-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ba/ppAtrydUPbYc12NdlCvYtER+2TltMNYmlPb8ADL+V4M/P3bk2FOd/TU3ncNdz iG0kAYeqqZw+O2TvqpM0CA== 0000230602-98-000006.txt : 19980402 0000230602-98-000006.hdr.sgml : 19980402 ACCESSION NUMBER: 0000230602-98-000006 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19980102 FILED AS OF DATE: 19980401 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRIANGLE PACIFIC CORP CENTRAL INDEX KEY: 0000230602 STANDARD INDUSTRIAL CLASSIFICATION: LUMBER & WOOD PRODUCTS (NO FURNITURE) [2400] IRS NUMBER: 942998971 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-22138 FILM NUMBER: 98585583 BUSINESS ADDRESS: STREET 1: 16803 DALLAS PKWY CITY: DALLAS STATE: TX ZIP: 75266-0100 BUSINESS PHONE: 9729313000 MAIL ADDRESS: STREET 1: 16803 DALLAS PKWY CITY: DALLAS STATE: TX ZIP: 75266-0100 10-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended January 2, 1998 ---------------------------------------------- [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ------------------ ------------------ Commission File Number: 0-22138 ----------------------------------------------- Triangle Pacific Corp. - ----------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 94-2998971 - ----------------------------------------------------------------------- State or other jurisdiction of (I.R.S. Employer incorporation or organization Identification No.) 16803 Dallas Parkway, Dallas, Texas 75248 - ----------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (214) 887-2000 -------------------- Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to section 12(g) of the Act: Common Stock, Par Value $.01 per share - -------------------------------------- (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO ------ ------ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] At March 1, 1998, the aggregate market value of the registrant's common stock held by non-affiliates was $515,223,972. The number of shares outstanding of the registrant's Common Stock, par value $.01 per share, as of March 1, 1998: Common Stock - 14,745,345 shares. DOCUMENTS INCORPORATED BY REFERENCE Part III of this Form 10-K incorporates certain information by reference from the registrant's Proxy Statement to be issued in connection with its Annual Meeting of Shareholders to be held May 6, 1998. PART I Item 1. Business -------- The Company is a Delaware corporation organized in February 1986 for the purpose of acquiring Triangle Pacific Corp., a New York corporation ("Old Triangle"), in a leveraged buyout transaction completed in May 1986. In September 1988, TPC Holding Corp. ("Holding") acquired the Company in a second leveraged buyout transaction pursuant to which the Company became a wholly- owned subsidiary of Holding. On June 8, 1992, the Company successfully completed a capital restructuring (the "1992 Restructuring") pursuant to which substantially all of the Company's outstanding long-term indebtedness, redeemable preferred stock and common stock were exchanged for new debt with lower interest rates and new common stock and Holding was merged into the Company. The Company filed two registration statements with the Securities and Exchange Commission in 1993 and sold to the public 7,939,750 shares of the Company's Common Stock and $160 million aggregate principal amount of 10-1/2% Senior Notes due 2003 (collectively, "the Offerings"). The net proceeds of the Offerings together with borrowings under a new $90 million credit facility (the "Credit Facility") were used (i) to repay the entire unpaid balance under the Company's previously-existing senior debt financing agreements, redeem certain previously outstanding debentures and pay related accrued interest, for a total of approximately $227 million, and (ii) for working capital and general corporate purposes. The Company's operations are conducted through a single business segment which consists of the manufacture and distribution of building products. The Company manufactures and sells hardwood flooring and other flooring and related products and manufactures and distributes kitchen and bathroom cabinets. The Company's products are used primarily in residential new construction and remodeling. The Company's products are also used for commercial applications such as retail stores and restaurants. The Company's business is seasonal, with demand for its products generally highest between April and November. Presented below is a summary of sales results for each of the fiscal years 1991 through 1997.
1997 1996 1995 1994 1993 1992 1991 ------------------------------------------------------------------- (in millions) Net Sales: Flooring $ 469.1 $ 336.4 $ 261.8 $ 244.0 $ 202.0 $ 152.9 $ 117.2 Cabinets 183.8 197.9 197.1 166.2 144.3 139.9 138.9 ------ ------ ------ ------ ------ ------ ------ Total Net Sales $ 652.9 $ 534.3 $ 458.9 $ 410.2 $ 346.3 $ 292.8 $ 256.1 ====== ====== ====== ====== ====== ====== ======
Bruce, Premier, Hartco, Robbins, Coastal Woodlands, Crystalguard, Expressions, Flexform, Herringstrip, Jewels Of Nature, Kennedale, Kingsford, Natural Reflections, Pattern Plus, Plantation, Somerset, Traffic Zone, Wearmaster, Aspen, Hampton, Quadric, Tiara, Tudor and Vantage are Trademarks or Registered Trademarks of Triangle Pacific Corp. Industry Overview - ----------------- The Company is a leading manufacturer of consumer wood products for both home and commercial use. The Company is the largest and best known manufacturer of hardwood flooring in the world and one of the largest manufacturers of kitchen and bathroom cabinets. The Company produces a complete line of hardwood flooring products and believes that it is generally recognized for its superior quality and service. The Company offers five distinct flooring brand names: Bruce, Hartco, Robbins, Premier, and Traffic Zone. The Company produces kitchen and bathroom cabinets under two brand names: IXL and Bruce. The Company estimates that new construction accounts for approximately 30 - - 40% of sales, with remodeling or replacement generating the remaining portion. Residential new construction activity is more cyclical than remodeling activity, which has historically been relatively stable. Sales of hardwood flooring in the United States are growing at a rate of 8% per year, more than twice as fast as the entire floorcovering industry as a whole. The Company believes that the growth of hardwood flooring sales is due to increased consumer preference for the aesthetic appeal of hardwood flooring and technological advances in the production, installation and maintenance of hardwood flooring, which allows wood flooring to compete favorably in total cost with other flooring products. Cabinet manufacturing is a highly fragmented industry with competitors of widely varying production capacities, distribution capabilities and financial resources. In recent years, contraction in the industry has resulted in smaller competitors leaving the market and more aggressive cost controls and marketing programs being implemented by the remaining participants. The Kitchen Cabinet Manufacturing Association estimates that there are 8,000 manufacturers of kitchen and bathroom cabinets competing for approximately 50% of the total cabinet market. The balance of the market is supplied by trim carpenters and job-site cabinet makers. The market is dependent on new home construction and remodeling activity. The entire cabinet manufacturing industry is characterized by excess capacity. In the late 1970's, new construction expanded to meet the demands of more than two million housing starts annually, plus remodeling. U.S. housing starts have not exceeded 1.85 million units since 1979. Price competition is severe, due principally to the excess industry capacity. Products and Product Development - -------------------------------- With both flooring and cabinet products, the Company continually addresses the changing consumer demands for products used in the home, including color trends in the furniture and home decorating industry, durability of the products and price points for competing products. The Company offers approximately 1,200 varieties of hardwood flooring and related products in a multitude of wood species, grades, sizes, styles and finishes. The Company's hardwood flooring products are generally available in various widths and lengths and are differentiated in terms of quality and price based primarily on whether the product is finished or unfinished and on the grade of the raw materials used to produce the product. The Company has been a leader in developing a wide variety of new flooring products, including (i) 5/16" thick solid parquet flooring, (ii) 3/8" thick laminated flooring, (iii) 3/8" thick engineered, square-edge, pre-finished flooring, (iv) 3/8" thick acrylic-impregnated flooring for commercial applications (all of the above for glue-down installation), (v) 3/4" thick square-edge, pre-finished flooring and (vi) most recently, 5/16" thick solid strip flooring. The Company believes that new product development has enabled it to increase its sales and has contributed to the overall growth of hardwood flooring since the mid-1970s. The Company's product innovations have made hardwood flooring a viable alternative for a variety of floorcovering applications. The Company has been instrumental in the development of thinner hardwood flooring products which can be glued to the concrete slab foundations increasingly used in new home construction. Installation of 3/4" thick hardwood flooring over concrete slabs requires the construction of a false floor above the slab to which the hardwood flooring can be nailed, thereby increasing installation time and expense. The Company has developed 5/16" thick flooring products, which can be glued or stapled to a variety of surfaces, eliminating the need for a false floor. The development of 3/8" thick engineered flooring (consisting of multiple layers of oak veneer, glued and pressed together), which can be glued to a wood or concrete sub-floor, further expanded the uses for hardwood flooring. The dimensional stability of engineered flooring permits its installation in kitchens and basements where the presence of moisture had previously rendered hardwood flooring impractical. In 1995, the Company introduced Natural Reflections, a 5/16" thick solid oak pre-finished strip. This was developed as an alternative to the traditional 3/4" thick unfinished strip that is the primary commodity product of the hardwood flooring industry. This thinner strip offers many benefits. It approximately doubles the yield of product from raw material, saving resources by using fewer trees in the manufacturing process. Because it contains less than half the wood in a traditional 3/4" thick strip, it is less expensive to make, less expensive to ship, and easier and faster to install. Also in 1995, the Company introduced a new product group, high pressure laminate flooring. This product, which is called Traffic Zone, features a CrystalGuard melamine wear-layer surface over a high-density fiberboard core. It offers superior wear characteristics in a variety of overlays that simulate fine wood finishes as well as marble, granite, and other materials. Traffic Zone is designed for consumers who want highly durable, easy-care, hard surface floorcovering as an alternative to stone, ceramic tile, sheet vinyl, vinyl tile and carpet. The Company manufactures kitchen and bathroom cabinets in approximately 100 different styles and colors and continues to develop new product styles. While the styles of the Company's cabinets vary from other manufacturers' brands, kitchen and bathroom cabinet construction is fundamentally the same throughout the industry. Differences in the price and quality of the Company's cabinets result from variations in basic materials (e.g., solid oak, plywood, particleboard or fiberboard doors), the type and quality of exterior and interior finish, the quality of the hardware and other features such as adjustable shelves and interior storage aids. During the latter part of 1994 and throughout 1995, the Company revamped its product line to improve marketability and mix of offerings. Among the many innovations that have emerged from this effort is a new cabinet line called Coronet, which is made of Plantation hardwood from Malaysia. Months of testing and research preceded the use of this new raw material, which produces an end product of the same durability and styling as other woods, but which can be sold at a lower price point. In its continuing effort to offer more value to builders and end-users, the Company introduced the Aspen Collection, a line of thermofoil-process products which feature high-quality vinyl laminates applied to fiberboard. Through innovative manufacturing techniques, the Company was able to produce this popular line, available in maple and white finishes, at prices attractive to the townhouse and single-family housing market. In 1996, the Company introduced Quadric. Unlike most thermofoil cabinets, Quadric features truly square corners in both doors and drawer fronts, achieved by extra steps in milling that duplicate the look of fine custom cabinetry at very competitive prices. Also introduced in 1996 were four new door styles: Tiara, Tiara Arched, Tudor and Tudor Arched. As of January 1996, the Company elected to discontinue the sale of lumber, which had remained a low-profit item, and to consolidate building products into its cabinet operations. Beginning with the first quarter of 1996, the financial results of this operation have been combined with those of cabinets. One of the benefits of the Hartco acquisition in 1996 was a sophisticated research and development center in Oneida, Tennessee, where the Company has consolidated its R & D efforts. The Company believes this facility will further enhance its ability to stay on the leading edge of product, manufacturing and engineering technology. Manufacturing - ------------- The Company manufactures its 3/4" thick solid oak hardwood flooring products at its plants in Nashville and Jackson, Tennessee, Beverly, West Virginia, West Plains, Missouri, Warren and Searcy, Arkansas,and Oneida, Tennessee. The Beverly, West Virginia plant also produces 5/16" thick solid strip pre-finished flooring. The Company manufactures its 3/8" thick engineered hardwood flooring products at its plants in Center, Texas, Port Gibson, Mississippi, Statesville, North Carolina, Warren, Arkansas and Somerset, Kentucky. The Center plant produces sufficient 1/8" thick oak veneer to supply approximately one-half of its veneer requirements. The Port Gibson, Mississippi plant supplies its own veneer requirements and most of the remainder of the Center plant's veneer requirements and a portion of the veneer requirements for the Statesville plant for the production of 3/8" thick engineered products. The Company manufactures its 5/16" thick solid parquet products at its plants in Jackson and Oneida, Tennessee in addition to the production of 3/4" thick product at these locations. The 1994 expansion of its Beverly, West Virginia, and Port Gibson, Mississippi, plants gave the Company additional manufacturing capacity, along with the acquisition of Premier Wood Floors in Statesville, North Carolina. Following the acquisition, the Company improved productivity in Premier's operations and broadened the Premier product line to include 3/4" thick solid strip and 5/16" thick solid parquet. Further efficiencies were achieved at all plants. In 1996, the Company acquired Hartco Flooring Company. This acquisition added manufacturing capacity to the Company without incurring larger capital expenditures required for new construction. In 1997, the Company acquired the residential hardwood flooring operations of Robbins, Inc., all of which are in Arkansas. This acquisition further added manufacturing capacity without incurring larger capital expenditures required for new construction. Raw materials for the hardwood flooring products produced at the Nashville, Jackson, Beverly, West Plains, Oneida, Somerset, Warren and Searcy plants consist primarily of rough cut oak lumber. Each plant obtains lumber from local independent sawmill operators, purchasing entire truckloads of ungraded, mixed specie lumber. The Company maintains an inventory of purchased lumber which is sufficient for approximately three to four months of operations. The quality and efficiency of lumber purchasing and grading operations are important determinants of manufacturing yields and productivity. Purchased lumber is stacked for drying in the open air for 90 to 120 days, and then placed in dry kilns for approximately five to seven days to reduce moisture content. Where necessary, the Company operates pre-drying kilns, which shorten the required open-air drying time. The Company's drying processes are another important determinant of satisfactory product yields. Following drying, the flooring-grade lumber is cut into various sizes of strip, plank and parquet flooring. The products are then sanded and, in some cases, beveled. A majority of the Company's products are pre-finished with a urethane or combination stain and wax finish. Pre-finished products are more durable and do not require a time-consuming sanding and finishing process at the installation site. Raw materials for the engineered hardwood flooring products manufactured at the Company's plants in Center, Texas, Port Gibson, Mississippi and Warren, Arkansas consist of oak logs which are purchased primarily from independent loggers located within about 100 miles of the respective plants. Purchased logs are stored in soaking ponds or under sprinklers until needed, and then debarked, soaked in hot water or steamed, cut to specific lengths, loaded into a lathe, and peeled to produce sheets of thin oak veneer. The Company employs advanced veneer manufacturing processes which substantially increase material yields, thereby reducing costs. The Company also purchases veneer from independent suppliers. Layers of veneer are then pressed into plywood which is cut into strip, plank and parquet hardwood flooring and then pre-finished. The total conversion time for engineered products, from log to finished product, is approximately one week. The Company also treats a portion of its 3/8" thick engineered product with an acrylic impregnating process to produce its Wear Master line of commercial flooring. Hartco produces Pattern Plus, an acrylic-impregnated engineered product at its Oneida plant. The Statesville, N.C. plant purchases veneer from outside sources and also obtains veneer from the Port Gibson plant, which is converted into engineered products. The Company operates four cabinet manufacturing plants. These regional plants enable the Company to compete with local and regional manufacturers on the basis of the cost of freight, speed of delivery and service to customers. Cabinet plant inventories consist of raw materials, component parts and a limited amount of work-in-process. Raw materials utilized by the plants consist of sheet stock of plywood, particleboard or fiberboard, and component parts consist of dimension parts (front frame parts, doors and drawer fronts), finished end panels, finishing materials and hardware. In the cabinet manufacturing operations, front frame parts, doors and drawer fronts are sanded smooth and color stained and finished. Then, end panels, tops, bottoms and shelves are glued and stapled to the front frames, drawers are assembled to drawer fronts and hardware is attached. The completed cabinet is inspected, packed and staged for shipment. Sheet stock is a commodity product purchased from a variety of suppliers. The Company obtains a portion of its front frame parts from its manufacturing facility located at the hardwood flooring plant in Jackson, Tennessee. The Company discontinued the production of cabinet doors and drawer fronts at its Jackson dimension plant at the end of February 1997. Doors, drawer fronts, finishing materials and hardware are purchased from several suppliers. The Company's continuous advances in the area of technology and manufacturing are the basis for its ability to improve yields from raw material and make products that are more appealing to consumers, easier to install, and more cost competitive. This year again, the Company made even greater improvements in labor efficiency and productivity as it sought ways to counter the difficult economic and market conditions. The Company is not dependent on any single supplier for any of its raw materials or component parts. The Company believes its sources of supply are adequate to meet its needs. Imports from foreign suppliers, which account for less than ten percent of the Company's raw materials and components, consist of wood veneer, laminated veneer door panels and certain hardware items. The following table sets forth certain information concerning the manufacturing facilities operated by the Company.
Owned/ Location Leased Product - -------- ------ ------------------------ Nashville, TN Owned 3/4" thick strip and plank; pre-finished, unfinished West Plains, MO Owned 3/4" thick strip; pre-finished, unfinished Beverly, WV (1) Leased 5/16" thick solid strip; pre-finished and 3/4" thick strip; pre-finished, unfinished Jackson, TN (2) Owned 5/16" thick solid parquet; pre-finished, unfinished 3/4" thick strip; unfinished Center, TX (3) Owned 3/8" and 1/4" thick engineered strip, plank and parquet; pre-finished, unfinished Port Gibson, MS (3) Owned 3/8" thick engineered strip, plank and parquet; pre-finished, unfinished Statesville, NC Owned 3/8" thick engineered strip, plank, pre-finished, unfinished Oneida, TN Owned 5/16" thick solid parquet; pre-finished, unfinished 3/4" thick strip; unfinished Somerset, KY Owned 3/8" thick engineered strip, plank, pre-finished, unfinished Warren, AR Owned 3/4" thick strip and plank; pre-finished, unfinished
Owned/ Location Leased Product - -------- ------ ------------------------ Warren, AR Owned 3/8", 1/2" and 9/16" thick engineered strip, plank and parquet; pre-finished, unfinished Searcy, AR Owned 3/4" thick unfinished strip Auburn, NE Owned Kitchen and bathroom cabinets McKinney, TX Owned Kitchen and bathroom cabinets Morristown, TN Owned Kitchen and bathroom cabinets Thompsontown, PA Owned Kitchen and bathroom cabinets
[FN] - ------------------ (1) During 1995, the operating lease agreement was amended to allow for a purchase option of $1 until 2018. The Company recorded the present value of the remaining future minimum lease payments as a capitalized lease asset and related capitalized lease obligation. (2) The Jackson plant also manufactures kitchen cabinet front frame parts used in cabinet production. (3) The Center and Port Gibson plants also produce 1/8" thick veneer, which is used in the manufacture of 3/8" thick engineered products at these plants and at the Statesville, N.C. plant. Sales and Marketing - ------------------- Flooring sales are made to independent wholesale floorcovering distributors located throughout the United States and a number of other countries. Most distributors handle a diverse line of floorcovering products in addition to hardwood flooring. The Company's distributors sell their products to retail floorcovering dealers, installation contractors, builders, remodelers and retail home center stores. The Company believes that new home construction and remodeling account for approximately 40% and 60%, respectively, of its flooring sales. The Company distributes its cabinets directly from the factories and also through Company-operated distribution centers in major markets across the country. These centers, which cater largely to builders and remodeling contractors, generate more than 40% of total cabinet sales. The Company-operated distribution centers are also used to support sales to major builders and retail home centers by providing prompt replacements for lost or damaged cabinets and delivery and storage for truckload quantities of cabinets pending staged deliveries to job sites. The Company believes that its distribution centers are an important factor in maintaining and increasing its sales, and intends to open additional distribution centers in new geographic markets as conditions warrant. The Bruce trademark is a valuable asset because of its significant brand name recognition. Based on independent surveys, the Company believes that the Bruce name is one of the best recognized consumer brand names of any floorcovering product. Sales and marketing efforts for Bruce flooring are designed to heighten Bruce's brand name recognition among end users. The Company advertises its Bruce flooring products in national and regional publications including House Beautiful, Better Homes and Gardens, Sunset, Southern Living and others. The addition of Hartco's distributors in 1996 and Robbins' distributors in 1997 expanded our overall presence in the floorcovering marketplace. This expanded access to the market is strengthened by our ability to offer five distinct brands - Bruce, Hartco, Robbins, Premier and Traffic Zone. The Company has developed Bruce product displays, more than 55,000 of which have been placed in floorcovering dealer showrooms across the U.S. Additionally, Hartco, Premier and Traffic Zone have placed more than 1,800, 3,200, and 4,500 displays, respectively, in floor covering dealer showrooms. These product displays are available in a variety of sizes designed to accommodate the varying floor spaces available in dealer showrooms. The Company has also developed marketing programs specifically tailored to retail home center stores and commercial users and has developed displays to demonstrate the ease of do-it-yourself installation of hardwood floors. The do-it-yourself installation displays have been placed in floorcovering retailers, lumber yards, home centers and other do-it-yourself specialty stores. Management believes that both the product displays and the do-it- yourself installation displays are important sales promotion devices. The Company operates a training facility at its Nashville plant to give its floorcovering distributors, dealers and contractors training in the sale, installation and maintenance of hardwood and high pressure laminate floors. Providing this training results in better educated resellers and installers, which the Company believes should enhance their ability to sell more flooring products and improve consumer satisfaction with the installed products. Flooring salespersons are assigned geographical sales territories. In addition to making direct sales to independent distributors, the sales force assists distributors in broadening their market penetration by making joint sales calls on dealers, conducting installation training for distributors and their customers, and advising on the use of advertising and special product promotions. Salespersons earn bonuses, in addition to their salaries, based on volume and sales mix. The cabinet sales force is one of the largest in the cabinet industry, currently employing approximately 204 salespersons. The sales force makes direct sales and service calls on builders, independent distributors and retail home center stores, and offers kitchen design, cabinet installation and cabinet display and marketing advice to retail home center stores and independent distributors. Most sales personnel are affiliated with one of the Company's distribution centers and are responsible for sales to all customers within their sales area including sales of cabinets directly by the plant. The Company maintains a competitive salary base and provides performance incentives by compensating its sales force with bonuses tied to volume and profitability. Competition - ----------- While the Company is currently the largest manufacturer of hardwood flooring in the world, it is a small part of the highly competitive floorcovering market. The floorcovering market includes companies which are substantially larger in sales and financial resources than the Company. Also the domestic floorcovering industry is facing greater competition from imported flooring products. The floorcovering industry, which includes carpet, sheet vinyl, vinyl tile, hardwood, high pressure laminate, ceramic tile and natural stone is highly competitive. The principal competitive factors in floorcovering are aesthetic appeal, price, durability and ease of installation and maintenance. Hardwood flooring is generally more durable than other floorcoverings. Thus, although the average selling price of hardwood flooring is higher than that of the selling price of most other floorcoverings, the Company believes that the overall cost is competitive after taking into accouont average product life, maintenance expenses and removal and replacement costs. The Company believes it competes favorably based on the high quality of the Company's products and the additional product support services offered by the Company and on the Company's network of independent distributors, its production of a complete line of hardwood flooring products, its innovative product development and manufacturing technology, and its well-known brand names and trademarks. The Company is one of the largest manufacturers of kitchen and bathroom cabinets in the U.S. The cabinet industry is a mature, highly competitive, regionalized and highly fragmented industry with thousands of cabinet makers competing primarily on a local basis. There is a relatively high manual labor content in cabinet products. Because of the low capital requirements for cabinet assembly, it is relatively easy and inexpensive for small cabinet makers to enter the industry as manufacturing competitors. In addition, high transportation costs limit the area to which a manufacturer can ship cabinets and still remain competitive. This has led the Company, and more recently, some of its larger competitors, to open regional manufacturing plants and distribution centers. The Company's four regional manufacturing plants and 41 Company-operated distribution centers are important factors in the Company's ability to maintain cost and price competitiveness with local and regional manufacturers. Due to excess manufacturing capacity, the cabinet industry has been subject to severe price competition. Other competitive factors include quality of product, production capacity and speed of delivery. The Company believes it competes favorably because of its breadth and quality of product offerings, and its production capacity, regional manufacturing facilities, national sales force and distribution capabilities. Backlog - ------- The Company generally sells its flooring products from inventories on hand. The Company produces its cabinets primarily in response to firm orders and, to a lesser extent, to maintain a working inventory at distribution centers operated by the Company. The Company generally ships its cabinets within a short time (e.g., one week) after receipt of an order. Accordingly, the dollar amount of backlog orders believed to be firm is not significant or indicative of the Company's future sales and earnings. Employees - --------- As of January 2, 1998, the Company employed approximately 5,404 persons. The Company has entered into collective bargaining agreements with hourly employees at six of its plants, covering in the aggregate approximately 2,091 employees. Management considers its employee relations to be satisfactory. Environmental Matters - --------------------- The Company's operations are subject to extensive federal, state and local laws and regulations relating to the generation, storage, handling, emission, transportation and discharge of materials into the environment. Permits are required for certain of the Company's operations, and these permits are subject to revocation, modification and renewal by issuing authorities. Governmental authorities have the power to enforce compliance with their regulations, and violations may result in the payment of fines or the entry of injunctions, or both. The Company does not believe it will be required under existing environmental laws and enforcement policies to expend amounts which will have a material adverse effect on its results of operations or financial condition. However, the requirements of such laws and enforcement policies have generally become stricter in recent years. Accordingly, the Company is unable to predict the ultimate cost of compliance with environmental laws and enforcement policies. ITEM 2. PROPERTIES The Company's principal manufacturing facilities are described under "Manufacturing" above. Management believes that the Company's plants and properties are generally well-maintained and in good operating condition. The Company maintains blanket property insurance coverage on all its properties with aggregate limits of $100 million. The Company is also insured for losses arising from loss of inventory, business interruption and certain extra expense. ITEM 3. LEGAL PROCEEDINGS The Company is not a party to any material pending legal proceedings. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. Executive Officers of the Registrant - ------------------------------------ Set forth below as of March 1, 1998 are the names, ages and principal occupations of the executive officers of the Company, as well as certain other information concerning their business experience. Name and Positions held Principal Occupation with the Company and Other Information ----------------------- --------------------- Floyd F. Sherman Mr. Sherman has served as Chairman Chairman of the Board of of the Board and Chief Executive Directors, and Chief Officer since July, 1992. Prior to Executive Officer November, 1994 he served as President of the Company since 1981. Prior to 1981, he served as Executive Vice President of the Company. Mr. Sherman is 58 years old and became a director of the Company in 1982. M. Joseph McHugh Mr. McHugh has served as President Director, President and Chief Operating Officer of the and Chief Operating Company since November, 1994. Officer Prior thereto, he served as Senior Executive Vice President and Treasurer of the Company since 1981. Prior to 1981, he served as Executive Vice President of the Company. He became a director of the Company in 1986. Mr. McHugh is also a director of Pillowtex Corporation. He is 60 years old. Robert J. Symon Mr. Symon has served as Executive Executive Vice President Vice President, since February 1998. Prior thereto, he served as Executive Vice President, Treasurer and Chief Financial Officer since November 1994. Prior thereto, he served as Vice President - Controller of the Company since 1978. Mr. Symon is 66 years old and served as a Director of the Company from December 1988 to June 1992. E. Dwain Plaster Mr. Plaster has served as a Vice Vice President, President, Treasurer and Chief Financial Treasurer and Chief Officer of the Company since February, Financial Officer 1998. Prior thereto, he served as Vice President since November 1994 and had been the Controller of Bruce Hardwood Floors since 1977. Mr. Plaster is 48 years old. Paul L. Barrett Mr. Barrett has served as Vice President Vice President, Secretary Secretary and General Counsel of the and General Counsel Company since November, 1997. Prior thereto for more than the past five years he served as Vice President, Secretary and General Counsel of Redman Industries Inc. Mr. Barrett is 62 years old. Charles A. Engle Mr Engle has served as a Vice President of Vice President the Company since 1979. He has also served as President of the Cabinet group since January 1996. Mr. Engle is 54 years old. John W. Esch Mr. Esch has served as a Vice Vice President President of the Company since November, 1994. He has been Controller of the Cabinet group since 1977. Mr. Esch is 53 years old. James T. Fidler Mr. Fidler has served as a Vice Vice President President of the Company since 1981. He has been Vice President-Operations since August, 1995. Prior thereto, he was Director-Management Information Operations for the Company. Mr. Fidler is 55 years old. Michael J. Kearins Mr. Kearins has served as a Vice Vice President President of the Company since 1985 and has primary responsibility for sales and marketing of flooring products. Prior to 1983, he had been a Regional Sales Manager of the Company. Mr. Kearins is 51 years old. James E. Price Mr. Price has served as a Vice Vice President President of the Company since November, 1994. He has been Vice President of manufacturing of flooring products since March, 1993. Prior thereto, he was General Manager since 1984. He had been a Plant Manager of the Company since 1979. Mr. Price is 55 years old. Allen Silver Mr. Silver has served as a Vice Vice President President of the Company since 1985. Prior to that time he had been a Vice President of manufacturing of cabinet products. Mr. Silver is 58 years old. Richard A. TerHaar Mr. TerHaar has served as Vice President Vice President of the Company since May, 1997. He has been Director of Management Information Services since 1995. Prior thereto he served as Manager of Systems and Programming since 1981. Mr. TerHaar is 49 years old. Jennifer E. Wisdom Ms. Wisdom has served as Vice President of Vice President the Company since May, 1997. She has been Director of Human Resources since 1994. Prior thereto, Ms. Wisdom was Director of Human Resources at Varo, Inc. since 1986. Ms. Wisdom is 51 years old. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS A) Price range of common stock The following table shows the range of market prices for the common stock on the NASDAQ National Market System for each quarter during the past two fiscal years. Market Price 1996 High Low ---- ------ ------ First Quarter 18-1/8 15-3/4 Second Quarter 21-3/8 16-3/8 Third Quarter 22-3/4 19 Fourth Quarter 24-7/8 19-3/4 1997 ---- First Quarter 29-3/4 23-1/16 Second Quarter 33 24-1/2 Third Quarter 36-1/2 28-7/16 Fourth Quarter 35-1/2 30-1/4 B) Approximate number of equity security holders (As of January 2, 1998) Class of Security Number of Record Holders ----------------- ------------------------ Common Stock ($.01 par value) 2,400 C) Dividend Policy The Company has not declared or paid any dividends on its Common Stock. Management currently intends to retain future earnings for the operation and expansion of the Company's business and does not anticipate paying any cash dividends in the foreseeable future. The payment of cash dividends is restricted under the terms of the Company's bank credit facility and the indenture relating to the Company's 10 1/2% Senior Notes due 2003. ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA (In thousands, except per share amounts) The selected consolidated financial data of the Company presented below for the five fiscal years ended January 2, 1998 was derived from the consolidated financial statements of the Company and should be read in conjunction with the consolidated financial statements and related notes included herein.
Fiscal Fiscal Fiscal Fiscal Fiscal year year year year year ended ended ended ended ended INCOME Jan. Jan. Dec. Dec. Dec. STATEMENT 2, 3, 29, 30, 31, DATA 1998 1997 1995 1994 1993 -------------------------------------------------------- Net sales $652,866 $534,261 $458,868 $410,159 $346,296 Cost of sales 495,256 402,759 342,348 300,160 269,360 -------------------------------------------------------- Gross profit 157,610 131,502 116,520 109,999 76,936 Selling, general and admin- istrative 80,503 68,611 60,841 57,928 44,213 Amortization of goodwill 2,638 1,739 1,520 1,520 1,613 Interest 22,863 19,719 18,380 18,920 19,406 -------------------------------------------------------- Income before income taxes and extra- ordinary item 51,606 41,433 35,779 31,631 11,704 Provision for income taxes 19,847 15,809 13,774 12,829 4,501 -------------------------------------------------------- Income before extraordinary item 31,759 25,624 22,005 18,802 7,203 Extraordinary item - Loss from repayment of debt - - - - (11,307) --------------------------------------------------------- Net income (loss) $ 31,759 $ 25,624 $ 22,005 $ 18,802 $ (4,104) ========================================================= Per share data: Net income before extraordinary item Basic $ 2.16 $ 1.75 $ 1.50 $ 1.28 $ 0.74 Diluted $ 2.07 $ 1.71 $ 1.49 $ 1.28 $ 0.74 Net income (loss) Basic $ 2.16 $ 1.75 $ 1.50 $ 1.28 $ (0.42) Diluted $ 2.07 $ 1.71 $ 1.49 $ 1.28 $ (0.42) Weighted common shares out- standing Basic 14,716 14,670 14,663 14,660 9,714 Diluted 15,321 15,005 14,815 14,701 9,714
Jan. Jan. Dec. Dec. Dec. BALANCE 2, 3, 29, 30, 31, SHEET DATA 1998 1997 1995 1994 1993 --------------------------------------------------------- Working capital $127,481 $114,509 $113,397 $ 94,354 $ 74,082 Total assets 543,221 449,963 399,815 363,451 326,545 Long-term debt, net of current portion 232,241 190,604 183,044 168,388 162,897 Common shareholders' investment 186,912 154,637 128,901 106,894 88,047
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations - --------------------- The following table sets forth selected information concerning the Company's results of operations for fiscal 1997, 1996 and 1995.
Fiscal Year ------------------------------ 1997 1996 1995 ------------------------------- (Dollars in millions) Net sales: Flooring $ 469.1 $ 336.4 $ 261.8 Cabinets 183.8 197.9 197.1 ------ ------ ------ Total net sales 652.9 534.3 458.9 ------ ------ ------ Gross profit 157.6 131.5 116.5 Selling, general and administrative expenses 80.5 68.6 60.8 Amortization of goodwill 2.6 1.7 1.5 ------ ------ ------ Operating income $ 74.5 $ 61.2 $ 54.2 ====== ====== ====== As a percent of net sales: Gross profit 24.1% 24.6% 25.4% Selling, general and administrative expenses 12.3 12.8 13.3 Operating income 11.4 11.4 11.8
Fiscal year 1997 compared to fiscal year 1996 - --------------------------------------------- Net sales for fiscal 1997 were $652.9 million, an increase of 22.2% over 1996 net sales of $534.3 million. Net flooring sales increased 39.5% to $469.1 million from $336.4 million in the prior year. Fiscal 1997 results include Hartco Flooring Company, which was acquired on June 28, 1996 and Robbins Hardwood Flooring, Inc., which acquired the Robbins Residential Flooring operations on March 28, 1997. Unit sales of hardwood flooring increased 31.9%. International sales were 12.0% of total flooring sales, which represented an increase of 51.8% over 1996 international sales. Net cabinet sales were $183.8 million in 1997 compared to $197.9 million in 1996. Unit sales declined 13.9%, while the average unit selling price increased 7.9%. The higher unit selling price is confirmation that the Company continues to be more selective in accepting orders. Consolidated gross profit for 1997 was $157.6 million, or 24.1% of net sales, compared to $131.5 million, or 24.6% of net sales in 1996. The decrease in gross profit percentage in 1997 was caused primarily by the cost of lumber, which greatly exceeded anticipated costs, partially offset by improved sales prices and manufacturing efficiencies. Selling, general and administrative expenses were $80.5 million, or 12.3% of net sales in 1997, compared to $68.6 million, or 12.8% of net sales in 1996. The total spending increase of $11.9 million was primarily due to marketing, selling and advertising expenses required to support increased sales and to expenses related to recent flooring acquisitions. Operating income was $74.5 million, or 11.4% of net sales in 1997, compared to $61.2 million, or 11.4% of net sales in 1996. Interest expense was $22.9 million in 1997, compared to $19.7 million in 1996. The higher interest expense is primarily attributable to the cost of financing the acquisition of Robbins Hardwood Flooring in March, 1997. Provision for income taxes of 38.5% of pretax income reflects increased rates over 1996, resulting from the full utilization of tax loss carry forwards, partially offset in the fourth quarter by a benefit from the restructuring of certain manufacturing operations. Net income for 1997 was $31.8 million, compared to $25.6 million in 1996, an increase of 23.9% on a 22.2% increase in net sales. Fiscal year 1996 compared to fiscal year 1995 - --------------------------------------------- Net sales for fiscal 1996 were $534.3 million, an increase of 16.4% over 1995 net sales of $458.9 million. Net flooring sales increased 28.5% to $336.4 million from $261.8 million in the prior year. These results benefited from the acquisition of Hartco Flooring Company in June, 1996. Unit sales of hardwood flooring increased 29.6% and, without Hartco, the increase in units was 13.5%. The National Oak Flooring Manufacturers Association (NOFMA) reported that 3/4" thick flooring sales increased 11.3% in units in 1996. Without Bruce, NOFMA's 3/4" thick industry shipments increased 9.2%. International sales were 11.5% of total flooring sales, which represented an increase of 55.6% over 1995. Net cabinet sales, without the impact of the decline in sales from the discontinued sales of the Beltsville Building Products unit, increased 8.0%, which represents a growth in unit sales of 5.1% and an average unit selling price increase of 2.8%. Cabinet industry shipments in 1996, as reported by the Kitchen Cabinet Manufacturers Association, were 74 million units, an increase of 2.5% over 1995. Consolidated gross profit for 1996 was $131.5 million, or 24.6% of net sales, compared to $116.5 million, or 25.4% of net sales in 1995. The decrease in gross profit percentage in 1996 was caused primarily by three factors: lower prices in flooring which were down 1.1% for the year; expenses incurred in the first half of 1996 related to the closing of the Beltsville Building Products Unit; and higher lumber costs, primarily in the fourth quarter. Selling, general and administrative expenses were $68.6 million, or 12.8% of net sales in 1996, compared to $60.8 million, or 13.3% of net sales in 1995. The total spending increase of $7.8 million was primarily due to marketing and selling expenses required to support the higher sales, and to the selling and administrative expenses of Hartco since June 28, 1996. Operating income was $61.2 million, or 11.4% of net sales in 1996, compared to $54.2 million, or 11.8% of net sales in 1995. Interest expense was $19.7 million in 1996, compared to $18.4 million in 1995. The higher interest expense is attributable to the cost of financing the acquisition of Hartco Flooring Company in June, 1996. Net income for 1996 was $25.6 million, compared to $22.0 million in 1995, an increase of 16.4% on a 16.4% increase in net sales. Liquidity and Capital Resources - ------------------------------- The Company has a Credit Facility which provides for up to $90.0 million of revolving credit loans for working capital and for letters of credit. Availability of borrowings under the Credit Facility is based upon a formula related to inventory and accounts receivable. At January 2, 1998, the Company had $39.4 million of borrowings under this facility. For the year ended January 2, 1998, cash decreased by $15.8 million. Cash of $55.6 million was used for the acquisition of Robbins Hardwood Flooring on March 28, 1997. In addition, cash used for additions to property, plant and equipment was $29.1 million, cash used for the acquisition of Bruce Floor Care Products Trademark was $1.6 million and long-term debt payments were $4.4 million. Bank borrowings of $39.4 million and cash provided by operating activities of $34.8 million were used to offset these expenditures. At January 2, 1998, the Company had working capital of $127.5 million, or 23.5% of total assets, and $32.0 million of unused bank borrowing capacity. The Company believes that borrowing availability under the Credit Facility and cash generated from operations will be adequate to fund working capital requirements, debt service payments and planned capital expenditures. The Company is in the process of completing the necessary updates for the Year 2000 compliance. Based on its review to date, the Company does not expect the cost of compliance to be material to its financial position or results of operations. This report includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact, including, without limitation, statements contained in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" regarding the Company's financial position, are forward-looking statements. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors of Triangle Pacific Corp.: We have audited the accompanying consolidated balance sheets of Triangle Pacific Corp. and Subsidiaries (a Delaware corporation) as of January 2, 1998, and January 3, 1997, and the related consolidated statements of operations, changes in shareholders' investment, and cash flows for the fiscal years ended January 2, 1998, January 3, 1997, and December 29, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Triangle Pacific Corp. and Subsidiaries as of January 2, 1998, and January 3, 1997 and the results of their operations and their cash flows for the fiscal years ended January 2, 1998, January 3, 1997, and December 29, 1995, in conformity with generally accepted accounting principles. Arthur Andersen LLP Dallas, Texas, February 2, 1998 Triangle Pacific Corp. and Subsidiaries Consolidated Balance Sheets (In thousands)
January 2, January 3, 1998 1997 ------------ ----------- ASSETS Current assets: Cash and cash equivalents $ 3,790 $ 19,638 Receivables (net of allowance of $3,662 and $3,053, respectively) 70,399 59,236 Inventories 128,988 95,096 Prepaid expenses 4,561 3,713 -------- -------- Total current assets 207,738 177,683 -------- -------- Property, plant and equipment Land 16,809 15,537 Buildings 65,050 56,274 Equipment, furniture and fixtures 161,076 133,197 -------- -------- 242,935 205,008 Less: accumulated depreciation 53,294 40,258 -------- -------- 189,641 164,750 Other assets: Goodwill 97,375 70,986 Trademarks 38,876 28,333 Deferred financing costs 4,437 5,290 Other 5,154 2,921 -------- -------- Total assets $ 543,221 $ 449,963 ======== ======== LIABILITIES AND SHAREHOLDERS' INVESTMENT Current liabilities: Current portion of long-term debt $ 3,957 $ 2,437 Accounts payable 28,831 18,520 Accrued liabilities 45,970 40,226 Income taxes payable 1,499 1,991 -------- -------- Total current liabilities 80,257 63,174 -------- -------- Long-term debt, net of current portion 232,241 190,604 Other long-term liabilities 3,565 2,331 Deferred income taxes 40,246 39,217 -------- -------- Total liabilities 356,309 295,326 -------- -------- Shareholders' investment: Common stock - $.01 par value, authorized shares - 30,000,000 issued and outstanding shares - 14,740,538 at January 2, 1998 and 14,686,558 at January 3, 1997 147 147 Additional paid-in capital 93,728 93,212 Retained earnings 93,037 61,278 -------- -------- Total shareholders' investment 186,912 154,637 -------- -------- Total liabilities and shareholders' investment $ 543,221 $ 449,963 ======== ========
[FN] The accompanying notes to consolidated financial statements are an integral part of these balance sheets. Triangle Pacific Corp. and Subsidiaries Consolidated Statements of Operations (In thousands, except per share amounts)
Fiscal Years Ended ---------------------------------------------- January 2, January 3, December 29, 1998 1997 1995 ------------- ------------ ------------ Net sales $ 652,866 $ 534,261 $ 458,868 --------- --------- --------- Costs and expenses: Cost of sales 495,256 402,759 342,348 Selling, general and administrative 80,503 68,611 60,841 Amortization of goodwill 2,638 1,739 1,520 Interest 22,863 19,719 18,380 -------- -------- -------- 601,260 492,828 423,089 -------- -------- -------- Income before income taxes 51,606 41,433 35,779 Provision for income taxes 19,847 15,809 13,774 -------- -------- -------- Net income $ 31,759 $ 25,624 $ 22,005 ======== ======== ======== Net income per share Basic $ 2.16 $ 1.75 $ 1.50 Diluted $ 2.07 $ 1.71 $ 1.49 Weighted common shares outstanding Basic 14,716 14,670 14,663 Diluted 15,321 15,005 14,815
[FN] The accompanying notes to consolidated financial statements are an integral part of these statements. Triangle Pacific Corp. and Subsidiaries Consolidated Statements of Changes in Shareholders' Investment (In thousands)
Additional Common Paid-In Retained Stock Capital Earnings Total - ---------------------------------------------------------------------------- Balance, December 30, 1994 $ 147 $ 93,098 $ 13,649 $106,894 Net income - - 22,005 22,005 Exercise of stock options - 2 - 2 - ---------------------------------------------------------------------------- Balance, December 29, 1995 $ 147 $ 93,100 $ 35,654 $128,901 Net income - - 25,624 25,624 Stock incentive bonus shares issued - 18 - 18 Exercise of stock options - 94 - 94 - ---------------------------------------------------------------------------- Balance, January 3, 1997 $ 147 $ 93,212 $ 61,278 $154,637 Net income - - 31,759 31,759 Stock incentive bonus shares issued - 386 - 386 Exercise of stock options - 130 - 130 - ---------------------------------------------------------------------------- Balance, January 2, 1998 $ 147 $ 93,728 $ 93,037 $186,912 ============================================================================
[FN] The accompanying notes to consolidated financial statements are an integral part of these statements. Triangle Pacific Corp. and Subsidiaries Consolidated Statements of Cash Flows (In thousands)
Fiscal Years Ended ------------------------------------------ January 2, January 3, December 29, 1998 1997 1995 - ------------------------------------------------------------------------------ Cash flows from operating activities: Net income $ 31,759 $ 25,624 $ 22,005 Adjustments: Depreciation 14,699 11,946 9,439 Deferred income taxes 1,029 (313) (507) Amortization of goodwill and trademarks 3,645 2,539 2,320 Amortization of deferred financing costs 941 898 1,432 Provision for doubtful accounts 850 422 435 Changes in assets and liabilities: Receivables (5,548) (1,562) (7,538) Inventories (20,629) (6,306) (3,672) Prepaid expenses (805) 1,291 (801) Accounts payable 8,417 (365) (637) Accrued liabilities - other 2,353 5.107 (197) Accrued liabilities - interest 173 (204) (641) Income taxes payable (493) 1,991 - Other (1,614) (575) 348 - ------------------------------------------------------------------------------ Net cash provided by operating activities 34,777 40,493 21,986 - ------------------------------------------------------------------------------ Cash flows from investing activities: Proceeds from sale of property, plant and equipment 199 4,341 10 Additions to property, plant and equipment (29,147) (13,506) (11,624) Acquisition of Hartco Flooring - (36,140) - Acquisition of KREDA Bonds - (5,012) - Acquisition of Robbins Flooring (55,627) - - Acquisition of Bruce Floor Care Products Trademark (1,550) - - - ------------------------------------------------------------------------------ Net cash (used) in investing activities (86,125) (50,317) (11,614) - ------------------------------------------------------------------------------ Cash flows from financing activities: Long-term debt borrowings 39,400 - - Long-term debt payments (4,416) (3,213) (3,767) Refinancing costs - - (712) Exercise of stock options 130 94 2 Stock incentive bonus shares issued 386 - - Reimbursement of construction deposits - - 1,780 - ------------------------------------------------------------------------------ Net cash provided by (used in) financing activities 35,500 (3,119) (2,697) - ------------------------------------------------------------------------------ Net (decrease) increase in cash $ (15,848) $ (12,943) $ 7,675 Cash and cash equivalents, beginning of period 19,638 32,581 24,906 - ------------------------------------------------------------------------------ Cash and cash equivalents, end of period $ 3,790 $ 19,638 $ 32,581 ==============================================================================
Triangle Pacific Corp. and Subsidiaries Consolidated Statements of Cash Flows (cont'd) (In thousands)
Fiscal Years Ended ------------------------------------------ January 2, January 3, December 29, 1998 1997 1995 - ------------------------------------------------------------------------------ Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 20,706 $ 18,352 $ 18,603 Income taxes 16,084 13,391 17,831
[FN] The accompanying notes to consolidated financial statements are an integral part of these statements. TRIANGLE PACIFIC CORP. AND SUBSIDIARIES NOTES to CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Triangle Pacific Corp. (the "Company") conducts its operations through a single business segment which consists of the manufacture and distribution of hardwood flooring products and kitchen and bathroom cabinets. The Company's products are used primarily in residential new construction and remodeling. Flooring products accounted for approximately 72% and kitchen cabinets 28%, of the Company's revenues during 1997. The Company's products are sold throughout the U.S. and a portion of the flooring products are sold worldwide. Basis of Consolidation: - ----------------------- The consolidated financial statements include the financial statements of Triangle Pacific Corp. and its subsidiaries. All intercompany balances and transactions have been eliminated. The Company maintains its records on a 52/53 week year. Net Income Per Share: - --------------------- Net income per share is computed using the weighted-average number of common shares and common stock equivalents outstanding during each period. Common stock equivalents represent the dilutive effect of outstanding stock options and warrants. The Company adopted Statement of Financial Accounting Standards No. 128 (SFAS 128) "Earnings Per Share" in the fourth quarter of 1997. Under SFAS 128, the Company has reported two net income per share amounts. Basic net income per share is calculated based on income available to common shareholders and the weighted-average number of shares outstanding during the period. Diluted net income per share includes additional dilution attributable to stock options and warrants. For comparative purposes, both basic and diluted net income per share are presented for the three fiscal years ended January 2, 1998, January 3, 1997 and December 29, 1995. Diluted net income per share in each of these three years are approximately the same as the previously reported net income per share. Cash and Cash Equivalents: - -------------------------- The Company considers all investments with an original maturity of less than three months to be cash equivalents. All cash equivalents are investment grade such as U.S. Government or A-1 or better securities rated by Standard & Poor's Corporation. Inventories: - ------------ Inventories are valued at the lower of cost or market. The last-in, first-out (LIFO) method is used primarily for lumber and certain other inventories and the first-in, first-out (FIFO) method is used for all other inventories. Inventories valued by the LIFO method were $65,407,000 at January 2, 1998 and $35,311,000 at January 3,1997. Had all inventories been valued by the FIFO method, which approximates current cost, inventories would have increased by $9,463,000 at January 2, 1998 and $2,851,000 at January 3, 1997. Raw materials inventories include purchased parts and supplies to be used in manufactured products. Work-in-process and finished goods inventories include material, labor and overhead costs incurred in the manufacturing process. The major components of inventories are as follows:
January 2, January 3, 1998 1997 ---------------------------- (in thousands) Raw materials $ 64,808 $ 50,873 Work-in-process 13,747 7,259 Finished goods 50,433 36,964 -------- -------- Total $ 128,988 $ 95,096 ======== ========
Property, Plant and Equipment: - ------------------------------ Property, plant and equipment were restated to fair value as of June 8, 1992, when the Company successfully completed a capital restructuring. All additions, subsequent thereto, are stated at acquisition or construction cost. Expenditures for maintenance, repairs, renewals and improvements which do not extend the useful lives of assets are charged to appropriate expense accounts in the year incurred. Upon disposition of an asset, cost and accumulated depreciation are removed from the accounts, and any gain or loss is included in the results of operations. Depreciation and amortization are computed on the straight-line basis using the following estimated useful lives: Buildings 10 to 50 years Equipment, furniture and fixtures 3 to 22 years Amortization of leasehold improvements is provided over the terms of the leases or the useful lives of the assets, whichever is shorter. For income tax purposes, all assets are depreciated under allowable tax depreciation methods. Intangible Assets: - ------------------ The Company annually evaluates its carrying value and expected period of benefit of trademarks and goodwill in relation to results of operations. In determining the recoverability of these assets the Company analyzes its historical and future ability to generate earnings before interest and taxes. Deferred financing costs are being amortized on the straight-line method over the lives of the related debt. Trademarks and goodwill are being amortized over 40 years. Accumulated amortization of trademarks and goodwill is $4,674,000 and $9,919,000, respectively, at January 2, 1998 and $3,667,000 and $7,281,000, respectively, at January 3, 1997. Fair Value of Financial Instruments: - ------------------------------------ The Company's cash equivalents and long-term debt are recorded at cost, which approximates fair market value at January 2, 1998. Use of Estimates: - ----------------- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NOTE 2 - LONG-TERM DEBT: Long-term debt consists of the following:
January 2, January 3, 1998 1997 ---------------------------- (In thousands) Senior Notes, 10 1/2% due 8-1-2003 $ 160,000 $ 160,000 Revolving note - bank 39,400 - Capitalized lease obligations 15,088 16,996 Industrial revenue bonds 21,710 16,045 -------- -------- 236,198 193,041 Less: Current portion of long-term debt (3,957) (2,437) -------- -------- $ 232,241 $ 190,604 ======== ========
Letters of credit outstanding were $18.6 million at January 2, 1998 and $15.0 million at January 3, 1997, under a facility pursuant to which they can be renewed or replaced. Senior Notes: - ------------- The Senior Notes are senior unsecured obligations of the Company with an aggregate principal amount of $160 million. The Senior Notes mature on August 1, 2003 and bear interest at an annual rate of 10 1/2%, payable in two equal semi-annual installments of $8,400,000 each, with each semi-annual period deemed to have 180 days. The Senior Notes are issued under an Indenture (the "Indenture") between the Company and Comerica Bank, as the present Trustee (the "Trustee"). The Senior Notes rank pari passu with all present and future senior indebtedness of the Company and senior to all present and future subordinated indebtedness of the Company. However, because borrowings under the Credit Facility are secured by inventory and accounts receivable of the Company and the proceeds thereof, the Senior notes are effectively subordinated to such borrowings to the extent of such security interest. The Senior Notes are not redeemable prior to August 1, 1998. Thereafter, the Senior Notes are redeemable at the option of the Company at redemption prices specified in the Indenture. The Senior Notes are not subject to any mandatory sinking fund requirements. Upon a "change of control" (as defined in the Indenture), the Company is required to offer to purchase all outstanding Senior notes at 101% of the principal amount thereof, plus accrued interest to the date of repurchase. In addition, the Company may be required to offer to purchase the Senior Notes at 100% of the principal amount plus accrued interest with the net cash proceeds of certain sales or other dispositions of assets. The Indenture contains covenants which limit, among other things, the incurrence of additional indebtedness by the Company and its subsidiaries, the payment of dividends on, or the purchase of the capital stock of the Company ("Restricted Payments"), the creation of liens on the assets of the Company and its subsidiaries, the creation of certain restrictions on the payment of dividends and other distributions by the Company's subsidiaries, the issuance of preferred stock by the Company's subsidiaries, and certain mergers, sales of assets and transactions with affiliates. Based on the Company's operations through January 2, 1998, the amount of Restricted Payments that the Company could make under the Indenture was $55,134,000. The Indenture specifies a number of events of default including, among others, the failure to make timely principal and interest payments or to meet the covenants contained therein. The Indenture contains a cross-default to other indebtedness of the Company aggregating more than $5,000,000 and certain customary bankruptcy and insolvency defaults. Upon the occurrence of an event of default under the Indenture, the Trustee or the holders of not less than 25% in principal amount of the outstanding Senior Notes may declare all amounts thereunder immediately due and payable, except that such amounts automatically become immediately due and payable in the event of a bankruptcy or insolvency default. Credit Facility: - ---------------- In December 1995, the Company entered into a Credit Facility, which provides for up to $90 million of revolving loans for working capital and general corporate purposes and for letters of credit. Availability of borrowings under the Credit Facility is based upon a formula related to inventory and accounts receivable. At January 2, 1998, the Company had $39.4 million of borrowings under the Credit Facility and had an additional $32.0 million of borrowing capacity under this facility. Borrowings under the Credit Facility bear interest at the agent's prime rate plus 0.375% (8.875% at January 2, 1998) or, at the Company's option, at certain alternate floating rates, and are secured by a pledge of the Company's inventory and accounts receivable. The Credit Facility expires on December 21, 2000. The Credit Facility contains covenants which restrict, among other things, the incurrence of additional indebtedness and rental obligations by the Company and its subsidiaries, the payment of dividends and other distributions related to the capital stock of the Company, the creation of liens on the assets of the Company and its subsidiaries, the creation of certain restrictions on the payment of dividends and other distributions by the Company's subsidiaries, investments and capital expenditures by the Company and its subsidiaries, the creation of new subsidiaries by the Company, and certain mergers, sales of assets and transactions with affiliates. The Credit Facility also contains certain financial covenants relating to the consolidated financial condition of the Company and its subsidiaries, including covenants relating to their net worth, the ratio of their earnings to their fixed charges, the ratio of their earnings to their interest expense, the ratio of their current assets to their current liabilities, and the ratio of their indebtedness to their total capitalization. At January 2, 1998, the Company was in compliance with all financial covenants. The Credit Facility specifies a number of events of default including, among others, the failure to make timely payments of principal, fees, and interest, the failure to perform the covenants contained therein, the failure of representations and warrants to be true, the occurrence of a "change of control"[as defined in the Credit Facility, to include, among other things, the ownership by any person or group of more than 25% (or, in the case of The TCW Group, Inc. and its affiliates, 50%) of the total voting securities of the Company], and certain impairments of the security for the Credit Facility. The Credit Facility also contains a cross-default to other indebtedness of the Company aggregating more than $2,000,000 and certain customary bankruptcy, insolvency and similar defaults. Upon the occurrence of an event of default under the Credit Facility, at least three of the lenders holding at least 60% of the principal indebtedness outstanding under the Credit Facility may declare all amounts thereunder immediately due and payable, except that such amounts automatically become immediately due and payable in the event of certain bankruptcy, insolvency or similar defaults. The Credit Facility generally prohibits the Company from prepaying in excess of $50.0 million of the Senior Notes whether the prepayment would result from the redemption of the Senior Notes, an offer by the Company to purchase the Senior Notes following a change of control or a sale or other disposition of assets, or the acceleration of the due date for payment of the Senior Notes. Capitalized Lease Obligations: - ------------------------------ During the fourth quarter of 1995, the operating lease agreement relating to the Company's Beverly, West Virginia, plant and related equipment was amended to allow for a purchase option of $1 until 2018. As a result, the Company recorded the present value of the remaining future minimum lease payments as a capitalized lease asset and related capitalized lease obligation. Industrial Revenue Bonds: - ------------------------- On June 28, 1996, in connection with the acquisition of Hartco Flooring Company, the Company acquired $10,000,000, in floating interest rate, City of Somerset, Kentucky, Industrial Revenue Bonds, due in full on August 1, 2009. These bonds were used to finance the Somerset, Kentucky hardwood flooring plant and are collateralized by a $10,000,000 letter of credit. At January 2, 1998, the various Industrial Revenue Bond (IRB) notes have interest rates that ranged up to 8.25% and at January 3, 1997, the interest rates ranged up to 7.87%. These IRB notes are payable through 2009 and are collateralized by the related underlying assets. Maturities for all long-term debt are as follows: (In thousands) 1998 $ 3,957 1999 4,111 2000 45,011 2001 4,800 2002 1,198 Thereafter 177,121 --------- Total $ 236,198 ========= NOTE 3 - INCOME TAXES: The components of the deferred tax liability and asset are as follows:
January 2, January 3, 1998 1997 ---------------------------- (In thousands) Deferred Tax Liability: Property, plant and equipment $ 26,925 $ 27,824 Trademarks 10,108 11,022 Other 7,856 7,338 -------- -------- Total $ 44,889 $ 46,184 -------- -------- Deferred Tax Asset: Other $ 4,643 $ 6,967 -------- -------- Total $ 4,643 $ 6,967 -------- -------- Net Deferred Tax Liability $ 40,246 $ 39,217 ======== ========
The provision for income taxes consists of the following:
Fiscal Years Ended ------------------------------------ January 2, January 3, December 29, 1998 1997 1995 ------------------------------------ (In thousands) Current: Federal $ 13,097 $ 12,338 $ 12,006 State and local 2,736 2,625 1,689 ------- ------- ------- $ 15,833 $ 14,963 $ 13,695 ------- ------- ------- Deferred: Federal $ 3,687 $ 722 $ 22 State and local 327 124 57 -------- ------- ------- $ 4,014 $ 846 $ 79 ------- ------- ------- Total $ 19,847 $ 15,809 $ 13,774 ======= ======= =======
The tax provision for the fiscal years ended January 2, 1998, January 3, 1997 and December 29, 1995 was 38.5%, 38.2% and 38.5% of pre-tax income, respectively. The factors causing the rate to vary from the U.S. Federal Statutory rate are as follows:
Fiscal Years Ended ------------------------------------ January 2, January 3, December 29, 1998 1997 1995 ------------------------------------ (In thousands) Computed (expected) tax provision $ 18,062 $ 14,502 $ 12,522 Increase (decrease) from: State and local taxes 2,023 1,830 1,155 Amortization of goodwill 685 609 532 Foreign sales (463) (394) (292) Other book to tax differences, net (460) (738) (143) ------- ------- ------- Total $ 19,847 $ 15,809 $ 13,774 ======= ======= =======
NOTE 4 - OPERATING LEASE COMMITMENTS: The Company rents certain real estate and equipment under operating leases expiring at various dates to 2015. Several leases include options for renewal or purchase and contain clauses for payment of real estate taxes and insurance. In most cases, management expects that in the normal course of business, leases will be renewed or replaced by other leases. The following is a summary of minimum future rental payments required under operating leases that have initial non-cancelable lease terms in excess of one year: (In thousands) 1998 $ 1,928 1999 1,143 2000 670 2001 236 2002 118 Thereafter 122 --------- Total $ 4,217 ========= Rental expense for operating leases amounted to $7,062,000, $6,682,000 and $8,335,000 for the fiscal years ended January 2, 1998, January 3, 1997 and December 29, 1995, respectively. NOTE 5 - EMPLOYEE BENEFIT PLANS: Pension and Profit Sharing Plans: - --------------------------------- The Company sponsors several defined benefit pension plans and is required to contribute to several labor union-related defined contribution plans. Total pension expense was $1,268,000, $1,169,000 and $1,114,000 for the fiscal years ended January 2, 1998, January 3, 1997 and December 29, 1995, respectively, including $647,000, $517,000 and $538,000, respectively, for defined benefit plans, which includes amortization of prior service costs over the estimated average remaining service period of active employees. The following table sets forth the defined benefit pension plans' funded status at January 2, 1998 and January 3, 1997.
January 2, January 3, 1998 1997 ---------------------------- (In thousands) Actuarial present value of benefit obligation: Vested $ 10,566 $ 10,519 Non-vested 695 566 -------- -------- Accumulated and projected benefit obligation 11,261 11,085 Plan assets at fair value 11,066 10,538 -------- -------- Projected benefit obligation in excess of plan assets (195) (547) Unrecognized prior service costs 842 598 Unrecognized net loss from past experience different from that assumed and effects of changes in assumptions 724 1,235 Adjustment to recognize minimum liability (1,071) (1,761) ------- -------- Prepaid (accrued) pension expense $ 300 $ (475) ======== ========
Net periodic pension costs for defined benefit pension plans for the fiscal years ended January 2, 1998, January 3, 1997, and December 29, 1995, include the following components:
Fiscal Years Ended ------------------------------------ January 2, January 3, December 29, 1998 1997 1995 ------------------------------------ (In thousands) Service cost-benefits earned during the period $ 317 $ 277 $ 271 Interest cost on projected benefit obligation 897 818 779 Actual return on plan assets (1,483) (1,129) (825) Net amortization and deferral 916 551 313 -------- -------- -------- Net periodic pension cost $ 647 $ 517 $ 538 ======== ======== ========
A weighted average discount rate of 8.5% was used in 1997, 1996 and 1995 to determine the benefit obligations of the Company's defined benefit pension plans. The plans do not provide for future compensation increases in calculating benefit obligations as the benefits do not derive from compensation levels but from length of service. The plans' assets are invested in a diversified portfolio of common stocks and fixed income securities. The expected long-term rate of return on plan assets was 8.0% in 1997, 1996 and 1995. The Company has a profit sharing plan for salaried employees, and a supplemental profit sharing plan for certain salaried employees to which contributions are made at the discretion of its Board of Directors as long as the Company has met specified financial goals. The fiscal year 1997, 1996 and 1995 contributions were $1,250,000, $1,250,000 and $1,245,450, respectively. Long-Term Incentive Plans: - -------------------------- In June 1993, the Company adopted the Triangle Pacific Corp. Long-Term Incentive Compensation Plan, (the "Long-Term Incentive Plan") which authorizes grants of various incentive awards to all regular salaried full-time officers and key employees of the Company. There are 1,400,000 shares of common stock authorized for issue under this plan. In February 1994, March 1994, February 1996, April 1996 and May 1997 stock options were granted for an aggregate of 1,072,700 shares at 100% of fair market value at the respective dates of grant. The following summarizes the Company's stock option activity:
Weighted Number Average of Exercise Price Exercise Price Shares Per Share Per Share -------------------------------------------------------------------- Outstanding, December 30, 1994 731,205 $ 2.99 - $15.13 $11.56 1995 Granted - - - Exercised (756) $ 2.99 $ 2.99 Forfeited - - - -------------------------------------------------------------------- Outstanding, December 29, 1995 730,449 $ 2.99 - $15.13 $11.57 1996 Granted 237,500 $16.38 $16.38 Exercised (22,093) $ 2.99 - $14.44 $ 4.29 Forfeited (14,200) $14.44 - $15.13 $14.64 -------------------------------------------------------------------- Outstanding, January 3, 1997 931,656 $ 2.99 - $16.38 $12.99 1997 Granted 277,500 $28.38 $28.38 Exercised (28,455) $ 2.99 - $14.44 $ 4.58 Forfeited (8,750) $14.44 - $28.38 $16.38 -------------------------------------------------------------------- Outstanding, January 2, 1998 1,171,951 $ 2.99 - $28.38 $16.68 ====================================================================
All stock options are granted with exercise prices equal to the fair market value of the Company's common stock at the date of grant. The weighted average exercise prices of the stock options granted during 1997 was $28.38. Stock options expire ten years from date of grant and vest equally over a four year period. The number of stock options exercisable at January 2, 1998, was 601,376 shares. These stock options have a weighted average exercise price of $11.98 per share and a weighted average contractual life of 6.0 years. The Company accounts for stock options in accordance with Accounting Principles Board Opinion No. 25, under which no compensation cost has been recognized for stock option awards. Had compensation cost for the stock options issued subsequent to January 1, 1995 been determined consistent with Statement of Financial Accounting Standards No. 123, "Accounting for Stock- Based Compensation" (SFAS 123), the Company's pro forma net income and net income per share for 1997, 1996 and 1995 would not have been materially different from reported net income and net income per share. Because the SFAS 123 method of accounting has not been applied to options granted prior to January 1, 1995, pro forma compensation cost may not be representative of that to be expected in future years. The value of each stock option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for 1997 grants: risk free interest rate of 6.88%, expected dividend yield of 0%; expected life of ten years; and expected volatility of 29.06%. The Company has a performance-based cash incentive plan for officers and other key employees to make annual bonus awards based upon pre-established criteria which were approved by the Board of Directors. The expense under this plan was $3,743,000, $3,282,000, and $2,287,000 in 1997, 1996 and 1995, respectively. Non-Employee Director Stock Option Plan: - ---------------------------------------- The Company has a Non-Employee Director Stock Option Plan for up to 100,000 shares of common stock. Options have been granted to six non-employee directors for an aggregate of 48,000 shares, with exercise prices equal to the fair market value at the date of grant. These options are currently exercisable and generally expire 10 years from the date of grant. Post-Retirement and Post-Employment Benefits: - --------------------------------------------- The Company, as of January 2, 1998, generally does not provide post- retirement life or health insurance benefits or any post-employment benefits other than those previously discussed. NOTE 6 - ACCRUED LIABILITIES: Amounts included in accrued liabilities are as follows:
January 2, January 3, 1998 1997 ---------------------------- (In thousands) Payroll $ 9,874 $ 8,187 Pension and profit sharing 1,766 1,919 Taxes 3,780 3,311 Insurance 8,911 9,340 Interest 7,202 7,029 Marketing 9,232 5,363 Other 5,205 5,077 ------- ------- Total $ 45,970 $ 40,226 ======= =======
NOTE 7 - SUPPLEMENTARY QUARTERLY FINANCIAL DATA (unaudited): (In thousands, except per share amounts)
Net Income Per Share Net Gross Net -------------------- Quarters Sales Profit Income Basic Diluted - -------------------------------------------------------------------------- 1997 First Quarter $145,205 $ 36,237 $ 5,859 $ 0.40 $ 0.38 Second Quarter 175,249 41,738 9,058 0.62 0.59 Third Quarter 165,795 40,485 8,415 0.57 0.55 Fourth Quarter 166,617 39,150 8,427 0.57 0.55 1996 First Quarter $110,525 $ 25,926 $ 3,904 $ 0.27 $ 0.26 Second Quarter 131,471 34,364 7,433 0.51 0.50 Third Quarter 142,941 34,755 6,762 0.46 0.45 Fourth Quarter 149,324 36,457 7,525 0.51 0.50
NOTE 8 - ACQUISITION OF RESIDENTIAL FLOORING DIVISION OF ROBBINS, INC. AND SEARCY FLOORING, INC. On March 28, 1997, Robbins Hardwood Flooring Inc., a newly formed wholly- owned subsidiary of Triangle Pacific Corp., acquired from Robbins Inc. and its affiliate Searcy Flooring, Inc., substantially all the assets and assumed certain liabilities (primarily IRB financing and trade payables) associated with their residential flooring operations. The purchase price was $64.2 million consisting of $55.6 in cash and the balance in assumed liabilities. The acquisition has been accounted for using the purchase method of accounting, and accordingly, the purchase price has been allocated to the assets purchased and the liabilities assumed based upon the fair values at the date of acquisition. The excess of the purchase price over the fair values of the net assets acquired was $36.9 million and has been recorded as goodwill, which is being amortized on a straight-line basis over 40 years. Sales and earnings for the residential flooring operations acquired by Robbins Hardwood Flooring Inc., are included in the reported results for the period since the acquisition on March 28, 1997. The net purchase price was allocated as follows: (in thousands) Net working capital $ 14,661 Net property, plant and equipment 11,295 Other assets 2,923 Goodwill 36,941 Other non-current liabilities (10,193) -------- Cash paid for Robbins Hardwood Flooring $ 55,627 ======== NOTE 9 - ACQUISITION OF HARTCO FLOORING COMPANY: On June 28, 1996, the Company acquired all of the outstanding shares of Hartco Flooring Company ("Hartco"), formerly a wholly-owned subsidiary of Premark International, Inc. The total value of the acquisition was $63 million, consisting of $36.1 million in cash and the balance representing the assumption of liabilities. The acquisition has been accounted for using the purchase method of accounting, and accordingly, the purchase price has been allocated to the assets purchased and the liabilities assumed based upon the fair values at the date of acquisition. The excess of the purchase price over the fair values of the net assets acquired was $17.5 million and has been recorded as goodwill, which is being amortized on a straight-line basis over 40 years. The accompanying consolidated financial statements reflect the operations of Hartco for the period subsequent to June 28, 1996. The net purchase price was allocated as follows: (in thousands) Net working capital $ 13,589 Net property, plant and equipment 22,717 Other assets 712 Goodwill 17,530 Other non-current liabilities (18,408) -------- Cash paid for Hartco $ 36,140 ======== The unaudited pro forma results below assume the acquisition occurred at the beginning of the years ended January 3, 1997 and December 29, 1995. (In thousands, except per share amounts)
Fiscal Years Ended ------------------------ January 3, December 29, 1997 1995 ------------------------ Net sales $ 574,680 $ 529,657 Net income 25,958 21,346 Net income per share $ 1.73 $ 1.44
The above pro forma results include adjustments to give effect to amortization of goodwill, interest expense on acquisition debt and certain other adjustments, together with related income tax effects. The pro forma results above are not necessarily indicative of the operating results that would have occurred had the acquisition been consummated as of the beginning of the periods presented, nor are they necessarily indicative of future operating results. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY The section entitled "Election of Directors" appearing in the definitive proxy statement of the Registrant for the annual meeting of shareholders to be held on May 5, 1998 sets forth certain information regarding the directors and is incorporated herein by reference. The section entitled "Executive Compensation-Compliance with Section 16(a) of the Exchange Act" appearing in the definitive proxy statement of the Registrant for the annual meeting of shareholders to be held on May 5, 1998 sets forth certain information regarding reporting under Section 16 of the Securities Exchange Act of 1934, as amended, and is incorporated herein by reference. Certain information with respect to the executive officers of the Registrant is set forth in Part I of this Form 10-K under the caption "Executive Officers of the Company." ITEM 11. EXECUTIVE COMPENSATION Information regarding the compensation of management is contained in the definitive proxy statement of the Registrant for the annual meeting of shareholders to be held on May 5, 1998, under the caption "Executive Compensation" and, except for the report of the compensation committee of the Board of Directors and the information contained under the caption "Performance Graph," is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information regarding ownership of the Company's Common Stock is contained in the definitive proxy statement of the Registrant for the annual meeting of shareholders to be held on May 5, 1998, under the captions "Security Ownership of Certain Beneficial Owners" and "Security Ownership of Management" and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS None PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a)(1) Financial Statements Included in Part II of this report. - Report of independent public accountants - Consolidated balance sheets as of January 2, 1998 and January 3, 1997. - Consolidated statements of operations for the fiscal years ended January 2, 1998, January 3, 1997, and December 29, 1995. - Consolidated statements of changes in shareholders' investment for the fiscal years ended January 2, 1998, January 3, 1997, and December 29, 1995. - Consolidated statements of cash flows for the fiscal years ended January 2, 1998, January 3, 1997, and December 29, 1995. - Notes to consolidated financial statements. (a)(2) Financial Statement Schedules Included in Part IV of this report: For the fiscal years ended January 2, 1998, January 3, 1997, and December 29, 1995. - Schedule II - Valuation and qualifying accounts and reserves. Information required by other schedules called for under Regulation S-X is either not applicable or is included in the consolidated financial statements or notes thereto. (a)(3) Exhibits -------- The information required by this Item 14(a)(3) is set forth in the Index to Exhibits in item 14(c) of this annual report on form 10-K. (b) Reports on Form 8-K ------------------- No reports on Form 8-K were filed during the fourth quarter of the year ended January 2, 1998. (c) Exhibits -------- 3.1 - Restated Certificate of Incorporation of the Registrant (incorporated herein by reference to Exhibit 3.1 to the Registrant's Form 10-K for the fiscal year ended December 31, 1993). 3.2 - Amended and Restated Bylaws of the Registrant (incorporated herein by reference to Exhibit 3.2 to the Registrant's Form 10-K for the fiscal year ended December 31, 1993). 4.1 - Form of 10 1/2% Senior Notes due 2003 (incorporated herein by reference to Exhibit 4.2 to the Registrant's Form 10-K for the fiscal year ended December 31,1993). 4.2 - Indenture governing 10 1/2% Senior Notes due 2003 (incorporated herein by reference to Exhibit 4.2 to the Registrant's Form 10-K for the fiscal year ended December 31, 1993). 4.3 - Credit Agreement dated as of August 4, 1993, as amended, among the Registrant, the Lenders listed therein and CitiCorp USA, Inc., as the Co-Agent for the Lenders, and the Bank of Nova Scotia, as the Agent for the Lenders (the "Credit Agreement") (incorporated herein by reference to Exhibit 4.4 to the Registrant's Registration Statement on Form S-1 (Registration No. 33-64530)). 4.4 - Amendment No. 4 to the Credit Agreement dated as of December 2, 1994. 4.5 - Amendment No. 6 to the Credit Agreement dated as of December 21, 1995. 4.6 - Amendment No. 7 to the Credit Agreement dated as of May 1, 1996. 4.7 - Amendment No. 10 to The Credit Agreement dated as of March 19, 1997. 4.8 - Amendment No. 11 to the Credit Agreement dated as of September 30, 1997. 10.1 - Registration Rights Agreement, dated as of June 5, 1992 by and among the Registrant and the Persons listed therein (incorporated herein by reference to Exhibit 10.1 to the Registrant's Registration Statement on Form S-1 (Registration No. 33-50724)). 10.2 - Lenders' Equity Agreement dated as of June 5, 1992 by and among the Registrant and the Banks and other financial institutions listed herein (incorporated herein by reference to Exhibit 10.2 to the Registrant's Registration Statement on Form S-1 (Registration No. 33-50724)). 10.3 - ESJ Exchange Agreement dated as of June 5, 1992 by and among the Registrant, TPC Holding Corp. and the ESJ Entities (incorporated herein by reference to Exhibit 10.3 to the Registrant's Registration Statement on Form S-1 (Registration No. 33-50724)). 10.4* - Management Equity Agreement dated as of June 5, 1992 by and among the Registrant and the individuals listed therein, and including a form of the Triangle Pacific Corp. Stock Option Plan (incorporated herein by reference to Exhibit 10.4 to the Registrant's Registration Statement on Form S-1 (Registration No. 33-50724)). 10.5* - Form of Amended and Restated Employment Agreement dated as of March 8, 1995 between the Company and the individuals named on Schedule 1 thereto. 10.6* - Form of Employment Agreement dated as of March 8, 1995 between the Company and the individuals named on Schedule 1 thereto. 10.7* - Salaried Employees Profit Sharing Plan (as restated January 1, 1993) of the Registrant 10.8* - Annual Cash Incentive Bonus System of the Registrant for Officers and Managers. 10.9* - Form of Stock Option Plan of the Registrant (incorporated herein by reference to Exhibit 10.12 to the Registrant's Registration Statement on Form S-1 (Registration No. 33-64530)). 10.10* - Form of Stock Option Agreement of the Registrant (incorporated herein by reference to Exhibit 10.13 to the Registrant's Registration Statement on From S-1 (Registration No. 33-64530)). 10.11 - Lease dated as of June 1, 1988 by and between West Virginia Jobs and Development Corporation and Registrant (incorporated herein by reference to Exhibit 10.11 to the Registrant's Registration Statement on Form S-1 (Registration No. 33-50724)). 10.12 - Amendment to lease effective as of April 14, 1989 by and between West Virginia Jobs and Development Corporation and the Registrant (incorporated herein by reference to Exhibit 10.15 to the Registrant's Registration Statement on Form S-1 (Registration No. 33-64530)). 10.13 - Second Amendment to lease effective as of November 1, 1991 by and between West Virginia Economic Development Authority, as successor to West Virginia Jobs and Development Corporation, and the Registrant (incorporated herein by reference to Exhibit 10.16 to the Registrant's Registration Statement on Form S-1 (Registration No. 33-64530)). 10.14 - Third Amendment to lease effective as of March 10, 1993 by and between West Virginia Economic Development Authority, as successor to West Virginia Jobs and Development Corporation, and the Registrant (incorporated herein by reference to Exhibit 10.17 to the Registrant's Registration Statement on Forms S-1 (Registration No. 33-64530)). 10.15 - Fourth amendment to lease effective as of September 22, 1995 by and between West Virginia Economic Development Authority, as successor to West Virginia Jobs and Development Corporation, and the Registrant. 10.16* - Triangle Pacific Corp. 1993 Long-Term Incentive Compensation Plan (incorporated herein by reference to Exhibit 10.18 to the Registrant's Registration Statement on Form S-1 (Registration No. 33-64530)). 10.17* - Triangle Pacific Corp. Nonemployee Director Stock Option Plan (incorporated herein by reference to Exhibit 10.19 to the Registrant's Registration Statement on Form S-1 (Registration No. 33-64530)). 10.18 - Form of Indemnity Agreement between the Registrant and each of its directors and executive officers (incorporated herein by reference to Exhibit 10.20 to the Registrant's Registration Statement on Form S-1 (Registration No. 33-64530)). 10.19* - Supplemental Profit Sharing and Deferred Compensation Plan of the Registrant. 10.20 - Stock Purchase Agreement dated as of June 28, 1996 between the Company and Premark International Inc. (incorporated herein by reference to Exhibit 2.1 to the Registrant's Form 8-K dated June 28, 1996). 10.21 - Asset Purchase Agreement dated as of March 28, 1997 between the Company and Robbins, Inc. And Searcy Flooring, Inc. 11.1 - Statement re computation of per share earnings 21.1 - Subsidiaries of the Registrant 23.1 - Consent of Arthur Andersen LLP 27.1 - Financial Data Schedule. - -------------- * Management contract or compensatory plan or arrangement required to be filed as an exhibit hereto. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized. TRIANGLE PACIFIC CORP. By: /s/ Floyd F. Sherman --------------------------- Floyd F. Sherman Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. /s/ Floyd F. Sherman Chairman of the Board March 31, 1998 - ---------------------------- and Chief Executive Officer Floyd F. Sherman (Principal Executive Officer) /s/ M. Joseph McHugh Director and President March 31, 1998 - ---------------------------- M. Joseph McHugh /s/ E. Dwain Plaster Vice President, March 31, 1998 - ---------------------------- Treasurer and Chief E. Dwain Plaster Financial Officer (Principal Financial & Accounting Officer) /s/ B. William Bonnivier Director March 31, 1998 - ---------------------------- B. William Bonnivier /s/ Charles M. Hansen, Jr. Director March 31, 1998 - ---------------------------- Charles M. Hansen, Jr. /s/ David R. Henkel Director March 31, 1998 - ---------------------------- David R. Henkel /s/ Bruce A. Karsh Director March 31, 1998 - ---------------------------- Bruce A. Karsh /s/ Jack L. McDonald Director March 31, 1998 - ---------------------------- Jack L. McDonald /s/ Carson R. McKissick Director March 31, 1998 - ---------------------------- Carson R. McKissick /s/Karen Gordon Mills Director March 31, 1998 - ---------------------------- Karen Gordon Mills SCHEDULE II ----------- TRIANGLE PACIFIC CORP. AND SUBSIDIARIES --------------------------------------- VALUATION AND QUALIFYING ------------------------ ACCOUNTS AND RESERVES --------------------- (in thousands)
Column A Column B Column C Column D Column E - -------- -------- -------- -------- -------- Additions Balance at charged to Balance beginning costs and at end of Classifications of period expenses Deductions(1) period - --------------------------------------------------------------------------- Fiscal Year ended December 29, 1995: Reserve for doubtful accounts and returns and allowances $ 2,491 $ 435 $ 338 $ 2,588 ===================================================== Fiscal Year ended January 3, 1997: Reserve for doubtful accounts and returns and allowances $ 2,588 $ 672(2) $ 207 $ 3,053 ===================================================== Fiscal Year ended January 2, 1998: Reserve for doubtful accounts and returns and allowances $ 3,053 $ 850(3) $ 241 $ 3,662 =====================================================
[FN] (1) Write-offs of specific accounts, net of recoveries. (2) Includes Hartco balance of $250 at June 28, 1996, acquisition date. (3) Includes Robbins balance of $431 at March 28, 1997, acquisition date. EX-10.21 2 - ------------------------------------------------------------------------------ ASSET PURCHASE AGREEMENT by and among TRIANGLE PACIFIC CORP., ROBBINS HARDWOOD FLOORING, INC. as Buyer and ROBBINS, INC., and SEARCY FLOORING, INC. as Sellers March 28, 1997 - ------------------------------------------------------------------------------ TABLE OF CONTENTS Page ASSET PURCHASE AGREEMENT ................................................. 1 ARTICLE I. .............................................................. 1 TERMS OF THE TRANSACTION ................................................ 1 1.1 Assets to be Transferred .................................... 1 1.2 Purchase Price .............................................. 4 1.3 Cash Payment ................................................ 4 1.4 Liabilities Assumed by Buyer ................................ 4 1.5 Estimated Cash Payment ...................................... 4 1.6 Certain Closing Adjustments ................................. 6 1.7 Final Price Adjustment ...................................... 6 1.8 Allocation of Purchase Price Among Sellers; Seller Representative. ............................................. 7 1.9 Allocation of Purchase Price Among Assets ................... 8 1.10 Liabilities Not Assumed by Buyer ............................ 8 1.11 Definitions ................................................. 9 ARTICLE II. ............................................................. 9 CLOSING ................................................................. 9 2.1 Time and Place of Closing ................................... 9 2.2 Effectiveness ............................................... 9 ARTICLE III. ............................................................ 9 REPRESENTATIONS AND WARRANTIES OF SELLERS ............................... 9 3.1 Corporate Organization and Qualification .................... 9 3.2 Authority Relative to This Agreement ........................ 10 3.3 Noncontravention ............................................ 10 3.4 Governmental Approvals ...................................... 10 3.5 Operation and Ownership of Business ......................... 10 3.6 Title to Assets ............................................. 11 3.7 Financial Statements ........................................ 11 3.8 Liabilities ................................................. 12 3.9 Absence of Certain Changes .................................. 12 3.10 Tax Matters ................................................. 12 3.11 Compliance With Laws ........................................ 13 3.12 Legal Proceedings ........................................... 13 3.13 Real Property ............................................... 13 3.14 Tangible Personal Property .................................. 15 3.15 Leased Property ............................................. 15 3.16 Inventory ................................................... 15 3.17 Receivables ................................................. 15 3.18 Intellectual Property ....................................... 16 3.19 Permits ..................................................... 16 3.20 Contracts and Agreements .................................... 17 3.21 ERISA; Accrued Compensation ................................. 19 3.22 Environmental Matters ....................................... 20 3.23 Labor Relations ............................................. 22 3.24 Customers and Suppliers ..................................... 23 3.25 Insurance .................................................. 23 3.26 Books and Records ........................................... 23 3.27 Brokerage Fees .............................................. 24 3.28 Insider Interests ........................................... 24 3.29 Disclosure .................................................. 24 3.30 Representations and Warranties on Closing Date .............. 24 ARTICLE IV. ............................................................. 24 REPRESENTATIONS AND WARRANTIES OF TRIANGLE AND BUYER .................... 24 4.1 Corporate Organization ...................................... 24 4.2 Authority Relative to This Agreement ........................ 25 4.3 Noncontravention ............................................ 25 4.4 Governmental Approvals ...................................... 25 4.5 Legal Proceedings ........................................... 26 4.6 Brokerage Fees .............................................. 26 4.7 Disclosure .................................................. 26 4.8 Representations and Warranties on Closing Date .............. 26 ARTICLE V. .............................................................. 26 CONDUCT OF BUSINESS PENDING CLOSING ..................................... 26 5.1 Conduct and Preservation of Business ........................ 26 5.2 Restrictions on Certain Actions ............................. 27 ARTICLE VI. ............................................................. 28 ADDITIONAL AGREEMENTS ................................................... 28 6.1 Access to Information; Confidentiality ...................... 28 6.2 Acquisition Proposals ....................................... 29 6.3 Third Party Consents ........................................ 30 6.4 Reasonable Best Efforts ..................................... 30 6.5 Employee and Employee Benefit Plan Matters .................. 30 6.6 Title Insurance and Surveys ................................. 34 6.7 Payment of Liabilities ...................................... 35 6.8 Public Announcements ........................................ 35 6.9 Environmental Provisions .................................... 35 6.10 Notice of Litigation ........................................ 36 6.11 Notification of Certain Matters ............................. 36 6.12 Amendment of Schedules ...................................... 37 6.13 Fees and Expenses ........................................... 37 6.14 Survival of Covenants ....................................... 37 6.15 Dispute Resolution .......................................... 37 6.16 Preparation of Closing Balance Sheet ........................ 38 6.17 Access to Records After Closing ............................. 39 6.18 Taxes; Other Charges ........................................ 40 6.19 Escrow; Liquidated Damages .................................. 40 ARTICLE VII. ............................................................ 40 CONDITIONS TO OBLIGATIONS OF SELLERS .................................... 40 7.1 Representations and Warranties True ......................... 40 7.2 Covenants and Agreements Performed .......................... 40 7.3 Certificate ................................................. 41 7.4 Opinion of Counsel to Buyer ................................. 41 7.5 Legal Proceedings ........................................... 41 7.6 Approval of Counsel to Seller ............................... 41 ARTICLE VIII. ........................................................... 41 CONDITIONS TO OBLIGATIONS OF TRIANGLE AND BUYER ......................... 41 8.1 Representations and Warranties True ......................... 41 8.2 Covenants and Agreements Performed .......................... 41 8.3 Certificate ................................................. 41 8.4 Preliminary Closing Statements .............................. 41 8.5 Payoff Letters. ............................................. 42 8.6 Opinion of Counsel to Seller ................................ 42 8.7 Legal Proceedings ........................................... 42 8.8 No Material Adverse Change .................................. 42 8.9 Noncompetition Agreements ................................... 42 8.10 Data Processing Agreement ................................... 42 8.11 International Distribution Agreement ........................ 42 8.12 Unacceptable Encumbrances; Title Insurance .................. 42 8.13 Due Diligence ............................................... 42 8.14 Environmental Matters ....................................... 43 8.15 Other Documents ............................................. 43 8.16 Approval of Counsel to Triangle and Buyer ................... 44 ARTICLE IX. ............................................................. 44 CONDITIONS TO OBLIGATIONS OF ALL PARTIES ................................ 44 9.1 Governmental and Third Party Consents and Approvals ......... 44 9.2 Trademark Agreement ......................................... 44 9.3 Equipment Bill of Sale ...................................... 44 9.4 Real Estate and Equipment Agreement ......................... 44 9.5 Supply Agreement ............................................ 44 ARTICLE X. .............................................................. 45 TERMINATION, AMENDMENT, AND REMEDIES .................................... 45 10.1 Termination ................................................. 45 10.2 Effect of Termination ....................................... 45 10.3 Amendment ................................................... 46 10.4 Waiver ...................................................... 46 10.5 Remedies Not Exclusive ...................................... 46 ARTICLE XI. ............................................................. 46 SURVIVAL OF REPRESENTATIONS ............................................. 46 11.1 Survival .................................................... 46 ARTICLE XII. ............................................................ 46 MISCELLANEOUS ........................................................... 46 12.1 Notices ..................................................... 46 12.2 Entire Agreement ............................................ 47 12.3 Binding Effect; Assignment; No Third Party Benefit .......... 48 12.4 Severability ................................................ 48 12.5 GOVERNING LAW ............................................... 48 12.6 Descriptive Headings ........................................ 48 12.7 Gender ...................................................... 48 12.8 References .................................................. 48 12.9 Further Assurances .......................................... 49 12.10 Counterparts ................................................ 49 12.11 Injunctive Relief ........................................... 49 ARTICLE XIII. ........................................................... 49 DEFINITIONS ............................................................. 49 13.1 Certain Defined Terms ....................................... 49 13.2 Certain Additional Defined Terms ............................ 51 LIST OF EXHIBITS AND SCHEDULES ........................................ S-i Exhibit 7.4 - Opinion of Counsel to Buyer ............................. E- Exhibit 8.6 - Opinion of Counsel to Seller ............................ E- Exhibit 8.9 - Noncompetition Agreement ................................ E- Exhibit 8.10 - Data Processing Agreement .............................. E- Exhibit 9.2 - Trademark Agreement ..................................... E- Exhibit 9.3 - Individual Assignment to Robbins ........................ E- Exhibit 9.4 - Individual Assignment to Searcy ......................... E- Exhibit 9.5 - Supply Agreement ........................................ E- Schedule 1.1(a) - Real Property ....................................... S- Schedule 1.1(b)(i) - Equipment and Machinery .......................... S- Schedule 1.1(b)(ii) - Excluded Equipment and Machinery ................ S- Schedule 1.1(c)(i) - Purchased Inventory .............................. S- Schedule 1.1(c)(ii) - Retained Inventory .............................. S- Schedule 1.1(e)(i) - Purchased Software ............................... S- Schedule 1.1(g) - Contracts and Agreements ............................ S- Schedule 1.1(h)(i) - Prepaid Expenses ................................. S- Schedule 1.1(h)(ii) - Excluded Prepaid Expenses ....................... S- Schedule 1.1(j) - Other Assets ........................................ S- Schedule 1.5(a) - Preliminary Closing Settlement Statement ............ S- Schedule 1.5(c) - Liabilities Assumed ................................. S- Schedule 1.7(a) - Final Closing Settlement Statement .................. S- Schedule 3.1 - Jurisdictions .......................................... S- Schedule 3.3 - Noncontravention ....................................... S- Schedule 3.4 - Governmental Approvals ................................. S- Schedule 3.5 - Ownership of Business .................................. S- Schedule 3.6 - Title to Assets ........................................ S- Schedule 3.8 - Seller Liabilities ..................................... S- Schedule 3.9 - Absence of Certain Changes ............................. S- Schedule 3.10 - Tax Matters ........................................... S- Schedule 3.12 - Legal Proceedings ..................................... S- Schedule 3.13 - Real Property ......................................... S- Schedule 3.14 - Tangible Personal Property ............................ S- Schedule 3.15 - Leased Property ....................................... S- Schedule 3.16 - Inventory Exceptions .................................. S- Schedule 3.17 - Receivables Exceptions ................................ S- Schedule 3.18 - Intellectual Property ................................. S- Schedule 3.19 - Permits ............................................... S- Schedule 3.20 - Contracts and Agreements .............................. S- Schedule 3.21 - ERISA ................................................. S- Schedule 3.22 - Environmental Matters ................................. S- Schedule 3.23 - Labor Relations ....................................... S- Schedule 3.24 - Customers and Suppliers ............................... S- Schedule 3.28 - Insider Interests ..................................... S- Schedule 6.16(a) - Inventory Schedule ................................. S- Schedule 6.16(b) - Receivables Schedule ............................... S- ASSET PURCHASE AGREEMENT This ASSET PURCHASE AGREEMENT (this "Agreement") is made as of March 28, 1997, by and among (1) TRIANGLE PACIFIC CORP., a Delaware corporation ("Triangle'), (2) ROBBINS HARDWOOD FLOORING, INC., a Delaware corporation ("Buyer"), (3) ROBBINS, INC., an Ohio corporation ("Robbins") and (4) SEARCY FLOORING, INC., an Ohio corporation ("Searcy") (Robbins and Searcy, are sometimes referred to herein collectively as "Sellers" and individually as a "Seller"). WHEREAS, Sellers desire to sell to Buyer, and Buyer desires to purchase from Sellers, upon the terms and subject to the conditions herein set forth, substantially all the assets of Sellers associated with the business of developing, manufacturing and selling residential flooring (the "Business"), as conducted by Sellers at and from the three manufacturing plants located on the Real Property (hereinafter defined); WHEREAS, it is the intent of the parties hereto that the acquisition include all of the goodwill associated with the conduct of the Business; NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, Buyer and Sellers hereby agree as follows: TERMS OF THE TRANSACTION 0 Assets to be Transferred. At the Closing, and on the terms and subject to the conditions set forth in this Agreement, Sellers shall sell, assign, transfer, deliver, and convey (collectively, "transfer"), or cause to be transferred, to Buyer, and Buyer shall purchase from Sellers, all assets and properties of every kind, character, and description, whether tangible, intangible, real, personal, or mixed, located on the Real Property (or otherwise identified on the Schedules to this Agreement) that are owned by Sellers or in which any Seller has any right, title, or interest, and that are used or held for use by any Seller in the conduct of the Business, or that are associated with the Business, as the same shall exist on the Closing Date, including, without limitation, the following assets and properties of Sellers existing on the Closing Date: ( ) Property and Plant. All those certain plots, tracts, or parcels of land located in Bradley County, Arkansas and White County, Arkansas and more particularly described on Schedule 1.1(a) (the "Real Property"), and all plants, factories, warehouses, storage facilities, laboratories, buildings, works, structures, fixtures, landings, construction in progress, improvements, betterments, installations, and additions constructed, erected, or located on or attached or affixed to the Real Property. (a) Equipment and Machinery. All furniture, equipment, machinery, materials, vehicles, rolling stock, apparatus, tools, dies, implements, appliances, spare parts, supplies, and other tangible personal property of every kind, character, and description owned by Sellers, both jointly and individually, or in which any Seller has any right, title or interest, and located on, or used at or primarily in connection with, the Real Property, or located elsewhere if used primarily in, or necessary for the efficient operation of, the Business, as of the Closing, including without limitation all the assets described on Schedule 1.1(b)(i), and excluding only the personal property identified on Schedule 1.1(b)(ii). (b) Inventories. All of Sellers' inventories, as of the Closing, located on the Real Property or otherwise identified on Schedule 1.1(c)(i), including without limitation finished goods, work-in-process, raw materials, supply and samples inventories, and other inventories, excluding only the Retained Inventory (hereinafter defined) described on Schedule 1.1(c)(ii). (c) Accounts Receivable. All accounts receivable of Sellers and all other rights of Sellers to payment for goods sold or leased or for services rendered, arising from the operation of the Business, including without limitation those included on the Receivables Schedules (hereinafter defined), and those that are not evidenced by instruments or chattel paper, whether or not earned by performance or written off or reserved against as a bad debt or doubtful account in any financial statements; together with all instruments and documents of title representing any of the foregoing, all rights in any merchandise or goods that any of the same represent, and all rights, title, security, and guaranties in favor of Sellers with respect to any of the foregoing, including without limitation any right of stoppage in transit. (d) Intellectual Property. All right, title, and interest of Sellers into and under all patents, trademarks, service marks, trade names, service names, brand names, copyrights, trade secrets, know-how, proprietary processes, inventions, computer software (including documentation and object and source codes if owned by Sellers and described on Schedule 1.1(e)(i)), and similar rights, and all registrations, applications, licenses, claims, causes of action, and rights with respect to any of the foregoing, to the extent they are or have been used primarily in connection with the operation of, the Business, and all rights to recover for infringement thereof, including without limitation all rights in and to the use of the mark "Robbins" and variations thereof in connection with the Business, and all the goodwill associated therewith, and excluding only the trademarks "Continuous Strip," "Monogram", Monogram XL", "Squar-Edge" and "Next Step ES" (the "Intellectual Property"); provided, however, that Sellers shall retain all rights with respect to the name "Robbins" and variations thereof and all rights with respect to the patents, trade secrets, and other items of intellectual property in connection with all uses other than the Business; provided further, that if any item of intellectual property retained by Sellers is necessary to continue operation of the Business, Sellers shall grant to Buyer a perpetual, royalty-free license to use the same. (e) Permits. All right, title, and interest of Sellers in, to, and under all Permits relating to, or used in connection with the operation of, the Business or relating to the construction, use, operation, or enjoyment of the Assets, as such Permits can be lawfully conveyed. (f) Contracts and Agreements. All right, title, and interest of Sellers in, to, and under the contracts and agreements, including personal property leases, described on Schedule 1.1(g), and all rights (including rights of refund and offset), privileges, deposits, claims, causes of action, and options in favor of Sellers relating or pertaining to such contracts and agreements. (g) Prepaid Expenses. All right, title, and interest of Sellers in and to all prepaid rentals and other prepaid expenses arising from payments made by Sellers in the ordinary course of the operation of the Business prior to the close of business on the Closing Date for goods or services where such goods or services have not been received by Sellers by the close of business on the Closing Date, including without limitation all prepaid expenses described on Schedule 1.1(h)(i), and excluding only those prepaid expenses described on Schedule 1.1(h)(ii). (h) Books and Records. All books, records, papers, and instruments of Sellers of whatever nature and wherever located that relate to the Assets or the operation of the Business, including without limitation all financial and accounting records and all books and records relating to employees, the purchase of materials, supplies, and services, product research and development, the manufacture and sale of products, and dealings with customers, vendors, and suppliers of the Business, and including computerized books and records and other computerized storage media and the software used in connection therewith, provided that Sellers shall be entitled to retain copies of any such books and records that are necessary for its tax, accounting, or legal purposes. (i) Other Assets. Whether or not enumerated above, (i) all assets located on the Real Property, (ii) all assets used exclusively in or exclusively supporting the manufacturing and other operations conducted at the plants located on the Real Property, (iii) all assets used exclusively in the marketing, sale and distribution of residential flooring, and (iv) all assets to which any value is attributed on the Closing Balance Sheet (hereinafter defined), including without limitation all rights of Sellers in the accounts and funds described on Schedule 1.1(j) and in any other escrow, trust or other account or fund containing, or otherwise relating to, proceeds of any financing included in the Liabilities (hereinafter defined). All the assets and properties described in this Section 1.1 and to be transferred to Buyer pursuant to this Agreement are collectively referred to herein as the "Assets." Notwithstanding anything otherwise in this Agreement to the contrary, the Assets shall not include any assets or properties of Sellers used primarily in or associated with any business activity of Sellers other than the Business, including without limitation the developing, manufacturing and selling of recreational flooring and sports surfaces, provided that all assets located on the Real Property other than those set forth on Schedule 1.1(c)(ii) shall be conclusively deemed to be used primarily in the Business. 1 Purchase Price. The total purchase price paid by Buyer (or by Triangle for the benefit of Buyer) in consideration of the transfer by Sellers to Buyer of the Assets (the "Purchase Price") shall consist of (i) a cash payment equal to the Net Book Value (hereinafter defined) of the Assets as of the Closing Date, plus $39,000,000 (the "Cash Payment"), and (ii) the assumption of the Liabilities (hereinafter defined) as herein provided. 2 Cash Payment. The cash portion of the Purchase Price shall be paid as follows: ( ) an amount equal to the Estimated Cash Payment (hereinafter defined) shall be paid at the Closing, in immediately available funds by confirmed wire transfer to a bank account to be designated by Sellers (such designation to occur no later than three (3) business days prior to the Closing Date (hereinafter defined)); and (a) the amount of any Final Price Adjustment (hereinafter defined) shall be paid by the party, and on or before the date, specified in Section 1.7(c), in immediately available funds by confirmed wire transfer to a bank account to be designated by the party to whom such Final Price Adjustment is payable (such designation to occur no later than two (2) business days prior to the date such payment is due). 3 Liabilities Assumed by Buyer. As partial consideration for the transfer of the Assets to Buyer, Buyer agrees, upon the terms and subject to the conditions set forth herein, to assume, at the Closing, and thereafter to pay, perform, and discharge, the Liabilities (hereinafter defined), but only the Liabilities and all liabilities arising after the Closing relating to Buyer's operation of the Business. Any Liabilities that constitute Payoff Indebtedness (hereinafter defined) shall be paid by Buyer (or by Triangle for the benefit of Buyer) at the Closing, in immediately available funds by confirmed wire transfer to a bank account to be designated by the creditor to whom such Payoff Indebtedness is payable (such designation to occur no later than two (2) business days prior to the Closing Date). 4 Estimated Cash Payment. The "Estimated Cash Payment" shall be equal to the Net Book Value of the Assets as of the date of the Latest Balance Sheet (hereinafter defined), plus $39,000,000, and shall be determined as follows: ( ) Not later than fifteen (15) days prior to the Closing Date, Sellers shall deliver to Buyer an unaudited, combined balance sheet reviewed by Arthur Andersen, LLP, as of January 25, 1997, with respect to (i) Robbins, (ii) Searcy and (iii) Robbins International, Inc., (the "Latest Balance Sheet"), together with a preliminary calculation of the Estimated Cash Payment presented in the format set forth on Schedule 1.5(a) (the "Preliminary Closing Settlement Statement", and together with the Latest Balance Sheet, the "Preliminary Closing Statements"). In connection with Buyer's review of the Preliminary Closing Statements, Sellers shall give Buyer and its representatives full access to all personnel, books and records of Sellers pertaining to the Business or the Preliminary Closing Statements, including without limitation all work papers of Sellers and their accountants and all pertinent accounting and other records of Sellers, and shall provide all other information pertaining to the Business or the Preliminary Closing Statements reasonably requested by Buyer and its representatives. The Latest Balance Sheet shall be prepared in accordance with generally accepted accounting principles in the United States of America as in effect from time to time applied on a basis - as to the substance of the principles applied (including application of the last-in, first-out method of inventory valuation), the manner of application and the estimation techniques used - with the Annual Financial Statements (hereinafter defined) ("U.S. GAAP"). The Preliminary Closing Settlement Statement shall be prepared in accordance with (i) the Latest Balance Sheet and (ii) the terms and provisions of this Agreement; provided, that solely for purposes of determining the Estimated Cash Payment, the amount of accounts payable and accrued expenses included in the Liabilities shall be as set forth in Annex II to the Preliminary Closing Settlement Statement. The Preliminary Closing Statements shall be accompanied by certificates signed by the chief executive officer and the chief financial officer of each of Robbins and Searcy, respectively, stating that the Preliminary Closing Statements have been prepared as described in the immediately preceding two sentences. (a) Sellers and Buyer shall assist and cooperate with each other and otherwise use their best efforts to obtain the Preliminary Closing Settlement Statement. Unless Buyer gives written notice of a Dispute (hereinafter defined) to Sellers within ten (10) days after receipt by Buyer of the Preliminary Closing Statements, the Preliminary Closing Statements shall be deemed accepted by Buyer in the form in which delivered by Sellers. If Buyer does not agree with the amount of any of the assets or liabilities set forth on the Latest Balance Sheet, or any of the calculations set forth on the Preliminary Closing Settlement Statement, written notice of its disagreement therewith (a "Dispute," as further defined in Section 6.15) shall be given by Buyer to Sellers within ten (10) days after receipt by Buyer of the Preliminary Closing Statements, and Buyer and Sellers shall attempt to resolve such Dispute and agree in writing upon the final content of the Preliminary Closing Settlement Statement prior to the Closing Date. If Sellers and Buyer are unable to resolve any such Dispute within such time period, such Dispute shall be resolved pursuant to Section 6.15. (b) As used in this Agreement, the following terms have the meanings given to them below: ( ) "Liabilities" means (A) all obligations of Sellers accruing from and after the Closing Date under the contracts and agreements described on Schedule 1.1(g) (but only to the extent that such liabilities and obligations arise from the operation of the Assets or the Business after the Closing Date), and (B) accounts payable, accrued expenses, product warranty and product liability claims, and obligations for borrowed money (except obligations under any bank credit agreement to which any Seller is a party), that are: (1) listed on Schedule 1.5(c), as amended pursuant to Section 1.7(a), and reflected on the Final Closing Settlement Statement, (2) not dischargeable or discharged in the ordinary course of the Business prior to the Closing, (3) not excluded liabilities under Section 1.10, and (4) properly classified under U.S. GAAP as liabilities of the Business as of the Closing Date. (i) "Net Book Value" means (i) the book value of the Assets as determined in accordance with U.S. GAAP and the terms of this Agreement, net of all reserves and valuation allowances, less (ii) the Liabilities. (ii) "Payoff Indebtedness" means any of the Liabilities that either (A) must be repaid upon consummation of the transactions contemplated by this Agreement to prevent a default with respect thereto or to release any Encumbrances securing payment thereof, or (B) Buyer notifies Sellers, not less than five (5) business days prior to the Closing Date, is to be repaid at the Closing. 5 Certain Closing Adjustments. The Purchase Price, as reflected on the Preliminary Closing Settlement Statement and on the Final Closing Settlement Statement, shall be adjusted as necessary to reflect the proration of ad valorem taxes provided for in Section 6.18. 6 Final Price Adjustment. The amount of any "Final Price Adjustment" shall be determined as follows: ( ) Not later than thirty (30) days after the Closing Date, Buyer shall deliver to Sellers an unaudited balance sheet, prepared so as to reflect the Assets and Liabilities as of the Closing (the "Closing Balance Sheet"), together with a calculation of the final Purchase Price pursuant to Section 1.2 and of whether a Final Price Adjustment is payable pursuant to Section 1.7(c) (the "Final Closing Settlement Statement", and together with the Closing Balance Sheet, the "Final Closing Statements"), presented in the format set forth on Schedule 1.7(a). The Final Closing Statements shall also include an amended Schedule 1.5(c), revised to include a detailed listing of the accounts payable and accrued expenses included in the Liabilities. In connection with Sellers' review of the Final Closing Statements, Buyer shall give Sellers and their representatives full access to all personnel, books and records pertaining to the Business, including without limitation all corresponding work papers of Buyer and its accountants and all pertinent accounting and other records of Buyer, and shall provide all other information reasonably requested by Sellers. The Closing Balance Sheet shall be prepared in accordance with U.S. GAAP. The Final Closing Settlement Statement shall be prepared in accordance with (i) the Closing Balance Sheet and (ii) the provisions of this Agreement. The Final Closing Statements shall be prepared in accordance with the immediately preceding two sentences. (a) Sellers and Buyer shall assist and cooperate with each other and otherwise use their best efforts to obtain the Final Closing Settlement Statement. If Sellers do not give written notice of a Dispute to Buyer within twenty (20) days after receipt by Sellers of the Final Closing Statements, the Final Closing Statements shall be deemed accepted by Sellers in the form in which delivered by Buyer. If Sellers do not agree with the amount of any of the assets or liabilities set forth on the Closing Balance Sheet, or any of the calculations set forth on the Final Closing Settlement Statement, written notice of their disagreement therewith shall be given by Sellers to Buyer within twenty (20) days after receipt by Sellers of the Final Closing Statements, and Buyer and Sellers shall attempt to resolve such Dispute and agree in writing upon the final content of the Final Closing Settlement Statement within twenty (20) days after receipt by Buyer of such notice of a Dispute. If Sellers and Buyer are unable to resolve any such Dispute within such time period, such Dispute shall be resolved pursuant to Section 6.15. The Final Closing Settlement Statement in the form delivered by Buyer to Sellers, if Sellers do not give notice of a Dispute, or as adjusted by written agreement of the parties or by the procedure specified in Section 6.15, shall constitute the "Final Closing Settlement Statement" under this Agreement. (b) The Final Price Adjustment, if any, shall be equal to the difference between the Estimated Cash Payment and the final Cash Payment (pursuant to Section 1.2 and Section 1.7(b)), and shall be: ( ) payable to Sellers, if the Estimated Cash Payment is lower than the final Cash Payment; or (i) payable to Buyers, if the Estimated Cash Payment is higher than the final Cash Payment; and (ii) in either case, payable within two (2) business days after the date the Final Closing Settlement Statement is determined pursuant to Section 1.7(b). 7 Allocation of Purchase Price Among Sellers; Seller Representative. (a) The portion of the Purchase Price payable in respect of the Net Book Value of the Assets shall be allocated among Sellers based on the respective Net Book Value of the Assets conveyed by each Seller, as reflected on the Preliminary Closing Settlement Statement and the Final Closing Settlement Statement, and the $39,000,000 payment provided for in Section 1.2 shall be allocated as follows: $31,750,000 to Robbins and $7,250,000 to Searcy. Any Final Price Adjustment shall be allocated among the Sellers based on the difference, if any, between the Net Book Value of the Assets conveyed by each Seller as reflected on the Preliminary Closing Settlement Statement and as reflected on the Final Closing Settlement Statement. (b) Each of Robbins and Searcy, by its execution of this Agreement, hereby designates and appoints James H. Stoehr, Jr. as its agent and attorney-in-fact, with full power of substitution, to serve as its "Seller Representative" for purposes of this Agreement and to take all actions required or permitted to be taken by Sellers, and to give and receive all notices required to be given by or to Sellers, after the Closing under the terms and provisions of this Agreement. Any action required or permitted to be taken by Sellers after the Closing, and any notice required to be given by or to Sellers after the Closing, shall be taken by or given by or to the Seller Representative, and any such action taken by, or notice given by or to, the Seller Representative shall be conclusively deemed to be validly taken or given in accordance with this Agreement. 8 Allocation of Purchase Price Among Assets. Sellers and Buyer will mutually determine the appropriate allocation of the Purchase Price among the Assets pursuant to Section 1060 of the Code, not less than sixty (60) days after Buyer's receipt of the Final Closing Settlement Statement. If Buyer and Sellers are not able to mutually determine such allocation within such period, it shall be determined by binding arbitration pursuant to Section 6.15. Sellers and Buyer shall report the transactions contemplated hereby on all Tax Returns (including information returns and supplements thereto required to be filed by the parties under Section 1060 of the Code) in a manner consistent with such allocation. 9 Liabilities Not Assumed by Buyer. Buyer shall not assume or take title to the Assets subject to, nor shall Triangle or Buyer in any way be liable or responsible for, any liabilities or obligations of Sellers (whether or not referred to in any Schedule or Exhibit hereto), except as specifically provided in Section 1.4, it being expressly acknowledged that it is the intention of the parties hereto that all liabilities and obligations that Sellers have or may have in the future (whether accrued, absolute, contingent, unliquidated, or otherwise, whether or not known to Sellers, and whether due or to become due), other than the Liabilities, shall be and remain the liabilities and obligations of Sellers. Without limiting the generality of the foregoing, and except as specifically provided in Section 1.4, Buyer shall not assume or take title to the Assets subject to, or in any way be liable or responsible for: ( )any liabilities or obligations of Sellers whether or not relating to the Assets or the Business, and whether or not arising or asserted prior to the Closing, (a) any liability or obligation of Sellers under any mortgage, deed of trust, security agreement, or financing statement, or any note, bond, or other instrument or obligation secured thereby, (b) any liability or obligation of Sellers existing at or arising after the Closing Date under any leases, contracts, agreements, or Permits included in the Assets that results from the material breach, default, or wrongful action or inaction of Sellers prior to the close of business on the Closing Date, (c) any liability or obligation of Sellers resulting from or relating to the employment relationship between any Seller and any Seller's present or former employees engaged in connection with the ownership or operation of the Assets or the Business or the termination of any such employment relationship, including without limitation severance pay and other similar benefits, if any, and any claims filed on or prior to the Closing Date or that may thereafter be filed by or on behalf of any such present or former employee relating to the employment or termination of employment of any such employee by a Seller, including without limitation any claim for wrongful discharge, breach of contract, unfair labor practice, employment discrimination, unemployment compensation, or workers' compensation, (d) any liability or obligation of Sellers in respect of any agreement, trust, plan, fund, or other arrangement under which benefits or employment is provided for any Seller's present or former employees engaged in connection with Sellers' ownership or operation of the Assets or the Business, and (e) any liabilities or deficiencies for any Taxes, to the extent applicable to periods (or portions thereof) ending on or prior to the Closing Date. For purposes of this Section 1.10, references to Sellers shall include predecessors in title. 10 Definitions. All capitalized terms used in this Agreement and not otherwise defined are defined in Article XIII of this Agreement. I. CLOSING 0 Time and Place of Closing. The consummation of the transactions contemplated hereby shall take place (i) at the offices of Thompson & Knight, P.C. at 10:00 a.m., local time, on March 28, 1997, or (ii) at such other time or place or on such other date as Buyer and Sellers shall agree (the "Closing"). The date on which the Closing is required to take place is herein referred to as the "Closing Date." All Closing transactions shall be deemed to have occurred simultaneously when all the conditions set forth in Articles VII, VIII and IX have been satisfied. 1 Effectiveness. The transactions contemplated by this Agreement shall all become effective as of the close of business on the Closing Date. II. REPRESENTATIONS AND WARRANTIES OF SELLERS Sellers represent and warrant to Triangle and Buyer that: 0 Corporate Organization and Qualification. Each of Robbins and Searcy is a corporation duly organized, validly existing, and in good standing under the laws of the jurisdiction of its incorporation and has all requisite corporate power and corporate authority to own, lease, and operate its properties and to carry on its business as now being conducted. No actions or proceedings to dissolve either Searcy or Robbins are pending or to Sellers' knowledge, threatened. Each of Robbins and Searcy is duly qualified or licensed to do business as a foreign corporation and is in good standing in each of the jurisdictions indicated on Schedule 3.1, which are all the jurisdictions in which the indicated entity owns, leases, or operates its properties or in which such qualification or licensing is required for the conduct of its business and the failure to so qualify or license would have a Material Adverse Effect. 1 Authority Relative to This Agreement. Each of Searcy and Robbins has full corporate power and corporate authority to execute, deliver, and perform this Agreement and the Ancillary Documents to which it is a party and to consummate the transactions contemplated hereby and thereby. The execution, delivery, and performance by each of Searcy and Robbins of this Agreement and the Ancillary Documents to which it is a party, and the consummation by it of the transactions contemplated hereby and thereby, have been duly authorized by all necessary corporate action. This Agreement has been duly executed and delivered by each of Searcy and Robbins and constitutes, and each Ancillary Document executed or to be executed by each of Searcy and Robbins has been, or when executed will be, duly executed and delivered by each of Searcy and Robbins and constitutes, or when executed and delivered will constitute, a valid and legally binding obligation of each of Searcy and Robbins, enforceable against each of Searcy and Robbins in accordance with its terms, except that such enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium, and similar laws affecting creditors' rights generally and (ii) equitable principles that may limit the availability of certain equitable remedies (such as specific performance) in certain instances and (iii) public policy considerations with respect to the enforceability of rights of indemnification. 2 Noncontravention. The execution, delivery, and performance by Sellers of this Agreement and the Ancillary Documents to which each is party and the consummation by them of the transactions contemplated hereby and thereby do not and will not (i) conflict with or result in a violation of any provision of the Articles of Incorporation or Code of Regulations of or other governing instruments of Robbins or Searcy, (ii) conflict with or result in a violation of any provision of, or constitute (with or without the giving of notice or the passage of time or both) a material default under, or give rise (with or without the giving of notice or the passage of time or both) to any right of termination, cancellation, or acceleration under, or require any consent, approval, authorization, or waiver of, or notice to, any party to, any bond, debenture, note, mortgage, indenture, lease, contract, agreement, or other instrument or obligation to which any Seller is a party or by which Sellers, or any of their respective properties, may be bound or any Permit held by Sellers, (iii) result in the creation or imposition of any Encumbrance upon the Assets, (iv) result in the loss of any material benefit to, or privilege or right of, the Business or otherwise attributable to any of the Assets, or (v) violate any Applicable Law binding upon Sellers, the Business or any of the Assets except, in the case of clause (ii) above, for (A) such consents, approvals, authorizations, and waivers that have been obtained and are unconditional and in full force and effect and such notices that have been duly given, and (B) such consents, approvals, authorizations, waivers, and notices disclosed on Schedule 3.3. 3 Governmental Approvals. Except as disclosed on Schedule 3.4, no consent, approval, order, or authorization of, or declaration, filing, or registration with, any Governmental Entity is required to be obtained or made by Sellers in connection with the execution, delivery, or performance by Sellers of this Agreement and the Ancillary Documents to which any of them is a party or the consummation by them of the transactions contemplated hereby or thereby. 4 Operation and Ownership of Business. No Seller has any direct or indirect equity or ownership interest in any corporation, partnership, joint venture, or other entity that is or whose assets are involved or used, directly or indirectly, in the conduct of the Business, and the Business is conducted exclusively by Sellers. No person who is an active employee of a Seller has greater than a three percent equity or ownership interest in any Seller except as indicated on Schedule 3.5. The Assets constitute all the material assets used primarily in, or necessary to continue, the operation of the Business in the ordinary course consistent with past practice. 5 Title to Assets. In the aggregate, Sellers are the owners of, and have good and marketable title to, all the Assets, free and clear of all Encumbrances other than the Permitted Encumbrances. Upon Sellers' transfer of the Assets to Buyer pursuant to this Agreement, Buyer will have good and marketable title to all the Assets, free and clear of all Encumbrances other than the Permitted Encumbrances. Except as disclosed on Schedule 3.6, no financing statement (or other instrument sufficient or effective as a financing statement) under the Uniform Commercial Code with respect to any of the Assets has been filed and is effective in any jurisdiction, and no Seller has signed any such financing statement (or other instrument) or any mortgage or security agreement granting any mortgage or security interest in any of the Assets or authorizing any secured party thereunder to file any such mortgage or financing statement (or other instrument). 6 Financial Statements. Sellers have delivered to Buyer accurate and complete copies of (i) the audited balance sheets as of October 31, 1992, 1993, 1994, 1995 and 1996, and the related audited statements of income, stockholders' equity and cash flows of Robbins and Searcy for each of the periods then ended, and the notes and schedules thereto, together with the unqualified reports thereon of Arthur Andersen, LLP, independent public accountants (the "Annual Financial Statements"), and (ii) the Latest Balance Sheet and the related unaudited, combined statements of income, stockholders' equity and cash flows of Robbins, Robbins International, Inc. and Searcy for the period then ended, reviewed by Arthur Andersen, LLP and certified by the chief financial officer and the chief executive officer of Robbins and Searcy, as appropriate (the "Interim Financial Statements") (the Annual Financial Statements and the Interim Financial Statements are collectively referred to as the "Financial Statements"). The Financial Statements (i) represent actual bona fide transactions, (ii) have been prepared from the books and records of Sellers in conformity with U.S. GAAP applied on a basis consistent (as to the substance of the principles applied, the manner of application and the estimation techniques used) with preceding years throughout the periods involved, and (iii) accurately, completely, and fairly present in all material respects the financial position of each of the Sellers and of the Business as of the respective dates thereof and their respective results of operations and cash flows for the periods then ended, except that the Interim Financial Statements are subject to normal year-end adjustments, which will not be material in the aggregate. Other than as expressly set forth therein, the statements of income included in the Financial Statements do not contain any items of special or nonrecurring income, and the balance sheets included in the Financial Statements do not reflect any write-up or revaluation increasing the book value of any assets, nor have there been any transactions since November 1, 1994 giving rise to special or nonrecurring income or any such write-up or revaluation. All financial projections, forecasts, and other forward-looking information provided by Sellers to Triangle or Buyer were, as of their respective dates, prepared in good faith and on a basis that management of Robbins and Searcy believed to be reasonable. The Financial Statements include all liability, valuation and other reserves and allowances required by U.S. GAAP and by this Agreement, including without limitation, reserves for Environmental Liabilities, employee benefit obligations (including accrued vacation and sick leave) and product warranty and product liability claims, and all such reserves and allowances (collectively, "Reserves") are adequate. 7 Liabilities. ( ) To their knowledge, Sellers have no material liabilities or obligations (whether accrued, absolute, contingent, unliquidated, or otherwise, whether or not known to Sellers, and whether due or to become due), except (i) liabilities reflected on the Latest Balance Sheet, (ii) liabilities described in the notes accompanying the Financial Statements, (iii) liabilities that have arisen since the date of the Latest Balance Sheet in the ordinary course of business (none of which is a liability for breach of contract, breach of warranty, tort, or infringement), (iv) liabilities arising under executory contracts entered into in the ordinary course of business (none of which is a liability for breach of contract), and (v) liabilities specifically set forth on Schedule 3.8. (a) Sellers' liabilities and obligations (whether accrued, absolute, contingent, unliquidated, or otherwise, whether or not known to Sellers, and whether due or to become due) for product warranty and product liability claims do not exceed the amount of Reserves therefor reflected in the Financial Statements. 8 Absence of Certain Changes. Except as disclosed on Schedule 3.9, since November 1, 1996, (i) to Sellers' knowledge, there has not been any material adverse change in, or any event or condition that might reasonably be expected to result in any material adverse change in, the business, assets, results of operations, condition (financial or otherwise), or prospects of the Business or the ownership or operation of the Assets or any material portion thereof except for general industry conditions; (ii) the Business has been conducted only in the ordinary course consistent with past practice; (iii) Sellers have not, in respect of the Business, incurred any material liability, engaged in any material transaction, or entered into any material agreement outside the ordinary course of business consistent with past practice; (iv) none of the 10 largest customers (including distributors) of any Seller has discontinued or significantly reduced its purchases from the Company, nor has any such customer given any notice or other indication it anticipates doing so; (v) there has not occurred any material loss, damage, destruction, or other casualty to any of the Assets (whether or not covered by insurance); and (vi) no Seller has, in respect of the Business, taken any of the actions set forth in Section 5.2 except as permitted thereunder. 9 Tax Matters. Except as disclosed on Schedule 3.10: ( ) each of Robbins and Searcy has duly filed all Tax Returns required to be filed by or with respect to it with the IRS or other applicable authority, and no extensions with respect to such Tax Returns have been requested or granted; (a) there are no Encumbrances with respect to Taxes (except for liens with respect to real property Taxes not yet due) upon any of the Assets; (b) Sellers have duly and timely withheld from salaries, wages, and other compensation and paid over to the appropriate taxing authorities all amounts required to be so withheld and paid over under all Applicable Laws; and (c) Sellers have complied in all material respects with all requirements of Applicable Law as necessary to qualify all industrial revenue bond financing included in the Liabilities for tax-free treatment and all such financing is so qualified. 10 Compliance With Laws. Sellers have complied in all material respects with all Applicable Laws relating to the ownership or operation of the Assets or the operation of the Business (including without limitation Applicable Laws relating to securities, properties, business operations, products, manufacturing processes, advertising and sales practices, employment practices, terms and conditions of employment, wages and hours, product safety, and civil rights), the failure to comply with which would result in a Material Adverse Effect. No Seller has received any written notice, that has not been dismissed or otherwise disposed of, that a Seller has not so complied. No Seller is charged with, or to the knowledge of Sellers threatened with or under investigation with respect to, any alleged violation of any Applicable Law relating to any aspect of the ownership of the Assets or operation of the Business. 11 Legal Proceedings. Except as set forth on Schedule 3.12, there are no Proceedings pending, or to the knowledge of Sellers threatened, against or involving Sellers (or any of Robbins' or Searcy's directors or officers) in connection with the Assets or the Business. No judgment, order, writ, injunction, or decree of any Governmental Entity has been issued or entered against Sellers or any of their affiliates that continues to be in effect with respect to or affecting the Assets or the operation of the Business. There are no Proceedings pending, or to the knowledge of Sellers threatened, seeking to restrain, prohibit, or obtain damages or other relief in connection with this Agreement or the transactions contemplated hereby. 12 Real Property. ( ) Sellers own, or as of the Closing will own, and have good and marketable title to all the Real Property, which is all the real property owned or leased by Sellers and used or held for use in the Business. There are no persons (other than Sellers) in possession of any portion of the Real Property as lessees, tenants at sufferance, or trespassers, nor does any person (other than Sellers) have a lease, tenancy, or other right of occupancy or use of any portion of the Real Property, except as specified on Schedule 3.13. Unless otherwise disclosed on Schedule 3.13, any lease, tenancy, or other right of occupancy or use disclosed on Schedule 3.13 may be terminated by Sellers at any time upon giving not more than thirty (30) days written notice, and, if directed by Buyer, Sellers shall give notice of termination at the Closing. The Real Property has full and free access to and from public highways, streets, and roads, and Sellers have no knowledge of any pending or threatened Proceeding that would limit or result in the termination of such access. To Sellers' knowledge, there exists no Proceeding or court order, or building code provision, deed restriction, or restrictive covenant (recorded or otherwise), or other private or public limitation, that might in any way have a Material Adverse Effect upon the continued use of the Real Property by Sellers in the manner it is currently used. (a) All buildings, improvements, and fixtures situated on the Real Property conform to all Applicable Laws, the failure of which would have a Material Adverse Effect. All the Real Property is zoned for the various purposes for which such Real Property is being used, and there exists no pending or, to the knowledge of Sellers, threatened Proceeding that might adversely affect the validity of such zoning. (b) The Real Property is connected to and serviced by water, sewage disposal, gas, telephone, and electric facilities that are adequate for the current use of the Real Property and, to the knowledge of Sellers, are in compliance with all Applicable Laws. All public utilities required for the operation of the Real Property enter the Real Property through adjoining public streets or, if they pass through adjoining private land, do so in accordance with valid public easements, and all utility lines and mains located on the Real Property have been properly dedicated to, and are serviced and maintained by, the appropriate public or quasi-public entity. (c) Except as set forth on Schedule 3.13, (i) the buildings, improvements, and fixtures situated on the Real Property are in operating condition (excepting ordinary wear and tear), (ii) Sellers have performed all maintenance thereon in the ordinary course consistent with past practice, and (iii) to Sellers' knowledge, the buildings, improvements, and fixtures situated on the Real Property are free of any latent or patent structural defects. (d) Neither the whole nor any part of the Real Property is subject to any pending Proceeding for condemnation or other taking by any Governmental Entity, and, to the knowledge of Sellers, no such condemnation or other taking is contemplated or threatened. (e) There are no delinquent Taxes, assessments, charges, debts, liabilities, claims, or obligations arising from the construction, occupancy, ownership, use, or operation of the Real Property, or the buildings, improvements, or fixtures situated thereon, or the business operated thereon, which could give rise to any mechanic's or materialmen's or other statutory lien against the Real Property, or the buildings, improvements, or fixtures situated thereon, or any part thereof, or for which Buyer will be responsible. (f) Sellers have delivered to Buyer accurate and complete copies of all title insurance policies, title reports, other title documents, surveys, certificates of occupancy, and Permits in the possession of Sellers relating to the Real Property or the buildings, improvements, or fixtures situated thereon. (g) No Seller is a "foreign person" within the meaning of Sections 1445 and 7701 of the Code. 13 Tangible Personal Property. Set forth on Schedule 3.14 is a list, as of the most recent practicable date, of all furniture, equipment, machinery, computer hardware, materials, motor vehicles, rolling stock, apparatus, tools, implements, appliances, and other tangible personal property (other than spare parts, supplies, and inventories) owned or leased by Sellers and used or held for use in the Business. 14 Leased Property. Set forth on Schedule 3.15 is a list of all leases (copies of which have been provided to Buyer) under which Sellers are lessees of real or personal property used or held for use in the Business. Sellers have good and valid leasehold interests in all such properties held by them under lease. Sellers have been in peaceable possession (or remedied any claims relating thereto) of the property covered by each such leases since the commencement of the original term of such lease. No waiver, indulgence, or postponement of Sellers' obligations under any such lease has been granted by the lessor or of the lessor's obligations thereunder by Sellers. No Seller is in breach of or in default under, and no event has occurred that (with or without the giving of notice or the passage of time or both) would constitute a default under, any of such leases, and Sellers have not received any notice from, or given any notice to, any lessor indicating that a Seller or such lessor is in breach of or in default under any of such leases. To the knowledge of Sellers, none of the lessors under any of such leases is in breach thereof or in default thereunder. Sellers have full right and power to occupy or possess, as the case may be, all the property covered by each such lease. 15 Inventory. Other than as described in Schedule 3.16, all inventory (including raw materials, work-in-process, and finished goods) included in the Assets is merchantable, or suitable and usable for the production or completion of merchantable products, for sale in the ordinary course of the Business. Other than as described in Schedule 3.16, none of such inventory is obsolete, discontinued, returned, damaged, overage, or of below standard quality or merchantability, except for items that have been written down to realizable market value. Each item of such inventory is reflected in Sellers' books and records, has been properly classified as to quality, and is valued in accordance with U.S. GAAP consistently applied using the last-in, first-out method of inventory valuation. Finished goods in such inventory conform to the applicable specifications of Sellers, including all applicable warranties, whether express or implied, given in connection with the sales of such goods and under Applicable Law, and are free from defects in design, workmanship, and material. Sellers also maintain sufficient inventories of spare and replacement parts to meet any repair and replacement obligations in the ordinary course of the Business, under applicable warranties or otherwise. 16 Receivables. Except as set forth on Schedule 3.17, all receivables (including accounts and notes receivable, employee advances, and accrued interest receivables) of Sellers as reflected on the Latest Balance Sheet and the Receivables Schedules or arising since the respective dates thereof generated by the Business are valid obligations of the respective makers thereof, have arisen in the ordinary course of the Business, are not subject to any valid defenses, counterclaims, or set offs, and are collectible in full at their recorded amounts in the ordinary course of the Business without resort to litigation or other extraordinary collection efforts, net of all cash discounts and doubtful accounts as reflected on the Latest Balance Sheet and the Receivables Schedules (in the case of receivables so reflected) or on the books of Sellers included in the Assets (in the case of receivables arising since the date thereof). The allowances for doubtful accounts reflected in the Latest Balance Sheet and on the books of Sellers were determined in accordance with U.S. GAAP and were and are reasonable in light of historical data and other relevant information. 17 Intellectual Property. ( ) Set forth on Schedule 3.18 is a list of all patents, trade secrets and trademarks included in the Intellectual Property used or held for use in the Business. Schedule 3.18 specifies, as applicable: (i) the nature of such patents, trade secrets and trademarks; (ii) the owner of such patents, trade secrets and trademarks; (iii) the jurisdictions by or in which such patents, trade secrets and trademarks are recognized without regard to registration or has been issued or registered or in which an application for such issuance or registration has been filed, including the respective registration or application numbers; and (iv) all licenses, sublicenses, and other agreements to which Sellers are parties and pursuant to which Sellers or any other person is authorized to use such patents, trade secrets and trademarks, including the identity of all parties thereto, a description of the nature and subject matter thereof, the applicable royalty, and the term thereof. (a) The listed Intellectual Property constitutes all Intellectual Property necessary for or, to Sellers' knowledge, otherwise of value in connection with the operation of the Business as presently or historically conducted. Sellers have good and marketable title to or are validly licensed (as disclosed in Schedule 3.18) to use all such Intellectual Property. To Sellers' knowledge, each item of such Intellectual Property is in full force and effect, Sellers are in compliance with all their obligations with respect thereto, and, to the knowledge of Sellers, no event has occurred that permits, or upon the giving of notice or the passage of time or otherwise would permit, the revocation or termination of any thereof. There are no Proceedings pending, or to the knowledge of Sellers threatened, against Sellers asserting that the use by Sellers of any of such Intellectual Property infringes the rights of any other person or seeking revocation, termination, or concurrent use of any of such Intellectual Property, and there is, to the knowledge of Sellers, no basis for any such Proceeding. To the knowledge of Sellers, none of such Intellectual Property is being infringed upon by any other person. None of such Intellectual Property is subject to any outstanding judgment, order, writ, injunction, or decree of any Governmental Entity, or any agreement, arrangement, or understanding, written or oral, restricting the scope or use thereof. To the knowledge of Sellers, the conduct of the Business at any time prior to the Closing Date did not infringe upon or otherwise misappropriate any Intellectual Property of any other person. 18 Permits. Set forth on Schedule 3.19 is a list of all Permits held by Sellers that relate to the Assets or the Business. Such Permits constitute all the Permits necessary or required for the ownership and operation of the Assets and the conduct of the Business, the failure of which would have a Material Adverse Effect. Each of such Permits is in full force and effect, Sellers are in material compliance with all their obligations with respect thereto, and, to the knowledge of Sellers, no event has occurred that permits, or with or without the giving of notice or the passage of time or both would permit, the revocation or termination of any thereof. Except as disclosed on Schedule 3.19, no notice has been issued by any Governmental Entity and no Proceeding is pending or, to the knowledge of Sellers, threatened with respect to any alleged failure by Sellers to have any Permit or any alleged failure by Sellers to comply with any Permit. 19 Contracts and Agreements. ( ) Set forth on Schedule 3.20 is a list of all the following leases, contracts, agreements, practices, arrangements, and understandings (written or oral, formal or informal) (collectively, for purposes of this Section 3.20, "agreements") to which Sellers are parties or by which Sellers are otherwise bound that relate to the Assets or the Business: ( ) collective bargaining agreements and similar agreements with employees as a group; (i) employee benefit agreements, trusts, plans, funds, or other arrangements of any nature, including those referred to in Section 5.2(c)(i); (ii) agreements with any director, officer, employee, consultant, or advisor of Sellers or any of their affiliates; (iii) agreements between or among Sellers and any of their affiliates; (iv) indentures, mortgages, security agreements, notes, loan or credit agreements, or other agreements relating to the borrowing of money by Sellers or to the direct or indirect guarantee or assumption by Sellers of any obligation of others, including any agreement that has the economic effect, although not the legal form, of any of the foregoing; (v) agreements relating to the acquisition or disposition of assets (other than sales of inventory in the ordinary course of business), including agreements relating to product returns by customers; (vi) agreements with respect to the lease of real or personal property; (vii) agreements concerning the management or operation of any real property; (viii) broker, distributor, dealer, manufacturer's representative, sales, agency, sales promotion, advertising, market research, marketing, consulting, research and development, maintenance, service, and repair agreements, except for any maintenance, service or repair agreements which are terminable without penalty on less than thirty (30) days notice or involve payments of less than $1,000 per month; (ix) license, royalty, or other agreements relating to Intellectual Property; (x) partnership, joint venture, and profit sharing agreements; (xi) agreements with any Governmental Entity; (xii) agreements relating to the release or disposal of hazardous material (as such term is defined in Section 3.22); (xiii) agreements in the nature of a settlement or a conciliation agreement arising out of any claim asserted by any other person; (xiv) agreements containing any covenant limiting the freedom of Sellers to engage in any line of business or compete with any other person in any geographic area or during any period of time; and (xv) powers of attorney granted by Sellers in favor of any person. (a) Sellers have delivered to Triangle or Buyer accurate and complete copies of the agreements listed on Schedule 3.20. Each of such agreements is a valid and binding agreement of the Sellers who are parties thereto and, to Sellers' knowledge, of the other party or parties thereto, enforceable against Sellers and such other party or parties in accordance with its terms except as such enforcement may be affected by bankruptcy or equitable principles. Sellers are not in breach of or in default under, nor has any event occurred that (with or without the giving of notice or the passage of time or both) would constitute a default by Sellers under, any material provision of any of such agreements, and Sellers have not received any notice from, or given any notice to, any other party indicating that Sellers are in breach of or in default under any of such agreements. To the knowledge of Sellers, no other party to any of such agreements is in breach of or in default under such agreements, nor has any assertion been made by Sellers of any such breach or default. Except as disclosed on Schedule 3.20, each of such agreements is freely and fully assignable to Buyer without penalty or other adverse consequence. (b) Sellers have not received notice of any plan or intention of any other party to any agreement to exercise any right of offset with respect to, or any right to cancel or terminate, any agreement, and Sellers do not know of any fact or circumstance that would justify the exercise by any such other party of such a right other than the automatic termination of such agreement in accordance with its terms. Sellers do not currently contemplate, or have reason to believe any other person currently contemplates, any amendment or change to any agreement that could have a Material Adverse Effect. 20 ERISA; Accrued Compensation. ( ) Set forth on Schedule 3.21 is a list of all employee benefit plans (as defined in Section 3(3) of ERISA), that are maintained by or contributed to by Sellers for employees who are employed in connection with the Assets or the Business. During the past five years, no Seller and no affiliate of any Seller has made or been required to make contributions to any "multiemployer plan", as defined in Section 3(37) of ERISA. Sellers and all the affiliates of Sellers have paid and discharged promptly when due all liabilities and obligations arising under ERISA or the Code of a character that if unpaid or unperformed might result in the imposition of a lien against any of the Assets. For purposes of this Section 3.21 only, an "affiliate" of any person means any other person that, together with such person, would be treated as a single employer under Section 414 of the Code. The only plans set forth on Schedule 3.21 which individually or collectively would constitute an "employee pension benefit plan" as defined in Section 3(2) of ERISA are identified as such on Section 3.21. Such plans are referred to in this Section as the "Pension Plans". (a) The Sellers have delivered to Triangle or Buyer or its representatives accurate and complete copies of the Pension Plans as currently in effect (and the related trust agreements) and all amendments thereto, the most recent summary plan descriptions for such Plans, the three most recent annual reports (form 5500 or 5500C/R including, if applicable, Schedule B thereto) filed with the IRS for such Plans, and the most recent favorable IRS determination letters for such Plans (the dates of which are set forth in Schedule 3.21). (b) Except to the extent that amendments may be required to be adopted as a result of the Uniformed Services Employment and Reemployment Rights Act of 1994 and the Small Business Job Protection Act of 1996, the Searcy Flooring, Inc. Profit Sharing Plan as amended and restated effective as of March 1, 1989 (the "Profit Sharing Plan"), is a qualified plan within the meaning of Section 401(a) of the Code as of the Closing Date and for prior plan years for which the statute of limitations has not expired (the "Open Period") and the trust forming a part thereof is exempt from taxes pursuant to Section 501(a) of the Code for the Open Period. This representation does not extend to the qualifications of the Profit Sharing Plan either with respect to amendments that may be adopted by the Buyer subsequent to the Closing Date that may have an effective date prior to the Closing Date or to the operations of the Profit Sharing Plan subsequent to the Closing Data as such operations may impact the qualification of the Profit Sharing Plan for current plan year. With respect to the Open Period, nothing done or omitted to be done and no transaction or holding of any asset under or in connection with the Searcy Flooring, Inc. Profit Sharing Plan through the Closing Date has or will make Triangle or Buyer (or any affiliate thereof) or any director or officer thereof subject to any liability under Title I of ERISA or liable for on behalf of the Profit Sharing Plan, or by an participant therein, alleging a breach or breaches of fiduciary duties or violations of ERISA or the Code which could result in liability on the part of Triangle or Buyer (or any affiliate thereof), its officers or directors or such Profit Sharing Plan, under ERISA or the Code and, to the best knowledge of Sellers, there is no basis for any such claim. The Profit Sharing Plan has been maintained in substantial compliance with its terms and the requirements presented by ERISA and the Code. (c) Except to the extent that amendments may be required to be adopted as a result of the Uniformed Services Employment and Reemployment Rights Act of 1994 and the Small Business Job Protection Act of 1996, the Employees' Retirement Savings Plan as amended and restated effective as of November 1, 1989, (the "401(k) Plan") is a qualified plan within the meaning of Section 401(a) of the Code as of the Closing Date and prior plan years for which the statute of limitations has not expired, and, as such the plan assets being transferred (the "Transferred Assets") to the similar plan being established by Buyer are being transferred from a qualified plan. There are not threatened or pending claims by or on behalf of the Transferred Assets, or by any participant having an interest in the Transferred Assets, alleging a breach or breaches of fiduciary duties or violations of ERISA or the Code which could result in liability on the part of Triangle or Buyer (or any affiliate thereof), its officers or directors or such Transferred Assets under ERISA or the Code and, to the best knowledge of the Sellers, there is no basis for such claim. (d) Sellers have calculated and accrued all Compensation earned by all Employees under all Employment Arrangements relating to any Employees of the Business, including without limitation all plans and arrangements identified on Schedules 3.20 and 3.21, for all periods through and including the Closing Date (and for salaried Employees of Robbins, through and including March 31, 1997), except for the accrued Compensation under the Profit Sharing Plan for the period November 1, 1996 through the Closing Date, which shall be accrued in accordance with Section 6.5(e). All such Compensation has been calculated as required by the terms of said plans and arrangements, or if not fixed by the existing terms of the plans and arrangements, in a manner no less favorable to participants therein than the manner in which such Compensation was calculated during the fiscal year ended October 31, 1997. All such Compensation required to be paid prior to the Closing Date pursuant to Section 6.5 has been paid in full. 21 Environmental Matters. ( ) Except as disclosed on Schedule 3.22: ( ) to Sellers' knowledge, the Business and the Assets currently comply with Applicable Environmental Laws (as defined below); (i) the Business and the Assets are not subject to any existing, pending, or to the knowledge of Sellers threatened, Proceeding under, or to any remedial obligations under, any Applicable Environmental Laws; (ii) all Permits, if any, required to be obtained by Sellers under any Applicable Environmental Laws in connection with any aspect of the Business, including without limitation those relating to the treatment, storage, disposal, or release of a hazardous material (as defined below), have been duly obtained and are in full force and effect, and Sellers are in material compliance with the terms and conditions of all such Permits; (iii) Sellers, with respect to the Business and the Assets, have at all times materially satisfied all Applicable Environmental Laws, and Sellers have not received any notice of noncompliance with any Applicable Environmental Laws; (iv) to Sellers' knowledge, there are no physical or environmental conditions existing on the Real Property or resulting from Sellers' operations or activities, past or present, at any location, that would give rise to any on-site (at the Real Property) or off-site (from the Real Property) remedial obligations under any Applicable Environmental Laws; (v) since the effective date of the relative requirements of Applicable Environmental Laws, all hazardous materials generated by Sellers in connection with the Business or the Assets have been transported only by carriers authorized under Applicable Environmental Laws to transport such materials, and have been disposed of only at treatment, storage, and disposal facilities authorized under Applicable Environmental Laws to treat, store, or dispose of such materials, and, to the knowledge of Sellers, such carriers and facilities have been and are operating in compliance with such authorizations and are not the subject of any existing, pending, or threatened Proceeding in connection with any Applicable Environmental Laws; (vi) to Sellers' knowledge, there has been no exposure of any person or property to hazardous materials in violation of Applicable Environmental Laws , nor has there been any release of hazardous materials into the environment in violation of Applicable Environmental Laws, by Sellers in connection with the Business or the Assets that could reasonably be expected to give rise to any claim for damages or compensation; and (vii) Sellers have made available to Triangle or Buyer all internal and external environmental audits and studies and all correspondence on substantial environmental matters in the possession of Sellers relating to the Business or the Assets; provided, that any privileged portion of such correspondence may have been redacted therefrom. (a) Irrespective of any other provision contained in this Agreement, all representations and warranties made by Sellers in this Agreement pertaining to hazardous materials, Applicable Environmental Laws, and any other environmental, health or safety matters are set forth solely in this Section 3.22. (b) For purposes of this Agreement: ( ) "Applicable Environmental Laws" means any and all Applicable Laws pertaining to health, safety, occupational safety, or the environment currently in effect in any and all jurisdictions in which Sellers have conducted the Business or owned or leased the Assets, including, without limitation, the Clean Air Act, as amended, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, the Rivers and Harbors Act of 1899, as amended, the Federal Water Pollution Control Act, as amended, the Occupational Safety and Health Act of 1970, as amended, the Resource Conservation and Recovery Act of 1976, as amended, the Safe Drinking Water Act, as amended, the Toxic Substances Control Act, as amended, the Superfund Amendments and Reauthorization Act of 1986, as amended, the Hazardous Materials Transportation Act, as amended, any regulations promulgated under such laws and any state law and other environmental conservation or protection laws; and (i) "hazardous material" means (A) any substance that is now listed, defined, considered or classified as hazardous, toxic or a solid waste pursuant to any Applicable Environmental Laws, (B) petroleum (including crude oil and any fraction thereof), natural gas, and natural gas liquids, (C) asbestos and asbestos containing materials, in any form, whether friable or non-friable, and (D) radon gas. 22 Labor Relations. ( ) Except as disclosed on Schedule 3.23, with respect to the Business at the plants operated on the Real Property, (i) there are no collective bargaining agreements, labor union contracts or similar agreements applicable to any employee to or by which a Seller is a party or is bound, no such agreement or contract has been requested by any employee or group of employees of any Seller, and no discussions have occurred with respect thereto by the management of either Robbins or Searcy with any such employee; (ii) no employee of any Seller is represented by any labor organization, collective bargaining representative, or group of employees; (iii) no labor organization, collective bargaining representative, or group of employees claims to represent a majority of the employees of any Seller in an appropriate unit of a Seller; (iv) no Seller is aware of or involved with any representational campaign or other organizing activities by any union or other organization or group seeking to become the collective bargaining representative of any of the employees of any Seller; (v) no Seller is obligated to bargain collectively with respect to wages, hours, and other terms and conditions of employment with any recognized or certified labor organization, collective bargaining representative, or group of employees representing employees of any Seller; and (vi) no Seller is aware of any strike, work stoppage, work slowdown, or lockout or any threat thereof, except for routine grievance matters, by or with respect to any employee of any Seller, and since November 1, 1994, there has been no significant labor dispute, strike, work stoppage, work slowdown, lockout, or similar matter involving any of the employees of any Seller. (a) With respect to the employees engaged in the Business, Sellers are in compliance with all Applicable Laws pertaining to employment and employment practices and wages, hours, and other terms and conditions of employment in respect of their employees and have no accrued liability for any arrears of wages or any Taxes or penalties for failure to comply with any thereof. With respect to the employees engaged in the Business, no Seller is engaged in any unfair labor practice or unlawful employment practice. There is no pending, or to the knowledge of Sellers threatened, Proceeding against or involving Sellers by or before, and Sellers are not subject to any judgment, order, writ, injunction, or decree of or inquiry from, the National Labor Relations Board, the Equal Employment Opportunity Commission, the Department of Labor, or any other Governmental Entity in connection with any current, former, or prospective employee of any Seller. (b) Sellers, to their knowledge, believe that their respective relations with the employees of the Business are satisfactory. 23 Customers and Suppliers. Set forth on Schedule 3.24 is a list of (i) the names of, and the dollar volume and percentage of products or services purchased by Sellers from, each Seller's 10 largest suppliers of products and services with respect to the Business (in terms of purchases) during each of the fiscal years ended October 31, 1995 and October 31, 1996, (ii) the dollar volume and percentage of sales by Sellers to each Seller's 25 largest customers of products and services with respect to the Business (in terms of sales) during each of such periods. Other than as set forth on Schedule 3.24, (i) none of such current customers or suppliers has refused, or communicated that it will or may refuse, to purchase or supply products or services from or to Sellers or has communicated that it will or may substantially reduce the amount of products or services that it is willing to purchase from or supply to Sellers, (ii) no Seller is past due (in accordance with the stated invoice terms) with respect to any amounts owed to any of the suppliers listed or required to be listed on Schedule 3.24, and (iii) there has not been any material adverse change in the business relationship of any Seller with any customer or supplier listed or required to be listed on Schedule 3.24. 24 Insurance. Sellers maintain with sound and reputable insurers, and there are currently in full force and effect, policies of insurance with respect to the Assets and the Business against such casualties and contingencies of such types and in such amounts as are customary for corporations of similar size engaged in similar lines of business. All premiums due and payable with respect to such policies have been timely paid. No notice of cancellation of, or indication of an intention not to renew, any such policy has been received by any Seller. 25 Books and Records. All the books and records of Sellers relating to the Assets or the Business, including all personnel files, employee data, and other materials relating to employees of the Business, are substantially complete and correct, have been maintained in accordance with good business practice and all Applicable Laws, and, in the case of the books of account, have been prepared and maintained in accordance with generally accepted accounting principles consistently applied. Such books and records accurately and fairly reflect, in reasonable detail, all transactions, revenues, expenses, assets, and liabilities of Sellers with respect to the Business. 26 Brokerage Fees. Sellers and their affiliates have not retained any financial advisor, broker, agent, or finder or paid or agreed to pay any financial advisor, broker, agent, or finder on account of this Agreement or any transaction contemplated hereby. Sellers shall indemnify and hold harmless Triangle and Buyer from and against any and all losses, claims, damages, and liabilities (including legal and other expenses reasonably incurred in connection with investigating or defending any claims or actions) with respect to any finder's fee, brokerage commission, or similar payment in connection with any transaction contemplated hereby asserted by any person on the basis of any act or statement made or alleged to have been made by Sellers or any of their affiliates. 27 Insider Interests. Except as disclosed on Schedule 3.28, no Insider (hereinafter defined) is presently directly, or to the knowledge of Sellers indirectly, a party to any transaction or agreement with any Seller, including, without limitation, any agreement, arrangement, or understanding, written or oral, providing for the employment of, furnishing of services by, rental of real or personal property from, use of real or personal property by, or requiring payments to, any Insider. As used herein, "Insider" means any shareholder, director, officer, or management employee of any Seller or any former owner of an interest in either Robbins or Searcy. To the knowledge of Sellers, no director, officer, or management employee of any Seller owns any interest in, or serves as a director, officer, or management employee of, any customer, supplier, or competitor of Sellers (other than an interest in a public corporation that does not exceed one percent (1%) of its outstanding securities). 28 Disclosure. No representation or warranty made by any Seller in this Agreement, and no statement of any Seller contained in any document, certificate, or other writing furnished or to be furnished by Sellers pursuant hereto or in connection herewith, contains or will contain, at the time of delivery, any untrue statement of a material fact or omits or will omit, at the time of delivery, to state any material fact necessary in order to make the statements contained therein, in light of the circumstances under which they are made, not misleading, the statement or omission of which will have a Material Adverse Effect. 29 Representations and Warranties on Closing Date. The representations and warranties made in this Article III will be true and correct on and as of the Closing Date with the same force and effect as if such representations and warranties had been made on and as of the Closing Date, except that any such representations and warranties that expressly relate only to an earlier date shall be true and correct on the Closing Date as of such earlier date. III. REPRESENTATIONS AND WARRANTIES OF TRIANGLE AND BUYER Triangle and Buyer each represents and warrants to Sellers that: 0 Corporate Organization. Each of Triangle and Buyer is a corporation duly organized, validly existing, and in good standing under the laws of the jurisdiction of its incorporation and has all requisite corporate power and corporate authority to own, lease, and operate its properties and to carry on its business as now being conducted. 1 Authority Relative to This Agreement. Each of Triangle and Buyer has full corporate power and corporate authority to execute, deliver, and perform this Agreement and the Ancillary Documents to which it is a party and to consummate the transactions contemplated hereby and thereby. The execution, delivery, and performance by each of Triangle and Buyer of this Agreement and the Ancillary Documents to which it is a party, and the consummation by it of the transactions contemplated hereby and thereby, have been duly authorized by all necessary corporate action of each of Triangle and Buyer. This Agreement has been duly executed and delivered by Triangle and Buyer and constitutes, and each Ancillary Document executed or to be executed by Triangle or Buyer has been, or when executed will be, duly executed and delivered by Triangle or Buyer and constitutes, or when executed and delivered will constitute, a valid and legally binding obligation of Triangle or Buyer, enforceable against Triangle or Buyer in accordance with its respective terms, except that such enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium, and similar laws affecting creditors' rights generally and (ii) equitable principles that may limit the availability of certain equitable remedies (such as specific performance) in certain instances and (iii) public policy considerations with respect to the enforceability of rights of indemnification. 2 Noncontravention. The execution, delivery, and performance by each of Triangle and Buyer of this Agreement and the Ancillary Documents to which it is a party and the consummation by it of the transactions contemplated hereby and thereby do not and will not (i) conflict with or result in a violation of any provision of the charter or bylaws of Triangle or Buyer, (ii) conflict with or result in a violation of any provision of, or constitute (with or without the giving of notice or the passage of time or both) a default under, or give rise (with or without the giving of notice or the passage of time or both) to any right of termination, cancellation, or acceleration under, or require any consent, approval, authorization, or waiver of any party to, any bond, debenture, note, mortgage, indenture, lease, contract, agreement, or other instrument or obligation to which either Triangle or Buyer is a party or by which either Triangle or Buyer or any of its properties may be bound or any Permit held by either Triangle or Buyer, (iii) result in the creation or imposition of any Encumbrance upon the properties of either Triangle or Buyer, or (iv) violate any Applicable Law binding upon either Triangle or Buyer. 3 Governmental Approvals. No consent, approval, order, or authorization of, or declaration, filing, or registration with, any Governmental Entity is required to be obtained or made by either Triangle or Buyer in connection with the execution, delivery, or performance by either Triangle or Buyer of this Agreement and the Ancillary Documents to which it is a party or the consummation by it of the transactions contemplated hereby or thereby, other than (i) compliance with any applicable requirements of the Exchange Act; (ii) filings with Governmental Entities to occur in the ordinary course following the consummation of the transactions contemplated hereby; and (iii) such consents, approvals, orders, or authorizations that, if not obtained, and such declarations, filings, or registrations that, if not made, would not, individually or in the aggregate, have a Material Adverse Effect on the business, assets, results of operations, condition (financial or otherwise), or prospects of Triangle and its subsidiaries considered as a whole or on the ability of either Triangle or Buyer to consummate the transactions contemplated hereby. 4 Legal Proceedings. There are no Proceedings pending, or to the knowledge of either Triangle or Buyer threatened, seeking to restrain, prohibit, or obtain damages or other relief in connection with this Agreement or the transactions contemplated hereby. 5 Brokerage Fees. Neither Triangle nor any of its affiliates has retained any financial advisor, broker, agent, or finder or paid or agreed to pay any financial advisor, broker, agent, or finder on account of this Agreement or any transaction contemplated hereby. Triangle shall indemnify and hold harmless Sellers from and against any and all losses, claims, damages, and liabilities (including legal and other expenses reasonably incurred in connection with investigating or defending any claims or actions) with respect to any finder's fee, brokerage commission, or similar payment in connection with any transaction contemplated hereby asserted by any person on the basis of any act or statement made or alleged to have been made by Triangle or any of its affiliates. 6 Disclosure. No representation or warranty made by either Triangle or Buyer in this Agreement, and no statement of either Triangle or Buyer contained in any document, certificate, or other writing furnished or to be furnished by either Triangle or Buyer pursuant hereto or in connection herewith, contains or will contain, at the time of delivery, any untrue statement of a material fact or omits, or will omit, at the time of delivery, to state any material fact necessary in order to make the statements contained therein, in the light of the circumstances under that they are made, not misleading. 7 Representations and Warranties on Closing Date. The representations and warranties made in this Article IV will be true and correct on and as of the Closing Date with the same force and effect as if such representations and warranties had been made on and as of the Closing Date, except that any such representations and warranties that expressly relate only to an earlier date shall be true and correct on the Closing Date as of such earlier date. IV. CONDUCT OF BUSINESS PENDING CLOSING Sellers hereby covenant and agree with Triangle and Buyer as follows: 0 Conduct and Preservation of Business. Except as expressly provided in this Agreement, during the period from the date hereof to the Closing, Sellers (i) shall conduct the Business only in the ordinary course consistent with past practice and in compliance with this Agreement and all Applicable Laws; (ii) shall use their reasonable efforts consistent with past practice to preserve, maintain, and protect the Assets; and (iii) shall use their reasonable efforts consistent with past practice to preserve intact the business organization of the Business, to keep available the services of the employees conducting the Business, and to maintain existing relationships with suppliers, contractors, distributors, customers, and others having business relationships with the Business. 1 Restrictions on Certain Actions. Without limiting the generality of the foregoing, and except as otherwise expressly provided in this Agreement, prior to the Closing, Sellers shall not, without the prior written consent of Buyer: ( ) create, incur, guarantee, or assume any liability or obligation in respect of the Business, except current liabilities incurred in the ordinary course of the Business, to the extent necessary to preserve and maintain the Business consistent with past practice; (a) mortgage or pledge any of the Assets or create or suffer to exist any Encumbrance thereupon, other than those existing in connection with the Permitted Encumbrances; (b) (i) enter into, adopt, or (except as may be required by law) amend or terminate any bonus, profit sharing, compensation, severance, termination, stock option, stock purchase, pension, retirement, deferred compensation, employment, collective bargaining, severance, or other employee benefit agreement, trust, plan, fund, or other arrangement for the benefit or welfare of any employee of the Business; (ii) increase in any manner the compensation or fringe benefits of any employee of the Business other than in the ordinary course of business, consistent with prior practice; or (iii) pay to any employee of the Business any benefit not required by any employee benefit agreement, trust, plan, fund, or other arrangement as in effect on the date hereof; (c) sell, lease, transfer, or otherwise dispose of, directly or indirectly, any of the Assets, other than in the ordinary course of the Business consistent with past practice; (d) make any capital expenditure or expenditures relating to the Business that are not in the ordinary course of business or that in the aggregate are in excess of $500,000; (e) pay, discharge, or satisfy any claims, liabilities, or obligations relating to the Business (whether accrued, absolute, contingent, unliquidated, or otherwise, and whether asserted or unasserted), including without limitation any loans or other amounts payable to shareholders or affiliates, other than the payment, discharge, or satisfaction in the ordinary course of the Business consistent with past practice, or in accordance with their terms, of liabilities reflected or reserved against in the Latest Balance Sheet or incurred since the date thereof in the ordinary course of the Business consistent with past practice; (f) enter into, or amend, modify, or change, any lease, contract, agreement, commitment, arrangement, or transaction relating to the Business, except in the ordinary course of the Business consistent with past practice; (g) delay payment of any account payable or other liability of Sellers relating to the Business beyond its due date or the date when such liability would have been paid in the ordinary course of the Business consistent with past practice; (h) allow the levels of raw materials, work-in-process, finished goods, supplies, and other materials included in the inventory of the Business to vary in any material respect from the levels customarily maintained by Sellers in the ordinary course of the Business consistent with past practice; (i) permit any current insurance or reinsurance policies to be cancelled or terminated or any of the coverages thereunder to lapse if such policy covers Assets or insures risks, contingencies, or liabilities of the Business, unless simultaneously with such cancellation, termination, or lapse, replacement policies providing coverage equal to or greater than the coverage cancelled, terminated, or lapsed are in full force and effect and written copies thereof have been provided to Triangle or Buyer; (j) authorize, declare, pay, or effect any dividend or liquidating or other distribution in respect of its capital stock (other than in cash for (i) payment of tax liabilities for tax periods ending prior to the Closing resulting from the subchapter S corporation status of a Seller) or (ii) payment of any obligations under any shareholder agreements or any direct or indirect redemption, purchase, or other acquisition of any of such stock (other than under any shareholder agreements); (k) deliberately take any action that would make any of the representations or warranties of any Seller contained in this Agreement untrue or inaccurate as of any time from the date of this Agreement to the Closing or would or might result in any of the conditions set forth in this Agreement not being satisfied; (l) enter into or amend any contract, agreement, or other commitment that would have a Material Adverse Effect; or (m) authorize or propose, or agree in writing or otherwise to take, any of the actions described in this Section 5.2. V. ADDITIONAL AGREEMENTS 0 Access to Information; Confidentiality. ( ) Between the date hereof and the Closing, Sellers shall, and shall cause Robbins International, Inc. to, (i) give Buyer and its authorized representatives reasonable access to all employees, all plants, offices, warehouses, and other facilities, and all books and records, including work papers and other materials prepared by Sellers' accountants, of Sellers and Robbins International relating to the Assets, the Liabilities or the Business, (ii) permit Buyer and its authorized representatives to make such inspections as they may reasonably require, with respect to the Business or the Assets, and (iii) furnish Buyer and its authorized representatives with such financial and operating data and other information with respect to the Assets, the Liabilities and the Business as Buyer may from time to time reasonably request; provided, however, that no investigation pursuant to this Section 6.1 shall affect any representation or warranty of Sellers contained in this Agreement or in any agreement, instrument, or document delivered pursuant hereto or in connection herewith; provided further, that, any such representation or warranty shall be modified or waived by such investigation to the extent Buyer obtains actual knowledge in the course thereof that Sellers are in violation or default under any such representation or warranty, and Buyer does not immediately bring such violation or default to the attention of Sellers and provide reasonable time for the cure thereof by Sellers. (a) Sellers acknowledge and agree that irreparable damage would occur in the event any confidential information regarding the Assets or the Business is disclosed to or utilized on behalf of any person that is in competition with the Business. Accordingly, Sellers covenant and agree that they will not, and that they will cause their affiliates not to, directly or indirectly, without the prior written consent of Buyer, use or disclose any of such confidential information, except in the normal course of operations of the Business or to authorized representatives of Buyer; provided, however, that confidential information shall not be deemed to include information that (i) was or becomes generally available to the public other than as a result of disclosure by Sellers or their affiliates or (ii) becomes available to Sellers after the Closing on a nonconfidential basis from a source other than Buyer, provided that such source is not known by Sellers to be bound by a confidentiality agreement with respect to such confidential information. Notwithstanding the foregoing provisions of this paragraph, Sellers and their affiliates may disclose any confidential information to the extent that, in the written opinion of counsel for Sellers, such person is legally compelled to do so, provided that, prior to making such disclosure, such person advises and consults with Buyer regarding such disclosure and provided further that such person discloses only that portion of such confidential information as is legally required. Buyer acknowledges and agrees that the Confidentiality Agreement dated December 20, 1996 between Triangle and Sellers shall remain in effect as provided therein. 1 Acquisition Proposals. From and after the date of this Agreement until the earlier of the Closing or the termination of this Agreement, neither Sellers nor any affiliate, director, officer, employee, agent, or representative of Sellers shall, directly or indirectly, (i) solicit, initiate, or knowingly encourage any Acquisition Proposal (as defined below) or (ii) engage in discussions or negotiations with, or disclose any nonpublic information relating to the Assets or the Business to, any person that is considering making or has made an Acquisition Proposal. Sellers shall immediately cease and cause to be terminated any existing activities, discussions, or negotiations with any persons conducted heretofore with respect to any Acquisition Proposal and shall promptly request each such person who has heretofore entered into a confidentiality agreement in connection with an Acquisition Proposal to return to Sellers all confidential information heretofore furnished to such person by or on behalf of Sellers. The term "Acquisition Proposal", as used in this Section 6.2, means any offer or proposal for, or any indication of interest in, the acquisition of the Assets or the Business or any portion thereof, other than the transactions contemplated or expressly permitted by this Agreement, by virtue of a merger, sale of assets or stock, or other acquisition of any of the stock of Robbins or Searcy or the assets of any of Sellers' residential flooring operations. 2 Third Party Consents. Each of the Sellers and Buyer shall use their reasonable best efforts to obtain all consents, approvals, orders, authorizations, and waivers of, and to effect all declarations, filings, and registrations with, all third parties (including Governmental Entities) that are necessary, required, or deemed by Buyer to be desirable to enable Sellers to transfer the Assets to Buyer as contemplated by this Agreement and to otherwise consummate the transactions contemplated hereby. All costs and expenses of obtaining or effecting any and all of the consents, approvals, orders, authorizations, waivers, declarations, filings, and registrations referred to in this Section 6.3 shall be borne by the party incurring the same. 3 Reasonable Best Efforts. Each party hereto agrees that it will not voluntarily undertake any course of action inconsistent with the provisions or intent of this Agreement and will use its reasonable best efforts to take, or cause to be taken, all action and to do, or cause to be done, all things reasonably necessary, proper, or advisable under Applicable Laws to consummate the transactions contemplated by this Agreement. Sellers shall cooperate with and assist Buyer and its authorized representatives in order to provide an efficient and orderly transfer of the control and management of the Assets and the Business to Buyer, to permit Buyer to assume the Liabilities without any changes in their repayment terms and conditions, and to avoid any undue interruption in the ongoing operations of the Assets and the Business following the Closing. Sellers agree to take all necessary and reasonable action pursuant to Ark. Code Ann. - 26-52-207 and other Applicable Law so that Buyer will be issued all permits necessary to continue to conduct the Business. 4 Employee and Employee Benefit Plan Matters. ( ) Sellers shall terminate the employment of all employees of the Business effective as of the close of business on the Closing Date. Buyer contemplates offering employment, effective the day after the Closing Date, to substantially all of such employees upon such terms and conditions as Buyer, in its sole discretion, determines. At Buyer's request, Sellers have not issued any notice required, if any is required, by the Worker Adjustment and Retraining Notification Act, 29 U.S.C. 2101, et seq., or any state statute requiring notice to terminated or laid off employees ("WARN"), whether such notice is required to be given before or after the Closing Date. Buyer agrees to and does hereby indemnify and hold Sellers harmless from any damages, claims, fees, penalties, costs, liabilities, compensation or any payments whatsoever required by WARN or any state statute requiring notice to terminated or laid off employees (collectively, the "WARN Compensation"), Sellers having refrained from issuing said notice at the request of Buyer. Sellers acknowledge and agree that they, and not Buyer, are and shall remain solely responsible for payment of any and all wages, salary, compensation, commission, bonuses, severance pay, insurance, supplement, pension, deferred compensation, retirement and any other benefits, premiums and claims, and all federal, state and local withholding, social security and other Taxes and governmental levies in connection therewith, other than the WARN Compensation (collectively, "Compensation"), due, to become due, committed, earned, accrued or otherwise promised to any person (collectively, "earned") who, as of the Closing Date, is a retiree, former employee, or current employee of any Seller (collectively, "Employees") relating to the period prior to and including the Closing Date, including without limitation all Compensation earned under the plans and arrangements identified on Schedules 3.20 and 3.21, and with respect to salaried Employees of Robbins, all Compensation relating to the period through and including March 31, 1997, excepting only all accrued vacation, sick pay, hourly wages (for March 27 and 28, 1997 for Searcy Employees), and Profit Sharing Plan contributions (for the plan year commencing November 1, 1996) included in the Liabilities. Sellers shall pay all such Compensation earned by all Employees as follows: ( ) for hourly Employees of Robbins, all Compensation earned through March 21, 1997 shall be paid on March 27, 1997, and all unpaid Compensation earned through March 28, 1997 shall be paid on or before April 4, 1997; (i) for salaried Employees of Robbins, all Compensation earned through March 31, 1997 shall be paid on March 27, 1997; and (ii) for all Employees of Searcy, all Compensation earned through March 26, 1997 shall be paid on or before March 27, 1997, and all unpaid Compensation earned through March 28, 1997 shall be paid on or before March 27, 1997; provided, that unpaid hourly wages earned (and related Taxes) for March 27 and 28, 1997 may be accrued on or before March 27 but not paid. (a) Other than as provided in Section 6.5(g) and in the proviso at the end of this sentence, Buyer is not hereby, and at no time hereafter will be, adopting, accepting, or assuming any employee benefit plan or collective bargaining agreement of any Seller relating to any Seller's employees or any other agreement, trust, plan, fund, or other arrangement of Sellers that provides for employee benefits or perquisites (collectively, "Employment Arrangements"), and Buyer shall have no liability or obligation whatsoever under any Employment Arrangement to Sellers or to any employees of Sellers, whether or not any of such employees are offered employment by or become employees of Buyer; provided, however, that Buyer shall credit such employees who do become Buyer's employees for all accrued vacation and sick pay included in the Liabilities. Buyer is not obligated to replace any of the Employment Arrangements for any employees of Sellers who become employees of Buyer, nor is Buyer obligated to provide such persons with any similar agreements, plans, or arrangements. (b) Sellers will comply after the Closing Date with the requirements of Sections 601 through 608 of ERISA and Section 4980B of the Code with respect to any employee or former employee of Sellers (and any dependent or former dependent thereof) whose employment with Sellers terminates in connection with or prior to Buyer's purchase of the Assets. It is the express intention of the parties hereto that to the extent necessary for Sellers to meet their obligations under this Section 6.5(c), Sellers shall cause one of their affiliates that maintains a group health plan after the Closing Date to extend group health plan coverage that complies with such requirements to any employee or former employee of Sellers (and any dependent or former dependent thereof) whose employment with Sellers terminates in connection with or prior to Buyer's purchase of the Assets. (c) All employer contributions to the Employees' Retirement Savings Plan (the "401(k) Plan") and the Searcy Flooring, Inc. Profit Sharing Plan (the "Profit Sharing Plan") for employees of the Business for the plan year ending October 31, 1996, shall be accrued and paid by Sellers on or before the Closing Date. To the extent the amount of contributions required to be accrued and paid by this Section 6.5(d) for either the 401(k) Plan or the Profit Sharing Plan is not fixed by the existing terms of said Plan, the amount of contributions accrued and paid for said Plan shall be calculated in a manner no less favorable to participants of said Plan than the manner in which was calculated the amount of the contributions made to said Plan for its plan year ending October 31, 1995. (d) To the extent employer contributions for employees of the Business are not made on or before the Closing Date to the 401(k) Plan and the Profit Sharing Plan for the plan year commencing November 1, 1996, Sellers agree to accrue such contributions on their books in the amounts required by the terms of said Plans, but only for the period of time from November 1, 1996 through the Closing Date for the Profit Sharing Plan and from November 1, 1996 through March 31, 1997 for the 401(k) Plan, (i) with respect to the 401(k) Plan, on or before the Closing Date, and (ii) with respect to the Profit Sharing Plan, on or before the date the Final Closing Statements are required to be delivered pursuant to Section 1.7(a). To the extent the amount of contributions required to be accrued by this Section 6.5(e) for either the 401(k) Plan or the Profit Sharing Plan is not fixed by the existing terms of said Plan, the amount of contributions accrued for said Plan shall be calculated in a manner no less favorable to participants of said Plan than the manner in which was calculated the amount of the contributions made to said Plan for its plan year ending October 31, 1995. On or before April 15, 1997, Robbins shall remit all employee contributions and pay all accrued employer contributions payable by it to the 401(k) plan for the period through the close of business on March 31, 1997, determined as if participants employed by Robbins on the Closing Date are employed by Robbins on March 31, provided that such contributions for the period March 22 through March 31, 1997 shall be paid by May 15, 1997. (e) Certain salaried and hourly employees of the Sellers currently participate in the 401(k) Plan. Prior to the Closing Date, Buyer agrees to take all action as may be necessary or appropriate to cause to be established a similar plan and related trust. Sellers agree to take all such action as may be necessary or appropriate to cause the trustee of the trust for the 401(k) Plan to effect an in kind transfer to the new trust of the assets making up the accounts of and equal in value to the account balances for those employees of the Business participating in the 401(k) Plan as of the close of business on the Closing Date who are employed by Buyer on the first business day following the Closing Date (including any earnings for periods through the close of business on the Closing Date and contributions and loan repayments deducted from payrolls issued on or before the Closing Date, but not yet credited as of the close of business on the Closing Date), with such transfer to be effected as soon as administratively practicable after the Closing Date, but in no event later than 60 days after the Closing Date. Sellers agree to make available to Buyer the new plan all such data and other information as may be necessary or appropriate for Buyer to properly maintain and administer the new plan on and after the Closing Date. Buyer agrees to cause to be provided to the transferring trustee appropriate receipts and accounting for the assets transferred to such trustee as may be reasonably requested by such trustee. Buyer agrees to file a timely application for a determination letter from the Internal Revenue Service to evidence that the new plan qualifies under Section 401(a) of the Code. (f) Certain hourly employees of the Sellers currently participate in the Profit Sharing Plan. Buyer and Sellers agree to take all such action as may be necessary or appropriate to cause Buyer (or an affiliate thereof) to assume the Profit Sharing Plan and be substituted for Searcy Flooring, Inc., including being named as the sponsoring employer, effective as of the Closing Date. Sellers agree to make available to the new sponsoring employer for the Profit Sharing Plan all such data and other information as may be necessary or appropriate for such employer to properly maintain and administer the Profit Sharing Plan on and after the Closing Date. Sellers agree to prepare and file timely the IRS Form 5500 series return required for the Profit Sharing Plan for its plan year ending October 31, 1996 and to provide a copy of the same to Buyer. Buyer agrees to prepare and file timely the IRS Form 5500 series return required for the Profit Sharing Plan for its plan year commencing November 1, 1996 and to provide a copy of the same to Sellers. Sellers agree to cause to be filed timely an IRS Form 1099-R (or any successor form) reporting every distribution made from the Profit Sharing Plan during 1997 and on or before the Closing Date, and Buyer agrees to cause to be filed timely an IRS Form 1099-R (or any successor form) reporting every distribution made from the Profit Sharing Plan during 1997 and after the Closing Date. (g) Sellers shall pay all claims incurred on or before the Closing Date under the medical plan covering employees of the Robbins Southern Division, as and when those claims become due and payable. (h) The provisions of Section 11.1 to the contrary notwithstanding, the representations and warranties of the Sellers contained in Section 3.21 shall survive the Closing, regardless of any investigation made by or on behalf of Triangle or Buyer, until the expiration of the limitation period under the applicable statute of limitations. Sellers, jointly and severally, shall indemnify, defend, and hold harmless Triangle and Buyer, each director, officer, employee, representative or agent of Triangle and Buyer, and each affiliate thereof, and their respective heirs, legal representatives, successors, and assigns (collectively, the "Buyer Group") from and against any and all claims, actions, causes of action, demands, assessments, losses, damages, liabilities, judgments, settlements, penalties, costs, and expenses (including reasonable attorneys' fees and expenses), of any nature whatsoever, whether actual or consequential, asserted against, imposed upon, or incurred by any member of the Buyer Group, directly or indirectly, by reason of or resulting from any inaccuracy or breach of any representation or warranty of any Seller contained in Section 3.21 or in any certificate, instrument, or document delivered pursuant thereto. 5 Title Insurance and Surveys. ( ) Buyer shall obtain an owner's policy of title insurance ("Title Insurance") in a form and amount and from a title insurance company reasonably acceptable to Buyer (the "Title Company") relating to each parcel of Real Property described on Schedule 1.1(a). (a) Within three (3) days after the execution and delivery of this Agreement, Buyer shall obtain a commitment for Title Insurance from the Title Company with respect to the Real Property ("Title Binders") showing fee title to such Real Property in Sellers, and committing to issue the Title Insurance with respect to such Real Property, such Title Binders to show all Encumbrances with respect to such Real Property. (b) Within three (3) days after the execution and delivery of this Agreement, Buyer shall obtain currently dated surveys (the "Surveys") of each parcel of Real Property, each of which Surveys shall be in form and substance, and prepared by a licensed professional engineer or surveyor, reasonably acceptable to Buyer and to the Title Company. The Surveys shall contain a statement on the face thereof certifying whether any part of the Real Property lies within a flood plain or flood prone area or a flood way of any body of water. The Surveys shall also show the zoning classifications of the Real Property under local zoning ordinances. (c) Within ten (10) days after the receipt of the Title Binders and copies of all exceptions shown therein and of the Surveys and copies of all applicable provisions of the local zoning ordinances, Buyer shall deliver to Sellers a notice (the "Objection Notice") if it reasonably believes that Seller's title to any Real Property is not as represented herein or that any of the Encumbrances reflected in the Title Binders or Surveys are not Permitted Encumbrances and the reasons for such belief (any such Encumbrances specified in the Objection Notice being referred to herein as "Unacceptable Encumbrances"). Sellers may, but shall not be obligated to, take such steps as shall be necessary to eliminate or modify the Unacceptable Encumbrances in a manner reasonably acceptable to Buyer. Sellers shall notify Buyer within ten (10) days after their receipt of the Objection Notice whether they intend to so eliminate or modify the Unacceptable Encumbrances. In the event Buyer shall not deliver an Objection Notice within such time period, all Encumbrances reflected in the Title Binders and Surveys shall be deemed to be Permitted Encumbrances. Any and all matters disclosed in the Title Binders or the Surveys as to which Buyer objects by timely delivery of the Objection Notice that are thereafter cured to the satisfaction of Buyer or waived by Buyer in writing shall also be deemed to be Permitted Encumbrances. In the event Sellers fail or are unable to cure the Unacceptable Encumbrances prior to the Closing Date (provided it is at least three (3) days after receipt of the Objection Notice), Buyer shall, in its discretion, have the right to terminate this Agreement by notice in writing to Sellers, or may accept such title to the Real Property as Seller can deliver. (d) The cost of obtaining Title Binders, Title Insurance, and Surveys shall be borne by Buyer. 6 Payment of Liabilities. Sellers shall pay, perform, and discharge prior to the Closing all of Sellers' liabilities that become due prior to the Closing and all of Sellers' liabilities that are due after the Closing, other than the Liabilities, as and when the same become due and payable. 7 Public Announcements. Except as may be required by Applicable Law or the National Association of Securities Dealers, Inc., neither Triangle, Buyer nor Sellers shall issue any press release or otherwise make any public statement with respect to this Agreement or the transactions contemplated hereby without the prior consent of the other party (which consent shall not be unreasonably withheld). Any such press release or public statement required by Applicable Law or by the National Association of Securities Dealers, Inc. shall only be made after reasonable notice to the other party. 8 Environmental Provisions. (a) Buyer shall have the opportunity to have the Real Property inspected for environmental matters by a qualified consultant of its choosing pursuant to Sections 6.1 and 8.14 of this Agreement. The cost of any and all such inspections of the property shall be borne solely by Buyer. Buyer shall provide a copy of any report of any such inspections to Sellers within five days of Sellers' request therefore, but such report, if any, shall be provided to Sellers only in the event Sellers make such request. (b) In addition, Sellers shall promptly after the execution of this Agreement, provide to Buyer, on a confidential basis, copies of any reports of environmental investigations of the Real Property authorized by or available to Sellers (the "Environmental Reports"). Buyer agrees and acknowledges that Sellers make no representations or warranties regarding the accuracy or completeness of the Environmental Reports. (c) If Buyer notifies the Sellers prior to the Closing Date that the results of its inspection of the Real Property or its review of the Environmental Reports are not acceptable to Buyer, then this Agreement shall be terminated and Buyer shall return all copies of the Environmental Reports to Sellers, and Sellers shall return all copies of inspection reports to Buyer. (d) Buyer and Sellers agree to ensure the confidentiality of the Environmental Reports and the results of Buyer's inspection in accordance with Section 6.1 above. Buyer and Sellers shall defend, hold harmless and indemnify each other from, for and against any and all claims, damages, liabilities and costs, known or unknown (including without limitation, cleanup cost, consulting and legal fees) (hereinafter, collectively "Losses") proximately caused by their breach of their obligations pursuant to the above confidentiality provision. (e) In the event Buyer determines in its sole discretion that the results of its review of the Environmental Reports and of its inspection of the Real Property are satisfactory and closes the transactions contemplated hereunder, each of Triangle and Buyer, on behalf of itself, its successors and assigns, agrees to release, discharge and covenant not to sue Sellers and each of their respective officers, directors, employees, agents, shareholders, successors and assigns and all persons referenced in Sections 9.3 and 9.4 from those Losses proximately caused by past, present or future presence of hazardous material on, in or under the Real Property including, without limitation, Losses arising under the Comprehensive Environmental Response Compensation and Liability Act, as amended, 42 USC 9601 et seq., the Resource Conservation and Recovery Act, as amended, 42 USC - 6901 et seq. regulations and other Applicable Environmental Laws, but excluding any Losses or portions of Losses involving the presence of hazardous materials on, in or under any property other than the Real Property. By way of example and not by limitation, claims relating to Losses arising from hazardous material on, in or under the Real Property on or before the time of Closing that moves to adjacent property are not released. 9 Notice of Litigation. Until the Closing, (i) Buyer, upon learning of the same, shall promptly notify Sellers of any Proceeding that is commenced or threatened against Buyer and that affects this Agreement or the transactions contemplated hereby and (ii) Sellers, upon learning of the same, shall promptly notify Buyer of any Proceeding that is commenced or threatened against Sellers and that affects this Agreement or the transactions contemplated hereby and any Proceeding that is commenced or threatened against Sellers and that would have been listed on Schedule 3.12 if such Proceeding had arisen prior to the date hereof. 10 Notification of Certain Matters. Sellers upon learning of same, shall give prompt notice to Buyer of (i) the occurrence or nonoccurrence of any event the occurrence or nonoccurrence of which would be likely to cause any representation or warranty contained in Article III to be untrue or inaccurate in any material respect at or prior to the Closing and (ii) any material failure of Sellers to comply with or satisfy any covenant, condition, or agreement to be complied with or satisfied by such person hereunder, and (iii) any notice or other communication from any person alleging that the consent or approval of such person is or may be required in connection with the transactions contemplated by this Agreement (other than those consents and approvals indicated as required on Schedule 3.3). Buyer shall give prompt notice to Sellers of (i) the occurrence or nonoccurrence of any event the occurrence or nonoccurrence of which would be likely to cause any representation or warranty contained in Article IV to be untrue or inaccurate in any material respect at or prior to the Closing and (ii) any material failure of Buyer to comply with or satisfy any covenant, condition, or agreement to be complied with or satisfied by such person hereunder. The delivery of any notice pursuant to this Section 6.11 shall not be deemed to (i) modify the representations or warranties hereunder of the party delivering such notice, (ii) modify the conditions set forth in Articles VII, VIII and IX, or (iii) limit or otherwise affect the remedies available hereunder to the party receiving such notice; provided, however, that if the Closing shall occur, then all matters disclosed pursuant to this Section 6.11 at or prior to the Closing shall be waived and no party shall be entitled to make a claim thereon pursuant to the terms of this Agreement. 11 Amendment of Schedules. Each party hereto agrees that, with respect to the representations and warranties of such party contained in this Agreement, such party shall have the continuing obligation until the Closing to supplement or amend promptly the Schedules hereto with respect to any matter hereafter arising or discovered that, if existing or known at the date of this Agreement, would have been required to be set forth or described in the Schedules. For all purposes of this Agreement, including without limitation for purposes of determining whether the conditions set forth in Sections 7.1 and 8.1 have been fulfilled, the Schedules hereto shall be deemed to include only that information contained therein on the date of this Agreement and shall be deemed to exclude all information contained in any supplement or amendment thereto; provided, however, that if the Closing shall occur, then all matters disclosed pursuant to any such supplement or amendment at or prior to the Closing shall be waived and no party shall be entitled to make a claim thereon pursuant to the terms of this Agreement. 12 Fees and Expenses. Except as otherwise expressly provided in this Agreement, all fees and expenses, including fees and expenses of counsel, financial advisors, and accountants, incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such fee or expense, whether or not the Closing shall have occurred; provided, however, that if this Agreement shall have been terminated pursuant to Section 10.1 as a result of the willful breach by a party of any of its representations, warranties, covenants, or agreements set forth in this Agreement, such breaching party shall pay the costs and expenses of the other parties in connection with the transactions contemplated by this Agreement. 13 Survival of Covenants. Except for any covenant or agreement that by its terms expressly terminates as of a specific date, the covenants and agreements of the parties hereto contained in this Agreement shall survive the Closing without contractual limitation. 14 Dispute Resolution. If any dispute or disagreement arises between Buyer and Sellers under this Agreement, including without limitation any disagreement under Section 1.5(b) or Section 1.7(b) (any such dispute or disagreement being referred to as a "Dispute"), and Buyer and Sellers are unable to resolve such Dispute within the time period prescribed elsewhere in this Agreement (or if no such time period is prescribed, within thirty (30) days after the date written notice of the Dispute is given by Buyer or Sellers), an arbitrator agreed upon by Buyer and Sellers (the "Arbitrator") shall be employed hereunder to settle such Dispute as soon as practicable. In the event that the parties are unable to agree upon the appointment of such an arbitrator within five (5) business days, then each of Buyer and Sellers shall within three (3) calendar days appoint an independent arbitrator, which independent arbitrators shall agree within three (3) business days on the appointment of a third independent arbitrator to whom the Dispute shall be submitted. Buyer and Sellers shall submit the Dispute to the Arbitrator within three (3) business days of its appointment and shall cooperate with each other and otherwise use their reasonable best efforts to cause the Arbitrator to make its decision within sixty (60) days after referral of a Dispute to it. The Arbitrator shall have access to all documents and facilities necessary to perform its function as arbitrator. The Arbitrator's determination with respect to any Dispute shall be final and binding upon the parties hereto. The non-prevailing party as determined by the Arbitrator shall pay all of the fees and expenses of the Arbitrator for such services. 15 Preparation of Closing Balance Sheet. ( ) For purposes of preparing the Closing Balance Sheet, the inventory acquired by Buyer pursuant to this Agreement (the "Inventory") shall be valued in accordance with the following procedures: ( ) Physical Count. Not more than seven (7) days after the Closing Date, a physical count of the Inventory shall be conducted by Sellers and Buyer and a schedule thereof (an "Inventory Schedule") prepared by Sellers and verified by representatives of Buyer. (i) Valuation. Each item of the Inventory, other than Excluded Inventory Items (hereinafter defined), shall be priced in accordance with Section 3.16 of this Agreement. Such price shall be multiplied by the physical count for each item and the total sum thus determined for all items of the entire Inventory, after being reduced by (A) the total amount of payments received and accounts receivable recorded by Sellers in respect of sales of Inventory listed on the Inventory Schedule(s), and (B) any Reserves determined in accordance with U.S. GAAP consistently applied, shall constitute the "Inventory Value" of the Inventory for purposes of this Agreement. (ii) Excluded Inventory Items. In making such physical count and determining the Inventory Value, the following items of the Inventory shall be excluded or adequately reserved for (the "Excluded Inventory Items"): ( ) All items which are damaged or otherwise defective; (A) All items which are discontinued or obsolete or which are no longer listed in Sellers' catalogues or are otherwise not currently being manufactured; (B) Any items listed on Schedule 1.1(c)(ii) (collectively, the "Retained Inventory"); (C) All items which are not owned by Sellers but instead, are held on consignment from third parties; and (D) All items in which any third party has any security or other interest that is not released at or prior to the Closing. (a) For purposes of preparing the Closing Balance Sheet, the accounts receivable acquired by Buyer pursuant to this Agreement (the "Receivables") shall be valued in accordance with the following procedures: ( ) Preparation of Receivables Schedules. Each Seller shall deliver to Buyer together with the Latest Balance Sheet, a schedule of its Receivables, each of which shall be separately identified and properly accrued on its books as of the close of business on the date of the Latest Balance Sheet. Such schedules are referred to herein as the "Receivables Schedules". The Receivables Schedules shall be certified as complete and correct by the principal executive and financial officers of each Seller. Each Receivables Schedule shall set forth the respective dates as of which each of the Receivables identified therein was accrued on the books of the Seller, the total amount and number of each of the invoices to which such Receivable relates, the total amount paid through the date of the Receivables Schedule with respect to each of such invoices, the total amounts remaining to be paid under each of such invoices, the total amount of customer credits and uncollected service charges existing with respect to the customer owing such Receivable, and the total amount of any reserve or allowance accrued on the Seller's books with respect to such Receivable. On or before the delivery to Buyer of its Receivables Schedule, each Seller shall have invoiced each of the customers owing a Receivable for the respective amounts owing by such customers as of the date of the Receivables Schedule. (i) Valuation. The Receivables shall be priced based on the total value of the Receivables as shown on the Receivables Schedules, and such value shall constitute the "Receivables Value" of the Receivables for purposes of this Agreement, subject to adjustment as provided in the next two sentences. The Receivables Value shall be reduced by the amount of (i) all payments of Receivables made by customers prior to the Closing, and (ii) all valuation and other reserves and allowances required by U.S. GAAP consistently applied with the Annual Financial Statements. The Receivables Value shall be increased by the value of all Receivables arising between the date of the Receivable Schedules and the Closing, as reflected on supplemental Receivables Schedules prepared in accordance with this Section 6.16 and delivered at the Closing or within seven (7) days thereafter. 16 Access to Records After Closing. ( ) For a period of five (5) years from and after the Closing Date, Sellers and their representatives shall have reasonable access to inspect and copy all books and records relating to the Assets, the Liabilities or the Business transferred to Buyer hereunder to the extent that such access may reasonably be required by Sellers in connection with matters relating to or affected by the operation of the Assets or the Business prior to the Closing Date. Such access shall be afforded by Buyer upon receipt of reasonable advance notice and during normal business hours. If Buyer shall desire to dispose of any of such books and records prior to the expiration of such five (5) year period, Buyer shall, prior to such disposition, give Sellers a reasonable opportunity, at Sellers' expense, to segregate and remove such books and records as Sellers may select. Sellers shall be solely responsible for any costs or expenses incurred by it pursuant to this Section 6.17. (a) For a period of five (5) years from and after the Closing Date, Buyer and its representatives shall have reasonable access to inspect and copy all books and records relating to the Assets, the Liabilities or the Business that Sellers or any of their affiliates may retain after the Closing Date. Such access shall be afforded by Sellers and their affiliates upon receipt of reasonable advance notice and during normal business hours. If Sellers or any of their affiliates shall desire to dispose of any of such books and records prior to the expiration of such five (5) year period, Sellers shall, prior to such disposition, give Buyer a reasonable opportunity, at Buyer's expense, to segregate and remove such books and records as Buyer may select. Buyer shall be solely responsible for any costs and expenses incurred by it pursuant to this Section 6.17. 17 Taxes; Other Charges. All sales, use and gross receipts Taxes resulting from the consummation of the transactions contemplated hereby shall be borne by Sellers and the parties shall cooperate in obtaining all exemptions from such Taxes. All other excise, registration, transfer, recording, and deed and stamp Taxes and fees incurred in connection with the consummation of the transactions contemplated hereby shall be borne by Sellers. Sellers shall file all necessary documentation with respect to, and make all payments of, such Taxes and fees on a timely basis. All ad valorem or similar Taxes attributable to the Assets for the 1997 calendar year shall be pro-rated between Buyer and Sellers on a daily basis, and the Purchase Price shall be adjusted to reflect such proration. 18 Escrow; Liquidated Damages. Triangle has deposited $500,000 with an escrow agent mutually agreeable to Triangle and Sellers. Such amount (together with any earnings thereon) will be credited to the Estimated Cash Payment and paid to Sellers at the Closing. If Triangle properly terminates this Agreement pursuant to the terms hereof due to the breach or default by Sellers, then such $500,000 (together with any earnings thereon) shall be promptly released to Triangle; otherwise, such $500,000 (together with any earnings thereon) shall be released to Sellers as liquidated damages. VI. CONDITIONS TO OBLIGATIONS OF SELLERS The obligations of Sellers to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment or waiver by Sellers on or prior to the Closing Date of each of the following conditions: 0 Representations and Warranties True. All the representations and warranties of Triangle and Buyer contained in this Agreement, and in any agreement, instrument, or document delivered pursuant hereto or in connection herewith on or prior to the Closing Date, shall be true and correct as of the date made and (having been deemed to have been made again on and as of the Closing Date in the same language) shall be true and correct on and as of the Closing Date. 1 Covenants and Agreements Performed. Triangle and Buyer shall have performed and complied with all covenants and agreements required by this Agreement to be performed or complied with by them on or prior to the Closing Date. 2 Certificate. Sellers shall have received a certificate executed on behalf of each of Triangle and Buyer by the chief executive and chief financial officers of each of Triangle and Buyer, dated the Closing Date, representing and certifying, in such detail as Sellers may reasonably request, that the conditions set forth in Sections 7.1 and 7.2 have been fulfilled. 3 Opinion of Counsel to Buyer. Sellers shall have received an opinion of Thompson & Knight, P.C., legal counsel to Triangle and Buyer, dated the Closing Date, in the form of Exhibit 7.4. 4 Legal Proceedings. No Proceeding shall, on the Closing Date, be pending or threatened seeking to restrain, prohibit, or obtain damages or other relief in connection with this Agreement or the consummation of the transactions contemplated hereby. 5 Approval of Counsel to Seller. All legal matters in connection with the consummation of the transactions contemplated hereby and all agreements, instruments, and documents delivered in connection therewith shall be reasonably satisfactory in form and substance to Graydon, Head & Ritchey, legal counsel to Sellers. VII. CONDITIONS TO OBLIGATIONS OF TRIANGLE AND BUYER The obligations of Triangle and Buyer to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment or waiver by Triangle and Buyer on or prior to the Closing Date of each of the following conditions: 0 Representations and Warranties True. All the representations and warranties of Sellers contained in this Agreement, and in any agreement, instrument, or document delivered pursuant hereto or in connection herewith on or prior to the Closing Date, shall be true and correct as of the date made and (having been deemed to have been made again on and as of the Closing Date in the same language) shall be true and correct on and as of the Closing Date. 1 Covenants and Agreements Performed. Sellers shall have performed and complied with all covenants and agreements required by this Agreement to be performed or complied with by them on or prior to the Closing Date. 2 Certificate. Buyer shall have received certificates executed on behalf of Robbins and Searcy by the chief executive officer of each company and by Mr. Stoehr as Seller Representative, each dated the Closing Date, representing and certifying, in such detail as Buyer may reasonably request, that the conditions set forth in Sections 8.1 and 8.2 have been fulfilled. 3 Preliminary Closing Statements. Buyer shall have received the Preliminary Closing Statements required by Section 1.3, prepared and delivered in accordance with the requirements thereof. 4 Payoff Letters. Buyer shall have received from each creditor to whom any Payoff Indebtedness is owing a writing setting forth the exact amount, including principal, interest and any other amount, of all Payoff Indebtedness owed by Sellers to such creditor as of the Closing Date. 5 Opinion of Counsel to Seller. Triangle and Buyer shall have received an opinion of Graydon, Head & Ritchey, legal counsel to Sellers, dated the Closing Date, in the form of Exhibit 8.6. 6 Legal Proceedings. No Proceeding shall, on the Closing Date, be pending or threatened seeking to restrain, prohibit, or obtain damages or other relief in connection with this Agreement or the consummation of the transactions contemplated hereby. 7 No Material Adverse Change. Since November 1, 1996 there shall not have been any material adverse change in the business, assets, results of operations, condition (financial or otherwise), or prospects of the Business or the ownership or operation of the Assets or any material portion thereof. 8 Noncompetition Agreements. Sellers, their affiliates (including without limitation Robbins International, Inc.), and all holders of voting stock of Robbins and Searcy (other than any shareholder who is neither an active employee of or who owns less than three percent (3%) of the outstanding equity of either company) shall have each entered into a Noncompetition Agreement with Triangle and Buyer in the form of Exhibit 8.9. 9 Data Processing Agreement. Buyer and Sellers shall have entered into a Data Processing Agreement in the form of Exhibit 8.10. 10 International Distribution Agreement. Buyer shall have entered into a satisfactory agreement with Robbins International, Inc. or Mr. Charles Gabbour to continue international sales and marketing efforts on behalf of the Business. 11 Unacceptable Encumbrances; Title Insurance. ( ) Buyer shall not have delivered to Sellers within the time period specified in Section 6.6 an Objection Notice describing an Unacceptable Encumbrance, or if it has so delivered an Objection Notice describing an Unacceptable Encumbrance, such Unacceptable Encumbrance shall have been eliminated or modified to the reasonable satisfaction of Buyer or waived by Buyer. (a) Buyer shall have received the Title Insurance described in Section 6.6. 12 Due Diligence. The due diligence conducted by Triangle, Buyer and their representatives in connection with the proposed transactions contemplated hereby shall not have caused Triangle, Buyer or their representatives to become aware that any representation or warranty of Sellers of this Agreement is not true and correct. 13 Environmental Matters. Buyer shall have received from an independent firm selected by it a report confirming that all environmental assessments and testing requested by Buyer, which shall be paid for by Buyer, have been completed, and the results thereof shall be satisfactory to Buyer. 14 Other Documents. Buyer shall have received the certificates, instruments, and documents listed below, all of which shall be in form and substance reasonably satisfactory to Buyer: ( ) Special warranty deeds in recordable and locally customary form describing the Real Property and all appurtenances, easements, rights of way and uses that benefit the Real Property and sufficient to transfer to Buyer good and marketable title to the Real Property, subject only to the Permitted Encumbrances. (a) Bills of sale, certificates of title and other instruments of assignment, transfer, and conveyance sufficient to transfer to Buyer and effectively vest in Buyer all right, title, and interest of Seller in and to the Business and good and marketable title to the Assets, subject only to the Permitted Encumbrances. (b) Executed copies of all consents and approvals of third parties required to be obtained by or on the part of Sellers for the consummation of the transactions contemplated hereby. (c) A tax clearance letter, certificate or receipt from the State of Arkansas, dated not more than ten (10) days prior to the Closing Date, stating that no amount of Tax, penalty or interest is due by Sellers under the Arkansas Tax laws or showing that all such amounts have been paid. (d) Lien search reports showing that, except those relating to Payoff Indebtedness and Permitted Encumbrances, no financing statements or other liens (or notices with respect to liens) affecting any of the Assets naming Sellers (by corporate or fictitious name or otherwise), any of their subsidiaries, affiliates, or predecessors, or the Business as debtor are on file in the Uniform Commercial Code or other relevant records of the office of the Secretary of State of Arkansas or the county clerk's office of any county in which any of the Real Property is located. (e) Releases of all liens, except those relating to Permitted Encumbrances, affecting any of the Assets. (f) All certificates of occupancy, if any, relating to the use or operation of the Real Property. (g) Sellers shall deliver to Buyer a non-foreign certificate required by Section 1445 of the Code and applicable regulations. (h) Such other certificates, instruments, and documents as may be reasonably requested by Buyer to carry out the intent and purposes of this Agreement. 15 Approval of Counsel to Triangle and Buyer. All legal matters in connection with the consummation of the transactions contemplated hereby and all agreements, instruments, and documents delivered in connection therewith shall be reasonably satisfactory in form and substance to Thompson & Knight, a Professional Corporation, legal counsel to Triangle and Buyer. VIII. CONDITIONS TO OBLIGATIONS OF ALL PARTIES The obligations of all parties to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment or waiver by all parties on or prior to the Closing Date of each of the following conditions: 0 Governmental and Third Party Consents and Approvals. Favorable orders, consents, and approvals in the form required to consummate this Agreement, the Ancillary Documents, and all transactions contemplated thereby, including but not limited to such required by the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"), shall have been received (if required) from necessary governmental agencies and third parties, or, in the case of the HSR Act, the waiting period under such act shall have expired. 1 Trademark Agreement. Buyer and Robbins shall have entered into an agreement in the form of Exhibit 9.2, pursuant to which Buyer shall have the exclusive right to use the names, trademarks, service marks and brand names consisting in whole or in part of "Robbins" in connection with residential flooring, and Robbins shall retain the exclusive right to use all names, trademarks, service marks and brand names consisting in whole or in part of "Robbins" for all other purposes. 2 Equipment Bill of Sale. Robbins and James H. Stoehr, Jr. shall have entered into an Equipment Bill of Sale in the form of Exhibit 9.4, for the sale to Robbins of certain machinery and equipment located on the Real Property and owned by James H. Stoehr, Jr. and the transactions contemplated thereby shall have been consummated. 3 Real Estate and Equipment Agreement. Searcy, James H. Stoehr, Jr., Katherine M. Stoehr, Thomas C. Stoehr and James H. Stoehr III shall have entered into an Agreement in the form of Exhibit 9.5, for the sale to Searcy of certain land, buildings and equipment leased to and used by Searcy Flooring, Inc., and the transactions contemplated thereby shall have been consummated. 4 Supply Agreement. Buyer and Sellers shall have entered into a supply agreement in the form of Exhibit 9.5. IX. TERMINATION, AMENDMENT, AND REMEDIES 0 Termination. This Agreement may be terminated and the transactions contemplated hereby abandoned at any time prior to the Closing in the following manner: ( ) by mutual written consent of Sellers, Triangle and Buyer; or (a) by either Sellers or Buyer, if: ( ) the Closing shall not have occurred on or before April 5, 1997 (unless the delay in completing the Closing is solely the result of compliance with the HSR Act, in which case the applicable date shall be April 30, 1997), unless such failure to close shall be due to a breach of this Agreement by the party seeking to terminate this Agreement pursuant to this clause (i); or (i) there shall be any statute, rule, or regulation that makes consummation of the transactions contemplated hereby illegal or otherwise prohibited or a Governmental Entity shall have issued an order, decree, or ruling or taken any other action permanently restraining, enjoining, or otherwise prohibiting the consummation of the transactions contemplated hereby, and such order, decree, ruling, or other action shall have become final and nonappealable; or (b) by Sellers, if (i) any of the representations and warranties of Buyer contained in this Agreement shall not be true and correct when made or at any time prior to the Closing as if made at and as of such time, or (ii) Buyer or Triangle shall have failed to fulfill any of its obligations under this Agreement, and, in the case of each of clauses (i) and (ii), such misrepresentation, breach of warranty, or failure (provided it can be cured) has not been cured within thirty (30) days of actual knowledge thereof by Buyer or Triangle; or (c) by Buyer, if (i) any of the representations and warranties of a Seller contained in this Agreement shall not be true and correct when made or at any time prior to the Closing as if made at and as of such time, or (ii) Sellers shall have failed to fulfill any of their obligations under this Agreement, and, in the case of each of clauses (i) and (ii), such misrepresentation, breach of warranty, or failure (provided it can be cured) has not been cured within thirty (30) days of actual knowledge thereof by Sellers. 1 Effect of Termination. In the event of the termination of this Agreement pursuant to Section 10.1 by Sellers or Buyer, written notice thereof shall forthwith be given by specifying the provision hereof pursuant to which such termination is made, and this Agreement shall become void and have no effect, except that the agreements contained in this Section 10.2, in Sections 6.8, 6.13 and 6.19, and in Articles XII and XIII shall survive the termination hereof. Nothing contained in this Section 10.2 shall relieve any party from liability for any breach of this Agreement. No termination of this Agreement shall affect the obligations of the parties pursuant to the confidentiality agreement referred to in Section 6.1, except to the extent specified in such confidentiality agreement. 2 Amendment. This Agreement may not be amended except by an instrument in writing signed by or on behalf of all the parties hereto. 3 Waiver. Sellers, on the one hand, or Triangle and Buyer, on the other, may (i) waive any inaccuracies in the representations and warranties of the other contained herein or in any document, certificate, or writing delivered pursuant hereto or (ii) waive compliance by the other with any of the other's agreements or fulfillment of any conditions to obligations contained herein. Any agreement on the part of a party hereto to any such waiver shall be valid only if set forth in an instrument in writing signed by or on behalf of such party or parties. No failure or delay by a party hereto in exercising any right, power, or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power, or privilege. 4 Remedies Not Exclusive. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. The rights and remedies of any party based upon, arising out of, or otherwise in respect of any inaccuracy in or breach of any representation, warranty, covenant, or agreement contained in this Agreement shall in no way be limited by the fact that the act, omission, occurrence, or other state of facts upon which any claim of any such inaccuracy or breach is based may also be the subject matter of any other representation, warranty, covenant, or agreement contained in this Agreement (or in any other agreement between the parties) as to which there is no inaccuracy or breach. X. SURVIVAL OF REPRESENTATIONS 0 Survival. The representations and warranties of the parties contained in this Agreement or in any certificate, instrument, or document delivered pursuant hereto shall expire at the Closing. XI. MISCELLANEOUS 0 Notices. All notices, requests, demands, and other communications required or permitted to be given or made hereunder by any party hereto shall be in writing and shall be deemed to have been duly given or made if delivered personally, or transmitted by first class registered or certified mail, postage prepaid, return receipt requested, or sent by prepaid overnight delivery service, or sent by cable, telegram, telefax, or telex, to the parties at the following addresses (or at such other addresses as shall be specified by the parties by like notice): If to Triangle or Buyer: Triangle Pacific Corp. Robbins Hardwood Flooring, Inc. 16803 Dallas Parkway Dallas, Texas 75248 Attention: Mr. Darryl T. Marchand Vice President and General Counsel Telefax: (214) 931-3284 copy to: Thompson & Knight, P.C. 1700 Pacific Avenue, Ste. 3300 Dallas, Texas 75201 Attention: Mr. William J. Schuerger Telefax: (214) 969-1751 If to Sellers: Robbins, Inc. Searcy Flooring, Inc. c/o Mr. James H. Stoehr, Jr. 4777 Eastern Avenue Cincinnati, Ohio 45226 Telefax: (847) 405-6381 copy to: Graydon, Head & Ritchey 1900 Fifth Third Center 511 Walnut Street Cincinnati, Ohio 45202 Attention: Mr. Michael A. Hirschfeld Telefax: (513) 651-3836 Such notices, requests, demands, and other communications shall be effective (i) if delivered personally or sent by courier service, upon actual receipt by the intended recipient, (ii) if mailed, upon the earlier of five days after deposit in the mail or the date of delivery as shown by the return receipt therefor, or (iii) if sent by telecopy or facsimile transmission, when the answer back is received. 1 Entire Agreement. This Agreement, together with the Schedules, Exhibits, Annexes, and other writings referred to herein or delivered pursuant hereto, constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof. 2 Binding Effect; Assignment; No Third Party Benefit. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. Except as otherwise expressly provided in this Agreement, neither this Agreement nor any of the rights, interests, or obligations hereunder shall be assigned by any of the parties hereto without the prior written consent of the other parties, except that either Triangle or Buyer may assign to Triangle or any affiliate of Triangle any of Triangle's or Buyer's rights, interests, or obligations hereunder, upon notice to Sellers, provided that no such assignment shall relieve either Triangle or Buyer of its obligations hereunder. Except as specifically provided in Section 6.5, nothing in this Agreement, express or implied, is intended to or shall confer upon any person other than the parties hereto, and their respective successors and permitted assigns, any rights, benefits, or remedies of any nature whatsoever under or by reason of this Agreement. 3 Severability. If any provision of this Agreement is held to be unenforceable, this Agreement shall be considered divisible and such provision shall be deemed inoperative to the extent it is deemed unenforceable, and in all other respects this Agreement shall remain in full force and effect; provided, however, that if any such provision may be made enforceable by limitation thereof, then such provision shall be deemed to be so limited and shall be enforceable to the maximum extent permitted by Applicable Law. 4 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ARKANSAS, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF. 5 Descriptive Headings. The descriptive headings herein are inserted for convenience of reference only, do not constitute a part of this Agreement, and shall not affect in any manner the meaning or interpretation of this Agreement. 6 Gender. Pronouns in masculine, feminine, and neuter genders shall be construed to include any other gender, and words in the singular form shall be construed to include the plural and vice versa, unless the context otherwise requires. 7 References. All references in this Agreement to Articles, Sections, and other subdivisions refer to the Articles, Sections, and other subdivisions of this Agreement unless expressly provided otherwise. The words "this Agreement", "herein", "hereof", "hereby", "hereunder", and words of similar import refer to this Agreement as a whole and not to any particular subdivision unless expressly so limited. Whenever the words "include", "includes", and "including" are used in this Agreement, such words shall be deemed to be followed by the words "without limitation". Each reference herein to a Schedule, Exhibit, or Annex refers to the item identified separately in writing by the parties hereto as the described Schedule, Exhibit, or Annex to this Agreement. All Schedules, Exhibits, and Annexes are hereby incorporated in and made a part of this Agreement as if set forth in full herein. 8 Further Assurances. From time to time, at the request of either party hereto and without further consideration, the parties hereto agree that each will execute and deliver to the other any and all documents in addition to those expressly provided for in this Agreement that may be reasonably necessary or appropriate to carry out the purposes of this Agreement and the transactions contemplated hereby, whether at or after the Closing. Sellers further agree that from time to time after the Closing they will execute and deliver to Buyer or its designee such further conveyances, assignments, or other written assurance, and take such further necessary actions, as Buyer may reasonably request in writing to perfect and protect Buyer's title to the Assets, and to secure to Buyer the benefit of the Business. 9 Counterparts. This Agreement may be executed by the parties hereto in any number of counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same agreement. Each counterpart may consist of a number of copies hereof each signed by less than all, but together signed by all, the parties hereto. 10 Injunctive Relief. The parties hereto acknowledge and agree that irreparable damage would occur in the event any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement, and shall be entitled to enforce specifically the provisions of this Agreement, in any court of the United States or any state thereof having jurisdiction, in addition to any other remedy to which the parties may be entitled under this Agreement or at law or in equity. XII. DEFINITIONS 0 Certain Defined Terms. As used in this Agreement, each of the following terms has the meaning given it below: "affiliate" means, with respect to any person, any other person that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such person. For the purposes of this definition, "control", when used with respect to any person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such person, whether through the ownership of voting securities, by contract, or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Ancillary Documents" means each agreement, instrument, and document (other than this Agreement) executed or to be executed by Sellers or Buyer in connection with the transactions contemplated by this Agreement. "Applicable Laws" means any statute, law, rule, or regulation or any judgment, order, writ, injunction, or decree of any Governmental Entity to which a specified person or property is subject. "Code" means the Internal Revenue Code of 1986, as amended. "Encumbrances" means liens, charges, pledges, options, mortgages, deeds of trust, security interests, claims, restrictions, easements, and other encumbrances of every type and description, whether imposed by law, agreement, understanding, or otherwise. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Governmental Entity" means any court or tribunal in any jurisdiction or any federal, state, municipal, or other governmental body, agency, authority, department, commission, board, bureau, or instrumentality. "IRS" means the Internal Revenue Service. "Knowledge" means actual knowledge of any officer or plant manager of any Seller. "Material Adverse Effect" means any change, development, or effect (individually or in the aggregate) that is, or is reasonably likely to be, materially adverse (i) to the business, assets, results of operations, condition (financial or otherwise), or prospects of the Business or to the ownership or operation of the Assets or any material portion thereof or (ii) to the ability of Sellers to perform on a timely basis any material obligation of Sellers under this Agreement or any agreement, instrument, or document entered into or delivered in connection herewith. "Permits" means material licenses, permits, franchises, consents, approvals, variances, exemptions, and other authorizations of or from Governmental Entities. "Permitted Encumbrances" means (i) Encumbrances created by Buyer, (ii) liens for Taxes not yet due and payable, (iii) statutory liens (including materialmen's, mechanic's, repairmen's, landlord's, purchase money security interests and other similar liens) arising in connection with the ordinary course of the Business securing Liabilities being assumed and payments for which are not yet due and payable, (iv) the Encumbrances designated as "Permitted Encumbrances" on Schedule 3.6, and (v) such imperfections or irregularities of title, if any, as (A) are not substantial in character, amount, or extent and do not materially detract from the value of the property subject thereto, (B) do not materially interfere with either the present or intended use of such property, and (C) do not, individually or in the aggregate, materially interfere with the conduct of the normal operations of the Business; provided, however, that at the Closing "Permitted Encumbrances" shall not include any liens for Taxes or statutory liens filed of record against the Assets. "person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, enterprise, unincorporated organization, or Governmental Entity. "Proceedings" means all proceedings, actions, claims, suits, investigations, and inquiries by or before any arbitrator or Governmental Entity. "reasonable efforts" means a party's reasonable efforts in good faith in accordance with reasonable commercial practice and without the incurrence of unreasonable expense. "Securities Act" means the Securities Act of 1933, as amended. "Taxes" means any income taxes or similar assessments or any sales, gross receipts, excise, occupation, use, ad valorem, property, production, severance, transportation, employment, payroll, franchise, or other tax imposed by any United States federal, state, or local (or any foreign or provincial) taxing authority, including any interest, penalties, or additions attributable thereto. "Tax Return" means any return or report, including any related or supporting information, with respect to Taxes. "U.S. GAAP" means generally accepted accounting principles in the United States of America as in effect from time to time applied on a basis - as to the substance of the principles applied (including application of the last-in, first-out method of inventory valuation), the manner of application and the estimation techniques used - with the Annual Financial Statements. 1 Certain Additional Defined Terms. In addition to such terms as are defined in the opening paragraph of and the recitals to this Agreement and in Section 13.1, the following terms are used in this Agreement as defined in the Sections set forth opposite such terms: Defined Term Section Reference - ------------ ----------------- Acquisition Proposal .................................. Section 6.2 Agreement ............................................. Preamble Annual Financial Statements ........................... Section 3.7 Applicable Environmental Laws ......................... Section 3.22(b)(i) Arbitrator ............................................ Section 6.15 Assets ................................................ Section 1.1 Business .............................................. Preamble Buyer ................................................. Preamble Buyer Group ........................................... Section 6.5(i) Cash Payment .......................................... Section 1.2 Closing ............................................... Section 2.1 Closing Balance Sheet ................................. Section 1.7(a) Closing Date .......................................... Section 2.1 Compensation .......................................... Section 6.5(a) Dispute ............................................... Section 6.15 earned ................................................ Section 6.5(a) Employees ............................................. Section 6.5(a) Employment Arrangements ............................... Section 6.5(b) Environmental Liabilities ............................. Section 3.22(b)(iii) Estimated Cash Payment ................................ Section 1.5 Excluded Inventory Items .............................. Section 6.16(a)(iii) Final Closing Settlement Statement .................... Section 1.7(a) Final Closing Statements .............................. Section 1.7(a) Final Price Adjustment ................................ Section 1.7 Financial Statements .................................. Section 3.7 hazardous material .................................... Section 3.22(b)(ii) HSR Act ............................................... Section 9.1 Insider ............................................... Section 3.28 Intellectual Property ................................. Section 1.1(e) Interim Financial Statements .......................... Section 3.7 Inventory ............................................. Section 6.16(a) Inventory Schedule .................................... Section 6.16(a)(i) Inventory Value ....................................... Section 6.16(a)(ii) Latest Balance Sheet .................................. Section 1.5(a) Liabilities ........................................... Section 1.5(c)(i) Net Book Value ........................................ Section 1.5(c)(ii) Objection Notice ...................................... Section 6.6(d) Payoff Indebtedness ................................... Section 1.5(c)(iii) Preliminary Closing Settlement Statement .............. Section 1.5(a) Preliminary Closing Statements ........................ Section 1.5(a) Profit Sharing Plan ................................... Section 6.5(c) Purchase Price ........................................ Section 1.2 Real Property ......................................... Section 1.1(a) Receivables ........................................... Section 6.16(b) Receivables Schedules ................................. Section 6.16(b)(i) Receivables Value ..................................... Section 6.16(b)(ii) Reserves .............................................. Section 3.7 Retained Inventory .................................... Section 6.16(a)(iii) Robbins ............................................... Preamble Searcy ................................................ Preamble Sellers ............................................... Preamble Seller Representative ................................. Section 1.8(b) Surveys ............................................... Section 6.6(c) Title Binders ......................................... Section 6.6(b) Title Company ......................................... Section 6.6(a) Title Insurance ....................................... Section 6.6(a) transfer .............................................. Section 1.1 Triangle .............................................. Preamble Unacceptable Encumbrances ............................. Section 6.6(d) U.S. GAAP ............................................. Section 1.5(a) IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized representatives, all as of the day and year first above written. TRIANGLE PACIFIC CORP. ROBBINS, INC. By: ------------------------------ By: ---------------------------- Floyd F. Sherman, James H. Stoehr, Jr., Chairman of the Board and President Chief Executive Officer ROBBINS HARDWOOD FLOORING, INC. SEARCY FLOORING, INC. By: ------------------------------ By: --------------------------- Robert J. Symon, James H. Stoehr, Jr. Vice President and Treasurer Chairman of the Board The undersigned, James H. Stoehr, Jr., hereby accepts appointment as the Seller Representative to act in accordance with the provisions of Section 1.8 of the foregoing Agreement. - ---------------------------- James H. Stoehr, Jr. LIST OF EXHIBITS AND SCHEDULES Exhibit 7.4 - Opinion of Counsel to Buyer .......................... E- Exhibit 8.6 - Opinion of Counsel to Seller ......................... E- Exhibit 8.9 - Noncompetition Agreement ............................. E- Exhibit 8.10 - Data Processing Agreement ........................... E- Exhibit 9.2 - Trademark Agreement .................................. E- Exhibit 9.3 - Individual Assignment to Robbins ..................... E- Exhibit 9.4 - Individual Assignment to Searcy ...................... E- Exhibit 9.5 - Supply Agreement ..................................... E- Schedule 1.1(a) - Real Property .................................... S- Schedule 1.1(b)(i) - Equipment and Machinery ....................... S- Schedule 1.1(b)(ii) - Excluded Equipment and Machinery ............. S- Schedule 1.1(c)(i) - Purchased Inventory ........................... S- Schedule 1.1(c)(ii) - Retained Inventory ........................... S- Schedule 1.1(e)(i) - Purchased Software ............................ S- Schedule 1.1(g) - Contracts and Agreements ......................... S- Schedule 1.1(h)(i) - Prepaid Expenses .............................. S- Schedule 1.1(h)(ii) - Excluded Prepaid Expenses .................... S- Schedule 1.1(j) - Other Assets ..................................... S- Schedule 1.5(a) - Preliminary Closing Settlement Statement ......... S- Schedule 1.5(c) - Liabilities Assumed .............................. S- Schedule 1.7(a) - Final Closing Settlement Statement ............... S- Schedule 3.1 - Jurisdictions ....................................... S- Schedule 3.3 - Noncontravention .................................... S- Schedule 3.4 - Governmental Approvals .............................. S- Schedule 3.5 - Ownership of Business ............................... S- Schedule 3.6 - Title to Assets ..................................... S- Schedule 3.8 - Seller Liabilities .................................. S- Schedule 3.9 - Absence of Certain Changes .......................... S- Schedule 3.10 - Tax Matters ........................................ S- Schedule 3.12 - Legal Proceedings .................................. S- Schedule 3.13 - Real Property ...................................... S- Schedule 3.14 - Tangible Personal Property ......................... S- Schedule 3.15 - Leased Property .................................... S- Schedule 3.16 - Inventory Exceptions ............................... S- Schedule 3.17 - Receivables Exceptions ............................. S- Schedule 3.18 - Intellectual Property .............................. S- Schedule 3.19 - Permits ............................................ S- Schedule 3.20 - Contracts and Agreements ........................... S- Schedule 3.21 - ERISA .............................................. S- Schedule 3.22 - Environmental Matters .............................. S- Schedule 3.23 - Labor Relations .................................... S- Schedule 3.24 - Customers and Suppliers ............................ S- Schedule 3.28 - Insider Interests .................................. S- Schedule 6.16(a) - Inventory Schedule .............................. S- Schedule 6.16(b) - Receivables Schedule ............................ S- EX-4.7 3 EXECUTION TENTH AMENDMENT TO CREDIT AGREEMENT THIS TENTH AMENDMENT TO CREDIT AGREEMENT, dated as of March 19, 1997 (this "Amendment"), to the Existing Credit Agreement (as defined below) is entered into by and among TRIANGLE PACIFIC CORP., a Delaware corporation (the "Borrower"), and the various financial institutions parties hereto (collectively, the "Lenders"), BANK OF AMERICA NT&SA as co-agent (the "Co- Agent") for the Lenders, and the BANK OF NOVA SCOTIA as the agent (the "Agent") for the Lenders. W I T N E S S E T H: - - - - - - - - - - WHEREAS, the Borrower, the Lenders, the Co-Agent and the Agent have heretofore entered into that certain Credit Agreement, dated as of August 4, 1993 (together with all Exhibits, Schedules and Attachments thereto, in each case as amended or otherwise modified prior to the date hereof, being collectively referred to herein as the "Existing Credit Agreement"); WHEREAS, the Borrower has requested that the Lenders amend the Existing Credit Agreement in certain respects as set forth below; and WHEREAS, the Lenders are willing, on the terms and conditions set forth below, to amend the Existing Credit Agreement in certain respects as provided herein (the Existing Credit Agreement, as amended pursuant to the terms of this Amendment, being referred to as the "Credit Agreement"); NOW, THEREFORE, in consideration of the premises and the mutual agreements herein contained, the Borrower and the Lenders hereby agree as follows: I. DEFINITIONS 1. Certain Definitions. The following terms (whether or not underscored) when used in this Amendment, including its preamble and recitals, shall, except where the context otherwise requires, have the following meanings (such meanings to be equally applicable to the singular and plural form thereof): "Affirmation and Consent" means the affirmation and consent executed and delivered pursuant to Subpart 3.1.4. "Agent" is defined in the first recital. "Amendment" is defined in the preamble. "Anderson-Tully Agreement" is defined in Subpart 2.3. "Borrower" is defined in the preamble. "Co-Agent" is defined in the preamble. "Credit Agreement" is defined in the third recital. "Existing Credit Agreement" is defined in the first recital. "Lenders" is defined in the preamble. "RHF" means Robbins Hardwood Flooring, Inc., a Delaware corporation formed by Borrower to complete the purchase of the Robbins Assets. "Robbins Assets" means the assets of the Robbins Sellers to be purchased by the Borrower or RHF pursuant to the Robbins Letter of Intent. "Robbins Letter of Intent" means the letter of intent between the Borrower and Robbins, Inc., Searcy Flooring, Inc. and James H. Stoehr Jr., dated December 23, 1996, as amended to the date of the Tenth Amendment. "Robbins Sellers" means, collectively, Robbins, Inc. and Searcy Flooring Inc. "Tenth Amendment" is defined in Subpart 3.1. "Tenth Amendment Effective Date" is defined in Subpart 3.1. 2. Other Definitions. Terms for which meanings are provided in the Existing Credit Agreement are, unless otherwise defined herein or the context otherwise requires, used in this Amendment with such meanings provided therein. III. AMENDMENTS TO AND CONSENTS UNDER THE EXISTING CREDIT AGREEMENT Effective on (and subject to the occurrence of) the Tenth Amendment Effective Date, and in reliance upon the representations and warranties made herein and (if any) in each other agreement furnished to the Agent pursuant to the terms hereof or in connection herewith, the parties hereto hereby agree that the Existing Credit Agreement is hereby amended and the assumption of the Anderson-Tully Agreement by Borrower or RHF is hereby consented to, all in accordance with this Part II. Except as expressly so amended or modified by this Amendment, the Existing Credit Agreement and each other Loan Document shall continue in full force and effect in accordance with their respective terms. 1. Amendments to Article I ("DEFINITIONS AND ACCOUNTING TERMS"). Article I of the Existing Credit Agreement is hereby amended in accordance with Subpart 2.1.1. 1. Section 1.1 ("Defined Terms") of the Existing Credit Agreement is hereby amended by inserting the following definitions in the appropriate alphabetical order: "RHF" means Robbins Hardwood Flooring, Inc., a Delaware corporation formed by Borrower to complete the purchase of the Robbins Assets. "Robbins Assets" means the assets of the Robbins Sellers to be purchased by the Borrower or RHF pursuant to the Robbins Letter of Intent. "Robbins Letter of Intent" means the letter of intent between the Borrower and Robbins, Inc., Searcy Flooring, Inc. and James H. Stoehr Jr., dated December 23, 1996, as amended to March 19, 1997. "Robbins Sellers" means, collectively, Robbins, Inc. and Searcy Flooring Inc. 2. Amendments to Article VII ("COVENANTS"). Article VII of the Existing Credit Agreement is hereby amended in accordance with Subparts 2.2.1, Subpart 2.2.2, Subpart 2.2.3, Subpart 2.2.4, Subpart 2.2.5, Subpart 2.2.6 and Subpart 2.2.7. 1. Section 7.2.2 ("Indebtedness") of the Existing Credit Agreement is hereby amended by (a) deleting the word "and" following the semi-colon appearing at the end of clause (c)(ii) of such subsection, (b) inserting the word "and" following the semi-colon appearing at the end of clause (c)(iii) of such subsection and (c) inserting a new clause (iv) to such subsection which shall read as follows: "(iv) Indebtedness incurred or assumed by the Borrower or RHF in an aggregate principal amount not to exceed ten million dollars ($10,000,000) and of the types described in Item 7.2.2(c)(iv) of the Disclosure Schedule." 2. Clause (c) of Section 7.2.3 ("Liens") of the Existing Credit Agreement is hereby amended in its entirety to read as follows: "(c) Liens (i) granted prior to the Closing Date to secure payment of Indebtedness of the type permitted and described in clause (c)(i) of Section 7.2.2; (ii) granted by Hartco to secure the payment of Indebtedness incurred by Hartco in an aggregate principal amount not to exceed $16,500,000 and of the type permitted and described in Item 7.2.3(c)(ii) of the Disclosure Schedule; and (iii) granted or assumed by the Borrower or RHF in the Robbins Assets to secure the payment of Indebtedness described in paragraphs 1, 2 and 3 of Item 7.2.2 (c)(iv) of the Disclosure Schedule and of the type permitted and described in Item 7.2.3(c)(iii) of the Disclosure Schedule;" 3. Clauses (b) and (c) of Section 7.2.4 ("Financial Condition") of the Existing Credit Agreement are hereby amended in their respective entireties to read as follows: "(b) the ratio of Funded Debt (excluding Contingent Liabilities relating to such Debt) to EBITDA, as of the last day of any Fiscal Quarter during each Fiscal Year set forth below to be greater than the ratio set forth opposite such Fiscal Year: Fiscal Year Ratio ----------- ----- 1996 3.25:1 1997 3.00:1 1998 2.50:1 1999 2.50:1 2000 2.50:1; "(c) the Fixed Charge Coverage Ratio as of the last day of any Fiscal Quarter during each Fiscal Year set forth below to be less than the ratio set forth opposite such Fiscal Year: Fixed Charge Fiscal Year Coverage Ratio ----------- -------------- 1996 .95:1 1997 .92:1 1998 1.05:1 1999 1.10:1 2000 1.10:1;" 4. Clause (e) of Section 7.2.5 ("Investments") of the Existing Credit Agreement is hereby amended in its entirety to read as follows: "(e) (i) Investments by the Borrower in Hartco arising from the transaction contemplated by the Hartco Letter of Intent; (iii) Investments by the Borrower in RHF arising from the transaction contemplated by the Robbins Letter of Intent; and (iii) in the ordinary course of business, Investments by the Borrower in any of its Subsidiaries (except Permitted Foreign Subsidiaries), or by any such Subsidiary in any of its Subsidiaries, by way of contributions to capital or loans or advances;" 5. Section 7.2.7 ("Capital Expenditures, Etc.") of the Existing Credit Agreement is hereby amended by (a) deleting the period at the end of such subsection and (b) inserting a new clause in place thereof to read as follows: "; provided, further, that for Fiscal Year 1997 only, the amount of Permitted Capital Expenditures shall be increased by the Capital Expenditures attributable to the purchase of the Robbins Assets in an amount not to exceed $70,000,000." 6. Clause (a) of Section 7.2.14 ("Negative Pledges, Restrictive Agreements, Etc.") of the Existing Agreement is hereby amended to read in its entirety as follows: "(a) the creation or assumption of any Lien upon its properties, revenues or assets, whether now owned (other than prohibitions contained in documents governing industrial revenue bonds to which Harto or Robbins are parties as in effect on March 19, 1997) or hereafter acquired, or the ability of the Borrower or any other Obligor to amend or otherwise modify this Agrement or any other Loan Document; or" 7. The Disclosure Schedule is hereby amended by adding thereto Items 7.2.2(c)(iv) and 7.2.3(c)(iii) as set forth in Annex I hereto. 3. Consent under Section 7.2.9 ("Take or Pay Contracts"). In connection with the purchase of the Robbins Assets, Borrower or RHF intends to assume that certain agreement for the purchase of veneers dated as of January 12, 1995 by and between Anderson-Tully Company and Robbins, Inc. under which Borrower will have an irrevocable obligation to purchase up to the required amount of veneer when delivered for a five-year term as provided therein (the "Anderson-Tully Agreement"). As of the Tenth Amendment Effective Date, Agent and each Lender hereby (i) consents to Borrower's or RHF's assumption and performance of Robbins, Inc.'s obligations under the Anderson-Tully Agreement, and (ii) waives any Default or Event of Default arising under Section 7.2.9 of the Existing Credit Agreement directly therefrom. IV. CONDITIONS TO EFFECTIVENESS 1. Tenth Amendment Effective Date. This Amendment (and the amendments and modifications contained herein) shall become effective, and shall thereafter be referred to as the "Tenth Amendment", on the date (the "Tenth Amendment Effective Date") when all of the conditions set forth in this Subpart 3.1 have been satisfied. 1. Delivery of RHF Guaranty. The Agent shall have received, for the benefit of each Lender, the Issuer and the Agent, a guaranty in respect of the Obligations in a form reasonably satisfactory to the Agent, duly executed and delivered by an Authorized Officer of RHF, dated as of the Tenth Amendment Effective date (the "RHF Guaranty)". 2. Delivery of RHF Security Agreement. The Agent shall have received, for the benefit of each Lender, the Issuer and the Agent, a security agreement in a form reasonably satisfactory to the Agent, duly executed and delivered by an Authorized Officer of RHF, dated as of the Tenth Amendment Effective Date (the "RHF Security Agreement"), together with such opinions in form and substance and from counsel satisfactory to Agent, as the Agent may require, together with (i) executed copies of proper Uniform Commercial Code Form UCC-3 termination statements, if any, necessary to release all Liens and other rights of any Person in any collateral described in such security agreement previously granted by any Person, (ii) Uniform Commercial Code financing statements naming RHF as the debtor and the Agent as the secured party to be filed under all jurisdictions as may be necessary or, in the opinion of the Agent, desirable to perfect the security interest of the Agent pursuant to such security agreement and (iii) certified copies of Uniform Commercial Code requests for information or similar search reports dated a date reasonably near the date of the acquisition of RHF listing all effective financing statements which name RHF as a debtor. 3. Solvency Certificate. The Agent shall have received for the benefit of each Lender, the Issuer and the Agent, a solvency certificate of an Authorized Officer of Borrower, in a form reasonably satisfactory to the Agent, dated as of the Tenth Amendment Effective Date. 4. Affirmation and Consent. The Agent shall have received a duly executed copy of the Affirmation and Consent to this Amendment, in a form reasonably satisfactory to the Agent, duly executed and delivered by each Obligor. 5. Acquisition of Robbins Assets. The acquisition of the Robbins Assets by Borrower or RHF shall have been completed without a material change in the terms of the acquisition from those set forth in the Robbins Letter of Intent, except as may be otherwise consented to by the Required Lenders. 6. Expenses. The Agent shall have received for its own account, or for the account of each Lender, as the case may be, reimbursement of all the Agent's expenses incurred and payable by Borrower under Subpart 4.5. 7. Environmental Audits. The Agent shall have received such assurances from the Borrower or reports from an environmental consultant relating to environmental audits of material real property to be acquired in the acquisition of the Robbins Assets reasonably satisfactory in scope and results to the Agent. 8. Opinions of Counsel. The Agent shall have received such opinions, each dated the Tenth Amendment Effective Date, in form and substance and from counsel satisfactory to the Agent, as the Agent may require. 9. Legal Details, etc. All documents executed or submitted pursuant hereto shall be satisfactory in form and substance to the Agent and its counsel. The Agent and its counsel shall have received all information and such counterpart originals or such certified or other copies or such materials as the Agent or its counsel may reasonably request, and all legal matters incident to the transactions contemplated by this Amendment shall be satisfactory to the Agent and its counsel. 10. Execution of Counterparts. The Agent shall have received counterparts of this Amendment, duly executed and delivered on behalf of the Borrower and each of the Lenders. 11. Resolutions. etc. The Agent shall have received in form and substance satisfactory to the Agent, (a) a certificate, dated the Tenth Amendment Effective Date, of the Borrower's Secretary or Assistant Secretary as to (i) resolutions of the Borrower's Board of Directors then in full force and effect authorizing the execution, delivery and performance of this Amendment and each other Loan Document executed or to be executed by it in connection herewith; and (ii) the incumbency and signatures of those officers of the Borrower authorized to act with respect to this Amendment and each other Loan Document executed or to be executed by it in connection herewith, upon which certificate each Lender may conclusively rely with respect to the incumbency and signature of such Authorized Officers until it shall have received a further certificate of the Secretary or Assistant Secretary of the Borrower cancelling or amending such prior certificate; (b) a certificate, dated the Tenth Amendment Effective Date, of the Secretary or Assistant Secretary of RHF, or of the Secretary or Assistant Secretary of the general partner of RHF, as to (i) resolutions of the Board of Directors of RHF, or the general partner of RHF, then in full force and effect authorizing the execution, delivery and performance of a guaranty and security agreement (as such are described in Subparts 3.1.1 and 3.1.2, below) and each other Loan Document executed or to be executed by RHF or by the general partner of RHF, in the name and on behalf of RHF, in connection herewith and therewith; and (ii) the incumbency and signatures of those officers of RHF, or the general partner of RHF, authorized to act with respect to the guaranty and the security agreement of RHF described in Subparts 3.1.1 and 3.1.2 below and each other Loan Document executed or to be executed by RHF or by the general partner of RHF, in the name and on behalf of RHF, in connection herewith and therewith, upon which certificate each Lender may conclusively rely with respect to the incumbency and signature of such Authorized Officers until it shall have received a further certificate of the Secretary or Assistant Secretary of RHF cancelling or amending such prior certificate; (c) a certificate, dated the Tenth Amendment Effective Date, of the Secretary or Assistant Secretary of each other Obligor as to (i) resolutions of such Obligor's Board of Directors then in full force and effect authorizing the execution, delivery and performance of the Affirmation and Consent and each other Loan Document executed or to be executed by it in connection herewith; and (ii) the incumbency and signatures of those officers of such Obligor authorized to act with respect to the Affirmation and Consent and each other Loan Document executed or to be executed by it in connection herewith, upon which certificate each Lender may conclusively rely with respect to the incumbency and signature of such Authorized Officers until it shall have received a further certificate of the Secretary or Assistant Secretary of such Obligor cancelling or amending such prior certificate; and (d) such other documents (certified if requested) or certificates as the Agent may reasonably request with respect to this Amendment, the Affirmation and Consent, any other Loan Document or any Organic Document or approval. V. MISCELLANEOUS; REPRESENTATIONS 1. Cross-References. References in this Amendment to any Part or Subpart are, unless otherwise specified or otherwise required by the context, to such Part or Subpart of this Amendment. 2. Loan Document Pursuant to Existing Credit Agreement. This Amendment is a Loan Document executed pursuant to the Existing Credit Agreement and shall be construed, administered and applied in accordance with all of the terms and provisions of the Existing Credit Agreement (and, following the Tenth Amendment Effective Date, the Credit Agreement). 3. Successors and Assigns. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. 4. Full Force and Effect; Limited Amendment. Except as expressly amended hereby, all of the representations, warranties, terms, covenants, conditions and other provisions of the Existing Credit Agreement and the other Loan Documents shall remain unamended and unwaived and shall continue to be, and shall remain, in full force and effect in accordance with their respective terms. The amendments set forth herein shall be limited precisely as provided for herein to the provisions expressly amended herein and shall not be deemed to be an amendment to, waiver of, consent to or modification of any other term or provision of the Existing Credit Agreement, any other Loan Document referred to therein or herein or of any transaction or further or future action on the part of the Borrower which would require the consent of the Lenders under the Existing Credit Agreement or any of the Loan Documents. 5. Payment of Expenses. The Borrower hereby agrees to pay and reimburse the Agent for all of its reasonable expenses incurred in connection with the negotiation, preparation, execution and delivery of this Amendment and related documents, including all reasonable fees and disbursements of counsel to the Agent. 6. Counterparts. This Amendment may be executed by the parties hereto in several counterparts, each of which when executed and delivered shall be deemed to be an original and all of which shall constitute together but one and the same agreement. 7. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK. 8. Compliance with Warranties. No Default, etc. Both before and after giving effect to the occurrence of the Tenth Amendment Effective Date and the amendments to the Existing Credit Agreement set forth above, the Borrower represents and warrants to the Lenders that the following statements are true and correct: (a) the representations and warranties set forth in Article VI (excluding, however, those contained in Section 6.7) of the Existing Credit Agreement and the representations and warranties set forth in Article III of each Security Agreement and in Article III of each Subsidiary Guaranty and in each other Loan Document are true and correct in all material respects with the same effect as if then made (unless stated to relate solely to an earlier date, in which case such representations and warranties were true and correct as of such earlier date); (b) except as disclosed by the Borrower to the Agent and the Lenders pursuant to Section 6.7 of the Existing Credit Agreement, (i) no labor controversy, litigation, arbitration or governmental investigation or proceeding is pending or, to the knowledge of the Borrower, threatened against the Borrower or any of its Subsidiaries which could result in a Material Adverse Effect (including with respect to this Amendment or any other Loan Document delivered in connection herewith); and (ii) no development has occurred in any labor controversy, litigation, arbitration or governmental investigation or proceeding disclosed pursuant to Section 6.7 of the Existing Credit Agreement which could result in a Material Adverse Effect (including with respect to this Amendment or any other Loan Document delivered in connection herewith); and (iii) no Default has occurred and is continuing. 9. Additional Representations. In order to induce the Lenders and the Agents to enter into this Amendment, the Borrower hereby additionally represents and warrants as follows: (a) the execution and delivery of this Amendment and the performance by the Borrower and each of its Subsidiaries of each of their respective obligations hereunder, under each other Loan Document, under the Existing Credit Agreement as amended hereby and, upon the occurrence of the Tenth Amendment Effective Date, under the Credit Agreement are within such Person's corporate powers, have been duly authorized by all necessary corporate action, have received all necessary governmental approvals (if any shall be required), and do not (i) contravene such Person's Organic Documents, (ii) contravene any contractual restriction, law or governmental regulation or court decree or order binding on or affecting such Person or (iii) result in, or require the creation or imposition of, any Lien on any of such Person's properties (other than pursuant to a Loan Document); and (b) this Amendment, each other Loan Document, the Existing Credit Agreement as amended hereby and, upon the occurrence of the Tenth Amendment Effective Date, the Credit Agreement are the legal, valid and binding obligations of the Borrower and each of its Subsidiaries, as applicable, enforceable in accordance with their respective terms (except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally and by principles of equity). [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized as of the day and year first above written. TRIANGLE PACIFIC CORP. By: --------------------------------- Title: THE BANK OF NOVA SCOTIA By: -------------------------------- Title: BANK OF AMERICA NT&SA By: -------------------------------- Title: COMERICA BANK - TEXAS By: --------------------------------- Title: DISCLOSURE SCHEDULE Item 7.2.2(c)(iv) 1. $8,000,000 Industrial Development Bonds Issued September 1, 1989. a. $5,000,000 City of Warren Arkansas Industrial Development Revenue Bonds, Series A, issued on September 1, 1989, variable interest rate (4.25% at October 31, 1996), due in annual installments through September 1999. b. $3,000,000 City of Warren Arkansas Industrial Development Revenue Bonds, Series B, issued on September 1, 1989, variable interest rate (4.75% at October 31, 1996), due in annual installments through September 1999. Loan Agreement: Section 6.1: Robbins must maintain its corporate existence, with certain exceptions. Section 7.1: Assignment only to domestic corporation who assumes all of the obligations of Robbins thereunder. Promissory Note: Payments of interest and principal due on or before dates set forth in the Indenture for payment of principal and interest on the bonds. Reimbursement Agreement: Section 9.3: Robbins may not assign any of its obligations relating to the bonds or projects financed thereby without the consent of the letter of credit bank. Indenture: The bonds are optionally redeemable by the issuer on the first day of each March, June, September and December (provided that Robbins has previously elected to have the remarketing agent adjust the interest rate on the bonds every ninety days). 2. $1,600,000 Economic Development Revenue Bonds Issued February 1, 1994. $1,600,000 Arkansas Development Finance Authority Economic Development Revenue Bonds issued February 1, 1994, Series D, 3.25% fixed interest rate, due in annual installments through February 2001. Loan Agreement: Section 5.07: Searcy must maintain its corporate existence, with certain exceptions. Section 5.05: Assignment only with issuer's or trustee's consent. Promissory Note: Payments of interest and principal due on the dates set forth on the payment schedule attached thereto. Prepayments only allowed in limited circumstances under the loan agreement and the indenture before the bonds are redeemed. Indenture: The bonds may not be redeemed until February 1, 1999. 3. $3,860,000 Industrial Development Bonds Issued October 1, 1996: a. $1,860,000 Arkansas Development Finance Authority Industrial Development Revenue Bonds issued on October 1, 1996, Series J, various fixed interest rates ranging from 4.3% to 5.5%, due in annual installments through September 2006. B. $2,000,000 Arkansas Development Finance Authority Industrial Development Revenue Bonds issued on October 1, 1996, Series K, various fixed interest rates ranging from 4.4% to 5.7%, due in annual installments through September 2006. Loan Agreement: Section 5.07: Robbins must maintain its corporate existence, with certain exceptions. Section 5.05: Assignment only with issuer's or trustee's consent. Promissory Note: Payments of interest and principal due on the dates set forth on the payment schedule attached thereto. Prepayments only allowed in limited circumstances under the loan agreement and the indenture before the bonds are redeemed. Indenture: The bonds may not be redeemed until October 1, 2004. 4. Note payable to Warren Bank and Trust Company in original principal amount of $628,538 and secured by a mortgage on certain land and buildings included in the Robbins Assets. The remaining principal and interest due at the closing of the acquisition will be repaid by Borrower at the closing and the mortgage released. 5. Notes payable by James H. Stoehr, Jr., Katherine M. Stoehr, Thomas C. Stoehr and James H. Stoehr III to Warren Bank & Trust Co. and others in the aggregate original principal amount of up to $200,000 and secured by a liens on certain land and equipment included in the Robbins Assets. The remaining principal and interest due at the closing of the acquisition will be repaid by Borrower at the closing and the liens released. Item 7.2.3(c)(iii) Purchase money mortgages, purchase money security interests or other Liens granted to secure payment of Indebtedness incurred by Robbins Sellers and assumed by Borrower or RHF (a) for the purpose of financing the construction of properties or fixed improvements or (b) in respect of Purchase Money Obligations for property used in a Permitted Business, and covering only (together in each case with accessions and fixtures thereto) the property so acquired or the properties or fixed improvements so constructed (it being understood that any Lien granted on property so acquired may also encumber and extend to properties and fixed improvements constructed thereon, and any Lien granted on properties and fixed improvements so constructed may also encumber and extend to property so acquired on which such improvements are constructed). EX-4.8 4 EXHIBIT 4.8 ELEVENTH AMENDMENT TO CREDIT AGREEMENT THIS ELEVENTH AMENDMENT TO CREDIT AGREEMENT, dated as of September 30, 1997 (this "Amendment"), to the Existing Credit Agreement (as defined below) is entered into by and among TRIANGLE PACIFIC CORP., a Delaware corporation (the "Borrower"), the various financial institutions parties hereto (collectively, the "Lenders"), BANK OF AMERICA NT&SA as co-agent (the "Co- Agent") for the Lenders and the BANK OF NOVA SCOTIA as the agent (the "Agent") for the Lenders. W I T N E S S E T H: - - - - - - - - - - WHEREAS, the Borrower, the Lenders, the Co-Agent and the Agent have heretofore entered into that certain Credit Agreement, dated as of August 4, 1993 (as amended or otherwise modified prior to the date hereof, "Existing Credit Agreement"); WHEREAS, the Borrower has requested that the Lenders amend the Existing Credit Agreement in certain respects as set forth below; and WHEREAS, the Lenders are willing, on the terms and conditions set forth below, to amend the Existing Credit Agreement in certain respects as provided herein (the Existing Credit Agreement, as amended pursuant to the terms of this Amendment, being referred to as the "Credit Agreement"); NOW, THEREFORE, in consideration of the premises and the mutual agreements herein contained, the Borrower and the Lenders hereby agree as follows: PART I. DEFINITIONS SUBPART I.1. Certain Definitions. The following terms (whether or not underscored) when used in this Amendment, including its preamble and recitals, shall, except where the context otherwise requires, have the following meanings (such meanings to be equally applicable to the singular and plural form thereof): "Affirmation and Consent" means the affirmation and consent executed and delivered pursuant to Subpart 3.1.4. "Agent" is defined in the preamble. "Amendment" is defined in the preamble. "Borrower" is defined in the preamble. "Co-Agent" is defined in the preamble. "Credit Agreement" is defined in the third recital. "Eleventh Amendment" is defined in Subpart 3.1. "Eleventh Amendment Effective Date" is defined in Subpart 3.1. "Existing Credit Agreement" is defined in the first recital. "Lenders" is defined in the preamble. "Restructuring Subsidiaries" means, collectively, BHFG Corp., BHFL Corp., HFCG Corp., HFCL Corp., DTM Corp. and Hartco Hardwood Flooring L.P., all organized under the laws of the State of Delaware, and Bruce Hardwood Flooring L.P., organized under the laws of the State of Texas. "Restructuring Transactions" means the transactions described in Annex I hereto. SUBPART I.2. Other Definitions. Terms for which meanings are provided in the Existing Credit Agreement are, unless otherwise defined herein or the context otherwise requires, used in this Amendment with such meanings provided therein. PART II. AMENDMENTS TO AND CONSENTS UNDER THE EXISTING CREDIT AGREEMENT Effective on (and subject to the occurrence of) the Eleventh Amendment Effective Date, and in reliance upon the representations and warranties made herein and in each other agreement furnished to the Agent pursuant to the terms hereof or in connection herewith, the parties hereto hereby agree that the Existing Credit Agreement is hereby amended and the consummation of the Restructuring Transactions is hereby consented to, all in accordance with this Part II. Except as expressly so amended or modified by this Amendment, the Existing Credit Agreement and each other Loan Document shall continue in full force and effect in accordance with their respective terms. SUBPART II.1. Amendments to Article I ("DEFINITIONS AND ACCOUNTING TERMS"). Article I of the Existing Credit Agreement is hereby amended in accordance with Subpart 2.1.1, Subpart 2.1.2 and Subpart 2.1.3. SUBPART II.1.1. Section 1.1 ("Defined Terms") of the Existing Credit Agreement is hereby amended by inserting the following definitions in the appropriate alphabetical order: "'Master Subordination Agreement' means that certain Intercompany Subordination Agreement dated September 30, 1997 among the Borrower, the Agent Hartco, RHF, Worldwide Kitchens and the Restructuring Subsidiaries. "'Restructuring Subsidiaries' means, collectively, BHFG Corp., BHFL Corp., HFCG Corp., HFCL Corp., DTM Corp. and Hartco Hardwood Flooring L.P., all organized under the laws of the State of Delaware, and Bruce Hardwood Flooring L.P., organized under the laws of the State of Texas." "'Restructuring Transactions' means the transactions described in Item 7.2.11 to the Disclosure Schedule." SUBPART II.1.2. The following defined terms in Section 1.1 ("Defined Terms") of the Existing Credit Agreement are hereby amended in their entirety to read as follows: "'Other Rental Obligations' means (without duplication) all monetary obligations of the Borrower or any of its Subsidiaries under any leasing or similar arrangement which, in accordance with GAAP, would not be classified as capitalized leases." "'Subsidiary' means, with respect to any Person, any Person of which more than 50% of the outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such Person (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency), or if such Person is not a corporation, more than 50% of the outstanding shares, interests, participation or other equivalents (however designated) of such Person, is at the time directly or indirectly owned by such Person, by such Person and one or more other Subsidiaries of such Person, or by one or more other Subsidiaries of such Person." SUBPART II.1.3. Clause (b)(vi) of the definition of "Fixed Charge Coverage Ratio" in Section 1.1 ("Defined Terms") is hereby amended to read in its entirety as follows: "(vi) the aggregate amount of Investments made by the Borrower and its Subsidiaries during such period, but only to the extent that such amount, when aggregated with the amount of all other Investments made since the Eleventh Amendment Effective Date, exceeds $35,000,000." SUBPART II.2. Amendments to Article VI ("REPRESENTATIONS AND WARRANTIES"). Article VI of the Existing Credit Agreement is hereby amended in accordance with Subparts 2.2.1, Subpart 2.2.2 and Subpart 2.2.3. SUBPART II.2.1. Section 6.1 ("Organization, etc.") of the Existing Credit Agreement is hereby amended in its entirety to read as follows: "SECTION 6.1. Organization, etc. The Borrower and each of its Subsidiaries which is a corporation or partnership is validly organized and existing and in good standing under the laws of the State or other jurisdiction of its organization, having all corporate or partnership powers required to carry on its business and enter into and carry out the transactions contemplated hereby. The Borrower and each of its Subsidiaries is duly qualified to do business and is in good standing as a foreign organization in each jurisdiction where the failure so to qualify could have a Material Adverse Effect, and has full power and authority and holds all requisite governmental licenses, permits and other approvals to enter into and perform its Obligations under this Agreement, the Notes and each other Loan Document to which it is a party and to own and hold under lease its property and to conduct its business substantially as currently conducted by it." SUBPART II.2.2. Section 6.2 ("Due Authorization, Non-Contravention, etc") of the Existing Credit Agreement is hereby amended by adding the words "or partnership" after the word "corporate" as it occurs in the next to last line of the first paragraph. SUBPART II.2.3. Section 6.5 ("Financial Information") of the Existing Credit Agreement is hereby amended by adding the words "or partnerships" after the word "corporations" in the next to last line of the first paragraph. SUBPART II.3. Amendments to Article VII ("COVENANTS"). Article VII of the Existing Credit Agreement is hereby amended in accordance with Subparts 2.3.1, Subpart 2.3.2, Subpart 2.3.3, Subpart 2.3.4, Subpart 2.3.5, Subpart 2.3.6 and Subpart 2.3.7. SUBPART II.3.1. Section 7.1.2 ("Compliance with Laws, etc.") of the Existing Credit Agreement is hereby amended by adding the words "or partnership" after the word "corporate" in the first line of clause (a) of Section 7.2.2. SUBPART II.3.2. Section 7.2.2 ("Indebtedness") of the Existing Credit Agreement is hereby amended by: (a) (i) Deleting the word "and" at the end of Section 7.2.2(c)(iii), (ii) deleting the period at the end of such subsection, (iii) inserting a semi-colon and the word "and" at the end of clause (c)(iv) of such subsection and (iv) inserting a new clause (v) to such subsection which shall read as follows: "(v) Indebtedness of the Borrower and Hartco existing on the date on which the Restructuring Transactions are consummated which is assumed by the Restructuring Subsidiaries as part of the Restructuring Transactions." (b) Amending Section 7.2.2(f) in its entirety to read as follows: "(f) Indebtedness (other than trade payables incurred in the ordinary course of business as allowed in clause (e) above) of (i) the Borrower to any of its Subsidiaries that have delivered the Master Subordination Agreement; (ii) a Subsidiary of the Borrower to the Borrower; provided, that such Subsidiary shall not become liable to any Person other than the Borrower in respect of such Indebtedness, and the amount of such Indebtedness incurred after the Closing Date shall not exceed an amount equal to the principal amount of Credit Extensions attributable to the Net Asset Value of Eligible Accounts and Eligible Inventory of such Subsidiary that have been utilized in arriving at the then existing Borrowing Base Amount; and in the event any such intercompany Indebtedness shall be evidenced by a note or other instrument, such note or other instrument shall be delivered to the Agent;" (c) Amending Section 7.2.2(h) in its entirety to read as follows: "(h) Indebtedness of the Borrower (i) in respect of its guaranty of Other Rental Obligations of any of its Subsidiaries incurred pursuant to the limits set forth in Section 7.2.8(k); and (ii) under the Borrower Guaranty;" (d) Renumbering the subsections following subsection (h) as subsections (i), (j), (k), and (l), respectively. (e) Amending Section 7.2.2(l) in its entirety to read as follows: "(l) Indebtedness of Permitted Foreign Subsidiaries to Persons other than the Borrower in an amount not in excess of $2,000,000, and Contingent Liabilities of the Borrower in respect thereof (calculated without duplication of specific Indebtedness and the Contingent Obligations arising in respect thereof);" SUBPART II.3.3. Section 7.2.3 ("Liens") of the Existing Credit Agreement is hereby amended by: (a) (i) inserting the word "and" following the semi-colon appearing at the end of clause (c)(iii) of Section 7.2.3 and (ii) inserting a new clause (iv) to such subsection which shall read as follows: "(iv) on assets of the Borrower and Hartco conveyed to the Restructuring Subsidiaries as part of the Restructuring Transactions, (including Liens securing the Obligations) which are existing on the date on which the Restructuring Transactions are consummated and which may be regranted, ratified and continued by the Restructuring Subsidiaries;" SUBPART II.3.4. Section 7.2.5 ("Investments") of the Existing Credit Agreement is hereby amended by: (a) (i) Deleting the word "and" following the semi-colon appearing at the end of clause (e)(ii) of such subsection, (ii) inserting the word "and" following the semi-colon appearing at the end of clause (e)(iii) of such subsection and (iii) inserting a new clause (iv) to such subsection which shall read as follows: "(iv) Investments by the Borrower or any of its Subsidiaries in any of the Restructuring Subsidiaries, or by any such Restructuring Subsidiary in any other Restructuring Subsidiary, by way of contributions to capital or loans or advances, in connection with the Restructuring Transactions;" SUBPART II.3.5. Section 7.2.8 ("Rental Obligations") is hereby amended in its entirety to read as follows: "SECTION 7.2.8. Rental Obligations Rental Obligations Rental ObligationsRental Obligations. The Borrower will not, and will not permit any of its Subsidiaries to, enter into at any time any arrangement which does not create a Capitalized Lease Liability and which involves the leasing by the Borrower or any of its Subsidiaries from any lessor of any real or personal property (or any interest therein), except Other Rental Obligations which will not require the payment of an aggregate amount of rentals by the Borrower and its Subsidiaries in any Fiscal Year in excess of the amount set forth below opposite such Fiscal Year (provided, that any calculation made for purposes of this Section shall exclude any amounts required to be expended for maintenance and repairs, insurance, taxes, assessments, and other similar charges and shall also exclude any amounts owed with respect to leases between the Borrower and any of its Subsidiaries or between Subsidiaries of the Borrower): Aggregate Amount Fiscal Year of Rentals ----------- ---------------- 1996 $7,500,000 1997 $9,000,000 1998 $13,500,000 1999 $14,000,000 2000 $14,000,000." SUBPART II.3.6. Section 7.2.11 (Asset Dispositions, etc.) of the Existing Credit Agreement is hereby amended by (i) deleting the word "or" at the end of subsection (d) thereof; (ii) deleting the period at the end of subsection (e) thereof and (iii) inserting a new subsection (f) which shall read as follows: "(f) the sale, transfer, lease, contribution or conveyance of assets of the Borrower and Hartco to the Restructuring Subsidiaries and the conveyance of assets of Hartco to the Borrower as part of the Restructuring Transactions." SUBPART II.3.7. The Disclosure Schedule is hereby amended by adding thereto Item 7.2.11 as set forth in Annex I hereto and by replacing Item 6.8 "Existing Subsidiaries" with Item 6.8 as set forth in Annex II hereto. PART III. CONDITIONS TO EFFECTIVENESS SUBPART III.1. Eleventh Amendment Effective Date. This Amendment (and the amendments and modifications contained herein) shall become effective, and shall thereafter be referred to as the "Eleventh Amendment", on the date (the "Eleventh Amendment Effective Date") when all of the conditions set forth in this Subpart 3.1 have been satisfied. SUBPART III.1.1. Delivery of Guaranties. The Agent shall have received, for the benefit of each Lender, the Issuer and the Agent, a guaranty in respect of the Obligations in a form reasonably satisfactory to the Agent, duly executed and delivered by an Authorized Officer of each of the Restructuring Subsidiaries or, if such Restructuring Subsidiary is a limited partnership, its General Partner, dated as of the Eleventh Amendment Effective date (the "Guaranties"). SUBPART III.1.2. Delivery of the Security Agreements. The Agent shall have received, for the benefit of each Lender, the Issuer and the Agent, a security agreement in a form reasonably satisfactory to the Agent, duly executed and delivered by an Authorized Officer of each of the Restructuring Subsidiaries or, if such Restructuring Subsidiary is a limited partnership, its General Partner, dated as of the Eleventh Amendment Effective Date (the "Security Agreements"), together with such opinions in form and substance and from counsel satisfactory to Agent, as the Agent may require, together with (i) executed copies of proper Uniform Commercial Code Form UCC-3 termination statements, if any, necessary to release all Liens and other rights of any Person (other than the Agent) in any collateral described in such security agreement previously granted by any Person, (ii) Uniform Commercial Code financing statements naming each of the Restructuring Subsidiaries as the debtor and the Agent as the secured party to be filed under all jurisdictions as may be necessary or, in the opinion of the Agent, desirable to perfect the security interest of the Agent pursuant to such security agreement and (iii) certified copies of Uniform Commercial Code requests for information or similar search reports dated a date reasonably near the date of the effectuation of the Restructuring Transactions listing all effective financing statements which name any of Restructuring Subsidiaries as a debtor. SUBPART III.1.3. Solvency Certificate. The Agent shall have received for the benefit of each Lender, the Issuer and the Agent, a solvency certificate of an Authorized Officer of Borrower, in a form reasonably satisfactory to the Agent, dated as of the Eleventh Amendment Effective Date. SUBPART III.1.4. Affirmation and Consent. The Agent shall have received a duly executed copy of the Affirmation and Consent to this Amendment, in a form reasonably satisfactory to the Agent, duly executed and delivered by each Obligor. SUBPART III.1.5. Consummation of the Restructuring Transactions. The Restructuring Transactions shall have been completed without a material change in the terms of the Restructuring Transactions from those set forth in Annex I hereto, except as may be otherwise consented to by the Required Lenders. SUBPART III.1.6. Expenses. The Agent shall have received for its own account, or for the account of each Lender, as the case may be, reimbursement of all the Agent's expenses incurred and payable by Borrower under Subpart 4.5. SUBPART III.1.7. Opinions of Counsel. The Agent shall have received such opinions, each dated the Eleventh Amendment Effective Date, in form and substance and from counsel satisfactory to the Agent, as the Agent may require. SUBPART III.1.8. Legal Details, etc. All documents executed or submitted pursuant hereto shall be satisfactory in form and substance to the Agent and its counsel. The Agent and its counsel shall have received all information and such counterpart originals or such certified or other copies or such materials as the Agent or its counsel may reasonably request, and all legal matters incident to the transactions contemplated by this Amendment shall be satisfactory to the Agent and its counsel. SUBPART III.1.9. Execution of Counterparts. The Agent shall have received counterparts of this Amendment, duly executed and delivered on behalf of the Borrower and each of the Lenders. SUBPART III.1.10. Resolutions. etc. The Agent shall have received in form and substance satisfactory to the Agent, (a) a certificate, dated the Eleventh Amendment Effective Date, of the Borrower's Secretary or Assistant Secretary as to (i) resolutions of the Borrower's Board of Directors then in full force and effect authorizing the execution, delivery and performance of this Amendment and each other Loan Document executed or to be executed by it in connection herewith; and (ii) the incumbency and signatures of those officers of the Borrower authorized to act with respect to this Amendment and each other Loan Document executed or to be executed by it in connection herewith, upon which certificate each Lender may conclusively rely with respect to the incumbency and signature of such Authorized Officers until it shall have received a further certificate of the Secretary or Assistant Secretary of the Borrower cancelling or amending such prior certificate; (b) a certificate, dated the Eleventh Amendment Effective Date, of the Secretary or Assistant Secretary of each of the Restructuring Subsidiaries, or if such Restructuring Subsidiary is a limited partnership, its General Partner, as to (i) resolutions of the Board of Directors of each of the Restructuring Subsidiaries, or if such Restructuring Subsidiary is a limited partnership, its General Partner, then in full force and effect authorizing the execution, delivery and performance of a guaranty and security agreement (as such are described in Subparts 3.1.1. and 3.1.2, above) and each other Loan Document executed or to be executed by each of the Restructuring Subsidiaries, in the name and on behalf of each of the Restructuring Subsidiaries, in connection herewith and therewith; and (ii) the incumbency and signatures of those officers of each of the Restructuring Subsidiaries, or if such Restructuring Subsidiary is a limited partnership, its General Partner, authorized to act with respect to the guaranty and the security agreement of each of the Restructuring Subsidiaries described in Subparts 3.1.1 and 3.1.2 below and each other Loan Document executed or to be executed by each of the Restructuring Subsidiaries or if such Restructuring Subsidiary is a limited partnership, its General Partner, in the name and on behalf of each of the Restructuring Subsidiaries, in connection herewith and therewith, upon which certificate each Lender may conclusively rely with respect to the incumbency and signature of such Authorized Officers until it shall have received a further certificate of the Secretary or Assistant Secretary of each of the Restructuring Subsidiaries cancelling or amending such prior certificate; (c) a certificate, dated the Eleventh Amendment Effective Date, of the Secretary or Assistant Secretary of each other Obligor as to (i) resolutions of such Obligor's Board of Directors then in full force and effect authorizing the execution, delivery and performance of the Affirmation and Consent and each other Loan Document executed or to be executed by it in connection herewith; and (ii) the incumbency and signatures of those officers of such Obligor authorized to act with respect to the Affirmation and Consent and each other Loan Document executed or to be executed by it in connection herewith, upon which certificate each Lender may conclusively rely with respect to the incumbency and signature of such Authorized Officers until it shall have received a further certificate of the Secretary or Assistant Secretary of such Obligor cancelling or amending such prior certificate; and (d) such other documents (certified if requested) or certificates as the Agent may reasonably request with respect to this Amendment, the Affirmation and Consent, any other Loan Document or any Organic Document or approval. PART IV. MISCELLANEOUS; REPRESENTATIONS SUBPART IV.1. Cross-References. References in this Amendment to any Part or Subpart are, unless otherwise specified or otherwise required by the context, to such Part or Subpart of this Amendment. SUBPART IV.2. Loan Document Pursuant to Existing Credit Agreement. This Amendment is a Loan Document executed pursuant to the Existing Credit Agreement and shall be construed, administered and applied in accordance with all of the terms and provisions of the Existing Credit Agreement (and, following the Eleventh Amendment Effective Date, the Credit Agreement). SUBPART IV.3. Successors and Assigns. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. SUBPART IV.4. Full Force and Effect; Limited Amendment. Except as expressly amended hereby, all of the representations, warranties, terms, covenants, conditions and other provisions of the Existing Credit Agreement and the other Loan Documents shall remain unamended and unwaived and shall continue to be, and shall remain, in full force and effect in accordance with their respective terms. The amendments set forth herein shall be limited precisely as provided for herein to the provisions expressly amended herein and shall not be deemed to be an amendment to, waiver of, consent to or modification of any other term or provision of the Existing Credit Agreement, any other Loan Document referred to therein or herein or of any transaction or further or future action on the part of the Borrower which would require the consent of the Lenders under the Existing Credit Agreement or any of the Loan Documents. SUBPART IV.5. Payment of Expenses. The Borrower hereby agrees to pay and reimburse the Agent for all of its reasonable expenses incurred in connection with the negotiation, preparation, execution and delivery of this Amendment and related documents, including all reasonable fees and disbursements of counsel to the Agent; provided that neither the Agent nor any Lender shall charge a fee to the Borrower in connection with the Restructuring Transactions or this Amendment. SUBPART IV.6. Counterparts. This Amendment may be executed by the parties hereto in several counterparts, each of which when executed and delivered shall be deemed to be an original and all of which shall constitute together but one and the same agreement. SUBPART IV.7. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK. SUBPART IV.8. Compliance with Warranties. No Default, etc. Both before and after giving effect to the occurrence of the Eleventh Amendment Effective Date and the amendments to the Existing Credit Agreement set forth above, the Borrower represents and warrants to the Lenders that the following statements are true and correct: (a the representations and warranties set forth in Article VI (excluding, however, those contained in Section 6.7) of the Existing Credit Agreement and the representations and warranties set forth in Article III of each Security Agreement and in Article III of each Subsidiary Guaranty and in each other Loan Document are true and correct in all material respects with the same effect as if then made (unless stated to relate solely to an earlier date, in which case such representations and warranties were true and correct as of such earlier date); (b except as disclosed by the Borrower to the Agent and the Lenders pursuant to Section 6.7 of the Existing Credit Agreement, (i no labor controversy, litigation, arbitration or governmental investigation or proceeding is pending or, to the knowledge of the Borrower, threatened against the Borrower or any of its Subsidiaries which could result in a Material Adverse Effect (including with respect to this Amendment or any other Loan Document delivered in connection herewith); and (ii no development has occurred in any labor controversy, litigation, arbitration or governmental investigation or proceeding disclosed pursuant to Section 6.7 of the Existing Credit Agreement which could result in a Material Adverse Effect (including with respect to this Amendment or any other Loan Document delivered in connection herewith); and (iii no Default has occurred and is continuing. SUBPART IV.9. Additional Representations. In order to induce the Lenders and the Agents to enter into this Amendment, the Borrower hereby additionally represents and warrants as follows: (a the execution and delivery of this Amendment and the performance by the Borrower and each of its Subsidiaries of each of their respective obligations hereunder, under each other Loan Document, under the Existing Credit Agreement as amended hereby and, upon the occurrence of the Eleventh Amendment Effective Date, under the Credit Agreement are within such Person's corporate powers, have been duly authorized by all necessary corporate action, have received all necessary governmental approvals (if any shall be required), and do not (i) contravene such Person's Organic Documents, (ii) contravene any contractual restriction, law or governmental regulation or court decree or order binding on or affecting such Person or (iii) result in, or require the creation or imposition of, any Lien on any of such Person's properties (other than pursuant to a Loan Document); and (b this Amendment, each other Loan Document, the Existing Credit Agreement as amended hereby and, upon the occurrence of the Eleventh Amendment Effective Date, the Credit Agreement are the legal, valid and binding obligations of the Borrower and each of its Subsidiaries, as applicable, enforceable in accordance with their respective terms (except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally and by principles of equity). [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized as of the day and year first above written. TRIANGLE PACIFIC CORP. By: --------------------------------- Title: THE BANK OF NOVA SCOTIA By: --------------------------------- Title: BANK OF AMERICA NT&SA By: --------------------------------- Title: COMERICA BANK - TEXAS By: --------------------------------- Title: ANNEX I RESTRUCTURING TRANSACTIONS As used in the Amendment and the Existing Credit Agreement, the term "Restructuring Transactions" means the transactions summarized on the attachment hereto. 1. All sales, marketing and lumber buying operations will be conducted by the Borrower, including any such operations previously conducted by Hartco, and all accounts and notes receivables of Hartco will be transferred to the Borrower. 2. All of the Borrower's hardwood flooring manufacturing operations (other than those conducted by Hartco) will be transferred to Bruce Hardwood Flooring L.P., a Texas limited partnership of which BHFL Corp. will be the 99% limited partner and BHFG Corp. will be the 1% general partner. All real property and tangible personal property, and all patents, trademarks and other intellectual property, utilized in these operations will be either transferred or leased by the Borrower to, and all associated liabilities will be assumed by, Bruce Hardwood Flooring L.P. 3. All of Hartco's hardwood flooring and related manufacturing operations will be transferred to Hartco Hardwood Flooring L.P., a Delaware limited partnership to which HFCL Corp. will be the 99% limited partner and HFCG Corp. will be the 1% general partner. All real property and tangible personal property utilized in these operations and all patents, trademarks and other intellectual property will be transferred by Hartco to Hartco Hardwood Flooring L.P. or transferred to DTM Corp. and then leased by DTM Corp. to Hartco Hardwood Flooring L.P., and all associated liabilities will be assumed by Hartco Hardwood Flooring L.P. or DTM Corp., as the case may be. ANNEX II ITEM 6.8 Existing Subsidiaries. Corporate Subsidiaries of Borrower State of Ownership Name Organization % - ---- ------------ -------- Worldwide Kitchens, Inc. Delaware 100% Hartco Flooring Company Tennessee 100% BHFG Corp. Delaware 100% BHFL Corp. Delaware 100% Robbins Hardwood Flooring, Inc. Delaware 100% Corporate Subsidiary of Hartco Flooring Company DTM Corp. Delaware 100% HFCG Corp. Delaware 100% HFCL Corp. Delaware 100% Limited Partnerships Bruce Hardwood Flooring L.P. Texas Limited Partner - BHFL Corp. 99% General Partner - BHFG Corp. 1% Hartco Hardwood Flooring L.P. Delaware Limited Partner - HFCL Corp. 99% General Partner - HFCG Corp. 1% EX-21.1 5 EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT Jurisdiction of Other Names Under Which Name Organization Business Conducted - ---- --------------- ----------------------- Robbins Hardwood Flooring, Inc. Delaware BHFL Corp. Delaware BHFG Corp. Delaware Bruce Hardwood Flooring, L.P. Texas "Bruce Hardwood Floors" "Premier Wood Floors" Hartco Flooring Company Tennessee HFCG Corp. Delaware HFCL Corp. Delaware Hartco Hardwood Flooring, L.P. Delaware "Hartco Flooring Company" DTM Corp. Delaware EX-11.1 6 Exhibit 11.1 ------------ TRIANGLE PACIFIC CORP. COMPUTATION OF NET INCOME PER SHARE Fiscal Years Ended -------------------------------------- January 2, January 3, December 29, 1998 1997 1995 -------------------------------------- BASIC - ----- Net Income $31,759,000 $25,624,000 $22,005,000 ========== ========== ========== Shares outstanding beginning of period 14,686,558 14,663,365 14,662,609 Weighted average number of shares issued from incentive bonus shares 23,398 1,008 - Weighted average number of shares issued from exercise of stock options 5,735 5,248 567 ---------- ---------- ---------- Basic weighted common shares outstanding 14,715,691 14,669,621 14,663,176 ========== ========== ========== Basic net income per share $ 2.16 $ 1.71 $ 1.49 ========== ========== ========== DILUTED - ------- Weighted average number of shares outstanding 14,715,691 14,669,621 14,663,176 Shares issuable from assumed exercise of stock options and stock warrants reduced by the number of shares which could have been purchased with the proceeds from exercise of such options and warrants 605,075 334,904 151,884 ---------- ---------- ---------- Diluted weighted common shares outstanding 15,320,766 15,004,525 14,815,060 ========== ========== ========== Diluted net income per share $ 2.07 $ 1.71 $ 1.49 ========== ========== ========== EX-27 7
5 12-MOS JAN-02-1998 JAN-02-1998 3,790,000 0 74,061,000 3,662,000 128,988,000 207,738,000 242,935,000 53,294,000 543,221,000 80,257,000 0 0 0 147,000 186,765,000 543,221,000 652,866,000 652,866,000 495,256,000 495,256,000 82,722,000 419,000 22,863,000 51,606,000 19,847,000 31,759,000 0 0 0 31,759,000 2.16 2.07
EX-23.1 8 Exhibit 23.1 Consent of independent Public Accountants As independent public accountants, we hereby consent to the incorporation of our reports included in this form 10-K, into the Company's previously filed Registration Statement Files Nos. 33-69682, 33-69684, 33-50724, 33-48599, 33- 48601 and 33-48603. ARTHUR ANDERSEN LLP Dallas, Texas March 27, 1998 -----END PRIVACY-ENHANCED MESSAGE-----