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 ss.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 ss.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 ss.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 ss.9(j) below.
(ii) inserting the following as the final sentence of ss.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 ss.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 ss.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 ss.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, ss.ss.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 ss.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 ss.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 ss.6(c)(iv) and replacing it in its entirety with the
following:
(iv) with respect to the Berkline Associates Pension Plan listed
on ss.4(p)(i) of the Disclosure Schedule, the New Plans (after giving
effect to the provisions of the foregoing ss.6(c)(ii)), and the HFG
Plan (after giving effect to the provisions of the foregoing
ss.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 ss.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 ss.6(f))".
SECTION 7. Amendment of Section 12. Section 12 of the Acquisition Agreement
is amended by deleting the second paragraph of ss.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 ss.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
ss.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 ss.12(r) of the
Acquisition Agreement.
"HFG Plan" has the meaning set forth in ss.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 ss.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 ss.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 ss.2(b)
of the Acquisition Agreement.
"Series A-2 Preferred Stock" has the meaning set forth in ss.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_____________________
Title:
MASCO CORPORATION
By_____________________
Title:
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