FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): April 20, 1998 (April 3, 1998)
------------------------------
SHAW INDUSTRIES, INC.
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(Exact name of registrant as specified in its charter)
Georgia 1-6853 58-1032521
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
616 E. Walnut Avenue, Dalton, Georgia 30720
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (706) 278-3812
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Not Applicable
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(Former name or former address, if changed since last report.)
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On April 3, 1998, the Registrant disposed of (the "U.K. Disposition") all
of the issued and outstanding capital stock of Carpets International (U.K.)
Limited and Kosset Carpets Limited, its U.K. indirect wholly-owned subsidiaries
(collectively "Carpets International"), to Carpet Holdings Limited, a U.K.
company owned by an investor group consisting of affiliates of Cravey Green &
Wahlen, a venture capital firm, and selected members of management of Carpets
International. The U.K. Disposition was effected pursuant to the Share Transfer
Agreement dated April 3, 1998 (the "Transfer Agreement") among the Registrant,
Shaw UK Holdings Limited and Carpet Holdings Limited, a copy of which is
attached as Exhibit 99.1 hereto and which is incorporated by reference herein.
Pursuant to the Transfer Agreement, Carpets International refinanced its
indebtedness under its credit facility and obtained the release and termination
of the guarantee of such indebtedness by the Registrant or any of its affiliate.
In addition, Carpet International agreed to use its commercially reasonable
endeavors to release the Registrant and any of its affiliates from substantially
all other securities, guarantees, performance bonds and indemnities with respect
to any debt or obligation of Carpets International or any of its subsidiaries.
2
<PAGE>
Item 7. Financial Statements and Exhibits.
(b) Pro Forma Financial Information.
The following unaudited pro forma condensed consolidated
financial statements give effect to the disposition of all of the
issued and outstanding shares of capital stock of Carpets
International (U.K.) Limited.
The unaudited pro forma condensed consolidated balance sheet
presents the financial position of the Registrant at January 3,
1998 giving effect to the disposition as if it had occurred on
such date. The unaudited pro forma condensed consolidated
statement of income for the year ended January 3, 1998 gives
effect to the disposition as if it had occurred at the beginning
of the period.
The unaudited pro forma financial information is presented
for informational purposes only and it is not necessarily
indicative of the financial position and results of operations
that would have been achieved had the disposition been completed
as of the dates indicated and is not necessarily indicative of
the Registrant's future financial position or results of
operations.
The unaudited pro forma condensed consolidated financial
statements should be read in conjunction with the historical
consolidated financial statements of the Registrant including the
related notes thereto.
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<PAGE>
<TABLE>
<CAPTION>
Pro Forma Financial Information
Shaw Industries, Inc.
Pro Forma Condensed Consolidated Balance Sheet
at January 3, 1998
(Unaudited)
==================================================================================================
(000's omitted)
Carpets
Historical International Pro Forma
(a)
----------- ------------- -----------
<S> <C> <C> <C>
Assets
Cash .......................................... $ 43,571 $ 16,566 $ 27,005
Accounts receivable ........................... 374,516 31,682 342,834
Inventories ................................... 530,059 44,532 485,527
Other current assets .......................... 118,267 2,215 116,052
----------- ----------- -----------
Total current assets ..................... 1,066,413 94,995 971,418
----------- ----------- -----------
Property, plant and equipment ................. 1,383,823 49,320 1,334,503
Accumulated depreciation ...................... (759,444) (29,064) (730,380)
----------- ----------- -----------
Net property, plant and equipment ........ 624,379 20,256 604,123
----------- ----------- -----------
Other assets .................................. 276,822 0 276,822
----------- ----------- -----------
Total assets ............................. $ 1,967,614 $ 115,251 $ 1,852,363
=========== =========== ===========
Liabilities and Shareholders' Equity
Notes payable ................................. $ 10 $ 0 $ 10
Current maturities of long-term debt .......... 2,752 1,734 1,018
Accounts payable .............................. 161,964 18,773 143,191
Accrued liabilities ........................... 160,728 7,922 152,806
----------- ----------- -----------
Total current liabilities ................ 325,454 28,429 297,025
----------- ----------- -----------
Long-term debt ................................ 930,424 85,882 844,542
Deferred income taxes ......................... 61,689 940 60,749
Other liabilities ............................. 12,513 0 12,513
----------- ----------- -----------
Total liabilities ........................ 1,330,080 115,251 1,214,829
Total shareholders' equity ............... 637,534 0 637,534
----------- ----------- -----------
Total liabilities and shareholders' equity $ 1,967,614 $ 115,251 $ 1,852,363
=========== =========== ===========
(a) To eliminate the assets and liabilities of Carpets International included
in the balance sheet of Shaw Industries, Inc. as of January 3, 1998.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Pro Forma Financial Information
Shaw Industries, Inc.
Pro Forma Condensed Consolidated Statement of Income
For the Year Ended January 3, 1998
(Unaudited)
(Dollars in thousands except per share amounts)
================================================================================
Carpets
Historical International Pro Forma
(a)
------------- ------------- -------------
<S> <C> <C> <C>
Net sales ................................. $ 3,575,774 $ 210,158 $ 3,365,616
Costs and expenses:
Cost of sales ...................... 2,680,472 177,653 2,502,819
Selling, general and administrative 722,590 28,889 693,701
Pre-opening expenses ............... 3,953 0 3,953
Charge to record store closing costs 36,787 0 36,787
Write-down of U.K. assets .......... 47,952 47,952 0
Interest, net ...................... 60,769 8,246 52,523
Other (income) expense, net ........ (7,032) 0 (7,032)
------------- ------------- -------------
Income before income taxes ................ 30,283 (52,582) 82,865
Provision for income taxes ................ 5,586 (28,901) 34,487
------------- ------------- -------------
Income before equity in income
of joint venture ................... 24,697 (23,681) 48,378
Equity in income of joint venture ......... 4,262 0 4,262
------------- ------------- -------------
Net income (loss) ......................... $ 28,959 ($ 23,681) $ 52,640
============= ============= =============
Earnings per common share:
Basic .............................. $ 0.22 ($ 0.17) $ 0.39
Diluted ............................ $ 0.22 ($ 0.17) $ 0.39
Weighted average shares outstanding:
Basic .............................. 133,523,380 133,523,380
Diluted ............................ 133,714,496 133,714,496
(a) To eliminate the results of operations of Carpets International for the
year ended January 3, 1998.
</TABLE>
<PAGE>
(c) Exhibits.
99.1 Share Transfer Agreement dated April 3, 1998 among the
Registrant, Shaw UK Holdings Limited and Carpet
Holdings Limited.
4
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SHAW INDUSTRIES, INC.
By: /s/ Bennie M. Laughter
------------------------
Name: Bennie M. Laughter
Title: Vice President, Secretary and
General Counsel
Dated: April 20, 1998
::ODMA\PCDOCS\ATL\203248\1
5
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- -------- -----------
99.1 Share Transfer Agreement dated April 3, 1998 among the
Registrant, Shaw UK Holdings Limited and Carpet Holdings
Limited.
::ODMA\PCDOCS\ATL\203248\1
Exhibit 99.1
SHARE TRANSFER AGREEMENT
between
SHAW INDUSTRIES, INC.
SHAW UK HOLDINGS LIMITED
and
CARPET HOLDINGS LIMITED
DATED AS OF APRIL 3, 1998
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1 TRANSFER OF SHARES................................................1
ARTICLE 2 THE CLOSING.......................................................2
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SHAW AND THE SELLER ............5
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PURCHASER......................23
ARTICLE 5 COVENANTS OF SHAW AND THE SELLER.................................24
ARTICLE 6 MUTUAL COVENANTS.................................................24
ARTICLE 7 PUBLIC ANNOUNCEMENTS.............................................24
ARTICLE 8 INDEMNIFICATION..................................................24
ARTICLE 9 ARBITRATION......................................................30
ARTICLE 10 GENERAL PROVISIONS...............................................30
ARTICLE 11 DEFINITIONS......................................................32
ARTICLE 1 TRANSFER OF SHARES 1
1.1 Shares 1
1.2 Consideration 1
1.3 No Liens, Etc. 1
1.4 Pre-Emption Rights 1
ARTICLE 2 THE CLOSING 2
2.1 Time and Place of Closing 2
2.2 Transactions at the Closing 2
2.3 Indemnification Regarding Accounts Receivable After Closing 4
2.4 Refinancing of Current Indebtedness and Release of Guarantees 4
2.5 Payment of Amounts due to Shaw 5
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SHAW AND THE SELLER 5
3.1 Organization and Qualification 5
3.2 Authority 5
3.3 Subsidiaries 6
3.4 Capitalization 7
3.5 Options and Other Rights 7
3.6 Financial Statements 7
3.7 The Accounts 7
3.8 Inventories 8
3.9 Personal Property 8
3.10 Real Property 9
3.11 Contracts 9
3.12 Intellectual Property 10
3.13 Insurance 11
3.14 Environmental Matters and Health and Safety 12
3.15 Litigation 13
3.16 Absence of Changes 14
3.17 Brokers and Finders 15
3.18 Labour Matters 15
3.19 Permits and Licenses 17
3.20 Taxes 17
3.21 Employee Benefit Plans 20
3.22 Compliance with Laws 21
3.23 Governmental Approval and Consents 22
3.24 Adequacy of the Company's Assets 22
3.25 Products Liability 22
3.26 Statutory Restrictions 22
3.27 Corporate and Other Records 22
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<PAGE>
3.28 Computers 22
3.29 Insolvency 23
3.30 Other Business Matters 23
3.31 Financing and Working Capital 24
3.32 Correctness of Representations 24
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PURCHASER 24
4.1 Organization and Qualification 24
4.2 Authority 24
4.3 Litigation 24
4.4 Brokers and Finders 24
4.5 Governmental Approval and Consents 24
4.6 Correctness of Representations 25
4.7 Knowledge of Seller's Breach 25
ARTICLE 5 COVENANTS OF SHAW AND THE SELLER 25
5.1 Covenant Not to Compete 25
ARTICLE 6 MUTUAL COVENANTS 25
6.1 Further Mutual Covenants 25
6.2 RTPA Suspensory Section. 25
ARTICLE 7 PUBLIC ANNOUNCEMENTS 26
7.1 Public Announcements 26
ARTICLE 8 INDEMNIFICATION 26
8.1 Definitions 26
8.2 Agreement of the Indemnitors to Indemnify 26
8.3 Procedures for Indemnification 27
8.4 Third Party Claims 28
8.5 Other Rights and Remedies 29
8.6 Duration 29
8.7 Limitations 30
8.8 Cooperation 30
8.9 Survival of Representations and Warranties 30
8.10 Mitigation of Losses 30
8.11 Acts Relating to Environmental Liabilities 30
8.12 Subrogation 31
ARTICLE 9 ARBITRATION 31
9.1 Arbitration 31
9.2 Jurisdiction 31
ARTICLE 10 GENERAL PROVISIONS 32
10.1 Fees and Expenses 32
10.2 Notices 32
10.3 Assignment; Binding Effect 32
10.4 No Benefit to Others 33
10.5 Headings, Gender, and 'Person' 33
10.6 Counterparts 33
10.7 Integration of Agreement 33
10.8 Time of Essence 33
10.9 Governing Law 33
10.10 Partial Invalidity 33
10.11 Investigation 33
ARTICLE 11 DEFINITIONS 34
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<PAGE>
TABLE OF EXHIBITS
Exhibit A Resignation of Directors
Exhibit B Resignation of Auditors
Exhibit C Powers of Attorney
Exhibit D-1 Company Opinion - Powell, Goldstein, Frazer & Murphy
Exhibit D-2 Company Opinion - Garretts
Exhibit E Supply Agreement
Exhibit F Personnel Transition Agreement
Exhibit G License Agreement
Exhibit H-1 Purchaser Opinion - Alston & Bird LLP
Exhibit H-2 Purchaser Opinion - Eversheds
Exhibit I Assignment
Exhibit J Notice of Resignation
Exhibit K Deed of Adherence
Exhibit L Substitution Certificate
Exhibit M Loan Note Transfer
Exhibit N Deed Regarding Absence of Claims
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<PAGE>
SCHEDULES
Schedule 2.4 Refinancing and Release of Guarantees
Schedule 3.0 General Disclosures
Schedule 3.1 Organization and Qualification
Schedule 3.3 Subsidiaries
Schedule 3.7 Accounts
Schedule 3.8 Inventories
Schedule 3.9.1 Vehicles
Schedule 3.9.2 Equipment
Schedule 3.9.3 Furniture and Fixtures
Schedule 3.9.4 Encumbrances
Schedule 3.9.5 Personal Property Leases
Schedule 3.9..6 Consents
Schedule 3.10.1 Particulars of Real Property
Schedule 3.10.2 Real Property - Rateable Value
Schedule 3.11.1 Contracts
Schedule 3.11.2 Contract/Supplies
Schedule 3.11.3 Contracts - Goods and Services/Customer List
Schedule 3.11.4 Capital Expenditures
Schedule 3.12 Intellectual Property
Schedule 3.13 Insurance
Schedule 3.14 Environmental Matters
Schedule 3.15 Litigation Matters
Schedule 3.16 Absence of Changes
Schedule 3.18.1 Labour Matters - Employees and Officers
Schedule 3.18.2 Labour Matters - Severance Payment
Schedule 3.19 Permits and Licenses
Schedule 3.20 Taxes
Schedule 3.21 Employee Benefit Plans
Schedule 3.25 Products Liability
Schedule 3.28 Computers
Schedule 3.31 Financing and Working Capital
-iv-
<PAGE>
CROSS REFERENCES TO DEFINED TERMS
TERM ARTICLE IN WHICH DEFINED
Accounting Date Article 11
Accounting Standards Article 11
Accounts Article 11
Accounts Receivable Article 11
Acquisition Documents Section 3.2
Affiliate Article 11
Agreement Preamble
Assignment Section 2.2(e)
CI Preamble
Closing Section 2.1
Closing Date Section 2.1
Collection Period Section 2.3
Company(ies) Preamble
Computer Equipment Article 11
Computer Software Article 11
Contract(s) Article 11
Deed of Adherence Section 2.2(e)
EA Provisions Section 3.14
Environmental Activity Section 3.14
Environmental Laws Section 3.14
Environmental Liability Article 11
Environmental Permits Section 3.14(b)(ii)
Equipment Article 11
ERA Section 3.18
Event Section 3.20
Financial Statements Section 3.6
Furniture and Fixtures Article 11
GHL Loan Agreement Article 11
GHL Loan Notes Article 11
GHL Security Interests Article 11
GHL Security Trust Deed Article 11
GAAP Section 3.6
Guarantees Section 2.4
ICTA Section 3.20
Indemnification Claim Section 8.1(a)
Indemnitee Section 8.1(b)
Indemnitor Section 8.1(c)
Indemnitor Representative Section 8.1(d)
Indemnity Payment Section 2.3
Intellectual Property Article 11
Inventory Article 11
Jurisdictional Courts Section 19.2
Know-How Article 11
Knowledge of the Warrantors Article 11
Kosset Preamble
Labour Claims Section 3.18
Laws Article 11
Legal Requirement Article 11
Liability to Taxation Section 3.20
License Agreement Section 2.2(b)
Loan Note Transfer Section 2.2(e)
Losses Section 8.1(e)
Management Preamble
Material Adverse Effect Article 11
NationsBank Facility Section 2.4
-v-
<PAGE>
Outstanding Receivables Section 2.3
Pension Scheme Section 3.21
Permits Article 11
Permitted Security Interests Article 11
Person Section 10.5
Personnel Transition Agreement Section 2.2(b)
Post-Closing Environmental Matter Section 8.11
Pre-Closing Receivables Section 2.3
Products Article 11
Property Article 11
Purchaser Preamble
Purchaser Opinion Section 2.2(c)(iii)
Purchaser's Relief Section 3.20
Purchaser Transactional Warranty Section 8.6
Relevant Substance Section 3.14
Relief Section 3.20
Schemes Section 3.21
Security Interests Article 11
Seller Preamble
Seller Opinion Section 2.2(a)(xi)
Shares Preamble
Substitution Certificate Section 2.2(e)
Supply Agreement Section 2.2(b)
Shaw Preamble
Shaw Transactional Warranties Section 8.6
Subsidiary(ies) Section 3.3
Taxation Section 3.20
Taxation Authority Section 3.20
Taxes Act Section 3.21
TC&A Section 3.20
Threshold Amount Section 8.7(a)
Third Party Claim Section 8.1(f)
VATA Section 3.20
Vehicles Article 11
Warrantors Article 3
West Yorkshire Article 11
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<PAGE>
SHARE TRANSFER AGREEMENT
THIS SHARE TRANSFER AGREEMENT (the "Agreement") is made and entered into as
of April 3, 1998, by and among CARPET HOLDINGS LIMITED, a company registered in
England under number 3503892 whose registered office is at Toftshaw Lane,
Bradford BD4 6QW ("Purchaser"), SHAW INDUSTRIES, INC., a Georgia corporation
("Shaw") and SHAW UK HOLDINGS LIMITED, a company registered in England under
number 2579120 whose registered office is at Toftshaw Lane, Bradford BD4 6QW
("Seller").
A. Seller is a direct wholly-owned subsidiary of Shaw, and is the legal and
beneficial owner of all of the issued shares in the capital of Carpets
International (U.K.) Limited, a company registered in England under number
924669, whose registered office is at Toftshaw Lane, Bradford BD4 6QW ("CI") and
of all of the issued shares in the capital of Kosset Carpets Limited, a company
registered in England under number 2487464, whose registered office is at
Toftshaw Lane, Bradford BD4 6QW ("Kosset"). All such issued shares in the
capital of CI and Kosset are hereinafter referred to as the "Shares;" and CI and
Kosset are sometimes referred to herein collectively as the "Companies" and
individually as a "Company."
B. Prior to the date hereof, Shaw has caused Seller to acquire full legal
and beneficial ownership of one (1) nominee share in the capital of CI
previously registered in the joint names of Galetas Nominees Limited and Seller
such that on the date hereof all of the Shares are owned, both legally and
beneficially, by Seller, and Seller has caused CI to be re-registered prior to
the date hereof as a private limited company in accordance with Sections 53-55
of the Companies Act 1985 such that at the time immediately prior to the
execution of this Agreement CI is a private limited company.
C. CI is engaged in the manufacture and sale from premises throughout the
United Kingdom of tufted carpet.
D. The Shares are worthless and Seller desires to abandon the Shares to
Purchaser and Purchaser desires to receiver a transfer of the Shares on the
terms set forth in this Agreement.
E. Certain members of management of the Companies, including Ralph Boe,
Archie Barfield, Joe Williams, Rob Harding and Eddie Charlesworth ("Management")
have an equity and management interest in Purchaser and intend to continue to
operate the business of the Companies from and after the closing of the
transactions contemplated hereby.
F. Shaw and Seller will derive material benefit from the conveyance of the
Shares to Purchaser and are, therefore, willing to make certain representations
and warranties with respect to the business, properties, affairs and condition
(financial and otherwise) of the Companies and their respective subsidiary
undertakings and to agree to indemnify the Purchaser as herein provided in order
to induce the Purchaser to accept the conveyance of the Shares.
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants, and agreements contained herein, the parties hereto agree as follows:
ARTICLE 1
TRANSFER OF SHARES
1.1 Shares. At the Closing, on and subject to the terms and conditions of
this Agreement, Seller shall assign, transfer and deliver full legal and
beneficial interest in the Shares to Purchaser, and Purchaser shall accept and
receive the Shares from the Seller.
1.2 Consideration. Purchaser shall pay no consideration for the Shares.
1.3 No Liens, Etc. Purchaser shall acquire good title to the Shares free
from all charges, liens, encumbrances, equities and claims of any kind together
with all rights which now or at any time after the date of this Agreement may
become attached to them, including any dividend or other distribution declared,
paid, made or created after the date of this Agreement.
1.4 Pre-Emption Rights. The Seller hereby waives all rights of pre-emption
under the respective Articles of Association of each of the Companies or
otherwise in respect of the transfer of the Shares to Purchaser under this
<PAGE>
Agreement (or shall procure that all such rights are waived).
ARTICLE 2
THE CLOSING
2.1 Time and Place of Closing. The closing of the transfer and conveyance
contemplated by this Agreement (the "Closing") shall be held at the offices of
Eversheds, Cloth Hall Court, Infirmary Street, Leeds, England, commencing at
9:00 a.m. local time , on the date hereof (the "Closing Date"). Subject to the
consummation of the Closing on the Closing Date, the transfer and conveyance to
Purchaser of the Shares will be effective as of 12:01 a.m. (local time) on the
Closing Date.
2.2 Transactions at the Closing. At the Closing, each of the following
items shall be delivered or effected:
(a) Seller shall either deliver, or cause to be delivered, to Purchaser or,
with respect to items (v)-(vi), made available at the premises of CI, the
following:
(i) duly executed transfers of the Shares in favour of Purchaser (or
as it will direct) together with all relevant share certificates (or in the
case of any lost certificate an indemnity satisfactory to Purchaser in
relation to it) and together also with such waivers and consents as are
required for the consummation of the transactions contemplated by this
Agreement and to enable Purchaser to be registered as the holder of the
Shares;
(ii) written resignations from all directors and the secretary (with
the exception of Ralph J. Boe and Archie Barfield) of each Company and
Subsidiary other than West Yorkshire in substantially the form of Exhibit
A;
(iii) the written resignation of Arthur Andersen as auditors of each
Company and Subsidiary other than West Yorkshire accompanied by the
statement referred to in section 392 of the Companies Act 1985 in
substantially the form of Exhibit B;
(iv) the certificate of incorporation, any certificate(s) of
incorporation on change of name, the common seal and the statutory books
and registers (all entered up to date) of each Company and Subsidiary
(other than West Yorkshire);
(v) all deeds and documents relating to the title of any Companies or
any Subsidiary (other than West Yorkshire to the Property);
(vi) all papers, books, records, keys, credit cards and other property
(if any) of each Company and Subsidiary which are in the possession or
under the control of Seller or any other person who resigns as an officer
of either Company or any Subsidiary in accordance with Section 2.2(a)(ii);
(vii) duly executed powers of attorney in substantially the form of
Exhibit C;
(viii) the opinion of Powell, Goldstein, Frazer & Murphy, counsel to
Shaw and the Seller, in substantially the form of Exhibit D-1 hereto, and
the opinion of Garretts, special counsel to Shaw and the Seller, in
substantially the form of Exhibit D-2 hereto (collectively, the "Seller
Opinion");
(ix) confirmation from the Panel on Takeovers and Mergers that the
transactions contemplated by this Agreement do not fall within the ambit of
The City Code on Takeovers and Mergers;
(x) such other evidence as Purchaser or its counsel may reasonably
require of the performance of all covenants and agreements of the Seller
hereunder which are required by the terms hereof to be performed on or
prior to the Closing of this Agreement.
The documents and certificates to be delivered hereunder by or on behalf of the
Seller on the Closing Date shall be in form and substance reasonably
satisfactory to Purchaser and its counsel.
(b) Shaw shall execute and deliver to CI the Supply Agreement substantially
in the form of Exhibit E hereto (the "Supply Agreement"), the Personnel
Transition Agreement substantially in the form of Exhibit F (the "Personnel
Transition Agreement") and the Technology License Agreement substantially in the
form of Exhibit G hereto (the "License Agreement").
2
<PAGE>
(c) Purchaser shall deliver to Shaw and the Seller the following:
(i) the opinion of Alston & Bird LLP, counsel to Purchaser, in
substantially the form of Exhibit H-1 hereto, and the opinion of Eversheds,
special counsel to Purchaser substantially in the form of Exhibit H-2
hereto (collectively, the "Purchaser Opinion"); and
(ii) such other evidence as Shaw and the Seller or their counsel may
reasonably require of the performance of all covenants and agreements of
Purchaser hereunder which are required by the terms hereof to be performed
on or prior to the Closing.
The documents and certificates to be delivered hereunder by or on behalf of
Purchaser on the Closing Date shall be in form and substance reasonably
satisfactory to Shaw, the Seller and their counsel.
(d) Seller and Shaw shall cause CI to execute and deliver the Supply
Agreement, the Personnel Transition Agreement and the License Agreement.
(e) Seller and Shaw shall cause CI to execute and deliver to Shaw the
assignment in respect of the GHL Loan Agreement substantially in the form of
Exhibit I (the "Assignment"), the notice of resignation of CI as Security
Trustee in respect of the GHL Security Interests substantially in the form of
Exhibit J, the deed of adherence in respect of the GHL Security Trust Deed
substantially in the form of Exhibit K (the "Deed of Adherence"), the
substituting certificate substantially in the form of Exhibit L substituting
Shaw as Security Trustee in place of CI for the purposes of the GHL Security
Interests (the "Substitution Certificate), and the transfer of the GHL Loan
Notes in favor of Shaw substantially in the form of Exhibit M (the "Loan Note
Transfer").
(f) Seller and Shaw shall:
(i) repay, and shall procure that any company ("controlled company")
of which Seller and Shaw has control (as defined in section 840 Income and
Corporation Taxes Act 1988) will repay, all amounts owed by it to any
Company or Subsidiary, whether due for payment or not;
(ii) deliver to Purchaser a deed in substantially the form of Exhibit
N acknowledging that, except for amounts payable as provided in Section
2.5, neither Seller nor Shaw nor any such controlled company has any claim
against any Company or Subsidiary and that, except for the Supply
Agreement, the Guarantees not released as of the date hereof, the Personnel
Transition Agreement and the License Agreement, there is no agreement or
arrangement under which any Company or Subsidiary has any actual,
contingent or prospective obligation (including, but not limited to, any
obligation under any guarantee entered into by any Company or Subsidiary to
or in respect of any of them); and
(iii) in respect of any such agreement or arrangement as is referred
to in Section 2.2(f)(ii) which previously existed deliver to Purchaser
evidence of the release or termination of it in form satisfactory to
Purchaser.
(g) Seller will procure that duly convened meetings are held at which:
(i) the transfers referred to in Section 2.2(a)(i) (subject to
stamping if not previously effected) are approved for registration in the
books of the relevant Company;
(ii) the persons nominated by Purchaser shall be appointed as
additional directors of the Companies and Subsidiaries specified (subject
to any maximum number of directors imposed by the relevant articles of
association), and any person designated by Purchaser shall be appointed as
secretary of the Companies and Subsidiaries specified, and cause the
resignations referred to in Section 2.2(a)(ii) shall be accepted;
(iii) all existing instructions to the bankers of each Company and
Subsidiary (other than West Yorkshire) shall be revoked and new
instructions given to such bankers as Purchaser may nominate, in such form
as Purchaser directs; and
(iv) the resignations referred to in Section 2.2(a)(iii) shall be
accepted and Deloitte & Touche shall be appointed as auditors of each
Company and Subsidiary (other than West Yorkshire).
3
<PAGE>
2.3 Indemnification Regarding Accounts Receivable After Closing. For a
period commencing on the Closing Date and ending on the one hundred and
twentieth (120th) day thereafter (the "Collection Period"), Purchaser shall
cause the Companies to use their commercially reasonable best efforts to collect
the accounts receivable of the Companies in existence on the Closing Date (the
"Pre-Closing Receivables"). Any payment received by the Companies or Purchaser
from a customer who is obligated on a Pre-Closing Receivable shall be applied to
the Pre-Closing Receivables due from such customer in order of age with
applications made first to the oldest Pre-Closing Receivable then outstanding.
Companies and Purchaser shall not treat a Pre-Closing Receivable and a
subsequent accounts receivable from the same customer differently (for example,
forgiving or not collecting a Pre-Closing Receivable but collecting a
post-Closing receivable from the same customer). Further, if the Companies or
Purchaser choose to discount, forgive or write-off any portion of the
Pre-Closing Receivables, the amounts discounted, forgiven or written-off shall
be added to the reserve for doubtful accounts for purposes of determining the
purchase price of the Outstanding Receivables. Upon the expiration of the
Collection Period, Purchaser shall cause the Companies to deliver to the Seller
and Shaw copies of all invoices and records, if any, relating to the Pre-Closing
Receivables which have not been collected (the "Outstanding Receivables"), and
Shaw and Seller shall undertake to collect, as agent for the Companies, all of
such Outstanding Receivables. Upon such delivery of copies of the invoices
relating to the Outstanding Receivables, Shaw or Seller shall pay to Purchaser
an amount in pounds (the "Indemnity Payment") equal to (a) one hundred percent
(100%) of the face value of the Outstanding Receivables less any applicable VAT
on such Outstanding Receivables less (b) the aggregate amount of reserves for
doubtful accounts receivable on the Closing Date (increased by the amount of any
discount, forgiveness or write-off of or with respect to any Pre-Closing
Receivables as aforesaid) relating to the Outstanding Receivables. From and
after such time, Shaw or the Seller, as the case may be, may, as agent for the
Companies but at its own expense, pursue in a commercially reasonable manner the
collection of the Outstanding Receivables and following the succesful collection
of any such Oustanding Receivables Shaw or the Seller shall pay the collected
amount to Purchaser and Purchaser shall refund to Shaw or Seller, as the case
may be, by way of repayment of the Indemnity Payment, an amount equal to the
Outstanding Receivables so collected. After the Indemnity Payment to Purchaser
by Seller or Shaw, Purchaser and the Companies shall promptly pay over to the
Seller or Shaw, as the case may be, in cash by way of full or partial repayment
of the Indemnity Payment (as the case may be) any payments they receive with
respect to such Outstanding Receivables. Shaw and Seller shall indemnify and
hold harmless CI (which obligation shall not be subject to the limitations
contained in Sections 8.6 or 8.7 below) in the amount of any VAT on such
Outstanding Receivable that, after reasonable efforts by CI to obtain a refund
of or relief in respect of, has not been refunded to CI or in respect of which
relief has not been given by the taxing authorities less the aggregate amount of
reserves for irrecoverable VAT on the Closing Date relating to the Outstanding
Receivables.
2.4 Refinancing of Current Indebtedness and Release of Guarantees. The
parties contemplate that immediately following the Closing, CI shall (i)
refinance with Bank Boston, N.A. as lender and as agent for other lenders, CI's
current indebtedness (including accrued but unpaid interest, prepayment fees or
charges and principal) pursuant to that certain credit agreement dated September
13, 1996 relating to a multi-currency revolving credit facility of $125,000,000
(the "NationsBank Facility") and in connection with such refinancing will
procure the release and termination, effective as of the Closing, of any
guarantee by Shaw or any Affiliate of Shaw of any indebtedness of CI under the
NationsBank Facility, and (ii) at or as soon as reasonably practicable after the
Closing, use its commercially reasonable endeavors to procure the release of
Shaw or any Affiliate of Shaw from all securities, guarantees, performance bonds
and indemnities given by or binding upon Shaw or any Affiliate of Shaw in
relation to any debt or obligation of either of the Companies or any of the
Subsidiaries, including, but without limiting the generality of the foregoing,
the guarantees or indemnities identified in Schedule 2.4 (the guarantee by Shaw
and any Affiliate of Shaw of the NationsBank Facility and the guarantees
referred to in subpart (ii) of this Section 2.4 are hereinafter referred to as
the "Guarantees").
2.5 Payment of Amounts Due to Shaw. Following the Closing, Purchaser shall
procure that CI will pay to Shaw the amount owed by CI to Shaw on the Closing
Date for the purchase of goods and services, net of all amounts payable as of
the Closing Date by Shaw to the Companies or the Subsidiaries (which net amount,
the parties agree, was approximately 3,904,375 pound sterling at February 28,
1998); provided, however, such net amount shall be payable in monthly
installments, without interest, of 100,000 pound sterling each (other than the
final installment which shall be in such amount less the 100,000 pound sterling
as shall be remaining) payable on or prior to the tenth day of each calendar
month commencing with the first calendar month occurring after the Closing and
continuing thereafter until such amount shall be paid in full. In the event any
installment is not paid within thirty (30) days after written notice of default
from Shaw to CI, Shaw shall have the right to accelerate the payment of all
unpaid installments of such net amount.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SHAW AND THE SELLER
Shaw and the Seller (collectively, the "Warrantors"), jointly and
severally, hereby represent and warrant to Purchaser as at the date hereof that,
except as fairly and clearly set forth in the general disclosures in Schedule
3.0:
3.1 Organization and Qualification.
(a) Each Company is a corporation duly organized and validly existing
under the laws of England and Wales and does not have any permanent
business establishment outside the United Kingdom. Schedule 3.1 hereto
contains with respect to each Company the address of such Company's
registered office.
(b) Except as set forth on Schedule 3.1;
(i) compliance has been made in all material respects with all
Laws or Legal Requirements in connection with the formation of each
Company and Subsidiary and all issues and grants of shares,
debentures, notes, mortgages or other securities of each Company and
Subsidiary;
(ii) the copies of the Memorandum and Articles of Association of
each Company which are attached to and a part of Schedule 3.1 are true
and accurate and include copies of all such amending resolutions and
agreements as have been or ought to have been filed with the Register
of Companies. Since January 1, 1997, neither Company nor any
Subsidiary nor any class of any of their members has passed any other
resolution (except for resolutions relating to business at annual
general meetings which was not special business);
(iii) all returns, particulars, resolutions and other documents
required to be filed with or delivered to the Registrar of Companies
by each Company and Subsidiary or any of their officers have been
correctly and properly prepared in all material respects and so filed
and delivered, and no such returns, particulars, resolutions or other
documents have been so filed or delivered during the period of
twenty-one (21) days ending with the date of this Agreement;
(iv) No notice or allegation that any of the statutory books
(including all registers and minutes books) of each Company and
Subsidiary is incorrect or should be rectified has been received by
the Warrantors; and
(v) So far as the Warrantors are aware none of the activities of
either Company or any Subsidiary is ultra vires either Company or any
Subsidiary.
3.2 Authority. Each of Shaw and the Seller has full power and authority to
enter into this Agreement and the agreements to which it is a party contemplated
hereby, or executed in connection herewith (collectively, this Agreement, the
Supply Agreement, the Personnel Transition Agreement, the License Agreement and
all other documents or agreements to be executed in connection herewith shall be
referred to hereinafter as the "Acquisition Documents"), and to consummate the
transactions contemplated hereby and thereby. The execution, delivery and
performance by each of Shaw and the Seller of each of the Acquisition Documents
to which it is a party have been duly and validly authorized and approved by all
necessary corporate or other action on the part of Shaw or the Seller, as the
case may be. Each of the Acquisition Documents to which Shaw or the Seller is a
party is the legal, valid, and binding obligation of Shaw or the Seller, as the
case may be, enforceable against Shaw or the Seller, as the case may be, in
accordance with its terms, except as enforceability may be limited by applicable
equitable principles (whether applied in a proceeding at law or in equity) or by
bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting
creditors' rights generally, to the exercise of judicial discretion in
accordance with general equitable principles, and to equitable defenses that may
be applied to the remedy of specific performance. Neither the execution,
delivery or performance by Shaw or the Seller of any of the Acquisition
Documents to which Shaw or the Seller is a party, nor the consummation by Shaw
or the Seller of the transactions contemplated thereby will (i) as to Shaw
violate its Articles of Incorporation or Bylaws or as to the Seller, violate or
is ultra vires its Memorandum or Articles of Association, (ii) violate any Legal
Requirement to which Shaw is subject or any Laws to which the Seller, is
subject, and in any case by which any of its assets may be bound, (iii) conflict
with, result in a breach of, or constitute a default under any indenture,
encumbrance, charge, option, mortgage, lease, agreement, or other instrument to
which Shaw or the Seller, is a party or by which either of them or their
respective assets may be bound, or (iv) result in the creation of any lien,
mortgage, option, charge, or encumbrance upon the Shares.
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3.3 Subsidiaries.
(a) Except as shown on Schedule 3.3, neither Company has any
proprietary interest, in any body corporate, unincorporated association,
trust, partnership, joint venture or other legal entity, and has not
entered into or offered to enter into any agreement to acquire any such
interest. Each of the entities listed on Schedule 3.3 (other than West
Yorkshire) is herein referred to as a "Subsidiary" and all such entities
are referred to collectively as the "Subsidiaries."
(b) Each Subsidiary is a corporation duly organized and validly
existing under the laws of England and Wales and does not have any
permanent business establishment outside the United Kingdom. Schedule 3.3
contains with respect to each Subsidiary the address of its registered
office.
(c) True and accurate details of the authorized and issued share
capital and the registered and beneficial holders of such issued share
capital of each Subsidiary (other than West Yorkshire) appear in Schedule
3.3. All shares in the capital of each Subsidiary (other than West
Yorkshire) issued and outstanding on the date hereof as shown in Schedule
3.3 are in issue fully paid and are legally and beneficially owned by and
registered in the Company whose name is set forth opposite the name of such
Subsidiary on Schedule 3.3, free from any encumbrance, equity or third
party right (including but not limited to any mortgage, charge, pledge,
option or lien), from any Contract to grant any of the same and from any
claim to any of the same. None of the Subsidiaries has allotted or issued
any share capital other than the shares shown in Schedule 3.3 as being
issued. None of the Subsidiaries has any interest in the share capital of
any body corporate, unincorporated association, trust, partnership, joint
venture or other legal entity, and has not entered into or offered to enter
into any agreement to acquire any such interest.
(d) There are (i) no outstanding options, warrants, agreements, calls,
conversion rights, exchange rights, pre-emptive rights (other than under
the respective Subsidiaries' Articles of Association referred to in Section
3.3 above or Section 89 the Companies Act of 1985) or other rights to
subscribe for, purchase or otherwise acquire, or any other agreements or
commitments of any character relating to the sale, issuance or voting of,
any shares in the capital of any Subsidiary, whether issued or unissued, or
any securities of any Subsidiary, and (ii) no existing agreements, options,
commitments or rights with, of or to any person to acquire any of the
issued shares of any Subsidiary.
(e) CI is the owner of 71 of the 100 shares in the capital of West
Yorkshire that are issued, with the remaining 29 of such shares being
owned, to the Knowledge of the Warrantors, by the other tenants of the West
Yorkshire Industrial Estate.
(f) Each Subsidiary (other than West Yorkshire, Abingdon Inc. and
Oxford Textile Mills Incorporated) has ceased all trading activity and is
dormant as defined in Section 250(3) of the Companies Act 1985 and has
passed a dormant company resolution pursuant to Section 250 of the
Companies Act 1985, which remains in full force and effect, and has filed
such resolution with the Registrar of Companies. To the Knowledge of the
Warrantors, the only business in which West Yorkshire is engaged is the
management of the West Yorkshire Industrial Estate, Toftshaw Lane,
Bradford. None of the Subsidiaries has any assets or liabilities (including
contingent liabilities) except as expressly included in, provided for or
noted in the Accounts of each such Subsidiary.
3.4 Capitalization. True and accurate details of the authorized and issued
share capital and the registered and beneficial holders of such issued share
capital of each of CI and Kosset appear in Schedule 3.4. The Shares shown in
Schedule 3.4 are in issue fully paid and are legally and beneficially owned by
and registered in the name of Seller, free from any encumbrance, equity or third
party right (including but not limited to any mortgage, charge, pledge, option
or lien), from any Contract to grant any of the same and from any claim to any
of the same. Except for the Subsidiaries, neither Company has allotted or issued
any share capital other than the shares shown in Schedule 3.4 as being issued.
Neither Company has any interest in any body corporate, unincorporated
association, trust, partnership, joint venture or other legal entity, and has
not entered into or offered to enter into any agreement to acquire any such
interest.
3.5 Options and Other Rights. There are (a) no outstanding options,
warrants, agreements, calls, conversion rights, exchange rights, pre-emptive
rights (other than under the respective Companies' Articles of Association
referred to in Section 3.1(b)(ii) above or Section 89 the Companies Act of 1985)
or other rights to subscribe for, purchase or otherwise acquire, or any other
agreements or commitments of any character relating to the sale, issuance or
voting of, any shares in the capital of either Company, whether issued or
unissued, or any securities convertible into or evidencing the right to purchase
any shares in the capital of either Company, and (b) no existing agreements,
options, commitments or rights with, of or to any person to acquire any of the
Shares of either Company.
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3.6 Financial Statements. Shaw and Seller have furnished to Purchaser the
unaudited financial statements of CI for the fiscal year ended January 3, 1998
and the unaudited interim financial statements of CI for the period January 4,
1998 to March 7, 1998 (collectively, the "Financial Statements") which are
attached to and a part of Schedule 3.6. The Financial Statements have been
prepared from the books and records of the Companies in accordance with the past
accounting practices of the Companies consistently applied. Neither Company has
received any advice or notification from its independent auditors that such
Company or any of its Subsidiaries has used any improper accounting practice
that would have the effect of not reflecting or incorrectly reflecting (in
either case to a material extent) in the Financial Statements or the books and
records, any properties, assets, liabilities, revenues, or expenses. The books,
records, and accounts (including the Financial Statements) of each Company
accurately and fairly reflect, in reasonable detail, the transactions and the
assets and liabilities of such Company together with the results of operation of
the Companies.
3.7 The Accounts.
(a) The Accounts of each Company and Subsidiary (true copies of which
are attached to Schedule 3.7):
(i) comply with the requirements of the Companies Act 1985;
(ii) have been prepared in accordance with the historical cost
convention, with all applicable Accounting Standards and (to the
extent that no Accounting Standard is applicable) with accounting
principles and practices generally accepted in the United Kingdom;
(iii) have been prepared on bases and principles which are
consistent with those used in the preparation of the audited statutory
accounts of each such Company and Subsidiary for the three (3)
financial years immediately preceding that which ended on the
Accounting Date;
(iv) show a true and fair view of the state of affairs of each
Company and Subsidiary as at the Accounting Date and of the results of
each Company and Subsidiary for the financial year ended on that date;
and
(v) (to the extent to which they are prepared on a consolidated
basis) show a true and fair view of the state of affairs of the
Companies and the Subsidiaries taken as a whole as at the Accounting
Date and the results of operations of the Companies and the
Subsidiaries taken as a whole for the financial year ended on that
date.
(b) True copies of the Accounts and of the audited accounts for each
financial year of each Company and Subsidiary preceding that which ended on
the Accounting Date have been delivered to the Registrar of Companies in
compliance with the Companies Act 1985, and the auditors' reports thereon
were unqualified.
3.8 Inventories. All Inventory reflected in the Financial Statements as
owned by CI or subsequently acquired (a) is now and at the Closing Date will be
located on the Property consistent with past practices, (b) has been or will be
acquired by a Company or a Subsidiary only in bona fide transactions entered
into in the ordinary course of business, (c) is of good and merchantable quality
except to the extent adequately reserved for in the Financial Statements,
consistent with past practice, (d) is not now and at the Closing Date will not
be subject to any write-down or write-off in excess of the reserves established
based on past practice, and (e) is valued at the lesser of cost or net
realizable market value, with appropriate adjustments for stale and slow moving
inventory. Except as described in Schedule 3.8 and except for Permitted Security
Interests, each of the Companies now has and on the Closing Date will have valid
legal title to its Inventory reflected in the Financial Statements as owned by
CI free and clear of any consignments, liens, claims, charges, and encumbrances.
Neither of the Companies nor any Subsidiary is under any liability or obligation
with respect to the return of inventory in the possession of wholesalers,
retailers, or other customers which is not reserved against in the Financial
Statements.
3.9 Personal Property.
(a) Schedule 3.9.1 contains a list that is true and correct in all
material respects and a description (including serial number, vehicle
registration, and tag number) of all Vehicles which are owned by a Company
or a Subsidiary. Schedule 3.9.2 contains a list that is true and correct in
all material aspect of all Equipment (excluding items of Equipment having a
value of less than 500 pound sterling individually ) which is owned by a
Company or a Subsidiary. Schedule 3.9.3 contains a list that is true and
correct in all
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material respects of all Furniture and Fixtures and all other items of
personal property (excluding items of Furniture and Fixtures and other
personal property having a value of less than 500 pound sterling
individually) which is owned by a Company or a Subsidiary. Subject to any
Permitted Security Interests, each Company or Subsidiary has good title to
all of the respective Furniture and Fixtures, Equipment, Vehicles, and
other items of personal property included among its assets that are owned
by it and which individually or collectively are material to the continued
operation of the businesses of the Companies and the Subsidiaries in the
ordinary and normal course (whether or not disclosed in Schedules 3.9.1,
3.9.2, or 3.9.3), free and clear of all liens, claims, charges, security
interests, equity or third party rights (including, but not limited to, any
mortgage, charge, pledge, option or lien from any Contract to grant any of
the same and from any claim to the same and other encumbrances of any kind
and of any nature, except as disclosed on Schedule 3.9.4.
(b) Each asset reflected in the Accounts (except for current assets
disposed of by the Companies and any of the Subsidiaries in the ordinary
course of their business since the Accounting Date) and each asset treated
as such an asset of the Companies and Subsidiaries as of the date hereof is
in the legal and beneficial ownership of such Company or Subsidiary and in
its possession or under its control.
(c) The Equipment, Vehicles and Furniture and Fixtures and other
equipment used in connection with the business of the Companies and
Subsidiaries is in a good and safe state of repair and condition and
satisfactory working order and have been regularly maintained to a good
technical standard and in accordance with safety regulations usually
observed in relation to them, except where the failure to be in good and
safe state of repair and condition and satisfactory working order or to be
so maintained would not have a Material Adverse Effect.
(d) Schedule 3.9.5 contains a list and/or copies of all leases for
Vehicles, Equipment, Furniture and Fixtures, or other items of personal
property leased by either Company or a Subsidiary (except miscellaneous
leases each having a value, if capitalized, of less than 500 pound
sterling). Accurate copies of each lease listed on Schedule 3.9.5 and all
amendments, extensions, and renewals thereof are attached thereto. Each of
the leases described on Schedule 3.9.5 is in full force and effect and
there are no existing defaults or events of default, real or claimed, or
events which with notice or lapse of time or both would constitute
defaults, the consequences of which, severally or in the aggregate, would
have a Material Adverse Effect. No rights of either Company or any
Subsidiary under any such leases to which it is a party have been assigned
or otherwise transferred as security for any obligation of such Company or
any Subsidiary.
3.10 Real Property.
(a) The particulars of the Property shown in Schedule 3.10.1
(including in the case of registered land the class of title and title
number) are true, complete and correct. The Companies have no other
interest in any real property and do not occupy any other real property.
(b) The Companies have exclusive occupation and possession of all
Property, free from any encumbrance, sublease, tenancy or right of
occupation in favour of any third party save as set out in Schedule 3.10.1.
(c) Each Property is in a good condition and state of repair (except
where the failure to be in good condition or state of repair would not have
a Material Adverse Effect) and is in all material respects fit for the
purpose for which it is at present used.
(d) All buildings forming part of the Property have been occupied
(within the meaning of section 65(2) Local Government Finance Act 1988)
continuously for at least the last six months and used for the purpose for
which they were constructed or have been adapted.
(e) So far as the Warrantors are aware, the Companies have no existing
or contingent liabilities in respect of any property previously occupied by
them or in which they owned or held any interest, including, without
limitation, leasehold premises assigned or otherwise disposed of.
(f) All written replies by or on behalf of the Companies and the
Subsidiaries to enquiries relating to each Property made by or on behalf of
Purchaser, and all oral replies supplemental thereto, were when given and
are now true and correct in all material respects and did not omit to state
any fact necessary in order to make the statements contained therein not
misleading. For purposes of sub-section 3.10(f), "Losses" (under Article 8
hereof) shall mean and be limited to any dimunition in the value of the
Property to which the information relates on a current use basis.
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3.11 Contracts.
(a) Schedule 3.11.1 contains a true and correct list of all Contracts
to which a Company or a Subsidiary is a party or subject to (or has agreed
in principle or made any offer or entered any negotiations to enter into)
not otherwise listed on Schedules 3.9.5, 3.10.3, 3.12, 3.13, 3.18, together
with a true and correct copy (and, if oral, a description) of each Contract
(other than Real Property Leases, personal property leases, and orders
received in the ordinary course of business for the purchase of the
Company's products) that:
(i) both cannot be terminated without any penalty or premium by
the Company or Subsidiary that is a party thereto on notice of thirty
(30) days or less and that involve or could involve an aggregate
consideration payable by or to any Company or Subsidiary that is in
excess of 25,000 pound sterling;
(ii) is between a Company or a Subsidiary and any officer,
shareholder, director, employee, or affiliate of Shaw, the Seller, a
Company or a Subsidiary;
(iii) is a distribution, dealer, representative, franchisor or
sales agency agreement, contract, or commitment;
(iv) is a lease under which a Company or a Subsidiary is lessor
relating to the assets of such Company or Subsidiary or any property
at which assets of such Company or Subsidiary are located;
(v) is a note, debenture, bond, equipment trust agreement, letter
of credit agreement, loan agreement, overdraft financial facility or
other contract or commitment for the borrowing or lending of money or
agreement or arrangement for a line of credit or guarantee, pledge, or
undertaking of the indebtedness of any other person;
(vi) is an agreement, contract, or commitment limiting or
restraining the freedom of a Company or a Subsidiary from engaging or
competing in any manner or in any business;
(vii) is a material agreement, contract, or commitment not made
in the ordinary course of business;
(viii) involves Intellectual Property rights licensing, marketing
rights, information sharing, manufacturing rights;
(ix) pursuant to which the Company or any Subsidiary is engaged
in a partnership, joint venture, consortium, joint development,
shareholders or similar arrangements;
(x) is for the supply of goods by either Company or any
Subsidiary on a sale or return basis or on a consignment inventory
basis;
(xi) for the supply of goods and/or services by or to either
Company or any Subsidiary on terms under which retrospective or future
discounts, price reductions or other financial incentives are given by
or to either Company or any Subsidiary dependent on the level of
purchases or any other factor and which involves a discount, price
reduction, or financial incentive not granted in the ordinary course
of business;
(xii) is for the supply of goods and/or services by either
Company or any Subsidiary which is not on the current standard terms
and conditions of supply, copies of which are attached in Schedule
3.11.2;
(xiii) involves conditions, warranties, indemnities or
representations given in connection with a sale of shares or assets
other than the sale of assets in the ordinary course of business, or
is a guarantee or indemnity in respect of the obligations of a third
party under which any material liability or contingent liability is
outstanding.
(xiv) to the Knowledge of the Warrantors, includes a term which
is not, or may not be, binding on either Company or any Subsidiary or
any other party in consequence of the Unfair Terms in Consumer
Contracts Regulations 1994; or
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(xv) is not on arm's length terms.
(b) Schedule 3.11.4 contains a true and correct list of all
commitments of each Company and Subsidiary for capital expenditures that
have been approved or made prior to the date of this Agreement in excess of
25,000 pound sterling and that remain outstanding as of the date hereof.
(c) Except as indicated on Schedule 3.16, there exists no actual or,
to the Knowledge of the Warrantors, any threatened breach, repudiation,
rescission, avoidance, termination, cancellation, or limitation of, or any
amendment, modification, or change to any Contract, which would have a
Material Adverse Effect.
(d) No Company or Subsidiary has delegated any power under power of
attorney of any person (as agent or otherwise) to bind or commit such
Company or Subsidiary, its business or such Company's or Subsidiary's
assets.
3.12 Intellectual Property.
(a) Schedule 3.12 contains a true and accurate list of all registered
Intellectual Property owned by Company or Subsidiary or which a Company or
a Subsidiary has the right to use in the conduct of its business,
containing a brief description of each such item of Intellectual Property
and the nature of such Company's or Subsidiary's interest therein. All of
the registered Intellectual Property listed on Schedule 3.12 is registered
solely in the name of a Company or a Subsidiary. Except as set forth in
Schedule 3.12, in the case of those of the Companies' and the Subsidiaries'
Intellectual Property rights that are registered, all renewal fees and
costs and charges in respect thereof have been duly paid in full and the
Warrantors have not received any written notice alleging that a basis
exists for the cancellation, rectification or any other modification of any
such registration. All Know-How that is material to the conduct of the
business as presently carried on by the Companies and the Subsidiaries is
in the possession of the Companies or the Subsidiaries and, so far as the
Warrantors are aware, the Companies and the Subsidiaries have the free
right to use the same without restriction.
(b) Except as shown on Schedule 3.12, none of the agreements pursuant
to which the Company has a license or right to use Intellectual Property
requires, and the processes employed and the products and services
currently dealt in or used by the Companies and the Subsidiaries do not
require (contingently or otherwise), the payment by any of the Companies or
the Subsidiaries of any royalty or of any sum in the nature of a royalty or
to liability to pay compensation under sections 40 and 41 Patents Act 1977.
No such royalties are unpaid or owing with respect to any such agreements.
(c) True and correct copies of all written agreements pursuant to
which either Company or any Subsidiary has any license or right to use any
Intellectual Property which is material to the business carried on by the
Companies and the Subsidiaries taken as a whole, are attached to Schedule
3.12. All such agreements are in full force and effect and, to the
Knowledge of the Warrantors there are no existing defaults or events of
default, real or claimed, or events which with or without notice or lapse
of time or both would constitute defaults under such agreements that would
give the non-defaulting party a right to terminate such agreement or a
right to receive any payment pursuant to such agreement.
(d) No written notice of any pending claim has been received by the
Companies or the Subsidiaries and to the Knowledge of the Warrantors, no
claim is threatened, which alleges that any Intellectual Property owned by
or licensed to either Company or any Subsidiary or which such Company or
Subsidiary otherwise has the right to use is invalid or unenforceable by
such Company or Subsidiary, nor are the Warrantors aware of any such claim
that is unasserted, but the assertion of which is probable. No written
notice of any pending claim has been received by the Companies or the
Subsidiaries and to the Knowledge of the Warrantors, no claim is threatened
which alleges that the manufacture, use, or sale by either Company or any
Subsidiary of its products, or any component or part thereof, or any
manufacturing operation or machinery employed by such Company or Subsidiary
nor the use by either Company or any Subsidiary of any Intellectual
Property violates or infringes upon any claims of any Intellectual Property
owned by any third party or the rights of any third party.
(e) To the Knowledge of the Warrantors, the design of such of the
Products as are manufactured by the Companies and the Subsidiaries and
which are material to the conduct of the business as presently carried on
by the Companies and the Subsidiaries were developed by employees of the
Companies or the Subsidiaries under contracts of employment which provide
for the waiver of each employee's moral rights and for ownership of any
Intellectual Property in the Products to vest in and belong to such Company
or the Subsidiary. To the Knowledge of the Warrantors, no employee,
consultant or former employee or any other third party has made or
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threatened to make any claim against either of the Companies or any of the
Subsidiaries that any Intellectual Property in a Product created or
developed by such Company or Subsidiary is not beneficially and legally
owned by such Company or Subsidiary.
3.13 Insurance.
(a) Each Company and Subsidiary and all of their respective assets are
and have at all relevant times been insured in such amounts and against
fire and other risks which would be reasonable for entities under the
ultimate ownership of Shaw and engaged in business of the type in which
such Company or Subsidiary is engaged. Set forth in Schedule 3.13 is an
accurate schedule of all insurance policies of the Companies and the
Subsidiaries in force on the date hereof, together with a statement of the
aggregate amount of claims paid out in the last three (3) years, and claims
pending or outstanding, under each such policy through the date hereof.
Neither Shaw, the Seller, either Company or any Subsidiary has received in
the last three (3) years any notice of cancellation or non-renewal of any
such policy, nor during such period has Shaw, the Seller, either Company or
any Subsidiary received any notice from any insurance carrier that any
premiums for insurance maintained by or for either Company or any
Subsidiary will be increased in the future disproportionately to increases
in the cost of insurance generally or that any insurance coverage presently
provided for will not be available to the Companies or the Subsidiaries in
the future on substantially the same terms as now in effect. No Company or
Subsidiary in the last three (3) years has been refused any insurance by
any insurance carrier to which it has applied for insurance or with which
it has carried insurance during the past three (3) years. There are no
outstanding requirements or recommendations by any current insurer or
underwriter of either Company or any Subsidiary which require or recommend
changes in the conduct of the business conducted by such Company or
Subsidiary, or require any repairs or other work to be done with respect to
any of such Company's or Subsidiary's assets or operations.
(b) To the Knowledge of the Warrantors, except as set forth on
Schedule 3.13, there are no circumstances likely to give rise to a material
claim of loss under any policy listed on such Schedule.
3.14 Environmental Matters.
(a) In this Section the following expressions shall have the following
respective meanings:
"EA Provisions" means Part II, paragraphs 162 and 162 of Schedule 22
of the Environment Act 1995 and the first complete set of regulations and
guidance under those provisions.
"Environmental Laws" means in relation to Environmental Activity , all
or any relevant statutes, including, but without prejudice to the
generality of the foregoing the Environmental Protection Act 1990, the
Water Resources Act 1991, the Water Industry Act 1991 and the Environment
Act 1995, all or any common law, regulations, statutory instruments,
treaties, directives, bye-laws, order or injunctions of any governmental
authority or agency or any regulatory body of or in any jurisdiction of the
European Community in force at the date of this Agreement and which are
applicable or capable of application to the Companies or the Subsidiaries
as at the date of this Agreement provided that the EA Provisions shall be
deemed to be in force at such date for the purposes of this Section;
"Environmental Activity" means any of the following:
(i) any release, emission, entry or introduction into the
environment of any Relevant Substance (as hereinafter defined);
(ii) any deposit, disposal, keeping or treatment of any Relevant
Substance or any importation, exportation, transportation, handling,
processing, manufacture, collection, sorting or presence of any
Relevant Substance;
(iii) nuisance, noise, the conservation, preservation or
protection of the environment or of man or of any living organism
supported by the environment or any other matter whatsoever affecting
the environment or any part of aspect of it;
and so that "environment" and "release" have the respective meanings
ascribed thereto by the Environmental Protection Act 1990;
"Relevant Substance" means any hazardous, dangerous, toxic, poisonous,
noxious, radioactive, flammable, explosive, infectious or polluting
substance, including (without limitation) any substance included under or
regulated by any Environmental Laws relating to matters within the scope of
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the definition of Environmental Activity which has or might be capable of
having an adverse impact on man and/or the environment.
(b) Except as set forth on Schedule 3.14, in relation to the Companies
and the Subsidiaries, to the Knowledge of the Warrantors:
(i) each Company and each Subsidiary, complies and has at all
times complied with all Environmental Laws relating to its respective
properties and business or any part thereof since September 1, 1993;
(ii) each Company and each Subsidiary has obtained and maintained
in full force and effect all relevant licenses, consents,
authorizations and approvals required under any Environmental Laws for
the conduct of the business as presently carried on by the Companies
and the Subsidiaries (the "Environmental Permits"). Schedule 3.14
contains a complete list of such Environmental Permits; and
(iii) each Company complies and has complied with all notices,
orders or requirements relating to such Environmental Permits and all
conditions of or subject to which any of them may have been issued and
is not required to incur any financial commitment or take any other
action in order to maintain them in full force and effect.
(c) Except as set forth on Schedule 3.14 no actions, proceedings,
claims, or investigations, and no notices of suspension or prohibition of
any activity are pending or to the Knowledge of the Warrantors have been
threatened against either Company or any Subsidiary or any of their
respective officers, employees or agents under any Environmental Laws, and
neither of the Warrantors has any reason to believe that either Company or
any Subsidiary has or is likely to have any liability in relation to any
Environmental Activity relating to the its respective Properties or
business or any part thereof as the same is presently conducted .
(d) Except as set forth on Schedule 3.14, no Company or Subsidiary or,
to the Knowledge of the Warrantors , any third party is carrying out or has
carried out any Environmental Activity on any real property owned by or
leased to a Company or a Subsidiary or as part of the business of either
Company or any Subsidiary which results, has resulted in or could result
in:
(i) either Company or any Subsidiary being held liable by any
governmental authority to carry out remedial work under any
Environmental Laws;
(ii) the creation of any trade effluent or commercial or
industrial waste requiring disposal or which has been disposed of in
breach of any Environmental Laws; or
(iii) the emission of any Relevant Substance into the air which
is not the subject of an Environmental Permit.
(e) Except as set forth on Schedule 3.14, to the Knowledge of the
Warrantors there are no storage tanks (above or below ground) on any of the
real property owned or leased by either Company or any Subsidiary or any
part thereof.
(f) Except as set forth on Schedule 3.14, to the Knowledge of the
Warrantors no Relevant Substance has been deposited, disposed of, kept,
treated, imported, exported, transported, processed, manufactured,
collected, sorted or produced by either Company or any Subsidiary on any
real property owned or leased by either Company or any Subsidiary.
(g) Except as set forth on Schedule 3.14, to the Knowledge of the
Warrantors no lien has arisen on any of the properties or assets of either
Company or any Subsidiary under or as a result of any Environmental Laws.
(h) Except as identified in Schedule 3.14, with respect to the real
property owned or leased by either Company or any Subsidiary no audit or
other investigation has been conducted as to environmental matters at any
of such property by any private party during the period which such property
has been owned, leased or used by either Company or any Subsidiary.
(i) Except as set forth in Schedule 3.14, to the Knowledge of the
Warrantors each of the Companies have at all times complied with all
applicable laws relating to employee health and safety; and no Company or
Subsidiary has received any notice that past or present conditions on any
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of the real property owned or leased by either Company or any Subsidiary
violate any applicable legal requirements or otherwise can be made the
basis of any claim, citations, proceeding, or investigation, based on or
related to violations of employee health and safety requirements.
(j) Each Company and Subsidiary employs a safety officer to ensure the
safe operation of the business.
(k) Except as set forth on Schedule 3.14, to the best Knowledge of the
Warrantors, in the three (3) years preceding the Closing Date there have
been no shut down of any of the plants operated by either Company or any
Subsidiary as a result of any Environmental Activity at any of such plants,
and during such period there have been no prosecutions of either Company or
any Subsidiary or any third party in respect of the business conducted by
the Companies and the Subsidiaries whether in respect of their respective
operation or the products produced or sold by them.
3.15 Litigation. Except as listed and briefly described on Schedule 3.15,
neither Company nor any Subsidiary is involved (whether as plaintiff, defendant
or any other party) in any civil, criminal, tribunal or arbitration proceedings
where the amount in issue is or may exceed 25,000 pound sterling and no such
proceedings are pending, or, to the Knowledge of the Warrantors, threatened by
or against either Company or any Subsidiary, and there are no facts known to the
Warrantors that are considered by the Warrantors to be likely to give rise to
any such proceedings. There is no unsatisfied judgment or unfulfilled order
outstanding against either Company or any Subsidiary and neither Company nor any
Subsidiary is a party to any undertaking or assurance given to a court, tribunal
or any other person in connection with the determination or settlement of any
claim or proceedings where the amount in issue is or may exceed 25,000 pound
sterling .
3.16 Absence of Changes. Except as set forth on Schedule 3.16 or on the
Financial Statements since December 31, 1997, there has not been any transaction
or occurrence in which either Company or any Subsidiary has:
(a) suffered any change in its business, operations, condition
(financial, trading or otherwise), liabilities (actual or contingent),
assets, margins of profitability (direct or indirect) or earnings nor has
there been any event which has had or may reasonably be expected to have a
material adverse effect on any of the foregoing which has or will have a
Material Adverse Effect;
(b) incurred any material obligations or liabilities of any nature
other than items incurred in the regular and ordinary course of business
consistent with past practice, or increased (or experienced any change in
the assumptions underlying or the methods of calculating) any bad debt,
contingency, or other reserve, other than in the ordinary course of
business consistent with past practice;
(c) paid, discharged, or satisfied any claim, lien, encumbrance,
obligation, or liability (whether absolute, accrued, contingent, and
whether due or to become due), other than the payment, discharge, or
satisfaction thereof in the ordinary course of business consistent with
past practice;
(d) permitted, allowed, or suffered any of its properties or assets to
be subjected to any mortgage, pledge, lien, encumbrance, restriction, or
charge of any kind, other than Permitted Security Interests;
(e) written down or written up the value of any Inventory (including
write-downs by reason of shrinkage or markdowns), determined as collectible
any accounts receivable or any portion thereof which were previously
considered uncollectible, or written off as uncollectible any accounts
receivable or any portion thereof, except for write-downs, write-ups, and
write-offs in the ordinary course of business consistent with past
practice;
(f) canceled any debts or waived any claims or rights in excess of
5,000 pound sterling individually or 25,000 pound sterling in the
aggregate;
(g) disposed of or permitted to lapse any right to material
Intellectual Property of either Company or any Subsidiary or disposed of or
disclosed to any person not authorized to have such information any
material Intellectual Property of either Company or any Subsidiary not
previously a matter of public knowledge or existing in the public domain;
(h) except for the capital expenditure commitments described on
Schedule 3.11.4, made any significant capital expenditure or commitment for
additions to property, plant, equipment, intangible, or capital assets or
for any other purpose, other than for emergency repairs or replacement;
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(i) made any material change in any method of accounting or accounting
principle, practice, or policy;
(j) acquired other than in the ordinary course of business consistent
with past practices any property or asset having a value in excess of
25,000 pound sterling;
(k) disposed of other than in the ordinary course of business
consistent with past practice any property or asset having a value in
excess of 25,000 pound sterling;
(l) except with respect to sums outstanding in the ordinary course of
business in relation to customers, made any loan to any third party
(including Shaw or any Affiliate thereof) which has not been repaid in
full, or guaranteed the indebtedness of any third party (including Shaw or
any Affiliate thereof);
(m) borrowed or raised any money or taken up any financial facilities
except under existing credit facilities;
(n) declared, paid or made any dividend or other payment which is, or
could be treated as, a distribution for the purposes of Part VI Income and
Corporation Taxes Act 1988 or section 418 Income and Corporation Taxes Act
1988;
(o) passed any resolution of its shareholders except in connection
with the transactions contemplated by this Agreement;
(p) changed its accounting reference date;
(q) had any management or similar charge become payable or has paid
any such charge to Shaw or Seller;
(r) taken any other action neither in the ordinary course of business
and consistent with past practice that has had or is reasonably likely to
have a Material Adverse Effect nor provided for in this Agreement; or
(s) agreed, so as to be legally bound, whether in writing or
otherwise, to take any of the actions set forth in this Section 3.16 and
not otherwise permitted by this Agreement.
3.17 Brokers and Finders. Neither CI, Kosset nor any Affiliate of either
has incurred any obligation or liability to any party for any brokerage fees,
agent's commissions, or finder's fees in connection with the transactions
contemplated by the Acquisition Documents.
3.18 Labour Matters.
(a) Schedule 3.18.1 contains a true and correct and complete list of
all employees and officers employed by either Company or any Subsidiary as
at January 16, 1998, their total remuneration for the year ended December
31, 1997.
(b) Schedule 3.18.1 contains a true and correct list of all senior
employees, their date of commencement of employment, their notice period,
their current remuneration and a description of all terms and conditions of
employment, perquisites and fringe benefits [including (without limitation)
bonuses and commission as they receive or are eligible to receive] and /or
copies of all their written service agreements and/or their contracts of
employment or particulars of employment statements are contained in
Schedule 3.18.1.
(c) Schedule 3.18.1 contains a true and correct list of all employees
engaged on terms and conditions which incorporate the term of any
collective bargaining agreement agreed between either Company or any
Subsidiary and any trade union and which are identified in Schedule 3.18.1
and copies of all such collective bargaining agreements are contained in
Schedule 3.18.1.
(d) Schedule 3.18.1 contains a true and correct list of all employees
engaged on a standard non-management style offer of employment ("the
standard offer of employment") a copy of which appears at Schedule 3.18.1
and neither Shaw nor the Seller are aware of any material deviations from
the standard offer of employment.
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(e) No change has been made since the Accounting Date in the terms of
employment (including compensation) of any person employed by either
Company or any Subsidiary at the date of this Agreement whose annual
aggregate remuneration exceeds 30,000 pound sterling, and neither Company
nor any Subsidiary is a party to any contract to make such a change.
(f) No Company or Subsidiary, within the last three (3) years, has
experienced any organized slowdown, work interruption, strike, lock-out or
work stoppage by its employees, industrial or trade dispute which has had a
Material Adverse Effect and to the Knowledge of the Warrantors, there are
no specific circumstances (ignoring for the avoidance of doubt, any effect
that the consummation of the transaction contemplated by this Agreement
might have) which may result in any industrial dispute the effect of which
might be to have a Material Adverse Effect. Except as described in Schedule
3.18.1, no Company or Subsidiary is a party to, or has any obligation
pursuant to, any oral and legally binding or written agreement with any
party regarding the rates of pay or working conditions of any of its
employees, and no Company or Subsidiary is obligated under any agreement to
recognize or bargain with any labour organization or union on behalf of its
employees or done any act which might be construed as recognition of a
trade union.
(g) Except as described on Schedule 3.18.1, there are no claims,
investigations, charges, citations, hearings, consent decrees, or
litigation involving current or former employees (excluding matters being
dealt with under standard internal grievance or disciplinary procedures)
concerning (i) wages, compensation, bonuses, commissions, awards, or
payroll deductions; (ii) equal employment or human rights violations or
discrimination regarding race, colour, religion, sex, national origin, age,
handicap, veteran's status, marital status, disability, or any other
recognized class, status, or attribute under any law prohibiting
discrimination; (iii) claims for unfair dismissal and redundancy payments;
(iv) grievances or arbitrations pursuant to current or expired collective
bargaining agreements; (v) occupational safety and health; (vi) workers'
compensation; (vii) wrongful termination, negligent hiring, invasion of
privacy or defamation; (viii) immigration; or any other claim based on the
employment relationship or termination of the employment relationship
(collectively, "Labour Claims") pending, or to the Knowledge of the
Warrantors, threatened against either Company or any Subsidiary.
(h) No Company or Subsidiary has in relation to all present and former
employees failed to comply with any agreements for the time being having
effect as regards relations with trade unions or the conditions of service
of its employees (whether collectively or individually) where such failure
to comply has or will have a Material Adverse Effect.
(i) Except as described on Schedule 3.18.2, there is no outstanding
agreement or arrangement and, no outstanding judgments or orders, with
respect to severance payments with respect to any employee of either
Company or any Subsidiary, involving the payment of more than 25,000 pound
sterling individually and 100,000 pound sterling in the aggregate, and all
contracts of employment between each Company and Subsidiary and their
directors and employees are terminable by such Company or Subsidiary
without giving compensation on not more than three (3) months notice.
(j) Except as set forth in Schedule 3.18.1 no employee of either
Company or any Subsidiary or any other individual whose services are
provided to either Company or any Subsidiary whose aggregate annual
remuneration, in each case, exceeds 30,000 pound sterling has given or
received notice terminating his or her employment or engagement resulting
in a contractual entitlement to a liquidated damages payment which is
outstanding.
(k) Except as set forth on Schedule 3.18.1, neither Company nor any
Subsidiary is operating nor has any present settled intention to introduce
any short time working scheme or redundancy scheme under which payments
greater than those required by statute are payable.
(l) Except as set forth in Schedule 3.18.1 no negotiations for any
increase in the remuneration or benefits of any employee of either Company
or any Subsidiary are current or due within a period of six (6) months
after the Closing Date which may lead to an increase of 50,000 pound
sterling or more in relation to the aggregate remuneration payable to
employees of the Companies or any Subsidiaries as a whole.
(m) Neither Shaw, the Seller, either Company nor any Subsidiary has
introduced any share incentive scheme or arrangement, share option scheme
or arrangement or any other scheme or arrangement relating to the
acquisition of any interest in any shares in either Company or any
Subsidiary for all or any of the directors or employees of either Company
or any Subsidiary.
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(n) Except as set forth in Schedule 3.18.1 to the Knowledge of the
Warrantors, no employee of either Company or any Subsidiary has within six
(6) months prior to the Closing Date been in breach of his or her contract
of employment or the proper standards of employment expected of such
employee by the Seller during such period, in either case in a manner which
has or may result in a Material Adverse Effect.
(o) Except as set forth in Schedule 3.18.1 no judgments or orders have
been made against either Company or any Subsidiary in the two (2) years
preceding the Closing Date which have not been fully complied with in
relation to its employees, and no liability has been incurred by either
Company or any Subsidiary in relation to its employees for breach of any
contract of service or for redundancy payments, protective awards,
compensation for wrongful dismissal, or unfair dismissal or for failure to
comply with any order for the reinstatements or re-engagement of any
employee, or for any other liability arising out of the termination of any
contract of employment which have not been fully complied with.
3.19 Permits and Licenses. Except as described on Schedule 3.19,
(a) Except for Permits the absence of which would not have a Material
Adverse Effect, all Permits (public and private) necessary or required for
each Company and Subsidiary to conduct the business which it presently
carries on have been obtained and are valid and subsisting and have been
complied with in all material respects, and to the Knowledge of the
Warrantors there is no reason why any of them should be suspended, canceled
or revoked.
(b) There is not in existence, or, to the Knowledge of the Warrantors,
pending, any investigation or inquiry by, or on behalf of, any governmental
or other body in respect of the affairs of any Company or Subsidiary.
3.20 Taxes.
(a) The provisions of this section 3.20 shall apply to each Company as
if the same were set out in full in respect of each such Company. For
purposes of this Section 3.20:
(i) the following terms have the following meanings unless
inconsistent with the context:
"Event" shall mean any event or fact whatsoever including a
change of residence including but not limited to:
(a) any transaction, action or omission (whether or not
either Company or any Subsidiary is party to it);
(b) the earning, receipt or accrual for any Taxation
purpose of any income (including interest), profits or
gains;
(c) the declaration, payment or making of any dividend
or other distribution;
(d) cash contributions made by the Seller to either
Company and/or any Subsidiary;
(e) the sale and purchase of the Shares pursuant to
this Agreement; and
(f) Closing.
"ICTA" shall mean Income and Corporation Taxes Act
1988.
"Liability to Taxation" shall mean (a) any Liability of
either Company or any Subsidiary to make an actual payment
of Taxation (whether or not such Company or Subsidiary is
primarily so liable and whether or not such Company or
Subsidiary has any right of recovery against any other
person); and (b) the use by either Company or any Subsidiary
(in whole or in part) of any Purchaser's Relief to reduce or
eliminate any liability of such Company or Subsidiary to
make an actual payment of Taxation (whether or not such
Company or Subsidiary is primarily so liable and whether or
not such Company or Subsidiary has any right of recovery
against any other person) in respect of which such Company
or Subsidiary would otherwise have been liable to make an
actual payment of Taxation;
"Outside the ordinary course of business" shall,
without limitation, include:-
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(a) any distribution (within the meaning of Part VI
(with section 418) ICTA) or deemed distribution;
(b) the disposal or acquisition of any asset or the
supply or obtaining of any service or business facility of
any kind in circumstances where the consideration (if any)
actually received or given for such disposal, acquisition,
supply or obtaining is different from the consideration
deemed to have been received or given for any Taxation
purpose;
(c) any Event which gives rise to a Liability to
Taxation in respect of deemed (as opposed to actual) income,
profits or gains;
(d) a Company or Subsidiary ceasing, or being deemed to
cease, to be a member of any group of companies or
associated with any other company for any Taxation purpose;
(e) the Event which gives rise to a Liability to
Taxation primarily chargeable against or attributable wholly
or partly to or recoverable wholly or partly from any other
person;
(f) the disposal of any capital asset or
crystallization or any held over gain or any capital
contribution;
(g) any reorganisation of any share or loan capital of
the Company;
(h) the failure by the Company to deduct for any
Taxation; or
(i) any Event which gives rise to any fine, penalty,
surcharge, interest or other imposition relating to any
Taxation.
"Purchaser's Relief" shall mean any Relief which arises as a
result of or in connection with any Event occurring after Closing
"Relief" shall mean any relief, trading losses, allowance,
exemption, set-off, deduction or credit available from, against
or in relation to Taxation or in the computation for any Taxation
purpose of income, profits or gains or any right to a repayment
of Taxation.
"Taxation" shall mean (a) any tax, duty, impost or levy,
past or present, of the United Kingdom or elsewhere, whether
governmental, state, provincial, local governmental or municipal,
including but not limited to income tax (including income tax
required to be deducted or withheld from or accounted for in
respect of any payment under section 203 ICTA or otherwise),
corporation tax, ACT, capital gains tax, inheritance tax, VAT,
Customs and other import or export duties, landfill tax, stamp
duty, stamp duty reserve tax, national insurance and social
security contributions but excluding water rates and business
property rates; and (b) any fine, penalty, surcharge, interest or
other imposition relating to any tax, duty, impost or levy
mentioned in paragraph (a) of this definition or to any account,
record, form, return or computation required to be kept,
preserved, maintained or submitted to any person for the purposes
of any such tax, duty, impost or levy.
"Taxation Authority" shall mean any authority, whether of
the United Kingdom or elsewhere, competent to impose, assess or
collect Taxation, including but not limited to the Board of
Inland Revenue, the Commissioners of Customs and Excise and the
Department of Social Security.
"TCGA" shall mean Taxation of Chargeable Gains Act 1992.
"VATA" shall mean Value Added Tax Act 1994.
(ii) references to Events include Events which are deemed to have
occurred for any Taxation purpose and references to income, profits or
gains earned, received or accrued for any Taxation purpose include
income, profits or gains which are deemed to have been earned,
received or accrued for any Taxation purpose.
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(b) No Event has occurred on or before the Accounting Date and no
Event hasoccured since the Accounting Date and on or before Closing which
is outside the ordinary course of business of the Company which in either
case has given rise to or may give rise to any Liability to Taxation other
than where specific provision reserve or allowance for such Liability to
Taxation is provided in the Accounts.
(c) Each Company and each Subsidiary has paid or otherwise accounted
for to the relevant Taxation Authority all Taxation which has become due
and payable to that Taxation Authority on or before Closing.
(d) Without prejudice to the generality of Section 3.20(b) no Event
has occurred which has given rise to or may give rise to any Liability to
Taxation under section 767A ICTA, sections 132 FA 1988 or section 179, 189,
or 191 TCGA either before, on or after the Closing by reason of the Company
being associated with any other Company on or before Closing.
(e) While the parties have acknowledged to each other (without
specifically making any representation or warranty to such effect) that
approximately $77 million of losses are available to the Company for
set-off under section 393(l) ICTA for the purposes of corporation tax
against any trading income of its trade after the Closing, the Warrantors
represent and warrant that not less than $3 million of such losses are so
available as of the Closing.
(f) All notices, returns, computations, registrations and payments
which should have been made by either Company or any Subsidiary for any
Taxation purpose have been made within the requisite periods and are
up-to-date, correct and on a proper basis and none of them is, or is likely
to be, the subject of any dispute with any Taxation Authority.
(g) None of the Companies or Subsidiaries is involved in any dispute
with any Taxation Authority concerning any matter which will adversely
affect in any way the liability of either Company or any Subsidiary to
Taxation and, so far as the Seller is aware there are no circumstances
which are likely to give rise to any such dispute.
(h) Each of the Companies and Subsidiaries has duly and properly made
all Taxation claims, disclaimers, elections and surrenders and given all
notices and consents and done all other things in respect of Taxation
assumed to have been made in the Accounts and all such claims, disclaimers,
elections, surrenders, notices, consents and other things have been
accepted as valid by the relevant Taxation Authorities and none has been
revoked or otherwise withdrawn.
(i) Each of the Companies and Subsidiaries has deducted and properly
accounted to the appropriate Taxation Authority for all amounts which it
has been obliged to deduct in respect of Taxation, has complied fully with
all reporting requirements relating to all such amounts and has (where
required by the applicable Taxation statute) duly provided certificates of
deduction of tax to the recipients of payments from which deductions have
been made.
(j) Without prejudice to the generality of Section 3.21(i), each of
the Companies and Subsidiaries has properly operated the Pay As You Earn
system, by making deductions, as required by the applicable Taxation
statute, from all payments made, or treated as made, to its directors,
employees or officers or former directors, employees or officers or any
persons required to be treated as such, and accounting to the Inland
Revenue for all Taxation so deducted and for all Taxation chargeable on
such Company or Subsidiary on benefits provided for its directors,
employees or officers, or former directors, employees or officers.
(k) Each of the Companies and Subsidiaries has complied fully with all
reporting requirements, and proper records have been maintained, relating
to all payments and benefits made or provided, or treated as made or
provided, to its directors, employees or officers or former directors,
employees or officers.
(l) Each of the Companies and Subsidiaries has complied with its
obligations relating to the Subcontractors Tax Deduction Scheme.
(m) Each of the Companies and Subsidiaries has complied fully with all
its obligations relating to Class 1 and Class IA National Insurance
Contributions, both primary and secondary.
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(n) None of the Companies or Subsidiaries has entered into or been a
party to any scheme, arrangement or transaction containing steps or stages
inserted for no commercial reason other than avoiding or deferring Taxation
or reducing a liability to Taxation.
(o) Each of the Companies and Subsidiaries is and has at all times
been resident in the United Kingdom for the purposes of all Taxation
statutes and has not at any time been resident outside the United Kingdom
for the purposes of any Taxation statute or any double taxation
arrangements and has not at any time been subject to Taxation in any
jurisdiction outside the United Kingdom or had a branch outside the United
Kingdom or any permanent establishment (as that expression is defined in
the respective double taxation relief orders current at the date of this
Agreement) outside the United Kingdom.
(p) Within the period of three (3) years ending on the date of this
Agreement there has been no major change in the nature or conduct of a
trade or business carried on by either Company or any Subsidiary within the
meaning of section 768 ICTA or a change in ownership of either Company or
any Subsidiary such that the section 768 or 768A ICTA has been or may be
applied to deny relief in respect of trading losses the subject of warranty
3.20(e).
3.21 Employee Benefit Plans.
(a) Schedule 3.21 contains a true and complete list of all the schemes
("the Schemes") or agreements for the provision of funding of any relevant
benefits (as defined in section 612(1) of the Income and Corporate Taxes
Act 1988 ("Taxes Act") but as if the exception contained in that section
were omitted) (each a "Pension Scheme") for any of the employees or
officers, former employees, or former officers, or their dependants of
either Company or any Subsidiary and of any profit sharing, share option,
share incentive, bonus, redundancy, severance, disability, life insurance
or medical plans relating to such employees, and Shaw and the Seller have
caused the Companies to deliver to Purchaser (and enclose with Schedule
3.21) true, correct and complete copies of each Scheme, including without
limitation, the Trust Deeds and Rules, all explanatory booklets,
announcements containing particulars of benefits and entitlements under
each such Scheme and in relation to each Pension Scheme, latest annual
reports and accounts, latest actuarial reports and subsequent actuarial
advice and details of its present trustees.
(b) Other than the Schemes listed in Schedule 3.21, no Company or
Subsidiary operates and no proposal has been announced to establish any
retirement death or disability benefits scheme in relation to its employees
or officers or the dependants of such persons and no Company or Subsidiary
is paying or is under any moral responsibility or legal obligation to pay
or provide any private medical insurance or any pension retirement or
disablement or sickness benefit gratuity, disability benefit, benefit in
connection with loss of office or employment or any similar benefit,
whether by way of a lump sum or otherwise to or in respect of its
employees, officers or in respect of any former officer or former employee
or a dependant of any such person.
(c) All contributions, any administrative charges and all actuarial,
consultancy, legal and other fees, charges or expenses due under the
Schemes which have become payable by either Company or any Subsidiary or by
its trustees or by any such employee in relation to the Schemes have been
duly and promptly paid and no services have been rendered in respect of it
where such an account or invoice has not been rendered.
(d) Each Pension Scheme is an exempt approved scheme within the
meaning of Chapter I of Part XIV of the Taxes Act. There is no reason why
such exempt approval may be withdrawn.
(e) All members of the Pension Schemes employed by either Company or
any Subsidiary are listed in Schedule 3.21 together with the current
membership category or level applicable.
(f) All employees of the Companies and the Subsidiaries who are
eligible for membership in the Pension Schemes have been offered membership
and the Companies or the trustees have an accurate membership and benefits
record.
(g) All lump sum death in service benefits which may be payable under
it are fully insured and all premiums due up to the date of this Agreement
have been paid.
(h) The Pension Schemes have, in all respects, at all times been
administered in accordance with their governing trusts powers and
provisions and the documents constituting and governing them (including all
notices and announcements and explanatory literature) and in accordance
with applicable law, except where a failure to so administer the Pension
Schemes has not had and will not have a Material Adverse Effect.
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(i) So far as the Warrantors are aware, having made suitable inquiry,
there are no actions, suits or claims (other than routine claims for
benefits) outstanding, pending or threatened by (or in respect of) the
employees against the trustees or the Companies or any Subsidiaries.
(j) So far as the Warrantors are aware, having made suitable inquiry,
no report has been made to the Occupational Pensions Regulatory Authority
under the provisions of the Pensions Act 1995 by the Actuary or Auditor to
the Pension Schemes or any other party, and to the knowledge of the
Warrantors neither of the Companies, any Subsidiary nor any trustee of any
Pension Scheme is subject to any penalty levied by the Occupational
Pensions Regulatory Authority.
(k) Details of any current or former employees (whether living or
deceased) of either Company or any Subsidiary who have been excluded or
prevented from participating in any Pension Scheme or arrangement
(including without limitation for the provision of death benefits) which
either Company or any Subsidiary has sponsored or in which any such
employees have participated at any time (including without limitation the
Pension Schemes) on the grounds of part-time employment, have been
disclosed.
(l) In relation to each of the pension schemes which are money
purchase schemes all contributions which are payable by the Companies and
Subsidiaries in accordance with its provisions to secure or provide the
benefits for and in respect of its members (including pensioners, deferred
pensioners and any other person prospectively or casting entry entitled to
benefit under it) and all contributions due from its members have been duly
made and the Companies and Subsidiaries have fulfilled other obligations
under it; and the benefits which are prospectively and contingently payable
under it are solely such as can be provided by the funds available for each
of its members.
(m) In relation to each of the Pension Schemes which are final salary
schemes:
(i) the Warrantors have no reason to believe that the report of
the last actuarial valuation and any subsequent actuarial advice was
inaccurate or incomplete when given;
(ii) since the date of the report of the last actuarial valuation
and any subsequent actuarial advice the Companies and Subsidiaries and
each of the pensionable employees who are obliged to do so have paid
contributions to each of the final salary schemes at the rates
recommended by the actuary in such valuation or advice and there are
no such contributions that have fallen due but are unpaid as of the
Closing Date; and
(iii) no augmentations to existing benefits have been made under
it and no additional benefits have been granted.
(n) In respect of any of the Pension Schemes which are winding up,
discontinued or terminated, neither the Companies nor any Subsidiaries have
any liability to make any further payments or contributions to such schemes
whatsoever.
3.22 Compliance with Laws. Each Company and Subsidiary has, in the conduct
of its respective business, complied with all Laws and Legal Requirements
applicable thereto, except where any failure so to comply has not and, on the
basis of the facts and circumstances prevailing at the Closing Date, will not
have a Material Adverse Effect. Neither Company, any Subsidiary nor any of their
respective assets are subject to any judgment, order, writ, injunction, or
decree issued by any court or any governmental or administrative body or agency
which is outstanding or currently in force and which would have a Material
Adverse Effect.
3.23 Governmental Approvals and Consents. No consent, approval, or
authorization of or declaration, filing, or registration with any governmental
or regulatory authority is required in connection with the execution, delivery,
and performance of this Agreement by Shaw or the Seller or the consummation by
Shaw and the Seller of the transactions contemplated hereby.
3.24 Adequacy of the Company's Assets. The assets of the Companies and the
Subsidiaries (including the Intellectual Property to be licensed from Shaw to CI
pursuant to the terms of the License Agreement, the availability of the services
to be provided by personnel pursuant to the terms of the Personnel Transition
Agreement and the goods to be supplied pursuant to the Supply Agreement) include
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all material rights, properties, interests in properties, and assets used by the
Companies and the Subsidiaries to operate the business as presently conducted by
the Companies and the Subsidiaries.
3.25 Products Liability. Except as set forth on Schedule 3.25, neither
Shaw, the Seller, either Company nor any Subsidiary has received any notice or
claim, and, to the best knowledge of Shaw, the Seller, either Company or any
Subsidiary, no claim has been threatened or alleged that any line or category of
products manufactured, designed, sold or delivered by either Company or any
Subsidiary contains any general defect in manufacture or design or that any
product in any such line or category of products of either Company or any
Subsidiary is defective in any manner that has resulted in the death of or
personal injury to any person or in the substantial risk of death or personal
injury.
3.26 Statutory Restrictions
(a) No agreement, transaction, practice or arrangement carried on or
proposed to be carried on by any Company or Subsidiary (or by any person
for whose acts or defaults any Company or Subsidiary may be liable),
whether unilaterally or with others, or to which any Company or Subsidiary
(or any such person) is or proposes to become a party, and no state of
affairs applicable to any Company or Subsidiary (or any such person):
(i) and which is material in the context of the business of the
Companies and the Subsidiaries taken as a whole and is or ought to be
or ought to have been registered in accordance with the provisions of
the Restrictive Trade Practices Acts 1976 and 1977 or contravenes the
provisions of the Resale Prices Act 1976 or is or has been the subject
of any inquiry, investigation or proceeding under any such
legislation;
(ii) is or has been the subject of an inquiry, investigation,
reference or report under the Fair Trading Act 1973 (or any other
legislation relating to monopolies or mergers) or the Competition Act
1980 and which had or may have a Material Adverse Effect;
(b) Neither Company nor any Subsidiary has
(i) made or threatened to make any formal complaint against any
other person to any relevant authority under any law or legislation
referred to in this Section 3.26; and
(ii) given any assurance or undertaking to the Restrictive
Practices Court, the Director General of Fair Trading, the Secretary
of State for Trade and Industry, the Commission or Court of First
Instance or Court of Justice of the European Union, or any other
court, person or body, which is outstanding or which has not yet been
complied with in full.
3.27 Corporate and Other Records.
(a) The records, systems and information of each Company and
Subsidiary and the means of access to them are in all material respects
exclusively owned by each of them and under their direct control.
3.28 Computers.
(a) The Computer Equipment and the Computer Software (and each part of
it) has in all material respects functioned adequately since its was
installed.
(b) All licenses, maintenance agreements, escrow agreements and
development agreements relating to Computer Software to which either of the
Companies or the Subsidiaries are a party that are material to the
operations of the Companies or the Subsidiaries are attached to Schedule
3.28.
(c) Neither the Computer Equipment nor the Computer Software is used
by any of the Companies or the Subsidiaries to hold or process any data
other than in manner authorized by the Companies' or the Subsidiaries'
current registration entry under the Data Protection Act 1994 and a copy of
such registration entry is attached to Schedule 3.28.
(d) Neither Company nor any of the Subsidiaries are a party to a
facilities management agreement (whether as a provider or a recipient of
services) nor is either Company or any of the Subsidiaries a subscriber to
or provider of bureau, out sourcing or similar services.
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3.29 Insolvency.
(a) To the Knowledge of the Warrantors, no petition has been received,
no order has been made and no resolution has been passed for the winding-up
of the Companies or any Subsidiary, no administrative receiver, receiver
and/or manager has been appointed of the whole or any part of the property
of any of the Companies or any Subsidiary, no administration order has been
made appointing an administrator in respect of any of the Companies or
Subsidiaries and no petition has been received for an administration order
in respect of any of the Companies or Subsidiaries.
(b) No voluntary arrangement has been approved under Part I Insolvency
Act 1986 and no compromise or arrangement has been sanctioned under section
425 of the Act in respect of any of the Companies or Subsidiaries.
(c) No distress, execution or other process which remains undischarged
has been levied on the assets of any of the Companies or Subsidiaries which
would have a Material Adverse Effect, neither Company nor any Subsidiary
has stopped the payment of its debts or received a written demand pursuant
to section 123(1)(a) Insolvency Act 1986 and none of them are unable to pay
their debts within the meaning of section 123 Insolvency Act 1986
(excluding subsection (2) thereof) nor could it be deemed that any of them
are unable to pay their debts within the meaning of section 123 Insolvency
Act 1986.
(d) No disqualification order has at any time been made pursuant to
the provisions of the Company Directors Disqualification Act 1986 against
any person who is now an officer or employee of any of the Companies or
Subsidiaries.
(e) There are no facts known to the Warrantors which could give rise
to any of the events or circumstances referred to in this Section 3.29.
3.30 Other Business Matters.
(a) During the twelve (12) months ended on the date of this Agreement
no substantial customer or supplier of either Company or any Subsidiary has
ceased or substantially reduced its business with either Company or any
Subsidiary the effect of either or both of which would have a Material
Adverse Effect, and no indication has been received by the Seller, Shaw,
the Companies or the Subsidiaries that there will or may be any such
change, cessation or reduction.
(b) Neither of the Companies nor any of the Subsidiaries carries on
business under or use on its letterhead, sales material, invoices or
vehicles or otherwise any name other than its own corporate name or any
name or any appearing in Schedule 3.1 hereto as being a name under which it
does business and to the Knowledge of the Warrantors there are no
circumstances which might prevent either Company or any Subsidiary from
continuing to carry on business under any such name.
(c) To the Knowledge of the Warrantors, in the last twelve (12) months
no code of practice has been issued by any government department,
association or similar body which relates to either Company's or any
Subsidiary's business non-compliance with which would or may have a
Material Adverse Effect.
3.31 Financing and Working Capital.
(a) None of the Companies or the Subsidiaries have engaged in any
borrowing or financing not required to be reflected in its statutory
accounts.
(b) Except as set out in Schedule 3.31 no person other than any of the
Companies or the Subsidiaries has given any guarantee of or security for
any overdraft, loan or other financial facility granted to any of the
Companies or the Subsidiaries.
(c) There is no Security Interest over any of the assets of any of the
Companies or the Subsidiaries other than a Permitted Security Interest.
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(d) None of the Companies or the Subsidiaries have applied for or
received any grant, subsidy, payment or allowance from any government,
authority, body or agency (whether supra-national, national, regional or
local) which may at any time be or become repaid or repayable in such a way
as to have a Material Adverse Effect.
3.32 Correctness of Representations. No representation or warranty of Shaw
or the Seller in this Agreement and no information or statement contained in any
certificate, or Schedule (including the General Disclosures on Schedule 3.0,
save and except paragraph (h) of such Schedule) of the Warrantors attached
hereto or furnished by or on behalf of the Warrantors in connection herewith,
contains any untrue statement of material fact or omits to state any fact
necessary in order to make the statements contained therein not misleading in
any material respect in the context in which given.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Shaw and the Seller as follows:
4.1 Organization and Qualification. Purchaser is a corporation duly
organized and validly existing under the laws of England and does not have any
permanent business establishment outside the United Kingdom.
4.2 Authority. Purchaser has full power and authority to enter into this
Agreement and each of the other Acquisition Documents to which it is a party and
consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance by Purchaser of this Agreement and each of the other
Acquisition Documents to which Purchaser is a party have been duly and validly
authorized and approved by all necessary action on the part of Purchaser. This
Agreement and each of the other Acquisition Documents to which Purchaser is a
party are the legal, valid, and binding obligations of Purchaser enforceable
against Purchaser in accordance with their terms, except as enforceability may
be limited by applicable equitable principles or by bankruptcy, insolvency,
reorganization, moratorium, or similar laws affecting creditors' rights
generally, and by the exercise of judicial discretion in accordance with
equitable principles. Neither the execution and delivery by Purchaser of this
Agreement or any of the other Acquisition Documents to which Purchaser is a
party nor the consummation by Purchaser of the transactions contemplated hereby
or thereby will (i) violate Purchaser's Articles of Association, (ii) violate
any provisions of law or any order of any court or any governmental unit to
which Purchaser is subject, or by which its assets are bound, or (iii) conflict
with, result in a breach of, or constitute a default under any mortgage, lease,
agreement, or other instrument to which Purchaser is a party or by which its
assets or properties are bound.
4.3 Litigation. There is no suit, action, proceeding, claim or
investigation pending, or to Purchaser's Knowledge threatened, against Purchaser
that would affect the consummation of the transactions contemplated herein or
have a material adverse effect on Purchaser, its business or its assets.
4.4 Brokers and Finders. Neither Purchaser nor any affiliate of Purchaser
has incurred any obligation or liability to any party for any brokerage fees,
agent's commissions, or finder's fees in connection with the transactions
contemplated by the Acquisition Documents.
4.5 Governmental Approvals and Consents. Except for the filing pursuant to
the Restrictive Trade Practices Act 1976 and the approval of the U.K. Panel on
Takeovers and Mergers, no consent, approval, or authorization of or declaration,
filing, or registration with any governmental or regulatory authority is
required in connection with the execution, delivery, and performance by
Purchaser of this Agreement or the consummation of the transactions contemplated
hereby.
4.6 Correctness of Representations. No representation or warranty of
Purchaser in this Agreementand no information or statement contained in any
certificate, or Schedule by the Purchaser attached hereto or furnished by or on
behalf of the Purchaser in connection herewith contains, any untrue statement of
material fact or omits to state any fact necessary in order to make the
statements contained therein not misleading in any material respect in the
context in which given.
4.7 Knowledge of Seller's Breach. Purchaser does not know of any matter or
circumstances which would constitute a breach by Shaw or Seller of any of the
warranties set out in Article 3 of this Agreement or of any matter which, with
the passing of time would be reasonably likely to give rise to a claim against
Shaw or the Seller pursuant to the provisions of this Agreement. For purposes of
this Agreement, the knowledge of any member of Management shall not be
attributed to Purchaser.
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ARTICLE 5
COVENANTS OF SHAW AND THE SELLER
5.1 Covenant Not to Compete.
(a) Shaw and the Seller each covenant and agree with Purchaser that,
for a period of five (5) years following the Closing Date, neither Shaw nor
the Seller will (i) own, manage, operate, join or control, or participate
in the ownership, management, operation or control of, any business or
enterprise, whether in corporate, proprietorship or partnership form or
otherwise, which manufactures tufted carpet and which has one or more
significant manufacturing facilities located in the United Kingdom and/or
the Republic of Ireland, (ii) entice, or seek to solicit or entice, away
from the Companies or Purchaser, Ralph J. Boe, Archie Barfield or any other
person employed by the Companies at the Closing Date or at any time during
the period of three (3) months immediately preceding the Closing Date, or
(iii) employ Ralph J. Boe or Archie Barfield, provided, however, the
covenants and agreements contained in this Section 5.1 shall not be deemed
or construed to prevent or prohibit Shaw from employing Ralph J. Boe at any
time after the second anniversary of the date hereof if such employment has
been solicited by Ralph J. Boe without any enticement or solicitation from
Shaw or any Affiliate thereof.
(b) Shaw and the Seller each acknowledge and agree that the covenant
and agreement set forth in Section 5.1(a) above is made and given in
connection with the transfer to Purchaser, through the transfer of the
Shares, of the business (including the goodwill associated therewith) of
the Companies and the Subsidiaries, and that such covenant and agreement is
reasonable and is necessary to protect and to preserve unto the Purchaser
the benefit of such business and the goodwill associated therewith. Shaw
and the Seller each further acknowledge and agree that great loss and
damage would be suffered and incurred by Purchaser, the Companies and the
Subsidiaries if either Shaw or the Seller should breach such covenants and
agreement, and that, in addition to all other remedies that are available
to Purchaser at law or in equity, the Purchaser shall be entitled to seek
both preliminary and permanent injunctive relief in order to prevent a
breach or contemplated breach by Shaw or Seller of such covenant and
agreement.
ARTICLE 6
MUTUAL COVENANTS
6.1 Further Mutual Covenants. Purchaser, Shaw and the Seller shall each
take all actions contemplated by this Agreement, and do all things reasonably
necessary to effect the consummation of the transactions contemplated by this
Agreement. Each party shall promptly notify each of the other parties of any
action, suit, or proceeding that shall be instituted or threatened against such
party to restrain, prohibit, or otherwise challenge the legality of any
transaction contemplated by this Agreement.
6.2 RTPA Suspensory Section. If this Agreement or any wider arrangement of
which it forms part constitutes an agreement, particulars of which are required
to furnished to the Director General of Fair Trading pursuant to Section 24
Restrictive Trade Practices Act 1976, then none of the parties shall give effect
to or enforce or purport to enforce any restriction by virtue of which the
Agreement (or wider arrangement) is subject to registration until the day after
relevant particulars have been duly furnished in accordance with Section 24 of
that Act.
ARTICLE 7
PUBLIC ANNOUNCEMENTS
7.1 Public Announcements. Shaw and the Purchaser will consult with each
other before issuing any press releases or otherwise making any public
statements or filings with governmental entities with respect to this Agreement
or the transactions contemplated hereby and shall not issue any press releases
or make any public statements or filings with governmental entities prior to
such consultation and shall modify any portion thereof if the other party
reasonably objects thereto, unless the same may be required by any applicable
law.
ARTICLE 8
INDEMNIFICATION
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8.1 Definitions.
For the purposes of this Article:
(a) "Indemnification Claim" shall mean a claim for
indemnification hereunder.
(b) "Indemnitee" shall mean the party or parties seeking
indemnification hereunder.
(c) "Indemnitor" shall mean the party or parties against whom
indemnification hereunder is sought.
(d) "Indemnitor Representative" shall mean Shaw in the case of an
Indemnification Claim asserted by the Purchaser, and Purchaser in the
case of an Indemnification Claim asserted by Shaw or the Seller.
(e) "Losses" shall mean any and all demands, claims, actions or
causes of action, assessments, losses, fines, judgments, costs,
damages (including special and consequential damages), liabilities, ),
costs, removal and remediation requirements and expenses, including
without limitation, interest, penalties, cost of investigation and
defense, and reasonable attorneys' and other professional fees and
expenses. "Losses" shall not include any liability, demand, claim,
action or course of action which is contingent only unless and until
such contingent liability becomes an actual liability.
(f) "Third Party Claim" shall mean any claim, suit or proceeding
(including, without limitation, a binding arbitration or an audit, or
investigation, assessment or determination by any taxing authority)
that is instituted against the Indemnitee which, if prosecuted
successfully, would result in a Loss for which the Indemnitee is
entitled to indemnification hereunder.
8.2 Agreement of the Indemnitors to Indemnify.
(a) Subject to the terms and conditions of this Article 8, Shaw
and Seller, jointly and severally, agree to indemnify, pay and hold
harmless the Purchaser from, against, for and in respect of any and
all Losses paid, suffered or incurred by the Purchaser, either Company
or any Subsidiary , and resulting from, based upon, or arising out of:
(i) the breach of any representation or warranty of Shaw and
the Seller contained in or made pursuant to Article 3 of this
Agreement, other than the representations and warranties
contained in Section 3.14, or in any certificate furnished by
Shaw or the Seller in connection herewith or therewith;
(ii) a breach of or failure to perform any covenant or
agreement of Shaw or the Seller made pursuant to this Agreement;
(iii) any deduction or withholding made from any payment
made by Shaw or the Seller under this Agreement (ignoring any
available Relief as defined in Section 3.20) or any Taxation
payable by the Purchaser in respect of any payment by Shaw or the
Seller under this Agreement;
(iv) the transactions described in Section 2.2(d),
including, without limitation, the execution and delivery by CI
of the GHL Loan Agreement, the GHL Loan Notes, the GHL Security
Interests, the Assignment, the GHL Security Trust Deed, the Deed
of Adherence, the Loan Transfer Note;
(v) any Environmental Liability;
(vi) any liability of CI to Georgia Holdings Limited arising
under or pursuant to that certain Asset Purchase Agreement, dated
February 7, 1997, between CI and Georgia Holdings Limited
relating to the sale of the business and assets of Youghal Carpet
Yarns, save and except any liability under Section 19 thereof;
and
(vii) any and all actions, suits, claims, proceedings,
investigations, demands, assessments, audits, fines, judgments,
costs and other expenses (including, without limitation,
reasonable legal fees and expenses) incident to any of the
foregoing or to the enforcement of this Section 8.2(a).
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(b) Subject to the terms and conditions of this Article 8,
Purchaser agrees to indemnify, pay and hold harmless Shaw and the
Seller and, in respect of subparagraph (b)(iii) below, any Affiliate
of Shaw from, against, for and in respect of any and all Losses paid,
suffered or incurred by Shaw or the Seller and, in respect of
subparagraph (b)(iii) below, any Affiliate of Shaw, and resulting
from, based upon, or arising out of:
(i) the breach of any representation or warranty of
Purchaser contained in or made pursuant to Article 4 of this
Agreement or in any certificate furnished by Purchaser in
connection herewith or therewith;
(ii) a breach of or failure to perform any covenant or
agreement of Purchaser made pursuant to this Agreement;
(iii) the failure of CI to procure the release of Shaw and
any Affiliate of Shaw from their respective obligations under or
with respect to the Guarantees; and
(iv) any and all actions, suits, claims, proceedings,
investigations, demands, assessments, audits, fines, judgments,
costs and other expenses (including, without limitation,
reasonable legal fees and expenses) incident to any of the
foregoing or to the enforcement of this Section 8.2(b).
8.3 Procedures for Indemnification.
(a) An Indemnification Claim shall be made by the Indemnitee by
delivery of a written notice to the Indemnitor Representative requesting
indemnification and specifying the basis on which indemnification is sought
and the amount of Losses claimed and, in the case of a Third Party Claim,
containing (by attachment or otherwise) such other information as the
Indemnitee shall have concerning such Third Party Claim.
(b) If the Indemnification Claim involves a Third Party Claim, the
procedures set forth in Section 8.4 hereof shall be observed by the
Indemnitee and the Indemnitor Representative.
(c) If the Indemnification Claim involves a matter other than a Third
Party Claim, the Indemnitor Representative shall have sixty (60) days to
object to such Indemnification Claim by delivery of a written notice of
such objection to the Indemnitee specifying in reasonable detail the basis
for such objection. Failure to timely so object shall constitute a final
and binding acceptance of the Indemnification Claim by the Indemnitor
Representative, and the Indemnification Claim shall be paid in accordance
with Section 8.3(d) hereof. If an objection is timely interposed by the
Indemnitor Representative, and the dispute is not resolved by the
Indemnitee and the Indemnitor Representative within forty-five (45) days
from the date the Indemnitee receives such objection or such longer period
as the Indemnitee and Indemnitor Representatives may agree, such dispute
shall be resolved by arbitration as provided in Article 9 of this
Agreement.
(d) Upon determination of the amount of an Indemnification Claim
whether by agreement between the Indemnitor Representative and the
Indemnitee or by an arbitration award or by any other final adjudication,
the amount of such Indemnification Claim shall be paid within ten (10) days
of the date such amount is determined. If the Indemnitor responsible for
payment of such Indemnification Claim is Purchaser, such payment shall be
made by wire transfer by Purchaser to Shaw. If the Indemnitors responsible
for payment of such Indemnification are Shaw and the Seller, such payment
shall be made by wire transfer by Shaw to Purchaser.
8.4 Third Party Claims. The obligations and liabilities of the Indemnitee
and Indemnitor hereunder with respect to a Third Party Claim shall be subject to
the following terms and conditions:
(a) The Indemnitee seeking indemnification for such Third Party Claim
shall give the Indemnitor Representative written notice of the Third Party
Claim promptly after receipt by the Indemnitee of notice thereof, and,
subject to Section 8.4(b) below, the Indemnitor Representative may
undertake the defense, compromise and settlement thereof by representatives
of its own choosing reasonably acceptable to the Indemnitee, and in
relation to any Third Party Claim involving any tax authority no action
shall be taken by the Indemnitor Representative without the prior written
consent of the Indemnitee (not to be unreasonably withheld or delayed). The
failure of the Indemnitee to notify the Indemnitor Representative of such
claim shall not relieve the Indemnitor of any liability that the Indemnitor
may have with respect to such claim except to the extent the Indemnitor is
prejudiced by such failure. The assumption of the defense, compromise and
settlement of any such Third Party Claim by the Indemnitor Representative
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shall not be an acknowledgment of the obligation of the Indemnitor to
indemnify such Indemnitee with respect to such claim hereunder. If the
Indemnitee desires to participate in, but not control, any such defense,
compromise and settlement, it may do so at its sole cost and expense. If,
however, the Indemnitor Representative fails or refuses to undertake the
defense of such Third Party Claim within fifteen (15) days after written
notice of such claim has been given to the Indemnitor Representative by the
Indemnitee, the Indemnitee shall have the right to undertake the defense,
compromise and settlement of such claim with counsel of its own choosing.
In the circumstances described in the preceding sentence, the Indemnitee
shall, promptly upon its assumption of the defense of such claim, make an
Indemnification Claim as specified in Section 8.3 which shall be deemed an
Indemnification Claim that is not a Third Party Claim for the purposes of
the procedures set forth herein.
(b) Notwithstanding the foregoing, if, in the reasonable opinion of
the Indemnitee after consultation with the Indemnitor Representative, any
Third Party Claim or the litigation or resolution thereof involves an issue
or matter which is reasonably expected to have a material adverse effect on
the business, operations, assets, properties or prospects of the Indemnitee
(including, without limitation, the administration of the tax returns and
responsibilities under the tax laws of the Indemnitee or the relationship
of CI or Kosset with any tax authority), other than as a result of money
damages or for which it would be entitled to indemnification hereunder the
Indemnitee shall have the right to control the defense, compromise and
settlement of such Third Party Claim undertaken by the Indemnitor
Representative, and the reasonable costs and expenses of the Indemnitee in
connection therewith shall be included as part of the indemnification
obligations of the Indemnitor hereunder. If the Indemnitee elects to
exercise such right, the Indemnitor Representative shall have the right to
participate in fully (by way of consultation, the ability to make
representations or otherwise), but not control, the defense, compromise and
settlement of such Third Party Claim at its sole cost and expense.
(c) No settlement of a Third Party Claim involving the asserted
liability of the Indemnitor under this Article 8 shall be made without the
prior written consent by or on behalf of the Indemnitor Representative,
which consent shall not be unreasonably withheld or delayed. Consent shall
be presumed in the case of settlements of 10,000 pound sterling or less
where the Indemnitor Representative has not responded within ten (10) days
of notice of a proposed settlement. If the Indemnitor Representative
assumes the defense of such a Third Party Claim, (i) no compromise or
settlement thereof may be effected by the Indemnitor Representative without
the Indemnitee's consent (not to be unreasonably withheld or delayed)
unless (A) there is no finding or admission of any violation of law or any
violation of the rights of any person and no effect on any other claim that
may be made against the Indemnitee, (B) the sole relief provided is
monetary damages that are paid in full by the Indemnitor, and (C) the
compromise or settlement includes, as an unconditional term thereof, the
giving by the claimant or the plaintiff to the Indemnitee of a release, in
form and substance satisfactory to the Indemnitee, from all liability in
respect of such Third Party Claim, and (ii) the Indemnitee shall have no
liability with respect to any compromise or settlement thereof effected
without its consent (not to be unreasonably withheld or delayed).
(d) In connection with the defense, compromise or settlement of any
Third Party Claim, the Indemnitee and the Indemnitor Representative shall
execute such powers of attorney as may reasonably be necessary or
appropriate to permit participation of counsel selected by such Indemnitee
or Indemnitor Representative and, as may reasonably be related to any such
Third Party Claim, shall provide access to the counsel, accountants and
other representatives of such Indemnitee or Indemnitor during normal
business hours to all properties, personnel, books, tax records, contracts,
commitments and all other business records of such Indemnitee or Indemnitor
and will furnish to such Indemnitee or Indemnitor copies of all such
documents as may reasonably be requested (certified, if requested).
8.5 Other Rights and Remedies. The rights of Purchaser under this Article 8
are the sole and exclusive rights and remedies of the Purchaseras to Shaw and
the Seller for the breach of any representation or warranty of Shaw and the
Seller contained in Article 3 of this Agreement or in any certificate furnished
by Shaw and the Seller in connection herewith, or for the failure of Shaw or the
Seller to perform any agreement, covenant or undertaking required by the terms
hereof to be performed by Shaw or the Seller. The rights and remedies of Shaw
and the Seller under this Article 8 are the sole and exclusive rights and
remedies of such parties for the inaccuracy or breach of any representation and
warranty of Purchaser contained in Article 4 of this Agreement, or in any
certificate, furnished by Purchaser in connection herewith, or for the failure
of Purchaser to perform any agreement, covenant or undertaking required by the
terms hereof to be performed by Purchaser.
8.6 Duration. The indemnification rights of the Purchaserfor Losses
resulting from a breach of representations and warranties of the Warrantors
contained in this Agreement or any certificate or covenants to be performed at
or prior to Closing (other than for Taxation, employee benefit, environmental
matters and "Shaw Transaction Warranties" and "Purchaser Transactional
Warranties," as hereafter defined) is subject to the condition that the
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Indemnitor Representative shall have received written notice of the Losses for
which indemnity is sought on or prior to July 1, 1999 fifteen (15) months from
the date hereof. The indemnification rights of the Purchaser for Losses
resulting from a breach of representations and warranties of the Warrantors
related to environmental matters as set forth in Section 3.14 and in respect of
indemnity for Environmental Liabilities set forth in Section 8.2(a)(v) are
subject to the condition that the Indemnitor Representative shall have received
written notice of the Losses for which indemnity is sought within three (3)
years of the Closing Date. The indemnification rights of the Purchaser for
Losses resulting from a breach of representations and warranties of the
Warrantors that are related to Taxation or employee benefit matters as set forth
in Sections 3.20 and 3.21 are subject to the condition that the Indemnitor
Representative shall have received written notice of the Losses for which
indemnity is sought prior to the expiration of seven (7) years from the Closing
Date. The indemnification rights of the Purchaser for Losses resulting from a
breach of any representation and warranty of the Warrantors with respect to
title to the Shares or the authority of Shaw or the Seller to enter into and
perform this Agreement (collectively, "Shaw Transactional Warranties") or for
Losses resulting from a breach of any covenant or agreement contained herein to
be performed following the Closing shall be effective for all purposes hereunder
for seven (7) years following the Closing. The indemnification rights of Shaw or
Seller for Losses resulting from a breach of any representation and warranty of
Purchaser contained in this Agreement or any certificate or any covenant to be
performed at or prior to the Closing is subject to the condition that the
Indemnitor Representative shall have received notice of the Losses for which
indemnity is sought on or prior to the second anniversary of the Closing Date,
provided that indemnification rights of Shaw or Seller for Losses resulting from
a breach of any representation or warranty of Purchaser with respect to the
authority of Purchaser to enter into and perform this Agreement ("Purchaser
Transactional Warranties") or for Losses resulting from a breach of any covenant
or agreement contained herein to be performed after the Closing shall be
effective for all purposes hereunder for seven (7) years following the Closing.
8.7 Limitations.
(a) The Indemnitor shall be obligated to indemnify the Indemnitee only
when the aggregate of all Losses suffered or incurred by the Indemnitee as
to which a right of indemnification is provided under this Article 8
exceeds two hundred fifty thousand dollars ($250,000)) (the "Threshold
Amount"). After the aggregate of all Losses suffered or incurred by the
Indemnitee exceeds the Threshold Amount, the Indemnitor shall be obligated
to indemnify the Indemnitee only for all such Losses in excess of the
Threshold Amount. The limitation in this Section 8.7(a) shall not apply to
the obligation of Shaw and Seller to indemnify Purchaser as provided in
Section 8.2(a)(vi).
(b) The Indemnitor shall not be liable for damages in excess of the
actual damages suffered by the Indemnitee as a result of the act,
circumstance, or condition for which indemnification is sought. The
liability of the Indemnitor with respect to any Indemnification Claim shall
be reduced by the tax benefit actually realized and by any insurance
proceeds received by the Indemnitee as a result of any Losses upon which
such Indemnification Claim is based, and shall include any tax detriment
actually suffered by the Indemnitee as a result of such Losses or as a
result of the receipt of any payment in respect of such Indemnification
Claim hereunder. The amount of such tax benefit or detriment shall be
determined by taking into account the effect, if any and to the extent
determinable, of timing differences resulting from the acceleration or
deferral of items of gain or loss resulting from such Losses or payment,
and shall otherwise be determined so that payment by the Indemnitor of the
Indemnification Claim, as adjusted to give effect to any such tax benefit
or detriment, will make the Indemnitee as economically whole as is
reasonably practical with respect to the Losses upon which the
Indemnification Claim is based and with respect to the indemnification
payment received with respect to such Indemnification Claim. Any dispute as
to the amount of such tax benefit or detriment shall be resolved by
arbitration as provided in Article 9 of this Agreement.
(c) In no event shall the obligations of Shaw and Seller to indemnify
the Purchaser under this Agreement exceed (i) eight million ($8,000,000)
dollars for all Losses for which a claim for indemnification is asserted on
or prior to July 1, 1999 and thereafter (ii) five million ($5,000,000)
dollars, less the aggregate amount of claims for Losses asserted during the
period from the date hereof to July 1, 1999 three year period following the
date hereof (but not more than five million ($5,000,000) dollars, for all
Losses for which a claim is asserted after July 1, 1999 and prior to the
seventh anniversary of the date hereof), provided that such limitations
shall not apply to the obligation of Shaw and Seller to indemnify Purchaser
with respect to the Shaw Transactional Warranties or as provided in Section
8.2(a)(vi). In no event shall the obligations of Purchaser to indemnify
Shaw or Seller under this Agreement exceed five million ($5,000,000)
dollars, provided that such limitation shall not apply to the obligation of
Purchaser to indemnify Shaw and Seller with respect to the Purchaser
Transactional Warranties or as provided in Section 8.2(b)(iii).
8.8 Cooperation. Shaw, the Seller and Purchaser shall cooperate with each
other in all reasonable respects in connection with the defense of any claim,
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including making available records relating to such claim and furnishing,
without expense, management employees of the party as may be reasonably
necessary for the preparation of the defense of any such claim or for testimony
as a witness in any proceeding relating to such claim; provided, however, that
the foregoing right to cooperation shall not be exercisable by one party in such
a manner as to interfere unreasonably with the normal operations and business of
the other party.
8.9 Survival of Representations and Warranties. All of the representations
and warranties of the parties set forth in Articles 3 and 4 of this Agreement,
and in any certificate delivered pursuant to this Agreement, shall survive the
consummation of the transactions provided for herein for such period of time as
a claim for indemnification for breach of any such representation and warranty
may be made as provided in Section 8.6 above, and shall not be extinguished by
the consummation of such transaction.
8.10 Mitigation of Losses. Any Indemnitees hereunder shall take such action
as shall be commercially reasonable to mitigate and lessen any loss for which
indemnification is sought hereunder.
8.11 Acts Relating to Environmental Liabilities. Ffollowing the Closing
Date, neither the Purchaser nor CI will take any action with respect to the
investigation, monitoring, clean-up or remediation of any Relevant Substance
located on, at or under or relating to the Property or the resolution of any
claim asserted by a third party or governmental authority that constitutes or
may give rise to an Environmental Liability (each a "Post-Closing Environmental
Matter") unless (A) the Purchaser or CI is required to do so by an order of a
governmental authority, or (B) Purchaser or CI shall have received written
advice of its legal counsel that the failure to take such action will subject
the Purchaser or CI to material fines, penalties or other like charges or is
likely to materially increase the Environmental Liability to which the Purchaser
or CI may be subject, or (C) the Purchaser or CI shall have received written
advice of Purchaser's environmental consultant that the failure to take action
is likely to materially increase the level of contamination by Relevant
Substance on, at or under or relating to any Property or is likely to materially
increase the Environmental Liability to which the Purchaser or CI may be subject
and (D) in any of the circumstances described in clauses (A), (B) or (C)
Purchaser or CI shall have notified Shaw as provided in Section 8.4(a) and
afforded to Shaw the right, pursuant to 8.4(a), to undertake the handling or
resolution of such Post-Closing Environmental Matter as if the same were the
subject of a Third Party Claim. Thereafter the parties shall have such rights
and obligations with respect to the Post-Closing Environmental Matter as if the
same were a Third Party Claim notwithstanding that the same may not have arisen
as a claim asserted by a third party (including a governmental authority).
Neither the Purchaser nor CI shall be required to appeal any order of any
governmental authority requiring the taking of any such action or otherwise to
contest any proceeding relating to such matter (whether instituted by a
governmental authority or private party) in any way that the Purchaser or CI, in
their sole good faith judgement, believe to be commercially unreasonable,
unnecessary or an inappropriate use of Purchaser's or CI's assets prior to
giving such notice. The Purchaser agrees that it shall not solicit or importune
any governmental authority to require or perform any investigation, remedial
action, correction of noncompliance or other action unless required by an
Environmental Law, governmental authority, court order or third party settlement
agreement. Nothing herein contained shall limit or restrict CI with respect to,
or remove from CI the right to control, the correction of environmental
conditions on, at or under the Property (whether or not such conditions
constitute a violation of applicable Environmental Law) where neither Purchaser
nor CI intend to seek or do seek indemnification from Shaw pursuant to Section
8.2(a)(v) with respect to such environmental condition.
8.12 Subrogation. To the extent that Indemnitor shall pay or reimburse an
Indemnitee in respect of Losses hereunder, the Indemnitor shall be subrogated to
the rights of such Indemnitee, of any, with respect to the claim, suit,
proceeding or matter for which such Losses are paid or reimbursed. In such
event, the Indemnitee shall, at Indemnitor's reasonable request, cooperate with
Indemnitor, at Indemnitor's expense, and take all reasonable actions to vest in
Indemnitor such rights of subrogation.
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ARTICLE 9
ARBITRATION
9.1 Arbitration. The parties agree that any dispute between or among them
arising out of or based upon this Agreement (other than a dispute arising out of
or based upon Section 5.1 hereof as to which the Purchaser shall have all rights
and remedies available to it at law or in equity with respect to breach or
contemplated breach thereof by Shaw or the Seller), shall be resolved by
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association. Arbitration shall be by a single arbitrator experienced
in the matters at issue and selected by Shaw and a Purchaser in accordance with
the Commercial Arbitration Rules of the American Arbitration Association. The
arbitration shall be held in such place in the metropolitan Atlanta, Georgia
area as may be specified by the arbitrator or any place agreed to by Shaw, the
Purchaser and the Arbitrator. The decision of the arbitrator shall be final and
binding as to any matter submitted under this Agreement; provided, however, that
if necessary, such decision and satisfaction procedure may be enforced in any
court of record having jurisdiction over the subject matter or over any of the
parties to this Agreement. All costs and expenses incurred in connection with
any such arbitration proceeding (including reasonable attorney's fees) shall be
borne by the party against which the decision is rendered, or, if no decision is
rendered, such cost and expense shall be borne equally by Shaw and the Seller as
one party and the Purchaser as the other party. If the decision of the
arbitrator is a compromise, the determination of which party or parties bears
the cost and expenses incurred in connection with any such arbitration
proceeding shall be made by the arbitrator on the basis of the arbitrator's
assessment of the relative merits of the party's position.
9.2 Jurisdiction. Solely for purposes of enforcing the award of any
arbitrator(s) and for matters relating to Section 5.1 hereof, any judicial
proceeding, legal or equitable, which may be brought against a party and
involving this Agreement or any Acquisition Document shall be brought in any
court of competent jurisdiction, state, federal or otherwise, in the State of
Georgia (the "Jurisdictional Courts"), and by execution and delivery of this
Agreement, each party irrevocably and unconditionally (i) accepts for itself and
its properties the exclusive jurisdiction and venue of the Jurisdictional Courts
and (ii) agrees to be bound by any judgment as to it or its properties rendered
by the Jurisdictional Courts and involving this Agreement or any Acquisition
Document or any other related document. Without limiting the foregoing, each
party hereby irrevocably and unconditionally waives, and agrees not to use as a
defense, to the fullest extent permitted by applicable law (x) any objection
which it may now or hereafter have to the laying of jurisdiction or venue in the
Jurisdictional Courts (including any defense that it is not personally subject
to the jurisdiction or venue of the Jurisdictional Courts) and (y) any claim
that any such forum is an inconvenient forum.
ARTICLE 10
GENERAL PROVISIONS
10.1 Fees and Expenses. Except as specifically provided in this Agreement,
the Purchaser, Shaw and the Seller each shall pay their respective fees and
expenses in connection with the transactions contemplated by this Agreement.
10.2 Notices. All notices, request, demands, and other communications
hereunder shall be in writing (which shall include communications by telex and
telecopy) and shall be delivered (a) in person or by courier or overnight
service, (b) mailed by first class registered or certified mail, postage
prepaid, return receipt requested, or (c) by facsimile transmission, as follows:
(a) If to Shaw or the Seller:
Shaw Industries, Inc.
616 East Walnut Avenue
Dalton, Georgia 30721
Attention: President
Telephone: (706) 278-3812
Facsimile: (706) 275-1442
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with a copy (which shall not constitute notice) to:
Ben Laughter, Esq.
Vice President and General Counsel
Shaw Industries, Inc.
616 East Walnut Avenue
Dalton, Georgia 30721
Telephone: (706) 275-1018
Facsimile: (706) 275-1442
(b) If to Purchaser:
Carpet Holdings Limited
c/o CGW Southeast Partners III, L.P.
Twelve Piedmont Center, Suite 210
Atlanta, Georgia 30305
Attention: Bart A. McLean
Telephone: (404) 816-3255
Facsimile: (404) 816-3258
with a copy (which shall not constitute notice) to:
Alston & Bird
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309
Attention: Sidney J. Nurkin, Esq.
Facsimile: (404) 881-7777
or to such other address as the parties hereto may designate in writing to the
other in accordance with this Section 10.2. Any party may change the address to
which notices are to be sent by giving written notice of such change of address
to the other parties in the manner above provided for giving notice. If
delivered personally or by courier, the date on which the notice, request,
instruction or document is delivered shall be the date on which such delivery is
made and if delivered by facsimile transmission or mail as aforesaid, the date
on which such notice, request, instruction or document is received shall be the
date of delivery.
10.3 Assignment; Binding Effect. (a) At the Closing, Purchaser may assign
all of its rights to be indemnified as provided in Article 8 to any lender or
lenders providing financing to Purchaser or either Company subject to all of the
provisions hereof and all rights, remedies and defenses that Shaw or the Seller
could assert against Purchaser. After the Closing, Purchaser may not assign its
interest in this Agreement to any person or entity.
10.4 No Benefit to Others. The representations, warranties, covenants, and
agreements contained in this Agreement are for the sole benefit of the parties
hereto, and in the case of Article 8 hereof, the Purchaser and they shall not be
construed as conferring any rights on any other persons.
10.5 Headings, Gender, and "Person". All section headings contained in this
Agreement are for convenience of reference only, do not form a part of this
Agreement and shall not affect in any way the meaning or interpretation of this
Agreement. Words used herein, regardless of the number and gender specifically
used, shall be deemed and construed to include any other number, singular or
plural, and any other gender, masculine, feminine, or neuter, as the context
requires. Any reference to a "person" herein shall include an individual, firm,
corporation, partnership, trust, governmental authority or body, association,
unincorporated organization or any other entity.
10.6 Counterparts. This Agreement may be executed in two (2) or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one counterpart has been signed by each party and
delivered to the other party hereto.
10.7 Integration of Agreement. This Agreement supersedes all prior
agreements, oral and written, between the parties hereto with respect to the
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subject matter hereof. Neither this Agreement, nor any provision hereof, may be
changed, waived, discharged, supplemented, or terminated orally, but only by an
agreement in writing signed by the party against which the enforcement of such
change, waiver, discharge, or termination is sought.
10.8 Time of Essence. Time is of the essence in this Agreement.
10.9 Governing Law. This Agreement shall be construed under the laws of the
State of Georgia, United States of America.
10.10 Partial Invalidity. Whenever possible, each provision hereof shall be
interpreted in such manner as to be effective and valid under applicable law,
but in case any one or more of the provisions contained herein shall, for any
reason, be held to be invalid, illegal, or unenforceable in any respect, such
invalidity, illegality, or unenforceability shall not affect any other
provisions of this Agreement, and this Agreement shall be construed as if such
invalid, illegal, or unenforceable provision or provisions had never been
contained herein unless the deletion of such provision or provisions would
result in such a material change as to cause completion of the transactions
contemplated hereby to be unreasonable.
10.11 Investigation. Any inspection, preparation, or compilation of
information or Schedules, or audit of the inventories, properties, financial
condition, or other matters relating to the Companies and the Subsidiaries
conducted by or on behalf of Purchaser pursuant to this Agreement shall in no
way limit, affect, or impair the ability of Purchaser to rely upon the
representations, warranties, covenants, and agreements of Shaw and the Company
set forth herein. Disclosure made in any Schedule shall be a valid and effective
disclosure for all purposes relating to this Agreement, provided however, no
disclosure contained in any Schedule shall be deemed to qualify or limit, or in
any respect constitute disclosure with respect to, Section 3.20 or any
representation or warranty contained therein unless such disclosure specifically
refers to the representation and warranty contained in Section 3.20 intended to
be so qualified or limited or with respect to which disclosure is intended.
ARTICLE 11
DEFINITIONS
In addition to terms defined in the body of this Agreement, capitalized
terms used herein shall have the meanings set forth below:
"Accounting Date" means December 31, 1997.
"Accounting Standards" means the statements of standard accounting practice
referred to in section 256 of the Companies Act 1985 issued by the Accounting
Standards Board or such other body as may be prescribed thereunder by the
Secretary of State from time to time, including, without limitation, the
statements of standard accounting practice formerly issued by the Accounting
Standards Committee and since adopted by the Accounting Standards Board and any
financial reporting standards issued by the Accounting Standards Board or such
other body as aforesaid.
"Accounts" means the audited accounts of each Company and Subsidiary for
the financial year which ended on the Accounting Date, comprising in each case a
balance sheet, a profit and loss account, notes and directors' and auditors'
reports, prepared by Arthur Andersen.
"Accounts Receivable" means all accounts, notes and other receivables of
the Company.
"Affiliate" (whether or not capitalized in this Agreement) means with
respect to any person, any other person that directly, or indirectly through one
or more intermediaries, controls or is controlled by or is under common control
with, such person.
"Computer Equipment" means all computer hardware, microprocessors (whether
embedded in a computer or any other piece of equipment) associated and
peripheral equipment and firmware and any other items that connect with any or
all of them which in each case are used in any of the Companies' or the
Subsidiaries' business as at the date of this Agreement.
"Computer Software" means all computer software owned or used by any of the
Companies or the Subsidiaries which is material to the conduct of the business
as carried on by either Company or the Subsidiaries as at the date of this
Agreement.
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"Contract" means any agreement whether conditional or unconditional which
imposes legally binding obligations on either Company or any Subsidiary.
"Environmental Liability" means any obligation or liability of the
Companies or any Subsidiary incurred in connection with compliance or attempted
compliance with Environmental Laws, (including the reasonable costs of
investigation, monitoring, clean-up or remediation of Relevant Substances), and
any obligation or liability of the Companies or any Subsidiaries to any
governmental agency or authority or to third parties arising out of or based
upon any Environmental Activity, in each case only to the extent such liability
or obligation arises from events, conditions or issues occurring or existing on
or before Closing. Notwithstanding the foregoing, "Environmental Liability"
shall not include (i) any and all consequential losses and liabilities of
whatever nature, including without limitation, any reduction or diminution in
the value of any Property, the business or the assets of the Companies or any
Subsidiaries, (ii) any liability or obligation which is contingent only unless
and until such contingent liability becomes an actual liability, or (iii) any
liability or obligation with respect to any of the matters specifically
identified in Schedule 3.14 as constituting existing violations of existing
Environmental Law or requiring immediate remedial action.
"Equipment" means all machinery, equipment, tools, computers, terminals,
computer equipment, office equipment, business machines, telephones and
telephone systems, parts, accessories, and the like, wherever located, and any
and all warranties of third parties with respect thereto.
"Furniture and Fixtures" means all furniture, fixtures, and leasehold
improvements wherever located, and any and all assignable warranties covering
such furniture, fixtures, and leasehold improvements owned by the Company or in
which the Company has an interest.
"GHL Loan Agreement" means the dollar denominated loan agreement dated
February 7, 1997 made between (1) CI and (2) Georgia Holdings Limited pursuant
to which CI procured Shaw to make an advance of $1,531,566 to Georgia Holdings
Limited.
"GHL Loan Notes" means $1,468,434 of secured loan notes created by Georgia
Holdings Limited by an instrument dated February 7, 1997.
"GHL Security Interests" means a fixed and floating charge created by
Georgia Holdings Limited dated February 7, 1997 to secure the repayment of all
amounts due and payable pursuant to the GHL Loan Agreement and the GHL Loan
Notes together with a trust deed February 7, 1997 pursuant to which CI was
appointed as security trustee.
GHL Security Trust Deed" means the trust deed dated February 7, 1997
referred to in the definition of "GHL Security Interests".
"Intellectual Property" means all patents, designs, art work, labels,
designs, specifications, designs-in-progress, formulations, Know-How,
prototypes, inventions, trademarks, trade names, trade styles, service marks,
and copyrights; all registrations and applications therefor, both registered and
unregistered, foreign and domestic; all trade secrets, technology or processes;
all computer software (including documentation and related object and, if
applicable, source codes); and all confidential or proprietary information and
all other intellectual or industrial property rights whether or not the same are
subsisting in the United Kingdom or any other part of the world together with
all or any goodwill relating or attached thereto and all renewals or extensions
thereto.
"Inventory" means all raw materials, work-in-progress, finished goods,
goods held for resale, spare parts, waste materials, scrap, samples, promotional
literature, and supplies wherever located.
"Know-How" means all know-how, confidential information, trade secrets
experience, drawings, designs, source code, programmer's notes, flow charts,
other technical information and information used by any of the Companies or the
Subsidiaries in carrying on its business in the manner in which it was carried
on immediately prior to Closing, including the benefit of obligations of
confidentiality in relation thereto however arising;
"Knowledge of the Warrantors" and words of similar import, including
"aware," mean an actual awareness of a fact or other matter (without the making
of any independent inquiry or investigation of any person, firm. corporation,
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unincorporated association, agency, governmental or quasi-governmental
department or authority) of the executive officers of Shaw and Archie Barfield,
Roy Montag (with respect to human resource matters), and Michael Kennedy (with
respect to financial and administrative matters).
"Laws" means all or any applicable law (whether criminal, civil or
administrative), common law, judgment, court order, statute, statutory
instrument, regulation, directive, European Community decision (insofar as
legally binding), bye-law, treaty, government circular, or instruction or
decision of any competent regulatory body;
"Legal Requirement" means any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, rule, regulation, statute, or treaty.
"Material Adverse Effect" means a material adverse effect on the business
or financial condition of the Companies and the Subsidiaries, taken as a whole.
"Permits" means, to the extent permitted under applicable law or
regulation, all licenses, franchises, permits, certificates, consents, and other
governmental or quasi-governmental authorizations of the Company.
"Permitted Security Interests" means (i) rights of retention of title and
liens which are implied by law or custom of trade or are incorporated in the
standard terms of contract of another contracting party and which arise in any
such case in the ordinary course of trading; and (ii) rights of set off arising
by operation of law or by contract in the ordinary course of trading; "Products"
means any and all of the products manufactured, sold, licensed, developed
marketed or distributed any of by the Companies or the Subsidiaries;
"Property" means the property specified in Schedule 3.10.1 (and, if more
than one, each such property) and each and every part of such property;
"Security Interests" means any mortgage, charge, assignment by way of
security, hypothecation, pledge, declaration of trust, lien, right of set off or
combination of accounts or any other security interest of whatsoever nature,
howsoever created or arising other than a Permitted Security Interest;
"Vehicles" means all motor vehicles, trucks, forklifts, and other rolling
stock, and all warranties of third parties related thereto.
"West Yorkshire" means West Yorkshire Industrial Estates (Management)
Limited, company number 1570526.
(Signatures appear on the following page)
34
<PAGE>
IN WITNESS WHEREOF, each party hereto has caused this Agreement to be
executed on its behalf by its duly authorized officer, all as of the day and
year first above written.
CARPET HOLDINGS LIMITED
By:
......................................
Name:
......................................
Title:
......................................
SHAW INDUSTRIES, INC.
By:
......................................
Name:
......................................
Title:
......................................
SHAW UK HOLDINGS LIMITED
By:
......................................
Name:
......................................
Title:
......................................
::ODMA\PCDOCS\ATL\203325\1
