of:
1. All liabilities and obligations of, or claims against, Seller or
Spitz, not expressly assumed by Buyer in this Agreement, including but not
limited to, all operating and other expenses of Seller up to the effective
date of the Closing, all income, sales, use, employment and other tax
liabilities accrued for operations up to the effectove date of the Closing
and all employment obligations of Seller including, without limitation, all
state or federal withholding obligations, employee benefit obligations,
vacation, claims of discrimination or unfair labor practices or of any
other nature whether accruing prior or subsequent to the effective date of
Closing relating to any present or former employee of Seller while he/she
was an employee of Seller and any claims of employees of Seller to have any
entitlement of employment with Buyer unless said employees are expressly
retained by Buyer after the employee has submitted an employment
application to Buyer.
2. Any damage or deficiency resulting from any material
misrepresentation, breach of warranty, or nonfulfillment of any agreement
on the part of Seller and or Spitz
-15-
<PAGE>
under this Agreement or from any material misrepresentation in or omission
from any certificate or other instrument furnished or to be furnished to
Buyer under this Agreement.
3. Any and all liabilities, claims or damages (whether or not caused
by negligence), including civil or criminal fines, arising out of or
relating to any of the following:
(i) Any generation, processing, handling, transportation, storage,
treatment or disposal of solid wastes or hazardous wastes by
Seller or Spitz, including but not limited to, any of such
activities occurring with respect to the business of Seller, the
assets purchased pursuant to the Asset Purchase Agreement, and
including the Real Property, or any facilities or property of
Seller or Spitz; and
(ii) Any releases or contamination by Seller or Spitz, or their
predecessors, tenants, vendors, employees or agents (including,
but not limited to, any releases as declared under the
Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended), to the extent occurring or existing
prior to closing, including, but not limited to, such releases to
land, groundwater, surface water or into the air.
B. BY BUYER: Buyer agrees that, on and after the date hereof, it shall
indemnify and save and hold harmless Seller and Spitz from and against any and
all damages incurred in connection with or arising out of or resulting from (1)
any material breach of any covenant or warranty, or the inaccuracy of any
representation, made by Buyer in or pursuant to this Agreement; (2) any
liability, obligation or commitment of Buyer relating in any way to the
Purchased Assets or Assumed Liabilities arising after the effective date of
Closing; or (3) any claim, liability, obligation or commitment of any nature
which is specifically assumed by Buyer pursuant to this Agreement.
C. CONDITIONS OF INDEMNIFICATION: With respect to any actual or
potential claim, any written demand, the commencement of any action, or the
occurrence of any other event which involves any matter or related series of
matters (a "Claim") against which a party hereto is indemnified (the
"Indemnified Party") by the other party (the "Indemnifying Party") under
Paragraphs A and B of this Article XV hereof:
1. Promptly after the Indemnified Party first receives written
documents pertaining to the Claim, or if such Claim does not involve a
third-party claim (a "Third-Party Claim"), promptly after the Indemnified
Party first has actual knowledge of such Claim, the Indemnified Party shall
give notice to the Indemnifying Party of such Claim in reasonable detail
and stating the amount involved, if known, together with copies of any such
written documents setting forth details pertaining to the claim.
2. The Indemnifying Party shall have no obligation to indemnify the
Indemnified Party with respect to any Claim if the Indemnified Party fails
to give notice with respect thereto in accordance with Paragraph 1 above.
-16-
<PAGE>
3. If the Claim involves a Third-Party Claim, then the Indemnifying
Party shall have the right, at its sole cost, expense, and ultimate
liability, regardless of the outcome, and through counsel of its choice
(which counsel shall be reasonably satisfactory to the Indemnified Party)
to litigate, defend, or otherwise attempt to resolve such Third-Party
Claim; provided, however, that if in the Indemnified Party's reasonable
judgment a conflict of interest may exist between the Indemnified Party and
the Indemnifying Party with respect to such Third-Party Claim, then the
Indemnified Party shall be entitled to select counsel of its own choosing,
reasonably satisfactory to the Indemnifying Party, in which event the
Indemnifying Party shall be obligated to pay the fees and expenses of such
counsel. Notwithstanding the preceding sentence, the Indemnified Party may
elect, at any time and at the Indemnified Party's sole cost, expense, and
ultimate liability, regardless of the outcome, and through counsel of its
own choice, to litigate, defend, settle, or otherwise attempt to resolve
such Third-Party Claim. If the Indemnified Party so elects (for reasons
other than the Indemnifying Party's failure or refusal to provide a defense
to such Third-Party Claim), then the Indemnifying Party shall have no
obligation to indemnify the Indemnified Party with respect to such
Third-Party Claim, but such disposition will be without prejudice to any
other right the Indemnified Party may have to indemnification under
Paragraphs A or B of this Article XV hereof, regardless of the outcome of
such Third-Party Claim. If the Indemnifying Party fails or refuses to
provide defense to any Third-Party Claim, then the Indemnified Party shall
have the right to undertake the defense, compromise, or settlement of such
Third-Party Claim, through counsel of its choice, on behalf of and for the
account and at the risk of the Indemnifying Party, and the Indemnifying
Party shall be obligated to pay the costs, expenses, and attorney fees
incurred by the Indemnified Party in connection with such Third-Party
Claim. In any event, Buyer, Seller, and Spitz shall fully cooperate with
each other and their respective counsel in connection with any such
litigation, defense, settlement, or other attempted resolution.
XVI. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
The obligations of Buyer to purchase the Purchased Assets from Seller are
subject to the satisfaction, on or before the Closing date, of all of the
following conditions, which conditions may be waived in writing by Buyer:
A. The representations and warranties of Seller and Spitz contained in
this Agreement shall have been true in all material respects when made and, in
addition, shall be true in all material respects on and as of the Closing date
with the same force and effect as though made on and as of the Closing date.
B. Seller and Spitz shall have, or have caused to be performed and
observed, in all material respects, all obligations and agreements hereunder and
shall have complied with all covenants and conditions contained in this
Agreement to be performed and complied with by them at or prior to the Closing
date.
C. If, prior to the Closing date, any material part of the Purchased
Assets is damaged by fire, other casualty, or any cause or activity not
attributable to or under the control of Buyer, Seller shall give Buyer written
notice thereof and Buyer may, at its option, terminate this Agreement by written
notice of such election given to Seller no later than five (5) working days
after receipt of Seller's notice, and upon giving such notice, both parties
shall be fully discharged from all duties hereunder and all obligations hereof.
However, if Buyer shall not so elect, or if an immaterial part
-17-
<PAGE>
of the Assets is damaged, then Seller hereby assigns to Buyer all of its
rights, title and interest in and to any and all insurance proceeds payable
by reason of such destruction or damage to the Purchased Assets and Seller
hereby agrees to pay Buyer a sum equal to the deductible amount provided in
such policies to the extent necessary to correct such damage.
D. At or prior to the Closing, Seller and Spitz shall have executed the
Non-Competition Agreement as provided in Article XIII herein.
E. There shall not have been, between the date of this Agreement and the
Closing date, any materially adverse change in any of the Purchased Assets or
the current operations of Seller.
F. Seller and Spitz shall have furnished Buyer with such certificates in
form and substance reasonably satisfactory to counsel for Buyer as may be
reasonably requested by counsel for Buyer to evidence compliance with the
conditions set forth in this Section.
G. Either (1) Seller shall have resolved the matters disclosed in Exhibit
10, or (2) Buyer and Seller shall have agreed as to how those matters that will
be handled.
H. At or prior to Closing, Buyer and Spitz shall have completed the
acquisition by Buyer from Spitz of the Real Property pursuant to the Real Estate
Purchase Agreement, a true and correct copy of which is attached hereto as
Exhibit 13, and the terms and conditions of which are incorporated herein by
this reference, or, alternatively, in the event that, for any reason whatsoever,
Buyer's acquisition of the Real Property from Spitz shall not be consummated in
accordance with the Real Estate Purchase Agreement, Buyer and Spitz shall have
entered into a long-term Lease for the Real Property on terms and conditions
acceptable to Buyer and its counsel.
I. At or prior to the Closing, Buyer and Spitz shall have executed the
Employment Agreement as provided in Article IX herein.
J. Prior to Closing, Buyer shall have completed, to its satisfaction,
such financial, environmental, technical and legal due diligence of Seller as
Buyer, its counsel, and its accountants shall deem necessary and appropriate.
K. Buyer shall have received approval from its Board of Directors for
consummation of this transaction on the terms and conditions contained herein.
L. Buyer shall have received from Seller's counsel, an opinion, dated of
as of the closing date, in form and substance satisfactory to Buyer and its
counsel in the form attached hereto as Exhibit 14.
M. Seller and Spitz shall have executed the Guaranty as provided in
Paragraph E of Article XII herein.
XVII. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
The obligation of Seller to sell the Purchased Assets under this Agreement
to Buyer is subject to the satisfaction, on or before the Closing date, of all
of the following conditions, which conditions may be waived in writing by
Seller:
-18-
<PAGE>
A. The representations and warranties of Buyer contained in this
Agreement shall have been true in all material respects when made and, in
addition, shall be true in all material respects on and as of the Closing date
with the same force and effect as though made on and as of the Closing date.
B. Buyer shall have, or have caused to be, performed and observed, in all
material respects, all covenants, agreements and conditions hereof to be
performed or observed by Buyer at or before the Closing.
C. Seller shall have received approval from its Board of Directors and
Shareholders for consummation of this transaction on the terms and conditions
contained herein.
D. Either (1) Seller shall have resolved the matters disclosed in Exhibit
10, or (2) Buyer and Seller shall have agreed as to how those matters will be
handled.
XVIII. NON-ASSIGNMENT
Neither this Agreement nor any of the rights or obligations hereunder may
be assigned by any party without the prior written consent of the other parties;
provided, however, Buyer may, without the consent of Seller and/or Spitz, assign
this Agreement and its rights and obligations hereunder to a wholly-owned
subsidiary corporation, which, after any such assignment, shall become the Buyer
hereunder. Notwithstanding the foregoing, in the event that Buyer shall assign
this Agreement to a wholly-owned subsidiary corporation, Buyer shall guarantee
the performance by the assignee of all of the obligations of Buyer hereunder.
At Closing, Seller shall consent in writing that Buyer may cause its subsidiary
corporation to qualify to do business in the State of Illinois, under the name
of "Design & Manufacturing, Inc." Subject to the foregoing, this Agreement
shall be binding upon and inure to the benefit of the parties hereto, their
respective successors and permitted assigns, and no other person shall have any
right, benefit or obligation hereunder, as a third-party beneficiary or
otherwise.
XIX. EXPENSES
Except as otherwise provided in this Agreement, each party shall pay its
respective expenses, taxes, charges and liabilities incurred in connection with
or arising out of this Agreement, including, without limitation thereto, counsel
fees, accounting fees, and other expenses related to the assignment and delivery
of the Purchased Assets to Buyer.
XX. NOTICES
Unless otherwise provided herein, any notices, request, instruction or
other document to be given hereunder by either party to the other shall be in
writing and delivered personally or mailed by certified mail, postage prepaid,
return receipt requested (such mailed notice to be effective on the date such
receipt is acknowledged or refused), as follows:
-19-
<PAGE>
IF TO SELLER: Design & Manufacturing, Ltd.
Attention: Jack E. Spitz
301 West Division Street
Fisher, IL 61843
WITH COPIES TO: Sam Erwin, Esq.
Erwin, Martinkus & Cole, Ltd.
411 West University Avenue
Champaign, IL 61820
and
Vine Street Partners, Inc.
Attention: Patrick W. Hartman
2 Salt Creek Lane, Suite 204
Hinsdale, IL 60521
IF TO SPITZ: Jack E. Spitz
53 Meadow Lane
Fisher, IL 61843
WITH COPY TO: Sam Erwin, Esq.
Erwin, Martinkus & Cole, Ltd.
411 West University Avenue
Champaign, IL 61820
IF TO BUYER: Ballantyne of Omaha, Inc.
Attention: John P. Wilmers
4350 McKinley Street
Omaha, NE 68112
WITH COPY TO: Marks Clare & Richards
David P. Wilson, Esq.
11605 Miracle Hills Dr., Suite 300
Omaha, NE 68154-4487
or at such other address or designation as is provided by one party to the other
in writing.
-20-
<PAGE>
XXI. CHOICE OF LAW
This Agreement shall be construed, interpreted and the rights of the
parties determined in accordance with the laws of the State of Illinois (without
reference to the choice of law provisions of Illinois law).
XXII. SURVIVAL OF WARRANTIES AND REPRESENTATIONS
The representations, warranties and covenants of the parties hereto
contained herein, or in any certificates or other documents delivered prior to
or at the Closing, shall not be deemed waived or otherwise affected by any
investigation theretofore made by either party. Each and every representation,
warranty and covenant of Seller, Spitz, and Buyer and the indemnification
provisions set forth in Article XV herein shall survive the Closing date and
remain operative and in full force and effect as herein provided.
XXIII. ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS
This Agreement, together with all exhibits and schedules hereto,
constitutes the entire agreement between the parties pertaining to the subject
matter hereof and supersedes all prior agreements, understandings, negotiations
and discussions, whether oral or written. No supplement, modification or waiver
of this Agreement shall be binding unless executed in writing by the party to be
bound thereby. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provision hereof (whether or
not similar), nor shall such waiver constitute a continuing waiver unless
otherwise expressly provided.
XXIV. MULTIPLE COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original, but all of which together constitute one and the
same instrument.
XXV. INVALIDITY
In the event that any one or more of the provisions contained in this
Agreement or in any other instrument referred to herein shall, for any reason,
be held to be invalid, illegal or unenforceable in any respect, then to the
maximum extent permitted by law, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement or any other such
instrument.
XXVI. TITLES
The titles, captions or headings of the Articles and Sections herein are
inserted for convenience of reference only and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement.
-21-
<PAGE>
XXVII. CONFIDENTIAL INFORMATION
In connection with the negotiation of this Agreement, each party
acknowledges that it has had access to confidential information relating to the
other party. Each party shall treat such information as confidential, preserve
the confidentiality thereof and not duplicate or make use of any other such
information, except to advisors, consultants, lenders and affiliates in
connection with the transactions contemplated hereby or pursuant to or as
required by law. If the transaction is not closed, each party shall return to
the other all confidential information in tangible form, belonging or relating
to the other party or provide a certificate of destruction of such material
acceptable to the other party.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on their respective behalf, by their respective officers
thereunto duly authorized, on this 3rd day of April, 1998.
"Seller"
DESIGN & MANUFACTURING, LTD.
By: /s/ Jack E. Spitz
------------------------------------------------
Jack E. Spitz, President
"Spitz"
/s/ Jack E. Spitz
------------------------------------------------
Jack E. Spitz
"Buyer"
BALLANTYNE OF OMAHA, INC.
a Delaware corporation
By: /s/ John P. Wilmers
-----------------------------------------------
John P. Wilmers, President
-22-
<PAGE>
STATE OF ILLINOIS )
) ss.
COUNTY OF CHAMPAIGN )
The foregoing instrument was acknowledged before me this 2nd day of
April, 1998, by JACK E. SPITZ, President of DESIGN & MANUFACTURING, LTD., an
Illinois corporation, on behalf of the corporation.
/s/ Donna J. Rose
____________________________________
Notary Public
[SEAL]
STATE OF ILLINOIS )
) ss.
COUNTY OF CHAMPAIGN )
On this 2nd day of April, 1998, before me, the undersigned, a Notary
Public in and for said County, personally appeared the above-named JACK E.
SPITZ, to me known to be the identical person named in and who executed the
foregoing instrument and acknowledged that he executed the same as his
voluntary act and deed.
/s/ Donna J. Rose
____________________________________
Notary Public
[SEAL]
STATE OF ILLINOIS )
) ss.
COUNTY OF CHAMPAIGN )
The foregoing instrument was acknowledged before me this 3rd day of
April, 1998, by JOHN P. WILMERS, President of BALLANTYNE OF OMAHA, INC., a
Delaware corporation, on behalf of the corporation.
/s/ Eric E. Stalter
[SEAL] ____________________________________
Notary Public
-23-
<PAGE>
Exhibit 11
Ballantyne of Omaha, Inc. and Subsidiaries
Computation of Earnings Per Share of Common Stock
Three Months Ended March 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
BASIC EARNINGS
Earnings applicable to
common stock $ 1,901,418 $ 1,568,200
Weighted average common
shares outstanding 9,036,535 8,569,785
------------ ------------
Basic earnings per share $ 0.21 $ 0.18
------------ ------------
------------ ------------
DILUTED EARNINGS
Earnings applicable to
common stock $ 1,901,418 $ 1,568,200
Weighted average common
shares outstanding 9,036,535 8,569,785
Assuming conversion
of options outstanding 454,569 742,202
------------ ------------
Weighted average common
shares outstanding, as adjusted 9,491,104 9,311,987
------------ ------------
Diluted earnings per share $ 0.20 $ 0.17
------------ ------------
------------ ------------
</TABLE>
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
QUARTERLY REPORT ON FORM 10-Q FOR BALLANTYNE OF OMAHA INC AND SUBSIDIARIES FOR
THE THREE MONTHS ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 4,901,266
<SECURITIES> 0
<RECEIVABLES> 11,500,898
<ALLOWANCES> 194,048
<INVENTORY> 19,431,146
<CURRENT-ASSETS> 36,353,970
<PP&E> 11,786,794
<DEPRECIATION> 3,662,336
<TOTAL-ASSETS> 45,889,265
<CURRENT-LIABILITIES> 7,950,809
<BONDS> 130,204
0
0
<COMMON> 90,409
<OTHER-SE> 37,467,528
<TOTAL-LIABILITY-AND-EQUITY> 45,889,265
<SALES> 17,271,887
<TOTAL-REVENUES> 17,271,887
<CGS> 11,963,465
<TOTAL-COSTS> 11,963,465
<OTHER-EXPENSES> 2,372,908
<LOSS-PROVISION> 60,000
<INTEREST-EXPENSE> 4,190
<INCOME-PRETAX> 2,944,494
<INCOME-TAX> 1,043,076
<INCOME-CONTINUING> 1,901,418
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,901,418
<EPS-PRIMARY> .21<F1>
<EPS-DILUTED> .20<F1>
<FN>
<F1>AMOUNTS DISCLOSED AS EPS-PRIMARY AND EPS-DILUTED
REPRESENT BASIC AND DILUTED EARNINGS PER SHARE AS
REQUIRED BY STATEMENT OF FINANCIAL ACCOUNTING
STANDARDS NO. 128 "EARNINGS PER SHARE."
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THESE SCHEDULES HAVE BEEN RESTATED IN ACCORDANCE WITH REGULATION
S-K, ITEM 601(c) (2) (iii) TO DISCLOSE EARNINGS PER SHARE AS REQUIRED
BY STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 128 "EARNINGS
PER SHARE."
</LEGEND>
<RESTATED>
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997 DEC-31-1997
<PERIOD-START> JAN-01-1997 JAN-01-1997 JAN-01-1997
<PERIOD-END> MAR-31-1997 JUN-30-1997 SEP-30-1997
<CASH> 6,258,708 5,685,071 6,636,141
<SECURITIES> 0 0 0
<RECEIVABLES> 8,493,584 10,071,261 10,680,442
<ALLOWANCES> 150,461 157,850 206,962
<INVENTORY> 13,670,586 15,467,712 16,270,800
<CURRENT-ASSETS> 28,805,652 31,821,035 34,117,957
<PP&E> 6,830,517 8,380,432 9,342,482
<DEPRECIATION> 2,764,505 2,962,002 3,159,510
<TOTAL-ASSETS> 33,812,464 38,327,160 41,640,473
<CURRENT-LIABILITIES> 7,828,845 9,007,915 9,766,192
<BONDS> 0 0 0
0 0 0
0 0 0
<COMMON> 85,698 88,927 90,185
<OTHER-SE> 25,511,449 28,679,777 31,348,091
<TOTAL-LIABILITY-AND-EQUITY> 33,812,464 38,327,160 41,640,473
<SALES> 14,724,814 31,073,809 48,452,667
<TOTAL-REVENUES> 14,724,814 31,073,809 48,452,667
<CGS> 10,368,767 21,785,256 34,016,616
<TOTAL-COSTS> 10,368,767 21,785,256 34,016,616
<OTHER-EXPENSES> 1,931,768 4,067,282 6,120,517
<LOSS-PROVISION> 9,000 14,010 67,000
<INTEREST-EXPENSE> 11,182 30,878 36,470
<INCOME-PRETAX> 2,468,459 5,312,034 8,423,005
<INCOME-TAX> 900,259 1,888,582 2,946,722
<INCOME-CONTINUING> 1,568,200 3,423,452 5,476,283
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 1,568,200 3,423,452 5,476,283
<EPS-PRIMARY> .18 .40 .63
<EPS-DILUTED> .17 .37 .59
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THESE SCHEDULES HAVE BEEN RESTATED IN ACCORDANCE WITH REGULATION S-K, ITEM
601(c) (2) (iii) TO DISCLOSE EARNINGS PER SHARE AS REQUIRED BY STATEMENT OF
FINANCIAL ACCOUNTING STANDARDS NO. 128 "EARNINGS PER SHARE."
</LEGEND>
<RESTATED>
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996 DEC-31-1996
<PERIOD-START> JAN-01-1996 JAN-01-1996 JAN-01-1996
<PERIOD-END> MAR-31-1996 JUN-30-1996 SEP-30-1996
<CASH> 340,073 211,030 5,573,841
<SECURITIES> 0 0 0
<RECEIVABLES> 7,396,036 7,139,825 7,820,231
<ALLOWANCES> 104,433 108,682 115,008
<INVENTORY> 10,631,893 10,112,844 10,988,205
<CURRENT-ASSETS> 18,814,582 18,102,388 24,825,614
<PP&E> 5,332,562 3,286,381 3,558,161
<DEPRECIATION> 2,280,000 2,390,877 2,499,783
<TOTAL-ASSETS> 22,954,000 22,454,919 29,391,434
<CURRENT-LIABILITIES> 8,117,400 7,199,668 6,817,736
<BONDS> 8,532,739 7,846,282 232,338
0 0 0
0 0 0
<COMMON> 66,000<F1> 66,000<F1> 84,975<F1>
<OTHER-SE> 5,851,389<F1> 6,956,497<F1> 21,869,913<F1>
<TOTAL-LIABILITY-AND-EQUITY> 22,954,000 22,454,919 29,391,434
<SALES> 11,362,637 23,857,860 36,494,907
<TOTAL-REVENUES> 11,362,637 23,857,860 36,494,907
<CGS> 8,174,415 17,075,185 25,771,040
<TOTAL-COSTS> 8,174,415 17,075,185 25,771,040
<OTHER-EXPENSES> 1,566,675 3,138,592 4,933,482
<LOSS-PROVISION> 7,005 14,010 17,414
<INTEREST-EXPENSE> 186,105 381,771 463,913
<INCOME-PRETAX> 1,428,437 3,248,302 5,348,795
<INCOME-TAX> 566,263 1,281,020 2,109,452
<INCOME-CONTINUING> 862,174 1,967,282 3,239,343
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 862,174 1,967,282 3,239,343
<EPS-PRIMARY> .13<F1> .30<F1> .46<F1>
<EPS-DILUTED> .13<F1> .28<F1> .43<F1>
<FN>
<F1> AMOUNTS AND PER SHARE DATA HAVE BEEN ADJUSTED FOR THE 3-FOR-2 STOCK SPLIT
ISSUED ON MARCH 5, 1997.
<F2> DATA FOR FISCAL 1995 HAVE NOT BEEN RESTATED FOR STATEMENT OF FINANCIAL
ACCOUNTING STANDARDS NO. 128 "EARNINGS PER SHARE" SINCE THE AMOUNTS WERE
NOT DIFFERENT THAN PREVIOUSLY REPORTED.
</FN>
</TABLE>
