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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): December 14, 1998
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Shelby Williams Industries, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 1-9457 62-0974443
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File number) Identification No.)
11-111 Merchandise Mart
Chicago, Illinois 60654
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (312) 527-3593
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_____________N/A________________________________________
Former name or former address, if changed since last report
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Item 2. ACQUISITION OR DISPOSITION OF ASSETS.
On December 14, 1998, the Registrant sold certain of its assets
constituting its "Pacific Home Furnishings" division to PHF Hawaii,
Incorporated, a Hawaii corporation (the "Purchaser") for an aggregate
purchase price of $2,538,800 pursuant to the terms of an asset purchase
agreement (the "Agreement") dated as of December 2, 1998 by and between
Registrant and Purchaser. The Registrant's Pacific Home Furnishings division
is involved principally in the sale of floor coverings and textile products.
A copy of the Agreement is attached hereto as Exhibit 2.1 and is hereby
incorporated by reference.
In connection with the transaction, $1,500,000 of the purchase
price was paid in cash, and $1,038,800 of the purchase price was paid by the
delivery of a promissory note (the "Note"). The Note bears interest at 6%
per annum and is secured by a pledge of the assets of the Purchaser,
subordinate to the interests of Purchaser's lender. Payment of the Note was
personally guaranteed by Thomas Lee and Gary Orimoto, the principal
shareholders of the Purchaser. Prior to this transaction, such guarantors
were employed by the Registrant as managers of Registrant's Pacific Home
Furnishings division.
The purchase price paid was the result of arms-length bargaining
between the Registrant and Purchaser, and, other than as set forth above,
there was no material relationship between the Purchaser and the Registrant
or any of its affiliates, directors or officers, or any associate of such
director or officer.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS.
(b) Pro Forma Financial Information
The approximate pro forma effects of the transaction as it would
have affected the Consolidated Balance Sheet at September 30, 1998, if the
transaction had been consummated on that date, were an increase in cash and
cash equivalents of $2,291,000 and a corresponding reduction in net assets of
discontinued operations, assuming receipt of the proceeds from the assets
sold with the business and liquidation and settlement of the other assets
and liabilities of the business sold. The approximate pro forma effects of
the transaction as it would have affected the Consolidated Statements of
Income for the year ended December 31, 1997, and for the nine months ended
September 30, 1998, if the transaction had been consummated on January 1,
1997, were increases of $103,000 and $79,000, respectively, in interest
income and income from continuing operations before income taxes, and $62,000
and $47,000, respectively, or one cent per share (basic and diluted) in each
period, in income from continuing operations.
(c) Exhibits
2.1 Asset Purchase Agreement dated December 2, 1998 by and
between the Registrant and PHF Hawaii, Incorporated.
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SIGNATURE
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 thereunto duly authorized.
Dated: December 21, 1998 SHELBY WILLIAMS INDUSTRIES, INC.
By: /s/ Sam Ferrell
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Name: Sam Ferrell
Title: Vice President of Finance,
Treasurer and
Assistant Secretary
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INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
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<S> <C>
2.1 Asset Purchase Agreement dated December 2, 1998 by and between the
Registrant and PHF Hawaii, Incorporated.
</TABLE>
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EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made December 2, 1998, between Shelby Williams
Industries, Inc., a Delaware corporation ("Seller"), and PHF Hawaii,
Incorporated, a Hawaii corporation ("Purchaser").
R E C I T A L S
A. Seller is engaged in the business of manufacturing and selling
furniture and other products on a worldwide basis. Seller's Pacific Home
Furnishings ("PHF") operating division is engaged in the business of
distributing floor coverings and textile products from its principal place of
business located at 98-735 Kuahao Place, Pearl City, Hawaii (the "PHF
Division").
B. Seller desires to sell to Purchaser certain of Seller's assets,
properties and rights relating to the PHF Division, other than the Excluded
Assets, as herein defined (the "Purchased Assets"), and Purchaser desires to
purchase the Purchased Assets, all on the terms and subject to the conditions
contained in this Agreement.
A G R E E M E N T S
Therefore, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
1.1 AGREEMENT TO PURCHASE AND SELL. On the terms and subject to
the conditions contained in this Agreement, Purchaser agrees to purchase from
Seller, and Seller agrees to sell to Purchaser, all of the Purchased Assets.
1.2 ENUMERATION OF PURCHASED ASSETS. The Purchased Assets shall
include the following assets owned by Seller:
(a) all inventory of the PHF Division, including, without
limitation, raw materials, work in process, finished goods, goods
in transit, service parts and supplies as set forth on Schedule
1.2(a) hereto (collectively, the "Inventory");
(b) all furniture, fixtures, equipment, machinery, parts,
computer hardware, tools, dies, jigs, patterns, molds, automobiles
and trucks and all other tangible personal property located on the
premises of the PHF Division (other than the Inventory) as set
forth on Schedule 1.2(b) hereto (collectively, the "Equipment");
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(c) all leasehold interests in property leased to Seller and
used exclusively in the conduct of the business of the PHF Division
as set forth on Schedule 1.2 (c) hereto (the "Leased Property");
(d) all sales orders and sales contracts, purchase orders and
purchase contracts, quotations and bids relating exclusively to the
PHF Division;
(e) all Intellectual Property (as herein defined) relating
exclusively to the PHF Division, including, without limitation, the
names "Pacific Home Furnishings" and "PHF", and all goodwill
associated therewith;
(f) all license agreements, distribution agreements, sales
representative agreements, service agreements, supply agreements,
franchise agreements, computer software agreements and technical
service agreements listed on Schedule 1.2 (f) attached hereto to
the extent they are legally transferable by Seller and related
exclusively to the conduct of the business of the PHF Division;
(g) all customer lists, customer records and information of the
PHF Division;
(h) all rights in connection with deposits, prepaid expenses
and claims against vendors with respect to the assets being sold
hereunder which are described on Schedule 1.2(h) attached hereto;
(i) all computer software, including all documentation and
source codes with respect to such software and licenses and leases
of software to the extent they are legally transferable by Seller
and related exclusively to the conduct of the business of the PHF
Division;
(j) all sales and promotional materials, catalogues and
advertising literature related exclusively to the conduct of the
business of the PHF Division; and
(k) all telephone numbers of the PHF Division.
1.3 EXCLUDED ASSETS. The Excluded Assets shall consist of the
following items:
(a) all cash on hand and in banks, cash equivalents
(exclusive of deposits and letters of credit from customers of
Seller), and investments;
(b) all accounts receivable, notes receivable, negotiable
instruments and chattel paper (collectively the "Accounts
Receivable") including, without limitation, the items listed on
Schedule 1.3(b) hereto;.
(c) Seller's bank accounts (including the lock box for the
collection of Seller's accounts receivable) checkbooks and
cancelled checks as set forth on Schedule 1.3(c) hereto;
(d) those contracts with Seller's Affiliates (as herein
defined) set forth on Schedule 1.3(d) hereto;
(e) claims (and benefits to the extent they arise therefrom )
that relate to liabilities other than the Assumed Liabilities (as
herein defined) and assets other than the Purchased Assets;
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(f) insurance policies of Seller and rights in connection
therewith, unless prior to the Closing, Purchaser elects, by
written notice delivered to Seller prior to the Closing Date, to
accept assignments of any of such insurance policies;
(g) rights arising from prepaid deposits and expenses, if
any, with respect to assets not being sold hereunder including,
without limitation, the items listed on Schedule 1.3(g) hereto;
(h) rights arising from any refunds due with respect to
insurance premium payments and tax refunds due from federal, state
and local taxing authorities including;
(i) all rights of indemnification and claims which relate to
the conduct of the PHF Division by Seller prior to the Closing Date;
(j) Seller's rights under this Agreement;
(k) the agreements, if any, set forth on Schedule 1.3(k);
(l) the assets, if any, described on Schedule 1.3(l); and
(m) all other assets of Seller not constituting a part of the
PHF Division.
ARTICLE II
ASSUMPTION OF LIABILITIES
2.1 AGREEMENT TO ASSUME. At the Closing (as herein defined),
Purchaser shall assume and agree to discharge and perform when due, all
liabilities and obligations of Seller of every kind and description, other
than the Excluded Liabilities, as herein defined (the "Assumed Liabilities").
2.2 EXCLUDED LIABILITIES. The following (and only the following)
liabilities and obligations of Seller shall constitute the "Excluded
Liabilities":
(a) any liabilities for legal, accounting, audit and
investment banking fees, brokerage commissions, and any other
expenses incurred by Seller in connection with the negotiation and
preparation of this Agreement and the sale of the Purchased Assets
to Purchaser;
(b) any liabilities of Seller for all taxes relating to the
PHF Division;
(c) any liability of Seller to banks or financial
institutions with respect to borrowed money;
(d) all liabilities of Seller prior to the Closing under that
certain Agreement, dated September 13, 1997, between Pacific Home
Furnishings and The Carpet, Linoleum and Soft Tile Union Local No.
1926, AFL-CIO (the "Union Agreement");
(e) all accounts payable of the PHF Division that are listed
on Schedule 2.2(d) hereto; and
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(f) any liabilities of Seller under those leases, contracts,
insurance policies, commitments, sales orders, purchase orders,
Permits (as defined herein) and Environmental Permits (as defined
herein) which are not assigned to Purchaser pursuant to this
Agreement.
2.3 NO EXPANSION OF THIRD PARTY RIGHTS. The assumption by
Purchaser of the Assumed Liabilities shall not expand the rights or remedies
of any third party against the Purchaser or the Seller as compared to the
rights and remedies which such third party would have had against the Seller
had the Purchaser not assumed the Assumed Liabilities.
ARTICLE III
PURCHASE PRICE, MANNER OF PAYMENT AND CLOSING
3.1 PURCHASE PRICE; METHOD OF PAYMENT.
(a) The "Purchase Price" of the Purchased Assets shall equal the
book value of the Inventory described in Section 1.2(a) as of the Closing
Date as mutually agreed upon consistent with Section 3.2 between Seller and
Purchaser immediately prior to the Closing (the "Inventory Valuation
Amount"), MINUS $1,500,000.
(b) The Purchase Price shall be paid as follows:
(i) an amount equal to $1,500,000 shall be paid in cash at
Closing (the "Cash Portion") by wire transfer to an account or
accounts specified by Seller in writing; and
(ii) the balance of the Purchase Price shall be paid by the
execution and delivery of a Secured Promissory Note of Purchaser
(the "Note"), personally guaranteed by Thomas Lee and Gary Orimoto,
all in the form of the Note and Guarantee attached hereto, as
Exhibits A and B respectively. The Seller's interest in the Note,
each Guarantee and its security interest in the Purchased Assets
shall be subordinate and junior to the Purchaser's indebtedness to
First Hawaiian Bank in the principal amount of $1,750,000, as set
forth in two Subordination Agreements executed by the Seller, the
Purchaser and First Hawaiian Bank.
3.2 INVENTORY VALUATION. No more than two days prior to the
Closing, Seller and Purchaser will jointly conduct an audit of the Inventory
to determine the Inventory Valuation Amount. The Inventory shall be valued
at Seller's cost in a manner consistent with Seller's past practices with
respect to the valuation of Inventory. Upon the conclusion of such audit, an
authorized representative of Seller and Purchaser shall execute an Officer's
Certificate certifying the Inventory Valuation Amount.
3.3 TIME AND PLACE OF CLOSING. The transaction contemplated by
this Agreement shall be consummated (the "Closing") at 10:00 a.m. at the
offices of Purchaser on December 14, 1998 or on such other date, or at such
other time or place, as shall be mutually agreed upon by Seller and
Purchaser; provided, however, that the date of the Closing shall be
automatically extended from time to time for so long as any of the conditions
set forth in Article VI shall not be satisfied or waived, subject, however,
to the provisions of Section 11.1. The date on which the Closing occurs in
accordance with the preceding sentence is referred to in this Agreement as
the "Closing Date". The Closing shall be deemed to be effective as of 12:01
a.m. on the Closing Date Honululu, Hawaii.
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3.4 MANNER OF PAYMENT OF THE PURCHASE PRICE. At the Closing,
Purchaser shall(i) assume the Assumed Liabilities, (ii) pay the Cash Portion
to Seller, by wire transfer to such account as Seller shall designate by
written notice delivered to Purchaser on or prior to the Closing Date and
(iii) deliver the Note and Guarantee to Seller.
3.5 CLOSING DELIVERIES. At the Closing, the parties shall execute
and deliver such bills of sale, assignments, deeds, documents of title,
assumption agreements, closing certificates, searches, title insurance
policies and other documents as are reasonably required in order to
effectuate the consummation of the transaction contemplated hereby. All
documents to be delivered by a party shall be in form and substance
reasonably satisfactory to the other party.
3.6 ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be
allocated among the Purchased Assets in the manner required by Section 1060
of the Internal Revenue Code of 1986, as amended (the "Code") and in
accordance with Schedule 3.6 hereto.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 PURCHASER'S REPRESENTATIONS AND WARRANTIES. Purchaser
represents and warrants to Seller that:
(a) Purchaser is a corporation duly organized, existing and
in good standing, under the laws of the State of Hawaii with
contributed capital of $250,000.
(b) Purchaser has full corporate power and authority to enter
into and perform (x) this Agreement and (y) all documents and
instruments to be executed by Purchaser pursuant to this Agreement
(collectively, "Purchaser's Ancillary Documents"). This Agreement
has been, and Purchaser's Ancillary Documents will be, duly
executed and delivered by duly authorized officers of Purchaser.
(c) No consent, authorization, order or approval of, or
filing or registration with, any governmental authority or other
person is required for the execution and delivery by Purchaser of
this Agreement and Purchaser's Ancillary Documents, and the
consummation by Purchaser of the transaction contemplated by this
Agreement and Purchaser's Ancillary Documents.
(d) Neither the execution and delivery of this Agreement and
Purchaser's Ancillary Documents by Purchaser, nor the consummation
by Purchaser of the transaction contemplated hereby, will conflict
with or result in a breach of any of the terms, conditions or
provisions of Purchaser's Certificate of Incorporation or By-laws,
or of any statute or administrative regulation, or of any order,
writ, injunction, judgment or decree of any court or governmental
authority or of any arbitration award.
(e) Purchaser is not a party to any unexpired, undischarged
or unsatisfied written or oral contract, agreement, indenture,
mortgage, debenture, note or other instrument under the terms of
which performance by Purchaser according to the terms of this
Agreement will be a default, or whereby timely performance by
Purchaser according to the terms of this Agreement may be
prohibited, prevented or delayed.
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(f) Neither Purchaser, nor any of its Affiliates has dealt
with any person or entity who is or may be entitled to a broker's
commission, finder's fee, investment banker's fee or similar
payment for arranging the transaction contemplated hereby or
introducing the parties to each other. As used herein, an
"Affiliate" is any person or entity which controls a party to this
Agreement, which that party controls, or which is under common
control with that party. In the case of Seller, an Affiliate shall
include Shelby Williams Industries, Inc. and its subsidiaries.
"Control" means the power, direct or indirect, to direct or cause
the direction of the management and policies of a person or entity
through voting securities, contract or otherwise.
4.2 SELLER'S REPRESENTATIONS AND WARRANTIES. Seller represents and
warrants to Purchaser that, except as set forth in the schedule delivered by
Seller to Purchaser concurrently herewith and identified as the "Disclosure
Schedule":
(a) Seller is a corporation duly organized, existing and in
good standing, under the laws of the State of Delaware. Seller has
all necessary corporate power and authority to conduct the business
of the PHF Division (the "Business") as it is now being conducted.
(b) Seller has full corporate power and authority to enter
into and perform (x) this Agreement and (y) all documents and
instruments to be executed by Seller pursuant to this Agreement
(collectively, "Seller's Ancillary Documents"). This Agreement has
been, and Seller's Ancillary Documents will be, duly executed and
delivered by duly authorized officers of Seller.
(c) No consent, authorization, order or approval of, or
filing or registration with, any governmental authority or other
person is required for the execution and delivery of this Agreement
and Seller's Ancillary Documents and the consummation by Seller of
the transaction contemplated by this Agreement and Seller's
Ancillary Documents.
(d) Neither the execution and delivery of this Agreement and
Seller's Ancillary Documents by Seller, nor the consummation by
Seller of the transaction contemplated hereby, will conflict with
or result in a breach of any of the terms, conditions or provisions
of Seller's Certificate of Incorporation or By-laws, or of any
statute or administrative regulation, or of any order, writ,
injunction, judgment or decree of any court or any governmental
authority or of any arbitration award.
(e) Seller has good title to, and the corporate power to
sell, the Purchased Assets, free and clear of any liens, claims,
encumbrances and security interests. The foregoing representation
and warranty shall not apply to the Leased Premises.
(f) The Disclosure Schedule lists and describes all material
contracts, leases, and agreements to which Seller is a party and
which relate to the conduct of the Business, including, without
limitation: employment and employment related agreements; covenants
not to compete; loan agreements; notes; security agreements; sales
representative, distribution, franchise, advertising and similar
agreements; leases and subleases of Leased Personalty or the Leased
Premises; license agreements; purchase orders and purchase
contracts and sales orders and sales contracts. All contracts,
leases, subleases and other instruments referred to in this
paragraph 4.2(f) are binding upon the parties thereto. No default
by Seller has occurred thereunder and, to Seller's knowledge, no
default by the other contracting parties has occurred thereunder,
which default would have a Material Adverse Effect (as defined).
For the purposes of this Agreement, "Material
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Adverse Effect" means a material adverse effect on the assets, liabilities,
financial condition or results of operations of the Business, taken as a
whole.
(g) Seller is not a party to, or bound by, any unexpired,
undischarged or unsatisfied written contract, agreement, indenture,
mortgage, debenture, note or other instrument under the terms of
which performance by Seller according to the terms of this
Agreement will be a default or an event of acceleration, which
default or acceleration would have a Material Adverse Effect, or
whereby timely performance by Seller according to the terms of this
Agreement may be prohibited, prevented or delayed.
(h) There is no litigation or proceeding, in law or in
equity, and there are no proceedings or governmental investigations
before any commission or other administrative authority, pending,
or, to Seller's knowledge, overtly threatened, against Seller or
its Affiliates, or with respect to the consummation of the
transaction contemplated hereby, or the use of the Purchased Assets
(whether used by Purchaser after the Closing or by Seller prior
thereto) which if decided adversely to Seller would have a Material
Adverse Effect.
(i) The Leased Premises are leased to Seller pursuant to
written leases, copies of which are attached to the Disclosure
Schedule. Seller is not in default under any material term of any
agreement relating to the Leased Premises nor, to Seller's
knowledge, is any other party thereto in material default
thereunder.
(j) Each material (i) trademark, service mark, slogan, trade
name, trade dress and the like (collectively with the associated
goodwill of each, "Trademarks"), including information regarding
each registration and pending application to register any such
Trademarks; (ii) common law Trademark; (iii) patent on and pending
application to patent any technology or design; (iv) registration
of and application to register any copyright; and (v) license of
rights in computer software, Trademarks, patents, copyrights,
unpatented formulations, and know-how, whether to or by Seller, is
listed in the Disclosure Schedule. The scheduled rights are
referred to herein collectively as the "Intellectual Property".
Seller has no knowledge: (i) that any other person or entity
claims the right to use in connection with similar or closely
related goods and in the same geographic area, any mark which is
identical or confusingly similar to any of the Trademarks; (ii) of
any claim that any third party asserts ownership rights in any of
the Intellectual Property; (iii) of any claim that Seller's use of
any Intellectual Property infringes any right of any third party;
and (iv) that any third party is infringing any of Seller's rights
in any of the Intellectual Property.
4.3 LIMITATION ON WARRANTIES. Thomas Lee and Gary Orimoto
(collectively, the "Managers") are each principal shareholders of Purchaser
and current employees of Seller. Each Manager has been actively engaged in
the management and operation of the Business for a period of over five (5)
years and is intimately familiar with the business and affairs of the PHF
Division. Accordingly, other than the representations and warranties
contained in subparagraphs (a), (b), (c) and (d) of Section 4.2 above,
Purchaser is acquiring the Purchased Assets and assuming the Assumed
Liabilities hereunder solely in reliance of the Managers' knowledge of the
Business and not any of the other representations and warranties contained in
Section 4.2. Seller makes no express or implied warranty of any kind
whatsoever, including, without limitation, any representation as to physical
condition or value of any of the Purchased Assets or the future profitability
or future earnings performance of the Business. ALL IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE ARE EXPRESSLY EXCLUDED.
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ARTICLE V
CONDUCT PRIOR TO THE CLOSING
5.1 GENERAL. Between the date hereof and the Closing Date:
(a) Seller shall give to Purchaser's officers, employees,
attorneys, consultants, accountants and lenders reasonable access
during normal business hours to all of the properties, books,
contracts, documents, records and personnel of Seller and shall
furnish to Purchaser such information as Purchaser may at any time
and from time to time reasonably request.
(b) Seller shall use reasonable efforts and make every good
faith attempt (and Purchaser shall cooperate with Seller) to obtain
the consents to the assignment of, or alternate arrangements
satisfactory to Purchaser with respect to, those contracts, leases,
or other instruments, which are enumerated in EXHIBIT C attached
hereto (the "Consents").
(c) Seller shall carry on the Business in the usual and
ordinary course of business, consistent with past practices.
(d) Purchaser shall not disclose to any third party or use
for any purpose other than evaluating and carrying out the
transaction contemplated hereby, any Confidential Information (as
defined herein) regarding Seller and the Business. Intending that
the term shall be broadly construed to include anything protectible
under applicable law, "Confidential Information" means all
information, and all documents and other tangible items which
record information, which at the time or times concerned is
protectible as a trade secret under applicable law. The preceding
portions of this paragraph (e) shall not apply to information (i)
which was in the public domain, (ii) which was previously known by
Purchaser, or (iii) to the extent that disclosure is required by
law.
(e) No party shall intentionally perform any act which, if
performed, or omit to perform any act which, if omitted to be
performed, would prevent or excuse the performance of this
Agreement by any party hereto or which would result in any
representation or warranty herein contained of said party being
untrue in any material respect as if originally made on and as of
the Closing Date.
ARTICLE VI
CONDITIONS TO CLOSING
6.1 CONDITIONS TO SELLER'S OBLIGATIONS. The obligation of Seller
to consummate the transaction contemplated hereby is subject to the
fulfillment of all of the following conditions on or prior to the Closing
Date, upon the non-fulfillment of any of which this Agreement may, at
Seller's option, be terminated pursuant to and with the effect set forth in
Article XI:
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(a) Each and every representation and warranty made by
Purchaser shall have been true and correct in all material respects
when made and shall be true and correct in all material respects as
if originally made on and as of the Closing Date.
(b) All obligations of Purchaser to be performed hereunder
through, and including on, the Closing Date (including, without
limitation, all obligations which Purchaser would be required to
perform at the Closing if the transaction contemplated hereby was
consummated) shall have been performed.
(c) No suit or proceeding shall have been commenced by any
governmental authority on any grounds to restrain, enjoin or hinder
the consummation of the transaction contemplated hereby.
(d) Purchaser shall have executed an Assignment, Assumption
and Bill of Sale in form and substance satisfactory to Seller.
(e) Purchaser and Seller shall have executed an assignment
and assumption agreement (the "Assignment and Assumption
Agreement") with respect to the premises located at 98-735 Kuahao
Place, Pearl City, Hawaii, in form and substance satisfactory to
Seller.
(f) In accordance with the valuation procedure set forth in
Section 3.2 hereof, the value of the Inventory on hand as of the
Closing Date shall not exceed $4,500,000.
6.2 CONDITIONS TO PURCHASER'S OBLIGATIONS. The obligation of
Purchaser to consummate the transaction contemplated hereby is subject to the
fulfillment of all of the following conditions on or prior to the Closing
Date, upon the non-fulfillment of any of which this Agreement may, at
Purchaser's option, be terminated pursuant to and with the effect set forth
in Article XI:
(a) Each and every representation and warranty made by Seller
shall have been true and correct in all material respects when made
and shall be true and correct in all material respects as if
originally made on and as of the Closing Date.
(b) All obligations of Seller to be performed hereunder
through, and including on, the Closing Date (including, without
limitation, all obligations which Seller would be required to
perform at the Closing if the transaction contemplated hereby was
consummated) shall have been performed.
(c) All of the Consents shall have been obtained.
(d) Seller shall have executed an Assignment, Assumption and
Bill of Sale in form and substance satisfactory to Purchaser.
(e) No suit or proceeding shall have been commenced by any
governmental authority to restrain, enjoin or hinder the
consummation of the transaction contemplated hereby.
(f) Purchaser and Seller shall have executed the Assignment
and Assumption Agreement, in form and substance satisfactory to
Purchaser.
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ARTICLE VII
POST-CLOSING AGREEMENTS
7.1 POST-CLOSING AGREEMENTS. From and after the Closing, the
parties shall have the respective rights and obligations which are set forth
in the remainder of this Article VII.
7.2 INSPECTION OF RECORDS. Seller and Purchaser shall each make
their respective books and records (including work papers in the possession
of their respective accountants) available for inspection by the other party,
or by its duly accredited representatives, for reasonable business purposes
at all reasonable times during normal business hours, for a seven (7) year
period after the Closing Date, with respect to all transactions occurring
prior to and those relating to the Closing, the historical financial
condition, results of operations and cash flows of Seller, or the Assumed
Liabilities. As used in this Section 7.2, the right of inspection includes
the right to make extracts or copies. The representatives of a party
inspecting the records of the other party shall be reasonably satisfactory to
the other party.
7.3 PAYMENTS OF ACCOUNTS RECEIVABLE. From and after the Closing
Date, Purchaser shall use reasonable goof faith efforts in order to collect
all outstanding Accounts Receivable. Purchaser's duties shall be limited to
sending statements and bills to customers, communicating with the customers,
receiving payments of the Accounts Receivable, transmitting the receipts to
Seller and keeping records of the payments received and transmitted to
Seller. Purchaser shall not be required to enforce collection of the
Accounts Receivable through collection agencies, legal process, or by any
extraordinary means. Except as provided below, in order to allow Purchaser
the opportunity to preserve and maintain good business relations with the
customers, Seller shall not communicate with, or threaten or institute legal
collection against, the customers to collect the Accounts Receivable, other
than sending statements and bills to the customers. Seller shall rely upon
Purchaser to collect the Accounts Receivable for a period of six (6) months
after the Closing Date, whereupon Seller shall be free to take all action
deemed necessary or desirable by Seller to collect the account and Purchaser
shall have no further obligation to attempt to collect such account. In the
event Purchaser shall receive any instrument of payment of any of the
Accounts Receivable, Purchaser shall forthwith deliver it to Seller, endorsed
where necessary without recourse to Seller. Sums collected by Purchaser from
customers who are indebted to Seller shall be applied first to the accounts
owed to Seller and then to amounts due to Purchaser.
7.4 PRODUCTS LIABILITY INSURANCE. For a period of five (5) years
commencing on the Closing Date, Purchaser shall maintain policies of products
liability insurance in form and substance satisfactory to Seller naming
Seller as an additional insured and covering the operations of the Business
with coverages and limits which are comparable to those maintained from time
to time by Purchaser with respect to its own business.
7.5 NON-ASSIGNMENT. Notwithstanding any provision to the contrary
contained herein, Seller shall not be obligated to assign to Purchaser any
contract, purchase order, sales order, lease or other instrument which
provides that it may not be assigned without the consent of the other party
thereto and for which such consent is not obtained, but in any such event,
Seller shall cooperate with Purchaser in any reasonable arrangement designed
to provide the benefits thereof to Purchaser; provided, however, that Seller
shall be obligated to deliver to Purchaser an assignment of the Sublease and
the consent thereto of the sublessor and master lessor, if necessary under
the master lease for the Leased Premises.
7.6 FURTHER ASSURANCES. The parties shall execute such further
documents, and perform such further acts, as may be necessary to transfer and
convey the Purchased Assets to Purchaser, on the terms
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herein contained, and to otherwise comply with the terms of this Agreement
and consummate the transaction contemplated hereby.
ARTICLE VIII
EMPLOYEES
8.1 EFFECT OF CLOSING. On the Closing Date, each Employee's
employment with Seller will terminate, and such Employee will have no
continuing right to participate in any of Seller's medical plans, retirement
plans or any other similar benefits of any nature whatsoever provided or made
available by Seller to its employees.
ARTICLE IX
COVENANT NOT TO COMPETE
9.1 NON-COMPETITION. Seller hereby agrees that for a three (3)
year term commencing from the date of this Agreement, Seller and Seller's
Affiliates shall not directly or indirectly engage in, or have any financial
or other interests (whether as a principal, partner, shareholder, consultant
or otherwise) in any business or activity in the State of Hawaii engaged in
the wholesale or retail sale or distribution of floor coverings, window
coverings or drapery products.
9.2 DEFAULT. Seller acknowledges that the restrictions in Section
9.1 above, in view of the nature of the business in which Purchaser is
engaged, are reasonable and necessary in order to protect the legitimate
interests of Purchaser and that any violation thereof would result in injury
to Purchaser. Therefore, Seller agrees that in the event Seller and/or
Seller's Affiliates violate any of the restrictions contained in Section 9.1
above, Purchaser shall be entitled to obtain injunction relief from any court
of competent jurisdiction, in addition to any other rights or remedies to
which Purchaser may be entitled.
9.3 REASONABLENESS OF RESTRICTIONS. If any provision of this
Article is held to be invalid or unenforceable, the remaining provisions
hereof shall nevertheless continue to be valid and enforceable as though the
invalid or unenforceable provisions had not been included herein. Seller
expressly agrees that if, in any judicial or other contested proceeding, the
scope of the restricted activity and/or geographic coverage and/or the period
of time of the covenant contained in Section 9.1 above should be found or
held to be unreasonable and unenforceable, then such scope of the restricted
activity and/or geographic coverage and/or such period of time, as the case
may be, shall be reduced to the extent necessary to enable enforcement of the
restrictions in such section to the fullest extent permitted under applicable
law.
9.4 MATERIAL INDUCEMENT. Seller acknowledges and agrees that the
foregoing covenant and representation is a material inducement to Purchaser's
execution of this Agreement and Purchaser's payment of the consideration
hereunder.
9.5 BINDING EFFECT. The covenants of this Article shall be
binding upon and inure to the benefit of Seller and Purchaser and their
respective successors and permitted assigns.
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ARTICLE X
INDEMNIFICATION
10.1 GENERAL. From and after the Closing, the parties shall
indemnify each other as provided in this Article X. As used in this
Agreement, the term "Damages" shall mean all liabilities, demands, claims,
actions or causes of action, regulatory, legislative or judicial proceedings
or investigations, assessments, levies, losses, fines, penalties, damages,
costs and expenses, including, without limitation, reasonable attorneys',
accountants', investigators', and experts' fees and expenses, sustained or
incurred in connection with the defense or investigation thereof.
10.2 INDEMNIFICATION OBLIGATIONS OF SELLER. Subject to the
provisions of Section 10.3, Seller shall indemnify, save and keep harmless
Purchaser and its successors and permitted assigns ("Purchaser Indemnitees")
against and from all Damages sustained or incurred by any of them resulting
from or arising out of or by virtue of:
(a) any material inaccuracy in or breach of any
representation and warranty made by Seller in subparagraphs (a),
(b), (c) and (d) of Section 4.2 of this Agreement or in any closing
document delivered to Purchaser in connection with this Agreement;
(b) any material breach by Seller of, or failure by Seller to
comply with, any of its covenants or obligations under this
Agreement (including, without limitation, its obligations under
this Article X);
(c) the failure to discharge any liability or obligation of
Seller other than the Assumed Liabilities; and
(d) any claims by any person or entity claiming to be
entitled to a broker's commission, finder's fee, investment
broker's fee or similar payment for arranging the transaction
contemplated hereby or introducing the parties to each other while
acting as or claiming to be an agent or representative of Seller in
connection with this transaction.
10.3 LIMITATION ON SELLER'S INDEMNIFICATION OBLIGATIONS. Seller's
obligations pursuant to the provisions of Section 10.2 are subject to the
following limitations:
(a) the Purchaser Indemnitees shall not be entitled to
recover under Section 10.2(a): (i) until the total amount which
Purchaser would recover under Section 10.2(a), but for this Section
10.3(a), exceeds $25,000, and then only for the excess over
$25,000; (ii) unless a claim for Damages has been asserted by
written notice, specifying the details of the alleged
misrepresentation or breach of warranty, delivered to Seller on or
prior to the first anniversary of the Closing Date; or (iii) if at
or before the time of Closing Purchaser had actual knowledge of the
misrepresentation or breach of warranty;
(b) the Purchaser Indemnitees shall not be entitled to
recover under Section 10.2(b) or (c) hereof if indemnification is
also available under Section 10.2(a) hereof;
(c) the Purchaser Indemnitees shall not be entitled to
recover under Section 10.2:
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(i) WITH RESPECT TO CONSEQUENTIAL DAMAGES, INCLUDING
CONSEQUENTIAL DAMAGES CONSISTING OF BUSINESS INTERRUPTION OR
LOST PROFITS, OR WITH RESPECT TO PUNITIVE DAMAGES;
(ii) to the extent aggregate Damages under Section
10.3(a) exceed the Purchase Price;
(iii) to the extent the Damages are covered by insurance
held by Purchaser;
(iv) with respect to the nonassignability or
nontransferability of any of the Purchased Assets or Assumed
Liabilities or the failure to obtain any consent, or
conditions imposed incident to the giving of any consent,
required in connection with, or as a consequence of, the
transfer of any of the Purchased Assets to, or the assumption
of the Assumed Liabilities by, Purchaser;
(d) the amount of any recovery pursuant to Section 10.2 shall
be net of any income tax benefits inuring to the Purchaser
Indemnitees as a result of the state of facts which entitled the
Purchaser Indemnitees to recover from Seller pursuant to Section
10.2.
10.4 PURCHASER'S INDEMNIFICATION COVENANTS. Purchaser shall
indemnify, save and keep harmless Seller and its successors and permitted
assigns against and from all Damages sustained or incurred by any of them
resulting from or arising out of or by virtue of:
(a) any material inaccuracy in or breach of any
representation and warranty made by Purchaser in this Agreement or
in any closing document delivered to Seller in connection with this
Agreement;
(b) any material breach by Purchaser of, or failure by
Purchaser to comply with, any of its covenants or obligations under
this Agreement (including, without limitation, its obligations
under this Article X);
(c) Purchaser's failure to pay, discharge and perform any of
the Assumed Liabilities; or
(d) any claims by any person or entity claiming to be
entitled to a broker's commission, finder's fee, investment
broker's fee or similar payment for arranging the transaction
contemplated hereby or introducing the parties to each other while
acting as or claiming to be an agent or representative of Purchaser
in connection with this transaction.
10.5 INDEMNIFICATION EXCLUSIVE REMEDY. Indemnification pursuant
to the provisions of this Article X shall be the exclusive remedy of the
parties for any misrepresentation or breach of any warranty or covenant
contained herein or in any closing document executed and delivered pursuant
to the provisions hereof with respect to any matter which is the subject of
this Article X. Without limiting the generality of the preceding sentence,
no legal action sounding in tort or strict liability may be maintained by any
party.
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ARTICLE XI
EFFECT OF TERMINATION/PROCEEDING
11.1 RIGHT TO TERMINATE. This Agreement and the transaction
contemplated hereby may be terminated at any time prior to the Closing by
prompt notice given in accordance with Section 12.3:
(a) by the mutual written consent of Purchaser and Seller; or
(b) by either of such parties if the Closing shall not have
occurred at or before 11:59 p.m. on December 16, 1998; provided,
however, that the right to terminate this Agreement under this
Section 11.1(b) shall not be available to any party whose failure
to fulfill any of its obligations under this Agreement has been the
cause of or resulted in the failure of the Closing to occur on or
prior to the aforesaid date.
11.2 REMEDIES. In the event of a breach of this Agreement, the
non-breaching party shall not be limited to the remedy of termination of this
Agreement, but shall be entitled to pursue all available legal and equitable
rights and remedies, and shall be entitled to recover all of its reasonable
costs and expenses incurred in pursuing them (including, without limitation,
reasonable attorneys' fees).
ARTICLE XII
MISCELLANEOUS
12.1 SALES AND TRANSFER TAXES. Purchaser shall pay all sales,
use, transfer and conveyance taxes arising in connection with the sale and
transfer of the Purchased Assets to Purchaser pursuant to this Agreement.
12.2 PUBLICITY. Except as otherwise required by law, press
releases concerning this transaction shall be made only with the prior
agreement of the Seller and Purchaser.
12.3 NOTICES. All notices required or permitted to be given
hereunder shall be in writing and may be delivered by hand, by facsimile, by
nationally recognized private courier, or by United States mail. Notices
delivered by mail shall be deemed given three (3) business days after being
deposited in the United States mail, postage prepaid, registered or certified
mail. Notices delivered by hand by facsimile, or by nationally recognized
private carrier shall be deemed given on the first business day following
receipt; provided, however, that a notice delivered by facsimile shall only
be effective if such notice is also delivered by hand, or deposited in the
United States mail, postage prepaid, registered or certified mail, on or
before two (2) business days after its delivery by facsimile. All notices
shall be addressed as follows:
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If to Seller
Addressed to
Shelby Williams Industries Inc.
150 Shelby Williams Drive
Morristown, TN 37813
Attention: Robert Coulter
Telecopier: 423-586-2260
with a copy to
D'Ancona & Pflaum
30 North LaSalle
Suite 2900
Chicago, Illinois 60602
Attention: Walter Roth
Telecopier: (312) 580-0923
If to Purchaser
Addressed to
PHF Hawaii, Incorporated
98-735 Kuahao Place
Pearl City, Hawaii 96782
Attention: President
Telecopier: 808-486-2201
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with a copy to
Kuniyuki & Chang
900 Fort Street
Suite 310
Honolulu, Hawaii 96813
Attention: Louis L.C. Chang
Telecopier: 808-521-2389
and/or to such other respective addresses and/or addressees as may be
designated by notice given in accordance with the provisions of this Section
12.3.
12.4 EXPENSES. Each party hereto shall bear all fees and expenses
incurred by such party in connection with, relating to or arising out of the
execution, delivery and performance of this Agreement and the consummation of
the transaction contemplated hereby, including, without limitation,
attorneys', accountants' and other professional fees and expenses.
12.5 ENTIRE AGREEMENT. This Agreement and the instruments to be
delivered by the parties pursuant hereto constitute the entire agreement
between the parties. Each exhibit and the Disclosure Schedule shall be
considered incorporated into this Agreement. Any matter which is disclosed
in any portion of the Disclosure Schedule is deemed to have been disclosed
for the purposes of all relevant provisions of this Agreement. The inclusion
of any item in the Disclosure Schedule is not evidence of the materiality of
such item for the purposes of this Agreement and Seller's Ancillary
Documents. The parties make no representations or warranties to each other,
except as contained in this Agreement. Purchaser acknowledges that it has
conducted an independent investigation of the financial condition, assets,
liabilities, properties and projected operations of the Business in making
its determination as to the propriety of the transaction contemplated by this
Agreement, and in entering into this Agreement has relied solely on the
results of said investigation and on the representations and warranties of
Seller expressly contained in this Agreement.
12.6 NON-WAIVER. The failure in any one or more instances of a
party to insist upon performance of any of the terms, covenants or conditions
of this Agreement, to exercise any right or privilege in this Agreement
conferred, or the waiver by said party of any breach of any of the terms,
covenants or conditions of this Agreement, shall not be construed as a
subsequent waiver of any such terms, covenants, conditions, rights or
privileges, but the same shall continue and remain in full force and effect
as if no such forbearance or waiver had occurred. No waiver shall be
effective unless it is in writing and signed by an authorized representative
of the waiving party.
12.7 APPLICABLE LAW. This Agreement shall be governed and
controlled as to validity, enforcement, interpretation, construction, effect
and in all other respects by the internal laws of the State of Hawaii
applicable to contracts made in that State.
12.8 BINDING EFFECT; BENEFIT. This Agreement shall inure to the
benefit of and be binding upon the parties hereto, and their successors and
permitted assigns. Nothing in this Agreement, express or implied, is
intended to confer on any person other than the parties hereto, and their
respective successors and permitted assigns any rights, remedies, obligations
or liabilities under or by reason of this Agreement, including, without
limitation, third party beneficiary rights.
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12.9 ASSIGNABILITY. This Agreement shall not be assignable by
either party without the prior written consent of the other party.
12.10 AMENDMENTS. This Agreement shall not be modified or amended
except pursuant to an instrument in writing executed and delivered on behalf
of each of the parties hereto.
12.11 HEADINGS. The headings contained in this Agreement are for
convenience of reference only and shall not affect the meaning or
interpretation of this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above written.
SELLER:
SHELBY WILLIAMS INDUSTRIES, INC.
By: /s/ Robert C. Coulter
----------------------------
Its: President
PURCHASER:
PHF HAWAII, INCORPORATED
By: /s/ Thomas Lee
----------------------------
Its: President
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