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paid-in capital by the number of shares outstanding after
the acquisition (i.e., paid-in capital as of January 31,
1989, $439,056, divided by total shares outstanding on the
same date, 7,200). The cash portion of the purchase price
was paid with retained earnings from old SWI and the
proceeds of debt incurred by new SWI. Prior to the Dubin
Clark purchase, SWI had virtually no long-term debt. After
the buyout, SWI had approximately $5 million in outstanding
debt.
The Dubin Clark purchase was completed on January 31,
1989. Messrs. Jacobson and Henochowicz received a total of
$279,000 in contingent payments based upon operating income
for the fiscal year ended on June 30, 1990. In January
1991, SWI repurchased 1,423,787 of the shares held by
Messrs. Jacobson and Henochowicz for $4,416,000 in cash.
SWI also purchased Messrs. Jacobson's and Henochowicz's
rights to future contingent payments for a total of
$4,098,000 in cash.
Dubin Clark was a sophisticated investor with a
proven record of successfully managing the growth of its
acquisitions. After acquiring SWI, Dubin Clark implemented
a plan to expand the company. Dubin Clark's original plan
was to open one or two new stores per year and become
dominant in certain regional markets. This would have
allowed Dubin Clark to withdraw excess cash from the
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