EXHIBIT 2.c
AMENDMENT NO. 2 TO ACQUISITION AGREEMENT
AMENDMENT NO.2 (the "Amendment") dated as of August 5, 1996 by and
between FURNISHINGS INTERNATIONAL INC., a Delaware corporation (the "Buyer"),
and Masco Corporation, a Delaware corporation ("Masco").
W I T N E S S E T H :
WHEREAS, the Buyer and Masco have heretofore entered into an Acquisition
Agreement dated as of March 29, 1996, as amended by Amendment No. 1 thereto
dated June 21, 1996 (as amended, the "Acquisition Agreement"); and
WHEREAS, the Parties hereto desire to amend the Acquisition Agreement to
provide for certain changes in consideration and other amendments as described
herein.
NOW, THEREFORE, in consideration of the premises and of the respective
agreements contained herein, the Parties agree to amend the Acquisition
Agreement as follows:
SECTION 1. Definitions; References. Unless otherwise specifically
defined herein, each term used herein which is defined in the Acquisition
Agreement shall have the meaning assigned to such term in the Acquisition
Agreement. Each reference to "hereof", "hereunder", "herein" and "hereby" and
each other similar reference and each reference to "this Agreement" and each
other similar reference contained in the Acquisition Agreement shall from and
after the date hereof refer to the Acquisition Agreement as amended hereby.
SECTION 2. Amendment of Section 2. Section 2 of the Acquisition
Agreement is amended by:
(i) deleting Section 2(b) and replacing it in its entirety with the
following:
(b) Purchase Price. The "Preliminary Purchase Price" shall
consist of (i) $705,348,913 in cash, (ii) a promissory note (the
"PIK Note") of the
Buyer having a principal amount equal to $285,000,000 and an
interest rate equal to 12% per annum and having the terms
(including the maturity and amortization schedule) set forth in
the attached Exhibit A; provided that (x) the principal amount of
the PIK Note will be further adjusted as provided in Section 2(f)
and (y) if on the Closing Date the Maximum Permitted Rate is less
than 12%, the interest rate on the PIK Note will be reduced to the
Maximum Permitted Rate and the principal amount of the PIK Note
will be increased consistent with the sample calculation provided
in Schedule 2(b) in an amount such that the discounted present
value of all scheduled cash payments (assuming interest will be
paid in cash as scheduled commencing on the eighth anniversary of
the Closing Date) under the PIK Note following such adjustment
(calculated using 12% as the discount factor) will be equal to the
discounted present value of all such payments under the PIK Note
prior to such adjustment (calculated using the same discount
factor), (iii) 550,090 shares of Series A-1 Preferred Stock (the
"Series A-1 Preferred Stock") of the Buyer having the terms set
forth in the Amended and Restated Certificate of Incorporation of
the Buyer attached as Exhibit B hereto, (iv) 21,930 shares of
Series A-2 Preferred Stock (the "Series A-2 Preferred Stock") of
the Buyer having the terms set forth in the Amended and Restated
Certificate of Incorporation of the Buyer attached as Exhibit B
hereto, (v) 303,503 shares of Series B Preferred Stock (the
"Series B Preferred Stock") of the Buyer having the terms set
forth in the Amended and Restated Certificate of Incorporation of
the Buyer attached as Exhibit B hereto, (vi) 5,000 shares of
Series A-1 Common Stock, 5,000 shares of Series A-2 Common Stock
and 5,000 shares of Series A-3 Common Stock (collectively, the
"Class A Common Stock") of the Buyer and (vii) 29,161 shares of
Series B-1 Common Stock, 29,161 shares of Series B-2 Common Stock
and 29,161 shares of Series B-3 Common Stock (collectively, the
"Class B Common Stock") of the Buyer. The Preliminary Purchase
Price will be applied as follows: first, to the repayment by the
HFG Companies and their Subsidiaries (as set forth in the Schedule
of Tax Allocations) of the Net Intercompany Balance and, second,
to the payment in full for the outstanding capital stock of the
HFG Companies. All cash transfers on the Closing Date pursuant to
this Section 2(b) will be made
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by wire transfer of immediately available funds to Masco (for Masco's
own account or, as appropriate, for the account of Masco Corporation
Limited). The Preliminary Purchase Price will be subject to certain
adjustments as described below in arriving at the Purchase Price.
The Parties agree that the Purchase Price shall be allocated for all
purposes among the capital stock and assets of the HFG Companies and
their Subsidiaries in accordance with Section 9(j) below.
(ii) inserting the following as the final sentence of Section
2(e)(i):
Notwithstanding anything in this Agreement to the contrary, (i)
all amounts transferred to Masco or any Subsidiary thereof (other
than the HFG Companies and their Subsidiaries) on the Closing Date
from the lockbox and other deposit accounts maintained by any of
the HFG Companies and their Subsidiaries, to the extent that such
amounts constitute "Collections" (as defined in the Pooling
Agreement) received in any such lockbox or other deposit account
on the Closing Date, shall be held by Masco (or such Subsidiary)
for the benefit of the Trustee and the Investor Certificateholders
(each as defined in the Pooling Agreement) and transferred to the
Collection Account (as defined in the Pooling Agreement) by wire
transfer of immediately available funds on the first Business Day
after the Closing Date and (ii) for purposes of the calculation of
the Adjusted Net Investment and Advances and Closing Date Cash,
all such Collections shall be included as Closing Date Cash in the
assets of the HFG Companies and their Subsidiaries as of the
Closing Date.
SECTION 3. Amendment of Section 3. Section 3 of the Acquisition
Agreement is amended by:
(i) deleting Section 3(a)(vi) and replacing it in its entirety with
the following:
(vi) Acquisition for Investment. Except for the securities of
the Buyer which are to be sold to members of the Management Group
pursuant to the Masco Stock Purchase Agreements, neither Masco nor
Masco Corporation Limited is acquiring any of the PIK Note, the
Series A Preferred Stock, the Series B Preferred Stock or the
Common Stock with a view
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to or for sale in connection with any distribution thereof within
the meaning of the Securities Act; provided, however, that the
disposition of Masco's or Masco Corporation Limited's property
(including any of the PIK Note, the Series A Preferred Stock, the
Series B Preferred Stock or the Common Stock) will at all times
remain within its control, subject only to the obligations of
Masco to resell the Series A Preferred Stock and the Common Stock
under the Masco Stock Purchase Agreements.
(ii) adding a new Section 3(b)(xvii) to read as follows:
(xvii) No Additional Issuances.
(A) The Buyer has no present plan or intention to issue any
Series A-2 Preferred Stock to any Person except (i) (w) to Masco,
pursuant to the terms of this Agreement, (x) to Mr. Wayne B. Lyon,
an individual member of the Management Group, pursuant to the Lyon
Stock Purchase Agreement, (y) up to 800 shares of Series A-2
Preferred to certain members of management of the Buyer's
Subsidiaries and (z) to 399, pursuant to the 399 Stock Purchase
Agreement, in each case at the Closing, and (ii) in connection
with any employee stock purchase or option plan which may be
adopted by the Buyer in the future; provided that such plan will
not permit the issuance thereunder of shares of Series A-2
Preferred Stock in excess of 14,000 shares.
(B) The Buyer has no present plan or intention to issue the
Class C Common Stock (i) to (x) Masco, (y) any member of the
Institutional Stockholder Group or (z) Wayne B. Lyon or (ii) to
any other Person, except in consideration for services performed
by such other Person for the Buyer.
(C) The Buyer has no present plan or intention to issue any
Preferred Stock or any Common Stock or any interest, direct or
indirect, in such Preferred Stock or such Common Stock, for cash
or property, to any holder of the Class C Common Stock, except in
connection with an employee stock purchase or option plan which
may be adopted by the Buyer in the future.
SECTION 4. Amendment of Section 4. Section 4(p)(i)(D) of the
Acquisition Agreement is amended by replacing the
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word "or" between "1993" and "(2)" with a comma, and by deleting the period at
the end of the sentence and adding a final clause to read in its entirety as
follows:
or (3) with respect to the New Plans (as hereinafter defined),
become so qualified in the opinion of counsel to Masco.
SECTION 5. Amendment of Section 5. Section 5 of the Acquisition
Agreement is amended by adding a new Section 5(l) to read in its entirety as
follows:
(l) Notwithstanding any other provision of this Agreement,
Masco shall have the right prior to the Closing Date to cause (i)
the transfer by Intro Europe B.V. of all of its assets and
liabilities to Intro Europe Inc. and (ii) the dividend of all of
the capital stock of Intro Europe B.V. to Masco or one of its
Subsidiaries (other than the HFG Companies or their Subsidiaries).
Masco agrees to indemnify and hold harmless the Buyer from and
against any Adverse Consequences arising out of or resulting from
the transfers and the dividend described in the immediately
preceding sentence or any contribution of such assets and
liabilities to a new Dutch corporation, including any costs of
consummating such transfers, dividend and contribution and any
additional Taxes resulting from such transfers, dividend and
contribution, and the Buyer (i) agrees that such transfers and
dividend shall not be deemed to violate any provision of this
Agreement, including, without limitation, Sections 4(b), 4(f),
4(g), 4(j) and 5(c) of this Agreement, (ii) acknowledges that,
after the date of such dividend, Intro Europe B.V. shall not
constitute a Subsidiary of the HFG Companies for any purpose
whatsoever, (iii) acknowledges that such transfers and dividend
have occurred prior to the Closing Date and (iv) hereby consents
to such transfers and dividend.
SECTION 6. Amendment of Section 6. Section 6 of the Acquisition
Agreement is amended by:
(i) Deleting Section 6(c)(ii) and replacing it in its entirety with
the following:
(ii) with respect to the Masco Corporation Master Pension Plan
and the Masco Corporation Pension Plan (the "Masco Plans"), as of
the Closing Date, Masco shall remove the HFG
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Participants in the Masco Plans from the Masco Plans, and thereupon
Masco shall cause such HFG Participants to become participants in
newly established tax-qualified plans, the terms of which are
substantially identical to the terms of the Masco Plans (the "New
Plans") and, as soon as practicable thereafter, shall transfer to
each New Plan the proportion of each of the Masco Plan's assets
allocable to liabilities accrued to the Closing Date to all HFG
Participants (including earnings and losses to the date of such
transfer allocable to such assets), which proportion shall be deemed
to equal the quotient of (x) the present value of benefits accrued on
the Closing Date for all HFG Participants in such Masco Plan
calculated on a termination basis pursuant to Code Sec. 414(l)
divided by (y) the present value of benefits accrued on the Closing
Date for all HFG Participants and Non-HFG Participants in such Masco
Plan, in each case calculated on a termination basis pursuant to Code
Sec. 414(l), all as mutually determined by Masco's and Buyer's
actuaries, and thereupon Masco shall retain all liabilities and
responsibilities relating to all Non-HFG Participants under the Masco
Plans and all assets so retained;
(ii) Deleting Section 6(c)(iii) and replacing it in its entirety
with the following:
(iii) with respect to the Masco Corporation Home Furnishings
and Building Products Pension Plan (the "HFG Plan"), as of the
Closing Date, Non-HFG Participants in the HFG Plan shall be
removed from the HFG Plan and its assets allocable to liabilities
accrued to the Closing Date to such Non-HFG Participants shall be
determined by the same methodology as set forth in subsection (ii)
above (except that "Non-HFG Participants" shall be substituted for
"HFG Participants" in clause (x) of such subsection (ii)) and, as
soon as practicable thereafter, Masco shall direct to Masco's
successor plan and trustee the transfer of the proportion of the
HFG Plan's assets so determined to be allocable to such liability
to such Non-HFG Participants, and thereupon Masco shall assume all
such liabilities and responsibilities relating to all such Non-HFG
Participants and the assets so transferred;
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(iii) Deleting Section 6(c)(iv) and replacing it in its entirety with
the following:
(iv) with respect to the Berkline Associates Pension Plan
listed on Section 4(p)(i) of the Disclosure Schedule, the New
Plans (after giving effect to the provisions of the foregoing
Section 6(c)(ii)), and the HFG Plan (after giving effect to the
provisions of the foregoing Section 6(c)(iii)), Masco shall direct
the resignation of such plans' trustees, and shall direct to the
Buyer's successor trustee a transfer in cash of all such plans'
assets (including all outstanding participant loans if any), and
thereafter the Buyer shall assume (or, in the case of the Berkline
Associates Pension Plan, the Berkline Corporation shall retain)
the sponsorship of such plans together with all liabilities and
responsibilities relating to such plans and the assets so
transferred (except as provided in clauses (ii) and (iii) above
and clause (viii) below);
(iv) Inserting in the second line of Section 6(f) between the words
"plan" and "prior" the following clause: "(other than the Masco
Plans, for which the New Plans shall be substituted for the
purposes of this Section 6(f))".
SECTION 7. Amendment of Section 12. Section 12 of the Acquisition
Agreement is amended by deleting the second paragraph of Section 12(r) and
replacing it in its entirety with the following:
Masco agrees that, from and after the Closing Date, it will
guarantee or otherwise provide up to (A) $15,000,000 in letters of
credit (whether or not standby letters of credit) or comparable
credit enhancement arrangements in support of any obligation as to
which any of the HFG Companies and their Subsidiaries is a
primary obligor or an account party (or an equivalent) and (B) up
to an additional $6,500,000 in letters of credit or other
arrangements described in (A) above that are outstanding as of the
Closing Date (such letters of credit and other arrangements
described in clauses (A) and (B) above being referred to
collectively as the "Guaranteed LCs"); provided that after the
Closing Date (x) no Guaranteed LCs shall be extended (other than a
one-time extension for a period of ten days or less) or renewed,
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including automatic or evergreen extensions or renewals, and (y) no
additional Guaranteed LC shall be provided by Masco, in each case
unless the aggregate amount of the Guaranteed LCs outstanding
immediately after giving effect to such extension, renewal or
provision is less than or equal to $15,000,000. The respective
obligations of Masco and the Buyer under this paragraph shall be
subject to the following additional terms and conditions:
(i) The obligation of Masco to guarantee or otherwise
provide the Guaranteed LCs and its obligations in respect of
any then outstanding Guaranteed LCs shall be irrevocably
terminated (in each case in accordance with clause (iii) of
this paragraph) upon the earliest of (w) the date on which any
PIK Note becomes due and payable (whether upon maturity, by
acceleration or otherwise (other than as a result of
redemption)), (x) the date of any redemption, in whole or in
part, of any PIK Note (other than a redemption that is funded
solely through the substantially concurrent issuance by the
Buyer or any of its Subsidiaries of debt securities having a
maturity of at least one year from the date of issuance), (y)
the date of occurrence of a Change of Control (as defined in
the PIK Note) or (z) any business day if on each business day
of the preceding 18-month period the aggregate amount of unused
availability (exclusive of any such availability supported by a
Guaranteed LC (in an amount not to exceed the lesser of (i)
$15,000,000 and (ii) the amount of the Guaranteed LC) which
availability, by the express terms of any underlying agreement
or instrument, would be subject to termination by reason of the
termination of the related Guaranteed LC) for (A) borrowings
under credit lines and receivables facilities or (B) issuances
of letters of credit, in each case available to be borrowed by
or issued for the benefit of the Buyer or its Subsidiaries, as
the case may be, equals at least $75,000,000.
(ii) The Buyer agrees to indemnify and hold harmless Masco
and its remaining Subsidiaries following the Closing from and
against any Adverse Consequences resulting from any failure or
delay in making a payment under (or any
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other breach of its or its Subsidiaries' obligations under) the
Guaranteed LCs or any agreement or instrument evidencing
obligations or liabilities supported by the Guaranteed LCs, as
the case may be; provided that any such indemnification shall
be effected through the issuance to Masco (at the time and
pursuant to the procedures set forth in the PIK Note) of a
promissory note of the Buyer having a principal amount equal to
the indemnification amount (provided that such principal amount
shall be appropriately modified in the same manner used to
modify the original principal amount of the PIK Note in
accordance with clause (y) of the proviso to Section 2(b)(ii))
and having terms equivalent to the terms of the PIK Note, it
being understood that the amount of the Guaranteed LCs that
Masco is obligated to provide will be reduced by the amount of
any such Adverse Consequences paid by Masco.
(iii) Immediately upon termination of Masco's obligations in
respect of the Guaranteed LCs (or if outstanding Guaranteed LCs
exceed those that Masco is obligated to guarantee or provide
pursuant to this Section 12(r)), the Buyer shall obtain the
release of all Guaranteed LCs (or all such excess Guaranteed
LCs) from the beneficiaries thereof, including, if necessary,
through cash collateralization of the underlying obligation or
liability of the relevant HFG Company or its Subsidiary.
(iv) The Buyer agrees to furnish to Masco (A) within 30 days
after the end of each fiscal quarter, or more frequently as
reasonably requested by Masco, a summary report of the
Guaranteed LCs outstanding as of the end of such fiscal quarter
(or other period specified by Masco in its request) for the HFG
Companies and their Subsidiaries and (B) from time to time, as
requested by Masco (but not more than once in any calendar
month), reasonably detailed information concerning the
availability of credit lines, receivables facilities and
letters of credit described in clause (i)(z) above.
SECTION 8. Amendment of Schedule of Defined Terms. The Schedule of
Defined Terms is hereby amended by:
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(i) adding the following defined terms to be inserted in
alphabetical order within the Schedule of Defined Terms:
"Class C Common Stock" means the Class C Common Stock of the
Buyer having the terms set forth in the Amended and Restated
Certificate of Incorporation of the Buyer attached as Exhibit B
hereto.
"Class D Common Stock" means the Class D Common Stock having
the terms set forth in the Amended and Restated Certificate of
Incorporation of the Buyer attached as Exhibit B hereto.
"Common Stock" means the Class A Common Stock, the Class B
Common Stock, the Class C Common Stock and the Class D Common
Stock, any securities into which such Class A Common Stock,
Class B Common Stock, Class C Common Stock or Class D Common
Stock shall have been changed, any securities resulting from
any reclassification or recapitalization of such Class A Common
Stock, Class B Common Stock, Class C Common Stock or Class D
Common Stock, and all other securities of any class or classes
(however designated) of the Buyer, the holders of which have
the right, without limitation as to amount, after payment on
any securities entitled to a preference on dividends or other
distributions upon any dissolution, liquidation or winding-up,
either to all or to a share of the balance of payments upon
such dissolution, liquidation or winding-up.
"Guaranteed LCs" has the meaning set forth in Section 12(r)
of the Acquisition Agreement.
"HFG Plan" has the meaning set forth in Section 6(c)(iii) of
the Acquisition Agreement.
"Institutional Stockholder Group" means 399 Venture
Partners, Inc., Associated Madison Companies, Inc., TRV
Employees Fund, L.P., Greenwich Street Capital, L.P., GSCP
Offshore Fund Ltd., The Travelers Insurance Company, and The
Travelers Life and Annuity Company (each individually, an
"Institutional Stockholder Group Member").
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"Lyon Stock Purchase Agreement" means the Lyon Stock
Purchase Agreement to be entered into as of the Closing Date
between the Buyer and Wayne B. Lyon, which shall provide for
the purchase of certain securities of the Buyer by Wayne B.
Lyon.
"Management Group" means each of the individuals whose name
appears under the heading "Management Group" on the signature
pages to the Stockholders' Agreement.
"Masco Plans" has the meaning set forth in Section 6(c)(ii)
of the Acquisition Agreement.
"Masco Stock Purchase Agreements" means all of the Stock
Purchase Agreements to be entered into as of the Closing Date
between Masco and certain members of the Management Group for
the purchase of certain securities of the Buyer by such members
of the Management Group from Masco.
"New Plans" has the meaning set forth in Section 6(c)(ii) of
the Acquisition Agreement.
"Pooling Agreement" means the Pooling Agreement dated as of
the Closing Date among LFI Receivables Corporation, LFI
Servicing Corporation, as master servicer, and The Chase
Manhattan Bank, as trustee, as in effect on the Closing Date.
"Preferred Stock" means the Series A Preferred Stock, the
Series B Preferred Stock and the Series C Preferred Stock, any
securities into which such Series A Preferred Stock, Series B
Preferred Stock or Series C Preferred Stock shall have been
changed, any securities resulting from any reclassification or
recapitalization of such Series A Preferred Stock, Series B
Preferred Stock or Series C Preferred Stock, and all other
securities of any class or classes (however designated) of the
Buyer, the holders of which have the right to a preference on
dividends or other distributions upon dissolution, liquidation
or winding-up; provided that the Class D Common Stock shall not
be deemed to be Preferred Stock.
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"Series A-1 Preferred Stock" has the meaning set forth in
Section 2(b) of the Acquisition Agreement.
"Series A-2 Preferred Stock" has the meaning set forth in
Section 2(b) of the Acquisition Agreement.
"Series C Preferred Stock" means the Series C Preferred
Stock having the terms set forth in the Amended and Restated
Certificate of Incorporation of the Buyer attached as Exhibit B
to the Acquisition Agreement.
(ii) deleting the definition of "Series A Preferred Stock" and
replacing it in its entirety with the following:
"Series A Preferred Stock" means the Series A-1 Preferred
Stock and the Series A-2 Preferred Stock.
SECTION 9. Amendment of Exhibit A. Exhibit A to the Acquisition
Agreement is hereby replaced in its entirety by Exhibit A to this Amendment.
SECTION 10. Amendment of Exhibit B. Exhibit B to the Acquisition
Agreement is hereby replaced in its entirety by Exhibit B to this Amendment.
SECTION 11. Governing Law. This Amendment shall be governed by and
construed in accordance with the domestic laws of the State of New York
without giving effect to any choice or conflict of law provision or rule
(whether of the State of New York or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of New
York.
SECTION 12. Counterparts; Amendments; Effectiveness. This Amendment
may be executed in one or more counterparts, each of which shall be deemed an
original but all of which together will constitute one and the same
instrument. No amendment of any provision of this Amendment shall be valid
unless the same shall be in writing and signed by the Buyer and Masco. This
Amendment shall become effective as of the date hereof.
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IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first above written.
FURNISHINGS INTERNATIONAL INC.
By /s/ ROBERT L. GEORGE
Title: Executive Vice President
MASCO CORPORATION
By /s/ JOHN R. LEEKLEY
Title: Vice President