TRANSITIONAL SERVICES AGREEMENT
Transitional Services Agreement dated as of July 16, 1996 between
MASCO Corporation, a Delaware corporation ("Masco"), and FURNISHINGS
INTERNATIONAL INC., a Delaware corporation (the "Buyer").
RECITALS
WHEREAS, Masco and the Buyer are parties to an Acquisition Agreement
dated as of March 29, 1996 (as may be amended, modified or supplemented from
time to time, the "Acquisition Agreement"), pursuant to which the Buyer is
acquiring from Masco all of the outstanding capital stock of the HFG Companies
(as defined in the Acquisition Agreement); and
WHEREAS, the Buyer desires that Masco provide, and Masco is willing
to provide, either directly or through its subsidiaries, certain services on the
terms and conditions hereinafter set forth, all as contemplated by Section 5(k)
of the Acquisition Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
Section 1. Services Provided.
(a) Commencing on the Closing Date (as defined in the Acquisition
Agreement) and during the term of this Agreement, Masco shall provide to the HFG
Companies and their Subsidiaries (as defined in the Acquisition Agreement)
corporate support staff and administrative services as described in Section 1(b)
hereof (inclusive of those services set forth on Annex A), provided that Masco
shall not be obligated to provide any services which would be in contravention
of law, and provided further that Masco shall not be obligated to provide any
legal or litigation support services. Masco shall furnish such services at the
reasonable request of the Buyer, consistent with past practice and with Masco's
requirement to provide services for its own businesses and without obligating
Masco to hire additional employees to provide such services to the HFG Companies
and their subsidiaries.
(b) The services to be provided hereunder shall be consistent in
kind, quality and amount with those customarily provided to Masco's own business
units and with those that Masco has provided to the businesses that Masco is
transferring to the Buyer in the Ordinary Course of Business (as defined in the
Acquisition Agreement) prior to the date hereof. Travel, lodging and similar
costs and expenses of Masco employees performing services hereunder shall
Transitional Services Agreement
be borne by Masco. Research and development services provided by Masco shall be
subject to the additional provisions set forth in the Research and Development
Undertaking attached hereto as Annex B.
Section 2. Fees.
(a) During the term hereof, the Buyer will pay Masco a fee for the
services provided under Section 1 hereof, irrespective of the HFG Companies' and
their Subsidiaries' actual use thereof, equal to $500,000 per calendar month,
subject to adjustment under Section 2(c) hereof (as adjusted, the "Monthly
Rate"), commencing as of the Closing (as defined in the Acquisition Agreement)
and continuing until the earlier of expiration of the term or the effective date
of a termination of the term under Section 3 hereof, except:
(i) with respect to the calendar month in which the Closing
occurs, the fee payable hereunder for such calendar month shall be
the product of (x) the Monthly Rate then in effect divided by the
number of days in such month times (y) the number of days from and
including the Closing Date to and including the last day of such
calendar month and
(ii) if (A) the Closing has occurred, (B) the term of this
Agreement is terminated pursuant to Section 3 hereof and (C) the
effective date of such termination is a day other than the last day
of a calendar month, the fee payable hereunder for such calendar
month shall be the product of (x) the Monthly Rate then in effect
divided by the number of days in such month times (y) the number of
days in such calendar month which have elapsed prior to and
including the effective date of termination.
After the Closing Date, such fee shall be payable monthly in arrears within 30
days after the end of each calendar month (commencing with the calendar month in
which the Closing occurs) during the term hereof.
(b)
(i) Masco will have the right to retain third parties to
provide services on behalf of the HFG Companies and their
Subsidiaries from time to time, in accordance with Masco's customary
practice in the Ordinary Course of Business prior to the date of
this Agreement. The use by Masco of any such third party will not be
subject to approval by the Buyer; provided that if requested by the
Buyer,
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Masco will keep the Buyer advised from time to time regarding any
significant use of such third parties and the cost of such use.
(ii) Masco shall be required to retain such third parties if
services to which the Buyer is entitled as described in Section 1(b)
hereof are requested by the Buyer and Masco has elected not to
employ or hire additional personnel to perform such services.
(iii) The Buyer shall be responsible for the payment of any
fees and expenses of third parties retained by Masco; provided that
the Buyer will not be responsible (and Masco will be responsible)
for the fees and expenses of any such third party which is retained
by Masco to provide services hereunder to the extent that (x) Masco
has itself provided such services to the businesses that Masco is
transferring to the Buyer in the Ordinary Course of Business prior
to the date of this Agreement and (y) the services provided by Masco
hereunder, together with the services provided by any such third
parties so retained, are not greater in kind, quality or amount than
those Masco has provided to the businesses that Masco is
transferring to the Buyer in the Ordinary Course of Business prior
to the date of this Agreement.
(c) If after the Closing Date, the Buyer or its subsidiaries employ
any personnel (whether or not such personnel have previously been employed by
Masco or its affiliates) to provide services to the Buyer and its subsidiaries
that have previously been provided by Masco pursuant to this Agreement, then to
the extent that such employment of personnel by the Buyer or its subsidiaries
results in a reduction in the services provided by Masco pursuant to this
Agreement, upon the effective date of each such employment the Monthly Rate
shall be appropriately adjusted downward to take into account the salary and
benefits of such employee paid by the Buyer or its subsidiaries and the services
formerly provided by Masco hereunder (which services are no longer required to
be provided by Masco as a result of such employment). The Buyer and Masco shall
negotiate each such adjustment in good faith. If any such adjustment is
effective during a calendar month in which the fee is being prorated on a daily
basis under clauses (i) or (ii) of Section 2(a), appropriate adjustments shall
be made to such pro-ration.
Section 3. Term.
(a) This Agreement shall continue in effect until April 30, 1997,
unless terminated in accordance with Section 3(b) or Section 3(d) below,
provided that if the Buyer desires a continuation of the term of this Agreement
beyond April 30, 1997 and the Buyer notifies Masco thereof on or before January
1, 1997, Masco agrees to negotiate with the Buyer in good faith as to the scope
and duration of services to be provided and as to appropriate fees therefor
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based upon the cost to Masco of the provision of such services (including
overhead and other allocated costs).
(b) The Buyer may terminate this Agreement for any reason at any
time upon at least 90 days' prior written notice to Masco. Upon termination of
this Agreement pursuant to this Section 3(b), the fees payable under Section 2
hereof shall be payable only through the effective date of termination.
(c) Upon termination of this Agreement (other than an automatic
termination under Section 3(d) hereof), or upon expiration of the term hereof,
Masco shall retain all books and records, or copies thereof, pertaining to the
business of the Buyer and its subsidiaries used or generated in the course of
the provision of services hereunder. Thereafter Masco will have the right to
dispose of such books and records, but will not do so unless it has given the
Buyer at least 90 days' prior notice of such disposition and the reasonable
opportunity, to the extent practicable, to have such books and records copied or
delivered to the Buyer at the Buyer's expense. If requested by the Buyer, Masco
will afford the Buyer reasonable access to such books and records during normal
business hours at the Buyer's expense and will permit the Buyer at its expense
to copy or to take original copies of such books and records to the extent such
books and records pertain solely to the Buyer's (and its subsidiaries')
businesses and to copy such books and records to the extent such books and
records pertain to the Buyers' (or any of its subsidiaries') businesses only in
part.
(d) If the Acquisition Agreement is terminated in accordance with
its terms, this Agreement shall thereupon terminate automatically without action
by either party hereto and shall be null and void, and no party hereto shall
thereafter have any liability hereunder, including without limitation any
obligation to pay a fee under Section 2 hereof.
Section 4. Indemnification.
(a) It is understood and agreed that in no event will Masco or any
of its subsidiaries, affiliates, directors, officers, employees and agents
(collectively, "Affiliates and Representatives") be liable to any of the Buyer,
the HFG Companies, their respective Affiliates and Representatives and their
respective financing parties for any loss incurred by any of such persons
resulting from the services provided by Masco hereunder (or otherwise provided
by Masco) or otherwise relating in any way to this Agreement, subject to the
obligation of Masco to pay third party fees and expenses set forth in the
proviso to Section 2(b)(iii) hereof, and except for any such loss resulting from
gross negligence, willful misfeasance or bad faith and subject to Section 4(c)
below. It is understood and agreed that in no event will Masco or its Affiliates
or Representatives be liable hereunder for any consequential damages for lost
profits or any exemplary or punitive damages.
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Transitional Services Agreement
(b) Subject to Section 4(c) below, the Buyer agrees to indemnify and
hold harmless Masco and its Affiliates and Representatives for any and all
losses, damages, costs, expenses (including reasonable attorney's fees and
expenses), penalties and liabilities (whether or not arising from the
negligence, but excluding the gross negligence, willful misfeasance or bad faith
of Masco or its Affiliates or Representatives) with respect to all liabilities,
duties and obligations of any kind whatsoever of Masco or its Affiliates or
Representatives resulting from the services to be provided pursuant to this
Agreement (or otherwise provided by Masco) or otherwise relating in any way to
this Agreement. The Buyer will either (I) cause each of its insurance carriers
providing property, liability or worker's compensation insurance as to the
Buyer, the HFG Companies and their Subsidiaries to waive any rights of
subrogation against Masco and its Affiliates and Representatives or (II) hold
Masco and its Affiliates and Representatives harmless from and against any claim
asserted by any such insurance carrier through rights of subrogation, absent bad
faith on the part of Masco.
(c) The Parties hereto agree that (i) nothing herein will, or may be
deemed to, restrict the ability of the Buyer to bring any action compelling
performance of or compliance with the terms of this Agreement or any action
asserting breach of this Agreement and (ii) nothing contained herein will, or
may be deemed to, impair or otherwise limit the rights and remedies available to
Masco, the Buyer and the Indemnified Buyer Parties (as defined in the
Acquisition Agreement) under the Acquisition Agreement.
Section 5. Independent Contractor; No Partnership.
(a) Masco shall select the Masco employees to provide services
hereunder on a basis consistent with past practice, and such individuals shall
not be deemed to be employees of the Buyer or any of its subsidiaries. All work
performed hereunder by Masco shall be performed by Masco as an independent
contractor.
(b) Notwithstanding anything herein to the contrary, no partnership
or joint venture has been created in or by this Agreement or as a result of the
provision of services hereunder.
Section 6. Assignment; Amendment; Non-Exclusive.
(a) This Agreement shall not be assignable by either party without
the express prior written consent of the other party.
(b) This Agreement may be amended only by an instrument in writing
or executed by the parties hereto. This Agreement does not amend, modify or
supersede the Acquisition Agreement in any way.
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(c) Without in any way limiting the obligations of the parties under
this Agreement, Masco agrees that the Buyer may enter into agreements with other
parties for the provision of any services provided by Masco hereunder.
Section 7. Notices. All notices and other written communications
hereunder shall be in writing and shall be given in accordance with the
provisions of the Acquisition Agreement.
Section 8. Specific Performance. The parties hereto agree that
irreparable damage will occur if any provision of this Agreement is not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity; provided, however, that each of the parties agrees to
provide the other with written notice at least two business days prior to filing
any motion or other pleading seeking a temporary restraining order, a temporary
or permanent injunction, specific performance, or any other equitable remedy and
to give the other and its counsel a reasonable opportunity to attend and
participate in any judicial or administrative hearing or other proceeding held
to adjudicate or rule upon any such motion or pleading.
Section 9. Governing Law. This Agreement 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 10. Severability. Any term or provision of this Agreement
that is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the offending term or provision in any
other situation or in any other jurisdiction.
Section 11. Counterparts. This Agreement 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.
Section 12. Waiver of Jury Trial. EACH OF MASCO AND THE BUYER HEREBY
WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT OR THE TRANSACTIONS BETWEEN MASCO AND THE BUYER
CONTEMPLATED HEREBY OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER
HEREOF. THIS WAIVER IS IRREVOCABLE AND SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO (OR ASSIGNMENTS OF) THIS AGREEMENT. IN
THE EVENT OF LITIGATION,
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Transitional Services Agreement
THIS AGREEMENT MAY BE FILED WITH THE COURT AS A WRITTEN CONSENT TO A TRIAL
WITHOUT A JURY.
Section 13. Annexes. The Annexes to this Agreement are deemed a part
of this Agreement and are subject to all of the provisions herein (including
without limitation Section 4(c) hereof).
[Remainder of Page Intentionally Left Blank]
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Transitional Services Agreement
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the day and year first above written.
FURNISHINGS INTERNATIONAL INC.
By___________________________
Name:
Title:
MASCO CORPORATION
By___________________________
Name:
Title:
[Signature Page to Transitional Services Agreement]
Transitional Services Agreement
ANNEX A
CORPORATE SERVICES TO BE PROVIDED
Accounting
Treasury
Tax
Corporate Development
Data Processing
Research and Development (See Annex B)
Human Resources and Employee Benefit Management
Intellectual Property Data Services
Market Research
Transitional Services Agreement
ANNEX B
RESEARCH AND DEVELOPMENT UNDERTAKING
I. Research and Development Program
1.01 Masco shall provide to the Buyer and its subsidiaries such
research and development services as have heretofore been provided to the
businesses Masco is transferring to the Buyer pursuant to the Acquisition
Agreement.
II. Confidential Relationship
2.01 It is acknowledged that in furtherance of the performance by
Masco of the research and development services to be performed under this Annex,
Masco and the Buyer, during the term of this Annex, may be exposed to and become
privy to and will generate various confidential or secret information
proprietary to the other, which confidential information may include, but is not
limited to, technical information and know-how concerning products,
developments, new product plans, equipment, drawings, specifications, models,
prototypes, ideas, designs, software, processes, methods, research, sales and
customers and information relating to the management, operation or planning of
the other, and the fact that the other is interested in certain projects or
technology (collectively hereinafter referred to as "Confidential Information").
Confidential Information shall be limited to information disclosed by one party
to the other party in writing and designated as confidential, exclusive of any
information which:
(1) was in the possession of the receiving party prior to receipt
thereof; provided, however, that Confidential Information
transferred to Buyer to the extent it relates exclusively to
such businesses as part of the transfer of businesses by Masco
to Buyer shall not be considered information "in the
possession of Masco prior to the receipt thereof" when
received by Masco under this Annex;
(2) is or becomes available to the public through no fault of the
receiving party;
(3) is obtained by the receiving party in good faith without
obligation of non-disclosure from a third party who has a
right to disclose the same; or
Transitional Services Agreement
(4) is developed by the receiving party independently of receipt
of such information from the disclosing party.
2.02 Masco and the Buyer shall hold and maintain the Confidential
Information of the other in confidence. Masco and the Buyer shall not without
the written consent of the disclosing party, except as specifically provided
herein or as required by law, disclose to any third party any Confidential
Information of the disclosing party prior to the later of (a) the third
anniversary of the date such Confidential Information is disclosed by the
disclosing party to the receiving party or (b) such other date as may be
designated in writing by the disclosing party any time prior to such third
anniversary.
2.03 Masco, to the extent required for the furtherance of the
research and development services for the Buyer contemplated by this Annex, may
disclose Confidential Information of the Buyer to any engineering or equipment
manufacturing or consulting firm so long as Masco provides a copy of the
confidentiality obligations set forth in this Annex to such firm and requires
such firm to comply with such confidentiality obligations.
III. Reports
3.01 Masco will keep the Buyer generally informed of the work
performed and the results achieved under the research and development services
provided by Masco to the Buyer. Interim reports will be provided to the business
units of the Buyer upon their request.
3.02 Monies for purchasing materials and other property utilized in
the research and development services shall be provided by the Buyer.
IV. Inventions and Patents
4.01 Title to each invention, design, improvement or other
patentable subject matter and to patent applications and patents thereon, made
during performance of research and development services by Masco under the
Transitional Services Agreement that are performed at the specific request of
the Buyer (hereinafter "Buyer Originated Inventions") shall reside in the Buyer.
Masco, its subsidiaries and, upon Masco's request, its affiliates, are hereby
granted an unlimited, royalty-free, irrevocable, non-exclusive license, but not
the right to grant sub-licenses, under each Buyer Originated Invention, and all
patent applications and patents thereon, to manufacture, use and sell any
process, machine, manufacture or composition of matter and improvements thereof,
incorporating such Buyer Originated Invention.
Transitional Services Agreement
4.02 Title to each invention or improvement and to patent
applications and patents thereof, made during performance of research and
development services by Masco and not described in Section 4.01 above shall
reside in Masco. Nothing in this Annex shall be construed as a grant to the
Buyer by Masco, by implication, estoppel or otherwise, of a license or other
right to use any Masco patent, trademark, tradename, Confidential Information or
other proprietary right not specifically granted to the Buyer.
4.03 Notwithstanding any non-disclosure provisions of this Annex,
Masco shall, if requested by the Buyer or any business unit of the Buyer, and
after notifying the Buyer, prepare, file, prosecute and maintain, or have
prepared, filed, prosecuted and maintained, patent applications to protect any
inventions of Buyer, including without limitation those inventions described in
paragraph 4.01 above, in any and all countries. The out-of-pocket expenses of
monitoring the preparation, filing and maintaining of such patent applications
and patents thereon paid to third parties (including without limitation all
government fees, annuities, and taxes and any monies paid to third parties)
shall be borne by the Buyer.
4.04 Each party will execute, acknowledge and deliver to the other
party all lawful papers which, in the opinion of the other party's counsel, are
necessary or desirable to vest or perfect title if required and in accordance
with paragraphs 4.01 and 4.02, as directed by the other party and its successors
and assigns, including without limitation applications for divisions of pending
applications, applications for reissue of patents and specific assignments of
applications and patents, and all rights under the International Convention for
the Protection of Industrial Property.
4.05 The Buyer agrees to assert no rights, claims or entitlements
against Masco, its suppliers, its customers, or its successors, assigns or
nominees, whether arising out of patents, trade secrets or otherwise, based on
non-substantial use by Masco of Confidential Information of the Buyer acquired
by Masco in the performance of the research and development services or based on
the use of Confidential Information of the Buyer in existence at the time the
Transitional Services Agreement of which this Annex is a part is signed;
provided, however, that any use which causes substantial harm to the Buyer shall
not be deemed a non-substantial use.
V. Infringement and Indemnification
5.01 The Buyer agrees to indemnify and hold harmless Masco and the
Seller Indemnified Parties (as defined in the Acquisition Agreement) for any and
all losses, damages, costs, expenses (including reasonable attorney's fees and
expenses), penalties and liabilities arising from any third party claim of
patent, trademark or copyright infringement, unfair competition or
misappropriation of proprietary, confidential or trade secret information to
Transitional Services Agreement
the extent such claim is based solely on Confidential Information of the Buyer
or its subsidiaries or on the specification and other materials provided by the
Buyer or its subsidiaries to Masco.
5.02 Masco agrees to indemnify and hold harmless the Buyer and the
Buyer Indemnified Parties (as defined in the Acquisition Agreement) for any and
all losses, damages, costs, expenses (including reasonable attorney's fees and
expenses), penalties, and liabilities arising from any third party claim of
patent, trademark or copyright infringement, unfair competition or
misappropriation of proprietary, confidential or trade secret information to the
extent such claim is based solely on Confidential Information of Masco or its
subsidiaries or on the specifications and other materials used by Masco other
than those provided by the Buyer or its subsidiaries.
5.03 Masco and the Buyer agree to notify each other promptly of any
claim brought by a third party that comes under either paragraphs 5.01 or 5.02
and agree that Masco shall promptly undertake reasonable efforts to obtain a
discontinuance of such claim and, if not successful, Masco shall consult with
the Buyer. If the third party claim becomes the subject of a court action, the
party against whom the action is brought shall select defense counsel (in
consultation with the other party), and damages, costs, expenses and attorney's
fees will be borne as stated in paragraphs 5.01 and 5.02.
5.04 Subject to the approval of the Buyer, which shall not be
unreasonably withheld, Masco shall have the right, at its expense, to bring suit
against any infringer of a patent directed to a Buyer Originated Invention
licensed by Masco when the act of infringement by the third party competes in
the marketplace with a business line of Masco and does not compete in the
marketplace with a business line of Buyer.
5.05 Masco and the Buyer each agree to cooperate fully with the
other and furnish any evidence in its possession bearing on the issues involved
in any court action brought against Masco or the Buyer described in paragraphs
5.01 and 5.02 and in any infringement action brought by Masco pursuant to
paragraph 5.04.
5.06 Any infringement action brought pursuant to paragraph 5.04
shall be either in the name of Masco, or in the name of the Buyer, or jointly by
Masco and the Buyer, as may be required by the law of the forum. For this
purpose, Masco and the Buyer agree to execute such legal papers necessary for
the prosecution of such action. In any such action, both Masco and the Buyer
shall be entitled to recoup their expenses, costs and attorney's fees from any
recoveries in such action.
VI. Termination
Transitional Services Agreement
6.01 This Annex shall terminate simultaneously with termination of
the Corporate Services Agreement unless terminated earlier or extended by
agreement of the parties. Paragraphs 2.01, 2.02, 2.03, 4.01, 4.02, 4.03, 4.04,
4.05, 5.01, 5.02, 5.03, 5.04, 5.05 and 5.06 shall survive termination of this
Annex.