Cook County Circuit Court in Chicago has awarded $16.6 million to the former owner of Alloyd Co. Inc. for breach of contract.
Arthur Gustafson sold Alloyd, a thermoformer and thermoforming machine manufacturer in De Kalb, Ill., to Wind Point Partners of Chicago in 1989 in a $37 million leveraged buyout. After the sale, the new owners discovered a $1.5 million shortfall in inventory. Even though Gustafson paid Alloyd $1.5 million for the shortfall, the new owners refused to pay $7 million in promissory notes and escrowed funds.
With accrued interest, the notes and escrowed funds amounted to $14 million. Jurors also awarded Gustafson $2.6 million for legal expenses.
``We got all we asked for,'' Gustafson's lawyer Michael Hannafan said in a telephone interview from Chicago.
Gustafson established a competing company, Algus Packaging Inc. of DeKalb, Ill., in 1995 after a five-year noncompete clause expired. The deal with Wind Point included $19.5 million for Alloyd's stock purchase and $8.5 million for a noncompete agreement and the rest was paid to Alloyd employees to remain with the company, Hannafan said.
Bob Cummings, an Alloyd board member and managing director of Wind Point, said his firm is disappointed with the decision. ``We will explore all avenues to get the situation changed,'' he said.
Hannafan said the inventory shortfall was an honest mistake based on inventory calculations from prior years. Lawyers for Alloyd and Wind Point argued that the shortfall meant Wind Point paid too much for Alloyd and the harm caused by the shortfall should be compensated at $15 for every dollar of the shortfall, amounting to $19.5 million.
Algus recorded sales of $3.5 million in 1997, $2.8 million of which came from thermoformed products. Gustafson said the unresolved dispute had interfered with his ability to expand sales.