LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
$200,000,000
10-7/8% Senior Subordinated Notes due 2006
PURCHASE AGREEMENT
July 31, 1996
CHASE SECURITIES INC.
270 Park Avenue
New York, New York 10017
MERRILL LYNCH, PIERCE, FENNER
& SMITH INCORPORATED
World Financial Center
North Tower
New York, New York 10281
Dear Sirs:
Lifestyle Furnishings International Ltd., a Delaware corporation
(the "Company"), proposes to issue and sell $200,000,000 principal amount of its
10-7/8% Senior Subordinated Notes due 2006 (the "Notes") to be unconditionally
guaranteed on a senior subordinated basis (the "Guarantees" and together with
the Notes, the "Securities") by certain entities listed on Schedule I hereto
that will be subsidiaries of the Company upon the consummation of the
Transactions and will then become parties hereto as provided by Section 5(y)
herein and Lifestyle Holdings Ltd. ("LHL") (collectively, the "Guarantors"). The
Securities are to be issued pursuant to an Indenture substantially in the form
of Exhibit A hereto to be dated as of the Closing Date (as defined in Section 3
hereof) (the "Indenture"), among the Company, the Guarantors and IBJ Schroder
Bank & Trust Company, as trustee (the "Trustee"). The Company and the
Guarantors, as provided by Section 5(y) herein (and in the case of LHL as a
party
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hereto), hereby confirm the agreement with Chase Securities Inc. ("CSI") and
Merrill Lynch, Pierce, Fenner & Smith Incorporated (together with CSI, the
"Initial Purchasers") with respect to the sale of the Securities.
The Securities will be offered and sold to the Initial Purchasers
without being registered under the Securities Act of 1933, as amended (the
"Securities Act"), in reliance on an exemption therefrom. The Company has
prepared a preliminary offering memorandum dated June 4, 1996 and a preliminary
offering memorandum dated July 19, 1996 (such preliminary offering memoranda
being collectively hereinafter referred to as the "preliminary offering
memorandum"), and an offering memorandum dated July 31, 1996 (such offering
memorandum, in the form first furnished to the Initial Purchasers for use in
connection with the offering of the Securities, being hereinafter referred to as
the "Offering Memorandum"), setting forth information regarding the Company, the
Guarantors and the Securities. The Company and the Guarantors, jointly and
severally, hereby confirm that they have authorized the use of the preliminary
offering memorandum and the Offering Memorandum in connection with the offering
and sale of the Securities.
Holders (including subsequent transferees) of the Securities will
have the registration rights set forth in the Exchange and Registration Rights
Agreement (the "Registration Rights Agreement"), to be dated the Closing Date,
in substantially the form of Exhibit B hereto. Pursuant to the Registration
Rights Agreement, the Company and the Guarantors will agree to file with the
Securities and Exchange Commission (the "Commission") (i) a registration
statement under the Securities Act (the "Exchange Offer Registration Statement")
registering an issue of a series of senior subordinated notes unconditionally
guaranteed on a senior subordinated basis by the Guarantors (the "Exchange
Securities") identical in all material respects to the Securities (except that
the Exchange Securities will not contain terms with respect to transfer
restrictions) to be offered in exchange for the
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Securities (the "Exchange Offer") and (ii) under certain circumstances, a shelf
registration statement pursuant to Rule 415 under the Securities Act (the "Shelf
Registration Statement").
Capitalized terms used herein without definition have the respective
meanings specified therefor in the Offering Memorandum.
1. Representations, Warranties and Agreements of the Company and the
Guarantors. The Company and the Guarantors jointly and severally represent and
warrant to and agree with each of the Initial Purchasers as of the date hereof
and as of the Closing Date that (except as disclosed in the Offering
Memorandum):
(a) Each of the preliminary offering memorandum and the Offering
Memorandum, as of its respective date, contains all the information that,
if requested by a prospective purchaser, would be required to be provided
pursuant to Rule 144A(d)(4) under the Securities Act. The Offering
Memorandum does not, and at the Closing Date, the Offering Memorandum and
any amendment or supplement thereto will not, contain any untrue statement
of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading; and, the
preliminary offering memorandum, as of its date, did not contain any
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The preceding
sentence does not apply to information contained in or omitted from the
preliminary offering memorandum or the Offering Memorandum (or any
supplement or amendment thereto) in reliance upon and in conformity with
written information relating to either Initial Purchaser furnished to the
Company by or on behalf of either
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Initial Purchaser specifically for use therein (the "Initial Purchasers'
Information"). The parties acknowledge and agree that the Initial
Purchasers' Information consists solely of the last paragraph of text on
the cover page of the Offering Memorandum and the third, fourth and sixth
paragraphs under the caption "Plan of Distribution" in the Offering
Memorandum.
(b) Each of the Company, Furnishings International Inc. ("Holdings")
and the Subsidiaries (each of the foregoing a "Furnishings Group Member"
and collectively the "Furnishings Group") has been duly incorporated or
organized and is validly existing as a corporation in good standing (if
applicable) under the laws of its jurisdiction of incorporation, except in
the case of Subsidiaries incorporated or organized outside of the United
States, where the failure to be so incorporated or organized and validly
existing in good standing would not have, singularly or in the aggregate,
a material adverse effect on the condition (financial or otherwise),
results of operations or business of the Company and the Subsidiaries
taken as a whole, as constituted after giving effect to the Transactions
(a "Material Adverse Effect"), is duly qualified to do business and is in
good standing as a foreign corporation or otherwise in each jurisdiction
in which its ownership or lease of property or the conduct of its
businesses requires such qualification, except where the failure to so
qualify would not have a Material Adverse Effect, and has all corporate
power and authority necessary to own or hold its respective properties and
to conduct the businesses in which it is engaged as described in the
Offering Memorandum, except in the case of Subsidiaries incorporated or
organized outside of the United States, where the failure to have such
corporate power and authority would not have a Material Adverse Effect.
The term "Subsidiary" means each person of which a majority of the voting
equity securities of other interests will be owned, directly
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or indirectly, by the Company upon the consummation of the Transactions.
(c) Each of Holdings and the Company has an authorized
capitalization as set forth in the Offering Memorandum. All of the issued
shares of capital stock of the Company have been duly and validly
authorized and issued and are fully paid and nonassessable, and are owned
by Holdings free and clear of any Lien (other than any Lien on such
capital stock pursuant to the Senior Bank Facilities). The capital stock
of Holdings conforms to the description thereof contained in the Offering
Memorandum. The description of the capital stock of the Company contained
in the Offering Memorandum is accurate. Schedule II attached hereto sets
forth as of the Closing Date (after giving effect to the Transactions) a
list of all Subsidiaries of the Company and the percentage ownership of
the Company. The shares of capital stock or other ownership interests of
the Company or a Subsidiary so indicated on Schedule II, upon the
consummation of the Transactions, will be validly authorized and issued
and will be fully paid and nonassessable, and the Company will own
directly or through Subsidiaries, its ownership percentage of such
Subsidiaries free and clear of any Lien (other than any Lien on such
capital stock pursuant to the Senior Bank Facilities).
(d) This Agreement has been duly authorized and validly executed and
delivered by the Company and each of the Guarantors. The Acquisition
Agreement has been duly authorized and validly executed and delivered by
Holdings. At the Closing Date the Indenture will conform in all respects
to the requirements of the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"), and the rules and regulations of the Commission
applicable to an indenture which is qualified thereunder. The Indenture,
the Registration Rights Agreement and the Tax Sharing Agreement, when
executed and delivered, will have been duly authorized
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by the Company and each of the Subsidiaries which is a party thereto. The
Acquisition Agreement constitutes, and each of the Indenture, the
Registration Rights Agreement and the Tax Sharing Agreement, when duly
executed and delivered in accordance with their respective terms by each
of the parties thereto will constitute, a valid and legally binding
agreement of each Furnishings Group Member which is a party thereto,
enforceable against each Furnishings Group Member which is a party thereto
in accordance with their respective terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer
and similar laws affecting creditors' rights and remedies generally and to
general principles of equity (regardless of whether enforcement is sought
in a proceeding at law or in equity).
(e) On the Closing Date, the Notes will have been duly authorized by
the Company, the Guarantees will have been duly authorized by the
Guarantors and the Securities, the Indenture, the Registration Rights
Agreement and the Tax Sharing Agreement will have been duly executed by
the Company and each of the Subsidiaries which is a party thereto and will
conform in all material respects to the descriptions thereof contained in
the Offering Memorandum. Upon execution and delivery of the Indenture, and
when the Notes are issued, authenticated and delivered in accordance with
the Indenture and paid for in accordance with the terms of this Agreement,
the Notes will constitute valid and legally binding obligations of the
Company, enforceable against the Company in accordance with their terms
and entitled to the benefits of the Indenture, subject to applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer
and similar laws affecting creditors' rights and remedies generally and to
general principles of equity (regardless of whether enforcement is sought
in a proceeding at law or in equity). Upon execution and delivery of the
Indenture, and when the Securities are issued, authenticated and
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delivered in accordance with the terms of this Agreement, the Guarantees
will constitute valid and legally binding obligations of the Guarantors
enforceable against the Guarantors in accordance with their terms subject
to applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and similar laws affecting creditors' rights and
remedies generally and to general principles of equity (regardless of
whether enforcement is sought in a proceeding at law or in equity).
(f) The execution, delivery and performance of the Indenture, the
Securities, the Registration Rights Agreement, the Tax Sharing Agreement,
the Acquisition Agreement and this Agreement by each Furnishings Group
Member which is a party thereto, the consummation of the Transactions and
the other transactions contemplated hereby and thereby, and the
fulfillment of the terms hereof or thereof, will not conflict with or
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, or, except as contemplated by the Senior Bank
Facilities, result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of any Furnishings Group Member
pursuant to, any indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument to which any Furnishings Group Member is a
party or by which any Furnishings Group Member is bound or to which any of
the property or assets of any Furnishings Group Member is subject, nor
will such actions result in any violation of the provisions of the
charter, partnership agreement, by-laws or other constituent documents, as
applicable, of any Furnishings Group Member or any statute or any
judgment, order, decree, rule or regulation of any court or arbitrator or
governmental agency or body having jurisdiction over any Furnishings Group
Member or any of its properties or assets, except for any such conflict,
breach, violation, default, lien, charge or encumbrance that would not
have a Material Adverse
8
Effect; the holders of the Securities will not be subject to personal
liability for obligations of the Company or any Guarantor by reason of
being such holders; and no consent, approval, authorization or order of,
or filing or registration with, any such court or arbitrator or
governmental agency or body under any such statute, judgment, order,
decree, rule or regulation is required for the execution, delivery and
performance of the Indenture, the Securities, the Registration Rights
Agreement, the Tax Sharing Agreement, the Acquisition Agreement or this
Agreement by any Furnishings Group Member or the consummation of the
Transactions and the other transactions contemplated hereby and thereby
which shall not have been obtained or made prior to the Closing Date
(other than such consents, approvals, authorizations or orders of, or
filings or registrations with, the Commission or any state securities
regulatory authorities as may be required to be obtained or made pursuant
to the Registration Rights Agreement).
(g) Coopers & Lybrand LLP are independent public accountants with
respect to the Company (and, to the knowledge of the Company, with respect
to Masco) as required by the Securities Act and the rules and regulations
thereunder for financial statements included in a definitive prospectus
forming part of a registration statement on Form S-1 under the Securities
Act. The historical combined financial statements of the Masco Home
Furnishings Group (including the related notes) included in the
preliminary offering memorandum and the Offering Memorandum comply in all
material respects with the requirements applicable to a Registration
Statement on Form S-1 and have been prepared, and fairly present in all
material respects, the combined financial position of the Masco Home
Furnishings Group at the respective dates indicated and the results of its
operations and its cash flows for the respective periods indicated, in
accordance with generally accepted accounting principles consistently
9
applied throughout such periods except for changes in accounting required
or permitted by generally accepted accounting principles and disclosed in
such financial statements; and the financial information and financial
data set forth in the Offering Memorandum under the captions
"Summary--Summary Historical and Pro Forma Financial Information,"
"Capitalization," "Selected Historical and Pro Forma Financial
Information," "Unaudited Pro Forma Financial Information" and
"Management's Discussion and Analysis of Results of Operations and
Financial Condition" are derived from the accounting records of the Masco
Home Furnishings Group, and fairly present in all material respects the
data purported to be shown. The pro forma financial statements contained
in the preliminary offering memorandum and the Offering Memorandum have
been pre pared on a basis consistent with such historical state ments,
except for the pro forma adjustments specified therein, include all
material adjustments to the historical financial data required by Rule
11-02 of Regulation S-X to reflect the Transactions as described in the
Offering Memorandum, and give effect to assump tions made on a reasonable
basis and present fairly the historical and proposed transactions
contemplated by the preliminary offering memorandum, the Offering
Memorandum and this Agreement. The other historical financial and
statistical information and data included in the preliminary offering
memorandum and the Offering Memorandum are, in all material respects,
accurately presented.
(h) There are no pending actions or suits or judicial, arbitral,
rule-making or other administrative or other proceedings to which any
Furnishings Group Member is a party or of which any property or assets of
any Furnishings Group Member is the subject which, singularly or in the
aggregate, are reasonably likely to have a Material Adverse Effect; and to
the best of the Company's and each Guarantor's knowledge, no such
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proceedings are threatened or contemplated by governmental authorities or
threatened by others.
(i) No action has been taken and no statute, rule or regulation or
order has been enacted, adopted or issued by any governmental agency or
body which prevents the issuance of the Securities or suspends the sale of
the Securities in any jurisdiction; no injunction, restraining order or
order of any nature by a federal or state court of competent jurisdiction
has been issued with respect to the Company or any of the Guarantors which
would prevent or suspend the issuance or sale of the Securities, or the
use of the preliminary offering memorandum or the Offering Memorandum in
any jurisdiction; no action, suit or proceeding is pending against or, to
the best of the Company's and each Guarantor's knowledge, threatened
against or affecting any Furnishings Group Member before any court or
arbitrator or any governmental body, agency or official, domestic or
foreign, which could reasonably be expected to interfere with or
materially adversely affect the issuance of the Securities or in any
manner draw into question the validity thereof or in any manner draw into
question the validity of the Indenture, the Securities, the Registration
Rights Agreement, the Tax Sharing Agreement, the Acquisition Agreement or
this Agreement or any action taken or to be taken pursuant hereto or
thereto.
(j) No Furnishings Group Member is, or after the consummation of the
Transactions will be (i) in violation of its charter, partnership
agreement, by-laws or other constituent documents, as applicable, (ii) in
default in any respect, and no event has occurred which, with notice or
lapse of time or both, would constitute such a default, in the due
performance or observance of any term, covenant or condition contained in
any indenture, mortgage, deed of trust, loan agreement or other material
agreement or instrument to which it is a party or by which it is
11
bound or to which any of its property or assets is subject and (iii) in
violation in any respect of any law, ordinance, governmental rule,
regulation or court decree to which it or its property or assets may be
subject, except any violation or default under clause (ii) or (iii), that
would not have a Material Adverse Effect.
(k) Each Furnishings Group Member possesses, and after the
consummation of the Transactions will possess, all material licenses,
certificates, authorizations and permits issued by, and has made, and
after the consummation of the Transactions will have made, all
declarations and filings with, the appropriate state, federal or foreign
regulatory agencies or bodies which are necessary for the ownership of its
respective properties or the conduct of its respective businesses as
described in the Offering Memorandum, except where the failure to possess
or make the same would not have, singularly or in the aggregate, a
Material Adverse Effect, and no Furnishings Group Member has received
notification of any revocation or modification of any such license,
authorization or permit and has no reason to believe that any such
license, certificate, authorization or permit will not be renewed, except
where such revocation, modification or non-renewal would not have,
singularly or in the aggregate, a Material Adverse Effect.
(l) All material Tax Returns (as defined below) required to be filed
by or with respect to any Furnishings Group Member in any jurisdiction
have been filed, other than those filings being contested in good faith,
and all material Taxes (as defined below), including withholding taxes,
penalties and interest, assessments, fees and other charges due or claimed
to be due from such entities have been paid, other than those being
contested in good faith and for which adequate reserves have been provided
or those currently
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payable without penalty or interest. To the best of the Company's and each
Guarantor's knowledge, all Tax Returns filed by or with respect to any
Furnishings Group Member prior to the date hereof were complete and
accurate, except such as could not reasonably be expected to result,
singularly or in the aggregate, in a Material Adverse Effect. Except such
as could not reasonably be expected to result, singularly or in the
aggregate, in a Material Adverse Effect, no claim for assessment or
collection of Taxes is presently being asserted against or with respect to
any Furnishings Group Member and no Furnishings Group Member is a party to
any pending action, proceeding or investigation by any governmental
authority for the assessment or collection of Taxes (as defined below),
nor does the Company have knowledge of any such threatened action,
proceeding or investigation. Except as set forth on the schedules to the
Acquisition Agreement, no waivers of statutes of limitation in respect of
any material Tax Returns have been given by or with respect to or
requested of any Furnishings Group Member nor has any Furnishings Group
Member (or any party on its behalf) agreed to any extension of time with
respect to a Tax assessment or deficiency. No material claim by any
authority in a jurisdiction where any Furnishings Group Member does not
currently file a Tax Return or regarding Taxes with respect to which no
Tax Return is required to be filed in such jurisdiction is pending to the
effect that any Furnishings Group Member is or may be subject to taxation
by that jurisdiction. No Liens are presently imposed upon or asserted
against or with respect to any assets of any Furnishings Group Member as a
result of or in connection with any failure, or alleged failure, to pay
any Tax, except such as could not reasonably be expected to result,
singularly or in the aggregate, in a Material Adverse Effect. Except as
provided in the Tax Sharing Agreement and for refunds to Masco for periods
prior to the Closing Date, as of the Closing Date, neither the Company nor
any Subsidiary will have any agreement, whether or not
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written, providing for the payment of Tax liabilities or entitlements to
refunds with any other party. To the best of the Company's and each
Guarantor's knowledge, each Furnishings Group Member has withheld and paid
all Taxes required to be withheld in connection with any amounts paid or
owing to any employee, creditor, independent contractor or other third
party with respect to the business of such Furnishings Group Member,
except where the failure to so withhold or pay would not, singularly or in
the aggregate, have a Material Adverse Effect. For purposes of this
Agreement, the terms "Tax" and "Taxes" shall mean all federal, state,
local or foreign income, payroll, employee withholding, unemployment
insurance, social security, sales use, service use, leasing use, excise,
franchise, gross receipts, value added, alternative or add-on minimum,
estimated, occupation, real and personal property, stamp, transfer,
workers' compensation, severance, windfall profits, environmental
(including taxes under Section 59A of the Internal Revenue Code of 1986,
as amended (the "Code")), or other tax of the same or of a similar nature,
including any interest, penalty, or addition thereto, whether disputed or
not. The term "Tax Return" means any return, declaration, report, form,
claim for refund, or information return or statement relating to Taxes or
income subject to taxation, or any amendment thereto, and including any
schedule or attachment thereto.
(m) No Furnishings Group Member is, or after the consummation of the
Transactions will be (a) an "investment company" or a company "controlled"
by an investment company within the meaning of the Investment Company Act
of 1940, as amended (the "Investment Company Act"), and the rules and
regulations of the Commission thereunder or (b) a "holding company" or a
"subsidiary company" of a holding company, or an "affiliate" thereof
within the meaning of the Public Utility Holding Company Act of 1935, as
amended.
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(n) The Furnishings Group Members maintain a system of internal
accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or
specific authorizations; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability; (iii)
access to assets is permitted only in accordance with management's general
or specific authorization; and (iv) the recorded accountability for assets
is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(o) The Company and the Subsidiaries will maintain insurance
covering their properties, operations, personnel and business, which
insurance is in amounts and insures against such losses and risks, as the
Company has reasonably concluded is sufficient, based on its experience
and industry practice.
(p) There are no securities of the Company or any Guarantor
registered under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or listed on a national securities exchange or quoted in
a U.S. automated inter-dealer quotation system. The Company and each
Guarantor has been advised that the Securities have been designated as
PORTAL securities in accordance with the rules and regulations of the
National Association of Securities Dealers, Inc. (the "NASD").
(q) None of the proceeds of the sale of the Securities will be used,
directly or indirectly, for the purpose of purchasing or carrying any
"margin security" as that term is defined in Regulations G and U of the
Board of Governors of the Federal Reserve System (the "Federal Reserve
Board"), for the purpose of reducing or retiring any indebtedness which
was originally incurred to purchase or carry any margin
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security or for any other purpose which might cause any of the Securities
to be considered a "purpose credit" within the meanings of Regulation G,
T, U or X of the Federal Reserve System.
(r) Other than this Agreement (and the engagement letter between
Holdings and CSI dated March 29, 1996), neither the Company nor any
Guarantor is a party to any contract, agreement or understanding with any
person that would give rise to a valid claim against the Company, any
Guarantor or either Initial Purchaser for a brokerage commission, finder's
fee or like payment in connection with the sale of the Securities.
(s) The Furnishings Group Members own or possess, and after the
consummation of the Transactions will own or will possess, adequate rights
to use all material patents, patent applications, trademarks, service
marks, trade names, trademark registrations, service mark registrations,
copyrights, licenses and know-how (including trade secrets and other
unpatented or unpatentable proprietary or confidential information,
systems or procedures) necessary for the conduct of its business
substantially as presently conducted and the Company has no reason to
believe that the conduct of the business of the Company and its
Subsidiaries will conflict with any such rights of others which might
reasonably be expected to have a Material Adverse Effect, and has not
received any notice of any claim of conflict with any such rights of
others which might reasonably be expected to have a Material Adverse
Effect.
(t) Each Furnishings Group Member has, and after the consummation of
the Transactions will have, good and marketable title in fee simple to, or
has, and after the consummation of the Transactions will have, valid
rights to lease or otherwise use, all items of real or personal property
which are material to the business of the Company and its Subsidiaries, in
each
16
case free and clear of all liens, encumbrances, claims and defects, and
imperfections of title, that may have a Material Adverse Effect (other
than as contemplated by the Senior Bank Facilities).
(u) No labor disturbance or dispute by the employees of any
Furnishings Group Member exists or, to the best of the Company's and each
Guarantor's knowledge, is threatened, in either case which might
reasonably be expected to have a Material Adverse Effect.
(v) No "prohibited transaction" (as defined in Section 406 of the
Employee Retirement Income Security Act of 1974, as amended, including the
regulations and published interpretations thereunder ("ERISA"), or Section
4975 of the Code) or "accumulated funding deficiency" (as defined in
Section 302 of ERISA) or any of the events set forth in Section 4043 of
ERISA (other than events with respect to which the 30-day notice
requirement under Section 4043 of ERISA has been waived) has, or after the
consummation of the Transactions will have, occurred with respect to any
employee benefit plan maintained by any Furnishings Group Member or any
other person or entity that, together with any Furnishings Group Member,
is treated as a single employer under Section 414 of the Code (each, an
"ERISA Affiliate"); each employee benefit plan maintained by any ERISA
Affiliate is, and after the consummation of the Transactions will be, in
compliance in all material respects with applicable laws, including ERISA
and the Code; no ERISA Affiliate has incurred and no ERISA Affiliate
expects to incur liability under Title IV of ERISA with respect to the
termination of, or withdrawal from, any "pension plan" (as defined in
ERISA); and each "pension plan" maintained by any ERISA Affiliate has
received a favorable determination letter from the Internal Revenue
Service with respect to its qualification under Section 401(a) of the Code
and nothing has occurred,
17
whether by action or by failure to act, which might reasonably be expected
to cause the loss of such qualification, except with respect to each item
specified in this paragraph (v), as would not have a Material Adverse
Effect.
(w) There has been no storage, generation, transportation, handling,
treatment, disposal, discharge, emission, or other release of any kind of
toxic or other wastes or other hazardous substances by, due to, or caused
by any Furnishings Group Member (or, to the best of the Company's and any
Guarantor's knowledge, any other entity for whose acts or omissions any
Furnishings Group Member is or may reasonably be expected to be liable)
upon any of the property now or previously owned or leased by any
Furnishings Group Member, or upon any other property, (i) in violation of
any applicable statute or any ordinance, rule, regulation, order,
judgment, decree or permit or (ii) which would, under any applicable
statute or any ordinance, rule (including rule of common law), regulation,
order, judgment, decree or permit, give rise to any liability, except in
the case of both clauses (i) and (ii) for any violation or liability which
could not reasonably be expected to result in, singularly or in the
aggregate with all such violations and liabilities, a Material Adverse
Effect; there has been no disposal, discharge, emission or other release
of any kind onto such property or into the environment surrounding such
property of any toxic or other wastes or other hazardous substances with
respect to which the Company or any Guarantor has knowledge, except for
any such disposal, discharge, emission or other release of any kind which
could not reasonably be expected to result in, singularly or in the
aggregate with all such disposals, discharges, emissions and other
releases, a Material Adverse Effect.
(x) None of the Company, any Guarantor, nor any affiliate (as such
term is defined in Rule 501(b) under
18
the Securities Act) of either of them has, directly or through any agent,
sold, offered for sale, solicited offers to buy or otherwise negotiated in
respect of, any "security" (as defined in the Securities Act), such that
any such offer or sale is or will be integrated with the sale of the
Securities in a manner that would require the registration of the
Securities under the Securities Act.
(y) None of the Company, any Guarantor, any affiliate (as such term
is defined in Rule 501(b) under the Securities Act) of any of them nor to
the Company's knowledge, any other person acting on its or their behalf
(excluding the Initial Purchasers, their respective affiliates, officers,
directors, employees, agents and representatives) has engaged, in
connection with the offering of the Securities, in any form of general
solicitation or general advertising within the meaning of Rule 502(c)
under the Securities Act.
(z) Assuming the accuracy of the Initial Purchasers' representations
in Section 2 hereof and its compliance with the agreements set forth
therein, it is not necessary, in connection with the issuance and sale of
the Securities and the offer, resale and delivery of the Securities in the
manner contemplated by this Agreement and the Offering Memorandum, to
register the Securities under the Securities Act or to qualify the
Indenture under the Trust Indenture Act.
(aa) Holdings, the Company and each Guarantor immediately after the
Closing Date (after giving effect to the Transactions) will be Solvent. As
used in this paragraph (aa), the term "Solvent" means, with respect to a
particular date, that on such date (A) the present fair market value (or
fair salable value) of the assets of such entity is not less than the
total amount required to pay the probable liabilities of such entity on
its total existing debts and liabilities (including contingent
liabilities) as they become absolute and
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matured, (B) such entity is able to realize upon its assets and pay its
debts and other liabilities, contingent obligations and commitments as
they mature and become due in the normal course of business, (C) assuming
the sale of the Securities as contemplated by this Agreement and as
described in the Offering Memorandum, such entity is not incurring debts
or liabilities beyond its ability to pay as such debts and liabilities
mature, and (D) such entity is not engaged in any business or transaction,
and is not about to engage in any business or transaction, for which its
property would constitute unreasonably small capital after giving due
consideration to the prevailing practice in the industry in which such
person is engaged. In computing the amount of such contingent liabilities
at any time, it is intended that such liabilities will be computed at the
amount that, in light of all the facts and circumstances existing at such
time, represents the amount that can reasonably be expected to become an
actual or matured liability.
(bb) The Securities satisfy the eligibility requirements of Rule
144A(d)(3) under the Securities Act.
(cc) Neither the Company nor any Guarantor has taken, nor will it
take, directly or indirectly, any action prohibited by Rule 10b-6 under
the Exchange Act in connection with the offering of the Securities.
(dd) Except as described in the Offering Memorandum, there are no
outstanding rights, warrants or options to acquire, or instruments
convertible into or exchangeable for, or agreements or understandings for
the sale or issuance of, any shares of capital stock of or other equity
interest in any Furnishings Group Member.
(ee) Since the date as of which information is given in the Offering
Memorandum, except as otherwise
20
stated therein, (A) there has been no material adverse change or, to the
knowledge of the Company, any development involving a prospective material
adverse change in the condition, financial or otherwise, results of
operation, business or prospects of the Company and the Subsidiaries,
taken as a whole, whether or not arising in the ordinary course of
business, (B) there have been no transactions entered into by any
Furnishings Group Member, other than those in the ordinary course of
business, which are material with respect to the Company or the
Subsidiaries, and (C) there has been no dividend or distribution of any
kind declared, paid or made by any Furnishings Group Member on any class
of its capital stock.
(ff) The only entity to which the Masco Home Furnishings Group sold
more than $15 million of goods and inventory in 1995 which will be an
affiliate (as such term is defined in Rule 501(b) under the Securities
Act) immediately upon the consummation of the Transactions was Levitz
Furniture Corporation.
2. Purchase by the Initial Purchasers. On the basis of the
representations, warranties and agreements contained herein, and subject to the
terms and conditions set forth herein, the Company agrees to issue and sell to
each of the Initial Purchasers, severally and not jointly, and the Initial
Purchasers, severally and not jointly, agree to purchase from the Company, the
principal amount of Securities set forth opposite the name of such Initial
Purchaser in Schedule III hereto at a purchase price equal to 97.0% of the
principal amount thereof, plus accrued interest, if any, from August 5, 1996 to
the Closing Date. If payment of the purchase price on the Closing Date is made
in immediately available funds, the Initial Purchasers shall be entitled to
deduct from such purchase price the costs, if any (calculated at the Federal
Funds Effective Rate as in effect at 12:00 P.M., New York City time, on the
business day prior to the Closing Date), of obtaining immediately available
funds for delivery on the Closing Date.
21
The Initial Purchasers have advised the Company and each Guarantor
that it is their intention, as promptly as it deems appropriate after the
Company shall have furnished the Initial Purchasers with copies of the Offering
Memorandum, to resell the Securities pursuant to the procedures and upon the
terms set forth in the Offering Memorandum, including not to solicit any offer
to buy or offer to sell the Securities by means of any form of general
solicitation or general advertising (within the meaning of Regulation D under
the Securities Act) or in any manner involving a public offering within the
meaning of Section 4(2) of the Securities Act. Each Initial Purchaser, severally
and not jointly, represents, warrants and agrees with the Company and each
Guarantor that it has solicited and will solicit offers for Securities only
from, and will offer Securities only to, persons that it reasonably believes to
be (i) QIBs or (ii) other Institutional Accredited Investors. Each Initial
Purchaser represents and warrants that it is either a QIB or an Institutional
Accredited Investor, in either case with such knowledge and experience in
financial and business matters as are necessary to evaluate the merits and risks
of an investment in the Securities, and is acquiring its interest in the
Securities not with a view to the distribution or resale thereof, except resales
in compliance with the registration requirements or exemption provisions of the
Securities Act and that neither it, nor anyone acting on its behalf, has offered
or will offer the Securities so as to bring the issuance and sale of the
Securities within the provisions of Section 5 of the Securities Act. The Company
and each Guarantor acknowledge and agree that the Initial Purchasers may sell
Securities to any affiliate of an Initial Purchaser and that any such affiliate
may sell Securities purchased by it to an Initial Purchaser. The Initial
Purchasers agree that, prior to or simultaneously with the confirmation of sale
by the Initial Purchasers to any purchaser of any of the Securities purchased by
the Initial Purchasers from the Company pursuant hereto, the Initial Purchasers
shall furnish to that purchaser a copy of the Offering Memorandum (and any
amendment thereof or supplement thereto that the
22
Company shall have furnished to the Initial Purchasers prior to the date of such
confirmation of sale). In addition to the foregoing, each Initial Purchaser
agrees and understands that the Company and each Guarantor and, for purposes of
the opinions to be delivered to the Initial Purchasers pursuant to Sections
5(c), (e), (f), (g), (h) and (i) hereof and the statement to be delivered to the
Initial Purchasers pursuant to Section 5(d) hereof, counsel to the Company, each
Guarantor and to the Initial Purchasers, respectively, may rely upon the
accuracy and truth of the foregoing representations, warranties and covenants in
this Section 2 and the Initial Purchasers, the Company and each Guarantor hereby
consents to such reliance.
3. Delivery of and Payment for the Securities. Delivery of and
payment for the Securities shall be made at the office of Cravath, Swaine &
Moore ("CS&M"), New York, New York, or at such other place as shall be agreed
upon by the Initial Purchasers and the Company, at 10:00 A.M., New York City
time, on August 5, 1996, or at such other date or time, not later than seven
full business days thereafter, as shall be agreed upon by the Initial Purchasers
and the Company (such date and time being referred to herein as the "Closing
Date"). On the Closing Date, the Company shall deliver or cause to be delivered
to CSI for the account of each Initial Purchaser certificates for the Securities
against payment to or upon the order of the Company of the purchase price by
wire or book-entry transfer of immediately available funds. Upon delivery, the
Securities shall be in global form, in such denominations and registered in such
names, or otherwise, as CSI on behalf of the Initial Purchasers shall have
requested in writing not less than two full business days prior to the Closing
Date. The Company shall make the certificates for the Securities available for
inspection by CSI on behalf of the Initial Purchasers in New York, New York, not
later than one full business day prior to the Closing Date.
23
4. Further Agreements of the Company and the Guarantors. The Company
and the Guarantors jointly and severally agree with each of the Initial
Purchasers:
(a) Prior to the completion of the distribution of the Securities,
to advise the Initial Purchasers promptly and, if requested, confirm such
advice in writing, of the happening of any event which makes any statement
of a material fact made in the Offering Memorandum untrue or which
requires the making of any additions to or changes in the Offering
Memorandum (as amended or supplemented from time to time) in order to make
the statements therein, in light of the circumstances under which they
were made, not misleading and not to effect such amendment or
supplementation without the consent of the Initial Purchasers, which
consent shall not be unreasonably withheld; to advise the Initial
Purchasers promptly of any order preventing or suspending the use of the
preliminary offering memorandum or the Offering Memorandum, of any
suspension of the qualification of the Securities for offering or sale in
any jurisdiction and of the initiation or threatening of any proceeding
for any such purpose; and to use best efforts to prevent the issuance of
any such order preventing or suspending the use of the preliminary
offering memorandum or the Offering Memorandum or suspending any such
qualification and, if any such suspension is issued, to use best efforts
to obtain the lifting thereof at the earliest possible time;
(b) to furnish promptly to each Initial Purchaser and counsel for
the Initial Purchasers, without charge, as many copies of the preliminary
offering memorandum and the Offering Memorandum (and of any amendments or
supplements thereto) as may be reasonably requested; to furnish to the
Initial Purchasers on the Closing Date three copies of the independent
accountants' report included in the Offering Memorandum signed by the
accountants rendering such report; and the Company and
24
the Guarantors hereby consent to the use of the preliminary offering
memorandum and the Offering Memorandum, and any amendments and supplements
thereto, in connection with resales of the Securities;
(c) if the delivery of the Offering Memorandum is required at any
time in connection with the sale of the Securities and if at such time any
events shall have occurred as a result of which the Offering Memorandum as
then amended or supplemented would include an untrue statement of a
material fact or omit to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under which
they were made when the Offering Memorandum is delivered, not misleading,
or if for any other reason it shall be necessary at such time to amend or
supplement the Offering Memorandum in order to comply with any law, to
notify the Initial Purchasers immediately thereof, and to promptly prepare
and furnish to the Initial Purchasers an amended Offering Memorandum or a
supplement to the Offering Memorandum which will correct such statement or
omission or effect such compliance. The Initial Purchasers' delivery of
any such amendment or supplement shall not constitute a waiver of any of
the conditions set forth in Section 5 hereof;
(d) during the two-year period following the Closing Date, provided
that any of the Securities or the Exchange Securities are outstanding, to
furnish to the Initial Purchasers all annual, quarterly and current
reports filed by the Company or any Guarantor with the Commission pursuant
to Section 13 or 15(d) under the Exchange Act or any rule or regulation of
the Commission thereunder;
(e) for so long as and at any time that it is not subject to Section
13 or 15(d) of the Exchange Act, upon request of any holder of the
Securities, to furnish to such holder, and to any prospective
25
purchaser or purchasers of the Securities designated by such holder,
information satisfying the requirements of subsection (d)(4) of Rule 144A
under the Securities Act. This covenant is intended to be for the benefit
of the holders from time to time of the Securities, and prospective
purchasers of the Securities designated by such holders;
(f) to use the proceeds from the sale of the Securities in the
manner described in the Offering Memorandum under the caption "Use of
Proceeds";
(g) to assist the Initial Purchasers in arranging to cause the
Securities to be designated as PORTAL securities in accordance with the
rules and regulations of the NASD;
(h) in connection with the offering of the Securities, to make its
officers, employees, independent accountants and legal counsel reasonably
available upon request by the Initial Purchasers;
(i) except following the effectiveness of the Exchange Offer or
Shelf Registration Statement, as the case may be, to not, and use
reasonable efforts to ensure that no affiliate (as such term is defined in
Rule 501(b) under the Securities Act) of the Company will, and not
authorize or knowingly permit any person acting on its or their behalf to,
solicit any offer to buy or offer to sell the Securities by means of any
form of general solicitation or general advertising (as such terms are
used in Regulation D under the Securities Act) or in any manner involving
a public offering within the meaning of Section 4(2) of the Securities
Act;
(j) to not, and use reasonable efforts to ensure that no affiliate
(as such term is defined in Rule 501(b) under the Securities Act) of the
Company will, offer, sell or solicit offers to buy or otherwise
26
negotiate in respect of any "security" (as defined in the Securities Act)
which could be integrated with the sale of the Securities in a manner that
would require the registration of the Securities under the Securities Act;
(k) to not, so long as the Securities are outstanding, be or become
an open-end investment company, unit investment trust or face-amount
certificate company that is or is required to be registered under Section
8 of the Investment Company Act, and to not be or become a closed-end
investment company required to be registered, but not registered,
thereunder;
(l) to cause each Note to bear the legend set forth in the form of
Note attached as Exhibit A to the Indenture until such legend shall no
longer be necessary or advisable because the Notes are no longer subject
to the restrictions on transfer described therein;
(m) to use its best efforts from time to time at the Initial
Purchasers' reasonable request to qualify the Securities for offering and
sale under the securities laws of such jurisdictions in the United States
and Canada as the Initial Purchasers may request and to comply with such
laws so as to permit the continuance of sales and dealings therein in such
jurisdictions for as long as may be necessary to complete the distribution
of the Securities; provided, however, that in connection therewith neither
the Company nor any Guarantor shall be required to qualify as a foreign
corporation or partnership, as the case may be, or as a dealer in
securities in any jurisdiction where it would not otherwise be required to
qualify but for this paragraph (m) or to file a general consent to service
of process in any jurisdiction where it is not so qualified or so subject
or to subject itself to taxation in any jurisdiction if it is not
otherwise so subject. The Company and the
27
Guarantors will promptly advise the Initial Purchasers of the receipt by
the Company or the Guarantors of any notification with respect to the
suspension of the qualification of the Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose;
(n) to comply with all agreements set forth in the representation
letters of the Company to The Depository Trust Company relating to the
approval of the Securities for "book-entry" transfer;
(o) for a period of 180 days from the date of the Offering
Memorandum, to not offer for sale, sell, contract to sell or otherwise
dispose of, directly or indirectly, or file a registration statement for,
or announce any offer, sale, contract for sale of or other disposition of
any debt securities issued or guaranteed by the Company or any Guarantor
(other than the Securities or the Exchange Securities) without the prior
written consent of CSI, which consent shall not be unreasonably withheld.
Neither the Company nor any Guarantor will at any time offer, sell,
contract to sell or otherwise dispose of, directly or indirectly, any
securities under circumstances where such offer, sale, contract or
disposition would cause the exemption afforded by Section 4(2) of the
Securities Act to cease to be applicable to the offer and sale of the
Securities as contemplated by this Agreement and the Offering Memorandum;
(p) other than as contemplated by the Registration Rights Agreement,
until the Initial Purchasers shall have notified the Company of the
completion of the resale of the Securities (and the Initial Purchasers
covenant to so notify), neither the Company, the Guarantors nor any of its
affiliated purchasers (as defined in Rule 10b-6 under the Exchange Act),
either alone or with one or more other persons, will bid for or purchase,
for any account in which it or any of its
28
affiliated purchasers has a beneficial interest, any Securities, or
attempt to induce any person to purchase any Securities; and neither it
nor any of its affiliated purchasers will make bids or purchases for the
purpose of creating actual, or apparent, active trading in or of raising
the price of the Securities;
(q) during the period from the Closing Date until three years after
the Closing Date, without the prior written consent of the Initial
Purchasers, to not, and not permit any of its Subsidiaries and, to the
extent reasonably within its control, any of its affiliates (as defined in
Rule 144 under the Securities Act) which are not Subsidiaries to, resell
any of the Securities that have been reacquired by them, except for
Securities purchased by the Company or any of its affiliates and resold in
a transaction registered under the Securities Act; and
(r) prior to the Closing Date, to not issue any press release or
other communication directly or indirectly or hold any press conference
with respect to the Company's financial condition, earnings, or business
prospects, without the prior written consent of the Initial Purchasers,
unless in the judgment of the Company and its counsel, and after
notification to the Initial Purchasers, such press release or
communication is required by law or failure to issue such press release
would have a Material Adverse Effect.
5. Conditions of Initial Purchasers' Obligations. The respective
obligations of the Initial Purchasers hereunder are subject (i) in the case of
representations and warranties qualified as to materiality, to the accuracy of
and compliance with such representations and warranties, when made and on the
Closing Date, in all respects, and in the case of representations and warranties
not qualified as to materiality, to the accuracy of and compliance with such
representations and warranties, when made and on the Closing
29
Date, in all material respects taken as a whole, on the part of the Company and
each Guarantor contained herein, (ii) to the accuracy of the statements of
officers of the Company and the Guarantors (as applicable) made in any
certificates pursuant to the provisions hereof, (iii) to the performance by the
Company and each Guarantor of its respective obligations hereunder, and (iv) to
each of the following additional terms and conditions:
(a) The Offering Memorandum shall have been printed and copies
distributed to the Initial Purchasers as promptly as practicable on or
following the date following the date of this Agreement or at such other
date and time as to which the Initial Purchasers may agree; and no stop
order suspending the sale of the Securities in any jurisdiction shall have
been issued and no proceeding for that purpose shall have been commenced
or shall be pending or threatened.
(b) All corporate proceedings and other legal matters incident to
the authorization, form and validity of the Securities, the Indenture, the
Registration Rights Agreement, the Tax Sharing Agreement, the Acquisition
Agreement, this Agreement and the Offering Memorandum, and all other legal
matters relating to this Agreement and the transactions contemplated
hereby shall be satisfactory in all material respects to the Initial
Purchasers, and the Company and the Guarantors each shall have furnished
to the Initial Purchasers all documents and information that it or its
counsel may reasonably request to enable them to pass upon such matters.
(c) Morgan, Lewis & Bockius LLP ("ML&B") shall have furnished to the
Initial Purchasers its written opinion, as counsel to the Company and the
Guarantors, addressed to the Initial Purchasers and dated the Closing
Date, in form and substance reasonably satisfactory to the Initial
Purchasers, to the effect that:
30
(i) each of the Company, LHL, the Receivables Subsidiary, the
Master Servicer, Ametex Fabrics, Inc., D-H Retail Space, Inc., Dixie
Furniture Company, Inc., Drexel Heritage Advertising Inc., Henry
Link Corporation, Interior Fabric Design, Inc., Link-Taylor
Corporation, Ramm, Son & Crocker, Inc., Robert Allen Fabrics of
N.Y., Inc., Universal Furniture Industries, Inc. and Young-Hinkel
Corporation has been duly incorporated, and each such corporation
and Sunbury Textile Mills, Inc. is validly existing as a corporation
in good standing under the laws of its state of incorporation and
has all corporate power and authority necessary to own or hold its
respective properties and to conduct the businesses in which it is
engaged as described in the Offering Memorandum;
(ii) each of the Company and the Subsidiaries (other than The
Berkline Corporation, Drexel Heritage Furnishings Inc., Henredon
Furniture Industries, Inc., Lexington Furniture Industries, Inc.,
Maitland-Smith, Inc., Robert Allen Fabrics, Inc. and Universal
Furniture Limited) is duly qualified to do business and is in good
standing as a foreign corporation or otherwise in each of the states
listed under the name of the Company and each Subsidiary in Schedule
IV hereto;
(iii) the Company's authorized capitalization is as set forth
in the Offering Memorandum; the description of the capital stock of
the Company contained in the Offering Memorandum is accurate; the
outstanding shares of capital stock of the Company are validly
authorized and issued and are fully paid and nonassessable, and are
owned by Holdings free and clear of any Lien (other than any Lien on
such capital stock pursuant to the Senior Bank Facilities); all of
the outstanding shares of capital stock of LHL, the Receivables
31
Subsidiary and the Master Servicer are validly authorized and issued
and will be fully paid and nonassessable, and are owned by the
Company directly or through Subsidiaries, free and clear of any Lien
(except in the case of LHL, for the Lien on such capital stock
pursuant to the Senior Bank Facilities);
(iv) the summaries in the Offering Memorandum of statutes,
legal and governmental proceedings and contracts, including without
limitation, the Indenture, the Securities and the Registration
Rights Agreement, accurately describe in all material respects the
provisions purported to be so summarized; the statements in the
Offering Memorandum under the caption "Certain Federal Income Tax
Considerations" to the extent that they constitute matters of law or
regulation or legal conclusions, have been reviewed by them and
fairly summarize the matters described therein in all material
respects;
(v) the Indenture conforms as to form in all material respects
with the requirements of the Trust Indenture Act and the rules and
regulations of the Commission applicable to an indenture which is
qualified thereunder;
(vi) neither the Company nor any Subsidiary is, before or
after the consummation of the Transactions (A) an "investment
company" or a company "controlled" by an investment company within
the meaning of the Investment Company Act and the rules and
regulations of the Commission thereunder, without taking account of
any exemption under the Investment Company Act arising out of the
number of holders of the Company's securities, or (B) a "holding
company" or a "subsidiary company" of a holding company, or an
"affiliate" thereof within the meaning of the
32
Public Utility Holding Company Act of 1935, as amended;
(vii) the Company, LHL, Ametex Fabrics, Inc., The Berkline
Corporation, D-H Retail Space, Inc., Drexel Heritage Advertising,
Inc., Drexel Heritage Furnishings Inc., Interior Fabric Design,
Inc., Ramm, Son & Crocker, Inc., Robert Allen Fabrics, Inc., Robert
Allen Fabrics of N.Y., Inc., Sunbury Textile Mills, Inc., Universal
Furniture Industries, Inc., and Universal Furniture Limited (each of
the foregoing a "NY-D Group Member") has full corporate right, power
and authority to execute and deliver the Indenture, the Securities,
the Registration Rights Agreement, the Tax Sharing Agreement and
this Agreement and to perform its respective obligations hereunder
and thereunder; and all corporate action required to be taken by
each NY-D Group Member for the due and proper authorization,
execution and delivery of the Indenture, the Securities, the
Registration Rights Agreement, the Tax Sharing Agreement and this
Agreement and the consummation of the Transactions and the other
transactions contemplated hereby and thereby have been duly and
validly taken;
(viii) each of this Agreement, the Tax Sharing Agreement and
the Registration Rights Agreement has been duly authorized, executed
and delivered by each NY-D Group Member which is a party thereto,
and (assuming due authorization, execution and delivery thereof by
each other party thereto) each constitutes a valid and legally
binding agreement, enforceable against the Company and each
Guarantor which is a party thereto in accordance with its terms
subject to applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer and similar laws affecting
creditors' rights and remedies generally and to general principles
of equity (regardless of
33
whether enforcement is sought in a proceeding at law or in equity)
and except to the extent that indemnification or contribution
provisions may be unenforceable;
(ix) the Indenture has been duly authorized, executed and
delivered by each NY-D Group Member and (assuming due authorization,
execution and delivery thereof by each other Guarantor and the
Trustee) constitutes a valid and legally binding agreement,
enforceable against the Company and each Guarantor in accordance
with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar laws
affecting creditors' rights and remedies generally and to general
principles of equity (regardless of whether enforcement is sought in
a proceeding at law or in equity); the Securities are in the form
contemplated by the Indenture and have been duly authorized and
executed by the Company and, upon the due authentication and
delivery thereof by the Trustee pursuant to the Indenture, will be
duly and validly issued and outstanding and will constitute valid
and legally binding obligations entitled to the benefits of the
Indenture and enforceable in accordance with their terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and similar laws affecting creditors' rights and
remedies generally and to general principles of equity (regardless
of whether enforcement is sought in a proceeding at law or in
equity);
(x) the execution, delivery and performance of the Indenture,
the Securities, the Registration Rights Agreement, the Tax Sharing
Agreement and this Agreement, the consummation of the Transactions
and the other transactions contemplated hereby and thereby, and the
34
fulfillment of the terms hereof or thereof, do not conflict with or
result in a breach or violation of any of the terms or provisions
of, or constitute a default under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or
assets (other than any Lien pursuant to the Senior Bank Facilities)
of (i) the Company, the Receivables Subsidiary, the Master Servicer
or LHL (each of the foregoing a "Special Corporation") pursuant to
any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which any Special Corporation is a party
or by which any Special Corporation is bound or to which any of the
property or assets of any Special Corporation is bound and (ii) any
Subsidiary pursuant to, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument entered into on the
Closing Date as part of the Transactions, except for any violation,
lien, charge or encumbrance that does not have a Material Adverse
Effect, nor will such actions result in any violation of the
provisions of the charter or by-laws of any NY-D Group Member or any
Federal or New York statute or the Delaware General Corporation Act,
or any judgment, order, decree, rule or regulation known to counsel
of any federal or state court or governmental agency or body having
jurisdiction over the Company or any of the Subsidiaries or any of
its properties or assets, except for such violations which would not
have a Material Adverse Effect; the holders of the Securities will
not be subject to personal liability for obligations of the Company
or any Guarantor by reason of being such holders; and no consent,
approval, authorization or order of, or filing or registration with,
any such court or governmental agency or body is required under any
such statute, judgment, order, decree, rule or regulation for the
execution, delivery and
35
performance of the Indenture, the Securities or the Registration
Rights Agreement, the Tax Sharing Agreement or the consummation of
the Transactions and the other transactions contemplated hereby and
thereby which shall not have been obtained or made prior to the
Closing Date except, with respect to the Exchange Offer and Exchange
Securities, filings or registration under the Securities Act or the
Exchange Act or the rules and regulations of the Commission
promulgated thereunder or the by-laws of the NASD and except any
filings, consents, approvals, authorizations, orders or
registrations the failure to so obtain or make would not have a
material adverse effect on the ability of the Company or any
Guarantor to consummate the offering of the Securities and the other
transactions required to be consummated herewith and thereby;
provided, however, that the foregoing may exclude state securities
or Blue Sky laws;
(xi) neither the consummation of the transactions
contemplated by this Agreement nor the sale, issuance, execution or
delivery of the Securities will violate Regulation G, T, U or X of
the Federal Reserve Board;
(xii) to the knowledge of counsel, there is no pending or
threatened action or suit or judicial, or other administrative
proceeding to which the Company or any of the Guarantors is a party
or of which any material property or assets of the Company or
Guarantors is the subject that, singly or in the aggregate, (A)
questions the validity of this Agreement, the Registration Rights
Agreement, the Tax Sharing Agreement or the Indenture or any action
taken or to be taken pursuant hereto or thereto, or (B) in the case
of a Special Corporation, if determined adversely to the
36
applicable Special Corporation, is reasonably likely to have a
Material Adverse Effect; and
(xiii) assuming the accuracy of the representations,
warranties and agreements of the Company and each of the Guarantors
contained in paragraphs (x), (y) and (z) of Section 1 of this
Agreement and of the Initial Purchasers in Section 2 of this
Agreement, the issuance and sale of the Securities and the offer,
resale and delivery of the Securities in the manner contemplated in
the Offering Memorandum and this Agreement, are exempt from the
registration requirements of the Securities Act and it is not
necessary to qualify the Indenture under the Trust Indenture Act;
In rendering such opinion, such counsel may rely as to matters
of fact, to the extent such counsel deems proper, on certificates of
responsible officers of the Company or the Subsidiaries and public
officials which are furnished to the Initial Purchasers.
(d) ML&B shall state that they have participated in conferences with
representatives of the Company and the Guarantors, representatives of the
independent auditors of the Company and the Guarantors and representatives
of the Initial Purchasers, at which conferences the contents of the
Offering Memorandum, any amendment thereof and supplement thereto and
related matters were discussed, and, although such counsel assume no
responsibility for the factual accuracy or completeness of the Offering
Memorandum, any amendment thereof or supplement thereto (except as
expressly provided above), nothing has come to the attention of such
counsel to cause such counsel to believe that the Offering Memorandum or
any amendment thereof or supplement thereto (except for financial
statements and schedules and other financial and statistical data included
therein, as to which no statement or opinion shall be given) contains any
37
untrue statement of a material fact or omits to state a material fact
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(e) John R. Leekley, General Counsel of Masco shall have furnished
to the Initial Purchasers his written opinion addressed to the Initial
Purchasers and dated the Closing Date, in form and substance reasonably
satisfactory to the Initial Purchasers, to the effect that:
(i) each of The Berkline Corporation, Drexel Heritage
Furnishings Inc., Henredon Furniture Industries, Inc., Lexington
Furniture Industries, Inc., Maitland-Smith, Inc., Robert Allen
Fabrics, Inc. and Universal Furniture Limited (each of the foregoing
a "Specified Subsidiary") has been duly incorporated and is validly
existing as a corporation in good standing under the laws of its
state of incorporation and has all corporate power and authority
necessary to own or hold its respective properties and to conduct
the businesses in which it is engaged as described in the Offering
Memorandum;
(ii) each Specified Subsidiary is duly qualified to do
business and is in good standing as a foreign corporation or
otherwise in each of the states listed under the name of each
Specified Subsidiary in Schedule V hereto;
(iii) all of the outstanding shares of capital stock of each
Specified Subsidiary are validly authorized and issued and will be
fully paid and nonassessable (other than as provided by Section 630
of the New York Business Corporation Law in the case of Drexel
Heritage Furnishings, Inc.), and are owned by the Company directly
or through Subsidiaries, free and clear of any Lien
38
(other than any Lien on such capital stock pursuant to the Senior
Bank Facilities);
(iv) the execution, delivery and performance of the Indenture,
the Securities, the Registration Rights Agreement and this
Agreement, the consummation of the Transactions and the other
transactions contemplated hereby and thereby, and the fulfillment of
the terms hereof or thereof, do not conflict with or result in a
breach or violation of any of the terms or provisions of, or
constitute a default under, or result in the creation or imposition
of any lien, charge or encumbrance upon any property or assets of
any of the Specified Subsidiaries pursuant to, any indenture,
mortgage, deed of trust, loan agreement or other agreement or
instrument to which any Specified Subsidiary is a party or by which
any Specified Subsidiary is bound or to which any of the property or
assets of any Specified Subsidiary is subject, except for any
violation, lien, charge or encumbrance that does not have a Material
Adverse Effect; and
(v) to the knowledge of counsel there is no pending or
threatened action or suit or judicial, or other administrative
proceeding to which any Subsidiary (other than the Receivables
Subsidiary, the Master Servicer or LHL) is a party or of which any
material property or assets of any Subsidiary (other than the
Receivables Subsidiary, the Master Servicer or LHL) is the subject
that, singly or in the aggregate, if determined adversely to any of
such Subsidiaries is reasonably likely to have a Material Adverse
Effect.
In rendering such opinion, such counsel may rely on local
counsel and, as to matters of fact, to the extent such counsel deems
proper, on certificates of responsible officers of the Company or the
39
Subsidiaries and public officials which are furnished to the Initial
Purchasers.
(f) Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P. shall have
furnished to the Initial Purchasers its written opinion, as special
counsel to the Company and the Guarantors, addressed to the Initial
Purchasers and dated the Closing Date, in form and substance reasonably
satisfactory to the Initial Purchasers, to the effect that:
(i) each of Drexel Heritage Home Inspirations, Inc., Henredon
Transportation Company and Intro Europe, Inc. (each of the foregoing
a "NC Specified Subsidiary") has been duly incorporated and is
validly existing as a corporation in good standing under the laws of
North Carolina and has all corporate power and authority necessary
to own or hold its respective properties and to conduct the
businesses in which it is engaged as described in the Offering
Memorandum;
(ii) Each NC Specified Subsidiary, Henredon Furniture
Industries, Inc., Lexington Furniture Industries, Inc. and
Maitland-Smith, Inc. (each of the foregoing a "NC Group Member") has
full corporate right, power and authority to execute and deliver the
Indenture, the Securities, the Registration Rights Agreement and
this Agreement and to perform its respective obligations hereunder
and thereunder; and all corporate action required to be taken by
each NC Group Member for the due and proper authorization, execution
and delivery of the Indenture, the Securities, the Registration
Rights Agreement and this Agreement and the consummation of the
Transactions and the other transactions contemplated hereby and
thereby have been duly and validly taken;
40
(iii) each of this Agreement and the Registration Rights
Agreement has been duly authorized, executed and delivered by each
NC Group Member and each constitutes a valid and legally binding
agreement;
(iv) the Indenture has been duly authorized, executed and
delivered by each NC Group Member and (assuming due authorization,
execution and delivery thereof by the Company, each other Guarantor
and the Trustee) constitutes a valid and legally binding agreement;
and
(v) the execution, delivery and performance of the Indenture,
the Securities, the Registration Rights Agreement and this
Agreement, the consummation of the Transactions and the other
transactions contemplated hereby and thereby, and the fulfillment of
the terms hereof or thereof, will not result in any violation of the
provisions of the charter or by-laws of any NC Group Member or any
North Carolina statute, or any judgement, order, decree, rule or
regulation known to counsel of any state court or governmental
agency or body having jurisdiction over any NC Group Member or any
of its property or assets, except for such violations which would
not have a Material Adverse Effect;
In rendering such opinion, such counsel may rely as to matters
of fact, to the extent such counsel deems proper, on certificates of
responsible officers of the Company or the Subsidiaries and public
officials which are furnished to the Initial Purchasers.
(g) Holland, Ray & Upchurch shall have furnished to the Initial
Purchasers its written opinion, as special counsel to the Company and the
Guarantors, addressed to the Initial Purchasers and dated the Closing
Date, in form and substance reasonably
41
satisfactory to the Initial Purchasers, to the effect that:
(i) each of Blue Mountain Trucking Corporation and Custom
Truck Tires, Inc. (each of the foregoing a "MS Specified
Subsidiary") has been duly incorporated and is validly existing as a
corporation in good standing under the laws of Mississippi, and has
all corporate power and authority necessary to own or hold its
respective properties and to conduct the businesses in which it is
engaged as described in the Offering Memorandum;
(ii) Each MS Specified Subsidiary has full corporate right,
power and authority to execute and deliver the Indenture, the
Securities, the Registration Rights Agreement and this Agreement and
to perform its respective obligations hereunder and thereunder; and
all corporate action required to be taken by MS Specified Subsidiary
for the due and proper authorization, execution and delivery of the
Indenture, the Securities, the Registration Rights Agreement and
this Agreement and the consummation of the Transactions and the
other transactions contemplated hereby and thereby have been duly
and validly taken;
(iii) each of this Agreement and the Registration Rights
Agreement has been duly authorized, executed and delivered by each
MS Specified Subsidiary and each constitutes a valid and legally
binding agreement;
(iv) the Indenture has been duly authorized, executed and
delivered by each MS Specified Subsidiary and (assuming due
authorization, execution and delivery thereof by the Company, each
other Guarantor and the Trustee) constitutes a valid and legally
binding agreement; and
42
(v) the execution, delivery and performance of the Indenture,
the Securities, the Registration Rights Agreement and this
Agreement, the consummation of the Transactions and the other
transactions contemplated hereby and thereby, and the fulfillment of
the terms hereof or thereof, will not result in any violation of the
provisions of the charter or by-laws of any MS Specified Subsidiary
or any Mississippi statute, or any judgment, order, decree, rule or
regulation known to counsel of any state court or governmental
agency or body having jurisdiction over any MS Specified Subsidiary
or any of its property or assets, except for such violations which
would not have a Material Adverse Effect;
In rendering such opinion, such counsel may rely as to matters
of fact, to the extent such counsel deems proper, on certificates of
responsible officers of the Company or the Subsidiaries and public
officials which are furnished to the Initial Purchasers.
(h) Raymond & Prokop P.C. shall have furnished to the Initial
Purchasers its written opinion, as special counsel to the Company and the
Guarantors, addressed to the Initial Purchasers and dated the Closing
Date, in form and substance reasonably satisfactory to the Initial
Purchasers, to the effect that:
(i) La Barge, Inc. has been duly incorporated and is validly
existing as a corporation in good standing under the laws of
Michigan and has all corporate power and authority necessary to own
or hold its respective properties and to conduct the businesses in
which it is engaged as described in the Offering Memorandum;
(ii) La Barge, Inc. has full corporate right, power and
authority to execute and deliver the Indenture, the Securities, the
Registration Rights
43
Agreement and this Agreement and to perform its respective
obligations hereunder and thereunder; and all corporate action
required to be taken by La Barge, Inc. for the due and proper
authorization, execution and delivery of the Indenture, the
Securities, the Registration Rights Agreement and this Agreement and
the consummation of the Transactions and the other transactions
contemplated hereby and thereby have been duly and validly taken;
(iii) each of this Agreement and the Registration Rights
Agreement has been duly authorized, executed and delivered by La
Barge, Inc. and each constitutes a valid and legally binding
agreement.
(iv) the Indenture has been duly authorized, executed and
delivered by La Barge, Inc. and (assuming due authorization,
execution and delivery thereof by the Company, each other Guarantor
and the Trustee) constitutes a valid and legally binding agreement;
and
(v) the execution, delivery and performance of the Indenture,
the Securities, the Registration Rights Agreement and this
Agreement, the consummation of the Transactions and the other
transactions contemplated hereby and thereby, and the fulfillment of
the terms hereof or thereof, will not result in any violation of the
provisions of the charter or by-laws of La Barge, Inc., or any
Michigan statute, or any judgment, order, decree, rule or regulation
known to counsel of any state court or governmental agency or body
having jurisdiction over La Barge, Inc. or any of its property or
assets, except for such violations which would not have a Material
Adverse Effect;
44
In rendering such opinion, such counsel may rely as to matters
of fact, to the extent such counsel deems proper, on certificates of
responsible officers of the Company or the Subsidiaries and public
officials which are furnished to the Initial Purchasers.
(i) The Initial Purchasers shall have received from CS&M, counsel
for the Initial Purchasers, such opinion or opinions, dated the Closing
Date, with respect to such matters as the Initial Purchasers may
reasonably require, and the Company and the Guarantors shall have
furnished to such counsel such documents as they request for enabling them
to pass upon such matters;
(j) The Company shall have furnished to the Initial Purchasers a
letter of Coopers & Lybrand LLP, dated the date hereof, in form and
substance satisfactory to the Initial Purchasers, to the effect that:
(i) they are independent certified public accountants with respect
to the Company and Masco within the meaning of Rule 101 of the American
Institute of Certified Public Accountants' Code of Professional Conduct
and its interpretations and rulings;
(ii) based upon a reading of the latest unaudited combined financial
statements made available by Masco for the Home Furnishings Group, the
procedures of the American Institute of Certified Public Accountants for a
review of interim financial information as described in Statement of
Auditing Standards No. 71, reading of minutes and inquiries of certain
officials of the Home Furnishings Group and Masco who have responsibility
for financial and accounting matters and certain other limited procedures
requested by the Initial Purchasers and described in detail in such
letter, nothing has come to their attention that causes them to believe
45
that (A) any unaudited combined financial statements included or
incorporated in the Offering Memorandum do not comply in form in all
material respects with applicable accounting requirements or (B) any
material modifications should be made to the unaudited combined financial
statements included in the Offering Memorandum for them to be in
conformity with generally accepted accounting principles applied on a
basis substantially consistent with that of the audited combined financial
statements included in the Offering Memorandum;
(iii) based upon the procedures detailed in such letter with respect
to the period subsequent to the date of the last available balance sheet,
including reading of minutes and inquiries of certain officials of the
Masco Home Furnishings Group and Masco who have responsibility for
financial and accounting matters, nothing has come to their attention that
causes them to believe that (A) at a specified date not more than five
business days prior to the date of the letter, there was any decrease in
net investment and advances, increase in long-term debt or decrease in net
current assets as compared with the amounts shown in the June 30, 1996,
unaudited combined balance sheet included in the Offering Memorandum or
(B) for the period from June 30, 1996, to a specified date not more than
five business days prior to the date of the letter, there were any
decreases, as compared with the corresponding period in the preceding
year, in net sales, gross profit or net income, except in all instances
for changes, increases or decreases that the Offering Memorandum discloses
have occurred or which are set forth in such letter, in which case the
letter shall be accompanied by an explanation by the Company as to the
significance thereof unless said explanation is not deemed necessary by
the Initial Purchasers;
(iv) they have performed certain other specified procedures as a
result of which they determined that
46
certain information of an accounting, financial or statistical nature
(which is limited to accounting, financial or statistical information
derived from the general accounting records of the Home Furnishings Group)
set forth in the Offering Memorandum agrees with the accounting records of
the Masco Home Furnishings Group, excluding any questions of legal
interpretation; and
(v) on the basis of a reading of the unaudited pro forma financial
statements included in the Offering Memorandum (the "pro forma financial
statements"); carrying out certain specified procedures; reading of
minutes and inquiries of certain officials of the Masco Home Furnishings
Group who have responsibility for financial and accounting matters; and
proving the arithmetic accuracy of the application of the pro forma
adjustments to the historical amounts in the pro forma financial
statements, nothing came to their attention which caused them to believe
that the pro forma adjustments have not been properly applied to the
historical amounts in the compilation of such statements.
(k) The Company shall have furnished to the Initial Purchasers a
letter (the "bring-down letter") of Coopers & Lybrand, LLP, addressed to
the Initial Purchasers and dated the Closing Date confirming, as of the
date of the bring-down letter (or, with respect to matters involving
changes or developments since the respective dates as of which specified
financial information is given in the Offering Memorandum, as of a date
not more than two days prior to the date of the bring-down letter), the
conclusions and findings of such firm with respect to the financial
information and other matters covered by its letter delivered to the
Initial Purchasers concurrently with the execution of this Agreement and
described in paragraph (j).
47
(l) The Company shall have furnished to the Initial Purchasers a
certificate, dated the Closing Date, signed by its chief executive officer
and its chief financial officer stating that (A) such officers have
carefully examined the Offering Memorandum, (B) in their opinion, as of
its date, the Offering Memorandum did not include any untrue statement of
a material fact and did not omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading and since its
date, no event has occurred which should have been set forth in a
supplement or amendment to the Offering Memorandum so that the Offering
Memorandum as of the Closing Date would not include any untrue statement
of a material fact or would not omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading and (C) as of
the Closing Date, to such officers' knowledge, the representations and
warranties of the Company and the Guarantors in this Agreement that are
qualified as to materiality are true and correct and the representations
and warranties of the Company and the Guarantors in this Agreement not
qualified as to materiality are true and correct in all material respects,
taken as a whole, each of the Company and the Subsidiaries has complied
with all agreements and satisfied all conditions on its part to be
performed or satisfied hereunder at or prior to the Closing Date, and
subsequent to the date of the most recent financial statements in the
Offering Memorandum, there has been no event or development, which in such
officers' judgement, can reasonably be expected to result in a Material
Adverse Effect.
(m) Subsequent to the execution and delivery of this Agreement or,
if earlier, the dates as of which information is given in the Offering
Memorandum (exclusive of any amendment or supplement thereto),
48
there has occurred no event or development that can reasonably be expected
to result in a Material Adverse Effect or the letter referred to in
paragraph (k) of this Section does not confirm in all material respects
the letter referred to in paragraph (j), the effect of which, in any such
case described above, is, in the reasonable judgment of the Initial
Purchasers, so material and adverse as to make it impracticable or
inadvisable to proceed with the offering or delivery of the Securities on
the terms and in the manner contemplated in the Offering Memorandum
(exclusive of any amendment or supplement).
(n) No action shall have been taken and no statute, rule,
regulation or order shall have been enacted, adopted or issued by any
governmental agency which would, as of the Closing Date, prevent the
issuance or sale of the Securities; and no injunction, restraining order
or order of any other nature by a Federal or state court of competent
jurisdiction shall have been issued as of the Closing Date which would
prevent the issuance or sale of the Securities.
(o) Subsequent to the execution and delivery of this Agreement (i)
no downgrading shall have occurred in the rating accorded the Securities
or any of the Company's or any Guarantor's other debt securities or
preferred stock by any "nationally recognized statistical rating
organization", as that term is defined by the Commission for purposes of
Rule 436(g)(2) under the Securities Act, and (ii) no such organization
shall have publicly announced that it has under surveillance or review
(other than an announcement with positive implications of a possible
upgrading), its rating of the Securities or any of the Company's or any
Guarantor's other debt securities or preferred stock.
(p) Subsequent to the execution and delivery of this Agreement there
shall not have occurred any of the
49
following: (i) trading in securities generally on the New York Stock
Exchange, the American Stock Exchange or the over-the-counter market shall
have been suspended or limited, or minimum prices shall have been
established on either of such exchanges or such market by the Commission,
by such exchange or by any other regulatory body or governmental authority
having jurisdiction, or trading in securities of the Company or any
Guarantor on any exchange or in the over-the-counter market shall have
been suspended or (ii) any moratorium on commercial banking activities
shall have been declared by Federal or New York State authorities or (iii)
an outbreak or escalation of hostilities or a declaration by the United
States of a national emergency or war or such a material adverse change in
general economic, political or financial conditions (or the effect of
international conditions on the financial markets in the United States
shall be such) as to make it, in the judgment of the Initial Purchasers,
impracticable or inadvisable to proceed with the offering or the delivery
of the Securities on the terms and in the manner contemplated in the
Offering Memorandum.
(q) The Company and each of the Guarantors shall have executed and
delivered the Registration Rights Agreement.
(r) The Securities shall have been approved by the NASD for trading
in the PORTAL market.
(s) The Indenture shall have been duly executed and delivered by the
Company, each of the Guarantors and the Trustee and the Securities shall
have been duly executed and delivered by the Company and each of the
Guarantors and duly authenticated by the Trustee.
(t) If any event shall have occurred that requires the Company under
Section 4(c) hereof to prepare an amendment or supplement to the Offering
50
Memorandum, such amendment or supplement shall have been prepared, the
Initial Purchasers shall have been given a reasonable opportunity to
comment thereon, and copies thereof delivered to the Initial Purchasers.
(u) There shall not have occurred any invalidation of Rule 144A
under the Securities Act by any court or any withdrawal or proposed
withdrawal of any rule or regulation under the Securities Act or the
Exchange Act by the Commission or any amendment or proposed amendment
thereof by the Commission which in the judgment of the Initial Purchasers
would materially impair the ability of the Initial Purchasers to purchase,
hold or effect resales of the Securities as contemplated hereby.
(v) The Company shall have furnished to the Initial Purchasers a
copy of a solvency letter in form and substance and from Houlihan, Lokey,
Howard & Zukin, Inc., or another independent evaluation firm satisfactory
to the Initial Purchasers.
(w) (i) the Acquisition Agreement and the Tax Sharing Agreement
shall have been executed and delivered by the parties thereto and shall be
in full force and effect and (ii) the Initial Purchasers shall be
satisfied that the Transactions shall have been consummated or will be
consummated simultaneously with the offering of the Securities on the
terms described in the Offering Memorandum.
(x) Each of the Guarantors shall have executed the letter
substantially in the form of Exhibit C hereto confirming its agreement to
become a party to and be bound by this Agreement as if signed by it on the
date hereof and the Guarantors shall have delivered such letter to each of
the other parties hereto.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be
51
deemed to be in compliance with the provisions hereof only if they are in form
and substance reasonably satisfactory to the Initial Purchasers.
6. Termination. The obligations of the Initial Purchasers hereunder may be
terminated by the Initial Purchasers, in their absolute discretion, by notice
given to and received by the Company prior to delivery of and payment for the
Securities if, prior to that time, any of the conditions precedent set forth in
Section 5 shall have not been satisfied when required or waived.
7. Defaulting Initial Purchasers. (a) If, on the Closing Date, any
Initial Purchaser defaults in the performance of its obligations under this
Agreement, the non-defaulting Initial Purchaser may make arrangements for the
purchase of such Securities by other persons satisfactory to the Company but if
no such arrangements are made within 36 hours after such default, this Agreement
shall terminate without liability on the part of the non-defaulting Initial
Purchaser or the Company except that the Company will continue to be liable for
the payment of expenses to the extent set forth in Sections 8 and 12 except that
the provisions of Sections 9 and 10 shall not terminate and shall remain in
effect. As used in this Agreement, the term "Initial Purchaser" includes, for
all purposes of this Agreement unless the context otherwise requires, any party
not listed in Schedule III hereto who, pursuant to this Section 7, purchases
Securities which a defaulting Initial Purchaser agreed but failed to purchase.
(b) Nothing contained herein shall relieve a defaulting Initial
Purchaser of any liability it may have to the Company or the non-defaulting
Initial Purchaser for damages caused by its default. If other persons are
obligated or agree to purchase the Securities of a defaulting Initial Purchaser,
either the non-defaulting Initial Purchaser or the Company may postpone the
Closing Date for up to seven full business days in order to effect
52
any changes that in the opinion of counsel for the Company or counsel for the
Initial Purchasers may be necessary in the Offering Memorandum or in any other
document or arrangement, and the Company agrees to promptly make any amendment
or supplement to the Offering Memorandum that effects any such changes.
8. Reimbursement of Initial Purchasers' Expenses. If this Agreement
is terminated pursuant to Section 6 or if for any reason the purchase of the
Securities by the Initial Purchasers is not consummated, the Company shall
remain responsible (except to a defaulting Initial Purchaser) for the expenses
to be paid or reimbursed by it pursuant to Section 12 and the respective
obligations of the Company and the Initial Purchasers pursuant to Sections 9 and
10 shall remain in effect. If the purchase of the Securities by the Initial
Purchasers is not consummated because any condition to the obligations of the
Initial Purchasers set forth in Section 5 hereof is not satisfied or because of
any refusal, inability or failure on the part of the Company to perform any
agreement herein or comply with any provision hereof other than by reason of a
default by the Initial Purchasers, the Company will reimburse the Initial
Purchasers upon demand for all reasonable out-of-pocket expenses (including
reasonable fees and disbursements of counsel) that shall have been incurred by
them in connection with this Agreement and the proposed purchase and sale of the
Securities.
9. Indemnification. (a) Each of the Company and the Guarantors,
jointly and severally, shall indemnify and hold harmless the Initial Purchasers,
their affiliates, and their respective officers, directors, employees,
representatives and agents, and each person, if any, who controls any Initial
Purchaser within the meaning of the Securities Act or the Exchange Act
(collectively referred to for the purposes of this Section 9 and Section 10 as
an Initial Purchaser), against any loss, claim, damage, expense or liability,
joint or several, or any action in respect thereof, to which an Initial
Purchaser may become subject, whether commenced or threatened and under the
Securities Act
53
or the Exchange Act or other Federal or state statutory law or regulation, at
common law or otherwise, insofar as such loss, claim, damage, liability or
action arises out of or is based upon (i) any untrue statement or alleged untrue
statement of any material fact contained in the preliminary offering memorandum
or the Offering Memorandum or in any amendment or supplement thereto or any
information provided by the Company pursuant to Section 4(e) or (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and shall reimburse
each Initial Purchaser for any legal or other expenses reasonably incurred by
that Initial Purchaser (upon presentation of a statement or statements therefor
in reasonable detail) in connection with investigating or preparing to defend or
defending against or appearing as a third party witness in connection with any
such loss, claim, damage, liability, expense or action as such expenses are
incurred; provided, however, that neither the Company nor any Guarantor shall be
liable in any such case to the extent that any such loss, claim, damage,
liability or action arises out of or is based upon any such untrue statement or
alleged untrue statement or omission or alleged omission from any of such
documents in reliance upon and in conformity with the Initial Purchasers'
Information; and provided further that with respect to any such untrue statement
or omission made in the preliminary offering memorandum, the indemnity agreement
contained in this Section 9(a) shall not enure to the benefit of any such
Initial Purchaser from whom the person asserting any such losses, claims,
damages or liabilities purchased the Securities concerned if, to the extent that
such sale was an initial resale by such Initial Purchaser and any such loss,
claim, damage or liability of such Initial Purchaser is a result of the fact
that both (A) a copy of the Offering Memorandum was not sent or given to such
person at or prior to the written confirmation of the sale of such Securities to
such person, and (B) the untrue statement or omission in the preliminary
offering memorandum was corrected in the
54
Offering Memorandum unless, in either case, such failure to deliver the Offering
Memorandum was a result of noncompliance by the Company or any Guarantor with
Section 4(c).
(b) Each Initial Purchaser, severally and not jointly, shall
indemnify and hold harmless each of the Company and the Guarantors, each of
their affiliates, each of their officers, directors, employees, representatives,
and agents and each person, if any, who controls the Company or any Guarantor
within the meaning of the Securities Act (collectively referred to for the
purposes of this Section 9 and Section 10 as the Company), to the same extent as
the foregoing indemnity from the Company to each Initial Purchaser, against any
loss, claim, damage or liability, joint or several, or any action in respect
thereof, to which the Company may become subject, under the Securities Act, the
Exchange Act or other Federal or state statutory law or regulation at common law
or otherwise, insofar as such loss, claim, damage, expense, liability or action
arises out of or is based upon (i) any untrue statement or alleged untrue
statement of a material fact contained in the preliminary offering memorandum or
the Offering Memorandum or in any amendment or supplement thereto or (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, but in each case only to
the extent that the untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with the Initial
Purchasers' Information, and shall reimburse the Company for any legal or other
expenses reasonably incurred (upon presentation of a statement or statements
therefor in reasonable detail) by the Company or any Guarantor in connection
with investigating or preparing to defend or defending against or appearing as
third party witness in connection with any such loss, claim, damage, liability,
expense or action as such expenses are incurred.
55
(c) Promptly after receipt by an indemnified party under this
Section 9 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party pursuant to Section 9(a) or 9(b), notify the indemnifying
party in writing of the claim or the commencement of that action; provided,
however, that the failure to notify the indemnifying party shall not relieve it
from any liability which it may have under this Section 9 except to the extent
it has been materially prejudiced by such failure; and, provided further that
the failure to notify the indemnifying party shall not relieve it from any
liability which it may have to an indemnified party otherwise than under this
Section 9. If any such claim or action shall be brought against an indemnified
party, and it shall notify the indemnifying party thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it
wishes, jointly with any other similarly notified indemnifying party, to assume
the defense thereof with counsel reasonably satisfactory to the indemnified
party. After notice from the indemnifying party to the indemnified party of its
election to assume the defense of such claim or action, the indemnifying party
shall not be liable to the indemnified party under this Section 9 for any legal
or other expenses subsequently incurred by the indemnified party in connection
with the defense thereof other than reasonable costs of investigation; provided,
however, that an indemnified party will have the right to employ its own counsel
in any such action, but the fees, expenses and other charges of such counsel
will be at the expense of such indemnified party unless (1) the employment of
counsel by the indemnified party has been authorized in writing by the
indemnifying party, (2) the indemnified party has reasonably concluded (based on
advice of counsel) that there may be legal defenses available to it or other
indemnified parties that are different from or in addition to those available to
the indemnifying party, (3) a conflict or potential conflict exists (based on
advice of counsel to the indemnified party) between the indemnified party and
the indemnifying party (in
56
which case the indemnifying party will not have the right to direct the defense
of such action on behalf of the indemnified party) or (4) the indemnifying party
has not in fact employed counsel to assume the defense of such action within a
reasonable time after receiving notice of the commencement of the action, in
each of which cases the reasonable fees, disbursements and other charges of
counsel will be at the expense of the indemnifying party or parties. It is
understood that the indemnifying party or parties shall not, in connection with
any proceeding or related proceedings in the same jurisdiction, be liable for
the reasonable fees, disbursements and other charges of more than one separate
firm of attorneys (in addition to any local counsel) at any one time for all
such indemnified party or parties. Each indemnified party, as a condition of the
indemnity agreements contained in Sections 9(a) and 9(b), shall use all
reasonable efforts to cooperate with the indemnifying party in the defense of
any such action or claim. No indemnifying party shall be liable for any
settlement of any such action effected without its written consent (which
consent shall not be unreasonably withheld), but if settled with its written
consent or if there be a final judgment for the plaintiff in any such action,
the indemnifying party agrees to indemnify and hold harmless any indemnified
party from and against any loss or liability by reason of such settlement or
judgment. No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened proceeding
in respect of which any indemnified party is or could have been a party and
indemnity could have been sought hereunder by such indemnified party, unless
such settlement includes an unconditional release of such indemnified party from
all liability on claims that are the subject matter of such proceeding.
The obligations of the Company and the Initial Purchasers in this
Section 9 and in Section 10 are in addition to any other liability which the
Company or the Initial Purchasers, as the case may be, may otherwise have,
57
including in respect of any breaches of representations, warranties and
agreements made herein by any such party.
10. Contribution. If the indemnification provided for in Section 9
is unavailable or insufficient to hold harmless an indemnified party under
Section 9(a) or 9(b), then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or payable by
such indemnified party as a result of such loss, claim, damage or liability, or
action in respect thereof, (i) in such proportion as shall be appropriate to
reflect the relative benefits received by the Company on the one hand and the
Initial Purchasers on the other from the offering of the Securities or (ii) if
the allocation provided by clause (i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company and
the Guarantors on the one hand and the Initial Purchasers on the other with
respect to the statements or omissions which resulted in such loss, claim,
damage or liability, or action in respect thereof, as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Initial Purchasers on the other with respect to such offering
shall be deemed to be in the same proportion as the total net proceeds from the
offering of the Securities purchased under this Agreement (before deducting
expenses) received by or on behalf of the Company bear to the total discounts
received by the Initial Purchasers with respect to the Securities purchased
under this Agreement, in each case as set forth in the table on the cover page
of the Offering Memorandum. The relative fault shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to the Company or any Guarantor or information supplied by the Company
or any Guarantor on the one hand or to the Initial Purchasers' Information on
the other, the intent of the parties and their relative knowledge, access to
information and opportunity to correct
58
or prevent such untrue statement or omission. The Company and the Initial
Purchasers agree that it would not be just and equitable if contributions
pursuant to this Section 10 were to be determined by pro rata allocation or by
any other method of allocation which does not take into account the equitable
considerations referred to herein. The amount paid or payable by an indemnified
party as a result of the loss, claim, damage or liability, or action in respect
thereof, referred to above in this Section 10 shall be deemed to include, for
purposes of this Section 10, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 10, no Initial
Purchaser shall be required to contribute any amount in excess of the amount by
which the total price at which the Securities purchased from the Company by it
were offered to investors less the amount of any damages which such Initial
Purchaser has otherwise paid or become liable to pay by reason of any untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Initial Purchasers' obligations
to contribute as provided in this Section 10 are several in proportion to their
respective purchase obligations and not joint.
11. Persons Entitled to Benefit of Agreement. This Agreement shall
enure to the benefit of and be binding upon the Initial Purchasers, the Company,
upon execution and delivery of a letter in the form of Exhibit C hereto, each of
the Guarantors and their respective successors. Nothing expressed or mentioned
in this Agreement is intended or shall be construed to give any person, firm or
corporation, other than the Initial Purchasers, their affiliates and the Company
and each of the Guarantors and, in each case, their respective successors and
the controlling persons and officers and directors referred to in Sections 9 and
10 and their heirs and legal representatives, any legal or
59
equitable right, remedy or claim under or in respect of this Agreement or any
provision contained herein.
12. Expenses. The Company and the Guarantors jointly and severally
agree to pay (a) the costs incident to the authorization, issuance, sale,
preparation and delivery of the Securities and any taxes payable in that
connection; (b) the costs incident to the preparation, printing and distribution
of any preliminary offering memorandum, the Offering Memorandum and any
amendments and supplements thereto; (c) the costs of reproducing and
distributing this Agreement, the Registration Rights Agreement and the
Indenture; (d) the preparation, issuance and delivery of the certificates for
the Securities to the Initial Purchasers; (e) the fees and expenses of
qualifying the Securities under the securities laws of the several jurisdictions
as provided in Section 4(m) and of preparing, printing and distributing Blue Sky
Memoranda (including related reasonable fees and expenses of CS&M); (f) any fees
charged by securities rating services for rating the Securities; (g) all fees
and expenses of the Trustee; (h) all costs incident to and fees and expenses of
the inclusion of the Securities on the PORTAL system and the approval of the
Securities for book-entry transfer by The Depository Trust Company; and (i) all
other costs and expenses incident to the performance of the obligations of the
Company and each of the Guarantors under this Agreement; provided, however,
that, except as otherwise provided in this Section 12 and in Section 8, the
Initial Purchasers shall pay their own costs and expenses, including the costs
and expenses of its counsel, any transfer taxes on the Securities which it may
sell and the expenses of advertising any offering of the Securities made by the
Initial Purchasers.
13. Survival. The respective indemnities, rights of contribution,
representations, warranties, agreements and statements made by or on behalf of
the Company, each of the Guarantors and the Initial Purchasers and any of their
respective affiliates, representatives, officers, directors or controlling
persons contained in this Agreement or in any
60
certificate delivered pursuant to this Agreement, shall survive the delivery of
and payment for the Securities and shall remain in full force and effect,
regardless of any termination or cancellation of this Agreement or any
investigation or statement as to the results thereof made by or on behalf of any
of them or any person controlling any of them.
14. Notices, etc. All statements, requests, notices and agreements
hereunder shall be in writing, and:
(a) if to the Initial Purchasers, shall be delivered or sent by
mail, telex or facsimile transmission to Chase Securities Inc., 270 Park
Avenue, 4th floor, New York, New York 10017, Attention: Mr. Stephen
Eichenberger;
(b) if to the Company or any Guarantor, shall be delivered or sent
by mail, telex or facsimile transmission, prior to the Closing Date, c/o
Morgan, Lewis & Bockius LLP, 101 Park Avenue, New York, New York 10178,
fax: (212) 309-6273, Attention: Philip H. Werner, on or after the Closing
Date, to the address of the Company set forth in the Offering Memorandum,
Attention: General Counsel;
provided, however, that any notice to an Initial Purchaser pursuant to Section
9(c) shall be delivered or sent by mail, telex or facsimile transmission to such
Initial Purchaser at its address set forth on the signature page hereof.
Any such statements, requests, notices or agreements shall take
effect at the time of receipt thereof.
15. Business Day. For purposes of this Agreement, "business day"
means any day on which the New York Stock Exchange, Inc. is open for trading.
16. Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York.
61
17. Counterparts. This Agreement may be executed in any number of
counterparts (which may include counterparts delivered by telecopier), each of
which shall be deemed to be an original, but all such counterparts shall
together constitute one and the same instrument.
18. Headings. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
If the foregoing is in accordance with your understanding of the
agreement between the Company and the
62
Initial Purchasers, kindly indicate your acceptance in the space provided for
that purpose below.
Very truly yours,
LIFESTYLE FURNISHINGS INTERNATIONAL
LTD.,
by_______________________________
Name:
Title:
LIFESTYLE HOLDINGS LTD.,
by_______________________________
Name:
Title:
Accepted:
CHASE SECURITIES INC.
by_______________________________
Authorized Signatory
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
by_______________________________
Authorized Signatory
Address for Notices:
CHASE SECURITIES INC.
One Chase Plaza, 25th floor
63
New York, New York 10081
Attention: Legal Department
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
World Financial Center
North Tower
New York, New York 10281
Attention: Wood Steinberg
64
SCHEDULE I
Ametex Fabrics, Inc., a Delaware corporation
The Berkline Corporation, a Delaware corporation
Blue Mountain Trucking Corporation, a Mississippi
corporation
Custom Truck Tires, Inc., a Mississippi corporation
D-H Retail Space, Inc., a Delaware corporation
Drexel Heritage Advertising, Inc., a Delaware corporation
Drexel Heritage Furnishings Inc., a New York corporation
Drexel Heritage Home Inspirations, Inc., a North Carolina
corporation
Henredon Furniture Industries, Inc., a North Carolina
corporation
Henredon Transportation Company, a North Carolina
corporation
Interior Fabric Design, Inc., a New York corporation
Intro Europe, Inc., a North Carolina corporation
La Barge, Inc., a Michigan corporation
Lexington Furniture Industries, Inc., a North Carolina
corporation
Maitland-Smith, Inc., a North Carolina corporation
Marbro Lamp Company, a California corporation
Ramm, Son & Crocker, Inc., a New York corporation
Robert Allen Fabrics, Inc., a Delaware corporation
Robert Allen Fabrics of N.Y. Inc., a Delaware corporation
Sunbury Textile Mills, Inc., a Delaware corporation
Universal Furniture Industries, Inc., a Delaware corporation
Universal Furniture Limited, a Delaware corporation
65
SCHEDULE III
Principal
Amount of
Initial Purchaser Subordinated Notes
----------------- ------------------
Chase Securities Inc. $120,000,000
Merrill Lynch, Pierce $ 80,000,000
Fenner & Smith Incorporated
Total $200,000,000
66
EXHIBIT C
CHASE SECURITIES INC.
270 Park Avenue
New York, New York 10017
MERRILL LYNCH, PIERCE, FENNER
& SMITH INCORPORATED
World Financial Center
North Tower
New York, New York 10281
Ladies and Gentlemen:
Pursuant to Section 5(y) of the Purchase Agreement referred to
below, this will confirm each of the undersigned's accession to such Purchase
Agreement and that each of the undersigned are hereby a party to and shall be
bound by the Purchase Agreement dated July 31, 1996, among each of you,
Lifestyle Furnishings International Ltd. and Lifestyle Holdings Ltd., with the
same force and effect as if each of the undersigned had signed the Purchase
Agreement on such date
Very truly yours,
AMETEX FABRICS, INC.,
by______________________________
Name:
Title:
67
THE BERKLINE CORPORATION,
by__________________________
Name:
Title:
BLUE MOUNTAIN TRUCKING
CORPORATION,
by__________________________
Name:
Title:
CUSTOM TRUCK TIRES, INC.,
by__________________________
Name:
Title:
D-H RETAIL SPACE, INC.,
by__________________________
Name:
Title:
68
DREXEL HERITAGE ADVERTISING,
INC.,
by__________________________
Name:
Title:
DREXEL HERITAGE FURNISHINGS
INC.,
by__________________________
Name:
Title:
DREXEL HERITAGE HOME
INSPIRATIONS, INC.,
by__________________________
Name:
Title:
HENREDON FURNITURE INDUSTRIES,
INC.,
by__________________________
Name:
Title:
69
HENREDON TRANSPORTATION
COMPANY,
by__________________________
Name:
Title:
INTERIOR FABRIC DESIGN, INC.,
by__________________________
Name:
Title:
INTRO EUROPE, INC.,
by__________________________
Name:
Title:
LA BARGE, INC.,
by__________________________
Name:
Title:
70
LEXINGTON FURNITURE
INDUSTRIES, INC.,
by__________________________
Name:
Title:
MAITLAND-SMITH, INC.,
by__________________________
Name:
Title:
MARBRO LAMP COMPANY,
by__________________________
Name:
Title:
RAMM, SON & CROCKER, INC.,
by__________________________
Name:
Title:
ROBERT ALLEN FABRICS, INC.,
by__________________________
Name:
Title:
71
ROBERT ALLEN FABRICS OF N.Y.,
INC.,
by__________________________
Name:
Title:
SUNBURY TEXTILE MILLS, INC.,
by__________________________
Name:
Title:
UNIVERSAL FURNITURE
INDUSTRIES, INC.,
by__________________________
Name:
Title:
UNIVERSAL FURNITURE LIMITED,
by__________________________
Name:
Title: