FIRST AMENDMENT
TO
STOCK PURCHASE AGREEMENT
THIS FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT dated as of
February 26, 1996 to the Stock Purchase Agreement dated as of January 5, 1996
(the "Agreement"), by and between XXXX Furniture, Inc., a North Carolina
corporation ("XXXX"), Xxxxxxxx Furniture, Inc., a North Carolina corporation
("Xxxxxxxx") and Xxxxxxxx Acquisition Co., a Delaware corporation ("Purchaser"
or "FAC"), is made and entered into by and among LADD, Fournier, FAC, and
Furniture Acquisition Co., a Delaware corporation ("Acquisition"). Capitalized
terms used herein without definition shall have the meanings respectively
ascribed to them in the Agreement.
WHEREAS, LADD, Fournier, FAC and Acquisition desire to amend
the Agreement as set forth below, and desire that, except for such Amendment,
the Agreement shall remain in full force and effect;
NOW THEREFORE, the parties hereto agree as follows:
1. FAC does hereby sell, convey, transfer and assign to
Acquisition its rights under the Agreement, and Acquisition does hereby
expressly assume all the obligations of FAC contained in the Agreement and
agrees to fully, faithfully and timely without default, comply with, keep and
perform all the terms, covenants, provisions and conditions contained therein.
XXXX does hereby consent to such assignment and assumption.
2. Section 1.4(A) of the Agreement shall be deleted in its
entirety and replaced by the following:
1.4 Payment of Purchase Price. (A) At the Closing,
the purchase price for the Shares (the "Purchase Price") shall
be calculated and paid to XXXX as follows:
(a) (i) an amount in cash or other immediately
available funds (the "Cash Amount") equal to (x) $3,000,000
plus (y) the remainder of (1) the total availability under
Purchaser's senior secured credit facility with the CIT
Group/Credit Finance, Inc. ("CIT") on the Closing Date, less
(2) $4,000,000 (the minimum availability that CIT requires at
Closing), less (3) Purchaser's transaction expenses (not to
exceed $900,000) and (ii) a subordinated promissory note (the
"Note") on terms set forth on the term sheet attached hereto
as Exhibit C in the principal amount of $10,048,660 less the
sum of the Cash Amount and $2,300,000 (the "Initial Working
Capital Adjustment") (such calculation equalling the "Original
Principal Amount") (which Original Principal Amount shall
automatically be adjusted pursuant to Section 1.4(B)(c)
below). On the day following the Closing Date Purchaser shall
certify the Cash Amount in writing to XXXX.
(b) At the Closing, the Cash Amount shall be paid by
delivery of a demand note of Acquisition in the principal
amount of the Cash Amount in form and substance satisfactory
to XXXX (the "Cash Amount Note"), which Cash Amount Note shall
be payable in cash or other immediately available funds
immediately upon the merger of Xxxxxxxx into Acquisition (the
"Merger"). In addition to the Cash Amount Note, Acquisition
shall deliver at Closing a demand note of Acquisition in the
principal amount of the Note as calculated pursuant to Section
1.4(A)(a)(ii) above (the "Acquisition Note") in form and
substance satisfactory to XXXX, which Acquisition Note shall
be exchanged for the Note immediately upon the merger of
Xxxxxxxx into Acquisition. In the event the Merger does not
become effective and the payment of the Cash Amount Note to
XXXX and the exchange of the Note and the Acquisition Note are
not made on the Closing Date or the following day, XXXX shall
not be deemed to have delivered the Shares to Acquisition, the
Cash Amount Note and the Acquisition Note shall not be deemed
to have been delivered to XXXX, and no interest in the
2
Shares or the Cash Amount Note and the Acquisition Note shall
have been transferred.
3. Section 1.4C(B)(a) shall be deleted in its entirety
and replaced by the following:
(B) Purchase Price Adjustment. (a) Delivery and Review of
Closing Balance Sheet. As promptly as practicable,
but not later than 21 days after the Closing Date,
the Company will cause to be prepared and delivered
to XXXX and Purchaser (i) the Closing Balance Sheet
in substantially the same form as the Interim Balance
Sheet and (ii) a certificate setting forth the
Closing Working Capital, together with supporting
calculations in reasonable detail (the "Adjustment
Certificate"). Purchaser and XXXX shall be given an
opportunity to discuss with the Company matters
relating to the determination of Closing Working
Capital. Purchaser and XXXX shall have 45 days from
the date on which the Closing Balance Sheet and the
Adjustment Certificate are delivered to them to
review such documents (the "Review Period").
Purchaser and XXXX shall be provided with full access
to the work papers of the Company in connection with
such review. If Purchaser or XXXX asserts that any
item or amount shown or reflected in the Closing
Balance Sheet or the Adjustment Certificate are not
materially correct or that the calculation of Closing
Working Capital was arrived at other than in
accordance with GAAP applied on a basis consistent
with those used in the preparation of the Interim
Balance Sheet (including the application of the
deviations from GAAP set forth in Schedule 2.1.4),
Purchaser or XXXX may, on or prior to the last day of
the Review Period, deliver a notice to the other
party setting forth, in reasonable detail, the basis
for the disagreement therewith, together with
support- ing calculations (the "Dispute Notice").
XXXX and Purchaser acknowledge that disputes
aggregating less than $25,000 shall not be deemed
material and thereby do not give rise to any
adjustment in Closing Working Capital. If no Dispute
Notice is received by either party on or prior to the
last day of the Review Period, the Closing Balance
Sheet and the Adjustment Certificate shall be deemed
accepted by both parties.
3
4. To reflect payments by XXXX on the Company's bond
indebtedness of $19,000, the Initial Working Capital Adjustment, and the amount
of the current assets relating to the Sam's product No. 09406.2, Section
1.4(B)(c) shall be amended by deletion of the amount "$13,075,500" and replacing
it with "$10,135,644" and deletion of the amount "$13,100,500" and replacing it
with "$10,160,644."
5. Section 1.4(B) shall be further amended by the
addition of Section 1.4(B)(d) as set forth below:
(d) Inventory Valuation. The parties agree that the
Company shall not perform a physical inventory as of
Closing Date. The Company and Purchaser agree that
following the Closing Date, the Purchase Price
Adjustment shall not be effected by and XXXX shall
have no liability with respect to any discrepancies
in inventory valuations that may be determined based
upon the result of any subsequent physical inventory.
6. Section 3.4(a) shall be amended by the addition of
the following to the end of the first sentence thereof:
"and further provided that the medical plan shall be
a preferred provider organization arrangement rather
than an indemnity arrangement and the level of
benefits and types of coverage may vary from the
medical plan of the Company in effect on the
Closing."
7. Section 3.4 shall be further amended by the addition
of Section 3.4(e) as follows:
(e) Effective as of the Closing Date, XXXX shall
cease to be responsible for administering medical and
dental claims filed by employees of the Company (and
their dependents). Purchaser shall, or shall cause
the
4
Company to, be responsible for administering all
medical and dental claims filed by employees of the
Company (and their dependents) on or after the
Closing. For purposes of this paragraph, a claim
shall be deemed to have been filed on the date on
which it is received by the claims processing
department of XXXX in High Point, North Carolina.
Purchaser shall assume full liability for the cost of
all medical and dental claims of employees of the
Company (and their dependents), regardless of when
filed.
8. Article 3 shall be amended by the addition of
Section 3.19 as follows:
3.19 Sam's Club Matter. Notwithstanding any
provisions in Article 6 to the contrary, XXXX or its insurer
shall be entitled to undertake, conduct and control the
conduct and settlement of any action or suit relating to the
accident at the Sam's Club in Abilene, Texas on February 3,
1996 as described in Schedule 2.1.4 (the "Sam's Accident"),
all as provided in Section 6.4(b); provided, however, in
connection with any settlement or compromise, XXXX shall not
make any public announcement regarding the accident without
the Company's prior written consent, which consent shall not
be unreasonably withheld, or identify the product as a product
of the Company in any public documents unless disclosure of
such information is deemed necessary as a matter of law by
XXXX'x counsel. The Company and Purchaser agree to preserve
and maintain all records, drawings, plans or any other
documents whatsoever relating to the design and manufacture of
product No. 09406.2 and any documents relating to sale of such
product to Walmart or Sam's Club and to make all such records
and documents available to XXXX, its insurer and their
counsel.
5
9. Section 6.1(a) shall be amended by the addition of a
new Section 6.1(a)(vi) thereto as follows:
(vi) Any Loss or Expense suffered by Purchaser or the
Company with respect to any action, suit or claim
relating to the Sam's Accident described in Schedule
2.1.4.
10. Section 6.1(a) shall be further amended by the addition of
the following after the term "EASY PLAN" and before the semicolon contained in
the penultimate sentence of Section 6.1(a):
and the indemnification provided for in clause (vi)
of this Section 6.1(a) shall survive without
termination.
11. Schedule 2.1.6 shall be redesignated as
Schedule 3.15.
12. Schedules 2.1.4 (Undisclosed Liabilities), 2.1.9 (Exhibit
D), 2.1.10 (item (8)), and Schedule 2.1.14 shall be amended by the addition of
the following disclosures:
Xxxxxxxx has been advised that a floor sample of Xxxxxxxx'x
product 09406.2 Door Storage Cabinet fell on a child at the
Sam's Club 8226 in Abilene, Texas on February 3, 1996,
resulting in the child's death. XXXX'x insurance carrier,
Zurich-American Insurance Group, has been notified of the
incident and a Claim Notice of Occurrence has been filed. XXXX
will indemnify and hold harmless Xxxxxxxx and Purchaser with
respect to any Loss or Expense relating to an action, suit or
claim arising from the Sam's Accident.
By attached letter dated February 20, 1996, Xxxxxxxx has been
advised by Sam's Club that due to the Sam's Accident, Sam's
Club intends to return all 09406.2 units currently held in
inventory, cancel all
6
outstanding purchase orders with respect to such unit, and to
offer all of its customers who purchased such unit the
opportunity to return it.
13. Schedules 2.1.4 (Material Changes) and 2.1.14 shall
be amended by the addition of the following disclosure:
Xxxxxx Home Centers, a customer of the Company with an
approximate outstanding receivable balance of $90,000, filed
for bankruptcy in December 1995.
14. The references to the factoring agreement with ITT
Financial Services in connection with the Xxxxxxxxxx Xxxx program contained in
Schedules 2.1.4, 2.1.14, and 2.1.15 are deleted in their entirety and replaced
with the following:
The Company has negotiated and approved a Factoring Agreement
with ITT Financial Services in connection with the Xxxxxxxxxx
Xxxx program. To date, sales to Department 63 of Xxxxxxxxxx
Xxxx, evidenced by invoices dated October 26, 27, and 28,
November 13, and December 1, 1995 totalling $647,933.72 have
been placed in the program.
15. Schedule 2.1.3 is amended as set forth below:
(a) Items 4(h) and 4(i) are deleted.
(b) Item 4(j) is amended to indicate that the correct
lessor is American Business Credit Corporation rather
than Bristol Office Supply.
7
(c) The following new items are added as set forth below:
o k) GreatAmerica Leasing Corporation
o Minolta copier
o Lessee - Xxxxxxxx Furniture, Inc.
o Section 16 of the Lease provides,
"You will not sublet, lend, assign
or pledge this lease, the equipment
or any interest in either. . ."
o l) First United Leasing Corporation
o Minolta copier
o Lessee - Xxxxxxxx Furniture, Inc.
o Section 6 of the Lease provides
"Lessee agrees not to sell, assign,
sublet, pledge or otherwise encumber
or suffer a lien upon or against any
interest in this Lease with the
property leased herein, . . .
without Lessor's prior written
consent."
o m) American Business Credit Corporation
o Sharp copier
o Lessee - Xxxxxxxx Furniture, Inc.
o Section 15 of the Lease provides,
"you have no right to sell,
transfer, assign this Lease or
sublease the Equipment."
16. Schedule 2.1.15 is amended as set forth below:
(a) Item 4(a) is amended to indicate that the correct
lessor of the Gateway computer is Finova rather than
Secured Funding Source.
(b) Items 10 and 11 are deleted.
(c) The following new items are added as set forth below:
15. GreatAmerica Leasing Corporation
o Lessee - Xxxxxxxx Furniture, Inc.
o Minolta copier
o 36 month term lease beginning
December 15, 1995
o Consent required (see 4(k) on
Schedule 2.1.3)
8
16. First United Leasing Corporation
o Lessee - Xxxxxxxx Furniture, Inc.
o Minolta copier
o 36 month term lease dated January
23, 1996
o Consent required (see 4(l) on
Schedule 2.1.3)
17. American Business Credit Corporation
o Lessee - Xxxxxxxx Furniture, Inc.
o Sharp copier
o 36 month term lease dated November
15, 1995
o Consent required (see 4(m) on
Schedule 2.1.3)
(d) Item 14 is amended to indicate that the correct
lessor is American Business Credit Corporation rather
than Bristol Office Supply.
17. Section 7.17 of the Agreement shall be amended by
the addition of the following definitions:
"Acquisition Note" shall have the meaning set forth in Section
1.4(A).
"Cash Amount Note" shall have the meaning set forth in Section
1.4(A).
"Initial Working Capital Adjustment" shall have the meaning
set forth in Section 1.4(A).
"Merger" shall have the meaning set forth in Section 1.4(A).
"Sam's Accident" shall have the meaning set forth in
Section 3.19.
18. This First Amendment may be executed in two or more
counterparts which together shall constitute a single agreement.
9
IN WITNESS WHEREOF, LADD, Fournier, Purchaser, and Acquisition
have caused this First Amendment to be signed by the respective officers
thereunto duly authorized all as of the date first above written.
XXXX FURNITURE COMPANY, INC.
By:
Title: Executive Vice President and
Chief Financial Officer
XXXXXXXX FURNITURE, INC.
By:
Title: Vice President
XXXXXXXX ACQUISITION CO.
By:
Title:
FURNITURE ACQUISITION CO.
By:
Title:
10
