<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 2, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
---------- ----------
Commission file number 0-18446
Fairwood Corporation
--------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3472113
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
c/o Mohasco Corporation
4401 Fair Lakes Court, Fairfax, VA 22033
---------------------------------- -----
(Address of principal executive offices) (Zip Code)
(703) 968-8015
--------------
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Outstanding at
Class June 30, 1994
----- -------------
Class A Voting, $.01 Par Value 500
- - ------------------------------ -----------------------------
Class B Non-Voting, $.01 Par Value 999,800
- - ---------------------------------- -----------------------------
<PAGE> 2
FAIRWOOD CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Dollars in thousands except share data)
<TABLE>
<CAPTION>
July 2, December 31,
Assets 1994 1993
------ ----------- ------------
(Unaudited) (Audited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 7,261 3,968
------- -------
Accounts and notes receivable:
Trade 44,872 47,734
Other 1,388 1,718
------- -------
46,260 49,452
Less allowance for discounts and doubtful accounts 4,881 4,062
------- -------
41,379 45,390
------- -------
Inventories 31,028 31,175
Prepaid expenses and other current assets 3,724 3,678
------- -------
Total current assets 83,392 84,211
------- -------
Property, plant and equipment, at cost 55,961 54,428
Less accumulated depreciation and amortization 30,346 28,685
------- -------
25,615 25,743
------- -------
Other assets 3,418 3,601
------- -------
$ 112,425 113,555
======= =======
</TABLE>
(Continued)
- 2 -
<PAGE> 3
FAIRWOOD CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Dollars in thousands except share data)
<TABLE>
<CAPTION>
July 2, December 31,
Liabilities and Deficit 1994 1993
----------------------- ----------- -----------
(Unaudited) (Audited)
<S> <C> <C>
Current Liabilities:
Current maturities of long-term debt $ 160 150
Accounts payable 13,353 13,945
Accrued expenses 20,609 21,070
Federal and state income taxes 5,630 5,709
------- -------
Total current liabilities 39,752 40,874
------- -------
Long-term debt, less current maturities:
Revolving credit 175,176 160,427
Senior subordinated debentures 80,000 80,000
Senior subordinated pay-in-kind debentures 98,239 91,173
Merger debentures 58,032 53,517
Other notes and leases 540 700
------- -------
411,987 385,817
------- -------
Deferred income taxes 2,827 2,827
Other liabilities 4,071 3,816
------- -------
6,898 6,643
------- -------
Redeemable preferred stock:
Junior preferred, cumulative, par value $.01 per share 100 100
------- -------
Common stock and other shareowners' deficit:
Common stock and additional paid-in capital 55,948 55,948
Retained deficit (402,260) (375,827)
------- -------
(346,312) (319,879)
------- -------
$ 112,425 113,555
======= =======
</TABLE>
See accompanying notes to the Unaudited Condensed Consolidated Financial
Statements.
- 3 -
<PAGE> 4
FAIRWOOD CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Operations
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------- -----------------------
July 2, July 3, July 2, July 3,
1994 1993 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $ 68,490 59,303 136,683 124,537
------- ------- ------- -------
Cost of sales 58,795 52,329 117,248 107,123
Selling, administrative and
general expenses 9,285 8,335 19,066 19,550
------- ------- ------- -------
68,080 60,664 136,314 126,673
------- ------- ------- -------
Operating income (loss) 410 ( 1,361) 369 ( 2,136)
Interest income 33 21 54 106
Interest on indebtedness 13,439 11,624 25,910 22,725
Other expenses, net 426 419 927 1,419
------- ------- -------- -------
Loss before income taxes and
cumulative effect of change
in accounting principle (13,422) (13,383) (26,414) (26,174)
Provision for income taxes
(benefit) - - - -
------- ------- ------- -------
Loss before cumulative effect of
change in accounting principle (13,422) (13,383) (26,414) (26,174)
Cumulative effect of change in
accounting principle for
income taxes - - - 2,100
------- ------- ------- -------
Net loss $ (13,422) (13,383) (26,414) (24,074)
======= ======= ======= =======
</TABLE>
See accompanying notes to the Unaudited Condensed Consolidated Financial
Statements.
- 4 -
<PAGE> 5
FAIRWOOD CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Year-to-date
-------------------------------
July 2, 1994 July 3, 1993
------------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $( 26,414) ( 24,074)
Adjustments to reconcile net loss to net cash
provided (used) by operating activities:
Cumulative effect of change in accounting principle - ( 2,100)
Depreciation and amortization 1,960 2,095
Loss on sale of property, plant and equipment ( 51) 401
Loss on sale of property recognized in 1992 - 4,562
Current period interest converted to pay-in-kind
debentures 5,790 4,964
Changes in assets and liabilities:
Accounts receivable 4,011 ( 1,889)
Inventories 147 ( 231)
Prepaid expenses and other current assets ( 46) ( 630)
Accounts payable ( 592) ( 911)
Accrued expenses 5,330 ( 546)
Federal and state income taxes ( 79) 2,462
Other, net 438 193
------- --------
Cash used - operating activities ( 9,506) ( 15,704)
------- -------
Cash flows from investing activities:
Capital expenditures ( 1,833) ( 1,571)
Dispositions of property, plant and equipment 52 3,887
------- -------
Cash provided (used) - investing activities ( 1,781) 2,316
------- -------
Cash flows from financing activities:
Proceeds from long-term debt 17,249 21,637
Repayment of long-term debt ( 2,650) ( 9,150)
Dividends ( 19) ( 16)
------- -------
Cash provided (used) - financing activities 14,580 12,471
------- --------
Increase (decrease) in cash and cash equivalents 3,293 ( 917)
Cash and cash equivalents:
Beginning of period 3,968 5,993
------- -------
End of period $ 7,261 5,076
======= =======
Supplemental schedule of cash flow information
- - ----------------------------------------------
Cash paid during year for:
Interest $ 13,824 12,232
Income taxes 80 931
Conversion of accrued interest to pay-in-kind
debentures 11,581 9,927
</TABLE>
Cash and cash equivalents include cash in banks and highly-liquid short-term
investments having a maturity of three months or less on date of purchase.
See accompanying notes to Unaudited Condensed Consolidated Financial
Statements.
- 5 -
<PAGE> 6
FAIRWOOD CORPORATION AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
1. In the opinion of management, the accompanying unaudited financial
statements include all adjustments, consisting of only normal recurring
adjustments, and present fairly the results of operations for the three
and six months ended July 2, 1994 and July 3, 1993, the financial position
at July 2, 1994 and December 31, 1993 and the cash flows for the six
months ended July 2, 1994 and July 3, 1993.
2. The results of operations for the three and six month periods ended July
2, 1994 are not necessarily indicative of the results to be expected for
the full year.
3. All inventories (materials, labor and overhead) are valued at the lower of
cost or market using the last-in, first-out (LIFO) method. The components
of inventory, in thousands, are as follows:
<TABLE>
<CAPTION>
July 2, 1994 December 31, 1993
------------- -----------------
(Unaudited) (Audited)
<S> <C> <C>
Raw materials $ 18,702 20,371
In process 9,077 9,487
Finished goods 16,684 14,346
------ ------
Inventories at
first-in, first-out 44,463 44,204
LIFO reserve 13,436 13,029
------ ------
Inventories at LIFO $ 31,027 31,175
====== ======
</TABLE>
4. The Company adopted Financial Accounting Standard No. 109, "Accounting for
Income Taxes", effective January 1, 1993. The cumulative effect of the
change in accounting principle resulted in a $2.1 million reduction of the
first quarter loss.
No provision for income taxes has been provided during the six months
ended July 2, 1994 and July 3, 1993, as the Company is in a net operating
loss carryforward position.
5. The Internal Revenue Service ("IRS") has examined the Company's Federal
income tax returns for the years 1988 through 1991 and is challenging
certain deductions, of which the most significant involves an effort to
recharacterize interest deductions as dividend distributions. The "IRS"
has delivered proposed adjustments that approximate a net tax cost of $94
million, including interest through July 2, 1994. The Company believes the
IRS's position with respect to these issues is incorrect and plans to
contest vigorously the proposed adjustments. The Company has delivered to
the IRS a protest of the proposed adjustments and requested a conference
with the IRS Appeals Office regarding the issues. The Company cannot
predict the ultimate outcome nor the impact on its financial statements,
if any.
- 6 -
<PAGE> 7
FAIRWOOD CORPORATION AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
6. On July 29, 1994, substantially all of the assets of Super Sagless
Corporation ("Super Sagless"), a wholly-owned subsidiary of the Company's
wholly owned subsidiary, were sold to a third party for $40,000,000 cash.
Of the total sales price, $24,250,000 was received upon closing. Of the
remaining $15,750,000, $750,000 was placed in escrow for a period of one
year and $15,000,000 was placed in escrow for a period of six months, in
both cases to secure certain of the Company's post-closing obligations.
After considering the estimated costs of disposition, the Company will
recognize a gain of approximately $21,000,000. The net proceeds from the
sale were used to pay existing debt.
During the six months ended July 2, 1994 and July 3, 1993, Super Sagless
generated net earnings of approximately $2,100,000 and $600,000,
respectively. See Part II, Item 5 of this Form 10-Q for certain unaudited
pro forma financial information regarding this disposition.
- 7 -
<PAGE> 8
Item 2.
FAIRWOOD CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
At July 2, 1994, the Company had short and long term debt of $412.1 million of
which $.2 million was current. Short and long term debt was $386.0 million at
December 31, 1993. The Company has the option during the first five years to
pay interest on the senior subordinated pay-in-kind debentures and merger
debentures either by cash or by the distribution of additional securities.
Additional securities were issued in lieu of the cash payment of interest due
April 1, 1994, on both the senior subordinated pay-in-kind debentures and
merger debentures, amounting to approximately $7.1 million and $4.5 million,
respectively.
Mohasco, the Company's principal operating subsidiary, is expected to service
debt from its cash flow from operations and available credit facilities.
Throughout 1993 and the first two quarters of 1994, Mohasco funded interest
obligations related to long-term indebtedness through increased borrowings from
Court Square Capital Limited ("CSCL"), under Mohasco's Credit Agreement with
CSCL (the "Credit Agreement"). During the second quarter of 1994 the Company
failed to comply with the loan agreement covenant regarding consolidated net
worth. On June 3, 1994, CSCL waived compliance of this covenant for each of the
months April, May and June of Fiscal Year 1994. The Company is dependent upon
CSCL for funding of its debt service costs. CSCL has increased its revolving
credit line to Mohasco in order for Mohasco to meet its obligations.
Management believes that cash flow from operations and funding from CSCL will
be adequate to meet the Company's obligations through the end of Fiscal Year
1994.
During Fiscal Year 1995 the Company's option to pay interest on its senior
subordinated pay-in-kind debentures and merger debentures in cash or the
distribution of additional securities will end. The Company's cash flow from
operations cannot be expected to be sufficient to permit the Company to make
cash interest payments on these debt securities and the Company's senior debt
obligations. In addition, the Company's credit facilities do not permit the
Company to borrow funds to make cash interest payments. Accordingly, the
Company will most likely default on its obligation to make cash interest
payments on its senior subordinated pay-in-kind debentures and merger
debentures.
Results of Operations
THREE MONTHS ENDED JULY 2, 1994, VERSUS THREE MONTHS ENDED JULY 3, 1993,
The following discussion presents the material changes in results of operations
which have occurred in the second quarter of 1994 in comparison to the same
period in 1993.
Net sales were approximately $68.5 million in the second quarter of 1994, an
increase over last year's second quarter sales of approximately $59.3 million,
due primarily to increased sales of upholstered furniture.
- 8 -
<PAGE> 9
Cost of sales were approximately $58.8 million and $52.3 million for the second
quarters of 1994 and 1993, respectively, or 85.8% and 88.2% of sales for the
second quarters of 1994 and 1993, respectively. Cost of sales as a percentage
of sales decreased 2.4% from the second quarter of 1993 to the second quarter
of due primarily to favorable manufacturing variances manufacturing variances
during the second quarter of 1994 caused primarily by improvements in plant
layout and the introduction of cellular manufacturing techniques.
Selling, administrative and general expenses were approximately $9.3 million
and $8.3 million for the second quarters of 1994 and 1993, respectively. The
increase in 1994 is due primarily to certain favorable non-recurring items that
took place in 1993 but not 1994. These involve the accrual of certain expenses
at higher rates than were required as a result of adjustments in Co-operative
advertising programs and a reduction of certain Comfort Center (furniture
gallery) expenses. There were also favorable adjustments of previously accrued
legal costs for contingencies that ultimately did not occur and of insurance
premiums on a retrospective basis. If not for these cited one time items
Selling, administrative and general expenses for the second quarter of 1994
would have been somewhat lower than in 1993.
Other expenses, net, were approximately $.4 million for the second quarters of
1994 and 1993.
SIX MONTHS ENDED JULY 2, 1994 VERSUS SIX MONTHS ENDED JULY 3, 1993
The following discussion presents the material changes in results of operations
which have occurred in the first six months of 1994 in comparison to the same
period in 1993.
Net sales for the first six months of 1994 increased from last year's sales of
approximately $124.5 million to approximately $136.7 million, primarily due to
increased sales of upholstered furniture.
Cost of sales were approximately $117.2 million and $107.1 million to
approximately $117.2 million for the first six months of 1994 and 1993,
respectively, or 85.8% and 86.0% of sales for the first six months of 1994
and 1993, respectively.
Selling, administrative and general expenses were approximately $19.1 million
and $19.6 million for the first six months of 1994 and 1993, respectively. The
decrease due primarily to more effective utilization of resources and reduction
of personnel due to the consolidation of administrative functions.
Other expenses, net, were approximately $.9 million and $1.4 million for the
first six months of 1994 and 1993, respectively. The first quarter of 1993
included losses on the sales of property of approximately $.5 million.
Effective January 1, 1993, the Company adopted Financial Accounting Standard
No. 109, "Accounting for Income Taxes", which resulted in a $2.1 million
cumulative effect of change in accounting principle, which reduced the 1993
loss. Refer to note 4 in the Notes to Unaudited Condensed Consolidated
Financial Statements.
No income taxes have been provided in the first six months of 1994 and 1993,
respectively, as the Company is in a net operating loss carryforward position.
- 9 -
<PAGE> 10
Part II OTHER INFORMATION
Item 1. Legal Proceedings
Reference is made to Item 3, Legal Proceedings, previously reported in the
Registrant's Form 10-K, for the year ended December 31, 1993, for a description
of pending legal action.
There are certain legal proceedings arising out of the normal course of
business, the financial risk of which are not considered material in relation
to the consolidated financial position of the Company.
Item 5. Other information
On July 29, 1994, Super Sagless Corporation, a wholly-owned subsidiary of
Mohasco, now named SSC Corporation ("Super Sagless"), sold substantially all of
its assets to Leggett & Platt Furniture Hardware Company, a wholly-owned
subsidiary of Leggett & Platt, Incorporated ("Leggett & Platt"), for $40
million in cash. Leggett & Platt also assumed substantially all of Super
Sagless's liabilities. The purchase price was determined pursuant to arm's
length negotiations between Super Sagless and Leggett & Platt. The net
proceeds of the asset sale were used to repay debt.
Prior to the asset sale, Super Sagless manufactured and sold mechanisms
for motion furniture, such as sleepers, recliners and rockers and office
furniture, hospital beds and related health care products. In connection with
the asset sale, Leggett & Platt and Mohasco Upholstered Furniture Corporation,
a wholly-owned subsidiary of Mohasco ("MUFCO"), entered into two supply
arrangements. Pursuant to these supply arrangements, Leggett & Platt has
agreed to supply at least 85% of the upholstered motion furniture mechanism
requirements of MUFCO's Stratford and Barcalouger operating units.
The following unaudited pro forma condensed consolidated balance sheet and
condensed consolidated statements of operations (collectively, the "pro forma
statements") were prepared as if the sale of Super Sagless were effective as of
January 1, 1993, for purposes of the pro forma condensed consolidated
statements of operations for the year ended December 31, 1993, and for the six
months ended July 2, 1994, and as of July 2, 1994, for the purposes of the pro
forma condensed consolidated balance sheet. The pro forma statements do not
purport to represent what the Company's financial position or results of
operations would actually have been if the sale of Super Sagless had in fact
occured on such dates or to project the Company's financial position or results
of operations as of any future date or for any future period. Information
regarding the Company's actual results of operations for the period presented
may be obtained from the respective filings on Form 10-K and elsewhere within
this Form 10-Q.
- 10 -
<PAGE> 11
FAIRWOOD CORPORATION AND SUBSIDIARIES
Pro Forma Condensed Consolidated Statement of Operations
(Unaudited)
Six Months ended July 2, 1994
(In thousands)
<TABLE>
<CAPTION>
Actual Super Sagless Application of Fairwood
Fairwood Corporation(1) Proceeds Pro Forma
-------- ----------- -------- ---------
<S> <C> <C> <C> <C>
Net sales $136,683 $(38,625) $ $ 98,058
Cost of sales 117,248 (33,291) 83,957
Selling, administrative
and general expenses 19,066 (3,390) 15,676
------- -------- ------- -------
Operating income (loss) 369 (1,944) - (1,575)
Interest expense, net 25,856 (1,486)(2) 24,370
Other expenses, net 927 108 1,035
------- ------- ------- -------
Loss before taxes (26,414) (2,052) 1,486 (26,980)
Income taxes - - - -
------- ------- ------- -------
Net loss $ (26,414) $ (2,052) $ 1,486 $(26,980)
======== ======== ======= ========
</TABLE>
See accompanying notes to the Unaudited Pro Forma Condensed Consolidated
Financial Statements.
- 11 -
<PAGE> 12
FAIRWOOD CORPORATION AND SUBSIDIARIES
Pro Forma Condensed Consolidated Statement of Operations
(Unaudited)
Year ended December 31, 1993
(In thousands)
<TABLE>
<CAPTION>
Actual Super Sagless Application of Fairwood
Fairwood Corporation(1) Proceeds Pro Forma
-------- ----------- -------- ---------
<S> <C> <C> <C> <C>
Net sales $261,451 $(67,913) $ $193,538
Cost of sales 221,519 (59,035) 162,484
Selling, administrative
and general expenses 37,985 (6,468) 31,517
------- -------- ------- -------
Operating income (loss) 1,947 (2,410) - (463)
Interest expense, net 46,641 (2,004)(2) 44,637
Gain on sale of subsidiary - 22,228 (3) 22,228
Other expenses, net 4,296 4,296
------- ------- ------- -------
Loss before taxes (48,990) (2,410) 24,232 (27,168)
Income taxes - - 1,200 (4) 1,200
------- ------- ------- --------
Net loss (5) $ (48,990) $ (2,410) $ 23,032 $(28,368)
======== ======== ======= ========
</TABLE>
See accompanying notes to the Unaudited Pro Forma Condensed Consolidated
Financial Statements.
- 12 -
<PAGE> 13
FAIRWOOD CORPORATION AND SUBSIDIARIES
Pro Forma Condensed Consolidated Balance Sheet
(Unaudited)
July 2, 1994
(In thousands)
<TABLE>
<CAPTION>
Actual Super Sagless Application of Fairwood
Fairwood Corporation (1) Proceeds Pro Forma
-------- ----------- -------- ---------
<S> <C> <C> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 7,261 $ $ 24,250 (6)
(24,250) (6) $ 7,261
Accounts and notes
receivable, net 41,379 (5,429) 15,750 (6) 51,700
Inventories 31,028 (6,833) 24,195
Prepaid expenses and
other current assets 3,724 (773) 2,951
------- -------- ------- -------
Total current assets 83,392 (13,035) 15,750 86,107
Property, plant and
equipment, net 25,615 (9,631) 15,984
Other assets 3,418 3,418
------- ------- ------- -------
Total assets $112,425 $(22,666) $ 15,750 $105,509
======= ======== ======= =======
Liabilities and
Shareowners' Equity
Current liabilities:
Current maturities of
long-term debt $ 160 $ $ $ 160
Accounts payable 13,353 (4,699) 3,832 (6) 12,486
Accrued expenses 20,609 (2,682) 17,927
Federal and state
income taxes 5,630 1,200 (4) 6,830
------- -------- ------- -------
Total current liabilities 39,752 (7,381) 5,032 37,403
Long-term debt 411,987 (24,250) (6) 387,737
Deferred income taxes 2,827 2,827
Other liabilities 4,071 4,071
------- -------- -------- -------
Total liabilities 458,637 (7,381) (19,218) 432,038
Redeemable preferred stock 100 100
Common stock and other
shareowner's equity (346,312) (15,285) 34,968 (326,629)
------- ------- -------- ---------
Total liabilities
and shareowners' equity $112,425 $(22,666) $ 15,750 $105,509
======= ======== ======= =======
</TABLE>
See accompanying notes to the Unaudited Pro Forma Condensed Consolidated
Financial Statements.
- 13 -
<PAGE> 14
FAIRWOOD CORPORATION AND SUBSIDIARIES
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
1. Reflects the operations and assets, liabilities and equity of Super
Sagless, excluding cash and cash equivalents which remain with the
Company.
2. Reflects the reduction in interest expenses on long-term debt based on the
use of the proceeds from the sale. The sales proceeds, net of associated
expenses, were used to reduce the outstanding balance of the Company's
revolving line of credit. It has been assumed that $15 million of the
total amount escrowed at the time of sale is released to the Company six
months after the date of closing, with the remaining $750,000 released one
year from the closing.
3. Reflects the gain on the sale of Super Sagless.
4. No additional Federal income taxes result from the sale as the Company is
generating sufficient operating losses to fully offset the gain on the
sale. However, for state income tax purposes, the sale is estimated to
result in an additional tax liability of $1.2 million.
5. In accordance with the regulations governing the preparation of pro forma
financial statements, the cumulative effect of the Company's change in
accounting principle as of January 1, 1993, has not been reflected in the
"Actual" column for the year ended December 31, 1993.
6. Reflects receipt of the sale consideration. Of the total sales price of
$40 million, $24.25 million was received at the date of closing and used
to pay down existing indebtedness. Of the remaining $15.75 million,
$750,000 was placed in escrow for a period of one year and $15 million was
placed in escrow for a period of six months, in both cases to secure
certain of the Company's post-closing obligations. The $3.83 million
represents accrued costs associated with the sale.
- 14 -
<PAGE> 15
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
2.1 Agreement for Purchase and Sale of Assets among Super Sagless
Corporation, Mohasco Corporation, Leggett & Platt Hardware Company
and Leggett & Platt, Incorporated, dated July 14, 1994.
(b) Reports on Form 8-K
None
- 15 -
<PAGE> 16
FAIRWOOD CORPORATION AND SUBSIDIARIES
SIGNATURES
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.
FAIRWOOD CORPORATION
(Registrant)
/s/ John B. Sganga
-------------------------
John B. Sganga
Chief Financial Officer,
Executive Vice President,
Secretary and Treasurer
Date: August 15, 1994
- 16 -
<PAGE> 17
FAIRWOOD CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX
Exhibit Sequential
No. Description Page No.
- - ------- ----------- ----------
2.1 Agreement for Purchase and Sale of Assets among 18
Super Sagless Corporation, Mohasco Corporation,
Leggett & Platt Furniture Hardware Company and
Leggett & Platt, Incorporated, dated July 14, 1994.
- 17 -
<PAGE> 1
EXHIBIT 2.1
AGREEMENT FOR PURCHASE AND SALE OF ASSETS
This Agreement for Purchase and Sale of Assets (this "Agreement") is
made as of July 14, 1994 among Super Sagless Corporation, a Delaware
corporation ("Seller"), Mohasco Corporation, a New York corporation
("Mohasco"), Leggett & Platt Furniture Hardware Company, a Delaware corporation
("Buyer"), and Leggett & Platt, Incorporated, a Missouri corporation
("Leggett").
RECITALS
WHEREAS, Seller, a wholly owned subsidiary of Mohasco, is engaged in
the manufacture and sale of upholstered furniture reclining, motion, sofa
sleeper and other mechanisms and similar products presently being offered by
Seller (the "Business") (the term "Business" shall include all aspects of
Seller's manufacturing and sales operations, including all support functions to
such manufacturing and sales activities);
WHEREAS, Seller desires to sell, and Buyer desires to buy,
substantially all of the assets of Seller;
WHEREAS, Mohasco is willing to guarantee the performance by Seller of
its obligation hereunder; and
WHEREAS, Leggett is willing to guarantee the performance by Buyer of
its obligations hereunder;
NOW THEREFORE, in consideration of the premises and for other good and
valuable consideration, the parties intending to be legally bound agree as
follows:
1. PURCHASE AND SALE
1.1 "PROPERTY" TO BE SOLD. On the Closing Date (as defined in
Section 7 below), Seller shall sell, convey, assign, deliver and transfer to
Buyer and Buyer shall buy and take possession of all of Seller's right, title
and interest in and to all real, personal, tangible, intangible, choate,
inchoate, contingent and other properties, rights, interests, expectancies,
equities and other things or assets of any kind which are used or usable in the
operation of the Business, including, but not limited to, the following
properties, rights and other assets, except the Excluded Assets (as defined in
Section 1.2 below) (collectively, the "Property"):
(a) RECEIVABLES. All accounts, notes and other
receivables of Seller ("Receivables").
(b) INVENTORIES. All raw materials, work-in-process
finished goods, supplies, parts and inventory of Seller
("Inventories") .
(c) PERSONAL PROPERTY. All of Seller's other tangible
personal property, wherever located, which is owned, leased or used by
Seller including, without limitation, equipment, machinery, tools,
vehicles, office furniture and fixtures
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which are used or usable in the operation of the Business ("Tangible
Personal Property").
(d) REAL ESTATE. All real property and real property
interests owned or held by Seller including without limitation land,
leasehold interests, buildings, improvements, rights-of-way,
easements, rights, privileges, hereditaments and appurtenances thereto
or located thereon and fixtures thereon ("Real Estate"), which Real
Estate is set forth on Schedule 1.1(d).
(e) RECORDS. Copies of all accounting and operating
ledgers, asset ledgers, inventory records, budgets, customer lists,
customer credit information, supplier lists, technical data, sales
literature, correspondence, computer printouts, books, notes, files
and all other accounting and operating records and other graphic or
electronically stored operating and financial information which are
used exclusively or primarily in the operation of the Business
("Records").
(f) INTANGIBLE RIGHTS. All trademarks, trade names
(including the name "Super Sagless" or any similar name and other
names used in the Business), service marks, copyrights, patents (and
all applications pertaining to the foregoing), formulas, contract
rights, trade secrets, know-how, goodwill and similar intangibles of
Seller or Mohasco (to the extent such intangibles of Mohasco relate
primarily or solely to the Business) ("Intangible Rights") including
without limitation those items set forth on Schedule 1.1(f).
(g) PERMITS. To the extent transferable, all governmental
licenses, permits, certificates and approvals owned or held by Seller
(the "Governmental Permits"), including, without limitation, those
Governmental Permits listed on Schedule 1.1(g).
(h) LICENSES. To the extent transferable, all licenses to
or from third parties (the "Licenses"), including without limitation
those items listed on Schedule 1.1(h).
(i) CONTRACTS AND COMMITMENTS. All rights of Seller under
purchase orders, contract commitments or sales contracts
(collectively, the "Contracts") all of which are listed on Schedule
1.1(i), except to the extent listed on Schedule 1.1(d) .
1.2 EXCLUDED ASSETS. Notwithstanding anything to the contrary
contained herein, the following assets (the "Excluded Assets") shall not be
sold to Buyer and all of the Excluded Assets shall be retained by Seller:
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(a) All cash and cash equivalents of Seller, including
without limitation any bank account credit balances on the books of
Seller, all rights of Seller under this Agreement, all tax returns and
related tax records of Seller, and all rights and claims to refunds or
credits of taxes.
(b) All shares of the capital stock of Seller held by
Seller as treasury shares.
(c) The minute books, stock ledger and similar corporate
records of Seller.
(d) All insurance policies of Seller.
(e) The items listed on Schedule 1.2.
1.3 PURCHASE PRICE. The purchase price for the Property shall be
$40,000,000 in cash. The purchase price shall be allocated among the Property
in the manner required by Section 1060 of the Internal Revenue Code of 1986, as
amended (the "Code"). On or before December 31, 1994, Buyer shall deliver to
Seller an allocation of the purchase price among the Property. Buyer and Seller
agree to file their federal and state income tax returns (and Form 8594, if
applicable) on the basis of such allocation and neither party shall thereafter
take a tax return position inconsistent with such allocation unless such
inconsistent position shall arise out of or through an audit or other inquiry
or examination by the Internal Revenue Service or other taxing authority.
1.4 PAYMENTS AT CLOSING. On the Closing Date, Buyer shall deliver
to (i) Seller $24,250,000 (the "Closing Date Payment"), (ii) NationsBank of
Texas, N.A. (the "Escrow Agent") $750,000 (the "Warranties Escrow Payment"), to
be held in escrow in accordance with the terms of the escrow agreement in the
form of Exhibit 1.4A attached hereto (the "Warranties Escrow Agreement"), and
(iii) the Escrow Agent $15,000,000 (the "Taxes Escrow Payment"), to be held in
escrow in accordance with the terms of the escrow agreement in the form of
Exhibit 1.4B attached hereto (the "Taxes Escrow Agreement"). Each such payment
shall be made by wire transfer of immediately available funds.
1.5 ASSUMPTION OF LIABILITIES.
(a) Buyer shall assume on the Closing Date and shall be
liable for the payment, performance and discharge when due of Seller's
obligations and liabilities, primary or secondary, direct or indirect, absolute
or contingent, known or unknown, whether or not accrued, arising out of and
relating to the Business or the Property under (i) contracts, agreements,
leases and arrangements identified on Schedule 1.1(d) or (i) and specifically
assigned to Buyer, (ii) vendor and customer purchase orders entered into by
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Seller prior to the Closing Date in the ordinary course of business, (iii)
refund, adjustment, allowance, repair, exchange and return policies of Seller
and warranty, guarantee and merchantability claims, in respect of any and all
products (including Inventories included in the Property) sold, manufactured or
designed by Seller in connection with the Business at any time before, on or
after the Closing Date; provided, however, Buyer shall not assume and shall not
be responsible for any liability arising from or with respect to product
liability claims except to the extent set forth in Section 4.13 below, (iv)
sales, transfer, recording, conveyance, value-added or similar taxes or
expenses that may be imposed as a result of the sale and transfer of the
.Property to Buyer hereunder, (v) Seller's policies for unused and accrued
vacation pay and personal time/sick leave, (vi) property taxes incurred with
respect to a taxable period (or portion of a taxable period) which period (or
portion) begins after the Closing Date, and (vii) non-interest bearing trade
payables and, except as otherwise provided herein, other current non-interest
bearing liabilities incurred by Seller prior to the Closing Date in the
ordinary course of business.
(b) Without limiting or expanding the provisions of
Section 1.5(a), Buyer shall not assume or have liability for any debts,
liabilities or obligations arising out of, or in connection with, any of the
following: (i) any "employee welfare benefits plans" (as such term is defined
in Section 3(1) of the Employee Retirement Income Security Act ("ERISA")) or
any of Seller's "employee pension benefit plans" (as such term is defined in
Section 3(2) of ERISA), or any other employee benefit programs or pay practices
of Seller; (ii) salaries, wages and bonuses which accrue prior to or on the
Closing Date; (iii) severance benefits; (iv) claims or losses arising under the
Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"), ERISA or the
Internal Revenue Code and which are imposed upon, incurred by, or assessed
against Seller or any of its employees in connection with any failure to comply
with the provisions of COBRA or ERISA, and which failure occurred with respect
to any current or prior employee of Seller or any qualified beneficiary of such
employee on or before the Closing Date; (v) any liability for income or any
other taxes assessed against or with respect to Seller or any member of the
affiliated group of corporations of which Seller is a member; or (vi) any
liability described on Schedule 1.5.
2. REPRESENTATIONS AND WARRANTIES OF SELLER AND MOHASCO
Seller and Mohasco, jointly and severally, make the following
representations and warranties to Buyer:
2.1 ORGANIZATION, AUTHORITY AND GOOD STANDING OF SELLER. Seller
is a corporation duly organized, validly existing and in good standing under
the laws of the state of Delaware and is duly qualified and in good standing in
those states listed in
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Schedule 2.1. Neither the ownership nor the operation of the Property nor
the conduct of the Business requires Seller to be qualified in any
jurisdictions other than those set forth in Schedule 2.1, where the failure to
so qualify would result in a material adverse effect on the ownership or
operation of the Property or the conduct of the Business. Seller has no
subsidiaries.
2.2 ORGANIZATION, AUTHORITY AND GOOD STANDING OF MOHASCO. Mohasco
is a corporation duly organized, validly existing and in good standing under
the laws of the state of New York. Mohasco owns and holds all of the
outstanding shares of capital stock of Seller.
2.3 FINANCIAL STATEMENTS, OBLIGATIONS AND LIABILITIES.
(a) For purposes of this Agreement "Financial Statements"
means the Year-End Statements and the Interim Statements referred to in
Schedules 2.3.1 and 2.3.2, respectively. The Financial Statements and the
Supplemental Information in Schedule 2.3.3 have been prepared in the ordinary
course of business from the regular financial books and records of Seller.
Except as may be noted on Schedule 2.3.1 or 2.3.2, the Financial Statements
have been prepared in accordance with generally accepted accounting principles
consistently applied ("GAAP") by Seller throughout the periods indicated and
fairly present in all material respects the financial condition and results of
operations of Seller as of the respective dates thereof and for the respective
periods covered thereby.
(b) All sales of Inventory by Seller to any wholly owned
subsidiary of Mohasco (or any operating division thereof) reflected in the
Financial Statements have been accounted for in accordance with GAAP. Prices
invoiced for such sales have generally resulted in gross margins which, in the
aggregate, are substantially similar to gross margins resulting from sales of
Inventory by Seller to other persons or entities, subject to commercially
reasonable adjustments due to economies of scale based on order size and/or
aggregate volume.
2.4 ABSENCE OF CERTAIN EVENTS. Since December 31, 1993, (i)
Seller has conducted its business only in the ordinary and usual course and in
substantially the same manner as theretofore conducted; (ii) there has not
occurred any event, circumstance or condition that has had a material adverse
effect on the financial condition, business, cash flows, assets, liabilities or
prospects of the Property or the Business; and (iii) except as set forth on
Schedule 2.4, Seller has not taken any action or failed to take any action
which would have violated any of the covenants of Section 4.2 if such action
had been taken or failed to be taken after the date hereof and prior to
Closing.
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2.5 TAXES. Seller and/or its affiliates have filed all income
tax returns required to be filed by or on behalf of Seller and all returns of
other taxes required to be filed by or on behalf of Seller, all such returns
are complete and correct in all material respects, and Seller and/or its
affiliates have paid or provided for all taxes shown to be due on such returns.
Except as described in Schedule 2.3.1, there are no present or, to the best of
Seller's knowledge, threatened disputes as to taxes or any proposed taxes,
assessments or the like of any nature which could affect the Property, the
operation of the Business or result in any lien or other encumbrance being
placed on any of the Property. There are no present tax liens on any of the
Property. Buyer will not have any liability for taxes related to Seller, which
liability may be assessed or claimed against Buyer or any part of the Property.
All taxes, including without limitation, governmental charges, assessments and
required contributions of Seller with respect to its business that may result
in the imposition of transferee or other liability on Buyer for the payment of
such taxes have been accurately recorded and duly paid, collected or withheld
and remitted to the appropriate governmental agency. Seller is not a foreign
person, as such person is referred to in Section 1445(b)(2) of the Code.
For purposes of this Agreement, the term "tax" or "taxes" shall mean
all taxes, however denominated, including any interest, penalties or other
additions to tax that may become payable in respect thereof, imposed by any
federal, territorial, state, local or foreign government or any agency or
political subdivision of any such government, which taxes shall include without
limitation all income or profits taxes (including, but not limited to, federal
income taxes and state income taxes), payroll and employee withholding taxes,
unemployment insurance, social security taxes, sales and use taxes, ad valorem
taxes, excise taxes, franchise taxes, gross receipts taxes, business license
taxes, worker's compensation, Pension Benefit Guaranty Corporation premiums and
other governmental charges, and other obligations of a nature similar to any of
the foregoing, which Seller is required to pay, withhold or collect.
2.6 PERMITS, CONTRACTS, ETC. Schedules 1.1(g), 1.1(h) and 1.1(i)
each contain, respectively, an accurate listing and brief description of the
Governmental Permits, Licenses and Contracts material to the conduct or
operation of the Business. Schedule 1.1(i) contains an accurate listing of all
material contracts, agreements or other legally binding commitments, together
with all amendments or modifications thereto, of Seller which directly or
indirectly affect the Business, except for the following, which are not
required to be set forth on such Schedule:
(a) any contract, agreement or other binding commitment
that involves an annual commitment by Seller of not more than $25,000,
provided that the contracts, agreements or other
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<PAGE> 7
binding commitments omitted from Schedule 1.1(i) solely by reason of
this paragraph (a) shall not involve aggregate annual commitments by
Seller of more than $250,000;
(b) any purchase order; and
(c) any contract, agreement or other binding commitment
that is terminable by Seller by notice of not more than ninety (90)
days for a cost of less than $25,000 or that will terminate by its
terms within ninety (90) days after the Closing Date.
With respect to items listed in Schedule 1.1(i), (i) all items listed are in
full force and effect with no default or breach thereunder by Seller or, to the
best of Seller's knowledge, any other party to such items; (ii) no event,
failure, condition or act has occurred which, with the passage of time or the
giving of notice or both, would result in a default or breach by Seller or, to
the best of Seller's knowledge, any other party thereto, under any such item or
permit termination, modification or acceleration of rights or obligations under
such terms; (iii) no defenses, offsets or counterclaims thereto have been
asserted; (iv) Seller has not waived any rights under any such item; and (v)
other than as contemplated herein, no such item shall be affected by the
transactions contemplated by this Agreement except, with respect to the
circumstances described in clauses (i), (ii) and (iii) of this Section 2.6,
where the existence of such circumstances would not result in a material
adverse effect on the ownership or operation of the Property or the conduct of
the Business. The Governmental Permits and, to the best knowledge of Seller,
the Licenses listed on Schedules 1.1(g) and 1.1(h) are all the licenses,
franchises, permits and governmental authorizations necessary for Seller to
conduct the Business in the manner in which and in the jurisdictions and places
where such Business is now conducted.
2.7 NO SERVICES PROVIDED.
(a) Seller does not provide or offer any services in
connection with the operation of its business.
(b) Neither Mohasco nor any of its affiliates provides
any services to Seller in connection with the conduct of the Business except
for financial reporting and the preparation of federal and state income tax
returns.
2.8 RECEIVABLES. Schedule 2.8 is a complete and accurate
schedule and aging of all accounts, notes and other receivables of the Seller
as of May 28, 1994. All of the Receivables are collectible in accordance with
their terms (without being subject to any defense, counterclaim or setoff)
except to the extent of any reserves reflected in the Interim Statements
included in the Financial Statements.
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2.9 INVENTORY. All items of Inventory are of a quality and
quantity usable and salable in the ordinary course of Seller's business. Since
December 31, 1993, all Inventory has been maintained at adequate levels for the
business of Seller in its normal course consistent with past practice, no write
down of the value of such Inventory has occurred or is required under Seller's
normal valuation policy or GAAP that has not been taken, and no additional
amounts have been reserved with respect to such Inventory, except as set forth
on Schedule 2.9.
2.10 PATENTS, TRADEMARKS, TRADE NAMES AND OTHER INTANGIBLE RIGHTS.
Schedule 1.1(f) lists all Intangible Rights material to the operation of the
Business which are owned, licensed or used by Seller or subject to a patent or
trademark application of Seller. Except for such of the Intangible Rights as
are subject to a patent or trademark application, Seller has full right, title
and interest to all Intangible Rights. Seller conducts the Business without
conflict or infringement with any patents, patent applications, trademarks,
trade names, service marks, trade secrets, copyrights, know-how and other
intangible rights claimed or held by others except for any conflict or
infringement which would not have a material adverse effect on the ownership or
operation of the Property or the conduct of the Business. None of the
Intangible Rights, to the best of Seller's knowledge, are being infringed by
the products, activities, operations, trade names, trademarks, service marks or
copyrights of any other persons and none are subject to any outstanding order,
judgment, decree or agreement restricting the use thereof, any of which could
reasonably be expected to result in a material adverse effect on the ownership
or operation of the Property or the conduct of the Business.
2.11 TITLE TO AND CONDITION OF ASSETS.
(a) REAL ESTATE. Schedule 1.1(d) contains a list of (i)
all Real Estate owned by Seller, (ii) all leases and subleases under which
Seller is lessor or lessee or sublessor or sublessee of any Real Estate,
together with all amendments, supplements, nondisturbance agreements, brokerage
and commission agreements and other agreements pertaining thereto; (iii) all
material options held by Seller or contractual obligations on the part of
Seller to purchase or acquire any interest in real property; and (iv) all
options granted by Seller or contractual obligations on the part of Seller to
sell or dispose of any material interest in real property.
Except as set forth on Schedule 1.1(d), Seller has good and valid fee
simple title to all owned Real Estate and none of the owned Real Estate is
subject to any lien, mortgage, deed of trust, pledge, security interest,
charge, option or other encumbrance or restriction of any kind or character
(collectively, "Liens"), except for (v) matters listed in the Title
Certificates of Holland, Ray & Upchurch, P.A. dated May 24, 1994 and May 30,
1994, copies of
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which are attached hereto as Schedule 2.11 (the "Title Certificates") issued to
Leggett, (w) zoning or planning restrictions, easements, permits, conditions
that would be revealed by surveys or physical inspection, liens arising by
operation of law, and other restrictions or limitations on the use of real
property which do not materially impair the use of such property by Seller in
the operation of the Business, (x) statutory liens for current taxes,
assessments or governmental charges or levies on property not yet due and
payable, (y) mechanics', carriers', workers', repairers' and other similar
liens imposed by law arising or incurred in the ordinary course of business for
obligations not yet due and payable and (z) unrecorded restrictions or
limitations which do not materially impair the use of such property by Seller
in the conduct of the Business.
Accurate and current copies of all real property leases (and all
amendments thereto) and any options and contractual obligations listed on
Schedule 1.1(d) have previously been delivered to Buyer. Seller has not
assigned any such real property leases or any such options or obligations.
Except as set forth in Schedule 1.1(d), there are no Liens on Seller's interest
in the real property leases, subject only to Liens for taxes and assessments
not yet due and payable. The real property leases and options and contractual
obligations listed on Schedule 1.1(d) are in full force and effect and
constitute binding obligations of Seller and the other parties thereto and (a)
there are no defaults thereunder by Seller or, to the best of Seller's
knowledge, by any other party thereto, and (b) no event has occurred which with
notice, lapse of time or both would constitute a default by Seller or, to the
best knowledge of Seller, by any other party thereto where such default or
event would result in a material adverse effect on the ownership or operation
of the Property or the conduct of the Business.
(b) PERSONAL PROPERTY. Except as set forth on Schedule
1.1(d), Seller has good and valid title to the Tangible Personal Property, free
and clear of all Liens except for (i) mechanics', carriers', workmen's,
repairmen's or other like liens arising or incurred in the ordinary course of
business, liens arising under original purchase price conditional sales
contracts and equipment leases with third parties entered into in the ordinary
course of business, liens for taxes, assessments and other governmental charges
which are not due and payable and (ii) other imperfections of title or
encumbrances which do not materially impair the continued use and operation of
the Tangible Personal Property in the conduct of the Business.
(c) CONDITION OF PROPERTIES. Except as set forth on
Schedule 1.1(d), the Real Estate and the Tangible Personal Property owned,
leased or otherwise held by Seller are in good operating condition and repair,
ordinary wear and tear excepted. There is no condition or defect in the Real
Estate that would materially and adversely impair the use or operation of the
Real Estate in the
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conduct of the Business or otherwise have a material adverse effect on the
conduct of the Business. The Property constitutes all of the assets necessary
for the operation of the Business as operated on the Closing Date.
(d) COMPLIANCE. The continued ownership, operation,
use and occupancy of the Real Estate as currently operated, used and occupied
will not violate any zoning, building, health, flood control, fire or other
law, ordinance, order or regulation or any restrictive covenant where such
violation would result in a material adverse effect on the ownership and use of
the Property and the conduct of the Business.
(e) UTILITIES. All utilities (including, without
limitation, water, sewer, gas, electricity, trash removal and telephone
service) are available to the Real Estate in sufficient quantities to
adequately serve the Real Estate as presently operated.
(f) TITLE CONVEYED AT CLOSING. At the Closing,
Seller will transfer and convey to Buyer good and valid title to all Property,
free and clear of any Liens except for the matters described in clauses (v)
through (z) of Section 2.11(a) and clauses (i) and (ii) of Section 2.11(b)
(other than Liens in favor of Citicorp Capital Investors, Ltd. or any successor
or affiliate thereof, which are to be released at or prior to Closing).
2.12 CUSTOMERS AND SUPPLIERS. None of Seller's customers or
suppliers has threatened in writing to cease or materially alter its business
with Buyer with respect to the Business after the Closing Date.
2.13 EMPLOYEES.
(a) Schedule 2.13 sets forth (i) the name, position and
current annual compensation of all current salaried employees of Seller whose
annual compensation is in excess of $30,000, together with the date and amount
of the last increase for each such person, (ii) any increase to become
effective after the date of this Agreement in the total compensation or rate of
total compensation payable by Seller to each such person, (iii) any increase to
become payable after the date of this Agreement by Seller to employees other
than those specified in clause (i) above, (iv) all presently outstanding loans
and advances (other than routine travel advances to be repaid or formally
accounted for within sixty (60) days) made by Seller to, or made to Seller by,
any director, officer or employee, and (v) all other transactions between
Seller and any director, officer or employee of Seller since December 31, 1993.
Schedule 2.13 sets forth the worker's compensation loss experience for Seller
since January 1, 1991. No employee of Seller is absent from work on short or
long-term disability leave or leave under the
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Family and Medical Leave Act of 1993 or has notified Seller in writing of
his or her intent to take such leave.
(b) Except as disclosed on Schedule 2.13, Seller is not a party to,
nor bound by, the terms of any collective bargaining agreement, and Seller has
not experienced any material labor difficulties during the last five years.
There are no material labor disputes existing, or to the best knowledge of
Seller, threatened involving, by way of example, strikes, work stoppages,
slowdowns, picketing, or any other interference with work or production, or any
other concerted action by employees. No grievance or other legal action arising
out of any collective bargaining agreement or relationship is pending, or to
the best knowledge of Seller, is threatened. No charges or proceedings before
the National Labor Relations Board, or similar state agency, are pending, or to
the best knowledge of Seller, are threatened against Seller.
(c) Seller's relationship with its employees is good. Except as
disclosed on Schedule 2.13, Seller is not a party to any employment contract
with any individual or employee. No legal proceedings, charges, complaints, or
similar actions against Seller are pending under any federal, state or local
laws affecting the employment relationship of any of Seller's employees
including, but not limited to: (i) anti-discrimination statutes such as Title
VII of the Civil Rights Act of 1964, as amended (or similar state or local laws
prohibiting discrimination because of race, sex, religion, national origin, age
and the like); (ii) the Fair Labor Standards Act or other federal, state or
local laws regulating hours of work, wages, overtime and other working
conditions; (iii) state laws with respect to tortious employment conduct, such
as slander, false light, invasion of privacy, negligent hiring or retention,
intentional infliction of emotional distress, assault and battery, or loss of
consortium; or (iv) the Occupational Safety and Health Act, as amended, as well
as any similar state laws, or other regulations respecting safety in the
workplace; and to the best knowledge of Seller, no proceedings, charges, or
complaints are threatened under any such laws or regulations. Seller is not
subject to any consent decree with any present or former employee, employee
representative or any governmental department, commission, board, agency or
instrumentality ("Agencies") relating to claims of discrimination or other
claims in respect to employment practices and policies; no government or Agency
has issued a judgment, order, decree or finding with respect to the labor and
employment practices (including practices relating to discrimination) of Seller
which could reasonably be expected to have a material adverse effect on the
conduct of the Business.
(d) With respect to each person employed by Seller on or after
November 6, 1986, (i) Seller hired such person in compliance in all material
respects with the Immigration Reform and Control Act of 1986 and the rules and
regulations thereunder ("IRCA") and
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(ii) Seller has complied in all material respects with all recordkeeping
and other regulatory requirements under IRCA.
(e) Since January 1, 1993, Seller has not incurred any
liability or obligation under the Worker Adjustment and Retraining Notification
Act or similar state laws. Seller has not laid off more than ten percent (10%)
of its employees at any single site of employment in any ninety (90) day period
during the twelve (12) month period ending March 31, 1994.
(f) Seller is in compliance in all material respects with
the provisions of the Americans with Disabilities Act (the "ADA"). With respect
to its obligations under Title III of the ADA, Seller has conducted a site
survey of each of its facilities and buildings subject to the provisions of the
ADA and has made such modifications to such facilities as are required by the
ADA.
2.14 EMPLOYEE BENEFIT PLANS.
(a) Schedule 2.14 hereto sets forth the name of each Plan
maintained by or contributed to by Seller. "Plan" means any employee benefit
plan as defined in Section 3(3) of ERISA. Seller is not, and since September
25, 1980, was not required to contribute to any multi-employer plan, within the
meaning of Section 4001(a)(3) of ERISA, or any "multiple employer plan" (within
the meaning of Section 4063 of ERISA). "ERISA Affiliate" means any member of
any "affiliated service group" as defined in Section 414(m) of the Code that
includes Seller, any member of any "controlled group of corporations" as
defined by Section 414(b) of the Code that includes Seller, or any member of
any group of "trades or businesses under common control" as defined by Section
414(c) of the Code that includes Seller.
(b) No Plan has applied for or obtained a waiver from the
Internal Revenue Service of any minimum funding requirement under Section 412
of the Code which would have a material adverse effect on the ownership or
operation of the Property or the conduct of the Business.
(c) (i) Neither Seller nor any ERISA Affiliate has
terminated or withdrawn (within the meaning of Section 4201 of ERISA) from any
employee pension benefit plan (within the meaning of Section 3(2) of ERISA)
subject to Title IV of ERISA including, but not limited to a multi-employer
plan (as defined in Section 4001(a)(3) of ERISA or a multiple employer plan (as
defined in Section 4063 of ERISA (herein referred to as a "Title IV Plan")
under circumstances giving rise to, or that would give rise to any actual or
potential liability to the Pension Benefit Guaranty Corporation ("PBGC") or any
other person which would have a material adverse effect on the ownership or
operation of the Property or the conduct of the Business, (ii) no event or
condition exists which presents a risk of termination of any Title IV Plan by
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the PBGC or withdrawal (within the meaning of Section 4201 of ERISA) from any
Title IV Plan which would have a material adverse effect on the ownership or
operation of the Property or the conduct of the Business, and (iii) there is no
actual or potential liability to the PBGC or any other person expected by
Seller or any ERISA Affiliate to be incurred with respect to any Title IV Plan,
including, but not limited to, any liability for any accumulated funding
deficiency as defined in Section 302 of ERISA or for any minimum funding
contribution under Section 302 of ERISA or withdrawal liability (within the
meaning of Section 4201 of ERISA), which liabilities in the case of any ERISA
Affiliate would have a material adverse effect on the ownership or operation of
the Property or the conduct of the Business.
(d) No lien imposed under Section 401(a)(29) or Section
412(n) of the Code, Section 302(f) or Section 4068 of ERISA, or arising out of
any action filed under ERISA Section 4301(b), exists upon any Property.
2.15 COMPLIANCE WITH LAWS. Seller has at all times complied and is
in compliance with all applicable federal, state, local and foreign laws,
rules, regulations and ordinances affecting Seller, the Property or the
operation of the Business, except where the failure to comply would not result
in a material adverse effect on the ownership or operation of the Property or
the conduct of the Business. Seller has not violated, and is not in default
with respect to, any judgment, order, writ, injunction, settlement agreement or
decree of, or any permit, license or other authority from any federal, state,
local or foreign court or Agency which could result in a material adverse
effect on the ownership or operation of the Property or the conduct of the
Business.
2.16 AUTHORIZATION; BINDING EFFECT; NO CONFLICT WITH OTHER
INSTRUMENTS. The execution and delivery of this Agreement and all other
agreements, certificates and other documents to be executed and delivered by
Seller or Mohasco and contemplated hereby have been duly authorized by Seller
and Mohasco, to the extent each is a party thereto. This Agreement constitutes,
and all other agreements, certificates and other documents to be executed and
delivered by either Seller or Mohasco will constitute the legal, valid and
binding obligation of Seller and Mohasco, to the extent each is a party
thereto, enforceable against such persons in accordance with their respective
terms. Except as set forth on Schedule 2.16, the execution and delivery of this
Agreement and the other agreements and documents contemplated hereby as Seller
and Mohasco, respectively, are a party thereto, and the consummation of the
transactions contemplated hereby and thereby will not: (a) violate or
constitute a default under the respective certificate of incorporation or
bylaws of Seller or Mohasco or any note, indenture, mortgage, deed of trust or
other contract, agreement or commitment of Seller or Mohasco; (b) result in the
loss or adverse modification of, or require any payment or impose any duty or
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obligation under, or accelerate any right of any other party to, any
Governmental Permit, License or Contract; or (c) result in the creation or
imposition of any lien, charge or encumbrance upon the Property or cause the
acceleration of any indebtedness of Seller or Mohasco, respectively.
2.17 CONSENTS. Except as set forth on Schedule 2.17, no consent,
approval, authorization or order of any court, Agency or any other person is
required in order to permit Seller and Mohasco to consummate the transactions
contemplated by this Agreement, except for compliance with the applicable
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act").
2.18 LITIGATION. Set forth on Schedule 2.18, is a list of all
suits, arbitrations, or legal, administrative or other governmental proceedings
or audits, inquiries or investigations pending, or, to the best knowledge of
Seller, threatened against Seller, or, to the extent related to the Business,
any of its employees, officers or directors, or affecting any of the Property.
None of the actions, suits, proceedings or investigations listed on Schedule
2.18 either (i) results or reasonably could be expected to, if adversely
determined, result in any material adverse effect on the Business, operations
or assets or the condition, financial or otherwise, or results of operations or
prospects of Seller or (ii) affects or reasonably could be expected to, if
adversely determined, affect the right or ability of Seller to carry on the
Business substantially as now conducted. Seller is not subject to any
continuing court or Agency judgment, order, writ, injunction or decree
applicable specifically to the Business, the operations or assets of Seller or
employees of Seller, nor in default with respect to any order, writ, injunction
or decree of any court or Agency with respect to the Business or Seller's
assets, operations or employees which could result in a material adverse effect
on the conduct of the Business.
2.19 BOOKS AND RECORDS. Seller does not have any Records or any
other systems, controls, data or information recorded, stored, maintained,
operated or otherwise wholly or partly dependent upon or held by any means
(including any electronic, mechanical or photographic process, whether
computerized or not) which (including all means of access thereto and
therefrom) are not under the exclusive ownership and direct control of Seller
and Mohasco (other than payroll records which Seller controls indirectly).
2.20 ENVIRONMENTAL MATTERS.
(a) Except as set forth on Schedule 2.20, (i) the
ownership, occupancy and operations of the Real Estate, and any use, storage,
treatment, disposal, or transportation of "Hazardous Substances," as defined
below, that has occurred in or on the Real Estate prior to the date of this
Agreement have been in compliance
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in all material respects with "Environmental Requirements," as defined below;
(ii) during the ownership, occupancy and operation of the Real Estate by
Seller, or, to the knowledge of Seller, prior to its ownership, occupancy or
operation, no release, leak, discharge, spill, disposal, or emission of
Hazardous Substances has occurred in, on, or under the Real Estate in a
quantity or manner that would result in a material adverse effect on the
conduct of the Business or the ownership or use of the Property; (iii) no
Hazardous Substances exist on the Real Estate as of the date of this Agreement,
except for the presence of quantities of Hazardous Substances utilized by
Seller or other tenants of the Real Estate in the ordinary course of their
business which would not result in a material adverse effect on the ownership
or use of the Property or the conduct of the Business; (iv) there is no pending
or, to the best knowledge of Seller, threatened litigation or administrative
investigation or proceeding concerning the Real Estate involving Hazardous
Substances or Environmental Requirements; (v) there is no friable ACM (as
defined below), within the Real Estate, and there are no above-ground or
underground storage tank systems ("Tank Systems") located at the Real Estate;
(vi) Seller currently holds all permits ("Permits") that it is required to have
under applicable Environmental Requirements for the ownership, occupancy and
operation of the Real Property and is in compliance in all material respects
with such Permits; and (vii) Seller does not have liability under any
Environmental Requirements with respect to any real property previously owned,
operated, or leased by Seller.
(b) DEFINITIONS. As used in this Agreement, the following
terms shall have the following meanings:
"Environmental Requirements" means all laws, statutes, rules,
regulations, ordinances, judgments, decrees, orders, agreements and
other restrictions and requirements (whether now or hereafter in
effect) of any governmental authority, including, without limitation,
federal, state, and local authorities, relating to the regulation or
protection of human health and safety, natural resources,
conservation, the environment, or the storage, treatment, disposal,
transportation, handling, or other management of industrial or solid
waste, hazardous waste, hazardous or toxic substances or chemicals, or
pollutants.
"Hazardous Substance" means (i) any "hazardous substance" as
defined in Section 101(14) of the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended from
time to time (42 U.S.C. Section 9601 et seq.) ("CERCLA") or any
regulations promulgated thereunder; (ii) petroleum and petroleum
by-products; (iii) asbestos or asbestos-containing material ("ACM");
or (iv) any additional substances or materials which have been or are
currently classified as pollutants, hazardous or toxic under
Environmental Requirements.
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2.21 PRODUCT LIABILITY. Schedule 2.21 sets forth the product
liability loss experience for individual claims in excess of $10,000, by each
claim and claim amount, for Seller since January 1, 1992. To the best knowledge
of Seller, all products sold by Seller have complied with all trade association
requirements, specifications and other forms of guidance.
2.22 BROKERS AND FINDERS. Neither Seller nor Mohasco has any
arrangement with a broker, finder, advisor or consultant in connection with the
transactions contemplated hereby. Neither Seller nor Mohasco has authorized any
person to act as a broker or finder or in any other similar capacity in
connection with this Agreement or the transactions contemplated hereby.
3. REPRESENTATIONS AND WARRANTIES OF BUYER AND LEGGETT
Buyer and Leggett represent and warrant to Seller as follows:
3.1 BUYER ORGANIZATION AND STANDING. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the state of
Delaware. Buyer has all necessary corporate powers to (i) enter into this
Agreement and all other agreements, certifications and other documents to be
executed and delivered by Buyer in connection herewith, and (ii) perform its
obligations under such agreements, certificates and other documents.
3.2 LEGGETT ORGANIZATION AND STANDING. Leggett is a corporation
duly organized, validly existing and in good standing under the laws of the
state of Missouri. Leggett has all necessary corporate powers to (i) enter into
this Agreement and all other agreements, certifications and other documents to
be executed and delivered by Leggett in connection herewith, and (ii) perform
its obligations under such agreements, certificates and other documents.
3.3 AUTHORIZATION; BINDING EFFECT; NO CONFLICT WITH OTHER
INSTRUMENTS. The execution and delivery of this Agreement and all other
agreements, certificates and other documents contemplated hereby have been duly
authorized and executed by Buyer and Leggett. This Agreement constitutes, and
all other agreements, certificates and other documents to be executed and
delivered will constitute, the legal, valid and binding obligation of Buyer and
Leggett, to the extent each is a party thereto, enforceable against each such
party in accordance with their respective terms. The execution and delivery of
this Agreement and the other agreements and documents contemplated hereby and
the consummation by Buyer and Leggett of the transactions contemplated hereby
and thereby will not violate or constitute a default under Buyer's Certificate
of Incorporation, Leggett's Restated Articles of Incorporation or the
respective Bylaws of Buyer or Leggett, or any note, indenture, mortgage, deed
of trust or other contract, agreement or commitment of Buyer or Leggett.
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<PAGE> 17
3.4 CONSENTS. No consent, approval, authorization or order of any
court, Agency or any other person is required in order to permit Buyer and
Leggett to consummate the transactions contemplated by this Agreement, except
for compliance with the applicable requirements of the HSR Act.
3.5 BROKERS AND FINDERS. Neither Buyer nor Leggett has any
arrangement with a broker, finder, advisor or consultant in connection with the
transactions contemplated hereby. Neither Buyer nor Leggett has authorized any
person to act as a broker or finder or in any other similar capacity in
connection with this Agreement or the transactions contemplated hereby.
4. ADDITIONAL COVENANTS
4.1 FULL ACCESS. From the date hereof and until the Closing,
Seller and Mohasco covenant and agree that Buyer and its representatives shall
be afforded access to all books, records, facilities and personnel of Seller.
Mohasco and Seller shall permit Buyer and its representatives to review the
Business, assets and operations of Seller, provided that such access and review
shall not unreasonably interfere with Seller's operations and shall be subject
to the Confidentiality Agreement dated March 18, 1994 between Mohasco and
Leggett (the "Confidentiality Agreement").
4.2 CONDUCT OF THE BUSINESS. Except with the prior written consent
of Buyer, and except for actions required or contemplated hereby, Seller shall
(and Mohasco shall cause Seller to) from the date hereof until the Closing (i)
conduct its business only in the ordinary and usual course and in substantially
the same manner as heretofore conducted; (ii) maintain the Property in good
operating condition and repair and continue normal maintenance; (iii) not sell,
mortgage, pledge, transfer or alienate any Property except in the ordinary
course of business; (iv) except as contemplated by Schedule 2.13, not increase
salaries or wages, declare bonuses, increase benefits, or institute any new
benefit plan or program; (v) comply in all material respects with all laws
applicable to Seller; (vi) not amend or in any way modify any Contract
identified on Schedule 1.1(i). or any lease identified on Schedule 1.1(d);
(vii) not enter into any transaction, contract or commitment not in the
ordinary course of business which obligates it (A) to pay A sum greater than
$10,000 in any one instance or $100,000 in the aggregate to any one person, or
(B) for a period extending beyond the Closing Date; (viii) not introduce any
material change with respect to the operation of its businesses, including any
method, principle or practice of accounting, except as may be required BY GAAP;
(ix) continue to carry its existing insurance, subject to variations and
amounts required by the ordinary operations of the Business; (x) not waive or
release any rights of material value; and (xi) promptly notify Buyer of any
event or condition which would or may cause any condition precedent in Article
5 hereof not to be fulfilled.
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4.3 PRESERVATION OF BUSINESS AND RELATIONSHIPS. Except as
otherwise provided herein, from the date hereof until the Closing, Seller and
Mohasco shall use their best efforts to preserve Seller's business organization
intact, to keep available to Buyer the present officers (other than John B.
Sganga) and employees of Seller and to preserve Seller's present relationship
with suppliers, customers and others having business relationships with them.
4.4 EXCLUSIVITY. From the date hereof and until July 13, 1994,
neither Seller nor Mohasco will encourage or solicit any inquiries or proposals
by, or engage in any discussions or negotiations with, or furnish any
non-public information to, any person concerning the sale or other disposition
of the Property or a merger, consolidation, sales of securities or acquisition
involving Seller.
4.5 ADDITIONAL ACTION. Each of Seller, Mohasco, Buyer and Leggett
shall use its best efforts and take all such action as may be reasonably
requested by the other party in order to effectuate the consummation of the
transactions contemplated by this Agreement, including without limitation,
obtaining all consents and releases necessary to effect the transfer of the
Property to Buyer.
4.6 CHANGE OF NAME. Seller shall cause its name to be changed on
or before the Closing Date to a name that is not similar to "Super Sagless" or
any other name used as of the Closing Date in the operation of the Business.
4.7 REMOVAL OF EXCLUDED PROPERTY. On or before the Closing Date,
Seller shall remove all of the Excluded Assets from Seller's facility in
Tupelo, Mississippi.
4.8 HSR ACT COMPLIANCE. Seller, Mohasco and Buyer will each use
their respective best efforts to respond as promptly as possible to all
inquiries received from the Federal Trade Commission and the Antitrust Division
of the Department of Justice for additional information or documentation
regarding the notification and report form filed pursuant to the HSR Act.
4.9 CONSENTS.
(a) Nothing in this Agreement shall be construed as an
attempt to assign any Governmental Permit, License or Contract which by its
terms or by law is nonassignable without the consent of another person unless
such consent shall have been obtained, or as to which all the remedies for the
enforcement thereof enjoyed by Seller would, as a matter of law, pass to Buyer
as an incident of the assignments provided for by this Agreement. In order,
however, to provide Buyer the full realization and value of every Contract,
Seller agrees that for a period of one year after the Closing, it will, at the
request and under the direction of Buyer, take all
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reasonable actions as shall in the opinion of Buyer or its counsel be necessary
or proper (i) to assure that the rights of Seller under such Contracts shall be
preserved for the benefit of Buyer and (ii) to facilitate receipt of the
consideration to be received by Seller in and under every such Contract, which
consideration shall be held for the benefit of, and shall be delivered to,
Buyer; provided, that Buyer shall reimburse Seller for any and all costs and
expenses incurred by Seller and approved by Buyer in connection with taking any
such actions.
(b) Buyer acknowledges that certain consents to the transactions
contemplated by this Agreement may be required from parties to the Contracts
and that such consents have not been obtained. Buyer agrees that Seller shall
not have any liability whatsoever arising out of or relating to the failure to
obtain any consents that may have been or may be required in connection with
the transactions contemplated by this Agreement or because of the default under
or acceleration or termination of any such Contract as a result thereof. Buyer
further agrees that no representation or warranty of Seller or Mohasco
contained herein shall be breached or deemed breached, and, except for those
consents set forth on Schedules 5.6 and 5.7, no condition to Buyer's
obligations to close the transactions contemplated by this Agreement shall be
deemed not satisfied, as a result of (i) the failure to obtain any such consent
or as a result of any such default, acceleration or termination or (ii) any
lawsuit, action, claim, proceeding or investigation commenced or threatened by
or on behalf of any persons arising out of or relating to the failure to obtain
any consent or any such default, acceleration or termination provided that in
either instance Seller has disclosed in the Schedules hereto the necessity to
obtain such consent. Buyer, Seller and Mohasco shall, jointly cooperate in
attempting to obtain any consents required in connection with the transactions
contemplated by this Agreement; provided, however, that neither Seller nor
Mohasco shall be required to expend money, commence any litigation or offer or
grant any accommodation (financial or otherwise) to any third party; and
provided further, nothing herein shall limit Seller's and Mohasco's other
obligations under Section 4.5 above.
4.10 ACCESS TO RECORDS. Following the Closing, Buyer shall have the
right, at its sole expense, to review and copy any records, data, ledgers or
other information relating to the Property or the Business that are not a part
of the Records.
4.11 COBRA CONTINUATION COVERAGE. Seller shall remain obligated in
accordance with Code Section 4980B and ERISA Section 601, et. seq. ("COBRA
continuation coverage"), to provide COBRA continuation coverage to those of its
covered employees, former employees and their qualified beneficiaries entitled
to receive COBRA continuation coverage under a group health plan sponsored by
Seller or an ERISA Affiliate on account of a qualifying event occurring either
prior to consummation or as a result of the
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consummation of the transactions contemplated by this Agreement. Seller and
Mohasco jointly and severally agree to indemnify and hold Buyer harmless from
any losses, damages or material expenses suffered by Buyer as a result of
claims for COBRA continuation coverage made by or on behalf of such employees,
former employees and their qualified beneficiaries.
4.12 ENVIRONMENTAL INDEMNITY. Seller and Mohasco jointly and
severally agree to indemnify and hold Buyer and Leggett harmless from any
losses, damages, costs, expenses or liabilities that Buyer may incur with
respect to liability (including without limitation liability under CERCLA or
similar state laws) related to the operation of the Business prior to the
Closing Date in connection with the Lee County Landfill in Tupelo, Mississippi.
4.13 PRODUCT LIABILITY.
(a) Seller and Mohasco represent and warrant to Buyer
that Schedule 4.13 sets forth the product liability experience for all claims
against Seller for the last ten years.
(b) Seller shall be responsible for all product liability
claims, costs and expenses associated with Pre-Closing Products (as defined
below) if (i) the incident resulting in liability occurs on or before the
Closing Date or (ii) the incident occurs after the Closing Date and involves a
Pre-Closing Product sold to Stratford, Barcolounger or any other affiliate of
Mohasco. Seller shall also be responsible for product liability claims, costs
and expenses associated with Pre-Closing Products sold to customers not
affiliated with Seller if the incident resulting in liability occurs after the
Closing Date, but only to the extent that such costs exceed (i) $62,500 in 1994
or (ii) $125,000 in any year thereafter plus the unused amounts from prior
years (i.e., when the costs in any prior years are less than $125,000 or, in
the case of 1994, $62,500). "Pre-Closing Products" shall mean products that
were either manufactured by Seller or purchased by Seller for resale to
customers prior to or on the Closing Date.
(c) Buyer shall be responsible for (i) all product
liability claims, costs and expenses associated with products manufactured
after the Closing Date or purchased after the Closing Date for resale to
customers and (ii) the first $125,000 of costs and expenses each calendar year
(except in calendar year 1994, which shall be $62,500) arising in connection
with product liability claims occuring after the Closing Date and involving
Pre-Closing Products sold to customers not affiliated with Mohasco.
5. CONDITIONS PRECEDENT TO PERFORMANCE OF BUYER AND LEGGETT
The obligations of Buyer and Leggett hereunder are subject to the
satisfaction (except to the extent waived in writing by Buyer) at or before the
Closing of all of the following conditions:
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5.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties of Seller and Mohasco in this Agreement or in
any Schedule that shall have been delivered to Buyer by Seller or Mohasco under
this Agreement that are qualified by materiality shall be true and correct, and
those representations not so qualified shall be true and correct in all
material respects, in each case as of the date hereof and on and as of the
Closing Date as though made on and as of the Closing Date, except to the extent
such representations and warranties expressly relate to an earlier date.
5.2 COMPLIANCE OF COVENANTS. Seller and Mohasco shall have
performed or caused to be performed in all material respects all obligations
and agreements and complied with all covenants and conditions of this Agreement
required to be performed or complied with on or before the Closing.
5.3 NO MATERIAL ADVERSE CHANGE. During the period from the date of
this Agreement to the Closing Date, there shall not have occurred any material
adverse change in the financial condition, results of operations or cash flows
of the Business and Seller shall not have sustained any material loss or damage
to the Property or the Business.
5.4 OPINION OF COUNSEL. Buyer and Leggett shall have received from
counsel for Seller and Mohasco an opinion dated the Closing Date, in the form
of Exhibit 5.4 attached hereto.
5.5 THIRD PARTY ACTION. There shall not have been instituted or
threatened by any governmental unit or Agency, any action, proceeding,
investigation, audit, inquiry or objection relating to the transactions
contemplated hereby.
5.6 CONSENTS REQUIRED. All agreements and consents listed on
Schedule 5.6 shall have been obtained.
5.7 PERMITS AND LICENSES REQUIRED. Seller shall have obtained all
consents listed on Schedule 5.7 in order to transfer the Governmental Permits
and Buyer shall have obtained all licenses, permits, certificates and
governmental approvals listed on Schedule 5.7.
5.8 SUPPLY AGREEMENT. Mohasco shall have caused Mohasco
Upholstered Furniture Corporation, a wholly owned subsidiary of Mohasco
("MUFCO"), on behalf of Stratford and Barcolounger, operating divisions of
MUFCO, to execute and deliver to Leggett supply agreements in the form of
Exhibit 5.8 attached hereto (the "Supply Agreement").
5.9 NONCOMPETITION AGREEMENT. Seller and Mohasco shall have
executed and delivered to Buyer a noncompetition agreement in the
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form of Exhibit 5.9 attached hereto (the "Noncompetition Agreement").
5.10 ESCROW AGREEMENTS. Seller, Mohasco and the Escrow Agent shall
have executed and delivered to Buyer and Leggett the Warranties Escrow
Agreement and the Taxes Escrow Agreement.
5.11 TITLE INSURANCE. On or before the Closing Date, Buyer shall
have received an owner's policy of title insurance in an amount equal to
$5,000,000 on a standard form from Lawyer's Title Insurance Company, insuring
Buyer's fee simple title and leasehold interest to the owned and leased Real
Estate described in Schedule 1.1(d) , subject only to (i) those title
exceptions which are standard exceptions contained generally in title policies
written by title companies, (ii) other encumbrances set forth in the Title
Certificates (except for the Liens to be released prior to Closing) and (iii)
those encumbrances referred to in clauses (w), (x), (y) and (z) of Section
2.11(a).
5.12 HSR ACT. All applicable waiting periods with respect to the
transactions contemplated hereby under the HSR Act shall have expired or early
termination shall have been granted.
5.13 NONFOREIGN AFFIDAVIT. Seller shall have furnished to Buyer an
affidavit stating, under penalty of perjury, the transferor's United States
taxpayer identification number and that the transferor is not a foreign person,
pursuant to Section 1445(b)(2) of the Code.
6. CONDITIONS PRECEDENT TO PERFORMANCE BY SELLER AND MOHASCO
The obligations of Seller and Mohasco hereunder are subject to the
satisfaction (except to the extent waived in writing by Seller and Mohasco) at
or before the Closing of all the following conditions:
6.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties by Buyer and Leggett in this Agreement or in any
Schedule that shall have been delivered to Seller by Buyer and Leggett under
this Agreement that are qualified by materiality shall be true and correct, and
those representations not so qualified shall be true and correct in all
material respects, in each case as of the date hereof and on and as of the
Closing Date as though made on and as of the Closing Date, except to the extent
such representations and warranties expressly relate to an earlier date.
6.2 COMPLIANCE WITH COVENANTS. Buyer shall have performed in all
material respects all of its obligations and agreements and complied with all
of its covenants and conditions of this Agreement required to be performed or
complied with on or before the Closing Date.
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6.3 SUPPLY AGREEMENT. Leggett shall have executed and delivered to
MUFCO the Supply Agreements.
6.4 ESCROW AGREEMENTS. Buyer, Leggett and the Escrow Agent shall
have executed and delivered to Seller and Mohasco the Warranties Escrow
Agreement and the Taxes Escrow Agreement.
6.5 OPINION OF COUNSEL. Seller and Mohasco shall have received
from counsel for Buyer and Leggett an opinion dated the closing Date, in the
form of Exhibit 6.5 attached hereto.
6.6 HSR ACT. All applicable waiting periods with respect to the
transactions contemplated hereby under the HSR Act shall have expired or early
termination shall have been granted.
6.7 THIRD PARTY ACTION. There shall not have been instituted or
threatened by any governmental unit or Agency, any action, proceeding,
investigation, audit, inquiry or obligation relating to the transactions
contemplated hereby.
7. CLOSING
7.1 CLOSING DATE AND PLACE. The parties will use their best
efforts to close the transactions contemplated hereby within five (5) business
days after the date on which the last condition set forth in Articles 5 and 6
has been satisfied or waived or such other date as the parties may mutually
agree upon. The closing of the transactions contemplated hereby is called the
"Closing." The day of Closing is called the "Closing Date." The Closing shall
be held at the offices of Locke Purnell Rain Harrell (A Professional
Corporation), Dallas, Texas.
7.2 MOHASCO'S AND SELLER'S CLOSING OBLIGATIONS. Seller or Mohasco,
as the case may be, subject to the satisfaction of all conditions precedent to
Seller's and Mohasco's obligations and the simultaneous delivery by Buyer of
all items required under Section 7.3, shall deliver to Buyer at the Closing:
(a) General warranty deeds, bills of sale and other
documents or instruments of conveyance, transfer or assignment as
shall be necessary or appropriate to vest or confirm in Buyer all
right, title and interest in and to all of the Property (including,
without limitation, assignments from Mohasco with respect to
Intangible Rights that are owned or held by Mohasco) , all of which
documents shall be in the form of Exhibit 7.2 attached hereto;
(b) The Warranties Escrow Agreement and the Taxes Escrow
Agreement executed by Seller and Mohasco;
(c) The Supply Agreements executed by MUFCO;
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(d) The Noncompetition Agreement executed by Seller and
Mohasco;
(e) A certificate dated as of the Closing Date to the
effect set forth in Sections 5.1 and 5.2; and
(f) The opinion of counsel referred to in Section 5.4.
7.3 BUYER'S CLOSING OBLIGATIONS. Buyer, subject to the
satisfaction of all conditions precedent to Buyer's obligations and the
simultaneous delivery by Seller and Mohasco of all items required under Section
7.2, shall deliver at the Closing:
(a) To Seller, the Closing Date Payment;
(b) To the Escrow Agent, the Warranties Escrow Payment
and the Taxes Escrow Payment;
(c) All appropriate instruments of assumption and other
documents or instruments as shall be necessary or appropriate to cause
Buyer to assume any liabilities to be assumed by Buyer hereunder,
executed by Buyer in the form of Exhibit 7.3 attached hereto;
(d) The Warranties Escrow Agreement and the Taxes Escrow
Agreement executed by Buyer and Leggett;
(e) The Supply Agreement executed by Leggett;
(f) A certificate dated as of the Closing Date to the
effect set forth in Sections 6.1 and 6.2; and
(g) The opinion of counsel referred to in section 6.5.
7.4 TERMINATION.
(a) Anything contained herein to the contrary
notwithstanding, this Agreement may be terminated and the transactions
contemplated hereby abandoned:
(i) by mutual written consent of Seller and Buyer;
(ii) by Seller if any of the conditions set forth in
Article 6 shall have become incapable of fulfillment and shall not
have been waived by Seller;
(iii) by Buyer if any of the conditions set forth in
Article 5 shall have become incapable of fulfillment and shall not
have been waived by Buyer;
(iv) by either party hereto, if the Closing does not occur
on or prior to October 31, 1994;
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provided that the party seeking termination pursuant to clause (ii), (iii) or
(iv) shall not be in material breach of any of its representations,
warranties, covenants or agreements contained in this Agreement.
(b) In the event of termination by Seller or Buyer pursuant to
this Section 7.4, written notice thereof shall forthwith be given to the other
parties and the transactions contemplated by this Agreement shall be
terminated, without further action by either party. If the transactions
contemplated by this Agreement are terminated as provided herein:
(i) Buyer shall immediately return to Seller all
documents and other material received from Seller relating to the
transactions contemplated hereby, whether obtained before or after the
execution hereof; and
(ii) all confidential information received by Buyer with
respect to Seller, the Business or Seller's other businesses shall be
treated in accordance with the Confidentiality Agreement, which
agreement shall remain in full force and effect notwithstanding the
termination of this Agreement.
(c) If this Agreement is terminated and the transactions
contemplated hereby are abandoned as described in this Section 7.4, this
Agreement shall become void and of no further force and effect, except for the
provisions of Sections 2.22, 3.5, 8.11 and 8.12. Nothing in this Section 7.4
shall be deemed to release any party hereto from any liability for any breach
by such party of the terms and provisions of this Agreement.
8. MISCELLANEOUS
8.1 EMPLOYMENT OBLIGATIONS. Immediately following the Closing,
Buyer shall offer employment to each of Seller's employees on terms and
conditions (i) substantially the same as each had with Seller on April 12, 1994
or (ii) consistent with Buyer's employment and benefit practices and procedures
as they exist on the Closing Date.
8.2 ENTIRE AGREEMENT; CONSTRUCTION. This Agreement (including all
agreements and other documents referenced herein (including the Confidentiality
Agreement)) 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 not be amended except by a writing signed by
the party to be charged. 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
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prepared or drafted this Agreement or the agreements contemplated hereby or
both.
8.3 SURVIVAL. All covenants, agreements, warranties,
representations, and undertakings of Mohasco, Seller, Buyer and Leggett
contained herein or in any document delivered hereunder shall survive the
Closing and remain in full force and effect thereafter and shall not be
affected by any preclosing investigation or examination of the subject matter
thereof made by another party hereto or its representatives; provided, however,
that (i) the representations and warranties of Seller and Mohasco contained in
Sections 2.1 through 2.4, 2.6 through 2.10, 2.11(a) through (e), and 2.12
through 2.22 shall terminate and expire one year and one day following the
Closing Date and (ii) the representations and warranties of Seller and Mohasco
contained in Sections 2.5 and 2.11(f) shall terminate and expire upon
expiration of the applicable statute of limitations.
8.4 EXHIBITS AND SCHEDULES. Each Exhibit and Schedule referred to
herein is hereby incorporated into this Agreement by reference to the same
extent as if set forth in full herein. The Exhibits and Schedules incorporated
herein by reference need not be physically attached hereto so long as such
Exhibits and Schedules are appropriately identified as such on their face.
8.5 HEADINGS. The headings of the sections and paragraphs of this
Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction hereof.
8.6 COLLECTION OF INTERCOMPANY RECEIVABLES. Mohasco represents and
warrants that the Receivables acquired hereunder which are owed to Seller by
Mohasco or any wholly owned subsidiary of Mohasco ("Intercompany Receivables")
are fully collectible. Mohasco shall reimburse Buyer for any such Intercompany
Receivables that are not paid within sixty (60) days following the Closing
Date.
8.7 LIMITATION ON LIABILITY. Seller and Mohasco shall not have any
liability for a breach of a representation or warranty under Article 2 above
unless and only to the extent that the aggregate losses, liabilities and
damages of Buyer for any such breach exceeds $250,000 and in no event shall the
total liability of Seller and Mohasco hereunder for any and all breaches of
such representations and warranties exceed $4,000,000 in the aggregate.
Notwithstanding the foregoing, the limitations in the preceding sentence shall
not apply to a breach of any of the representations and warranties contained in
Sections 2.5, 2.11(f) or 2.22. Nothing in this Section 8.7 is intended to limit
the obligations of Seller and Mohasco under Section 8.10 below.
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8.8 LIMITATION ON KNOWLEDGE. To the extent any representation or
warranty of Seller in Article 2 is limited to "the best of Seller's knowledge"
or similar language, knowledge shall be limited to any facts or circumstances
known by any of the individuals set forth on Schedule 8.8.
8.9 LEGGETT GUARANTY. Leggett shall and hereby does guarantee the
performance of all obligations of Buyer hereunder. The obligations of Leggett
hereunder are direct, absolute and unconditional, and may be enforced by Seller
or Mohasco without first seeking recourse, taking any steps against or
instituting any proceedings against Buyer. The obligations of Leggett hereunder
shall not be impaired or affected by the voluntary or involuntary liquidation,
sale, or other disposition of all or substantially all of the assets of Buyer,
or the receivership, insolvency, bankruptcy, reorganization or other similar
proceedings affecting Buyer or any of its assets, or the consolidation or
merger of Buyer or any other cause or circumstance, whether similar or
dissimilar to the foregoing, that might otherwise constitute a defense
available to or discharge of Buyer or a guarantor.
8.10 BULK SALES LAW. The parties hereto agree to waive compliance
with the bulk sales law of the State of Mississippi and Seller and Mohasco
shall jointly and severally indemnify and hold harmless Buyer from any
liability arising as a result of the failure to comply with such laws. The
parties acknowledge and agree that the Taxes Escrow Payment may be used to
satisfy the obligations of Seller and Mohasco under this Section 8.10 in the
event that a Claim (as defined in the Taxes Escrow Agreement) is made.
8.11 EXPENSES. Buyer and Leggett shall pay all costs and expenses
incurred or to be incurred by Buyer and Leggett in negotiating and preparing
this Agreement and in closing and carrying out the transactions contemplated
hereby. Seller and Mohasco shall pay all costs and expenses incurred or to be
incurred by Seller and Mohasco in negotiating and preparing this Agreement and
closing and carrying out the transactions contemplated hereby.
8.12 PUBLIC ANNOUNCEMENTS. No public announcement of the
transactions contemplated hereby shall be made by any party prior to the
Closing without the prior written consent of the other parties, except as
required by law after consultation among the parties.
8.13 CONFIDENTIALITY AGREEMENT. Effective as of the Closing and
with respect to the Business and the Property only, Buyer's and Leggett's
obligation to Seller and Mohasco under the Confidentiality Agreement shall
terminate.
8.14 NOTICES. Any notice, request, instruction, document or other
communication to be given hereunder by any party hereto to
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any other party hereto shall be in writing and validly given if (i) delivered
personally, (ii) sent by telecopy and confirmed in the manner set forth in
clauses (i), (iii) or (iv), (iii) delivered by overnight express, or (iv) sent
by registered or certified mail, postage prepaid, as follows:
If to Seller or Mohasco: c/o Mohasco Corporation
4401 Fair Lake Court
Fairfax, VA 22033
Telecopy No.: (703) 968-8047
Attn: John B. Sganga
with a copy to: Dechert Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, PA 19103-2793
Telecopy No.: (215) 994-2222
Attn: Christopher G. Karras
If to Buyer or Leggett: c/o Leggett & Platt,
Incorporated
No. 1 Leggett Road
Carthage, MO 64836
Telecopy No.: (417) 358-8449
Attn: Robert A. Jefferies, Jr.
Senior Vice President
with a copy to: Locke Purnell Rain Harrell
2200 Ross Avenue, Suite 2200
Dallas, Texas 75201-6776
Telecopy No.: (214) 740-8800
Attn: Maurice E. Purnell, Jr.
or at such other address for a party as shall be specified by like notice. Any
notice which is delivered personally, or sent by telecopy or overnight express
in the manner provided herein shall be deemed to have been duly given to the
party to whom it is directed upon actual receipt by such party. Any notice
which is addressed and mailed in the manner herein provided shall be
conclusively presumed to have been given to the party to whom it is addressed
at the close of business, local time of the recipient, on the fifth day after
the day it is so placed in the mail.
8.15 TAX IMPLICATIONS. Seller and Buyer each acknowledge that each
party shall be responsible for obtaining such assurances regarding the tax
implications to it of the transactions contemplated hereby as it deems
appropriate, and each shall assume the risk of any adverse tax consequence to
it relating to any of the transactions contemplated hereby.
8.16 COUNTERPARTS; TELECOPIER. This Agreement may be executed in
several counterparts, each of which shall be an original and all
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of which shall contain but one and the same Agreement. Signature pages may be
exchanged by telecopier. The parties intend that counterpart copies so signed
and exchanged shall be fully binding.
8.17 GOVERNING LAW. This Agreement shall be governed by the
internal laws (ignoring principles of conflicts of laws) of the State of
Delaware.
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IN WITNESS WHEREOF, the parties have executed this Agreement the date
first above written.
LEGGETT & PLATT FURNITURE HARDWARE
COMPANY
By: /S/ R. A. JEFFERIES, JR.
------------------------------
Name: R. A. Jefferies, Jr.
----------------------------
Title: President
---------------------------
LEGGETT & PLATT, INCORPORATED
By: /S/ R. A. JEFFERIES, JR.
------------------------------
Name: R. A. Jefferies, Jr.
----------------------------
Title: Senior Vice President
---------------------------
SUPER SAGLESS CORPORATION
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
MOHASCO CORPORATION
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
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<PAGE> 31
IN WITNESS WHEREOF, the parties have executed this Agreement the date
first above written.
LEGGETT & PLATT FURNITURE HARDWARE
COMPANY
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
LEGGETT & PLATT, INCORPORATED
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
SUPER SAGLESS CORPORATION
By: /S/ STEPHEN R. LAKE
------------------------------
Name: Stephen R. Lake
----------------------------
Title: President & CEO
---------------------------
MOHASCO CORPORATION
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
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<PAGE> 32
IN WITNESS WHEREOF, the parties have executed this Agreement the date
first above written.
LEGGETT & PLATT FURNITURE HARDWARE
COMPANY
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
LEGGETT & PLATT, INCORPORATED
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
SUPER SAGLESS CORPORATION
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
MOHASCO CORPORATION
By: /S/ JOHN B. SGANGA
------------------------------
Name: John B. Sganga
----------------------------
Title: Executive Vice President
---------------------------
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