STOCK PURCHASE AGREEMENT, dated as of December 15, 1993
(the "Agreement"), among LADD Furniture, Inc., a North Carolina
corporation (the "Purchaser"), and each person listed in Sched-
ule 1.1 hereto (individually a "Seller" and collectively the
"Sellers"), who are all of the stockholders of Pilliod Holding
Company, a Delaware corporation (the "Holding Company"). Certain
capitalized terms used in this Agreement are defined in Arti-
cle VIII.
W I T N E S S E T H :
WHEREAS, the Sellers own all of the issued and
outstanding capital stock of the Holding Company, consisting of
6,842,500 shares of Class A Common Stock, par value $0.01 per share
(the "Shares");
WHEREAS, the Holding Company owns all of the issued and
outstanding capital stock of The Pilliod Cabinet Company, an Ohio
corporation (the "Cabinet Company"), the sole operating subsidiary
of the Holding Company; and
WHEREAS, the Sellers wish to sell the Shares to the
Purchaser, and the Purchaser wishes to purchase the Shares from the
Sellers, on the terms and conditions and for the consideration set
forth herein.
NOW, THEREFORE, in consideration of the mutual promises
made herein and of the mutual benefits to be derived herefrom, the
parties hereto agree as follows:
ARTICLE I
SALE AND PURCHASE OF SHARES
1.1 Sale and Purchase of Shares. Subject to all of the
terms and conditions of this Agreement and in reliance upon the
representations and warranties contained herein, at the Closing
provided for in section 1.2, (a) each of the Sellers will sell to
the Purchaser the number of Shares set forth opposite such Seller's
name in the column entitled "Number of Shares Owned" in Sched-
ule 1.1 hereto, and (b) the Purchaser will purchase from each of
the Sellers the number of Shares set forth opposite such Seller's
name in the column entitled "Number of Shares Owned" in Sched-
ule 1.1 hereto for a cash purchase price equal to the Purchase
Price hereinafter defined. Such Shares shall be delivered by the
Sellers as provided in section 1.3 and such cash purchase price
shall be paid by the Purchaser as provided in section 1.4. The
total Purchase Price to be paid by the Purchaser for the 6,842,500
Shares, representing all of the issued and outstanding capital
stock of the Holding Company, shall be equal to $54,000,000 less
the aggregate principal amount of Scheduled Indebtedness
outstanding on the Closing Date (subject to adjustment as
determined by the purchase price adjustment provisions of section
3.5).
1.2 Closing. The closing of the purchase and sale of
the Shares contemplated hereby (the "Closing") will take place at
the offices of Debevoise & Plimpton, 875 Third Avenue, New York,
New York 10022 at 10:00 A.M. New York City time on January 31, 1994
(effective January 29, 1994) or at such other place, time or date
as the parties hereto may agree in writing (the "Closing Date"),
subject to section 7.1.
1.3 Delivery of Shares. At the Closing, each Seller
will transfer to the Purchaser, against payment of the purchase
price therefor as provided in section 1.4, good and valid title to
the Shares being sold by such Seller, free and clear of any liens,
charges, encumbrances, security interests, options or rights or
other claims of others of any character whatsoever with respect
thereto, by delivering to the Purchaser certificates for such
Shares, duly endorsed in blank or accompanied by a stock power or
other proper instrument of assignment duly executed in blank, and
having all requisite stock transfer stamps attached.
1.4 Payment of Purchase Price. At the Closing, the
Purchaser shall deliver (a) to the account of Clayton, Dubilier &
Rice, Inc. as Custodian (the "Custodian") under the Power of
Attorney and Custody Agreements, each dated as of December 8, 1993
(individually a "Custody Agreement" and collectively the "Custody
Agreements"), between each of the Sellers and Clayton, Dubilier &
Rice, Inc., as Attorney-in-Fact and Custodian, immediately
available funds in an amount equal to the excess of the Purchase
Price over the Stock Escrow Amount and (b) to the account of the
Escrow Agent immediately available funds in an amount equal to the
Stock Escrow Amount, to be held by the Escrow Agent under the terms
of the Escrow Agreement pending the completion of the procedures
set forth in section 3.5. Such delivery shall be made, in the case
of the portion payable to the Custodian, by a wire transfer of such
funds on the Closing Date to such account as shall be designated in
writing by the Custodian to the Purchaser at least two business
days prior to the Closing Date, or, upon the request of the Cus-
todian, by cashier's or certified check, payable to the Custodian
or its order; and, in the case of the Stock Escrow Amount, by a
wire transfer of such amount on the Closing Date to the account
specified in the Escrow Agreement. All stock, documentary, stamp,
excise and other transfer or other taxes payable in respect of the
transfer of the Shares shall be paid by the Sellers. The delivery
by the Purchaser to the Custodian of the aggregate purchase price
for the Shares pursuant to this section 1.4 shall constitute deliv-
ery of such purchase price to the Sellers and entitle the Purchaser
to delivery of the Shares pursuant to section 1.3. The Purchaser
shall have no liability to any Seller as a result of any act or
failure to act by the Custodian.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties as to Holding Company
and Cabinet Company. The Sellers, jointly and severally, represent
and warrant to the Purchaser as of the date hereof as follows:
2.1.1 Corporate Status. (a) Holding Company. The
Holding Company is a corporation duly incorporated, validly exist-
ing and in good standing under the laws of the State of Delaware
and has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as
presently conducted. The Holding Company is duly qualified and in
good standing as a foreign corporation duly authorized to do
business in all jurisdictions in which the failure to be so
qualified would have a Material Adverse Effect. The Holding
Company does not own directly or indirectly any Subsidiaries other
than the Cabinet Company and Export, a wholly-owned subsidiary of
the Cabinet Company which has had no assets or liabilities or
operations at any time during the past five years.
(b) Cabinet Company. The Cabinet Company is a corpo-
ration duly incorporated, validly existing and in good standing
under the laws of the State of Ohio and has all requisite corporate
power and authority to own, lease and operate its properties and to
carry on its business as presently conducted. The Cabinet Company
is duly qualified and in good standing as a foreign corporation
duly authorized to do business in all jurisdictions in which the
failure to be so qualified would have a Material Adverse Effect.
The Cabinet Company does not own, directly or indirectly, any
Subsidiaries other than Export, a wholly-owned subsidiary which has
had no assets or liabilities or operations at any time during the
past five years.
(c) Corporate Records. The Sellers have caused the
Holding Company to deliver to the Purchaser complete and correct
copies, as in effect on the date hereof, of the Certificate of
Incorporation and By-Laws of the Holding Company and the Cabinet
Company and all amendments to each thereof. The Purchaser has been
given the opportunity to inspect the corporate records of the
Holding Company and the Cabinet Company described in Schedule
2.1.4.
2.1.2 Capitalization. (a) Capital Stock. The
authorized capital stock of the Holding Company consists of
(i) 9,000,000 shares of Class A Common Stock, par value $0.01 per
share (the "Class A Common Stock"), of which 6,842,500 shares are
issued and outstanding, and (ii) 9,000,000 shares of Class B Common
Stock, par value $0.01 per share (the "Class B Common Stock", and,
together with the Class A Common Stock, the "Common Stock"), none
of which are issued and outstanding. The Shares constitute all of
the issued and outstanding capital stock of the Holding Company,
have been duly authorized and validly issued, and are fully paid
and nonassessable. Schedule 1.1 contains a complete and correct
list of all persons owning of record any shares of Common Stock,
specifying for each Seller the number of shares owned and the
number of each certificate representing such shares.
(b) Options. There are 1,310,000 shares of the Holding
Company's Class A Common Stock reserved for issuance upon the exer-
cise of the options (the "Options") issued to certain employees and
officers of the Holding Company (the "Option Holders"). There are
Options relating to 1,310,000 shares of Class A Common Stock
outstanding (the "Option Shares"). Schedule 1.1 contains a com-
plete and correct list of all Option Holders, including the number
of Option Shares issuable upon exercise of each Option and the
exercise price thereof.
(c) Agreements with Respect to Common Stock. There are
no preemptive or similar rights on the part of any holder of any
class of securities of the Holding Company other than such rights
as may be set forth in the Management Stock Subscription Agreements
and the Management Stock Option Agreements between the Holding
Company and certain of the Sellers and Option Holders
(collectively, the "Management Agreements"). Except for the
Options, no options, warrants, conversion or other rights,
agreements, commitments, arrangements or understandings of any kind
obligating the Holding Company or the Cabinet Company, contingently
or otherwise, to issue or sell any shares of its capital stock of
any class or any securities convertible into or exchangeable for
any such shares, are outstanding, and no authorization therefor has
been given.
(d) Capitalization of Cabinet Company, etc. The
authorized capital stock of the Cabinet Company consists of 100
shares of common stock, par value $.01 per share, of which 100
shares are issued and outstanding (the "Cabinet Company Shares").
The Cabinet Company Shares constitute all of the issued and
outstanding capital stock of the Cabinet Company, have been duly
authorized and validly issued, and are fully paid and non-assess-
able. The Holding Company is the sole record and beneficial owner
of all of the Cabinet Company Shares. There are no options,
warrants, conversion or other rights, agreements, commitments,
arrangements or understandings of any kind obligating the Holding
Company or the Cabinet Company, contingently or otherwise, to issue
or sell any Cabinet Company Shares or any securities convertible
into or exchangeable for Cabinet Company Shares, outstanding, and
no authorization therefore has been given.
(e) Capitalization of Export, etc. The authorized
capital stock of Export consists of 250 shares of common stock, no
par value, of which 125 shares are issued and outstanding (the
"Export Shares"). The Export Shares constitute all of the issued
and outstanding capital stock of Export, have been duly authorized
and validly issued, and are fully paid and non-assessable. The
Cabinet Company is the sole record and beneficial owner of all of
the Export Shares. There are no options, warrants, conversion or
other rights, agreements, commitments, arrangements or understand-
ings of any kind obligating the Cabinet Company or Export, con-
tingently or otherwise, to issue or sell any Export Shares or any
securities convertible into or exchangeable for Export Shares,
outstanding, and no authorization therefore has been given.
2.1.3 Conflicts, Consents, Subsequent Actions. (a)
Conflicts. Except (i) as set forth on Schedule 2.1.3 and (ii) for
conflicts, violations and defaults that could not, either in any
case or in the aggregate, have a Material Adverse Effect, the
execution and delivery of this Agreement by the Sellers, and the
consummation by the Sellers of the transactions contemplated hereby
in the manner contemplated hereby, will not conflict with or result
in any violation of or default under (or any event that, with
notice or lapse of time or both, would constitute a default under),
any provision of (x) the Certificate of Incorporation or By-Laws of
the Holding Company or the Cabinet Company, (y) any mortgage,
indenture, loan agreement, note, bond, deed of trust, other
agreement, commitment or obligation for the borrowing of money or
the obtaining of credit, material lease or other material agree-
ment, contract, license, franchise, permit or instrument to which
the Holding Company or the Cabinet Company is a party or by which
the Holding Company or the Cabinet Company may be bound, or (z) any
judgment, order, decree, law, statute, rule or regulation appli-
cable to the Holding Company or the Cabinet Company.
(b) Consents. Except (i) as may be required under the
HSR Act, (ii) as set forth in Schedule 2.1.3, (iii) as may be
required pursuant to the terms of the Management Agreements, and
(iv) for any consents and approvals of third parties in respect of
any contract or agreement of the Holding Company or the Cabinet
Company Subsidiary where the failure to obtain such consent or
approval, either in any case or in the aggregate, could not have a
Material Adverse Effect, no consent, approval, authorization,
permit, order, filing, registration or qualification of or with any
court, governmental authority or third person is required to be
obtained by the Holding Company or the Cabinet Company in
connection with the execution and delivery of this Agreement by the
Sellers or the consummation by the Sellers of the transactions
contemplated hereby in the manner contemplated hereby or the
ownership and operation by the Purchaser of the business and
properties of the Holding Company and the Cabinet Company
subsequent to the Closing in substantially the same manner as
previously owned and operated by the Holding Company and the
Cabinet Company (assuming no circumstance peculiar to the Purchaser
unknown to the Holding Company and the Cabinet Company that is not
applicable to them).
(c) Subsequent Actions. For purposes of this Agreement,
the consummation by the Sellers of the transactions contemplated
hereby in no event shall be construed to include any merger with or
other restructuring of the Holding Company, or any other action by
the Holding Company, the Cabinet Company, the Purchaser or any
parent, subsidiary or Affiliate thereof, subsequent to the consum-
mation of the purchase and sale of the Shares.
2.1.4 Financial Information, Material Adverse Change,
Undisclosed Liabilities. (a) Financial Statements. The Sellers
have delivered to the Purchaser audited consolidated statements of
operations, changes in stockholders' equity and cash flows of the
Holding Company and the Cabinet Company for the fiscal years ended
May 2, 1992 and May 1, 1993 and audited consolidated balance sheets
of the Holding Company and the Cabinet Company as at such dates
(the "Audited Financials"), together with the notes thereto, in
each case audited by Ernst & Young, the Holding Company's certified
public accountants. The Sellers also have delivered to the Pur-
chaser an unaudited consolidating balance sheet of the Holding
Company and the Cabinet Company as at November 27, 1993 and an
unaudited consolidating income statement for the seven months then
ended (the "Interim Financials"), prepared from and in accordance
with the books and records of the Holding Company as at such date.
The Audited Financials and the Interim Financials have been
prepared in accordance with generally accepted accounting prin-
ciples consistently applied throughout the periods indicated and
present fairly the financial condition of the Holding Company and
the Cabinet Company at the respective dates indicated and (in the
case of the Audited Financials) the results of operations and cash
flows of the Holding Company and the Cabinet Company for the
respective periods indicated, except that the Interim Financials
are subject to year-end audit adjustments, do not contain notes and
do not reflect any provision for deferred income taxes.
(b) Material Adverse Effect. Except as disclosed on
Schedule 2.1.4, since May 1, 1993, there has been no change in the
business, properties, financial condition, results of operations or
prospects of the Holding Company and the Cabinet Company that could
have a Material Adverse Effect.
(c) Undisclosed Liabilities. Except (i) as and to the
extent reflected in the audited consolidated balance sheet of the
Holding Company and the Cabinet Company as at May 1, 1993 included
in the Audited Financials or in the notes to the Audited Financials
for the year then ended, (ii) as disclosed in Schedule 2.1.4 or any
other Schedule hereto and (iii) as to Environmental Matters,
neither the Holding Company nor the Cabinet Company had on May 1,
1993 any liabilities or obligations, secured or unsecured (whether
absolute, accrued, contingent or otherwise, and whether due or to
become due) that has had or could have a Material Adverse Effect.
Since May 1, 1993, neither the Holding Company nor the Cabinet
Company has incurred any liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise, and whether
due or to become due), except (w) as and to the extent reflected in
the Interim Financials, (x) as disclosed in Schedule 2.1.4 or any
other Schedule hereto, (y) for liabilities or obligations incurred
in the ordinary course of business and consistent with past
practice and which, individually or in the aggregate, have not had
and could not have a Material Adverse Effect and (z) as to
Environmental Matters.
(d) Financial Practices. The accounts, notes and other
receivables, the allowance for possible losses, and the accounts
payable and accrued expenses of the Holding Company and the Cabinet
Company shown on the Audited Financials and the Interim Financials
have been reported in accordance with generally accepted accounting
principles, consistently applied, except that the Interim
Financials are subject to year-end audit adjustments, do not
contain notes and do not reflect any provision for deferred income
taxes. From May 1, 1993, to the date hereof, the Holding Company
and the Cabinet Company have collected a percentage of their
outstanding accounts receivable substantially consistent with past
experience. From May 1, 1993, to the date hereof, the Holding
Company and the Cabinet Company have paid their accounts payable
and accrued expenses on a timely basis in the ordinary course of
business, consistent with past practice.
2.1.5 Insurance. Schedule 2.1.5 accurately lists all of
the policies of general liability, property, auto, workers'
compensation, product liability, life and other forms of insurance
providing insurance coverage for the Holding Company and the
Cabinet Company. (The Cabinet Company maintains in force certain
group life insurance plans, which are listed on Schedule 2.1.13.)
Each of such policies is in full force and effect and no notice of
termination or nonrenewal with respect to any such policy has been
received by the Holding Company or the Cabinet Company. There are
no outstanding unpaid premiums, and there are no amounts due and
payable with respect to outstanding borrowings incurred to fund
insurance premiums which have not been paid when due. There are no
provisions for retroactive or retrospective premium adjustments,
except those for which adequate reserves have been recorded on the
books and records of the Company in accordance with generally
accepted accounting principles. Neither the Holding Company nor
the Cabinet Company has knowledge of any state of facts or the
occurrence of any event which either of them reasonably believes
will form the basis of any claim against the Holding Company or the
Cabinet Company which might materially increase the insurance
premiums payable under any such policy. Schedule 2.1.5 also
contains a true and complete description of all outstanding bonds
and other surety arrangements issued or entered into in connection
with the business and operations of the Holding Company and the
Cabinet Company. No consents by any party to such policies are
required in order for the Sellers to execute, deliver and perform
this Agreement and for the consummation of the transactions
contemplated hereby. To the knowledge of the Sellers, there are no
existing circumstances that entitle such insurers to refuse
liability under their respective policies, and no other person has
the right to receive an interest in the proceeds of such policies.
2.1.6 Litigation. Except (a) as set forth in Sched-
ule 2.1.6 and (b) as to Environmental Matters, there is no action,
claim, suit or proceeding pending or, to the best knowledge of the
Holding Company or the Cabinet Company, threatened by or against or
affecting the Holding Company or the Cabinet Company and there is
no investigation pending or, to the best knowledge of the Holding
Company or the Cabinet Company, threatened against or affecting the
Holding Company or the Cabinet Company (in each case before any
court or governmental or regulatory authority or body and in each
case whether or not the defense thereof or liability in respect
thereof is covered by policies of insurance), that could, either
individually or in the aggregate, have a Material Adverse Effect,
or that challenges the validity of this Agreement or the consumma-
tion of the transactions contemplated hereby. Neither the Holding
Company nor the Cabinet Company is subject to any outstanding
order, writ, injunction or decree that could have a Material
Adverse Effect or could interfere materially with the consummation
of the transactions contemplated hereby.
2.1.7 Compliance with Laws, Permits. (a) Compliance
with Laws. Except (a) as set forth on Schedule 2.1.7 and (b) as to
Environmental Matters, neither the Holding Company nor the Cabinet
Company has received any notice or has any knowledge that the
Holding Company or the Cabinet Company is in violation of, or
default under, any judgment, order or decree of any court or admin-
istrative agency or any law, statute, ordinance, rule or regula-
tion, of any foreign, federal, state or local government or any
other governmental department or agency (including without
limitation, any laws or regulations relating to anti-competitive
practices, discrimination, employment, health, transportation and
safety), which violations and defaults could, either individually
or in the aggregate, have a Material Adverse Effect or interfere
materially with the consummation of the transactions contemplated
hereby.
(b) Permits. The Holding Company and the Cabinet
Company hold all permits, licenses, franchises and other
authorizations from governmental authorities (collectively,
"Governmental Permits") required to own, lease, operate or use the
properties owned, leased, operated or used by them and to conduct
their business as now being conducted, other than (a) those the
failure to hold which could not, individually or in the aggregate,
have a Material Adverse Effect and (b) as to Environmental Matters.
After giving effect to the execution and delivery of this Agreement
and the consummation by the Sellers of the transactions
contemplated hereby in the manner contemplated hereby and the
ownership and operation by the Purchaser of the business and
properties of the Holding Company and the Cabinet Company subse-
quent to the Closing in substantially the same manner as previously
owned and operated by the Holding Company and the Cabinet Company
(assuming no circumstance peculiar to the Purchaser unknown to the
Holding Company and the Cabinet Company that is not applicable to
them), each of the Governmental Permits (except for such incidental
licenses, permits and other authorizations which would be readily
obtainable by any qualified applicant without undue burden in the
event of any lapse, termination, cancellation or forfeiture there-
of) will continue to be valid, subsisting and in full force and
effect without (i) the occurrence of any breach, default or
forfeiture of rights thereunder or (ii) the consent, approval, or
act of or the making of any filing with, any governmental body,
regulatory commission or other party.
2.1.8 Tax Matters. (a) General. Each of the Holding
Company and the Cabinet Company (i) has filed on a timely basis all
United States federal tax returns required by law to be filed by it
and has filed on a timely basis all state, local and foreign tax
returns required by law to be filed by it (including, without
limitation, tax returns for all income, franchise, property, sales,
use, excise, escheat, intangible, employment, withholding and
service taxes) (except to the extent that the failure so to file
could not have a Material Adverse Effect) and (ii) has paid on a
timely basis all such taxes, penalties and additions to tax
relating to such taxes and interest on such taxes, penalties and
additions to tax (all income, franchise, property, sales, use,
excise, escheat, intangible, employment, withholding and service
taxes and any penalties and additions to tax related to such taxes
and interest on all such taxes, penalties and additions to tax
being referred to in this section 2.1.8 collectively as "Taxes" and
all returns relating to such Taxes being referred to in this sec-
tion 2.1.8 as "Tax Returns") levied upon it or its properties as
shown on the returns referred to in clause (i), other than those
that are presently payable without penalty, as to which sufficient
reserves have been established in accordance with generally
accepted accounting principles on the books and records of the
Holding Company and the Cabinet Company. Except as set forth on
Schedule 2.1.8, for all fiscal years ended on or prior to May 1,
1993 and for the period ended November 27, 1993, each of the
Holding Company and the Cabinet Company has established on their
books and records reserves in accordance with generally accepted
accounting principles for the payment of any Taxes not yet due and
payable. Each of the Holding Company and the Cabinet Company has
made all required declarations of estimated United States federal
and all applicable state and local income taxes and have paid all
taxes as shown on such declarations. All monies required to be
held by the Holding Company and the Cabinet Company from employees
of the Holding Company and the Cabinet Company for income taxes,
social security and other payroll taxes have been collected or
withheld, and either paid to the respective governmental agencies,
set aside in accounts for such purpose, or accrued, reserved
against and entered upon the books of the Holding Company. All
proper amounts have been collected or withheld by the Holding
Company and the Cabinet Company for all other Taxes payable or
anticipated to be payable. There are no liens for Taxes upon the
assets of the Holding Company or the Cabinet Company, except liens
for Taxes that are not yet due. Except as set forth on Schedule
2.1.8, and except in connection with an election (whether deemed or
actual) by the Purchaser under section 338 or 336(e) of the Code,
the execution, delivery, and performance of this Agreement will not
cause any Taxes to be payable (other than by the Sellers) or cause
any lien, charge, or encumbrance to secure any Taxes to be created
either immediately or upon the nonpayment of any Tax (other than on
the properties or assets of the Sellers). The Holding Company's
United States Tax Returns have been audited, or the time for audit
has expired, for periods ended through April 29, 1989 and, to the
best of the Holding Company's and the Cabinet Company's knowledge,
there are no pending tax examinations or audits of their respective
Tax Returns. Neither the United States Internal Revenue Service
nor any other taxing authority is now asserting or to the best
knowledge of the Holding Company and the Cabinet Company
threatening to assert against the Holding Company or the Cabinet
Company any deficiency or claim for additional Taxes, and, to the
best knowledge of the Holding Company and the Cabinet Company,
there is no basis for the assertion of any such deficiency or claim
which, if successfully asserted, could have a Material Adverse
Effect. Except as set forth on Schedule 2.1.8, neither the Holding
Company nor the Cabinet Company has granted any waiver of any
statute of limitation with respect to, or any extension of a period
for the assessment of, any United States federal, state, county or
municipal or any Taxes. The Holding Company and the Cabinet
Company have delivered to Purchaser true and complete copies of all
federal income tax returns (including amended returns) and tax
audit reports, if any, for the last six fiscal years.
2.1.9 Brokers, Finders. Neither the Holding Company nor
the Cabinet Company has retained any broker or finder in connection
with the transactions contemplated hereby so as to give rise to any
claim against the Purchaser for any brokerage or finder's
commission, fee or similar compensation.
2.1.10 Absence of Certain Changes. Except as set forth
in Schedule 2.1.10, since May 1, 1993, neither the Holding Company
nor the Cabinet Company has (a) issued, sold or delivered or agreed
to issue, sell or deliver any additional shares of its capital
stock or any options, warrants or rights to acquire any such capi-
tal stock, or securities convertible into or exchangeable for such
capital stock, (b) mortgaged, pledged or subjected to any lien,
lease, security interest or other charge or encumbrance any of its
assets, tangible or intangible, involving more than $25,000,
(c) acquired or disposed of any assets or properties having a value
in excess of $50,000, or entered into any agreement or other ar-
rangements for any such acquisition or disposition, except for the
acquisition or disposition of inventory in the ordinary course of
business consistent with past practice, (d) declared, made, paid or
set apart any sum for any dividend or other distribution to its
shareholders (except from the Cabinet Company to the Holding
Company) or purchased or redeemed or made any commitment to
purchase or redeem any shares of its capital stock or any option,
warrant or right to purchase any of its capital stock, or re-
classified its capital stock, (e) increased or orally promised to
increase the rate or improve the terms of payment of wages,
salaries, compensation, fees, bonus, insurance, pension or other
benefits payable to any Affiliate, officer or employee other than
in accordance with the normal compensation and benefits policies of
the Holding Company or the Cabinet Company, or granted any
severance or termination pay, or entered into any employment,
severance or consulting agreement or arrangement with any Affiliate
officer or employee that is not terminable by the employer on less
than 30 days notice without cause and without penalty, (f) forgiven
or cancelled any debts or claims or waived any rights of value
other than in the ordinary course of business consistent with past
practice, (g) suffered any damage, destruction or loss (whether or
not covered by insurance) affecting its properties or assets that
could have a Material Adverse Effect, (h) suffered any strike, or
suffered any other labor trouble affecting its business or
operations that could have a Material Adverse Effect, (i) suffered
or experienced any change in relations with or loss of any
employees, suppliers or customers that could have a Material
Adverse Effect, (j) created, incurred, guaranteed or assumed or
agreed to create, incur, guarantee or assume any indebtedness for
borrowed money, except under its revolving credit arrangements as
in effect from time to time, or entered into any capitalized
leases, (k) changed any method of accounting or accounting practice
or policy of the Holding Company or the Cabinet Company, except for
accounting for income taxes as required by Statement of Financial
Accounting Standards No. 109, (l) conducted its business other than
in the ordinary course consistent with past practice, except as
required by this Agreement, (m) settled or compromised any claim,
suit or cause of action involving more than $25,000, (n) made any
capital expenditures or commitments therefor involving more than
$25,000, (o) revalued any of their respective assets, including,
without limitation, write-ups or write-downs of inventory or write-
offs of accounts receivable other than in the ordinary course of
business consistent with past practice, (p) delayed payment of any
of their respective accounts payable or other liabilities beyond
the due date thereof or the date when such liability would have
been paid in the ordinary course of business consistent with past
practice, or (q) entered into any agreement or made any commitment
to take any of the types of action described in clauses (a) through
(q) above.
2.1.11 Title to Properties, etc. (a) Each of the
Holding Company and the Cabinet Company has good title to all of
its material tangible personal properties and assets, including the
tangible personal properties and assets reflected in the Interim
Financials referred to in section 2.1.4 (other than inventories and
other properties and assets disposed of in the ordinary course of
business since the date of the Interim Financials), subject to no
mortgage, lien or security interest except those listed in part I
of Schedule 2.1.11; and subject to no other charge, encumbrance,
title imperfection or other restriction of any nature except (i)
those listed on Schedule 2.1.11 and (ii) those that could not,
individually or in the aggregate, have a Material Adverse Effect.
All machinery and equipment in use is in good and serviceable
condition, reasonable wear and tear excepted, and has been well
maintained.
(b) Schedule 2.1.11 sets forth a complete list of (i)
all real property and all interests in real property owned in fee
by the Holding Company or the Cabinet Company (each an "Owned
Property") and (ii) all real property and all interests in real
property leased by the Holding Company or the Cabinet Company (each
a "Leased Property", and, together with the Owned Property, the
"Real Property"). The Holding Company and the Cabinet Company have
(x) good and marketable fee title to all Owned Property and (y)
valid leasehold interests in all Leased Property; and such title
and leasehold interests are insured or insurable and are free and
clear of any mortgage, lien or security interest except those
listed in part III of Schedule 2.1.11; and subject to no other
charge, encumbrance, title imperfection or restriction of any
nature, other than (A) those created or permitted under the
agreements listed pursuant to Section 2.1.12(iv) and (B) those that
could not, individually or in the aggregate, have a Material
Adverse Effect. The Holding Company has made available to the Pur-
chaser complete and correct copies of all deeds and leases relating
to the Real Property. All improvements on the Owned Property are
in good and serviceable condition, reasonable wear and tear
excepted, and have been well maintained.
(c) The Owned Property is in full compliance with all
applicable building, zoning, subdivision and other land use and
similar laws, codes, ordinances, rules, regulations and orders of
governmental authorities ("Real Estate Laws"), other than those the
failure to comply with which could not have a Material Adverse
Effect, and neither the Holding Company nor the Cabinet Company has
received any notice or has any knowledge of violation or claimed
violation of any Real Estate Law. The Holding Company and the
Cabinet Company enjoy peaceful and undisturbed possession under
their respective leases of the Leased Property, and each of such
leases is in full force and effect.
2.1.12 Certain Contracts. (a) Schedule 2.1.12 sets
forth a complete list of all Contracts of the Holding Company and
the Cabinet Company. The term "Contracts" shall mean (i) contracts
and agreements with respect to which the aggregate amount
reasonably expected to be paid or received thereunder in the future
exceeds $25,000, other than (A) open trade accounts with respect to
the purchase or sale by the Holding Company or the Cabinet Company
of its supplies or products, respectively, in the ordinary course
of business and (B) leases of real property listed in Sched-
ule 2.1.11; (ii) contracts and agreements outstanding with of-
ficers, employees (including leased employees), directors, agents,
consultants, advisors, salesmen, sales, manufacturer, advertising
or public relations representatives, distributors, consignees,
sales agents or dealers, other than (x) contracts that by their
terms are cancelable by the Holding Company or the Cabinet Company
with notice of not more than 30 days and without cancellation
penalties or severance payments or other payments required to be
paid after the date of cancellation aggregating in excess of
$25,000, and (y) contracts that provide for payments based solely
on products sold and require no minimum payments and do not provide
for territorial restrictions; (iii) collective bargaining
agreements or other contracts with any labor union; (iv) mortgages,
indentures, security agreements, notes, letters of credit, loan
agreements or guarantees furnished by or binding upon the Holding
Company or the Cabinet Company; (v) agreements prohibiting or
materially limiting the ability of the Holding Company or the
Cabinet Company to engage in any business or compete with any per-
son; (vi) licenses or other agreements providing in whole or part
for the use of any patents, trademarks, trade names, service marks,
registered copyrights, inventions, trade secrets or other propri-
etary know-how; (vii) contracts for the future acquisition by the
Holding Company or the Cabinet Company of any other business or
company; (viii) contracts and agreements between the Holding
Company and its stockholders or between the Holding Company and any
Affiliate of the Holding Company; (ix) any contract for the
purchase or sale of real property; and (x) any contract or
agreement relating to the use, development, purchase or licensing
of computer hardware or software. The Holding Company has made
available to the Purchaser complete and correct copies of all
Contracts.
(b) All of the Contracts are in full force and effect
and constitute a valid and binding obligation of the Holding
Company or the Cabinet Company and neither the Holding Company nor
the Cabinet Company, nor, to the best knowledge of the Holding
Company and the Cabinet Company, any other party to any of the Con-
tracts, is (or, with notice or lapse of time or both, would be) in
default in any respect, which defaults could in the aggregate have
a Material Adverse Effect or give rise to the right of any holder
of indebtedness to accelerate the maturity thereof.
(c) No Contract or any other agreement between the
Holding Company or the Cabinet Company and any of the Sellers or
any of the Sellers' Affiliates will continue in effect after the
Closing. Assuming the obtaining of any necessary consents, the
execution and delivery of this Agreement and the consummation by
the Sellers of the transactions contemplated hereby in the manner
contemplated hereby and the ownership and operation by the
Purchaser of the business and properties of the Holding Company and
the Cabinet Company subsequent to the Closing in substantially the
same manner as previously owned and operated by the Holding Company
and the Cabinet Company (assuming no circumstance peculiar to the
Purchaser unknown to the Holding Company and the Cabinet Company
that would not be applicable to them) will not cause any amounts
payable under the Contracts to be increased, including without
limitation, pursuant to any change of control provisions that may
be contained therein.
2.1.13 Compliance with ERISA. (a) Schedule 2.1.13 sets
forth a complete list of each "employee benefit plan," as that term
is defined in section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and each bonus,
deferred or incentive compensation, stock purchase, stock option,
severance or termination pay plan or program that is maintained or
contributed to by the Holding Company or the Cabinet Company for
the benefit of any of their respective employees or former
employees (the "Plans"). With respect to each of the Plans, the
Holding Company has heretofore made available to the Purchaser (or
will deliver to the Purchaser prior to the Closing) correct and
complete copies of each of the following documents: (i) the Plan
and related trust or other funding document described in
Schedule 2.1.4 (including all amendments thereto), (ii) the Form
5500 annual reports described in Schedule 2.1.4, including all
attachments thereto, filed with the Internal Revenue Service with
respect to each such Plan, (iii) the trust and actuarial reports
described in Schedule 2.1.4, if any, prepared with respect to each
such Plan, (iv) the most recent determination letter received from
the Internal Revenue Service with respect to each such Plan that is
intended to be qualified under section 401 of the Code, (v) the
summary plan description described in Schedule 2.1.4 and (vi) the
financial statements described in Schedule 2.1.4, if any, prepared
with respect to each Plan.
(b) Each Plan has been administered and operated in
material compliance with the applicable requirements of ERISA and
the Code and no such Plan is subject to section 412 of the Code or
Title IV of ERISA. No liability to the Pension Benefit Guaranty
Corporation (the "PBGC") has been or is expected to be incurred by
the Holding Company or the Cabinet Company or any other trade or
business that is treated as a member of the same "controlled group"
of, or under "common control" with, the Holding Company or the
Cabinet Company pursuant to section 4001(b) of ERISA or section 412
of the Code (a "Related Person"). Neither the Holding Company nor
any Plan nor any trust thereunder nor, to the knowledge of the
Holding Company, any fiduciary of any Plan has engaged in any
prohibited transaction that has resulted or is reasonably expected
to result in the imposition of any tax pursuant to section 4975(a)
or (b) of the Code or penalty pursuant to section 409 or section
502(i) of ERISA on the Holding Company or the Cabinet Company, such
Plan or such trust. No Plan is a "multiemployer plan" (within the
meaning of section 3(37) of ERISA) or a "multiple employer" plan
(within the meaning of section 4063 or 4064 of ERISA). Each Plan
that is intended to be qualified under section 401(a) of the Code
has received a favorable determination letter from the Internal
Revenue Service to that effect.
(c) There are no pending or, to the best knowledge of
the Holding Company or the Cabinet Company, threatened claims of
any employee or former employee of the Holding Company or the
Cabinet Company against or otherwise involving any of the Plans
(other than routine claims for benefits).
(d) All contributions (including insurance premiums)
required to have been made by the Holding Company or the Cabinet
Company to any Plan pursuant to the applicable provisions of any
Plan, the Code or ERISA have been made within the time prescribed
by such provisions of the Code and ERISA and all contributions
required to have been made by each Related Person to any other
employee benefit plan (within the meaning of section 3(3) of ERISA)
of any Related Person pursuant to section 412 of the Code have been
made within the time prescribed by section 412 of the Code.
(e) No events have occurred and no condition with
respect to a Plan exists that would subject the Holding Company,
the Cabinet Company or the Purchaser to any material tax under
section 4971, 4977 or 4979 of the Code or to a material fine under
section 502(c) of ERISA. Neither the Holding Company nor the
Cabinet Company retains the services of any leased employees (as
such term is defined in section 414(n) of the Code) that must be
taken into account with respect to any Plan.
(f) On or after the date hereof and prior to the Closing
Date, no Plan maintained by the Holding Company or the Cabinet
Company will be (i) terminated by the Holding Company or the
Cabinet Company, (ii) amended by the Holding Company or the Cabinet
Company in any manner which would materially increase the benefits
accrued by any participant thereunder, or (iii) amended by the
Holding Company or the Cabinet Company in any manner which would
materially increase the cost of maintaining such Plan to the
Holding Company, the Cabinet Company or the Purchaser.
(g) Neither the Holding Company nor the Cabinet Company
sponsors or maintains a VEBA, other than one which has no assets or
liabilities. Each "employee welfare benefit plan" (as such term is
defined in section 3(1) of ERISA) which is a "group health plan"
(as such term is defined in section 4980(g)(2)) of the Code)
complies with the applicable requirements of section 4980B of the
Code.
(h) The Holding Company and the Cabinet Company have
complied in all material respects with the applicable requirements
of the Americans with Disabilities Act and the Family and Medical
Leave Act and have operated each Plan in material compliance with
such laws.
2.1.14 Trademarks, Trade Names, Patents, etc. (a)
Schedule 2.1.14 sets forth a complete list of (i) all United
States, state or foreign trade names, trademarks, service marks,
patents or copyrights or applications therefor, or patent licenses
or patent applications owned by or registered in the name of the
Holding Company or the Cabinet Company or used in the business of
the Holding Company or the Cabinet Company or in which the Holding
Company or the Cabinet Company holds any right, license or interest
(collectively, the "Intellectual Property"); (ii) all agreements,
commitments, contracts, understandings, licenses, assignments and
indemnities relating or pertaining to any asset, property or right
of the character described in the preceding clause to which the
Holding Company or the Cabinet Company is a party, showing in each
case the parties and the material terms; and (iii) all licenses or
agreements pertaining to mailing lists, know-how, trade secrets,
inventions, disclosures or uses of ideas currently used in the
business of the Holding Company or the Cabinet Company to which the
Holding Company or the Cabinet Company is a party, showing in each
case the parties and the material terms.
(b) Except as set forth in Schedule 2.1.14, all patents,
if any, listed in Schedule 2.1.14 as being owned, controlled or
used by the Holding Company or the Cabinet Company are valid and in
force and all patent applications of the Holding Company or the
Cabinet Company, if any, listed therein are in good standing, all
without challenge of any kind, and, except as otherwise disclosed
in such Schedule 2.1.14, the Holding Company or the Cabinet Company
owns the entire right, title and interest in and to such patents
and patent applications without qualification, limitation, burden
or encumbrance of any kind. All the registrations for trade names,
trademarks, service marks and copyrights, if any, listed in
Schedule 2.1.14 as being owned, controlled or used by the Holding
Company or the Cabinet Company are valid and in force and all
applications for such registrations are pending and in good
standing, all without challenge of any kind, and the Holding
Company or the Cabinet Company owns the entire right, title and
interest in and to all such trade names, trademarks and service
marks so listed as well as the registrations and applications for
registration therefor without qualification, limitation, burden or
encumbrance of any kind. Correct and complete copies of all the
patents and patent applications and of all trademarks, trade names,
service marks and copyrights and registrations, applications or
deposits therefor and all licenses listed in Schedule 2.1.14 will
be furnished to Purchaser prior to Closing.
(c) Except as set forth in Schedule 2.1.14 the Holding
Company or the Cabinet Company owns or has the right to use all
patents, trademarks, service marks, copyrights, trade names,
inventions, improvements, processes, formulae, trade secrets,
mailing lists, know-how and proprietary or confidential information
used in conducting the business of the Holding Company and the
Cabinet Company. All such patents, trademarks, service marks,
copyrights, trade names, inventions, improvements, processes,
formulae, trade secrets, mailing lists, know-how and proprietary or
confidential information may be transferred to Purchaser pursuant
to the transactions contemplated by this Agreement without the
consent of any third party. Except as set forth in Schedule 2.1.6,
(i) no infringement of any patent, patent right, trademark, service
mark, trade name or copyright or registration thereof has occurred
or results in any way from the operations or business of the
Holding Company or the Cabinet Company, (ii) no claim or, to the
knowledge of the Holding Company or the Cabinet Company, threat of
any such infringement has been made or implied in respect of any of
the foregoing, (iii) no claim of invalidity of any patent described
in Schedule 2.1.14 has been made, (iv) no proceedings are pending
or, to the knowledge of the Holding Company or the Cabinet Company,
threatened against the Holding Company or the Cabinet Company which
challenge the validity or ownership of any patent, trademark, trade
name, service mark or copyright or the ownership of any other right
or property described in Schedule 2.1.14, (v) there is not, to the
knowledge of the Holding Company or the Cabinet Company, any
infringing use of any of the same by others and (vi) to the
knowledge of the Holding Company and the Cabinet Company, except as
set forth in Schedule 2.1.6, neither the Holding Company nor the
Cabinet Company has received written notice of, and there is no
basis for, a claim against the Holding Company or the Cabinet
Company that the operations, activities, products, equipment,
machinery or processes of the businesses of the Holding Company or
the Cabinet Company infringe the patents, trademarks, service
marks, trade names, copyrights or other property rights of others.
2.1.15 Labor Matters. Since January 1, 1988, there has
been no work stoppage or slowdown or other labor difficulties
relating to the Holding Company or the Cabinet Company that has had
or could have a Material Adverse Effect. Except as set forth in
Schedule 2.1.15, neither the Holding Company nor the Cabinet
Company is aware of any labor union that is currently seeking to
represent or organize the employees at any of the principal
facilities of the Holding Company and the Cabinet Company other
than labor unions currently representing such employees. Except as
set forth in Schedule 2.1.15, (i) the Holding Company and the
Cabinet Company are in substantial compliance with all federal,
state and local laws respecting employment and employment practices
(including immigration laws relevant to employment), terms and
conditions of employment and wages and hours, and are not engaged
in any unfair labor practice; (ii) there is no unfair labor prac-
tice complaint against the Holding Company or the Cabinet Company
pending before the National Labor Relations Board or any state or
local labor relations board or agency; and (iii) no grievance which
could have a Material Adverse Effect on the business or operations
of the Holding Company or the Cabinet Company and no arbitration
proceeding arising out of or under collective bargaining agreements
is pending and, to the best knowledge of the Holding Company and
the Cabinet Company, no claim therefore has been asserted.
2.1.16 Disclosure. To the Holding Company's and the
Cabinet Company's best knowledge, this Agreement, the Schedules
hereto and the certificates and other documents furnished by the
Holding Company, the Cabinet Company or any of the Sellers to the
Purchaser pursuant hereto, taken as a whole, do not as of their
respective dates contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements
contained herein and therein not misleading. No officer, director
or employee of the Holding Company or the Cabinet Company or any
other person has been authorized to give any information or to make
any representation in connection with the transactions contemplated
hereby other than those contained herein and in any certificates or
documents furnished pursuant hereto and, if given or made, such
information or representation may not be relied upon as having been
authorized by the Holding Company, the Cabinet Company or any of
the Sellers.
2.1.17 Affiliate Transactions. Except as set forth in
Schedule 2.1.17, neither the Holding Company nor the Cabinet
Company has within the period of three years preceding the date of
this Agreement engaged in any transaction material to the Holding
Company or the Cabinet Company with any Affiliate of the Holding
Company, other than upon fair and reasonable terms that are no less
favorable to the Holding Company or the Cabinet Company than those
which might be obtained in an arm's-length transaction at the time
from persons that are not Affiliates of the Holding Company. No
Contract or other agreement between the Holding Company or the
Cabinet Company and any of the Sellers' Affiliates will continue in
effect after the Closing.
2.2 Representations and Warranties as to the Sellers.
Each of the Sellers, as to itself, severally and not jointly
represents and warrants to the Purchaser as follows:
2.2.1 Authorization, etc. Such Seller has full right,
power and authority to enter into this Agreement and the Custody
Agreement to which such Seller is a party and to perform fully such
Seller's obligations hereunder and thereunder. This Agreement and
such Custody Agreement have been duly executed and delivered by
such Seller and constitute the legal, valid and binding obligations
of such Seller enforceable against such Seller in accordance with
their respective terms.
2.2.2 Conflicts, Consents, Subsequent Actions. (a)
Conflicts. The execution and delivery by each Seller of this
Agreement and the Custody Agreement to which such Seller is a
party, and the consummation by each Seller of the transactions
contemplated hereby and thereby, in the manner contemplated hereby
and thereby, do not and will not conflict with or result in the
breach of any of the terms or provisions of, or constitute a
default under (or an event that, with notice or lapse of time or
both, would constitute a default under), any mortgage, indenture,
loan agreement, note, other agreement for the borrowing of money or
the obtaining of credit, deed of trust, will, lease or other mater-
ial agreement or instrument to which such Seller is a party or by
which such Seller or the Shares owned by such Seller may be bound,
or (to the extent that a default thereunder could materially impair
such Seller's ability to carry out the terms of this Agreement) any
judgment, order, decree, law, statute, rule or regulation
applicable to such Seller or to the Shares to be sold by such
Seller, except (i) as set forth in Schedule 2.2.2, (ii) that such
Seller is party to an agreement restricting disposition of the
Shares to be sold by such Seller hereunder unless such Seller has
delivered to the Holding Company an opinion of counsel, satisfac-
tory to the Holding Company, to the effect that such disposition is
exempt from the provisions of section 5 of the Securities Act of
1933, as amended (the "Securities Act"), or the Holding Company has
waived the delivery of such opinion, and (iii) in the case of each
Seller other than The Clayton & Dubilier Private Equity Fund
Limited Partnership (collectively, the "Management Sellers"), the
Holding Company and The Clayton & Dubilier Private Equity Fund
Limited Partnership or its designee have rights to purchase such
Shares pursuant to the Management Agreements.
(b) Consents. Except (i) as may be required under the
HSR Act, (ii) as set forth in Schedule 2.2.2 and (iii) as may be
required pursuant to the terms of the Management Agreements, no
consent, approval, authorization, order, filing, registration or
qualification of or with any court, governmental authority or third
person is required to be obtained by such Seller in connection with
the execution and delivery by such Seller of this Agreement or
consummation by such Seller of the transactions contemplated herein
in the manner contemplated hereby.
(c) Subsequent Actions. For purposes of this Agreement,
the consummation by such Seller of the transactions contemplated
hereby and by the Custody Agreement to which such Seller is a party
in no event shall be construed to include any merger with or other
restructuring of the Holding Company, or any other action by the
Holding Company, the Cabinet Company, the Purchaser or any parent,
subsidiary or Affiliate thereof, subsequent to the consummation of
the purchase and sale of the Shares.
2.2.3 Title to Stock, etc. Such Seller is the record
and beneficial owner of and has good and valid title to the Shares
to be sold by such Seller pursuant to this Agreement, free and
clear of any lien, pledge, charge, security interest, encumbrance,
preemptive subscription, title retention agreement, adverse claim
or option, except as set forth in section 2.2.2 or Schedule 2.2.2
(including, without limitation, in the case of each Management
Seller, the Management Agreements). Upon the delivery of and
payment for such Shares at the Closing, as provided for in this
Agreement, such Seller will transfer to the Purchaser good and
valid title to such Shares, free and clear of any lien, pledge,
charge, security interest, encumbrance, preemptive subscription,
title retention agreement, adverse claim, option or other
restriction whatsoever.
2.2.4 Litigation. There is no action, claim, suit or
proceeding pending or, to such Seller's best knowledge, threatened
by or against or affecting such Seller and there is no investiga-
tion pending or, to the best knowledge of such Seller, threatened
against or affecting such Seller, in each case before any court or
governmental or regulatory authority or body, that could have a
material adverse effect on the consummation of the transactions
contemplated by this Agreement.
2.2.5 Brokers, Finders. Such Seller has not retained
any broker or finder in connection with the transactions
contemplated hereby so as to give rise to any claim against the
Purchaser or the Holding Company or the Cabinet Company for any
brokerage or finder's commission, fee or similar compensation.
Merrill Lynch & Co. has acted as financial advisor to the Sellers
and its fees and expenses will be paid by the Sellers at the
Closing.
2.3 Representations and Warranties of Purchaser. The
Purchaser represents and warrants to each of the Sellers as of the
date hereof as follows:
2.3.1 Purchaser's Corporate Status. The Purchaser is a
corporation duly incorporated, validly existing and in good
standing under the laws of the State of North Carolina.
2.3.2 Authorization, etc. The Purchaser has full
corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby and to
perform its obligations hereunder. The execution and delivery of
this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all requisite
corporate action on the part of the Purchaser. This Agreement has
been duly executed and delivered by the Purchaser and constitutes
the legal, valid and binding obligation of the Purchaser
enforceable against the Purchaser in accordance with its terms.
2.3.3 Conflicts, Consents. (a) Conflicts. The
execution and delivery of this Agreement by the Purchaser, and the
consummation by the Purchaser of the transactions contemplated
hereby in the manner contemplated hereby, do not and will not
conflict with or result in any violation of, or default under (or
any event that, with notice or lapse of time or both, would
constitute a default under), any provision of (i) the Certificate
of Incorporation or By-Laws of the Purchaser, (ii) any mortgage,
indenture, loan agreement, note, bond, deed of trust, other agree-
ment, commitment or obligation for the borrowing of money or the
obtaining of credit, material lease or other material agreement,
contract, license, franchise, permit or instrument to which the
Purchaser is a party or by which it may be bound, or (iii) any
judgment, order, decree, law, statute, rule or regulation
applicable to the Purchaser.
(b) Consents. Except as may be required under the HSR
Act, no consent, approval, authorization, permit, order, filing,
registration or qualification of or with any court, governmental
authority or third person is required to be obtained by the Pur-
chaser in connection with the execution and delivery by the
Purchaser of this Agreement or the consummation by the Purchaser of
the transactions contemplated hereby in the manner contemplated
hereby.
2.3.4 Litigation. There is no action, claim, suit or
proceeding pending or, to the Purchaser's best knowledge,
threatened by or against or affecting the Purchaser and there is no
investigation pending or, to the best knowledge of the Purchaser,
threatened against or affecting the Purchaser, in each case before
any court or governmental or regulatory authority or body, that
could have a material adverse effect on the consummation of the
transactions contemplated by this Agreement.
2.3.5 Brokers, Finders. The Purchaser has not retained
any broker or finder in connection with the transactions
contemplated hereby so as to give rise to any valid claim against
any of the Sellers, the Holding Company or any Subsidiary for any
brokerage or finder's commission, fee or similar compensation.
2.3.6 Purchase for Investment. The Purchaser is
acquiring the Shares for its own account for investment and not
with a view to any distribution thereof. The Purchaser
acknowledges receipt of advice from the Holding Company to the
effect that the Shares have not been registered under the
Securities Act or any state securities laws.
ARTICLE III
CERTAIN COVENANTS PENDING AND POST-CLOSING
3.1 Access and Information; Confidentiality. Prior to
the Closing, the Sellers will cause the Holding Company and the
Cabinet Company (a) to give to the Purchaser and its
representatives full and free access to its properties, books,
records, contracts and commitments, (b) to furnish all such
information and documents relating to its properties and business
as the Purchaser may reasonably request, and (c) to allow the
Purchaser to discuss matters relating to the Holding Company and
the Cabinet Company with the outside auditors and attorneys for the
Holding Company and the Cabinet Company, with any other
representatives of the Holding Company or the Cabinet Company as
reasonably requested by the Purchaser, and, if accompanied by a
representative of the Cabinet Company or subject to such other
reasonable conditions as the Cabinet Company may impose, with
customers and suppliers of the Cabinet Company. All information
about the Holding Company and the Cabinet Company obtained by the
Purchaser, whether furnished before or after the date hereof,
whether oral or written, and regardless of the manner in which it
is obtained, will be considered "Proprietary Information" for
purposes of the letter dated August 5, 1993 from the Cabinet
Company to the Purchaser concerning confidentiality and related
matters, unless such information is excluded as Proprietary Infor-
mation by the terms of such letter, which letter is hereby incor-
porated by reference and made a part hereof; and such letter will
apply to all such Proprietary Information furnished pursuant to
this Agreement to the same extent as if it were furnished pursuant
thereto.
3.2 Conduct of Business of the Holding Company and the
Cabinet Company. Except as set forth in Schedule 3.2, from the
date hereof to the Closing, the Sellers will cause the Holding
Company and the Cabinet Company (a) to conduct their businesses
only in the ordinary course in substantially the same manner as
heretofore, (b) to maintain and keep their properties and equipment
in such repair, working order and condition as is sufficient for
the operation of their business in the ordinary course, (c) to keep
in full force and effect insurance comparable in amount and scope
of coverage to that now maintained by them (to the extent available
on commercially reasonable terms in the case of any renewal or
replacement policies), (d) to perform in all material respects all
of their obligations under all contracts and commitments applicable
to their businesses or properties, (e) to use their reasonable
efforts to maintain and preserve their business organizations
intact, and maintain their relationships with their suppliers and
customers so that they will be preserved after the Closing, (f) to
maintain their books of account and records in the usual and regu-
lar manner, (g) to comply in all material respects with all laws
and regulations applicable to them and to the conduct of their
businesses, (h) not to amend their certificates of incorporation or
by-laws, (i) not to merge or consolidate with, or agree to merge or
consolidate with, or to purchase substantially all of the assets
of, or otherwise acquire, any business or any business organization
or division thereof, (j) promptly to advise the Purchaser in writ-
ing of any Material Adverse Effect, and (k) not to take any action
described in section 2.1.10.
3.3 Efforts to Consummate Transaction. The Purchaser
and each Seller shall use their reasonable efforts to take or cause
to be taken all actions required to consummate the transactions
contemplated hereby. The Purchaser and Sellers shall file or
supply, or cause to be filed or supplied, all material
applications, notifications and information required to be filed or
supplied by them or the Holding Company pursuant to applicable law
in connection with the transactions contemplated hereby, including
filings and reports pursuant to the HSR Act. The Purchaser shall
use its reasonable efforts to obtain all consents and approvals
from governmental authorities and third parties required to be ob-
tained by the Purchaser for the consummation by the Purchaser of
the transactions contemplated hereby, other than any consents and
approvals the failure of which to be obtained, either in any case
or in the aggregate, could not have a material adverse effect on
the transactions contemplated hereby. Each Seller shall use such
Seller's reasonable efforts to obtain all consents and approvals
from governmental authorities and third parties and waivers by the
Holding Company and The Clayton & Dubilier Private Equity Fund
Limited Partnership required to be obtained by such Seller for the
consummation by such Seller of the transactions contemplated
hereby, other than any consents and approvals the failure of which
to be obtained, either in any case or in the aggregate, could not
have a material adverse effect on the transactions contemplated
hereby. The Purchaser shall cooperate in good faith with the
Holding Company, the Cabinet Company and the Sellers in the obtain-
ing by the Holding Company and the Cabinet Company of all consents
and approvals from governmental authorities and third parties
required to be obtained by the Holding Company and the Cabinet
Company for the consummation of the transactions contemplated
hereby.
3.4 Non-Solicitation. Each Seller, severally and not
jointly, covenants that from the date hereof through the Closing
Date, such Seller will not, directly or indirectly, and will not
permit any employee, representative, financial or legal advisor or
agent of such Seller to, make, solicit, assist or encourage the
initiation of any inquiries or proposals or participate in any
negotiations with any party or furnish any confidential information
to any party (other than the Purchaser and its employees,
representatives, advisors and agents) concerning the acquisition of
the Shares or any portion of the assets, properties or business of
the Holding Company or the Cabinet Company, other than dispositions
of inventories and other assets in the ordinary course of business.
3.5 Purchase Price Adjustment. (a) Delivery and
Review of Closing Balance Sheet. As promptly as practicable, but
no later than 45 days after the Closing Date, the Sellers will
cause to be prepared and delivered to the Purchaser (i) the Closing
Financial Statements, accompanied by the auditors' report thereon
from a nationally recognized firm of independent public accountants
selected by the Sellers (which may be Ernst & Young, the Holding
Company's independent public accountants), and (ii) a certificate
of the Company, setting forth the Closing Net Book Value and the
Closing Working Capital, together with supporting calculations in
reasonable detail (the "Adjustment Certificate"). The Purchaser
and its accountants shall be given an opportunity to discuss with
the Sellers' accountants matters relating to the scope of the audit
to be performed (including, without limitation, determination of
sample sizes for accounts receivable and inventory observations)
and, prior to the delivery of the Closing Financial Statements, the
Purchaser and its accountants shall be given an opportunity to
review draft financial statements and to discuss with the Sellers'
accountants significant audit issues that arose in the course of
their audit. The Purchaser shall have 30 days from the date on
which the Closing Balance Sheet and the Adjustment Certificate are
delivered to it to review such documents (the "Review Period").
The Purchaser and its accountants shall be provided with full
access to the work papers of the Sellers' accountants in connection
with such review. If the Purchaser asserts that any item or amount
shown or reflected in the Closing Balance Sheet or the Adjustment
Certificate or that the calculation of the Closing Net Book Value
or the Closing Working Capital, was arrived at other than in accor-
dance with generally accepted accounting principles applied on a
basis consistent with those used in the preparation of the Balance
Sheet (other than with regard to the application of Statement of
Financial Accounting Standards No. 109), the Purchaser may, on or
prior to the last day of the Review Period, deliver a notice to the
Sellers setting forth, in reasonable detail, each disputed item or
amount and the basis for the Purchaser's disagreement therewith,
together with supporting calculations (the "Dispute Notice"). If
no Dispute Notice is received by the Sellers on or prior to the
last day of the Review Period, the Closing Balance Sheet and the
Adjustment Certificate shall be deemed accepted by the Purchaser.
(b) Disputes. Within 30 days after delivery of the
Dispute Notice if the Purchaser and the Sellers shall be unable
despite their reasonable efforts to resolve the dispute set forth
in the Dispute Notice, the Purchaser and the Sellers shall jointly
retain another nationally recognized firm of independent public
accountants mutually acceptable to them. Such independent firm
shall review the Closing Balance Sheet (and, if necessary or
appropriate in their judgment, any related work papers of the
Sellers' accountants), the Adjustment Certificate and the Dispute
Notice, and shall, as promptly as practicable and in no event later
than 45 days following the date of their engagement, deliver to the
Sellers and the Purchaser a report (the "Adjustment Report")
setting forth, in reasonable detail, their determination with
respect to all of the disputed items or amounts specified in the
Dispute Notice, and the revisions, if any, to be made to the
Closing Balance Sheet, the Adjustment Certificate and the
calculation of the Closing Net Book Value or the Closing Working
Capital to reflect such determination, together with supporting
calculations. The Adjustment Report shall be final and binding
upon the Purchaser and the Sellers. The Sellers shall pay one-
half, and the Purchaser shall pay one-half, of the fees and
expenses of such independent firm incurred in preparing and deliv-
ering such Adjustment Report.
(c) Adjustment and Payment. The Purchase Price shall be
reduced by an amount equal to the sum of (i) the excess, if any, of
the Target Net Book Value over the Closing Net Book Value plus (ii)
the excess, if any, of the Target Working Capital over the Closing
Working Capital; in each case based on the Closing Net Book Value
and the Closing Working Capital determined pursuant to sec-
tion 3.5(a) or 3.5(b), as the case may be. Any adjustment to the
Purchase Price pursuant to this section 3.5 shall be paid by the
Sellers in the manner set forth hereafter in this paragraph (c),
two business days after the date on which the Adjustment Report is
delivered to the Sellers and the Purchaser or, if no Dispute Notice
is received by the Sellers on or prior to the last day of the
Review Period, then on the business day following the last day of
the Review Period. Any such payment shall be made in cash, by wire
transfer of immediately available funds to the account of the
Purchaser designated at least two business days prior to the date
on which such payment is scheduled to be made.
The purchase price adjustment payable pursuant to this
section 3.5 shall be paid by application of the Escrow Amount in
the manner provided in the Escrow Agreement. If the Escrow Amount
shall be insufficient to pay in full the amount of the purchase
price adjustment, the Sellers hereby jointly and severally agree to
pay the deficiency to the Purchaser, and the Sellers each agree
that in such event the Purchaser may proceed against any one of
them for the full payment of the purchase price adjustment, without
proceeding against any of the others.
The parties acknowledge that the Purchaser may receive
from one or more of the Sellers the full amount of the purchase
price adjustment, by payment by such Seller or Sellers of amounts
in excess of such Seller or Seller's proportionate share of the
purchase price adjustment. In such event, each Seller agrees to
pay to the Seller or Sellers which shall have paid such amounts to
the Purchaser pursuant to this section 3.5 its proportionate share
of such purchase price adjustment, determined as provided in
paragraph V of the Custody Agreements, to reimburse the paying
Seller or Sellers for amounts paid by them in excess of their
proportionate shares. In addition, the Purchaser will cause the
Holding Company to assign to such Seller or Sellers who shall have
paid such amounts to the Purchaser all of the Holding Company's
rights to receive from the Option Holders all amounts the Holding
Company may then be entitled to receive from the Option Holders in
payment of the purchase price adjustment pursuant to paragraph 5 of
the Option Cancellation Agreements.
3.6 Environmental Survey. (a) Prior to the Closing,
the Purchaser shall cause to be conducted by a reputable firm of
environmental consultants selected by the Purchaser (the
"Environmental Consultants") an environmental survey of the Owned
Property and such other environmental investigation relating to the
Operations of the Holding Company and the Cabinet Company as may be
satisfactory to the Purchaser. Such survey and investigation shall
be at the Purchaser's sole expense. The Sellers will cause the
Holding Company and the Cabinet Company to furnish to the Purchaser
and the Environmental Consultants full and free access to the Owned
Property and to such books, records and documents relating to the
Owned Property and to the business and Operations of the Holding
Company and the Cabinet Company as the Purchaser may reasonably
request in connection with such environmental survey and
investigation. The Purchaser will cause the Environmental
Consultants, upon the request of any Seller, to provide the Sellers
with informal periodic reports (but no less frequently than weekly)
of their findings during the course of their survey and inves-
tigation. The Purchaser will use its reasonable efforts to complete
such environmental survey and investigation by the fifth business
day prior to January 31, 1994 (or such other date as the parties
hereto may have agreed pursuant to section 1.2).
(b) At the conclusion of such environmental survey and
investigation, but not later than the fifth business day prior to
the Closing, the Purchaser will cause the Environmental Consultants
to deliver to the Sellers a certificate setting forth in reasonable
detail each Material Environmental Cost (the "Environmental
Certificate") determined as a result of such survey and
investigation. The Sellers shall have four business days from the
date on which the Environmental Certificate is delivered to them to
review the Environmental Certificate and, if they so elect, to
cause the Environmental Certificate to be reviewed by a reputable
firm of environmental consultants selected by the Sellers (the
"Sellers' Consultants"). If the Sellers' Consultants shall assert
that any item of Material Environmental Cost set forth on the
Environmental Certificate is incorrect in any material respect, the
Sellers may, on or prior to the Closing Date, deliver a notice to
the Purchaser setting forth each disputed item or amount (the
"Environmental Dispute Notice"). The Sellers, within ten business
days after delivery of the Environmental Dispute Notice, shall
deliver a supplemental notice setting forth in reasonable detail
the basis for their disagreement with each of the items of Material
Environmental Cost covered by the Environmental Dispute Notice.
(c) If an Environmental Dispute Notice shall be
delivered, the Closing shall automatically be adjourned to the
thirtieth day following the date of delivery thereof (or, if such
thirtieth day shall not be a business day, to the next following
business day), and the dispute resolution procedures set forth in
paragraph (d) of this section 3.6 shall be complied with.
(d) Within five days after delivery of the Environmental
Dispute Notice, if the Purchaser and the Sellers shall be unable
despite their reasonable efforts to resolve the dispute set forth
in the Environmental Dispute Notice, the Purchaser and the Sellers
shall jointly retain another reputable firm of environmental
consultants mutually acceptable to them. Such firm shall review
the Environmental Certificate, the Environmental Dispute Notice and
the environmental audit reports and other documentation prepared by
or for the Environmental Consultants and the Sellers' Consultants
in the course of their respective surveys and investigations, and
shall, as promptly as practicable and in no event later than 25
days following the date of their engagement, deliver to the Sellers
and the Purchaser a report (the "Environmental Adjustment Report")
setting forth, in reasonable detail, their determination with
respect to all of the disputed items or amounts specified in the
Environmental Dispute Notice, together with appropriate supporting
calculations. The Environmental Adjustment Report shall be final
and binding upon the Purchaser and the Sellers. The Sellers shall
pay one-half, and the Purchaser shall pay one-half, of the fees and
expenses of such independent firm incurred in preparing and
delivering such Environmental Adjustment Report.
ARTICLE IV
CONDITIONS PRECEDENT
4.1 Conditions to Obligations of Purchaser. The
obligation of the Purchaser under this Agreement to purchase the
Shares is subject to the fulfillment, at or prior to the Closing,
of the following conditions, any one or more of which may be waived
by the Purchaser at its sole discretion:
4.1.1 Representations, Performance, etc. Either (a) the
representations and warranties of the Sellers contained in sections
2.1.2(a) and 2.1.2(b) shall be true and correct, and the other
representations and warranties of the Sellers contained in sec-
tions 2.1 and 2.2 shall be true and correct in all material
respects, at and as of the Closing Date with the same effect as
though made at and as of the Closing Date, except as modified by
transactions permitted by this Agreement or (b) the aggregate
amount of Material Violations of the representations and warranties
of the Sellers contained in sections 2.1 and 2.2 shall be less than
$500,000. The Sellers shall have duly performed and complied with
all agreements, covenants and conditions required by this Agreement
to be performed or complied with by them prior to or at the Closing
Date unless the failure (other than the failure to tender the
Shares for delivery as required by section 1.3) so to perform or to
comply could not have a Material Adverse Effect. The Sellers shall
have delivered to the Purchaser a certificate executed on behalf of
each of the Sellers, dated the Closing Date, to the effect set
forth above in this section 4.1.1.
4.1.2 Opinion of Counsel. The Purchaser shall have
received favorable opinions, addressed to the Purchaser and dated
the Closing Date, of (a) Debevoise & Plimpton, special counsel to
the Sellers and the Holding Company, in substantially the form
attached hereto as Exhibit A-1, (b) Eastman & Smith, special Ohio
counsel to the Cabinet Company, in substantially the form attached
hereto as Exhibit A-2, and (c) Shumaker, Loop & Kendrick, counsel
to certain of the Sellers, substantially in the form attached
hereto as Exhibit A-3.
4.1.3 Resignation of Directors. Each director and
officer of the Holding Company (and, as requested by the Purchaser,
each director and officer of the Cabinet Company and Export) shall
have submitted his resignation effective as of the Closing.
4.1.4 Certain Approvals, etc. All consents and
approvals from governmental authorities and third parties required
to be obtained by the Sellers and the Holding Company to consummate
the transactions contemplated hereby shall have been obtained,
including the expiration or termination of all applicable waiting
periods under the HSR Act and other applicable laws, regulations,
orders and decrees, other than any consents and approvals of third
parties in respect of any contract or agreement of the Holding
Company or the Cabinet Company (not involving the borrowing of
money) in respect of which the failure to obtain such consent or
approval could not have a Material Adverse Effect. The Sellers
shall have obtained a waiver by the Holding Company of the require-
ment for the delivery of an opinion of counsel upon the sale of the
Shares, to the effect that such sale is exempt from the provisions
of section 5 of the Securities Act, and the Management Sellers
shall have obtained waivers by the Holding Company and The Clayton
& Dubilier Private Equity Fund Limited Partnership (on behalf of
itself and any affiliate thereof) of their respective rights to
purchase the Shares of each Management Seller pursuant to the
Management Agreements. Each Management Agreement shall have been
terminated.
4.1.5 No Injunction. No injunction or other order
issued by a court of competent jurisdiction restraining or
prohibiting the consummation of the transactions contemplated by
this Agreement shall be in effect.
4.1.6 Cancellation of Options. The Holding Company
shall have received the Option Cancellation Agreement of each
Option Holder, substantially in the form attached hereto as Exhib-
it B, and shall have delivered complete and correct copies of such
Option Cancellation Agreements to the Purchaser. All of the issued
and outstanding Options of the Holding Company, entitling the
holders thereof to a total of 1,310,000 Option Shares, shall have
been cancelled by the Holding Company prior to the Closing. The
Holding Company or the Cabinet Company prior to the Closing (a)
shall have borrowed funds (under the Loan and Security Agreement or
from another source) in an amount equal to the Total Option
Cancellation Amount and (b) shall have paid (i) to the Escrow Agent
a portion of the proceeds of such borrowing equal to the Option
Escrow Amount and (ii) to the holders of the Options an amount
equal to the balance of the proceeds (the Total Option Cancellation
Amount less the Option Escrow Amount) less fees and expenses
charged to the Option Holders pursuant to the Option Cancellation
Agreements and applicable withholding.
4.1.7 Certificate as to Certain Tax Matters. Each
Seller shall have delivered to Purchaser a certificate that meets
the requirements of section 1.1445-2(b)(2) of the U.S. federal
income tax regulations certifying that such Seller is not a foreign
person, or the Holding Company or the Cabinet Company shall have
delivered to the Purchaser a certificate that meets the
requirements of section 1.897-2(h) certifying that neither the
Holding Company nor the Cabinet Company is a United States real
property holding corporation.
4.1.8 Review of Environmental Survey. The Purchaser
shall have completed and received the results of the environmental
survey described in section 3.6. The aggregate amount of Material
Environmental Costs set forth in the Environmental Certificate or,
if applicable, the Environmental Adjustment Certificate, delivered
pursuant to section 3.6, shall be less than $500,000.
4.1.9 Employment Agreements. The Cabinet Company shall
have entered into Employment Agreements with Thomas Millner, Mark
Little and William Duncan in substantially the form attached hereto
as Exhibit C-1, and the Cabinet Company shall have entered into an
Employment Agreement with John Long in substantially the form
attached hereto as Exhibit C-2.
4.1.10 Escrow Agreement. The Purchaser, the Custodian
and the Escrow Agent shall have executed and delivered the Escrow
Agreement and the Escrow Agreement shall be in full force and
effect.
4.1.11 Confirmation Delivered by Merrill Lynch & Co.
The Purchaser shall have received from Merrill Lynch & Co. evidence
satisfactory to the Purchaser that neither the Purchaser, the
Holding Company nor the Cabinet Company shall be liable for the
fees and expenses payable to Merrill Lynch & Co. pursuant to the
third, fourth and fifth paragraphs of its engagement letter with
the Cabinet Company dated July 30, 1993.
4.2 Conditions to Obligations of Sellers. The
obligation of the Sellers under this Agreement to sell the Shares
is subject to the fulfillment, at or prior to the Closing, of the
following conditions, any one or more of which may be waived by the
Sellers at their sole discretion:
4.2.1 Representations, Performance, etc. The
representations and warranties of the Purchaser contained in sec-
tion 2.3 shall be true and correct in all material respects at and
as of the Closing Date with the same effect as though made at and
as of the Closing Date, except as modified by transactions
permitted by this Agreement. The Purchaser shall have duly
performed and complied with all agreements, covenants and
conditions required by this Agreement to be performed or complied
with by it prior to or at the Closing Date. The Purchaser shall
have delivered to the Sellers a certificate of the Purchaser signed
by an officer of the Purchaser familiar with the transactions
contemplated by this Agreement, dated the Closing Date, to the
effect set forth above in this section 4.2.1.
4.2.2 Opinion of Counsel. The Sellers shall have
received a favorable opinion, addressed to each of them and dated
the Closing Date, of Petree Stockton, L.L.P., counsel for the Pur-
chaser, in substantially the form attached hereto as Exhibit A-4.
4.2.3 Repayment of Indebtedness for Borrowed Money of
Company. The Purchaser shall repay or arrange to have the Cabinet
Company repay, in full, or shall assume or secure the necessary
consents with respect to, all Scheduled Indebtedness, together with
all interest accrued and unpaid to the date of payment and any
prepayment premium payable with respect thereto, or the holders of
any Scheduled Indebtedness shall have agreed to waive any defaults
or mandatory prepayments or redemptions arising thereunder or under
the security arrangements relating thereto resulting from the sale
of the Shares and the consummation of the other transactions con-
templated hereby and shall have consented to such transactions.
4.2.4 Certain Approvals, etc. All consents and
approvals from governmental authorities and third parties required
to be obtained by the Purchaser to consummate the transactions
contemplated hereby shall have been obtained, including the
expiration or termination of all applicable waiting periods under
the HSR Act and other applicable laws, regulations, orders and
decrees, other than any consents and approvals of third parties in
respect of any contract or agreement of the Purchaser (not
involving the borrowing of money) in respect of which the failure
to obtain such consent or approval, either in any case or in the
aggregate, could not have a Material Adverse Effect.
4.2.5 No Injunction. No injunction or other order
issued by a court of competent jurisdiction restraining or
prohibiting the consummation of the transactions contemplated by
this Agreement shall be in effect.
4.2.6 Cancellation of Options. Each Option Holder shall
have received a duly executed Option Cancellation Agreement from
the Holding Company which provides for the termination and
cancellation of such Holder's Options as specified therein. The
Holding Company or the Cabinet Company prior to the Closing (a)
shall have borrowed funds (under the Loan and Security Agreement or
from another source) in an amount equal to the Total Option
Cancellation Amount and (b) shall have paid (i) to the Escrow Agent
a portion of the proceeds of such borrowing equal to the Option
Escrow Amount and (ii) to the holders of the Options an amount
equal to the balance of the proceeds (the Total Option Cancellation
Amount less the Option Escrow Amount) less fees and expenses
charged to the Option Holders pursuant to the Option Cancellation
Agreements and applicable withholding.
4.2.7 Escrow Agreement. The Purchaser, the Custodian
and the Escrow Agent shall have executed and delivered the Escrow
Agreement and the Escrow Agreement shall be in full force and
effect.
4.2.8 Officers' Certificates. Each Seller shall have
received a certificate or certificates of the officers of the
Holding Company and the Cabinet Company, setting forth such
information with regard to the representations and warranties
contained in section 2.1 as such Seller may reasonably require in
order to enable such Seller to make the representations and
warranties contained therein.
ARTICLE V
EMPLOYEE BENEFIT MATTERS
The Purchaser agrees that it shall, or shall cause the
Holding Company or the Cabinet Company to, except for the
Management Bonus Program and the Medical Expense Reimbursement Plan
dated September 23, 1976 of the Cabinet Company, maintain for a
period of one year following the Closing, employee benefits and
employee benefit plans in respect of the employees or former
employees of the Holding Company or the Cabinet Company or their
beneficiaries which, in the aggregate, provide benefits that are
substantially equivalent to the benefits that are provided to such
individuals immediately prior to the Closing, at no greater cost to
such individuals, and shall cause the Holding Company and the
Cabinet Company to honor its and their obligations and
responsibilities to such employees, former employees and
beneficiaries under all employee benefit plans, and related
programs, arrangements and policies. With respect to the
Management Bonus Program, the Purchaser agrees that it shall, or
shall cause the Holding Company or the Cabinet Company to, maintain
management incentive programs no less favorable than those provided
by Purchaser to similarly situated management employees. Payments
and benefits accrued under the terms the Management Bonus Program
with respect to periods prior to the Closing Date shall be paid by
the Cabinet Company concurrently with the Closing. The Cabinet
Company shall concurrently with the Closing pay to the executive
officers entitled thereto the payments payable under the Special
Bonus Agreement.
ARTICLE VI
PUBLIC ANNOUNCEMENTS
Except as may otherwise be required by law, the Purchaser
shall not, directly or indirectly, make or cause to be made any
public announcement or issue any notice in any form with respect to
this Agreement or the transactions contemplated hereby without the
prior written consent of the Sellers, and none of the Sellers
shall, directly or indirectly, make or cause to be made any public
announcement or issue any notice in any form with respect to this
Agreement or the transactions contemplated hereby without the prior
written consent of the Purchaser.
ARTICLE VII
TERMINATION
7.1 Grounds for Termination. This Agreement may be
terminated at any time prior to the Closing Date in the
circumstances set forth in this Section 7.1, by delivering written
notice of such termination.
7.1.1 Termination by Sellers. This Agreement may be
terminated by the Sellers (or by the Custodian acting on behalf of
the Sellers) upon the happening of an occurrence or circumstance
which will result in the failure to satisfy any of the conditions
set forth in section 4.2 and the Purchaser shall have failed to
satisfy such condition within twenty days after notice by Sellers
(or by the Custodian acting on behalf of the Sellers).
7.1.2 Termination by Purchaser. This Agreement may be
terminated by the Purchaser upon the happening of an occurrence or
circumstance which will result in the failure to satisfy any of the
conditions set forth in section 4.1 and the Sellers shall have
failed to satisfy such condition within twenty days after notice by
the Purchaser.
7.1.3 Termination by Either Party. This Agreement may
be terminated by either the Purchaser or the Sellers (or the
Custodian acting on behalf of the Sellers) if (i) the
representations and warranties of the other party shall prove not
to have been true in all material respects as of the date when
made, (ii) events shall have occurred subsequent to the date hereof
as a result of which the representations and warranties of the
other party could not be true in all material respects as of the
Closing Date, unless the occurrence of such events shall be due to
the failure of the party seeking to terminate this Agreement to
perform or comply with any of the covenants, agreements or
conditions hereof to be performed or complied with by such party
prior to the Closing, or (iii) the Closing shall not have occurred
prior to April 15, 1994 (or such other date as may be mutually
agreed by the parties).
7.2 Effect of Termination. If this Agreement is
terminated as permitted under Section 7.1, such termination shall
be without liability of or to any party to this Agreement or any
Affiliate, stockholder, partner, director, officer, employee or
agent of such party. The provisions of Sections 3.1 and 9.2 shall
survive any such termination.
ARTICLE VIII
DEFINITIONS
8.1 Definitions. As used herein and in the Schedules
hereto the following terms have the following respective meanings:
Affiliate: any person directly or indirectly
controlling, controlled by or under common control with any other
person.
Agreement: the meaning specified in the first paragraph.
Audited Financials: the meaning specified in sec-
tion 2.1.4(a).
Balance Sheet: the audited consolidated balance sheet of
the Holding Company as of May 1, 1993, included in the Audited
Financials.
Cabinet Company: the meaning specified in the second
WHEREAS clause of this Agreement.
Class A Common Stock: the meaning specified in sec-
tion 2.1.2(a).
Class B Common Stock: the meaning specified in section
2.1.2(a).
Closing: the meaning specified in section 1.2.
Closing Balance Sheet: the audited consolidated balance
sheet of the Holding Company as of the Effective Date, which shall
(a) be prepared in accordance with generally accepted accounting
principles applied on a basis consistent with those used in the
preparation of the Balance Sheet (other than with regard to the
application of Statement of Financial Accounting Standards No. 109)
and (b) have been audited in accordance with generally accepted
auditing standards by a nationally recognized firm of independent
public accountants selected by the Sellers.
Closing Date: the meaning specified in section 1.2.
Closing Financial Statements: the Closing Balance Sheet;
and the related audited consolidated statements of operations, cash
flows and stockholders' equity (deficit) of the Holding Company for
the period from May 2, 1993 to the Effective Date.
Closing Net Book Value: the Holding Company's total
stockholders' equity as shown on the Closing Balance Sheet,
adjusted by subtracting or adding the following accounting items to
the extent they were added or subtracted, as the case may be, in
calculating such total stockholders' equity: (a) cancellation of
stock option compensation expense, (b) compensation expense
incurred under the Special Bonus Agreement, (c) gain on liquidation
of subordinated debt, (d) change of control payment in respect of
long-term indebtedness, (e) legal and accounting fees incurred in
connection with discontinued initial public offering, (f) the tax
effects of items (a) through (e) above and (g) all remaining net
deferred tax liabilities.
Closing Working Capital: the excess of consolidated
current assets over consolidated current liabilities (exclusive of
the current portion of long-term indebtedness) of the Holding
Company as shown on the Closing Balance Sheet.
Code: the Internal Revenue Code of 1986, as amended.
Common Stock: the meaning specified in section 2.1.2(a).
Contracts: the meaning specified in section 2.1.12.
Custodian: the meaning specified in section 1.4.
Custody Agreements: the meaning specified in sec-
tion 1.4.
Effective Date: the fiscal month-end of the Holding
Company most recently preceding the Closing Date (which fiscal
month-end shall be January 29, 1994, if the Closing Date shall be
January 31, 1994 as scheduled).
Environmental Laws: all applicable federal, state,
county or local statutes, laws, regulations, rules, ordinances,
codes, orders, licenses and permits of any governmental authority
relating to protection of the environment (but without giving
effect to any change in applicable law which will become effective
after the Closing Date).
Environmental Matters: liabilities, obligations,
actions, claims, suits or proceedings arising under Environmental
Laws or relating to Hazardous Substances, and violations of or
defaults under Environmental Laws (all of which are to be dealt
with in the manner provided in sections 3.6 and 4.1.8).
ERISA: the meaning specified in section 2.1.13(a).
ERISA Plans: the meaning specified in section 2.1.13(a).
Escrow Agent: Chemical Bank, a New York State chartered
bank, as Escrow Agent under the terms of the Escrow Agreement.
Escrow Agreement: the Escrow Agreement among the
Purchaser, the Custodian and the Escrow Agent, in substantially the
form attached hereto as Exhibit D.
Escrow Amount: $1,750,000.
Export: Pilliod Export Corporation, an Ohio corporation.
Hazardous Substances: any waste, substance or material
defined as a hazardous waste or hazardous substance or otherwise
determined to be toxic or a pollutant or contaminant under any
Environmental Laws or judicial or administrative order or decisions
now in effect or in effect at any time during the ownership by the
Holding Company or the Cabinet Company of the Owned Property or the
Previously Owned Property, including, without limitation, asbestos,
petroleum and petroleum products and any substance deemed hazardous
pursuant to the Comprehensive Environmental Response, Compensation
and Liability Act, as amended, and the Resource, Conservation and
Recovery Act, as amended.
Holding Company: the meaning specified in the introduc-
tory paragraph of this Agreement.
HSR Act: the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and the rules and regulations promulgated
thereunder.
Intellectual Property: the meaning specified in sec-
tion 2.1.14.
Interim Financials: the meaning specified in sec-
tion 2.1.4(a).
Leased Property: the meaning specified in sec-
tion 2.1.11(b).
Loan and Security Agreement: the Loan and Security
Agreement, dated as of June 17, 1988, as amended to the date
hereof, between the Cabinet Company and Sanwa Business Credit
Company.
Management Agreements: the meaning specified in sec-
tion 2.1.2(c).
Management Sellers: the meaning specified in sec-
tion 2.2.2(a).
Material Adverse Effect: a material adverse effect on
the business, properties, assets (tangible and intangible) or
financial condition or results of operation of the Holding Company
and the Cabinet Company (taken as a whole), in each case other than
as a result of general economic conditions.
Material Environmental Cost: any material civil penalty
or fine, or any material remedial cost or other material work,
repairs, construction or capital expenditures (or any investigative
or engineering expense related thereto or in furtherance thereof)
required under any Environmental Laws with respect to the Owned
Property or the Previously Owned Property or the continuation of
the Operations (a) which has been incurred or which is more likely
than not, in light of the facts and circumstances known at the time
of determination, to be incurred within twelve months by the
Holding Company or the Cabinet Company or, after giving effect to
the Closing, the Purchaser, (b) which is or will be with respect to
any single occurrence or condition in excess of $25,000 and (c)
which is the result of (i) the Owned Property or the Previously
Owned Property and their existing and prior uses by the Holding
Company and the Cabinet Company, and the Operations, not complying
with Environmental Laws; (ii) the Owned Property or the Previously
Owned Property having been previously used as a landfill or as a
dump for garbage or refuse; (iii) any material use, discharge,
release, storage, disposal or treatment of any Hazardous Substances
on or from the Owned Property or the Previously Owned Property; or
(iv) storage tanks for Hazardous Substances or petroleum-based
products having been located on the Owned Property or the
Previously Owned Property, either above or below ground, or under-
ground pipes or lines being on the Owned Property or the Previously
Owned Property, except for county water or sewer lines or electri-
cal conduits, if any, owned by public utility companies.
Material Violation: with respect to any of the
representations and warranties of the Sellers contained in sections
2.1 and 2.2, the untruth or incorrectness of such representation
and warranty, if the financial impact of such untruth or
incorrectness is equal to or greater than $25,000. For all
purposes of this Agreement, if an event or occurrence has a
financial impact equal to or greater than $25,000, it will be
deemed to have a Material Adverse Effect.
Meridian Property: the real property located in
Lauderdale County, Mississippi and sold by the Cabinet Company to
the Lauderdale County Economic Development District pursuant to the
Contract For Sale and Purchase of Real Property dated July 15,
1992.
Operations: the existing and prior conduct of the
business and operations of the Holding Company and the Cabinet
Company (including, without limitation, the on-site and off-site
use, storage, transportation, treatment or disposal of Hazardous
Substances).
Option Cancellation Agreements: the separate agreements
to be entered into among each Option Holder and the Holding
Company, providing for the cancellation, effective prior to the
Closing, of the Options held by such Option Holder, and payment of
the Option Cancellation Amount to the Option Holder with respect to
each Option covered thereby.
Option Cancellation Amount: with respect to each Option
held by each Option Holder, an amount equal to the excess of (i)
the product of (x) the quotient of the Purchase Price divided by
6,842,500 and (y) the number of shares of capital stock of the
Company which would be issued upon exercise of such Option over
(ii) the exercise price payable pursuant such Option.
Option Escrow Amount: a portion of the Escrow Amount
equal to the Escrow Amount multiplied by a fraction, the numerator
of which is the Total Option Cancellation Amount and the
denominator of which is the sum of the Purchase Price and the Total
Option Cancellation Amount.
Option Holder: the meaning specified in sec-
tion 2.1.2(b).
Option Shares: the meaning specified in sec-
tion 2.1.2(b).
Options: the meaning specified in section 2.1.2(b).
Owned Property: the meaning specified in sec-
tion 2.1.11(b).
PBGC: the meaning specified in section 2.1.13(a).
Plans: the meaning specified in section 2.1.13(a).
Previously Owned Property: the Meridian Property and any
other real property owned or leased by the Holding Company or the
Cabinet Company at any time, other than the Owned Property.
Purchase Price: the meaning specified in section 1.1.
Purchaser: the meaning specified in the introductory
paragraph of this Agreement.
Real Estate Laws: the meaning specified in section
2.1.11(c).
Real Property: the meaning specified in sec-
tion 2.1.11(b).
Related Person: the meaning specified in sec-
tion 2.1.13(b).
Scheduled Indebtedness: (a) indebtedness of the Cabinet
Company under the Loan and Security Agreement, including without
limitation (i) the change of control payment equal to $100,000,
(ii) deferred commitment fees payable upon change of control up to
$240,000 and (iii) the portion of such indebtedness equal to
$3,000,000 and reflected on the Balance Sheet as "notes payable to
banks, effectively guaranteed by the Company's principal
shareholders"; (b) the Amended Subordinated Notes due 1998 of the
Cabinet Company, outstanding in the principal amount of $2,824,500,
plus the change of control payment equal to $1,000,000; (c) the
Non-Negotiable Promissory Note of the Cabinet Company, dated
September 29, 1989, original principal amount $672,750; (d) capital
leases with Hewlett-Packard Company relating to computer equipment
and Eaton Financial Corporation relating to a Thermwood router; and
(e) without duplication of clause (a) above, indebtedness incurred
(x) to fund the payment by the Cabinet Company of the Total Option
Cancellation Amount (including the portion paid to the Escrow Agent
in respect of the Option Escrow Amount) as contemplated by sec-
tions 4.1.6 and 4.2.6, (y) to fund payments in respect of the
Special Bonus Agreement or any other compensation arrangements and
(z) for any other purpose after the date hereof; and including in
each case interest accrued and unpaid to the Closing Date.
Securities Act: the meaning specified in section 2.2.2.
Seller or Sellers: the meaning specified in the
introductory paragraph of this Agreement.
Shares: the meaning specified in the first WHEREAS
clause of this Agreement.
Special Bonus Agreement: the agreement of the Cabinet
Company evidenced by the Memorandum dated September 1, 1993, to pay
to the four senior executive officers of the Cabinet Company a
special bonus aggregating $1,000,000 in connection with the
transactions contemplated by this Agreement.
Stock Escrow Amount: a portion of the Escrow Amount
equal to the Escrow Amount less the Option Escrow Amount.
Subsidiary: each corporation of which the Holding
Company owns, directly or indirectly, capital stock representing
more than 50% of the outstanding voting stock.
Target Net Book Value: $4,875,000.
Target Working Capital: $17,000,000.
Taxes: the meaning specified in section 2.1.8.
Tax Returns: the meaning specified in section 2.1.8.
Total Option Cancellation Amount: the aggregate of the
Option Cancellation Amounts payable in respect of all Options.
ARTICLE IX
MISCELLANEOUS
9.1 Survival of Representations and Warranties. The
representations, warranties and covenants of the Sellers and the
Purchaser contained in this Agreement (other than those contained
in Article V and in sections 3.5 and 9.2) or in any certificate
delivered pursuant to this Agreement shall not survive the Closing
hereunder. From and after the Closing, the Sellers shall have no
liability to the Purchaser for or with respect to, and the
Purchaser releases the Sellers from, any cost, loss, damage or
liability that the Purchaser may thereafter suffer or incur as a
result of Environmental Matters.
9.2 Expenses. Each of the Sellers and the Purchaser
shall assume and bear its own expenses, costs and fees incurred in
the preparation and execution of this Agreement and compliance
herewith, including attorneys' and accountants' fees.
9.3 Assignment; Successors. This Agreement shall not be
assignable by any party hereto without the prior written consent of
all of the other parties and any attempt to assign this Agreement
without such consent shall be void and of no effect; except that
the rights (but none of the obligations) of the Purchaser hereunder
may be assigned at least five days prior to the Closing, without
the consent of the Sellers, to any corporation all of the
outstanding capital stock of which is owned by the Purchaser. This
Agreement shall inure to the benefit of, and be binding on and
enforceable against, the successors and assigns of the respective
parties hereto. Nothing in this Agreement, expressed or implied,
is intended or shall be construed to confer upon any person other
than the parties and successors and assigns permitted by this sec-
tion 9.3 any right, remedy or claim under or by reason of this
Agreement.
9.4 Amendment and Modification. Neither this Agreement
nor any term hereof may be changed, waived, discharged or
terminated orally, other than by the written consent signed by the
party against which such change, waiver, discharge or termination
is sought to be enforced.
9.5 Notices. All notices, consents, requests,
instructions, approvals and other communications provided for
herein and all legal processes in regard hereto shall be validly
given, made or served, if in writing and delivered personally or
sent by registered or certified mail, postage prepaid, or by
commercial courier or by telecopy (promptly confirmed in writing),
if to the Sellers, to them c/o Clayton, Dubilier & Rice, Inc., 126
East 56th Street, New York, New York 10022, Attention:
Mr. Joseph L. Rice, III, with copies to Franci J. Blassberg, Esq.,
Debevoise & Plimpton, 875 Third Avenue, New York, New York 10022,
and if to the Purchaser, to it at LADD Furniture, Inc., One Plaza
Center, Box HP-3, High Point, NC 27261-1500, FAX: (910) 885-6050,
Attention: Richard R. Allen, Chairman of the Board, President and
Chief Executive Officer, with copies to Petree Stockton, L.L.P.1001
West Fourth Street, Winston-Salem, NC 27101, FAX: (910) 607-7505,
Attention: Robert E. Esleeck, Esq., or, in each case, at such other
address as may be specified in writing.
9.6 Best Knowledge. For the purposes of the
representations and warranties of the Sellers contained in
Article II, the knowledge or the best knowledge of the Holding
Company or the Cabinet Company shall be deemed to consist solely of
the knowledge or best knowledge, as the case may be, of those
individuals listed on Schedule 9.6.
9.7 Arbitration. Any dispute, controversy or claim
arising out of or in connection with, or relating to, this
Agreement or any breach or alleged breach hereof (except as
otherwise provided in section 3.5 or 3.6) shall, upon the request
of any party involved, be submitted to, and settled by, arbitration
in the City of New York, State of New York pursuant to the
commercial arbitration rules then in effect of the American
Arbitration Association. Any award rendered shall be final and
conclusive upon the parties and a judgment thereon may be entered
in the highest court of the forum, state or federal, having
jurisdiction. The expenses of the arbitration shall be borne
equally by the parties to the arbitration, provided that each party
shall pay for and bear the costs of experts, evidence and counsel's
fees, except that in the discretion of the arbitrator, any award
may include the costs of a party's counsel if the arbitrator
expressly determines that the party against whom such award is
entered has caused the dispute, controversy or claim to be
submitted to arbitration as a dilatory tactic.
9.8 Release of Claims Against Merrill Lynch & Co.
Reference is made to the letter (the "Engagement Letter"), dated
July 30, 1993, between the Cabinet Company and Merrill Lynch & Co.
("Merrill Lynch"), as amended by the letter, dated December 15,
1993, among the Cabinet Company, Merrill Lynch and the Sellers.
Each of the Sellers agrees, as contemplated by the Engagement
Letter, not to make any claim against Merrill Lynch or its
affiliates or their respective directors, officers, employees,
agents or controlling persons (collectively, "Merrill Lynch
Parties"), for any liability (whether direct or indirect, in
contract or tort or otherwise) to such Seller related to or arising
out of the engagement of Merrill Lynch pursuant to, or the
performance by Merrill Lynch of the services contemplated by, the
Engagement Letter except to the extent that any loss, claim, damage
or liability is found in a final judgment by a court (or a
settlement tantamount to such a final judgment, to which any
Merrill Lynch Party is a party) to have resulted from the bad faith
or gross negligence of any such Merrill Lynch Party. The agreement
contained in this section 9.8 shall survive the Closing hereunder,
notwithstanding anything in section 9.1 to the contrary.
9.9 Miscellaneous. The headings contained in this
Agreement are for reference purposes only and shall not affect in
any way the meaning or interpretation of this Agreement. This
Agreement constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof, except for the
confidentiality agreement described in section 3.1. This Agreement
may be executed in several counterparts, each of which shall
constitute one and the same instrument. This Agreement shall be
governed in all respects, including validity, interpretation and
effect, by the laws of the State of New York, without giving effect
to the conflict of laws rules thereof. If any term or provision of
this Agreement is held by a court or other authority of competent
jurisdiction to be invalid, void or unenforceable, the remaining
terms and provisions of this Agreement shall remain in full force
and effect and shall in no way be affected, impaired or
invalidated.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date first above written.
PURCHASER:
LADD FURNITURE, INC.
By________________________________
Name:
Title:
SELLERS:
The Clayton & Dubilier Private
Equity Fund Limited Partnership
By Clayton & Dubilier Associates
Limited Partnership, the General
Partner
By_____________________________
Joseph L. Rice, III
General Partner
By_____________________________
Donald J. Gogel
General Partner
_________________________________*
Peter P. Pilliod
_________________________________*
Barbara Ann Whetsel
_________________________________*
Debra Lynn Pilliod
_________________________________*
Henry O. Timnick
_________________________________*
Arthur E. Reinhold
_________________________________*
Sidney A. Lenger
_________________________________*
Martin P. Doolan
_________________________________*
John R. Long
_________________________________*
Thomas Millner
_________________________________*
William M. Duncan
________________________________
William J. Pilliod
_________________________________
Mark A. Little
_________________________________*
Kevin Driscoll
_________________________________*
Gary Olson
_________________________________*
Progressive Furniture Inc.
*By Clayton, Dubilier & Rice,
Inc., as Attorney-in-Fact
By:__________________________
Name:
Title:
__________________________________________________________________________
STOCK PURCHASE AGREEMENT
among
LADD Furniture, Inc.,
as Purchaser
and
THE STOCKHOLDERS OF
PILLIOD HOLDING COMPANY,
as Sellers
Dated as of December 15, 1993
_____________________________________________________________________________
TABLE OF CONTENTS
Page
ARTICLE I: SALE AND PURCHASE OF SHARES
1.1 Sale and Purchase of Shares 2
1.2 Closing 3
1.3 Delivery of Shares 3
1.4 Payment of Purchase Price 3
ARTICLE II: REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties as to
Holding Company and Cabinet Company 5
2.1.1 Corporate Status 5
2.1.2 Capitalization 6
2.1.3 Conflicts, Consents, Subsequent
Actions 9
2.1.4 Financial Information, Material
Adverse Change, Undisclosed
Liabilities 12
2.1.5 Insurance 15
2.1.6 Litigation 16
2.1.7 Compliance with Laws, Permits 17
2.1.8 Tax Matters 19
2.1.9 Brokers, Finders 22
2.1.10 Absence of Certain Changes 22
2.1.11 Title to Properties, etc. 25
2.1.12 Certain Contracts 27
2.1.13 Compliance with ERISA 30
2.1.14 Trademarks, Trade Names,
Patents, etc. 34
2.1.15 Labor Matters 38
2.1.16 Disclosure 39
2.1.17 Affiliate Transactions 40
2.2 Representations and Warranties as to
the Sellers 40
2.2.1 Authorization, etc. 40
2.2.2 Conflicts, Consents, Subsequent
Actions 41
2.2.3 Title to Stock, etc. 43
2.2.4 Litigation 44
2.2.5 Brokers, Finders 44
2.3 Representations and Warranties
of Purchaser 44
2.3.1 Purchaser's Corporate Status 44
2.3.2 Authorization, etc. 45
2.3.3 Conflicts, Consents 45
2.3.4 Litigation 46
2.3.5 Brokers, Finders 46
2.3.6 Purchase for Investment 47
ARTICLE III: CERTAIN COVENANTS PENDING AND POST-CLOSING
3.1 Access and Information; Confidentiality 47
3.2 Conduct of Business of the Holding
Company and the Cabinet Company 48
3.3 Efforts to Consummate Transaction 50
3.4 Non-Solicitation 51
3.5 Purchase Price Adjustment 52
3.6 Environmental Survey 56
ARTICLE IV: CONDITIONS PRECEDENT
4.1 Conditions to Obligations of Purchaser 60
4.1.1 Representations, Performance,
etc. 60
4.1.2 Opinion of Counsel 61
4.1.3 Resignation of Directors 61
4.1.4 Certain Approvals, etc. 62
4.1.5 No Injunction 63
4.1.6 Cancellation of Options 63
4.1.7 Certificate as to Certain
Tax Matters 64
4.1.8. Review of Environmental Survey 64
4.1.9. Employment Agreements 64
4.1.10. Escrow Agreement 65
4.1.11. Confirmation Delivered by Merrill
Lynch & Co. 65
4.2 Conditions to Obligations of Sellers 65
4.2.1 Representations, Performance,
etc. 65
4.2.2 Opinion of Counsel 66
4.2.3 Repayment of Indebtedness for
Borrowed Money of Company 66
4.2.4 Certain Approvals, etc. 67
4.2.5 No Injunction 67
4.2.6 Cancellation of Options 67
4.2.7. Escrow Agreement 68
4.2.8 Officers' Certificates 68
ARTICLE V: EMPLOYEE BENEFIT MATTERS 69
ARTICLE VI: PUBLIC ANNOUNCEMENTS 70
ARTICLE VII: TERMINATION
7.1 Grounds for Termination 70
7.1.1 Termination by Sellers 71
7.1.2 Termination by Purchaser 71
7.1.3 Termination by Either Party 71
7.2 Effect of Termination 72
ARTICLE VIII: DEFINITIONS
8.1 Definitions 72
ARTICLE IX: MISCELLANEOUS
9.1 Survival of Representations and Warranties 84
9.2 Expenses 84
9.3 Assignment; Successors 85
9.4 Amendment and Modification 85
9.5 Notices 86
9.6 Best Knowledge 86
9.7 Arbitration 87
9.8 Release of Claims Against Merrill Lynch 87
9.9 Miscellaneous 88
SCHEDULES
1.1 Shares of Common Stock
2.1.3 Conflicts and Consents
2.1.4 Material Adverse Effect and Undisclosed Liabilities
2.1.5 Insurance and Bond and Surety Arrangements
2.1.6 Litigation
2.1.7 Violation of Laws
2.1.8 Tax Matters
2.1.10 Certain Changes
2.1.11 Title to Properties
2.1.12 Contracts
2.1.13 Employee Benefit Plans
2.1.14 Intellectual Property
2.1.15 Labor Matters
2.1.17 Affiliate Transactions
2.2.2 Seller Conflicts and Consents
9.6 Officers of Pilliod
EXHIBITS
Exhibit A-1 Form of Opinion of Debevoise & Plimpton
Exhibit A-2 Form of Opinion of Eastman & Smith
Exhibit A-3 Form of Opinion of Shumaker, Loop &
Kendrick
Exhibit A-4 Form of Opinion of Petree, Stockton L.L.P.
Exhibit B Option Cancellation Agreement
Exhibit C-1 Form of Employment Agreement
Exhibit C-2 Employment Agreement among Pilliod Holding
Company, the Pilliod Cabinet Company and
John R. Long
Exhibit D Escrow Agreement