<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) May 13, 1996
------------------------------
Leggett & Platt, Incorporated
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Missouri 1-7845 44-0324630
- ------------------------------------------------------------------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
No. 1 Leggett Road, Carthage, MO 64836
- ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (417) 358-8131
----------------------------
- ------------------------------------------------------------------------------
(Former name or former address, if changed since last report.)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Leggett & Platt, Incorporated (the "Company") acquired Pace Holdings, Inc.
("Holdings") of Fayetteville, Arkansas on May 13, 1996. The acquisition was
accomplished through the merger (the "Merger") of a wholly owned subsidiary of
the Company into Holdings. As a result of the transaction, Holdings became a
wholly owned subsidiary of the Company. Pace Industries, Inc. ("Pace"), the
principal operating subsidiary of Holdings, also became a subsidiary of the
Company as a result of the transaction.
Pursuant to the merger, the Company issued approximately 5,134,000 shares
(the "L&P Shares") of its common stock ("L&P Stock"), $.01 par value, to the 40
shareholders of Holdings, including certain Holdings directors and executive
officers. Set out below is further information concerning the directors,
executive officers and holders of more than 5% of the common stock of Holdings
("Holdings Stock").
<TABLE>
<CAPTION>
Shares of Holdings
Stock Beneficially
Owned Prior to Merger
-----------------------
Name and Address Shares Percent
- ---------------- ------ -------
<S> <C> <C>
KP Holdings, L.P.* 103,000 31.2%
c/o Kenner & Company, Inc.
437 Madison Avenue
New York, NY 10022
UBS Capital LLC 48,000 14.5%
299 Park Avenue
New York, NY 10171-0026
Bob L. Gaddy 43,215** 13.1%
c/o Pace Holdings, Inc.
One McIlroy Plaza, Suite 401
Fayetteville, AR 72701
James F. Keenan 29,794 9.0%
211 Seaview Avenue
Palm Beach, FL 33480
Alice L. Walton 20,000 6.1%
c/o Llama Company
One McIlroy Plaza, Suite 301
Fayetteville, AR 72701
James D. Starkey 16,196 4.9%
c/o the Company
One McIlroy Plaza, Suite 401
Fayetteville, AR 72701
J. Scott Bull 13,661 4.1%
c/o the Company
One McIlroy Plaza, Suite 401
Fayetteville, AR 72701
</TABLE>
* Jeffrey L. Kenner and John M. Baldwin were directors of Holdings and
executive officers of Kenner & Company, Inc. Each is therefore deemed to
beneficially own these shares.
** Includes shares held by trusts which Mr. Gaddy serves as Trustee.
<PAGE>
Bob L. Gaddy, the Chairman and Chief Executive Officer of Holdings, has
been elected as a director and senior vice president of the Company.
Each share of Holdings Stock, issued and outstanding immediately prior to
the effective date of the Merger (the "Effective Date") was converted, pursuant
to the terms of the Merger including provisions for adjustments to the merger
consideration, into the right to receive approximately 15.7124 shares of L&P
Stock and cash in lieu of fractional shares.
Holdings was a privately owned company with annual sales of about $200
million for the fiscal year ended June 30, 1995. Holdings and its primary
operating subsidiary, Pace Industries, Inc., is a leading manufacturer of non-
automotive aluminum die cast products. Products manufactured and sold by
Holdings and its subsidiaries include die castings for gas barbeque grills,
outdoor lighting, electrical motors, clean room flooring and other consumer
and industrial products. Holdings and its subsidiaries operate approximately
eight manufacturing facilities. The Company intends to continue the general
lines of business acquired in the Holdings transaction.
ITEM 7(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
(1) The following consolidated financial statements of Pace Holdings, Inc.
are incorporated by reference from the Company's Registration
Statement on Form S-3 (Registration Number 333-03233).
Financial Statements -- June 30, 1995 and 1994 -- Audited
Report of Independent Accountants
Consolidated Balance Sheet
Consolidated Statement of Income
Consolidated Statement of Stockholders' Equity
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
(2) Financial Statements -- March 31, 1996 -- Unaudited
Consolidated Condensed Balance Sheet at March 31, 1996 and
June 30, 1995
Consolidated Condensed Statement of Operations for nine months
ended March 31, 1996 and March 31, 1995
Consolidated Condensed Statement of Cash Flows for nine months
ended March 31, 1996 and March 31, 1995
Notes to Consolidated Condensed Financial Statements
ITEM 7(b) PRO FORMA FINANCIAL INFORMATION
1. Leggett & Platt, Incorporated and Subsidiaries and Pace Holdings, Inc.
and Subsidiary Pro Forma Condensed and Combined Balance Sheet as of
March 31, 1996 (Unaudited)
2. Leggett & Platt, Incorporated and Subsidiaries and Pace Holdings, Inc.
and Subsidiary Pro Forma Condensed and Combined Statement of Earnings
for the Three Months Ended March 31, 1996 (Unaudited)
3. Leggett & Platt, Incorporated and Subsidiaries and Pace Holdings, Inc.
and Subsidiary Pro Forma Condensed Combined Statement of Earnings for
the Twelve Months Ended December 31, 1995 (Unaudited)
4. Leggett & Platt, Incorporated and Subsidiaries and Pace Holdings, Inc.
and Subsidiary Pro Forma Condensed Combined Statement of Earnings for
the Twelve Months Ended December 31, 1994 (Unaudited)
5. Leggett & Platt, Incorporated and Subsidiaries and Pace Holdings, Inc.
and Subsidiary Notes to Pro Forma Condensed Combined Financial
Statements (Unaudited)
ITEM 7(c) EXHIBITS
See Exhibit Index
<PAGE>
PACE HOLDINGS, INC.
AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
<PAGE>
PACE HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEET
(Dollars in Thousands Except Shares and Par Value)
(Unaudited)
<TABLE>
<CAPTION>
ASSETS March 31, June 30,
1996 1995
--------- ---------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 785 $ 254
Accounts and notes receivable, net 53,848 42,016
Inventories 57,666 25,429
Other current assets 2,440 357
--------- ---------
Total current assets 114,739 68,056
--------- ---------
Property, plant and equipment:
Less accumulated depreciation and amortization of $9,605 at
March 31, 1996 and $5,894 at June 30, 1995 60,678 48,148
Excess of investment over net assets acquired 74,741 70,374
Other assets 8,533 10,915
--------- ---------
Total assets $ 258,691 $ 197,493
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 4,272 $ 671
Accounts payable 35,076 25,850
Accrued liabilities 10,818 7,062
--------- ---------
Total current liabilities 50,166 33,583
--------- ---------
Long-term debt 169,714 129,129
--------- ---------
Subordinated notes 20,000 20,000
--------- ---------
Other long-term obligations 1,610 1,374
--------- ---------
Deferred income taxes 6,018 7,950
--------- ---------
Commitments and contingencies (Note 4)
Minority interest in subsidiary 2,216 2,041
--------- ---------
Stockholders' equity:
Common Stock, par value $.01 per share:
Class A, voting, 1,000,000 shares authorized,
300,000 shares issued and outstanding 3 3
Class B, non-voting, 26,163 shares authorized,
14,492 shares issued and outstanding - -
Additional paid-in capital 38,119 29,997
Carryover basis adjustment attributable to the continuing
management stockholders (31,079) (31,079)
Retained earnings 1,924 4,495
--------- ---------
Total stockholders' equity 8,967 3,416
--------- ---------
Total liabilities and stockholders' equity $ 258,691 $ 197,493
========= =========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
<PAGE>
PACE HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
-------------------------
1996 1995
---------- -----------
<S> <C> <C>
Net sales $ 141,585 $ 117,107
Cost of sales 114,996 92,992
---------- -----------
Gross profit 26,589 24,115
Selling, general and administrative expenses 10,878 7,812
Amortization of intangibles 4,705 4,361
---------- -----------
Operating income 11,006 11,942
Other income (expense):
Interest expense (15,876) (13,171)
Other income 65 (77)
---------- -----------
Loss before income taxes (4,805) (1,306)
Income tax benefit 2,409 346
---------- -----------
Loss before minority interest (2,396) (960)
Minority interest in (income)
loss of consolidated subsidiary (175) 134
---------- -----------
Net loss $ (2,571) $ (826)
========== ===========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
2
<PAGE>
PACE HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
-------------------------
1996 1995
---------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (2,571) $ (826)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation 3,725 2,904
Amortization 5,395 5,025
Loss (gain) on sale of property, plant and equipment (2) 16
Minority interest in loss (income) of consolidated subsidiary 175 (134)
Deferred income taxes (1,932) (567)
Change in assets and liabilities:
Accounts and notes receivable (10,460) (3,931)
Inventories (30,547) (23,264)
Other current assets (2,083) (356)
Other assets (496) (1,899)
Accounts payable 9,042 9,553
Accrued liabilities 2,423 2,594
---------- -----------
Net cash provided by (used in) operating activities (27,331) (10,885)
---------- -----------
Cash flows from investing activities:
Purchase of property, plant and equipment (11,060) (7,232)
Proceeds from sale of equipment 14 123
Acquisition of business 91 -
Payment of deferred cost - (1,359)
Collection of notes receivable 342 365
---------- -----------
Net cash provided by (used in) investing activities (10,613) (8,103)
---------- -----------
Cash flows from financing activities:
Proceeds from long-term debt 41,621 18,705
Payments of long-term debt (860) (689)
Payments of other long-term obligations (36) -
Payment of deferred loan fees (275) -
Proceeds from minority interest - 965
Redemption of Class B shares (1,975) -
---------- -----------
Net cash provided by (used in) financing activities 38,475 18,981
---------- -----------
Net increase (decrease) in cash and cash equivalents 531 (7)
Cash and cash equivalents - beginning 254 473
---------- -----------
Cash and cash equivalents - ending $ 785 $ 466
========== ===========
Supplementary disclosure of cash flow information:
Cash paid during the period for:
Income taxes $ 2,808 $ 1,626
Interest 12,005 9,527
Non-cash investing and financing activities:
Equipment acquired by issuance of note payable 1,500 -
Business acquired by issuance of stock 10,097 -
</TABLE>
See accompanying notes to consolidated condensed financial statements.
<PAGE>
PACE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Dollars in Thousands)
(Unaudited)
NOTE 1. GENERAL
In the opinion of management, the accompanying consolidated condensed
financial statements contain all adjustments (adjustments are of a normal
recurring nature) necessary to present fairly the consolidated financial
position of Pace Holdings, Inc. and Subsidiary (the "Company") as of March 31,
1996 and June 30, 1995, and the consolidated results of operations for the nine
month periods ended March 31, 1996 and 1995 and the consolidated cash flows for
the nine month periods ended March 31, 1996 and 1995. Results of operations for
the nine months ended March 31, 1996, are not necessarily indicative of results
which will be achieved for the full fiscal year.
NOTE 2. INVENTORIES
The components of inventory are as follows:
<TABLE>
<CAPTION>
March 31, June 30,
1996 1995
--------- --------
<S> <C> <C>
Finished Goods $32,036 $ 8,811
Work-In-Process 5,518 4,199
Raw Materials 12,777 6,364
Supplies 7,335 6,055
------- -------
$57,666 $25,429
======= =======
</TABLE>
NOTE 3. RELATED PARTIES
The Company has provided administrative, marketing and distribution
functions to an affiliated company at the Company's cost. The affiliated
company has performed verti-cast die casting operations, similar to a sub-
contractor, using raw materials provided by the Company pursuant to a supply
agreement between the Company and the affiliated company. Billings to the
Company for services provided by the affiliated company were $4.3 million and
$7.8 million during the nine months ended March 31, 1996 and 1995, respectively.
Effective December 1, 1995, the Company discontinued this relationship.
NOTE 4. CONTINGENCIES
In connection with the acquisition of Universal Die Casting, Inc.
("Universal") assets by Precision Industries, Inc. ("Precision"), an entity
subsequently acquired by the Company during fiscal 1990, the National Labor
Relations Board ("NLRB") filed a complaint based on an unfair labor charge filed
by the union representing the former employees of Universal. The complaint
alleges that the Company refused to hire former employees of Universal because
they were union members and refused to bargain with the union. It seeks back pay
and benefits, together with interest thereon, from October 18, 1988, and
reinstatement on behalf of 81 individuals. In May 1993, the administrative law
judge in a recommended order, rendered a decision against the Company. The
recommended order would require the Company to recognize and bargain with the
union and to offer immediate and full reinstatement of 61 employees and make
such
4
<PAGE>
employees whole for any loss of earnings and other benefits suffered as a result
of the alleged discrimination against them. However, under applicable law, such
damages would generally be reduced by the amount of mitigation, if any, by such
individuals, including salary and benefits earned by such individuals since
October 18, 1988. The Company filed an appeal to the full NLRB in Washington and
exceptions to the administrative law judge's recommended order. On January 3,
1996, the NLRB rendered its decision on the Company's appeal by affirming the
administrative law judge's decision and recommended order against the Company.
The Company has appealled the NLRB's decision to the Eighth Circuit Court of
Appeals in St. Louis, Missouri and will contest individual backpay
specifications in NLRB compliance proceedings, if necessary. During August 1994,
the Company began implementation of a plan to offer employment to certain of
these individuals, which offers, in the event there was an unfavorable outcome
to the Company regarding this matter, would toll the accrual of any further back
pay and benefits. The Company believes its hiring practices were objective and
complied with all labor laws and that the individuals were denied employment for
legitimate reasons. The Company and special litigation counsel have concluded
that it is only reasonably possible that there could be an adverse outcome with
respect to these proceedings.
On May 23, 1994, TRW Inc., an Ohio corporation ("TRW") filed a complaint
styled as TRW Inc. v. Pace Industries, Inc. and Pace Industries Cast-Tech
Division, Inc., No. 94CV71983DT, in United States District Court in the Eastern
District of the State of Michigan alleging that the Company breached supply
contracts between the parties in 1991 and 1992 and seeking compensatory damages
of $4.7 million and punitive damages of $10 million. On November 2, 1994, the
Company filed an answer and counterclaim to the TRW complaint denying the
allegations in the TRW complaint and claiming compensatory damages approximating
$12 million relating to: (i) the nonpayment of invoices for parts ordered and
accepted by TRW; (ii) the nonpayment by TRW for parts ordered, but not accepted
and (iii) the breach of certain promises and misrepresentations by TRW regarding
assets and tooling purchased by the Company for the purpose of manufacturing and
supplying parts requested by TRW. On August 2, 1995, TRW filed an amended
complaint alleging essentially the same breach of contract claims for the $4.7
million of compensatory damages and an unspecified amount of exemplary damages,
although the $10 million claim for punitive damages was removed from the
litigation in the amended complaint by TRW. The Company intends to vigorously
pursue the counterclaim against TRW, while defending the allegations in the TRW
amended complaint, which the Company believes are without merit. The Company and
its counsel have concluded that it is only reasonably possible that there could
be an adverse outcome with respect to the TRW litigation. A rescheduled trial
date, of June 18, 1996, has been set with respect to this litigation and
discovery is currently in process.
NOTE 5. INCOME TAXES
The effective tax rate differs from the statutory rate primarily due to
amortization of goodwill which is not deductible for tax purposes. The
effective tax rate was calculated based on projected taxable income for the full
fiscal year and the anticipated changes in the deferred tax assets and deferred
tax liabilities.
NOTE 6. CLASS B COMMON STOCK
The Company had issued 18,329 shares of Class B Common Stock, that can be
put to the Company on specific dates beginning in January of 1996, giving the
Class B Shareholders the right to sell shares of the Class B Common Stock to the
Company at contractually specified prices. The put option had a total
contractual value of $10,097. During January 1996, 3,837 shares were put by the
Class B Shareholders for a total price of $1,975,000.
5
<PAGE>
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES
AND
PACE HOLDINGS, INC. AND SUBSIDIARY
PRO FORMA CONDENSED COMBINED BALANCE SHEET
MARCH 31, 1996
(Unaudited)
The following pro forma condensed combined balance sheet combines balance sheets
of Leggett & Platt, Incorporated and Subsidiaries (Leggett) and Pace Holdings,
Inc. and Subsidiary (Pace) at March 31, 1996, under the assumptions set forth in
the accompanying notes. The pro forma condensed combined balance sheet should be
read in conjunction with the separate financial statements and notes thereto of
Leggett and Pace. The pro forma condensed combined balance sheet is not
necessarily indicative of the financial position of the combined companies as it
may be in the future.
<TABLE>
<CAPTION>
Pro Forma Adjustments
Historical -------------------------
--------------------- Note Pro Forma
Leggett Pace Amount Reference Combined
--------- ------- ------------------------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 3.9 $ 0.8 $ $ 4.7
Receivables 283.1 53.9 337.0
Inventories 278.3 57.6 (2.8) (6) 333.1
Other current assets 38.2 2.4 40.6
--------- ------- ------- ---------
Total current assets 603.5 114.7 (2.8) 715.4
Property, Plant and Equipment - at cost 831.4 70.3 901.7
Less accumulated depreciation and amortization 369.5 9.6 379.1
--------- ------- ------- ---------
Net Property, Plant and Equipment 461.9 60.7 0.0 522.6
Other Assets
Investments in and advances to associated companies 5.6 0.0 9.9 (3) 5.6
(9.9) (4)
Goodwill, net 138.5 74.7 213.2
Sundry 52.9 8.5 (4.4) (7) 57.0
--------- ------- ------- ---------
TOTAL ASSETS $ 1,262.4 $ 258.6 $ (7.2) $ 1,513.8
========= ======= ======= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts and notes payable $ 83.4 $ 35.1 $ $ 118.5
Accrued expenses and other liabilities 169.2 15.0 184.2
--------- ------- ------- ---------
Total current liabilities 252.6 50.1 0.0 302.7
Long-Term Debt 175.3 189.7 27.2 (5)(8) 392.2
Deferred Income Taxes and Other Liabilities 68.0 7.6 (10.2) (9) 65.4
Minority interest in subsidiary 0.0 2.2 2.2
Shareholders' Equity
Common stock 0.8 0.0 0.1 (3) 0.9
Additional contributed capital 152.2 7.1 (7.6) (3)-(5) 151.7
Retained earnings 625.2 1.9 (16.7) (3)(4)(6)-(9) 610.4
Cumulative translation adjustment (5.0) 0.0 (5.0)
Less treasury stock (6.7) 0.0 (6.7)
--------- ------- ------- ---------
Total shareholders' equity 766.5 9.0 (24.2) 751.3
--------- ------- ------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,262.4 $ 258.6 $ (7.2) $ 1,513.8
========= ======= ======= =========
</TABLE>
<PAGE>
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES
AND
PACE HOLDINGS, INC. AND SUBSIDIARY
PRO FORMA CONDENSED COMBINED STATEMENT OF EARNINGS
THREE MONTHS ENDED MARCH 31, 1996
(Unaudited)
The following pro forma condensed combined statement of earnings combines the
operations of Leggett & Platt, Incorporated and Subsidiaries (Leggett) and Pace
Holdings, Inc. and Subsidiary (Pace) for the three months ended March 31, 1996.
This statement has been prepared under the assumptions set forth in the
accompanying notes. This statement should be read in conjunction with the
separate financial statements and notes thereto of Leggett and Pace. The pro
forma condensed combined statement of earnings is not necessarily indicative of
the results of operations of the combined companies as they may be in the future
or as they might have been had the acquisition been effective January 1, 1996.
<TABLE>
<CAPTION>
Pro Forma Adjustments
Historical -------------------------
--------------------- Note Pro Forma
Leggett Pace Amount Reference Combined
--------- ------- ------------------------- ---------
<S> <C> <C> <C> <C> <C>
Net sales $ 524.2 $ 67.1 $ $ 591.3
Costs, expenses and other
Cost of goods sold 393.9 54.2 0.0 (6) 448.1
Selling, distribution, administrative and other, net 68.1 5.6 73.7
Interest expense 2.6 5.7 (2.5) (7)(8) 5.8
--------- ------- ------- ---------
Total costs, expenses and other 464.6 65.5 (2.5) 527.6
--------- ------- ------- ---------
Earnings before income taxes 59.6 1.6 2.5 63.7
Income taxes 23.2 0.6 0.1 (9) 23.9
--------- ------- ------- ---------
Net Earnings $ 36.4 $ 1.0 $ 2.4 $ 39.8
========= ======= ======= =========
Net Earnings Per Share $ 0.43 $ 0.44
Average common and common
equivalent shares outstanding 85.2 90.3
</TABLE>
<PAGE>
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES
AND
PACE HOLDINGS, INC. AND SUBSIDIARY
PRO FORMA CONDENSED COMBINED STATEMENT OF EARNINGS
TWELVE MONTHS ENDED DECEMBER 31, 1995
(UNAUDITED)
(Amounts in Millions, except per share)
The following pro forma condensed combined statement of earnings combines the
operations of Leggett & Platt, Incorporated and Subsidiaries (Leggett) and Pace
Holdings, Inc. and Subsidiary (Pace) for the twelve months ended December 31,
1995. This statement has been prepared under the assumptions set forth in the
accompanying notes. This statement should be read in conjunction with the
separate financial statements and notes thereto of Leggett and Pace incorporated
by reference or included in this report. The pro forma condensed combined
statement of earnings is not necessarily indicative of the results of operations
of the combined companies as they may be in the future or as they might have
been had the acquisition been effective January 1, 1995.
<TABLE>
<CAPTION>
Historical Pro Forma Adjustments
------------------- ---------------------
Note Pro Forma
Leggett Pace Amount Reference Combined
--------- -------- ------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Net sales $2,059.3 $198.6 $ $2,257.9
Costs, expenses and other
Cost of goods sold 1,568.3 158.0 2.6 (6) 1,728.9
Selling, distribution, administrative and other, net 258.8 19.0 277.8
Interest expense 11.5 20.7 (5.9) (7)(8) 26.3
-------- ------ ----- --------
Total costs, expenses and other 1,838.6 197.7 (3.3) 2,033.0
-------- ------ ----- --------
Earnings before income taxes 220.7 0.9 3.3 224.9
Income taxes 85.8 1.1 1.3 (9) 88.2
-------- ------ ----- --------
Net Earnings $ 134.9 $ (0.2) $ 2.0 $ 136.7
======== ====== ===== ========
Net Earnings Per Share $ 1.59 $ 1.52
Average common and common equivalent shares outstanding 84.9 90.0
</TABLE>
<PAGE>
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES
AND
PACE HOLDINGS, INC. AND SUBSIDIARY
PRO FORMA CONDENSED COMBINED STATEMENT OF EARNINGS
TWELVE MONTHS ENDED DECEMBER 31, 1994
(UNAUDITED)
(Amounts in Millions, except per share)
The following pro forma condensed combined statement of earnings combines the
operations of Leggett & Platt, Incorporated and Subsidiaries (Leggett) and Pace
Holdings, Inc. and Subsidiary (Pace) for the twelve months ended December 31,
1994. This statement has been prepared under the assumptions set forth in the
accompanying notes. This statement should be read in conjunction with the
separate financial statements and notes thereto of Leggett and Pace incorporated
by reference or included in this report. The pro forma condensed combined
statement of earnings is not necessarily indicative of the results of operations
of the combined companies as they may be in the future or as they might have
been had the acquisition been effective January 1, 1994.
<TABLE>
<CAPTION>
Historical Pro Forma Adjustments
------------------- ---------------------
Note Pro Forma
Leggett Pace Amount Reference Combined
--------- -------- ------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Net sales $1,858.1 $151.4 $ $2,009.5
Costs, expenses and other
Cost of goods sold 1,429.1 116.1 1.3 (6) 1,546.5
Selling, distribution, administrative and other, net 229.7 15.7 245.4
Interest expense 9.8 17.3 (7.3) (7)(8) 19.8
-------- ------ ----- --------
Total costs, expenses and other 1,668.6 149.1 (6.0) 1,811.7
-------- ------ ----- --------
Earnings before income taxes 189.5 2.3 6.0 197.8
Income taxes 74.1 1.2 2.3 (9) 77.6
-------- ------ ----- --------
Net Earnings $ 115.4 $ 1.1 $ 3.7 $ 120.2
======== ====== ===== ========
Net Earnings Per Share $ 1.39 $ 1.36
Average common and common equivalent shares outstanding 83.1 88.2
</TABLE>
<PAGE>
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES
AND
PACE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(Unaudited)
(Amounts in Millions, except share data)
Note 1: The pro forma statements reflect Leggett & Platt, Incorporated's
(Leggett) acquisition of all of the outstanding voting common shares of
Pace Holdings, Inc. (Holdings) in exchange for approximately 5.1
million shares of Leggett's common stock in a transaction accounted for
as a pooling of interests. The pro forma condensed combined balance
sheet presents the acquisition of Pace Holdings, Inc. and Subsidiary
(Pace) as if it had occurred on March 31, 1996, while the pro forma
condensed combined statements of earnings for the three months ended
March 31, 1996 and the twelve months ended December 31, 1995 and 1994
present the acquisition as if it had occurred on January 1 of each
year. Only statements of earnings since 1994 are presented due to
Holdings' leveraged buyout of Pace Industries, Inc. in December, 1993.
Note 2: Pace has previously had a June 30 fiscal year end. The pro forma
condensed combined financial statements were prepared by restating
Pace's operating results to Leggett's December 31 fiscal year end.
Such presentation aligns comparable fiscal (calendar) quarters for Pace
and Leggett, and provides a basis for future comparability of combined
results. Pace's operating results are seasonal, with significant sales
and operating profits occurring in the first two calendar quarters of
the year.
Note 3: To record shares issued by Leggett for Holdings' voting common shares.
Note 4: To eliminate Leggett's investment in Holdings.
Note 5: To reflect the exercise of put options under change in control
provisions by holders of Holdings' non-voting stock.
Note 6: To adjust inventories to LIFO cost method to conform Pace's accounting
policies to those of Leggett.
Note 7: To eliminate debt issuance fees and related amortization.
Note 8: To reduce interest expense on debt which would have been retired
through the issuance of new debt with lower interest rates and to
recognize additional borrowing for merger related expenditures.
Note 9: To record the tax benefit on the items in Notes 6, 7 and 8.
Note 10: If the Merger is consummated, Leggett will incur up to $45 in
nonrecurring merger costs relating to debt restructuring, transaction
fees, the exercise of stock options and other contractual obligations.
These costs will be charged to the combined results of operations
during the current year and are not reflected in the pro forma
statements of earnings.
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Leggett & Platt, Incorporated
__________________________________
Registrant
May 24, 1996 /s/ Michael A. Glauher
_________________________ __________________________________
Date Signature
<PAGE>
Exhibit Index
Exhibit Sequential
Number Description Page Number
- ------ ----------- -----------
2 Merger Agreement..............................
23 Consent of Coopers & Lybrand..................
99 The following consolidated financial statements of Pace
Holdings, Inc. are incorporated by reference from the Company's
Registration Statement on Form S-3 (Registration Number 333-
03233).
Financial Statements -- June 30, 1995 and 1994 -- Audited
Report of Independent Accountants
Consolidated Balance Sheet
Consolidated Statement of Income
Consolidated Statement of Stockholders' Equity
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
<PAGE>
MERGER AGREEMENT
This Merger Agreement (this "Agreement"), dated as of April 11, 1996, among
Pace Holdings, Inc., a Delaware corporation (the "Company"), Pace Industries,
Inc., an Arkansas corporation ("Pace"), Leggett & Platt, Incorporated, a
Missouri corporation ("L&P"), and L&P Acquisition Company-7, a Delaware
corporation ("L&P Sub").
RECITALS
The Company owns 100% of the outstanding capital stock of Pace. Pace and
its subsidiaries and affiliates carry on an aluminum die casting and related
tool and die businesses at several facilities in the United States and Mexico.
L&P desires to acquire the Company and its subsidiaries, including Pace, through
the merger (the "Merger") of L&P Sub into the Company.
For federal income tax purposes, the parties intend that the Merger
provided for in this Agreement will qualify as a reorganization within the
meaning of Section 368 of the Internal Revenue Code of 1986, as amended (the
"Code") and for financial and accounting purposes will be accounted for as a
"pooling of interests."
Accordingly, in consideration of the premises and other good and valuable
consideration, the parties intending to be legally bound agree as follows:
1. THE MERGER
1.1 PARTIES, SURVIVOR, EFFECT. Pursuant to the terms and conditions of
this Agreement, upon Closing, L&P Sub shall be merged with and into the Company.
The Company shall be the surviving corporation. The Merger shall be consummated
pursuant to the General Corporation Law of Delaware. The Plan of Merger is set
forth as Exhibit 1.1.
1.2 MERGER CONSIDERATION. The "Merger Consideration" is 5,500,000 shares
of the common stock, $.01 par value, of L&P (the "L&P Common Stock"), adjusted
as provided in Exhibit 1.2. The shares of L&P Common Stock issued as Merger
Consideration are referred to as the "L&P Shares." The Merger Consideration
shall be allocated among Company Shares (as defined below) and options to
purchase Company Shares as set forth in Exhibit 1.2.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND PACE
The Company and Pace, jointly and severally, represent and warrant to L&P:
2.1 SUBSIDIARIES AND AFFILIATES; CAPITALIZATION. Schedule 2.1A lists all
of the Company's Subsidiaries and Affiliates. "Subsidiary" means any entity for
which the Company, directly or through other Subsidiaries, owns 50% or more of
the voting power. "Affiliate" means any person or entity which controls, is
controlled by or is under common control with the Company. The term Affiliate
includes all Subsidiaries. Pace is a direct, wholly owned Subsidiary of the
Company.
All authorized capital stock, issued and outstanding capital stock and
treasury shares of the Company and each of the Company's Subsidiaries are listed
in Schedule 2.1B. The
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authorized capital stock of the Company is called the "Company Stock." All
issued and outstanding shares of Company Stock are referred to collectively as
the "Company Shares." All issued and outstanding equity interests of the
Subsidiaries are referred to as the "Subsidiary Shares." The ownership of the
Company Shares and the Subsidiary Shares is set forth on Schedule 2.1C. The
holders of Company Shares are called the "Shareholders."
All Company Shares and Subsidiary Shares have been duly authorized and
validly issued and are fully paid and nonassessable. All issuances, transfers or
purchases of Subsidiary Shares and, to the best of the Company's knowledge,
Company Shares have been in compliance with all applicable agreements and laws.
Except as disclosed on Schedule 2.1C and in the Current SEC Reports, there are
no outstanding subscriptions, options, rights, warrants, rights of first
refusal, convertible securities, or other agreements or commitments obligating
the Company or any Subsidiary to issue or to transfer or to purchase any Company
Shares or Subsidiary Shares, or, to the best of the Company's knowledge, for any
Shareholder of the Company to transfer any Company Shares.
2.2 TITLE TO SECURITIES. All Company Shares are owned of record by the
persons identified in Schedule 2.1C. Except as disclosed on Schedule 2.1C, all
Subsidiary Shares are owned of record and beneficially by the persons identified
in Schedule 2.1C and are owned by the persons identified in Schedule 2.1C free
and clear of any liens, encumbrances, security agreements, claims, restrictions,
voting agreements, proxies, options, rights of first refusal, contractual rights
or other interests (collectively "Claims"). The Company has not received written
notice from any person that it has an adverse claim with respect to any Company
Shares. Except as disclosed on Schedule 2.1C, no prior offer, issue, purchase,
sale, merger, transfer or other transaction by the Company or any Subsidiary
with respect to any Company Shares or Subsidiary Shares (including shares,
options, warrants, or debt convertible into shares, options or warrants), or
capital stock of any corporation which has merged into the Company, has given
rise to any Claim or action which is enforceable against the Company, any
Subsidiary, L&P or L&P Sub.
2.3 ORGANIZATION. The Company and each Subsidiary are corporations duly
organized, validly existing and in good standing under the laws of the states of
their respective incorporation. The Company and each Subsidiary are duly
qualified and in good standing in each jurisdiction where the conduct of their
businesses require them to be so qualified, except where the failure to be so
qualified would not in the aggregate have or result in a material adverse effect
or change on the financial condition, results of operations, cash flows, assets,
liabilities, business or prospects of the Company and its Subsidiaries taken as
a whole (a "Company Material Adverse Effect").
2.4 SEC REPORTS, FINANCIAL STATEMENTS, OBLIGATIONS AND LIABILITIES. Pace
has filed all required forms, reports and documents with the Securities and
Exchange Commission ("SEC") required to be filed by it pursuant to the federal
securities laws and the SEC rules and regulations thereunder, all of which have
complied in all material respects as of their respective filing dates, or, in
the case of registration statements, their respective effective dates, with all
applicable requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations promulgated thereunder. None of
such forms, reports or documents, including, without limitation, any exhibits,
financial statements or schedules included therein, at the time filed, or, in
the case of registration statements, their respective effective dates, contained
any untrue statement of a material fact or
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omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. Pace's annual report on Form 10-K for the year
ended June 30, 1995 and all forms, reports and documents filed by Pace with the
SEC since June 30, 1995 are hereinafter collectively referred to as the "Current
SEC Reports".
The "Pace Financial Statements" means the consolidated financial
statements of Pace and its subsidiaries (including the related notes and
schedules) included in the Current SEC Reports. The "Company Financial
Statements" means the Year-End Statements and Interim Statements of the Company
(including the related notes and schedules) listed in Schedule 2.4. Each of the
consolidated balance sheets of the Company in the Company Financial Statements
and each of the consolidated balance sheets of Pace in the Pace Financial
Statements fairly present the consolidated financial position of the Company,
Pace and its Subsidiaries, respectively, as of their respective dates and each
of the consolidated statements of income, shareholders' equity and cash flows of
the Company in the Company Financial Statements and of Pace in the Pace
Financial Statements fairly present the results of operations, shareholders'
equity and cash flows of the Company, Pace and its Subsidiaries, respectively
for the periods set forth therein (subject, in the case of unaudited statements
to normal year-end audit adjustments which would not be material in amount or
effect), in each case in accordance with generally accepted accounting
principles consistently applied during the periods involved, except as may be
noted therein. Except as provided in the Company Financial Statements and the
Pace Financial Statements, all transactions reflected in the Company's Financial
Statements and the Pace Financial Statements were on an arms-length basis.
Neither the Company nor any Subsidiary has any material debt,
liability, or obligation (whether accrued, absolute, contingent, by guarantee,
indemnity, or otherwise, and whether due or to become due) nor has there been
any occurrence which involves a material liability of the Company or any
Subsidiary in each case of a type required to be disclosed in the Company
Financial Statements or the Pace Financial Statements or the notes thereto,
except those (i) disclosed in the Company Financial Statements or the Pace
Financial Statements or Schedule 2.4 or the Current SEC Reports or (ii) incurred
in the ordinary course of business since, in the case of the Company, the date
(the "Company Interim Balance Sheet Date") of the balance sheet (the "Company
Interim Balance Sheet") included in the Interim Statements, and, in the case of
Pace and its subsidiaries, December 31, 1995, which liabilities do not relate to
any breach of warranty. All outstanding debt of the Company and its Subsidiaries
may be prepaid at any time without penalty or premium except as disclosed on
Schedule 2.4A.
2.5 ABSENCE OF CERTAIN EVENTS. Except as disclosed in Schedule 2.5
or the Current SEC Reports, since June 30, 1995, (i) the Company and its
Subsidiaries have in all material respects conducted their businesses only in
the ordinary and usual course and in substantially the same manner as previously
conducted, and (ii) there has not been any event, circumstance or condition that
has had, or is reasonably likely to have, a Company Material Adverse Effect.
Except as disclosed in Schedule 2.5 or the Current SEC Reports, since June 30,
1995, the Company and each Subsidiary has (a) maintained its assets in
reasonable operating condition and repair, normal wear and tear excepted, and
continued normal maintenance, (b) not declared or paid any dividends on any
Company Shares, (c) not purchased or otherwise acquired, transferred, sold or
issued any shares of Company Stock or granted any options or other rights to
purchase the same, except for the issuance of 18,329 Class B Shares (as defined
in the Company's Restated Certificate of Incorporation) on
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<PAGE>
October 11, 1995 and the purchase by the Company of 1726, 383 and 1728 Class B
Shares on January 5, 1996, February 22, 1996 and March 15, 1996, respectively,
for an aggregate purchase price of $1,975,000, (d) not changed its Restated
Certificate of Incorporation, Bylaws, material loan agreements, or powers of
attorney, except for the Amendment to the Restated Certificate of Incorporation
of the Company filed with the Delaware Secretary of State on October 11, 1995,
(e) not sold, mortgaged, alienated or disposed of any material asset except
inventory in the ordinary course business, (f) not loaned or agreed to loan any
funds, (g) except in the ordinary course of business and consistent with past
practice, not increased salaries or wages, declared bonuses, increased benefits,
or instituted any new benefit plan or program, (h) not introduced any material
change with respect to the operation of its business, including method,
principle or practice of accounting, (i) not entered into any transaction or
other relationship with any Shareholder or any family member of any Shareholder
or any Affiliate of the foregoing.
2.6 TAXES. Within the times and in the manner prescribed by law,
the Company and each of its Subsidiaries have filed all material Tax returns and
have withheld and paid or discharged all material Taxes due and payable. The
provision made for Taxes on the Company Interim Balance Sheet and Pace's balance
sheet (the "Pace Interim Balance Sheet") included in its most recent quarterly
report on Form 10-Q are sufficient for the payment of all unpaid Taxes of the
Company and Pace and its subsidiaries, respectively, for the periods ended on or
prior to the Company Interim Balance Sheet Date or the date of the Pace Interim
Balance Sheet, as the case may be. All material Tax liabilities have been
discharged except those not yet due and payable, and neither the Company nor any
Subsidiary has any liability for material Taxes of any other person (whether by
way of transferee liability or the application of Treas. Reg. Section 1.1502-6
or otherwise). There are no present disputes as to material Taxes or any
material Tax liens on any assets of the Company or any Subsidiary. There are no
outstanding agreements or waivers extending filing dates or the statutes or
other periods of limitation applicable to any Tax or Tax return except as set
forth in Schedule 2.6. All Tax returns of the Company and each Subsidiary
provided to L&P or its representatives are accurate and complete in all material
respects. No audit of any Tax or Tax return of the Company or any Subsidiary is
pending or, to the best knowledge of the Company, proposed except as set forth
in Schedule 2.6. Neither the Company nor any Subsidiary has been, or has any
liability for unpaid Taxes because it once was, a member of an affiliated group
during any consolidated return year. None of the Company's or any Subsidiaries'
assets has been financed with or directly or indirectly secures any industrial
revenue bonds or debt the interest on which is tax-exempt under Section 103(a)
of the Code, except as set forth in Schedule 2.6.
Except as set forth on Schedule 2.6, no new election with respect to
Taxes, or changes in current elections with respect to Taxes of the Company or
any Subsidiary shall be made after the date of this Agreement without the prior
written consent of L&P. Except as set forth on Schedule 2.6, neither the Company
nor any Subsidiary has made an election under Section 338 of the IRC or has
taken any action that would result in any Tax liability to the Company or any
Subsidiary as a result of a deemed election within the meaning of Section 338 of
the IRC. Except as set forth on Schedule 2.6, neither the Company nor any
Subsidiary is a party to any safe harbor lease within the meaning of Section
168(f)(8) of the IRC, as in effect prior to the amendment by the Tax Equity and
Fiscal Responsibility Act of 1982. Except as set forth on Schedule 2.6, neither
the Company nor any Subsidiary is or has been a United States real property
holding corporation within the meaning of Section 897(c)(2) of the IRC during
the applicable period specified in Section 897(c)(1)(A)(ii) of the IRC and L&P
is not required to withhold Tax by reason of Section 1445 of
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the IRC. Except as set forth on Schedule 2.6, neither the Company nor any
Subsidiary is a "consenting corporation" under Section 341(f) of the IRC. Except
as set forth on Schedule 2.6, neither the Company nor any Subsidiary has entered
into any compensatory agreements with respect to the performance of services
which payment thereunder (whether such payment is required because of the
Merger, any of the transaction contemplated by this Agreement, any changes in
control of the Company or any Subsidiary or otherwise) would result in a
nondeductible expense to the Company or any Subsidiary pursuant to Section 280G
of the IRC or an excise tax to the recipient of such payment pursuant to Section
4999 of the IRC. Except as set forth on Schedule 2.6, neither the Company nor
any Subsidiary has made or will make (i) a protective carryover election or an
affirmative action carryover under Treasury Regulations Section 1.338-4T(f)(6),
(ii) an offset prohibition election under Treasury Regulations Section
1.338-4T(f)(6), (iii) a deemed dividend election under Treasury Regulations
Section 1.1502-32(f)(2) or a consent dividend under Section 565 of the IRC.
Except as set forth on Schedule 2.6, neither the Company nor any Subsidiary has
participated in an international boycott as defined in IRC Section 999. Neither
the Company nor any Subsidiary has agreed to, nor is it required to make, any
adjustment under IRC Section 481(a) by reason of a change in accounting method
or otherwise. Listed on Schedule 2.6 are all deferred intercompany transactions,
as defined in Treas. Reg. Section 1.1502-13 or 1.1502-13T, between members of
the affiliated group. None of such transactions will be triggered as a result of
the Merger.
Within the period covered by any applicable statute of limitations,
neither the Company nor any Subsidiary has joined in the filing of a
consolidated return other than the consolidated return of the current affiliated
group of which the Company or a Subsidiary is the common parent. Neither the
Company nor any Subsidiary is a party to or bound by any affiliated group
consolidated return tax allocation agreement, tax sharing agreement or tax
indemnification agreement except as disclosed in Schedule 2.6. Neither the
Company nor any Subsidiary is a partner in any joint venture, partnership, or
other arrangement or contract that is treated as a partnership for federal
income tax purposes except as disclosed in Schedule 2.6.
"Tax" or "Taxes" means all taxes, including any interest, penalties or
other additions to tax, which the Company or any Subsidiary is required to pay,
withhold or collect (including without limitation all income or profits taxes,
payroll and employee withholding taxes, unemployment insurance, social security
or welfare taxes, sales and use taxes, ad valorem taxes, value-added taxes,
excise taxes, surcharges, franchise taxes, gross receipts taxes, business
license taxes, occupation taxes, real and personal property taxes, assessments,
environmental taxes, transfer taxes, worker's compensation, Pension Benefit
Guaranty Corporation premiums and other governmental charges, and other similar
obligations).
2.7 CONTRACTS. Schedule 2.7 accurately lists all contracts,
agreements or other legally binding commitments (including all amendments or
modifications thereto) but excluding any purchase orders entered into with
customers or suppliers in the ordinary course of business ("Contracts") which
(i) would be required to be filed as an exhibit under the Exchange Act if the
Company were subject to the requirements of the Exchange Act, (ii) contemplate
payment by or to the Company or its Subsidiaries in excess of $1 million over
the term of such Contract, or (iii) contemplate payment by or to the Company or
its Subsidiaries in excess of $300,000 over the term of such Contract and cannot
be terminated without penalty by the Company and its Subsidiaries in less than
one year from the date hereof. All Contracts are in full force with no material
default or
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breach by any party to such Contracts. No event, failure, condition or act has
occurred which, with the passage of time or the giving of notice, would result
in a material default or breach by any party under any Contract or permit
termination, modification or acceleration of rights or obligations under such
Contracts, except as disclosed in Schedule 2.7. No defenses, offsets or
counterclaims have been asserted by any party under any Contract except as
disclosed in Schedule 2.7. Neither the Company nor any Subsidiary has waived
any material rights under any Contract except as disclosed in Schedule 2.7. No
Contract shall be adversely affected in any material manner by the transactions
contemplated by this Agreement except as disclosed in Schedule 2.7.
Neither the Company nor any Subsidiary has received notice of any
pending or threatened termination or premium increase with respect to any
insurance policy listed or required to be listed on Schedule 2.7, and the
Company and each Subsidiary are in compliance in all material respects with all
conditions contained in each policy. Except as disclosed in Schedule 2.7, there
are no pending claims against such insurance by the Company or any Subsidiary as
to which insurers are defending under reservation of rights or have denied
liability. All claims under such insurance have been properly filed by the
Company and the Subsidiaries.
2.8 Intentionally Deleted
2.9 RECEIVABLES. The Company's and Pace's and its subsidiaries'
accounts receivable as shown on the Company Interim Balance Sheet and Pace
Interim Balance Sheet, respectively, or arising since the date thereof are
collectible in the ordinary course of business, less the recorded allowance for
bad debts shown on such balance sheets.
2.10 INVENTORY. All inventory of the Company and each Subsidiary is
of a quality and quantity useable and saleable in the ordinary course of
business, except to the extent of any inventory reserve included in the Pace
Interim Balance Sheet.
2.11 INTELLECTUAL PROPERTY. The Company and its Subsidiaries have
full right, title and interest to all patents, patent applications, trademarks,
tradenames, service marks, copyrights, trade secrets, inventions, know-how and
other similar intangible rights ("Intellectual Property") which are material to
the operation of the business of the Company or any Subsidiary. The Company and
its Subsidiaries conduct their businesses without conflict or infringement with
any intellectual property claimed or held by others.
2.12 REAL PROPERTY. Schedule 2.12 accurately lists all real property
currently owned, leased, rented or otherwise occupied by the Company and the
Subsidiaries. The use of, and all improvements located on, all real property
owned or leased by the Company or any Subsidiary comply with all applicable
material zoning and similar requirements except as set forth on Schedule 2.12.
No improvement on such real property encroaches on any boundary or easement,
violates any set-back requirement, or is located on a flood plain except for
such items which do not materially and adversely affect title to or the current
use of such property except as set forth on Schedule 2.12. There are no leases,
subleases or other agreements granting to any party, other than the Company or a
Subsidiary, the right of use or occupancy of any portion of such real property,
and there are no outstanding options or rights of first refusal to purchase any
of such real property except as set forth in Schedule 2.12.
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2.13 TITLE TO AND CONDITION OF ASSETS. The Company and its
Subsidiaries own free and clear of all security interests, claims, encumbrances,
easements, rights-of-way, restrictions and other interests ("Encumbrances"), or
lease, all assets reflected in the Company Financial Statements or the Pace
Financial Statements or otherwise used to conduct their businesses, except for
those Encumbrances disclosed in the Company Financial Statements, the Pace
Financial Statements, the Current SEC Reports or Schedule 2.13, as well as the
lien of current taxes not yet due and payable and such matters that are not
substantial in amount and do not materially detract from or interfere with the
use of any assets or materially impair business operations. The Company and its
Subsidiaries are in possession of all material assets necessary to conduct their
businesses.
2.14 CUSTOMERS AND SUPPLIERS. Schedule 2.14 accurately lists the 10
largest (measured by dollar volume) customers of and 10 largest suppliers to the
Company and its Subsidiaries to whom sales or from whom purchases have been made
at any time during fiscal 1995 and 1996, together with summaries of the gross
sales made to each customer and gross purchases from each supplier during such
periods. Except as disclosed on Schedule 2.14, none of such customers or
suppliers has advised the Company or any Subsidiary of its intent to cease or
materially reduce their business with the Company or any Subsidiary after the
Closing Date.
2.15 EMPLOYEES. Schedule 2.15 lists all employment agreements to
which the Company or any Subsidiary is a party or is bound. Except as disclosed
on Schedule 2.15, neither the Company nor any Subsidiary is aware of any
executive or divisional officer or key employee of the Company or any Subsidiary
who has indicated an intention to terminate, or who is reasonably likely to
terminate, employment if the transactions contemplated by this Agreement are
completed. Except as set forth in Schedule 2.15, (i) there have been no actual
or, to the best of the Company's knowledge, threatened labor disputes or work
stoppages within the last three years and (ii) none of the employees of the
Company or any Subsidiary is represented by a union and no union organizing
activities are taking place.
2.16 EMPLOYEE BENEFIT PLANS. Schedule 2.16 lists all defined benefit
plans, defined contribution plans, welfare plans, compensation plans and other
employee benefit plans and programs maintained by the Company, any Subsidiary or
any predecessor of the Company or any Subsidiary ("Benefit Plans"). As respects
all Benefit Plans, except as set forth in Schedule 2.16: (a) the Company and
each Subsidiary has operated each Benefit Plan in compliance in all material
respects with all applicable laws and in compliance in all material respects
with such Benefit Plan; (b) there are no funding deficiencies (determined on a
plan termination basis); (c) no Reportable Event, as defined by the Employee
Retirement Income Security Act ("ERISA"), has occurred during the last two
years; (d) no Benefit Plan is a Multiemployer Plan (as defined in Section 4001
of ERISA); (e) no Benefit Plan provides for medical benefits, life insurance or
other similar benefits to retirees or their families; (f) no Benefit Plan is
self funded except to the extent indicated in Schedule 2.16; (g) neither the
Company nor any Subsidiary has effected a termination or partial termination of
any Benefit Plan or participation in any Benefit Plan within the last five
years; (h) no disabled current or former employee claims or receives or is
entitled to receive disability, pension, health, welfare or life insurance
benefits from the Company or any Subsidiary; and (i) all Benefit Plans may be
terminated or modified by the Company and each Subsidiary in its discretion
without penalty or premium.
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2.17 COMPLIANCE WITH LAWS. Except as set forth in Schedule 2.17, the
Company and each Subsidiary are in compliance in all material respects with all
applicable laws, rules, regulations and ordinances affecting the Company's and
each Subsidiary's properties or the operation of their businesses. Except as set
forth in Schedule 2.17, neither the Company nor any Subsidiary has violated, or
is in default with respect to, any judgment, order, injunction, settlement
agreement or decree of, or any material permit, license or other authority from,
any court, agency or instrumentality.
2.18 AUTHORIZATION; BINDING EFFECT; NO CONFLICT. The execution and
delivery of this Agreement and all other agreements, certificates and other
documents contemplated hereby have been duly authorized by the Company and Pace.
This Agreement constitutes, and all other agreements, certificates and other
documents to be executed and delivered by the Company and Pace will constitute,
the legal, valid and binding obligation of the Company and Pace, enforceable
against each of them in accordance with their terms, subject to applicable
bankruptcy, insolvency, moratorium or other similar laws relating to creditors'
rights and general principles of equity. Except for compliance with the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), the
voting and filing requirements of the General Corporation Law of Delaware, and
except as set forth in Schedule 2.18, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will:
(a) require any consent, authorization, approval or other action of any person,
entity or government authority; (b) violate or constitute a default under the
Restated Certificate of Incorporation or Bylaws of the Company or any Subsidiary
or any material note, indenture, mortgage, deed of trust or other contract,
agreement or commitment, license or permit of the Company or any Subsidiary; or
(c) result in the creation or imposition of any Encumbrance upon the property of
the Company or any Subsidiary or cause the acceleration of any material
indebtedness of the Company or any Subsidiary.
2.19 LITIGATION. There are no suits, arbitrations, or legal,
administrative or other proceedings or audits, inquiries or investigations
pending, threatened in writing against or affecting the Company or any
Subsidiary, or any of their officers or directors relating to the Company or any
Subsidiary, except as listed on Schedule 2.19 or the Current SEC Reports.
Neither the Company nor any Subsidiary is subject to any judgment, order or
decree except as set forth in Schedule 2.19 or the Current SEC Reports.
2.20 BOOKS AND RECORDS. The minute books of the Company and each
Subsidiary contain accurate records in all material respects of all meetings of,
and corporate action taken by, the shareholders and Board of Directors of the
Company and each Subsidiary. The stock record books of the Company and each
Subsidiary are accurate and complete in all material respects.
2.21 ENVIRONMENTAL MATTERS. All representations and warranties
contained in this section are qualified by the disclosures in Schedule 2.21. No
"hazardous substance" within the meaning of the Comprehensive Environmental
Response, Compensation and Liability Act, as amended, no petroleum product or
any fraction thereof and no other substance regulated under any federal, state
or local environmental law, statute, regulation, ordinance, permit or other
legal requirement ("Environmental Law") is present on, in, under or about any
real property owned, leased or used by the Company or any Subsidiary, except for
such quantities as used in the ordinary course of business which are stored in
appropriate containers pursuant to generally accepted manufacturing practices
and in compliance in all material respects with applicable law. The Company and
each Subsidiary
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have at all times complied and are in compliance in all material respects with
all Environmental Laws. No current or proposed Environmental Law imposes or
proposes to impose standards or requirements which will require the Company or
any Subsidiary to make capital expenditures in excess of $500,000 in the
aggregate to comply with such standards or requirements. Neither the Company nor
any Subsidiary has to the best of the Company's knowledge any liability that
equals or exceeds $50,000 for the cleanup, remediation, removal or abatement of
(i) any facility or property to which any waste or by-product of the Company or
any Subsidiary has been sent, directly or indirectly, for treatment, storage,
disposal or recycling or (ii) any property currently or previously (a) owned,
(b) leased or (c) used in connection with a die casting manufacturing facility
by the Company, any Subsidiary or any predecessor. No underground or below grade
storage tank is located at any property currently owned or leased by the Company
or any Subsidiary. Neither the Company nor any Subsidiary has paid any civil or
criminal fines, penalties or the like relating to alleged failure to comply with
Environmental Laws.
2.22 PRODUCT LIABILITY. Since December 31, 1990, there has been no
claim, notice of claim, demand or investigation received by the Company or any
Subsidiary (except for Pace Industries Puget Division, Inc. since July 14, 1995)
alleging personal injury caused by a product of the Company or any Subsidiary
except as set forth in Schedule 2.22.
2.23 POOLING OF INTERESTS. The Company is autonomous; it has not
been a subsidiary or division of another corporation during the period beginning
2-1/2 years prior to the date of this Agreement and ending on the Closing Date
(the "Pooling Period"). During the Pooling Period, except as disclosed on
Schedule 2.23, the Company has not (i) owned any L&P Common Stock or other
securities issued by L&P, (ii) changed the equity interest of the Company Stock
or other equity interests, or (iii) reacquired any Company Stock or other equity
interests.
2.24 MANAGEMENT PROJECTIONS. Management of Pace have made certain
projections concerning sales growth, profitability and other matters. These
projections have been delivered to L&P in documents entitled "Pace Industries
Consolidated Budgeted Statement of Income (Probable Low Side) Year Ending June
30, 1996; Pace Industries Consolidated Budgeted Statement of Income - 1997
(Preliminary Projections) dated March 4, 1996 (the "Projections")." The
Projections were prepared in the ordinary course of the Company's and its
Subsidiaries' business in a manner consistent with the Company Financial
Statements and Pace Financial Statements and not with a view to the sale of the
Company and its Subsidiaries. The Projections, as of the date hereof, represent
the Company's and its Subsidiaries' best estimate of the Company's and its
Subsidiaries' future performance for the periods covered by the Projections.
2.25 AFFILIATE RELATIONSHIPS. Except as listed on Schedule 2.25
neither the Company nor any Subsidiary, nor any director, executive or
divisional officer of the Company or any Subsidiary (or any immediate family
member) has any direct or indirect interest in any competitor, supplier,
customer, lessee or lessor, with whom the Company or any Subsidiary does
business, except for purchases from or sales to the Company or any Subsidiary of
less than $10,000 for any such transactions. Except as set forth in the Current
SEC Reports, Schedule 2.25A lists all agreements between the Company or any
Subsidiary on the one hand and any shareholder, director, executive officer or
divisional officer (or any immediate family member) on the other hand that
exceed $10,000 for each such agreement.
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3. L&P'S REPRESENTATIONS, WARRANTIES AND COVENANTS
L&P and L&P Sub jointly and severally represent and warrant to the
Company and Pace:
3.1 ORGANIZATION AND STANDING. L&P and L&P Sub are corporations
duly organized, validly existing and in good standing under the laws of the
states of their respective organization. L&P and L&P Sub are duly qualified and
in good standing in each jurisdiction where the conduct of their businesses
require them to be so qualified, except where the failure to be so qualified
would not in the aggregate have or result in a material adverse effect or change
on the financial condition, results of operation, cash flow, assets,
liabilities, business or prospects of L&P and its subsidiaries taken as a whole
(a "L&P Material Adverse Effect"). L&P and L&P Sub have all necessary corporate
powers to (i) enter into this Agreement and all other agreements, certificates
and other documents to be executed and delivered by L&P under this Agreement,
and (ii) perform their obligations under such agreements, certificates and other
documents. L&P Sub is a wholly-owned subsidiary of L&P and L&P owns all issued
and outstanding capital stock of L&P Sub free and clear of any Claims.
3.2 THE L&P SHARES. The L&P Shares when delivered hereunder will be
duly authorized, validly issued, and fully paid and nonassessable. The L&P
Shares will be issued pursuant to Section 4(2) of the Securities Act of 1933 and
Regulation D promulgated thereunder. Certificates representing L&P Shares issued
to Affiliates of the Company will contain a restrictive legend in the form of
Exhibit 3.2A. Certificates representing the L&P Shares issued to all other
Shareholders will contain a restrictive legend in the form of Exhibit 3.2B.
3.3 SEC REPORTS, FINANCIAL STATEMENTS OBLIGATIONS AND LIABILITIES.
Since December 31, 1992, L&P has filed all required forms, reports and documents
with the SEC required to be filed by it pursuant to the federal securities laws
and the SEC rules and regulations thereunder, all of which have complied in all
material respects as of the respective filing dates, or, in the case of
registration statements, their respective effective dates, with all applicable
requirements of the Securities Act and the Exchange Act, and the rules and
regulations promulgated thereunder. None of such forms, reports or documents,
including without limitation, any exhibits, financial statements or schedules
included therein, at the time filed, or, in the case of registration statements,
their respective effective dates, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
in which they were made, not misleading. L&P's annual report on Form 10-K for
the year ended December 31, 1995 and all forms, reports and documents filed by
L&P with the SEC under the Exchange Act since December 31, 1995 are hereinafter
collectively referred to as the "L&P 34 Act Reports."
The "L&P Financial Statements" means the consolidated financial
statements of L&P and its subsidiaries included in the L&P 34 Act Reports. Each
of the consolidated balance sheets of L&P in the L&P Financial Statements
(including the related notes and schedules) fairly present the consolidated
financial position of L&P and its consolidated subsidiaries as of their
respective dates and each of the consolidated statements of income,
stockholders' equity and cash flows of L&P and its consolidated subsidiaries in
the L&P Financial Statements (including the related notes and schedules) fairly
present the results of operations, shareholders' equity and cash flows of L&P
and its consolidated subsidiaries (subject, in the case of unaudited statements
to normal year-end audit
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adjustments which would not be material in amount or effect), in each case in
accordance with generally accepted accounting principles consistently applied
during the periods involved, except as may be noted therein.
Neither L&P nor any of its consolidated subsidiaries has any material
debt, liability, or obligation (whether accrued, absolute, contingent, by
guarantee, indemnity, or otherwise, and whether due or to become due) nor has
there been any occurrence which involves s material liability of L&P or any
consolidated subsidiary in each case of a type required to be disclosed in the
L&P Financial Statements or the notes thereto, except those (i) disclosed in the
L&P Financial Statements or the L&P 34 Act Reports, or (ii) incurred in the
ordinary course of business since December 31, 1995.
3.4 ABSENCE OF CERTAIN EVENTS. Except as disclosed in Schedule 3.4 and
in the L&P 34 Act Reports, since December 31, 1995, (i) L&P and its subsidiaries
have in all material respects conducted their businesses only in the ordinary
course and in substantially the same manner as previously conducted, (ii) there
has not been any event, circumstance or condition that has had or is reasonably
likely to have an L&P Material Adverse Effect; and (iii) L&P and its
subsidiaries have not introduced any material change with respect to the
operation of their respective businesses, including method, principle or
practice of accounting.
3.5 AUTHORIZATION; BINDING EFFECT; NO CONFLICT. The execution and
delivery of this Agreement have been, and at Closing all other agreements,
certificates and other documents contemplated hereby will have been, duly
authorized and executed by L&P and L&P Sub. This Agreement constitutes, and at
Closing all other agreements, certificates and other documents to be executed
and delivered will constitute, the legal, valid and binding obligation of L&P
and L&P Sub, enforceable against each of them in accordance with their terms,
subject to applicable bankruptcy, insolvency, moratorium or other similar laws
relating to creditors' rights and general principles of equity. Except for
compliance with the HSR Act, the Securities and Exchange Commission declaring
the secondary registration statement relating to the sale of the L&P Shares
effective, and the listing of the L&P Shares on the New York and Pacific Stock
Exchanges, the consummation by L&P and L&P Sub of the transactions contemplated
hereby will not (i) require any consent, authorization or approval of any
person, entity or government authority, or (ii) violate or constitute a default
under the Restated Articles of Incorporation or Bylaws of L&P, the Certificate
of Incorporation or Bylaws of L&P Sub, or any material note, indenture,
mortgage, deed of trust or other material contract, agreement or commitment of
L&P or L&P Sub which would result in L&P being unable to perform its obligations
hereunder.
4. COVENANTS OF THE PARTIES
The Company and Pace, jointly and severally, covenant to L&P and L&P
and L&P Sub jointly and severally covenant to the Company and Pace as follows:
4.1 FULL ACCESS. The Company and Pace agree that from the date hereof
until the Closing, L&P and its representatives shall be afforded full access at
reasonable times to such personnel, facilities, properties, accounts, books,
records, information, contracts and documents of or relating to the Company and
all Subsidiaries and the Company and Pace shall furnish to L&P and its
representatives such information concerning the business, finances and
properties of the Company
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and its Subsidiaries as appropriate for L&P to confirm (i) the Company's and
Pace's compliance with their covenants under this Agreement, and (ii) the
satisfaction of all conditions precedent to the obligations of L&P.
4.2 CONDUCT OF THE COMPANY'S BUSINESS. Except with the prior
written consent of L&P (which consent will not be unreasonably withheld), and
except for actions required or contemplated hereby, the Company and each
Subsidiary shall from the date hereof until the Closing: (a) conduct their
businesses only in the ordinary and usual course and in substantially the same
manner as heretofore conducted, (b) maintain their material assets in normal
operating condition and repair (ordinary wear and tear excepted) and continue
normal maintenance, (c) not make any contract or commitment for capital
expenditures in excess of $500,000, (d) not declare or pay any dividends on any
Company Shares, (e) not purchase or otherwise acquire, transfer, sell or issue
any shares of Company Stock or grant any options or other rights to purchase the
same, except for options granted under the Company's Amended and Restated
Employee Stock Option Plan to purchase up to 30,000 Class A Shares (as defined
in the Company's Restated Certificate of Incorporation) and except for the
purchase of Class B Shares pursuant to Section 3(b) of Part II of Article Fourth
of the Company's Restated Certificate of Incorporation, (f) not change its
Restated Certificate of Incorporation, bylaws, material loan agreements or
powers of attorney, (g) not sell, mortgage, alienate or dispose of any material
asset except inventory in the ordinary course of business, (h) not lend or agree
to lend any funds, or borrow or incur any indebtedness except in the ordinary
course of business in accordance with past practice, (i) not increase salaries
or wages or declare bonuses of or to any executive or divisional officer,
increase benefits, or institute any new benefit plan or program, (j) comply in
all material respects with all laws applicable to the Company or any Subsidiary,
(k) not amend or in any way modify any Contract identified or required to be
identified on Schedule 2.7 in a manner adverse to the Company or any Subsidiary,
(l) not enter into any transaction, contract or commitment in the ordinary
course of business which obligates it to pay a sum greater than $300,000 in any
one instance or $800,000 in the aggregate to any one person, or obligates it for
a period ending after the date of this Agreement (except for purchases from
suppliers in the ordinary course of business which are consistent with past
practice), (m) not introduce any material change with respect to the operation
of its businesses, including any method, principle or practice of accounting,
(n) not enter into any transaction or other relationship with any Shareholder or
any family member of any Shareholder, or any Affiliate of the foregoing except
for any transaction required by Section 4.7, and (o) not take any action or fail
to take any action which might adversely affect L&P's ability to account for the
Merger as a pooling of interests.
4.3 PRESERVATION OF BUSINESS AND RELATIONSHIPS. From the date
hereof until the Closing, the Company and each Subsidiary shall use their
reasonable best efforts to preserve the Company's and each Subsidiary's business
organizations intact, to keep available to L&P the present officers and
employees of the Company and each Subsidiary and to preserve the Company's and
each Subsidiary's present relationship with suppliers, customers and others
having business relationships with them.
4.4 EXCLUSIVITY. From the date hereof until the earlier of either
(i) the Closing Date or (ii) termination of this Agreement for any reason,
neither the Company nor any Subsidiary will directly or indirectly solicit,
initiate or encourage any inquiries or the submission of a proposal, or
participate in any discussions or negotiations, or provide any information
regarding a Prohibited Transaction (other than an initial public offering of
securities) with or to any person other than L&P
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and its representatives. A "Prohibited Transaction" means any disposition of
stock or assets (other than in the ordinary course of business) of the Company
or any Subsidiary or any change in control of the Company or any Subsidiary.
The Company will immediately notify L&P if any person makes an offer or inquiry
relating to a possible Prohibited Transaction. Notwithstanding the foregoing,
Pace and the Company without notification to L&P may on a confidential basis
engage in discussions with and provide information to one or more investment
bankers regarding the possibility of a public offering of securities of the
Company or Pace if the Merger does not close.
4.5 ACTIONS TO EFFECT THE MERGER. At or prior to Closing, L&P, L&P
Sub, the Company and its Subsidiaries will use their reasonable best efforts to
take all actions necessary to approve and effect the Merger and the other
transactions contemplated hereby, including without limitation executing and
filing such documents and certificates as may be necessary or appropriate and
adopting and entering into the employment arrangements referenced in Section
5A.5 hereof. The parties hereto agree to use their reasonable best efforts to
fulfill all conditions precedent to the parties' obligations to close the
Merger. The Company shall promptly deliver all notices to holders of Class B
Shares contemplated by the Company's Restated Certificate of Incorporation
including without limitation Section 3(b) of Part II of Article Fourth thereof.
Each party hereto agrees to promptly notify the other party of any event or
condition which would or may cause any condition precedent in Articles 5A, 5B or
6 hereof not to be fulfilled.
4.6 CONSENTS. If obtaining any consents, permit transfers or other
actions by the Company or its Subsidiaries is necessary or desirable in L&P's
opinion prior to Closing to facilitate the consummation of this Agreement and
the transactions contemplated thereby, the Company and its Subsidiaries shall
use their reasonable best efforts to obtain any such consents, permit transfers
or other actions.
4.7 AFFILIATE TRANSACTIONS. Upon L&P's reasonable request, the
Company and its Subsidiaries will terminate or otherwise resolve, in a manner
mutually satisfactory to L&P, the Company and Pace, all agreements and
relationships between the Company or any Subsidiary, on one hand, and any
director, officer or Shareholder or any family member of any director, officer
or Shareholder, or any Affiliate of the foregoing, on the other hand.
4.8 S-3 REGISTRATION STATEMENT. Prior to the Closing, L&P will file
with the Securities and Exchange Commission a secondary offering shelf
registration statement under the Securities Act of 1933 on Form S-3 registering
the sale of those L&P Shares the Shareholders of the Company (and their
permitted assignees pursuant to the Registration Rights and Maintenance
Agreement in the form contemplated by the Shareholder Letter Agreement referred
to in Section 8.10) have timely requested to be registered in a registration
statement to be effective on or before the Closing Date. L&P will use its
reasonable best efforts to cause the registration statement to be declared
effective on or before the Closing Date. Not less than five (5) business days
prior to filing of said registration statement with the SEC, L&P shall provide a
draft copy of such document to the Company for its review and comment, which
comments, if any, will be reasonably considered by L&P prior to the filing of
the registration statement.
4.9 INDEMNIFICATION OF DIRECTORS AND OFFICERS. L&P shall provide
for indemnification of current and former officers and directors of the Company
and its Subsidiaries as follows:
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(a) For a continuous period of three years after the Closing
Date, L&P shall indemnify and hold harmless every officer and director
of the Company and the Subsidiaries who currently has rights to
indemnification from the Company or the Subsidiaries with respect to
matters occurring on or before the Closing Date (including this
Agreement and the transactions contemplated hereby), to the same
extent and on the same terms and conditions as they are now entitled
to indemnification pursuant to the Company's Restated Certificate of
Incorporation and the General Corporation Laws of Delaware; and
(b) L&P shall take all requisite action to assure that the
Restated Certificate of Incorporation and Bylaws of the Company will
contain for a continuous period of at least three years following the
Closing Date provisions relating to the indemnification of those
persons who were officers and directors of the Company at any time
before the Closing Date that are at least as favorable to those
persons as the indemnification provisions that are currently contained
in the Company's Bylaws and Restated Certificate of Incorporation.
4.10 SECURITIES LAWS. The parties anticipate that the L&P Shares
will be issued to the Shareholders in reliance on the exemption from
registration under Section 4(2) of the Securities Act and Regulation D
thereunder. In the event L&P determines that such exemption is not available,
L&P agrees promptly to file a registration statement with the SEC using the
applicable form and to use its reasonable best efforts to cause such
registration statement to be declared effective by the SEC at the earliest
practical date.
4.11 AVAILABILITY AND LISTING OF L&P SHARES. L&P will maintain a
sufficient number of authorized, but unissued shares of L&P common stock
necessary to consummate this Agreement and the transactions contemplated hereby
and will use its best efforts to have the L&P Shares listed on the New York
Stock Exchange and the Pacific Stock Exchange subject to official notice of
issuance at or prior to the Closing.
5A. CONDITIONS PRECEDENT TO PERFORMANCE OF L&P AND L&P SUB
The obligations of L&P and L&P Sub are subject to the satisfaction
(except to the extent waived in writing by L&P) before the Closing of all of the
following conditions:
5A.1 INTENTIONALLY OMITTED
5A.2 OPINION OF COUNSEL. L&P shall have received from counsel for
the Company an opinion dated as of the Closing Date, substantially in the form
of Exhibit 5A.2.
5A.3 THIRD PARTY ACTION. A law or final order must not have been
issued, adopted, enacted, entered, or enforced by, and a suit, action or
proceeding by a governmental authority or any third party must not be pending or
threatened in writing by or before, any governmental authority or any state or
federal court in the United States that (directly or indirectly) does or seeks
to do any of the following: (i) declare the Merger to be illegal; (ii) enjoin,
restrain, or otherwise prohibit the acquisition of the Company by L&P pursuant
to the Merger; (iii) prohibit the ownership or operation by L&P of the assets,
business or properties of the Company and the Subsidiaries; or (iv) compel
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L&P (or any of its Affiliates or subsidiaries) to segregate or dispose of the
Company and Subsidiaries or any of the businesses of L&P or its Subsidiaries.
5A.4 INTENTIONALLY OMITTED
5A.5 EMPLOYMENT ARRANGEMENTS. The employment contracts, bonus,
compensation and benefit arrangements or plans of the Company and Subsidiaries
shall have been terminated or modified in the manner agreed in writing by L&P
and the Company on or before the date of this Agreement. The Revised and
Restated Employee Incentive Compensation Plan in the form agreed upon in writing
by L&P and the Company on or before the date of this Agreement shall have been
adopted by Pace. The persons listed in Schedule 5A.5B shall have entered into
employment agreements in substantially the form agreed upon in writing by L&P
and the Company on or before the date of this Agreement.
5A.6 INTENTIONALLY OMITTED
5A.7 INTENTIONALLY OMITTED
5A.8 POOLING MATTERS. L&P shall have obtained such assurances
satisfactory to L&P from Price Waterhouse as it deems necessary that the Merger
shall be accounted for as a pooling of interests. The Dissenters' Interests
shall be less than 5% of the Merger Consideration. The term "Dissenters'
Interest" shall mean the aggregate fair market value of L&P Shares allocable to
all Shareholders who have validly exercised appraisal rights under the General
Corporation Law of the State of Delaware, which such Shareholders would have had
the right to receive under the Merger if they had not elected appraisal rights.
5A.9 INTENTIONALLY OMITTED
5A.10 COMPANY STOCK OPTIONS. All options granted under the Company's
Amended and Restated Employee Stock Option Plan shall have been exercised in
full prior to Closing.
5A.11 INTENTIONALLY OMITTED
5A.12 Other Agreements. Those persons listed on Schedule 5A.12
hereto shall have executed and delivered to L&P and the Company agreements
concerning non-competition and confidentiality in substantially the form
attached to the letter agreements contemplated by Section 8.10.
L&P and L&P Sub may waive any condition specified in this Section 5A
if they execute a writing so stating at or prior to the Closing.
5B. CONDITIONS PRECEDENT TO PERFORMANCE BY COMPANY AND PACE
The obligations of the Company and Pace are subject to the
satisfaction (except to the extent waived by the Company) before Closing of all
the following conditions:
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5B.1 INTENTIONALLY OMITTED
5B.2 TAX STATUS. The Company and Pace shall have received an
opinion from counsel to the Company and Pace that the Merger shall qualify as a
reorganization for purposes of Section 368 of the Code.
5B.3 SECONDARY REGISTRATION STATEMENT. The secondary registration
statement of L&P relating to certain of the L&P Shares shall have been declared
effective and no stop order suspending the effectiveness thereof shall have been
issued and no proceeding for that purpose shall have been instituted. L&P shall
have tendered to each Shareholder an executed Registration Rights and
Maintenance Agreement in the form contemplated by the Shareholder Letter
Agreement referred to in Section 8.10.
5B.4 OPINION OF COUNSEL. The Company and Pace shall have received
from counsel for L&P an opinion dated as of the Closing date, substantially in
the form of Exhibit 5B.4.
5B.5 THIRD PARTY ACTION. A law or final nonappealable order must
not have been issued, adopted, enacted, entered, or enforced by a governmental
authority or third party and a suit, action, or proceeding by a governmental
authority or third party must not be pending or threatened in writing before,
any governmental authority or any state or federal court in the United States
that (directly or indirectly) does or seeks to do any of the following: (i)
declare the Merger to be illegal; (ii) permanently enjoin, restrain, or
otherwise prohibit the acquisition of the Company by L&P pursuant to the Merger;
or (iii) prohibit the ownership or operation by L&P of all or a significant
portion of the assets, business or properties of L&P's existing aluminum
operations.
5B.6 EMPLOYMENT AGREEMENTS. L&P shall have tendered to the persons
listed on Schedule 5A.5B executed employment agreements substantially in the
form set out in the writing provided for in Section 5A.5.
5B.7 BONUS PLAN. L&P shall have tendered to the Company an Amended
and Restated Employee Incentive Compensation Plan in the form set out in the
writing provided for in Section 5A.5 executed by L&P.
The Company and Pace may waive any condition specified in this Section
5B if they execute a writing so stating at or prior to the Closing.
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6. MUTUAL CONDITIONS PRECEDENT TO PERFORMANCE
The obligations of each party to this Agreement are subject to the
satisfaction or waiver on or before the Closing of all the following conditions:
6.1 COVENANTS. Each party and the Shareholders shall have performed
in all material respects all of their obligations and agreements and complied in
all material respects with all of their covenants and conditions of this
Agreement and the other agreements contemplated hereby. (Notwithstanding the
foregoing, no party may rely on its own breach (or a breach by one or more of
its Affiliates or Shareholder) as a failure of condition precedent.)
6.2 APPROVAL OF DOCUMENTATION. The form and substance of all
certificates, instruments and other documents delivered or deliverable under
this Agreement shall be satisfactory in all reasonable respects to counsel for
each party.
6.3 LISTING OF L&P SHARES. The L&P Shares shall have been approved
for listing on the New York and Pacific Stock Exchanges, subject to notice of
issuance.
6.4 APPROVALS. The requirements of the HSR Act, including any
applicable filing and waiting period requirements (as extended), relating to the
transactions contemplated hereby, and all related government approvals, shall
have been satisfied and obtained.
7. CLOSING
7.1 CLOSING DATE AND PLACE. The closing of the transactions
contemplated hereby (the "Closing") shall take place as soon as reasonably
practicable but in any event within five (5) business days after satisfaction of
the parties conditions precedent to the obligations in Sections 5A, 5B and 6.
The day of Closing is called the "Closing Date." The Closing shall be held at a
location that is mutually acceptable to the parties. The Closing shall not be
deemed to have occurred until all deliveries and actions necessary to satisfy
all conditions and complete the Closing have occurred, including without
limitation L&P receiving confirmation that the Merger is effective under the
General Corporation Law of the State of Delaware.
7.2 TERMINATION. This Agreement may be terminated by the parties
and the Merger abandoned at any time prior to the effectiveness of the Merger
under the General Corporation Law of Delaware, as follows:
(a) By mutual agreement of the parties, whether before or after the
date or dates on which Company shareholder action is taken under the General
Corporation Law of the State of Delaware in respect of approval of this
Agreement and the transactions contemplated hereby;
(b) By either the Company or L&P, upon written notice to all other
parties to this Agreement, at any time after July 31, 1996 if the Closing Date
shall not have occurred by July 31, 1996; provided, however, that the right to
terminate this Agreement under this paragraph (b) shall not be available to any
party which has intentionally breached this Agreement or whose failure to comply
with its covenants and agreements set forth in this Agreement shall have been
the primary cause of the Closing not occurring by July 31, 1996;
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(c) Upon termination pursuant to this Section 7.2, no party hereto
shall have any liability as a result of such termination.
8. MISCELLANEOUS
8.1 GOVERNING LAW. This Agreement shall be governed by Delaware
law.
8.2 EXHIBITS AND SCHEDULES. Each Exhibit (including, but not
limited to, Exhibits 1.1, 1.2, 3.2A, 3.2B, 5A.2, 5B.4, 8.2 and 8.10A) and
Schedule referred to herein is incorporated into this Agreement. Such Exhibits
and Schedules need not be physically attached hereto if they are appropriately
identified as such on their face.
8.3 ENTIRE AGREEMENT; CONSTRUCTION. This Agreement (including all
agreements and other documents referenced herein) constitutes the entire
agreement among the parties and supersedes any prior understandings or
agreements, written or oral, that relate to the subject hereof. This Agreement
may be amended only by a writing signed by the parties hereto. The parties
agree that all parties participated in the preparation and negotiation of this
Agreement and the agreements contemplated hereby and that neither this Agreement
nor any of the agreements contemplated hereby shall be construed against any
party by virtue of the fact that any party prepared or drafted such Agreements.
8.4 COUNTERPARTS; TELECOPIER. This Agreement may be executed in
several counterparts, each of which shall be an original and all of which shall
constitute one and the same Agreement. Signature pages exchanged by telecopier
shall be fully binding.
8.5 EXPENSES. L&P shall pay all costs and expenses incurred or to
be incurred by it in negotiating and preparing this Agreement and carrying out
the transactions contemplated hereby. The Company and Pace will pay all third
party fees and expenses incurred by them relating to the Merger (including all
fees and expenses relating to the negotiation and preparation of the letter of
intent, this Agreement and exhibits and schedules thereto, due diligence,
changes in executive compensation and the Closing, but excluding all fees and
expenses relating to lien releases, lender charges, prepayments penalties, if
any, etc. relating to the Company, Pace and its Subsidiaries loan and debt
agreements) up to a maximum of $500,000 in the aggregate. The Shareholders of
the Company will pay all third party fees and expenses of the Company and Pace
relating to the Merger (including without limitation those fees and expenses
referenced above) in excess of an aggregate of $500,000.
8.6 PUBLIC ANNOUNCEMENTS. Promptly after the date hereof, the
parties contemplate making an announcement of the Merger. The announcement will
be in a form satisfactory to the parties. The Company and its Subsidiaries will
assist and cooperate with, and will cause their directors, officers and
employees to assist and cooperate with, L&P regarding such announcement as the
parties may from time to time agree. Except for such announcement, no public
announcements of the Merger and the other transactions contemplated hereby
before the Closing shall be made by the parties without the prior written
consent of the parties, except as required by law.
8.7 CONFIDENTIALITY AGREEMENTS. Effective as of the Closing, L&P's
obligation to the Company and the Shareholders under confidentiality and similar
agreements (including without limitation the letter agreement dated November 28,
1994) shall terminate. If the Merger and the other
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transactions contemplated hereby are not closed for any reason the provisions of
the confidentiality agreement dated November 28, 1994 shall automatically be
extended for two years after any termination of this Agreement.
8.8 NOTICES. Notices hereunder shall be in writing and served by
mail, express overnight delivery, telecopier or other electronic transmission.
Notices to L&P and L&P Sub shall be addressed to: No. 1 Leggett Road, Carthage,
Missouri 64836, Attention - Robert A. Jefferies, Jr., Senior Vice President (Fax
417-358-8449), with a copy to the L&P Legal Department at the same address (Fax
417-358-8449). Notices to the Company and Pace shall be addressed to: Bob L.
Gaddy, Chairman and Chief Executive Officer, Pace Industries, Inc., P.O. Box
309, Fayetteville, AR 72702 (Fax 501-443-7058), with a copy to Gordon Y.
Allison, at the same address and facsimile number.
8.9 BROKER'S FEES. Each party represents to the other that there
are no finder's, broker's, agent's or similar fees or expenses due relating to
the Merger or any of the transactions contemplated hereby. Each party hereby
agrees to indemnify one another against any liability, cost or expense incurred
by reason of any finder's, broker's, agent's or similar fees or expenses alleged
to be payable because of any act, omission or statement of the indemnifying
party.
8.10 OTHER AGREEMENTS. The Shareholders and L&P have entered into
letter agreements in the form previously submitted to Shareholders. L&P and the
Company are also concurrently delivering a Reciprocal Tax, Pooling and Private
Offering Exemption Letter in the form of Exhibit 8.10A. Those persons listed on
Schedule 5A.12 are delivering letters to L&P whereby they agree to execute at
closing the agreements attached to Schedule 5A.12. This Agreement shall not be
deemed to be executed and delivered until (i) the Reciprocal Tax, Pooling and
Private Offering Exemption Letter and (ii) the letter agreements contemplated by
Section 5.A.12 have been executed and delivered.
8.11 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties of the parties in this Agreement are true on the
date hereof and none of such representation and warranties shall survive the
date hereof.
19
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
LEGGETT & PLATT, INCORPORATED PACE HOLDINGS, INC.
By: /s/ Robert A. Jefferies, Jr. By: /s/ Bob L. Gaddy
__________________________________ __________________________________
Senior Vice President Chairman & CEO
L&P ACQUISITION COMPANY - 7 PACE INDUSTRIES, INC.
By: /s/ Robert A. Jefferies, Jr. By: /s/ Bob L. Gaddy
__________________________________ __________________________________
Senior Vice President Chairman & CEO
<PAGE>
SCHEDULES
2.1A Subsidiaries, Affiliates
2.1B Capital Stock
2.1C Ownership of Company and Subsidiary Shares
2.4 Company Financial Statements
2.4A Outstanding Debt with Prepayment Penalties
2.5 Material Changes
2.6 Exceptions to Tax Representations
2.7 Contracts
2.12 Real Property
2.13 Title to and Condition of Assets
2.14 Customers and Suppliers
2.15 Employees
2.16 Employee Benefit Plans
2.17 Compliance with Laws
2.18 Consents
2.19 Litigation
2.21 Environmental Matters
2.22 Product Liability
2.23 Reacquisition of Company Shares
2.25 Related Party Transactions
3.4 Absence of Certain Events
5A.5B Persons Required to sign Employment Agreements
5A.12 Persons to Execute Other Agreements
6.4 Required Consents and Approvals
<PAGE>
EXHIBITS
========
1.1 Plan of Merger
1.2 Adjustment and Allocation of Merger Consideration
3.2A Affiliate Restrictive Legend
3.2B Non-Affiliate Restrictive Legend
5A.2 Opinion of Counsel
5B.4 Opinion of Counsel
8.10A Reciprocal Tax, Pooling and Private Exemption Letter
<PAGE>
AMENDMENT NO. 1
TO
THE MERGER AGREEMENT
This Amendment No. 1 to the Merger Agreement (this "Amendment No. 1") is
entered into as of May 10, 1996 by and among Leggett & Platt, Incorporated a
Missouri corporation ("L&P"), L&P Acquisition Company-7, a Delaware corporation
and wholly-owned subsidiary of L&P ("L&P Sub"), Pace Holdings, Inc., a Delaware
corporation (the "Company") and Pace Industries, Inc., an Arkansas corporation
and wholly-owned subsidiary of the Company ("Pace").
WHEREAS, L&P, L&P Sub, the company and Pace as of April 11, 1996 entered
into that certain Merger Agreement (the "Agreement") pursuant to which they
agreed that, at the Effective Time (as defined in the Plan of Merger), L&P Sub
would be merged with and into the Company pursuant to and in accordance with the
Agreement and the Delaware General Corporation Law in a transaction in which the
Company would be the surviving corporation and all outstanding shares of the
Company's common stock would be converted into shares of L&P's common stock, as
provided in the Agreement; and
WHEREAS, the parties, being duly authorized hereunto by their respective
Boards of Directors, desire to enter into this Agreement No. 1, to reflect the
foregoing, and for other purposes as hereinafter set forth; and
WHEREAS, all of the shareholders of the Company have approved this
Amendment in an Agreement Among Shareholders;
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and agreements contained in this Amendment No. 1 L&P, L&P
Sub, the Company and Pace agree as follows:
1.Section 8.5. The last two (2) sentences of Section 8.5 of the Agreement
are modified in their entirety to read as follows:
"The Company and Pace will pay all third party fees and expenses incurred
by them relating to the Merger, the transactions contemplated thereby and
certain debt charges relating to Company notes as of the Closing Date to
the extent such fees and expenses exceed $500,000 in total (such fees and
expenses shall include all fees and expenses relating to the negotiation
and preparation of the letter of intent relating to the Merger, the Merger
Agreement, due diligence, changes in executive compensation and the
Closing, but shall exclude all fees and expenses relating to lien releases,
lender charges, prepayment penalties, if any, etc. relating to the
Company's, Pace's and its Subsidiaries' bank loan agreements. Each
Shareholder of the Company will pay such Shareholder's pro rata portion of
the third party fees and expenses referenced in the preceding sentence
based on such Shareholder's equity interest in the Company as of the
Closing Date (including all Company Shares issuable upon exercise of
options granted under the Company's Amendment and Restated Employee Stock
Option Plan)."
<PAGE>
2. All Other Provisions of Agreement Unaffected. Except as expressly
amended by this Amendment No. 1 each and all of the provisions of the
Agreement shall remain unaffected by this Amendment No. 1, and shall
continue unabated and in full force and effect without any diminution,
modification, amendment or restriction whatsoever.
3. Board Approval. Each of L&P, L&P Sub, the Company and Pace represents
and warrants to the other that its execution, delivery and performance
of this Amendment No. 1 has been duly authorized by its Board of
Directors.
4. Counterparts. This Amendment No. 1 may be executed in any number of
counterparts, each of which will constitute an original document, and
all of which, together, will constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have caused this Amendment No.1 to the
Merger Agreement to be executed and delivered to one another on and as of the
date first written above.
LEGGETT & PLATT, INCORPORATED
By: /s/ Robert A. Jefferies, Jr.
---------------------------------------
Senior Vice President
L&P ACQUISITION COMPANY - 7
By: /s/ Ernest C. Jett
---------------------------------------
Vice President
PACE HOLDINGS, INC.
By: /s/ J. Scott Bull
---------------------------------------
President
PACE INDUSTRIES, INC.
By: /s/ J. Scott Bull
---------------------------------------
President
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Form 8-K, dated May 24,1996,
of Leggett & Platt, Incorporated of our report dated August 23, 1995, on our
audit of the consolidated financial statements of Pace Holdings, Inc. and
Subsidiary as of June 30, 1995 and 1994 and for the year ended June 30, 1995 and
the six months ended June 30, 1994.
/s/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Tulsa, Oklahoma
May 24, 1996
