Exhibit 10.1

Execution Version

SHARE PURCHASE AGREEMENT

by and among

LUXELIT S.À R.L.,

FINCERAMICA S.P.A.,

MOHAWK INDUSTRIES, INC.,

and

MOHAWK INTERNATIONAL HOLDINGS (DE) CORPORATION

Dated

December 20, 2012

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TABLE OF CONTENTS

 

         Page  

ARTICLE I

  

DEFINITIONS

  

Section 1.1

  Definitions      1   

Section 1.2

  Interpretation      10   

Section 1.3

  Schedules and Exhibits      11   

ARTICLE II

  

SALE AND PURCHASE

  

Section 2.1

  Purchase and Sale      11   

ARTICLE III

  

PURCHASE AND SALE

  

Section 3.1

  Purchase Price      11   

Section 3.2

  Estimated Purchase Price      12   

Section 3.3

  Good Faith Negotiations      12   

Section 3.4

  No Delay of Closing; Post-Closing Resolution      12   

Section 3.5

  Closing Payments      12   

Section 3.6

  Payment Mechanics      13   

Section 3.7

  Dispute Resolution      13   

Section 3.8

  Excess Amount      14   

Section 3.9

  Shortfall Amount      14   

Section 3.10

  Adjustment      14   

Section 3.11

  Interest      14   

ARTICLE IV

  

CLOSING

  

Section 4.1

  Closing      14   

Section 4.2

  Seller Actions and Deliverables at the Closing      15   

Section 4.3

  Purchaser Deliverables at the Closing      16   

Section 4.4

  One Transaction      16   

ARTICLE V

  

REPRESENTATIONS AND WARRANTIES OF THE SELLERS

  

Section 5.1

  Authority; Enforceability      17   

Section 5.2

  Non-Contravention; Consents      17   

Section 5.3

  The Shares      17   

Section 5.4

  Organization; Subsidiaries      18   

Section 5.5

  Financial Statements      19   

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Section 5.6

  Financial Statement Preparation      19   

Section 5.7

  Position Since Reference Date      19   

Section 5.8

  Debts Owed by the Target Companies      20   

Section 5.9

  Compliance with Applicable Laws      20   

Section 5.10

  Insurance      20   

Section 5.11

  Contracts      20   

Section 5.12

  Enforceability of Material Contracts; Defaults under Material Contracts     
21   

Section 5.13

  Litigation      22   

Section 5.14

  Intellectual Property      22   

Section 5.15

  Real Property      22   

Section 5.16

  Leased Property      23   

Section 5.17

  Personal Property      23   

Section 5.18

  Employment Matters      24   

Section 5.19

  Labor Matters      24   

Section 5.20

  Employee Benefits      24   

Section 5.21

  Non-U.S. Benefit Plans      27   

Section 5.22

  Italian Employment and Labor Matters      27   

Section 5.23

  Taxes      28   

Section 5.24

  Brokers and Finders      30   

Section 5.25

  Environmental Matters      30   

Section 5.26

  Suppliers and Customers      31   

Section 5.27

  Products      31   

Section 5.28

  Related Party Transactions      31   

Section 5.29

  FCPA Matters      32   

Section 5.30

  No Further Representations      32   

ARTICLE VI

  

REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER

  

Section 6.1

  Authority; Enforceability      32   

Section 6.2

  Non-contravention; Consents      33   

Section 6.3

  Organization      33   

Section 6.4

  Litigation      33   

Section 6.5

  Financial Statements; Filings; No Undisclosed Liabilities      34   

Section 6.6

  Position Since Reference Date      36   

Section 6.7

  Investigation      36   

Section 6.8

  Brokers and Finders      36   

Section 6.9

  No Further Representations      36   

ARTICLE VII

  

COVENANTS

  

Section 7.1

  Conduct of the Business      36   

Section 7.2

  Further Assurances      39   

Section 7.3

  Filings; Reasonable Cooperation      39   

Section 7.4

  Solicitation      40   

Section 7.5

  Confidentiality      40   

 

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Section 7.6

  Notice of Developments      41   

Section 7.7

  Parent Covenant      42   

Section 7.8

  Employees and Employee Benefits      42   

Section 7.9

  Listing      43   

Section 7.10

  Access to Properties, Books and Records      43   

Section 7.11

  Seller Representative      44   

Section 7.12

  Repayments of Certain Amounts      44   

Section 7.13

  Nonsolicitation      45   

Section 7.14

  Russian Management Retention Plan      45   

Section 7.15

  Directors, Officers and Statutory Auditors      45   

ARTICLE VIII

  

CONDITIONS TO CLOSING

  

Section 8.1

  Mutual Conditions      45   

Section 8.2

  Conditions of the Purchaser      46   

Section 8.3

  Conditions of the Sellers      46   

Section 8.4

  Waiver of Conditions      47   

Section 8.5

  Notification      47   

ARTICLE IX

  

TERMINATION

  

Section 9.1

  Termination      47   

Section 9.2

  Effect of Termination      48   

ARTICLE X

  

SURVIVAL

  

Section 10.1

  Survival      48   

Section 10.2

  Cap on Liability      48   

ARTICLE XI

  

MISCELLANEOUS

  

Section 11.1

  Announcements      48   

Section 11.2

  Assignment      49   

Section 11.3

  Specific Performance      49   

Section 11.4

  Costs and Expenses; Taxes      49   

Section 11.5

  Notices      50   

Section 11.6

  Entire Agreement      51   

Section 11.7

  Waivers      51   

Section 11.8

  Counterparts      51   

Section 11.9

  Amendments      52   

Section 11.10

  Severability      52   

Section 11.11

  Third Party Beneficiaries      52   

Section 11.12

  Governing Law      52   

 

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Section 11.13

  Dispute Resolution      52   

Exhibit A

  Adjustment Methodologies   

Exhibit B

  Registration Rights and Lock-Up Agreement   

 

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INDEX OF DEFINED TERMS

 

     Page   12/31 Balance Sheet      Exhibit A    Accounting Principles     
Section 1.1(a)    Adjustment Methodologies      Section 3.2    Affiliate     
Section 1.1(b)    Agents      Section 5.22(e)    Agreement      Preamble   
Authorization      Section 1.1(c)    Average Closing Price      Section 1.1(d)
   Base Amount      Section 3.1    Benefit Plans      Section 5.20(a)(i)   
Business Day      Section 1.1(e)    Business IP      Section 1.1(f)    Capex
Plan      Section 1.1(g)    Cash      Section 1.1(h)    Cash Adjustment Payment
     Section 3.5    Cash Closing Consideration      Section 3.5    Closing     
Section 1.1(i)    Closing Date      Section 4.1    Collective Rules      Section
5.18(b)    Company      Section 1.1(j), Recitals    Company Material Adverse
Effect      Section 1.1(k)    Confidential Information      Section 1.1(l)   
Confidentiality Agreement      Section 1.1(m)    Continuing Employees     
Section 7.8(a)    Controlled Subsidiaries      Section 1.1(n)    Default
Interest      Section 1.1(o)    Disclosure Letter      Section 1.1(p)    DOJ   
  Section 7.3(c)    Due Diligence Investigation      Section 6.7    EdilFriuli
Bond Amount      Section 1.1(q)    Encumbrance      Section 1.1(r)   
Environmental Authorizations      Section 5.25(a)    Environmental Law     
Section 1.1(s)    ERISA Affiliate      Section 5.20(c)    Estimated Purchase
Price      Section 3.2    Estimated Purchase Price Statement      Section 3.2   
Excess Amount      Section 3.8    Exchange Act      Section 1.1(t)    Exchange
Rate Calculation Time      Section 3.6    FCPA      Section 5.29    Financial
Statements      Section 5.5    Finceramica      Preamble    FTC      Section
7.3(c)   

 

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Fundamental Representations      Section 1.1(u)    Governing Documents     
Section 5.2(b)    Governmental Antitrust Authority      Section 7.3(c)   
Governmental Authority      Section 1.1(v)    Hazardous Substance     
Section 1.1(w)    HSR Act      Section 1.1(x)    IFRS      Section 1.1(y)   
Indebtedness      Section 1.1(z)    Independent Accounting Firm      Section 3.7
   Intellectual Property Rights      Section 1.1(aa)    Italian Management
Incentive Payments      Section 1.1(bb)    June 30 Audited Balance Sheet     
Exhibit A    Knowledge of the Company      Section 1.1(cc)    Law      Section
1.1(dd)    LIBOR      Section 1.1(ee)    LuxELIT      Preamble    Major
Customers      Section 5.26    Major Suppliers      Section 5.26    Marazzi
Group      Section 1.1(ff)    Material Contracts      Section 5.11    Most
Recent Audited Financial Statements      Section 5.5    Most Recent Financial
Statements      Section 5.5    Negotiation Period      Section 3.4    New
Company Plans      Section 7.8(b)    NOL NPV Amount      Section 1.1(gg)   
Non-Controlled Target Company      Section 1.1(ii)    Non-Operational Real
Estate Value      Section 1.1(hh)    Non-U.S. Benefit Plans      Section 5.21   
Notary      Section 1.1(jj)    NYSE      Section 6.5(f)    Other Deductions     
Section 1.1(jj)    Outside Date      Section 9.1(a)    Owned IP      Section
1.1(kk)    Parcel      Section 5.15    Parent      Preamble    Parent Common
Stock      Section 1.1(mm)    Parent Common Stock Consideration      Section 3.5
   Parent Disclosure Letter      Section 1.1(nn)    Parent Financial Statements
     Section 1.1(oo)    Parent Group      Section 1.1(pp)    Parent SEC Reports
     Section 6.5(a)    Pension Liability Amount      Section 1.1(qq)   
Permitted Encumbrances      Section 1.1(rr)    Person      Section 1.1(ss)   
Portfolio Company      Section 1.1(tt)    Proposed Transaction      Section
1.1(uu)   

 

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Purchase Price      Section 3.1    Purchaser      Preamble    Purchaser
Fundamental Representations      Section 1.1(vv)    Real Property Lease     
Section 5.16    Reference Date      Section 5.5    Release      Section 1.1(ww)
   Representatives      Section 1.1(xx)    Russian Management Retention Payments
     Section 1.1(yy)    Russian Management Retention Plan      Section 1.1(zz)
   Sarbanes-Oxley Act      Section 1.1(aaa)    SEC      Section 6.2(a)    SEC
Documents      Section 1.1(bbb)    Securities Act      Section 1.1(ccc)   
Securities Laws      Section 1.1(ddd)    Securitization      Section 1.1(eee)   
Seller      Preamble    Seller Allocation Schedule      Section 3.5    Seller
Representative      Section 7.11(a)    Sellers      Preamble    Share Cap     
Section 1.1(fff)    Shares      Recitals    Short / Medium Term Financial Assets
and Receivables      Section 1.1(ggg)    Shortfall Amount      Section 3.9   
Specified Indebtedness      Section 1.1(hhh)    Subsidiaries      Section 5.4(b)
   Subsidiary      Section 5.4(b)    Target Companies      Section 1.1(iii)   
Tax      Section 1.1(jjj)    Tax Authority      Section 1.1(kkk)    Tax
Liability      Section 1.1(lll)    Tax Return      Section 1.1(mmm)    Taxation
     Section 1.1(jjj)    Transaction Expenses      Section 1.1(nnn)   
Transaction Incentive Payments      Section 1.1(ooo)    Transaction Incentive
Plan      Section 1.1(ppp)    Unpaid Russian IPO Expenses      Section 1.1(qqq)
   US Tax Code      Section 1.1(rrr)    WARN      Section 5.19    Year-End Cash
     Section 1.1(sss)    Year-End EdilFriuli Bond Amount      Section 1.1(ttt)
   Year-End Indebtedness      Section 1.1(uuu)    Year-End Pension Liability
Amount      Section 1.1(vvv)    Year-End Short / Medium Term Financial Assets
and Receivables      Section 1.1(www)   

 

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SHARE PURCHASE AGREEMENT

This SHARE PURCHASE AGREEMENT, dated as of December 20, 2012 (this “Agreement”),
by and among LuxELIT S.á r.l., a Luxembourg limited liability company
(“LuxELIT”), Finceramica S.p.A., an Italian corporation (“Finceramica” and
together with LuxELIT, the “Sellers” and each a “Seller”), Mohawk Industries,
Inc., a Delaware corporation (the “Parent”) and Mohawk International Holdings
(DE) Corporation, a Delaware corporation and wholly-owned subsidiary of Parent
(the “Purchaser”).

WHEREAS, the Sellers own, beneficially and of record, all of the issued share
capital (the “Shares”) of Fintiles S.p.A., an Italian corporation (società per
azioni) with registered address at via B. Telesio 2, Milan (Italy), registered
with the Companies Register of Milan at no. 06187460966 (the “Company”);

WHEREAS, the Purchaser desires to purchase, and each Seller desires to sell to
the Purchaser, the Shares.

NOW, THEREFORE, in consideration of the premises, and the mutual
representations, warranties, covenants and agreements herein set forth and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto hereby agree as follows:

ARTICLE I

DEFINITIONS

Section 1.1 Definitions. Capitalized terms used in this Agreement shall have the
meanings set forth in this Agreement. The following terms, when used in this
Agreement, shall have the following meanings:

 

(a) “Accounting Principles” shall mean IFRS consistently applied in accordance
with the past practice of the Target Companies;

 

(b) “Affiliate” shall mean, in relation 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 first Person, and “control”
(including the terms “controlled by” and “under common control with”), with
respect to the relationship between or among two or more Persons, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the affairs or management of a Person, whether through the
ownership of voting securities, by contract or otherwise; provided, that (i) in
respect of any Target Company formed or incorporated in Italy, the definition of
“control” shall be interpreted and construed in accordance with article 2359,
paragraphs 1 and 2, of the Italian Civil Code; and (ii) in the case of the
Company, the term “Affiliate” shall not include portfolio companies of the
Sellers or their respective controlled Affiliates;

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(c) “Authorization” shall mean any authorization, approval, consent,
certificate, license, permit or franchise of or from any Governmental Authority
or pursuant to any Law;

 

(d) “Average Closing Price” shall mean the average of the daily closing prices
for the shares of Parent Common Stock for the thirty (30) consecutive trading
days on which such shares are actually traded on the NYSE (as reported by The
Wall Street Journal or, if not reported thereby, such other source mutually
agreed by the Purchaser and the Seller Representative) ending at the close of
trading on the fourth (4th) trading day immediately preceding the Closing Date);

 

(e) “Business Day” shall mean a day, other than a Saturday or Sunday or public
holiday in New York or Italy, on which banks are open in New York and Italy for
general commercial business;

 

(f) “Business IP” shall mean the Owned IP and all other registered and material
unregistered Intellectual Property Rights used by the Target Companies;

 

(g) “Capex Plan” shall mean the plan set forth on Schedule 1.1(g) of the
Disclosure Letter setting forth the planned capital expenditure of the Target
Companies;

 

(h) “Cash” shall mean for the Target Companies on a consolidated basis an amount
equal to, without duplication, the cash, bank deposits, cash equivalents
(including checks for deposits received or deposited by a Target Company but not
yet credited to the accounts of a Target Company) and short-term marketable
investments of the Target Companies, determined in accordance with the
Accounting Principles and consistent with the preparation of the Financial
Statements;

 

(i) “Closing” shall mean completion of the sale and purchase of the Shares in
accordance with the provisions of this Agreement;

 

(j) “Company” shall have the meaning set forth in the recitals to this
Agreement;

 

(k)

“Company Material Adverse Effect” shall mean any fact, circumstance, occurrence,
change or event that has a material adverse effect on the business, results of
operations or financial condition of the Target Companies, taken as a whole,
other than any fact, circumstance, occurrence, change or event resulting from,
relating to or arising out of: (i) changes in general economic conditions in any
of the markets, industries or geographical areas in which any of the Target
Companies operate (except to the extent that such changes materially and
disproportionately have a greater adverse impact on the Target Companies, taken
as a whole, as compared to the adverse impact such changes have on other Persons
operating in the same industries as the Target Companies operate); (ii) any
change in the financial, credit, banking, currency or capital markets in general
(whether in the United States, Italy, Russia or any other country in which any
of the Target Companies operate) or

 

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  changes in currency exchange rates or interest rates or currency fluctuations;
(iii) acts of God or other calamities, national or international political or
social conditions, including the engagement by any country in hostilities,
whether commenced before or after the date hereof, and whether or not pursuant
to the declaration of a national emergency or war, or the occurrence of any
military or terrorist attack; (iv) changes in Law or in IFRS or other accounting
requirements or principles imposed upon the Target Companies, including, in each
case, the interpretations thereof; (v) any actions taken, or failures to take
action, as contemplated or permitted by this Agreement or to which the Parent or
the Purchaser has consented in writing; or (vi) the announcement of the sale or
potential sale of the Company, or the announcement or the taking of any action
contemplated by this Agreement, including by reason of the identity of the
Parent or the Purchaser or any plans or intentions of the Parent or the
Purchaser with respect to the conduct of the businesses of any of the Target
Companies, including any impact thereof on relationships, contractual or
otherwise, with customers, suppliers and/or employees;

 

(l) “Confidential Information” shall mean any information received or held by a
Seller (or any of its Representatives) relating to the Parent or the Parent
Group including, following the Closing, any of the Target Companies;

 

(m) “Confidentiality Agreement” shall mean the Confidentiality Agreement, dated
August 20, 2012, between Marazzi Group and Parent;

 

(n) “Controlled Subsidiaries” shall mean each Subsidiary that is directly or
indirectly controlled by the Company based upon the concept of control in the
definition of “Affiliate”;

 

(o) “Default Interest” shall mean LIBOR plus 400 basis points per annum;

 

(p) “Disclosure Letter” shall mean the letter from the Sellers to the Purchaser
delivered concurrently with the signing of this Agreement;

 

(q) “EdilFriuli Bond Amount” shall mean all outstanding amounts payable pursuant
to the interest bearing credit facility extended by Marazzi Group in favor of
EdilFriuli S.p.A. on February 23, 2004 with the principal amount of €2,500,000;

 

(r) “Encumbrance” shall mean any mortgage, lien, pledge, charge, right of first
refusal, encumbrance or any other security interest or rights of third parties
or any agreement to create any of the foregoing;

 

(s) “Environmental Law” shall mean any Law relating to the protection of the
environment or, as it pertains to exposure to hazardous substances, human health
or safety;

 

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(t) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder;

 

(u) “Fundamental Representations” means the representations and warranties set
forth in Sections 5.1, 5.3, 5.4(a) and 5.24;

 

(v) “Governmental Authority” shall mean any supra-national, national, state,
municipal or local government (including any subdivision, court of competent
jurisdiction, administrative agency or commission or other authority thereof),
stock exchange or self-regulatory organization exercising any regulatory,
taxing, importing or any other governmental authority, including the European
Union;

 

(w) “Hazardous Substance” shall mean any substance, material or waste that is
controlled, regulated or governed by any Environmental Law as hazardous, toxic,
or words of similar import;

 

(x) “HSR Act” shall mean the United States Hart-Scott Rodino Antitrust
Improvements Act of 1976, as amended;

 

(y) “IFRS” shall mean the accounting principles prepared by the International
Accounting Standards Board and adopted in compliance with the procedure of
article 6 of the EU regulation 19 July 2002 no. 1606/2002 of the European
Parliament and of the European Council as integrated by, interpreted and applied
in accordance with the accounting principles issued by the Commission of the
Consiglio Nazionale dei Dottori Commercialisti e dei Ragionieri and by the OIC –
Organismo Italiano Contabilità;

 

(z) “Indebtedness” shall mean for the Target Companies on a consolidated basis
an amount equal to, without duplication, (a) indebtedness for borrowed money of
the Target Companies or indebtedness issued or incurred in substitution or
exchange for indebtedness for borrowed money of the Target Companies, including
indebtedness evidenced by any note, bond, debenture, mortgage or other debt
instrument or debt security, plus (b) obligations of the Target Companies under
capitalized leases (as determined with respect to the Accounting Principles) to
the extent accounted for as such on the Financial Statements, plus (c) net
obligations of the Target Companies in respect of interest rate swaps, hedges or
similar arrangements, but excluding (i) any swaps, hedges or similar
arrangements related to foreign exchange and (ii) forward arrangements for the
purchase of gas entered into by the Target Companies in the ordinary course of
business, plus (d) the amount of the Securitization, plus (e) any accrued
interest, fees, penalties, prepayment penalties resulting from the consummation
of the Proposed Transaction or other expenses for obligations of the kind
referred to in clauses (a) through (d) above; it being understood that in no
event shall Indebtedness include any amount included as Transaction Expenses,
the Pension Liability Amount or the EdilFriuli Bond Amount;

 

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(aa) “Intellectual Property Rights” shall mean the following intangible property
and rights, interests and protections, however arising, pursuant to the Laws of
any jurisdiction throughout the world: (i) trademarks, service marks, trade
names, brand names, logos, trade dress and other proprietary indicia of goods
and services, whether registered, unregistered or arising by Law, and all
registrations and applications for registration of such trademarks, including
intent-to-use applications, and all issuances, extensions and renewals of such
registrations and applications, together with the goodwill associated with any
of the foregoing; (ii) internet domain names, whether or not trademarks,
registered in any generic top level domain or country-code level domain;
(iii) original works of authorship in any medium of expression, whether or not
published, all copyrights and databases (whether registered, unregistered or
arising by Law), all registrations and applications for registration of such
copyrights, and all issuances, extensions and renewals of such registrations and
applications; (iv) patented and patentable designs and inventions, all design,
plant and utility patents, letters patent, utility models, pending patent
applications and provisional applications and all issuances, divisions,
continuations, continuations-in-part; reissues, extensions, reexaminations and
renewals of such patents and applications; and (v) trade secrets under
applicable Law, and confidential or proprietary production information, customer
lists, know-how, formulas, databases, production information, compounds and
other confidential or proprietary business information;

 

(bb) “Italian Management Incentive Payments” shall mean an amount equal to
€2,100,000 payable to the individual set forth on Schedule 1(bb) to the
Disclosure Letter pursuant to the Scrittura Privata, dated July 2012 consisting
of: (i) €500,000, which will become immediately payable upon the consummation of
the Proposed Transaction and (ii) €1,600,000, which shall become payable in the
event that (A) such individual is discharged without just cause prior to
December 2013 or (B) such individual resigns within three (3) months following
the consummation of the Proposed Transaction;

 

(cc) “Knowledge of the Company” shall mean the knowledge of the individuals set
forth on Schedule 1.1(cc) of the Disclosure Letter;

 

(dd) “Law” shall mean any law, statute, common law, rule or regulation, and any
judgment or order of any Governmental Authority;

 

(ee) “LIBOR” shall mean (a) the offered rate of a three-month tenor which
appears on the relevant page on the Reuters screen; or (b) if no offered rate
appears on the relevant page of the Reuters screen or there is no relevant page
on the Reuters screen, the comparable rate as quoted by Barclays or any
successor to such bank;

 

(ff) “Marazzi Group” shall mean Marazzi Group S.p.A.;

 

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(gg) “NOL NPV Amount” shall mean €20,000,000;

 

(hh) “Non-Operational Real Estate Value” shall mean €11,000,000;

 

(ii) “Non-Controlled Target Company” shall mean each Target Company other than
the Company or any Controlled Subsidiary;

 

(jj) “Notary” shall mean a notary public in Italy designated by Purchaser prior
to the Closing that is reasonably acceptable to the Sellers;

 

(kk) “Other Deductions” shall mean €10,000,000 consisting of items mutually
agreed prior to the execution of this Agreement;

 

(ll) “Owned IP” shall mean the registered and material unregistered Intellectual
Property Rights owned by the Target Companies;

 

(mm) “Parent Common Stock” shall mean the $.01 par value common stock of the
Parent;

 

(nn) “Parent Disclosure Letter” shall mean the letter from the Parent to the
Sellers delivered concurrently with the signing of this Agreement;

 

(oo) “Parent Financial Statements” shall mean the consolidated balance sheets
(including related notes and schedules, if any) of the Parent as of
September 29, 2012 and as of December 31, 2011 and the related statements of
income, changes in shareholders’ equity, and cash flows (including related notes
and schedules, if any) for the nine (9) months ended September 29, 2012, and for
each of the three (3) fiscal years ended December 31, 2011, 2010 and 2009, as
filed by the Parent in the SEC Documents;

 

(pp) “Parent Group” shall mean the Parent and its Affiliates from time to time;

 

(qq) “Pension Liability Amount” shall mean (i) all accrued and unfunded
severance indemnities, “Trattamento di Fine Rapporto”, pursuant to article 2120
Italian Civil Code and to law n. 297 of May 29 1982 and (ii) retirement benefit
obligations related to Groupe Marazzi France S.A., in each case in accordance
with the Accounting Principles and as recorded on the Company’s balance sheet;

 

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(rr) “Permitted Encumbrances” shall mean (i) those Encumbrances set forth on
Schedule 1.1(rr) of the Disclosure Letter; (ii) mechanics’, carriers’,
workmen’s, repairmen’s or other like Encumbrances arising or incurred in the
ordinary course of business; (iii) Encumbrances arising under original purchase
price conditional sales contracts and equipment leases with third parties
entered into in the ordinary course of business and liens for Taxes that are not
due and payable or that may thereafter be paid without penalty or that are being
contested in good faith by appropriate proceedings; (iv) all rights reserved to
or vested in any Governmental Authority to control or regulate any asset or
property in any manner and all Laws applicable to assets or properties;
(v) other imperfections of title or Encumbrances, if any, that do not,
individually or in the aggregate, materially impair the continued use and
operation of the Company’s assets in the conduct of its business as presently
conducted; (vi) easements, covenants, rights-of-way and other similar
restrictions of record; (vii) any conditions that may be shown by a current,
accurate survey or physical inspection of any real property made prior to
Closing; and (viii) (A) zoning, building and other similar restrictions,
(B) Encumbrances that have been placed by any developer, landlord or other third
party on property over which the Company has easement rights and (C) unrecorded
easements, covenants, rights-of-way and other similar restrictions, none of
which items set forth in this clause (viii), in the aggregate, materially impair
the continued use and operation of real property used in the conduct of the
business of the Company as presently conducted;

 

(ss) “Person” shall mean any individual, firm, corporation (wherever
incorporated), partnership, limited liability company, joint venture, trust,
association, organization, Governmental Authority, works council or employee
representative body (whether or not having separate legal personality) or any
other entity;

 

(tt) “Portfolio Company” shall mean portfolio companies (as such term is
commonly understood in the private equity industry) of the Sellers or their
respective Affiliates where Sellers or their respective Affiliates “control” (as
such term is defined in the definition of Affiliate) such portfolio company;

 

(uu) “Proposed Transaction” shall mean the transactions contemplated by this
Agreement;

 

(vv) “Purchaser Fundamental Representations” means the representations and
warranties set forth in Sections 6.1, 6.2, and 6.8;

 

(ww) “Release” shall mean any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or disposing into
the environment;

 

(xx) “Representatives” shall mean, in relation to a Person, its respective
Affiliates and the directors, officers, employees, agents, advisers, accountants
and consultants of that Person and/or of its respective Affiliates;

 

(yy) “Russian Management Retention Payments” shall mean a portion of the amounts
that are payable under the Russian Management Retention Plan equal to
€18,100,000;

 

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(zz) “Russian Management Retention Plan” shall mean the plan that shall be
adopted by the Parent, the Company, any of their respective Subsidiaries or any
combination thereof between the date hereof and the Closing Date substantially
on the terms set forth on Schedule 1(zz) to the Disclosure Letter pursuant to
which certain employees of the Target Companies employed in Russia either
identified on such Schedule or identified by the Company after the date hereof
will be entitled to receive payments, in the form of cash and shares of Parent
Common Stock, in the aggregate value (which, with respect to shares of Parent
Common Stock, will be measured based on the Average Closing Price) equal to
€18,805,000;

 

(aaa) “Sarbanes-Oxley Act” shall mean the Sarbanes-Oxley Act of 2002, as
amended, and the rules and regulations promulgated thereunder, or any successor
statute, rules or regulations thereto;

 

(bbb) “SEC Documents” shall mean all forms, proxy statements, registration
statements, reports, schedules, and other documents filed, or required to be
filed, by a party or any of its Affiliates with any Governmental Authority
pursuant to the Securities Laws;

 

(ccc) “Securities Act” means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder;

 

(ddd) “Securities Laws” means the Securities Act, the Exchange Act, the
Sarbanes-Oxley Act, the Investment Company Act of 1940, as amended, the
Investment Advisors Act of 1940, as amended, the Trust Indenture Act of 1939, as
amended, and the rules and regulations of any Governmental Authority promulgated
thereunder;

 

(eee) “Securitization” shall mean the outstanding amount of assigned receivables
sold or transferred without recourse to Calyon or any other arranger;

 

(fff) “Share Cap” shall mean the number of whole shares of Parent Common Stock
equal to 19.99% of the number of shares of Parent Common Stock outstanding
immediately prior to the Closing;

 

(ggg) “Short / Medium Term Financial Assets and Receivables” shall mean to the
extent not included in Cash, (a) the amount deposited to support the Target
Companies’ obligations to Calyon in connection with the Securitization and
(b) the EdilFriuli Bond Amount;

 

(hhh) “Specified Indebtedness” shall mean Indebtedness set forth on Schedule
1.1(hhh) of the Disclosure Letter;

 

(iii) “Target Companies” shall mean the Company and its Subsidiaries, and
“Target Company” shall mean any of them;

 

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(jjj) “Tax” or “Taxation,” shall mean (a) any taxes on gross or net income or
profits and gains and (b) all other direct and indirect taxes, levies, duties
(including import and export duties), imposts, charges and withholdings of any
nature imposed by any Tax Authority, including any excise, property, real
property, value added, sales, use, occupation, transfer, stamp, franchise and
payroll taxes, and any and all liability for the payment of any such amounts as
a result of any successor or transferee liability, together with all penalties,
charges and interest relating to any of the foregoing or to any late or
incorrect return in respect of any of them;

 

(kkk) “Tax Authority” shall mean any taxing or other Governmental Authority
(whether in the United States, Italy, Spain, Russia or elsewhere) competent to
impose any Tax Liability, or assess or collect any Tax;

 

(lll) “Tax Liability” shall mean a liability of any Target Company to make or
suffer an actual payment of Tax (or an amount in respect of Tax);

 

(mmm) “Tax Return” shall mean any return (including any informational return),
report, statement, schedule, notice, form, or other document or information
filed with or submitted to, or required to be filed with or submitted to any
Governmental Authority in connection with the determination, assessment,
collection or payment of any Tax or in connection with the administration,
implementation or enforcement of compliance with any legal requirement relating
to any Tax;

 

(nnn) “Transaction Expenses” shall mean (i) any amounts that are payable by the
Company or any Controlled Subsidiary to (x) Eidos Partners S.r.l., (y) counsel
to the Company, any Controlled Subsidiary or the Sellers, and (z) any other
transaction advisor engaged by the Company, any Controlled Subsidiary or the
Sellers, including accountants and data room administrators, in connection with
this Agreement and the Proposed Transaction, (ii) all Italian Management
Incentive Payments, (iii) all amounts that are payable by the Company or any
Controlled Subsidiary to directors, officers, consultants or employees of the
Company or any Controlled Subsidiary as a result of the execution of this
Agreement or the consummation of the Proposed Transaction, including (A) all
Transaction Incentive Payments and (B) all Russian Management Retention
Payments, (iv) all Unpaid Russian IPO Expenses, and (v) all amounts that are
payable to Sellers or Affiliates of Sellers by the Company or any Controlled
Subsidiary as a result of the execution of this Agreement or the consummation of
the Proposed Transaction, in the case of each of clauses (i) through (v), that
are incurred prior to or at the Closing and either (x) are paid after
December 31, 2012 and before the Closing Date or (y) are payable on or after the
Closing Date; provided, that for the avoidance of doubt, any amount paid on or
prior to December 31, 2012 will not be included in the computation;

 

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(ooo) “Transaction Incentive Payments” shall mean the sum of all amounts that
are payable under the Transaction Incentive Plan;

 

(ppp) “Transaction Incentive Plan” shall mean the bonus plan to be adopted by
the board of directors of Marazzi Group pursuant to which payment of amounts set
forth on Schedule 1(ppp) of the Disclosure Letter shall be made to the
individuals listed on such Schedule on or prior to the Closing Date;

 

(qqq) “Unpaid Russian IPO Expenses” shall mean all amounts that are owed to
counsel and other advisors of Open Joint Stock Company KM Group in connection
with its proposed 2012 initial public offering;

 

(rrr) “US Tax Code” shall mean the United States Internal Revenue Code of 1986,
as amended;

 

(sss) “Year-End Cash” shall mean the aggregate Cash as of the close of business
on December 31, 2012;

 

(ttt) “Year-End EdilFriuli Bond Amount” shall mean the EdilFriuli Bond Amount as
of the close of business on December 31, 2012;

 

(uuu) “Year-End Indebtedness” shall mean the sum of the outstanding Indebtedness
of the Target Companies as of the close of business on December 31, 2012;

 

(vvv) “Year-End Pension Liability Amount” shall mean the Pension Liability
Amount as of the close of business on December 31, 2012; and

 

(www) “Year-End Short / Medium Term Financial Assets and Receivables” shall mean
the aggregate Short / Medium Term Financial Assets and Receivables as of the
close of business on December 31, 2012.

 

Section 1.2 Interpretation. In this Agreement, unless the context otherwise
requires:

 

(a) headings do not affect the interpretation of this Agreement;

 

(b) references to any United States legal term or concept shall, in respect of
any jurisdiction other than the United States, be construed as references to the
term or concept which most nearly corresponds to it in that jurisdiction;

 

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(c) references to “dollars” or “$” are references to the lawful currency of the
United States of America; and references to “euros” or “€” are references to the
lawful currency of the member states of the European Union that adopt the single
currency in accordance with the EC Treaty;

 

(d) any phrase introduced by the terms “including” or “include” or any similar
expression shall be construed as illustrative and shall not limit the sense of
the words preceding those terms;

 

(e) the words “hereof,” “hereby” and “herein” and words of similar meaning when
used in this Agreement refer to this Agreement in its entirety and not to any
particular Article, Section or provision of this Agreement; and

 

(f) disclosure of any matter in any Section of the Disclosure Letter or Parent
Disclosure Letter shall be deemed to be disclosure of such matter with respect
to any other sections of the Disclosure Letter or Parent Disclosure Letter,
respectively, to which such matter is specifically cross referenced or to which
such matter relates to the extent it is reasonably apparent from the text of
such disclosure that such disclosure applies to the relevant representation or
warranty of such other Section. The inclusion of any item in the Disclosure
Letter or Parent Disclosure Letter shall not be deemed to be an admission or
evidence of materiality of such item, nor shall it establish any standard of
materiality for any purpose whatsoever.

Section 1.3 Schedules and Exhibits. The Schedules, Disclosure Letter, Parent
Disclosure Letter and Exhibits comprise schedules and exhibits to this Agreement
and form part of this Agreement.

ARTICLE II

SALE AND PURCHASE

Section 2.1 Purchase and Sale. On and subject to the terms and conditions of
this Agreement, the Purchaser agrees to purchase the Shares from the Sellers,
and each Seller agrees to sell and transfer the Shares owned by it to the
Purchaser, free and clear of all Encumbrances, other than Permitted
Encumbrances.

ARTICLE III

PURCHASE AND SALE

Section 3.1 Purchase Price. The purchase price for the Shares shall be an amount
equal to, without duplication: (i) €1,170,000,000 (the “Base Amount”),
(ii) minus the amount of Year-End Indebtedness, (iii) minus the amount of
Transaction Expenses, (iv) minus the Year-End Pension Liability Amount,
(v) minus the Year-End EdilFriuli Bond Amount, (vi) minus the Other Deductions,
(vii) plus the Non-Operational Real Estate Value, (viii) plus the NOL NPV
Amount, (ix) plus the Year-End Cash and (x) plus the Year-End Short / Medium
Term Financial Assets and Receivables (the amount calculated pursuant to this
sentence, the “Purchase Price”).

 

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Section 3.2 Estimated Purchase Price. On or before the date that is ten
(10) days prior to the anticipated Closing Date, the Sellers shall prepare and
the Seller Representative shall deliver to the Purchaser a statement, certified
by the Company’s Chief Financial Officer (the “Estimated Purchase Price
Statement”), setting forth the Sellers’ good faith estimate of the Purchase
Price as of the Closing Date (the “Estimated Purchase Price”), together with
reasonable supporting detail. Such calculation shall be based on, and consistent
with, the calculation methodologies set forth as Exhibit A, which shall include
an illustrative calculation of the Purchase Price assuming a “Year-End” Date of
June 30, 2012 (the “Adjustment Methodologies”).

Section 3.3 Good Faith Negotiations. After receipt of the Estimated Purchase
Price Statement and prior to the day falling three (3) days prior to the
anticipated Closing Date, the Purchaser and the Sellers shall negotiate in good
faith to mutually agree upon the amounts set forth in the Estimated Purchase
Price Statement, excluding the NOL NPV Amount, Non-Operational Real Estate Value
and Other Deductions, none of which shall be subject to negotiation, adjustment
or modification. If the Purchaser and the Sellers agree upon the amounts set
forth in the Estimated Purchase Price Statement, then the Purchase Price set
forth therein shall be final, conclusive, binding and non-appealable.

Section 3.4 No Delay of Closing; Post-Closing Resolution. If the Purchaser and
the Sellers fail to agree upon the amounts set forth in the Estimated Purchase
Price Statement at least three (3) days before the anticipated Closing Date,
neither the Purchaser nor the Sellers shall delay the Closing because of such
failure to agree. The Estimated Purchase Price set forth in the Estimated
Purchase Price Statement delivered by the Sellers shall be deemed to apply for
purposes of this Agreement. As promptly as practicable following the Closing and
in no event later than fifteen (15) days following the Closing Date (the
“Negotiation Period”), the Purchaser and the Sellers shall attempt in good faith
to resolve any differences that they had with respect to the amounts set forth
in the Estimated Purchase Price Statement, excluding the NOL NPV Amount,
Non-Operational Real Estate Value and Other Deductions, none of which shall be
subject to negotiation, adjustment or modification. If the Purchaser and the
Sellers resolve their differences, then, upon their agreement in writing setting
forth such resolution, the Estimated Purchase Price Statement, as amended to the
extent necessary to reflect the resolution of their differences, shall be final,
conclusive, binding and non-appealable.

Section 3.5 Closing Payments. The Estimated Purchase Price (or, if finalized
pursuant to Section 3.3, the Purchase Price) shall be paid at the Closing by
delivery of (i) an amount equal to the Estimated Purchase Price multiplied by
50% (the “Cash Closing Consideration”) by wire transfer to the Sellers in the
proportions set forth in Schedule 3.5 of the Disclosure Letter (the “Seller
Allocation Schedule”), (ii) the Parent Common Stock Consideration to the Sellers
in the proportions set forth in the Seller Allocation Schedule and (iii) if
applicable, the Cash Adjustment Payment. “Parent Common Stock Consideration”
shall be that number of fully paid and non-assessable shares of Parent Common
Stock, rounded up to the next whole share, equal to (i) the Estimated Purchase
Price (or, if finalized pursuant to Section 3.3, the Purchase Price) converted
into United States Dollars multiplied by 50%, divided by (ii) the Average
Closing Price; provided, however, that in no event shall more than the Share Cap
be issued in connection with the Closing; provided, further, that in the event
the Parent Common Stock Consideration would be greater than the Share Cap if not
for the imposition of the Share Cap, then Purchaser shall pay to the Sellers, in
accordance with the first sentence of this Section 3.5, an additional amount in
cash equal to the product of (x) the difference between the unadjusted amount of
the Parent Common Stock Consideration and the

 

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Share Cap and (y) the Average Closing Price (the “Cash Adjustment Payment”). The
conversion of the Estimated Purchase Price from Euros into US Dollars and the
conversion of any Cash Adjustment Payment from U.S. Dollars into Euros shall
each use the exchange rate as of the Exchange Rate Calculation Time.

Section 3.6 Payment Mechanics. Any payment to a Seller to be made by wire
transfer of immediately available funds pursuant to this Agreement by the
Purchaser shall be made to the bank account or accounts nominated by such Seller
in writing to the Purchaser at least three (3) days prior to the due date for
payment. Any payment to be made pursuant to this Agreement by a Seller shall be
made to the bank account nominated by the Purchaser in writing to such Seller at
least three (3) days prior to the due date for payment. Unless otherwise agreed
in writing, any payments by wire transfer under this Agreement shall be in
immediately available funds in Euros, and if any component included in the
calculation of the Purchase Price is not denominated in Euros, the exchange
rates in effect at the close of business New York time on the third
(3rd) Business Day (the “Exchange Rate Calculation Time”) prior to the
anticipated Closing Date shall be used to convert such amount to Euros. The
Purchaser shall be entitled to deduct and withhold, and shall pay over to the
applicable Tax Authority, Taxes required by any applicable Law to be deducted or
withheld on payments made pursuant to this Agreement; provided, however, that
the Purchaser shall be entitled to rely upon any duly and properly executed
certifications, affidavits or other documentation obtained by, or otherwise
provided to, the Purchaser that reduces or eliminates any such required
withholding. If the Purchaser so withholds any amount, such amount shall be
treated for all purposes of this Agreement as having been paid to the Sellers.
The Purchaser shall provide the Sellers with official government receipts (or,
if no such official governmental receipts are available, executed bank payment
forms) relating to such deduction or withholding within fifteen (15) Business
Days after the Purchaser actually receives such receipts.

Section 3.7 Dispute Resolution. If the Purchaser and the Seller Representative
are unable to agree upon the Purchase Price during the Negotiation Period, then
they shall refer their remaining differences to the dispute resolution
department of Grant Thornton LLP or such other independent accounting firm as
the parties shall agree (the “Independent Accounting Firm”), which shall
determine the Purchase Price. The Purchaser and the Seller Representative shall
instruct the Independent Accounting Firm to deliver its written determination to
the Purchaser and the Seller Representative no later than the forty-fifth
(45th) day following the date on which the remaining differences are referred to
the Independent Accounting Firm or such other date as may be specified by the
parties, which written determination shall (i) be in accordance with the
Adjustment Methodologies, (ii) be based solely on presentations and written
submissions by Seller Representative and Purchaser to the Independent Accounting
Firm, and not by independent review, (iii) set forth in reasonable detail the
basis for the Independent Accounting Firm’s final determination of the Purchase
Price and (iv) absent manifest error, be final, conclusive, non-appealable and
binding on the parties. In determining each disputed item, the Independent
Accounting Firm may not assign a value to such item greater than the greatest
value for such item claimed by either the Purchaser or the

 

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Seller Representative or less than the lowest value for such item claimed by
either the Purchaser or the Seller Representative, as the case may be. The fees
and expenses (including VAT) of the Independent Accounting Firm shall be
allocated between the Purchaser and the Parent, on the one hand, and the Seller
Representative, on the other hand, in the same proportion that the aggregate
amount of the disputed items so submitted to the Independent Accounting Firm
that is unsuccessfully disputed by each such party (as finally determined by the
Independent Accounting Firm) bears to the total amount of such disputed items so
submitted. The Purchaser and the Seller Representative shall make available to
the Independent Accounting Firm and to each other all relevant books and records
and working papers relating to the Estimated Purchase Price Statement (including
access to personnel at the Company, the Purchaser and the Sellers who prepared
and reviewed the Estimated Purchase Price Statement) and all other items
reasonably requested by the Independent Accounting Firm.

Section 3.8 Excess Amount. If the Purchase Price determined pursuant to
Section 3.4 exceeds the Estimated Purchase Price (if and when determined in
accordance with Section 3.4 or 3.7 above) (the amount of such excess, the
“Excess Amount”), then within five (5) Business Days following such
determination, the Purchaser shall pay to the Sellers the Excess Amount by wire
transfer of immediately available funds in the proportions set forth in the
Seller Allocation Schedule.

Section 3.9 Shortfall Amount. If the Estimated Purchase Price exceeds the
Purchase Price determined pursuant to Section 3.4 (if and when determined in
accordance with Section 3.4 or 3.7 above) (the amount of such excess, the
“Shortfall Amount”), then the Sellers shall severally, but not jointly, pay to
the Purchaser, within five (5) days following such determination, the Shortfall
Amount by wire transfer of immediately available funds based on the proportions
set forth in the Seller Allocation Schedule.

Section 3.10 Adjustment. All payments made by a Seller to the Purchaser or by
the Purchaser to a Seller under this Agreement, other than payments of interest,
shall so far as possible be made by way of adjustment to the Purchase Price.

Section 3.11 Interest. If any amount due for payment in accordance with this
Agreement is not paid on the due date for payment, the Person in default shall
pay the Default Interest on such amount from but excluding the due date to and
including the date of actual payment calculated on a daily basis.

ARTICLE IV

CLOSING

Section 4.1 Closing. The Closing shall take place at the offices of Skadden,
Arps, Slate, Meagher & Flom (UK) LLP, 40 Bank Street, Canary Wharf, London, E14
5DS and, at the choice of Purchaser, either at the offices of the Notary or at
the offices of the Italian counsel to the Purchaser in Milan on the tenth
(10th) day after the satisfaction or waiver (if permissible) of each of the
conditions set forth in Article VIII (other than those conditions that by their
nature are to be satisfied at the Closing (but subject to the satisfaction or
waiver thereof)) and/or at such other time and location(s) as the parties to
this Agreement may agree (the “Closing Date”).

 

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Section 4.2 Seller Actions and Deliverables at the Closing. At the Closing,
Sellers shall:

 

(a) cause the ordinary shareholders meeting (or, as the case may be, the
competent corporate body) of each of the Target Companies set forth on Schedule
4.2(a) of the Disclosure Letter to be held to resolve upon:

 

  (i) the appointment of the new directors and, if necessary, Statutory Auditors
(permanent and alternate) designated by the Purchaser in order to replace the
directors who will tender their resignation in accordance with clause (e) below
and any Statutory Auditors (permanent and alternate) of the Target Companies who
tender their resignation as contemplated by Section 7.15, and whose names will
be notified to the Sellers at least five (5) Business Days prior to the Closing;
and

 

  (ii) to the maximum extent allowed by Law and upon the terms set forth on
Schedule 4.2(a)(ii) of the Disclosure Letter: (A) the full release and discharge
through the Closing Date of all the Persons who served as directors of the
relevant Target Company since May 13, 2008; (B) the full waiver of any action or
claim against such directors in relation thereto; and (C) to indemnify and hold
harmless the same Persons from any liabilities arising out of or otherwise
relating to their respective office through the Closing Date;

 

(b) duly endorse in favor of the Purchaser the relevant share certificates
representing the Shares with such endorsements to be validly authenticated by
the Notary;

 

(c) cause the Purchaser to be registered in the shareholders’ ledger of the
Company as owner of the Shares and deliver to the Purchaser the Company’s
shareholders’ ledger evidencing the Purchaser’s ownership of the Shares;

 

(d) deliver to the Purchaser payoff letters in forms reasonably acceptable to
the Purchaser from each holder of Specified Indebtedness as of the Closing
indicating the amount required to discharge the Specified Indebtedness owed as
of the Closing and providing for the release of all Encumbrances securing the
Specified Indebtedness upon payment therefor;

 

(e) deliver to the Purchaser letters of resignation in the form set forth on
Schedule 4.2(e) of the Disclosure Letter duly executed and effective as of the
Closing by such directors and officers of the Controlled Subsidiaries set forth
on Schedule 4.2(a) of the Disclosure Letter;

 

(f) deliver to the Purchaser a certificate of an executive officer of each
Seller pursuant to Section 8.2(d);

 

(g) deliver to the Purchaser other certificates and documents reasonably
requested by the Purchaser that are consistent with the terms hereof; and

 

(h) deliver to the Purchaser a Registration Rights and Lock-Up Agreement in the
form of Exhibit B executed by each of the Sellers.

 

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Section 4.3 Purchaser Deliverables at the Closing. At the Closing, the Purchaser
shall:

 

(a) pay, by wire transfer of immediately available funds, the Cash Closing
Consideration to the Sellers in accordance with Article III;

 

(b) pay, by wire transfer of immediately available funds, the amounts specified
in the payoff letters delivered pursuant to Section 4.2(d) to each applicable
holder of Specified Indebtedness identified therein to the account or accounts
specified therein;

 

(c) deliver to the Sellers the Parent Common Stock Consideration in accordance
with Article III free and clear of all Encumbrances other than restrictions on
transfer provided for by applicable federal and state securities laws and
Encumbrances imposed by the Registration Rights and Lock-Up Agreement;

 

(d) deliver to each of the Persons who served as director of any of the Target
Companies set forth on Schedule 4.2(a) of the Disclosure Letter since May 13,
2008 a written statement in the form set forth on Schedule 4.3(d) of the
Disclosure Letter since May 13, 2008 to fully discharge and release, to the
maximum extent allowed by Law, each such director from any liability deriving
from his/her office with the relevant Target Company through the Closing Date
and waive any action or claim in relation thereto;

 

(e) deliver to the Sellers a Registration Rights and Lock-Up Agreement in the
form of Exhibit B executed by the Parent; and

 

(f) deliver to the Sellers a certificate of an executive officer of the Parent
and the Purchaser pursuant to Section 8.3(c).

Section 4.4 One Transaction. All actions and transactions constituting the
Closing (including, without limitation, the transfer of the Shares), regardless
of the sequence of their implementation, shall be regarded for the purposes of
the Closing as one single transaction, such that no action or transaction shall
be deemed to have taken place unless and until all other actions and
transactions constituting the Closing shall have taken place as set forth in
this Agreement; provided, however, that the repayment of all Indebtedness repaid
at the Closing shall be deemed to occur last, without regard to when such
repayment actually occurs but nothing in this proviso shall be given any effect
for purposes of determining the accuracy of the representations and warranties
made by the Sellers pursuant to this Agreement, determining whether the
conditions set forth in Sections 8.1 or 8.2 have been satisfied or subjecting
Sellers to liability for breach following termination of this Agreement.

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF THE SELLERS

Except as set forth in the Disclosure Letter, the Sellers jointly and severally
represent and warrant to the Purchaser as of the date of this Agreement (except
with respect to the Fundamental Representations and clauses (i) and (ii) of
Section 5.2(b), which are made severally, and not jointly, by each Seller with
respect to such Seller only) as follows:

 

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Section 5.1 Authority; Enforceability.

 

(a) Each Seller has the requisite corporate power and authority to execute this
Agreement, perform its obligations hereunder and to consummate the Proposed
Transaction. The execution, delivery and performance by a Seller of this
Agreement and the consummation of the Proposed Transaction have been duly and
validly authorized by all necessary corporate action on the part of the Seller
and such authorization has not been subsequently modified or rescinded.

 

(b) This Agreement has been duly and validly executed and delivered by each
Seller and constitutes, assuming due authorization, execution and delivery of
this Agreement by the Parent and the Purchaser, a valid and binding legal
obligation of such Seller, enforceable against such Seller in accordance with
the terms hereof.

Section 5.2 Non-Contravention; Consents.

 

(a) The execution and delivery of this Agreement by each Seller does not, and
the performance of this Agreement by the Sellers will not, require any consent,
approval, authorization or permit of, or filing with, or notification to, any
Governmental Authority, except (i) under the HSR Act and any other applicable
antitrust, competition, investment or similar Laws, (ii) for such other
consents, approvals, Authorizations, filings or notifications, the failure of
which to make or obtain, would not, individually or in the aggregate, reasonably
be expected to have a Company Material Adverse Effect, and (iii) those required
by reasons of the regulatory status or operations of the Parent or the
Purchaser.

 

(b) The execution and delivery of this Agreement by each Seller does not, and
the consummation of the Proposed Transaction will not, (i) conflict with or
violate any provision of the Seller’s, any Controlled Subsidiary’s or, to the
Knowledge of the Company, any Non-Controlled Target Company’s memorandum and
articles of association or incorporation, bylaws, operating agreement,
partnership agreement or other equivalent constitutional documents
(collectively, “Governing Documents”), (ii) assuming all filings and
notifications under the HSR Act and any other applicable antitrust, competition,
investment or similar Laws have been made and any waiting periods thereunder
have terminated or expired, conflict with or violate any applicable Laws, or
(iii) result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel any Material Contract, except, in the case of (ii) or (iii), as would
not reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect.

Section 5.3 The Shares.

 

(a) The Sellers own, collectively, all of the Shares.

 

(b) Each Seller owns its Shares free and clear of all Encumbrances. Except as
set forth on Schedule 5.3(b) of the Disclosure Letter, as of the date hereof and
at the Closing Date, the Seller will hold good and valid title to the Shares,
free and clear of all Encumbrances.

 

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(c) The Shares constitute the whole of the issued share capital of the Company.
All of the Shares have been validly issued and fully paid in.

 

(d) There are no outstanding warrants, options, rights, agreements, convertible
or exchangeable securities or other commitments pursuant to which a Seller or
the Company is or may become obligated to issue, sell, purchase, return or
redeem any shares of capital stock or other securities of the Company. There are
no outstanding or authorized appreciation, phantom interest, profit
participation or similar rights with respect to the Company. There are no voting
trusts, proxies or other agreements or undertakings with respect to the voting
of the capital stock of the Company.

Section 5.4 Organization; Subsidiaries.

 

(a) Each Seller is duly organized and validly existing under the Laws of its
jurisdiction of organization and has all necessary power and authority to
conduct its business in the manner in which it is currently being conducted. The
Company is duly organized and validly existing under the Laws of its
jurisdiction of organization and has all necessary power and authority to
conduct its business in the manner in which it is currently being conducted. The
Company is not the subject of any bankruptcy, dissolution, liquidation,
reorganization or similar proceeding.

 

(b) Schedule 5.4(b) of the Disclosure Letter contains a true and complete list
of all of the Persons in which the Company owns, directly or indirectly, any
capital stock, shares, membership interests, other equity rights, interests or
other securities or derivatives thereof (the “Subsidiaries” and each a
“Subsidiary”).

 

(c) Each of the Controlled Subsidiaries and, to the Knowledge of the Company,
each of the Non-Controlled Target Companies (i) is duly organized and validly
existing under the laws of its jurisdiction of organization, except where
failure to be so duly organized or validly existing, individually or in the
aggregate, would not reasonably be expected to have a Company Material Adverse
Effect; and (ii) has all necessary power to conduct its business in the manner
in which it is being conducted as of the date of this Agreement, except where
the absence of such power to conduct its business would not reasonably be
expected to have a Company Material Adverse Effect.

 

(d) All of the outstanding shares of capital stock, shares or membership
interests, other equity rights, interests or other securities of each Controlled
Subsidiary, and to the Knowledge of the Company, of each of the Non-Controlled
Target Companies (in each case, as to the securities owned by a Target Company),
are duly and validly issued and outstanding, fully paid and non-assessable and
are legally and beneficially owned, directly or indirectly, by the Company, free
and clear of all Encumbrances, except for (i) applicable transfer restrictions
pursuant to applicable Laws, (ii) Permitted Encumbrances and (iii) those
Encumbrances that will be released on or prior to the Closing Date.

 

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(e) There are no outstanding warrants, options, rights, agreements, convertible
or exchangeable securities or other commitments pursuant to which a Seller, the
Company, any Controlled Subsidiary or, to the Knowledge of the Company, any
Non-Controlled Target Company, is or may become obligated to issue, sell,
purchase, return or redeem any shares of capital stock or other securities of
any Controlled Subsidiary or Non-Controlled Target Company. There are no
outstanding or authorized appreciation, phantom interest, profit participation
or similar rights with respect to any Controlled Subsidiary or, to the Knowledge
of the Company, any Non-Controlled Target Company. There are no voting trusts,
proxies or other agreements or undertakings with respect to the voting of the
capital stock of any Controlled Subsidiary or, to the Knowledge of the Company,
any Non-Controlled Target Company.

 

(f) No Controlled Subsidiary or, to the Knowledge of the Company, any
Non-Controlled Target Company is the subject of any bankruptcy, dissolution,
liquidation, reorganization or similar proceeding.

 

(g) To the Knowledge of the Company, the Company has provided to the Purchaser
true and complete copies of the Governing Documents of each Controlled
Subsidiary as in effect as of the date hereof.

Section 5.5 Financial Statements. Schedule 5.5 of the Disclosure Letter sets
forth true and correct copies of the following financial information (the
“Financial Statements”): (i) the audited consolidated balance sheet and profit
and loss statements, as of and for the fiscal years ended December 31,
2009, December 31, 2010 and December 31, 2011 (the “Reference Date”) for the
Target Companies (including, in each case, any related notes); (ii) the audited
consolidated balance sheets and profit and loss statements as of and for the six
(6) months ended June 30, 2012 (the “Most Recent Audited Financial Statements”)
and (iii) the unaudited consolidated balance sheets and profit and loss
statements as of and for the nine (9) months ended September 30, 2012 (the “Most
Recent Financial Statements”) for the Target Companies.

Section 5.6 Financial Statement Preparation. The Financial Statements have been
prepared from the books, records and accounts of the Target Companies and in
accordance with the Accounting Principles throughout the periods covered thereby
and present fairly in all material respects the financial condition of the
Target Companies as of such dates and the results of operations of the Target
Companies for such periods; provided, however, that the Most Recent Financial
Statements are subject to normal year-end adjustments and lack footnotes and
other presentation items. To the Knowledge of the Company, none of the Target
Companies has any material liabilities other than liabilities (i) that are
reflected in the Most Recent Audited Financial Statements, (ii) were incurred in
the ordinary course of business since the date of the Most Recent Audited
Financial Statements or (iii) that would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect.

Section 5.7 Position Since Reference Date. Since the Reference Date and through
the date hereof, except as set forth on Schedule 5.7 of the Disclosure Letter or
in connection with the Proposed Transaction, (i) the Company, the Controlled
Subsidiaries and, to the Knowledge of the Company, the other Target Companies
have not conducted their respective business in any

 

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material respect not in the ordinary course of business consistent with past
practice and (ii) the Target Companies have not suffered any change in its
business, operations or financial position which changes, individually or in the
aggregate, have had or would reasonably be expected to have a Company Material
Adverse Effect.

Section 5.8 Debts Owed by the Target Companies. As of the date of this
Agreement, none of the Company, any Controlled Subsidiary or, to the Knowledge
of the Company, any Non-Controlled Target Company owes any Indebtedness of the
type contemplated by clause (a) of the definition thereof in excess of
€5,000,000 and no such Indebtedness of any Target Company has become due and
payable, or capable of being declared due and payable, before its normal or
originally stated maturity.

Section 5.9 Compliance with Applicable Laws. Each Target Company is in
compliance with all applicable Laws, except for such instances of
non-compliances which, individually or in the aggregate, would not reasonably be
expected to have a Company Material Adverse Effect. The Target Companies own,
hold, possess or lawfully use in the operation of their business all
Authorizations which are necessary to conduct their business in all material
respects as currently conducted. Such Authorizations are valid and in full force
and effect.

Section 5.10 Insurance. Each of the Company, the Controlled Subsidiaries and to
the Knowledge of the Company, the Non-Controlled Target Companies, maintains
insurance policies which, in all material respects, are against risks of a
character and in such amounts as customary for companies of a similar size
operating in the same or similar industry. Each insurance policy of the Company,
the Controlled Subsidiaries, and to the Knowledge of the Company, the
Non-Controlled Target Companies, is in full force and effect as of the date
hereof, all premiums payable to date have been paid and to the Knowledge of the
Company there are no circumstances which would reasonably be expected to lead to
the insurers avoiding any material liability under them. The insurance policy
with Assicurazioni Generali is in full force and effect as of the date hereof
and Marazzi Group has submitted claims in the amount of €14,500,000 under such
policy with respect to the earthquakes occurring in Northern Italy during May
2012.

Section 5.11 Contracts. Schedule 5.11 of the Disclosure Letter lists all of the
following contracts and agreements (other than purchase orders entered into in
the ordinary course of business and other than contracts that by their terms may
be terminated in the ordinary course of business upon less than sixty (60) days’
notice without penalty or premium) to which each of the Company, the Controlled
Subsidiaries and to the Knowledge of the Company, the Non-Controlled Target
Companies, is a party and which have not been entirely fulfilled or performed
(collectively, “Material Contracts”):

 

(a) any agreement that by its terms requires the payment by or on behalf of the
Target Companies in excess of €2,000,000 per annum, or the delivery by the
Target Companies of goods or services with a fair market value in excess of
€2,500,000 per annum or provides for the Target Companies to receive payments in
excess of €2,000,000 per annum;

 

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(b) any agreement that (x) requires any Target Company to purchase any material
portion of any product or service from a third party for a purchase price in
excess of €2,500,000, (y) contains a “take or pay” provision in excess of
€2,000,000 per calendar year or (z) requires that any Target Company deal
exclusively with a third party in connection with the sale or purchase of any
product or service if such products or services have a purchase price of more
than €2,500,000 individually or in the aggregate;

 

(c) any contract that relates to an acquisition or divestiture of assets that
contains covenants, indemnities or other obligations that could impose a
liability greater than €5,000,000 on the Target Companies;

 

(d) any agreement under which any Target Company has any outstanding
Indebtedness of the type described in Section 5.8;

 

(e) any agreement with any employee, officer, director or representative
providing for employment for a specified term or providing for a termination,
change of control, retention or similar payment in excess of €2,000,000;

 

(f) any bonds or agreements of guarantee in which any Target Company acts as a
surety or guarantor with respect to any obligation (fixed or contingent) of
another Person in excess of €1,000,000;

 

(g) any partnership or joint venture agreements that are either (i) material to
the operations of the Company and its Subsidiaries, taken as a whole, or
(ii) could require any payment or contribution in excess of €2,000,000;

 

(h) any agreement that provides for the payment of any amount as a result of the
execution, delivery or performance of this Agreement or the consummation of the
Proposed Transaction in excess of €2,000,000 individually or in the aggregate;

 

(i) any agreement limiting or restraining in any material respect any Target
Company or any successor thereto from engaging or competing in any manner, in
any location or in any business;

 

(j) any agreement with a third party providing for the operation by third party
of all or a material portion of the quarrying, manufacturing or shipping
operations of the Company and its Subsidiaries, taken as a whole, in the United
States, Italy or Russia that provide for annual payments in excess of
€2,000,000; or

 

(k) any agreement providing that a Target Company indemnify any Person, other
than in the ordinary course of business or for agreements for which the Target
Company’s liability for indemnification is limited to €2,000,000 or less.

Section 5.12 Enforceability of Material Contracts; Defaults under Material
Contracts. Sellers have provided to the Purchaser a correct and complete (other
than redactions of pricing information and immaterial information) copy of each
written Material Contract and, if oral, a written description of the material
terms of such oral Material Contract. Each of the Material Contracts is in full
force and effect and there exists no default under any such Material Contracts
by the Company, the Controlled Subsidiaries and to the Knowledge of the Company,
the Non-Controlled Target Companies or, to the Knowledge of the Company, any
other party to such

 

21

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Material Contracts or any event which will create a default thereunder by the
Target Companies, that would individually or in the aggregate, reasonably be
expected to have a Company Material Adverse Effect. There exists no actual or,
to the Knowledge of the Company, threatened termination, cancellation, or
limitation of, or any material amendment, material modification, or material
change to any Material Contract.

Section 5.13 Litigation. As of the date hereof, there is no action, claim, suit,
arbitration, or proceeding pending before any Governmental Authority, or to the
Knowledge of the Company, threatened in writing, against any of the Target
Companies that (a) involves a claim in excess of €500,000, (b) involves a claim
for an unspecified amount which, individually or in the aggregate, would
reasonably be expected to have a Company Material Adverse Effect or (c) seeks
injunctive relief that is reasonably likely to be granted and would be material
to the Company and its Subsidiaries, taken as a whole.

Section 5.14 Intellectual Property. Except as would not, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect, the
Target Companies own all of the rights and interests in and have title, in each
case free from Encumbrances other than Permitted Encumbrances, to, or have a
valid license to, all of the Business IP; provided that the foregoing is not a
representation or warranty with respect to infringement, misappropriation or
other violation of Intellectual Property (which is addressed below in this
Section 5.14). To the Knowledge of the Company as of the date hereof, no
material item of the Owned IP is subject to any injunction, judgment, order,
decree, ruling, or charge. No action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand as of the date hereof is pending or, to the
Knowledge of the Company, is threatened in writing that challenges the legality,
validity, enforceability, use, or ownership of any material item of Owned IP. To
the Knowledge of the Company, no material operations of any Target Company or
any product manufactured or distributed by any Target Company, as conducted or
manufactured during the two (2) years prior to the date hereof has infringed,
violated or misappropriated the Intellectual Property of any Person in any
material respect. The representations and warranties set forth in this
Section 5.14 are the sole and exclusive representations and warranties of the
Sellers with respect to intellectual property matters.

Section 5.15 Real Property. Schedule 5.15 of the Disclosure Letter is a true,
correct and complete list of all material real property owned by the Company,
the Controlled Subsidiaries and, to the Knowledge of the Company, the
Non-Controlled Target Companies (and the address of such real property) and the
name of the applicable owner as of the date of this Agreement. With respect to
each such parcel of owned real property (a “Parcel”) listed on Schedule 5.15 of
the Disclosure Letter:

 

(a) the entity owning such Parcel has good and marketable title to such Parcel
(including all rights necessary to operate its business in all material respects
as presently conducted), free and clear of all Encumbrances other than Permitted
Encumbrances, which do not have and are not reasonably likely to, individually
or in the aggregate, impair in any material respect the current use or occupancy
of property subject thereto;

 

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(b) to the Knowledge of the Company, all facilities have received all material
approvals of Governmental Authorities (including Authorizations) required in
connection with the ownership or operation thereof and have been operated and
maintained in all material respects in accordance with applicable material Law
(including Laws relating to safety at work, hygiene, fire prevention and fitness
for use);

 

(c) there are no subleases, licenses, concessions or other written agreements
granting to any party the right of use or occupancy of any portion of any
material Parcel or rights to purchase any material Parcel or any portion thereof
or interest therein;

 

(d) there are no parties (other than the Target Companies) in possession of any
Parcel, other than tenants under any leases who are in possession of space to
which they are entitled; and

 

(e) to the Knowledge of the Company, each material structure on any Parcel is in
sufficient repair and operating condition for the conduct of the business of the
Target Companies in all material respects as currently conducted.

Section 5.16 Leased Property. Schedule 5.16 of the Disclosure Letter sets forth
all real property used by the Company, the Controlled Subsidiaries and, to the
Knowledge of the Company, the Non-Controlled Target Companies pursuant to
leases, subleases, licenses and/or any other types of occupancy agreements, that
are material to the continued operation of the business of the Target Companies,
taken as a whole and as currently operated (any such lease, license or other
occupancy agreement, individually, a “Real Property Lease”). A Target Company
has a valid and enforceable leasehold interest under each of the Real Property
Leases, and, to the Knowledge of the Company, no Target Company has received any
written notice of any default or event, which, with notice or lapse of time, or
both, would constitute a default by a Target Company under any of the Real
Property Leases, except such defaults that do not have and are not reasonably
likely to have, in the aggregate, a Company Material Adverse Effect. The Company
has provided to the Purchaser true and complete copies, in all material
respects, of the Real Property Leases as in effect as of the date hereof,
together with all material amendments, modifications or supplements, if any,
thereto, including any transfers, assignments or subleases thereof to which a
Target Company is a party.

Section 5.17 Personal Property. Each of the Company, the Controlled Subsidiaries
and to the Knowledge of the Company, the Non-Controlled Target Companies
(a) owns, leases or licenses from third parties all material tangible personal
property required to conduct its and their respective businesses in all material
respects as presently conducted, (b) has good and valid title to all such
tangible personal property owned by it or them, free and clear of all
Encumbrances except for Permitted Encumbrances, and (c) upon consummation of the
Proposed Transaction, will be entitled to continue to use all such tangible
personal property which is currently employed by it or them in the conduct of
their respective businesses in all material respects as presently conducted.

 

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Section 5.18 Employment Matters. Schedule 5.18 of the Disclosure Letter lists
all of the following:

 

(a) a list of all employees, consultants, officers, directors and agents
(including “collaboratori a progetto” and “collaboratori coordinati e
continuative”) of the Company and each Controlled Subsidiary with an annual base
salary or compensation in excess of €250,000 or equivalent local currency;

 

(b) (x) all current recognition, procedural or other agreements between any
Controlled Subsidiary and any trade union (whether independent or not), works
council, European works council or other body representing its employees or any
of them, and (y) all local collective bargaining agreements and pension fund
regulations but excluding any national collective bargaining agreements
(collectively the “Collective Rules”); and

 

(c) a description of any material share incentive scheme, share option scheme or
profit sharing, bonus, severance scheme, or other incentive scheme applicable to
any of the current or former directors or employees of the Company or any
Controlled Subsidiary under which the Company or any Controlled Subsidiary has
any obligation.

Section 5.19 Labor Matters. To the Knowledge of the Company, no Target Company
is involved in any labor or trade disputes that involves a claim in excess of
€1,000,000 with any trade union, association of trade unions, works council,
European works council or body representing the employees of any Target Company
or any material number or category of its employees, and to the Knowledge of the
Company, no such dispute is pending or threatened. None of the Company, any
Controlled Subsidiary or, to the Knowledge of the Company, any Non-Controlled
Target Company is party to any collective bargaining agreement or other
agreement with any labor union or any other similar organization. No labor union
or similar organization currently represents the employees of the Company, any
Controlled Subsidiary or, to the Knowledge of the Company, any Non-Controlled
Target Company, and to the Knowledge of the Company, no labor union or similar
organization, or any employees of any Target Company have taken any action with
respect to organizing the employees of any Target Company. None of the Company,
any Controlled Subsidiary or, to the Knowledge of the Company, any
Non-Controlled Target Company in the United States has, in the last three
(3) years, effectuated a “plant closing” or “mass layoff” as those terms are
defined in the Worker Adjustment and Retraining Notification Act of 1988, as
amended (“WARN”), affecting in whole or in part any site of employment,
facility, operating unit or employee of any Target Company in the United States
without complying with the notice requirements and other provisions of WARN
which could cause any liability any Target Company.

Section 5.20 Employee Benefits. The following representations in this
Section 5.20 apply exclusively to the Target Companies’ United States
operations:

 

(a) Generally.

 

  (i)

Except for the plans contemplated by this Agreement, Schedule 5.20(a)(i) of the
Disclosure Letter lists all material employee benefit plans and employment or
severance agreements or other similar arrangements to which the Company, the
Controlled Subsidiaries or, to the Knowledge of the Company, any Non-

 

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  Controlled Target Company is a party or by which any of them is bound or has
any liability (collectively, the “Benefit Plans”), including (a) any
profit-sharing, deferred compensation, bonus, stock option, phantom stock, stock
purchase, performance units, pension, retainer, consulting, retirement,
severance, change of control, supplemental unemployment benefits, welfare or
incentive plan, agreement or arrangement, (b) any plan, agreement or arrangement
providing for “fringe benefits,” perquisites or “survivor benefits” to
employees, officers, directors or agents or their respective beneficiaries,
(c) any hospitalization, health, welfare, dental, disability, life insurance or
other benefit plan, or (d) any other “employee benefit plan” within the meaning
of Section 3(3) of ERISA, whether or not such arrangement is subject to ERISA.

 

  (ii) The Sellers have provided to the Purchaser true and complete copies of
all Benefit Plans and, with respect to each Benefit Plan, if applicable, (a) the
current summary plan description and any master or prototype plan document(s)
and material modifications thereto, (b) the Form 5500 filed in the two most
recent plan years, (c) the most recent determination letter from the Internal
Revenue Service, (d) the two most recent actuarial reports or other financial
statements of each of the Benefit Plans, (e) trust agreements or other funding
arrangements for each Benefit Plan (including insurance contracts), and
(f) copies of any filings within the past three years with the Internal Revenue
Service or for any Target Company’s internal records under Revenue Procedure
2008-50 or its successor revenue procedure and any filings within the past three
(3) years with the Department of Labor under its Voluntary Fiduciary Correction
Program, if any.

 

  (iii) The Benefit Plans have been operated in all material respects in
compliance with their terms and the applicable provisions of ERISA, if any, the
regulations and published authorities thereunder, and all other Laws applicable
to the Benefit Plans. There are no actions (other than routine claims for
benefits) pending or, to the Knowledge of the Company, threatened against any
Target Company or any Benefit Plan or its assets, or arising out of any of the
Benefit Plans which could reasonably be expected to result in material liability
to any Target Company. No Benefit Plan is under audit or investigation by the
Internal Revenue Service, the Department of Labor, the Pension Benefit Guaranty
Corporation or other regulatory agency and, to the Knowledge of the Company, no
such audit or investigation is threatened. No prohibited transaction (within the
meaning of Section 4975 of the US Tax Code or 406 of ERISA) has occurred with
respect to any of such Benefit Plan that could reasonably be expected to result
in material liability to any Target Company.

 

  (iv) Except as otherwise contemplated by this Agreement, the execution of, and
performance of the Proposed Transaction, either alone or together with any
additional or subsequent events, will not constitute an event under any Benefit
Plan that will result in any payment in excess of $500,000 (whether of severance
pay or otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to fund benefits with respect
to any employee of the Target Companies.

 

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  (v) No Benefit Plan is subject to the terms of any collective bargaining
agreement.

 

  (vi) All contributions due from the Company or any Controlled Subsidiary with
respect to any Benefit Plan have been timely made or have been properly accrued
as liabilities in all material respects of the Company or any Controlled
Subsidiary and reflected in the financial statements of the Company or any
Controlled Subsidiary in accordance with the terms of such Benefit Plan and
applicable Law.

 

  (vii) None of the Target Companies is a party to any agreement, contract,
arrangement or plan that has resulted or will result, separately or in the
aggregate in any payment of any “excess parachute payment” within the meaning of
US Tax Code Section 280G (or similar provisions of state, local or foreign Tax
law).

 

(b) Qualified Plans. Each Benefit Plan that is intended to be qualified under
Section 401(a) of the US Tax Code and any trust maintained pursuant thereto has
received a determination letter to such effect and that any such trust is exempt
from federal income taxation under Section 501(c) of the US Tax Code, and
nothing has occurred with respect to the operations of the Benefit Plans which
is reasonably likely to cause the loss of such qualification or exemption.

 

(c) Title IV Plans. Each Target Company and its ERISA Affiliates do not and have
never sponsored, maintained, contributed to, or been obligated under ERISA or
otherwise to contribute to (i) a “defined benefit plan” (as defined in ERISA
Section 3(35) and US Tax Code Section 414(j)), (ii) a “multi-employer plan” (as
defined in ERISA Sections 3(37) and 4001(a)(3)), (iii) a “multiple-employer
plan” (meaning a plan sponsored by more than one employer within the meaning of
ERISA Sections 4063 or 4064 or US Tax Code Section 413(c)), or (iv) a “multiple
employer welfare arrangement” (as defined in ERISA Section 3(40)). Each Target
Company and its ERISA Affiliates have not incurred and there are no
circumstances under which either could reasonably incur any liability under
Title IV of ERISA. For purposes of this Agreement, the term “ERISA Affiliate” of
any Target Company means any other entity which, together with the Target
Company, would be treated as a single employer under US Tax Code Section 414 or
ERISA Section 4001(b).

 

(d) Post-employment Plans. Neither the Company nor any Controlled Subsidiary
maintains or is obligated to provide benefits under any life, medical or health
plan that provides benefits to retirees other than (i) benefit continuation
rights under Section 4980B of the US Tax Code or Part 6 of Subtitle B of Title I
of ERISA, or similar state law, (ii) benefits under insured plans maintained by
the Company or such Controlled Subsidiary (as the case may be) provided in the
event an employee is disabled at the time of termination of the employee’s
employment with the Company or such Controlled Subsidiary (as the case may be)
and the conversion privileges provided under such insured plans, (iii) coverage
otherwise mandated by applicable Law, (iv) death benefits or retirement benefits
under any “employee pension benefit plan,” as that term is defined in
Section 3(2) of ERISA, and (v) deferred compensation benefits accrued as
liabilities on the books of the Company or any Target Company and disclosed on
their financial statements.

 

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Section 5.21 Non-U.S. Benefit Plans. Except as set forth in Schedule 5.21 of the
Company Disclosure Letter, the Target Companies do not maintain any benefit
arrangements maintained outside of the United States including any deferred
compensation agreements, executive compensation plans, bonus plans,
profit-sharing plans, pension plans, severance pay or retirement plans, share
option plans, employee share purchase plans, private life insurance plans or
hospitalization insurance plans (the “Non-U.S. Benefit Plans”). With respect to
each Non-U.S. Benefit Plan, (i) all employer and employee contributions to each
Non-U.S. Benefit Plan required by Law or by the terms of such Non-U.S. Benefit
Plan have been made, or, if applicable, accrued in accordance with normal
accounting practices, (ii) the fair market value of the assets of each funded
Non-U.S. Benefit Plan, the liability of each insurer for any Non-U.S. Benefit
Plan funded through insurance, or the book reserve established for any Non-U.S.
Benefit Plan, together with any accrued contributions, is sufficient to procure
or provide for the accrued benefit obligations, as of the date of this
Agreement, with respect to all current or former participants in such Non-U.S.
Benefit Plan according to the actuarial assumptions and valuations most recently
used to determine employer contributions to such Non-U.S. Benefit Plan and no
transaction contemplated by this Agreement shall cause such assets or insurance
obligations to be less than such benefit obligations, and (iii) each Non-U.S.
Benefit Plan required to be registered has been registered and has been
maintained in good standing with applicable Governmental Authorities. Except as
set forth in Schedules 5.21 and 5.22(c) of the Company Disclosure Letter, and
except as otherwise contemplated in this Agreement, the execution of, and
performance of the Proposed Transaction, either alone or together with any
additional or subsequent events, will not constitute an event under any Non-U.S.
Benefit Plan that will result in any payment in excess of €2,000,000 (whether of
severance pay or otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to fund benefits with respect
to any employee of the Target Companies.

Section 5.22 Italian Employment and Labor Matters. The following representations
in this Section 5.22 apply exclusively to the Target Companies’ Italian
operations:

 

(a) Except for the employees listed on the books and records of Marazzi Group as
employees, to the Knowledge of the Company no other person (including
consultants, collaboratori a progetto, temporary workers, agents, stagiaires,
trainees, apprentices, and fixed-term/seasonal employees, also hired in the
past) has the right to claim the status of employees (if they do not currently
have employment status), or permanent employees (if they currently are under a
fixed-term employment agreement) of Marazzi Group under applicable Law, with an
annual base salary in excess of €250,000, or which would otherwise entitle such
persons, or any labor union or government agency acting on behalf of such
persons, to collect from Marazzi Group any wages, benefits, severance
indemnities, social security charges or any other sums of any nature. To the
Knowledge of the Company, the employees listed on the books and records of
Marazzi Group have been properly classified in the legal and collective
bargaining employment categories according to the duties, tasks and
responsibilities entrusted to them as per the employment contracts or performed
on a de facto basis and none of them could validly claim to be reclassified in a
higher employment level.

 

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(b) Marazzi Group are in material compliance with the Collective Rules (which
for purposes solely of this Section 5.22(b), shall include the National
Collective Agreement) and all other applicable Laws on employment.

 

(c) There are no contracts, resolutions or other arrangements currently in force
between Marazzi Group and the employees providing for “golden parachutes”
bonuses, deferred compensation, length of notice required to terminate the
employment other than such as may be required by Law or by the Collective Rules,
stability pacts, limitations on the termination of employment agreements or to
guarantee a certain total number of employees or to maintain or hire a specific
number of employees or economic benefits. To the Knowledge of the Company,
Marazzi Group has not entered into or promised any restructuring plan that
provides for the above-mentioned benefits or limitations.

 

(d) All social security and pension contributions due by Marazzi Group have been
duly paid and provisions for TFR (i.e., severance indemnity) and other reserve
with regard to any other amount due or right accrued but not payable are fully
and properly made and recorded in the statutory accounts of Marazzi Group and/or
in the books and records of Marazzi Group.

 

(e) Schedule 5.22(e) of the Disclosure Letter sets forth a complete list of all
agents, sales agents, distributors and business finders of Marazzi Group
(collectively the “Agents”), and their respective applicable individual and
collective bargaining agreements (if any and if applicable) to whom aggregate
payments in excess of €250,000 were made in the twelve months ended
September 30, 2012. Marazzi Group are in compliance with all individual and
collective bargaining agreements with their Agents and they have satisfied in
all respects their legal and contractual obligations (including social security
issues) towards them and none of the Agents has the right to claim the
acknowledgement of a subordinate employment relationship with Marazzi Group.

Section 5.23 Taxes.

 

(a) For all taxable periods beginning on or after January 1, 2008 for which the
period of assessment or collection has not lapsed:

 

  (i)

(A) all material Tax Returns required to be filed by or on behalf of the
Company, the Controlled Subsidiaries and, to the Knowledge of the Company, the
Non-Controlled Target Companies have been duly and timely filed with the
appropriate Tax Authority (after giving effect to any valid extensions of time
in which to make such filings), (B) each such Tax Return of the Company, the
Controlled Subsidiaries and, to the Knowledge of the Company, the Non-Controlled
Target Companies was true, correct and complete in all material respects when
filed and (C) all amounts shown on such Tax Returns of the Company, the
Controlled Subsidiaries and, to the Knowledge of the Company, the

 

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  Non-Controlled Target Companies as due, and all other material Taxes that have
become due and payable by the Company, any Controlled Subsidiary and, to the
Knowledge of the Company, the Non-Controlled Target Companies have been fully
paid;

 

  (ii) the Company, the Controlled Subsidiaries and, to the Knowledge of the
Company, the Non-Controlled Target Companies have complied in all material
respects with all applicable Laws in force at the applicable time relating to
the payment, collection or withholding of Taxes (such as sales Taxes or
withholding of Taxes from the wages of employees or other amounts paid or owing
to any independent contractor, creditor, stockholder or other third party);

 

  (iii) all material deficiencies asserted or assessments made in respect of a
Tax Return filed by or on behalf of the Company, any Controlled Subsidiary and,
to the Knowledge of the Company, the Non-Controlled Target Companies that have
been claimed in writing by any Tax Authority have been fully paid or are being
contested in good faith and none of the Company, any Controlled Subsidiary and,
to the Knowledge of the Company, the Non-Controlled Target Companies has been
notified in writing of any other material audits or investigations by any Tax
Authority relating to any Tax Return filed by or on behalf of any such Target
Company; and

 

  (iv) to the Knowledge of the Company, no material claim has been made in
writing to the Company, any Controlled Subsidiary or any Non-Controlled Target
Companies by any Tax Authority in a jurisdiction in which such entity does not
file Tax Returns that such entity is or may be subject to Taxation by that
jurisdiction.

 

(b) None of the Company, the Controlled Subsidiaries and, to the Knowledge of
the Company, the Non-Controlled Target Companies has been a member of a
combined, consolidated, affiliated or unitary group for Tax filing purposes,
other than the group in which it currently is a member, for which it has any
current or future liability for Taxes.

 

(c) None of the Company, the Controlled Subsidiaries and, to the Knowledge of
the Company, the Non-Controlled Target Companies is party to any Tax sharing,
indemnity or similar agreement (other than such an agreement solely among the
Target Subsidiaries) that will not be terminated on or before the Closing Date
without any future liability to the Company, the Controlled Subsidiaries or, to
the Knowledge of the Company, the Non-Controlled Target Companies (including for
past Taxes).

 

(d) Schedule 5.23(d) of the Disclosure Letter lists all elections that have been
filed by the Company, the Controlled Subsidiaries and, to the Knowledge of the
Company, the Non-Controlled Target Companies under United States Treasury
Regulations Section 301.7701-3 (and each similar provision of state, local or
foreign Law).

 

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(e) None of the Company, the Controlled Subsidiaries and, to the Knowledge of
the Company, the Non-Controlled Target Companies currently is the beneficiary of
any currently effective extension of time within which to file any Tax Return
that has not already been filed and none of the Company, any Controlled
Subsidiary, and, to the Knowledge of the Company, any Non-Controlled Target
Company waived or extended any statute of limitations in respect of Taxes which
have not already been paid.

Section 5.24 Brokers and Finders. Neither the Sellers, the Company, the
Controlled Subsidiaries or, to the Knowledge of the Company, the Non-Controlled
Target Companies have employed any broker or finder or incurred any liability
for any brokerage fees, commissions or finders’ fees in connection with the
Proposed Transaction.

Section 5.25 Environmental Matters.

 

  (a) (i) The Company and the Controlled Subsidiaries possess, and, since
January 1, 2010, have possessed, all Authorizations required by Environmental
Laws for the conduct of its respective business (collectively, “Environmental
Authorizations”), except where the failure to possess such Environmental
Authorizations does not have and would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect; (ii) the
Company and the Controlled Subsidiaries are and, since January 1, 2010, have
been in compliance with all applicable Environmental Laws and Environmental
Authorizations, except for matters which have been resolved or for noncompliance
that does not have and would not reasonably be expected to have, individually or
in the aggregate, a Company Material Adverse Effect; (iii) there are no lawsuits
or other proceedings pending or, to the Knowledge of the Company, threatened,
against any Controlled Subsidiary or any of their respective predecessors
alleging the violation of, noncompliance with or liability under any applicable
Environmental Laws that would reasonably be expected to have, individually or in
the aggregate, a Company Material Adverse Effect; (iv) no notice under any
Environmental Law has been received from any Governmental Authority that is
currently outstanding concerning the Release or possible Release of Hazardous
Substances, or requiring an investigation for Hazardous Substances, at any
location owned, operated or leased, now or in the past, by the Company or the
Controlled Subsidiaries, the subject matter of which notice would reasonably be
expected to have a Company Material Adverse Effect; (v) to the Knowledge of the
Company, there are no Hazardous Substances on, at, under, or migrating to or
from, (A) any property currently owned, operated or leased by the Company or its
Controlled Subsidiaries or (B) any property formerly owned, operated or leased
by the Company or its Controlled Subsidiaries, or any of their respective
predecessors, in each case, that could reasonably be expected to result in
liability under Environmental Law, except as would not reasonably be expected to
have, in the aggregate, a Company Material Adverse Effect; and (vi) to the
Knowledge of the Company, none of the Company, its Controlled Subsidiaries, or
any of their respective predecessors, have used any waste disposal site, or
otherwise disposed of, transported, or arranged for the transportation of, any
Hazardous Substances to any place or location (x) in violation of any
Environmental Law or (y) listed on the National Priorities List or any similar
state or foreign list of contaminated sites, in each case, except as would not
reasonably be expected to have a Company Material Adverse Effect.

 

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(b) The Company has provided to the Purchaser true and complete copies and
results of any material reports, studies, analyses, tests, or monitoring in the
possession of the Company and the Controlled Subsidiaries with respect to
Hazardous Substances on, at, under, or migrating to or from any property
currently or formerly owned, operated, or leased by the Company, the Controlled
Subsidiaries or any of their respective predecessors, or concerning compliance
by any of the foregoing with Environmental Law.

 

(c) The representations and warranties set forth in this Section 5.25 are the
sole and exclusive representations and warranties of the Sellers with respect to
environmental matters.

Section 5.26 Suppliers and Customers. Schedule 5.26 of the Disclosure Letter
sets forth a list of (i) the ten (10) largest suppliers (by dollar amount) to
the Target Companies, taken as a whole, since January 1, 2012 (“Major
Suppliers”) and (ii) the ten (10) customers with the highest dollar amount of
purchases or services from the Target Companies, taken as a whole, since
January 1, 2012 (“Major Customers”). No Major Supplier or Major Customer has
since January 1, 2012 materially decreased or limited, or to the Knowledge of
the Company, threatened to materially decrease or limit, its provision or
receipt of services to or from any of the Target Companies. No termination,
cancellation or limitation of, or any material modification or change in, the
business relationships (including product pricing and payment terms) of any
Target Company has occurred or, to the Knowledge of the Company, is threatened
with any Major Supplier or Major Customer.

Section 5.27 Products. Except as does not have and would not reasonably be
likely to have, individually or in the aggregate, a Company Material Adverse
Effect, all products designed, manufactured, sold, distributed, leased,
installed, delivered or held in inventory by the Target Companies are free from
any material defects and conform in all material respects with all customary and
reasonable standards for products of such type, subject to the reserve for
product warranty claims set forth on the face of the Company Financial
Statements.

Section 5.28 Related Party Transactions. None of the Sellers, any Affiliate of
Sellers (other than Portfolio Companies), any officer, director or other
management employees of the Company or any Controlled Subsidiary (each, a
“Related Party”) and, to the Knowledge of the Company, none of the
Non-Controlled Target Companies, any officer, director or other management
employees of a Non-Controlled Target Company or the employees or shareholders of
any Controlled Subsidiary or any Non-Controlled Target Company, has any direct
or indirect ownership, participation, royalty or other interest in, or is an
officer, director, employee of, consultant to or contractor for any Person that
does business with, or has any contractual arrangement with, the Company, any
Controlled Subsidiary or, to the knowledge of the Company, any Non-Controlled
Target Company (solely with respect to any non-arm’s length arrangements between
any such person and a Non-Controlled Target Company) (except with respect to any
interest in less than 5% of the shares of any corporation whose shares are
publicly traded and with respect to intercompany arrangements between the
Company and Controlled Subsidiaries).

 

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Section 5.29 FCPA Matters. To the Knowledge of the Company, since January 1,
2010, and except as has been previously disclosed to Purchaser or Parent, no
Target Company (including any of their respective officers, directors, agents,
or employees) has, directly or indirectly taken any action which would cause it
to be in violation of the Foreign Corrupt Practices Act of 1977, as amended, or
any rules or regulations thereunder or any similar anti-corruption or
anti-bribery Law applicable to the Target Companies in any jurisdiction other
than the United States (in each case, as in effect at the time of such action)
(collectively, the “FCPA”) or, in violation of the FCPA (i) used any corporate
funds for unlawful contributions, gifts, entertainment or other unlawful
expenses relating to political activity, (ii) made, offered or authorized any
unlawful payment to foreign or domestic government officials or employees,
whether directly or indirectly, or (iii) made, offered or authorized any
unlawful bribe, rebate, payoff, influence payment, kickback or other similar
unlawful payment, whether directly or indirectly.

Section 5.30 No Further Representations. Notwithstanding anything contained in
this Article V or any other provision of this Agreement, it is the explicit
intent of each party hereto that the Sellers are not making any representation
or warranty whatsoever, express or implied, except those representations and
warranties set forth in this Article V, and in entering into this Agreement and
acquiring the Shares from the Sellers, each of the Parent and the Purchaser
expressly acknowledges and agrees that it is not relying on any statement,
representation or warranty, including, but not limited to, those which may be
contained in any confidential information memorandum or similar materials
containing information regarding the Target Companies or any of their businesses
or in any materials provided to the Parent or the Purchaser during the course of
its Due Diligence Investigation of the Target Companies, other than those
representations and warranties set forth in this ARTICLE V.

ARTICLE VI

REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER

The Parent and the Purchaser represent and warrant to the Sellers as of the date
of this Agreement as follows:

Section 6.1 Authority; Enforceability.

 

(a) Each of the Parent and the Purchaser has the requisite corporate power and
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the Proposed Transaction. The execution, delivery
and performance by each of the Parent and the Purchaser of this Agreement and
the consummation of the Proposed Transaction have been duly and validly
authorized by all necessary corporate action on the part of the Parent and the
Purchaser, respectively, and such authorization has not been subsequently
modified or rescinded.

 

(b) This Agreement has been duly executed and delivered by the each of the
Parent and the Purchaser and constitutes, assuming due authorization, execution
and delivery of this Agreement by the Sellers, a valid and binding legal
obligation of each of the Parent and the Purchaser, enforceable against the each
of the Parent and the Purchaser in accordance with the terms hereof.

 

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(c) The shares of Parent Common Stock representing the Parent Common Stock
Consideration have been duly authorized by all necessary corporate action on the
part of the Parent and, when issued in accordance with this Agreement, will be
duly and validly issued, fully paid and nonassessable, free and clear of all
Encumbrances, other than restrictions on transfer provided for by applicable
federal and state securities laws and Encumbrances imposed by the Registration
Rights and Lock-Up Agreement.

Section 6.2 Non-contravention; Consents.

 

(a) The execution and delivery of this Agreement by the Parent and the Purchaser
do not, and the performance of this Agreement by the Parent and the Purchaser
will not, require any consent, approval or Authorization of, or filing with, or
notification to, any Governmental Authority, except (i) under the HSR Act and
any other applicable antitrust, competition, investment or similar Laws,
(ii) for such other consents, approvals, Authorizations, filings or
notifications, the failure of which to make or obtain, would not, individually
or in the aggregate, materially impair or delay either the Parent or the
Purchaser from consummating the transactions contemplated hereby, and (iii) as
may be required by the rules and regulations of the Securities and Exchange
Commission (the “SEC”) and the New York Stock Exchange.

 

(b) The execution and delivery of this Agreement by the Parent and the Purchaser
do not, and consummation of the Proposed Transaction will not, (i) conflict with
or violate any provision of the Governing Documents of the Purchaser,
(ii) assuming all filings and notifications under the HSR Act and any other
applicable antitrust, competition, investment or similar Laws have been made and
any waiting periods thereunder have terminated or expired, conflict with or
violate any Law applicable to the Parent or the Purchaser or (iii) result in a
breach of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel any agreement or
contract to which the Parent or the Purchaser is a party, except, in the case of
(ii) or (iii), as would not, individually or in the aggregate, materially impair
or delay either the Parent or the Purchaser from consummating the Proposed
Transaction.

Section 6.3 Organization. Each of the Purchaser and the Parent is duly organized
and validly existing under the laws of its respective jurisdiction of
organization and has all necessary power and authority to conduct its business
in the manner in which it is being conducted at the date of this Agreement.

Section 6.4 Litigation. There is no litigation, arbitration, or administrative
proceeding pending, or to the knowledge of the Parent or the Purchaser,
threatened in writing, against the Parent or the Purchaser that seeks to, and
neither the Parent nor the Purchaser is subject to any judgments, decrees,
injunctions or orders of any Governmental Authority which, individually or in
the aggregate, would reasonably be expected to enjoin, rescind or materially
delay the ability of the Parent and the Purchaser to effect the Closing or
otherwise prevent the Parent or the Purchaser from performing in all material
respects their obligations hereunder.

 

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Section 6.5 Financial Statements; Filings; No Undisclosed Liabilities.

 

(a) Parent has timely filed all SEC Documents required to be filed by the Parent
since January 1, 2010 (together with all such SEC Documents filed, whether or
not required to be filed the “Parent SEC Reports”). The Parent SEC Reports
(i) at the time filed, complied in all material respects with the applicable
requirements of the Securities Laws and other applicable Laws and (ii) did not,
at the time they were filed (or, if amended or superseded by a filing prior to
the date of this Agreement, then on the date of such filing or, in the case of
registration statements, at the effective date thereof) contain any untrue
statement of a material fact or omit to state a material fact required to be
stated in such Parent SEC Reports or necessary in order to make the statements
in such Parent SEC Reports, in light of the circumstances under which they were
made, not misleading. To the extent required by Securities Laws, each Parent SEC
Report was accompanied by the certificates required to be filed or submitted by
the Parent’s chief executive officer and chief financial officer pursuant to the
Sarbanes-Oxley Act and, at the time of filing or submission of each such
certificate, such certificate was true and accurate and complied in all material
respects with the Sarbanes-Oxley Act. No member of the Parent Group other than
the Parent is required to file any SEC Documents.

 

(b) Each of the Parent Financial Statements (including, in each case, any
related notes) contained in the Parent SEC Reports, including any Parent SEC
Reports filed after the date of this Agreement and prior to Closing, complied as
to form in all material respects with applicable Securities Laws and other
applicable laws, was prepared in accordance with GAAP applied on a consistent
basis throughout the periods involved (except as may be indicated in the notes
to such financial statements or, in the case of unaudited interim statements, as
permitted by Form 10-Q of the SEC), and fairly presented in all material
respects the consolidated financial position of the Parent and its subsidiaries
as at the respective dates and the consolidated results of operations and cash
flows for the periods indicated, except that the unaudited interim financial
statements were or are subject to normal and recurring year-end adjustments
which were not or are not expected to be material in amount or effect.

 

(c)

The Parent maintains disclosure controls and procedures required by Rule 13a-15
or 15d-15 under the Exchange Act. Such disclosure controls and procedures are
effective to ensure that information required to be disclosed by the Parent in
the reports that it is required to file or submit, or files or submits, under
the Securities Act and the Exchange Act are recorded, processed, summarized and
reported, within the time periods specified in the SEC’s rules and forms. The
Parent maintains internal control over financial reporting (as defined in Rule
13a-15 or 15d-15, as applicable, under the Exchange Act). Such internal control
over financial reporting is effective in providing reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with GAAP and includes
policies and procedures that (i) pertain to the maintenance of records that in
reasonable detail accurately and fairly reflect the transactions and
dispositions of the assets of the Parent, (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial
statements in accordance with GAAP, and that receipts and expenditures of the
Parent are being made only in accordance with authorizations of management and
directors of the Parent, and (iii) provide reasonable assurance regarding

 

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  prevention or timely detection of unauthorized acquisition, use or disposition
of the Parent’s assets that could have a material effect on its financial
statements. The Parent has disclosed, based on the most recent evaluation of its
chief executive officer and its chief financial officer prior to the date of
this Agreement, to the Parent’s auditors and the audit committee of the Parent’s
board of directors (A) any significant deficiencies in the design or operation
of its internal controls over financial reporting that are reasonably likely to
adversely affect the Parent’s ability to record, process, summarize and report
financial information and has identified for the Parent’s auditors and audit
committee of the Parent’s board of directors any material weaknesses in internal
control over financial reporting and (B) any fraud, whether or not material,
that involves management or other employees who have a significant role in the
Parent’s internal control over financial reporting.

 

(d) Since January 1, 2010 through the date of this Agreement, (i) neither the
Parent nor any of its subsidiaries nor any director, officer, employee, auditor
or accountant of the Parent or any of its subsidiaries has received any material
complaint, allegation, assertion or claim, whether written or oral, that the
Parent or its subsidiaries have engaged in illegal or fraudulent accounting or
auditing practices, and (ii) no attorney representing the Parent or any of its
subsidiaries, whether or not employed by the Parent or any of its subsidiaries,
has reported to the board of directors of the Parent or any committee thereof or
to any director or officer of the Parent any evidence of a material violation of
Securities Laws, breach of fiduciary duty or similar violation, relating to
periods after January 1, 2010, by the Parent or any of its officers, directors,
employees or agents. To the knowledge of the executive officers of the Parent
and except as set forth in Section 6.5(d) of the Parent Disclosure Letter, there
are no SEC inquiries or investigations, other governmental inquiries or
investigations pending or threatened, in each case regarding any accounting
practices of the Parent or any of its subsidiaries or any malfeasance by any
executive officer of the Parent.

 

(e) There are no outstanding or unresolved comments from any comment letters
received by the Parent from the SEC relating to any of the Parent SEC Reports.
To the knowledge of the executive officers of the Parent, none of the Parent SEC
Reports is the subject of any ongoing review by the SEC.

 

(f) The Parent is in compliance in all material respects with the applicable
listing and corporate governance rules and regulations of the New York Stock
Exchange (the “NYSE”). The Parent has not, in the preceding twelve (12) months,
received notice from the NYSE to the effect that the Parent is not in compliance
with the listing or maintenance requirements of the NYSE. The Parent is, and,
assuming the consummation of the Proposed Transactions, has no reason to believe
that it will not in the foreseeable future continue to be, in compliance with
all such listing and maintenance requirements.

 

(g) To the knowledge of the executive officers of the Parent, none of the Parent
or its subsidiaries has any material liabilities other than liabilities (i) that
are reflected in the Parent Financial Statements, (ii) were incurred in the
ordinary course of business since January 1, 2012 or (iii) that would not
reasonably be expected to have, individually or in the aggregate, a material
adverse effect on the business, results of operations or financial condition of
the Parent and its subsidiaries, taken as a whole.

 

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Section 6.6 Position Since Reference Date. Since the Reference Date and through
the date hereof, except as set forth in the Parent Disclosure Letter or in
connection with the Proposed Transactions, the Parent and its subsidiaries have
not (i) conducted its business in any material respect not in the ordinary
course of business consistent with past practice or (ii) suffered any change
that would reasonably be expected to have, individually or in the aggregate, a
material adverse effect on the business, results of operations or financial
condition of the Parent and its subsidiaries, taken as a whole.

Section 6.7 Investigation. The Parent and the Purchaser have been afforded
reasonable access to the books, records, facilities and personnel of the Target
Companies for purposes of conducting a due diligence investigation of the Target
Companies. The Parent and the Purchaser have conducted a reasonable due
diligence investigation of the Target Companies and have received satisfactory
answers to all inquiries they have made respecting the Target Companies and
their businesses (the “Due Diligence Investigation”). Each of the Parent and the
Purchaser hereby acknowledges and agrees that the Sellers do not make any
representations or warranties to the Parent or the Purchaser, express or
implied, other than those representations set forth in Article V.

Section 6.8 Brokers and Finders. Neither the Parent, the Purchaser nor any of
the Parent’s other Subsidiaries has employed any broker or finder or incurred
any liability for any brokerage fees, commissions or finders’ fees in connection
with the Proposed Transaction.

Section 6.9 No Further Representations. Notwithstanding anything contained in
this Article VI or any other provision of this Agreement, it is the explicit
intent of each party hereto that the Purchaser is not making any representation
or warranty whatsoever, express or implied, except those representations and
warranties set forth in this Article VI, and in entering into this Agreement and
distributing the Parent Common Stock to the Sellers, the Sellers expressly
acknowledges and agrees that it is not relying on any statement, representation
or warranty, including, but not limited to, those which may be contained in any
confidential information memorandum or similar materials containing information
regarding the Purchaser or its businesses or in any materials provided to the
Sellers during the course of its due diligence investigation of the Purchaser,
other than those representations and warranties set forth in this Article VI.

ARTICLE VII

COVENANTS

Section 7.1 Conduct of the Business.

 

(a) From the date of this Agreement until the Closing Date, except as
(i) otherwise contemplated in this Agreement or in the Disclosure Letter,
(ii) set forth in the Capex Plan, or (iii) set forth on Schedule 7.1(a) of the
Disclosure Letter, the Sellers shall cause the Controlled Subsidiaries to
(i) operate their respective businesses in the ordinary course of business,
consistent with past practice and in compliance with the existing governance and
business policies and (ii) without the prior written consent of the Parent
(which consent shall not be unreasonably withheld, conditioned or delayed), not
do any of the following:

 

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  (i) sell, transfer, lease, sublease, license or otherwise dispose of any
properties or assets (including intangible assets) which are material,
individually or in the aggregate, to the business of the Target Companies as
currently conducted, provided, however, that none of the Target Companies shall
take any of the foregoing actions with respect to the non-operational real
estate without the prior written consent of the Parent;

 

  (ii) make or incur capital expenditures in an aggregate amount exceeding
€2,000,000 other than as set forth in the Capex Plan;

 

  (iii) (A) commence any claim other than in accordance with past practices or
(B) compromise, settle or grant any release of any claim relating to any pending
litigation or arbitration where the amount involved exceeds €1,000,000 or
involves a material restriction upon the operations of any Target Company;

 

  (iv) (A) amend or otherwise modify (including by entering into a new Material
Contract with such party or otherwise) any of its Material Contracts in such a
way as to materially reduce the expected business or economic benefits thereof
other than in the ordinary course of business, (B) amend or otherwise modify
(including by entering into a new agreement with such party or otherwise) any of
the agreements with members of the management of any Target Company in Russia
that are to become effective upon the consummation of the Proposed Transaction;
(C) terminate (other than allowing expiration according to its scheduled term,
including by failing to renew) any Material Contract, (D) enter into any
agreement that, if existing on the date of this Agreement, would be a Material
Contract, in each case except as contemplated by this Agreement or as required
by Law, or (E) enter into any agreement with a Related Party that is not on an
arms’ length basis;

 

  (v) amend any of the Governing Documents of any Target Company;

 

  (vi) modify, amend, terminate or permit the lapse of, in any material manner,
any lease of, operating agreement or other agreement relating to any real
property material to the businesses of the Target Companies (except for the
lapse or termination of any lease or agreement in accordance with its terms or
the renewals of existing leases in the ordinary course of business);

 

  (vii) delay payments to vendors or suppliers beyond normal and ordinary
payment terms (except with respect to payment obligations being contested in
good faith) in any material respect or offer any material inducements or
incentives to customers to pay earlier than normal and ordinary payment terms;

 

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  (viii)     grant to any employee any material increase in compensation or
benefits, except (A) for normal salary increases following performance reviews
and payment of any performance-based incentives upon the achievement of
performance goals with respect to plans in effect immediately prior to the date
of this Agreement, (B) in connection with any newly hired employees filling
positions that are, as of the date of this Agreement, vacant (or which become
vacant due to terminations of employment and/or promotions) and in connection
with any promotions, (C) as may be required under existing U.S. Benefit Plans or
Non-U.S. Benefit Plans, (D) as may be required by applicable Law or contemplated
by this Agreement, (E) as may be required by any employment agreement in effect
as of the date hereof; (F) as may be required by any collective bargaining
agreement, national collective bargaining agreement or similar arrangement with
a union, trade union or works council set forth in the Disclosure Letter or
(G) for the adoption of and grant of awards pursuant to the Transaction
Incentive Plan and selection of participants and their respective award amounts
(to the extent such participants and their award amounts are not listed on
Schedule 1(zz) to the Disclosure Letter) in the Russian Management Retention
Plan;

 

  (ix) increase the aggregate amounts payable by the Target Companies pursuant
to the Transaction Incentive Plan;

 

  (x) repurchase, redeem, or otherwise acquire or exchange, directly or
indirectly, any shares, or any securities convertible into any shares, of the
capital stock or any other equity of any Target Company, or declare or pay any
dividend or make any other distribution in respect of any Target Company;

 

  (xi) increase or reduce their respective share capital, or issue, grant or
sell any stock, other equity interests, options, rights or warrants in any
Target Company;

 

  (xii) adjust, split, combine or reclassify any capital stock or other equity
of any Target Company;

 

  (xiii) purchase any securities or make any material investment, either by
purchase of stock of securities, contributions to capital, asset transfers, or
purchase of any assets, in any Person, or otherwise acquire direct or indirect
control over any Person;

 

  (xiv) permit any of the Target Companies’ assets to become subjected to any
Encumbrance other than (x) those Encumbrances existing prior to the date of this
Agreement which would be removed at or prior to Closing or (y) Permitted
Encumbrances;

 

  (xv) change or amend any material Tax elections or Tax Returns filed on or
prior to the date hereof, except in each case, in the ordinary course of
business or as required by applicable Law;

 

  (xvi) make any material change to any Tax or accounting method or system of
internal accounting control, except as may be appropriate to conform to changes
in Tax Laws or regulatory accounting requirements or IFRS or in the ordinary
course of business; or

 

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  (xvii)     authorize any of, or commit or agree to take any of, the foregoing
actions.

 

(b) Within thirty (30) Business Days (or in the case of January 2013, within
forty-five (45) Business days) following the end of each calendar month, the
Sellers shall deliver to Purchaser the unaudited consolidated balance sheets and
profit and loss statements of the Target Companies.

Section 7.2 Further Assurances. Each of the parties hereto will use its
respective commercially reasonable efforts to take all actions and to do all
things necessary, proper or advisable to consummate the Proposed Transaction
(including satisfaction, but not waiver, of the Closing conditions set forth in
Article VIII).

Section 7.3 Filings; Reasonable Cooperation.

 

(a) Each of the Sellers and Purchaser agree to use its commercially reasonable
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary under applicable antitrust laws and regulations to
consummate and make effective the Proposed Transaction, which actions shall
include furnishing all information and documents required by applicable Law in
connection with approvals of or filings with any Governmental Authority with
regulatory jurisdiction over enforcement of any applicable antitrust laws
(“Governmental Antitrust Authority”), including filing, or causing to be filed,
as promptly as practicable, except that any required notification and report
forms under the HSR Act will be filed with the U.S. Federal Trade Commission
(the “FTC”) and the U.S. Department of Justice (the “DOJ”) no later than
January 4, 2013 following the execution and delivery of this Agreement, and any
notification form to other competent Governmental Antitrust Authorities (as
listed in Schedule 8.1(a)) will be filed as promptly as practicable, and in any
event no later than January 31, 2013.

 

(b) Each of the Sellers and the Purchaser shall furnish to the other such
necessary information and reasonable assistance as the other may request in
connection with its preparation of any filing or submission that is necessary
under the HSR Act or any other antitrust merger control laws, permit the other
party to review any filing or submission prior to forwarding to any Governmental
Antitrust Authority and accept any reasonable comments made by that other party.
The Sellers and the Purchaser shall keep each other apprised of the status of
any communications with, and any inquiries or requests for additional
information from, the FTC, the DOJ and other Governmental Antitrust Authorities
and shall comply as promptly as practicable with any such inquiry or request.
Each of the Sellers and the Purchaser agree not to participate in any
substantive meeting or discussion, either in person or by telephone, with any
Governmental Antitrust Authority in connection with the transactions
contemplated by this Agreement, unless it consults with the respective other
party in advance and, to the extent not prohibited by such governmental entity,
gives the respective other party the opportunity to attend and participate.
Purchaser shall be responsible for the payment of all filing fees or other
disbursements to the applicable Governmental Authorities in connection with
obtaining any approvals or making the notifications or filings required for the
purposes of satisfying the conditions set forth in Article VIII (including,
without limitation, document translation fees or third party expert fees but not
including the costs of each party’s own legal advisors).

 

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(c) Notwithstanding anything in this Section 7.3 to the contrary, nothing in
this Section 7.3 shall require, or be deemed to require, the Parent or the
Purchaser to propose, negotiate, offer to commit, effect or agree to (x) any
sale, divestiture, license, contract with a third party or disposition of assets
or businesses of the Parent Group or any Target Company or (y) any behavioral
remedy; provided that the Parent and Purchaser shall be required to, and shall
and shall cause their respective controlled Affiliates to, propose, negotiate,
offer to commit to, effect and agree to any and all commercially reasonable
licenses, contracts with third parties and behavioral remedies that are
necessary or appropriate in connection with obtaining the approval from the
relevant Governmental Authority under the HSR Act or any other antitrust merger
control law.

Section 7.4 Solicitation. The Sellers agree that following the date of this
Agreement, neither the Sellers, nor any of the Target Companies controlled by
the Sellers, nor any of their respective directors, officers, Affiliates or
Representatives will directly or indirectly, solicit, initiate, consider,
facilitate, encourage or accept or furnish to any other person any information
with respect to, any other proposals from any Person relating to any acquisition
or purchase of all or any of the capital stock of any of the Target Companies or
all or substantially all of the assets of any Target Company (other than the
sale of inventory in the ordinary course of business consistent with past
practice). The Sellers shall, and shall cause the Target Companies controlled by
the Sellers to, immediately cease and cause to be terminated all existing
discussions, conversations, negotiations and other communications with any
Person conducted heretofore with respect to any of the foregoing.

Section 7.5 Confidentiality.

 

(a) Purchaser and Parent acknowledge that following the date hereof, regardless
of whether this Agreement is terminated, the Confidentiality Agreement shall
remain in full force and effect in accordance with its terms.

 

(b)

Until the second (2nd) anniversary of the Closing Date, Sellers will, and will
cause their Affiliates to, hold in confidence, and not disclose to any Person
(other than as contemplated by this Section 7.5), any Confidential Information;
provided, however, that for Confidential Information that is a trade secret
under applicable Law, for so long as such Confidential Information remains a
trade secret under applicable law, Sellers will, and will cause their directors,
officers and Affiliates to, hold in confidence, and not disclose to any Person
(other than as contemplated by this Section 7.5), any such Confidential
Information.

 

(c)

Section 7.5(b) shall not prevent disclosure by the Sellers or their
Representatives to the extent that: (i) Sellers reasonably determine disclosure
is required by Law or by any Governmental Authority (including any Tax
Authority) having applicable jurisdiction (provided that the disclosing party
shall first, to the extent reasonably practicable and permitted by Law, inform
the other party of its intention to disclose such Confidential Information and
take into account the reasonable comments of the other party), (ii) disclosure
of Confidential

 

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  Information which was lawfully in the possession of such party or any of its
Representatives (in either case as evidenced by written records) without any
obligation of secrecy prior to its being received or held, (iii) disclosure of
Confidential Information which has previously become publicly available other
than through breach of this Agreement; or disclosure is required for the purpose
of any arbitral or judicial proceedings arising out of this Agreement.

 

(d) The Sellers may disclose Confidential Information to their Representatives;
provided that the Sellers shall only disclose the Confidential Information to
their respective Representatives if it is reasonably required for purposes
connected with this Agreement and only if such Representatives are informed of
the confidential nature of the Confidential Information and agree to keep such
Confidential Information confidential.

 

(e) The parties hereto agree to keep the details of the negotiation of this
Agreement and the terms of this Agreement confidential, except to the extent
required by Law or for financial reporting purposes and except that the parties
may disclose such information to their respective Representatives as necessary
in connection with the ordinary conduct of their respective businesses (so long
as such Representatives agree to maintain the confidentiality of such
information).

Section 7.6 Notice of Developments.

 

(a) During the period commencing on the date hereof and terminating upon the
earlier to occur of the Closing or the termination of this Agreement, the Seller
Representative will give the Purchaser prompt written notice of any material
development that would make the satisfaction of any of the conditions set forth
in Sections 8.1 or 8.2 on the Closing Date impossible or reasonably unlikely. No
such notification, or failure to give any notice required by this
Section 7.6(a), shall be given any effect for purposes of determining the
accuracy of the representations and warranties made by the Sellers pursuant to
this Agreement, determining whether the conditions set forth in Sections 8.1 or
8.2 have been satisfied or subjecting Sellers to liability for breach following
termination of this Agreement.

 

(b) During the period commencing on the date hereof and terminating upon the
earlier to occur of the Closing or the termination of this Agreement, the Parent
and the Purchaser shall give prompt written notice to the Seller Representative
of any material development that would make the satisfaction of any of the
conditions set forth in Sections 8.1 or 8.3 on the Closing Date impossible or
reasonably unlikely. No such notification, or failure to give any notice
required by this Section 7.6(b), shall be given any effect for purposes of
determining the accuracy of the representations and warranties made by the
Parent and the Purchaser pursuant to this Agreement, determining whether the
conditions set forth in Sections 8.1 or 8.3 have been satisfied or subjecting
the Parent and the Purchaser to liability for breach following termination of
this Agreement.

 

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Section 7.7 Parent Covenant. From the date of this Agreement until the earlier
of the Closing Date or the termination of this Agreement, except as otherwise
expressly contemplated herein, the Parent covenants and agrees that it shall
conduct its business and the business of its Subsidiaries in a manner designed
in its reasonable judgment, to preserve intact the Parent Group’s core
businesses and goodwill.

Section 7.8 Employees and Employee Benefits.

 

(a) From the Closing until the twelve (12) month anniversary of the Closing, the
Parent or Purchaser or an Affiliate shall provide to those employees of the
Target Companies as of immediately prior to the Closing who continue as
employees of the Parent Group after the Closing Date (other than those
represented by a union the “Continuing Employees”) compensation and benefits
that are, in the aggregate, substantially similar to those generally provided to
similarly situated employees of the Parent Group. In addition, during such
twelve (12) month period, the Parent shall provide Continuing Employees with
substantially the same severance benefits provided to similarly situated
employees of the Parent Group. Nothing herein shall be deemed to be a guarantee
of employment for any employee of the Target Companies, or other than as
provided in any applicable employment agreement or other contract, to restrict
the right of the Parent or Purchaser to terminate the employment of any such
employee. The terms and conditions of employment for the employees of the Target
Companies as of the Closing who are represented by a union and who continue with
the Target Companies shall be governed by the applicable collective bargaining
agreement.

 

(b) With respect to any employee benefit plan in which any Continuing Employees
first become eligible to participate at or after the Closing (the “New Company
Plans”), the Parent or an applicable affiliate shall use commercially reasonable
efforts to: (i) waive all pre-existing conditions, exclusions and waiting
periods with respect to participation and coverage requirements applicable to
employees of the Target Companies or under any health and welfare New Company
Plans in which such employees may be eligible to participate after the Closing
Date to the extent such pre-existing conditions, exclusions and waiting periods
were waived or otherwise satisfied under a corresponding Benefit Plan of a
Target Company immediately prior to the Closing Date or would have been so
waiver or satisfied but for such Benefit Plan’s termination pursuant to
Section 7.8(c), (ii) cause deductibles, coinsurance or maximum out-of-pocket
payments made by such employees during the applicable plan year in which such
employee first participates in the applicable New Company Plan to reduce the
amount of deductibles, coinsurance and maximum out-of-pocket payments under the
New Company Plans to the extent taken account under the corresponding Benefit
Plan of a Target Company in respect of the same plan year or would have been so
taken into account but for such Benefit Plan’s termination pursuant to
Section 7.8(c).; and (ii) recognize service credited by the Target Companies
prior to the Closing for purposes of eligibility to participate and vesting
credit (and, for purposes of severance and paid time off only, for purposes of
determining the amount or level of benefit) in any New Company Plan in which
such employees may be eligible to participate after the Closing; provided,
however, that in no event shall any credit be given to the extent it would
result in the duplication of benefits for the same period of service.

 

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(c) If Parent so requests no later than ten (10) days before the Closing Date,
subject to applicable Law and the terms and conditions of the applicable Benefit
Plans, Sellers shall cause to be terminated Section 401K Plans as requested by
the Parent and shall consider in good faith any requests to terminate any other
Benefit Plans covering employees of the Company employed by any Controlled
Subsidiaries of the Company located in the United States to the extent such
Benefit Plans are in the Seller’s sole judgment terminable in accordance with
applicable law and plan terms without incurring any expenses or legal or
financial liabilities. No later than the day immediately before the Closing
Date, Sellers shall provide the Parent with evidence that the board of directors
of the applicable plan sponsor has terminated each Benefit Plan terminated
pursuant to the immediately preceding sentence pursuant to resolutions of the
board of directors that are effective as of no later than the day immediately
prior to the Closing Date. The form and substance of such resolutions shall be
subject to the review and reasonable approval of the Parent.

 

(d) Except as expressly provided herein, nothing contained in this Agreement,
whether express or implied, shall (i) be treated as an amendment or other
modification of any Benefit Plan or (ii) limit the right of the Parent Group to
amend, terminate or otherwise modify any Benefit Plan following the Closing,
(iii) confer upon any Person whether or not a party to this Agreement any right
to employment, any right to compensation or benefits, or any other right of any
kind or nature whatsoever.

 

(e) Notwithstanding anything to the contrary in this Agreement, the Target
Companies, in their sole discretion, shall be permitted to (i) prior to the
Closing, pay out bonuses for any completed fiscal year to their employees in the
ordinary course of business and (ii) on the Closing, pay to each eligible
employee a pro rata bonus in respect of the Company’s then current fiscal year
through the Closing based on the Target Companies’ determination, in good faith
(and in consultation with the Parent), of the amounts earned, based on actual
performance through the Closing.

Section 7.9 Listing. The Parent shall cause to be listed, prior to the Closing,
on the NYSE, subject to official notice of issuance, the shares of the Parent
Common Stock to be issued to the Sellers pursuant to the Proposed Transaction,
and the Parent shall give all notices and make all filings with the NYSE
required in connection with the transactions contemplated herein.

Section 7.10 Access to Properties, Books and Records. From the date of this
Agreement until the earlier of termination of this Agreement or the Closing,
Sellers shall give the Parent and the Purchaser reasonable access, upon
reasonable notice during normal business hours to all properties, books, records
and key management personnel of or pertaining to the Target Companies; provided,
however, that the foregoing will not: (i) materially interfere with the
day-to-day operations of the Target Companies; and (ii) require Sellers or the
Target Companies to provide access or to disclose information where such access
or disclosure would contravene any Law or contract, or would relate to
commercially sensitive information, or would result in the waiver of any legal
privilege or work-product protection. Any information disclosed will be subject
to the provisions of the Confidentiality Agreements.

 

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Section 7.11 Seller Representative.

 

(a) In order to efficiently administer certain matters contemplated hereby
following the date hereof, including the defense or settlement of any claims,
each Seller, by signing this Agreement, hereby designates LuxELIT as the
representative of the Sellers (the “Seller Representative”). The Seller
Representative is hereby appointed and constituted the true and lawful
attorney-in-fact of each Seller, with full power in his, her or its name and on
his, her or its behalf to act according to the terms of this Agreement. The
Seller Representative hereby accepts such appointment.

 

(b) In the event the Seller Representative becomes unable to perform its
responsibilities hereunder, resigns from such position or is otherwise removed
by the Sellers, the Sellers will mutually agree to select another representative
to fill such vacancy and such substituted representative shall be deemed to be
the Seller Representative for all purposes of this Agreement and the documents
delivered pursuant hereto.

 

(c) All decisions and actions by the Seller Representative shall be binding upon
all of the Sellers, and no Seller shall have the right to object, dissent,
protest or otherwise contest any such decision or action.

 

(d) The Seller Representative shall not be liable for any act done or omitted
hereunder as Seller Representative so long as such action did not constitute bad
faith, gross negligence or willful misconduct, and any act done or omitted to be
done pursuant to the advice of counsel shall be conclusive evidence of the
absence of bad faith, gross negligence and willful misconduct. The Seller
Representative shall be entitled to be indemnified and held harmless by the
Sellers against any loss, liability or expense incurred without bad faith, gross
negligence or willful misconduct on the part of the Seller Representative and
arising out of or in connection with the acceptance or administration of his
duties hereunder. The Sellers shall reimburse to the Seller Representative the
expenses of the Seller Representative pro rata in accordance with the allocation
set forth on the Seller Allocation Schedule.

 

(e) The Parent and the Purchaser shall be entitled to rely conclusively on the
instructions and decisions given or made by the Seller Representative and no
party shall have any cause of action against the Parent and the Purchaser for
any action taken by the Parent and the Purchaser in reliance upon any such
instructions or decisions.

 

(f) The provisions of this Section 7.11 are independent and severable, are
irrevocable and coupled with an interest, and shall be enforceable
notwithstanding any rights or remedies that any Seller may have in connection
with the Proposed Transaction. The provisions of this Section 7.11 shall be
binding upon the executors, heirs, legal representatives successors and assigns
of each Seller, and any references in this Agreement to a Seller means and
include the successors to the Seller’s rights hereunder.

Section 7.12 Repayments of Certain Amounts. In the event that the payment
contemplated by clause (ii) of the definition of Italian Management Incentive
Payments is not paid prior to December 31, 2013, the Purchaser and the Parent
shall notify the Seller Representative of such non-payment and shall promptly
(and in any event within five (5) Business Days) refund such payment amount to
the Seller Representative by wire transfer of immediately available funds for
payment to Sellers pro rata in accordance with the allocation set forth on the
Seller Allocation Schedule.

 

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Section 7.13 Nonsolicitation. For a period of three (3) years following the
Closing Date, each Seller agrees that neither it nor any of its respective
Affiliates will (i) solicit, recruit for employment or hire any executive or
other employee of the Target Companies or (ii) induce any of the executives or
other employees referenced in clause (i) to terminate their employment with the
Target Companies. The foregoing sentence shall not restrict Sellers and their
respective Affiliates from (i) engaging in general solicitations of employment
not directly targeting employees or officers of the Target Companies (e.g.,
through general advertisements, search firms, etc.) or hiring any employee or
officer responding to such general solicitations, or (ii) soliciting, recruiting
or hiring any employee or officer of the Target Companies from and after the
date that is six (6) months following termination of his or her employment by
the Target Companies. Nothing in this Section 7.13 shall be deemed to (A) waive
the rights and remedies of any Target Company under any employment agreement, or
any other agreement, with any current or former employee of such Target Company
or (B) apply to any Portfolio Company.

Section 7.14 Russian Management Retention Plan. Between the date hereof and the
Closing, Parent, the Company, any of their respective Subsidiaries or any
combination thereof shall adopt the Russian Management Retention Plan including
the terms set forth in Schedule 7.14 to the Disclosure Letter and otherwise
substantially on the terms set forth in Schedule 1.1(zz) to the Disclosure
Letter. The Russian Management Retention Plan shall become effective upon the
Closing.

Section 7.15 Directors, Officers and Statutory Auditors. Promptly following the
date hereof, but in any event at least fifteen (15) days prior to Closing, the
Sellers shall, or as appropriate shall cause the Company and Controlled
Subsidiaries to, request that the Statutory Auditors (permanent and alternate)
of the Company and each Controlled Subsidiary execute a letter of resignation in
the form set forth in Schedule 7.15 to the Disclosure Letter. To the extent
requested by the Purchaser at least fifteen (15) days prior to the Closing, the
Sellers shall, or as appropriate shall cause the Company and Controlled
Subsidiaries to, request that the directors and officers of the Company and each
Controlled Subsidiary execute a letter of resignation in the form set forth in
Schedule 4.2(e) to the Disclosure Letter.

ARTICLE VIII

CONDITIONS TO CLOSING

Section 8.1 Mutual Conditions. The respective obligations of each of the parties
are subject to satisfaction or waiver, at or prior to the Closing Date, of each
of the following conditions:

 

(a) (i) all waiting periods (and any extensions thereof) under the HSR Act
applicable to the Proposed Transaction having expired or been terminated and
(ii) all consents, approvals and authorizations of the Governmental Antitrust
Authorities in the jurisdictions set forth on Schedule 8.1(a) of the Disclosure
Letter shall have been obtained; and

 

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(b) at the Closing Date, (i) there being in effect no preliminary or permanent
injunction or other order issued by any Governmental Authority of competent
jurisdiction, and (ii) no action shall have been commenced by a Governmental
Antitrust Authority, in the case of either of clauses (i) or (ii) which
restrains, prohibits or otherwise makes illegal the consummation of the Proposed
Transaction.

Section 8.2 Conditions of the Purchaser. The obligations of the Purchaser to
consummate the Closing shall be further subject to the satisfaction or waiver at
or prior to the Closing, of each of the following conditions:

 

(a) the Fundamental Representations shall be true and correct in all material
respects as of the date of this Agreement and as of the Closing Date as though
made on and as of such date, except as contemplated by this Agreement (unless
any such representation or warranty is made only as of a specific date, in which
event such representation or warranty shall be true and correct in all material
respects only as of such specific date);

 

(b) the other representations and warranties of the Sellers (disregarding all
qualifications and exceptions contained therein regarding “materiality” or a
“Company Material Adverse Effect”) shall be true and correct as of the date of
this Agreement and as of the Closing Date as though made on and as of such date,
except, in the case of this Section 8.2(b), as contemplated by this Agreement or
where the failure of any such representation or warranty to be so true and
correct would not have a Company Material Adverse Effect (unless any such
representation or warranty is made only as of a specific date, in which event
such representation or warranty shall be true and correct only as of such
specific date, except as contemplated by this Agreement or where the failure of
any such representation or warranty to be so true and correct would not
reasonably be expected to have a Company Material Adverse Effect);

 

(c) the Sellers shall have performed in all material respects the obligations,
and complied in all material respects with the agreements and covenants,
required to be performed by or complied with by them under this Agreement at or
prior to the Closing Date; and

 

(d) the Parent and the Purchaser shall have received a certificate of an
executive officer of each Seller, certifying that the conditions set forth in
Sections 8.2(a), (b) and (c) have been satisfied with respect to such Seller.

Section 8.3 Conditions of the Sellers. The obligations of the Sellers to
consummate the Closing contemplated shall be further subject to the satisfaction
or waiver at or prior to the Closing of the following conditions:

 

(a)

the representations and warranties of the Purchaser and the Parent set forth in
this Agreement shall be true and correct in all material respects as of the date
of this Agreement and as of the Closing Date as though made on and as of such
date, except as contemplated by this Agreement or where the failure of such
representations and warranties to be so true would not prevent the Purchaser and
the Parent from consummating the Proposed Transaction or performing its
obligations under this Agreement (unless any such representation or warranty is
made only as of a specific date,

 

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  in which event such representation or warranty shall be true and correct only
as of such specific date, except as contemplated by this Agreement or where the
failure of such representations and warranties to be so true and correct would
not prevent the Purchaser and the Parent from consummating the Proposed
Transaction or performing their respective obligations under this Agreement);

 

(b) each of the Purchaser and the Parent shall have performed in all material
respects the obligations, and complied in all material respects with the
agreements and covenants, required to be performed by or complied with by it
under this Agreement at or prior to the Closing Date; and

 

(c) the Sellers shall have received a certificate of an executive officer of the
Purchaser and the Parent, certifying that the conditions set forth in Sections
8.3(a) and (b) have been satisfied.

Section 8.4 Waiver of Conditions. The conditions set forth in Section 8.1 may
only be waived by written notice from the party waiving such condition. The
conditions set forth in Section 8.2 may only be waived by written notice from
the Purchaser. The conditions set forth in Section 8.3 may only be waived by
written notice from the Seller Representative.

Section 8.5 Notification. The Sellers and the Purchaser shall each notify the
other promptly upon becoming aware that any of the conditions set forth in
Section 8.1, Section 8.2 or Section 8.3 have been fulfilled.

ARTICLE IX

TERMINATION

Section 9.1 Termination. This Agreement may be terminated at any time prior to
the Closing;

 

(a) by either the Seller Representative or the Purchaser if the Closing has not
occurred by September 30, 2013 (the “Outside Date”); provided, however, if the
only conditions (other than those conditions that by their nature are to be
satisfied at the Closing) set forth in Article VIII not satisfied as of the
Outside Date are those set forth in Section 8.1(a) or clause (ii) of
Section 8.1(b), then the Outside Date shall be extended to December 31, 2013;
provided, further, that the right to terminate this Agreement under this
Section 9.1(a) will not be available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of, or has resulted in, the
failure of the Closing to occur by this date;

 

(b) by either the Seller Representative or the Purchaser in the event that any
Governmental Authority has enacted, issued, enforced or entered into any
statute, rule, regulation, injunction or other order (which the parties hereto
will use all reasonable efforts to lift), restraining, enjoining or otherwise
prohibiting the Proposed Transaction that will have become final and
non-appealable;

 

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(c) by the Parent or the Purchaser if the Sellers shall have breached in any
material respect any of its representations and warranties, covenants or
agreements contained in this Agreement, which breach (i) cannot be cured by the
Outside Date and (ii) would result in any of the conditions in Section 8.2 not
being satisfied by the Outside Date

 

(d) by the Seller Representative if the Purchaser or the Parent shall have
breached in any material respect any of their respective representations and
warranties, covenants or agreements contained in this Agreement, which breach
(i) cannot be cured by the Outside Date and (ii) which would result in any of
the conditions in Section 8.3 not being satisfied by the Outside Date; or

 

(e) by the mutual written consent of the Seller Representative and the
Purchaser.

Section 9.2 Effect of Termination. In the event of termination of this Agreement
under Section 9.1 by written notice to the other parties, this Agreement will
become void and there will be no liability on the part of any party to this
Agreement except that nothing in this Agreement will relieve any party to this
Agreement from liability for fraud or any willful and material breach by such
party of the terms and provisions of this Agreement.

ARTICLE X

SURVIVAL

Section 10.1 Survival. The representations and warranties contained in this
Agreement or in any other agreement, certificate or other document extended in
connection herewith shall terminate and not survive the Closing; provided that
the Fundamental Representations and the Purchaser Fundamental Representations
shall survive until the second (2nd) anniversary of the Closing Date. The
covenants and agreements contained in this Agreement and to be performed at or
prior to the Closing shall not survive the Closing; the covenants and agreements
contained herein to be performed or complied with after the Closing shall
survive the Closing in accordance with their respective terms.

Section 10.2 Cap on Liability. The aggregate amount to be paid by each Seller to
the Purchaser under all claims for breach of the Fundamental Representations
together shall be limited to the amount of the Purchase Price allocable to such
Seller under the Seller Allocation Schedule.

ARTICLE XI

MISCELLANEOUS

Section 11.1 Announcements.

 

(a) The parties hereto will consult with each other before issuing press
releases or otherwise making any public statements or communicating with the
employees of the Target Companies with respect to this Agreement or the Proposed
Transaction and the parties hereto shall not issue any such press release or
public statement without the prior approval of the other party (which approval
will not be unreasonably withheld or delayed).

 

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(b) The restriction in Section 11.1(a) shall not apply (i) to communications by
the Sellers or its shareholders to the limited partners or other investors in
such shareholders or (ii) to the extent the public announcement is required by
Law or any Governmental Authority; provided, however, that in the case of clause
(b)(ii) hereof the party making the announcement shall use its commercially
reasonable efforts to consult with the other party in advance as to its form,
content and timing.

Section 11.2 Assignment. This Agreement and the rights and obligations hereunder
may not be assigned unless (a) such assignment is consented to in writing by
both the Purchaser and the Sellers, or (b) the Parent or the Purchaser assigns
its rights, in whole or in part, to a direct or indirect wholly owned Affiliate
of the Parent, but in the case of clause (b), no such assignment will relieve
the Purchaser or the Parent of its respective obligations under this Agreement,
including the obligation to pay the Purchase Price by means of delivery of the
Parent Common Stock and funds as set forth herein. This Agreement and all the
provisions hereof shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and permitted assigns.

Section 11.3 Specific Performance. Each party acknowledges and agrees that the
other parties may be irreparably damaged if this Agreement is not performed in
accordance with its terms and that any breach of this Agreement and the
non-consummation of the Proposed Transaction may not be adequately compensated
in all cases by monetary damages alone. Accordingly, in addition to any other
right or remedy to which a party may be entitled, at Law or equity, that party
shall be entitled to enforce this Agreement in accordance with its terms and
require the other party to consummate the Closing as contemplated hereby.

Section 11.4 Costs and Expenses; Taxes.

 

(a) Subject to this Section 11.4 and except as otherwise provided in this
Agreement, the Sellers, on the one hand, and the Purchaser and the Parent, on
the other hand, shall each be responsible for their own costs, charges and other
expenses incurred in connection with the Proposed Transaction.

 

(b) The Purchaser shall be responsible for the preparation and filing (and all
costs related thereto) of Tax Returns (including any documentation) with respect
to all transfer, documentation, sales, use, stamp, registration, and similar
Taxes (including any real property transfer or similar Tax) incurred or which
may be payable in connection with this Agreement or any transaction contemplated
hereby. The Purchaser shall be responsible for any and all such Taxes.

 

(c) Any refunds of Taxes plus any interest received with respect thereto from
the applicable Tax Authorities for any period shall be for the benefit of the
Purchaser. In the event that a Tax Authority determines a deficiency in any Tax,
the Purchaser shall have authority to determine whether to dispute such
deficiency determination and to control the prosecution or settlement of such
dispute.

 

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Section 11.5 Notices. All notices, demands or other communications to be given
or delivered under or by reason of the provisions of this Agreement will be in
writing in English and will be deemed to have been given when delivered
personally to the recipient or when sent to the recipient by facsimile (receipt
confirmed), one (1) Business Day after the date when sent to the recipient by
reputable overnight express courier services (charges prepaid) or three
(3) Business Days after the date when mailed to the recipient by certified or
registered mail, return receipt requested and postage prepaid. Such notices,
demands and other communications will be sent the Purchaser and the Sellers at
the addresses indicated below:

If to LuxELIT, to:

LuxELIT S.à r.l.

282, Route de Longwy L – 1940

Luxembourg

Fax: (+352) 26 86 81 86

Attention: Board of Managers

Copy to (which shall not constitute notice):

Skadden, Arps, Slate, Meagher & Flom LLP

Four Times Square

New York, NY 10036

Fax: 212-735-2000

Attention: Allison R. Schneirov, Esq.

If to Finceramica, to:

Finceramica S.p.A.

Via Della Barberia 22/2 40123 Bologna

Italy

Fax: (+39) 051 332075

Attention: Rosaria Marazzi, Chairperson of the Board of Directors

Copy to (which shall not constitute notice):

LCA Lega Colucci e Associati

Via della Moscova 18, 20121 Milano

Italy

Fax: (+39) 02 76018478

Attention: Paolo A. Colucci

                  Vittorio Turinetti di Priero

If to Parent:

Mohawk Industries, Inc.

P.O. Box 12069

160 South Industrial Boulevard

Calhoun, GA 30702

Fax: 706-624-2483

Attention: James T. Lucke

Vice President & General Counsel

 

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Copy to (which shall not constitute notice):

Alston & Bird LLP

1201 West Peachtree Street

Atlanta, GA 30309

Fax: 404-253-8380

Attention: R. David Patton, Esq.

If to Purchaser:

Mohawk International Holdings (DE) Corporation

P.O. Box 12069

160 South Industrial Boulevard

Calhoun, GA 30702

Fax: 706-624-2483

Attention: James T. Lucke

Vice President & General Counsel

Copy to (which shall not constitute notice):

Alston & Bird LLP

1201 West Peachtree Street

Atlanta, GA 30309

Fax: 404-253-8380

Attention: R. David Patton, Esq.

Section 11.6 Entire Agreement. This Agreement and the Confidentiality Agreement
set forth the entire agreement among the parties in respect of the sale and
purchase of the Shares and supersedes any prior agreement (whether oral or
written) relating to the Proposed Transaction. No party shall have any claim or
remedy in respect of any statement, representation, warranty or undertaking,
made by or on behalf of the other party in relation to the Proposed Transaction
which is not expressly set forth in this Agreement.

Section 11.7 Waivers. No failure or delay by a party in exercising any right or
remedy provided by Law or under this Agreement shall impair such right or remedy
or operate or be construed as a waiver or variation of it or preclude its
exercise at any subsequent time and no single or partial exercise of any such
right or remedy shall preclude any further exercise of it or the exercise of any
other remedy.

Section 11.8 Counterparts. This Agreement may be executed in any number of
separate counterparts (including by means of facsimile), each of which is an
original but all of which taken together shall constitute one and the same
instrument.

 

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Section 11.9 Amendments. No amendment to this Agreement shall be valid unless it
is in writing and duly executed by the Parent, the Purchaser and the Seller
Representative.

Section 11.10 Severability. Each of the provisions of this Agreement is
severable, If any such provision is held to be or becomes invalid or
unenforceable in any respect under the Law of any jurisdiction, it shall have no
effect in that respect and the parties shall use all reasonable efforts to
replace it in that respect with a valid and enforceable substitute provision the
effect of which is as close to its intended effect as possible.

Section 11.11 Third Party Beneficiaries. A person who is not a party to this
Agreement shall have no right to enforce any of its terms and this Agreement is
not intended to give any Person other than the parties hereto and their
permitted assigns any rights hereunder. Notwithstanding the foregoing, the
Seller Representative is an intended third party beneficiary with respect to the
provisions of Section 7.11 and the individuals identified on Schedule 1(zz) to
the Disclosure Letter are intended third party beneficiaries with respect to the
provisions of Section 7.14.

Section 11.12 Governing Law. THIS AGREEMENT AND ANY CLAIM, CONTROVERSY OR
DISPUTE ARISING UNDER OR RELATED IN ANY WAY TO THIS AGREEMENT, THE RELATIONSHIP
OF THE PARTIES, THE PROPOSED TRANSACTION AND/OR THE INTERPRETATION AND
ENFORCEMENT OF THE RIGHTS AND DUTIES OF THE PARTIES HEREUNDER OR RELATED IN ANY
WAY TO THE FOREGOING, SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
DOMESTIC LAW OF THE STATE OF DELAWARE WITHOUT GIVING EFFECT TO ANY CHOICE OR
CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF DELAWARE OR ANY OTHER
JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION
OTHER THAN THE STATE OF DELAWARE.

Section 11.13 Dispute Resolution. EACH PARTY IRREVOCABLY SUBMITS TO THE
EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN NEW CASTLE
COUNTY, DELAWARE FOR THE PURPOSES OF ANY SUIT, ACTION OR OTHER PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER TRANSACTION DOCUMENTS OR
ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY AND AGREES THAT ALL CLAIMS IN
RESPECT OF THE SUIT, ACTION OR OTHER PROCEEDING MAY BE HEARD AND DETERMINED IN
ANY SUCH COURT. EACH PARTY AGREES TO COMMENCE ANY SUCH SUIT, ACTION OR OTHER
PROCEEDING IN THE STATE AND FEDERAL COURTS SITTING IN NEW CASTLE COUNTY,
DELAWARE. EACH PARTY WAIVES ANY DEFENSE OF IMPROPER VENUE OR INCONVENIENT FORUM
TO THE MAINTENANCE OF ANY ACTION OR PROCEEDING SO BROUGHT AND WAIVES ANY BOND,
SURETY, OR OTHER SECURITY THAT MIGHT BE REQUIRED OF ANY OTHER PARTY WITH RESPECT
THERETO. ANY PARTY MAY MAKE SERVICE ON ANY OTHER PARTY BY SENDING OR DELIVERING
A COPY OF THE PROCESS TO THE PARTY TO BE SERVED AT THE ADDRESS AND IN THE MANNER
PROVIDED FOR THE GIVING OF NOTICES IN SECTION 11.5. NOTHING IN THIS SECTION
11.13, HOWEVER, SHALL AFFECT THE RIGHT OF ANY PARTY TO SERVE LEGAL PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW OR AT EQUITY. EACH PARTY AGREES THAT A FINAL
JUDGMENT IN ANY ACTION OR PROCEEDING SO BROUGHT SHALL BE CONCLUSIVE AND MAY BE
ENFORCED BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW OR AT
EQUITY.

 

52

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EACH OF THE PARTIES HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY
ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT,
ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE PERFORMANCE OF SUCH RIGHTS AND
OBLIGATIONS. EACH OF THE PARTIES (i) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT
SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVERS AND (ii) ACKNOWLEDGES THAT SUCH OTHER PARTY HAS BEEN INDUCED
TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE WAIVERS AND
CERTIFICATIONS CONTAINED HEREIN.

This Section 11.13 shall not apply to any dispute under Article III that is
required to be decided by the Independent Accounting Firm.

[Signature pages follow]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.

 

SELLERS:

 

LUXELIT S.À R.L.

By:   /s/ Cedric Pedoni  

Name: Cedric Pedoni

Title: Manager

FINCERAMICA S.P.A. By:   /s/ Rosaria Marazzi  

Name: Rosaria Marazzi

Title: Chairperson of the Board

MOHAWK INTERNATIONAL HOLDINGS (DE) CORPORATION By:   /s/ Frank H. Boykin  

Name: Frank H. Boykin

Title: President

MOHAWK INDUSTRIES, INC. By:   /s/ Jeffrey S. Lorberbaum  

Name: Jeffrey S. Lorberbaum

Title: Chairman and CEO

 

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EXHIBIT A

Adjustment Methodologies

Year-End Calculations Generally

The account balances comprising Indebtedness, Pension Liability Amount,
EdilFriuli Bond Amount, Cash and Short / Medium Term Financial Assets and
Receivables shall be derived from the consolidated audited balance sheet of the
Target Companies as of the close of business on December 31, 2012 as per the
Consolidated Financial Statements at December 31, 2012 (the “12/31 Balance
Sheet”). Unless otherwise specifically provided herein, the 12/31 Balance Sheet
shall be prepared in accordance with the Accounting Principles.

Year-End Indebtedness

General – Year-End Indebtedness shall be derived from the 12/31 Balance Sheet.

Classification – No items for which balances existed on or prior to December 31,
2012 will be classified as Indebtedness on the 12/31 Balance Sheet unless it has
been consistently classified as Indebtedness in the audited consolidated balance
sheet as of June 30, 2012 (the “June 30 Audited Balance Sheet”); provided that
items that were not in existence as of the date of the June 30 Audited Balance
Sheet shall be classified as Indebtedness if, but only if, such classification
is consistent with the Accounting Principles.

Loans, credit lines and other bank borrowings – Notwithstanding the general
provisions in the clause “classification” above, Indebtedness shall include
borrowed money of the Target Companies or indebtedness issued or incurred in
substitution or exchange for indebtedness of the type described in clause (a) of
the definition of “Indebtedness” that was outstanding as of June 30, 2012.

Penalties and prepayment penalties – Notwithstanding the general provisions in
the clause “classification” above, Indebtedness shall include penalties and
prepayment penalties with respect to items described in clauses (a) through
(d) of the definition “Indebtedness”, if any, that would become payable as a
result of the consummation of the Proposed Transaction, as calculated by Target
Companies based on the agreements in place as of December 31, 2012.

Obligations of the Target Companies under finance leases – Notwithstanding the
general provisions in the clause “classification” above, Indebtedness shall
include the present value of the minimum lease payments calculated using the
interest rate implicit in the lease, in relation to finance leases, determined
and calculated in accordance with Accounting Principles.

Accrued interests – Notwithstanding the general provisions in the clause
“classification” above, Indebtedness shall include the accrued and unpaid
interest expenses and income as of December 31, 2012 determined in accordance
with Accounting Principles for obligations of the kind referred to in clauses
(a) through (c) as per the definition “Indebtedness.”

--------------------------------------------------------------------------------

Securitization – The amount of the Securitization is not classified as
indebtedness under the Accounting Principles. The amount of Securitization
included as Indebtedness shall be the amount of outstanding receivables
transferred by the Target Companies set forth on the report communicated by
Calyon or any other applicable arranger as of a cut-off date in December 2012,
less any money transferred to Calyon or such other applicable arranger on or
after such cut-off date through December 31, 2012 in relation to such
receivables. All amounts shall be calculated in accordance with past practice of
the Target Companies.

Interest rate swaps, hedges or similar arrangements – Notwithstanding the
general provisions in the clause “classification” above, Indebtedness shall
include the net mark to market value at December 31, 2012 of any liabilities and
receivables for interest rate swaps, hedges or similar arrangements, but
excluding (i) any swaps, hedges or similar arrangements related to foreign
exchange and (ii) forward arrangements for the purchase of gas entered into by
the Target Companies in the ordinary course of business, determined in
accordance with Accounting Principles and as communicated by the arranger of the
interest rate swaps, hedges or similar arrangements.

Annex 1 attached hereto sets forth the amount of Indebtedness as of June 30,
2012 using the methodologies set forth above (including penalties and prepayment
penalties calculated in the manner set forth above). The final schedule will be
produced replacing June 30, 2012 with December 31, 2012. In Annex 1 for each
item classified within Indebtedness, the specific general ledger account code is
provided except with respect to the Securitization and Penalties and prepayment
penalties.

Year-End Pension Liability Amount

General – Year-End Pension Liability Amount shall be derived from the 12/31
Balance Sheet and shall be calculated in accordance with the Accounting
Principles. The Pension Liability Amount shall be comprised of the liabilities
pursuant to the “Trattamento di fine rapporto” and the “Retraite et Medaille du
Travail” schemes in respect of employees of the Target Companies.

Annex 2 attached hereto sets forth the amount of Pension Liability Amount as of
June 30, 2012 using the methodologies set forth above. The final schedule will
be produced replacing June 30, 2012 with December 31, 2012.

Year-End EdilFriuli Bond Amount

General – Year-End EdilFriuli Bond Amount shall be derived from the 12/31
Balance Sheet based on the agreement between EdilFriuli S.p.A. and Marazzi Group
dated 25 June 2010 including any eventual amendments signed between EdilFriuli
S.p.A. and Marazzi Group before December 31, 2012.

Annex 4 attached hereto sets forth the amount of EdilFriuli Bond Amount as of
June 30, 2012 using the methodologies set forth above. The final schedule will
be produced replacing June 30, 2012 with December 31, 2012.

 

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Year-End Cash

General – Year-End Cash shall be derived from the 12/31 Balance Sheet.

Classification – No items for which balances existed on or prior to December 31,
2012 will be classified as Cash on the 12/31 Balance Sheet unless it has been
consistently classified as Cash in the June 30 Audited Balance Sheet; provided,
that items that were not in existence as of the date of the June 30 Audited
Balance Sheet shall be classified as Cash if, but only if, such classification
is consistent with the Accounting Principles.

Cash – Notwithstanding the general provisions above, Cash shall include, the
cash, bank deposits, cash equivalents (including checks for deposits received by
the Target Company but not yet credited to the Target Company’s accounts and the
balance of Calyon’s clearing accounts) and any short-term marketable investments
of the Target Companies. Cash shall not include an amount equal to the aggregate
amount of cash realized from sales of non-operational real estate closing after
November 30, 2012.

Annex 3 attached hereto sets forth the amount of Cash as of June 30, 2012 using
the methodologies set forth above. The final schedule will be produced replacing
June 30, 2012 with December 31, 2012.

Year-End Short / Medium Term Financial Assets and Receivables

General – Year-End Short / Medium Term Financial Assets and Receivables shall be
derived from the 12/31 Balance Sheet.

Classification – No items for which balances existed on or prior to December 31,
2012 will be classified as Short / Medium Term Financial Assets and Receivables
on the 12/31 Balance Sheet unless it has been consistently classified as Short /
Medium Term Financial Assets and Receivables in the June 30 Audited Balance
Sheet; provided, that items that were not in existence as of the date of the
June 30 Audited Balance Sheet shall be classified as Short / Medium Term
Financial Assets and Receivables if, but only if, such classification is
consistent with the Accounting Principles.

Calyon Deposits (clause (a)) – The Year-End Short / Medium Term Financial Assets
and Receivables shall include the guarantee deposit in relation to the
Securitization agreement in place with Calyon and reflected on the 12/31 Balance
Sheet.

EdilFriuli Bond Amount – see definition of “Year-End EdilFriuli Bond Amount”
above.

Annex 4 attached hereto sets forth the amount of Short / Medium Term Financial
Assets and Receivables as of June 30, 2012 using the methodologies set forth
above the final schedule will be produced replacing June 30, 2012 with
December 31, 2012.

Transaction Expenses

General – Transaction Expenses shall be calculated as of the Closing Date.

 

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Advisor Fees and Unpaid Russian IPO Expenses (clauses (i) and (iv)) – Amounts
payable by the Company or any Controlled Subsidiary to advisors in relation to
the Proposed Transaction and the proposed initial public offering of Open Joint
Stock Company KM Group shall be determined in reference to obligations of the
Company or any Controlled Subsidiary set forth in a bill or invoice of the
applicable advisor referencing fees and expenses incurred prior to or at the
Closing. All Transaction Expenses paid by the Target Companies on or before
December 31, 2012 shall not be included in the calculation of Transaction
Expenses.

The following advisors have been engaged by Open Joint Stock Company KM Group as
of the date of the Agreement in relation to its proposed 2012 initial public
offering:

 

  •  

VTB Capital;

 

  •  

Deutsche Bank;

 

  •  

Mediobanca;

 

  •  

Skadden Arps Slate Meagher & Flom LLP;

 

  •  

Deloitte Touche Tohmatsu Limited and the affiliates of Deloitte and such member
firm;

 

  •  

Ernst Young;

 

  •  

FBK;

 

  •  

Frost & Sullivan;

 

  •  

Nielsen;

 

  •  

Intellik;

 

  •  

Legal Capital Partners;

 

  •  

NIKA;

 

  •  

DF King;

 

  •  

BDO.

The following advisors have been engaged by the Sellers and/or the Target
Companies as of the date of the Agreement in relation to the Proposed
Transaction:

 

  •  

Skadden Arps Slate Meagher & Flom LLP;

 

  •  

Eidos Partners S.r.l.;

 

  •  

Studio Legale Giliberti Pappalettera Triscornia e Associati;

 

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  •  

Studio Valente Associati;

 

  •  

-PricewaterhouseCoopers; and

 

  •  

Deloitte Financial Advisory Services S.r.l., other member firms of Deloitte
Touche Tohmatsu Limited and the affiliates of Deloitte and such member firms

Incentive Payments (clauses (ii) and (iii)) – Amounts payable by the Company or
any Controlled Subsidiary to individual beneficiaries in respect of the Italian
Management Incentive Payments, Transaction Incentive Payments, Russian
Management Retention Payments or any other outstanding amounts payable by the
Company or any Controlled Subsidiary to directors, officers or employees of the
Company or any Controlled Subsidiary as a result of the execution of this
Agreement or the consummation of the Proposed Transaction shall be given the
following values as agreed by the parties:

 

  •  

Italian Management Incentive Payments: €2,100,000;

 

  •  

Transaction Incentive Payments: up to €1,125,000

 

  •  

Russian Management Retention Payments: € 18,100,000.

Incentive payments shall not include bonuses accrued or paid in the ordinary
course of business to each eligible employee as contemplated by Section 7.8(e)
of the Agreement.

NOL NPV

General – NOL NPV shall mean €20,000,000.

Non-Operational Real Estate Value

General – Non-Operational Real Estate Value shall mean €11,000,000

Other Deductions

General – Other Deductions shall mean €10,000,000

 

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Exhibit B

STOCK RESTRICTION AND REGISTRATION RIGHTS AGREEMENT

THIS STOCK RESTRICTION AND REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is
made and entered into as of             ,             , by and among Mohawk
Industries, Inc., a Delaware corporation (the “Parent”), LuxELIT S.á r.l., a
Luxembourg limited liability company (“LuxELIT”) and Finceramica S.p.A., an
Italian corporation (“Finceramica” and together with LuxELIT the “Sellers” and
each a “Seller”).

R E C I T A L S

WHEREAS, pursuant to the terms of that certain Stock Purchase Agreement dated as
of December 20, 2012 (as may be amended, the “Purchase Agreement”), by and among
the Parent, Mohawk International Holdings (DE) Corporation, a wholly-owned
subsidiary of the Parent (“Purchaser”), and Sellers, the Purchaser shall
purchase from the Sellers all of the issued share capital (the “Shares”) of
Fintiles S.p.A, an Italian corporation (società per azioni) with registered
address at via B. Telesio 2, Milan (Italy), registered with the Companies
Register of Milan at no. 06187460966 (the “Acquisition”), with a portion of the
consideration therefore being the Sellers’ receipt of shares of the $0.01 par
value common stock of the Parent (the “Parent Common Stock”);

WHEREAS, the Parent has agreed, as a condition precedent to Sellers’ obligations
under the Purchase Agreement, to grant the Sellers certain registration rights;
and

WHEREAS, pursuant to Section 7.11 of the Purchase Agreement, LuxELIT (or, if
applicable, its successor as selected pursuant to Section 7.11 of the Purchase
Agreement, the “Seller Representative”) is each Seller’s true and lawful
attorney-in-fact for purposes of this Agreement (and, by execution of a joinder
to this Agreement, each Permitted Transferee shall accept Seller Representative
as its true and lawful attorney-in-fact for purposes of this Agreement); and

WHEREAS, the Parent and the Sellers desire to define such registration rights on
the terms and subject to the conditions herein set forth.

NOW, THEREFORE, in consideration of the foregoing premises and for other good
and valuable consideration, the parties hereby agree as follows:

1. DEFINITIONS

As used in this Agreement, the following terms have the respective meanings set
forth below:

“Affiliate” of any Person means any other Person that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with, such Person. The term “control” (including the terms
“controlling,” “controlled by” and “under common control with”) as used with
respect to any Person means the possession, direct or indirect, 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.

 

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“Commission” means the Securities and Exchange Commission or any other federal
agency at the time administering the Securities Act;

“Effective Date” means the date on which the Acquisition is consummated;

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder;

“Excluded Shares” means no more than that number of shares (rounded up to the
nearest whole share) equal to 7.5% of the Mohawk Common Stock issued in
connection with the Acquisition.

“Lock-up Party” means the Sellers and their Permitted Transferees, provided
that, for the avoidance of doubt, if either or both of             or
            becomes a Permitted Transferee, it shall not be a Lock-up Party with
respect to the Excluded Shares (provided, that if             or
            holds any Registrable Securities which are not Excluded Shares, then
            or             , as the case may be, shall be a Lock-up Party with
respect to, but only with respect to, such other Registrable Securities).

“Permitted Transferee” means those Persons listed on Schedule 1 to this
Agreement to the extent that such transferee executes a joinder to this
Agreement substantially in the form of Exhibit A hereto.

“Person” means any individual, firm, corporation (wherever incorporated),
partnership, limited liability company, joint venture, trust, association,
organization, governmental authority, works council or employee representative
body (whether or not having separate legal personality) or any other entity;

“register”, “registered” and “registration” means a registration effected by
preparing and filing a registration statement in compliance with the Securities
Act (and any post-effective amendments filed or required to be filed) and the
declaration, ordering of or automatic effectiveness of such registration
statement;

“Registrable Securities” means (A) the shares of Parent Common Stock issued to
the Investors under the Purchase Agreement, and (B) any securities of the Parent
issued as a dividend or other distribution with respect to, or in exchange for
or in replacement of, the shares of Parent Common Stock referred to in clause
(A); provided, that Registrable Securities shall not include such securities as
are actually sold pursuant to (i) a registration statement with respect to the
sale of such securities that has become effective under the Securities Act, or
(ii) Rule 144 (or any successor provision thereto) under the Securities Act
(“Rule 144”);

 

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“Registration Expenses” means all expenses incurred by the Parent in compliance
with this Agreement, including, without limitation, all registration and filing
fees, printing expenses, fees and disbursements of counsel for the Parent, fees
and disbursements for any transfer agent for the Registrable Securities,
printing expenses, blue sky fees and expenses (but excluding the compensation of
regular employees of the Parent, which shall be paid in any event by the
Parent);

“Securities Act” means the Securities Act of 1933, as amended and the rules and
regulations promulgated thereunder; and

“Selling Expenses” means all selling commissions applicable to the sale of
Registrable Securities and all fees and disbursements of counsel for each of the
Sellers and, if applicable, their respective Permitted Transferees.

2. LOCK-UP; RESTRICTIONS ON TRANSFER

(a) No Lock-up Party shall effect any transfer, sale or distribution or make any
short sale of, or loan of, any Parent Common Stock received by a Seller pursuant
to the Purchase Agreement (collectively, the “Lock-up Shares”) from the
Effective Date until the date that is the earlier of (i) the date as the Parent
shall agree and (ii) (A) 90 days following the Effective Date, with respect to
50 percent of the Lock-up Shares received by the applicable Seller and (B) 180
days following the Effective Date, with respect to the remaining Lock-up Shares
received by such applicable Seller (each a “Lock-up Period”); provided that,
notwithstanding the foregoing, the Sellers may transfer all or a portion of the
Lock-up Shares to a Permitted Transferee (which Permitted Transferee shall, if
applicable, become a Lock-up Party upon executing a joinder to this Agreement
substantially in the form of Exhibit A hereto) during the Lock-Up Period;
provided, further, that the Excluded Shares shall in no event be considered
Lock-up Shares.

(b) Following the applicable Lock-up Period and prior to any proposed transfer
of any Registrable Securities (other than (x) under the circumstances described
in Section 3 hereof and (y) with respect to Registrable Securities that no
longer bear the restrictive legend set forth in Section 2(c) hereof), the
applicable Seller shall give written notice to the Parent of its intention to
effect such transfer. Each such notice shall describe the manner of the proposed
transfer and, with respect to transfers of Registrable Securities pursuant to an
exemption from registration under the Securities Act, if requested by the
Parent, shall be accompanied by an opinion of counsel reasonably satisfactory to
the Parent (it being understood that Skadden, Arps, Slate, Meagher & Flom LLP
shall be acceptable to render such opinion) to the effect that the proposed
transfer may be effected without registration under the Securities Act,
whereupon such Seller shall be entitled to transfer the Registrable Securities
in accordance with the terms of its notice. Each certificate or instrument
evidencing transferred Registrable Securities shall bear the legend set forth in
Section 2(c), except that any such certificate or instrument shall not bear such
legend if (i) such transfer is made pursuant to an effective registration
statement, (ii) such transfer is in accordance with the provisions of Rule 144
(or any other rule permitting the resale of Registrable Securities without
registration under the Securities Act) or (iii) the opinion of counsel referred
to above is to the further effect that the transferee and any subsequent
transferee that is not an Affiliate of the Parent would be entitled to transfer
such Registrable Securities in a public sale without registration under the
Securities Act.

 

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(c) Subject to the foregoing, each certificate evidencing Registrable Securities
issued in connection with the Acquisition (“Restricted Shares”) shall bear a
legend in substantially the following form:

“THESE SECURITIES ARE SUBJECT TO RESTRICTIONS CONTAINED IN THAT CERTAIN STOCK
RESTRICTION AND REGISTRATION RIGHTS AGREEMENT DATED [            ], 2013. THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY
STATE SECURITIES ACTS AND MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS
THEY HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND ANY APPLICABLE
STATE SECURITIES ACTS OR AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.”

(d) In the event that any Restricted Shares shall cease to be subject to the
restrictions on transfer set forth in this Agreement, the Parent shall, upon the
written request of the Seller, issue to such Seller one or more new certificates
evidencing such shares without the legend required by Section 2(c) hereof
endorsed thereon.

3. REGISTRATION RIGHTS

(a) Shelf Registration.

(i) The Parent has filed a “shelf” registration statement on Form S-3 relating
to delayed or continuous offerings pursuant to Rule 415 under the Securities
Act, which registration statement became automatically effective upon the filing
thereof (the “Shelf Registration”). As promptly as practicable, but in no event
more than 10 days, following the Effective Date, the Parent shall file a
supplement to the prospectus that forms a part of the Registration Statement
(the “Base Prospectus”) providing for the resale, subject to Section 3(a)(iv)
hereof, from time to time by each of the Sellers and any Permitted Transferee of
the Registrable Securities which prospectus supplement (such prospectus
supplement and the Base Prospectus together, the “Prospectus”) shall name each
of the Sellers and each person identified as a Permitted Transferee as selling
securityholders of the Registrable Securities, in such a manner as to permit
each of the Sellers and each Permitted Transferee to deliver the Prospectus to
purchasers of Registrable Securities in accordance with applicable law. The
Parent shall, subject to Section 3(g) hereof, use its reasonable best efforts to
keep the Shelf Registration continuously effective until February 28, 2015 (or,
in the event that the Parent renews the Shelf Registration, [•]1) in order to
permit the Prospectus to be usable by Holders during such period (the
“Effectiveness Period”).

(ii) If, for any reason, at any time during the Effectiveness Period the Shelf
Registration ceases to be effective under the Securities Act, or ceases to be
usable for the purposes contemplated hereunder, then the Parent shall use its
reasonable best efforts to promptly cause the Shelf Registration to become
effective or usable under the Securities Act (including obtaining the prompt
withdrawal of any order suspending the effectiveness of such

 

1 

Three (3) years following the Effective Date.

 

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Shelf Registration), and in any event shall, as promptly as reasonably
practicable, (A) amend the Shelf Registration in a manner reasonably expected to
obtain the withdrawal of any order suspending the effectiveness of the Shelf
Registration or (B) file an additional registration statement or prospectus
supplement to a prospectus contained in an existing automatic shelf registration
statement, as applicable (a “Subsequent Shelf Registration”), for an offering to
be made on a delayed or continuous basis pursuant to Rule 415 registering the
resale from time to time by the Sellers of all Registrable Securities as of the
time of such filing. If a Subsequent Shelf Registration is filed and such
Subsequent Shelf Registration is not an automatic shelf registration statement
or a prospectus supplement to a prospectus contained in an existing automatic
shelf registration statement, the Parent shall use its commercially reasonable
efforts to cause such Subsequent Shelf Registration to become effective under
the Securities Act as promptly as practicable after such filing, but in no event
later than the date that is one hundred eighty (180) days following the date
that such Subsequent Shelf Registration is required to be filed with the
Commission. The Parent shall use its reasonable best efforts to keep such
Subsequent Shelf Registration (or another Subsequent Shelf Registration)
continuously effective under the Securities Act from the date the Subsequent
Shelf Registration is declared effective until the end of the Effectiveness
Period. Subject to Section 3(a)(iv) hereof, each such Subsequent Shelf
Registration, if any, shall provide for the registration of such Registrable
Securities for resale by each of the Sellers (and, if applicable, any Permitted
Transferee) in accordance with any reasonable method of distribution elected by
a Seller (and, if applicable, any Permitted Transferee).

(iii) The Parent shall supplement and amend the Shelf Registration and any
Subsequent Shelf Registration, as the case may be, if required by the rules,
regulations or instructions applicable to the registration form used by the
Parent for such Shelf Registration or Subsequent Shelf Registration, if required
by the Securities Act or, if necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading, as reasonably
requested by one or more Sellers or any Permitted Transferee.

(iv) Notwithstanding anything to the contrary in this Agreement, the Parent
shall not be obligated to file or cause to be filed any Prospectus, including
any prospectus included in a Subsequent Shelf Registration, that provides for
the resale of Registrable Securities by means of an underwritten offering.

(b) Expenses of Registration. All Registration Expenses incurred in connection
with any registration, qualification or compliance pursuant to this Agreement
(including all Registration Expenses incurred in connection with the Shelf
Registration and any supplements or amendments thereto, whether or not already
effective or it becomes effective, and whether all, none or some of the
Registrable Securities are sold pursuant to the Shelf Registration) shall be
borne by the Parent, and all Selling Expenses shall be borne by the Seller (or,
if applicable, their Permitted Transferee) incurring such expense severally and
not jointly.

(c) Registration Procedures. Subject to Section 3(a)(iv) hereof, the Parent
shall use its reasonable best efforts to effect the registration and the sale of
such Registrable Securities in accordance with each Seller’s (and, if
applicable, each Permitted Transferee’s) intended methods of disposition
thereof, and pursuant thereto the Parent shall, at its expense and as
expeditiously as possible:

 

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(i) furnish to each Seller (and, if applicable, any Permitted Transferee) such
number of conformed copies of the applicable registration statement and of each
amendment and supplement thereto (in each case including all exhibits) and such
number of copies of the prospectus forming a part of such registration statement
(including each preliminary prospectus, any summary prospectus or any term sheet
(as such term is used in Rule 434 under the Securities Act)) and any other
prospectus filed under Rule 424 under the Securities Act, in conformity with the
requirements of the Securities Act, and such other documents, including without
limitation documents incorporated or deemed to be incorporated by reference
prior to the effectiveness of such registration, as each of the Sellers (and, if
applicable, any Permitted Transferee) from time to time may reasonably request;
and

(ii) notify the Sellers (and, if applicable, any Permitted Transferee), at any
time during the Effectiveness Period of the occurrence of any event as a result
of which any prospectus relating to the sale of Registrable Securities contains
an untrue statement of a material fact or omits any material fact necessary to
make the statements therein not misleading, and, at the request of any Seller
(and, if applicable, any Permitted Transferee), the Parent shall prepare a
supplement or amendment to such prospectus so that, as thereafter supplemented
and/or amended, such prospectus shall not contain an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading;

(iii) use its reasonable best efforts to maintain the listing of the Registrable
Securities on the New York Stock Exchange;

(iv) cause management of the Parent to cooperate reasonably with each of the
Sellers (and, if applicable, each Permitted Transferee) with respect to
significant placements of Registrable Securities, including by participating in
one-on-one meetings with institutional investors and responding to reasonable
requests for information; and

(v) promptly notify each of the Sellers (and, if applicable, any Permitted
Transferee):

(A) when any registration statement, any pre-effective amendment, the prospectus
or any prospectus supplement or post-effective amendment to any registration
statement relating to the resale of Registrable Securities has been filed and,
with respect to any such registration statement or any post-effective amendment,
when the same has become effective;

(B) of any written request by the Commission for amendments or supplements to
any registration statement or any prospectus relating to the resale of
Registrable Securities or of any inquiry by the Commission relating to any such
registration statement or the Parent’s status as a well-known seasoned issuer;
and

(C) of the notification to the Parent by the Commission of its initiation of any
proceeding with respect to the issuance by the Commission of any stop order
suspending the effectiveness of any registration statement relating to the
resale of Registrable Securities.

 

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(d) The Parent represents and warrants that no registration statement (including
any amendments or supplements thereto and prospectuses contained therein)
relating to the resale of Registrable Securities shall contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein, or necessary to make the statements therein not misleading
(except that the Parent makes no representation or warranty with respect to
information relating to the Sellers (and, if applicable, any Permitted
Transferee) furnished to the Parent by or on behalf of the Sellers (and, if
applicable, any Permitted Transferee) specifically for use therein).

(e) Indemnification.

(i) The Parent will indemnify each of the Sellers (and, if applicable, their
respective Permitted Transferees), as applicable, each of its officers,
directors, members and partners, and each person controlling each of the Sellers
(and, if applicable, their respective Permitted Transferees), with respect to
any registration which has been effected pursuant to this Agreement against all
claims, losses, damages and liabilities (or actions in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any prospectus, offering circular or other document
(including any related registration statement, notification or the like)
incident to any such registration, qualification or compliance, or based on any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
any violation by the Parent of the Securities Act or the Exchange Act or
relating to action or inaction required of the Parent in connection with any
such registration, qualification or compliance, and will reimburse each of the
Sellers (and, if applicable, their respective Permitted Transferees), and each
of their respective officers, directors, members and partners, and each person
controlling each of the Sellers (and, if applicable, their respective Permitted
Transferees), for any legal and any other expenses reasonably incurred in
connection with investigating and defending any such claim, loss, damage,
liability or action, provided that the Parent will not be liable in any such
case to the extent that any such claim, loss, damage, liability or expense
arises out of or is based on any untrue statement or omission based upon written
information furnished to the Parent by the Sellers (and, if applicable, their
respective Permitted Transferees) and stated to be specifically for use therein.

(ii) Each of the Sellers (and, if applicable, their respective Permitted
Transferees), severally and not jointly, will, if Registrable Securities held by
it are included in the securities as to which any registration, qualification or
compliance is being effected, indemnify the Parent, each of its directors and
officers, and each person who controls the Parent, against all claims, losses,
damages and liabilities (or actions in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any such registration statement, prospectus, offering circular or
other document made by such Seller (and, if applicable, any Permitted
Transferee), or any omission (or alleged omission) to state therein a material
fact required to be stated therein or necessary to make the statements by such
Seller (and, if applicable, such Permitted Transferee) therein not misleading,
and will reimburse the Parent and such directors, officers, persons or control
persons for any legal or any other expenses reasonably incurred in connection
with investigating or defending any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such registration statement, prospectus, offering circular or other
document in reliance upon and in

 

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conformity with written information furnished to the Parent by such Seller (and,
if applicable, such Permitted Transferee) and stated to be specifically for use
therein; provided, however, that the obligations of each of the Sellers (and, if
applicable, their respective Permitted Transferees) hereunder and under clause
(vi) below shall be limited to an amount equal to the net proceeds actually
received by such Seller for securities sold as contemplated herein pursuant to
such registration.

(iii) Each party entitled to indemnification under this Section 3(e) (the
“Indemnified Party”) shall give notice to the party required to provide
indemnification (the “Indemnifying Party”) promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom; provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld) and the Indemnified Party may participate in such
defense at such party’s expense (unless the Indemnified Party shall have
reasonably concluded that there may be a conflict of interest between the
Indemnifying Party and the Indemnified Party in such action, in which case the
fees and expenses of one such counsel for all Indemnified Parties (in addition
to any local counsel) shall be at the expense of the Indemnifying Party), and
provided further that the failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its obligations
under this Section 3(e) unless the Indemnifying Party is materially prejudiced
thereby. No Indemnifying Party, in the defense of any such claim or litigation
shall, except with the consent of each Indemnified Party (which consent shall
not be unreasonably withheld or delayed), consent to entry of any judgment or
enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnified Party of a
release from all liability in respect to such claim or litigation. Each
Indemnified Party shall furnish such information regarding itself or the claim
in question as an Indemnifying Party may reasonably request in writing and as
shall be reasonably required in connection with the defense of such claim and
litigation resulting therefrom.

(iv) If the indemnification provided for in this Section 3(e) is held by a court
of competent jurisdiction to be unavailable to an Indemnified Party with respect
to any loss, liability, claim, damage or expense referred to herein, then the
Indemnifying Party, in lieu of indemnifying such Indemnified Party hereunder,
shall contribute to the amount paid or payable by such Indemnified Party as a
result of such loss, liability, claim, damage or expense in such proportion as
is appropriate to reflect the relative fault of the Indemnifying Party on the
one hand and of the Indemnified Party on the other in connection with the
statements or omissions which resulted in such loss, liability, claim, damage or
expense, as well as any other relevant equitable considerations. The relative
fault of the Indemnifying Party and of the Indemnified Party shall be determined
by reference to, among other things, whether the untrue (or alleged untrue)
statement of a material fact or the omission (or alleged omission) to state a
material fact relates to information supplied by the Indemnifying Party or by
the Indemnified Party and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Parent and the Sellers agree that it would not be just and equitable if
contribution pursuant to this Section 3(e)(iv) were determined by pro rata
allocation (even if the Sellers and their respective Permitted Transferees were
treated as one entity for such purpose) or by any other method of allocation
that does not take account of the equitable considerations referred to above.

 

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(v) The foregoing indemnity agreement of the Parent and Sellers is subject to
the condition that, insofar as they relate to any loss, claim, liability or
damage made in a preliminary prospectus but eliminated or remedied in the
amended prospectus that is on file with the Commission at the time of a sale of
Registrable Securities (the “Final Prospectus”), such indemnity or contribution
agreement shall not inure to the benefit of any Seller (but only if such Seller
was required to deliver such Final Prospectus) if a copy of such Final
Prospectus was furnished to such Seller prior to the time of sale of such
Registrable Securities and was not furnished to the person asserting the loss,
liability, claim or damage at or prior to the time such action is required by
the Securities Act.

(f) Information by the Sellers. Each of the Sellers (and, if applicable, their
respective Permitted Transferees) holding securities included in any
registration shall furnish to the Parent such information regarding such Seller
(and, if applicable, such Permitted Transferee) and the distribution proposed by
such Seller or Permitted Transferee as the Parent may reasonably request in
writing and as shall be reasonably required in connection with any registration
referred to in this Agreement.

(g) Holdback Agreement; Postponement. Notwithstanding the provisions of
Section 3(a), if the Board of Directors of the Parent determines in good faith
that it is in the best interests of the Parent (i) not to disclose the existence
of facts surrounding any proposed or pending acquisition, disposition, strategic
alliance or financing transaction involving the Parent or (ii) for any purpose,
to suspend the registration rights set forth herein, the Parent may, by notice
to the Seller Representative in accordance with Section 6(a) (a “Suspension
Notice”), suspend the rights of the Sellers (and, if applicable, their
respective Permitted Transferees) to make sales pursuant to the applicable Shelf
Registration or Subsequent Shelf Registration, as the case may be, for such a
period of time as the Board of Directors may reasonably determine; provided that
such periods of suspension may not exceed 60 days in the aggregate during any
period of 12 consecutive months. If the Parent shall deliver to the Sellers
(and, if applicable, their respective Permitted Transferees) any Suspension
Notice, the Effectiveness Period shall be extended by the number of days during
the period from and including the date of the delivery of such Suspension Notice
to and including the date the Seller (and, if applicable, their respective
Permitted Transferees) is advised by the Parent that such suspension has ended.

(h) Assignment. The registration rights set forth in Section 3 hereof may not be
assigned, in whole or in part, by any Seller other than, if applicable, to
Permitted Transferees who execute a joinder to this Agreement substantially in
the form of Exhibit A hereto. Any assignment to the contrary shall be null and
void.

4. RULE 144 REPORTING

With a view to making available the benefits of certain rules and regulations of
the Commission which may permit the sale of restricted securities to the public
without registration, the Parent agrees that it will:

(a) make and keep current public information available (as those terms are
understood and defined in Rule 144) at all times;

 

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(b) use its reasonable best efforts to file with the Commission in a timely
manner all reports and other documents required of the Parent under the
Securities Act and the Exchange Act; and

(c) so long as there are outstanding any Registrable Securities, furnish to each
Seller (and, if applicable, each Permitted Transferee), upon request, a written
statement by the Parent as to its compliance with the reporting requirements of
Rule 144 and of the Securities Act and the Exchange Act, a copy of the most
recent annual or quarterly report of the Parent, and such other reports and
documents so filed as such Seller may reasonably request in availing itself of
any rule or regulation of the Commission allowing such Seller (and, if
applicable, such Permitted Transferee) to sell any such securities without
registration.

5. INTERPRETATION OF THIS AGREEMENT

(a) Directly or Indirectly. Where any provision in this Agreement refers to
action to be taken by any Person, or which such Person is prohibited from
taking, such provision shall be applicable whether such action is taken directly
or indirectly by such Person.

(b) Generally. In this Agreement, unless the context otherwise requires:
(i) headings do not affect the interpretation of this Agreement; (ii) any phrase
introduced by the terms “including”, “include”, “in particular” or any similar
expression shall be construed as illustrative and shall not limit the sense of
the words preceding those terms; and (iii) the words “hereof,” “hereby” and
“herein” and words of similar meaning when used in this Agreement refer to this
Agreement in its entirety and not to any particular Article, Section or
provision of this Agreement.

6. MISCELLANEOUS

(a) Notices. All notices, demands or other communications to be given or
delivered under or by reason of the provisions of this Agreement will be in
writing in English and will be deemed to have been given when delivered
personally to the recipient or when sent to the recipient by facsimile (receipt
confirmed), one (1) business day after the date when sent to the recipient by
reputable overnight express courier services (charges prepaid) or three
(3) business days after the date when mailed to the recipient by certified or
registered mail, return receipt requested and postage prepaid. Such notices,
demands and other communications will be sent the Parent and the Seller
Representative at the addresses indicated below:

If to Seller Representative, to:

LuxELIT S.à r.l.

282, Route de Longwy L – 1940

Luxembourg

Fax: (+352) 26 86 81 86

Attention: Board of Managers

 

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If to the Parent:

Mohawk Industries, Inc.

P.O. Box 12069

160 South Industrial Boulevard

Calhoun, GA 30702

Fax: 706-624-2483

Attention: James T. Lucke

(b) Entire Agreement. This Agreement sets forth the entire agreement among the
parties in respect of the subject matter hereof. No party shall have any claim
or remedy in respect of any statement, representation, warranty or undertaking
relating to the subject matter hereof which is not expressly set forth in this
Agreement.

(c) Waivers. No failure or delay by a party in exercising any right or remedy
provided by law or under this Agreement shall impair such right or remedy or
operate or be construed as a waiver or variation of it or preclude its exercise
at any subsequent time and no single or partial exercise of any such right or
remedy shall preclude any further exercise of it or the exercise of any other
remedy.

(d) Counterparts. This Agreement may be executed in any number of separate
counterparts (including by means of facsimile), each of which is an original but
all of which taken together shall constitute one and the same instrument.

(e) Amendments. No amendment to this Agreement shall be valid unless it is in
writing and duly executed by the Parent and Seller Representative.

(f) Severability. Each of the provisions of this Agreement is severable. If any
such provision is held to be or becomes invalid or unenforceable in any respect
under the law of any jurisdiction, it shall have no effect in that respect and
the parties shall use all reasonable efforts to replace it in that respect with
a valid and enforceable substitute provision the effect of which is as close to
its intended effect as possible.

(g) Third Party Beneficiaries. A person who is not a party to this Agreement
shall have no right to enforce any of its terms and this Agreement is not
intended to give any Person other than the parties hereto and their permitted
assigns any rights hereunder.

(h) Governing Law. THIS AGREEMENT AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING
UNDER OR RELATED IN ANY WAY TO THIS AGREEMENT, THE RELATIONSHIP OF THE PARTIES,
THE PROPOSED TRANSACTION AND/OR THE INTERPRETATION AND ENFORCEMENT OF THE RIGHTS
AND DUTIES OF THE PARTIES HEREUNDER OR RELATED IN ANY WAY TO THE FOREGOING,
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAW OF THE
STATE OF DELAWARE WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW
PROVISION OR RULE (WHETHER OF THE STATE OF DELAWARE OR ANY OTHER JURISDICTION)
THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE
STATE OF DELAWARE.

 

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(i) Dispute Resolution. EACH PARTY IRREVOCABLY SUBMITS TO THE EXCLUSIVE
JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN NEW CASTLE COUNTY,
DELAWARE FOR THE PURPOSES OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT, THE OTHER TRANSACTION DOCUMENTS OR ANY
TRANSACTION CONTEMPLATED HEREBY OR THEREBY AND AGREES THAT ALL CLAIMS IN RESPECT
OF THE SUIT, ACTION OR OTHER PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH
COURT. EACH PARTY AGREES TO COMMENCE ANY SUCH SUIT, ACTION OR OTHER PROCEEDING
IN THE STATE AND FEDERAL COURTS SITTING IN NEW CASTLE COUNTY, DELAWARE. EACH
PARTY WAIVES ANY DEFENSE OF IMPROPER VENUE OR INCONVENIENT FORUM TO THE
MAINTENANCE OF ANY ACTION OR PROCEEDING SO BROUGHT AND WAIVES ANY BOND, SURETY,
OR OTHER SECURITY THAT MIGHT BE REQUIRED OF ANY OTHER PARTY WITH RESPECT
THERETO. ANY PARTY MAY MAKE SERVICE ON ANY OTHER PARTY BY SENDING OR DELIVERING
A COPY OF THE PROCESS TO THE PARTY TO BE SERVED AT THE ADDRESS AND IN THE MANNER
PROVIDED FOR THE GIVING OF NOTICES IN SECTION 6(a). NOTHING IN THIS SECTION
6(i). HOWEVER, SHALL AFFECT THE RIGHT OF ANY PARTY TO SERVE LEGAL PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR AT EQUITY. EACH PARTY AGREES THAT A FINAL
JUDGMENT IN ANY ACTION OR PROCEEDING SO BROUGHT SHALL BE CONCLUSIVE AND MAY BE
ENFORCED BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW OR AT
EQUITY.

EACH OF THE PARTIES HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY
ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT,
ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE PERFORMANCE OF SUCH RIGHTS AND
OBLIGATIONS. EACH OF THE PARTIES (i) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT
SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVERS AND (ii) ACKNOWLEDGES THAT SUCH OTHER PARTY HAS BEEN INDUCED
TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE WAIVERS AND
CERTIFICATIONS CONTAINED HEREIN.

[Signature pages follow]

 

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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first set forth above.

 

SELLERS: LUXELIT S.À R.L. By:       Name:   Title:

 

FINCERAMICA S.P.A. By:       Name:   Title:

 

PARENT: MOHAWK INDUSTRIES, INC. By:       Name:   Title:

 

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Exhibit A

JOINDER AGREEMENT

WHEREAS, simultaneously with the execution of this Joinder Agreement (this
“Agreement”), [•] (the “Acquiror”) is acquiring from [•], [•] shares of common
stock, par value $0.01 per share (the “Parent Common Shares”), of [•], a
Delaware corporation (the “Parent”);

WHEREAS, as a condition to the acquisition of the Parent Common Shares, the
Acquiror has agreed, upon the acquisition of the Parent Common Shares, to join
that certain Stock Restriction and Registration Rights Agreement, dated as of
[•], 2012 (the “Registration Agreement”), among the Parent, LuxELIT and
Finceramica;

WHEREAS, Acquiror understands that the execution of this Agreement is a
condition precedent to the acquisition of the Parent Common Shares; and

WHEREAS, capitalized terms used but not defined herein shall have the meaning
set forth in the Registration Agreement.

NOW, THEREFORE, as an inducement to the transferor of the Parent Common Shares
and pursuant to Sections 2(a) and 3(h) of the Registration Agreement, the
parties agree as follows:

1. [•] hereby agrees that, immediately upon its acquisition of Parent Common
Shares, it shall automatically join in the Registration Agreement , and shall
thereafter be bound by the terms and provisions and receive the benefits of the
Registration Agreement with respect to the Parent Common Shares as fully as if
it were an initial signatory thereto, and shall be deemed to be a “Permitted
Transferee” and a “Seller” for all purposes thereunder.

2. Acquiror accepts Seller Representative as its true and lawful
attorney-in-fact for purposes of this Agreement and the Registration Agreement.
Seller Representative shall be a third party beneficiary of this paragraph 2.

3. This Agreement shall be governed by and construed in accordance with the laws
of the State of Delaware without giving effect to the principles of conflicts of
law, and Acquiror shall be subject to the provisions of Sections 6(h) and (i) of
the Registration Agreement with respect to any dispute arising out of or
relating to this Agreement.

 

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IN WITNESS WHEREOF, the undersigned have executed this Agreement this
        day of                     .

 

[ACQUIROR] By:   By:       Name:   Title: Address:

 

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Accepted: MOHAWK INDUSTRIES, INC. By:       Name:   Title:

 

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Schedule I

Permitted Transferees

 

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