UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended January 2, 1998
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number: 0-22138
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Triangle Pacific Corp.
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(Exact name of registrant as specified in its charter)
Delaware 94-2998971
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State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
16803 Dallas Parkway, Dallas, Texas 75248
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (214) 887-2000
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to section 12(g) of the Act:
Common Stock, Par Value $.01 per share
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
At March 1, 1998, the aggregate market value of the registrant's common
stock held by non-affiliates was $515,223,972.
The number of shares outstanding of the registrant's Common Stock, par
value $.01 per share, as of March 1, 1998: Common Stock - 14,745,345 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Part III of this Form 10-K incorporates certain information by reference
from the registrant's Proxy Statement to be issued in connection with its
Annual Meeting of Shareholders to be held May 6, 1998.
<PAGE>
PART I
Item 1. Business
--------
The Company is a Delaware corporation organized in February 1986 for the
purpose of acquiring Triangle Pacific Corp., a New York corporation ("Old
Triangle"), in a leveraged buyout transaction completed in May 1986. In
September 1988, TPC Holding Corp. ("Holding") acquired the Company in a second
leveraged buyout transaction pursuant to which the Company became a wholly-
owned subsidiary of Holding.
On June 8, 1992, the Company successfully completed a capital
restructuring (the "1992 Restructuring") pursuant to which substantially all
of the Company's outstanding long-term indebtedness, redeemable preferred
stock and common stock were exchanged for new debt with lower interest rates
and new common stock and Holding was merged into the Company.
The Company filed two registration statements with the Securities and
Exchange Commission in 1993 and sold to the public 7,939,750 shares of the
Company's Common Stock and $160 million aggregate principal amount of 10-1/2%
Senior Notes due 2003 (collectively, "the Offerings"). The net proceeds of
the Offerings together with borrowings under a new $90 million credit facility
(the "Credit Facility") were used (i) to repay the entire unpaid balance under
the Company's previously-existing senior debt financing agreements, redeem
certain previously outstanding debentures and pay related accrued interest,
for a total of approximately $227 million, and (ii) for working capital and
general corporate purposes.
The Company's operations are conducted through a single business segment
which consists of the manufacture and distribution of building products. The
Company manufactures and sells hardwood flooring and other flooring and
related products and manufactures and distributes kitchen and bathroom
cabinets. The Company's products are used primarily in residential new
construction and remodeling. The Company's products are also used for
commercial applications such as retail stores and restaurants. The Company's
business is seasonal, with demand for its products generally highest between
April and November.
Presented below is a summary of sales results for each of the fiscal years
1991 through 1997.
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993 1992 1991
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(in millions)
<S> <C> <C> <C> <C> <C> <C> <C>
Net Sales:
Flooring $ 469.1 $ 336.4 $ 261.8 $ 244.0 $ 202.0 $ 152.9 $ 117.2
Cabinets 183.8 197.9 197.1 166.2 144.3 139.9 138.9
------ ------ ------ ------ ------ ------ ------
Total
Net Sales $ 652.9 $ 534.3 $ 458.9 $ 410.2 $ 346.3 $ 292.8 $ 256.1
====== ====== ====== ====== ====== ====== ======
</TABLE>
Bruce, Premier, Hartco, Robbins, Coastal Woodlands, Crystalguard, Expressions,
Flexform, Herringstrip, Jewels Of Nature, Kennedale, Kingsford, Natural
Reflections, Pattern Plus, Plantation, Somerset, Traffic Zone, Wearmaster,
Aspen, Hampton, Quadric, Tiara, Tudor and Vantage are Trademarks or Registered
Trademarks of Triangle Pacific Corp.
Industry Overview
- -----------------
The Company is a leading manufacturer of consumer wood products for both
home and commercial use. The Company is the largest and best known
manufacturer of hardwood flooring in the world and one of the largest
manufacturers of kitchen and bathroom cabinets. The Company produces a
complete line of hardwood flooring products and believes that it is generally
recognized for its superior quality and service. The Company offers five
distinct flooring brand names: Bruce, Hartco, Robbins, Premier, and Traffic
Zone. The Company produces kitchen and bathroom cabinets under two brand
names: IXL and Bruce.
<PAGE>
The Company estimates that new construction accounts for approximately 30
- - 40% of sales, with remodeling or replacement generating the remaining
portion. Residential new construction activity is more cyclical than
remodeling activity, which has historically been relatively stable.
Sales of hardwood flooring in the United States are growing at a rate of
8% per year, more than twice as fast as the entire floorcovering industry as a
whole. The Company believes that the growth of hardwood flooring sales is due
to increased consumer preference for the aesthetic appeal of hardwood flooring
and technological advances in the production, installation and maintenance of
hardwood flooring, which allows wood flooring to compete favorably in total
cost with other flooring products.
Cabinet manufacturing is a highly fragmented industry with competitors of
widely varying production capacities, distribution capabilities and financial
resources. In recent years, contraction in the industry has resulted in
smaller competitors leaving the market and more aggressive cost controls and
marketing programs being implemented by the remaining participants. The
Kitchen Cabinet Manufacturing Association estimates that there are 8,000
manufacturers of kitchen and bathroom cabinets competing for approximately 50%
of the total cabinet market. The balance of the market is supplied by trim
carpenters and job-site cabinet makers. The market is dependent on new home
construction and remodeling activity. The entire cabinet manufacturing
industry is characterized by excess capacity. In the late 1970's, new
construction expanded to meet the demands of more than two million housing
starts annually, plus remodeling. U.S. housing starts have not exceeded 1.85
million units since 1979. Price competition is severe, due principally to the
excess industry capacity.
Products and Product Development
- --------------------------------
With both flooring and cabinet products, the Company continually addresses
the changing consumer demands for products used in the home, including color
trends in the furniture and home decorating industry, durability of the
products and price points for competing products.
The Company offers approximately 1,200 varieties of hardwood flooring and
related products in a multitude of wood species, grades, sizes, styles and
finishes. The Company's hardwood flooring products are generally available in
various widths and lengths and are differentiated in terms of quality and
price based primarily on whether the product is finished or unfinished and on
the grade of the raw materials used to produce the product.
The Company has been a leader in developing a wide variety of new flooring
products, including (i) 5/16" thick solid parquet flooring, (ii) 3/8" thick
laminated flooring, (iii) 3/8" thick engineered, square-edge, pre-finished
flooring, (iv) 3/8" thick acrylic-impregnated flooring for commercial
applications (all of the above for glue-down installation), (v) 3/4" thick
square-edge, pre-finished flooring and (vi) most recently, 5/16" thick solid
strip flooring. The Company believes that new product development has enabled
it to increase its sales and has contributed to the overall growth of hardwood
flooring since the mid-1970s. The Company's product innovations have made
hardwood flooring a viable alternative for a variety of floorcovering
applications.
The Company has been instrumental in the development of thinner hardwood
flooring products which can be glued to the concrete slab foundations
increasingly used in new home construction. Installation of 3/4" thick
hardwood flooring over concrete slabs requires the construction of a false
floor above the slab to which the hardwood flooring can be nailed, thereby
increasing installation time and expense. The Company has developed 5/16"
thick flooring products, which can be glued or stapled to a variety of
surfaces, eliminating the need for a false floor. The development of 3/8"
thick engineered flooring (consisting of multiple layers of oak veneer, glued
and pressed together), which can be glued to a wood or concrete sub-floor,
further expanded the uses for hardwood flooring. The dimensional stability of
engineered flooring permits its installation in kitchens and basements where
the presence of moisture had previously rendered hardwood flooring
impractical.
<PAGE>
In 1995, the Company introduced Natural Reflections, a 5/16" thick solid
oak pre-finished strip. This was developed as an alternative to the
traditional 3/4" thick unfinished strip that is the primary commodity product
of the hardwood flooring industry. This thinner strip offers many benefits.
It approximately doubles the yield of product from raw material, saving
resources by using fewer trees in the manufacturing process. Because it
contains less than half the wood in a traditional 3/4" thick strip, it is less
expensive to make, less expensive to ship, and easier and faster to install.
Also in 1995, the Company introduced a new product group, high pressure
laminate flooring. This product, which is called Traffic Zone, features a
CrystalGuard melamine wear-layer surface over a high-density fiberboard core.
It offers superior wear characteristics in a variety of overlays that simulate
fine wood finishes as well as marble, granite, and other materials. Traffic
Zone is designed for consumers who want highly durable, easy-care, hard
surface floorcovering as an alternative to stone, ceramic tile, sheet vinyl,
vinyl tile and carpet.
The Company manufactures kitchen and bathroom cabinets in approximately
100 different styles and colors and continues to develop new product styles.
While the styles of the Company's cabinets vary from other manufacturers'
brands, kitchen and bathroom cabinet construction is fundamentally the same
throughout the industry. Differences in the price and quality of the
Company's cabinets result from variations in basic materials (e.g., solid
oak, plywood, particleboard or fiberboard doors), the type and quality of
exterior and interior finish, the quality of the hardware and other features
such as adjustable shelves and interior storage aids.
During the latter part of 1994 and throughout 1995, the Company revamped
its product line to improve marketability and mix of offerings. Among the
many innovations that have emerged from this effort is a new cabinet line
called Coronet, which is made of Plantation hardwood from Malaysia. Months of
testing and research preceded the use of this new raw material, which produces
an end product of the same durability and styling as other woods, but which
can be sold at a lower price point. In its continuing effort to offer more
value to builders and end-users, the Company introduced the Aspen Collection,
a line of thermofoil-process products which feature high-quality vinyl
laminates applied to fiberboard. Through innovative manufacturing techniques,
the Company was able to produce this popular line, available in maple and
white finishes, at prices attractive to the townhouse and single-family
housing market.
In 1996, the Company introduced Quadric. Unlike most thermofoil cabinets,
Quadric features truly square corners in both doors and drawer fronts,
achieved by extra steps in milling that duplicate the look of fine custom
cabinetry at very competitive prices. Also introduced in 1996 were four new
door styles: Tiara, Tiara Arched, Tudor and Tudor Arched.
As of January 1996, the Company elected to discontinue the sale of lumber,
which had remained a low-profit item, and to consolidate building products
into its cabinet operations. Beginning with the first quarter of 1996, the
financial results of this operation have been combined with those of cabinets.
One of the benefits of the Hartco acquisition in 1996 was a sophisticated
research and development center in Oneida, Tennessee, where the Company has
consolidated its R & D efforts. The Company believes this facility will
further enhance its ability to stay on the leading edge of product,
manufacturing and engineering technology.
Manufacturing
- -------------
The Company manufactures its 3/4" thick solid oak hardwood flooring
products at its plants in Nashville and Jackson, Tennessee, Beverly, West
Virginia, West Plains, Missouri, Warren and Searcy, Arkansas,and Oneida,
Tennessee. The Beverly, West Virginia plant also produces 5/16" thick solid
strip pre-finished flooring. The Company manufactures its 3/8" thick
engineered hardwood flooring products at its plants in Center, Texas, Port
Gibson, Mississippi, Statesville, North Carolina, Warren, Arkansas and
Somerset, Kentucky. The Center plant produces sufficient 1/8" thick oak
veneer to supply approximately one-half of its veneer requirements. The Port
Gibson, Mississippi plant supplies its own veneer requirements and most of the
remainder of the Center plant's veneer requirements and a portion of the
veneer requirements for the Statesville plant for the production of 3/8" thick
engineered products. The Company manufactures its 5/16" thick solid parquet
products at its plants in Jackson and Oneida, Tennessee in addition to the
production of 3/4" thick product at these locations.
<PAGE>
The 1994 expansion of its Beverly, West Virginia, and Port Gibson,
Mississippi, plants gave the Company additional manufacturing capacity, along
with the acquisition of Premier Wood Floors in Statesville, North Carolina.
Following the acquisition, the Company improved productivity in Premier's
operations and broadened the Premier product line to include 3/4" thick solid
strip and 5/16" thick solid parquet. Further efficiencies were achieved at
all plants.
In 1996, the Company acquired Hartco Flooring Company. This acquisition
added manufacturing capacity to the Company without incurring larger capital
expenditures required for new construction.
In 1997, the Company acquired the residential hardwood flooring operations
of Robbins, Inc., all of which are in Arkansas. This acquisition further
added manufacturing capacity without incurring larger capital expenditures
required for new construction.
Raw materials for the hardwood flooring products produced at the
Nashville, Jackson, Beverly, West Plains, Oneida, Somerset, Warren and Searcy
plants consist primarily of rough cut oak lumber. Each plant obtains lumber
from local independent sawmill operators, purchasing entire truckloads of
ungraded, mixed specie lumber. The Company maintains an inventory of
purchased lumber which is sufficient for approximately three to four months of
operations. The quality and efficiency of lumber purchasing and grading
operations are important determinants of manufacturing yields and
productivity.
Purchased lumber is stacked for drying in the open air for 90 to 120 days,
and then placed in dry kilns for approximately five to seven days to reduce
moisture content. Where necessary, the Company operates pre-drying kilns,
which shorten the required open-air drying time. The Company's drying
processes are another important determinant of satisfactory product yields.
Following drying, the flooring-grade lumber is cut into various sizes of
strip, plank and parquet flooring. The products are then sanded and, in some
cases, beveled. A majority of the Company's products are pre-finished with a
urethane or combination stain and wax finish. Pre-finished products are more
durable and do not require a time-consuming sanding and finishing process at
the installation site.
Raw materials for the engineered hardwood flooring products manufactured
at the Company's plants in Center, Texas, Port Gibson, Mississippi and Warren,
Arkansas consist of oak logs which are purchased primarily from independent
loggers located within about 100 miles of the respective plants. Purchased
logs are stored in soaking ponds or under sprinklers until needed, and then
debarked, soaked in hot water or steamed, cut to specific lengths, loaded into
a lathe, and peeled to produce sheets of thin oak veneer. The Company employs
advanced veneer manufacturing processes which substantially increase material
yields, thereby reducing costs. The Company also purchases veneer from
independent suppliers. Layers of veneer are then pressed into plywood which
is cut into strip, plank and parquet hardwood flooring and then pre-finished.
The total conversion time for engineered products, from log to finished
product, is approximately one week.
The Company also treats a portion of its 3/8" thick engineered product
with an acrylic impregnating process to produce its Wear Master line of
commercial flooring. Hartco produces Pattern Plus, an acrylic-impregnated
engineered product at its Oneida plant. The Statesville, N.C. plant purchases
veneer from outside sources and also obtains veneer from the Port Gibson
plant, which is converted into engineered products.
The Company operates four cabinet manufacturing plants. These regional
plants enable the Company to compete with local and regional manufacturers on
the basis of the cost of freight, speed of delivery and service to customers.
Cabinet plant inventories consist of raw materials, component parts and a
limited amount of work-in-process. Raw materials utilized by the plants
consist of sheet stock of plywood, particleboard or fiberboard, and component
parts consist of dimension parts (front frame parts, doors and drawer fronts),
finished end panels, finishing materials and hardware. In the cabinet
manufacturing operations, front frame parts, doors and drawer fronts are
sanded smooth and color stained and finished. Then, end panels, tops, bottoms
and shelves are glued and stapled to the front frames, drawers are assembled
to drawer fronts and hardware is attached. The completed cabinet is
inspected, packed and staged for shipment.
<PAGE>
Sheet stock is a commodity product purchased from a variety of suppliers.
The Company obtains a portion of its front frame parts from its manufacturing
facility located at the hardwood flooring plant in Jackson, Tennessee. The
Company discontinued the production of cabinet doors and drawer fronts at its
Jackson dimension plant at the end of February 1997. Doors, drawer fronts,
finishing materials and hardware are purchased from several suppliers.
The Company's continuous advances in the area of technology and
manufacturing are the basis for its ability to improve yields from raw
material and make products that are more appealing to consumers, easier to
install, and more cost competitive. This year again, the Company made even
greater improvements in labor efficiency and productivity as it sought ways to
counter the difficult economic and market conditions.
The Company is not dependent on any single supplier for any of its raw
materials or component parts. The Company believes its sources of supply are
adequate to meet its needs. Imports from foreign suppliers, which account for
less than ten percent of the Company's raw materials and components, consist
of wood veneer, laminated veneer door panels and certain hardware items.
The following table sets forth certain information concerning the
manufacturing facilities operated by the Company.
<TABLE>
<CAPTION>
Owned/
Location Leased Product
- -------- ------ ------------------------
<S> <C> <C>
Nashville, TN Owned 3/4" thick strip and plank;
pre-finished, unfinished
West Plains, MO Owned 3/4" thick strip; pre-finished,
unfinished
Beverly, WV (1) Leased 5/16" thick solid strip;
pre-finished
and 3/4" thick strip;
pre-finished, unfinished
Jackson, TN (2) Owned 5/16" thick solid parquet;
pre-finished, unfinished
3/4" thick strip; unfinished
Center, TX (3) Owned 3/8" and 1/4" thick engineered strip,
plank and parquet; pre-finished,
unfinished
Port Gibson, MS (3) Owned 3/8" thick engineered strip,
plank and parquet; pre-finished,
unfinished
Statesville, NC Owned 3/8" thick engineered strip,
plank, pre-finished, unfinished
Oneida, TN Owned 5/16" thick solid parquet;
pre-finished, unfinished
3/4" thick strip; unfinished
Somerset, KY Owned 3/8" thick engineered strip,
plank, pre-finished, unfinished
Warren, AR Owned 3/4" thick strip and plank;
pre-finished, unfinished
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Owned/
Location Leased Product
- -------- ------ ------------------------
<S> <C> <C>
Warren, AR Owned 3/8", 1/2" and 9/16" thick
engineered strip, plank and
parquet; pre-finished, unfinished
Searcy, AR Owned 3/4" thick unfinished strip
Auburn, NE Owned Kitchen and bathroom cabinets
McKinney, TX Owned Kitchen and bathroom cabinets
Morristown, TN Owned Kitchen and bathroom cabinets
Thompsontown, PA Owned Kitchen and bathroom cabinets
</TABLE>
[FN]
- ------------------
(1) During 1995, the operating lease agreement was amended to allow for a
purchase option of $1 until 2018. The Company recorded the present
value of the remaining future minimum lease payments as a capitalized
lease asset and related capitalized lease obligation.
(2) The Jackson plant also manufactures kitchen cabinet front frame parts
used in cabinet production.
(3) The Center and Port Gibson plants also produce 1/8" thick veneer,
which is used in the manufacture of 3/8" thick engineered products at
these plants and at the Statesville, N.C. plant.
Sales and Marketing
- -------------------
Flooring sales are made to independent wholesale floorcovering
distributors located throughout the United States and a number of other
countries. Most distributors handle a diverse line of floorcovering products
in addition to hardwood flooring. The Company's distributors sell their
products to retail floorcovering dealers, installation contractors, builders,
remodelers and retail home center stores. The Company believes that new home
construction and remodeling account for approximately 40% and 60%,
respectively, of its flooring sales.
The Company distributes its cabinets directly from the factories and also
through Company-operated distribution centers in major markets across the
country. These centers, which cater largely to builders and remodeling
contractors, generate more than 40% of total cabinet sales.
The Company-operated distribution centers are also used to support sales
to major builders and retail home centers by providing prompt replacements for
lost or damaged cabinets and delivery and storage for truckload quantities of
cabinets pending staged deliveries to job sites. The Company believes that its
distribution centers are an important factor in maintaining and increasing its
sales, and intends to open additional distribution centers in new geographic
markets as conditions warrant.
The Bruce trademark is a valuable asset because of its significant brand
name recognition. Based on independent surveys, the Company believes that the
Bruce name is one of the best recognized consumer brand names of any
floorcovering product. Sales and marketing efforts for Bruce flooring are
designed to heighten Bruce's brand name recognition among end users. The
Company advertises its Bruce flooring products in national and regional
publications including House Beautiful, Better Homes and Gardens, Sunset,
Southern Living and others.
The addition of Hartco's distributors in 1996 and Robbins' distributors in
1997 expanded our overall presence in the floorcovering marketplace. This
expanded access to the market is strengthened by our ability to offer five
distinct brands - Bruce, Hartco, Robbins, Premier and Traffic Zone.
The Company has developed Bruce product displays, more than 55,000 of
which have been placed in floorcovering dealer showrooms across the U.S.
<PAGE>
Additionally, Hartco, Premier and Traffic Zone have placed more than 1,800,
3,200, and 4,500 displays, respectively, in floor covering dealer showrooms.
These product displays are available in a variety of sizes designed to
accommodate the varying floor spaces available in dealer showrooms. The
Company has also developed marketing programs specifically tailored to retail
home center stores and commercial users and has developed displays to
demonstrate the ease of do-it-yourself installation of hardwood floors. The
do-it-yourself installation displays have been placed in floorcovering
retailers, lumber yards, home centers and other do-it-yourself specialty
stores. Management believes that both the product displays and the do-it-
yourself installation displays are important sales promotion devices.
The Company operates a training facility at its Nashville plant to give
its floorcovering distributors, dealers and contractors training in the sale,
installation and maintenance of hardwood and high pressure laminate floors.
Providing this training results in better educated resellers and installers,
which the Company believes should enhance their ability to sell more flooring
products and improve consumer satisfaction with the installed products.
Flooring salespersons are assigned geographical sales territories. In
addition to making direct sales to independent distributors, the sales force
assists distributors in broadening their market penetration by making joint
sales calls on dealers, conducting installation training for distributors and
their customers, and advising on the use of advertising and special product
promotions. Salespersons earn bonuses, in addition to their salaries, based
on volume and sales mix.
The cabinet sales force is one of the largest in the cabinet industry,
currently employing approximately 204 salespersons. The sales force makes
direct sales and service calls on builders, independent distributors and
retail home center stores, and offers kitchen design, cabinet installation and
cabinet display and marketing advice to retail home center stores and
independent distributors. Most sales personnel are affiliated with one of the
Company's distribution centers and are responsible for sales to all customers
within their sales area including sales of cabinets directly by the plant.
The Company maintains a competitive salary base and provides performance
incentives by compensating its sales force with bonuses tied to volume and
profitability.
Competition
- -----------
While the Company is currently the largest manufacturer of hardwood
flooring in the world, it is a small part of the highly competitive
floorcovering market. The floorcovering market includes companies which are
substantially larger in sales and financial resources than the Company. Also
the domestic floorcovering industry is facing greater competition from
imported flooring products.
The floorcovering industry, which includes carpet, sheet vinyl, vinyl
tile, hardwood, high pressure laminate, ceramic tile and natural stone is
highly competitive. The principal competitive factors in floorcovering are
aesthetic appeal, price, durability and ease of installation and maintenance.
Hardwood flooring is generally more durable than other floorcoverings. Thus,
although the average selling price of hardwood flooring is higher than that of
the selling price of most other floorcoverings, the Company believes that the
overall cost is competitive after taking into accouont average product life,
maintenance expenses and removal and replacement costs.
The Company believes it competes favorably based on the high quality of
the Company's products and the additional product support services offered by
the Company and on the Company's network of independent distributors, its
production of a complete line of hardwood flooring products, its innovative
product development and manufacturing technology, and its well-known brand
names and trademarks.
The Company is one of the largest manufacturers of kitchen and bathroom
cabinets in the U.S. The cabinet industry is a mature, highly competitive,
regionalized and highly fragmented industry with thousands of cabinet makers
competing primarily on a local basis. There is a relatively high manual labor
content in cabinet products. Because of the low capital requirements for
cabinet assembly, it is relatively easy and inexpensive for small cabinet
makers to enter the industry as manufacturing competitors. In addition, high
transportation costs limit the area to which a manufacturer can ship cabinets
and still remain competitive. This has led the Company, and more recently,
<PAGE>
some of its larger competitors, to open regional manufacturing plants and
distribution centers. The Company's four regional manufacturing plants and 41
Company-operated distribution centers are important factors in the Company's
ability to maintain cost and price competitiveness with local and regional
manufacturers.
Due to excess manufacturing capacity, the cabinet industry has been
subject to severe price competition. Other competitive factors include
quality of product, production capacity and speed of delivery. The Company
believes it competes favorably because of its breadth and quality of product
offerings, and its production capacity, regional manufacturing facilities,
national sales force and distribution capabilities.
Backlog
- -------
The Company generally sells its flooring products from inventories on
hand. The Company produces its cabinets primarily in response to firm orders
and, to a lesser extent, to maintain a working inventory at distribution
centers operated by the Company. The Company generally ships its cabinets
within a short time (e.g., one week) after receipt of an order. Accordingly,
the dollar amount of backlog orders believed to be firm is not significant or
indicative of the Company's future sales and earnings.
Employees
- ---------
As of January 2, 1998, the Company employed approximately 5,404 persons.
The Company has entered into collective bargaining agreements with hourly
employees at six of its plants, covering in the aggregate approximately 2,091
employees. Management considers its employee relations to be satisfactory.
Environmental Matters
- ---------------------
The Company's operations are subject to extensive federal, state and local
laws and regulations relating to the generation, storage, handling, emission,
transportation and discharge of materials into the environment. Permits are
required for certain of the Company's operations, and these permits are
subject to revocation, modification and renewal by issuing authorities.
Governmental authorities have the power to enforce compliance with their
regulations, and violations may result in the payment of fines or the entry of
injunctions, or both. The Company does not believe it will be required under
existing environmental laws and enforcement policies to expend amounts which
will have a material adverse effect on its results of operations or financial
condition. However, the requirements of such laws and enforcement policies
have generally become stricter in recent years. Accordingly, the Company is
unable to predict the ultimate cost of compliance with environmental laws and
enforcement policies.
ITEM 2. PROPERTIES
The Company's principal manufacturing facilities are described under
"Manufacturing" above. Management believes that the Company's plants and
properties are generally well-maintained and in good operating condition.
The Company maintains blanket property insurance coverage on all its
properties with aggregate limits of $100 million. The Company is also insured
for losses arising from loss of inventory, business interruption and certain
extra expense.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any material pending legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
<PAGE>
Executive Officers of the Registrant
- ------------------------------------
Set forth below as of March 1, 1998 are the names, ages and principal
occupations of the executive officers of the Company, as well as certain other
information concerning their business experience.
Name and Positions held Principal Occupation
with the Company and Other Information
----------------------- ---------------------
Floyd F. Sherman Mr. Sherman has served as Chairman
Chairman of the Board of of the Board and Chief Executive
Directors, and Chief Officer since July, 1992. Prior to
Executive Officer November, 1994 he served as
President of the Company since 1981.
Prior to 1981, he served as
Executive Vice President of the
Company. Mr. Sherman is 58 years
old and became a director of the
Company in 1982.
M. Joseph McHugh Mr. McHugh has served as President
Director, President and Chief Operating Officer of the
and Chief Operating Company since November, 1994.
Officer Prior thereto, he served as Senior
Executive Vice President and
Treasurer of the Company since 1981.
Prior to 1981, he served as
Executive Vice President of the
Company. He became a director of
the Company in 1986. Mr. McHugh is
also a director of Pillowtex
Corporation. He is 60 years old.
Robert J. Symon Mr. Symon has served as Executive
Executive Vice President Vice President, since February 1998.
Prior thereto, he served as Executive
Vice President, Treasurer and Chief
Financial Officer since November 1994.
Prior thereto, he served as Vice
President - Controller of the Company
since 1978. Mr. Symon is 66 years old
and served as a Director of the Company
from December 1988 to June 1992.
E. Dwain Plaster Mr. Plaster has served as a Vice
Vice President, President, Treasurer and Chief Financial
Treasurer and Chief Officer of the Company since February,
Financial Officer 1998. Prior thereto, he served as Vice
President since November 1994 and had been
the Controller of Bruce Hardwood Floors
since 1977. Mr. Plaster is 48 years old.
Paul L. Barrett Mr. Barrett has served as Vice President
Vice President, Secretary Secretary and General Counsel of the
and General Counsel Company since November, 1997. Prior
thereto for more than the past five years
he served as Vice President, Secretary and
General Counsel of Redman Industries Inc.
Mr. Barrett is 62 years old.
Charles A. Engle Mr Engle has served as a Vice President of
Vice President the Company since 1979. He has also served
as President of the Cabinet group since
January 1996. Mr. Engle is 54 years old.
<PAGE>
John W. Esch Mr. Esch has served as a Vice
Vice President President of the Company since
November, 1994. He has been Controller
of the Cabinet group since 1977.
Mr. Esch is 53 years old.
James T. Fidler Mr. Fidler has served as a Vice
Vice President President of the Company since 1981.
He has been Vice President-Operations
since August, 1995. Prior thereto, he
was Director-Management Information
Operations for the Company. Mr. Fidler
is 55 years old.
Michael J. Kearins Mr. Kearins has served as a Vice
Vice President President of the Company since 1985 and has
primary responsibility for sales and
marketing of flooring products. Prior to
1983, he had been a Regional Sales Manager
of the Company. Mr. Kearins is 51 years
old.
James E. Price Mr. Price has served as a Vice
Vice President President of the Company since
November, 1994. He has been Vice
President of manufacturing of flooring
products since March, 1993. Prior thereto,
he was General Manager since 1984. He had
been a Plant Manager of the Company since
1979. Mr. Price is 55 years old.
Allen Silver Mr. Silver has served as a Vice
Vice President President of the Company since 1985.
Prior to that time he had been a
Vice President of manufacturing of cabinet
products. Mr. Silver is 58 years old.
Richard A. TerHaar Mr. TerHaar has served as Vice President
Vice President of the Company since May, 1997. He has
been Director of Management Information
Services since 1995. Prior thereto he
served as Manager of Systems and
Programming since 1981. Mr. TerHaar is
49 years old.
Jennifer E. Wisdom Ms. Wisdom has served as Vice President of
Vice President the Company since May, 1997. She has been
Director of Human Resources since 1994.
Prior thereto, Ms. Wisdom was Director of
Human Resources at Varo, Inc. since 1986.
Ms. Wisdom is 51 years old.
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
A) Price range of common stock
The following table shows the range of market prices for the common stock
on the NASDAQ National Market System for each quarter during the past two
fiscal years.
Market Price
1996 High Low
---- ------ ------
First Quarter 18-1/8 15-3/4
Second Quarter 21-3/8 16-3/8
Third Quarter 22-3/4 19
Fourth Quarter 24-7/8 19-3/4
1997
----
First Quarter 29-3/4 23-1/16
Second Quarter 33 24-1/2
Third Quarter 36-1/2 28-7/16
Fourth Quarter 35-1/2 30-1/4
B) Approximate number of equity security holders (As of January
2, 1998)
Class of Security Number of Record Holders
----------------- ------------------------
Common Stock ($.01 par value) 2,400
C) Dividend Policy
The Company has not declared or paid any dividends on its Common Stock.
Management currently intends to retain future earnings for the operation and
expansion of the Company's business and does not anticipate paying any cash
dividends in the foreseeable future. The payment of cash dividends is
restricted under the terms of the Company's bank credit facility and the
indenture relating to the Company's 10 1/2% Senior Notes due 2003.
<PAGE>
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
(In thousands, except per share amounts)
The selected consolidated financial data of the Company presented below
for the five fiscal years ended January 2, 1998 was derived from the
consolidated financial statements of the Company and should be read in
conjunction with the consolidated financial statements and related notes
included herein.
<TABLE>
<CAPTION>
Fiscal Fiscal Fiscal Fiscal Fiscal
year year year year year
ended ended ended ended ended
INCOME Jan. Jan. Dec. Dec. Dec.
STATEMENT 2, 3, 29, 30, 31,
DATA 1998 1997 1995 1994 1993
--------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $652,866 $534,261 $458,868 $410,159 $346,296
Cost of sales 495,256 402,759 342,348 300,160 269,360
--------------------------------------------------------
Gross profit 157,610 131,502 116,520 109,999 76,936
Selling,
general and
admin-
istrative 80,503 68,611 60,841 57,928 44,213
Amortization
of goodwill 2,638 1,739 1,520 1,520 1,613
Interest 22,863 19,719 18,380 18,920 19,406
--------------------------------------------------------
Income before
income taxes
and extra-
ordinary item 51,606 41,433 35,779 31,631 11,704
Provision
for income taxes 19,847 15,809 13,774 12,829 4,501
--------------------------------------------------------
Income before
extraordinary
item 31,759 25,624 22,005 18,802 7,203
Extraordinary
item - Loss from
repayment of
debt - - - - (11,307)
---------------------------------------------------------
Net income (loss) $ 31,759 $ 25,624 $ 22,005 $ 18,802 $ (4,104)
=========================================================
Per share
data:
Net income before
extraordinary item
Basic $ 2.16 $ 1.75 $ 1.50 $ 1.28 $ 0.74
Diluted $ 2.07 $ 1.71 $ 1.49 $ 1.28 $ 0.74
Net income (loss)
Basic $ 2.16 $ 1.75 $ 1.50 $ 1.28 $ (0.42)
Diluted $ 2.07 $ 1.71 $ 1.49 $ 1.28 $ (0.42)
Weighted common
shares out-
standing
Basic 14,716 14,670 14,663 14,660 9,714
Diluted 15,321 15,005 14,815 14,701 9,714
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Jan. Jan. Dec. Dec. Dec.
BALANCE 2, 3, 29, 30, 31,
SHEET DATA 1998 1997 1995 1994 1993
---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Working
capital $127,481 $114,509 $113,397 $ 94,354 $ 74,082
Total assets 543,221 449,963 399,815 363,451 326,545
Long-term
debt, net
of current
portion 232,241 190,604 183,044 168,388 162,897
Common
shareholders'
investment 186,912 154,637 128,901 106,894 88,047
</TABLE>
<PAGE>
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
- ---------------------
The following table sets forth selected information concerning the
Company's results of operations for fiscal 1997, 1996 and 1995.
<TABLE>
<CAPTION>
Fiscal Year
------------------------------
1997 1996 1995
-------------------------------
(Dollars in millions)
<S> <C> <C> <C>
Net sales:
Flooring $ 469.1 $ 336.4 $ 261.8
Cabinets 183.8 197.9 197.1
------ ------ ------
Total net sales 652.9 534.3 458.9
------ ------ ------
Gross profit 157.6 131.5 116.5
Selling, general and
administrative
expenses 80.5 68.6 60.8
Amortization
of goodwill 2.6 1.7 1.5
------ ------ ------
Operating income $ 74.5 $ 61.2 $ 54.2
====== ====== ======
As a percent of net sales:
Gross profit 24.1% 24.6% 25.4%
Selling, general and
administrative expenses 12.3 12.8 13.3
Operating income 11.4 11.4 11.8
</TABLE>
Fiscal year 1997 compared to fiscal year 1996
- ---------------------------------------------
Net sales for fiscal 1997 were $652.9 million, an increase of 22.2% over
1996 net sales of $534.3 million.
Net flooring sales increased 39.5% to $469.1 million from $336.4 million
in the prior year. Fiscal 1997 results include Hartco Flooring Company, which
was acquired on June 28, 1996 and Robbins Hardwood Flooring, Inc., which
acquired the Robbins Residential Flooring operations on March 28, 1997. Unit
sales of hardwood flooring increased 31.9%. International sales were 12.0% of
total flooring sales, which represented an increase of 51.8% over 1996
international sales.
Net cabinet sales were $183.8 million in 1997 compared to $197.9 million
in 1996. Unit sales declined 13.9%, while the average unit selling price
increased 7.9%. The higher unit selling price is confirmation that the
Company continues to be more selective in accepting orders.
Consolidated gross profit for 1997 was $157.6 million, or 24.1% of net
sales, compared to $131.5 million, or 24.6% of net sales in 1996. The
decrease in gross profit percentage in 1997 was caused primarily by the cost
of lumber, which greatly exceeded anticipated costs, partially offset by
improved sales prices and manufacturing efficiencies.
Selling, general and administrative expenses were $80.5 million, or 12.3%
of net sales in 1997, compared to $68.6 million, or 12.8% of net sales in
1996. The total spending increase of $11.9 million was primarily due to
marketing, selling and advertising expenses required to support increased
sales and to expenses related to recent flooring acquisitions.
Operating income was $74.5 million, or 11.4% of net sales in 1997,
compared to $61.2 million, or 11.4% of net sales in 1996.
<PAGE>
Interest expense was $22.9 million in 1997, compared to $19.7 million in
1996. The higher interest expense is primarily attributable to the cost of
financing the acquisition of Robbins Hardwood Flooring in March, 1997.
Provision for income taxes of 38.5% of pretax income reflects increased
rates over 1996, resulting from the full utilization of tax loss carry
forwards, partially offset in the fourth quarter by a benefit from the
restructuring of certain manufacturing operations.
Net income for 1997 was $31.8 million, compared to $25.6 million in 1996,
an increase of 23.9% on a 22.2% increase in net sales.
Fiscal year 1996 compared to fiscal year 1995
- ---------------------------------------------
Net sales for fiscal 1996 were $534.3 million, an increase of 16.4% over
1995 net sales of $458.9 million.
Net flooring sales increased 28.5% to $336.4 million from $261.8 million
in the prior year. These results benefited from the acquisition of Hartco
Flooring Company in June, 1996. Unit sales of hardwood flooring increased
29.6% and, without Hartco, the increase in units was 13.5%. The National Oak
Flooring Manufacturers Association (NOFMA) reported that 3/4" thick flooring
sales increased 11.3% in units in 1996. Without Bruce, NOFMA's 3/4" thick
industry shipments increased 9.2%. International sales were 11.5% of total
flooring sales, which represented an increase of 55.6% over 1995.
Net cabinet sales, without the impact of the decline in sales from the
discontinued sales of the Beltsville Building Products unit, increased 8.0%,
which represents a growth in unit sales of 5.1% and an average unit selling
price increase of 2.8%. Cabinet industry shipments in 1996, as reported by
the Kitchen Cabinet Manufacturers Association, were 74 million units, an
increase of 2.5% over 1995.
Consolidated gross profit for 1996 was $131.5 million, or 24.6% of net
sales, compared to $116.5 million, or 25.4% of net sales in 1995. The
decrease in gross profit percentage in 1996 was caused primarily by three
factors: lower prices in flooring which were down 1.1% for the year; expenses
incurred in the first half of 1996 related to the closing of the Beltsville
Building Products Unit; and higher lumber costs, primarily in the fourth
quarter.
Selling, general and administrative expenses were $68.6 million, or 12.8%
of net sales in 1996, compared to $60.8 million, or 13.3% of net sales in
1995. The total spending increase of $7.8 million was primarily due to
marketing and selling expenses required to support the higher sales, and to
the selling and administrative expenses of Hartco since June 28, 1996.
Operating income was $61.2 million, or 11.4% of net sales in 1996,
compared to $54.2 million, or 11.8% of net sales in 1995.
Interest expense was $19.7 million in 1996, compared to $18.4 million in
1995. The higher interest expense is attributable to the cost of financing
the acquisition of Hartco Flooring Company in June, 1996.
Net income for 1996 was $25.6 million, compared to $22.0 million in 1995,
an increase of 16.4% on a 16.4% increase in net sales.
Liquidity and Capital Resources
- -------------------------------
The Company has a Credit Facility which provides for up to $90.0 million
of revolving credit loans for working capital and for letters of credit.
Availability of borrowings under the Credit Facility is based upon a formula
related to inventory and accounts receivable. At January 2, 1998, the Company
had $39.4 million of borrowings under this facility.
For the year ended January 2, 1998, cash decreased by $15.8 million. Cash
of $55.6 million was used for the acquisition of Robbins Hardwood Flooring on
March 28, 1997. In addition, cash used for additions to property, plant and
<PAGE>
equipment was $29.1 million, cash used for the acquisition of Bruce Floor Care
Products Trademark was $1.6 million and long-term debt payments were $4.4
million. Bank borrowings of $39.4 million and cash provided by operating
activities of $34.8 million were used to offset these expenditures.
At January 2, 1998, the Company had working capital of $127.5 million, or
23.5% of total assets, and $32.0 million of unused bank borrowing capacity.
The Company believes that borrowing availability under the Credit Facility
and cash generated from operations will be adequate to fund working capital
requirements, debt service payments and planned capital expenditures.
The Company is in the process of completing the necessary updates for the
Year 2000 compliance. Based on its review to date, the Company does not
expect the cost of compliance to be material to its financial position or
results of operations.
This report includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements other than
statements of historical fact, including, without limitation, statements
contained in this "Management's Discussion and Analysis of Financial Condition
and Results of Operations" regarding the Company's financial position, are
forward-looking statements. Although the Company believes that the
expectations reflected in such forward-looking statements are reasonable, it
can give no assurance that such expectations will prove to have been correct.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of Triangle Pacific Corp.:
We have audited the accompanying consolidated balance sheets of Triangle
Pacific Corp. and Subsidiaries (a Delaware corporation) as of January 2, 1998,
and January 3, 1997, and the related consolidated statements of operations,
changes in shareholders' investment, and cash flows for the fiscal years ended
January 2, 1998, January 3, 1997, and December 29, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Triangle
Pacific Corp. and Subsidiaries as of January 2, 1998, and January 3, 1997 and
the results of their operations and their cash flows for the fiscal years
ended January 2, 1998, January 3, 1997, and December 29, 1995, in conformity
with generally accepted accounting principles.
Arthur Andersen LLP
Dallas, Texas,
February 2, 1998
<PAGE>
<TABLE>
Triangle Pacific Corp. and Subsidiaries
Consolidated Balance Sheets
(In thousands)
<CAPTION>
January 2, January 3,
1998 1997
------------ -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,790 $ 19,638
Receivables (net of allowance of
$3,662 and $3,053, respectively) 70,399 59,236
Inventories 128,988 95,096
Prepaid expenses 4,561 3,713
-------- --------
Total current assets 207,738 177,683
-------- --------
Property, plant and equipment
Land 16,809 15,537
Buildings 65,050 56,274
Equipment, furniture and fixtures 161,076 133,197
-------- --------
242,935 205,008
Less: accumulated depreciation 53,294 40,258
-------- --------
189,641 164,750
Other assets:
Goodwill 97,375 70,986
Trademarks 38,876 28,333
Deferred financing costs 4,437 5,290
Other 5,154 2,921
-------- --------
Total assets $ 543,221 $ 449,963
======== ========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current liabilities:
Current portion of long-term debt $ 3,957 $ 2,437
Accounts payable 28,831 18,520
Accrued liabilities 45,970 40,226
Income taxes payable 1,499 1,991
-------- --------
Total current liabilities 80,257 63,174
-------- --------
Long-term debt, net of current portion 232,241 190,604
Other long-term liabilities 3,565 2,331
Deferred income taxes 40,246 39,217
-------- --------
Total liabilities 356,309 295,326
-------- --------
Shareholders' investment:
Common stock - $.01 par value,
authorized shares - 30,000,000
issued and outstanding shares -
14,740,538 at January 2, 1998 and
14,686,558 at January 3, 1997 147 147
Additional paid-in capital 93,728 93,212
Retained earnings 93,037 61,278
-------- --------
Total shareholders' investment 186,912 154,637
-------- --------
Total liabilities and shareholders' investment $ 543,221 $ 449,963
======== ========
</TABLE>
[FN]
The accompanying notes to consolidated financial statements are an integral
part of these balance sheets.
<PAGE>
<TABLE>
Triangle Pacific Corp. and Subsidiaries
Consolidated Statements of Operations
(In thousands, except per share amounts)
<CAPTION>
Fiscal Years Ended
----------------------------------------------
January 2, January 3, December 29,
1998 1997 1995
------------- ------------ ------------
<S> <C> <C> <C>
Net sales $ 652,866 $ 534,261 $ 458,868
--------- --------- ---------
Costs and expenses:
Cost of sales 495,256 402,759 342,348
Selling, general and
administrative 80,503 68,611 60,841
Amortization of goodwill 2,638 1,739 1,520
Interest 22,863 19,719 18,380
-------- -------- --------
601,260 492,828 423,089
-------- -------- --------
Income before income taxes 51,606 41,433 35,779
Provision for income taxes 19,847 15,809 13,774
-------- -------- --------
Net income $ 31,759 $ 25,624 $ 22,005
======== ======== ========
Net income per share
Basic $ 2.16 $ 1.75 $ 1.50
Diluted $ 2.07 $ 1.71 $ 1.49
Weighted common shares
outstanding
Basic 14,716 14,670 14,663
Diluted 15,321 15,005 14,815
</TABLE>
[FN]
The accompanying notes to consolidated financial statements are an integral
part of these statements.
<PAGE>
<TABLE>
Triangle Pacific Corp. and Subsidiaries
Consolidated Statements of Changes in Shareholders' Investment
(In thousands)
<CAPTION>
Additional
Common Paid-In Retained
Stock Capital Earnings Total
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, December 30, 1994 $ 147 $ 93,098 $ 13,649 $106,894
Net income - - 22,005 22,005
Exercise of stock options - 2 - 2
- ----------------------------------------------------------------------------
Balance, December 29, 1995 $ 147 $ 93,100 $ 35,654 $128,901
Net income - - 25,624 25,624
Stock incentive bonus
shares issued - 18 - 18
Exercise of stock options - 94 - 94
- ----------------------------------------------------------------------------
Balance, January 3, 1997 $ 147 $ 93,212 $ 61,278 $154,637
Net income - - 31,759 31,759
Stock incentive bonus
shares issued - 386 - 386
Exercise of stock options - 130 - 130
- ----------------------------------------------------------------------------
Balance, January 2, 1998 $ 147 $ 93,728 $ 93,037 $186,912
============================================================================
</TABLE>
[FN]
The accompanying notes to consolidated financial statements are an integral
part of these statements.
<PAGE>
<TABLE>
Triangle Pacific Corp. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
<CAPTION>
Fiscal Years Ended
------------------------------------------
January 2, January 3, December 29,
1998 1997 1995
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating
activities:
Net income $ 31,759 $ 25,624 $ 22,005
Adjustments:
Depreciation 14,699 11,946 9,439
Deferred income taxes 1,029 (313) (507)
Amortization of goodwill
and trademarks 3,645 2,539 2,320
Amortization of deferred
financing costs 941 898 1,432
Provision for doubtful
accounts 850 422 435
Changes in assets and
liabilities:
Receivables (5,548) (1,562) (7,538)
Inventories (20,629) (6,306) (3,672)
Prepaid expenses (805) 1,291 (801)
Accounts payable 8,417 (365) (637)
Accrued liabilities -
other 2,353 5.107 (197)
Accrued liabilities -
interest 173 (204) (641)
Income taxes payable (493) 1,991 -
Other (1,614) (575) 348
- ------------------------------------------------------------------------------
Net cash provided by operating
activities 34,777 40,493 21,986
- ------------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from sale of property,
plant and equipment 199 4,341 10
Additions to property, plant
and equipment (29,147) (13,506) (11,624)
Acquisition of Hartco Flooring - (36,140) -
Acquisition of KREDA Bonds - (5,012) -
Acquisition of Robbins Flooring (55,627) - -
Acquisition of Bruce Floor Care
Products Trademark (1,550) - -
- ------------------------------------------------------------------------------
Net cash (used) in investing
activities (86,125) (50,317) (11,614)
- ------------------------------------------------------------------------------
Cash flows from financing activities:
Long-term debt borrowings 39,400 - -
Long-term debt payments (4,416) (3,213) (3,767)
Refinancing costs - - (712)
Exercise of stock options 130 94 2
Stock incentive bonus shares issued 386 - -
Reimbursement of construction
deposits - - 1,780
- ------------------------------------------------------------------------------
Net cash provided by (used in)
financing activities 35,500 (3,119) (2,697)
- ------------------------------------------------------------------------------
Net (decrease) increase in cash $ (15,848) $ (12,943) $ 7,675
Cash and cash equivalents,
beginning of period 19,638 32,581 24,906
- ------------------------------------------------------------------------------
Cash and cash equivalents,
end of period $ 3,790 $ 19,638 $ 32,581
==============================================================================
</TABLE>
<PAGE>
Triangle Pacific Corp. and Subsidiaries
Consolidated Statements of Cash Flows (cont'd)
(In thousands)
<TABLE>
<CAPTION>
Fiscal Years Ended
------------------------------------------
January 2, January 3, December 29,
1998 1997 1995
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Supplemental disclosures of cash
flow information:
Cash paid during the period for:
Interest $ 20,706 $ 18,352 $ 18,603
Income taxes 16,084 13,391 17,831
</TABLE>
[FN]
The accompanying notes to consolidated financial statements are an integral
part of these statements.
<PAGE>
TRIANGLE PACIFIC CORP. AND SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Triangle Pacific Corp. (the "Company") conducts its operations through a
single business segment which consists of the manufacture and distribution of
hardwood flooring products and kitchen and bathroom cabinets. The Company's
products are used primarily in residential new construction and remodeling.
Flooring products accounted for approximately 72% and kitchen cabinets 28%, of
the Company's revenues during 1997. The Company's products are sold
throughout the U.S. and a portion of the flooring products are sold worldwide.
Basis of Consolidation:
- -----------------------
The consolidated financial statements include the financial statements of
Triangle Pacific Corp. and its subsidiaries. All intercompany balances and
transactions have been eliminated. The Company maintains its records on a
52/53 week year.
Net Income Per Share:
- ---------------------
Net income per share is computed using the weighted-average number of
common shares and common stock equivalents outstanding during each period.
Common stock equivalents represent the dilutive effect of outstanding stock
options and warrants.
The Company adopted Statement of Financial Accounting Standards No. 128
(SFAS 128) "Earnings Per Share" in the fourth quarter of 1997. Under SFAS
128, the Company has reported two net income per share amounts. Basic net
income per share is calculated based on income available to common
shareholders and the weighted-average number of shares outstanding during the
period. Diluted net income per share includes additional dilution
attributable to stock options and warrants. For comparative purposes, both
basic and diluted net income per share are presented for the three fiscal
years ended January 2, 1998, January 3, 1997 and December 29, 1995. Diluted
net income per share in each of these three years are approximately the same
as the previously reported net income per share.
Cash and Cash Equivalents:
- --------------------------
The Company considers all investments with an original maturity of less
than three months to be cash equivalents. All cash equivalents are investment
grade such as U.S. Government or A-1 or better securities rated by Standard &
Poor's Corporation.
Inventories:
- ------------
Inventories are valued at the lower of cost or market. The last-in,
first-out (LIFO) method is used primarily for lumber and certain other
inventories and the first-in, first-out (FIFO) method is used for all other
inventories. Inventories valued by the LIFO method were $65,407,000 at
January 2, 1998 and $35,311,000 at January 3,1997. Had all inventories been
valued by the FIFO method, which approximates current cost, inventories would
have increased by $9,463,000 at January 2, 1998 and $2,851,000 at January 3,
1997. Raw materials inventories include purchased parts and supplies to be
used in manufactured products. Work-in-process and finished goods inventories
include material, labor and overhead costs incurred in the manufacturing
process. The major components of inventories are as follows:
<TABLE>
<CAPTION>
January 2, January 3,
1998 1997
----------------------------
(in thousands)
<S> <C> <C>
Raw materials $ 64,808 $ 50,873
Work-in-process 13,747 7,259
Finished goods 50,433 36,964
-------- --------
Total $ 128,988 $ 95,096
======== ========
</TABLE>
<PAGE>
Property, Plant and Equipment:
- ------------------------------
Property, plant and equipment were restated to fair value as of June 8,
1992, when the Company successfully completed a capital restructuring. All
additions, subsequent thereto, are stated at acquisition or construction cost.
Expenditures for maintenance, repairs, renewals and improvements which do not
extend the useful lives of assets are charged to appropriate expense accounts
in the year incurred. Upon disposition of an asset, cost and accumulated
depreciation are removed from the accounts, and any gain or loss is included
in the results of operations. Depreciation and amortization are computed on
the straight-line basis using the following estimated useful lives:
Buildings 10 to 50 years
Equipment, furniture and fixtures 3 to 22 years
Amortization of leasehold improvements is provided over the terms of the
leases or the useful lives of the assets, whichever is shorter. For income
tax purposes, all assets are depreciated under allowable tax depreciation
methods.
Intangible Assets:
- ------------------
The Company annually evaluates its carrying value and expected period of
benefit of trademarks and goodwill in relation to results of operations. In
determining the recoverability of these assets the Company analyzes its
historical and future ability to generate earnings before interest and taxes.
Deferred financing costs are being amortized on the straight-line method over
the lives of the related debt. Trademarks and goodwill are being amortized
over 40 years. Accumulated amortization of trademarks and goodwill is
$4,674,000 and $9,919,000, respectively, at January 2, 1998 and $3,667,000 and
$7,281,000, respectively, at January 3, 1997.
Fair Value of Financial Instruments:
- ------------------------------------
The Company's cash equivalents and long-term debt are recorded at cost,
which approximates fair market value at January 2, 1998.
Use of Estimates:
- -----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
NOTE 2 - LONG-TERM DEBT:
Long-term debt consists of the following:
<TABLE>
<CAPTION>
January 2, January 3,
1998 1997
----------------------------
(In thousands)
<S> <C> <C>
Senior Notes, 10 1/2%
due 8-1-2003 $ 160,000 $ 160,000
Revolving note - bank 39,400 -
Capitalized lease
obligations 15,088 16,996
Industrial revenue
bonds 21,710 16,045
-------- --------
236,198 193,041
Less: Current portion
of long-term debt (3,957) (2,437)
-------- --------
$ 232,241 $ 190,604
======== ========
</TABLE>
<PAGE>
Letters of credit outstanding were $18.6 million at January 2, 1998 and
$15.0 million at January 3, 1997, under a facility pursuant to which they can
be renewed or replaced.
Senior Notes:
- -------------
The Senior Notes are senior unsecured obligations of the Company with an
aggregate principal amount of $160 million. The Senior Notes mature on August
1, 2003 and bear interest at an annual rate of 10 1/2%, payable in two equal
semi-annual installments of $8,400,000 each, with each semi-annual period
deemed to have 180 days. The Senior Notes are issued under an Indenture (the
"Indenture") between the Company and Comerica Bank, as the present Trustee
(the "Trustee"). The Senior Notes rank pari passu with all present and future
senior indebtedness of the Company and senior to all present and future
subordinated indebtedness of the Company. However, because borrowings under
the Credit Facility are secured by inventory and accounts receivable of the
Company and the proceeds thereof, the Senior notes are effectively
subordinated to such borrowings to the extent of such security interest.
The Senior Notes are not redeemable prior to August 1, 1998. Thereafter,
the Senior Notes are redeemable at the option of the Company at redemption
prices specified in the Indenture. The Senior Notes are not subject to any
mandatory sinking fund requirements.
Upon a "change of control" (as defined in the Indenture), the Company is
required to offer to purchase all outstanding Senior notes at 101% of the
principal amount thereof, plus accrued interest to the date of repurchase. In
addition, the Company may be required to offer to purchase the Senior Notes at
100% of the principal amount plus accrued interest with the net cash proceeds
of certain sales or other dispositions of assets.
The Indenture contains covenants which limit, among other things, the
incurrence of additional indebtedness by the Company and its subsidiaries, the
payment of dividends on, or the purchase of the capital stock of the Company
("Restricted Payments"), the creation of liens on the assets of the Company
and its subsidiaries, the creation of certain restrictions on the payment of
dividends and other distributions by the Company's subsidiaries, the issuance
of preferred stock by the Company's subsidiaries, and certain mergers, sales
of assets and transactions with affiliates.
Based on the Company's operations through January 2, 1998, the amount of
Restricted Payments that the Company could make under the Indenture was
$55,134,000.
The Indenture specifies a number of events of default including, among
others, the failure to make timely principal and interest payments or to meet
the covenants contained therein. The Indenture contains a cross-default to
other indebtedness of the Company aggregating more than $5,000,000 and certain
customary bankruptcy and insolvency defaults. Upon the occurrence of an event
of default under the Indenture, the Trustee or the holders of not less than
25% in principal amount of the outstanding Senior Notes may declare all
amounts thereunder immediately due and payable, except that such amounts
automatically become immediately due and payable in the event of a bankruptcy
or insolvency default.
Credit Facility:
- ----------------
In December 1995, the Company entered into a Credit Facility, which
provides for up to $90 million of revolving loans for working capital and
general corporate purposes and for letters of credit. Availability of
borrowings under the Credit Facility is based upon a formula related to
inventory and accounts receivable. At January 2, 1998, the Company had $39.4
million of borrowings under the Credit Facility and had an additional $32.0
million of borrowing capacity under this facility. Borrowings under the
Credit Facility bear interest at the agent's prime rate plus 0.375% (8.875% at
January 2, 1998) or, at the Company's option, at certain alternate floating
rates, and are secured by a pledge of the Company's inventory and accounts
receivable. The Credit Facility expires on December 21, 2000.
<PAGE>
The Credit Facility contains covenants which restrict, among other things,
the incurrence of additional indebtedness and rental obligations by the
Company and its subsidiaries, the payment of dividends and other distributions
related to the capital stock of the Company, the creation of liens on the
assets of the Company and its subsidiaries, the creation of certain
restrictions on the payment of dividends and other distributions by the
Company's subsidiaries, investments and capital expenditures by the Company
and its subsidiaries, the creation of new subsidiaries by the Company, and
certain mergers, sales of assets and transactions with affiliates.
The Credit Facility also contains certain financial covenants relating to
the consolidated financial condition of the Company and its subsidiaries,
including covenants relating to their net worth, the ratio of their earnings
to their fixed charges, the ratio of their earnings to their interest expense,
the ratio of their current assets to their current liabilities, and the ratio
of their indebtedness to their total capitalization. At January 2, 1998, the
Company was in compliance with all financial covenants.
The Credit Facility specifies a number of events of default including,
among others, the failure to make timely payments of principal, fees, and
interest, the failure to perform the covenants contained therein, the failure
of representations and warrants to be true, the occurrence of a "change of
control"[as defined in the Credit Facility, to include, among other things,
the ownership by any person or group of more than 25% (or, in the case of The
TCW Group, Inc. and its affiliates, 50%) of the total voting securities of the
Company], and certain impairments of the security for the Credit Facility.
The Credit Facility also contains a cross-default to other indebtedness of the
Company aggregating more than $2,000,000 and certain customary bankruptcy,
insolvency and similar defaults. Upon the occurrence of an event of default
under the Credit Facility, at least three of the lenders holding at least 60%
of the principal indebtedness outstanding under the Credit Facility may
declare all amounts thereunder immediately due and payable, except that such
amounts automatically become immediately due and payable in the event of
certain bankruptcy, insolvency or similar defaults.
The Credit Facility generally prohibits the Company from prepaying in
excess of $50.0 million of the Senior Notes whether the prepayment would
result from the redemption of the Senior Notes, an offer by the Company to
purchase the Senior Notes following a change of control or a sale or other
disposition of assets, or the acceleration of the due date for payment of the
Senior Notes.
Capitalized Lease Obligations:
- ------------------------------
During the fourth quarter of 1995, the operating lease agreement relating
to the Company's Beverly, West Virginia, plant and related equipment was
amended to allow for a purchase option of $1 until 2018. As a result, the
Company recorded the present value of the remaining future minimum lease
payments as a capitalized lease asset and related capitalized lease
obligation.
Industrial Revenue Bonds:
- -------------------------
On June 28, 1996, in connection with the acquisition of Hartco Flooring
Company, the Company acquired $10,000,000, in floating interest rate, City of
Somerset, Kentucky, Industrial Revenue Bonds, due in full on August 1, 2009.
These bonds were used to finance the Somerset, Kentucky hardwood flooring
plant and are collateralized by a $10,000,000 letter of credit. At January 2,
1998, the various Industrial Revenue Bond (IRB) notes have interest rates that
ranged up to 8.25% and at January 3, 1997, the interest rates ranged up to
7.87%.
These IRB notes are payable through 2009 and are collateralized by the
related underlying assets.
<PAGE>
Maturities for all long-term debt are as follows:
(In thousands)
1998 $ 3,957
1999 4,111
2000 45,011
2001 4,800
2002 1,198
Thereafter 177,121
---------
Total $ 236,198
=========
NOTE 3 - INCOME TAXES:
The components of the deferred tax liability and asset are as follows:
<TABLE>
<CAPTION>
January 2, January 3,
1998 1997
----------------------------
(In thousands)
<S> <C> <C>
Deferred Tax Liability:
Property, plant and equipment $ 26,925 $ 27,824
Trademarks 10,108 11,022
Other 7,856 7,338
-------- --------
Total $ 44,889 $ 46,184
-------- --------
Deferred Tax Asset:
Other $ 4,643 $ 6,967
-------- --------
Total $ 4,643 $ 6,967
-------- --------
Net Deferred Tax Liability $ 40,246 $ 39,217
======== ========
</TABLE>
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
Fiscal Years Ended
------------------------------------
January 2, January 3, December 29,
1998 1997 1995
------------------------------------
(In thousands)
<S> <C> <C> <C>
Current:
Federal $ 13,097 $ 12,338 $ 12,006
State and local 2,736 2,625 1,689
------- ------- -------
$ 15,833 $ 14,963 $ 13,695
------- ------- -------
Deferred:
Federal $ 3,687 $ 722 $ 22
State and local 327 124 57
-------- ------- -------
$ 4,014 $ 846 $ 79
------- ------- -------
Total $ 19,847 $ 15,809 $ 13,774
======= ======= =======
</TABLE>
<PAGE>
The tax provision for the fiscal years ended January 2, 1998, January 3,
1997 and December 29, 1995 was 38.5%, 38.2% and 38.5% of pre-tax income,
respectively. The factors causing the rate to vary from the U.S. Federal
Statutory rate are as follows:
<TABLE>
<CAPTION>
Fiscal Years Ended
------------------------------------
January 2, January 3, December 29,
1998 1997 1995
------------------------------------
(In thousands)
<S> <C> <C> <C>
Computed (expected)
tax provision $ 18,062 $ 14,502 $ 12,522
Increase (decrease) from:
State and local taxes 2,023 1,830 1,155
Amortization of goodwill 685 609 532
Foreign sales (463) (394) (292)
Other book to tax
differences, net (460) (738) (143)
------- ------- -------
Total $ 19,847 $ 15,809 $ 13,774
======= ======= =======
</TABLE>
NOTE 4 - OPERATING LEASE COMMITMENTS:
The Company rents certain real estate and equipment under operating leases
expiring at various dates to 2015. Several leases include options for renewal
or purchase and contain clauses for payment of real estate taxes and
insurance. In most cases, management expects that in the normal course of
business, leases will be renewed or replaced by other leases.
The following is a summary of minimum future rental payments required
under operating leases that have initial non-cancelable lease terms in excess
of one year:
(In thousands)
1998 $ 1,928
1999 1,143
2000 670
2001 236
2002 118
Thereafter 122
---------
Total $ 4,217
=========
Rental expense for operating leases amounted to $7,062,000, $6,682,000 and
$8,335,000 for the fiscal years ended January 2, 1998, January 3, 1997 and
December 29, 1995, respectively.
NOTE 5 - EMPLOYEE BENEFIT PLANS:
Pension and Profit Sharing Plans:
- ---------------------------------
The Company sponsors several defined benefit pension plans and is required
to contribute to several labor union-related defined contribution plans.
Total pension expense was $1,268,000, $1,169,000 and $1,114,000 for the fiscal
years ended January 2, 1998, January 3, 1997 and December 29, 1995,
respectively, including $647,000, $517,000 and $538,000, respectively, for
defined benefit plans, which includes amortization of prior service costs over
the estimated average remaining service period of active employees.
<PAGE>
The following table sets forth the defined benefit pension plans' funded
status at January 2, 1998 and January 3, 1997.
<TABLE>
<CAPTION>
January 2, January 3,
1998 1997
----------------------------
(In thousands)
<S> <C> <C>
Actuarial present value of
benefit obligation:
Vested $ 10,566 $ 10,519
Non-vested 695 566
-------- --------
Accumulated and projected
benefit obligation 11,261 11,085
Plan assets at fair value 11,066 10,538
-------- --------
Projected benefit obligation
in excess of plan assets (195) (547)
Unrecognized prior service costs 842 598
Unrecognized net loss from past
experience different from that
assumed and effects of changes
in assumptions 724 1,235
Adjustment to recognize
minimum liability (1,071) (1,761)
------- --------
Prepaid (accrued) pension expense $ 300 $ (475)
======== ========
</TABLE>
Net periodic pension costs for defined benefit pension plans for the
fiscal years ended January 2, 1998, January 3, 1997, and December 29, 1995,
include the following components:
<TABLE>
<CAPTION>
Fiscal Years Ended
------------------------------------
January 2, January 3, December 29,
1998 1997 1995
------------------------------------
(In thousands)
<S> <C> <C> <C>
Service cost-benefits
earned during the period $ 317 $ 277 $ 271
Interest cost on projected
benefit obligation 897 818 779
Actual return on plan assets (1,483) (1,129) (825)
Net amortization and deferral 916 551 313
-------- -------- --------
Net periodic pension cost $ 647 $ 517 $ 538
======== ======== ========
</TABLE>
A weighted average discount rate of 8.5% was used in 1997, 1996 and 1995
to determine the benefit obligations of the Company's defined benefit pension
plans. The plans do not provide for future compensation increases in
calculating benefit obligations as the benefits do not derive from
compensation levels but from length of service. The plans' assets are
invested in a diversified portfolio of common stocks and fixed income
securities. The expected long-term rate of return on plan assets was 8.0% in
1997, 1996 and 1995.
The Company has a profit sharing plan for salaried employees, and a
supplemental profit sharing plan for certain salaried employees to which
contributions are made at the discretion of its Board of Directors as long as
the Company has met specified financial goals. The fiscal year 1997, 1996 and
1995 contributions were $1,250,000, $1,250,000 and $1,245,450, respectively.
Long-Term Incentive Plans:
- --------------------------
In June 1993, the Company adopted the Triangle Pacific Corp. Long-Term
Incentive Compensation Plan, (the "Long-Term Incentive Plan") which authorizes
grants of various incentive awards to all regular salaried full-time officers
and key employees of the Company. There are 1,400,000 shares of common stock
<PAGE>
authorized for issue under this plan. In February 1994, March 1994, February
1996, April 1996 and May 1997 stock options were granted for an aggregate of
1,072,700 shares at 100% of fair market value at the respective dates of
grant.
The following summarizes the Company's stock option activity:
<TABLE>
<CAPTION>
Weighted
Number Average
of Exercise Price Exercise Price
Shares Per Share Per Share
--------------------------------------------------------------------
<S> <C> <C> <C>
Outstanding,
December 30, 1994 731,205 $ 2.99 - $15.13 $11.56
1995
Granted - - -
Exercised (756) $ 2.99 $ 2.99
Forfeited - - -
--------------------------------------------------------------------
Outstanding,
December 29, 1995 730,449 $ 2.99 - $15.13 $11.57
1996
Granted 237,500 $16.38 $16.38
Exercised (22,093) $ 2.99 - $14.44 $ 4.29
Forfeited (14,200) $14.44 - $15.13 $14.64
--------------------------------------------------------------------
Outstanding,
January 3, 1997 931,656 $ 2.99 - $16.38 $12.99
1997
Granted 277,500 $28.38 $28.38
Exercised (28,455) $ 2.99 - $14.44 $ 4.58
Forfeited (8,750) $14.44 - $28.38 $16.38
--------------------------------------------------------------------
Outstanding,
January 2, 1998 1,171,951 $ 2.99 - $28.38 $16.68
====================================================================
</TABLE>
All stock options are granted with exercise prices equal to the fair
market value of the Company's common stock at the date of grant. The weighted
average exercise prices of the stock options granted during 1997 was $28.38.
Stock options expire ten years from date of grant and vest equally over a four
year period. The number of stock options exercisable at January 2, 1998, was
601,376 shares. These stock options have a weighted average exercise price of
$11.98 per share and a weighted average contractual life of 6.0 years.
The Company accounts for stock options in accordance with Accounting
Principles Board Opinion No. 25, under which no compensation cost has been
recognized for stock option awards. Had compensation cost for the stock
options issued subsequent to January 1, 1995 been determined consistent with
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-
Based Compensation" (SFAS 123), the Company's pro forma net income and net
income per share for 1997, 1996 and 1995 would not have been materially
different from reported net income and net income per share. Because the SFAS
123 method of accounting has not been applied to options granted prior to
January 1, 1995, pro forma compensation cost may not be representative of that
to be expected in future years.
The value of each stock option grant is estimated on the date of grant
using the Black-Scholes option pricing model with the following weighted
average assumptions used for 1997 grants: risk free interest rate of 6.88%,
expected dividend yield of 0%; expected life of ten years; and expected
volatility of 29.06%.
The Company has a performance-based cash incentive plan for officers and
other key employees to make annual bonus awards based upon pre-established
criteria which were approved by the Board of Directors. The expense under
this plan was $3,743,000, $3,282,000, and $2,287,000 in 1997, 1996 and 1995,
respectively.
<PAGE>
Non-Employee Director Stock Option Plan:
- ----------------------------------------
The Company has a Non-Employee Director Stock Option Plan for up to
100,000 shares of common stock. Options have been granted to six non-employee
directors for an aggregate of 48,000 shares, with exercise prices equal to the
fair market value at the date of grant. These options are currently
exercisable and generally expire 10 years from the date of grant.
Post-Retirement and Post-Employment Benefits:
- ---------------------------------------------
The Company, as of January 2, 1998, generally does not provide post-
retirement life or health insurance benefits or any post-employment benefits
other than those previously discussed.
NOTE 6 - ACCRUED LIABILITIES:
Amounts included in accrued liabilities are as follows:
<TABLE>
<CAPTION>
January 2, January 3,
1998 1997
----------------------------
(In thousands)
<S> <C> <C>
Payroll $ 9,874 $ 8,187
Pension and profit sharing 1,766 1,919
Taxes 3,780 3,311
Insurance 8,911 9,340
Interest 7,202 7,029
Marketing 9,232 5,363
Other 5,205 5,077
------- -------
Total $ 45,970 $ 40,226
======= =======
</TABLE>
NOTE 7 - SUPPLEMENTARY QUARTERLY FINANCIAL DATA (unaudited):
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Net Income
Per Share
Net Gross Net --------------------
Quarters Sales Profit Income Basic Diluted
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1997
First Quarter $145,205 $ 36,237 $ 5,859 $ 0.40 $ 0.38
Second Quarter 175,249 41,738 9,058 0.62 0.59
Third Quarter 165,795 40,485 8,415 0.57 0.55
Fourth Quarter 166,617 39,150 8,427 0.57 0.55
1996
First Quarter $110,525 $ 25,926 $ 3,904 $ 0.27 $ 0.26
Second Quarter 131,471 34,364 7,433 0.51 0.50
Third Quarter 142,941 34,755 6,762 0.46 0.45
Fourth Quarter 149,324 36,457 7,525 0.51 0.50
</TABLE>
NOTE 8 - ACQUISITION OF RESIDENTIAL FLOORING DIVISION OF
ROBBINS, INC. AND SEARCY FLOORING, INC.
On March 28, 1997, Robbins Hardwood Flooring Inc., a newly formed wholly-
owned subsidiary of Triangle Pacific Corp., acquired from Robbins Inc. and its
affiliate Searcy Flooring, Inc., substantially all the assets and assumed
certain liabilities (primarily IRB financing and trade payables) associated
with their residential flooring operations. The purchase price was $64.2
million consisting of $55.6 in cash and the balance in assumed liabilities.
The acquisition has been accounted for using the purchase method of
accounting, and accordingly, the purchase price has been allocated to the
assets purchased and the liabilities assumed based upon the fair values at the
date of acquisition. The excess of the purchase price over the fair values of
<PAGE>
the net assets acquired was $36.9 million and has been recorded as goodwill,
which is being amortized on a straight-line basis over 40 years. Sales and
earnings for the residential flooring operations acquired by Robbins Hardwood
Flooring Inc., are included in the reported results for the period since the
acquisition on March 28, 1997.
The net purchase price was allocated as follows:
(in thousands)
Net working capital $ 14,661
Net property, plant and equipment 11,295
Other assets 2,923
Goodwill 36,941
Other non-current liabilities (10,193)
--------
Cash paid for Robbins Hardwood Flooring $ 55,627
========
NOTE 9 - ACQUISITION OF HARTCO FLOORING COMPANY:
On June 28, 1996, the Company acquired all of the outstanding shares of
Hartco Flooring Company ("Hartco"), formerly a wholly-owned subsidiary of
Premark International, Inc. The total value of the acquisition was $63
million, consisting of $36.1 million in cash and the balance representing the
assumption of liabilities.
The acquisition has been accounted for using the purchase method of
accounting, and accordingly, the purchase price has been allocated to the
assets purchased and the liabilities assumed based upon the fair values at the
date of acquisition. The excess of the purchase price over the fair values of
the net assets acquired was $17.5 million and has been recorded as goodwill,
which is being amortized on a straight-line basis over 40 years. The
accompanying consolidated financial statements reflect the operations of
Hartco for the period subsequent to June 28, 1996.
The net purchase price was allocated as follows:
(in thousands)
Net working capital $ 13,589
Net property, plant and equipment 22,717
Other assets 712
Goodwill 17,530
Other non-current liabilities (18,408)
--------
Cash paid for Hartco $ 36,140
========
The unaudited pro forma results below assume the acquisition occurred at
the beginning of the years ended January 3, 1997 and December 29, 1995. (In
thousands, except per share amounts)
<TABLE>
<CAPTION>
Fiscal Years Ended
------------------------
January 3, December 29,
1997 1995
------------------------
<S> <C> <C>
Net sales $ 574,680 $ 529,657
Net income 25,958 21,346
Net income per share $ 1.73 $ 1.44
</TABLE>
The above pro forma results include adjustments to give effect to
amortization of goodwill, interest expense on acquisition debt and certain
other adjustments, together with related income tax effects. The pro forma
results above are not necessarily indicative of the operating results that
would have occurred had the acquisition been consummated as of the beginning
of the periods presented, nor are they necessarily indicative of future
operating results.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The section entitled "Election of Directors" appearing in the definitive
proxy statement of the Registrant for the annual meeting of shareholders to be
held on May 5, 1998 sets forth certain information regarding the directors and
is incorporated herein by reference. The section entitled "Executive
Compensation-Compliance with Section 16(a) of the Exchange Act" appearing in
the definitive proxy statement of the Registrant for the annual meeting of
shareholders to be held on May 5, 1998 sets forth certain information
regarding reporting under Section 16 of the Securities Exchange Act of 1934,
as amended, and is incorporated herein by reference. Certain information with
respect to the executive officers of the Registrant is set forth in Part I of
this Form 10-K under the caption "Executive Officers of the Company."
ITEM 11. EXECUTIVE COMPENSATION
Information regarding the compensation of management is contained in the
definitive proxy statement of the Registrant for the annual meeting of
shareholders to be held on May 5, 1998, under the caption "Executive
Compensation" and, except for the report of the compensation committee of the
Board of Directors and the information contained under the caption
"Performance Graph," is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding ownership of the Company's Common Stock is contained
in the definitive proxy statement of the Registrant for the annual meeting of
shareholders to be held on May 5, 1998, under the captions "Security Ownership
of Certain Beneficial Owners" and "Security Ownership of Management" and is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) Financial Statements
Included in Part II of this report.
- Report of independent public accountants
- Consolidated balance sheets as of January 2, 1998 and
January 3, 1997.
- Consolidated statements of operations for the fiscal
years ended January 2, 1998, January 3, 1997, and
December 29, 1995.
- Consolidated statements of changes in shareholders'
investment for the fiscal years ended January 2, 1998,
January 3, 1997, and December 29, 1995.
- Consolidated statements of cash flows for the fiscal
years ended January 2, 1998, January 3, 1997, and
December 29, 1995.
- Notes to consolidated financial statements.
(a)(2) Financial Statement Schedules
Included in Part IV of this report:
For the fiscal years ended January 2, 1998, January 3, 1997,
and December 29, 1995.
- Schedule II - Valuation and qualifying accounts
and reserves.
Information required by other schedules called for under
Regulation S-X is either not applicable or is included in
the consolidated financial statements or notes thereto.
(a)(3) Exhibits
--------
The information required by this Item 14(a)(3) is set forth
in the Index to Exhibits in item 14(c) of this annual report on
form 10-K.
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed during the fourth quarter
of the year ended January 2, 1998.
(c) Exhibits
--------
3.1 - Restated Certificate of Incorporation of the
Registrant (incorporated herein by reference to
Exhibit 3.1 to the Registrant's Form 10-K for the
fiscal year ended December 31, 1993).
3.2 - Amended and Restated Bylaws of the Registrant
(incorporated herein by reference to Exhibit 3.2 to
the Registrant's Form 10-K for the fiscal year ended
December 31, 1993).
<PAGE>
4.1 - Form of 10 1/2% Senior Notes due 2003 (incorporated
herein by reference to Exhibit 4.2 to the
Registrant's Form 10-K for the fiscal year ended
December 31,1993).
4.2 - Indenture governing 10 1/2% Senior Notes due 2003
(incorporated herein by reference to Exhibit 4.2 to
the Registrant's Form 10-K for the fiscal year ended
December 31, 1993).
4.3 - Credit Agreement dated as of August 4, 1993, as
amended, among the Registrant, the Lenders listed
therein and CitiCorp USA, Inc., as the Co-Agent for
the Lenders, and the Bank of Nova Scotia, as the
Agent for the Lenders (the "Credit Agreement")
(incorporated herein by reference to Exhibit 4.4 to
the Registrant's Registration Statement on Form S-1
(Registration No. 33-64530)).
4.4 - Amendment No. 4 to the Credit Agreement dated as of
December 2, 1994.
4.5 - Amendment No. 6 to the Credit Agreement dated as of
December 21, 1995.
4.6 - Amendment No. 7 to the Credit Agreement dated as of
May 1, 1996.
4.7 - Amendment No. 10 to The Credit Agreement dated as of
March 19, 1997.
4.8 - Amendment No. 11 to the Credit Agreement dated as of
September 30, 1997.
10.1 - Registration Rights Agreement, dated as of June 5,
1992 by and among the Registrant and the Persons
listed therein (incorporated herein by reference to
Exhibit 10.1 to the Registrant's Registration
Statement on Form S-1 (Registration No. 33-50724)).
10.2 - Lenders' Equity Agreement dated as of June 5, 1992 by
and among the Registrant and the Banks and other
financial institutions listed herein (incorporated
herein by reference to Exhibit 10.2 to the
Registrant's Registration Statement on Form S-1
(Registration No. 33-50724)).
10.3 - ESJ Exchange Agreement dated as of June 5, 1992 by
and among the Registrant, TPC Holding Corp. and the
ESJ Entities (incorporated herein by reference to
Exhibit 10.3 to the Registrant's Registration
Statement on Form S-1 (Registration No. 33-50724)).
10.4* - Management Equity Agreement dated as of June 5, 1992
by and among the Registrant and the individuals
listed therein, and including a form of the Triangle
Pacific Corp. Stock Option Plan (incorporated herein
by reference to Exhibit 10.4 to the Registrant's
Registration Statement on Form S-1 (Registration No.
33-50724)).
10.5* - Form of Amended and Restated Employment Agreement
dated as of March 8, 1995 between the Company and the
individuals named on Schedule 1 thereto.
10.6* - Form of Employment Agreement dated as of March 8,
1995 between the Company and the individuals named on
Schedule 1 thereto.
<PAGE>
10.7* - Salaried Employees Profit Sharing Plan (as restated
January 1, 1993) of the Registrant
10.8* - Annual Cash Incentive Bonus System of the Registrant
for Officers and Managers.
10.9* - Form of Stock Option Plan of the Registrant
(incorporated herein by reference to Exhibit 10.12 to
the Registrant's Registration Statement on Form S-1
(Registration No. 33-64530)).
10.10* - Form of Stock Option Agreement of the Registrant
(incorporated herein by reference to Exhibit 10.13 to
the Registrant's Registration Statement on From S-1
(Registration No. 33-64530)).
10.11 - Lease dated as of June 1, 1988 by and between West
Virginia Jobs and Development Corporation and
Registrant (incorporated herein by reference to
Exhibit 10.11 to the Registrant's Registration
Statement on Form S-1 (Registration No. 33-50724)).
10.12 - Amendment to lease effective as of April 14, 1989 by
and between West Virginia Jobs and Development
Corporation and the Registrant (incorporated herein
by reference to Exhibit 10.15 to the Registrant's
Registration Statement on Form S-1 (Registration No.
33-64530)).
10.13 - Second Amendment to lease effective as of November 1,
1991 by and between West Virginia Economic
Development Authority, as successor to West Virginia
Jobs and Development Corporation, and the Registrant
(incorporated herein by reference to Exhibit 10.16 to
the Registrant's Registration Statement on Form S-1
(Registration No. 33-64530)).
10.14 - Third Amendment to lease effective as of March 10,
1993 by and between West Virginia Economic
Development Authority, as successor to West Virginia
Jobs and Development Corporation, and the Registrant
(incorporated herein by reference to Exhibit 10.17 to
the Registrant's Registration Statement on Forms S-1
(Registration No. 33-64530)).
10.15 - Fourth amendment to lease effective as of September 22,
1995 by and between West Virginia Economic Development
Authority, as successor to West Virginia Jobs and
Development Corporation, and the Registrant.
10.16* - Triangle Pacific Corp. 1993 Long-Term Incentive
Compensation Plan (incorporated herein by reference
to Exhibit 10.18 to the Registrant's Registration
Statement on Form S-1 (Registration No. 33-64530)).
10.17* - Triangle Pacific Corp. Nonemployee Director Stock
Option Plan (incorporated herein by reference to
Exhibit 10.19 to the Registrant's Registration
Statement on Form S-1 (Registration No. 33-64530)).
10.18 - Form of Indemnity Agreement between the Registrant
and each of its directors and executive officers
(incorporated herein by reference to Exhibit 10.20 to
the Registrant's Registration Statement on Form S-1
(Registration No. 33-64530)).
10.19* - Supplemental Profit Sharing and Deferred Compensation
Plan of the Registrant.
<PAGE>
10.20 - Stock Purchase Agreement dated as of June 28, 1996 between
the Company and Premark International Inc. (incorporated
herein by reference to Exhibit 2.1 to the Registrant's Form
8-K dated June 28, 1996).
10.21 - Asset Purchase Agreement dated as of March 28, 1997 between
the Company and Robbins, Inc. And Searcy Flooring, Inc.
11.1 - Statement re computation of per share earnings
21.1 - Subsidiaries of the Registrant
23.1 - Consent of Arthur Andersen LLP
27.1 - Financial Data Schedule.
- --------------
* Management contract or compensatory plan or arrangement required to
be filed as an exhibit hereto.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereto duly
authorized.
TRIANGLE PACIFIC CORP.
By: /s/ Floyd F. Sherman
---------------------------
Floyd F. Sherman
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/ Floyd F. Sherman Chairman of the Board March 31, 1998
- ---------------------------- and Chief Executive Officer
Floyd F. Sherman (Principal Executive Officer)
/s/ M. Joseph McHugh Director and President March 31, 1998
- ----------------------------
M. Joseph McHugh
/s/ E. Dwain Plaster Vice President, March 31, 1998
- ---------------------------- Treasurer and Chief
E. Dwain Plaster Financial Officer
(Principal Financial & Accounting Officer)
/s/ B. William Bonnivier Director March 31, 1998
- ----------------------------
B. William Bonnivier
/s/ Charles M. Hansen, Jr. Director March 31, 1998
- ----------------------------
Charles M. Hansen, Jr.
/s/ David R. Henkel Director March 31, 1998
- ----------------------------
David R. Henkel
/s/ Bruce A. Karsh Director March 31, 1998
- ----------------------------
Bruce A. Karsh
/s/ Jack L. McDonald Director March 31, 1998
- ----------------------------
Jack L. McDonald
/s/ Carson R. McKissick Director March 31, 1998
- ----------------------------
Carson R. McKissick
/s/Karen Gordon Mills Director March 31, 1998
- ----------------------------
Karen Gordon Mills
<PAGE>
SCHEDULE II
-----------
<TABLE>
TRIANGLE PACIFIC CORP. AND SUBSIDIARIES
---------------------------------------
VALUATION AND QUALIFYING
------------------------
ACCOUNTS AND RESERVES
---------------------
(in thousands)
<CAPTION>
Column A Column B Column C Column D Column E
- -------- -------- -------- -------- --------
Additions
Balance at charged to Balance
beginning costs and at end of
Classifications of period expenses Deductions(1) period
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fiscal Year ended
December 29, 1995:
Reserve for
doubtful accounts
and returns and
allowances $ 2,491 $ 435 $ 338 $ 2,588
=====================================================
Fiscal Year ended
January 3, 1997:
Reserve for
doubtful accounts
and returns and
allowances $ 2,588 $ 672(2) $ 207 $ 3,053
=====================================================
Fiscal Year ended
January 2, 1998:
Reserve for
doubtful accounts
and returns and
allowances $ 3,053 $ 850(3) $ 241 $ 3,662
=====================================================
</TABLE>
[FN]
(1) Write-offs of specific accounts, net of recoveries.
(2) Includes Hartco balance of $250 at June 28, 1996, acquisition date.
(3) Includes Robbins balance of $431 at March 28, 1997, acquisition date.
- ------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT
by and among
TRIANGLE PACIFIC CORP.,
ROBBINS HARDWOOD FLOORING, INC.
as Buyer
and
ROBBINS, INC.,
and
SEARCY FLOORING, INC.
as Sellers
March 28, 1997
- ------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
ASSET PURCHASE AGREEMENT ................................................. 1
ARTICLE I. .............................................................. 1
TERMS OF THE TRANSACTION ................................................ 1
1.1 Assets to be Transferred .................................... 1
1.2 Purchase Price .............................................. 4
1.3 Cash Payment ................................................ 4
1.4 Liabilities Assumed by Buyer ................................ 4
1.5 Estimated Cash Payment ...................................... 4
1.6 Certain Closing Adjustments ................................. 6
1.7 Final Price Adjustment ...................................... 6
1.8 Allocation of Purchase Price Among Sellers; Seller
Representative. ............................................. 7
1.9 Allocation of Purchase Price Among Assets ................... 8
1.10 Liabilities Not Assumed by Buyer ............................ 8
1.11 Definitions ................................................. 9
ARTICLE II. ............................................................. 9
CLOSING ................................................................. 9
2.1 Time and Place of Closing ................................... 9
2.2 Effectiveness ............................................... 9
ARTICLE III. ............................................................ 9
REPRESENTATIONS AND WARRANTIES OF SELLERS ............................... 9
3.1 Corporate Organization and Qualification .................... 9
3.2 Authority Relative to This Agreement ........................ 10
3.3 Noncontravention ............................................ 10
3.4 Governmental Approvals ...................................... 10
3.5 Operation and Ownership of Business ......................... 10
3.6 Title to Assets ............................................. 11
3.7 Financial Statements ........................................ 11
3.8 Liabilities ................................................. 12
3.9 Absence of Certain Changes .................................. 12
3.10 Tax Matters ................................................. 12
3.11 Compliance With Laws ........................................ 13
3.12 Legal Proceedings ........................................... 13
3.13 Real Property ............................................... 13
3.14 Tangible Personal Property .................................. 15
3.15 Leased Property ............................................. 15
3.16 Inventory ................................................... 15
<PAGE>
3.17 Receivables ................................................. 15
3.18 Intellectual Property ....................................... 16
3.19 Permits ..................................................... 16
3.20 Contracts and Agreements .................................... 17
3.21 ERISA; Accrued Compensation ................................. 19
3.22 Environmental Matters ....................................... 20
3.23 Labor Relations ............................................. 22
3.24 Customers and Suppliers ..................................... 23
3.25 Insurance .................................................. 23
3.26 Books and Records ........................................... 23
3.27 Brokerage Fees .............................................. 24
3.28 Insider Interests ........................................... 24
3.29 Disclosure .................................................. 24
3.30 Representations and Warranties on Closing Date .............. 24
ARTICLE IV. ............................................................. 24
REPRESENTATIONS AND WARRANTIES OF TRIANGLE AND BUYER .................... 24
4.1 Corporate Organization ...................................... 24
4.2 Authority Relative to This Agreement ........................ 25
4.3 Noncontravention ............................................ 25
4.4 Governmental Approvals ...................................... 25
4.5 Legal Proceedings ........................................... 26
4.6 Brokerage Fees .............................................. 26
4.7 Disclosure .................................................. 26
4.8 Representations and Warranties on Closing Date .............. 26
ARTICLE V. .............................................................. 26
CONDUCT OF BUSINESS PENDING CLOSING ..................................... 26
5.1 Conduct and Preservation of Business ........................ 26
5.2 Restrictions on Certain Actions ............................. 27
ARTICLE VI. ............................................................. 28
ADDITIONAL AGREEMENTS ................................................... 28
6.1 Access to Information; Confidentiality ...................... 28
6.2 Acquisition Proposals ....................................... 29
6.3 Third Party Consents ........................................ 30
6.4 Reasonable Best Efforts ..................................... 30
6.5 Employee and Employee Benefit Plan Matters .................. 30
6.6 Title Insurance and Surveys ................................. 34
6.7 Payment of Liabilities ...................................... 35
6.8 Public Announcements ........................................ 35
6.9 Environmental Provisions .................................... 35
6.10 Notice of Litigation ........................................ 36
<PAGE>
6.11 Notification of Certain Matters ............................. 36
6.12 Amendment of Schedules ...................................... 37
6.13 Fees and Expenses ........................................... 37
6.14 Survival of Covenants ....................................... 37
6.15 Dispute Resolution .......................................... 37
6.16 Preparation of Closing Balance Sheet ........................ 38
6.17 Access to Records After Closing ............................. 39
6.18 Taxes; Other Charges ........................................ 40
6.19 Escrow; Liquidated Damages .................................. 40
ARTICLE VII. ............................................................ 40
CONDITIONS TO OBLIGATIONS OF SELLERS .................................... 40
7.1 Representations and Warranties True ......................... 40
7.2 Covenants and Agreements Performed .......................... 40
7.3 Certificate ................................................. 41
7.4 Opinion of Counsel to Buyer ................................. 41
7.5 Legal Proceedings ........................................... 41
7.6 Approval of Counsel to Seller ............................... 41
ARTICLE VIII. ........................................................... 41
CONDITIONS TO OBLIGATIONS OF TRIANGLE AND BUYER ......................... 41
8.1 Representations and Warranties True ......................... 41
8.2 Covenants and Agreements Performed .......................... 41
8.3 Certificate ................................................. 41
8.4 Preliminary Closing Statements .............................. 41
8.5 Payoff Letters. ............................................. 42
8.6 Opinion of Counsel to Seller ................................ 42
8.7 Legal Proceedings ........................................... 42
8.8 No Material Adverse Change .................................. 42
8.9 Noncompetition Agreements ................................... 42
8.10 Data Processing Agreement ................................... 42
8.11 International Distribution Agreement ........................ 42
8.12 Unacceptable Encumbrances; Title Insurance .................. 42
8.13 Due Diligence ............................................... 42
8.14 Environmental Matters ....................................... 43
8.15 Other Documents ............................................. 43
8.16 Approval of Counsel to Triangle and Buyer ................... 44
ARTICLE IX. ............................................................. 44
CONDITIONS TO OBLIGATIONS OF ALL PARTIES ................................ 44
9.1 Governmental and Third Party Consents and Approvals ......... 44
9.2 Trademark Agreement ......................................... 44
9.3 Equipment Bill of Sale ...................................... 44
<PAGE>
9.4 Real Estate and Equipment Agreement ......................... 44
9.5 Supply Agreement ............................................ 44
ARTICLE X. .............................................................. 45
TERMINATION, AMENDMENT, AND REMEDIES .................................... 45
10.1 Termination ................................................. 45
10.2 Effect of Termination ....................................... 45
10.3 Amendment ................................................... 46
10.4 Waiver ...................................................... 46
10.5 Remedies Not Exclusive ...................................... 46
ARTICLE XI. ............................................................. 46
SURVIVAL OF REPRESENTATIONS ............................................. 46
11.1 Survival .................................................... 46
ARTICLE XII. ............................................................ 46
MISCELLANEOUS ........................................................... 46
12.1 Notices ..................................................... 46
12.2 Entire Agreement ............................................ 47
12.3 Binding Effect; Assignment; No Third Party Benefit .......... 48
12.4 Severability ................................................ 48
12.5 GOVERNING LAW ............................................... 48
12.6 Descriptive Headings ........................................ 48
12.7 Gender ...................................................... 48
12.8 References .................................................. 48
12.9 Further Assurances .......................................... 49
12.10 Counterparts ................................................ 49
12.11 Injunctive Relief ........................................... 49
ARTICLE XIII. ........................................................... 49
DEFINITIONS ............................................................. 49
13.1 Certain Defined Terms ....................................... 49
13.2 Certain Additional Defined Terms ............................ 51
<PAGE>
LIST OF EXHIBITS AND SCHEDULES ........................................ S-i
Exhibit 7.4 - Opinion of Counsel to Buyer ............................. E-
Exhibit 8.6 - Opinion of Counsel to Seller ............................ E-
Exhibit 8.9 - Noncompetition Agreement ................................ E-
Exhibit 8.10 - Data Processing Agreement .............................. E-
Exhibit 9.2 - Trademark Agreement ..................................... E-
Exhibit 9.3 - Individual Assignment to Robbins ........................ E-
Exhibit 9.4 - Individual Assignment to Searcy ......................... E-
Exhibit 9.5 - Supply Agreement ........................................ E-
Schedule 1.1(a) - Real Property ....................................... S-
Schedule 1.1(b)(i) - Equipment and Machinery .......................... S-
Schedule 1.1(b)(ii) - Excluded Equipment and Machinery ................ S-
Schedule 1.1(c)(i) - Purchased Inventory .............................. S-
Schedule 1.1(c)(ii) - Retained Inventory .............................. S-
Schedule 1.1(e)(i) - Purchased Software ............................... S-
Schedule 1.1(g) - Contracts and Agreements ............................ S-
Schedule 1.1(h)(i) - Prepaid Expenses ................................. S-
Schedule 1.1(h)(ii) - Excluded Prepaid Expenses ....................... S-
Schedule 1.1(j) - Other Assets ........................................ S-
Schedule 1.5(a) - Preliminary Closing Settlement Statement ............ S-
Schedule 1.5(c) - Liabilities Assumed ................................. S-
Schedule 1.7(a) - Final Closing Settlement Statement .................. S-
Schedule 3.1 - Jurisdictions .......................................... S-
Schedule 3.3 - Noncontravention ....................................... S-
Schedule 3.4 - Governmental Approvals ................................. S-
Schedule 3.5 - Ownership of Business .................................. S-
Schedule 3.6 - Title to Assets ........................................ S-
Schedule 3.8 - Seller Liabilities ..................................... S-
Schedule 3.9 - Absence of Certain Changes ............................. S-
Schedule 3.10 - Tax Matters ........................................... S-
Schedule 3.12 - Legal Proceedings ..................................... S-
Schedule 3.13 - Real Property ......................................... S-
Schedule 3.14 - Tangible Personal Property ............................ S-
Schedule 3.15 - Leased Property ....................................... S-
Schedule 3.16 - Inventory Exceptions .................................. S-
Schedule 3.17 - Receivables Exceptions ................................ S-
Schedule 3.18 - Intellectual Property ................................. S-
Schedule 3.19 - Permits ............................................... S-
Schedule 3.20 - Contracts and Agreements .............................. S-
Schedule 3.21 - ERISA ................................................. S-
Schedule 3.22 - Environmental Matters ................................. S-
Schedule 3.23 - Labor Relations ....................................... S-
Schedule 3.24 - Customers and Suppliers ............................... S-
Schedule 3.28 - Insider Interests ..................................... S-
Schedule 6.16(a) - Inventory Schedule ................................. S-
Schedule 6.16(b) - Receivables Schedule ............................... S-
<PAGE>
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement") is made as of March 28,
1997, by and among (1) TRIANGLE PACIFIC CORP., a Delaware corporation
("Triangle'), (2) ROBBINS HARDWOOD FLOORING, INC., a Delaware corporation
("Buyer"), (3) ROBBINS, INC., an Ohio corporation ("Robbins") and (4) SEARCY
FLOORING, INC., an Ohio corporation ("Searcy") (Robbins and Searcy, are
sometimes referred to herein collectively as "Sellers" and individually as a
"Seller").
WHEREAS, Sellers desire to sell to Buyer, and Buyer desires to purchase
from Sellers, upon the terms and subject to the conditions herein set forth,
substantially all the assets of Sellers associated with the business of
developing, manufacturing and selling residential flooring (the "Business"),
as conducted by Sellers at and from the three manufacturing plants located on
the Real Property (hereinafter defined);
WHEREAS, it is the intent of the parties hereto that the acquisition
include all of the goodwill associated with the conduct of the Business;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Buyer and Sellers hereby agree as follows:
TERMS OF THE TRANSACTION
0 Assets to be Transferred. At the Closing, and on the terms and
subject to the conditions set forth in this Agreement, Sellers shall sell,
assign, transfer, deliver, and convey (collectively, "transfer"), or cause to
be transferred, to Buyer, and Buyer shall purchase from Sellers, all assets
and properties of every kind, character, and description, whether tangible,
intangible, real, personal, or mixed, located on the Real Property (or
otherwise identified on the Schedules to this Agreement) that are owned by
Sellers or in which any Seller has any right, title, or interest, and that are
used or held for use by any Seller in the conduct of the Business, or that are
associated with the Business, as the same shall exist on the Closing Date,
including, without limitation, the following assets and properties of Sellers
existing on the Closing Date:
( ) Property and Plant. All those certain plots, tracts, or
parcels of land located in Bradley County, Arkansas and White County,
Arkansas and more particularly described on Schedule 1.1(a) (the "Real
Property"), and all plants, factories, warehouses, storage facilities,
laboratories, buildings, works, structures, fixtures, landings,
construction in progress, improvements, betterments, installations, and
additions constructed, erected, or located on or attached or affixed to
the Real Property.
(a) Equipment and Machinery. All furniture, equipment,
machinery, materials, vehicles, rolling stock, apparatus, tools, dies,
implements, appliances, spare parts, supplies, and other tangible
<PAGE>
personal property of every kind, character, and description owned by
Sellers, both jointly and individually, or in which any Seller has any
right, title or interest, and located on, or used at or primarily in
connection with, the Real Property, or located elsewhere if used
primarily in, or necessary for the efficient operation of, the Business,
as of the Closing, including without limitation all the assets described
on Schedule 1.1(b)(i), and excluding only the personal property
identified on Schedule 1.1(b)(ii).
(b) Inventories. All of Sellers' inventories, as of the
Closing, located on the Real Property or otherwise identified on Schedule
1.1(c)(i), including without limitation finished goods, work-in-process,
raw materials, supply and samples inventories, and other inventories,
excluding only the Retained Inventory (hereinafter defined) described on
Schedule 1.1(c)(ii).
(c) Accounts Receivable. All accounts receivable of Sellers and
all other rights of Sellers to payment for goods sold or leased or for
services rendered, arising from the operation of the Business, including
without limitation those included on the Receivables Schedules
(hereinafter defined), and those that are not evidenced by instruments or
chattel paper, whether or not earned by performance or written off or
reserved against as a bad debt or doubtful account in any financial
statements; together with all instruments and documents of title
representing any of the foregoing, all rights in any merchandise or goods
that any of the same represent, and all rights, title, security, and
guaranties in favor of Sellers with respect to any of the foregoing,
including without limitation any right of stoppage in transit.
(d) Intellectual Property. All right, title, and interest of
Sellers into and under all patents, trademarks, service marks, trade
names, service names, brand names, copyrights, trade secrets, know-how,
proprietary processes, inventions, computer software (including
documentation and object and source codes if owned by Sellers and
described on Schedule 1.1(e)(i)), and similar rights, and all
registrations, applications, licenses, claims, causes of action, and
rights with respect to any of the foregoing, to the extent they are or
have been used primarily in connection with the operation of, the
Business, and all rights to recover for infringement thereof, including
without limitation all rights in and to the use of the mark "Robbins" and
variations thereof in connection with the Business, and all the goodwill
associated therewith, and excluding only the trademarks "Continuous
Strip," "Monogram", Monogram XL", "Squar-Edge" and "Next Step ES" (the
"Intellectual Property"); provided, however, that Sellers shall retain
all rights with respect to the name "Robbins" and variations thereof and
all rights with respect to the patents, trade secrets, and other items of
intellectual property in connection with all uses other than the
Business; provided further, that if any item of intellectual property
retained by Sellers is necessary to continue operation of the Business,
Sellers shall grant to Buyer a perpetual, royalty-free license to use the
same.
(e) Permits. All right, title, and interest of Sellers in, to,
and under all Permits relating to, or used in connection with the
operation of, the Business or relating to the construction, use,
operation, or enjoyment of the Assets, as such Permits can be lawfully
conveyed.
(f) Contracts and Agreements. All right, title, and interest of
Sellers in, to, and under the contracts and agreements, including
<PAGE>
personal property leases, described on Schedule 1.1(g), and all rights
(including rights of refund and offset), privileges, deposits, claims,
causes of action, and options in favor of Sellers relating or pertaining
to such contracts and agreements.
(g) Prepaid Expenses. All right, title, and interest of Sellers
in and to all prepaid rentals and other prepaid expenses arising from
payments made by Sellers in the ordinary course of the operation of the
Business prior to the close of business on the Closing Date for goods or
services where such goods or services have not been received by Sellers
by the close of business on the Closing Date, including without
limitation all prepaid expenses described on Schedule 1.1(h)(i), and
excluding only those prepaid expenses described on Schedule 1.1(h)(ii).
(h) Books and Records. All books, records, papers, and
instruments of Sellers of whatever nature and wherever located that
relate to the Assets or the operation of the Business, including without
limitation all financial and accounting records and all books and records
relating to employees, the purchase of materials, supplies, and services,
product research and development, the manufacture and sale of products,
and dealings with customers, vendors, and suppliers of the Business, and
including computerized books and records and other computerized storage
media and the software used in connection therewith, provided that
Sellers shall be entitled to retain copies of any such books and records
that are necessary for its tax, accounting, or legal purposes.
(i) Other Assets. Whether or not enumerated above, (i) all
assets located on the Real Property, (ii) all assets used exclusively in
or exclusively supporting the manufacturing and other operations
conducted at the plants located on the Real Property, (iii) all assets
used exclusively in the marketing, sale and distribution of residential
flooring, and (iv) all assets to which any value is attributed on the
Closing Balance Sheet (hereinafter defined), including without limitation
all rights of Sellers in the accounts and funds described on Schedule
1.1(j) and in any other escrow, trust or other account or fund
containing, or otherwise relating to, proceeds of any financing included
in the Liabilities (hereinafter defined).
All the assets and properties described in this Section 1.1 and to be
transferred to Buyer pursuant to this Agreement are collectively referred to
herein as the "Assets." Notwithstanding anything otherwise in this Agreement
to the contrary, the Assets shall not include any assets or properties of
Sellers used primarily in or associated with any business activity of Sellers
other than the Business, including without limitation the developing,
manufacturing and selling of recreational flooring and sports surfaces,
provided that all assets located on the Real Property other than those set
forth on Schedule 1.1(c)(ii) shall be conclusively deemed to be used primarily
in the Business.
1 Purchase Price. The total purchase price paid by Buyer (or by
Triangle for the benefit of Buyer) in consideration of the transfer by Sellers
to Buyer of the Assets (the "Purchase Price") shall consist of (i) a cash
payment equal to the Net Book Value (hereinafter defined) of the Assets as of
the Closing Date, plus $39,000,000 (the "Cash Payment"), and (ii) the
assumption of the Liabilities (hereinafter defined) as herein provided.
2 Cash Payment. The cash portion of the Purchase Price shall be paid
as follows:
<PAGE>
( ) an amount equal to the Estimated Cash Payment (hereinafter
defined) shall be paid at the Closing, in immediately available funds by
confirmed wire transfer to a bank account to be designated by Sellers
(such designation to occur no later than three (3) business days prior to
the Closing Date (hereinafter defined)); and
(a) the amount of any Final Price Adjustment (hereinafter
defined) shall be paid by the party, and on or before the date, specified
in Section 1.7(c), in immediately available funds by confirmed wire
transfer to a bank account to be designated by the party to whom such
Final Price Adjustment is payable (such designation to occur no later
than two (2) business days prior to the date such payment is due).
3 Liabilities Assumed by Buyer. As partial consideration for the
transfer of the Assets to Buyer, Buyer agrees, upon the terms and subject to
the conditions set forth herein, to assume, at the Closing, and thereafter to
pay, perform, and discharge, the Liabilities (hereinafter defined), but only
the Liabilities and all liabilities arising after the Closing relating to
Buyer's operation of the Business. Any Liabilities that constitute Payoff
Indebtedness (hereinafter defined) shall be paid by Buyer (or by Triangle for
the benefit of Buyer) at the Closing, in immediately available funds by
confirmed wire transfer to a bank account to be designated by the creditor to
whom such Payoff Indebtedness is payable (such designation to occur no later
than two (2) business days prior to the Closing Date).
4 Estimated Cash Payment. The "Estimated Cash Payment" shall be
equal to the Net Book Value of the Assets as of the date of the Latest Balance
Sheet (hereinafter defined), plus $39,000,000, and shall be determined as
follows:
( ) Not later than fifteen (15) days prior to the Closing Date,
Sellers shall deliver to Buyer an unaudited, combined balance sheet
reviewed by Arthur Andersen, LLP, as of January 25, 1997, with respect to
(i) Robbins, (ii) Searcy and (iii) Robbins International, Inc., (the
"Latest Balance Sheet"), together with a preliminary calculation of the
Estimated Cash Payment presented in the format set forth on Schedule
1.5(a) (the "Preliminary Closing Settlement Statement", and together with
the Latest Balance Sheet, the "Preliminary Closing Statements"). In
connection with Buyer's review of the Preliminary Closing Statements,
Sellers shall give Buyer and its representatives full access to all
personnel, books and records of Sellers pertaining to the Business or the
Preliminary Closing Statements, including without limitation all work
papers of Sellers and their accountants and all pertinent accounting and
other records of Sellers, and shall provide all other information
<PAGE>
pertaining to the Business or the Preliminary Closing Statements
reasonably requested by Buyer and its representatives. The Latest
Balance Sheet shall be prepared in accordance with generally accepted
accounting principles in the United States of America as in effect from
time to time applied on a basis - as to the substance of the principles
applied (including application of the last-in, first-out method of
inventory valuation), the manner of application and the estimation
techniques used - with the Annual Financial Statements (hereinafter
defined) ("U.S. GAAP"). The Preliminary Closing Settlement Statement
shall be prepared in accordance with (i) the Latest Balance Sheet and
(ii) the terms and provisions of this Agreement; provided, that solely
for purposes of determining the Estimated Cash Payment, the amount of
accounts payable and accrued expenses included in the Liabilities shall
be as set forth in Annex II to the Preliminary Closing Settlement
Statement. The Preliminary Closing Statements shall be accompanied by
certificates signed by the chief executive officer and the chief
financial officer of each of Robbins and Searcy, respectively, stating
that the Preliminary Closing Statements have been prepared as described
in the immediately preceding two sentences.
(a) Sellers and Buyer shall assist and cooperate with each other
and otherwise use their best efforts to obtain the Preliminary Closing
Settlement Statement. Unless Buyer gives written notice of a Dispute
(hereinafter defined) to Sellers within ten (10) days after receipt by
Buyer of the Preliminary Closing Statements, the Preliminary Closing
Statements shall be deemed accepted by Buyer in the form in which
delivered by Sellers. If Buyer does not agree with the amount of any of
the assets or liabilities set forth on the Latest Balance Sheet, or any
of the calculations set forth on the Preliminary Closing Settlement
Statement, written notice of its disagreement therewith (a "Dispute," as
further defined in Section 6.15) shall be given by Buyer to Sellers
within ten (10) days after receipt by Buyer of the Preliminary Closing
Statements, and Buyer and Sellers shall attempt to resolve such Dispute
and agree in writing upon the final content of the Preliminary Closing
Settlement Statement prior to the Closing Date. If Sellers and Buyer are
unable to resolve any such Dispute within such time period, such Dispute
shall be resolved pursuant to Section 6.15.
(b) As used in this Agreement, the following terms have the
meanings given to them below:
( ) "Liabilities" means (A) all obligations of Sellers
accruing from and after the Closing Date under the contracts and
agreements described on Schedule 1.1(g) (but only to the extent that
such liabilities and obligations arise from the operation of the
Assets or the Business after the Closing Date), and (B) accounts
payable, accrued expenses, product warranty and product liability
claims, and obligations for borrowed money (except obligations under
any bank credit agreement to which any Seller is a party), that are:
(1) listed on Schedule 1.5(c), as amended pursuant to Section
1.7(a), and reflected on the Final Closing Settlement Statement, (2)
not dischargeable or discharged in the ordinary course of the
Business prior to the Closing, (3) not excluded liabilities under
Section 1.10, and (4) properly classified under U.S. GAAP as
liabilities of the Business as of the Closing Date.
(i) "Net Book Value" means (i) the book value of the
Assets as determined in accordance with U.S. GAAP and the terms of
this Agreement, net of all reserves and valuation allowances, less
(ii) the Liabilities.
(ii) "Payoff Indebtedness" means any of the Liabilities
that either (A) must be repaid upon consummation of the transactions
contemplated by this Agreement to prevent a default with respect
thereto or to release any Encumbrances securing payment thereof, or
(B) Buyer notifies Sellers, not less than five (5) business days
prior to the Closing Date, is to be repaid at the Closing.
5 Certain Closing Adjustments. The Purchase Price, as reflected on
the Preliminary Closing Settlement Statement and on the Final Closing
Settlement Statement, shall be adjusted as necessary to reflect the proration
of ad valorem taxes provided for in Section 6.18.
<PAGE>
6 Final Price Adjustment. The amount of any "Final Price Adjustment"
shall be determined as follows:
( ) Not later than thirty (30) days after the Closing Date,
Buyer shall deliver to Sellers an unaudited balance sheet, prepared so as
to reflect the Assets and Liabilities as of the Closing (the "Closing
Balance Sheet"), together with a calculation of the final Purchase Price
pursuant to Section 1.2 and of whether a Final Price Adjustment is
payable pursuant to Section 1.7(c) (the "Final Closing Settlement
Statement", and together with the Closing Balance Sheet, the "Final
Closing Statements"), presented in the format set forth on Schedule
1.7(a). The Final Closing Statements shall also include an amended
Schedule 1.5(c), revised to include a detailed listing of the accounts
payable and accrued expenses included in the Liabilities. In connection
with Sellers' review of the Final Closing Statements, Buyer shall give
Sellers and their representatives full access to all personnel, books and
records pertaining to the Business, including without limitation all
corresponding work papers of Buyer and its accountants and all pertinent
accounting and other records of Buyer, and shall provide all other
information reasonably requested by Sellers. The Closing Balance Sheet
shall be prepared in accordance with U.S. GAAP. The Final Closing
Settlement Statement shall be prepared in accordance with (i) the Closing
Balance Sheet and (ii) the provisions of this Agreement. The Final
Closing Statements shall be prepared in accordance with the immediately
preceding two sentences.
(a) Sellers and Buyer shall assist and cooperate with each other
and otherwise use their best efforts to obtain the Final Closing
Settlement Statement. If Sellers do not give written notice of a Dispute
to Buyer within twenty (20) days after receipt by Sellers of the Final
Closing Statements, the Final Closing Statements shall be deemed accepted
by Sellers in the form in which delivered by Buyer. If Sellers do not
agree with the amount of any of the assets or liabilities set forth on
the Closing Balance Sheet, or any of the calculations set forth on the
Final Closing Settlement Statement, written notice of their disagreement
therewith shall be given by Sellers to Buyer within twenty (20) days
after receipt by Sellers of the Final Closing Statements, and Buyer and
Sellers shall attempt to resolve such Dispute and agree in writing upon
the final content of the Final Closing Settlement Statement within twenty
(20) days after receipt by Buyer of such notice of a Dispute. If Sellers
and Buyer are unable to resolve any such Dispute within such time period,
such Dispute shall be resolved pursuant to Section 6.15. The Final
Closing Settlement Statement in the form delivered by Buyer to Sellers,
if Sellers do not give notice of a Dispute, or as adjusted by written
agreement of the parties or by the procedure specified in Section 6.15,
shall constitute the "Final Closing Settlement Statement" under this
Agreement.
(b) The Final Price Adjustment, if any, shall be equal to the
difference between the Estimated Cash Payment and the final Cash Payment
(pursuant to Section 1.2 and Section 1.7(b)), and shall be:
( ) payable to Sellers, if the Estimated Cash Payment is
lower than the final Cash Payment; or
(i) payable to Buyers, if the Estimated Cash Payment is
higher than the final Cash Payment; and
<PAGE>
(ii) in either case, payable within two (2) business days
after the date the Final Closing Settlement Statement is determined
pursuant to Section 1.7(b).
7 Allocation of Purchase Price Among Sellers; Seller Representative.
(a) The portion of the Purchase Price payable in respect of the Net
Book Value of the Assets shall be allocated among Sellers based on the
respective Net Book Value of the Assets conveyed by each Seller, as
reflected on the Preliminary Closing Settlement Statement and the Final
Closing Settlement Statement, and the $39,000,000 payment provided for in
Section 1.2 shall be allocated as follows: $31,750,000 to Robbins and
$7,250,000 to Searcy. Any Final Price Adjustment shall be allocated
among the Sellers based on the difference, if any, between the Net Book
Value of the Assets conveyed by each Seller as reflected on the
Preliminary Closing Settlement Statement and as reflected on the Final
Closing Settlement Statement.
(b) Each of Robbins and Searcy, by its execution of this Agreement,
hereby designates and appoints James H. Stoehr, Jr. as its agent and
attorney-in-fact, with full power of substitution, to serve as its
"Seller Representative" for purposes of this Agreement and to take all
actions required or permitted to be taken by Sellers, and to give and
receive all notices required to be given by or to Sellers, after the
Closing under the terms and provisions of this Agreement. Any action
required or permitted to be taken by Sellers after the Closing, and any
notice required to be given by or to Sellers after the Closing, shall be
taken by or given by or to the Seller Representative, and any such action
taken by, or notice given by or to, the Seller Representative shall be
conclusively deemed to be validly taken or given in accordance with this
Agreement.
8 Allocation of Purchase Price Among Assets. Sellers and Buyer will
mutually determine the appropriate allocation of the Purchase Price among the
Assets pursuant to Section 1060 of the Code, not less than sixty (60) days
after Buyer's receipt of the Final Closing Settlement Statement. If Buyer and
Sellers are not able to mutually determine such allocation within such period,
it shall be determined by binding arbitration pursuant to Section 6.15.
Sellers and Buyer shall report the transactions contemplated hereby on all Tax
Returns (including information returns and supplements thereto required to be
filed by the parties under Section 1060 of the Code) in a manner consistent
with such allocation.
9 Liabilities Not Assumed by Buyer. Buyer shall not assume or take
title to the Assets subject to, nor shall Triangle or Buyer in any way be
liable or responsible for, any liabilities or obligations of Sellers (whether
or not referred to in any Schedule or Exhibit hereto), except as specifically
provided in Section 1.4, it being expressly acknowledged that it is the
intention of the parties hereto that all liabilities and obligations that
Sellers have or may have in the future (whether accrued, absolute, contingent,
unliquidated, or otherwise, whether or not known to Sellers, and whether due
or to become due), other than the Liabilities, shall be and remain the
liabilities and obligations of Sellers. Without limiting the generality of
the foregoing, and except as specifically provided in Section 1.4, Buyer shall
not assume or take title to the Assets subject to, or in any way be liable or
responsible for:
( )any liabilities or obligations of Sellers whether or not relating
to the Assets or the Business, and whether or not arising or asserted
prior to the Closing,
<PAGE>
(a) any liability or obligation of Sellers under any mortgage,
deed of trust, security agreement, or financing statement, or any note,
bond, or other instrument or obligation secured thereby,
(b) any liability or obligation of Sellers existing at or
arising after the Closing Date under any leases, contracts, agreements,
or Permits included in the Assets that results from the material breach,
default, or wrongful action or inaction of Sellers prior to the close of
business on the Closing Date,
(c) any liability or obligation of Sellers resulting from or
relating to the employment relationship between any Seller and any
Seller's present or former employees engaged in connection with the
ownership or operation of the Assets or the Business or the termination
of any such employment relationship, including without limitation
severance pay and other similar benefits, if any, and any claims filed on
or prior to the Closing Date or that may thereafter be filed by or on
behalf of any such present or former employee relating to the employment
or termination of employment of any such employee by a Seller, including
without limitation any claim for wrongful discharge, breach of contract,
unfair labor practice, employment discrimination, unemployment
compensation, or workers' compensation,
(d) any liability or obligation of Sellers in respect of any
agreement, trust, plan, fund, or other arrangement under which benefits
or employment is provided for any Seller's present or former employees
engaged in connection with Sellers' ownership or operation of the Assets
or the Business, and
(e) any liabilities or deficiencies for any Taxes, to the extent
applicable to periods (or portions thereof) ending on or prior to the
Closing Date.
For purposes of this Section 1.10, references to Sellers shall include
predecessors in title.
10 Definitions. All capitalized terms used in this Agreement and not
otherwise defined are defined in Article XIII of this Agreement.
I.
CLOSING
0 Time and Place of Closing. The consummation of the transactions
contemplated hereby shall take place (i) at the offices of Thompson & Knight,
P.C. at 10:00 a.m., local time, on March 28, 1997, or (ii) at such other time
or place or on such other date as Buyer and Sellers shall agree (the
"Closing"). The date on which the Closing is required to take place is herein
referred to as the "Closing Date." All Closing transactions shall be deemed
to have occurred simultaneously when all the conditions set forth in Articles
VII, VIII and IX have been satisfied.
1 Effectiveness. The transactions contemplated by this Agreement
shall all become effective as of the close of business on the Closing Date.
<PAGE>
II.
REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers represent and warrant to Triangle and Buyer that:
0 Corporate Organization and Qualification. Each of Robbins and
Searcy is a corporation duly organized, validly existing, and in good standing
under the laws of the jurisdiction of its incorporation and has all requisite
corporate power and corporate authority to own, lease, and operate its
properties and to carry on its business as now being conducted. No actions or
proceedings to dissolve either Searcy or Robbins are pending or to Sellers'
knowledge, threatened. Each of Robbins and Searcy is duly qualified or
licensed to do business as a foreign corporation and is in good standing in
each of the jurisdictions indicated on Schedule 3.1, which are all the
jurisdictions in which the indicated entity owns, leases, or operates its
properties or in which such qualification or licensing is required for the
conduct of its business and the failure to so qualify or license would have a
Material Adverse Effect.
1 Authority Relative to This Agreement. Each of Searcy and Robbins
has full corporate power and corporate authority to execute, deliver, and
perform this Agreement and the Ancillary Documents to which it is a party and
to consummate the transactions contemplated hereby and thereby. The
execution, delivery, and performance by each of Searcy and Robbins of this
Agreement and the Ancillary Documents to which it is a party, and the
consummation by it of the transactions contemplated hereby and thereby, have
been duly authorized by all necessary corporate action. This Agreement has
been duly executed and delivered by each of Searcy and Robbins and
constitutes, and each Ancillary Document executed or to be executed by each of
Searcy and Robbins has been, or when executed will be, duly executed and
delivered by each of Searcy and Robbins and constitutes, or when executed and
delivered will constitute, a valid and legally binding obligation of each of
Searcy and Robbins, enforceable against each of Searcy and Robbins in
accordance with its terms, except that such enforceability may be limited by
(i) applicable bankruptcy, insolvency, reorganization, moratorium, and similar
laws affecting creditors' rights generally and (ii) equitable principles that
may limit the availability of certain equitable remedies (such as specific
performance) in certain instances and (iii) public policy considerations with
respect to the enforceability of rights of indemnification.
2 Noncontravention. The execution, delivery, and performance by
Sellers of this Agreement and the Ancillary Documents to which each is party
and the consummation by them of the transactions contemplated hereby and
thereby do not and will not (i) conflict with or result in a violation of any
provision of the Articles of Incorporation or Code of Regulations of or other
governing instruments of Robbins or Searcy, (ii) conflict with or result in a
violation of any provision of, or constitute (with or without the giving of
notice or the passage of time or both) a material default under, or give rise
(with or without the giving of notice or the passage of time or both) to any
right of termination, cancellation, or acceleration under, or require any
consent, approval, authorization, or waiver of, or notice to, any party to,
any bond, debenture, note, mortgage, indenture, lease, contract, agreement, or
other instrument or obligation to which any Seller is a party or by which
Sellers, or any of their respective properties, may be bound or any Permit
<PAGE>
held by Sellers, (iii) result in the creation or imposition of any Encumbrance
upon the Assets, (iv) result in the loss of any material benefit to, or
privilege or right of, the Business or otherwise attributable to any of the
Assets, or (v) violate any Applicable Law binding upon Sellers, the Business
or any of the Assets except, in the case of clause (ii) above, for (A) such
consents, approvals, authorizations, and waivers that have been obtained and
are unconditional and in full force and effect and such notices that have been
duly given, and (B) such consents, approvals, authorizations, waivers, and
notices disclosed on Schedule 3.3.
3 Governmental Approvals. Except as disclosed on Schedule 3.4, no
consent, approval, order, or authorization of, or declaration, filing, or
registration with, any Governmental Entity is required to be obtained or made
by Sellers in connection with the execution, delivery, or performance by
Sellers of this Agreement and the Ancillary Documents to which any of them is
a party or the consummation by them of the transactions contemplated hereby or
thereby.
4 Operation and Ownership of Business. No Seller has any direct or
indirect equity or ownership interest in any corporation, partnership, joint
venture, or other entity that is or whose assets are involved or used,
directly or indirectly, in the conduct of the Business, and the Business is
conducted exclusively by Sellers. No person who is an active employee of a
Seller has greater than a three percent equity or ownership interest in any
Seller except as indicated on Schedule 3.5. The Assets constitute all the
material assets used primarily in, or necessary to continue, the operation of
the Business in the ordinary course consistent with past practice.
5 Title to Assets. In the aggregate, Sellers are the owners of, and
have good and marketable title to, all the Assets, free and clear of all
Encumbrances other than the Permitted Encumbrances. Upon Sellers' transfer of
the Assets to Buyer pursuant to this Agreement, Buyer will have good and
marketable title to all the Assets, free and clear of all Encumbrances other
than the Permitted Encumbrances. Except as disclosed on Schedule 3.6, no
financing statement (or other instrument sufficient or effective as a
financing statement) under the Uniform Commercial Code with respect to any of
the Assets has been filed and is effective in any jurisdiction, and no Seller
has signed any such financing statement (or other instrument) or any mortgage
or security agreement granting any mortgage or security interest in any of the
Assets or authorizing any secured party thereunder to file any such mortgage
or financing statement (or other instrument).
6 Financial Statements. Sellers have delivered to Buyer accurate and
complete copies of (i) the audited balance sheets as of October 31, 1992,
1993, 1994, 1995 and 1996, and the related audited statements of income,
stockholders' equity and cash flows of Robbins and Searcy for each of the
periods then ended, and the notes and schedules thereto, together with the
unqualified reports thereon of Arthur Andersen, LLP, independent public
accountants (the "Annual Financial Statements"), and (ii) the Latest Balance
Sheet and the related unaudited, combined statements of income, stockholders'
equity and cash flows of Robbins, Robbins International, Inc. and Searcy for
the period then ended, reviewed by Arthur Andersen, LLP and certified by the
chief financial officer and the chief executive officer of Robbins and Searcy,
as appropriate (the "Interim Financial Statements") (the Annual Financial
Statements and the Interim Financial Statements are collectively referred to
as the "Financial Statements"). The Financial Statements (i) represent actual
bona fide transactions, (ii) have been prepared from the books and records of
Sellers in conformity with U.S. GAAP applied on a basis consistent (as to the
substance of the principles applied, the manner of application and the
estimation techniques used) with preceding years throughout the periods
involved, and (iii) accurately, completely, and fairly present in all material
<PAGE>
respects the financial position of each of the Sellers and of the Business as
of the respective dates thereof and their respective results of operations and
cash flows for the periods then ended, except that the Interim Financial
Statements are subject to normal year-end adjustments, which will not be
material in the aggregate. Other than as expressly set forth therein, the
statements of income included in the Financial Statements do not contain any
items of special or nonrecurring income, and the balance sheets included in
the Financial Statements do not reflect any write-up or revaluation increasing
the book value of any assets, nor have there been any transactions since
November 1, 1994 giving rise to special or nonrecurring income or any such
write-up or revaluation. All financial projections, forecasts, and other
forward-looking information provided by Sellers to Triangle or Buyer were, as
of their respective dates, prepared in good faith and on a basis that
management of Robbins and Searcy believed to be reasonable. The Financial
Statements include all liability, valuation and other reserves and allowances
required by U.S. GAAP and by this Agreement, including without limitation,
reserves for Environmental Liabilities, employee benefit obligations
(including accrued vacation and sick leave) and product warranty and product
liability claims, and all such reserves and allowances (collectively,
"Reserves") are adequate.
7 Liabilities.
( ) To their knowledge, Sellers have no material liabilities or
obligations (whether accrued, absolute, contingent, unliquidated, or
otherwise, whether or not known to Sellers, and whether due or to become
due), except (i) liabilities reflected on the Latest Balance Sheet, (ii)
liabilities described in the notes accompanying the Financial Statements,
(iii) liabilities that have arisen since the date of the Latest Balance
Sheet in the ordinary course of business (none of which is a liability
for breach of contract, breach of warranty, tort, or infringement), (iv)
liabilities arising under executory contracts entered into in the
ordinary course of business (none of which is a liability for breach of
contract), and (v) liabilities specifically set forth on Schedule 3.8.
(a) Sellers' liabilities and obligations (whether accrued,
absolute, contingent, unliquidated, or otherwise, whether or not known to
Sellers, and whether due or to become due) for product warranty and
product liability claims do not exceed the amount of Reserves therefor
reflected in the Financial Statements.
8 Absence of Certain Changes. Except as disclosed on Schedule 3.9,
since November 1, 1996, (i) to Sellers' knowledge, there has not been any
material adverse change in, or any event or condition that might reasonably be
expected to result in any material adverse change in, the business, assets,
results of operations, condition (financial or otherwise), or prospects of the
Business or the ownership or operation of the Assets or any material portion
thereof except for general industry conditions; (ii) the Business has been
conducted only in the ordinary course consistent with past practice; (iii)
Sellers have not, in respect of the Business, incurred any material liability,
engaged in any material transaction, or entered into any material agreement
outside the ordinary course of business consistent with past practice; (iv)
none of the 10 largest customers (including distributors) of any Seller has
discontinued or significantly reduced its purchases from the Company, nor has
any such customer given any notice or other indication it anticipates doing
so; (v) there has not occurred any material loss, damage, destruction, or
other casualty to any of the Assets (whether or not covered by insurance); and
(vi) no Seller has, in respect of the Business, taken any of the actions set
forth in Section 5.2 except as permitted thereunder.
<PAGE>
9 Tax Matters. Except as disclosed on Schedule 3.10:
( ) each of Robbins and Searcy has duly filed all Tax Returns
required to be filed by or with respect to it with the IRS or other
applicable authority, and no extensions with respect to such Tax Returns
have been requested or granted;
(a) there are no Encumbrances with respect to Taxes (except for
liens with respect to real property Taxes not yet due) upon any of the
Assets;
(b) Sellers have duly and timely withheld from salaries, wages,
and other compensation and paid over to the appropriate taxing
authorities all amounts required to be so withheld and paid over under
all Applicable Laws; and
(c) Sellers have complied in all material respects with all
requirements of Applicable Law as necessary to qualify all industrial
revenue bond financing included in the Liabilities for tax-free treatment
and all such financing is so qualified.
10 Compliance With Laws. Sellers have complied in all material
respects with all Applicable Laws relating to the ownership or operation of
the Assets or the operation of the Business (including without limitation
Applicable Laws relating to securities, properties, business operations,
products, manufacturing processes, advertising and sales practices, employment
practices, terms and conditions of employment, wages and hours, product
safety, and civil rights), the failure to comply with which would result in a
Material Adverse Effect. No Seller has received any written notice, that has
not been dismissed or otherwise disposed of, that a Seller has not so
complied. No Seller is charged with, or to the knowledge of Sellers
threatened with or under investigation with respect to, any alleged violation
of any Applicable Law relating to any aspect of the ownership of the Assets or
operation of the Business.
11 Legal Proceedings. Except as set forth on Schedule 3.12, there are
no Proceedings pending, or to the knowledge of Sellers threatened, against or
involving Sellers (or any of Robbins' or Searcy's directors or officers) in
connection with the Assets or the Business. No judgment, order, writ,
injunction, or decree of any Governmental Entity has been issued or entered
against Sellers or any of their affiliates that continues to be in effect with
respect to or affecting the Assets or the operation of the Business. There
are no Proceedings pending, or to the knowledge of Sellers threatened, seeking
to restrain, prohibit, or obtain damages or other relief in connection with
this Agreement or the transactions contemplated hereby.
<PAGE>
12 Real Property.
( ) Sellers own, or as of the Closing will own, and have good
and marketable title to all the Real Property, which is all the real
property owned or leased by Sellers and used or held for use in the
Business. There are no persons (other than Sellers) in possession of any
portion of the Real Property as lessees, tenants at sufferance, or
trespassers, nor does any person (other than Sellers) have a lease,
tenancy, or other right of occupancy or use of any portion of the Real
Property, except as specified on Schedule 3.13. Unless otherwise
disclosed on Schedule 3.13, any lease, tenancy, or other right of
occupancy or use disclosed on Schedule 3.13 may be terminated by Sellers
at any time upon giving not more than thirty (30) days written notice,
and, if directed by Buyer, Sellers shall give notice of termination at
the Closing. The Real Property has full and free access to and from
public highways, streets, and roads, and Sellers have no knowledge of any
pending or threatened Proceeding that would limit or result in the
termination of such access. To Sellers' knowledge, there exists no
Proceeding or court order, or building code provision, deed restriction,
or restrictive covenant (recorded or otherwise), or other private or
public limitation, that might in any way have a Material Adverse Effect
upon the continued use of the Real Property by Sellers in the manner it
is currently used.
(a) All buildings, improvements, and fixtures situated on the
Real Property conform to all Applicable Laws, the failure of which would
have a Material Adverse Effect. All the Real Property is zoned for the
various purposes for which such Real Property is being used, and there
exists no pending or, to the knowledge of Sellers, threatened Proceeding
that might adversely affect the validity of such zoning.
(b) The Real Property is connected to and serviced by water,
sewage disposal, gas, telephone, and electric facilities that are
adequate for the current use of the Real Property and, to the knowledge
of Sellers, are in compliance with all Applicable Laws. All public
utilities required for the operation of the Real Property enter the Real
Property through adjoining public streets or, if they pass through
adjoining private land, do so in accordance with valid public easements,
and all utility lines and mains located on the Real Property have been
properly dedicated to, and are serviced and maintained by, the
appropriate public or quasi-public entity.
(c) Except as set forth on Schedule 3.13, (i) the buildings,
improvements, and fixtures situated on the Real Property are in operating
condition (excepting ordinary wear and tear), (ii) Sellers have performed
all maintenance thereon in the ordinary course consistent with past
practice, and (iii) to Sellers' knowledge, the buildings, improvements,
and fixtures situated on the Real Property are free of any latent or
patent structural defects.
(d) Neither the whole nor any part of the Real Property is
subject to any pending Proceeding for condemnation or other taking by any
Governmental Entity, and, to the knowledge of Sellers, no such
condemnation or other taking is contemplated or threatened.
(e) There are no delinquent Taxes, assessments, charges, debts,
liabilities, claims, or obligations arising from the construction,
occupancy, ownership, use, or operation of the Real Property, or the
buildings, improvements, or fixtures situated thereon, or the business
<PAGE>
operated thereon, which could give rise to any mechanic's or
materialmen's or other statutory lien against the Real Property, or the
buildings, improvements, or fixtures situated thereon, or any part
thereof, or for which Buyer will be responsible.
(f) Sellers have delivered to Buyer accurate and complete copies
of all title insurance policies, title reports, other title documents,
surveys, certificates of occupancy, and Permits in the possession of
Sellers relating to the Real Property or the buildings, improvements, or
fixtures situated thereon.
(g) No Seller is a "foreign person" within the meaning of
Sections 1445 and 7701 of the Code.
13 Tangible Personal Property. Set forth on Schedule 3.14 is a list,
as of the most recent practicable date, of all furniture, equipment,
machinery, computer hardware, materials, motor vehicles, rolling stock,
apparatus, tools, implements, appliances, and other tangible personal property
(other than spare parts, supplies, and inventories) owned or leased by Sellers
and used or held for use in the Business.
14 Leased Property. Set forth on Schedule 3.15 is a list of all leases
(copies of which have been provided to Buyer) under which Sellers are lessees
of real or personal property used or held for use in the Business. Sellers
have good and valid leasehold interests in all such properties held by them
under lease. Sellers have been in peaceable possession (or remedied any
claims relating thereto) of the property covered by each such leases since the
commencement of the original term of such lease. No waiver, indulgence, or
postponement of Sellers' obligations under any such lease has been granted by
the lessor or of the lessor's obligations thereunder by Sellers. No Seller is
in breach of or in default under, and no event has occurred that (with or
without the giving of notice or the passage of time or both) would constitute
a default under, any of such leases, and Sellers have not received any notice
from, or given any notice to, any lessor indicating that a Seller or such
lessor is in breach of or in default under any of such leases. To the
knowledge of Sellers, none of the lessors under any of such leases is in
breach thereof or in default thereunder. Sellers have full right and power to
occupy or possess, as the case may be, all the property covered by each such
lease.
15 Inventory. Other than as described in Schedule 3.16, all inventory
(including raw materials, work-in-process, and finished goods) included in the
Assets is merchantable, or suitable and usable for the production or
completion of merchantable products, for sale in the ordinary course of the
Business. Other than as described in Schedule 3.16, none of such inventory is
obsolete, discontinued, returned, damaged, overage, or of below standard
quality or merchantability, except for items that have been written down to
realizable market value. Each item of such inventory is reflected in Sellers'
books and records, has been properly classified as to quality, and is valued
in accordance with U.S. GAAP consistently applied using the last-in, first-out
method of inventory valuation. Finished goods in such inventory conform to
the applicable specifications of Sellers, including all applicable warranties,
whether express or implied, given in connection with the sales of such goods
and under Applicable Law, and are free from defects in design, workmanship,
and material. Sellers also maintain sufficient inventories of spare and
replacement parts to meet any repair and replacement obligations in the
ordinary course of the Business, under applicable warranties or otherwise.
<PAGE>
16 Receivables. Except as set forth on Schedule 3.17, all receivables
(including accounts and notes receivable, employee advances, and accrued
interest receivables) of Sellers as reflected on the Latest Balance Sheet and
the Receivables Schedules or arising since the respective dates thereof
generated by the Business are valid obligations of the respective makers
thereof, have arisen in the ordinary course of the Business, are not subject
to any valid defenses, counterclaims, or set offs, and are collectible in full
at their recorded amounts in the ordinary course of the Business without
resort to litigation or other extraordinary collection efforts, net of all
cash discounts and doubtful accounts as reflected on the Latest Balance Sheet
and the Receivables Schedules (in the case of receivables so reflected) or on
the books of Sellers included in the Assets (in the case of receivables
arising since the date thereof). The allowances for doubtful accounts
reflected in the Latest Balance Sheet and on the books of Sellers were
determined in accordance with U.S. GAAP and were and are reasonable in light
of historical data and other relevant information.
17 Intellectual Property.
( ) Set forth on Schedule 3.18 is a list of all patents, trade
secrets and trademarks included in the Intellectual Property used or held
for use in the Business. Schedule 3.18 specifies, as applicable: (i) the
nature of such patents, trade secrets and trademarks; (ii) the owner of
such patents, trade secrets and trademarks; (iii) the jurisdictions by or
in which such patents, trade secrets and trademarks are recognized
without regard to registration or has been issued or registered or in
which an application for such issuance or registration has been filed,
including the respective registration or application numbers; and (iv)
all licenses, sublicenses, and other agreements to which Sellers are
parties and pursuant to which Sellers or any other person is authorized
to use such patents, trade secrets and trademarks, including the identity
of all parties thereto, a description of the nature and subject matter
thereof, the applicable royalty, and the term thereof.
(a) The listed Intellectual Property constitutes all
Intellectual Property necessary for or, to Sellers' knowledge, otherwise
of value in connection with the operation of the Business as presently or
historically conducted. Sellers have good and marketable title to or are
validly licensed (as disclosed in Schedule 3.18) to use all such
Intellectual Property. To Sellers' knowledge, each item of such
Intellectual Property is in full force and effect, Sellers are in
compliance with all their obligations with respect thereto, and, to the
knowledge of Sellers, no event has occurred that permits, or upon the
giving of notice or the passage of time or otherwise would permit, the
revocation or termination of any thereof. There are no Proceedings
pending, or to the knowledge of Sellers threatened, against Sellers
asserting that the use by Sellers of any of such Intellectual Property
infringes the rights of any other person or seeking revocation,
termination, or concurrent use of any of such Intellectual Property, and
there is, to the knowledge of Sellers, no basis for any such Proceeding.
To the knowledge of Sellers, none of such Intellectual Property is being
infringed upon by any other person. None of such Intellectual Property
is subject to any outstanding judgment, order, writ, injunction, or
decree of any Governmental Entity, or any agreement, arrangement, or
understanding, written or oral, restricting the scope or use thereof. To
the knowledge of Sellers, the conduct of the Business at any time prior
to the Closing Date did not infringe upon or otherwise misappropriate any
Intellectual Property of any other person.
<PAGE>
18 Permits. Set forth on Schedule 3.19 is a list of all Permits held
by Sellers that relate to the Assets or the Business. Such Permits constitute
all the Permits necessary or required for the ownership and operation of the
Assets and the conduct of the Business, the failure of which would have a
Material Adverse Effect. Each of such Permits is in full force and effect,
Sellers are in material compliance with all their obligations with respect
thereto, and, to the knowledge of Sellers, no event has occurred that permits,
or with or without the giving of notice or the passage of time or both would
permit, the revocation or termination of any thereof. Except as disclosed on
Schedule 3.19, no notice has been issued by any Governmental Entity and no
Proceeding is pending or, to the knowledge of Sellers, threatened with respect
to any alleged failure by Sellers to have any Permit or any alleged failure by
Sellers to comply with any Permit.
19 Contracts and Agreements.
( ) Set forth on Schedule 3.20 is a list of all the following
leases, contracts, agreements, practices, arrangements, and
understandings (written or oral, formal or informal) (collectively, for
purposes of this Section 3.20, "agreements") to which Sellers are parties
or by which Sellers are otherwise bound that relate to the Assets or the
Business:
( ) collective bargaining agreements and similar agreements
with employees as a group;
(i) employee benefit agreements, trusts, plans, funds, or
other arrangements of any nature, including those referred to in
Section 5.2(c)(i);
(ii) agreements with any director, officer, employee,
consultant, or advisor of Sellers or any of their affiliates;
(iii) agreements between or among Sellers and any of their
affiliates;
(iv) indentures, mortgages, security agreements, notes, loan
or credit agreements, or other agreements relating to the borrowing
of money by Sellers or to the direct or indirect guarantee or
assumption by Sellers of any obligation of others, including any
agreement that has the economic effect, although not the legal form,
of any of the foregoing;
(v) agreements relating to the acquisition or disposition
of assets (other than sales of inventory in the ordinary course of
business), including agreements relating to product returns by
customers;
(vi) agreements with respect to the lease of real or
personal property;
(vii) agreements concerning the management or operation of
any real property;
(viii) broker, distributor, dealer, manufacturer's
representative, sales, agency, sales promotion, advertising, market
research, marketing, consulting, research and development,
maintenance, service, and repair agreements, except for any
<PAGE>
maintenance, service or repair agreements which are terminable
without penalty on less than thirty (30) days notice or involve
payments of less than $1,000 per month;
(ix) license, royalty, or other agreements relating to
Intellectual Property;
(x) partnership, joint venture, and profit sharing
agreements;
(xi) agreements with any Governmental Entity;
(xii) agreements relating to the release or disposal of
hazardous material (as such term is defined in Section 3.22);
(xiii) agreements in the nature of a settlement or a
conciliation agreement arising out of any claim asserted by any
other person;
(xiv) agreements containing any covenant limiting the freedom
of Sellers to engage in any line of business or compete with any
other person in any geographic area or during any period of time;
and
(xv) powers of attorney granted by Sellers in favor of any
person.
(a) Sellers have delivered to Triangle or Buyer accurate and
complete copies of the agreements listed on Schedule 3.20. Each of such
agreements is a valid and binding agreement of the Sellers who are
parties thereto and, to Sellers' knowledge, of the other party or parties
thereto, enforceable against Sellers and such other party or parties in
accordance with its terms except as such enforcement may be affected by
bankruptcy or equitable principles. Sellers are not in breach of or in
default under, nor has any event occurred that (with or without the
giving of notice or the passage of time or both) would constitute a
default by Sellers under, any material provision of any of such
agreements, and Sellers have not received any notice from, or given any
notice to, any other party indicating that Sellers are in breach of or in
default under any of such agreements. To the knowledge of Sellers, no
other party to any of such agreements is in breach of or in default under
such agreements, nor has any assertion been made by Sellers of any such
breach or default. Except as disclosed on Schedule 3.20, each of such
agreements is freely and fully assignable to Buyer without penalty or
other adverse consequence.
(b) Sellers have not received notice of any plan or intention of
any other party to any agreement to exercise any right of offset with
respect to, or any right to cancel or terminate, any agreement, and
Sellers do not know of any fact or circumstance that would justify the
exercise by any such other party of such a right other than the automatic
termination of such agreement in accordance with its terms. Sellers do
not currently contemplate, or have reason to believe any other person
currently contemplates, any amendment or change to any agreement that
could have a Material Adverse Effect.
<PAGE>
20 ERISA; Accrued Compensation.
( ) Set forth on Schedule 3.21 is a list of all employee benefit
plans (as defined in Section 3(3) of ERISA), that are maintained by or
contributed to by Sellers for employees who are employed in connection
with the Assets or the Business. During the past five years, no Seller
and no affiliate of any Seller has made or been required to make
contributions to any "multiemployer plan", as defined in Section 3(37) of
ERISA. Sellers and all the affiliates of Sellers have paid and
discharged promptly when due all liabilities and obligations arising
under ERISA or the Code of a character that if unpaid or unperformed
might result in the imposition of a lien against any of the Assets. For
purposes of this Section 3.21 only, an "affiliate" of any person means
any other person that, together with such person, would be treated as a
single employer under Section 414 of the Code. The only plans set forth
on Schedule 3.21 which individually or collectively would constitute an
"employee pension benefit plan" as defined in Section 3(2) of ERISA are
identified as such on Section 3.21. Such plans are referred to in this
Section as the "Pension Plans".
(a) The Sellers have delivered to Triangle or Buyer or its
representatives accurate and complete copies of the Pension Plans as
currently in effect (and the related trust agreements) and all amendments
thereto, the most recent summary plan descriptions for such Plans, the
three most recent annual reports (form 5500 or 5500C/R including, if
applicable, Schedule B thereto) filed with the IRS for such Plans, and
the most recent favorable IRS determination letters for such Plans (the
dates of which are set forth in Schedule 3.21).
(b) Except to the extent that amendments may be required to be
adopted as a result of the Uniformed Services Employment and Reemployment
Rights Act of 1994 and the Small Business Job Protection Act of 1996, the
Searcy Flooring, Inc. Profit Sharing Plan as amended and restated
effective as of March 1, 1989 (the "Profit Sharing Plan"), is a qualified
plan within the meaning of Section 401(a) of the Code as of the Closing
Date and for prior plan years for which the statute of limitations has
not expired (the "Open Period") and the trust forming a part thereof is
exempt from taxes pursuant to Section 501(a) of the Code for the Open
Period. This representation does not extend to the qualifications of the
Profit Sharing Plan either with respect to amendments that may be adopted
by the Buyer subsequent to the Closing Date that may have an effective
date prior to the Closing Date or to the operations of the Profit Sharing
Plan subsequent to the Closing Data as such operations may impact the
qualification of the Profit Sharing Plan for current plan year. With
respect to the Open Period, nothing done or omitted to be done and no
transaction or holding of any asset under or in connection with the
Searcy Flooring, Inc. Profit Sharing Plan through the Closing Date has or
will make Triangle or Buyer (or any affiliate thereof) or any director or
officer thereof subject to any liability under Title I of ERISA or liable
for on behalf of the Profit Sharing Plan, or by an participant therein,
alleging a breach or breaches of fiduciary duties or violations of ERISA
or the Code which could result in liability on the part of Triangle or
Buyer (or any affiliate thereof), its officers or directors or such
Profit Sharing Plan, under ERISA or the Code and, to the best knowledge
of Sellers, there is no basis for any such claim. The Profit Sharing
<PAGE>
Plan has been maintained in substantial compliance with its terms and the
requirements presented by ERISA and the Code.
(c) Except to the extent that amendments may be required to be
adopted as a result of the Uniformed Services Employment and Reemployment
Rights Act of 1994 and the Small Business Job Protection Act of 1996, the
Employees' Retirement Savings Plan as amended and restated effective as
of November 1, 1989, (the "401(k) Plan") is a qualified plan within the
meaning of Section 401(a) of the Code as of the Closing Date and prior
plan years for which the statute of limitations has not expired, and, as
such the plan assets being transferred (the "Transferred Assets") to the
similar plan being established by Buyer are being transferred from a
qualified plan. There are not threatened or pending claims by or on
behalf of the Transferred Assets, or by any participant having an
interest in the Transferred Assets, alleging a breach or breaches of
fiduciary duties or violations of ERISA or the Code which could result in
liability on the part of Triangle or Buyer (or any affiliate thereof),
its officers or directors or such Transferred Assets under ERISA or the
Code and, to the best knowledge of the Sellers, there is no basis for
such claim.
(d) Sellers have calculated and accrued all Compensation earned by
all Employees under all Employment Arrangements relating to any Employees
of the Business, including without limitation all plans and arrangements
identified on Schedules 3.20 and 3.21, for all periods through and
including the Closing Date (and for salaried Employees of Robbins,
through and including March 31, 1997), except for the accrued
Compensation under the Profit Sharing Plan for the period November 1,
1996 through the Closing Date, which shall be accrued in accordance with
Section 6.5(e). All such Compensation has been calculated as required by
the terms of said plans and arrangements, or if not fixed by the existing
terms of the plans and arrangements, in a manner no less favorable to
participants therein than the manner in which such Compensation was
calculated during the fiscal year ended October 31, 1997. All such
Compensation required to be paid prior to the Closing Date pursuant to
Section 6.5 has been paid in full.
21 Environmental Matters.
( ) Except as disclosed on Schedule 3.22:
( ) to Sellers' knowledge, the Business and the Assets
currently comply with Applicable Environmental Laws (as defined
below);
(i) the Business and the Assets are not subject to any
existing, pending, or to the knowledge of Sellers threatened,
Proceeding under, or to any remedial obligations under, any
Applicable Environmental Laws;
(ii) all Permits, if any, required to be obtained by Sellers
under any Applicable Environmental Laws in connection with any
aspect of the Business, including without limitation those relating
to the treatment, storage, disposal, or release of a hazardous
material (as defined below), have been duly obtained and are in full
force and effect, and Sellers are in material compliance with the
terms and conditions of all such Permits;
<PAGE>
(iii) Sellers, with respect to the Business and the Assets,
have at all times materially satisfied all Applicable Environmental
Laws, and Sellers have not received any notice of noncompliance with
any Applicable Environmental Laws;
(iv) to Sellers' knowledge, there are no physical or
environmental conditions existing on the Real Property or resulting
from Sellers' operations or activities, past or present, at any
location, that would give rise to any on-site (at the Real Property)
or off-site (from the Real Property) remedial obligations under any
Applicable Environmental Laws;
(v) since the effective date of the relative requirements
of Applicable Environmental Laws, all hazardous materials generated
by Sellers in connection with the Business or the Assets have been
transported only by carriers authorized under Applicable
Environmental Laws to transport such materials, and have been
disposed of only at treatment, storage, and disposal facilities
authorized under Applicable Environmental Laws to treat, store, or
dispose of such materials, and, to the knowledge of Sellers, such
carriers and facilities have been and are operating in compliance
with such authorizations and are not the subject of any existing,
pending, or threatened Proceeding in connection with any Applicable
Environmental Laws;
(vi) to Sellers' knowledge, there has been no exposure of
any person or property to hazardous materials in violation of
Applicable Environmental Laws , nor has there been any release of
hazardous materials into the environment in violation of Applicable
Environmental Laws, by Sellers in connection with the Business or
the Assets that could reasonably be expected to give rise to any
claim for damages or compensation; and
(vii) Sellers have made available to Triangle or Buyer all
internal and external environmental audits and studies and all
correspondence on substantial environmental matters in the
possession of Sellers relating to the Business or the Assets;
provided, that any privileged portion of such correspondence may
have been redacted therefrom.
(a) Irrespective of any other provision contained in this
Agreement, all representations and warranties made by Sellers in this
Agreement pertaining to hazardous materials, Applicable Environmental
Laws, and any other environmental, health or safety matters are set forth
solely in this Section 3.22.
(b) For purposes of this Agreement:
( ) "Applicable Environmental Laws" means any and all
Applicable Laws pertaining to health, safety, occupational safety,
or the environment currently in effect in any and all jurisdictions
in which Sellers have conducted the Business or owned or leased the
Assets, including, without limitation, the Clean Air Act, as
amended, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, the Rivers and Harbors Act of
1899, as amended, the Federal Water Pollution Control Act, as
amended, the Occupational Safety and Health Act of 1970, as amended,
<PAGE>
the Resource Conservation and Recovery Act of 1976, as amended, the
Safe Drinking Water Act, as amended, the Toxic Substances Control
Act, as amended, the Superfund Amendments and Reauthorization Act of
1986, as amended, the Hazardous Materials Transportation Act, as
amended, any regulations promulgated under such laws and any state
law and other environmental conservation or protection laws; and
(i) "hazardous material" means (A) any substance that is
now listed, defined, considered or classified as hazardous, toxic or
a solid waste pursuant to any Applicable Environmental Laws, (B)
petroleum (including crude oil and any fraction thereof), natural
gas, and natural gas liquids, (C) asbestos and asbestos containing
materials, in any form, whether friable or non-friable, and (D)
radon gas.
22 Labor Relations.
( ) Except as disclosed on Schedule 3.23, with respect to the
Business at the plants operated on the Real Property, (i) there are no
collective bargaining agreements, labor union contracts or similar
agreements applicable to any employee to or by which a Seller is a party
or is bound, no such agreement or contract has been requested by any
employee or group of employees of any Seller, and no discussions have
occurred with respect thereto by the management of either Robbins or
Searcy with any such employee; (ii) no employee of any Seller is
represented by any labor organization, collective bargaining
representative, or group of employees; (iii) no labor organization,
collective bargaining representative, or group of employees claims to
represent a majority of the employees of any Seller in an appropriate
unit of a Seller; (iv) no Seller is aware of or involved with any
representational campaign or other organizing activities by any union or
other organization or group seeking to become the collective bargaining
representative of any of the employees of any Seller; (v) no Seller is
obligated to bargain collectively with respect to wages, hours, and other
terms and conditions of employment with any recognized or certified labor
organization, collective bargaining representative, or group of employees
representing employees of any Seller; and (vi) no Seller is aware of any
strike, work stoppage, work slowdown, or lockout or any threat thereof,
except for routine grievance matters, by or with respect to any employee
of any Seller, and since November 1, 1994, there has been no significant
labor dispute, strike, work stoppage, work slowdown, lockout, or similar
matter involving any of the employees of any Seller.
(a) With respect to the employees engaged in the Business, Sellers
are in compliance with all Applicable Laws pertaining to employment and
employment practices and wages, hours, and other terms and conditions of
employment in respect of their employees and have no accrued liability
for any arrears of wages or any Taxes or penalties for failure to comply
with any thereof. With respect to the employees engaged in the Business,
no Seller is engaged in any unfair labor practice or unlawful employment
practice. There is no pending, or to the knowledge of Sellers
threatened, Proceeding against or involving Sellers by or before, and
Sellers are not subject to any judgment, order, writ, injunction, or
decree of or inquiry from, the National Labor Relations Board, the Equal
Employment Opportunity Commission, the Department of Labor, or any other
Governmental Entity in connection with any current, former, or
prospective employee of any Seller.
<PAGE>
(b) Sellers, to their knowledge, believe that their respective
relations with the employees of the Business are satisfactory.
23 Customers and Suppliers. Set forth on Schedule 3.24 is a list of
(i) the names of, and the dollar volume and percentage of products or services
purchased by Sellers from, each Seller's 10 largest suppliers of products and
services with respect to the Business (in terms of purchases) during each of
the fiscal years ended October 31, 1995 and October 31, 1996, (ii) the dollar
volume and percentage of sales by Sellers to each Seller's 25 largest
customers of products and services with respect to the Business (in terms of
sales) during each of such periods. Other than as set forth on Schedule 3.24,
(i) none of such current customers or suppliers has refused, or communicated
that it will or may refuse, to purchase or supply products or services from or
to Sellers or has communicated that it will or may substantially reduce the
amount of products or services that it is willing to purchase from or supply
to Sellers, (ii) no Seller is past due (in accordance with the stated invoice
terms) with respect to any amounts owed to any of the suppliers listed or
required to be listed on Schedule 3.24, and (iii) there has not been any
material adverse change in the business relationship of any Seller with any
customer or supplier listed or required to be listed on Schedule 3.24.
24 Insurance. Sellers maintain with sound and reputable insurers, and
there are currently in full force and effect, policies of insurance with
respect to the Assets and the Business against such casualties and
contingencies of such types and in such amounts as are customary for
corporations of similar size engaged in similar lines of business. All
premiums due and payable with respect to such policies have been timely paid.
No notice of cancellation of, or indication of an intention not to renew, any
such policy has been received by any Seller.
25 Books and Records. All the books and records of Sellers relating to
the Assets or the Business, including all personnel files, employee data, and
other materials relating to employees of the Business, are substantially
complete and correct, have been maintained in accordance with good business
practice and all Applicable Laws, and, in the case of the books of account,
have been prepared and maintained in accordance with generally accepted
accounting principles consistently applied. Such books and records accurately
and fairly reflect, in reasonable detail, all transactions, revenues,
expenses, assets, and liabilities of Sellers with respect to the Business.
26 Brokerage Fees. Sellers and their affiliates have not retained any
financial advisor, broker, agent, or finder or paid or agreed to pay any
financial advisor, broker, agent, or finder on account of this Agreement or
any transaction contemplated hereby. Sellers shall indemnify and hold
harmless Triangle and Buyer from and against any and all losses, claims,
damages, and liabilities (including legal and other expenses reasonably
incurred in connection with investigating or defending any claims or actions)
with respect to any finder's fee, brokerage commission, or similar payment in
connection with any transaction contemplated hereby asserted by any person on
the basis of any act or statement made or alleged to have been made by Sellers
or any of their affiliates.
27 Insider Interests. Except as disclosed on Schedule 3.28, no Insider
(hereinafter defined) is presently directly, or to the knowledge of Sellers
indirectly, a party to any transaction or agreement with any Seller,
including, without limitation, any agreement, arrangement, or understanding,
written or oral, providing for the employment of, furnishing of services by,
rental of real or personal property from, use of real or personal property by,
or requiring payments to, any Insider. As used herein, "Insider" means any
<PAGE>
shareholder, director, officer, or management employee of any Seller or any
former owner of an interest in either Robbins or Searcy. To the knowledge of
Sellers, no director, officer, or management employee of any Seller owns any
interest in, or serves as a director, officer, or management employee of, any
customer, supplier, or competitor of Sellers (other than an interest in a
public corporation that does not exceed one percent (1%) of its outstanding
securities).
28 Disclosure. No representation or warranty made by any Seller in
this Agreement, and no statement of any Seller contained in any document,
certificate, or other writing furnished or to be furnished by Sellers pursuant
hereto or in connection herewith, contains or will contain, at the time of
delivery, any untrue statement of a material fact or omits or will omit, at
the time of delivery, to state any material fact necessary in order to make
the statements contained therein, in light of the circumstances under which
they are made, not misleading, the statement or omission of which will have a
Material Adverse Effect.
29 Representations and Warranties on Closing Date. The representations
and warranties made in this Article III will be true and correct on and as of
the Closing Date with the same force and effect as if such representations and
warranties had been made on and as of the Closing Date, except that any such
representations and warranties that expressly relate only to an earlier date
shall be true and correct on the Closing Date as of such earlier date.
III.
REPRESENTATIONS AND WARRANTIES OF TRIANGLE AND BUYER
Triangle and Buyer each represents and warrants to Sellers that:
0 Corporate Organization. Each of Triangle and Buyer is a corporation
duly organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
corporate authority to own, lease, and operate its properties and to carry on
its business as now being conducted.
1 Authority Relative to This Agreement. Each of Triangle and Buyer
has full corporate power and corporate authority to execute, deliver, and
perform this Agreement and the Ancillary Documents to which it is a party and
to consummate the transactions contemplated hereby and thereby. The
execution, delivery, and performance by each of Triangle and Buyer of this
Agreement and the Ancillary Documents to which it is a party, and the
consummation by it of the transactions contemplated hereby and thereby, have
been duly authorized by all necessary corporate action of each of Triangle and
Buyer. This Agreement has been duly executed and delivered by Triangle and
Buyer and constitutes, and each Ancillary Document executed or to be executed
by Triangle or Buyer has been, or when executed will be, duly executed and
delivered by Triangle or Buyer and constitutes, or when executed and delivered
will constitute, a valid and legally binding obligation of Triangle or Buyer,
enforceable against Triangle or Buyer in accordance with its respective terms,
except that such enforceability may be limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium, and similar laws affecting creditors'
rights generally and (ii) equitable principles that may limit the availability
<PAGE>
of certain equitable remedies (such as specific performance) in certain
instances and (iii) public policy considerations with respect to the
enforceability of rights of indemnification.
2 Noncontravention. The execution, delivery, and performance by each
of Triangle and Buyer of this Agreement and the Ancillary Documents to which
it is a party and the consummation by it of the transactions contemplated
hereby and thereby do not and will not (i) conflict with or result in a
violation of any provision of the charter or bylaws of Triangle or Buyer, (ii)
conflict with or result in a violation of any provision of, or constitute
(with or without the giving of notice or the passage of time or both) a
default under, or give rise (with or without the giving of notice or the
passage of time or both) to any right of termination, cancellation, or
acceleration under, or require any consent, approval, authorization, or waiver
of any party to, any bond, debenture, note, mortgage, indenture, lease,
contract, agreement, or other instrument or obligation to which either
Triangle or Buyer is a party or by which either Triangle or Buyer or any of
its properties may be bound or any Permit held by either Triangle or Buyer,
(iii) result in the creation or imposition of any Encumbrance upon the
properties of either Triangle or Buyer, or (iv) violate any Applicable Law
binding upon either Triangle or Buyer.
3 Governmental Approvals. No consent, approval, order, or
authorization of, or declaration, filing, or registration with, any
Governmental Entity is required to be obtained or made by either Triangle or
Buyer in connection with the execution, delivery, or performance by either
Triangle or Buyer of this Agreement and the Ancillary Documents to which it is
a party or the consummation by it of the transactions contemplated hereby or
thereby, other than (i) compliance with any applicable requirements of the
Exchange Act; (ii) filings with Governmental Entities to occur in the ordinary
course following the consummation of the transactions contemplated hereby; and
(iii) such consents, approvals, orders, or authorizations that, if not
obtained, and such declarations, filings, or registrations that, if not made,
would not, individually or in the aggregate, have a Material Adverse Effect on
the business, assets, results of operations, condition (financial or
otherwise), or prospects of Triangle and its subsidiaries considered as a
whole or on the ability of either Triangle or Buyer to consummate the
transactions contemplated hereby.
4 Legal Proceedings. There are no Proceedings pending, or to the
knowledge of either Triangle or Buyer threatened, seeking to restrain,
prohibit, or obtain damages or other relief in connection with this Agreement
or the transactions contemplated hereby.
5 Brokerage Fees. Neither Triangle nor any of its affiliates has
retained any financial advisor, broker, agent, or finder or paid or agreed to
pay any financial advisor, broker, agent, or finder on account of this
Agreement or any transaction contemplated hereby. Triangle shall indemnify
and hold harmless Sellers from and against any and all losses, claims,
damages, and liabilities (including legal and other expenses reasonably
incurred in connection with investigating or defending any claims or actions)
with respect to any finder's fee, brokerage commission, or similar payment in
connection with any transaction contemplated hereby asserted by any person on
the basis of any act or statement made or alleged to have been made by
Triangle or any of its affiliates.
6 Disclosure. No representation or warranty made by either Triangle
or Buyer in this Agreement, and no statement of either Triangle or Buyer
contained in any document, certificate, or other writing furnished or to be
furnished by either Triangle or Buyer pursuant hereto or in connection
herewith, contains or will contain, at the time of delivery, any untrue
<PAGE>
statement of a material fact or omits, or will omit, at the time of delivery,
to state any material fact necessary in order to make the statements contained
therein, in the light of the circumstances under that they are made, not
misleading.
7 Representations and Warranties on Closing Date. The representations
and warranties made in this Article IV will be true and correct on and as of
the Closing Date with the same force and effect as if such representations and
warranties had been made on and as of the Closing Date, except that any such
representations and warranties that expressly relate only to an earlier date
shall be true and correct on the Closing Date as of such earlier date.
IV.
CONDUCT OF BUSINESS PENDING CLOSING
Sellers hereby covenant and agree with Triangle and Buyer as follows:
0 Conduct and Preservation of Business. Except as expressly provided
in this Agreement, during the period from the date hereof to the Closing,
Sellers (i) shall conduct the Business only in the ordinary course consistent
with past practice and in compliance with this Agreement and all Applicable
Laws; (ii) shall use their reasonable efforts consistent with past practice to
preserve, maintain, and protect the Assets; and (iii) shall use their
reasonable efforts consistent with past practice to preserve intact the
business organization of the Business, to keep available the services of the
employees conducting the Business, and to maintain existing relationships with
suppliers, contractors, distributors, customers, and others having business
relationships with the Business.
1 Restrictions on Certain Actions. Without limiting the generality of
the foregoing, and except as otherwise expressly provided in this Agreement,
prior to the Closing, Sellers shall not, without the prior written consent of
Buyer:
( ) create, incur, guarantee, or assume any liability or obligation
in respect of the Business, except current liabilities incurred in the
ordinary course of the Business, to the extent necessary to preserve and
maintain the Business consistent with past practice;
(a) mortgage or pledge any of the Assets or create or suffer to
exist any Encumbrance thereupon, other than those existing in connection
with the Permitted Encumbrances;
(b) (i) enter into, adopt, or (except as may be required by law)
amend or terminate any bonus, profit sharing, compensation, severance,
termination, stock option, stock purchase, pension, retirement, deferred
compensation, employment, collective bargaining, severance, or other
employee benefit agreement, trust, plan, fund, or other arrangement for
the benefit or welfare of any employee of the Business; (ii) increase in
any manner the compensation or fringe benefits of any employee of the
Business other than in the ordinary course of business, consistent with
prior practice; or (iii) pay to any employee of the Business any benefit
not required by any employee benefit agreement, trust, plan, fund, or
other arrangement as in effect on the date hereof;
<PAGE>
(c) sell, lease, transfer, or otherwise dispose of, directly or
indirectly, any of the Assets, other than in the ordinary course of the
Business consistent with past practice;
(d) make any capital expenditure or expenditures relating to the
Business that are not in the ordinary course of business or that in the
aggregate are in excess of $500,000;
(e) pay, discharge, or satisfy any claims, liabilities, or
obligations relating to the Business (whether accrued, absolute,
contingent, unliquidated, or otherwise, and whether asserted or
unasserted), including without limitation any loans or other amounts
payable to shareholders or affiliates, other than the payment, discharge,
or satisfaction in the ordinary course of the Business consistent with
past practice, or in accordance with their terms, of liabilities
reflected or reserved against in the Latest Balance Sheet or incurred
since the date thereof in the ordinary course of the Business consistent
with past practice;
(f) enter into, or amend, modify, or change, any lease, contract,
agreement, commitment, arrangement, or transaction relating to the
Business, except in the ordinary course of the Business consistent with
past practice;
(g) delay payment of any account payable or other liability of
Sellers relating to the Business beyond its due date or the date when
such liability would have been paid in the ordinary course of the
Business consistent with past practice;
(h) allow the levels of raw materials, work-in-process, finished
goods, supplies, and other materials included in the inventory of the
Business to vary in any material respect from the levels customarily
maintained by Sellers in the ordinary course of the Business consistent
with past practice;
(i) permit any current insurance or reinsurance policies to be
cancelled or terminated or any of the coverages thereunder to lapse if
such policy covers Assets or insures risks, contingencies, or liabilities
of the Business, unless simultaneously with such cancellation,
termination, or lapse, replacement policies providing coverage equal to
or greater than the coverage cancelled, terminated, or lapsed are in full
force and effect and written copies thereof have been provided to
Triangle or Buyer;
(j) authorize, declare, pay, or effect any dividend or liquidating
or other distribution in respect of its capital stock (other than in cash
for (i) payment of tax liabilities for tax periods ending prior to the
Closing resulting from the subchapter S corporation status of a Seller)
or (ii) payment of any obligations under any shareholder agreements or
any direct or indirect redemption, purchase, or other acquisition of any
of such stock (other than under any shareholder agreements);
(k) deliberately take any action that would make any of the
representations or warranties of any Seller contained in this Agreement
untrue or inaccurate as of any time from the date of this Agreement to
the Closing or would or might result in any of the conditions set forth
in this Agreement not being satisfied;
<PAGE>
(l) enter into or amend any contract, agreement, or other
commitment that would have a Material Adverse Effect; or
(m) authorize or propose, or agree in writing or otherwise to take,
any of the actions described in this Section 5.2.
V.
ADDITIONAL AGREEMENTS
0 Access to Information; Confidentiality.
( ) Between the date hereof and the Closing, Sellers shall, and
shall cause Robbins International, Inc. to, (i) give Buyer and its
authorized representatives reasonable access to all employees, all
plants, offices, warehouses, and other facilities, and all books and
records, including work papers and other materials prepared by Sellers'
accountants, of Sellers and Robbins International relating to the Assets,
the Liabilities or the Business, (ii) permit Buyer and its authorized
representatives to make such inspections as they may reasonably require,
with respect to the Business or the Assets, and (iii) furnish Buyer and
its authorized representatives with such financial and operating data and
other information with respect to the Assets, the Liabilities and the
Business as Buyer may from time to time reasonably request; provided,
however, that no investigation pursuant to this Section 6.1 shall affect
any representation or warranty of Sellers contained in this Agreement or
in any agreement, instrument, or document delivered pursuant hereto or in
connection herewith; provided further, that, any such representation or
warranty shall be modified or waived by such investigation to the extent
Buyer obtains actual knowledge in the course thereof that Sellers are in
violation or default under any such representation or warranty, and Buyer
does not immediately bring such violation or default to the attention of
Sellers and provide reasonable time for the cure thereof by Sellers.
(a) Sellers acknowledge and agree that irreparable damage would
occur in the event any confidential information regarding the Assets or
the Business is disclosed to or utilized on behalf of any person that is
in competition with the Business. Accordingly, Sellers covenant and
agree that they will not, and that they will cause their affiliates not
to, directly or indirectly, without the prior written consent of Buyer,
use or disclose any of such confidential information, except in the
normal course of operations of the Business or to authorized
representatives of Buyer; provided, however, that confidential
information shall not be deemed to include information that (i) was or
becomes generally available to the public other than as a result of
disclosure by Sellers or their affiliates or (ii) becomes available to
Sellers after the Closing on a nonconfidential basis from a source other
than Buyer, provided that such source is not known by Sellers to be bound
by a confidentiality agreement with respect to such confidential
information. Notwithstanding the foregoing provisions of this paragraph,
Sellers and their affiliates may disclose any confidential information to
the extent that, in the written opinion of counsel for Sellers, such
person is legally compelled to do so, provided that, prior to making such
disclosure, such person advises and consults with Buyer regarding such
disclosure and provided further that such person discloses only that
portion of such confidential information as is legally required. Buyer
acknowledges and agrees that the Confidentiality Agreement dated December
<PAGE>
20, 1996 between Triangle and Sellers shall remain in effect as provided
therein.
1 Acquisition Proposals. From and after the date of this Agreement
until the earlier of the Closing or the termination of this Agreement, neither
Sellers nor any affiliate, director, officer, employee, agent, or
representative of Sellers shall, directly or indirectly, (i) solicit,
initiate, or knowingly encourage any Acquisition Proposal (as defined below)
or (ii) engage in discussions or negotiations with, or disclose any nonpublic
information relating to the Assets or the Business to, any person that is
considering making or has made an Acquisition Proposal. Sellers shall
immediately cease and cause to be terminated any existing activities,
discussions, or negotiations with any persons conducted heretofore with
respect to any Acquisition Proposal and shall promptly request each such
person who has heretofore entered into a confidentiality agreement in
connection with an Acquisition Proposal to return to Sellers all confidential
information heretofore furnished to such person by or on behalf of Sellers.
The term "Acquisition Proposal", as used in this Section 6.2, means any offer
or proposal for, or any indication of interest in, the acquisition of the
Assets or the Business or any portion thereof, other than the transactions
contemplated or expressly permitted by this Agreement, by virtue of a merger,
sale of assets or stock, or other acquisition of any of the stock of Robbins
or Searcy or the assets of any of Sellers' residential flooring operations.
2 Third Party Consents. Each of the Sellers and Buyer shall use their
reasonable best efforts to obtain all consents, approvals, orders,
authorizations, and waivers of, and to effect all declarations, filings, and
registrations with, all third parties (including Governmental Entities) that
are necessary, required, or deemed by Buyer to be desirable to enable Sellers
to transfer the Assets to Buyer as contemplated by this Agreement and to
otherwise consummate the transactions contemplated hereby. All costs and
expenses of obtaining or effecting any and all of the consents, approvals,
orders, authorizations, waivers, declarations, filings, and registrations
referred to in this Section 6.3 shall be borne by the party incurring the
same.
3 Reasonable Best Efforts. Each party hereto agrees that it will not
voluntarily undertake any course of action inconsistent with the provisions or
intent of this Agreement and will use its reasonable best efforts to take, or
cause to be taken, all action and to do, or cause to be done, all things
reasonably necessary, proper, or advisable under Applicable Laws to consummate
the transactions contemplated by this Agreement. Sellers shall cooperate with
and assist Buyer and its authorized representatives in order to provide an
efficient and orderly transfer of the control and management of the Assets and
the Business to Buyer, to permit Buyer to assume the Liabilities without any
changes in their repayment terms and conditions, and to avoid any undue
interruption in the ongoing operations of the Assets and the Business
following the Closing. Sellers agree to take all necessary and reasonable
action pursuant to Ark. Code Ann. - 26-52-207 and other Applicable Law so that
Buyer will be issued all permits necessary to continue to conduct the
Business.
<PAGE>
4 Employee and Employee Benefit Plan Matters.
( ) Sellers shall terminate the employment of all employees of the
Business effective as of the close of business on the Closing Date.
Buyer contemplates offering employment, effective the day after the
Closing Date, to substantially all of such employees upon such terms and
conditions as Buyer, in its sole discretion, determines. At Buyer's
request, Sellers have not issued any notice required, if any is required,
by the Worker Adjustment and Retraining Notification Act, 29 U.S.C. 2101,
et seq., or any state statute requiring notice to terminated or laid off
employees ("WARN"), whether such notice is required to be given before or
after the Closing Date. Buyer agrees to and does hereby indemnify and
hold Sellers harmless from any damages, claims, fees, penalties, costs,
liabilities, compensation or any payments whatsoever required by WARN or
any state statute requiring notice to terminated or laid off employees
(collectively, the "WARN Compensation"), Sellers having refrained from
issuing said notice at the request of Buyer. Sellers acknowledge and
agree that they, and not Buyer, are and shall remain solely responsible
for payment of any and all wages, salary, compensation, commission,
bonuses, severance pay, insurance, supplement, pension, deferred
compensation, retirement and any other benefits, premiums and claims, and
all federal, state and local withholding, social security and other Taxes
and governmental levies in connection therewith, other than the WARN
Compensation (collectively, "Compensation"), due, to become due,
committed, earned, accrued or otherwise promised to any person
(collectively, "earned") who, as of the Closing Date, is a retiree,
former employee, or current employee of any Seller (collectively,
"Employees") relating to the period prior to and including the Closing
Date, including without limitation all Compensation earned under the
plans and arrangements identified on Schedules 3.20 and 3.21, and with
respect to salaried Employees of Robbins, all Compensation relating to
the period through and including March 31, 1997, excepting only all
accrued vacation, sick pay, hourly wages (for March 27 and 28, 1997 for
Searcy Employees), and Profit Sharing Plan contributions (for the plan
year commencing November 1, 1996) included in the Liabilities. Sellers
shall pay all such Compensation earned by all Employees as follows:
( ) for hourly Employees of Robbins, all Compensation
earned through March 21, 1997 shall be paid on March 27, 1997, and
all unpaid Compensation earned through March 28, 1997 shall be paid
on or before April 4, 1997;
(i) for salaried Employees of Robbins, all Compensation
earned through March 31, 1997 shall be paid on March 27, 1997; and
(ii) for all Employees of Searcy, all Compensation earned
through March 26, 1997 shall be paid on or before March 27, 1997,
and all unpaid Compensation earned through March 28, 1997 shall be
paid on or before March 27, 1997; provided, that unpaid hourly wages
earned (and related Taxes) for March 27 and 28, 1997 may be accrued
on or before March 27 but not paid.
(a) Other than as provided in Section 6.5(g) and in the proviso at
the end of this sentence, Buyer is not hereby, and at no time hereafter
will be, adopting, accepting, or assuming any employee benefit plan or
<PAGE>
collective bargaining agreement of any Seller relating to any Seller's
employees or any other agreement, trust, plan, fund, or other arrangement
of Sellers that provides for employee benefits or perquisites
(collectively, "Employment Arrangements"), and Buyer shall have no
liability or obligation whatsoever under any Employment Arrangement to
Sellers or to any employees of Sellers, whether or not any of such
employees are offered employment by or become employees of Buyer;
provided, however, that Buyer shall credit such employees who do become
Buyer's employees for all accrued vacation and sick pay included in the
Liabilities. Buyer is not obligated to replace any of the Employment
Arrangements for any employees of Sellers who become employees of Buyer,
nor is Buyer obligated to provide such persons with any similar
agreements, plans, or arrangements.
(b) Sellers will comply after the Closing Date with the
requirements of Sections 601 through 608 of ERISA and Section 4980B of
the Code with respect to any employee or former employee of Sellers (and
any dependent or former dependent thereof) whose employment with Sellers
terminates in connection with or prior to Buyer's purchase of the Assets.
It is the express intention of the parties hereto that to the extent
necessary for Sellers to meet their obligations under this Section
6.5(c), Sellers shall cause one of their affiliates that maintains a
group health plan after the Closing Date to extend group health plan
coverage that complies with such requirements to any employee or former
employee of Sellers (and any dependent or former dependent thereof) whose
employment with Sellers terminates in connection with or prior to Buyer's
purchase of the Assets.
(c) All employer contributions to the Employees' Retirement Savings
Plan (the "401(k) Plan") and the Searcy Flooring, Inc. Profit Sharing
Plan (the "Profit Sharing Plan") for employees of the Business for the
plan year ending October 31, 1996, shall be accrued and paid by Sellers
on or before the Closing Date. To the extent the amount of contributions
required to be accrued and paid by this Section 6.5(d) for either the
401(k) Plan or the Profit Sharing Plan is not fixed by the existing terms
of said Plan, the amount of contributions accrued and paid for said Plan
shall be calculated in a manner no less favorable to participants of said
Plan than the manner in which was calculated the amount of the
contributions made to said Plan for its plan year ending October 31,
1995.
(d) To the extent employer contributions for employees of the
Business are not made on or before the Closing Date to the 401(k) Plan
and the Profit Sharing Plan for the plan year commencing November 1,
1996, Sellers agree to accrue such contributions on their books in the
amounts required by the terms of said Plans, but only for the period of
time from November 1, 1996 through the Closing Date for the Profit
Sharing Plan and from November 1, 1996 through March 31, 1997 for the
401(k) Plan, (i) with respect to the 401(k) Plan, on or before the
Closing Date, and (ii) with respect to the Profit Sharing Plan, on or
before the date the Final Closing Statements are required to be delivered
pursuant to Section 1.7(a). To the extent the amount of contributions
required to be accrued by this Section 6.5(e) for either the 401(k) Plan
or the Profit Sharing Plan is not fixed by the existing terms of said
Plan, the amount of contributions accrued for said Plan shall be
calculated in a manner no less favorable to participants of said Plan
than the manner in which was calculated the amount of the contributions
made to said Plan for its plan year ending October 31, 1995. On or
before April 15, 1997, Robbins shall remit all employee contributions and
pay all accrued employer contributions payable by it to the 401(k) plan
<PAGE>
for the period through the close of business on March 31, 1997,
determined as if participants employed by Robbins on the Closing Date are
employed by Robbins on March 31, provided that such contributions for the
period March 22 through March 31, 1997 shall be paid by May 15, 1997.
(e) Certain salaried and hourly employees of the Sellers currently
participate in the 401(k) Plan. Prior to the Closing Date, Buyer agrees
to take all action as may be necessary or appropriate to cause to be
established a similar plan and related trust. Sellers agree to take all
such action as may be necessary or appropriate to cause the trustee of
the trust for the 401(k) Plan to effect an in kind transfer to the new
trust of the assets making up the accounts of and equal in value to the
account balances for those employees of the Business participating in the
401(k) Plan as of the close of business on the Closing Date who are
employed by Buyer on the first business day following the Closing Date
(including any earnings for periods through the close of business on the
Closing Date and contributions and loan repayments deducted from payrolls
issued on or before the Closing Date, but not yet credited as of the
close of business on the Closing Date), with such transfer to be effected
as soon as administratively practicable after the Closing Date, but in no
event later than 60 days after the Closing Date. Sellers agree to make
available to Buyer the new plan all such data and other information as
may be necessary or appropriate for Buyer to properly maintain and
administer the new plan on and after the Closing Date. Buyer agrees to
cause to be provided to the transferring trustee appropriate receipts and
accounting for the assets transferred to such trustee as may be
reasonably requested by such trustee. Buyer agrees to file a timely
application for a determination letter from the Internal Revenue Service
to evidence that the new plan qualifies under Section 401(a) of the Code.
(f) Certain hourly employees of the Sellers currently participate
in the Profit Sharing Plan. Buyer and Sellers agree to take all such
action as may be necessary or appropriate to cause Buyer (or an affiliate
thereof) to assume the Profit Sharing Plan and be substituted for Searcy
Flooring, Inc., including being named as the sponsoring employer,
effective as of the Closing Date. Sellers agree to make available to the
new sponsoring employer for the Profit Sharing Plan all such data and
other information as may be necessary or appropriate for such employer to
properly maintain and administer the Profit Sharing Plan on and after the
Closing Date. Sellers agree to prepare and file timely the IRS Form 5500
series return required for the Profit Sharing Plan for its plan year
ending October 31, 1996 and to provide a copy of the same to Buyer.
Buyer agrees to prepare and file timely the IRS Form 5500 series return
required for the Profit Sharing Plan for its plan year commencing
November 1, 1996 and to provide a copy of the same to Sellers. Sellers
agree to cause to be filed timely an IRS Form 1099-R (or any successor
form) reporting every distribution made from the Profit Sharing Plan
during 1997 and on or before the Closing Date, and Buyer agrees to cause
to be filed timely an IRS Form 1099-R (or any successor form) reporting
every distribution made from the Profit Sharing Plan during 1997 and
after the Closing Date.
(g) Sellers shall pay all claims incurred on or before the Closing
Date under the medical plan covering employees of the Robbins Southern
Division, as and when those claims become due and payable.
(h) The provisions of Section 11.1 to the contrary notwithstanding,
the representations and warranties of the Sellers contained in Section
3.21 shall survive the Closing, regardless of any investigation made by
<PAGE>
or on behalf of Triangle or Buyer, until the expiration of the limitation
period under the applicable statute of limitations. Sellers, jointly and
severally, shall indemnify, defend, and hold harmless Triangle and Buyer,
each director, officer, employee, representative or agent of Triangle and
Buyer, and each affiliate thereof, and their respective heirs, legal
representatives, successors, and assigns (collectively, the "Buyer
Group") from and against any and all claims, actions, causes of action,
demands, assessments, losses, damages, liabilities, judgments,
settlements, penalties, costs, and expenses (including reasonable
attorneys' fees and expenses), of any nature whatsoever, whether actual
or consequential, asserted against, imposed upon, or incurred by any
member of the Buyer Group, directly or indirectly, by reason of or
resulting from any inaccuracy or breach of any representation or warranty
of any Seller contained in Section 3.21 or in any certificate,
instrument, or document delivered pursuant thereto.
5 Title Insurance and Surveys.
( ) Buyer shall obtain an owner's policy of title insurance ("Title
Insurance") in a form and amount and from a title insurance company
reasonably acceptable to Buyer (the "Title Company") relating to each
parcel of Real Property described on Schedule 1.1(a).
(a) Within three (3) days after the execution and delivery of this
Agreement, Buyer shall obtain a commitment for Title Insurance from the
Title Company with respect to the Real Property ("Title Binders") showing
fee title to such Real Property in Sellers, and committing to issue the
Title Insurance with respect to such Real Property, such Title Binders to
show all Encumbrances with respect to such Real Property.
(b) Within three (3) days after the execution and delivery of this
Agreement, Buyer shall obtain currently dated surveys (the "Surveys") of
each parcel of Real Property, each of which Surveys shall be in form and
substance, and prepared by a licensed professional engineer or surveyor,
reasonably acceptable to Buyer and to the Title Company. The Surveys
shall contain a statement on the face thereof certifying whether any part
of the Real Property lies within a flood plain or flood prone area or a
flood way of any body of water. The Surveys shall also show the zoning
classifications of the Real Property under local zoning ordinances.
(c) Within ten (10) days after the receipt of the Title Binders and
copies of all exceptions shown therein and of the Surveys and copies of
all applicable provisions of the local zoning ordinances, Buyer shall
deliver to Sellers a notice (the "Objection Notice") if it reasonably
believes that Seller's title to any Real Property is not as represented
herein or that any of the Encumbrances reflected in the Title Binders or
Surveys are not Permitted Encumbrances and the reasons for such belief
(any such Encumbrances specified in the Objection Notice being referred
to herein as "Unacceptable Encumbrances"). Sellers may, but shall not be
obligated to, take such steps as shall be necessary to eliminate or
modify the Unacceptable Encumbrances in a manner reasonably acceptable to
Buyer. Sellers shall notify Buyer within ten (10) days after their
<PAGE>
receipt of the Objection Notice whether they intend to so eliminate or
modify the Unacceptable Encumbrances. In the event Buyer shall not
deliver an Objection Notice within such time period, all Encumbrances
reflected in the Title Binders and Surveys shall be deemed to be
Permitted Encumbrances. Any and all matters disclosed in the Title
Binders or the Surveys as to which Buyer objects by timely delivery of
the Objection Notice that are thereafter cured to the satisfaction of
Buyer or waived by Buyer in writing shall also be deemed to be Permitted
Encumbrances. In the event Sellers fail or are unable to cure the
Unacceptable Encumbrances prior to the Closing Date (provided it is at
least three (3) days after receipt of the Objection Notice), Buyer shall,
in its discretion, have the right to terminate this Agreement by notice
in writing to Sellers, or may accept such title to the Real Property as
Seller can deliver.
(d) The cost of obtaining Title Binders, Title Insurance, and
Surveys shall be borne by Buyer.
6 Payment of Liabilities. Sellers shall pay, perform, and discharge
prior to the Closing all of Sellers' liabilities that become due prior to the
Closing and all of Sellers' liabilities that are due after the Closing, other
than the Liabilities, as and when the same become due and payable.
7 Public Announcements. Except as may be required by Applicable Law
or the National Association of Securities Dealers, Inc., neither Triangle,
Buyer nor Sellers shall issue any press release or otherwise make any public
statement with respect to this Agreement or the transactions contemplated
hereby without the prior consent of the other party (which consent shall not
be unreasonably withheld). Any such press release or public statement
required by Applicable Law or by the National Association of Securities
Dealers, Inc. shall only be made after reasonable notice to the other party.
8 Environmental Provisions.
(a) Buyer shall have the opportunity to have the Real Property
inspected for environmental matters by a qualified consultant of its
choosing pursuant to Sections 6.1 and 8.14 of this Agreement. The cost
of any and all such inspections of the property shall be borne solely by
Buyer. Buyer shall provide a copy of any report of any such inspections
to Sellers within five days of Sellers' request therefore, but such
report, if any, shall be provided to Sellers only in the event Sellers
make such request.
(b) In addition, Sellers shall promptly after the execution of this
Agreement, provide to Buyer, on a confidential basis, copies of any
reports of environmental investigations of the Real Property authorized
by or available to Sellers (the "Environmental Reports"). Buyer agrees
and acknowledges that Sellers make no representations or warranties
regarding the accuracy or completeness of the Environmental Reports.
(c) If Buyer notifies the Sellers prior to the Closing Date that
the results of its inspection of the Real Property or its review of the
Environmental Reports are not acceptable to Buyer, then this Agreement
shall be terminated and Buyer shall return all copies of the
Environmental Reports to Sellers, and Sellers shall return all copies of
inspection reports to Buyer.
<PAGE>
(d) Buyer and Sellers agree to ensure the confidentiality of the
Environmental Reports and the results of Buyer's inspection in accordance
with Section 6.1 above. Buyer and Sellers shall defend, hold harmless
and indemnify each other from, for and against any and all claims,
damages, liabilities and costs, known or unknown (including without
limitation, cleanup cost, consulting and legal fees) (hereinafter,
collectively "Losses") proximately caused by their breach of their
obligations pursuant to the above confidentiality provision.
(e) In the event Buyer determines in its sole discretion that the
results of its review of the Environmental Reports and of its inspection
of the Real Property are satisfactory and closes the transactions
contemplated hereunder, each of Triangle and Buyer, on behalf of itself,
its successors and assigns, agrees to release, discharge and covenant not
to sue Sellers and each of their respective officers, directors,
employees, agents, shareholders, successors and assigns and all persons
referenced in Sections 9.3 and 9.4 from those Losses proximately caused
by past, present or future presence of hazardous material on, in or under
the Real Property including, without limitation, Losses arising under the
Comprehensive Environmental Response Compensation and Liability Act, as
amended, 42 USC 9601 et seq., the Resource Conservation and Recovery
Act, as amended, 42 USC - 6901 et seq. regulations and other Applicable
Environmental Laws, but excluding any Losses or portions of Losses
involving the presence of hazardous materials on, in or under any
property other than the Real Property. By way of example and not by
limitation, claims relating to Losses arising from hazardous material on,
in or under the Real Property on or before the time of Closing that moves
to adjacent property are not released.
9 Notice of Litigation. Until the Closing, (i) Buyer, upon learning
of the same, shall promptly notify Sellers of any Proceeding that is commenced
or threatened against Buyer and that affects this Agreement or the
transactions contemplated hereby and (ii) Sellers, upon learning of the same,
shall promptly notify Buyer of any Proceeding that is commenced or threatened
against Sellers and that affects this Agreement or the transactions
contemplated hereby and any Proceeding that is commenced or threatened against
Sellers and that would have been listed on Schedule 3.12 if such Proceeding
had arisen prior to the date hereof.
10 Notification of Certain Matters. Sellers upon learning of same,
shall give prompt notice to Buyer of (i) the occurrence or nonoccurrence of
any event the occurrence or nonoccurrence of which would be likely to cause
any representation or warranty contained in Article III to be untrue or
inaccurate in any material respect at or prior to the Closing and (ii) any
material failure of Sellers to comply with or satisfy any covenant, condition,
or agreement to be complied with or satisfied by such person hereunder, and
(iii) any notice or other communication from any person alleging that the
consent or approval of such person is or may be required in connection with
the transactions contemplated by this Agreement (other than those consents and
approvals indicated as required on Schedule 3.3). Buyer shall give prompt
notice to Sellers of (i) the occurrence or nonoccurrence of any event the
occurrence or nonoccurrence of which would be likely to cause any
representation or warranty contained in Article IV to be untrue or inaccurate
in any material respect at or prior to the Closing and (ii) any material
failure of Buyer to comply with or satisfy any covenant, condition, or
agreement to be complied with or satisfied by such person hereunder. The
delivery of any notice pursuant to this Section 6.11 shall not be deemed to
(i) modify the representations or warranties hereunder of the party delivering
such notice, (ii) modify the conditions set forth in Articles VII, VIII and
IX, or (iii) limit or otherwise affect the remedies available hereunder to the
<PAGE>
party receiving such notice; provided, however, that if the Closing shall
occur, then all matters disclosed pursuant to this Section 6.11 at or prior to
the Closing shall be waived and no party shall be entitled to make a claim
thereon pursuant to the terms of this Agreement.
11 Amendment of Schedules. Each party hereto agrees that, with respect
to the representations and warranties of such party contained in this
Agreement, such party shall have the continuing obligation until the Closing
to supplement or amend promptly the Schedules hereto with respect to any
matter hereafter arising or discovered that, if existing or known at the date
of this Agreement, would have been required to be set forth or described in
the Schedules. For all purposes of this Agreement, including without
limitation for purposes of determining whether the conditions set forth in
Sections 7.1 and 8.1 have been fulfilled, the Schedules hereto shall be deemed
to include only that information contained therein on the date of this
Agreement and shall be deemed to exclude all information contained in any
supplement or amendment thereto; provided, however, that if the Closing shall
occur, then all matters disclosed pursuant to any such supplement or amendment
at or prior to the Closing shall be waived and no party shall be entitled to
make a claim thereon pursuant to the terms of this Agreement.
12 Fees and Expenses. Except as otherwise expressly provided in this
Agreement, all fees and expenses, including fees and expenses of counsel,
financial advisors, and accountants, incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such fee or expense, whether or not the Closing shall have occurred;
provided, however, that if this Agreement shall have been terminated pursuant
to Section 10.1 as a result of the willful breach by a party of any of its
representations, warranties, covenants, or agreements set forth in this
Agreement, such breaching party shall pay the costs and expenses of the other
parties in connection with the transactions contemplated by this Agreement.
13 Survival of Covenants. Except for any covenant or agreement that by
its terms expressly terminates as of a specific date, the covenants and
agreements of the parties hereto contained in this Agreement shall survive the
Closing without contractual limitation.
14 Dispute Resolution. If any dispute or disagreement arises between
Buyer and Sellers under this Agreement, including without limitation any
disagreement under Section 1.5(b) or Section 1.7(b) (any such dispute or
disagreement being referred to as a "Dispute"), and Buyer and Sellers are
unable to resolve such Dispute within the time period prescribed elsewhere in
this Agreement (or if no such time period is prescribed, within thirty (30)
days after the date written notice of the Dispute is given by Buyer or
Sellers), an arbitrator agreed upon by Buyer and Sellers (the "Arbitrator")
shall be employed hereunder to settle such Dispute as soon as practicable. In
the event that the parties are unable to agree upon the appointment of such an
arbitrator within five (5) business days, then each of Buyer and Sellers shall
within three (3) calendar days appoint an independent arbitrator, which
independent arbitrators shall agree within three (3) business days on the
appointment of a third independent arbitrator to whom the Dispute shall be
submitted. Buyer and Sellers shall submit the Dispute to the Arbitrator
within three (3) business days of its appointment and shall cooperate with
each other and otherwise use their reasonable best efforts to cause the
Arbitrator to make its decision within sixty (60) days after referral of a
Dispute to it. The Arbitrator shall have access to all documents and
facilities necessary to perform its function as arbitrator. The Arbitrator's
<PAGE>
determination with respect to any Dispute shall be final and binding upon the
parties hereto. The non-prevailing party as determined by the Arbitrator
shall pay all of the fees and expenses of the Arbitrator for such services.
15 Preparation of Closing Balance Sheet.
( ) For purposes of preparing the Closing Balance Sheet, the
inventory acquired by Buyer pursuant to this Agreement (the "Inventory")
shall be valued in accordance with the following procedures:
( ) Physical Count. Not more than seven (7) days after the
Closing Date, a physical count of the Inventory shall be conducted
by Sellers and Buyer and a schedule thereof (an "Inventory
Schedule") prepared by Sellers and verified by representatives of
Buyer.
(i) Valuation. Each item of the Inventory, other than
Excluded Inventory Items (hereinafter defined), shall be priced in
accordance with Section 3.16 of this Agreement. Such price shall be
multiplied by the physical count for each item and the total sum
thus determined for all items of the entire Inventory, after being
reduced by (A) the total amount of payments received and accounts
receivable recorded by Sellers in respect of sales of Inventory
listed on the Inventory Schedule(s), and (B) any Reserves determined
in accordance with U.S. GAAP consistently applied, shall constitute
the "Inventory Value" of the Inventory for purposes of this
Agreement.
(ii) Excluded Inventory Items. In making such physical count
and determining the Inventory Value, the following items of the
Inventory shall be excluded or adequately reserved for (the
"Excluded Inventory Items"):
( ) All items which are damaged or otherwise defective;
(A) All items which are discontinued or obsolete or which
are no longer listed in Sellers' catalogues or are otherwise
not currently being manufactured;
(B) Any items listed on Schedule 1.1(c)(ii)
(collectively, the "Retained Inventory");
(C) All items which are not owned by Sellers but instead,
are held on consignment from third parties; and
(D) All items in which any third party has any security
or other interest that is not released at or prior to the
Closing.
(a) For purposes of preparing the Closing Balance Sheet, the
accounts receivable acquired by Buyer pursuant to this Agreement (the
"Receivables") shall be valued in accordance with the following
procedures:
<PAGE>
( ) Preparation of Receivables Schedules. Each Seller shall
deliver to Buyer together with the Latest Balance Sheet, a schedule
of its Receivables, each of which shall be separately identified and
properly accrued on its books as of the close of business on the
date of the Latest Balance Sheet. Such schedules are referred to
herein as the "Receivables Schedules". The Receivables Schedules
shall be certified as complete and correct by the principal
executive and financial officers of each Seller. Each Receivables
Schedule shall set forth the respective dates as of which each of
the Receivables identified therein was accrued on the books of the
Seller, the total amount and number of each of the invoices to which
such Receivable relates, the total amount paid through the date of
the Receivables Schedule with respect to each of such invoices, the
total amounts remaining to be paid under each of such invoices, the
total amount of customer credits and uncollected service charges
existing with respect to the customer owing such Receivable, and the
total amount of any reserve or allowance accrued on the Seller's
books with respect to such Receivable. On or before the delivery to
Buyer of its Receivables Schedule, each Seller shall have invoiced
each of the customers owing a Receivable for the respective amounts
owing by such customers as of the date of the Receivables Schedule.
(i) Valuation. The Receivables shall be priced based on the
total value of the Receivables as shown on the Receivables
Schedules, and such value shall constitute the "Receivables Value"
of the Receivables for purposes of this Agreement, subject to
adjustment as provided in the next two sentences. The Receivables
Value shall be reduced by the amount of (i) all payments of
Receivables made by customers prior to the Closing, and (ii) all
valuation and other reserves and allowances required by U.S. GAAP
consistently applied with the Annual Financial Statements. The
Receivables Value shall be increased by the value of all Receivables
arising between the date of the Receivable Schedules and the
Closing, as reflected on supplemental Receivables Schedules prepared
in accordance with this Section 6.16 and delivered at the Closing or
within seven (7) days thereafter.
16 Access to Records After Closing.
( ) For a period of five (5) years from and after the Closing Date,
Sellers and their representatives shall have reasonable access to inspect
and copy all books and records relating to the Assets, the Liabilities or
the Business transferred to Buyer hereunder to the extent that such
<PAGE>
access may reasonably be required by Sellers in connection with matters
relating to or affected by the operation of the Assets or the Business
prior to the Closing Date. Such access shall be afforded by Buyer upon
receipt of reasonable advance notice and during normal business hours.
If Buyer shall desire to dispose of any of such books and records prior
to the expiration of such five (5) year period, Buyer shall, prior to
such disposition, give Sellers a reasonable opportunity, at Sellers'
expense, to segregate and remove such books and records as Sellers may
select. Sellers shall be solely responsible for any costs or expenses
incurred by it pursuant to this Section 6.17.
(a) For a period of five (5) years from and after the Closing Date,
Buyer and its representatives shall have reasonable access to inspect and
copy all books and records relating to the Assets, the Liabilities or the
Business that Sellers or any of their affiliates may retain after the
Closing Date. Such access shall be afforded by Sellers and their
affiliates upon receipt of reasonable advance notice and during normal
business hours. If Sellers or any of their affiliates shall desire to
dispose of any of such books and records prior to the expiration of such
five (5) year period, Sellers shall, prior to such disposition, give
Buyer a reasonable opportunity, at Buyer's expense, to segregate and
remove such books and records as Buyer may select. Buyer shall be solely
responsible for any costs and expenses incurred by it pursuant to this
Section 6.17.
17 Taxes; Other Charges. All sales, use and gross receipts Taxes
resulting from the consummation of the transactions contemplated hereby shall
be borne by Sellers and the parties shall cooperate in obtaining all
exemptions from such Taxes. All other excise, registration, transfer,
recording, and deed and stamp Taxes and fees incurred in connection with the
consummation of the transactions contemplated hereby shall be borne by
Sellers. Sellers shall file all necessary documentation with respect to, and
make all payments of, such Taxes and fees on a timely basis. All ad valorem
or similar Taxes attributable to the Assets for the 1997 calendar year shall
be pro-rated between Buyer and Sellers on a daily basis, and the Purchase
Price shall be adjusted to reflect such proration.
18 Escrow; Liquidated Damages. Triangle has deposited $500,000 with an
escrow agent mutually agreeable to Triangle and Sellers. Such amount
(together with any earnings thereon) will be credited to the Estimated Cash
Payment and paid to Sellers at the Closing. If Triangle properly terminates
this Agreement pursuant to the terms hereof due to the breach or default by
Sellers, then such $500,000 (together with any earnings thereon) shall be
promptly released to Triangle; otherwise, such $500,000 (together with any
earnings thereon) shall be released to Sellers as liquidated damages.
VI.
CONDITIONS TO OBLIGATIONS OF SELLERS
The obligations of Sellers to consummate the transactions contemplated by
this Agreement shall be subject to the fulfillment or waiver by Sellers on or
prior to the Closing Date of each of the following conditions:
0 Representations and Warranties True. All the representations and
warranties of Triangle and Buyer contained in this Agreement, and in any
agreement, instrument, or document delivered pursuant hereto or in connection
herewith on or prior to the Closing Date, shall be true and correct as of the
date made and (having been deemed to have been made again on and as of the
Closing Date in the same language) shall be true and correct on and as of the
Closing Date.
1 Covenants and Agreements Performed. Triangle and Buyer shall have
performed and complied with all covenants and agreements required by this
Agreement to be performed or complied with by them on or prior to the Closing
Date.
2 Certificate. Sellers shall have received a certificate executed on
behalf of each of Triangle and Buyer by the chief executive and chief
financial officers of each of Triangle and Buyer, dated the Closing Date,
representing and certifying, in such detail as Sellers may reasonably request,
that the conditions set forth in Sections 7.1 and 7.2 have been fulfilled.
<PAGE>
3 Opinion of Counsel to Buyer. Sellers shall have received an opinion
of Thompson & Knight, P.C., legal counsel to Triangle and Buyer, dated the
Closing Date, in the form of Exhibit 7.4.
4 Legal Proceedings. No Proceeding shall, on the Closing Date, be
pending or threatened seeking to restrain, prohibit, or obtain damages or
other relief in connection with this Agreement or the consummation of the
transactions contemplated hereby.
5 Approval of Counsel to Seller. All legal matters in connection with
the consummation of the transactions contemplated hereby and all agreements,
instruments, and documents delivered in connection therewith shall be
reasonably satisfactory in form and substance to Graydon, Head & Ritchey,
legal counsel to Sellers.
VII.
CONDITIONS TO OBLIGATIONS OF TRIANGLE AND BUYER
The obligations of Triangle and Buyer to consummate the transactions
contemplated by this Agreement shall be subject to the fulfillment or waiver
by Triangle and Buyer on or prior to the Closing Date of each of the following
conditions:
0 Representations and Warranties True. All the representations and
warranties of Sellers contained in this Agreement, and in any agreement,
instrument, or document delivered pursuant hereto or in connection herewith on
or prior to the Closing Date, shall be true and correct as of the date made
and (having been deemed to have been made again on and as of the Closing Date
in the same language) shall be true and correct on and as of the Closing Date.
1 Covenants and Agreements Performed. Sellers shall have performed
and complied with all covenants and agreements required by this Agreement to
be performed or complied with by them on or prior to the Closing Date.
2 Certificate. Buyer shall have received certificates executed on
behalf of Robbins and Searcy by the chief executive officer of each company
and by Mr. Stoehr as Seller Representative, each dated the Closing Date,
representing and certifying, in such detail as Buyer may reasonably request,
that the conditions set forth in Sections 8.1 and 8.2 have been fulfilled.
3 Preliminary Closing Statements. Buyer shall have received the
Preliminary Closing Statements required by Section 1.3, prepared and delivered
in accordance with the requirements thereof.
4 Payoff Letters. Buyer shall have received from each creditor to
whom any Payoff Indebtedness is owing a writing setting forth the exact
amount, including principal, interest and any other amount, of all Payoff
Indebtedness owed by Sellers to such creditor as of the Closing Date.
<PAGE>
5 Opinion of Counsel to Seller. Triangle and Buyer shall have
received an opinion of Graydon, Head & Ritchey, legal counsel to Sellers,
dated the Closing Date, in the form of Exhibit 8.6.
6 Legal Proceedings. No Proceeding shall, on the Closing Date, be
pending or threatened seeking to restrain, prohibit, or obtain damages or
other relief in connection with this Agreement or the consummation of the
transactions contemplated hereby.
7 No Material Adverse Change. Since November 1, 1996 there shall not
have been any material adverse change in the business, assets, results of
operations, condition (financial or otherwise), or prospects of the Business
or the ownership or operation of the Assets or any material portion thereof.
8 Noncompetition Agreements. Sellers, their affiliates (including
without limitation Robbins International, Inc.), and all holders of voting
stock of Robbins and Searcy (other than any shareholder who is neither an
active employee of or who owns less than three percent (3%) of the outstanding
equity of either company) shall have each entered into a Noncompetition
Agreement with Triangle and Buyer in the form of Exhibit 8.9.
9 Data Processing Agreement. Buyer and Sellers shall have entered
into a Data Processing Agreement in the form of Exhibit 8.10.
10 International Distribution Agreement. Buyer shall have entered into
a satisfactory agreement with Robbins International, Inc. or Mr. Charles
Gabbour to continue international sales and marketing efforts on behalf of the
Business.
11 Unacceptable Encumbrances; Title Insurance.
( ) Buyer shall not have delivered to Sellers within the time
period specified in Section 6.6 an Objection Notice describing an
Unacceptable Encumbrance, or if it has so delivered an Objection Notice
describing an Unacceptable Encumbrance, such Unacceptable Encumbrance
shall have been eliminated or modified to the reasonable satisfaction of
Buyer or waived by Buyer.
(a) Buyer shall have received the Title Insurance described in
Section 6.6.
12 Due Diligence. The due diligence conducted by Triangle, Buyer and
their representatives in connection with the proposed transactions
contemplated hereby shall not have caused Triangle, Buyer or their
representatives to become aware that any representation or warranty of Sellers
of this Agreement is not true and correct.
13 Environmental Matters. Buyer shall have received from an
independent firm selected by it a report confirming that all environmental
assessments and testing requested by Buyer, which shall be paid for by Buyer,
have been completed, and the results thereof shall be satisfactory to Buyer.
<PAGE>
14 Other Documents. Buyer shall have received the certificates,
instruments, and documents listed below, all of which shall be in form and
substance reasonably satisfactory to Buyer:
( ) Special warranty deeds in recordable and locally customary form
describing the Real Property and all appurtenances, easements, rights of
way and uses that benefit the Real Property and sufficient to transfer to
Buyer good and marketable title to the Real Property, subject only to the
Permitted Encumbrances.
(a) Bills of sale, certificates of title and other instruments of
assignment, transfer, and conveyance sufficient to transfer to Buyer and
effectively vest in Buyer all right, title, and interest of Seller in and
to the Business and good and marketable title to the Assets, subject only
to the Permitted Encumbrances.
(b) Executed copies of all consents and approvals of third parties
required to be obtained by or on the part of Sellers for the consummation
of the transactions contemplated hereby.
(c) A tax clearance letter, certificate or receipt from the State
of Arkansas, dated not more than ten (10) days prior to the Closing Date,
stating that no amount of Tax, penalty or interest is due by Sellers
under the Arkansas Tax laws or showing that all such amounts have been
paid.
(d) Lien search reports showing that, except those relating to
Payoff Indebtedness and Permitted Encumbrances, no financing statements
or other liens (or notices with respect to liens) affecting any of the
Assets naming Sellers (by corporate or fictitious name or otherwise), any
of their subsidiaries, affiliates, or predecessors, or the Business as
debtor are on file in the Uniform Commercial Code or other relevant
records of the office of the Secretary of State of Arkansas or the county
clerk's office of any county in which any of the Real Property is
located.
(e) Releases of all liens, except those relating to Permitted
Encumbrances, affecting any of the Assets.
(f) All certificates of occupancy, if any, relating to the use or
operation of the Real Property.
(g) Sellers shall deliver to Buyer a non-foreign certificate
required by Section 1445 of the Code and applicable regulations.
(h) Such other certificates, instruments, and documents as may be
reasonably requested by Buyer to carry out the intent and purposes of
this Agreement.
15 Approval of Counsel to Triangle and Buyer. All legal matters in
connection with the consummation of the transactions contemplated hereby and
all agreements, instruments, and documents delivered in connection therewith
shall be reasonably satisfactory in form and substance to Thompson & Knight, a
Professional Corporation, legal counsel to Triangle and Buyer.
<PAGE>
VIII.
CONDITIONS TO OBLIGATIONS OF ALL PARTIES
The obligations of all parties to consummate the transactions
contemplated by this Agreement shall be subject to the fulfillment or waiver
by all parties on or prior to the Closing Date of each of the following
conditions:
0 Governmental and Third Party Consents and Approvals. Favorable
orders, consents, and approvals in the form required to consummate this
Agreement, the Ancillary Documents, and all transactions contemplated thereby,
including but not limited to such required by the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "HSR Act"), shall have been received (if
required) from necessary governmental agencies and third parties, or, in the
case of the HSR Act, the waiting period under such act shall have expired.
1 Trademark Agreement. Buyer and Robbins shall have entered into an
agreement in the form of Exhibit 9.2, pursuant to which Buyer shall have the
exclusive right to use the names, trademarks, service marks and brand names
consisting in whole or in part of "Robbins" in connection with residential
flooring, and Robbins shall retain the exclusive right to use all names,
trademarks, service marks and brand names consisting in whole or in part of
"Robbins" for all other purposes.
2 Equipment Bill of Sale. Robbins and James H. Stoehr, Jr. shall have
entered into an Equipment Bill of Sale in the form of Exhibit 9.4, for the
sale to Robbins of certain machinery and equipment located on the Real
Property and owned by James H. Stoehr, Jr. and the transactions contemplated
thereby shall have been consummated.
3 Real Estate and Equipment Agreement. Searcy, James H. Stoehr, Jr.,
Katherine M. Stoehr, Thomas C. Stoehr and James H. Stoehr III shall have
entered into an Agreement in the form of Exhibit 9.5, for the sale to Searcy
of certain land, buildings and equipment leased to and used by Searcy
Flooring, Inc., and the transactions contemplated thereby shall have been
consummated.
4 Supply Agreement. Buyer and Sellers shall have entered into a
supply agreement in the form of Exhibit 9.5.
<PAGE>
IX.
TERMINATION, AMENDMENT, AND REMEDIES
0 Termination. This Agreement may be terminated and the transactions
contemplated hereby abandoned at any time prior to the Closing in the
following manner:
( ) by mutual written consent of Sellers, Triangle and Buyer; or
(a) by either Sellers or Buyer, if:
( ) the Closing shall not have occurred on or before April 5,
1997 (unless the delay in completing the Closing is solely the
result of compliance with the HSR Act, in which case the applicable
date shall be April 30, 1997), unless such failure to close shall be
due to a breach of this Agreement by the party seeking to terminate
this Agreement pursuant to this clause (i); or
(i) there shall be any statute, rule, or regulation that makes
consummation of the transactions contemplated hereby illegal or
otherwise prohibited or a Governmental Entity shall have issued an
order, decree, or ruling or taken any other action permanently
restraining, enjoining, or otherwise prohibiting the consummation of
the transactions contemplated hereby, and such order, decree,
ruling, or other action shall have become final and nonappealable;
or
(b) by Sellers, if (i) any of the representations and warranties of
Buyer contained in this Agreement shall not be true and correct when made
or at any time prior to the Closing as if made at and as of such time, or
(ii) Buyer or Triangle shall have failed to fulfill any of its
obligations under this Agreement, and, in the case of each of clauses (i)
and (ii), such misrepresentation, breach of warranty, or failure
(provided it can be cured) has not been cured within thirty (30) days of
actual knowledge thereof by Buyer or Triangle; or
(c) by Buyer, if (i) any of the representations and warranties of a
Seller contained in this Agreement shall not be true and correct when
made or at any time prior to the Closing as if made at and as of such
time, or (ii) Sellers shall have failed to fulfill any of their
obligations under this Agreement, and, in the case of each of clauses (i)
and (ii), such misrepresentation, breach of warranty, or failure
(provided it can be cured) has not been cured within thirty (30) days of
actual knowledge thereof by Sellers.
1 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 10.1 by Sellers or Buyer, written notice thereof
shall forthwith be given by specifying the provision hereof pursuant to which
such termination is made, and this Agreement shall become void and have no
effect, except that the agreements contained in this Section 10.2, in Sections
6.8, 6.13 and 6.19, and in Articles XII and XIII shall survive the termination
hereof. Nothing contained in this Section 10.2 shall relieve any party from
liability for any breach of this Agreement. No termination of this Agreement
shall affect the obligations of the parties pursuant to the confidentiality
agreement referred to in Section 6.1, except to the extent specified in such
confidentiality agreement.
2 Amendment. This Agreement may not be amended except by an
instrument in writing signed by or on behalf of all the parties hereto.
3 Waiver. Sellers, on the one hand, or Triangle and Buyer, on the
other, may (i) waive any inaccuracies in the representations and warranties of
the other contained herein or in any document, certificate, or writing
delivered pursuant hereto or (ii) waive compliance by the other with any of
the other's agreements or fulfillment of any conditions to obligations
contained herein. Any agreement on the part of a party hereto to any such
waiver shall be valid only if set forth in an instrument in writing signed by
or on behalf of such party or parties. No failure or delay by a party hereto
in exercising any right, power, or privilege hereunder shall operate as a
waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right, power,
or privilege.
4 Remedies Not Exclusive. The rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies provided by
law. The rights and remedies of any party based upon, arising out of, or
otherwise in respect of any inaccuracy in or breach of any representation,
warranty, covenant, or agreement contained in this Agreement shall in no way
be limited by the fact that the act, omission, occurrence, or other state of
facts upon which any claim of any such inaccuracy or breach is based may also
be the subject matter of any other representation, warranty, covenant, or
agreement contained in this Agreement (or in any other agreement between the
parties) as to which there is no inaccuracy or breach.
X.
SURVIVAL OF REPRESENTATIONS
0 Survival. The representations and warranties of the parties
contained in this Agreement or in any certificate, instrument, or document
delivered pursuant hereto shall expire at the Closing.
<PAGE>
XI.
MISCELLANEOUS
0 Notices. All notices, requests, demands, and other communications
required or permitted to be given or made hereunder by any party hereto shall
be in writing and shall be deemed to have been duly given or made if delivered
personally, or transmitted by first class registered or certified mail,
postage prepaid, return receipt requested, or sent by prepaid overnight
delivery service, or sent by cable, telegram, telefax, or telex, to the
parties at the following addresses (or at such other addresses as shall be
specified by the parties by like notice):
If to Triangle or Buyer:
Triangle Pacific Corp.
Robbins Hardwood Flooring, Inc.
16803 Dallas Parkway
Dallas, Texas 75248
Attention: Mr. Darryl T. Marchand
Vice President and
General Counsel
Telefax: (214) 931-3284
copy to:
Thompson & Knight, P.C.
1700 Pacific Avenue, Ste. 3300
Dallas, Texas 75201
Attention: Mr. William J. Schuerger
Telefax: (214) 969-1751
If to Sellers:
Robbins, Inc.
Searcy Flooring, Inc.
c/o Mr. James H. Stoehr, Jr.
4777 Eastern Avenue
Cincinnati, Ohio 45226
Telefax: (847) 405-6381
copy to:
<PAGE>
Graydon, Head & Ritchey
1900 Fifth Third Center
511 Walnut Street
Cincinnati, Ohio 45202
Attention: Mr. Michael A. Hirschfeld
Telefax: (513) 651-3836
Such notices, requests, demands, and other communications shall be effective
(i) if delivered personally or sent by courier service, upon actual receipt by
the intended recipient, (ii) if mailed, upon the earlier of five days after
deposit in the mail or the date of delivery as shown by the return receipt
therefor, or (iii) if sent by telecopy or facsimile transmission, when the
answer back is received.
1 Entire Agreement. This Agreement, together with the Schedules,
Exhibits, Annexes, and other writings referred to herein or delivered pursuant
hereto, constitutes the entire agreement between the parties hereto with
respect to the subject matter hereof and supersedes all prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof.
2 Binding Effect; Assignment; No Third Party Benefit. This Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns. Except as otherwise expressly
provided in this Agreement, neither this Agreement nor any of the rights,
interests, or obligations hereunder shall be assigned by any of the parties
hereto without the prior written consent of the other parties, except that
either Triangle or Buyer may assign to Triangle or any affiliate of Triangle
any of Triangle's or Buyer's rights, interests, or obligations hereunder, upon
notice to Sellers, provided that no such assignment shall relieve either
Triangle or Buyer of its obligations hereunder. Except as specifically
provided in Section 6.5, nothing in this Agreement, express or implied, is
intended to or shall confer upon any person other than the parties hereto, and
their respective successors and permitted assigns, any rights, benefits, or
remedies of any nature whatsoever under or by reason of this Agreement.
3 Severability. If any provision of this Agreement is held to be
unenforceable, this Agreement shall be considered divisible and such provision
shall be deemed inoperative to the extent it is deemed unenforceable, and in
all other respects this Agreement shall remain in full force and effect;
provided, however, that if any such provision may be made enforceable by
limitation thereof, then such provision shall be deemed to be so limited and
shall be enforceable to the maximum extent permitted by Applicable Law.
4 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ARKANSAS, WITHOUT
REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF.
5 Descriptive Headings. The descriptive headings herein are inserted
for convenience of reference only, do not constitute a part of this Agreement,
and shall not affect in any manner the meaning or interpretation of this
Agreement.
<PAGE>
6 Gender. Pronouns in masculine, feminine, and neuter genders shall
be construed to include any other gender, and words in the singular form shall
be construed to include the plural and vice versa, unless the context
otherwise requires.
7 References. All references in this Agreement to Articles, Sections,
and other subdivisions refer to the Articles, Sections, and other subdivisions
of this Agreement unless expressly provided otherwise. The words "this
Agreement", "herein", "hereof", "hereby", "hereunder", and words of similar
import refer to this Agreement as a whole and not to any particular
subdivision unless expressly so limited. Whenever the words "include",
"includes", and "including" are used in this Agreement, such words shall be
deemed to be followed by the words "without limitation". Each reference
herein to a Schedule, Exhibit, or Annex refers to the item identified
separately in writing by the parties hereto as the described Schedule,
Exhibit, or Annex to this Agreement. All Schedules, Exhibits, and Annexes are
hereby incorporated in and made a part of this Agreement as if set forth in
full herein.
8 Further Assurances. From time to time, at the request of either
party hereto and without further consideration, the parties hereto agree that
each will execute and deliver to the other any and all documents in addition
to those expressly provided for in this Agreement that may be reasonably
necessary or appropriate to carry out the purposes of this Agreement and the
transactions contemplated hereby, whether at or after the Closing. Sellers
further agree that from time to time after the Closing they will execute and
deliver to Buyer or its designee such further conveyances, assignments, or
other written assurance, and take such further necessary actions, as Buyer may
reasonably request in writing to perfect and protect Buyer's title to the
Assets, and to secure to Buyer the benefit of the Business.
9 Counterparts. This Agreement may be executed by the parties hereto
in any number of counterparts, each of which shall be deemed an original, but
all of which shall constitute one and the same agreement. Each counterpart
may consist of a number of copies hereof each signed by less than all, but
together signed by all, the parties hereto.
10 Injunctive Relief. The parties hereto acknowledge and agree that
irreparable damage would occur in the event any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of the provisions
of this Agreement, and shall be entitled to enforce specifically the
provisions of this Agreement, in any court of the United States or any state
thereof having jurisdiction, in addition to any other remedy to which the
parties may be entitled under this Agreement or at law or in equity.
<PAGE>
XII.
DEFINITIONS
0 Certain Defined Terms. As used in this Agreement, each of the
following terms has the meaning given it below:
"affiliate" means, with respect to any person, any other person
that, directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, such person.
For the purposes of this definition, "control", when used with respect to
any person, means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such
person, whether through the ownership of voting securities, by contract,
or otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Ancillary Documents" means each agreement, instrument, and document
(other than this Agreement) executed or to be executed by Sellers or
Buyer in connection with the transactions contemplated by this Agreement.
"Applicable Laws" means any statute, law, rule, or regulation or any
judgment, order, writ, injunction, or decree of any Governmental Entity
to which a specified person or property is subject.
"Code" means the Internal Revenue Code of 1986, as amended.
"Encumbrances" means liens, charges, pledges, options, mortgages,
deeds of trust, security interests, claims, restrictions, easements, and
other encumbrances of every type and description, whether imposed by law,
agreement, understanding, or otherwise.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Governmental Entity" means any court or tribunal in any
jurisdiction or any federal, state, municipal, or other governmental
body, agency, authority, department, commission, board, bureau, or
instrumentality.
"IRS" means the Internal Revenue Service.
"Knowledge" means actual knowledge of any officer or plant manager
of any Seller.
"Material Adverse Effect" means any change, development, or effect
(individually or in the aggregate) that is, or is reasonably likely to
be, materially adverse (i) to the business, assets, results of
operations, condition (financial or otherwise), or prospects of the
Business or to the ownership or operation of the Assets or any material
portion thereof or (ii) to the ability of Sellers to perform on a timely
<PAGE>
basis any material obligation of Sellers under this Agreement or any
agreement, instrument, or document entered into or delivered in
connection herewith.
"Permits" means material licenses, permits, franchises, consents,
approvals, variances, exemptions, and other authorizations of or from
Governmental Entities.
"Permitted Encumbrances" means (i) Encumbrances created by Buyer,
(ii) liens for Taxes not yet due and payable, (iii) statutory liens
(including materialmen's, mechanic's, repairmen's, landlord's, purchase
money security interests and other similar liens) arising in connection
with the ordinary course of the Business securing Liabilities being
assumed and payments for which are not yet due and payable, (iv) the
Encumbrances designated as "Permitted Encumbrances" on Schedule 3.6, and
(v) such imperfections or irregularities of title, if any, as (A) are not
substantial in character, amount, or extent and do not materially detract
from the value of the property subject thereto, (B) do not materially
interfere with either the present or intended use of such property, and
(C) do not, individually or in the aggregate, materially interfere with
the conduct of the normal operations of the Business; provided, however,
that at the Closing "Permitted Encumbrances" shall not include any liens
for Taxes or statutory liens filed of record against the Assets.
"person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, enterprise,
unincorporated organization, or Governmental Entity.
"Proceedings" means all proceedings, actions, claims, suits,
investigations, and inquiries by or before any arbitrator or Governmental
Entity.
"reasonable efforts" means a party's reasonable efforts in good
faith in accordance with reasonable commercial practice and without the
incurrence of unreasonable expense.
"Securities Act" means the Securities Act of 1933, as amended.
"Taxes" means any income taxes or similar assessments or any sales,
gross receipts, excise, occupation, use, ad valorem, property,
production, severance, transportation, employment, payroll, franchise, or
other tax imposed by any United States federal, state, or local (or any
foreign or provincial) taxing authority, including any interest,
penalties, or additions attributable thereto.
"Tax Return" means any return or report, including any related or
supporting information, with respect to Taxes.
"U.S. GAAP" means generally accepted accounting principles in the
United States of America as in effect from time to time applied on a
basis - as to the substance of the principles applied (including
application of the last-in, first-out method of inventory valuation), the
manner of application and the estimation techniques used - with the
Annual Financial Statements.
1 Certain Additional Defined Terms. In addition to such terms as are
defined in the opening paragraph of and the recitals to this Agreement and in
Section 13.1, the following terms are used in this Agreement as defined in the
Sections set forth opposite such terms:
<PAGE>
Defined Term Section Reference
- ------------ -----------------
Acquisition Proposal .................................. Section 6.2
Agreement ............................................. Preamble
Annual Financial Statements ........................... Section 3.7
Applicable Environmental Laws ......................... Section 3.22(b)(i)
Arbitrator ............................................ Section 6.15
Assets ................................................ Section 1.1
Business .............................................. Preamble
Buyer ................................................. Preamble
Buyer Group ........................................... Section 6.5(i)
Cash Payment .......................................... Section 1.2
Closing ............................................... Section 2.1
Closing Balance Sheet ................................. Section 1.7(a)
Closing Date .......................................... Section 2.1
Compensation .......................................... Section 6.5(a)
Dispute ............................................... Section 6.15
earned ................................................ Section 6.5(a)
Employees ............................................. Section 6.5(a)
Employment Arrangements ............................... Section 6.5(b)
Environmental Liabilities ............................. Section 3.22(b)(iii)
Estimated Cash Payment ................................ Section 1.5
Excluded Inventory Items .............................. Section 6.16(a)(iii)
Final Closing Settlement Statement .................... Section 1.7(a)
Final Closing Statements .............................. Section 1.7(a)
Final Price Adjustment ................................ Section 1.7
Financial Statements .................................. Section 3.7
hazardous material .................................... Section 3.22(b)(ii)
HSR Act ............................................... Section 9.1
Insider ............................................... Section 3.28
Intellectual Property ................................. Section 1.1(e)
Interim Financial Statements .......................... Section 3.7
Inventory ............................................. Section 6.16(a)
Inventory Schedule .................................... Section 6.16(a)(i)
Inventory Value ....................................... Section 6.16(a)(ii)
Latest Balance Sheet .................................. Section 1.5(a)
Liabilities ........................................... Section 1.5(c)(i)
Net Book Value ........................................ Section 1.5(c)(ii)
Objection Notice ...................................... Section 6.6(d)
Payoff Indebtedness ................................... Section 1.5(c)(iii)
Preliminary Closing Settlement Statement .............. Section 1.5(a)
Preliminary Closing Statements ........................ Section 1.5(a)
Profit Sharing Plan ................................... Section 6.5(c)
Purchase Price ........................................ Section 1.2
Real Property ......................................... Section 1.1(a)
Receivables ........................................... Section 6.16(b)
Receivables Schedules ................................. Section 6.16(b)(i)
<PAGE>
Receivables Value ..................................... Section 6.16(b)(ii)
Reserves .............................................. Section 3.7
Retained Inventory .................................... Section 6.16(a)(iii)
Robbins ............................................... Preamble
Searcy ................................................ Preamble
Sellers ............................................... Preamble
Seller Representative ................................. Section 1.8(b)
Surveys ............................................... Section 6.6(c)
Title Binders ......................................... Section 6.6(b)
Title Company ......................................... Section 6.6(a)
Title Insurance ....................................... Section 6.6(a)
transfer .............................................. Section 1.1
Triangle .............................................. Preamble
Unacceptable Encumbrances ............................. Section 6.6(d)
U.S. GAAP ............................................. Section 1.5(a)
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized representatives, all as of the day and year first
above written.
TRIANGLE PACIFIC CORP. ROBBINS, INC.
By: ------------------------------ By: ----------------------------
Floyd F. Sherman, James H. Stoehr, Jr.,
Chairman of the Board and President
Chief Executive Officer
ROBBINS HARDWOOD FLOORING, INC. SEARCY FLOORING, INC.
By: ------------------------------ By: ---------------------------
Robert J. Symon, James H. Stoehr, Jr.
Vice President and Treasurer Chairman of the Board
The undersigned, James H. Stoehr, Jr., hereby accepts appointment as the
Seller Representative to act in accordance with the provisions of Section 1.8
of the foregoing Agreement.
- ----------------------------
James H. Stoehr, Jr.
<PAGE>
LIST OF EXHIBITS AND SCHEDULES
Exhibit 7.4 - Opinion of Counsel to Buyer .......................... E-
Exhibit 8.6 - Opinion of Counsel to Seller ......................... E-
Exhibit 8.9 - Noncompetition Agreement ............................. E-
Exhibit 8.10 - Data Processing Agreement ........................... E-
Exhibit 9.2 - Trademark Agreement .................................. E-
Exhibit 9.3 - Individual Assignment to Robbins ..................... E-
Exhibit 9.4 - Individual Assignment to Searcy ...................... E-
Exhibit 9.5 - Supply Agreement ..................................... E-
Schedule 1.1(a) - Real Property .................................... S-
Schedule 1.1(b)(i) - Equipment and Machinery ....................... S-
Schedule 1.1(b)(ii) - Excluded Equipment and Machinery ............. S-
Schedule 1.1(c)(i) - Purchased Inventory ........................... S-
Schedule 1.1(c)(ii) - Retained Inventory ........................... S-
Schedule 1.1(e)(i) - Purchased Software ............................ S-
Schedule 1.1(g) - Contracts and Agreements ......................... S-
Schedule 1.1(h)(i) - Prepaid Expenses .............................. S-
Schedule 1.1(h)(ii) - Excluded Prepaid Expenses .................... S-
Schedule 1.1(j) - Other Assets ..................................... S-
Schedule 1.5(a) - Preliminary Closing Settlement Statement ......... S-
Schedule 1.5(c) - Liabilities Assumed .............................. S-
Schedule 1.7(a) - Final Closing Settlement Statement ............... S-
Schedule 3.1 - Jurisdictions ....................................... S-
Schedule 3.3 - Noncontravention .................................... S-
Schedule 3.4 - Governmental Approvals .............................. S-
Schedule 3.5 - Ownership of Business ............................... S-
Schedule 3.6 - Title to Assets ..................................... S-
Schedule 3.8 - Seller Liabilities .................................. S-
Schedule 3.9 - Absence of Certain Changes .......................... S-
Schedule 3.10 - Tax Matters ........................................ S-
Schedule 3.12 - Legal Proceedings .................................. S-
Schedule 3.13 - Real Property ...................................... S-
Schedule 3.14 - Tangible Personal Property ......................... S-
Schedule 3.15 - Leased Property .................................... S-
Schedule 3.16 - Inventory Exceptions ............................... S-
Schedule 3.17 - Receivables Exceptions ............................. S-
Schedule 3.18 - Intellectual Property .............................. S-
Schedule 3.19 - Permits ............................................ S-
Schedule 3.20 - Contracts and Agreements ........................... S-
Schedule 3.21 - ERISA .............................................. S-
Schedule 3.22 - Environmental Matters .............................. S-
Schedule 3.23 - Labor Relations .................................... S-
Schedule 3.24 - Customers and Suppliers ............................ S-
<PAGE>
Schedule 3.28 - Insider Interests .................................. S-
Schedule 6.16(a) - Inventory Schedule .............................. S-
Schedule 6.16(b) - Receivables Schedule ............................ S-
EXECUTION
TENTH AMENDMENT TO CREDIT AGREEMENT
THIS TENTH AMENDMENT TO CREDIT AGREEMENT, dated as of March 19, 1997
(this "Amendment"), to the Existing Credit Agreement (as defined below) is
entered into by and among TRIANGLE PACIFIC CORP., a Delaware corporation (the
"Borrower"), and the various financial institutions parties hereto
(collectively, the "Lenders"), BANK OF AMERICA NT&SA as co-agent (the "Co-
Agent") for the Lenders, and the BANK OF NOVA SCOTIA as the agent (the
"Agent") for the Lenders.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Borrower, the Lenders, the Co-Agent and the Agent have
heretofore entered into that certain Credit Agreement, dated as of August 4,
1993 (together with all Exhibits, Schedules and Attachments thereto, in each
case as amended or otherwise modified prior to the date hereof, being
collectively referred to herein as the "Existing Credit Agreement");
WHEREAS, the Borrower has requested that the Lenders amend the Existing
Credit Agreement in certain respects as set forth below; and
WHEREAS, the Lenders are willing, on the terms and conditions set forth
below, to amend the Existing Credit Agreement in certain respects as provided
herein (the Existing Credit Agreement, as amended pursuant to the terms of
this Amendment, being referred to as the "Credit Agreement");
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the Borrower and the Lenders hereby agree as
follows:
I.
DEFINITIONS
1. Certain Definitions. The following terms (whether or not underscored)
when used in this Amendment, including its preamble and recitals, shall,
except where the context otherwise requires, have the following meanings (such
meanings to be equally applicable to the singular and plural form thereof):
"Affirmation and Consent" means the affirmation and consent executed and
delivered pursuant to Subpart 3.1.4.
"Agent" is defined in the first recital.
<PAGE>
"Amendment" is defined in the preamble.
"Anderson-Tully Agreement" is defined in Subpart 2.3.
"Borrower" is defined in the preamble.
"Co-Agent" is defined in the preamble.
"Credit Agreement" is defined in the third recital.
"Existing Credit Agreement" is defined in the first recital.
"Lenders" is defined in the preamble.
"RHF" means Robbins Hardwood Flooring, Inc., a Delaware corporation
formed by Borrower to complete the purchase of the Robbins Assets.
"Robbins Assets" means the assets of the Robbins Sellers to be purchased
by the Borrower or RHF pursuant to the Robbins Letter of Intent.
"Robbins Letter of Intent" means the letter of intent between the
Borrower and Robbins, Inc., Searcy Flooring, Inc. and James H. Stoehr Jr.,
dated December 23, 1996, as amended to the date of the Tenth Amendment.
"Robbins Sellers" means, collectively, Robbins, Inc. and Searcy Flooring
Inc.
"Tenth Amendment" is defined in Subpart 3.1.
"Tenth Amendment Effective Date" is defined in Subpart 3.1.
2. Other Definitions. Terms for which meanings are provided in the Existing
Credit Agreement are, unless otherwise defined herein or the context otherwise
requires, used in this Amendment with such meanings provided therein.
III.
AMENDMENTS TO AND CONSENTS UNDER THE
EXISTING CREDIT AGREEMENT
Effective on (and subject to the occurrence of) the Tenth Amendment
Effective Date, and in reliance upon the representations and warranties made
herein and (if any) in each other agreement furnished to the Agent pursuant to
the terms hereof or in connection herewith, the parties hereto hereby agree
<PAGE>
that the Existing Credit Agreement is hereby amended and the assumption of the
Anderson-Tully Agreement by Borrower or RHF is hereby consented to, all in
accordance with this Part II. Except as expressly so amended or modified by
this Amendment, the Existing Credit Agreement and each other Loan Document
shall continue in full force and effect in accordance with their respective
terms.
1. Amendments to Article I ("DEFINITIONS AND ACCOUNTING TERMS"). Article I
of the Existing Credit Agreement is hereby amended in accordance with Subpart
2.1.1.
1. Section 1.1 ("Defined Terms") of the Existing Credit Agreement is hereby
amended by inserting the following definitions in the appropriate alphabetical
order:
"RHF" means Robbins Hardwood Flooring, Inc., a Delaware corporation
formed by Borrower to complete the purchase of the Robbins Assets.
"Robbins Assets" means the assets of the Robbins Sellers to be
purchased by the Borrower or RHF pursuant to the Robbins Letter of
Intent.
"Robbins Letter of Intent" means the letter of intent between the
Borrower and Robbins, Inc., Searcy Flooring, Inc. and James H. Stoehr
Jr., dated December 23, 1996, as amended to March 19, 1997.
"Robbins Sellers" means, collectively, Robbins, Inc. and Searcy
Flooring Inc.
2. Amendments to Article VII ("COVENANTS"). Article VII of the Existing
Credit Agreement is hereby amended in accordance with Subparts 2.2.1, Subpart
2.2.2, Subpart 2.2.3, Subpart 2.2.4, Subpart 2.2.5, Subpart 2.2.6 and Subpart
2.2.7.
1. Section 7.2.2 ("Indebtedness") of the Existing Credit Agreement is hereby
amended by (a) deleting the word "and" following the semi-colon appearing at
the end of clause (c)(ii) of such subsection, (b) inserting the word "and"
following the semi-colon appearing at the end of clause (c)(iii) of such
subsection and (c) inserting a new clause (iv) to such subsection which shall
read as follows:
"(iv) Indebtedness incurred or assumed by the Borrower or RHF in an
aggregate principal amount not to exceed ten million dollars
($10,000,000) and of the types described in Item 7.2.2(c)(iv) of the
Disclosure Schedule."
2. Clause (c) of Section 7.2.3 ("Liens") of the Existing Credit Agreement is
hereby amended in its entirety to read as follows:
"(c) Liens
(i) granted prior to the Closing Date to secure payment of
Indebtedness of the type permitted and described in clause (c)(i) of
Section 7.2.2;
<PAGE>
(ii) granted by Hartco to secure the payment of Indebtedness
incurred by Hartco in an aggregate principal amount not to exceed
$16,500,000 and of the type permitted and described in Item 7.2.3(c)(ii)
of the Disclosure Schedule; and
(iii) granted or assumed by the Borrower or RHF in the Robbins
Assets to secure the payment of Indebtedness described in paragraphs 1, 2
and 3 of Item 7.2.2 (c)(iv) of the Disclosure Schedule and of the type
permitted and described in Item 7.2.3(c)(iii) of the Disclosure
Schedule;"
3. Clauses (b) and (c) of Section 7.2.4 ("Financial Condition") of the
Existing Credit Agreement are hereby amended in their respective entireties to
read as follows:
"(b) the ratio of Funded Debt (excluding Contingent Liabilities relating
to such Debt) to EBITDA, as of the last day of any Fiscal Quarter during
each Fiscal Year set forth below to be greater than the ratio set forth
opposite such Fiscal Year:
Fiscal Year Ratio
----------- -----
1996 3.25:1
1997 3.00:1
1998 2.50:1
1999 2.50:1
2000 2.50:1;
<PAGE>
"(c) the Fixed Charge Coverage Ratio as of the last day of any Fiscal
Quarter during each Fiscal Year set forth below to be less than the ratio
set forth opposite such Fiscal Year:
Fixed Charge
Fiscal Year Coverage Ratio
----------- --------------
1996 .95:1
1997 .92:1
1998 1.05:1
1999 1.10:1
2000 1.10:1;"
4. Clause (e) of Section 7.2.5 ("Investments") of the Existing Credit
Agreement is hereby amended in its entirety to read as follows:
"(e)
(i) Investments by the Borrower in Hartco arising from the
transaction contemplated by the Hartco Letter of Intent;
(iii) Investments by the Borrower in RHF arising from the
transaction contemplated by the Robbins Letter of Intent; and
(iii) in the ordinary course of business, Investments by the
Borrower in any of its Subsidiaries (except Permitted Foreign
Subsidiaries), or by any such Subsidiary in any of its Subsidiaries, by
way of contributions to capital or loans or advances;"
5. Section 7.2.7 ("Capital Expenditures, Etc.") of the Existing Credit
Agreement is hereby amended by (a) deleting the period at the end of such
subsection and (b) inserting a new clause in place thereof to read as follows:
"; provided, further, that for Fiscal Year 1997 only, the amount of
Permitted Capital Expenditures shall be increased by the Capital
Expenditures attributable to the purchase of the Robbins Assets in an
amount not to exceed $70,000,000."
6. Clause (a) of Section 7.2.14 ("Negative Pledges, Restrictive Agreements,
Etc.") of the Existing Agreement is hereby amended to read in its entirety as
follows:
<PAGE>
"(a) the creation or assumption of any Lien upon its properties, revenues
or assets, whether now owned (other than prohibitions contained in
documents governing industrial revenue bonds to which Harto or Robbins
are parties as in effect on March 19, 1997) or hereafter acquired, or the
ability of the Borrower or any other Obligor to amend or otherwise modify
this Agrement or any other Loan Document; or"
7. The Disclosure Schedule is hereby amended by adding thereto Items
7.2.2(c)(iv) and 7.2.3(c)(iii) as set forth in Annex I hereto.
3. Consent under Section 7.2.9 ("Take or Pay Contracts"). In connection
with the purchase of the Robbins Assets, Borrower or RHF intends to assume
that certain agreement for the purchase of veneers dated as of January 12,
1995 by and between Anderson-Tully Company and Robbins, Inc. under which
Borrower will have an irrevocable obligation to purchase up to the required
amount of veneer when delivered for a five-year term as provided therein (the
"Anderson-Tully Agreement"). As of the Tenth Amendment Effective Date, Agent
and each Lender hereby (i) consents to Borrower's or RHF's assumption and
performance of Robbins, Inc.'s obligations under the Anderson-Tully Agreement,
and (ii) waives any Default or Event of Default arising under Section 7.2.9 of
the Existing Credit Agreement directly therefrom.
IV.
CONDITIONS TO EFFECTIVENESS
1. Tenth Amendment Effective Date. This Amendment (and the amendments and
modifications contained herein) shall become effective, and shall thereafter
be referred to as the "Tenth Amendment", on the date (the "Tenth Amendment
Effective Date") when all of the conditions set forth in this Subpart 3.1 have
been satisfied.
<PAGE>
1. Delivery of RHF Guaranty. The Agent shall have received, for the
benefit of each Lender, the Issuer and the Agent, a guaranty in respect
of the Obligations in a form reasonably satisfactory to the Agent, duly
executed and delivered by an Authorized Officer of RHF, dated as of the
Tenth Amendment Effective date (the "RHF Guaranty)".
2. Delivery of RHF Security Agreement. The Agent shall have received,
for the benefit of each Lender, the Issuer and the Agent, a security
agreement in a form reasonably satisfactory to the Agent, duly executed
and delivered by an Authorized Officer of RHF, dated as of the Tenth
Amendment Effective Date (the "RHF Security Agreement"), together with
such opinions in form and substance and from counsel satisfactory to
Agent, as the Agent may require, together with (i) executed copies of
proper Uniform Commercial Code Form UCC-3 termination statements, if any,
necessary to release all Liens and other rights of any Person in any
collateral described in such security agreement previously granted by any
Person, (ii) Uniform Commercial Code financing statements naming RHF as
the debtor and the Agent as the secured party to be filed under all
jurisdictions as may be necessary or, in the opinion of the Agent,
desirable to perfect the security interest of the Agent pursuant to such
security agreement and (iii) certified copies of Uniform Commercial Code
requests for information or similar search reports dated a date
reasonably near the date of the acquisition of RHF listing all effective
financing statements which name RHF as a debtor.
3. Solvency Certificate. The Agent shall have received for the benefit
of each Lender, the Issuer and the Agent, a solvency certificate of an
Authorized Officer of Borrower, in a form reasonably satisfactory to the
Agent, dated as of the Tenth Amendment Effective Date.
4. Affirmation and Consent. The Agent shall have received a duly
executed copy of the Affirmation and Consent to this Amendment, in a form
reasonably satisfactory to the Agent, duly executed and delivered by each
Obligor.
5. Acquisition of Robbins Assets. The acquisition of the Robbins
Assets by Borrower or RHF shall have been completed without a material
change in the terms of the acquisition from those set forth in the
Robbins Letter of Intent, except as may be otherwise consented to by the
Required Lenders.
6. Expenses. The Agent shall have received for its own account, or for
the account of each Lender, as the case may be, reimbursement of all the
Agent's expenses incurred and payable by Borrower under Subpart 4.5.
7. Environmental Audits. The Agent shall have received such assurances
from the Borrower or reports from an environmental consultant relating to
<PAGE>
environmental audits of material real property to be acquired in the
acquisition of the Robbins Assets reasonably satisfactory in scope and
results to the Agent.
8. Opinions of Counsel. The Agent shall have received such opinions,
each dated the Tenth Amendment Effective Date, in form and substance and
from counsel satisfactory to the Agent, as the Agent may require.
9. Legal Details, etc. All documents executed or submitted pursuant
hereto shall be satisfactory in form and substance to the Agent and its
counsel. The Agent and its counsel shall have received all information
and such counterpart originals or such certified or other copies or such
materials as the Agent or its counsel may reasonably request, and all
legal matters incident to the transactions contemplated by this Amendment
shall be satisfactory to the Agent and its counsel.
10. Execution of Counterparts. The Agent shall have received
counterparts of this Amendment, duly executed and delivered on behalf of
the Borrower and each of the Lenders.
11. Resolutions. etc. The Agent shall have received in form and
substance satisfactory to the Agent,
(a) a certificate, dated the Tenth Amendment Effective Date, of the
Borrower's Secretary or Assistant Secretary as to
(i) resolutions of the Borrower's Board of Directors then in full
force and effect authorizing the execution, delivery and performance of
this Amendment and each other Loan Document executed or to be executed by
it in connection herewith; and
(ii) the incumbency and signatures of those officers of the Borrower
authorized to act with respect to this Amendment and each other Loan
Document executed or to be executed by it in connection herewith,
upon which certificate each Lender may conclusively rely with respect to
the incumbency and signature of such Authorized Officers until it shall
have received a further certificate of the Secretary or Assistant
Secretary of the Borrower cancelling or amending such prior certificate;
(b) a certificate, dated the Tenth Amendment Effective Date, of the
Secretary or Assistant Secretary of RHF, or of the Secretary or Assistant
Secretary of the general partner of RHF, as to
(i) resolutions of the Board of Directors of RHF, or the general
partner of RHF, then in full force and effect authorizing the execution,
delivery and performance of a guaranty and security agreement (as such
<PAGE>
are described in Subparts 3.1.1 and 3.1.2, below) and each other Loan
Document executed or to be executed by RHF or by the general partner of
RHF, in the name and on behalf of RHF, in connection herewith and
therewith; and
(ii) the incumbency and signatures of those officers of RHF, or the
general partner of RHF, authorized to act with respect to the guaranty
and the security agreement of RHF described in Subparts 3.1.1 and 3.1.2
below and each other Loan Document executed or to be executed by RHF or
by the general partner of RHF, in the name and on behalf of RHF, in
connection herewith and therewith,
upon which certificate each Lender may conclusively rely with respect to
the incumbency and signature of such Authorized Officers until it shall
have received a further certificate of the Secretary or Assistant
Secretary of RHF cancelling or amending such prior certificate;
(c) a certificate, dated the Tenth Amendment Effective Date, of the
Secretary or Assistant Secretary of each other Obligor as to
(i) resolutions of such Obligor's Board of Directors then in
full force and effect authorizing the execution, delivery and
performance of the Affirmation and Consent and each other Loan
Document executed or to be executed by it in connection herewith;
and
(ii) the incumbency and signatures of those officers of such
Obligor authorized to act with respect to the Affirmation and
Consent and each other Loan Document executed or to be executed by
it in connection herewith,
upon which certificate each Lender may conclusively rely with respect to
the incumbency and signature of such Authorized Officers until it shall
have received a further certificate of the Secretary or Assistant
Secretary of such Obligor cancelling or amending such prior certificate;
and
(d) such other documents (certified if requested) or certificates
as the Agent may reasonably request with respect to this Amendment, the
Affirmation and Consent, any other Loan Document or any Organic Document
or approval.
V.
MISCELLANEOUS; REPRESENTATIONS
1. Cross-References. References in this Amendment to any Part or Subpart
are, unless otherwise specified or otherwise required by the context, to such
Part or Subpart of this Amendment.
<PAGE>
2. Loan Document Pursuant to Existing Credit Agreement. This Amendment is a
Loan Document executed pursuant to the Existing Credit Agreement and shall be
construed, administered and applied in accordance with all of the terms and
provisions of the Existing Credit Agreement (and, following the Tenth
Amendment Effective Date, the Credit Agreement).
3. Successors and Assigns. This Amendment shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns.
4. Full Force and Effect; Limited Amendment. Except as expressly amended
hereby, all of the representations, warranties, terms, covenants, conditions
and other provisions of the Existing Credit Agreement and the other Loan
Documents shall remain unamended and unwaived and shall continue to be, and
shall remain, in full force and effect in accordance with their respective
terms. The amendments set forth herein shall be limited precisely as provided
for herein to the provisions expressly amended herein and shall not be deemed
to be an amendment to, waiver of, consent to or modification of any other term
or provision of the Existing Credit Agreement, any other Loan Document
referred to therein or herein or of any transaction or further or future
action on the part of the Borrower which would require the consent of the
Lenders under the Existing Credit Agreement or any of the Loan Documents.
5. Payment of Expenses. The Borrower hereby agrees to pay and reimburse the
Agent for all of its reasonable expenses incurred in connection with the
negotiation, preparation, execution and delivery of this Amendment and related
documents, including all reasonable fees and disbursements of counsel to the
Agent.
6. Counterparts. This Amendment may be executed by the parties hereto in
several counterparts, each of which when executed and delivered shall be
deemed to be an original and all of which shall constitute together but one
and the same agreement.
7. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK.
8. Compliance with Warranties. No Default, etc. Both before and after giving
effect to the occurrence of the Tenth Amendment Effective Date and the
amendments to the Existing Credit Agreement set forth above, the Borrower
represents and warrants to the Lenders that the following statements are true
and correct:
(a) the representations and warranties set forth in Article VI
(excluding, however, those contained in Section 6.7) of the Existing
Credit Agreement and the representations and warranties set forth in
Article III of each Security Agreement and in Article III of each
Subsidiary Guaranty and in each other Loan Document are true and correct
in all material respects with the same effect as if then made (unless
stated to relate solely to an earlier date, in which case such
representations and warranties were true and correct as of such earlier
date);
<PAGE>
(b) except as disclosed by the Borrower to the Agent and the
Lenders pursuant to Section 6.7 of the Existing Credit Agreement,
(i) no labor controversy, litigation, arbitration or
governmental investigation or proceeding is pending or, to the
knowledge of the Borrower, threatened against the Borrower or any of
its Subsidiaries which could result in a Material Adverse Effect
(including with respect to this Amendment or any other Loan Document
delivered in connection herewith); and
(ii) no development has occurred in any labor controversy,
litigation, arbitration or governmental investigation or proceeding
disclosed pursuant to Section 6.7 of the Existing Credit Agreement
which could result in a Material Adverse Effect (including with
respect to this Amendment or any other Loan Document delivered in
connection herewith); and
(iii) no Default has occurred and is continuing.
9. Additional Representations. In order to induce the Lenders and the
Agents to enter into this Amendment, the Borrower hereby additionally
represents and warrants as follows:
(a) the execution and delivery of this Amendment and the
performance by the Borrower and each of its Subsidiaries of each of their
respective obligations hereunder, under each other Loan Document, under
the Existing Credit Agreement as amended hereby and, upon the occurrence
of the Tenth Amendment Effective Date, under the Credit Agreement are
within such Person's corporate powers, have been duly authorized by all
necessary corporate action, have received all necessary governmental
approvals (if any shall be required), and do not (i) contravene such
Person's Organic Documents, (ii) contravene any contractual restriction,
law or governmental regulation or court decree or order binding on or
affecting such Person or (iii) result in, or require the creation or
imposition of, any Lien on any of such Person's properties (other than
pursuant to a Loan Document); and
(b) this Amendment, each other Loan Document, the Existing Credit
Agreement as amended hereby and, upon the occurrence of the Tenth
Amendment Effective Date, the Credit Agreement are the legal, valid and
binding obligations of the Borrower and each of its Subsidiaries, as
applicable, enforceable in accordance with their respective terms (except
as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally and by principles of equity).
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
TRIANGLE PACIFIC CORP.
By: ---------------------------------
Title:
THE BANK OF NOVA SCOTIA
By: --------------------------------
Title:
BANK OF AMERICA NT&SA
By: --------------------------------
Title:
COMERICA BANK - TEXAS
By: ---------------------------------
Title:
<PAGE>
DISCLOSURE SCHEDULE
Item 7.2.2(c)(iv)
1. $8,000,000 Industrial Development Bonds Issued September 1, 1989.
a. $5,000,000 City of Warren Arkansas Industrial Development Revenue
Bonds, Series A, issued on September 1, 1989, variable interest rate
(4.25% at October 31, 1996), due in annual installments through
September 1999.
b. $3,000,000 City of Warren Arkansas Industrial Development Revenue
Bonds, Series B, issued on September 1, 1989, variable interest rate
(4.75% at October 31, 1996), due in annual installments through
September 1999.
Loan Agreement:
Section 6.1: Robbins must maintain its corporate existence,
with certain exceptions.
Section 7.1: Assignment only to domestic corporation who
assumes all of the obligations of Robbins
thereunder.
Promissory Note: Payments of interest and principal due on or
before dates set forth in the Indenture for
payment of principal and interest on the
bonds.
Reimbursement Agreement:
Section 9.3: Robbins may not assign any of its obligations
relating to the bonds or projects financed
thereby without the consent of the letter
of credit bank.
Indenture: The bonds are optionally redeemable by the
issuer on the first day of each March, June,
September and December (provided that Robbins
has previously elected to have the remarketing
agent adjust the interest rate on the bonds
every ninety days).
2. $1,600,000 Economic Development Revenue Bonds Issued February 1, 1994.
$1,600,000 Arkansas Development Finance Authority Economic Development
Revenue Bonds issued February 1, 1994, Series D, 3.25% fixed interest
rate, due in annual installments through February 2001.
<PAGE>
Loan Agreement:
Section 5.07: Searcy must maintain its corporate existence,
with certain exceptions.
Section 5.05: Assignment only with issuer's or trustee's
consent.
Promissory Note: Payments of interest and principal due on the
dates set forth on the payment schedule
attached thereto. Prepayments only allowed
in limited circumstances under the loan
agreement and the indenture before the bonds
are redeemed.
Indenture: The bonds may not be redeemed until February
1, 1999.
3. $3,860,000 Industrial Development Bonds Issued October 1, 1996:
a. $1,860,000 Arkansas Development Finance Authority Industrial
Development Revenue Bonds issued on October 1, 1996, Series J,
various fixed interest rates ranging from 4.3% to 5.5%, due in
annual installments through September 2006.
B. $2,000,000 Arkansas Development Finance Authority Industrial
Development Revenue Bonds issued on October 1, 1996, Series K,
various fixed interest rates ranging from 4.4% to 5.7%, due in
annual installments through September 2006.
Loan Agreement:
Section 5.07: Robbins must maintain its corporate
existence, with certain exceptions.
Section 5.05: Assignment only with issuer's or trustee's
consent.
Promissory Note: Payments of interest and principal due on the
dates set forth on the payment schedule
attached thereto. Prepayments only allowed
in limited circumstances under the loan
agreement and the indenture before the bonds
are redeemed.
Indenture: The bonds may not be redeemed until October
1, 2004.
4. Note payable to Warren Bank and Trust Company in original principal
amount of $628,538 and secured by a mortgage on certain land and
<PAGE>
buildings included in the Robbins Assets. The remaining principal and
interest due at the closing of the acquisition will be repaid by Borrower
at the closing and the mortgage released.
5. Notes payable by James H. Stoehr, Jr., Katherine M. Stoehr, Thomas C.
Stoehr and James H. Stoehr III to Warren Bank & Trust Co. and others in
the aggregate original principal amount of up to $200,000 and secured by
a liens on certain land and equipment included in the Robbins Assets.
The remaining principal and interest due at the closing of the
acquisition will be repaid by Borrower at the closing and the liens
released.
<PAGE>
Item 7.2.3(c)(iii)
Purchase money mortgages, purchase money security interests or other Liens
granted to secure payment of Indebtedness incurred by Robbins Sellers and
assumed by Borrower or RHF (a) for the purpose of financing the construction
of properties or fixed improvements or (b) in respect of Purchase Money
Obligations for property used in a Permitted Business, and covering only
(together in each case with accessions and fixtures thereto) the property so
acquired or the properties or fixed improvements so constructed (it being
understood that any Lien granted on property so acquired may also encumber and
extend to properties and fixed improvements constructed thereon, and any Lien
granted on properties and fixed improvements so constructed may also encumber
and extend to property so acquired on which such improvements are
constructed).
EXHIBIT 4.8
ELEVENTH AMENDMENT TO CREDIT AGREEMENT
THIS ELEVENTH AMENDMENT TO CREDIT AGREEMENT, dated as of September 30,
1997 (this "Amendment"), to the Existing Credit Agreement (as defined below)
is entered into by and among TRIANGLE PACIFIC CORP., a Delaware corporation
(the "Borrower"), the various financial institutions parties hereto
(collectively, the "Lenders"), BANK OF AMERICA NT&SA as co-agent (the "Co-
Agent") for the Lenders and the BANK OF NOVA SCOTIA as the agent (the "Agent")
for the Lenders.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Borrower, the Lenders, the Co-Agent and the Agent have
heretofore entered into that certain Credit Agreement, dated as of August 4,
1993 (as amended or otherwise modified prior to the date hereof, "Existing
Credit Agreement");
WHEREAS, the Borrower has requested that the Lenders amend the Existing
Credit Agreement in certain respects as set forth below; and
WHEREAS, the Lenders are willing, on the terms and conditions set forth
below, to amend the Existing Credit Agreement in certain respects as provided
herein (the Existing Credit Agreement, as amended pursuant to the terms of
this Amendment, being referred to as the "Credit Agreement");
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the Borrower and the Lenders hereby agree as
follows:
PART I.
DEFINITIONS
SUBPART I.1. Certain Definitions. The following terms (whether or not
underscored) when used in this Amendment, including its preamble and recitals,
shall, except where the context otherwise requires, have the following
meanings (such meanings to be equally applicable to the singular and plural
form thereof):
"Affirmation and Consent" means the affirmation and consent executed and
delivered pursuant to Subpart 3.1.4.
"Agent" is defined in the preamble.
"Amendment" is defined in the preamble.
<PAGE>
"Borrower" is defined in the preamble.
"Co-Agent" is defined in the preamble.
"Credit Agreement" is defined in the third recital.
"Eleventh Amendment" is defined in Subpart 3.1.
"Eleventh Amendment Effective Date" is defined in Subpart 3.1.
"Existing Credit Agreement" is defined in the first recital.
"Lenders" is defined in the preamble.
"Restructuring Subsidiaries" means, collectively, BHFG Corp.,
BHFL Corp., HFCG Corp., HFCL Corp., DTM Corp.
and Hartco Hardwood Flooring L.P., all organized
under the laws of the State of Delaware, and
Bruce Hardwood Flooring L.P., organized under
the laws of the State of Texas.
"Restructuring Transactions" means the transactions described in Annex I
hereto.
SUBPART I.2. Other Definitions. Terms for which meanings are provided
in the Existing Credit Agreement are, unless otherwise defined herein or the
context otherwise requires, used in this Amendment with such meanings provided
therein.
PART II.
AMENDMENTS TO AND CONSENTS UNDER THE
EXISTING CREDIT AGREEMENT
Effective on (and subject to the occurrence of) the Eleventh Amendment
Effective Date, and in reliance upon the representations and warranties made
herein and in each other agreement furnished to the Agent pursuant to the
terms hereof or in connection herewith, the parties hereto hereby agree that
the Existing Credit Agreement is hereby amended and the consummation of the
Restructuring Transactions is hereby consented to, all in accordance with this
Part II. Except as expressly so amended or modified by this Amendment, the
Existing Credit Agreement and each other Loan Document shall continue in full
force and effect in accordance with their respective terms.
SUBPART II.1. Amendments to Article I ("DEFINITIONS AND ACCOUNTING
TERMS"). Article I of the Existing Credit Agreement is hereby amended in
accordance with Subpart 2.1.1, Subpart 2.1.2 and Subpart 2.1.3.
SUBPART II.1.1. Section 1.1 ("Defined Terms") of the Existing Credit
Agreement is hereby amended by inserting the following definitions in the
appropriate alphabetical order:
<PAGE>
"'Master Subordination Agreement' means that certain Intercompany
Subordination Agreement dated September 30, 1997 among the Borrower, the
Agent Hartco, RHF, Worldwide Kitchens and the Restructuring Subsidiaries.
"'Restructuring Subsidiaries' means, collectively, BHFG Corp., BHFL
Corp., HFCG Corp., HFCL Corp., DTM Corp. and Hartco Hardwood Flooring
L.P., all organized under the laws of the State of Delaware, and Bruce
Hardwood Flooring L.P., organized under the laws of the State of Texas."
"'Restructuring Transactions' means the transactions described in
Item 7.2.11 to the Disclosure Schedule."
SUBPART II.1.2. The following defined terms in Section 1.1 ("Defined
Terms") of the Existing Credit Agreement are hereby amended in their entirety
to read as follows:
"'Other Rental Obligations' means (without duplication) all monetary
obligations of the Borrower or any of its Subsidiaries under any leasing
or similar arrangement which, in accordance with GAAP, would not be
classified as capitalized leases."
"'Subsidiary' means, with respect to any Person, any Person of which
more than 50% of the outstanding capital stock having ordinary voting
power to elect a majority of the board of directors of such Person
(irrespective of whether at the time capital stock of any other class or
classes of such corporation shall or might have voting power upon the
occurrence of any contingency), or if such Person is not a corporation,
more than 50% of the outstanding shares, interests, participation or
other equivalents (however designated) of such Person, is at the time
directly or indirectly owned by such Person, by such Person and one or
more other Subsidiaries of such Person, or by one or more other
Subsidiaries of such Person."
SUBPART II.1.3. Clause (b)(vi) of the definition of "Fixed Charge
Coverage Ratio" in Section 1.1 ("Defined Terms") is hereby amended to read in
its entirety as follows:
"(vi) the aggregate amount of Investments made by the Borrower and
its Subsidiaries during such period, but only to the extent that such
amount, when aggregated with the amount of all other Investments made
since the Eleventh Amendment Effective Date, exceeds $35,000,000."
SUBPART II.2. Amendments to Article VI ("REPRESENTATIONS AND
WARRANTIES"). Article VI of the Existing Credit Agreement is hereby amended
in accordance with Subparts 2.2.1, Subpart 2.2.2 and Subpart 2.2.3.
SUBPART II.2.1. Section 6.1 ("Organization, etc.") of the Existing Credit
Agreement is hereby amended in its entirety to read as follows:
"SECTION 6.1. Organization, etc. The Borrower and each of its
Subsidiaries which is a corporation or partnership is validly organized
and existing and in good standing under the laws of the State or other
jurisdiction of its organization, having all corporate or partnership
powers required to carry on its business and enter into and carry out the
transactions contemplated hereby. The Borrower and each of its
<PAGE>
Subsidiaries is duly qualified to do business and is in good standing as
a foreign organization in each jurisdiction where the failure so to
qualify could have a Material Adverse Effect, and has full power and
authority and holds all requisite governmental licenses, permits and
other approvals to enter into and perform its Obligations under this
Agreement, the Notes and each other Loan Document to which it is a party
and to own and hold under lease its property and to conduct its business
substantially as currently conducted by it."
SUBPART II.2.2. Section 6.2 ("Due Authorization, Non-Contravention,
etc") of the Existing Credit Agreement is hereby amended by adding the words
"or partnership" after the word "corporate" as it occurs in the next to last
line of the first paragraph.
SUBPART II.2.3. Section 6.5 ("Financial Information") of the Existing
Credit Agreement is hereby amended by adding the words "or partnerships" after
the word "corporations" in the next to last line of the first paragraph.
SUBPART II.3. Amendments to Article VII ("COVENANTS"). Article VII of
the Existing Credit Agreement is hereby amended in accordance with Subparts
2.3.1, Subpart 2.3.2, Subpart 2.3.3, Subpart 2.3.4, Subpart 2.3.5, Subpart
2.3.6 and Subpart 2.3.7.
SUBPART II.3.1. Section 7.1.2 ("Compliance with Laws, etc.") of the
Existing Credit Agreement is hereby amended by adding the words "or
partnership" after the word "corporate" in the first line of clause (a) of
Section 7.2.2.
SUBPART II.3.2. Section 7.2.2 ("Indebtedness") of the Existing Credit
Agreement is hereby amended by:
(a) (i) Deleting the word "and" at the end of Section
7.2.2(c)(iii), (ii) deleting the period at the end of such subsection,
(iii) inserting a semi-colon and the word "and" at the end of clause
(c)(iv) of such subsection and (iv) inserting a new clause (v) to such
subsection which shall read as follows:
"(v) Indebtedness of the Borrower and Hartco existing on the
date on which the Restructuring Transactions are consummated which
is assumed by the Restructuring Subsidiaries as part of the
Restructuring Transactions."
(b) Amending Section 7.2.2(f) in its entirety to read as follows:
"(f) Indebtedness (other than trade payables incurred in the
ordinary course of business as allowed in clause (e) above) of (i)
the Borrower to any of its Subsidiaries that have delivered the
Master Subordination Agreement; (ii) a Subsidiary of the Borrower to
the Borrower; provided, that such Subsidiary shall not become liable
to any Person other than the Borrower in respect of such
Indebtedness, and the amount of such Indebtedness incurred after the
Closing Date shall not exceed an amount equal to the principal
amount of Credit Extensions attributable to the Net Asset Value of
Eligible Accounts and Eligible Inventory of such Subsidiary that
have been utilized in arriving at the then existing Borrowing Base
<PAGE>
Amount; and in the event any such intercompany Indebtedness shall be
evidenced by a note or other instrument, such note or other
instrument shall be delivered to the Agent;"
(c) Amending Section 7.2.2(h) in its entirety to read as follows:
"(h) Indebtedness of the Borrower (i) in respect of its
guaranty of Other Rental Obligations of any of its Subsidiaries
incurred pursuant to the limits set forth in Section 7.2.8(k); and
(ii) under the Borrower Guaranty;"
(d) Renumbering the subsections following subsection (h) as
subsections (i), (j), (k), and (l), respectively.
(e) Amending Section 7.2.2(l) in its entirety to read as follows:
"(l) Indebtedness of Permitted Foreign Subsidiaries to Persons
other than the Borrower in an amount not in excess of $2,000,000,
and Contingent Liabilities of the Borrower in respect thereof
(calculated without duplication of specific Indebtedness and the
Contingent Obligations arising in respect thereof);"
SUBPART II.3.3. Section 7.2.3 ("Liens") of the Existing Credit Agreement
is hereby amended by:
(a) (i) inserting the word "and" following the semi-colon
appearing at the end of clause (c)(iii) of Section 7.2.3 and (ii)
inserting a new clause (iv) to such subsection which shall read as
follows:
"(iv) on assets of the Borrower and Hartco conveyed to the
Restructuring Subsidiaries as part of the Restructuring
Transactions, (including Liens securing the Obligations) which are
existing on the date on which the Restructuring Transactions are
consummated and which may be regranted, ratified and continued by
the Restructuring Subsidiaries;"
SUBPART II.3.4. Section 7.2.5 ("Investments") of the Existing Credit
Agreement is hereby amended by:
(a) (i) Deleting the word "and" following the semi-colon appearing
at the end of clause (e)(ii) of such subsection, (ii) inserting the word
"and" following the semi-colon appearing at the end of clause (e)(iii) of
such subsection and (iii) inserting a new clause (iv) to such subsection
which shall read as follows:
"(iv) Investments by the Borrower or any of its Subsidiaries in
any of the Restructuring Subsidiaries, or by any such Restructuring
Subsidiary in any other Restructuring Subsidiary, by way of
contributions to capital or loans or advances, in connection with
the Restructuring Transactions;"
SUBPART II.3.5. Section 7.2.8 ("Rental Obligations") is hereby amended
in its entirety to read as follows:
<PAGE>
"SECTION 7.2.8. Rental Obligations Rental Obligations Rental
ObligationsRental Obligations. The Borrower will not, and will not
permit any of its Subsidiaries to, enter into at any time any arrangement
which does not create a Capitalized Lease Liability and which involves
the leasing by the Borrower or any of its Subsidiaries from any lessor of
any real or personal property (or any interest therein), except Other
Rental Obligations which will not require the payment of an aggregate
amount of rentals by the Borrower and its Subsidiaries in any Fiscal Year
in excess of the amount set forth below opposite such Fiscal Year
(provided, that any calculation made for purposes of this Section shall
exclude any amounts required to be expended for maintenance and repairs,
insurance, taxes, assessments, and other similar charges and shall also
exclude any amounts owed with respect to leases between the Borrower and
any of its Subsidiaries or between Subsidiaries of the Borrower):
Aggregate Amount
Fiscal Year of Rentals
----------- ----------------
1996 $7,500,000
1997 $9,000,000
1998 $13,500,000
1999 $14,000,000
2000 $14,000,000."
SUBPART II.3.6. Section 7.2.11 (Asset Dispositions, etc.) of the
Existing Credit Agreement is hereby amended by (i) deleting the word "or" at
the end of subsection (d) thereof; (ii) deleting the period at the end of
subsection (e) thereof and (iii) inserting a new subsection (f) which shall
read as follows:
"(f) the sale, transfer, lease, contribution or conveyance of
assets of the Borrower and Hartco to the Restructuring Subsidiaries and
the conveyance of assets of Hartco to the Borrower as part of the
Restructuring Transactions."
SUBPART II.3.7. The Disclosure Schedule is hereby amended by adding
thereto Item 7.2.11 as set forth in Annex I hereto and by replacing Item 6.8
"Existing Subsidiaries" with Item 6.8 as set forth in Annex II hereto.
PART III.
CONDITIONS TO EFFECTIVENESS
SUBPART III.1. Eleventh Amendment Effective Date. This Amendment (and
the amendments and modifications contained herein) shall become effective, and
shall thereafter be referred to as the "Eleventh Amendment", on the date (the
<PAGE>
"Eleventh Amendment Effective Date") when all of the conditions set forth in
this Subpart 3.1 have been satisfied.
SUBPART III.1.1. Delivery of Guaranties. The Agent shall have received,
for the benefit of each Lender, the Issuer and the Agent, a guaranty in
respect of the Obligations in a form reasonably satisfactory to the Agent,
duly executed and delivered by an Authorized Officer of each of the
Restructuring Subsidiaries or, if such Restructuring Subsidiary is a limited
partnership, its General Partner, dated as of the Eleventh Amendment Effective
date (the "Guaranties").
SUBPART III.1.2. Delivery of the Security Agreements. The Agent shall
have received, for the benefit of each Lender, the Issuer and the Agent, a
security agreement in a form reasonably satisfactory to the Agent, duly
executed and delivered by an Authorized Officer of each of the Restructuring
Subsidiaries or, if such Restructuring Subsidiary is a limited partnership,
its General Partner, dated as of the Eleventh Amendment Effective Date (the
"Security Agreements"), together with such opinions in form and substance and
from counsel satisfactory to Agent, as the Agent may require, together with
(i) executed copies of proper Uniform Commercial Code Form UCC-3 termination
statements, if any, necessary to release all Liens and other rights of any
Person (other than the Agent) in any collateral described in such security
agreement previously granted by any Person, (ii) Uniform Commercial Code
financing statements naming each of the Restructuring Subsidiaries as the
debtor and the Agent as the secured party to be filed under all jurisdictions
as may be necessary or, in the opinion of the Agent, desirable to perfect the
security interest of the Agent pursuant to such security agreement and (iii)
certified copies of Uniform Commercial Code requests for information or
similar search reports dated a date reasonably near the date of the
effectuation of the Restructuring Transactions listing all effective financing
statements which name any of Restructuring Subsidiaries as a debtor.
SUBPART III.1.3. Solvency Certificate. The Agent shall have received
for the benefit of each Lender, the Issuer and the Agent, a solvency
certificate of an Authorized Officer of Borrower, in a form reasonably
satisfactory to the Agent, dated as of the Eleventh Amendment Effective Date.
SUBPART III.1.4. Affirmation and Consent. The Agent shall have received
a duly executed copy of the Affirmation and Consent to this Amendment, in a
form reasonably satisfactory to the Agent, duly executed and delivered by each
Obligor.
SUBPART III.1.5. Consummation of the Restructuring Transactions. The
Restructuring Transactions shall have been completed without a material change
in the terms of the Restructuring Transactions from those set forth in Annex I
hereto, except as may be otherwise consented to by the Required Lenders.
SUBPART III.1.6. Expenses. The Agent shall have received for its own
account, or for the account of each Lender, as the case may be, reimbursement
of all the Agent's expenses incurred and payable by Borrower under Subpart
4.5.
<PAGE>
SUBPART III.1.7. Opinions of Counsel. The Agent shall have received
such opinions, each dated the Eleventh Amendment Effective Date, in form and
substance and from counsel satisfactory to the Agent, as the Agent may
require.
SUBPART III.1.8. Legal Details, etc. All documents executed or
submitted pursuant hereto shall be satisfactory in form and substance to the
Agent and its counsel. The Agent and its counsel shall have received all
information and such counterpart originals or such certified or other copies
or such materials as the Agent or its counsel may reasonably request, and all
legal matters incident to the transactions contemplated by this Amendment
shall be satisfactory to the Agent and its counsel.
SUBPART III.1.9. Execution of Counterparts. The Agent shall have
received counterparts of this Amendment, duly executed and delivered on behalf
of the Borrower and each of the Lenders.
SUBPART III.1.10. Resolutions. etc. The Agent shall have received in
form and substance satisfactory to the Agent,
(a) a certificate, dated the Eleventh Amendment Effective Date, of
the Borrower's Secretary or Assistant Secretary as to
(i) resolutions of the Borrower's Board of Directors then in
full force and effect authorizing the execution, delivery and
performance of this Amendment and each other Loan Document executed
or to be executed by it in connection herewith; and
(ii) the incumbency and signatures of those officers of the
Borrower authorized to act with respect to this Amendment and each
other Loan Document executed or to be executed by it in connection
herewith,
upon which certificate each Lender may conclusively rely with respect to
the incumbency and signature of such Authorized Officers until it shall
have received a further certificate of the Secretary or Assistant
Secretary of the Borrower cancelling or amending such prior certificate;
(b) a certificate, dated the Eleventh Amendment Effective Date, of
the Secretary or Assistant Secretary of each of the Restructuring
Subsidiaries, or if such Restructuring Subsidiary is a limited
partnership, its General Partner, as to
(i) resolutions of the Board of Directors of each of the
Restructuring Subsidiaries, or if such Restructuring Subsidiary is a
limited partnership, its General Partner, then in full force and
effect authorizing the execution, delivery and performance of a
guaranty and security agreement (as such are described in Subparts
3.1.1. and 3.1.2, above) and each other Loan Document executed or to
be executed by each of the Restructuring Subsidiaries, in the name
and on behalf of each of the Restructuring Subsidiaries, in
connection herewith and therewith; and
<PAGE>
(ii) the incumbency and signatures of those officers of each of
the Restructuring Subsidiaries, or if such Restructuring Subsidiary
is a limited partnership, its General Partner, authorized to act
with respect to the guaranty and the security agreement of each of
the Restructuring Subsidiaries described in Subparts 3.1.1 and 3.1.2
below and each other Loan Document executed or to be executed by
each of the Restructuring Subsidiaries or if such Restructuring
Subsidiary is a limited partnership, its General Partner, in the
name and on behalf of each of the Restructuring Subsidiaries, in
connection herewith and therewith,
upon which certificate each Lender may conclusively rely with respect to
the incumbency and signature of such Authorized Officers until it shall
have received a further certificate of the Secretary or Assistant
Secretary of each of the Restructuring Subsidiaries cancelling or
amending such prior certificate;
(c) a certificate, dated the Eleventh Amendment Effective Date, of
the Secretary or Assistant Secretary of each other Obligor as to
(i) resolutions of such Obligor's Board of Directors then in
full force and effect authorizing the execution, delivery and
performance of the Affirmation and Consent and each other Loan
Document executed or to be executed by it in connection herewith;
and
(ii) the incumbency and signatures of those officers of such
Obligor authorized to act with respect to the Affirmation and
Consent and each other Loan Document executed or to be executed by
it in connection herewith, upon which certificate each Lender
may conclusively rely with respect to
the incumbency and signature of such Authorized Officers until it shall
have received a further certificate of the Secretary or Assistant
Secretary of such Obligor cancelling or amending such prior certificate;
and
(d) such other documents (certified if requested) or certificates
as the Agent may reasonably request with respect to this Amendment, the
Affirmation and Consent, any other Loan Document or any Organic Document
or approval.
PART IV.
MISCELLANEOUS; REPRESENTATIONS
SUBPART IV.1. Cross-References.
References in this Amendment to any Part or Subpart are, unless otherwise
specified or otherwise required by the context, to such Part or Subpart of
this Amendment.
SUBPART IV.2. Loan Document Pursuant to Existing Credit Agreement. This
Amendment is a Loan Document executed pursuant to the Existing Credit
Agreement and shall be construed, administered and applied in accordance with
all of the terms and provisions of the Existing Credit Agreement (and,
following the Eleventh Amendment Effective Date, the Credit Agreement).
<PAGE>
SUBPART IV.3. Successors and Assigns. This Amendment shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns. SUBPART IV.4. Full Force and Effect; Limited
Amendment. Except as expressly amended hereby, all of the representations,
warranties, terms, covenants, conditions and other provisions of the Existing
Credit Agreement and the other Loan Documents shall remain unamended and
unwaived and shall continue to be, and shall remain, in full force and effect
in accordance with their respective terms. The amendments set forth herein
shall be limited precisely as provided for herein to the provisions expressly
amended herein and shall not be deemed to be an amendment to, waiver of,
consent to or modification of any other term or provision of the Existing
Credit Agreement, any other Loan Document referred to therein or herein or of
any transaction or further or future action on the part of the Borrower which
would require the consent of the Lenders under the Existing Credit Agreement
or any of the Loan Documents.
SUBPART IV.5. Payment of Expenses. The Borrower hereby agrees to pay
and reimburse the Agent for all of its reasonable expenses incurred in
connection with the negotiation, preparation, execution and delivery of this
Amendment and related documents, including all reasonable fees and
disbursements of counsel to the Agent; provided that neither the Agent nor any
Lender shall charge a fee to the Borrower in connection with the Restructuring
Transactions or this Amendment.
SUBPART IV.6. Counterparts. This Amendment may be executed by the
parties hereto in several counterparts, each of which when executed and
delivered shall be deemed to be an original and all of which shall constitute
together but one and the same agreement.
SUBPART IV.7. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK.
SUBPART IV.8. Compliance with Warranties. No Default, etc. Both before and
after giving effect to the occurrence of the Eleventh Amendment Effective Date
and the amendments to the Existing Credit Agreement set forth above, the
Borrower represents and warrants to the Lenders that the following statements
are true and correct:
(a the representations and warranties set forth in Article VI
(excluding, however, those contained in Section 6.7) of the Existing
Credit Agreement and the representations and warranties set forth in
Article III of each Security Agreement and in Article III of each
Subsidiary Guaranty and in each other Loan Document are true and correct
in all material respects with the same effect as if then made (unless
stated to relate solely to an earlier date, in which case such
representations and warranties were true and correct as of such earlier
date);
(b except as disclosed by the Borrower to the Agent and the
Lenders pursuant to Section 6.7 of the Existing Credit Agreement,
(i no labor controversy, litigation, arbitration or
governmental investigation or proceeding is pending or, to the
<PAGE>
knowledge of the Borrower, threatened against the Borrower or any of
its Subsidiaries which could result in a Material Adverse Effect
(including with respect to this Amendment or any other Loan Document
delivered in connection herewith); and
(ii no development has occurred in any labor controversy,
litigation, arbitration or governmental investigation or proceeding
disclosed pursuant to Section 6.7 of the Existing Credit Agreement
which could result in a Material Adverse Effect (including with
respect to this Amendment or any other Loan Document delivered in
connection herewith); and
(iii no Default has occurred and is continuing. SUBPART
IV.9. Additional Representations. In order to induce the Lenders and the
Agents to enter into this Amendment, the Borrower hereby additionally
represents and warrants as follows: (a the execution and delivery
of this Amendment and the
performance by the Borrower and each of its Subsidiaries of each of their
respective obligations hereunder, under each other Loan Document, under
the Existing Credit Agreement as amended hereby and, upon the occurrence
of the Eleventh Amendment Effective Date, under the Credit Agreement are
within such Person's corporate powers, have been duly authorized by all
necessary corporate action, have received all necessary governmental
approvals (if any shall be required), and do not (i) contravene such
Person's Organic Documents, (ii) contravene any contractual restriction,
law or governmental regulation or court decree or order binding on or
affecting such Person or (iii) result in, or require the creation or
imposition of, any Lien on any of such Person's properties (other than
pursuant to a Loan Document); and
(b this Amendment, each other Loan Document, the Existing Credit
Agreement as amended hereby and, upon the occurrence of the Eleventh
Amendment Effective Date, the Credit Agreement are the legal, valid and
binding obligations of the Borrower and each of its Subsidiaries, as
applicable, enforceable in accordance with their respective terms (except
as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally and by principles of equity).
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
TRIANGLE PACIFIC CORP.
By: ---------------------------------
Title:
THE BANK OF NOVA SCOTIA
By: ---------------------------------
Title:
BANK OF AMERICA NT&SA
By: ---------------------------------
Title:
COMERICA BANK - TEXAS
By: ---------------------------------
Title:
<PAGE>
ANNEX I
RESTRUCTURING TRANSACTIONS
<PAGE>
As used in the Amendment and the Existing Credit Agreement, the term
"Restructuring Transactions" means the transactions summarized on the
attachment hereto.
1. All sales, marketing and lumber buying operations will be conducted by
the Borrower, including any such operations previously conducted by
Hartco, and all accounts and notes receivables of Hartco will be
transferred to the Borrower.
2. All of the Borrower's hardwood flooring manufacturing operations (other
than those conducted by Hartco) will be transferred to Bruce Hardwood
Flooring L.P., a Texas limited partnership of which BHFL Corp. will be
the 99% limited partner and BHFG Corp. will be the 1% general partner.
All real property and tangible personal property, and all patents,
trademarks and other intellectual property, utilized in these operations
will be either transferred or leased by the Borrower to, and all
associated liabilities will be assumed by, Bruce Hardwood Flooring L.P.
3. All of Hartco's hardwood flooring and related manufacturing operations
will be transferred to Hartco Hardwood Flooring L.P., a Delaware limited
partnership to which HFCL Corp. will be the 99% limited partner and HFCG
Corp. will be the 1% general partner. All real property and tangible
personal property utilized in these operations and all patents,
trademarks and other intellectual property will be transferred by Hartco
to Hartco Hardwood Flooring L.P. or transferred to DTM Corp. and then
leased by DTM Corp. to Hartco Hardwood Flooring L.P., and all associated
liabilities will be assumed by Hartco Hardwood Flooring L.P. or DTM
Corp., as the case may be.
<PAGE>
ANNEX II
ITEM 6.8 Existing Subsidiaries.
Corporate Subsidiaries of Borrower
State of Ownership
Name Organization %
- ---- ------------ --------
Worldwide Kitchens, Inc. Delaware 100%
Hartco Flooring Company Tennessee 100%
BHFG Corp. Delaware 100%
BHFL Corp. Delaware 100%
Robbins Hardwood Flooring, Inc. Delaware 100%
Corporate Subsidiary of Hartco Flooring Company
DTM Corp. Delaware 100%
HFCG Corp. Delaware 100%
HFCL Corp. Delaware 100%
Limited Partnerships
Bruce Hardwood Flooring L.P. Texas
Limited Partner - BHFL Corp. 99%
General Partner - BHFG Corp. 1%
Hartco Hardwood Flooring L.P. Delaware
Limited Partner - HFCL Corp. 99%
General Partner - HFCG Corp. 1%
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
Jurisdiction of Other Names Under Which
Name Organization Business Conducted
- ---- --------------- -----------------------
Robbins Hardwood Flooring, Inc. Delaware
BHFL Corp. Delaware
BHFG Corp. Delaware
Bruce Hardwood Flooring, L.P. Texas "Bruce Hardwood Floors"
"Premier Wood Floors"
Hartco Flooring Company Tennessee
HFCG Corp. Delaware
HFCL Corp. Delaware
Hartco Hardwood Flooring, L.P. Delaware "Hartco Flooring Company"
DTM Corp. Delaware
Exhibit 11.1
------------
TRIANGLE PACIFIC CORP.
COMPUTATION OF NET INCOME PER SHARE
Fiscal Years Ended
--------------------------------------
January 2, January 3, December 29,
1998 1997 1995
--------------------------------------
BASIC
- -----
Net Income $31,759,000 $25,624,000 $22,005,000
========== ========== ==========
Shares outstanding
beginning of period 14,686,558 14,663,365 14,662,609
Weighted average number
of shares issued from
incentive bonus shares 23,398 1,008 -
Weighted average number
of shares issued from
exercise of stock options 5,735 5,248 567
---------- ---------- ----------
Basic weighted common
shares outstanding 14,715,691 14,669,621 14,663,176
========== ========== ==========
Basic net income per share $ 2.16 $ 1.71 $ 1.49
========== ========== ==========
DILUTED
- -------
Weighted average number
of shares outstanding 14,715,691 14,669,621 14,663,176
Shares issuable from assumed
exercise of stock options
and stock warrants reduced
by the number of shares which
could have been purchased with
the proceeds from exercise of
such options and warrants 605,075 334,904 151,884
---------- ---------- ----------
Diluted weighted common
shares outstanding 15,320,766 15,004,525 14,815,060
========== ========== ==========
Diluted net income per share $ 2.07 $ 1.71 $ 1.49
========== ========== ==========
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-02-1998
<PERIOD-END> JAN-02-1998
<CASH> 3,790,000
<SECURITIES> 0
<RECEIVABLES> 74,061,000
<ALLOWANCES> 3,662,000
<INVENTORY> 128,988,000
<CURRENT-ASSETS> 207,738,000
<PP&E> 242,935,000
<DEPRECIATION> 53,294,000
<TOTAL-ASSETS> 543,221,000
<CURRENT-LIABILITIES> 80,257,000
<BONDS> 0
0
0
<COMMON> 147,000
<OTHER-SE> 186,765,000
<TOTAL-LIABILITY-AND-EQUITY> 543,221,000
<SALES> 652,866,000
<TOTAL-REVENUES> 652,866,000
<CGS> 495,256,000
<TOTAL-COSTS> 495,256,000
<OTHER-EXPENSES> 82,722,000
<LOSS-PROVISION> 419,000
<INTEREST-EXPENSE> 22,863,000
<INCOME-PRETAX> 51,606,000
<INCOME-TAX> 19,847,000
<INCOME-CONTINUING> 31,759,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 31,759,000
<EPS-PRIMARY> 2.16
<EPS-DILUTED> 2.07
</TABLE>
Exhibit 23.1
Consent of independent Public Accountants
As independent public accountants, we hereby consent to the incorporation of
our reports included in this form 10-K, into the Company's previously filed
Registration Statement Files Nos. 33-69682, 33-69684, 33-50724, 33-48599, 33-
48601 and 33-48603.
ARTHUR ANDERSEN LLP
Dallas, Texas
March 27, 1998
