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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------
FORM 10-K/A
AMENDMENT NO. 1
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997 Commission file number 333-11905
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 56-1977928
(State of Incorporation) (I.R.S. Employer Identification No.)
1300 National Highway, Thomasville, NC 27360
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (336) 476-4777
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K/A or any
amendment to this Form 10-K/A. /X/
The registrant is a privately held corporation. As such, there is no
practicable method to determine the aggregate market value of the voting stock
held by non-affiliates of the registrant.
Number of shares outstanding of registrant's Common Stock as of March 31, 1998:
100 shares of Common Stock, par value $.01 per share.
<PAGE>
LIFESTYLE FURNISHINGS INTERNATIONAL LTD. (the "Company") filed its
Form 10-K on March 17, 1998 (the "Form 10-K"). This amendment is being filed
within 120 days of the end of the fiscal year covered by the Form 10-K with the
information required by Items 10, 11, 12 and 13 of Form 10-K which was not
included in the Company's Form 10-K.
The Company was incorporated in May 1996 for the purpose of acquiring
the Home Furnishings Group (the "Home Furnishings Group") of Masco Corporation
("Masco"). FURNISHINGS INTERNATIONAL INC., a Delaware Corporation ("Holdings")
subscribed for 100 shares of the common stock, par value $.01 per share, of the
Company and is the Company's sole stockholder. On August 5, 1996, Holdings
acquired the Home Furnishings Group from Masco pursuant to an acquisition
agreement (the "Acquisition Agreement") for a purchase price of approximately
$1.1 billion and contributed substantially all of the businesses acquired to the
Company as common equity (the "Transactions").
The Company's corporate headquarters is currently located in
Thomasville, North Carolina and is owned by the Company. The Company plans to
relocate its corporate headquarters in 1998 to 4000 Lineage Court, High Point,
N.C. 27265.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below are the names, ages, positions and offices held and a
brief description of the business experience during the preceding five years of
the directors and executive officers of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Wayne B. Lyon................. 65 Chairman of the Board, President and Chief Executive Officer
Douglas C. Barnard............ 39 Vice President, General Counsel and Secretary
Ronald J. Hoffman............. 53 Vice President, Treasurer and Chief Financial Officer
James R. Melton............... 55 Vice President and Controller
Ronnie R. Robbins, Jr. ....... 51 Vice President-Taxes
Richard M. Cashin, Jr. ....... 44 Director
David L. Johnston............. 57 Director
Robert C. Larson.............. 63 Director
David F. Thomas............... 48 Director
Martin D. Walker.............. 65 Director
</TABLE>
MR. LYON is Chairman of the Board, President and Chief Executive
Officer of the Company. Mr. Lyon has been a director of Masco for more than the
past five years, and was Masco's President and Chief Operating Officer until
1996. Mr. Lyon is also a director of Comerica Incorporated and Emco Limited.
MR. BARNARD is Vice President, General Counsel and Secretary of the
Company. Mr. Barnard was an Associate Corporate Counsel of Masco from 1992 to
1996. Previously, he was a partner at the law firm of Kirkland & Ellis in
Chicago.
MR. HOFFMAN is Vice President, Treasurer and Chief Financial Officer
of the Company. Mr. Hoffman was Vice President and Group Controller of the Home
Furnishings Group from 1993 to 1996, and a Group Controller of Masco prior to
joining the Home Furnishings Group.
MR. MELTON is Vice President and Corporate Controller of the Company.
Previously, Mr. Melton was Vice President-Administration and Group Controller of
the Home Furnishings Group until 1996.
MR. ROBBINS is Vice President-Taxes of the Company. Mr. Robbins was
Vice President-Taxes of the Home Furnishings Group from 1994 to 1996.
Previously, he was Vice President-Taxes and Assistant Secretary of Masco
Building Products.
2
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MR. CASHIN is a Director of the Company. Mr. Cashin has been
President since 1994, and a Managing Director for more than the past five years,
of Citicorp Venture Capital, Ltd. In addition, he serves as a director of Cable
Systems International, Delco Remy International, Euramax International plc,
Fairchild Semiconductor, Freedom Forge, Gerber Childrenswear, Hoover Group,
Levitz Furniture Incorporated, MSX International, Thermal Engineering and Titan
Wheel International Inc.
MR. JOHNSTON is a Director of the Company. Mr. Johnston has been a
professor of law at McGill University, Montreal, Canada, since 1979 and was a
principal of McGill from 1979 to 1994. Mr. Johnston is a director of Seagram
Company, Canada Trust, Emco Ltd. and CGI Ltd.
MR. LARSON is a Director of the Company. Mr. Larson has been Chairman
of the Taubman Realty Group, which owns, develops and operates regional shopping
centers, for more than the past five years. In addition, Mr. Larson has been
Vice Chairman of the Board of Directors of Taubman Centers, Inc., which is the
managing partner of the Taubman Realty Group, since its inception in 1992. Mr.
Larson also serves as non-executive director of Bass PLC, the London based group
operating in hotel, leisure retailing and branded drinks.
MR. THOMAS is a Director of the Company. Mr. Thomas has been
President of 399 Ventures, Inc. since 1994 and has been a Managing Director of
Citicorp Venture Capital, Ltd. for more than the past five years. Mr. Thomas is
a director of Anvil Knitwear, Inc., Galey & Lord Incorporated, Neenah
Corporation, Plainwell Inc. and Stage Stores, Inc.
MR WALKER is a Director of the Company. Mr. Walker is Principal of
MORWAL Investments, a private investment firm. Mr. Walker was the Chairman
and Chief Executive Officer of M.A. Hanna Company from 1986 to his retirement
in 1997. Mr. Walker is a director of Comerica Incorporated, The Goodyear Tire
& Rubber Company, M. A. Hanna Company, Lexmark International Group, Inc.,
M.A. Hanna Company, Meritor Automotive, Inc., The Reynolds & Reynolds
Company, Textron Inc. and The Timken Company.
3
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ITEM 11. EXECUTIVE COMPENSATION
The following tables and notes summarize the annual and long-term
compensation of the Company's chief executive officer and the other four most
highly paid executive officers (collectively, the "named executive officers")
for the year ended December 31, 1997 and the period from August 6, 1996 to
December 31, 1996. The named executive officers did not receive any compensation
from the Company prior to August 6, 1996.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
NAME AND OTHER ANNUAL RESTRICTED STOCK ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION (1) AWARDS (2) COMPENSATION (3)
- ------------------ ---- ------- ----- ---------------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Wayne B. Lyon............... 1997 $500,000 $125,000 $107,661 $27,370
Chairman of the 1996 192,308 380,000(4) $108,805 14,838
Board, President
and Chief
Executive Officer
Douglas C. Barnard.......... 1997 172,150 27,000 24,509
Vice President, 1996 63,462 40,000 15,955 10,880 24,946
General Counsel and
Secretary
Ronald J. Hoffman........... 1997 177,200 27,750 11,228
Vice President, 1996 65,385 45,000 13,600 6,301
Treasurer and
Chief Financial
Officer
James R. Melton............. 1997 174,870 27,000 11,114
Vice President and 1996 65,385 41,000 13,600 6,301
Controller
Ronnie R. Robbins, Jr....... 1997 153,340 15,720 17,267
Vice President- 1996 57,592 30,000 5,440 12,900
Taxes
</TABLE>
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(1) This column includes the following: (i) tax reimbursement payments;
(ii) personal use of the Company airplane (for 1997: Mr. Lyon-$56,746)
and (iii) personal use of Company auto.
(2) In connection with the consummation of the Transactions, members of
management received shares of common stock of Holdings ("Restricted
Stock") on August 5, 1996. The dollar amounts included in the table
are based on an assumed August 5, 1996 per share value of $5.44, which
was the price per share attributable to the common stock of Holdings
issued in the Transactions. The recipients of the Restricted Stock are
parties to a Stockholders Agreement which, among other things,
provides that the Restricted Stock will vest in increments of 20% per
year so long as the holder of such stock remains employed by the
Company. In certain events, the vesting will be accelerated.
Dividends, if any, are payable to the holders as and when declared and
paid. Because Holdings does not have any capital stock which is
publicly-traded, there has not been any market determination of the
dollar value of the Restricted Stock as of December 31, 1997.
(3) This column includes the following: (i) Company contributions and
allocations under the Company's defined contribution retirement plans
for the accounts of each of the named executive officers (for 1997:
Mr. Lyon-$3,092, Mr. Barnard-$3,092, Mr. Hoffman-$3,092, Mr.
Melton-$3,092 and Mr. Robbins-$2,959); (ii) Company contributions to
the group term life insurance plan for each of the named executive
officers (for 1997: Mr. Lyon-$2,640, Mr. Barnard-$2,421, Mr.
Hoffman-$2,640, Mr. Melton-$2,640 and Mr. Robbins-$2,370); (iii) the
Company's cash payments in lieu of contributions under the Company's
defined contribution plans for each of the named executive officers
(for 1997: Mr. Lyon-$4,638, Mr. Barnard-$4,638, Mr. Hoffman-$4,638,
Mr. Melton-$4,638, Mr. Robbins-$4,438); (iv) Company contributions and
allocations under the Company's Benefit Restoration Plan (for 1997:
Mr. Lyon-$17,000, Mr. Barnard-$608, Mr. Hoffman-$858 and Mr.
Melton-$744); (v) in the case of Mr. Barnard, $13,750 received
in 1997 as reimbursement in connection with his relocation; and (vi)
in the case of Mr. Robbins $7,500 received in 1997 as loan forgiveness
in connection with his 1994 relocation.
(4) This figure includes an amount Mr. Lyon received in connection with
his efforts in securing bank debt, subordinated debt and securitized
receivables financing for the Company's acquisition in August 1996 of
the Home Furnishings Group.
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PENSION PLAN TABLE
The named executive officers participate in pension plans maintained
by the Company for certain of its salaried employees. The following table shows
estimated annual retirement benefits payable for life at age 65 for various
levels of compensation and service under these plans.
<TABLE>
<CAPTION>
YEARS OF SERVICE (1)
REMUNERATION(2) 5 10 15 20 25 30
- -------------- ------------- ------------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
$100,000 $ 5,645 $11,290 $ 16,935 $ 22,580 $ 28,225 $ 33,870
200,000 11,290 22,580 33,870 45,161 56,451 67,741
300,000 16,935 33,870 50,806 67,741 84,676 101,611
400,000 22,580 45,161 67,741 90,321 112,902 135,482
500,000 28,225 56,451 84,676 113,902 141,127 169,352
600,000 33,870 67,741 101,611 135,482 169,352 203,223
</TABLE>
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(1) The plans provide credit for employment with the Company and, except
for Mr. Lyon, for prior employment with any of Masco and certain
affiliates of Masco. Vesting occurs after five full years of
employment or upon retirement at or after attaining age 65. The
benefit amounts set forth in the table above have been converted from
the plans' calculated five-year certain and life benefit and are not
subjected to reduction for social security benefits or for other
offsets, except to the extent that pension or equivalent benefits are
payable, other than to Mr. Lyon, under a Masco plan or a plan of
certain affiliates of Masco. The table does not depict Internal
Revenue Code ("Code") limitations on tax-qualified plans because one
of the plans is a non-qualified plan established by the Company to
restore, for certain salaried employees (including the named executive
officers), benefits that are otherwise limited by the Code. For each
year of credited service prior to July 1, 1971, there is an additional
annual benefit equal to .2 of 1 percent of final average earnings in
excess of $9,000. Approximate years of credited service for the named
executive officers participating in the plan are: Mr. Lyon-1; Mr.
Barnard-5; Mr. Hoffman-28; Mr. Melton-25; and Mr. Robbins-29.
(2) For purposes of determining benefits payable, remuneration is equal to
the average of the highest five consecutive January 1 annual base
salary rates paid by the Company prior to retirement.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company does not have a standing Compensation Committee. All
decisions respecting the compensation of executive officers are made by the
Board of Directors. Wayne B. Lyon, Chairman of the Board, President and Chief
Executive Officer, does not participate in board deliberations respecting his
own compensation.
DIRECTOR COMPENSATION
The directors of the Company who are officers, employees or otherwise
affiliates of Holdings or the Company do not presently receive compensation for
their services as directors. Directors of the Company are entitled to
reimbursement of their reasonable out-of-pocket expenses in connection with
their travel to and attendance at meetings of the board of directors or
committees thereof. The directors of the Company who are not also officers,
employees or otherwise affiliates of Holdings or the Company receive an annual
fee of $25,000 plus $1,000 for each meeting attended.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Company's authorized capital stock consists of 3,000 shares of
common stock, par value $.01 per share, 100 shares of which are issued and
outstanding and owned by Holdings.
Holdings' authorized capital stock consists of 6,000,000 shares of
Class A Common Stock, par value $.01 per share (the "Class A Common Stock")
(consisting of four series, 1,000,000 shares of Series A-1 Common Stock,
1,000,000 shares of Series A-2 Common Stock, 1,000,000 shares of Series A-3
Common Stock and 3,000,000 shares of Series I Common Stock (which will only be
issuable after the occurrence of a public offering meeting certain criteria as
set forth in the Stockholders Agreement (as defined below) (a "Qualifying
Offering"))), 6,000,000 shares of Class B
5
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Common Stock, par value $.01 per share (the "Class B Common Stock") (consisting
of four series, 1,000,000 shares of Series B-1 Common Stock, 1,000,000 shares of
Series B-2 Common Stock, 1,000,000 shares of Series B-3 Common Stock and
3,000,000 shares of Series II Common Stock (which will only be issuable after a
Qualifying Offering)), 116,100 shares of Class C Common Stock, par value $.01
per share (the "Class C Common Stock," together with the Class A Common Stock
and Class B Common Stock, the "Holdings Common Stock"), 100,000 shares of Class
D Common Stock, par value $.01 per share, a special class designed to track the
performance of a subsidiary of Holdings that is not a subsidiary of the Company
(the "Class D Common Stock"), and 4,000,000 shares of Preferred Stock, par value
$.01 per share, of which the following series have been designated: 1,103,320
shares of Series A-1 Preferred Stock, stated value $100 per share (the "Series
A-1 Preferred Stock"), 96,681 shares of Series A-2 Preferred Stock, stated value
$100 per share (the "Series A-2 Preferred Stock" and, together with the Series
A-1 Preferred Stock, the "Senior Preferred Stock"), 303,503 shares of Series B
Convertible Preferred Stock, stated value $6.02 per share (the "Series B
Preferred Stock"), and 102,622 shares of Series C Convertible Preferred Stock,
stated value $6.02 per share (the "Series C Preferred Stock" and, together with
the Series B Preferred Stock, the "Convertible Preferred Stock"). There is no
established public trading market for these securities of Holdings.
The stockholders of Holdings are party to a Stockholders Agreement,
dated as of August 5, 1996, as amended (the "Stockholders Agreement"),
pertaining to such matters as (i) the composition of the board of directors of
Holdings; (ii) corporate governance; and (iii) restrictions on the transfer of
such stock.
The table below sets forth certain information regarding the equity
ownership of Holdings as of March 31, 1998 by (i) each person or entity who
beneficially owns five percent or more of any class of voting capital stock;
(ii) each director of the Company; (iii) each executive officer of the
Company named in Item 11 above; and (iv) the directors and executive
officers of the Company, as a group. Each holder of Class A Common Stock and
each holder of Class B Common Stock holds an equal number of shares of each
series thereof (other than Series I or Series II). Certain of the securities
of Holding are convertible into other securities. Except as noted in the
footnotes to the table, the information in the table below assumes no such
conversion.
6
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<TABLE>
<CAPTION>
CAPITALIZATION OF HOLDINGS
CLASS A CLASS B CLASS C CLASS D SERIES A-1 SERIES A-2 SERIES B SERIES C
NAME AND ADDRESS COMMON COMMON COMMON COMMON PREFERRED PREFERRED PREFERRED PREFERRED
- ---------------- ------ ------ ------ ------ --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
399 Venture Partners, Inc. 33,781 174,676 -- 6,158 380,833 -- -- 69,289
399 Park Avenue 34.4% 46.8% -- 66.4% 34.5% -- -- 67.5%
New York, NY
Travelers Group Inc. . . . . 4,905 23,385 -- 1,009 55,419 -- -- 12,050
(and certain affiliates) 5.0% 6.3% -- 10.9% 5.0% -- -- 11.7%
388 Greenwich Street
New York, NY
Masco Corporation (1) . . . . 15,000 71,490 -- 1,009 550,090 -- 303,503 --
21001 Van Born Road 15.3% 19.2% -- 10.9% 49.9% -- 100.0% --
Taylor, MI
CCT Partners III, L.P. (2) . . 5,961 30,825 -- -- 67,206 -- -- 12,227
399 Park Avenue 6.1% 8.3% 6.1% 11.9%
New York, NY
Wayne B. Lyon . . . . . . . . .32,766 90,561 -- 1,009 550,090 23,085 303,503 --
including Common and 33.4% 24.3% -- 10.9% 49.9% 28.0% 100.0% --
Preferred Stock owned by
Masco Corporation (3)
1300 National Highway
Thomasville, NC
Douglas C. Barnard . . . . . . 34,179 50,022 114,498 -- -- * -- --
individually and as voting 34.8% 13.4% 100.0% -- -- * -- --
trustee for the
management investors (4)
1300 National Highway
Thomasville, NC
Ronald J. Hoffman . . . . . . * * 2,500 -- -- * -- --
1300 National Highway * * 2.2% -- -- * -- --
Thomasville, NC
James R. Melton . . . . . . . . * * 2,500 -- -- * -- --
1300 National Highway * * 2.2% -- -- * -- --
Thomasville, NC
Ronnie R. Robbins, Jr. . . . . * * * -- -- * -- --
1300 National Highway * * * -- -- * -- --
Thomasville, NC
Richard M. Cashin, Jr. (6) . . 34,846 180,185 -- 6,317 392,844 -- -- 71,474
399 Venture Partners, Inc. 35.5% 48.3% -- 68.2% 35.6% -- -- 69.6%
399 Park Avenue
New York, NY
David L. Johnston . . . . . . . -- * -- -- -- * -- --
3690 Peel Street -- * -- -- -- * -- --
Montreal, Quebec
Canada
Robert C. Larson (5) . . . . -- * -- -- -- * -- --
Taubman Realty Group -- * -- -- -- * -- --
200 East Long Lake Road
Bloomfield Hills, MI
David F. Thomas (6) . . . . . 34,846 180,185 -- 6,317 392,844 -- -- 71,474
399 Venture Partners, Inc. 35.5% 48.3% -- 68.2% 35.6% -- -- 69.6%
399 Park Avenue
New York, NY
</TABLE>
7
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<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Martin D. Walker . . . . . . . -- * -- -- -- * -- --
24500 Center Ridge Rd. -- * -- -- -- * -- --
Suite 275
Westlake, Ohio
Directors and named . . . . . 85,091 307,205 114,498 7,487 954,944 26,024 303,503 73,659
executive officers of the 86.6% 82.3% 100.0% 80.8% 86.6% 31.5% 100.0% 71.8%
Company, as a group
(10 persons) (7)
</TABLE>
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* less than 1.0%
(1) Masco's fully-diluted (assuming conversion of all Convertible
Preferred Stock) ownership of Holdings Common Stock is 39.3%.
However, Masco is restricted from holding more than 19.9% of the
Holdings Common Stock.
(2) CCT Partners III, L.P. ("CCT") is a limited partnership, the partners
of which are certain employees of 339 Venture Partners, Inc. Shares
held by CCT are not included in the table as shares beneficially
owned by 339 Ventures Partners, Inc.
(3) Amounts shown include shares held by Masco, as well as 17,776 shares
of Class A Common Stock and 19,071 shares of Class B Common Stock
held by an estate planning trust for the benefit of Mr. Lyon's family
members, all of which shares may be deemed to be beneficially owned
by Mr. Lyon. Mr. Lyon disclaims beneficial ownership of all such
shares.
(4) Amounts shown consist of shares held by Mr. Barnard individually and
as voting trustee for the members of management. Mr. Barnard has no
pecuniary interest in such shares other than 203 shares of Class A
Common Stock, 218 shares of Class B Common Stock and 2,000 shares of
Class C Common Stock. In addition, Mr. Barnard holds less than 1.0%
of the Series A-2 Preferred Stock. Mr. Barnard disclaims beneficial
ownership of shares held by himself as voting trustee for other
management investors.
(5) Amounts shown consist of shares held by a limited partnership for the
benefit of Mr. Larson's family members.
(6) Amounts shown include shares held by 399 Venture Partners, Inc.,
which may be deemed to be beneficially owned by Messrs. Cashin and
Thomas. Messrs. Cashin and Thomas disclaim beneficial ownership of
such shares. In addition, amounts shown for Messrs. Cashin and
Thomas include 1,065 shares of Class A Common Stock, 5,509 shares
of Class B Common Stock, 160 shares of Class D Common Stock, 12,011
shares of Series A-1 Preferred Stock and 2,185 shares of Series C
Preferred Stock held directly by each. Amounts shown for Messrs.
Cashin and Thomas exclude shares held by CCT, a limited partnership
in which each has an indirect economic interest as a limited
partner.
(7) Amounts shown include shares held by 399 Venture Partners, Inc.,
which may be deemed to be beneficially owned by Messrs. Cashin and
Thomas, shares held by Masco and by an estate planning trust for
the benefit of Mr. Lyon's family members, all of which may be
deemed to be beneficially owned by Mr. Lyon, and shares held by
Mr. Barnard as voting trustee for the management investors, which
may be deemed to be beneficially owned by Mr. Barnard. Messrs.
Cashin and Thomas disclaim beneficial ownership of shares held by
399 Venture Partners, Inc., Mr. Lyon disclaims beneficial ownership
of shares held by Masco and of shares owned by an estate planning
trust for the benefit of Mr. Lyon's family members, and Mr. Barnard
disclaims beneficial ownership of shares held by himself as voting
trustee for other management investors.
8
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
BUSINESS ARRANGEMENTS WITH HOLDINGS
As a part of the Transactions, Holdings and the Company entered into
a Management Agreement pursuant to which Holdings provides to the Company
executive management, corporate support, administrative, data processing, human
resources, legal, environmental, audit, treasury, tax and other
management-related services. The Company compensates Holdings in an amount equal
to Holdings's actual cost of providing such services. Those costs approximated
$15.8 million during 1997 and $6.6 million for the period August 6, 1996 to
December 31, 1996, of which approximately $1.5 million was included in accrued
liabilities at December 31, 1997 and 1996.
The Company sells furniture and accessories to certain distribution
businesses owned by Holdings. The Company's sales to Holdings were $38.6 million
during 1997 and $21.2 million for the period August 6, 1996 to December 31,
1996. As a result of these sales transactions, the Company had accounts
receivable totaling $15.0 million and $13.6 million at December 31, 1997 and
1996, respectively.
ACQUISITION ARRANGEMENTS
Certain provisions of the Acquisition Agreement survive the
consummation of the Transactions and continue for a period as contractual
obligations between Masco and Holdings. The following summarizes the provisions
of the Acquisition Agreement.
Masco has made various representations, warranties and covenants
respecting the Home Furnishings Group, and the Acquisition Agreement provides
for indemnification by Masco for periods of one to three years in the event of
any breach of such representations, warranties or covenants. With certain
exceptions, Masco will not be obligated to make payments for the first $15.0
million of indemnifiable claims nor be obligated to make payments of more than
$100.0 million. The Acquisition Agreement provides that Masco has the exclusive
right to undertake certain activities relating to environmental matters
pertaining to the Company for which Masco may be responsible under the
indemnification provisions with the prior written consent of Holdings, such
consent not to be unreasonably withheld. Holdings will cooperate with Masco
regarding these activities and, with certain exceptions, reimburse Masco for
reasonable costs and expenses until Holdings has incurred damages in specified
amounts.
Masco has agreed that it will not (i) on or prior to August 5, 2001
engage in the design or manufacture of certain furniture and fabric products
(the "Restricted Activities") or acquire an interest in an entity that would
result in Masco having annual revenues from Restricted Activities that exceed
certain levels or (ii) on or prior to August 5, 1998 (a) cause or attempt to
cause any customer or supplier of the Company or its subsidiaries to terminate
or materially reduce its business with the Company or its subsidiaries or (b)
initiate contact (other than through general solicitation to the public) with
any officer of the Company or its subsidiaries for the purpose of offering
employment by Masco or any of its subsidiaries.
PURCHASE OF STOCK FROM 399 VENTURE PARTNERS, INC.
In March 1997, pursuant to an option granted by 399 Venture Partners,
Inc. as part of the Transactions, Holdings acquired (i) 4,842 shares of Class A
Common Stock (divided equally among the series thereof) at $5.44 per share; (ii)
5,199 shares of Class B Common Stock (divided equally among the series thereof)
at $5.44 per share; and (iii) 13,770 shares of Series A-2 Preferred Stock at
$100 per share plus accreted dividends. Such shares were issued to certain
members of management (but not any of the named executive officers in Item 11)
pursuant to a Management Investment Plan.
TAX SHARING AGREEMENT
Holdings, the Company and its United States subsidiaries are included
in the consolidated United States federal income tax return of Holdings.
Holdings, the Company and certain of the Company's United States subsidiaries
have entered into the Tax Sharing Agreement whereby the Company pays Holdings
(or Holdings pays the Company)
9
<PAGE>
its pro rata share of the total tax liability, as set out in the Tax Sharing
Agreement. In the event the Company is included in a joint, combined,
consolidated or unitary state or local income or franchise tax return with
Holdings, the Company shall make payments to Holdings, and Holdings shall make
payments to the Company, in a manner consistent with that described above for
federal tax purposes. In 1997, the Company paid $22.8 million to Holdings
pursuant to such Agreement.
10
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereto duly authorized.
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
By: _____________________________________
Wayne B. Lyon
Chairman of the Board,
President and Chief Executive Officer
April ____, 1998
Pursuant to the requirements of the Securities Act of 1934, this
Report has been signed below by the following persons in the capacities and on
the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
__________________________________ Chairman of the Board, President and Chief Executive Officer April 25, 1998
Wayne B. Lyon (principal executive officer)
__________________________________ Vice President, Treasurer and Chief Financial Officer April 25, 1998
Ronald J. Hoffman (principal financial and accounting officer)
__________________________________ Director April 25, 1998
Richard M. Cashin, Jr.
__________________________________ Director April 25, 1998
David L. Johnston
__________________________________ Director April 25, 1998
Robert C. Larson
__________________________________ Director April 25, 1998
David F. Thomas
__________________________________ Director April 25, 1998
Martin D. Walker
</TABLE>
11
