1. Belmont Office Furniture formed Holton- Central Holdings and paid $ 3.9 million for all 3,900,000 shares of Holton-Central Holdings€™ $.01 par value common stock.
2. Holton-Central Holdings borrowed $ 6,000,000 to help Holton-Central exit from bankruptcy; the principal would be repaid in six $ 1 million payments each July 1, beginning July 1, 2010. Also due each July 1, beginning July 1, 2010, was 10% interest on the unpaid balance as of the previous July 1.
3. Holton-Central Holdings paid $ 4,765,000 cash for the assets of Holton-Central Inc., and assumed the firm€™s $ 875,000 of accounts payable.
Holton Chairs had been an innovative designer and producer of quality office chairs since Arnold Holton founded the firm in Grand Rapids, Michigan, in 1938. In 1947, Holton purchased Central Chairs and renamed itself Holton-Central Inc. When Mr. Holton died in 1994, long-time executives managed the firm for his heirs. Through a variety of circumstances, including foreign competition, outdated production equipment and processes, expensive wage contracts, and low quality, Holton-Central gradually became unprofitable. In early 2009, Holton-Central Inc., declared bankruptcy and closed its doors. Because of concerns about chemical contaminants at Holton-Central€™s original factory (no longer in use), no one would buy the corporation as a going concern. Instead, one bidder offered to buy Holton-Central€™s assets, except for the original factory, and resume operations at the current production facility under the Holton-Central name.
That bidder, Belmont Office Furniture, produced high-quality office desks. Peter Cardell purchased Belmont Office Furniture€™s assets out of bankruptcy in 2003; within four years he increased revenues by 65% and returned Belmont to profitability. By 2009, Mr. Cardell decided to acquire another office furniture company. On July 1, 2009, the Holton- Central bankruptcy judge accepted Belmont€™s $ 4,765,000 offer for Holton-Central€™s assets and accounts payable. The $ 4,765,000 purchase price equaled the market value of the tangible assets, minus $ 875,000 of accounts payable, plus $ 265,000, which Mr. Cardell considered goodwill:

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Raw material inventory Work-in-process inventory Finished goods inventory Equipment (5-year life) Building (20-year life) $175,000 $220,000 $115,000 $450,000 $3,600,000 $815,000 $5,375,000 $875,000 $4,500,000 $265,000 $4,765,000 Land Total tangible assets Less: Accounts payable Net tangible assets Goodwill Total purchase price