ACQUISITION AGREEMENT,
dated as of December 9, 1996,
among
XXXXXXX & XXXXXX PRODUCTS CO.,
XXXXXXX & XXXXXX FLOOR COVERINGS GROUP, INC.,
XXXXXXX & XXXXXX FLOOR COVERINGS, INC.,
CAF HOLDINGS, INC.
and
CAF ACQUISITION CORP.
TABLE OF CONTENTS
(Not a part of the Agreement)
I. PURCHASE AND SALE OF SHARES . . . . . . . . . . . . . . . 1
1.1. Purchase and Sale of Shares . . . . . . . . . . . 1
1.2. Unadjusted Purchase Price . . . . . . . . . . . . 1
1.3. Purchase Price Adjustment . . . . . . . . . . . . 3
1.4. Intercompany Obligations . . . . . . . . . . . . . 5
II. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . 5
2.1. Representations and Warranties of Seller . . . . . 5
2.1.1. Corporate Matters . . . . . . . . . . . . 5
2.1.2. The Shares . . . . . . . . . . . . . . . 6
2.1.3. Officers and Directors . . . . . . . . . 7
2.1.4. Authorization and Effect of Agreement . . 7
2.1.5. No Restrictions . . . . . . . . . . . . . 7
2.1.6. Financial Statements . . . . . . . . . . 8
2.1.7. Conduct of the Business Since the
Balance Sheet Date . . . . . . . . . . . 8
2.1.8. Compliance with Laws . . . . . . . . . . 9
2.1.9. Tangible Personal Property; Title to
Assets . . . . . . . . . . . . . . . . . 9
2.1.10. Real Property . . . . . . . . . . . . . . 10
2.1.11. Insurance . . . . . . . . . . . . . . . . 10
2.1.12. Intellectual Property . . . . . . . . . . 10
2.1.13. Litigation; Decrees . . . . . . . . . . . 11
2.1.14. Contract Rights . . . . . . . . . . . . . 11
2.1.15. Employee Plans . . . . . . . . . . . . . 12
2.1.16. Taxes . . . . . . . . . . . . . . . . . . 14
2.1.17. Environmental Matters . . . . . . . . . . 16
2.1.18. No Undisclosed Liabilities . . . . . . . 17
2.1.19. Assets . . . . . . . . . . . . . . . . . 17
2.1.20. Affiliate Interests . . . . . . . . . . . 17
2.1.21. Brokers . . . . . . . . . . . . . . . . . 18
2.1.22. Warranty Claims and Liabilities . . . . . 18
2.1.23. Labor Matters . . . . . . . . . . . . . . 18
2.1.24. Supplier Relationships . . . . . . . . . 18
2.2. Representations and Warranties of Purchaser . . . 18
2.2.1. Corporate Organization . . . . . . . . . 18
2.2.2. Authorization and Effect of Agreement . . 18
2.2.3. No Restrictions. . . . . . . . . . . . . 19
2.2.4. Financial Capacity . . . . . . . . . . . 19
2.3. Certain Limitations on Representations and
Warranties . . . . . . . . . . . . . . . . . . . . 20
III. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . 20
3.1. Investigation by Purchaser . . . . . . . . . . . . 20
3.2. Press Releases . . . . . . . . . . . . . . . . . . 21
3.3. Regulatory Filings . . . . . . . . . . . . . . . . 22
3.4. Injunctions . . . . . . . . . . . . . . . . . . . 22
3.5. Operation of the Business . . . . . . . . . . . . 23
3.6. Satisfaction of Conditions . . . . . . . . . . . . 24
3.7. Negotiations With Others . . . . . . . . . . . . . 24
3.8. Certain Additional Covenants . . . . . . . . . . . 24
3.9. Efforts to Consummate . . . . . . . . . . . . . . 25
3.10. Resignations . . . . . . . . . . . . . . . . . . . 25
IV. THE CLOSING . . . . . . . . . . . . . . . . . . . . . . 26
4.1. Conditions Precedent to Obligations of Purchaser,
Parent and Seller . . . . . . . . . . . . . . . . . . . 26
4.2. Additional Conditions Precedent to Obligations of
Purchaser and Parent . . . . . . . . . . . . . . . 26
4.2.1. No Material Misrepresentation or Breach . 26
4.2.2. Transfer Documents, Etc . . . . . . . . . 26
4.2.3. No Material Adverse Change . . . . . . . 27
4.2.4. No Market Change . . . . . . . . . . . . 27
4.2.5. Other Documents . . . . . . . . . . . . . 27
4.3. Additional Conditions Precedent to Obligations of
Seller . . . . . . . . . . . . . . . . . . . . . . 27
4.3.1. No Material Misrepresentation or Breach . 27
4.3.2. Estimated Purchase Price . . . . . . . . 28
4.3.3. Other Documents . . . . . . . . . . . . . 28
4.4. The Closing . . . . . . . . . . . . . . . . . . . 28
4.5. Termination . . . . . . . . . . . . . . . . . . . 28
V. SURVIVAL AND INDEMNIFICATION . . . . . . . . . . . . . . 29
5.1. Survival of Representations, Warranties and
Covenants . . . . . . . . . . . . . . . . . . . . 29
5.2. Limitations on Liability . . . . . . . . . . . . . 30
5.3. Indemnification . . . . . . . . . . . . . . . . . 31
5.4. Defense of Claims . . . . . . . . . . . . . . . . 33
VI. OTHER POST-CLOSING COVENANTS . . . . . . . . . . . . . . 35
6.1. Personnel Matters . . . . . . . . . . . . . . . . 35
6.1.1. Employees and Employee Benefit Plans . . 35
6.1.2. Assumption of Obligations . . . . . . . . 36
6.1.4. Employment and Plan Amendments or
Terminations . . . . . . . . . . . . . . 37
6.1.5. Transitional Matters . . . . . . . . . . 38
6.1.6. Employee Information . . . . . . . . . . 38
6.2. General Post-Closing Matters . . . . . . . . . . . 38
6.2.1. Post-Closing Notifications . . . . . . . 38
6.2.2. Company Name . . . . . . . . . . . . . . 38
6.2.3. Access . . . . . . . . . . . . . . . . . 38
6.2.4. Certain Tax Matters . . . . . . . . . . . 40
6.2.5. Insurance . . . . . . . . . . . . . . . . 45
6.2.6. Receivables . . . . . . . . . . . . . . . 46
6.2.7. Master Contracts, Etc. . . . . . . . . . 46
VII. MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . 47
7.1. Notices . . . . . . . . . . . . . . . . . . . . . 47
7.2. Expenses . . . . . . . . . . . . . . . . . . . . . 48
7.3. Successors and Assigns . . . . . . . . . . . . . . 49
ii
7.4. Waiver . . . . . . . . . . . . . . . . . . . . . . 49
7.5. Entire Agreement . . . . . . . . . . . . . . . . . 49
7.6. Amendments, Supplements, Etc . . . . . . . . . . . 50
7.7. Rights of the Parties . . . . . . . . . . . . . . 50
7.8. Further Assurances . . . . . . . . . . . . . . . . 50
7.9. Applicable Law; Jurisdiction . . . . . . . . . . . 50
7.10. Titles and Headings . . . . . . . . . . . . . . . 50
7.11. Certain Interpretive Matters and Definitions . . . 50
iii
Table of Defined Terms
(Not a Part of the Agreement)
Section
Accountants . . . . . . . . . . . . . . . . . . . . . . . 1.3(c)
Actual Purchase Price Adjustment Amount . . . . . . . . . 1.3(a)
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . 7.11(a)
Agreement . . . . . . . . . . . . . . . . . . . . . Introduction
Assets . . . . . . . . . . . . . . . . . . . . . . . . . 3.5(b)
Balance Sheet Date . . . . . . . . . . . . . . . . . . . . 2.1.6
BASF . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3(e)
BASF Claims . . . . . . . . . . . . . . . . . . . . . . . 5.3(e)
Business . . . . . . . . . . . . . . . . . . . . . . . Recitals
C&A . . . . . . . . . . . . . . . . . . . . . . . . Introduction
C&A Corp . . . . . . . . . . . . . . . . . . . . . . . 2.1.16(i)
Closing Price . . . . . . . . . . . . . . . . . . . . . . 1.2(a)
Closing Date Balance Sheet . . . . . . . . . . . . . . . 1.3(a)
Closing Date . . . . . . . . . . . . . . . . . . . . . . 4.4(a)
Closing . . . . . . . . . . . . . . . . . . . . . . . . . 4.4(a)
Code . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.15(b)
Company . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Confidentiality Agreement . . . . . . . . . . . . . . . . . . 7.5
Contracts . . . . . . . . . . . . . . . . . . . . . . . . 2.1.14
Direct Claim . . . . . . . . . . . . . . . . . . . . . . 5.4(c)
Employee Plan . . . . . . . . . . . . . . . . . . . . . 2.1.15(a)
Employee . . . . . . . . . . . . . . . . . . . . . . . 2.1.15(a)
Environment . . . . . . . . . . . . . . . . . . . . . . . 2.1.17
Environmental Condition . . . . . . . . . . . . . . . . . 2.1.17
Environmental Law . . . . . . . . . . . . . . . . . . . . 2.1.17
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.15(a)
Estimated Purchase Price Adjustment Amount . . . . . . . 1.2(b)
Estimated Purchase Price . . . . . . . . . . . . . . . . 1.2(b)
Financial Statements . . . . . . . . . . . . . . . . . . . 2.1.6
Floorcoverings UK . . . . . . . . . . . . . . . . . . . Recitals
Floorcoverings US . . . . . . . . . . . . . . . . . . . Recitals
Form 8023 . . . . . . . . . . . . . . . . . . . . . . . 6.2.4(i)
Former Employee . . . . . . . . . . . . . . . . . . . . 2.1.15(a)
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.6
Governmental Entity . . . . . . . . . . . . . . . . . . . . 2.1.5
Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . 2.1.6
Historical Financial Statements . . . . . . . . . . . . . . 2.1.6
HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.5
Indebtedness . . . . . . . . . . . . . . . . . . . . . . 1.2(a)
Indemnifiable Losses . . . . . . . . . . . . . . . . . . 5.2(a)
Indemnifying Party . . . . . . . . . . . . . . . . . . . 5.2(a)
Indemnitee . . . . . . . . . . . . . . . . . . . . . . . 5.2(a)
Indemnity Payment . . . . . . . . . . . . . . . . . . . . 5.2(a)
Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 6.2.5
iv
Insurance Policies . . . . . . . . . . . . . . . . . . . 6.1.11
Intellectual Property . . . . . . . . . . . . . . . . . 2.1.12
Knowledge of Seller . . . . . . . . . . . . . . . . . . . . 7.11
Last Offer . . . . . . . . . . . . . . . . . . . . . . . 1.3(c)
Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.5
Leased Real Property . . . . . . . . . . . . . . . . . . 2.1.10
Legal Proceedings . . . . . . . . . . . . . . . . . . . . 2.1.13
Liens . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.2(a)
Master Contracts . . . . . . . . . . . . . . . . . . . . . 6.2.7
Material Adverse Effect . . . . . . . . . . . . . . . . 2.1.1(b)
Maximum APD Liability Amount . . . . . . . . . . . . . . . 6.2.8
MSA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2.4
NCA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2.4
Net Working Capital Amount . . . . . . . . . . . . . . . 1.2(a)
Non-Prevailing Party . . . . . . . . . . . . . . . . . . 1.3(c)
NWC Over/Under Amount . . . . . . . . . . . . . . . . . . 1.2(a)
Owned Real Property . . . . . . . . . . . . . . . . . . . 2.1.10
Orders . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.13
Parent . . . . . . . . . . . . . . . . . . . . . . Introduction
Permit . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.5
Permitted Liens . . . . . . . . . . . . . . . . . . . . . . 2.1.9
Post-Closing Affiliates . . . . . . . . . . . . . . . . . . . 1.4
Post-Closing Covenants . . . . . . . . . . . . . . . . . 5.1(b)
Pre-Closing Tax Period . . . . . . . . . . . . . . . . 6.2.4(b)
Prevailing Party . . . . . . . . . . . . . . . . . . . . 1.3(c)
Products . . . . . . . . . . . . . . . . . . . . . . . Recitals
Purchase Price . . . . . . . . . . . . . . . . . . . . . 1.2(a)
Purchaser . . . . . . . . . . . . . . . . . . . . . Introduction
Purchaser Companies . . . . . . . . . . . . . . . . . . . 5.2(e)
Push-Down Liabilities . . . . . . . . . . . . . . . . . . 1.2(a)
Records . . . . . . . . . . . . . . . . . . . . . . . . 6.2.3(a)
Retirement Plans . . . . . . . . . . . . . . . . . . . . . 6.1.3
Section 338(h)(10) Election . . . . . . . . . . . . . . 6.2.4(h)
Seller . . . . . . . . . . . . . . . . . . . . . . Introduction
Seller Trade Name . . . . . . . . . . . . . . . . . . . . 6.2.2
Shares . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Surety Obligations . . . . . . . . . . . . . . . . . . 6.2.7(a)
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.16(j)
Tax Returns . . . . . . . . . . . . . . . . . . . . . . . 2.1.16
Tax Ruling . . . . . . . . . . . . . . . . . . . . . . 2.1.16(d)
Third Party Claim . . . . . . . . . . . . . . . . . . . . 5.2(a)
TNA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2.5
Transaction Documents . . . . . . . . . . . . . . . . . . . 2.1.4
Transfer . . . . . . . . . . . . . . . . . . . . . . . Recitals
UST's . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.17
Workpapers . . . . . . . . . . . . . . . . . . . . . . . 1.3(b)
v
ACQUISITION AGREEMENT
This Acquisition Agreement (this "Agreement") is made and entered
into as of the 9th day of December, 1996, among Xxxxxxx & Xxxxxx
Products Co., a Delaware corporation ("C&A"), Xxxxxxx & Xxxxxx Floor
Coverings Group, Inc., a Delaware corporation ("Seller"), Xxxxxxx &
Xxxxxx Floor Coverings, Inc., a Delaware corporation ("Floorcoverings
US"), CAF Holdings, Inc., a Virginia corporation ("Parent"), and CAF
Acquisition Corporation, a Virginia corporation ("Purchaser").
RECITALS:
A. Floorcoverings US and its subsidiary Xxxxxxx & Xxxxxx
United Kingdom Limited, a company incorporated in England
("Floorcoverings UK") (together with Floorcoverings US, the
"Company"), are presently engaged in the business (the "Business") of
designing, manufacturing and marketing commercial carpets and related
products ("Products") and performing certain related services;
B. Seller is the record and beneficial owner of all
of the issued and outstanding shares of Common Stock, par value
$0.01 per share, of Floorcoverings US (the "Shares");
C. Seller desires to sell, assign and deliver
("Transfer") to Purchaser, and Purchaser desires to purchase and
accept from Seller, the Shares on the terms and subject to the
conditions set forth in this Agreement; and
D. C&A, as the sole shareholder of Seller, and Parent, as
the sole shareholder of Purchaser, each desire that such transaction
be consummated on such terms and subject to such conditions.
NOW, THEREFORE, the parties hereto agree as follows:
I. PURCHASE AND SALE OF SHARES
1.1. Purchase and Sale of Shares. On the terms and subject to the
conditions hereof, at the Closing, Seller will Transfer to Purchaser,
and Purchaser will purchase and accept from Seller, the Shares, free
and clear of all Liens, for the Purchase Price.
1.2. Unadjusted Purchase Price. (a) The purchase price for
the purchase and sale of the Shares will be U.S. $197,000,000
(the "Closing Price") (including $27,000,000 paid in
consideration of the execution and delivery of the TNA), less the
amount of any Indebtedness outstanding as of the Closing
(calculated after giving effect to any payments or prepayments of
any such Indebtedness at or immediately prior to or after the
Closing (provided, however, that nothing in this Section 1.2 will be
deemed to constitute an authorization for the incurrence or
maintenance of any such Indebtedness by the Company)), and increased
or decreased, as the case may be, by the amount by which the Net
Working Capital Amount (determined as herein provided) as of the
opening of business on Closing Date exceeds or is less than, as the
case may be, $28,033,000 as such number may be adjusted, however, to
exclude the average of month end balances of all assets and
liabilities in respect of Retained Claims from November 1995 to
October 1996) (such amount, the "NWC Over/Under Amount") (the Closing
Price, as so adjusted, being hereafter referred to as the "Purchase
Price"). For purposes of this Agreement, (x) "Indebtedness" means the
principal amount of indebtedness for borrowed money and capitalized
lease obligations that in accordance with GAAP are required to be
reflected as indebtedness on a consolidated balance sheet of the
Company, (y) the term "Net Working Capital Amount" means an amount,
calculated in accordance with the accounting principles set forth in
Schedule 1.3(a), equal to (1) the sum of cash and cash equivalents,
accounts receivable, other receivables, inventory and prepaid and
other current assets, less (2) the amount of all accounts payable,
accrued expenses and other current liabilities, all as determined in
accordance with the principles, policies and procedures used in
preparing the Balance Sheet and Schedule 1.3(a), but in all events
excluding all liabilities relating to Taxes to be paid by C&A or
Seller, or for which C&A or Seller is responsible, pursuant to this
Agreement, Push Down Liabilities and all assets and liabilities in
respect of Retained Claims and (z) the term "Push Down" Liabilities"
means the categories of liabilities listed as such on Schedule 1.2(a).
(b) Not less than two business days prior to the Closing Date,
Seller and Purchaser will jointly prepare a consolidated balance sheet
which will set forth their estimates of the Indebtedness and the NWC
Over/Under Amount (collectively, the "Estimated Purchase Price
Adjustment Amounts"), determined in accordance with Section 1.2(a) as
if they were the Actual Purchase Price Adjustment Amounts, but based
upon their review of monthly financial information then available to
Seller and Purchaser and their respective inquiries of personnel
responsible for the preparation of financial information relating to
the Company in the ordinary course thereof. If the parties are unable
so to agree on the Estimated Purchase Price Adjustment Amounts, then
the amounts thereof as determined by Seller in good faith will be the
Estimated Purchase Price Adjustment Amounts for all purposes of this
Agreement, provided, however, that nothing herein will limit the
relative rights and obligations of the parties under Section 1.3. The
Closing Price will be reduced or increased dollar-for-dollar, as the
case may be (as so adjusted, the "Estimated Purchase Price"), to
reflect the Estimated Purchase Price Adjustment Amounts as calculated
on the basis set forth in the second sentence of Section 1.3(a).
2
(c) On the Closing Date, Purchaser will pay by wire transfer of
immediately available funds to such account as Seller has theretofore
designated an amount equal to the Estimated Purchase Price.
1.3. Purchase Price Adjustment. (a) In order to determine the
Purchase Price, the Estimated Purchase Price will be (i) increased by
the amount, if any, by which the NWC Over/Under Amount as finally
determined in accordance with this Section 1.3 exceeds the
corresponding amount thereof used in determining the Estimated
Purchase Price Adjustment Amounts, (ii) increased by the amount, if
any, by which the Indebtedness used in determining the Estimated
Purchase Price Adjustment Amounts exceeds the amount of Indebtedness
as finally determined in accordance with this Section 1.3, (iii)
decreased by the amount, if any, by which the NWC Over/Under Amount as
finally determined in accordance with this Section 1.3 is less than
the corresponding amount thereof used in so determining the Estimated
Purchase Price Adjustment Amounts, and (iv) decreased by the amount,
if any, by which the amount of Indebtedness as finally determined in
accordance with this Section 1.3 exceeds the corresponding amount
thereof used in determining the Estimated Purchase Price Adjustment
Amounts. For purposes of this Agreement, (x) the adjustment referred
to in the immediately preceding sentence will be finally calculated on
a net basis and (y) all determinations of the actual amounts thereof
(the "Actual Purchase Price Adjustment Amounts") will be determined by
the amounts thereof required to be shown on a consolidated balance
sheet of the Company prepared in accordance with this Section 1.3 as
of the opening of business on the Closing Date (the "Closing Date
Balance Sheet") on a basis consistent with, and using the same
accounting principles, policies, practices and procedures used in
preparing, the Balance Sheet and otherwise in accordance with the
principles set forth in Schedule 1.3(a) and Section 1.2(a).
(b) Within 60 calendar days after the Closing Date, Seller will
in good faith prepare and deliver, or cause to be prepared and
delivered, to Purchaser an unaudited Closing Date Balance Sheet
setting forth the Actual Purchase Price Adjustment Amounts. Seller and
its authorized representatives will be entitled to review, during
normal business hours, the books, records and work papers of the
Company to prepare the Closing Date Balance Sheet and to determine the
Actual Purchase Price Adjustment Amounts. Without limiting the
generality or effect of any other provision hereof, Purchaser will (i)
provide Seller and its representatives access, during normal business
hours, to the facilities, personnel and accounting and other records
of the Company to the extent reasonably determined by Seller to be
necessary to permit Seller to prepare or have prepared the Closing
Date Balance Sheet and to compute the Actual Purchase Price Adjustment
Amounts as herein provided; provided, however, that Seller will
conduct any such review in a manner that does not unreasonably
interfere with the conduct of the Business by the Company after the
Closing, and (ii) take such actions as may be reasonably requested by
Seller
3
to close, or to assist Seller in closing, as of the opening of
business on the Closing Date, the books and accounting records of the
Company and otherwise reasonably to cooperate with Seller and its
representatives in the preparation of the Closing Date Balance Sheet.
Concurrently with the delivery of the Closing Date Balance Sheet,
Seller will use its reasonable efforts to cause Xxxxxx Xxxxxxxx L.L.P.
to provide Purchaser access to any of such firm's workpapers, trial
balances and similar materials prepared in connection with such firm's
audits or reviews of any of the Financial Statements (the
"Workpapers").
(c) If, within 30 calendar days after the date of Seller's
delivery of its computation of the Actual Purchase Price Adjustment
Amounts, Purchaser determines in good faith that such computations are
inaccurate, Purchaser will give written notice to Seller within such
30 calendar day period (i) setting forth Purchaser's computation of
Actual Purchase Price Adjustment Amounts and (ii) specifying in
reasonable detail Purchaser's basis for its disagreement with Seller's
computations. The failure by Purchaser so to express its disagreement
or provide such specification within such 30 calendar day period will
constitute Purchaser's acceptance of Seller's computation of the
Actual Purchase Price Adjustment Amounts. If Purchaser and Seller are
unable to resolve any disagreement between them within ten calendar
days after the giving of notice of such disagreement, the items in
dispute will be referred for determination to the Charlotte, North
Carolina office of KPMG Peat Marwick LLP (the "Accountants") as
promptly as practicable. The Accountants will make a determination as
to each of the items in dispute, which determination will be (A) in
writing, (B) furnished to each of the parties hereto as promptly as
practicable after the items in dispute have been referred to the
Accountants, (C) made in accordance with this Agreement, and (D)
conclusive and binding upon each of the parties hereto. In connection
with their determination of the disputed items, the Accountants will
be entitled to rely on the Workpapers and the Company's or C&A's, as
the case may be, books and records, and the fees and expenses of the
Accountants will be shared equally by Purchaser and Seller (except as
provided below). Purchaser and Seller will use reasonable efforts to
cause the Accountants to render their decision as soon as practicable,
including without limitation by promptly complying with all reasonable
requests by the Accountants for information, books, records and
similar items. If the determination of the Accountants represents an
outcome more favorable to either Purchaser or Seller than the midpoint
of such parties' last written settlement offers related to all items
in dispute, in the aggregate, submitted to the other party at least
two calendar days before the referral of the matter to the Accountants
(each a "Last Offer"), then the party obtaining such favorable result
will be deemed the "Prevailing Party" and the other party will be
deemed the "Non-Prevailing Party". For purposes hereof, all of the
fees and expenses of the Accountants, will be borne by the
Non-Prevailing Party. No party will disclose to the Accountants,
4
and the Accountants will not consider for any purpose, any
settlement offer (other than the Last Offer) made by any party.
(d) To the extent that the Actual Purchase Price Adjustment
Amounts, calculated on a net basis, determined as provided in this
Section 1.3 is more or less than the Estimated Net Purchase Price
Adjustment Amounts, Seller or Purchaser, as applicable, will, within
ten calendar days after the final determination of the Actual Purchase
Price Adjustment Amounts, calculated on a net basis, pursuant to this
Section 1.3, make payment by wire transfer of immediately available
funds of the amount of such difference, together with interest thereon
from the Closing Date to the date of payment (at a rate equal to Chase
Manhattan Bank's prime rate, as publicly announced and in effect from
time to time during such period, plus 2.0%, calculated on the basis of
the actual number of days elapsed over 365), to such account as has
been designated by Purchaser or Seller, as applicable.
1.4. Intercompany Obligations. Notwithstanding any other
provision hereof, any amount paid or accrued by Seller or any of its
Affiliates other than the Company (collectively, "Post- Closing
Affiliates") in respect of liabilities or obligations of the Company
of a type that would be shown on a consolidated balance sheet of the
Company as "Accounts Receivable-Intercompany" or "Accounts
Payable-Intercompany" will be settled at or prior to the Closing and
will not be reflected in the Closing Date Balance Sheet. Effective
immediately after the Closing, all intercompany liabilities and
obligations owing from Seller or any Post-Closing Affiliate to the
Company or owing from the Company to Seller or any Post-Closing
Affiliate that is not settled as contemplated by the immediately
preceding sentence will be netted against each other and the net
balance thereof will be discharged and deemed forgiven without further
action or payment and all such amounts will be excluded from the
determination of the Net Working Capital Amount or Indebtedness under
Sections 1.2 and 1.3. As a result, immediately following the Closing,
there will be no further liability or obligation in respect of any
such matters between Seller or any Post-Closing Affiliate, on the one
hand, and the Company on the other hand, except as expressly provided
herein. Any holder of a note or other evidence of indebtedness deemed
settled pursuant to this Section 1.4 will surrender such note or other
evidence of indebtedness to the obligor thereon.
II. REPRESENTATIONS AND WARRANTIES
2.1. Representations and Warranties of Seller and C&A.
Subject to Section 2.3, Seller and C&A, jointly and severally,
represent and warrant to Purchaser as follows:
2.1.1. Corporate Matters. (a) Each of C&A and Seller is a
corporation duly organized, validly existing and in good standing
under the Law of the State of Delaware and Seller
5
has the requisite corporate power to own and hold the Shares.
Each of Floorcoverings US and Floorcoverings UK is a corporation duly
organized, validly existing and in good standing under the Laws of its
jurisdiction of incorporation.
(b) Each of Floorcoverings US and Floorcoverings UK has the
requisite corporate power and authority to own, lease or otherwise
hold the assets owned, leased or otherwise held by it and to carry on
its business as presently conducted, and is duly qualified to conduct
business as a foreign corporation in each jurisdiction listed on
Schedule 2.1.1. The jurisdictions listed in Schedule 2.1.1 constitute
all jurisdictions in which Floorcoverings US's or Floorcoverings UK's
ownership, leasing or holding of property or the nature or conduct of
the Business makes qualification to conduct business as a foreign
corporation necessary, except for such jurisdictions in which its
failure to be so qualified, individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect. For
purposes of this Agreement, the term "Material Adverse Effect" means
an event, circumstance or occurrence that has a material adverse
effect on the Business or the consolidated financial condition or
results of operations of the Company.
2.1.2. The Shares. (a) Except as set forth on
Schedule 2.1.5, Seller owns free and clear of any mortgages,
liens, security interests or other encumbrances (collectively,
"Liens") the number of Shares listed in Schedule 2.1.2, which
Shares represent all of the issued and outstanding shares of
capital stock of the Company.
(b) The Shares are duly authorized, validly issued and
outstanding, fully paid and nonassessable. The Shares have not been
issued in violation of, and are not subject to, any preemptive rights,
and there are no outstanding convertible or exchangeable securities,
calls, options or similar Contracts relating to the Shares or that may
require the Company to issue to any person or entity any shares of any
of its capital stock. Except as listed or described on Schedule 2.1.5,
there are no voting trust or other Contracts restricting the voting,
dividend rights or disposition of the Shares.
(c) Except as set forth in Schedule 2.1.2(c), Seller owns the
Shares beneficially and of record free and clear of all Liens and at
the Closing will Transfer its entire right, title and interest in and
to the Shares to Purchaser.
(d) The Company does not own, beneficially or of record, any
stock or other ownership interests in, or control, any other entity,
other than Floorcoverings UK, all of the issued and outstanding share
capital of which is owned by Floorcoverings US free and clear of all
Liens (except as set forth on Schedule 2.1.2(d)); and, except as set
forth on Schedule 2.1.2(d), there are no outstanding convertible or
exchangeable securities or agreements giving any person or entity any
right to acquire
6
shares of capital stock of Floorcoverings UK and no voting trusts or
other Contracts restricting the voting, dividend rights or disposition
of shares of Floorcoverings UK.
2.1.3. Officers and Directors. Schedule 2.1.3 lists
all officers and directors of Floorcoverings US and
Floorcoverings UK as of the date hereof. Seller will promptly
notify Purchaser of any change in the information set forth in
Schedule 2.1.3 prior to the Closing.
2.1.4. Authorization and Effect of Agreement. Each of C&A
and Seller has the requisite corporate power to execute and deliver
this Agreement and the other agreements or instruments referred to
herein (collectively, the "Transaction Documents") and to perform the
transactions contemplated hereby to be performed by it. All necessary
corporate action required to be taken under the Delaware General
Corporation Law for the due authorization of the execution and
delivery by each of C&A and Seller of the Transaction Documents to be
executed by either of them and the performance by each of C&A and
Seller of the transactions contemplated thereby to be performed by
either of them has been duly taken by C&A or Seller, as the case may
be. The Transaction Documents have been, or will be, as the case may
be, duly executed and delivered by Seller or C&A, as the case may be,
and, assuming the due execution and delivery of the Transaction
Documents by Parent and Purchaser, constitute, or will constitute, as
the case may be, valid and binding obligations of each of C&A and
Seller, as applicable, enforceable in accordance with their terms.
2.1.5. No Restrictions. The execution and delivery of the
Transaction Documents by C&A and Seller to which they are parties does
not, and the performance by C&A and Seller of the transactions
contemplated thereby to be performed by them will not conflict with,
or result in any violation of, or constitute a default (with or
without notice or lapse of time or both) under, or give rise to a
right of termination, cancellation or acceleration of any obligation
or the loss of a benefit under, any provision of the Certificate of
Incorporation or By-laws of Seller or C&A or the Company, or any
Contract listed or described or required to be listed or described on
Schedule 2.1.14, or any permit or approval ("Permit") issued under any
domestic, foreign or other statute, law, ordinance, rule, regulation,
judgment, order, injunction, decree or ruling or common law obligation
("Law") of any domestic, foreign or other court, government,
governmental agency, authority, entity or instrumentality
("Governmental Entity"), other than any such conflicts, violations or
defaults as are listed or described on Schedule 2.1.5 or which,
individually or in the aggregate, could not
reasonably be expected to result in a material undisclosed liability
of the Company. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is
required to be obtained or made by or with respect to Seller or the
Company in connection with the
7
execution and delivery of the Transaction Documents by C&A and Seller
or the performance by C&A and Seller of the transactions contemplated
thereby to be performed by them, except (i) for the filing of a
premerger notification report by an Affiliate of Seller under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), if applicable in the circumstances, (ii) for such of the
foregoing as are listed or described on Schedule 2.1.5, and (iii) for
such consents, approvals, orders, authorizations of, or registrations,
declarations or filings with, any Governmental Entity, which,
individually or in the aggregate, if not obtained or made, could not
reasonably be expected to result in a material undisclosed liability
of the Company.
2.1.6. Financial Statements. (a) Attached as Schedule
2.1.6(a) are the audited combined balance sheets of the Company as of
January 28, 1995 and January 27, 1996, the related audited combined
statements of operations and cash flows for the fiscal years then
ended, accompanied by the accountant's reports thereon, the unaudited
combined balance sheet of the Company as of October 26, 1996 (the
"Balance Sheet") and the unaudited combined statements of operations
for the nine month periods ended October 28, 1995 and October 26,
1996, respectively (collectively, with the related notes, the
"Financial Statements"). The Financial Statements present fairly, in
all material respects, the consolidated financial position of the
Company as of the dates thereof and the results of its operations and
cash flows for the periods specified in conformity with United States
generally accepted accounting principles, consistently applied
("GAAP"), except for the Push-Down Liabilities, except as set forth in
Schedule 1.3(a) and except, in the case of the unaudited statements,
for normal year-end adjustments. (For purposes of this Agreement,
"Balance Sheet Date" means October 26, 1996.)
(b) Attached as Schedule 2.1.6(b) are the audited
consolidated balance sheets of the Company as of January 28, 1995 and
January 27, 1996, the related audited consolidated statements of
operations and cash flows for the fiscal years then ended, accompanied
by the accountant's reports thereon, the unaudited consolidated
balance sheet of the Company as of October 26, 1996 and the related
unaudited consolidated statements of operations and cash flows for the
nine month period ended October 28, 1995 and October 26, 1996
(collectively, with the related notes, the "144A Financial
Statements"). The 144A Financial Statements present fairly, in all
material respects, the consolidated financial position of the Company
as of the date thereof and the results of its operations and cash
flows for the periods specified in conformity with GAAP, except, in
the case of the unaudited statements, for normal year-end adjustments.
2.1.7. Conduct of the Business Since the Balance Sheet Date.
Except as listed or described on Schedule 2.1.7, since the Balance
Sheet Date, (a) the Company has conducted the
8
Business only in the ordinary course, consistent with past
practice, (b) the Company has not taken any action which would have
constituted a violation of Section 3.5 if Section 3.5 had applied
since the Balance Sheet Date, and (c) there has not been any Material
Adverse Effect, including any damage, destruction, loss or abandonment
(whether or not covered by insurance) which, individually or in the
aggregate, has or, to the Knowledge of Seller, could reasonably be
expected to have, a Material Adverse Effect, other than, as applied to
the accuracy of this representation in respect of the period between
the date hereof and the Closing Date, changes or effects after the
date hereof that result from general economic conditions or
competitive circumstances in the markets in which the Business is
conducted.
2.1.8. Compliance with Laws. Except as listed or described
on Schedule 2.1.8, the Company is not in violation of any Law
applicable to the Company or the conduct of the Business, or to the
Owned Real Property, and has not committed any such violation since
January 1, 1995, other than such violations which, individually or in
the aggregate, could not reasonably be expected to result in a
material undisclosed liability of the Company or give rise to criminal
liability. Since January 1, 1995, neither Seller nor the Company has
received notice of any alleged violation of Law which could reasonably
be expected to either result in a material undisclosed liability of
the Company or give rise to criminal liability. The Company has all
Permits (including without limitation Permits under Environmental
Laws) necessary to conduct the Business substantially as presently
conducted and all such Permits are in full force and effect, except
where the failure to have such Permits or the failure of such Permits
to be in full force and effect could not reasonably be expected to
have a Material Adverse Effect.
2.1.9. Tangible Personal Property; Title to Assets. Except
(a) with respect to the Owned Real Property and the Leased Real
Property which are the subject of Section 2.1.10 and (b) as listed or
described on Schedule 2.1.9, the tangible assets owned by the Company
as of the date hereof or hereafter purchased or acquired by the
Company are owned by the Company free and clear of all Liens except
for (i) Liens that are listed or described on Schedule 2.1.9, (ii)
mechanics', carriers', workers', repairmen's or other similar Liens
arising or incurred in the ordinary course of business of the Business
relating to liabilities of the Company that are not overdue, (iii)
Liens for taxes, assessments and other similar governmental charges
which are not due and payable or which may thereafter be paid without
penalty, and (iv) Liens that arise under zoning, land use and other
similar Laws and other imperfections of title or encumbrances, if any,
which could not be reasonably expected, individually or in the
aggregate, materially to affect the marketability of the property
subject thereto or to impair the continued use of the property subject
thereto in the Business as presently conducted. (The items referred to
in clauses (i) through (iv) of the immediately preceding sentence are
hereafter referred to as "Permitted
9
Liens".) Since January 1, 1995, the tangible personal property has
been maintained in all material respects in good repair in accordance
with C&A's general maintenance policies.
2.1.10. Real Property. Schedule 2.1.10 lists all real
property owned in fee by the Company (the "Owned Real Property") or
leased by the Company (the "Leased Real Property"). The Company has
good and marketable fee simple title to the Owned Real Property and
valid and subsisting leasehold interests in the Leased Real Property
(subject to the terms of the applicable leases, subleases and related
instruments governing the Company's interests therein, as listed on
Schedule 2.1.10), free and clear of all Liens other than (a) Liens
listed or described on Schedule 2.1.10, (b) Permitted Liens, and (c)
easements, covenants, rights-of-way and other encumbrances or
restrictions, whether recorded or referred to in an applicable lease
which could not reasonably be expected to materially impair the
marketability or continued occupancy or use of the property subject
thereto in the Business as presently conducted. The leases and
subleases related to the Leased Real Property are valid and subsisting
leases or subleases which are in full force and effect.
2.1.11. Insurance. Schedule 2.1.11 lists (i) all material
policies of fire, liability and other forms of insurance covering
occurrences as of, or claims made on, the date hereof and maintained
by the Company, or by Seller or any Post-Closing Affiliate to the
extent applicable to the Company or the Business ("Insurance
Policies") and (ii) to the knowledge of Seller, all claims made by the
Company or the Seller or any Post-Closing Affiliate with respect to
the Company under any such Insurance Policy from February 1, 1991 to
October 31, 1996, and the disposition or status thereof. All premiums
due under such policies have been paid, and none of C&A, Seller or the
Company is in default in any material respect under any provision of
any such policy nor has it failed to give notice or present any
material claim thereunder in a timely manner so as to bar recovery of
any valid claim. Neither Seller nor any of its Affiliates has received
any written notice of cancellation or non-renewal of any such
insurance policy or that any such insurance premiums (if such policies
are continued by Seller and its Affiliates) will be increased
materially.
2.1.12. Intellectual Property. Schedule 2.1.12 lists
or describes all patents and trademarks and all material trade
names, service marks and registered copyrights, and registrations
and applications therefor, used or held for use in the conduct of
or otherwise material to the Business as of the date hereof (the
"Intellectual Property"). Except as set forth on Schedule 2.1.12, the
Company owns or has the right to use (as shown on Schedule 2.1.12) all
of the Intellectual Property and neither Seller, any Post-Closing
Affiliate nor the Company has received any written notice (that has
not been subsequently satisfied or withdrawn) of any material conflict
with, or assertion that the Company is or may be infringing, the
asserted rights of others in
10
connection with the use by the Company of any of the Intellectual
Property in the conduct of the Business.
2.1.13. Litigation; Decrees. Except (a) as listed or
described on Schedule 2.1.13, there are no lawsuits or administrative
or other adjudicative proceedings ("Legal Proceedings") pending or, to
the Knowledge of Seller, threatened in writing against the Company or
any Employee Plan, including without limitation in respect of
Intellectual Property, except for Legal Proceedings which, if
determined adversely, could not reasonably be expected to have a
Material Adverse Effect. To the Knowledge of Seller, the Company is
not in default under the terms of any judgment, order or decree of any
Governmental Entity (collectively, "Orders").
2.1.14. Contract Rights. Except as listed or described on
Schedule 2.1.14, as of the date hereof, the Company is not a party to
or bound by any lease, agreement or other contract or legally binding
contractual right or obligation (collectively, "Contracts") that is of
a type described below:
(a) Any employment, severance or consulting Contract with an
Employee or Former Employee that is not terminable at will by the
Company (other than, as to any Employee or Former Employee of
Floorcoverings UK, any Contract for the employment of any such
Employee or Former Employee implied in Law);
(b) Any collective bargaining Contract with any labor
union;
(c) Any Contract for capital expenditures or the acquisition
or construction of fixed assets which requires aggregate future
payments in excess of $500,000;
(d) Any Contract relating to cleanup, abatement or other
actions (other than monitoring or reporting in the ordinary
course of business) in connection with environmental liabilities;
(e) Any Contract granting to any person or entity a
first-refusal, first-offer or other right to purchase or acquire
any of the Shares or any other capital stock or other securities
of Floorcoverings US or Floorcoverings UK;
(f) Any license, royalty Contract or other Contract with
respect to Intellectual Property which pursuant to the terms
thereof requires future payments by the Company (other than
software, on-line or similar service Contracts in the ordinary
course of business of the Business);
(g) Any indenture, mortgage, loan or credit Contract under
which the Company has borrowed any money or issued any note,
bond, indenture or other evidence of indebtedness for
11
or guaranteed indebtedness for money borrowed by others or under
which any Person has issued a letter of credit with respect to
which the Company has any liability;
(h) Any Contract with any manufacturer's representative or
other sales agent having a remaining term in excess of one year
and which is not terminable without penalty on 90 calendar days'
or less notice;
(i) Any Contract under which the Company is (i) a lessee of
real property, (ii) a lessee of, or holds or uses, any machinery,
equipment, vehicle or other tangible personal property owned by a
third person or entity, (iii) a lessor of real property, or (iv)
a lessor of any tangible personal property owned by the Company,
in the case of any of (ii), (iii) and (iv) which requires annual
payments in excess of $100,000;
(j) Any Contract which involves aggregate future payments by
or to the Company in excess of $500,000 other than a purchase or
sales order entered into in the ordinary course of the conduct of
the Business;
(k) Any Contract obligating the Company to make any
"parachute payment" (as that term is used in Section 280G of the
Code) to any Employee or any other payment which is contingent
upon a change in control of Floorcoverings US or Floorcoverings
UK;
(l) Any Contract which prohibits or restricts the
Company from engaging in the manufacture or sale of any
Products; or
(m) Any Surety Obligation within the meaning of Section
6.2.7(a) or (b) and any Master Contract within the meaning of
Section 6.2.7(c).
Except as set forth on Schedule 2.1.14, each Contract listed or
described on Schedule 2.1.14 is a valid and binding obligation of the
Company and to the Knowledge of Seller is a valid and binding
obligations of the other party thereto. Except as set forth on
Schedule 2.1.14, to the Knowledge of Seller, the Company has performed
in all material respects the obligations required to be performed by
it through the date hereof under each of such Contracts and the
Company is not (with or without the lapse of time or the giving of
notice, or both) in material breach or default thereunder.
2.1.15. Employee Plans. (a) For purposes of this Agreement,
the term "Employee Plan" means each employee benefit plan as defined
in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), and each other material plan, program,
agreement or arrangement, whether or not subject to ERISA, that (i)
provides benefits for Employees or
12
Former Employees and (ii) is maintained by Seller, any Post- Closing
Affiliate or the Company or to which Seller, any Post- Closing
Affiliate or the Company contributes or is obligated to contribute, or
under which Seller, any Post-Closing Affiliate or the Company is
liable in respect of Employees or Former Employees. As used in this
Agreement, (A) the term "Employee" means each person (if any) listed
or described as such on Schedule 2.1.15 and each person who is
presently employed by the Company primarily in the conduct of the
Business and (B) the term "Former Employee" means any person formerly
so employed by the Company. The terms "Employee" and "Former Employee"
will include, where an Employee Plan provides benefits for
beneficiaries or dependents, the beneficiaries and dependents of an
Employee or Former Employee. Schedule 2.1.15 lists or describes all
Employee Plans other than Employee Plans listed or described on
Schedule 2.1.14 or mandated or implied by Law. None of the Employee
Plans is a multiemployer plan within the meaning of Section 3(37) of
ERISA.
(b) With respect to each Employee Plan, Seller has delivered
to Purchaser, to the extent applicable, a true, correct and complete
copy of (i) the plan document for each Employee Plan as currently in
effect (or a description of any Employee Plan for which there is no
plan document), including any agreements entered into in connection
with such Employee Plan, (ii) the three most recent annual reports
(Form 5500 Series) filed with the Internal Revenue Service, (iii) the
most recent annual financial report and actuarial report, and (iv) the
most recent summary plan description, together with each summary of
material modifications. Except as set forth on Schedule 2.1.15, each
Employee Plan which is intended to be a "qualified plan" under Section
401(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
is so identified on Schedule 2.1.15, and the trust (if any) forming a
part thereof, has received a favorable determination from the Internal
Revenue Service as to the qualification under the Code of each such
Employee Plan. Seller has delivered to Purchaser a copy of the most
recent determination letter with respect to each such Employee Plan,
and nothing has occurred since the date of such determination letter
that would adversely affect such qualification which is not identified
in Schedule 2.1.15 and cannot be corrected within the remedial
amendment period provided under Section 401(b) of the Code.
(c) Neither Seller, any Post-Closing Affiliate, nor the
Company has engaged in a transaction with respect to any Employee Plan
which could subject any Employee Plan, Purchaser or the Company to a
material civil penalty under ERISA or a material tax under the Code.
Each of the Employee Plans has been operated and administered in all
material respects in accordance with applicable Laws, including
without limitation, to the extent applicable, the Code and ERISA.
Neither Seller, any Post-Closing Affiliate nor the Company has
incurred, and no condition exists that could reasonably be expected to
cause Seller, any Post-
13
Closing Affiliate or the Company to incur any liability under Title IV
of ERISA that could reasonably be expected to result in liability to
Purchaser or the Company. Each Employee Plan that is a group health
plan within the meaning of Section 5000(b)(1) of the Code is in
compliance in all material respects with the provisions of Section
4980B(f) of the Code. There is not any pending or, to the Knowledge of
Seller, threatened material claim by or on behalf of any Employee
Plan, by any Employee or Former Employee covered under any Employee
Plan or otherwise involving any Employee Plan (other than routine
claims for benefits). Except as set forth in Schedule 2.1.15 and
Section 6.1.3, neither the execution and delivery of this Agreement
nor the consummation of the transaction contemplated hereby will
(either alone or in conjunction with any subsequent or related event,
including termination of employment) (i) result in any material
payment (including severance, unemployment compensation, golden
parachute or otherwise) under any Employee Plan, (ii) materially
increase any compensation or benefits otherwise payable under any
Employee Plan, or (iii) accelerate any material liability under any
Employee Plan.
(d) All contributions required to be made to each Employee
Plan under the terms of such Plan, ERISA or the Code for all periods
of time prior to the Closing Date have been or, as applicable, will by
the Closing Date be timely made or paid in full or, to the extent not
required to be made before the Closing Date, will be fully reflected
on the Closing Date Balance Sheet as either a current liability or a
Push Down Liability.
(e) Neither the Seller nor Seller's Affiliates has made any
legally binding commitment to establish any new Employee Plan, to
modify any Employee Plan or to increase benefits or compensation of
Employees or Former Employees (except for normal increases in
compensation consistent with past practices or as disclosed in
Schedule 2.1.15), nor has any intention to do so been communicated by
C&A or Seller to Employees or Former Employees.
(f) Except as set forth on Schedule 2.1.15 or in Section
6.1.2, none of the Seller, any Post-Closing Affiliate or the Company
has any liability for life, health, medical or other welfare benefits
to Former Employees, except for health continuation coverage under
Section 4980B(f) of the Code.
2.1.16. Taxes. (a) The Company has timely filed (or has had
filed on its behalf) or caused to be timely filed with the appropriate
United States, state, local and foreign taxing authorities all
returns, reports or information returns or statements relating to
Taxes (including amendments thereto) (collectively, "Tax Returns")
required to be filed by it with respect to the Company on or prior to
the Closing Date (taking into account all extensions of due dates).
All such Tax Returns were correct and complete in all material
respects.
14
(b) The Company has timely paid all Taxes owed with respect
to the Company. No penalties or other charges are due with respect to
the late filing of any Tax Return of the Company required to be filed
on or before the Closing Date (taking into account all extensions of
due dates). The Company has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing
to any employee, independent contractor, creditor or other third
party. The unpaid Taxes of the Company will not exceed the reserves
for Taxes (other than any reserve for deferred Taxes established to
reflect timing differences between book and Tax income) that are
reflected in the Closing Date Balance Sheet.
(c) Schedule 2.1.16 sets forth the jurisdictions (other than
the United States) in which the Company files Tax Returns, indicates
the Tax Returns in such states that have been audited and indicates
those Tax Returns in such jurisdictions that currently are the subject
of an audit. Except as set forth on Schedule 2.1.16, there are no
waivers or extensions of any applicable statute of limitations, or
agreements to any extension of time for the assessment or collection
of such Taxes with respect to any such Tax Returns, which waivers,
extensions or agreements currently are in effect. Except as set forth
on Schedule 2.1.16, since January 1, 1995, no claim has been made by
an authority in a jurisdiction where the Company does not file Tax
Returns that it is or may be subject to taxation by that jurisdiction
and no such claim exists as of the date hereof.
(d) Except as set forth on Schedule 2.1.16, the Company has
not requested or received a Tax Ruling or entered into a Tax Closing
Agreement with any taxing authority that would have a continuing
effect after the Closing Date. For purposes of the preceding sentence,
the term "Tax Ruling" means a written ruling of a taxing authority
relating to Taxes, and the term "Tax Closing Agreement" means a
written Contract with a taxing authority relating to Taxes. Except as
set forth on Schedule 2.1.16, the Company is not a party to any Tax
allocation or sharing Contract.
(e) Except as set forth on Schedule 2.1.16, no action, suit,
proceeding, investigation, audit, claim or assessment is presently
pending or, to the Knowledge of Seller, has been proposed to the
Company or Seller or C&A with regard to any Taxes that relates to the
Company for which the Company would be liable.
(f) Except as set forth on Schedule 2.1.16, the Company is
not required to make any adjustment pursuant to Section 481 of the
Code by reason of a change in accounting method or otherwise.
(g) Except as set forth on Schedule 2.1.16, the Company has
not filed (nor will it file prior to the Closing Date) a consent
pursuant to Section 341(f) of the Code or agreed
15
to have Section 341(f)(2) of the Code apply to any disposition of a
"subsection (f) asset" (as that term is defined in Section 341(f)(4)
of the Code) owned by the Company.
(h) Purchaser will not be required to deduct and withhold
any amount pursuant to Section 1445 of the Code upon the consummation
of the transactions contemplated by this Agreement.
(i) The Company has filed a consolidated federal income tax
return with Seller and Xxxxxxx & Xxxxxx Corporation, a Delaware
corporation ("C&A Corp."), for each of the Company's taxable years
preceding the Company's taxable year that includes the Closing Date,
and the Company will file a consolidated federal income tax return
with Seller and C&A Corp. for the Company's taxable year that includes
the Closing Date. Seller is a member of a consolidated group that is
eligible to make an election under Section 338(h)(10) of the Code (and
any comparable election under state or local law that would be
applicable to a material portion of the taxable income resulting from
such election).
(j) For purposes of this Agreement, "Taxes" means all
federal, state, local, foreign and other taxes (including without
limitation income, profits, premium, estimated, excise, sales, use,
occupancy, gross receipts, franchise, ad valorem, severance, capital
levy, production, transfer, withholding, social security, employment,
unemployment compensation, payroll-related and property taxes,
alternative minimum, estimated stamp, value added, windfall profits,
import duties and other governmental charges and assessments), whether
or not measured in whole or in part by net income, and including
deficiencies, interest, additions to tax or additional amounts,
interest and penalties with respect thereto. Such term shall also
include any "Taxes" as to which the Company is liable as a successor
or transferee or pursuant to a contractual obligation.
2.1.17. Environmental Matters. Except as listed or described
on Schedule 2.1.17, (i) the Company does not have any liability under
any Environmental Law (including without limitation any obligation to
remediate any Environmental Condition whether caused by the Company or
a third Person) applicable to the Owned Real Property or the Leased
Real Property, (ii) the Company is not in violation of any
Environmental Law, (iii) there exists no Environmental Condition with
respect to the Owned Real Property or the Leased Real Property, (iv)
there have not been any discharges originating from the Owned Real
Property or the Leased Real Property to the environment or any public
treatment facility except in compliance with applicable Environmental
requirements, and (v) there are not located under any of the Owned
Real Property or the Leased Real Property any underground storage
tanks ("UST's"), which liability, violation, Environmental Condition,
discharge or UST's specified in (i), (ii), (iii), (iv) or (v) could
reasonably be expected to have a Material Adverse Effect.
"Environment" means
16
soil, surface waters, groundwaters, land, surface or subsurface
strata, ambient air or any other environmental medium. "Environmental
Condition" means a condition with respect to the Environment which has
resulted, or is reasonably likely to result, in a material loss,
liability, cost or expense to the Company. "Environmental Law" means
any Law for the protection of the Environment, including without
limitation, the Laws listed on Schedule 2.1.17.
2.1.18. No Undisclosed Liabilities. The Company does not
have any liabilities (defined for this purpose as liabilities
involving the payment of money rather than general, contractual or
other obligations), whether known or unknown, absolute, accrued,
contingent or otherwise and whether due or to become due, including
any uninsured liabilities, except (i) as and to the extent set forth
in the Balance Sheet or specifically disclosed in the notes thereto,
(ii) liabilities incurred in the ordinary course of business
consistent with past practice and not prohibited by this Agreement,
which could not reasonably be expected to have a Material Adverse
Effect, (iii) as set forth in Schedule 2.1.18, (iv) current
liabilities reflected in the Closing Date Balance Sheet, (v) Push-Down
Liabilities, and (vi) liabilities relating to Taxes, Retained Claims
and other liabilities for which C&A or Seller is responsible pursuant
to this Agreement. Schedule 1.2(a) sets forth the Assumed Push-Down
Liabilities by category and the amounts thereof as shown on the books
of C&A as of October 26, 1996.
2.1.19. Assets. Except as described on Schedule
2.1.19, the Real Property and the personal property that will be
owned or leased by the Company on the Closing Date constitute all
of the properties and assets used or held for use primarily in
connection with the Business.
2.1.20. Affiliate Interests. Except as disclosed in Schedule
2.1.20, none of C&A, Seller, any Affiliate of C&A or Seller (other
than the Company) or to the Knowledge of C&A any officer or director
of the Company, or any member of their immediate family, (i) has a
controlling interest or other material financial interest (other than
a noncontrolling investment in a public company) in any business
entity which competes with the Business, (ii) has any personal
financial interest, direct or indirect, in any property, real or
personal, tangible or intangible, including Intellectual Property,
owned or used by the Company in the Business, or (iii) provides or
causes to be provided to, or receives from, the Company any assets,
loans, advances, services or facilities, provided, however, that the
representation and warranty set forth in clause (i) above, insofar as
it relates to Affiliates of Seller or C&A, will apply only to
Affiliates controlled by C&A, Seller or C&A Corp. Except for the
Transaction Documents, the only Contracts between the Company and C&A
or any Affiliate of C&A that will remain in effect after the Closing
under which Purchaser, the Company or any of their Affiliates will
have any ongoing obligation or duty,
17
are those items (and only with respect to such obligations or duties)
which are identified in Schedule 2.1.20 as remaining in place and
having obligations or duties.
2.1.21. Brokers. No broker, investment banker, financial
advisor or other person (other than The Blackstone Group and
Wasserstein, Perella & Co., Inc., the fees and expenses of which will
be paid by the Seller) is entitled to any broker's finder's, financial
advisor's or other similar fee or commission in connection with the
transactions contemplated by this Agreement.
2.1.22. Warranty Claims and Liabilities. As of the Closing
Date, the Company will not have any liability for breach of any
express or implied product warranty arising out of the installation of
Products at an individual location, or arising out of a Product
design, manufacturing or process defect or series of related Product
design, manufacturing or process defects, which in either case could
reasonably be expected to have a Material Adverse Effect.
2.1.23. Labor Matters. The Company is not a party to any
union contract in respect of any Employees. Since January 1, 1995, (a)
no organized work stoppage or other organized labor dispute has been
or is pending or, to the Knowledge of Seller, threatened and (b) no
organized effort has been or is pending or, to the Knowledge of
Seller, threatened by any labor union seeking to represent any group
of Employees in the United States.
2.1.24. Supplier Relationships. To the Knowledge of Seller,
the Company has access to raw materials and other supplies sufficient
to continue to conduct the Business on a competitive basis and has not
experienced any material supply shortage since January 1, 1995. To the
knowledge of Seller, the transactions contemplated by this Agreement
could not reasonably be expected to have a Material Adverse Effect on
the Company's relationship with any supplier of such raw materials and
other supplies taken as a whole.
2.2. Representations and Warranties of Purchaser. Subject
to Section 2.3, each of Purchaser and Parent jointly and
severally represents and warrants to Seller as follows:
2.2.1. Corporate Organization. Each of Purchaser and Parent
is a corporation duly organized, validly existing and in good standing
under the Laws of their respective jurisdiction of incorporation and
has the requisite corporate power to own, lease or otherwise hold its
properties and assets and to carry on its business as presently
conducted.
2.2.2. Authorization and Effect of Agreement. Each of Parent
and Purchaser has the requisite corporate power to execute and deliver
this Agreement and to perform the transactions contemplated hereby to
be performed by it. All
18
necessary corporate action required to be taken under the Virginia
Stock Corporation Act for the due authorization of the execution and
delivery by each of Parent and Purchaser of this Agreement and the
performance by each of Parent and Purchaser of the transactions
contemplated hereby to be performed by each of them has been duly
taken by each of Parent and Purchaser. This Agreement has been duly
executed and delivered by each of Parent and Purchaser and, assuming
the due execution and delivery of this Agreement by Seller and C&A
constitutes a valid and binding obligation of each of Parent and
Purchaser, enforceable in accordance with its terms.
2.2.3. No Restrictions. The execution and delivery of this
Agreement by each of Parent and Purchaser does not, and the
performance by Parent and Purchaser of the transactions contemplated
hereby to be performed by each of them will not conflict with, or
result in any material violation of, or constitute a material default
(with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancellation or acceleration of any
obligation or the loss of a material benefit under, any provision of
the charter or bylaws or comparable governing documents of Parent or
Purchaser, or any material Contract or Permit applicable to Purchaser
other than any such conflicts, violations or defaults which,
individually or in the aggregate, could not reasonably be expected to
result in a material undisclosed liability of Parent or Purchaser. No
material consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is
required to be obtained or made by or with respect to Parent or
Purchaser in connection with the execution and delivery of this
Agreement by Parent or Purchaser or the performance by Parent or
Purchaser of the transactions contemplated hereby to be performed by
either of them, except (i) for such of the foregoing as are listed or
described on Schedule 2.2.3 and (ii) for such consents, approvals,
orders, authorizations of, or registrations, declarations or filings
with, any Governmental Entity, which, individually or in the aggregate
if not obtained or made, could not reasonably be expected to result in
a material undisclosed liability of Parent or Purchaser.
2.2.4. Financial Capacity. Parent has obtained commitment
letters (copies of which have been provided to Seller), subject to
certain conditions set forth therein, for an aggregate of $51 million
equity financing, an aggregate of $85 million senior debt financing
and an aggregate of $100 million bridge subordinated debt financing.
Assuming the accuracy of the representations and warranties of Seller
and C&A herein and compliance by Seller and C&A with their covenants
contained herein, Parent believes that the conditions to the
availability of all such financing will be satisfied prior to the
Closing and Parent will use reasonable efforts so to obtain such
financing.
2.3. Certain Limitations on Representations and Warranties. (a)
Each of the parties is a sophisticated legal entity that was
19
advised by experienced counsel and, to the extent it deemed
necessary, other advisors in connection with this Agreement.
Accordingly, each of the parties hereby acknowledges that (i) there
are no representations or warranties by or on behalf of any party
hereto or any of its respective Affiliates or representatives other
than those expressly set forth in this Agreement and (ii) the parties'
respective rights, obligations and remedies with respect to this
Agreement and the events giving rise thereto will be solely and
exclusively as set forth in the Transaction Documents and the
Confidentiality Agreement.
(b) Any representation and warranty made in this Agreement
by Seller will be deemed for all purposes to be qualified by the
disclosures made in any Schedule specifically referred to in such
representation or warranty and by the information disclosed in any
other Schedule if the relevance of such information to such
representation and warranty is reasonably apparent on its face.
References in this Article to matters "primarily" relating to the
Business are to matters which predominantly relate to the Business
rather than predominantly to one of either Seller's or any
Post-Closing Affiliate's other businesses or to the businesses or
operations of Seller or any Post-Closing Affiliate generally.
III. COVENANTS
3.1. Investigation by Purchaser. (a) Prior to the Closing, upon
reasonable notice from Parent (on behalf of itself and Purchaser) to
Seller given in accordance with this Agreement, Seller will, and will
cause the Company to, afford to the officers, attorneys, accountants
or other authorized representatives of Purchaser and Parent reasonable
access during normal business hours to the facilities and the books
and records of the Company so as to afford Purchaser and Parent a
reasonable opportunity to make, at their sole cost and expense, such
review, examination and investigation of the Company as Purchaser and
Parent may reasonably desire to make, including without limitation a
so-called "Phase I" (i.e., documentary review and walk-through site
inspection) preliminary environmental evaluation; provided, however,
that no borings or other so-called "Phase II" environmental
examinations will be performed without Seller's prior written consent,
which consent may be given or withheld in Seller's sole discretion.
Purchaser and Parent will be permitted to make extracts from or to
make copies of such books and records as may be reasonably necessary.
Prior to the Closing, Seller will furnish to Parent or Purchaser, or
cause to be furnished to Parent or Purchaser, such financial and
operating data and other information pertaining to the Company as
Parent or Purchaser may reasonably request; provided, however, that
nothing in this Agreement will obligate Seller to take actions that
would unreasonably disrupt the normal course of business of itself,
any Post-Closing Affiliate or the Company, violate the terms of any
applicable Law or rules of any national stock exchange applicable to
it or its Affiliates or any Contract to which any of them is a
20
party or to which any of them or any of their assets are subject (to
the extent described in reasonable detail in response to any request
for information specified above) or grant access to any of their
proprietary or confidential information not related to the Business.
(b) Subject to Section 3.2, whether or not the Closing occurs,
Parent and Purchaser will, and will cause each of their Affiliates to,
treat in confidence all documents, materials and other information
(including without limitation information relating to supply and sales
agreements and relationships with third persons or entities) disclosed
by any other party that is not its Affiliate, whether before, during
or after the course of the negotiations leading to the execution of
this Agreement or thereafter, including without limitation in its
investigation of the other parties and in the preparation of
agreements, schedules and other documents relating to the consummation
of the transactions contemplated hereby. Prior to the Closing, and in
the event that this Agreement is terminated, neither Purchaser, Parent
nor any of their Affiliates will, and if the Closing occurs C&A will
not and will cause its Affiliates not to, disclose to any third party
any confidential information, except as required by Law or rules of
any national stock exchange or any Governmental Authority applicable
to it or its Affiliates or as Parent or Purchaser determines is
required to be disclosed in connection with the financing described in
Section 2.2.4, subject to Seller's right to review and reasonably
object to such disclosure. If this Agreement is terminated, Purchaser,
Parent and each of their Affiliates will return to Seller all
originals and copies of all non-public documents and materials of the
type provided for in this Section 3.1 which have been furnished or
made available in connection with this Agreement, and Purchaser and
Parent will destroy all notes, analyses, compilations, studies or
other documents which contain or otherwise reflect such information.
3.2. Press Releases. Prior to the Closing, no party will issue or
cause the publication of any press release or other public
announcement with respect to this Agreement or the transactions
contemplated hereby without the prior consent of Parent (in the case
of Seller) or Seller (in the case of Purchaser or Parent), which
consent will not be unreasonably withheld; provided, however, that
nothing herein will prohibit any party from issuing or causing
publication of any such press release or public announcement to the
extent that such party determines such action to be required by Law or
the rules of any national stock exchange applicable to it or its
Affiliates, in which event the party making such determination will,
if practicable in the circumstances, use reasonable efforts to allow
the other parties reasonable time to comment on such release or
announcement in advance of its issuance.
3.3. Regulatory Filings. (a) Within two business days after the
date hereof, Parent will, and Seller will cause the ultimate
21
parent entity of Seller to, make such filings, if any, as may be
required by the HSR Act with respect to the consummation of the
transactions contemplated by this Agreement. Thereafter, Parent will,
and Seller will cause the ultimate parent entity of Seller to, file or
cause to be filed as promptly as practicable with the United States
Federal Trade Commission (the "FTC") and the United States Department
of Justice (the "DOJ") supplemental information, if any, which may be
required or requested by the FTC or the DOJ pursuant to the HSR Act.
To the extent required by Law, Seller will make, or cause any of its
Affiliates to make, such filings and use its reasonable efforts to
obtain the governmental approvals and the other consents (if any)
referred to in Section 2.1.5, and Purchaser and Parent will each make
such filings and use their respective reasonable efforts to obtain the
governmental approvals and the other consents (if any) referred to in
Section 2.2.3. All filings referred to in this Section 3.3(a) will
comply in all material respects with the requirements of the
respective Laws pursuant to which they are made.
(b) Without limiting the generality or effect of Section 3.3(a),
each of the parties will (i) use their respective reasonable efforts
to comply as expeditiously as possible with all lawful requests of
Governmental Entities for additional information and documents
pursuant to the HSR Act, if applicable, (ii) not (A) extend any
waiting period under the HSR Act or (B) enter into any agreement with
any Governmental Entity not to consummate the transactions
contemplated by this Agreement, except with the prior consent of each
of the other parties hereto, and (iii) cooperate with each other and
use reasonable efforts to cause the lifting or removal of any
temporary restraining order, preliminary injunction or other judicial
or administrative order which may be entered into in connection with
the transactions contemplated by this Agreement, including without
limitation the execution, delivery and performance by the appropriate
entity of such divestiture agreements or other actions, as the case
may be, as may be necessary to secure the expiration or termination of
the applicable waiting periods under the HSR Act or the removal,
dissolution, stay or dismissal of any temporary restraining order,
preliminary injunction or other judicial or administrative order which
prevents the consummation of the transactions contemplated hereby or
requires as a condition thereto that all or any part of the Business
be held separate and, prior to or after the Closing, pursue the
underlying litigation or administrative proceeding diligently and in
good faith.
3.4. Injunctions. Without limiting the generality or effect of
any provision of Section 3.3 or Article IV, if any Governmental Entity
having jurisdiction over any party issues or otherwise promulgates any
injunction, decree or similar order prior to the Closing which
prohibits the consummation of the transactions contemplated hereby,
the parties will use their respective reasonable efforts to have such
injunction dissolved or otherwise eliminated as promptly as possible
and, prior to or
22
after the Closing, to pursue the underlying litigation diligently
and in good faith.
3.5. Operation of the Business. Except in connection with or as a
result of any matter listed or described on Schedule 3.5, as expressly
contemplated herein or as otherwise consented to by Parent (on behalf
of itself and Purchaser) in writing, prior to the Closing, Seller will
cause the Company to:
(a) Use reasonable efforts to keep the Business intact
(including without limitation relationships with customers,
employees, suppliers and others) and not take or permit to be
taken or do or suffer to be done anything other than in the
ordinary course of business of the Business as presently
conducted, and use reasonable efforts to maintain the goodwill
associated with the Business; provided, however, that nothing in
this Agreement or otherwise will prohibit or restrict the Company
from (i) paying or prepaying any indebtedness for borrowed money
or any intercompany obligation, (ii) paying any cash dividend or
other distribution of cash or cash equivalent items, or (iii)
repurchasing for cash any capital stock;
(b) Continue existing practices relating to maintenance of
the assets owned, leased or otherwise held by the Company for use
in the Business ("Assets") in good repair, ordinary wear and tear
excepted, and continue to make capital expenditures substantially
in accordance with budgets delivered to Purchaser;
(c) Authorize and approve the capital expenditures to
be made by the Company described on Schedule 3.5(c);
(d) Not purchase, sell, lease or dispose of, or enter into
any Contract for the purchase, sale, lease or disposition of, or
subject to Lien, any of the Assets other than (i) Products or
(ii) in the ordinary course of business of the Business;
(e) Not adopt or make any amendment to any Employee Plan or
increase the general rates of compensation of Employees, except
(i) as required by Law or (ii) pursuant to any Contract listed on
Schedule 2.1.14;
(f) Not enter into, amend, modify or cancel any Contract
listed or required to be listed on Schedule 2.1.14, except in the
ordinary course of business consistent with past practice;
(g) Not incur indebtedness for borrowed money, or assume,
guarantee, endorse or otherwise become responsible for the
obligations of any other person or entity, or make loans or
advances to any person or entity (other than advances to
Employees in the ordinary course of business
23
consistent with past practice reflected on the Company's books
and records);
(h) Not enter into any joint venture, partnership or
similar arrangement;
(i) Not amend its Certificate of Incorporation or By-
Laws;
(j) Not dispose of, permit to lapse or otherwise fail to
preserve any of its Intellectual Property or other similar
rights, dispose of or permit to lapse any material Permit, or
dispose of or disclose to any person or entity other than an
authorized representative of Purchaser, any trade secret (except
for such of the foregoing as may occur by operation of Law or the
terms of any of the foregoing); or
(k) Not enter into a Contract to do any of the foregoing
(other than as may be required by Sections 3.5(a), (b) or (c)).
3.6. Satisfaction of Conditions. Without limiting the generality
or effect of any provision of Article IV, prior to the Closing, each
of the parties hereto will use its respective reasonable efforts with
due diligence and in good faith to satisfy promptly all conditions
required hereby to be satisfied by such party in order to expedite the
consummation of the transactions contemplated hereby.
3.7. Negotiations With Others. From the date hereof until
the termination of this Agreement in accordance with its terms or
the Closing, C&A and its Affiliates will not, and will cause its and
their respective officers, directors, investment bankers, attorneys,
accountants and other agents not to: (i) initiate, solicit (including
by way of furnishing information) or accept, any offer or proposal
which constitutes, an Alternative Proposal or (ii) in the event of an
unsolicited Alternative Proposal, engage in substantive discussions or
negotiations, or enter into any Contract, with, or furnish information
to, any Person relating to any Alternative Proposal. All such
negotiations prior to the date hereof have been terminated. For
purposes of this Agreement, "Alternative Proposal" means any proposal
or offer from any Person relating to any acquisition or purchase of
all or substantially all of the assets or common stock of the Company
or any merger, consolidation, business combination or similar
transaction involving the Company, other than the transactions
contemplated by this Agreement.
3.8. Certain Additional Covenants. (a) Seller will, and will
cause the management of the Company to, upon reasonable request, meet
with Purchaser during normal business hours at C&A's or the Company's
principal executive offices to discuss the general status of the
ongoing operations of the Company, and
24
Seller will notify Purchaser (i) of any emergency or change in
the normal conduct of the Business and (ii) of any event, occurrence,
fact, condition, change or effect that constitutes a breach of any
representation, warranty or covenant of C&A or Seller hereunder of
which, to the Knowledge of Seller, Purchaser or Parent does not also
have Knowledge (other than any of the foregoing occurring after the
date hereof and not constituting a breach of Seller's or C&A's
covenants in this Agreement); provided, however, that for purposes of
the rights and obligations of the parties, any supplemental or amended
disclosure by Seller will not be deemed to have been disclosed unless
so agreed in writing by Purchaser, or to preclude Purchaser from (i)
seeking a remedy in damages for losses incurred as a result of the
omission of such supplemented or amended disclosure, subject to the
limitations set forth in Section 5.2 or (ii) terminating this
Agreement if such supplemented or amended disclosure causes or reveals
the failure of any condition to Purchaser's obligation to close.
(b) Purchaser will notify Seller prior to the Closing if
Purchaser obtains Knowledge of any breach of any representation,
warranty or covenant of Seller or C&A hereunder of which, to the
Knowledge of Purchaser, Seller or C&A does not also have Knowledge.
(c) C&A and Seller will use reasonable efforts to have
Xxxxxx Xxxxxxxx, L.L.P. consent to Purchaser's use of the audited
financial statements included in the Financial Statements as may be
required by applicable Law in the disclosure documents relating to
Purchaser's contemplated financing.
3.9. Efforts to Consummate. Subject to the terms and conditions
herein provided, each of C&A and Seller, on the one hand, and Parent
and Purchaser, on the other hand, will use reasonable efforts to take
or cause to be taken, all actions and to do, or cause to be done, all
things necessary to consummate and make effective the transactions
contemplated by this Agreement and to cooperate with the other in
connection with the foregoing. C&A and Seller will, at their sole
expense, cause to be included in the assets and properties of the
Company prior to the Closing all assets, properties, permits,
authorizations, rights and related obligations which are being used or
held for use primarily or exclusively by the Company (whether or not
such assets, properties, permits, authorizations, rights and related
obligations are presently owned or held by the Company), all on terms
and conditions, and pursuant to documentation, reasonably acceptable
to Purchaser.
3.10. Resignations. Prior to the Closing, upon
Purchaser's specific request, Seller will cause to resign or to
be removed from office such officers and directors of
Floorcoverings US or Floorcoverings UK whose full-time employment
is not in the Business.
25
IV. THE CLOSING
4.1. Conditions Precedent to Obligations of Purchaser, Parent and
Seller. The obligations of each of Purchaser, Parent and Seller under
this Agreement to consummate the transactions contemplated hereby will
be subject to the satisfaction, at or prior to the Closing, of the
conditions that there shall not have been entered a preliminary or
permanent injunction, temporary restraining order or other judicial or
administrative order or decree in any jurisdiction, the effect of
which prohibits the Closing. The foregoing conditions may be waived
(i) insofar as it is a condition to the obligations of Purchaser or
Parent, by Parent (without the joinder of Purchaser) at its option and
(ii) insofar as it is a condition to the obligations of Seller, by
Seller at its option.
4.2. Additional Conditions Precedent to Obligations of Purchaser
and Parent. The obligations of Purchaser and Parent under this
Agreement to consummate the transactions contemplated hereby will be
subject to the satisfaction, at or prior to the Closing, of all of the
following conditions, any one or more of which may be waived at the
option of Parent (without the joinder of Purchaser):
4.2.1. No Material Misrepresentation or Breach. There shall have
been no material breach by Seller in the performance of any of the
covenants herein to be performed by it in whole or in part prior to
the Closing, and the representations and warranties of Seller
contained in this Agreement shall be true and correct in all material
respects as of the Closing Date, except for representations or
warranties made as of a specified date, which shall be true and
correct in all material respects as of the specified date, and C&A
shall have delivered to Purchaser a certificate certifying each of the
foregoing, dated the Closing Date and signed by one of its executive
officers to the foregoing effect (it being understood that where any
such representation or warranty already includes a Material Adverse
Effect or other materiality exception, no further materiality
exception is to be permitted by this Section);
4.2.2. Transfer Documents, Etc. Seller shall have delivered or
caused to be delivered to Purchaser the certificates representing the
Shares, and certificates representing all shares of capital stock of
Floorcoverings UK not owned by Floorcoverings US, which certificates
shall have been duly endorsed for transfer or accompanied by duly
executed stock powers, with (if applicable) any required tax stamps
affixed thereto. In addition, at the Closing, Seller shall have
delivered to Purchaser duly signed resignations, effective immediately
after the Closing, of all officers and directors of Floorcoverings US
and Floorcoverings UK whose full-time employment is not in the
Business, or shall have taken such other action as is necessary
26
to remove such persons as officers or directors of Floorcoverings US
and Floorcoverings UK after the Closing;
4.2.3. No Material Adverse Change. Since January 27, 1996,
nothing shall have occurred (and the Purchaser or Parent shall have
become aware of no facts or conditions not previously known),
including as a result of any Legal Proceedings commenced after the
date hereof (and not disclosed on any Schedule hereto), which the
Purchaser or Parent shall reasonably determine could have a material
adverse effect on the business, property, assets, nature of assets,
liabilities, condition (financial or otherwise), results of operations
or prospects of the Company or the Business, after giving effect to
the transactions contemplated hereby;
4.2.4. No Market Change. (i) Trading in securities generally on
the New York or American Stock Exchange shall not have been suspended;
minimum or maximum prices shall not have been established on any such
exchange; (ii) a banking moratorium shall not have been declared by
New York or United States authorities; and (iii) there shall not have
been (x) an outbreak or escalation of hostilities between the United
States and any foreign power, or (y) an outbreak or escalation of any
other insurrection or armed conflict involving the United States or
any other national or international calamity or emergency, or (z) any
material change in the general financial markets of the United States
which, in each case, in the reasonable judgment of the Parent or
Purchaser, would materially and adversely affect the ability to sell
or syndicate loans of a nature similar to the financing contemplated
by Section 2.2.4; and
4.2.5. Other Documents. C&A shall have duly executed and
delivered to Purchaser a Management Services Agreement in
substantially the form of Schedule 4.2.5(a) (the "MSA"), a Tradename
Agreement in substantially the form of Schedule 4.2.5(b) (the "TNA"),
a Noncompetition Agreement in substantially the form of Schedule
4.2.5(c) (the "NCA") and shall have delivered an opinion of Xxxxx,
Day, Xxxxxx & Xxxxx, counsel to C&A and Seller, substantially to the
effect set forth in Schedule 4.2.5(e).
4.3. Additional Conditions Precedent to Obligations of Seller and
C&A. The obligations of Seller and C&A under this Agreement to
consummate the transactions contemplated hereby will be subject to the
satisfaction, at or prior to the Closing, of all the following
conditions, any one or more of which may be waived at the option of
Seller.
4.3.1. No Material Misrepresentation or Breach. There shall have
been no material breach by either Purchaser or Parent in the
performance of any of the covenants herein to be performed by either
of them in whole or in part prior to the Closing, and the
representations and warranties of Parent and Purchaser contained in
this Agreement shall be true and correct in all material respects as
of the Closing Date, except for representations or warranties made as
of a specified date, which shall be true and correct in all
27
material respects as of the specified date, and each of Purchaser and
Parent shall have delivered to Seller a certificate certifying each of
the foregoing, dated the Closing Date and signed by one of its
executive officers to the foregoing effect (it being understood that
where any such representation or warranty already includes a Material
Adverse Effect or other materiality exception, no further materiality
exception is to be permitted by this Section);
4.3.2. Estimated Purchase Price. Purchaser shall have
delivered to Seller in the manner specified in Section 1.2 an
amount equal to the Estimated Purchase Price; and
4.3.3. Other Documents. Purchaser shall have caused the Company
to have duly executed and delivered to C&A the MSA, the TNA and the
NCA and shall have delivered an opinion of McGuire, Woods, Battle &
Xxxxxx, L.L.P., counsel to Parent and Purchaser, substantially to the
effect set forth in Schedule 4.3.3.
4.4. The Closing. (a) Subject to the fulfillment or waiver of the
conditions precedent specified in Sections 4.1, 4.2 and 4.3, the
consummation of the purchase and sale of the Shares contemplated
hereby (the "Closing") will take place on January 31, 1997 or such
other date as provided herein (the "Closing Date"). The Closing will
take place at 10:00 A.M., Eastern Time, at the offices of Xxxxx, Day,
Xxxxxx & Xxxxx at 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000.
(b) Subject to Section 4.5(b), if the Closing has not occurred by
the date specified in Section 4.4(a), then the Closing Date will be
extended to the earlier of (a) the second business day after the
conditions set forth in Section 4.1 have been satisfied and (b) such
other date, on or prior to the Drop Dead Date, to which Parent (on
behalf of itself and Purchaser) and Seller mutually agree.
4.5. Termination. Notwithstanding anything contained in
this Agreement to the contrary, this Agreement may be terminated
at any time prior to the Closing:
(a) By the mutual written consent of Parent (without
the joinder of Purchaser) and Seller;
(b) By either Parent (without the joinder of Purchaser) or
Seller if the Closing shall not have occurred on or before the
later of the following dates (the "Drop Dead Date"): (i) January
31, 1997 and (ii) if Purchaser certifies that it is continuing to
pursue the consummation of the Closing in good faith, such other
date not later than February 17, 1997 as Purchaser may designate;
provided that the failure to consummate the transactions
contemplated
28
hereby on or before such date did not result from the failure by
the party seeking termination of this Agreement to fulfill any
undertaking or commitment provided for herein that is required to
be fulfilled before Closing; or
(c) By either Parent (without the joinder of Purchaser) or
Seller if there shall have been entered a final, nonappealable
order or injunction of any Governmental Entity restraining or
prohibiting the consummation of the transactions contemplated
hereby or any material part thereof.
In the event of the termination of this Agreement under this Section
4.5, each party hereto will pay all of its own fees and expenses.
There will be no further liability hereunder on the part of any party
hereto if this Agreement is so terminated, except under Section 3.1(b)
or by reason of a breach of any covenant or representation contained
in this Agreement, including without limitation the covenants
contained in Sections 3.3, 3.4 and 3.7.
V. SURVIVAL AND INDEMNIFICATION
5.1. Survival of Representations, Warranties and Covenants. (a)
Each of the representations and warranties contained in Article II
will survive the Closing and remain in full force and effect until the
last day of the fifteenth full month after the Closing Date, except
that (i) the representations and warranties set forth in Section
2.1.17 will survive the Closing and remain in full force and effect
until the third anniversary of the Closing Date, (ii) the
representation and warranty in Section 2.1.22 will survive the Closing
and remain in full force and effect until the second anniversary of
the Closing Date, and (iii) the representations and warranties set
forth in Sections 2.1.1(a), 2.1.2, 2.1.4, 2.1.15, 2.1.16, 2.1.21,
2.2.1 and 2.2.2 will survive the Closing and remain in full force and
effect until the expiration of the statute of limitations, if any. Any
claim for indemnification with respect to any of such matters which is
not asserted by a notice given as herein provided specifically
identifying the particular breach underlying such claim (whether or
not the Indemnifiable Loss has been actually incurred as of the date
of such notice) and the facts and Indemnifiable Loss relating thereto
(to the extent reasonably determinable as of the date of such notice),
within such specified periods of survival may not be pursued and is
hereby irrevocably waived.
(b) The covenants contained in Sections 3.1(b), 3.3(b) 3.4 and
3.8(c), in this Article V and in Articles I, VI and VII (the
"Post-Closing Covenants") will survive the Closing and remain in
effect indefinitely unless a specified period is otherwise set forth
in this Agreement (in which event such specified period will control).
All other covenants contained in this Agreement will terminate,
without further action, upon the occurrence of
29
the Closing, with the result that any claim for an alleged breach of
any such covenant may not be pursued and is hereby irrevocably waived.
5.2. Limitations on Liability. (a) For purposes of this
Agreement, (i) "Indemnity Payment" means any amount of Indemnifiable
Losses required to be paid pursuant to this Agreement, (ii)
"Indemnitee" means any person or entity entitled to indemnification
under this Agreement, (iii) "Indemnifying Party" means any person or
entity required to provide indemnification under this Agreement, (iv)
"Indemnifiable Losses" means any and all claims, demands, actions,
suits or proceedings (by any person or entity, including without
limitation any Governmental Entity), settlements and compromises
relating thereto and reasonable attorneys' fees and expenses in
connection therewith or in enforcing the Indemnifying Party's
obligations hereunder, losses, liabilities, costs and expenses,
reduced by the amount of insurance proceeds actually received from any
person or entity that is not an Affiliate of the Indemnitee, and (v)
"Third Party Claim" means any claim, demand, action, suit or
proceeding made or brought by any person or entity who or which is not
a party to this Agreement or an Affiliate of a party to this
Agreement.
(b) Notwithstanding any other provision in this Agreement
or of any applicable Law:
(i) No Indemnitee will be entitled to indemnification
by an Indemnifying Party under Section 5.3(a)(i) or
otherwise in respect of any breach or alleged breach of any
representation or warranty contained in Sections 2.1.1(b) (second
sentence only), 2.1.5 (as applied to filing or approval
requirements under Laws only), 2.1.8, 2.1.17 or 2.1.13 (but with
respect to Section 2.1.13, only as to Legal Proceedings commenced
during the period from the date of this Agreement to and
including the Closing Date and insofar as the Indemnifiable
Losses relating to, resulting from or arising out of such Legal
Proceeding relate to, result from or arise out of non-compliance
with any Law (including without limitation any Environmental Law)
and the existence of which proceedings do not constitute a breach
of this Agreement as of the date hereof), unless the aggregate
amount of Indemnifiable Losses incurred by the Indemnitee in
respect of any individual event or occurrence or series of events
or occurrences arising out of a common nucleus of operative
facts, giving rise to such Indemnifiable Losses exceeds $100,000,
in which event the Indemnitee will be entitled to pursue such
claim to the full amount of its Indemnifiable Losses relating
thereto.
(ii) No Indemnitee will be entitled to indemnification by an
Indemnifying Party under Section 5.3(a)(i) or 5.3(b)(i) or
otherwise in respect of any breach or alleged breach of any
representation or warranty contained in
30
Article II insofar as such representation or warranty is
qualified by a Material Adverse Effect or other materiality
exception unless the aggregate amount of Indemnifiable Losses
incurred by the Indemnitee in respect of any individual event or
occurrence or series of related events or occurrences arising out
of a common nucleus of operative facts, giving rise to such
Indemnifiable Losses exceeds $25,000, in which event the
Indemnitee will be entitled to pursue such claim to the full
amount of its Indemnifiable Losses relating thereto.
Notwithstanding the foregoing, any claim which arises out of a
matter which is within the scope of the representations and
warranties referred to in Section 5.2(b)(i) is subject to the
limitations set forth in Section 5.2(b)(i) and not in this
Section 5.2(b)(ii).
(iii) No Indemnitee will be entitled to indemnification by an
Indemnifying Party under Sections 5.3(a)(i) (except for a claim
for breach of Sections 2.1.1(a), 2.1.2, 2.1.4 or 2.1.21) or
Section 5.3(b)(i) unless and until the aggregate amount of claims
which may be asserted for Indemnifiable Losses under Section
5.3(a)(i) or Section 5.3(b)(i), as the case may be, exceeds
$2,000,000, and then only to the extent of the excess.
(c) Notwithstanding any other provision of this Agreement, the
indemnification obligations of C&A and Seller, collectively, under
Section 5.3(a)(i) (except for a claim for breach of Sections 2.1.1(a),
2.1.2 or 2.1.4) or of Purchaser, Parent and the Company, collectively,
under Section 5.3(b)(i) will not exceed $66.7 million.
(d) As between any Seller and any Seller Affiliate, on the one
hand, and Purchaser, Parent or any Affiliate thereof, on the other
hand, the rights and obligations set forth in this Article V will be
the sole and exclusive remedies for breach of this Agreement.
5.3. Indemnification. (a) Subject to Sections 5.1, 5.2 and 5.4,
each of C&A and Seller will jointly and severally indemnify, defend
and hold harmless Parent, Purchaser and their respective Affiliates
and their respective directors, officers, partners, shareholders,
employees, agents and representatives (including, without limitation,
any predecessor or successor to any of the foregoing) from and against
any and all Indemnifiable Losses relating to, resulting from or
arising out of:
(i) Any breach by C&A or Seller of any of the
representations or warranties of C&A or Seller contained in this
Agreement (without giving effect to any Material Adverse Effect
or other materiality limitations therein or exception thereto
other than the Material Adverse Effect or other materiality
limitations or exceptions in Section 2.1.22 and, to the extent
relating to, resulting from or
31
arising out of any matter which is the subject of Section 2.1.22,
Section 2.1.18);
(ii) Any breach by C&A or Seller of any Post-Closing
Covenant of C&A or Seller contained in this Agreement;
(iii) Any controlled group liability under (A) Title IV of
ERISA, (B) Section 302 of ERISA, (C) Sections 412 and 4971 of the
Code, (D) continuation coverage requirements of Sections 601, et
seq. of ERISA and Section 4980B of the Code, and (E)
corresponding or similar provisions of foreign Laws, other than
such liabilities that arise solely out of, or relate solely to,
Employees or Former Employees; and
(iv) The ownership, conduct, condition or Transfer (including
without limitation any Taxes associated therewith, related
thereto or arising therefrom) of the entity previously owned by
Floorcoverings UK that was engaged in the wallcoverings business,
or the business conducted by such entity.
(b) Subject to Sections 5.1, 5.2 and 5.4, each of Purchaser and
Parent will, and, if the Closing occurs, will cause the Company to,
jointly and severally indemnify, defend and hold harmless C&A, Seller
and each Post-Closing Affiliate and their respective directors,
officers, partners, shareholders, employees, agents and
representatives (including, without limitation, any predecessor or
successor to any of the foregoing) from and against any and all
Indemnifiable Losses relating to, resulting from or arising out of:
(i) Any breach by Purchaser or Parent of any of the
representations or warranties of Purchaser or Parent contained in
this Agreement (without giving effect to any Material Adverse
Effect or other materiality limitation therein or exception
thereto);
(ii) Any breach by Purchaser or Parent of any
Post-Closing Covenant of Purchaser or Parent contained in
this Agreement;
(iii) Any Assumed Push-Down Liabilities (provided, however,
that Purchaser and Parent's liability hereunder will not exceed
the Maximum APD Liability Amount).
(c) Certain Litigation. Notwithstanding any other provision of
this Agreement, C&A and Seller will jointly and severally indemnify,
defend and hold harmless Parent, Purchaser and their respective
Affiliates and their respective directors, officers, partners,
shareholders, employees, agents and representatives (including without
limitation any predecessor or successor to any of the foregoing) from
and against, all Indemnifiable Losses relating to, resulting from or
arising out of the claims set forth in Schedule 5.3(c) (the "Retained
32
Claims"). Seller will retain or assume the defense of all Retained
Claims, which shall be treated by all parties hereto as Third Party
Claims under Section 5.4, provided that the last two sentences of
Section 5.4(b) will not be applicable to any Retained Claims.
Purchaser will cause the Company to deliver to Seller at the Closing a
power of attorney to enable C&A to prosecute, defend, compromise or
settle any Retained Claim in such form as C&A or Seller may reasonably
request, subject to the terms hereof. Without limiting the generality
of Section 5.4(c), Seller will be entitled to any recovery,
settlement, rebate or other payment relating to, resulting from or
arising out of the Retained Claims. Purchaser will, and will cause the
Company and its employees to, cooperate in the defense and prosecution
of Third Party Claims, so long as such cooperation does not
unreasonably disrupt or interfere with its requirements or any of its
or its Affiliates' operations or services.
5.4. Defense of Claims. (a) If any Indemnitee receives notice of
the assertion or commencement of any Third Party Claim against such
Indemnitee with respect to which an Indemnifying Party is obligated to
provide indemnification under this Agreement, the Indemnitee will give
such Indemnifying Party reasonably prompt written notice thereof, but
in any event not later than 30 calendar days after receipt of such
written notice of such Third Party Claim. Such notice by the
Indemnitee will describe the Third Party Claim in reasonable detail,
will include copies of all material written evidence thereof and will
indicate the estimated amount, if reasonably practicable, of the
Indemnifiable Loss that has been or may be sustained by the
Indemnitee. The Indemnifying Party will have the right to participate
in, or, by giving written notice to the Indemnitee, to assume, the
defense of any Third Party Claim at such Indemnifying Party's own
expense and by such Indemnifying Party's own counsel (reasonably
satisfactory to the Indemnitee), and the Indemnitee will cooperate in
good faith in such defense.
(b) If, within ten calendar days after giving notice of a Third
Party Claim to an Indemnifying Party pursuant to Section 5.4(a), an
Indemnitee receives written notice from the Indemnifying Party that
the Indemnifying Party has elected to assume the defense of such Third
Party Claim as provided in the last sentence of Section 5.4(a), the
Indemnifying Party will not be liable for any legal expenses
subsequently incurred by the Indemnitee in connection with the defense
thereof; provided, however, that if the Indemnifying Party fails to
take reasonable steps necessary to defend diligently such Third Party
Claim within ten calendar days after receiving written notice from the
Indemnitee that the Indemnitee believes the Indemnifying Party has
failed to take such steps or if the Indemnifying Party has not
undertaken fully to indemnify the Indemnitee in respect of all
Indemnifiable Losses relating to the matter, the Indemnitee may assume
its own defense, and the Indemnifying Party will be liable for all
reasonable costs or expenses paid or incurred in connection therewith.
Without the prior written consent of the
33
Indemnitee, the Indemnifying Party will not enter into any settlement
of any Third Party Claim which would lead to liability or create any
financial or other obligation on the part of the Indemnitee for which
the Indemnitee is not entitled to indemnification hereunder, or which
provides for injunctive or other non-monetary relief applicable to the
Indemnitee or does not include an unconditional release of all
Indemnified Parties. If a firm offer is made to settle a Third Party
Claim without leading to liability or the creation of a financial or
other obligation on the part of the Indemnitee for which the
Indemnitee is not entitled to indemnification hereunder and the
Indemnifying Party desires to accept and agree to such offer, the
Indemnifying Party will give written notice to the Indemnitee to that
effect. If the Indemnitee fails to consent to such firm offer within
ten calendar days after its receipt of such notice, the Indemnitee may
continue to contest or defend such Third Party Claim and, in such
event, the maximum liability of the Indemnifying Party as to such
Third Party Claim will not exceed the amount of such settlement offer.
(c) Any claim by an Indemnitee on account of an Indemnifiable
Loss which does not result from a Third Party Claim (a "Direct Claim")
will be asserted by giving the Indemnifying Party reasonably prompt
written notice thereof, but in any event not later than 30 calendar
days after the Indemnitee becomes aware of such Direct Claim. Such
notice by the Indemnitee will describe the Direct Claim in reasonable
detail, will include copies of all material written evidence thereof
and will indicate the estimated amount, if reasonably practicable, of
the Indemnifiable Loss that has been or may be sustained by the
Indemnitee. The Indemnifying Party will have a period of 30 calendar
days within which to respond in writing to such Direct Claim. If the
Indemnifying Party does not so respond within such 30 calendar day
period, the Indemnifying Party will be deemed to have rejected such
claim, in which event the Indemnitee will be free to pursue such
remedies as may be available to the Indemnitee on the terms and
subject to the provisions of this Agreement.
(d) A failure to give timely notice or to include any specified
information in any notice as provided in Sections 5.4(a), 5.4(b) or
5.4(c) will not affect the rights or obligations of any party
hereunder except and only to the extent that, as a result of such
failure, any party which was entitled to receive such notice was
deprived of its right to recover any payment under its applicable
insurance coverage or was otherwise prejudiced as a result of such
failure.
(e) If the amount of any Indemnifiable Loss, at any time
subsequent to the making of an Indemnity Payment to the Indemnitee, is
reduced by recovery, settlement or otherwise under or pursuant to any
insurance coverage, or pursuant to any claim, recovery, settlement,
rebate or other payment by or against any other person or entity, the
amount of such reduction, less any
34
costs, expenses, premiums or taxes incurred in connection therewith,
will promptly be repaid by the Indemnitee to the Indemnifying Party.
Upon making any Indemnity Payment the Indemnifying Party will, to the
extent of such Indemnity Payment, be subrogated to all rights of the
Indemnitee against any third person or entity that is not an Affiliate
of the Indemnitee in respect of the Indemnifiable Loss to which the
Indemnity Payment relates; provided, however, that (i) the
Indemnifying Party shall then be in compliance with its obligations
under this Agreement in respect of such Indemnifiable Loss and (ii)
until the Indemnitee recovers full payment of its Indemnifiable Loss,
any and all claims of the Indemnifying Party against any such third
person or entity on account of said Indemnity Payment will be
subrogated and subordinated in right of payment to the Indemnitee's
rights against such third person or entity. Without limiting the
generality or effect of any other provision hereof, each such
Indemnitee and Indemnifying Party will duly execute upon request all
instruments reasonably necessary to evidence and perfect the
above-described subrogation and subordination rights.
VI. OTHER POST-CLOSING COVENANTS
6.1. Personnel Matters.
6.1.1. Employees and Employee Benefit Plans. (a) Purchaser will,
and will cause the Company to, indemnify C&A and each of its
Affiliates for any Indemnifiable Loss relating to, resulting from or
arising out of any change in employee plan benefits or levels of
compensation following the Closing Date from those existing on the
date hereof, or any liability or obligation to any Employee in the
event that Purchaser or the Company terminates the employment of any
person who is an Employee as of the Closing Date. Notwithstanding the
foregoing, in the event that the employment with the Company of any of
the Employees listed on Schedule 6.1.1(a) is terminated by the Company
not later than 90 calendar days after the Closing, Seller will
reimburse the Company for severance payments due to such Employees and
made by the Company, provided that such obligation will not, as to any
such Employee, exceed the maximum amount due to any such Employee
pursuant to the terms of any Contract or Employee Plan applicable
thereto as in effect immediately prior to the Closing.
(b) Purchaser agrees that, under any employee benefit plan made
available or established after the Closing, Employees will receive
credit for their years of service with Seller, any Post-Closing
Affiliate or the Company prior to the Closing in determining
eligibility and vesting thereunder, and in determining the amount of
benefits under any applicable sick leave, vacation or severance plan.
Purchaser will, or will cause one of its Affiliates to, cover
Employees and Former Employees as of the Closing under a group health
plan and waive any preexisting condition limitations applicable to
35
Employees or Former Employees under any group health plan made
available to Employees or Former Employees to the extent that an
Employee's or Former Employee's condition would not have operated as a
preexisting condition limitation under any applicable group health
plan, and Purchaser will, or will cause one of its Affiliates to, take
all action necessary to ensure that Employees and Former Employees are
given full credit for all co-payments and deductibles incurred under
any group health plan for the plan year that includes the Closing
Date.
6.1.2. Assumption of Obligations. (a) Effective as of the
Closing, Purchaser will, or will cause one of its Affiliates to,
assume and be solely responsible for all liabilities and obligations
of any of Seller, each Post-Closing Affiliate or the Company arising
at any time and relating to the employment or termination of
employment of any Employee or Former Employee, except to the extent
that any of such liabilities or obligations are expressly retained by
any Seller or any Post-Closing Affiliate pursuant to this Section 6.1.
(b) Except as provided in Section 6.1.3 and in clause (z) in the
next sentence, effective as of the Closing, Purchaser will, or will
cause one of its Affiliates to, assume and be solely responsible for
all liabilities and obligations of either Seller or any Post-Closing
Affiliate with respect to Employees and Former Employees under any
Employee Plan and Seller and each Post-Closing Affiliate will be
relieved of all liabilities and obligations with respect to such
Employee Plans (except for claims for medical or dental, or accident
and sickness benefits that in either case are incurred but not
reported or paid as of the Closing). The liabilities and obligations
assumed by Purchaser and all of its Affiliates pursuant to this
Section 6.1.2(b) include without limitation (i) any liability or
obligation relating to (x) short-term and long-term disability
benefits, (y) group medical benefits, and (z) retiree health and life
insurance benefits (but in the case of such retireee benefits only for
the Former Employees identified in Schedule 6.1.2(a) and for Employees
and Former Employees who retire from the Company after July 30, 1996
who are eligible for such benefits); including in each case any claims
for disability, medical, health and life insurance benefits incurred
prior to the Closing (but excluding claims for medical or dental, or
accident and sickness benefits that in either case are incurred but
not reported or paid as of the Closing); and (ii) any liability or
obligation to provide such Employees and Former Employees and their
qualified beneficiaries with continuation coverage (within the meaning
of Section 4980B(f)(2) of the Code) under each Employee Plan that is a
group health plan, and any liability or obligation relating to such
coverage, including without limitation any liability or obligation to
provide such Employees and Former Employees with the notice required
under Section 4980B(f)(6) of the Code with respect to qualifying
events that occur as a result of the Transfer of the Assets.
Notwithstanding the foregoing, neither Purchaser nor any of its
Affiliates will assume any liabilities or obligations with respect to
Seller's
36
cafeteria plan arrangement arising out of any failure of Seller to set
forth the terms of such plan in a written plan document.
6.1.3. Retirement Plans. As of the Closing, Seller will cause
Employees to fully vest in their accrued benefits under the Xxxxxxx &
Xxxxxx Corporation Employees' Profit Sharing and Personal Savings
Plan, the Xxxxxxx & Xxxxxx Corporation Salaried Employees' Pension
Account Plan and the Xxxxxxx & Xxxxxx Corporation Hourly Employees'
Pension Account Plan (the "Retirement Plans"). Neither Purchaser nor
any of its Affiliates will assume any liabilities or obligations with
respect to the Retirement Plans, which will be retained by Seller. As
soon as practicable after the Closing, to the extent permitted by Law
and the terms of the Retirement Plans, Seller will permit
distributions to Employees of their vested benefits under the
Retirement Plans. With respect to Retirement Plans from which
distributions may be made, Purchaser will, or will cause one of its
Affiliates to, take all action necessary to cause one or more
qualified retirement plans maintained by Purchaser or any one of its
Affiliates to accept an eligible rollover distribution (within the
meaning of Section 402(f)(2) of the Code) of the amounts distributed
from the Retirement Plans to each Employee who shall become an
employee of Purchaser's affiliated group and a rollover contribution
(within the meaning of Section 408(d)(3) of the Code) with respect to
such amounts. To the extent distributions are not permitted under Law,
the Purchaser and Seller will take such mutually agreed upon action
with respect to Employees' plan accounts, whether that be a spin-off,
trustee-to-trustee transfer to a plan maintained by Purchaser or any
of its Affiliates, or retention in the Retirement Plans for eventual
distribution pursuant to the terms of such plan.
6.1.4. Employment and Plan Amendments or Terminations. Except as
provided in Section 6.1.1, no provision of this Section 6.1 will limit
Purchaser's or any of its Affiliates' right and authority to
discontinue, suspend or modify the employment of any Employee or
benefits provided to any or all Employees or Former Employees after
the Closing; provided, however, that in the event of any such
discontinuance, suspension or modification Purchaser will, or will
cause one of its Affiliates to, remain liable for all Employee Plan
and other employee benefit liabilities or obligations assumed pursuant
to this Agreement and will indemnify, defend and hold harmless Seller,
each Post-Closing Affiliate and their respective directors, officers,
partners, employees, agents and representatives (including without
limitation any predecessor or successor to any of the foregoing) from
and against any and all Indemnifiable Losses they may suffer or incur
as a result thereof. Neither Seller nor any Post-Closing Affiliate
will be liable for any liability or obligation that may arise from the
amendment or termination by Purchaser or any of its Affiliates of any
employee benefit plan assumed, established or continued by Purchaser
or any of its Affiliates under this Section 6.1.
37
6.1.5. Transitional Matters. Each of Seller and Purchaser will
use its respective reasonable efforts to cooperate to (a) transfer to
Purchaser or any of its Affiliates any insurance and administrative
services contracts that Purchaser wishes to continue with respect to
any Employee Plan that Purchaser or any of its Affiliates is assuming
or continuing pursuant to this Agreement and (b) cause any insurance
carrier administering workers' compensation and other employee benefit
liabilities or obligations assumed by Purchaser or any of its
Affiliates to deal directly with Purchaser or such Affiliate.
6.1.6. Employee Information. Each of Seller and Purchaser will
provide the other, in a timely manner, any information with respect to
any Employee's or Former Employee's employment with and compensation
from Seller, any Post-Closing Affiliate or Purchaser or any of its
Affiliates, as the case may be, or rights or benefits under any
employee benefit plan which the other party hereto may reasonably
request.
6.2. General Post-Closing Matters.
6.2.1. Post-Closing Notifications. Purchaser and Seller will, and
each will cause its respective Affiliates to, comply with any
post-Closing notification or other requirements, to the extent then
applicable to such party, of any antitrust, trade competition,
investment, control or other Law of any Governmental Entity having
jurisdiction over the Business.
6.2.2. Company Name. C&A will cause Seller to change its
corporate name after the Closing to delete therefrom the words
"Floor Coverings."
6.2.3. Access. (a) On the Closing Date, or as soon thereafter as
practicable, and in no event later than 30 calendar days after the
Closing Date, Seller will deliver or cause to be delivered to
Purchaser all original agreements, documents, books, records,
including without limitation Employee records and records relating to
obligations of the Company to Employees under Employee Plans retained
or assumed by the Purchaser or the Company hereunder, and files
primarily relating to the Business or the Company (collectively,
"Records") in the possession of Seller or any Post-Closing Affiliate
to the extent not in the possession of the Company or Purchaser,
subject to the following exceptions:
(i) Purchaser recognizes that certain Records may contain
only incidental information relating to the Company or may
primarily relate to the Seller or any Post-Closing Affiliate, or
the businesses of the Seller or any
Post-Closing Affiliate other
than the Business, and Seller and its Post-Closing Affiliates may
retain such Records and Seller may deliver appropriately excised
copies of such Records;
38
(ii) Seller and each Post-Closing Affiliate may retain any
Tax Returns so long as true and complete copies of the portions
thereof relating to the Business are delivered to Purchaser at or
before the Closing or made available to the Purchaser following
the Closing; and
(iii) Seller and each Post-Closing Affiliate may retain
privileged Records and Records relating to the Retained Claims.
After the Closing, each party will, and will cause its Affiliates to,
retain all Records (except those Records referred to in Section
6.2.3(a)(i) and (ii)) required to be retained pursuant to obligations
imposed by any applicable Law. Except as provided in the immediately
preceding sentence, each party will, and will
cause its Affiliates to, retain all Records for a period of seven
years after the Closing Date. After the end of such seven-year period,
before disposing, or permitting its Affiliates to dispose, of any such
Records, each party will, and will cause its Affiliates to, give
notice to such effect to the other party and give the other party at
its cost and expense an opportunity to remove and retain all or any
part of such Records as the other party may elect.
(b) After the Closing, upon reasonable notice, each party hereto
will give, or cause to be given, to the representatives, employees,
counsel and accountants of the other parties hereto access, during
normal business hours, to Records relating to periods prior to or
including the Closing, and will permit such persons to examine and
copy such Records to the extent reasonably requested by the other
party in connection with tax and financial reporting matters
(including, without limitation, any Tax Return relating to state or
local real property transfer or gains taxes), audits, legal
proceedings (including without limitation those pertaining to Retained
Claims), governmental investigations and other business purposes and
to make inquiries relating thereto of the relevant personnel;
provided, however, that nothing herein will obligate any party to take
actions that would unreasonably disrupt the normal course of its
business, violate the terms of any contract to which it is a party or
to which it or any of its assets is subject or grant access to any of
its proprietary, confidential or classified information (except to the
extent required for purposes of defending or prosecuting any third
party Legal Proceedings). Each party will, and will cause its
respective Affiliates controlled by it to, provide or make available
to the other and the other's respective Affiliates access to employees
of Purchaser and the Company for the purposes of, and with the
limitations described in, the preceding sentence (including without
limitation for the purpose of providing, and preparing to provide,
testimony in connection with third party Legal Proceedings).
6.2.4. Certain Tax Matters. (a) Seller will prepare and file or
cause to be prepared and filed all foreign, federal,
39
state and local Income Tax Returns for the Company required to be
filed with the appropriate foreign, United States, state and local
taxing authorities for any taxable period that ends on or before the
Closing Date (each a "Pre-Closing Tax Period"). Seller will prepare
and, if required to do so by applicable Law, deliver to Purchaser for
signing and filing any Income Tax Returns of the Company with respect
to any Pre-Closing Tax Period (including any short period) that have
not been filed prior to the Closing Date. Seller will pay all Taxes
required to be paid with respect to such Tax Returns.
(b) Except as otherwise provided in Section 6.2.4(a) or Section
6.2.4(c), Purchaser will prepare and file or cause to be prepared and
filed all Tax Returns for the Company that are required to be filed
with the appropriate United States, state, local and foreign taxing
authorities for all periods as to which such Tax Returns are due after
the Closing Date (taking into account all extensions of due dates).
Subject to Section 6.2.4(r), Purchaser will pay or cause to be paid
all Taxes required to be paid with respect to such Tax Returns.
(c) With respect to any taxable period that would otherwise
include but not end on the Closing Date, to the extent permissible
pursuant to applicable Law, Seller will, and Purchaser will cause the
Company to, (i) take all steps as are or may be reasonably necessary,
including without limitation the filing of elections or returns with
applicable taxing authorities, to cause such period to end on the
Closing Date or (ii) if clause (i) is inapplicable, report the
operations of the Company only for the portion of such period ending
on the Closing Date in a combined, consolidated or unitary Tax Return
filed by Seller or a Post-Closing Affiliate, notwithstanding that such
taxable period does not end on the Closing Date. If clause (ii)
applies to a taxable period of the Company, the portion of such
taxable period included in such return filed by Seller will be treated
as a Pre-Closing Tax Period described in Section 6.2.4(a) and
Purchaser will not be responsible for filing such return for such
portion of such year pursuant to Section 6.2.4(b), provided that the
foregoing will not relieve Purchaser of its obligation under Section
6.2.4(b) to file a Tax Return reporting the operations of the Company
for the portion of such taxable period beginning after the Closing
Date.
(d) Purchaser will prepare and deliver, or will cause to be
prepared and delivered, within 60 calendar days of receipt of Seller's
request therefor, to Seller, Seller's standard international, federal
and state Tax Return data gathering packages relating to the Company.
Such packages will be prepared on a basis consistent with the prior
year's Tax Returns. In addition to providing such packages to Seller,
Purchaser will promptly provide or cause to be provided to Seller such
other information as Seller may reasonably request in order for the
operations of the Company to be properly reported in such Tax Returns.
40
(e) C&A and Seller will, jointly and severally, indemnify, defend
and hold harmless Purchaser and each Purchaser Affiliate from and
against any and all liability for any taxable period as a result of
Treasury Regulation Section 1.1502-6 (or any comparable provision of
state, local or foreign law) for Taxes of any corporation, other than
the Company, which is or has been affiliated with the Seller or C&A
Corp.
(f) Purchaser is eligible to and will make a timely and
effective election under Section 338(g) of the Code (and any
comparable provision of state or local law) with respect to the
purchase of the Shares hereunder. Both Seller and Purchaser are
eligible to, and Purchaser will make and Seller will cause C&A Corp.
to make, a timely and effective election under Section 338(h)(10) of
the Code (and any comparable provision of state or local law) with
respect to such purchase (the "Section 338(h)(10) Election").
(g) At the Closing, Purchaser will deliver to Seller a completed
Internal Revenue Service Form 8023A, and the required schedules
thereto ("Form 8023A"), providing for the Section 338(h)(10) Election.
Provided that the information on such Form 8023A is, in the reasonable
determination of Seller, correct and complete in all material
respects, Seller will, at the Closing, execute and deliver such Form
8023A to Purchaser. If any changes or supplements are required to the
Form 8023A as a result of information that is first available after
the Closing, Seller and Purchaser will promptly agree upon and make
such changes. Purchaser and Seller (or C&A Corp.) will timely file the
Form 8023A, and any required supplements thereto, and will provide
written evidence to the other that it has done so.
(h) Purchaser and Seller agree that neither of them will take, or
permit their Affiliates to take, any action to modify or revoke the
elections contained in or the content of any Form 8023A without the
express written consent of the other party.
(i) Seller will cause any tax sharing agreements between the
Company and Seller or any other Post-Closing Affiliate to be
terminated, effective as of the Closing Date, to the extent that any
such agreement relates to the Company.
(j) Seller will pay and indemnify and hold Purchaser and the
Company harmless from (i) any and all Taxes arising from the Section
338(h)(10) Election and (ii) any Tax liability, cost, or expense
arising out of the failure to pay such Tax. Seller will also pay any
state or local Tax (and indemnify and hold Purchaser and the Company
harmless against any Tax liability, cost, or expense arising out of
any failure to pay such Tax) attributable to any election under state
or local law comparable to the election available under Section 338(g)
of the Code (or which results from the making of an election under
Section 338(g) of the Code) with respect to Purchaser's acquisition of
the Company.
41
(k) Purchaser and Seller agree to report transactions under this
Agreement consistent with the Section 338(h)(10) Election and will
take no position contrary thereto unless required to do so pursuant to
a final determination by any Taxing authority or judicial proceeding.
(l) Purchaser and Seller agree that the Purchase Price and the
liabilities of the Company (plus other relevant items) will be
allocated to the assets of the Company for purposes of all Tax Returns
and other appropriate documents in a manner consistent with the
purchase price allocation to be determined by the parties on or before
the Closing Date (if such determination is agreed to prior to the
Closing Date) and in accordance with Treasury Regulation Section
1.338(h)(10)-1.
(m) On or before the Closing Date, Seller agrees to provide
Purchaser and the Company with all required clearance certificates or
similar documents that may be required by any state, local or other
Taxing authority in order, to the extent allowed, to relieve Purchaser
of any obligation to withhold any portion of the Purchase Price. If
necessary to avoid sales or use Taxes, Seller will, to the extent
allowed, provide Purchaser with all appropriate state and local resale
certificates.
(n) Seller will furnish to Purchaser on or before the Closing
Date a certification of Seller's non-foreign status as set forth in
Treasury Regulation Section 1.1445-2(b).
(o) Seller, Purchaser and the Company will reasonably cooperate
with each other in connection with the preparation and filing of all
Tax Returns or any audit examinations for any period, including
without limitation the timely furnishing or making available of
records, books of account and any other information necessary for the
preparation of the Tax Returns.
(p) (i) With respect to any Tax Return for a Pre-Closing Tax
Period, Seller and its duly appointed representatives will have the
sole right, at its or their expense, to supervise or otherwise
coordinate any examination process and to negotiate, resolve, settle
or contest any asserted Tax deficiencies or assert and prosecute any
claims for refund; notwithstanding the foregoing, without the express
written consent of Purchaser or the Company, which consent will not be
unreasonably withheld or delayed, Seller will not file any amended Tax
Return, settle any Tax claim or assessment, or surrender any right to
claim a refund of Tax, if such action could have the effect of
increasing the Tax liabilities of the Company or Purchaser.
(ii) With respect to any other Tax Return of the Company,
Purchaser, the Company and their duly appointed representatives will
have the sole right, at the expense of Purchaser or the Company, to
supervise or otherwise coordinate any examination process and to
negotiate, resolve, settle or contest any asserted Tax deficiencies or
assert and prosecute any
42
claims for refund; notwithstanding the foregoing, without the express
written consent of Seller, which consent will not be unreasonably
withheld or delayed, neither Purchaser nor the Company will file any
amended Tax Return, settle any Tax claim or assessment, or surrender
any right to claim a refund of Tax, if such action could have the
effect of increasing the Tax liabilities of Seller or any Post-Closing
Affiliate.
(iii) Each party hereto will notify the other within 30
calendar days (unless action is required sooner, then as soon
as practicable) of the assertion of any claim or the commencement of
any suit, action, proceeding, investigation or audit with respect to
the operations of the Company that is the subject of this Section
6.2.4(p), and will provide the other copies (subject to deletion of
nonrelevant information) of all correspondence relating to such
contest.
(q) "Income Tax" or "Income Taxes" means all Taxes imposed on,
measured by or which require reference to, net or taxable income
(including any income, franchise, estimated, alternative, minimum,
add-on minimum or other Tax imposed on, measured by or which require
reference to, net or taxable income), together with interest and
penalties thereon and estimated payments thereof.
(r) The Seller and C&A will, jointly and severally defend,
indemnify and hold harmless the Parent, Purchaser and the Company and
their respective directors, officers, employees, agents and
representatives (including, without limitation, any predecessor or
successor to any of the foregoing) from and against any breach of a
covenant contained in this Section 6.2.4 and against the following
Taxes and, except as otherwise provided in Section 6.2.4(p), against
any loss, damage, liability, or expense, including reasonable fees for
attorneys and consultants, incurred in contesting or otherwise in
connection with any such Taxes and in enforcing their rights under
this Section 6.2.4: (i) all Taxes imposed on the Company with respect
to taxable periods ending before or on the Closing Date and (ii) with
respect to taxable periods beginning before the Closing Date and
ending after the Closing Date, Taxes imposed on the Company that are
allocable, pursuant to Section 6.2.4(t), to the portion of such period
ending on the Closing Date.
(s) Purchaser and Parent will, and, if the Closing occurs, will
cause the Company to, jointly and severally indemnify, defend and hold
harmless C& A and Seller and each Post-Closing Affiliate and their
respective directors, officers, partners, employees, agents and
representatives (including, without limitation, any predecessor to any
of the foregoing) from and against (i) all Taxes imposed on the
Company with respect to taxable periods beginning after the Closing
Date and, with respect to taxable periods beginning before the Closing
Date and ending after the Closing Date, Taxes imposed on the Company
that are allocable, pursuant to Section 6.2.4(t), to the portion of
such period beginning after the Closing Date, and (ii) any loss,
43
damage, liability, or expense, including reasonable fees for attorneys
and consultants, incurred in contesting or otherwise in connection
with any such Taxes and in enforcing their rights under this Section
6.2.4.
(t) In the case of Taxes that are payable with respect to a
taxable period that begins before the Closing Date and ends after the
Closing Date, the portion of any such Tax that is allocable to the
portion of the period ending on the Closing Date will be:
(i) in the case of Taxes that are either (x) Income Taxes,
or (y) imposed in connection with any sale or other transfer or
assignment of property, real or personal, tangible or intangible
(other than conveyances pursuant to this Agreement, as provided
under Section 7.2), deemed equal to the amount that would be
payable if the taxable year ended immediately prior to the
Closing Date (including the taxable years of organizations in
which the Company owns a partnership interest or equity interest)
(except that, solely for purposes of determining the marginal tax
rate applicable to income or receipts during such period in a
jurisdiction in which such tax rate depends upon the level of
income or receipts, annualized income or receipts may be taken
into account if appropriate for an equitable sharing of such
Taxes); and
(ii) in the case of Taxes not described in subparagraph (i)
that are imposed on a periodic basis and measured by the level of
any item, deemed to be the amount of such Taxes for the entire
period (or, in the case of such Taxes being determined on an
arrears basis, the amount of such Taxes for the immediately
preceding period) multiplied by a fraction the numerator of which
is the number of calendar days in the period ending immediately
prior to the Closing Date and the denominator of which is the
number of calendar days in the entire period.
(u) Any Tax refund (or comparable benefit resulting from a
reduction in Tax liability) for a period ending on or before the
Closing Date arising out of the carryback of a loss or credit incurred
by the Company in a taxable period (or allocable portion thereof)
ending after the Closing Date will be the property of the Purchaser
and, if received by the Seller or any Post-Closing Affiliate, will be
paid over promptly to the Purchaser (including any interest received
from or credited thereon by the applicable taxing authority). Any
other Tax refund for a period ending on or before the Closing Date or
for the allocable portion of a period including the Closing Date will
be the property of the Seller. Purchaser will pay or cause the Company
to pay to Seller all refunds or credits of Taxes (including any
interest received from or credited thereon by the applicable taxing
authority) received by Purchaser or any of its Affiliates after the
Closing Date and attributable to Taxes paid by Seller, any
Post-Closing Affiliate, or the Company. Such payment will be made to
Seller
44
promptly after receipt of any such refund from, or allowance of such
credit by, the relevant taxing authority. In all other events, any Tax
refund will be the property of the Company and paid to the Company.
(v) For purposes of this Section 6.2.4, Purchaser and Seller will
allocate all income, gain, loss, deductions and credits of the Company
properly attributable to the Closing Date, but not attributable to the
Section 338(h)(10) Election, to the day after the Closing Date for all
federal, state, local and foreign Tax purposes.
6.2.5. Insurance. With respect to any loss, liability or damage
suffered by the Company after the Closing Date relating to, resulting
from or arising out of the conduct of the Business prior to the
Closing Date for which Seller or any Post-Closing Affiliate would be
entitled to assert, or cause any other person or entity to assert, a
claim for recovery under any policy of insurance maintained by Seller
or a Post-Closing Affiliate or for the benefit of Seller or the
Company, in respect of the Business, products, employees or the
Company ("Insurance"), at the request of Purchaser, Seller will use
its reasonable efforts to assert, or to assist Purchaser or the
Company to assert, one or more claims under such Insurance covering
such loss, liability or damage if Purchaser or the Company is not
itself entitled to assert such claim, provided that all of Seller's
and any Post- Closing Affiliate's out-of-pocket costs and expenses
incurred in connection with the foregoing, including without
limitation any liability, obligation or expense referred to in the
last sentence of this Section 6.2.5, are promptly reimbursed by
Purchaser. Seller will be deemed, solely for the purpose of asserting
claims for Insurance pursuant to the immediately preceding sentence,
to have assumed or retained liability for such loss, liability or
damage to the extent of the policy limits of the applicable policy of
Insurance; provided, however, that (a) Purchaser's and Parent's
obligations under Section 5.3(b) will not be affected by the
provisions of this Section 6.2.5 and (b) with respect to any claim
made at the request of Purchaser or the Company by Seller or any
Seller Affiliate under any Insurance pursuant to this Section 6.2.5,
each of Purchaser and Parent will jointly and severally indemnify,
defend and hold harmless Seller and each Post-Closing Affiliate and
their respective directors, officers, partners, employees, agents and
representatives (including without limitation any predecessor or
successor of any of the foregoing) from and against any Indemnifiable
Loss relating to, resulting from or arising out of any deductible,
policy limit, obligation, indemnity, reinsurance due to the
liquidation or insolvency of the reinsurer, self-insurance retention,
premium adjustments resulting from claims made at the request of
Purchaser or the Company under this Section 6.2.5 or other like
arrangement by which any such entity retains any liability or
obligation under any such policy of Insurance or otherwise.
45
6.2.6. Receivables. As of the Closing, C&A and Seller will
terminate the participation of the Company in the accounts receivables
facility operated by a finance subsidiary of C&A for C&A and its
affiliates and C&A and Seller will, jointly and severally, indemnify,
defend and hold harmless the Company or Purchaser for any
Indemnifiable Loss arising out of the Company's participation, or
termination of participation, in this facility, provided, however,
that the foregoing indemnity obligation will not apply to any loss on
the sale of receivables prior to the Closing Date or the collection
(or failure to collect) the receivables. C&A and Seller hereby agree
that all monies (regardless of any prior discount or loss on sale)
collected after the Closing by Seller or any Post-Closing Affiliate of
the Seller with respect to receivables attributable to the Company
will be paid to the Company within three business days of Seller's or
Post-Closing Affiliate's receipt thereof.
6.2.7. Surety Obligations; Master Contracts. (a) From and after
the Closing, Parent and Purchaser will, and will cause the Company to,
use reasonable efforts to obtain and have issued replacements for any
guarantee, performance bond, letter of credit or other agreement
guaranteeing or securing liabilities and obligations (including
without limitation in respect of operating or other leases and the
surety bonds listed on Schedule 2.1.14) (collectively, "Surety
Obligations") relating to the Business or the Company under which the
Seller or any Post-Closing Affiliate has any liability to a third
party and to obtain any amendments, novations, releases, waivers,
consents or approvals necessary to release Seller and each
Post-Closing Affiliate party to such Surety Obligations from all
liability thereunder relating to the Business or the Company, in each
case as promptly as practicable. In the event and for the period that
Purchaser and the Company fail to obtain any such replacement,
amendment, novation, release, waiver, consent or approval, without
limiting the generality of Section 5.3(b), Parent and Purchaser will
jointly and severally indemnify, defend, and hold harmless each of
Seller and each Post-Closing Affiliate and their respective
Affiliates, directors, officers, partners, employees, agents and
representatives (including without limitation the predecessors or
successors of any of the foregoing) from and against any Indemnifiable
Loss relating to, resulting from or arising out of any such failure by
Purchaser or the Company.
(b) From and after the Closing, C&A will, and will cause
Seller to, use reasonable efforts to obtain and have issued
replacements for any Surety Obligations relating to any business other
than the Business or any Post-Closing Affiliate of C&A under which the
Company has any liability to a third party and to obtain any
amendments, novations, releases, waivers, consents or approvals
necessary to release the Company from all liability thereunder
relating to any business other than the Business or any Post-Closing
Affiliate of C&A, in each case as promptly as practicable. In the
event and for the period that C&A or Seller fails to obtain any such
replacement, amendment, novation,
46
release, waiver, consent or approval, without limiting the generality
of Section 5.3(c), C&A and Seller will jointly and severally
indemnify, defend, and hold harmless the Company and its respective
Affiliates, directors, officers, partners, employees, agents and
representatives (including without limitation the predecessors or
successors of any of the foregoing) from and against any Indemnifiable
Loss relating to, resulting from or arising out of any such failure by
C&A or Seller.
(c) To the extent permissible under the terms thereof, C&A
will continue to make available to the Company the equipment listed on
Schedule 6.2.7(c) in accordance with the terms of the related
contracts listed thereon (the "Master Contracts"). Purchaser will, and
will cause the Company to, reimburse C&A for the Company's
proportionate share of C&A's lease and other payments required to be
made (other than payments attributable to a default by C&A under a
Master Contract unless such default relates to, results from or arises
out of any action or failure to take action by a Company under the
applicable Master Contract) under any such Master Contracts.
6.2.8. Assumed Push-Down Liabilities. Without further
action, effective as of the Closing, Floorcoverings US will assume the
liabilities of C&A and each of its Post-Closing Affiliates in respect
of only the amounts of all Push-Down Liabilities identified as
"Assumed Push-Down Liabilities" on Schedule 1.2(a) as of the Closing
(the "Assumed Push-Down Liabilities"), provided, however, that the
aggregate amount of such Assumed Push-Down Liabilities as of the
opening of business on the Closing Date will not exceed the "Maximum
Amount of Assumed Push-Down Liabilities" as shown on Schedule 1.2(a)
(the "Maximum APD Liability Amount").
VII. MISCELLANEOUS PROVISIONS
7.1. Notices. All notices and other communications required or
permitted hereunder will be in writing and, unless otherwise provided
in this Agreement, will be deemed to have been duly given when
delivered in person or by a nationally recognized overnight courier
service or when dispatched during normal business hours by electronic
facsimile transfer (confirmed in writing by mail simultaneously
dispatched) to the appropriate party at the address specified below:
(a) If to Parent or Purchaser, to:
CAF Holdings, Inc.
000 Xxxx Xxxx Xxxxxx
Xxxxxxxxxxxxxxx, Xxxxxxxx 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx
47
with a copy to:
McGuire, Woods, Battle & Xxxxxx, L.L.P.
Xxx Xxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx
(b) If to Seller, to:
Xxxxxxx & Xxxxxx Floor Coverings Group, Inc.
000 XxXxxxxxxx Xxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Facsimile No.: (000) 000-0000
Attention: Corporate Counsel
with a copy to:
Xxxxxxx & Xxxxxx Products Co.
000 Xxxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxxxxxx X. Xxxxxxx, Esq.
Executive Vice President - Law
and
Xxxxx, Day, Xxxxxx & Xxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
or to such other address or addresses as any such party may from time
to time designate as to itself by like notice.
7.2. Expenses. Except as otherwise expressly provided herein, (a)
each of Seller and C&A will pay or cause to be paid all expenses
incurred by Seller or C&A incident to this Agreement and in preparing
to consummate and consummating the transactions provided for herein
and (b) each of Parent and Purchaser will pay any expenses incurred by
it incident to this Agreement and in preparing to consummate and
consummating the transactions provided for herein, including without
limitation the fees and expenses of any broker, finder, financial
advisor or similar person engaged by such party.
7.3. Successors and Assigns. (a) Subject to Section 7.3(b), this
Agreement will be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns, but will
not be assignable or delegatable by any party without the prior
written consent of the other parties hereto. Notwithstanding the
foregoing sentence, Purchaser may assign this Agreement to any lender
to Purchaser or any
48
subsidiary of Purchaser as security for obligations to such lender in
respect of the financing arrangements entered into in connection with
the transactions contemplated hereby and any refinancings, extensions,
refundings or renewals thereof, provided however, that no assignment
hereunder shall in any way affect Purchaser's or the Company's
obligations or liabilities under this Agreement.
(b) Nothing in this Agreement is intended to limit Purchaser's
ability to sell or to Transfer the Shares following the Closing Date
provided that such sale or Transfer will not result in a termination
of any of Parent's or Purchaser's covenants, duties, responsibilities,
obligations or liabilities hereunder, including without limitation
under Sections 3.1(b) and Articles V and VI, unless the person or
entity acquiring the Shares pursuant to such sale or Transfer assumes
all of such covenants, duties, responsibilities, obligations and
liabilities in a written instrument reasonably satisfactory to Seller.
7.4. Waiver. Either Parent (on behalf of itself and Purchaser) or
Seller by written notice to the other may (a) extend the time for
performance of any of the obligations or other actions of the other
under this Agreement, (b) waive any inaccuracies in the
representations or warranties of the other contained in this
Agreement, (c) waive compliance with any of the conditions or
covenants of the other contained in this Agreement, or (d) waive or
modify performance of any of the obligations of the other under this
Agreement; provided, however, that neither Parent (on behalf of itself
and Purchaser) nor Seller may, without the prior written consent of
the other, make or grant such extension of time, waiver of
inaccuracies or compliance or waiver or modification of performance
with respect to its (or any of its Affiliates') representations,
warranties, conditions or covenants hereunder. Except as provided in
the immediately preceding sentence, no action taken pursuant to this
Agreement will be deemed to constitute a waiver of compliance with any
representations, warranties or covenants contained in this Agreement
and will not operate or be construed as a waiver of any subsequent
breach, whether of a similar or dissimilar nature.
7.5. Entire Agreement. This Agreement (including the Schedules
hereto) supersedes any other agreement, whether written or oral, that
may have been made or entered into by any party or any of their
respective Affiliates (or by any director, officer or representative
thereof) prior to the date hereof relating to the matters contemplated
hereby, other than the confidentiality agreement (the "Confidentiality
Agreement"), between Seller or one of its Affiliates and Parent or one
of its Affiliates, which will survive the execution, delivery or
termination of this Agreement and to which Purchaser agrees to be
bound as if it was an original party thereto. This Agreement (together
with the Schedules hereto) constitutes the entire agreement by and
among the parties hereto and there are no agreements or commitments by
49
or among such parties or their Affiliates except as expressly set
forth herein.
7.6. Amendments, Supplements, Etc. This Agreement may be
amended or supplemented at any time by additional written
agreements as may mutually be determined by Parent (without the
joinder of Purchaser) and Seller to be necessary, desirable or
expedient to further the purposes of this Agreement, or to
clarify the intention of the parties hereto.
7.7. Rights of the Parties. Except as provided in Article V or in
Sections 6.2.4 and 7.3, nothing expressed or implied in this Agreement
is intended or will be construed to confer upon or give any person or
entity other than the parties hereto and their respective Affiliates
any rights or remedies under or by reason of this Agreement or any
transaction contemplated hereby.
7.8. Further Assurances. From time to time, whether at or after
the Closing as and when requested by either Parent (on behalf of
itself and Purchaser) or C&A on behalf of itself and Seller, the other
will execute and deliver, or cause to be executed and delivered, all
such documents and instruments as may be reasonably necessary or
otherwise reasonably requested by Purchaser or C&A to consummate the
transactions contemplated by this Agreement or otherwise to carry out
the intent and purpose of this Agreement and to assure that the
Company holds all of the assets, properties, permits, authorizations,
rights and related obligations used or held for use primarily or
exclusively in the Business, including without limitation the proper
filing, registration or recordation of such documents and instruments.
7.9. Applicable Law; Jurisdiction. This Agreement and the legal
relations among the parties hereto will be governed by and construed
in accordance with the substantive Laws of the State of New York,
without giving effect to the principles of conflict of laws thereof.
7.10. Titles and Headings. Titles and headings to Sections
herein are inserted for convenience of reference only, and are
not intended to be a part of or to affect the meaning or
interpretation of this Agreement.
7.11. Certain Interpretive Matters and Definitions. (a) Unless
the context otherwise requires, (i) all references to Sections or
Schedules are to Sections or Schedules of or to this Agreement, (ii)
each term defined in this Agreement has the meaning assigned to it,
(iii) each accounting term not otherwise defined in this Agreement has
the meaning assigned to it in accordance with GAAP, (iv) "or" is
disjunctive but not necessarily exclusive, (v) words in the singular
include the plural and vice versa, (vi) the terms "subsidiary" and
"Affiliate" have the meanings given to those terms in Rule 12b-2 of
Regulation 12B under the Securities Exchange Act of 1934, as amended,
(vii) all references to "$" or dollar amounts will be to
50
lawful currency of the United States of America, and (viii) "Knowledge
of Seller" means solely to the actual knowledge of the persons listed
on Schedule 7.11(a), and (ix) "Knowledge of Purchaser" means solely to
the actual Knowledge of the persons is listed on Schedule 7.11(b).
(b) No provision of this Agreement will be interpreted in favor
of, or against, any of the parties hereto by reason of the extent to
which any such party or its counsel participated in the drafting
thereof or by reason of the extent to which any such provision is
inconsistent with any prior draft hereof or thereof.
(c) Seller's obligations to Employees and other third parties
(other than Parent, Purchaser and the Company) will be deemed closed
out for purposes of calculating any amounts owed by C&A or any of its
Affiliates to any such third party as of the date of the final
determination of the Actual Net Working Capital Amount pursuant to
Section 1.3
51
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement the day and year first above written.
XXXXXXX & XXXXXX PRODUCTS CO.
By: /s/ J. Xxxxxxx Xxxxx
---------------------------------
Name:
----------------------------
Title:
---------------------------
XXXXXXX & XXXXXX FLOOR
COVERINGS GROUP, INC.
By: /s/ Neoraj Xxxxx
---------------------------------
Name:
----------------------------
Title:
---------------------------
XXXXXXX & XXXXXX
FLOOR COVERINGS, INC.
By: /s/ J. Xxxxxxx Xxxxx
---------------------------------
Name:
----------------------------
Title:
---------------------------
CAF HOLDINGS, INC.
By: /s/ Xxxxxxx X. Xxxxx
---------------------------------
Name: Xxxxxxx X. Xxxxx
----------------------------
Title: President
---------------------------
CAF ACQUISITION CORPORATION
By: /s/ Xxxxxxx X. Xxxxx
---------------------------------
Name: Xxxxxxx X. Xxxxx
----------------------------
Title: President
---------------------------
52
IRREVOCABLE UNDERTAKING
In order to induce Xxxxxxx & Xxxxxx Products Co. ("C&A") and
Xxxxxxx & Xxxxxx Floor Coverings Group, Inc. ("Seller") to enter into
the Acquisition Agreement, dated the date hereof, among such entities
and certain other entities, including Affiliates of the undersigned
(the "Agreement"), each of Quad-C Partners II, L.P., Quad-C Partners
III, L.P., Quad-C Partners IV, LP and Paribas Principal Inc., jointly
and severally irrevocably guarantees to Seller and C&A that it will
cause Purchaser to be capitalized so that Purchaser has on hand at all
times cash or cash equivalents not less than $2,100,000 less any
amounts paid to C&A or Seller in excess of the Purchaser's
liabilities, not funded by other sources, for out-of-pocket
transaction expenses incurred by Parent or Purchaser in pursuing
the Agreement and the transactions contemplated thereby ("Deal
Expenses"), the undersigned covenanting that the Purchaser
will not voluntarily incur any liabilities or obligations other
than Deal Expenses (excluding for all purposes of this Irrevocable
Undertaking liabilities for damages to C&A or Seller arising under
the Agreement).
Each of the undersigned hereby represents and warrants to
the Seller and C&A that it is duly organized and validly existing
under the laws of its jurisdiction of organization and has the
requisite partnership or corporate authority, as the case may be, to
execute this Irrevocable Undertaking and this Irrevocable Undertaking
has been duly executed and delivered by each of the Undersigned, and,
assuming the due execution and delivery of this Irrevocable
Undertaking by Seller and C&A, constitutes a valid and binding
obligation of each of the Undersigned enforceable against it in
accordance with its terms.
Each of the undersigned (i) acknowledges that it has duly
executed and delivered this Irrevocable Undertaking in order to induce
C&A and Seller to enter into the Agreement and (ii) agrees that its
obligations hereunder will not be diminished or otherwise affected by
any amendment to or waiver of or other action by the party under the
Agreement and waives all suretyship defenses which might otherwise
arise as a result thereof.
This Irrevocable Undertaking will terminate and be of no
further force and effect upon the earlier of (i) consummation of the
acquisition, (ii) contribution to a separate account for the sole
benefit of Seller and C&A of an amount equal to $2.1 million in
respect of this Irrevocable Undertaking, less any amounts theretofore
paid to Seller or C&A, and (iii) the termination of the Agreement in
accordance with the terms thereof unless Purchaser or Parent had
previously breached in any material respect any representation,
warranty or covenant of Purchaser or Parent therein.
Terms used herein with initial capital letters which are
defined in the Agreement are used herein as so defined.
53
EXECUTED on the 9th day of December, 1996.
Quad-C Partners II, L.P.
By: Quad-C, Inc. General Partner
---------------------------------
By: /s/ Xxxxxxx X. Xxxxx
---------------------------------
Name: Xxxxxxx X. Xxxxx
-------------------------------
Title: V.P.
------------------------------
Quad-C Partners III, L.P.
By: Quad-C II, L.C. General Partner
---------------------------------
By: /s/ Xxxxxxx X. Xxxxx
---------------------------------
Name: Xxxxxxx X. Xxxxx
-------------------------------
Title: V.P.
------------------------------
Quad-C Partners IV, L.P.
By: Quad-C IV, L.C., General Partner
---------------------------------
By: /s/ Xxxxxxx X. Xxxxx
---------------------------------
Name: Xxxxxxx X. Xxxxx
-------------------------------
Title: V.P.
------------------------------
Paribas Principal Inc.
By: /s/ Xxxx X. Xxxxxxx
---------------------------------
Name: Xxxx X. Xxxxxxx
-------------------------------
Title: V.P.
------------------------------
54
LIST OF SCHEDULES
Schedule 1.2(a) Push-Down Liabilities
Schedule 1.3(a) Accounting Policies - Divisional Basis
Schedule 2.1.1 Qualifications
Schedule 2.1.2 Shares
Schedule 2.1.2(c) Liens on Shares
Schedule 2.1.2(d) Liens and other Rights to Shares
Schedule 2.1.3 Officers & Directors
Schedule 2.1.5 Liens, Conflicts, Violations or Defaults
Schedule 2.1.6(a) Combined Financial Statements
Schedule 2.1.6(b) Consolidated Financial Statements
Schedule 2.1.7 Conduct of the Business Since the Balance Sheet Date
Schedule 2.1.8 Compliance with Laws
Schedule 2.1.9 Tangible Personal Property; Title to Assets
Schedule 2.1.10 Leased Real Property
Schedule 2.1.11 Insurance
Schedule 2.1.12 Intellectual Property
Schedule 2.1.13 Litigation; Decrees
Schedule 2.1.14 Contract Rights
Schedule 2.1.15 Current Employee Benefits
Schedule 2.1.l6 Taxes
Schedule 2.1.17 Environmental Matters
Schedule 2.1.18 No Undisclosed Liabilities
Schedule 2.1.19 Certain Property
Schedule 2.1.20 Affiliate Interests
Schedule 2.2.3 Consents, Approvals, etc.
Schedule 3.5 Exceptions to Operating Covenants
Schedule 3.5(c) Capital Expenditures
Schedule 4.2.5(a) Management Services Agreement
Schedule 4.2.5(b) Tradename License Agreement
Schedule 4.2.5(c) Non-Competition Agreement
Schedule 4.2.5(e) Xxxxx Day Opinion
Schedule 4.3.3 McGuire, Woods, Battle & Xxxxxx, L.L.P. Opinion
Schedule 5.3(c) Retained Claims
Schedule 6.1.1(a) Certain Employees
Schedule 6.1.2(a) Retiree Medical Benefits
Schedule 6.2.7(c) Master Contracts
Schedule 7.11(a) Knowledge of Seller
Schedule 7.11(b) Knowledge of Purchaser
The Registrant hereby undertakes to furnish supplementally a copy of any
schedule omitted herefrom as permitted by Item 601(b)(2) of Regulation S-K to
the Commission upon request.
