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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 29, 1994.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-6761
COLLINS & AIKMAN GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 38-1954600
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
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8320 UNIVERSITY EXECUTIVE PARK, SUITE 102
CHARLOTTE, NORTH CAROLINA 28262
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (704)
548-2350
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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$2.50 Convertible Preferred Stock, Series A American Stock Exchange
15% Subordinated Notes due 1995 American Stock Exchange
Pacific Stock Exchange*
11 3/8% Usable Subordinated Debentures due 1997 American Stock Exchange
Pacific Stock Exchange*
7 1/2%/10% Debentures due 2005 American Stock Exchange
Pacific Stock Exchange*
11 7/8% Senior Subordinated Debentures due 2001 American Stock Exchange
* Collins & Aikman Group, Inc. has applied to the Securities and Exchange Commission
("Commission") to have its debt securities removed from listing on the Pacific Stock
Exchange ("PSE"). The PSE did not object to such application, which is currently pending
before the Commission.
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SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the $2.50 Convertible Preferred Stock, Series
A held by nonaffiliates of the Registrant (based upon the closing price on the
American Stock Exchange on May 2, 1994) was approximately $42,900,000.
As of May 2, 1994, the number of outstanding shares of the Registrant's
common stock, $0.10 par value, was 47,808,123 shares. Since April 13, 1989, all
shares have been held by Collins & Aikman Holdings Corporation (formerly WCI
Holdings Corporation).
DOCUMENTS INCORPORATED BY REFERENCE: NONE
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COLLINS & AIKMAN GROUP INC. AND SUBSIDIARIES
FORM 10-K ANNUAL REPORT INDEX
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Item 1. Business, page 1.
Item 2. Properties, page 6.
Item 3. Legal Proceedings, page 6.
Item 4. Submission of Matters to a Vote of Security Holders, page 9.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters, page 9.
Item 6. Selected Financial Data, page 10.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, page 11.
Item 8. Financial Statements and Supplementary Data, page 17.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure, page 17.
Item 10. Directors and Executive Officers of the Registrant, page 18.
Item 11. Executive Compensation, page 21.
Item 12. Security Ownership of Certain Beneficial Owners and Management, page 30.
Item 13. Certain Relationships and Related Transactions, page 32.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K, page 33.
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PART I
ITEM 1. BUSINESS
Collins & Aikman Group, Inc. ("Group" or the "Company") (formerly Wickes
Companies, Inc.) was incorporated in Delaware on March 17, 1971, and is the
successor to a Michigan corporation called The Wickes Corporation, whose
earliest predecessor company was established in 1854.
On October 25, 1988, Group, Collins & Aikman Holdings II Corporation
("Holdings II") (formerly WCI Holdings II Corporation) and Collins & Aikman
Holdings Corporation ("Holdings") (formerly WCI Holdings Corporation) entered
into an Amended and Restated Agreement and Plan of Merger (the "Merger
Agreement"). Pursuant to the Merger Agreement, Holdings acquired approximately
80% of the outstanding shares of the Company's common stock, par value $.01 per
share (the "Common Stock") on December 8, 1988 following a tender offer. On
April 13, 1989, a subsidiary of Holdings merged with and into Group (the
"Merger"), and Group became a direct wholly owned subsidiary of Holdings.
Holdings II and Holdings were formed for the purpose of acquiring the entire
equity interest in Group. Holdings II is a Delaware corporation jointly owned by
Blackstone Capital Partners L.P., a Delaware limited partnership ("Blackstone
Partners"), and Wasserstein Perella Partners, L.P., a Delaware limited
partnership ("WP Partners"), and their respective affiliates.
Since the acquisition of Group by Holdings (the "1988 Acquisition"), the
Company has divested 27 businesses for approximately $1,643 million. By the end
of 1993, the Company had streamlined its operations into its three existing
business segments. See Notes 4 and 16 to Consolidated Financial Statements.
The Company is a leader in each of its three business segments: Automotive
Products, the largest supplier of interior trim products to the North American
automotive industry; Interior Furnishings, the largest manufacturer of
residential upholstery fabrics in the U.S.; and Wallcoverings, the largest
producer of residential wallcoverings in the U.S. For certain financial
information regarding the Company's business segments, see Note 16 to
Consolidated Financial Statements and "ITEM 7. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS."
All references to a year with respect to the Company refer to the fiscal
year of the Company which ends on the last Saturday of January of the following
year.
AUTOMOTIVE PRODUCTS
GENERAL
The Company is a leading designer and manufacturer of automotive products
with 1993 net sales in this segment of $677.9 million. Automotive Products
supplies four major interior trim products -- automotive seat fabric
("bodycloth"), molded floor carpets, accessory floor mats and luggage
compartment liner -- and convertible top stacks. Automotive Products had 1993
net sales in these product lines of $537.8 million. Automotive Products has
supplied interior trim products to the automotive industry for over 60 years.
While some interior trim suppliers have sales volumes equivalent to or greater
than that of the Company in a single product line, management believes that the
Company sells a wider variety of interior trim products, has products on more
vehicle lines and has a broader, more uniform sales penetration at foreign owned
North American automotive production and assembly facilities ("Transplants") and
U. S. automotive equipment manufacturers (together with Transplants, "OEMs")
than any of its competitors.
The Company's sales are dependent on certain significant automotive
customers. Sales to General Motors Corporation accounted for more than 10% of
the Company's net sales in each of 1993, 1992 and 1991, and sales to Chrysler
Corporation accounted for approximately 10% of the Company's net sales in each
of 1993 and 1992.
Automotive industry demand historically has been influenced by both
cyclical factors and long-term growth trends. During the last three decades, the
stock of U.S. light vehicles (passenger cars, pickups, mini vans and sports
utility vehicles) grew at a 3.2% compound annual rate, and at a 2.4% compound
annual rate since 1980. Since nearly all of the historic growth in the stock of
light vehicles has been associated with increases in the
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driving age population and real per capita income, the Company anticipates that
the fleet of light vehicles will continue to grow at rates consistent with these
factors.
Annual new car and truck sales historically have been cyclical. In the most
recent cycle, U.S. light vehicle sales declined from an average of 15.4 million
units per year in 1986-1988 to a low of 12.3 million units in 1991. Since late
1993, however, U.S. light vehicles sales have accelerated strongly, reflecting
what management believes to be the early phase of a cyclical upturn. Cyclical
upturns in the auto cycle generally have lasted three to five years.
PRODUCTS
Automotive Products manufactures five principal products: automotive seat
fabric, molded floor carpets, accessory floor mats, luggage compartment trim and
convertible top stacks. Automotive Products also produces a variety of other
automotive and nonautomotive products.
AUTOMOTIVE SEAT FABRIC. Automotive Products manufactures a wide variety of
bodycloth, including flat-wovens, velvets and knits. Automotive Products also
laminates foam to bodycloth. In 1993, 1992 and 1991, Automotive Products had net
sales of bodycloth of $218.4 million, $191.1 million and $189.8 million,
respectively.
MOLDED FLOOR CARPETS. Molded floor carpets includes polyethylene,
barrier-backed and molded urethane underlay carpet. In the Company's automotive
molded floor product line, it has developed a "foam-in-place" process to provide
floor carpeting with enhanced acoustical and fit characteristics, resulting in a
substantial gain in unit selling prices. In 1993, 1992 and 1991 net sales of
molded floor carpets were $180.5 million, $173.1 million and $161.9 million,
respectively.
ACCESSORY FLOOR MATS. Automotive Products produces carpeted automotive
accessory floor mats for both North American produced vehicles and imported
vehicles. In 1993, management estimates that approximately 63% of all vehicles
produced in North America included accessory mats as original equipment.
LUGGAGE COMPARTMENT TRIM. Luggage compartment trim includes one-piece
molded trunk systems and assemblies, wheelhouse covers, seatbacks, tireboard
covers, center pan mats and other trunk trim products.
CONVERTIBLE TOP STACKS. Automotive Products designs, manufactures and
distributes convertible top stacks through its Dura Convertible Systems
division ("Dura"). In October 1993, Dura began shipping its "Top-in-a-Box"
product for Ford Motor Company's redesigned Mustang vehicle.
OTHER. Automotive Products also produces a variety of other auto products,
including die cuts for automotive interior trim applications, convertible power
train units, headliner fabric, and roll goods for export and domestic
consumption. Small volumes of certain products, such as residential floor mats,
casket and tie linings and sliver knits, are sold to other commercial and
industrial markets.
COMPETITION
The automotive supply business is highly competitive. The primary
competitor in bodycloth is Milliken & Company. The primary competitors in molded
floor carpet are Masland Corporation and JPS Automotive Products Corp. In
accessory floor mats, the Company competes primarily against Pretty Products
Company. Automotive Products' primary competitors in luggage compartment trim
are Masland Corporation and Gates Corporation. In convertible top stacks,
Automotive Products competes primarily against American Sunroof Corporation.
The Company principally competes for new business at the design stage of
new models and upon the redesign of existing models. The Company is vulnerable
to a decrease in demand for the models that generate the most sales for the
Company, a failure to obtain purchase orders for new or redesigned models and
pricing pressure from the major automotive companies.
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FACILITIES
Automotive Products has 34 manufacturing, warehouse and other facilities
located in the U.S., Canada and Mexico aggregating approximately 5.9 million
square feet. The majority of these facilities are located in North Carolina,
Ohio and Michigan and in Ontario and Quebec, Canada. Approximately 90% of the
total square footage of these facilities is owned and the remainder is leased.
Many facilities are strategically located to provide just-in-time ("JIT")
inventory delivery to the Company's customers.
INTERIOR FURNISHINGS
Interior Furnishings designs and manufactures residential and commercial
upholstery fabrics through its Decorative Fabrics group and high-end specified
contract floorcoverings through its Floorcoverings group. In 1993, the Interior
Furnishings segment had net sales of $407.2 million.
DECORATIVE FABRICS
GENERAL. Interior Furnishings' Decorative Fabrics group is the largest
designer and manufacturer of upholstery fabrics in the U.S. The Decorative
Fabrics group had 1993 net sales of $313.6 million. Decorative Fabrics strives
to be the preferred supplier of middle to high-end flat-woven upholstery fabrics
to furniture manufacturers and fabric distributors. This group's primary
division, Mastercraft, is the leading manufacturer of flat-woven upholstery
fabrics. Management believes that Mastercraft has substantially more Jacquard
looms and styling capacity dedicated to upholstery fabrics, and offers more
patterns (approximately 14,000) in a greater range of price points than any of
its competitors. The breadth and size of Mastercraft's manufacturing and design
capabilities provide it with exceptional flexibility to respond to changing
customer demands and to develop innovative product offerings. In order to
accommodate anticipated growth, the Company recently initiated a plan to invest
$85 million in Mastercraft between 1994 and 1998. Investment is targeted toward
the purchase of high-speed looms to increase capacity and productivity, new
electronic jacquard heads to reduce pattern changeover times, and computer
monitoring systems to provide information about the manufacturing processes and
to improve quality, productivity and capacity.
The three primary types of upholstery fabric are flat-wovens, velvets and
prints. Flat-woven fabrics are made in two major styles: Jacquard, which is
produced on high-speed computerized looms capable of weaving intricate designs
into the fabric, and Dobby, a plain fabric produced on standard looms. Demand
for upholstery fabric generally varies with economic conditions, particularly
sales of new and existing homes, and is directly associated with sales of
upholstered furniture at the retail level. Shifts in consumer taste can also
affect demand for upholstery fabric.
PRODUCTS. Decorative Fabrics' four operating divisions are Mastercraft,
Cavel, Warner and Greeff. Mastercraft and Cavel design and manufacture
Jacquards, velvets and other woven fabrics for the furniture, interior design,
commercial, recreational vehicle and industrial markets. Greeff and Warner
design and distribute high-end designer fabrics to interior designers and
specialty retailers in the U.S. and the U.K., respectively.
Decorative Fabrics had net sales of flat-woven products in 1993, 1992 and
1991 of $268.9 million, $254.7 million and $214.5 million, respectively.
CUSTOMERS. Decorative Fabrics is a primary supplier to virtually all major
furniture manufacturers in the U.S., including La-Z-Boy, Ethan Allen,
Thomasville, Flexsteel, Bassett, Broyhill, Baker, Henredon, Rowe and Robert
Allen. Due to the breadth of its product offerings, strong design capabilities
and superior customer service, the Company has developed close relationships
with many of Decorative Fabrics' over 1,000 customers.
Nearly all of Decorative Fabrics' products are made to customer order. This
reduces the amount of raw material and finished goods inventory required and
greatly reduces product returns, all of which improve profit margins.
COMPETITION. The U.S. upholstery fabrics market is highly competitive.
Manufacturers compete on the basis of design, quality, price and customer
service. Decorative Fabrics' primary competitors include Quaker Fabric
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Corporation, Culp, Inc., Joan Fabrics Corp. and the Burlington House Upholstery
Division of Burlington Industries, Inc.
FACILITIES. Mastercraft operates four weaving plants and one finishing
plant in North Carolina aggregating 1.1 million square feet, of which
approximately 93% is owned and the remainder is leased. Cavel shares
manufacturing capacity with Automotive Products at three plants in Roxboro,
North Carolina. Greeff and Warner are designers and distributors, subcontracting
all manufacturing.
FLOORCOVERINGS
GENERAL. The Floorcoverings group of the Interior Furnishings segment is a
leading producer of high-end specified contract carpeting products for
institutional and commercial customers. In 1993 Floorcoverings had net sales of
$93.6 million. Its principal products are six-foot wide rolls and modular carpet
tiles. Floorcoverings produces virtually no product for inventory or for
commodity markets.
Since 1990, Floorcoverings has repositioned its product offerings, shedding
those products in which it lacked either a low-cost position or proprietary
product advantage. By focusing on areas of competitive advantage, Floorcoverings
has prospered, notwithstanding a significant downturn in commercial construction
and renovation, and increased its average selling price per square yard by over
13%.
Management estimates that 70% of the Company's floorcoverings business is
based on renovation rather than new construction projects. Historically,
renovation activity has been significantly less cyclical than new construction.
Also, approximately 60% of Floorcoverings' 1993 net sales were to institutional
customers such as government, healthcare, and education facilities rather than
to commercial market customers. Management believes that government, healthcare
and educational customers are stable growth sectors.
PRODUCTS. Floorcoverings' key competitive advantage in its principal
products, six-foot wide rolls and modular carpet tiles, is its patented
Powerbond RS(Register mark) adhesive technology, which has 14 years of patent
protection remaining. Because the Powerbond RS(Register mark) system does not
use wet adhesives, it permits the installation of floorcoverings directly on
floor surfaces, including existing carpeting, with substantially reduced labor
costs and without the fumes of conventional wet adhesives. This allows for less
disruptive and less time-consuming installation and, for this reason, is
particularly attractive to institutions such as schools and hospitals. In
addition to reducing installation downtime for customers to as little as one
day, management believes Floorcoverings' product exhibits demonstrably superior
durability and cleaning characteristics ideally suited for high-traffic areas
such as airline terminals and customers such as Discovery Zone and Blockbuster.
COMPETITION. The commercial carpet industry is highly competitive, and
several of Floorcoverings' competitors have substantially greater commercial
carpet sales in the commodity segments of the industry, segments in which
Floorcoverings does not compete. Floorcoverings' niche products have demanding
specifications and generally cannot be manufactured using the equipment which
currently supplies most of the industry's commodity products. The Company's
primary competitors are Interface, Milliken & Company, Mohawk Industries and
Shaw Industries, Inc.
FACILITIES. Floorcoverings owns and operates four facilities in Dalton,
Georgia aggregating approximately 630,000 square feet.
WALLCOVERINGS
GENERAL
Wallcoverings, which operates under the name "Imperial", is a leading
manufacturer and distributor of a full range of wallcoverings for the
residential and commercial sectors of the wallcoverings market with 1993 net
sales of $220.4 million. It is the only producer of wallcoverings in the U.S.
that is fully integrated from paper production through design and distribution.
In addition, management believes that Imperial has a competitive advantage due
to its extensive in-house design expertise and licensing arrangements, its low
cost, vertically-integrated manufacturing capability, and its advanced customer
ordering and service network.
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The wallcoverings industry experienced significant and consistent growth
from the early 1980s through 1987. This growth resulted in part from increases
in new construction starts and existing home sales, which peaked in 1986 to
1987. In addition, a one-time surge in demand created a new industry-wide layer
of inventory as a result of the rapid growth of large in-stock retailers.
Between 1983 and 1987, the industry's physical shipment volume increased from
137 million to 200 million rolls of wallpaper per year, a 9.9% annual growth
rate. Between 1987 and 1990, the industry underwent a contraction, with volume
declining dramatically from 200 million rolls in 1987 to 174 million rolls in
1990, a 4.5% annual decline. This resulted from a slowdown in the overall
economy, particularly in the housing market, coupled with a reduction in
inventory by overstocked retailers. From 1991 to 1993, the industry's physical
shipment volume increased at a compound annual growth rate of 3.0%.
The wallcoverings market can generally be divided into the residential and
commercial sectors with the residential sector being the larger of the two
sectors. Demand for wallcoverings is primarily influenced by levels of
construction, renovation and remodeling. In addition to these cyclical factors,
shifts in consumer taste between wallpaper and paint can be a factor. The two
primary distribution channels within the residential sector of the wallcoverings
market are independent retailers ("dealers") and retail chains.
The industry contraction of the late 1980s and early 1990s left Imperial
with unutilized manufacturing capacity, an oversized distribution network and
excess product offerings. Between 1989 and 1992, Imperial implemented a
comprehensive downsizing program designed to bring Imperial's high fixed-cost
structure into better alignment with the changed industry environment. Imperial
closed 22 showrooms and 12 warehouses and reduced fixed costs by nearly 15%.
Imperial also substantially reduced the annual introduction rate of new
collections and virtually eliminated its use of independent distributors in
favor of exclusive captive distribution. This restructuring program improved
manufacturing efficiencies, but it adversely affected sales and led to a
reduction in shelf space and market share. As a result, Imperial's sales
declined during 1992 and into 1993, despite what management now believes to have
been a moderate upturn in industry conditions.
A new management team installed in February 1993 determined that the
reduction in new collections had been too severe. Accordingly, in late 1993,
management instituted a second restructuring program to bolster its new product
introduction rate through aggressive product design efforts. This product line
renewal led to 62 collections being introduced in 1993 and 70 collections being
planned for introduction in 1994, compared to 45 in 1992. Management is also
broadening its selection of in-stock programs and improving its order
fulfillment capabilities.
PRODUCTS
Management believes Imperial has maintained its leading market position due
to its competitive edge in color and design. Its in-house studio of
approximately 35 artists represents a major strategic investment by Imperial
which is supplemented by an active licensing program under which Imperial
licenses proven designs from well-known designers. Imperial is continuously
introducing new designs and color concepts that supplement its already vast
library.
Imperial offers a large number of well-known brand names, including
Imperial, United, Sterling Prints, Katzenbach & Warren, Greeff, Albert Van Luit
and Plexus. In addition to these in-house brands, Imperial licenses a number of
well-known brand names, including Gear, Laura Ashley, Pfaltzgraff, Croscill,
Mario Buatta, David and Dash, Louis Nichole, Clarence House and Carlton Varney,
for which it converts home furnishing designs into wallcovering designs.
Imperial also distributes the lines of John Wilman, Great Britain's largest
wallcoverings designer and manufacturer.
In recent years, there has been increasing demand for wallcoverings
coordinated with decorative accessories such as window treatments, bedding,
upholstery fabric and other textile products. To satisfy this demand from
upscale home furnishings customers, Imperial provides fabrics, which it
generally purchases outside the Company, that are coordinated with its
wallcovering designs. Some of these fabrics are supplied by the Mastercraft and
Greeff divisions of the Company.
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CUSTOMERS
Dealers and chains account for the largest portion of Imperial's customer
base. Management believes that the Company has the leading share in each of
these distribution channels. Management believes that Imperial has the most
extensive dealer network in the U.S., selling to approximately 15,000 dealers.
Imperial also sells to many of the leading chains in the country, including Home
Depot, Lowes, Sears, Sherwin Williams and Target.
COMPETITION
Competition in the wallcoverings industry is based on design, price and
customer service. Imperial's principal competitors are Borden, GenCorp, F.S.
Schumacher and Seabrook Wallcoverings.
FACILITIES
Imperial operates five manufacturing facilities in the United States and
three in Canada, as well as three distribution centers in the United States
aggregating 1.5 million square feet. Of this amount approximately 82% is owned
and the remainder is leased, including the three U.S. distribution centers.
RAW MATERIALS
Raw materials and other supplies used in the Company's operations are
normally available from a variety of competing suppliers. The loss of a single
or few suppliers would not have a material adverse effect on the Company.
ENVIRONMENTAL MATTERS
See "ITEM 3. LEGAL PROCEEDINGS -- Environmental Proceedings" and "ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -- ENVIRONMENTAL MATTERS."
EMPLOYEES
As of January 29, 1994, the Company's subsidiaries employed approximately
12,000 persons on a full-time or full-time equivalent basis. Approximately 2,200
of such employees are represented by labor unions. Management believes that the
Company's relations with its employees and with the unions that represent
certain of them are good.
ITEM 2. PROPERTIES
For information concerning the principal physical properties of Group and
its various operating divisions, see "ITEM 1. BUSINESS."
ITEM 3. LEGAL PROCEEDINGS
Except as described below, Group and its subsidiaries are not a party to
any material pending legal proceedings, other than ordinary routine litigation
incidental to their businesses.
PREFERRED STOCK REDEMPTION LITIGATION. On August 2, 1991, a Fifth
Consolidated Amended Complaint was filed in IN RE IVAN F. BOESKY SECURITIES
LITIGATION (the "BOESKY action"), a multi-district litigation pending for pre-
trial purposes in the United States District Court for the Southern District of
New York. In essence, the complaint is an amalgam of numerous class action and
individual claims against a variety of defendants relating principally to the
activities of, among others, Ivan F. Boesky, Drexel Burnham Lambert Incorporated
and Michael R. Milken. Among other things, the complaint alleges that these
defendants and various named associates, along with Group and certain former
officers and directors of Group, conspired to manipulate the price of the Common
Stock in April 1986 for the purpose of triggering a redemption of outstanding
preferred stock of Group issued in an April 24, 1985 public offering (the
"Preferred Stock"). The complaint alleges claims for compensatory and punitive
damages in unspecified amounts against Group and the individual Group-related
defendants for fraud
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and deceit, breach of fiduciary duty, unjust enrichment and violations of
Section 25400 of the California Corporations Code. It does so on behalf of a
certified class of persons and entities who, during the period of April 23, 1986
through June 2, 1986 redeemed, converted or sold shares of the Preferred Stock.
The complaint also alleges numerous other claims not involving Group or its
former officers and directors. The factual allegations in the complaint
involving Group are substantially similar to the allegations set forth in CITRON
V. WICKES COMPANIES, INC., ET AL., AND WEINBERGER V. WICKES COMPANIES, INC., ET
AL., two actions previously filed in the Superior Court of the State of
California for the County of Los Angeles which have been stayed in favor of the
BOESKY action.
PREFERRED STOCK LITIGATION. On or about October 27, 1992, suit was filed in
the United States District Court for the Central District of California against
Holdings, Group and nine current or former officers and directors of Holdings
and/or Group. The complaint, as amended, brought on behalf of a purported class
of purchasers of preferred stock of Holdings and Group, alleged Federal
securities law violations, state common law fraud and negligent
misrepresentation in various Holdings and Group Forms 10-K and 10-Q issued
during the period from December 1990 to December 1992. The complaint sought
unspecified damages and costs. On January 3, 1994, the Court approved a
Stipulation of Settlement pursuant to which Group agreed, in full settlement of
the lawsuit, to make certain disclosures concerning the 11 7/8% Securities (as
hereinafter defined) in certain of its Annual Report on Form 10-K and Quarterly
Report on Form 10-Q filings and, under certain circumstances, a press release.
In addition, Group reimbursed plaintiffs' counsel for attorneys' fees and
expenses of $200,000.
POF ARBITRATION. On or about May 26, 1992, Advanced Development &
Engineering Centre ("ADEC"), a division of an indirect subsidiary of Group,
filed a request for arbitration with the International Chamber of Commerce
seeking a resolution of ADEC's dispute with the Pakistan Ordnance Factories
Board ("POF") concerning ADEC's installation of a munitions facility in Pakistan
for a purchase price of $26.5 million. ADEC alleges that POF violated the
contract, among other things, by refusing to permit completion of a production
run, which would have entitled ADEC to receive $2.65 million, the remaining
unpaid portion of the purchase price under the contract. On August 6, 1992, POF
filed a reply and counterclaim alleging that as a result of ADEC's alleged
breach of the contract, POF's entire investment in the munitions facility was a
loss. POF claims damages in excess of $30 million.
DERIVATIVE LITIGATION. On or about March 19, 1993, a complaint was filed in
the Supreme Court of the State of New York, County of New York, against Group,
Blackstone Management Partners L.P. ("Blackstone Management"), Blackstone
Partners, WP Partners (together with Blackstone Partners, "the Partners"),
Wasserstein Perella & Co., Inc. ("WP & Co.") and six current or former directors
and/or officers of Group, captioned GLINERT V. COLLINS & AIKMAN GROUP, INC., ET
AL. That complaint, and an amendment dated April 13, 1994, alleged that the
plaintiff brought the action derivatively on behalf of Group. Plaintiff alleged
that the payment of certain fees by Group to its affiliates constitutes unfair
self-dealing, a waste and spoilation of Group's assets and breach of contract.
Plaintiff sought to have the defendants account to Group for any profits of
Blackstone Management and WP & Co. and for any damages to Group as a result of
the transactions alleged in the complaint. Plaintiff also sought to have a
permanent injunction entered prohibiting the further payment of certain fees by
Group to Blackstone Management and WP & Co. On April 13, 1994, plaintiff and
defendants entered into a stipulation of settlement in full settlement of the
lawsuit, and on April 28, 1994, the court entered a scheduling order calling
for, among other things, a hearing on the final approval of the settlement on
June 9, 1994. If the settlement is approved by the Court, after notice and a
hearing, the Company, Blackstone Management and WP & Co. shall enter into an
agreement relating to the provision of certain management, consulting and
financial services to the Company (including services to be rendered for the
$2.5 million in combined fees paid annually to each of Blackstone Management and
WP & Co. and transactional services to be billed based on specified formulas).
The Company shall appoint an ombudsman to review annually and challenge (if
warranted) payments, and disputes shall be resolved by an arbitrator-expert. To
the extent fees are paid to Blackstone Management, WP & Co. and their affiliates
in the future in accordance with that agreement, such fees shall not be subject
to objection or challenge by the Company or any preferred holder. The agreement
also provides for a deferral or cessation of certain fees under certain
circumstances. As part of the settlement, the Company on behalf of all the
defendants shall pay plaintiffs' counsel fees and expenses as awarded by the
Court up to $225,000.
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In the opinion of the Company's management based on the facts presently
known to it, the ultimate outcome of any of these legal proceedings will not
have a material effect on the Company's consolidated financial condition or
future results of operations.
ENVIRONMENTAL PROCEEDINGS
DOUGLAS, MICHIGAN. On January 4, 1991, a complaint was filed in the Circuit
Court for Allegan County, Michigan, captioned HAWORTH, INC. V. WICKES
MANUFACTURING COMPANY (the "HAWORTH action"), in which Haworth, Inc. ("Haworth")
alleges that predecessors of Wickes Manufacturing released environmental
contaminants on property, now owned by Haworth, located in the Village of
Douglas, Michigan. Haworth seeks a declaratory judgment that Wickes
Manufacturing is liable for the alleged contamination of the site,
indemnification for any costs incurred or to be incurred in connection with the
alleged contamination, an affirmative injunction requiring Wickes Manufacturing
to implement response actions at the site, damages in connection with alleged
diminution in value of the subject property, and other damages, interest, and
costs, all in unspecified amounts. Wickes Manufacturing has filed counterclaims
against Haworth. On June 28, 1993, the Court entered an order granting Wickes
Manufacturing's motion for summary disposition dismissing all of Haworth's
claims against Wickes Manufacturing. On July 19, 1993, Haworth appealed the
Court's order granting Wickes Manufacturing's motion for summary disposition. On
October 22, 1993, a complaint was filed in the United States District Court for
the Western District of Michigan, captioned HAWORTH, INC. V. WICKES
MANUFACTURING COMPANY AND PARAMOUNT COMMUNICATIONS, INC. (the "Second HAWORTH
action"). In the Second HAWORTH action, Haworth alleges federal and state law
claims with respect to Wickes Manufacturing and Paramount Communications Inc.
that are factually similar to the state law claims alleged in the HAWORTH
action, and Haworth seeks relief similar to the relief it seeks in the HAWORTH
action. The Michigan Department of Natural Resources, by letter dated December
20, 1989, notified Wickes Manufacturing pursuant to the Michigan Environmental
Response Act that Wickes Manufacturing is potentially responsible for
undertaking investigation and response actions to address contamination at the
site involved in the HAWORTH action and its possible effect on the water supply
of the Village of Douglas.
NORTH SMITHFIELD, RHODE ISLAND. On May 23, 1988, a complaint was filed in
the United States District Court for the District of Rhode Island, captioned
UNITED STATES V. KAYSER-ROTH CORPORATION AND HYDRO-MANUFACTURING, INC. (the
"STAMINA MILLS action"), in which the United States sought to recover response
costs under The Comprehensive Environmental Response, Compensation and Liability
Act ("CERCLA") from Group's former Kayser-Roth Corporation subsidiary
("Kayser-Roth") and others in connection with a site formerly operated by
Stamina Mills, Inc., a former subsidiary of Kayser-Roth, in North Smithfield,
Rhode Island. In January 1990, the District Court held Kayser-Roth liable under
CERCLA for all past and future response costs. By Amended Administrative Order
issued June 4, 1991, the EPA directed Kayser-Roth to implement the remedies set
forth in its Record of Decision issued September 18, 1990. Since the beginning
of fiscal 1990 to date, Kayser-Roth has paid approximately $2.9 million for past
response costs, prejudgment interest and remediation. Kayser-Roth is in the
process of complying with the remainder of the order. Group has agreed to
indemnify Kayser-Roth with respect to this matter.
On March 14, 1991, Hydro-Manufacturing, Inc. ("Hydro") filed a complaint in
the Providence County Superior Court for the State of Rhode Island captioned
HYDRO-MANUFACTURING, INC. V. KAYSER-ROTH CORPORATION, alleging, among other
things, that Hydro was compelled to submit to a Consent Decree in the STAMINA
MILLS action whereby it agreed to transfer the site to the United States in
order to limit Hydro's liability. Group has agreed to indemnify Kayser-Roth with
respect to this matter. In this action, Hydro sought to recover from Kayser-Roth
the alleged diminution in the site's value resulting from the site's
contamination, legal fees and costs incurred in defending the STAMINA MILLS
action, punitive damages, and other damages, interest and costs, all in
unspecified amounts. On July 21, 1992, the Court entered an order dismissing the
litigation. Hydro appealed the dismissal of the case to the Rhode Island Supreme
Court. On April 19, 1994, the Rhode Island Supreme Court affirmed the lower
court's order dismissing the litigation.
MISCELLANEOUS ENVIRONMENTAL MATTERS. In addition to the judicial and
administrative proceedings listed above, the Company also is legally or
contractually responsible or alleged to be responsible for the investigation
8
<PAGE>
and remediation of contamination at various other sites. It also has received
notices that it is a potentially responsible party ("PRP") in a number of
proceedings. It is a normal risk of operating a manufacturing business that
liability may be incurred for investigating and remediating on-site and off-site
contamination. The Company is currently engaged in investigation or remediation
at certain sites. These sites include, among others, the following: a site
adjacent to a facility formerly operated by Wickes Manufacturing's former Bohn
Heat Transfer division located at Beardstown, Illinois; a site formerly owned
and operated by Wickes Manufacturing's alleged former Daybrook Ottawa division
located at Bowling Green, Ohio; a site owned and formerly operated by Group
located at Elmira, California; the Beaunit Corporation Superfund Site located
near Fountain Inn, South Carolina; the Butterworth Landfill Superfund Site
located at Grand Rapids, Michigan; the Distler farm landfill site located at
Jefferson County, Kentucky; a site owned and formerly operated by Wickes
Manufacturing's former Mechanical Components division located at Mancelona,
Michigan; the Jadco Hughes Superfund Site located at North Belmont, North
Carolina; the former Albert Van Luit plant site owned by a Group subsidiary
located in North Hollywood, California; and the Stringfellow Superfund Site
located at Riverside County, California. In the last three fiscal years, Group
has paid approximately $5.5 million in the aggregate (excluding amounts paid in
connection with the Stamina Mills action disclosed above) in connection with its
various environmental sites. The majority of such costs have been incurred in
connection with the Elmira, California and North Hollywood, California sites.
In addition to the environmental sites and proceedings listed above, the
Company is and has been a party or PRP at other sites and involved in other
proceedings from time to time. It is difficult to estimate the total cost of
investigation and remediation due to various factors including incomplete
information regarding particular sites and other PRP's, uncertainty regarding
the extent of environmental problems and the Company's share, if any, of
liability for such problems, the selection of alternative compliance approaches,
the complexity of environmental laws and regulations and changes in cleanup
standards and techniques. When it has been possible to provide reasonable
estimates of the Company's liability with respect to environmental sites,
provisions have been made in accordance with generally accepted accounting
principles. However, there can be no assurance that the Company has identified
or properly assessed all potential environmental liability arising from the
activities or properties of the Company, its present and former subsidiaries and
their corporate predecessors. As of January 29, 1994, the Company has
established reserves of approximately $30.8 million for the estimated future
costs related to all its known environmental sites. In the opinion of
management, based on the facts presently known to it, the environmental costs
and contingencies will not have a material adverse effect on the Company's
consolidated financial condition or results of operations.
Group is seeking insurance coverage for a portion of the defense costs and
liability it has incurred and may incur in connection with the environmental
proceedings described above. Coverage issues have not been resolved. There can
be no assurance that any coverage will be provided.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There no longer is a trading market for the Common Stock. Upon the
consummation of the Merger on April 13, 1989, Holdings became the sole owner of
all the Common Stock of Group.
Group's bank loan agreements and indentures governing outstanding debt
restrict the payment of dividends on its Common Stock. Since January 26, 1991,
no dividends could be paid by Group to Holdings under the most restrictive
provisions in the existing debt agreements of Group. Under these provisions,
which are contained in the indenture, as amended, (the "11 7/8% Indenture"),
pursuant to which the Company's 11 7/8% Senior Subordinated Debentures due 2001
(the "11 7/8% Securities") as of January 29, 1994, Group would have needed to
earn an additional $866 million of consolidated net income (as defined in the
11 7/8% Indenture, as amended), in order to eliminate the deficit in its
dividend capacity (assuming no change in the other factors used to determine
Group's
9
<PAGE>
dividend capacity). Accordingly, Group does not expect to be permitted to pay
dividends on its Common Stock during fiscal 1994 or in the foreseeable future
beyond fiscal 1994, so long as the 11 7/8% Securities are outstanding. See "ITEM
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS" and Note 9 to Consolidated Financial Statements.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected consolidated financial information
for the Company at and for each of the five fiscal years indicated. The
statements of operations and balance sheet data have been restated to reflect
discontinued operations (see Note 4 to Consolidated Financial Statements). As a
result of an acquisition in 1991, and the recognition of a cumulative adjustment
in 1991 to adopt the accrual basis of accounting for postretirement benefits
(see Notes 1 and 11 to Consolidated Financial Statements), the financial
information set forth below is not comparable for the periods presented and
should not be considered indicative of current or future operations or income.
The following financial information should be read in conjunction with
"ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS" and the Consolidated Financial Statements and notes thereto
appearing elsewhere herein.
<TABLE>
<CAPTION>
1993 1992 (A) 1991 1990 1989
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
STATEMENTS OF OPERATIONS DATA
Net sales.................................. $1,305,517 $1,277,500 $1,184,316 $1,232,403 $1,276,442
Loss from continuing operations before
income taxes (b)......................... (165,078) (39,105) (43,722) (46,069) (95,259)
Loss from continuing operations after
income taxes............................. (176,692) (41,404) (59,570) (64,042) (100,193)
Income (loss) before extraordinary
items.................................... (292,291) (271,253) (93,901) (130,830) 66,348
Net income (loss)(c)....................... (292,291) (271,253) (170,515) (91,625) 233,858
BALANCE SHEET DATA (AT FISCAL YEAR END)
Working capital............................ $ 319,730 $ 325,375 $ 174,580 $ 235,382 $ 351,791
Total assets............................... 1,540,210 1,813,181 2,000,595 2,132,644 2,561,954
Short-term debt (d)........................ 29,711 70,433 55,643 14,091 8,428
Long-term obligations and redeemable
preferred stock (e)...................... 733,580 784,850 776,404 836,559 1,041,650
Stockholder's equity....................... 210,344 489,274 773,281 950,929 1,083,581
</TABLE>
(a) 1992 included fifty-three weeks.
(b) 1992 and 1990 include restructuring costs of $10.0 million and $17.3
million, respectively. 1989 includes restructuring costs of $16.2 million.
1993 includes a goodwill write-down of $144.8 million and a $26.7 million
charge related to the Holdings 1993 Employee Stock Option Plan.
(c) 1991 net loss is after the cumulative effect of the change in accounting
principle for other postretirement benefits, net of tax of $0, of $87.6
million.
(d) Includes notes payable, current maturities of long-term debt and current
portion of capital lease obligations.
(e) Long-term obligations includes long-term debt and noncurrent portion of
capital lease obligations.
10
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with "ITEM 6.
SELECTED FINANCIAL DATA" and the Consolidated Financial Statements of the
Company and the notes thereto, included elsewhere in this Form 10-K.
RECENT DEVELOPMENTS
On April 19, 1994, the Company's parent, Holdings, as part of a proposed
recapitalization (the "Recapitalization"), filed a registration statement on
Form S-2 covering the issuance by Holdings in a public offering of 20,000,000
shares of Holdings common stock.
The Recapitalization, if effected, would result in (i) the defeasance and
redemption or prepayment of substantially all outstanding debt of Holdings and
its subsidiaries including the Company and (ii) the redemption of all
outstanding preferred stock of the Company and Holdings. The sources of capital
for the Recapitalization are proceeds of the public offering, cash on hand and
amounts to be available under certain proposed new credit facilities (the "New
Credit Facilities"). The New Credit Facilities will consist of (i) a Closing
Date Term Loan Facility in an aggregate principal amount of $475 million with a
term of eight years, (ii) a Delayed Draw Term Loan Facility in an aggregate
principal of $25 million with a term of eight years and (iii) a Revolving
Facility in an aggregate principal amount of up to $275 million with a term of
seven years. These facilities will include various restrictive covenants
including maintenance of EBITDA (i.e. earnings before interest, taxes,
depreciation and amortization) and interest coverage ratios, leverage and
liquidity tests and various other restrictive covenants which are typical for
such facilities.
In connection with the Recapitalization, Holdings II, currently the sole
common stockholder of Holdings, will be merged into Holdings and Holdings will
change its name to Collins & Aikman Corporation. Concurrently, the Company will
be merged into its wholly-owned subsidiary, Collins & Aikman Corporation ("C&A
Co."), which will change its name to C&A Products Co.
GENERAL
After the 1988 Acquisition, the Company implemented a restructuring plan
designed to focus on certain businesses in which it enjoyed a competitive
advantage and to eliminate unnecessary corporate overhead. The Company divested
27 business units which in 1988 contributed 73% of net sales. The aggregate
proceeds from these divestitures were $1,643 million, and enabled the Company to
reduce total indebtedness from $1,862 million at October 29, 1988 to $763.1
million at the end of 1993. In addition, the Company reduced and consolidated
corporate staffs. Throughout this period, the Company made substantial
investments to enhance the competitive position of its three continuing business
segments and to strengthen its position as a low-cost producer.
The Company's continuing business segments consist of Automotive Products,
Interior Furnishings and Wallcoverings. The Company's 1993 net sales were
$1,305.5 million, with approximately $677.9 million (51.9%) in Automotive
Products, $407.2 million (31.2%) in Interior Furnishings, and $220.4 million
(16.9%) in Wallcoverings.
The industries in which the Company competes are cyclical. Automotive
Products is influenced by the level of North American vehicle production.
Interior Furnishings is primarily influenced by the level of residential,
institutional and commercial construction and renovation. Wallcoverings is also
influenced by levels of construction and renovation and by the trends in home
remodeling.
During 1993, the Company disposed of several businesses and reclassified
one subsidiary as a continuing business. Accordingly, the Company's 1993
financial statements reflect (i) the sale of the Company's Engineering Group,
(ii) the disposition of substantially all of the assets, and the settlement of
substantially all the current liabilities, of the Company's Builders Emporium
division ("Builders Emporium"), (iii) the sale of Kayser-Roth, and (iv) the
decision to retain Dura. The results of the Engineering Group, Builders Emporium
and Kayser-Roth are classified as discontinued operations for all periods. The
results of Dura are now classified in Automotive Products and prior reporting
periods have been restated to reflect Dura as a continuing operation. As
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<PAGE>
a result of the foregoing, this discussion is not comparable to the previous
discussions of the Company's operations. See Note 4 to Consolidated Financial
Statements.
The Company reclassified its industry segments during 1993 to realign its
products based on primary customer groups. Businesses related to the automotive
industry which were part of the Company's former Specialty Textiles segment have
been reclassified as Automotive Products. The decorative fabrics and
floorcoverings businesses have been reclassified as Interior Furnishings.
Previously, the floorcovering business was part of the Specialty Textiles
segment. Wallcoverings' products, which were previously part of the Home
Furnishing segment, have been reclassified as Wallcoverings. Industry segment
information has been restated for the years 1992 and 1991. See Note 16 to the
Consolidated Financial Statements.
The Company does not believe that inflation has had a material impact on
sales or income during the three years ended January 29, 1994.
1993 COMPARED TO 1992
NET SALES
Net sales increased 2.2% to $1,305.5 million in 1993 (a 52-week year) from
$1,277.5 million in 1992 (a 53-week year). The overall increase in net sales
reflected improvement in Automotive Products and Interior Furnishings offset by
a decrease in net sales at Wallcoverings.
Automotive Products' net sales increased 5.3% in 1993 to $677.9 million.
Net sales growth increased, primarily during the second half of 1993, due to a
number of factors. First, growth in the North American vehicle build accelerated
due in part to increased production by the Transplants. Second, the Company won
placement of its products on a number of new and existing vehicle lines in 1993.
Third, the Company continued to benefit from increasing sales content per
vehicle. These factors were offset by decreased demand for product for certain
key models in the second quarter due to OEM production downtime during model
changeovers.
Interior Furnishings' net sales increased 3.9% in 1993 to $407.2 million.
The increase in net sales was attributable to an industry-wide strengthening of
furniture sales in 1993 (somewhat offset by an industry-wide decline in sales
volume during the second quarter of 1993) and increased sales of the Company's
patented Powerbond RS(Register mark) floorcovering products. Net sales increased
by 5.6% at both Mastercraft, which represents 66.0% of Interior Furnishings'
sales, and Floorcoverings due largely to volume increases.
Wallcoverings' net sales decreased 8.9% in 1993 to $220.4 million. The
decrease in sales was due primarily to the consolidation of certain product
distribution channels and to Wallcoverings' downsizing program. In the fourth
quarter, management responded to these reduced sales by aggressively rebuilding
dealer shelf space. As a result, sample book placements in the dealer market
increased.
OPERATING EXPENSES
Total operating expenses were $1,386.4 million and $1,229.5 million in 1993
and 1992, respectively, including $38.8 million ($26.7 million of which was a
one-time charge related to the Holdings 1993 Employee Stock Option Plan (the
"1993 Plan")) and $24.0 million of unallocated corporate expenses, respectively.
Operating expenses allocated to the Company's three business segments totaled
$1,347.6 million and $1,205.5 million in 1993 and 1992, respectively. These
operating expenses in 1993 included certain non-recurring charges relating to
(i) the write-down of goodwill in the amount of $144.8 million in the quarter
ended October 30, 1993 and (ii) postretirement medical plan costs, which were
$4.7 million higher, on an annual basis, than expected in future periods due to
changes in plan provisions which became effective April 1, 1994. Operating
expenses in 1992 included (i) $10.0 million of charges relating to
Wallcoverings' downsizing program and (ii) postretirement medical plan costs,
which were $5.0 million higher, on an annual basis, than expected in future
periods due to changes in plan provisions which became effective April 1, 1994.
See Notes 2 and 3 to the Consolidated Financial Statements.
Excluding the goodwill write-down in 1993 and the restructuring charges in
1992, operating expenses allocated to the segments were $1,202.8 million or
92.1% of sales in 1993 compared to $1,195.5 million or 93.6% of
12
<PAGE>
sales in 1992. This 1.5 percentage point improvement is the result of the
allocation of fixed costs over a larger sales volume, improved manufacturing
productivity, and continuing cost reduction initiatives at both the operating
and corporate level.
At the end of the third quarter of 1993, the Company recorded a
restructuring charge of $24.0 million, principally related to the write-down of
certain surplus or under-utilized assets of the Automotive Products and
Wallcoverings segments and to provide for the obsolescence of certain
manufacturing processes as a result of shifts in customer demand. During the
fourth quarter of 1993 management reevaluated its plan to restructure these
manufacturing facilities. Based on changes in product mix and underlying
improvement in certain of the Company's businesses, management has concluded
that the assets and facilities identified previously can be utilized at a level
of production that would not result in the impairment of the asset values.
Accordingly, in the fourth quarter of 1993 management has revised its estimate
and reversed these charges.
INTEREST EXPENSE
Interest expense for continuing operations, net of interest income of $4.3
million in 1993 and $4.0 million in 1992, decreased to $84.2 million during 1993
compared to $87.1 million in 1992. Interest expense, including amounts allocated
to discontinued operations and excluding interest income, decreased to $107.9
million during 1993 compared to $114.4 million in 1992. The decrease in interest
expense was due to the additional week in 1992 and a reduction in the Company's
weighted average cost of borrowings.
INCOME TAXES
In 1993 income taxes of $11.6 million consisted primarily of foreign and
state taxes. This amount compared with $2.3 million in 1992.
DISCONTINUED OPERATIONS
The Company's loss from discontinued operations was $115.6 million for 1993
and $229.8 million for 1992, including losses on disposals of $111.1 million and
$184.0 million, respectively.
The 1993 loss is primarily attributable to the $109.3 million additional
charge arising from the Company's determination as of the end of the second
quarter of 1993 that it would be unable to sell Builders Emporium as an ongoing
entity. The 1992 loss reflected primarily the expected loss on the anticipated
sale of Builders Emporium.
NET INCOME
The combined effect of the foregoing resulted in a net loss of $292.3
million in 1993 compared to a net loss of $271.3 million in the prior year.
1992 COMPARED TO 1991
NET SALES
Net sales increased 7.9% to $1,277.5 million in 1992 (a 53-week year) from
$1,184.3 million in 1991 (a 52-week year).
Automotive Products' net sales increased 5.5% to $643.8 million in 1992
from $610.3 million in 1991, reflecting the impact of a modest increase in the
North American vehicle build as well as an improvement in Automotive Products'
product mix. The molded carpet product line experienced the largest net sales
increase.
Interior Furnishings' net sales increased 16.3% to $391.8 million in 1992
from $336.8 million in 1991 principally due to two factors. First, 1992 net
sales reflected the full year impact of the acquisition of Doblin, a
manufacturer of high-end Jacquard fabric, in the third quarter of 1991, as well
as substantial incremental net sales volume from, the full utilization of excess
Doblin manufacturing capacity. Second, Floorcoverings' net sales increased
17.7%, which was primarily attributable to restyled product offerings.
13
<PAGE>
Wallcoverings' net sales increased 2.0% to $241.9 million in 1992 from
$237.2 million in 1991. The net sales increase reflected a combination of two
offsetting factors. During the first quarter of 1992, the Company benefited from
the increase in industry demand for wallcoverings. However, this increase was
offset by reduced sales due primarily to Wallcoverings' efforts during 1992 to
consolidate certain distribution channels and its downsizing program.
OPERATING EXPENSES
Total operating expenses were $1,229.5 million and $1,140.4 million in 1992
and 1991, respectively, including $24.0 million and $25.8 million of unallocated
corporate expenses. Operating expenses allocated to the Company's three business
segments totaled $1,205.5 million and $1,114.5 million in 1992 and 1991,
respectively. Operating expenses in 1992 included $10.0 million of restructuring
costs. Prior to these charges, 1992 operating expenses allocated to the segments
were $1,195.5 million or 93.6% of sales, versus $1,114.5 million or 94.1% of
sales in 1991, representing a .5 percentage point improvement.
RESTRUCTURING CHARGES
In 1992, the Company reevaluated the distribution methods as well as
certain manufacturing and product lines in Wallcoverings. This reevaluation
resulted in a restructuring charge of $10.0 million for the closure of certain
manufacturing facilities. Of this amount, $2.7 million related to asset
write-downs and $7.3 million related to the consolidation of Wallcoverings'
operations.
INTEREST EXPENSE
Interest expense for continuing operations, net of interest income of $4.0
million in 1992 and $6.9 million in 1991, decreased to $87.1 million during 1992
compared to $ 87.7 million in 1991. Interest expense, including amounts
allocated to discontinued operations and excluding interest income, decreased to
$114.4 million during 1992 compared to $119.6 million in 1991 principally as a
result of the reduction in the Company's weighted average cost of borrowings.
INCOME TAXES
The Company's 1992 income taxes of $2.3 million consisted primarily of
foreign and state taxes. In 1991, income taxes of $15.8 million consisted of
foreign and state taxes of $11.6 million and Federal income taxes of $4.2
million.
DISCONTINUED OPERATIONS
As previously discussed, loss from discontinued operations, net of taxes
and including loss on disposals, was $229.8 million in 1992 compared to the loss
from discontinued operations of $34.3 million in 1991. The 1992 loss primarily
reflected the expected loss on the anticipated sale of Builders Emporium. The
1991 loss was attributable to the discontinuation of the remaining businesses of
Wickes Manufacturing.
EXTRAORDINARY ITEM AND CHANGE IN ACCOUNTING
Gain on early retirement of indebtedness, net of taxes, was $10.9 million
in 1991. See Note 9 to the Consolidated Financial Statements.
The cumulative effect on prior years of the change in accounting for
postretirement benefits other than pensions was $87.6 million in 1991. See Note
11 to the Consolidated Financial Statements.
NET INCOME
The combined effect of the foregoing resulted in a net loss of $271.3
million in 1992 compared to a net loss of $170.5 million in 1991.
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<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At January 29, 1994, the Company had cash and cash equivalents totaling
$78.4 million compared to $80.1 million at January 30, 1993. Included in cash
and cash equivalents at January 29, 1994 was $8.6 million held by C&A Co. On
April 27, 1994, Group received cash proceeds of $71.2 million, including accrued
interest, from the repayment of the Kayser-Roth note referred to below.
The Company's principal uses of liquidity for the next several years will
be to fund principal and interest payments on its indebtedness, working capital
and capital expenditures. The Company makes capital expenditures on a recurring
basis for replacement and improvements. As of January 29, 1994, the Company had
approximately $43.0 million in outstanding capital commitments. During 1994, the
Company anticipates capital expenditures will exceed the annual expenditures
made by its continuing businesses during 1993, 1992 and 1991, which were $44.9
million, $38.2 million and $38.9 million, respectively. This increase is due
primarily to the acquisition of additional machinery and equipment to expand the
productive capacity of Decorative Fabrics' Mastercraft division, as well as
ongoing capital expenditures in each of the Company's three segments.
The Company has significant obligations relating to postretirement,
casualty, environmental, lease and other liabilities of discontinued operations.
Management anticipates that the net cash requirements of its discontinued
operations will be approximately $20.9 million during 1994. However, it is
possible that the actual net cash requirements of the Company's discontinued
operations could differ materially from management's estimates. Management
believes that such needs can be adequately funded in 1994 by net cash provided
by operating activities and by borrowings under bank credit facilities.
From time to time, the Company evaluates acquisitions. In 1991 the Company
acquired the Doblin Fabrics Division of Springs Industries. The Company expects
to fund any future acquisitions with net cash provided by operating activities,
borrowings under bank credit facilities or the issuance of securities.
Net cash provided by the operating activities of the Company's continuing
operations in 1993 was $28.0 million. If the Recapitalization is effected, the
Company expects to have approximately $660.7 million of
outstanding indebtedness and unused borrowing availability of approximately
$121.3 million under the New Credit Facilities after giving effect to the
Recapitalization. Management believes that, if the Recapitalization is effected,
borrowings under the New Credit Facilities together with cash generated from
operations will provide sufficient liquidity to meet cash requirements through
1994 and into the foreseeable future.
As part of the Recapitalization as proposed, all the outstanding public
debt and preferred stock of the Company and its subsidiaries would be defeased
and redeemed. In addition, the C&A Co. Credit Agreement described below would be
terminated and all borrowings thereunder would be prepaid.
If the Recapitalization is not successful, management believes that the
Company has sufficient liquidity to meet its cash requirements through 1994 and
into 1995. To meet long-term cash requirements, the Company will require
alternative financing or proceeds from asset sales. There can be no assurance as
to the timing of any such financing or asset sales or the proceeds the Company
could realize therefrom. Restrictions in existing debt agreements of the Company
could limit the ability of the Company to effect future financings and asset
sales.
Since January 26, 1991, no additional cash dividends to Holdings have been
permitted under the most restrictive provisions in the existing debt agreements
of the Company. Under these provisions, which are contained in the 11 7/8%
Indenture, as of January 29, 1994, Group would have needed to earn an additional
$866.0 million of consolidated net income (as defined in the 11 7/8% Indenture)
in order to eliminate the deficit in its dividend capacity (assuming no change
in the other factors used to determine the Company's dividend capacity).
As of January 29, 1994, the Company had total outstanding long-term
indebtedness of $759.3 million (including the current portion of $25.9 million)
at varying interest rates between 5% and 15% per annum. Annual cash interest
expense on that indebtedness in 1994 will be approximately $87.2 million. At the
end of 1992 and 1991, the Company had total outstanding indebtedness of $860.8
million and $859.2 million, respectively. Cash interest paid during 1993, 1992
and 1991 was approximately $101.5 million, $102.5 million and $112.6 million,
respectively.
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The maturities of long-term debt of the Company during 1994, 1995 and 1996
are $25.9 million, $170.9 million and $63.3 million, respectively. See Note 9 to
Consolidated Financial Statements. Under the terms of the 11 7/8% Indenture, the
Company is required to redeem $138 million aggregate principal amount of 11 7/8%
Securities on each June 1 from 1993 through 2000 ("Mandatory Redemptions") and
to repay the remaining outstanding 11 7/8% Securities at maturity on June 1,
2001. Under the terms of the 11 7/8% Indenture, if Adjusted Net Worth (as such
term is defined in the 11 7/8% Indenture) is equal to or less than $700 million
on the last day of any fiscal quarter (the "Minimum Equity Test"), the Company
would be required to begin on the last day of the second fiscal quarter
thereafter (unless the Minimum Equity Test is satisfied at the end of the
intervening fiscal quarter) semi-annual redemptions ("Accelerated Redemptions")
of $138 million aggregate principal amount of 11 7/8% Securities until all the
11 7/8% Securities are redeemed or until the Minimum Equity Test is again
satisfied. The Company can reduce its obligation to make any cash Mandatory
Redemption or Accelerated Redemption payment through the application of
previously redeemed or purchased and canceled 11 7/8% Securities as permitted by
the Indenture. The Company has previously delivered for cancellation $1,033
million in aggregate principal amount of 11 7/8% Securities, which are available
for such purpose. The Company satisfied the Minimum Equity Test at the end of
fiscal 1993. On that date, Adjusted Net Worth was $753.7 million. If the Company
had not satisfied the Minimum Equity Test at that date and did not subsequently
satisfy such test, the first cash redemption payment (after giving effect to
credits for previously acquired 11 7/8% Securities) would be required at the end
of the fiscal quarter ending January 1997. By comparison, if the Company
continues to satisfy the Minimum Equity Test at all times or cures any failure
of such test prior to any accelerated cash redemption payment becoming due, no
cash redemption payment will be required until June 1, 2000.
During 1993, the Company sold Kayser-Roth for approximately $170 million
(subject to post-closing purchase price adjustment), including a $70 million
senior unsecured bridge note. A portion of the proceeds were used to repay $66
million of borrowings under a Kayser-Roth credit facility. The Company's
Engineering Group, which was discontinued in 1992, was sold during 1993 for
approximately $51 million. Additionally, the Company has nearly completed the
disposition of the real estate, inventory and other assets of its Builders
Emporium home improvement retail chain which the Company discontinued at the end
of 1992. During 1993, the Company used cash from the aforementioned sources and
new borrowings of $76.1 million to repay $179.9 million of outstanding
indebtedness. During 1992 and 1991, the Company expended $54.4 million and
$182.8 million, respectively, for the reduction of indebtedness while incurring
new indebtedness of $60.1 million and $157.6 million, respectively. On April 27,
1994, the Kayser-Roth note was repaid with accrued interest. The Company intends
to use these cash proceeds of $71.2 million for general corporate purposes,
including possibly the repurchase of a portion of its 15% Subordinated Notes due
1995 or other debt in open market or privately negotiated transactions.
The Company's C&A Co. subsidiary consummated a $225 million credit
agreement with a syndicate of banks on May 22, 1991 that expires on May 15, 1998
(the "C&A Co. Credit Agreement"). In 1993, C&A Co. made net principal repayments
under the C&A Co. Credit Agreement of $54 million and paid Group dividends
aggregating $30 million. Availability under the C&A Co. Credit Agreement is
determined monthly based upon C&A Co.'s receivables balance. The C&A Co. Credit
Agreement permits C&A Co. to pay additional dividends to Group only if C&A Co.
satisfies a minimum liquidity requirement of $25 million and then limits the
amount of total dividends to $175 million plus 90% (or 100% if certain specified
ratios are met) of C&A Co.'s net income (excluding the impact of Statement of
Financial Accounting Standards No. 106 "Employers' Accounting for Postretirement
Benefits Other Than Pensions") subsequent to April 27, 1991. As of January 29,
1994, an additional $54.8 million was available to C&A Co. under the C&A Co.
Credit Agreement. Although, as of that date, approximately $56 million of
additional dividends could be paid to Group under the dividend restriction in
the C&A Co. Credit Agreement, other financial covenants in the C&A Co. Credit
Agreement would limit the amount of dividends to approximately $47 million. C&A
Co. and its subsidiaries are separate corporate entities and the assets of C&A
Co. and its subsidiaries are available first and foremost to satisfy the claims
of the creditors of C&A Co. and such subsidiaries. At January 29, 1994,
receivables and fixed assets pledged as collateral under the C&A Co. Credit
Agreement aggregated approximately $168 million and $104 million, respectively.
16
<PAGE>
The Company's Canadian subsidiaries have a bank demand line of credit that
made available to them approximately $8.5 million at January 29, 1994, of which
approximately $5.8 million was outstanding as of that date.
The Company's Board of Directors has authorized expenditures for the
voluntary repurchase from time to time of Group's outstanding publicly traded
debt securities. During 1991, the Company repurchased publicly traded debt
securities with a face value of approximately $160 million. The principal source
of funds for the repurchase of publicly traded debt in 1991 was net proceeds
from borrowings under the C&A Co. Credit Agreement. There were no repurchases of
publicly traded debt during 1992 or 1993. Repurchases of publicly traded debt
may be made from time to time through open market or privately negotiated
transactions. The Company expects to fund any such additional repurchases out of
the proceeds of the Kayser-Roth note referred to above, cash from operating
activities or borrowings under existing or new lines of credit. Such repurchases
may occur prior to the consummation of the proposed Recapitalization (which, if
effected as proposed, would result in the defeasance and redemption of such
debt) or at any other time, depending on market conditions, available cash and
other factors that the Board of Directors of Group in its sole discretion deems
relevant to the advisability of repurchasing publicly traded debt.
For information regarding commitments and contingencies, see Note 17 to
Consolidated Financial Statements.
ENVIRONMENTAL MATTERS
The Company is subject to increasingly stringent Federal, state and local
environmental laws and regulations that (i) affect ongoing operations and may
increase capital costs and operating expenses and (ii) impose liability for the
costs of investigation and remediation and certain other damages related to
on-site and off-site soil and groundwater contamination. The Company's
management believes that it has obtained, and is in material compliance with,
all material environmental permits and approvals necessary to conduct its
various businesses. Environmental compliance costs for continuing businesses
currently are accounted for as normal operating expenses or capital expenditures
of the business units. In the opinion of management, based on the facts
presently known to it, such environmental compliance costs will not have a
material adverse effect on the Company's consolidated financial condition or
results of operations.
The Company is legally or contractually responsible or alleged to be
responsible for the investigation and remediation of contamination at various
sites. It also has received notices that it is a PRP in a number of proceedings.
The Company may be named as a PRP at other sites in the future, including with
respect to divested and acquired businesses. It is a normal risk of operating a
manufacturing business that liability may be incurred for investigating and
remediating on-site and off-site contamination. The Company is currently engaged
in investigation or remediation at certain sites. It is difficult to estimate
the total cost of investigation and remediation due to various factors including
incomplete information regarding particular sites and other PRP's, uncertainty
regarding the extent of environmental problems and the Company's share, if any,
of liability for such problems, the selection of alternative compliance
approaches, the complexity of environmental laws and regulations and changes in
cleanup standards and techniques. When it has been possible to provide
reasonable estimates of the Company's liability with respect to environmental
sites, provisions have been made in accordance with generally accepted
accounting principles. However, there can be no assurance that the Company has
identified or properly assessed all potential environmental liability arising
from the activities or properties of the Company, its present and former
subsidiaries and their corporate predecessors. As of January 29, 1994, the
Company has established reserves of approximately $30.8 million for the
estimated future costs related to all its known environmental sites. In the
opinion of management, based on the facts presently known to it, the
environmental costs and contingencies will not have a material adverse effect on
the Company's consolidated financial condition or results of operations. See
"ITEM 3. LEGAL PROCEEDINGS -- Environmental Proceedings."
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See the Consolidated Financial Statements of Collins & Aikman Group, Inc.
and subsidiaries included herein and listed on the Index to Financial Statements
set forth in Item 14(a)(1) of this Form 10-K Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
17
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS
The following is a list of the names and ages (as of April 28, 1994) of all
the incumbent directors of the Company, indicating all other positions and
offices with the Company held by each person, the date each such person was
appointed a director and each such person's principal occupations and employment
during the past five years. All such persons have been appointed to serve until
their successors are elected, or until their earlier resignation or retirement.
None of such directors is related to any executive officer or other director of
the Company by blood, marriage or adoption. The directors are also directors of
Holdings and Holdings II as well. The affiliations between the Company and WP
Management, WP Group, WP & Co., the Blackstone Group and Blackstone (as such
terms are defined below) are set forth below under "ITEM 12. SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT -- Certain Affiliations".
<TABLE>
<CAPTION>
POSITIONS AND OFFICES HELD AND
PRINCIPAL OCCUPATIONS AND EMPLOYMENT
NAME AGE DIRECTOR SINCE DURING THE PAST FIVE YEARS
<S> <C> <C> <C>
David A. Stockman................ 47 December 1988 Co-Chairman and Co-Chief Executive Officer since July
1993. General Partner of the Blackstone Group
Holdings L.P. (the "Blackstone Group"), which is
under common control with Blackstone Partners,
since 1988. Mr. Stockman is also a director of
Edward J. DeBartolo Corporation.
Bruce Wasserstein................ 46 June 1992 Co-Chairman and Co-Chief Executive Officer since June
1992. Chairman and Chief Executive Officer,
Wasserstein Perella Management Partners, Inc. ("WP
Management") since June 1992; Chief Executive
Officer and Chairman or President, Wasserstein
Perella Group, Inc. ("WP Group") since 1988. Mr.
Wasserstein is Chairman of the Board of Maybelline,
Inc.
James R. Birle................... 58 December 1988 Co-Chairman and Co-Chief Executive Officer from May
1991 until July 1993. Co-Chairman and Chief
Executive Officer from December 1988 to May 1991;
General Partner of the Blackstone Group since 1988.
Mr. Birle is also a director of Connecticut Mutual
Life Insurance Co., Great Lakes Dredge & Dock
Corporation and Transtar, Inc.
Stephen A. Schwarzman............ 47 December 1988 Co-Founding Partner of the Blackstone Group and
President and Chief Executive Officer of The
Blackstone Group L.P. ("Blackstone") since 1985.
Mr. Schwarzman is also a director of Great Lakes
Dredge & Dock Corporation and Transtar, Inc.
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
POSITIONS AND OFFICES HELD AND
PRINCIPAL OCCUPATIONS AND EMPLOYMENT
NAME AGE DIRECTOR SINCE DURING THE PAST FIVE YEARS
<S> <C> <C> <C>
Randall Weisenburger............. 35 August 1989 Vice Chairman since April 1994. Deputy Chairman from
July 1992 to April 1994; Managing Director of WP &
Co. since December 1993; Director of WP & Co. from
December 1992 to December 1993; Vice President of
WP & Co. from December 1989 to December 1992;
Associate of WP & Co. from 1988 to December 1989.
Mr. Weisenburger is also Vice Chairman of the Board
of Mabelline, Inc. and Chairman of the Yardley
Lentheric Group.
W. Townsend Ziebold, Jr.......... 31 December 1992 Director of WP & Co. since December 1993; Vice-
President of WP & Co. from December 1991 to
December 1993; Associate of WP & Co. from 1988 to
December 1991. Mr. Ziebold is also a director of
Maybelline, Inc.
</TABLE>
EXECUTIVE OFFICERS
The following is a list of the names and ages (as of April 28, 1994) of all
the executive officers of the Company, indicating all positions and offices with
the Company held by each such person and each such person's principal
occupations and employment during the past five years. All such persons hold
office at the pleasure of the Company's Board of Directors.
<TABLE>
<CAPTION>
POSITIONS AND OFFICES HELD AND PRINCIPAL OCCUPATIONS
NAME AGE AND EMPLOYMENT DURING THE PAST FIVE YEARS
<S> <C> <C>
David A. Stockman.................. 47 See description under "Directors" above.
Bruce Wasserstein.................. 46 See description under "Directors" above.
Randall J. Weisenburger............ 35 See description under "Directors" above.
William J. Brucchieri.............. 51 President, Imperial Wallcoverings, Inc., a wholly owned subsidiary of
C&A Co., a wholly owned subsidiary of the Company, since February
1993 and named an executive officer of the Company for purposes
hereof in April 1994. Executive Vice President of Imperial
Wallcoverings, Inc. from March 1992 to January 1993. Executive Vice
President of Mastercraft Division of C&A Co. from January 1990 to
February 1992. Vice President, Operations of Mastercraft Division of
C&A Co. from August 1989 to January 1990. Vice President,
Administration and Control, Mastercraft Division of C&A Co., from
January 1988 to July 1989.
Thomas E. Hannah................... 55 President and Chief Executive Officer of Collins & Aikman Textile and
Wallcoverings Group, a division of C&A Co., a wholly owned
subsidiary of the Company, since November 1991 and named an
executive officer of the Company for purposes hereof in April 1993.
President and Chief Executive Officer of the Collins & Aikman
Textile Group from February 1989 to November 1991. President of
Milliken & Company's Finished Apparel Division prior to that.
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
POSITIONS AND OFFICES HELD AND PRINCIPAL OCCUPATIONS
NAME AGE AND EMPLOYMENT DURING THE PAST FIVE YEARS
<S> <C> <C>
Andrew Major....................... 72 President of Collins & Aikman Decorative Fabrics Group, a division of
C&A Co., a wholly owned subsidiary of the Company, since 1987, and
named an executive officer of the Company for purposes hereof in
April 1994.
John P. McNicholas................. 31 Vice Chairman since April 1994. Deputy Chairman from July 1992 to
April 1994; Vice President of Blackstone Group from January 1992 to
present; Associate of Blackstone Group from November 1990 to
December 1991; Associate, Merchant Banking Group -- Merrill Lynch
Capital Markets from August 1989 to November 1990. Graduate student,
Darden School of Business Administration, University of Virginia in
1989.
Paul W. Meeks...................... 41 Vice President and Treasurer since September 1992. Assistant Treasurer
from April 1988 to September 1992.
John D. Moose...................... 57 President of Collins & Aikman North American Auto Group, a division of
C&A Co., a wholly owned subsidiary of the Company, since June 1989,
and named an executive officer of the Company for purposes hereof in
April 1994. Executive Vice President, Marketing of Automotive
Division of Automotive Division of C&A Co. prior to that.
Elizabeth R. Philipp............... 37 Executive Vice President, General Counsel and Secretary since April
1994. Vice President, General Counsel and Secretary from April 1993
to April 1994; Vice President and General Counsel from September
1990 to April 1993. Prior to that, associated with the law firm of
Cravath, Swaine & Moore.
Mark O. Remissong.................. 41 Senior Vice President and Chief Financial Officer of C&A Co., a wholly
owned subsidiary of the Company, and an executive officer of the
Company for purposes hereof since December 1993. Vice President of
Finance for Burlington Industries from 1989 until December 1993.
Harry F. Schoen III................ 58 President, Mastercraft Division of C&A Co., a wholly owned subsidiary
of the Company, since January 1993 and named an executive officer of
the Company for purposes hereof in April 1994. Executive Vice
President and Chief Operating Officer of the Mastercraft Division of
C&A Co. from April 1992 to December 1992. General Manager of
Milliken & Company's Greige Fine Goods Group prior to that.
</TABLE>
20
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
compensation for services rendered to the Company and its subsidiaries by (i)
the Company's Co-Chairmen of the Board and Co-Chief Executive Officers, (ii) the
Company's former Co-Chairman of the Board and Co-Chief Executive Officer (who
resigned from such positions on July 20, 1993), (iii) the Company's four most
highly compensated executive officers (other than the Co-Chief Executive
Officers) who were serving as executive officers at the end of the fiscal year
ended January 29, 1994 and whose total annual salary and bonus exceeded $100,000
and (iv) two former executive officers who would have been among the Company's
four most highly compensated executive officers but for the fact that they were
not serving as executive officers on January 29, 1994 (the individuals named in
clauses (i) through (iv) being hereinafter referred to as the "named executive
officers"). On April 1, 1993, Mr. Fenton's employment as an executive officer of
the Company or any of its subsidiaries terminated. On January 28, 1994, Mr.
Seelert ceased to be an executive officer of the Company due to the sale by the
Company of its Kayser-Roth subsidiary. Mr. Seelert resigned from Kayser-Roth on
January 28, 1994.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
ANNUAL COMPENSATION
OTHER AWARDS
NAME AND ANNUAL SECURITIES PAYOUTS ALL OTHER
PRINCIPAL YEAR SALARY BONUS COMPENSATION UNDERLYING LTIP COMPENSATION
POSITION (1) ($) ($) ($) OPTIONS (#) PAYOUTS ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C>
DAVID A. STOCKMAN 1993 15,000(2) 0 0 0 0 0
Co-Chairman of 1992 15,000(2) 0 0 0 0 0
the Board and 1991 15,000(2) 0 0 0 0 0
Co-Chief
Executive Officer
BRUCE WASSERSTEIN 1993 15,000(2) 0 0 0 0 0
Co-Chairman of 1992 7,500(2)(3) 0 0 0 0 0
the Board and 1991 N/A N/A N/A N/A N/A N/A
Co-Chief Executive
Officer
JAMES R. BIRLE 1993 15,000(2) 0 0 0 0 0
Former Co-Chairman 1992 15,000(2) 0 0 0 0 0
of the Board and 1991 15,000(2) 0 0 0 0 0
Former Co-Chief
Executive Officer
THOMAS E. HANNAH 1993 415,000 783,960 (4) 981,435 2,319,907(5) 19,481(6)
President and CEO 1992 407,500 630,800 (4) 0 0 24,256
of Collins & Aikman 1991 364,600 0 (4) 0 0 28,500
Textile and
Wallcoverings Group
DAVID J. MCKITTRICK 1993 350,000 375,000(8) 244,667(9) 0 0 12,809(10)
Vice Chairman and 1992 271,923(11) 175,000 (4) 0 0 914
Chief Operating 1991 N/A N/A N/A N/A N/A N/A
Officer (7)
PAUL W. MEEKS 1993 125,833 42,000 153,465(12) 11,403 6,500(5) 4,836(13)
Vice President and 1992 106,000 60,000 (4) 0 0 6,540
Treasurer 1991 100,000 52,000 (4) 0 0 2,035
ELIZABETH R. PHILIPP 1993 256,250 120,000 (4) 91,853 77,433(5) 9,838(14)
Executive Vice 1992 246,667 100,000 (4) 0 0 19,566
President, General 1991 230,000 75,000 (4) 0 0 2,610
Counsel and Secretary
ROBERT L. SEELERT 1993 300,000 0 (4) 0 0 11,683(15)
Former President 1992 300,000 150,000 (4) 0 0 3,501
and CEO of 1991 227,308(16) 150,000 91,545(17) 0 0 90,095
Kayser-Roth
Corporation, a
former subsidiary
of Group
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
ANNUAL COMPENSATION
OTHER AWARDS
NAME AND ANNUAL SECURITIES PAYOUTS ALL OTHER
PRINCIPAL YEAR SALARY BONUS COMPENSATION UNDERLYING LTIP COMPENSATION
POSITION (1) ($) ($) ($) OPTIONS (#) PAYOUTS ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C>
ROBERT S. FENTON 1993 162,211(18) 0 (4) 0 69,737(5) 15,364(19)
Former Vice 1992 225,000 100,000 (4) 0 0 470,094
President, Tax 1991 206,250 63,000 (4) 0 0 19,469
and Administration,
and Secretary
</TABLE>
(1) The information given in this table is for the fiscal years indicated, not
calendar years. 1993 indicates the fiscal year ended January 29, 1994. 1992
indicates the fiscal year ended January 30, 1993. 1991 indicates the fiscal
year ended January 25, 1992.
(2) Represents compensation for serving on the Board of Directors of the
Company. Mr. Stockman, Mr. Wasserstein and Mr. Birle received no separate
compensation during the years shown for serving as executive officers of
the Company or any of its subsidiaries.
(3) Mr. Wasserstein was elected as director and appointed Co-Chairman of the
Board of Directors and Co-Chief Executive Officer of the Company effective
June 19, 1992. "N/A" appearing in the table opposite Mr. Wasserstein's name
denotes not applicable, as it pertains to fiscal years in which Mr.
Wasserstein held no positions with the Company or its subsidiaries.
(4) Total perquisites for executive officer were less than the lesser of
$50,000 or 10% of annual salary and bonus. Perquisites for an executive
officer may, but do not necessarily, include reimbursement for any of the
following expenses: car; financial planning; executive fitness; executive
physicals and medical; luncheon club; and relocation.
(5) The amounts for Mr. Hannah, Mr. Meeks and Ms. Philipp represent payouts in
November 1993 under the Equity Share Plan, which was terminated in October
1993. In connection with such termination, certain conditions as to the
vesting of awards to the following executive officers were modified: Mr.
Hannah (approximately $464,000 of the amount shown as a payout was
attributable to such modification); Mr. Meeks (the entire payout was
attributable to such modification); and Ms. Philipps ($12,000 of the amount
shown as a payout was attributable to such modification). The payout to Mr.
Fenton was made in August 1993 based upon Mr. Fenton's vested interest in
the Equity Share Plan as of April 1993 (the date at which Mr. Fenton ceased
to be an executive officer of the Company or any of its subsidiaries).
(6) Amount for fiscal 1993 consists of (i) C&A Co.'s contributions to the C&A
Co. Profit Sharing Plan, a defined contribution plan (the "PSP"), in the
amount of approximately $4,717, (ii) C&A Co.'s contributions to the
non-qualified supplement to the PSP (the "SPSP") in the amount of
approximately $5,699, (iii) premiums in the amount of $4,812 and $911 paid
by C&A Co. for basic term life insurance and Accidental Death &
Dismemberment life insurance ("AD&D life insurance"), respectively, under
group life insurance policies and (iv) interest income in the amount of
$3,342 in connection with a promissory note (bearing interest at the rate
of 4% per annum and maturing April 1, 1993) which was given by C&A Co. to
Mr. Hannah for a portion of his fiscal 1992 bonus.
(7) Mr. McKittrick was appointed Vice Chairman and Chief Operating Officer on
March 23, 1992. Prior to that date, Mr. McKittrick held no positions with
the Company or its subsidiaries. "N/A" appearing in the table opposite Mr.
McKittrick's name denotes not applicable, as it pertains to fiscal years in
which Mr. McKittrick held no positions with the Company or its
subsidiaries. Mr. McKittrick resigned as an executive officer of the
Company and any of its subsidiaries on April 4, 1994, but continues to
serve as principal financial and accounting officer with limited
responsibilities for a transitional period. See "Employment Agreements".
22
<PAGE>
(8) $200,000 of this amount represents the portion of Mr. McKittrick's phantom
equity award vested during fiscal 1993. The vested amount is payable upon
termination for reasons other than cause pursuant to his employment
agreement. See "Employment Agreements".
(9) Includes $228,204 reimbursement for relocation costs in connection with Mr.
McKittrick's move to Group's headquarters in Charlotte, North Carolina,
including gross-ups of relocation reimbursements to compensate the
executive for incremental federal and state income taxes.
(10) Amount for fiscal 1993 consists of (i) Group's contributions to the PSP in
the amount of approximately $4,717, (ii) Group's contributions to the SPSP
in the amount of approximately $2,283, (iii) premiums in the amount of
$4,057 and $645 paid by Group for basic term life insurance and AD&D life
insurance, respectively, under group life insurance policies and (iv)
interest income in the amount of $1,107 in connection with a promissory
note (bearing interest at the rate of 4% per annum and maturing April 1,
1993) which was given by Group to Mr. McKittrick for a portion of his
fiscal 1992 bonus.
(11) Includes salary for the period from March 23, 1992 through January 30,
1993, the portion of fiscal year 1992 during which Mr. McKittrick was an
executive officer of the Company.
(12) Includes $148,226 representing reimbursement for relocation costs in
connection with Mr. Meeks' move to Group's headquarters in Charlotte, North
Carolina, including gross-ups of relocation reimbursements to compensate
the executive for incremental federal and state income taxes.
(13) Amount for fiscal 1993 consists of (i) Group's contributions to the PSP in
the amount of approximately $3,912 and (ii) premiums in the amount of $828
and $96 paid by Group for basic term life insurance and AD&D life
insurance, respectively, under group life insurance policies.
(14) Amount for fiscal 1993 consists of (i) Group's contributions to the PSP in
the amount of approximately $4,717, (ii) Group's contributions to the SPSP
in the amount of approximately $1,427, (iii) premiums in the amount of
$2,958 and $343 paid by Group for basic term life insurance and AD&D life
insurance, respectively, under group life insurance policies and (iv)
interest income in the amount of $393 in connection with a promissory note
(bearing interest at the rate of 4% per annum and maturing April 1, 1993)
which was given by Group to Ms. Philipp for a portion of her fiscal 1992
bonus.
(15) Amount for fiscal 1993 consists of (i) Kayser-Roth's matching contributions
to the 401(m) Kayser-Roth Corporation Employees' Savings Plan (the "K-R
Savings Plan") in the amount of $4,500, (ii) premiums in the amount of $126
paid by Kayser-Roth for basic term life insurance and AD&D life insurance
under group life insurance policies, (iii) interest income in the amount of
approximately $955 in connection with a promissory note (bearing interest
at the rate of 4% per annum and maturing April 1, 1993) which was given by
Kayser-Roth to Mr. Seelert for a portion of his fiscal 1992 bonus and (iv)
premiums in the amount of approximately $6,102 paid by Kayser-Roth for long
term disability insurance. Mr. Seelert resigned on January 28, 1994 after
the sale of Kayser-Roth.
(16) Includes salary for the period from May 1, 1991 through January 25, 1992,
the portion of the fiscal year during which Mr. Seelert was employed by
Kayser-Roth.
(17) Includes approximately $86,179 for relocation costs in connection with Mr.
Seelert's move to Kayser-Roth's headquarters in Greensboro, North Carolina,
including gross-ups of relocation reimbursements to compensate the
executive for incremental federal and state income taxes.
(18) Mr. Fenton ceased to be an executive officer of the Company or any of its
subsidiaries on April 1, 1993. However, Mr. Fenton continues to be employed
by the Company (although not as an executive officer) pursuant to a new
employment agreement. See "Employment Agreements".
(19) Amount for fiscal 1993 consists of (i) Group's contributions to the PSP in
the amount of approximately $4,717, (ii) Group's contributions to the SPSP
in the amount of approximately $1,877, (iii) Group's matching contributions
to the Retirement Savings Plus Plan (the "RSPP") and payment in lieu of a
contribution in 1993 to the non-qualified supplement to the RSPP (the
"Supplemental RSPP") in the amounts of $1,363 and $1,948, respectively,
(iv) premiums of $4,348 and $748 paid by Group for basic term life
insurance and AD&D life insurance, respectively, under group life insurance
policies and (v) interest income in the
23
<PAGE>
amount of $363 in connection with a promissory note (bearing interest at
the rate of 4% per annum and maturing April 1, 1993) which was given by
Group to Mr. Fenton for a portion of his fiscal 1992 bonus. The RSPP was
terminated on April 30, 1993 and account balances of continuing employees
were rolled over into the PSP. The Supplemental RSPP was terminated and
account balances were paid out.
OPTION GRANTS IN LAST FISCAL YEAR
Shown below is further information on grants of stock options pursuant to
the 1993 Plan for the fiscal year ended January 29, 1994, to the named executive
officers. The 1993 Plan became effective as of January 28, 1994 (the "Effective
Date") upon the approval by vote of the majority of common stock of Holdings
("Holdings Common Stock") in April 1994.
<TABLE>
<CAPTION>
NUMBER OF POTENTIAL REALIZABLE VALUE
SECURITIES % OF TOTAL AT ASSUMED ANNUAL RATES OF
UNDERLYING OPTIONS GRANTED EXERCISE MARKET PRICE STOCK PRICE APPRECIATION
OPTIONS TO EMPLOYEES PRICE ON DATE OF EXPIRATION FOR OPTION TERM (2)
NAME GRANTED (#)(1) IN FISCAL 1993 ($ / SH) GRANT (2) DATE (3) 5% ($) 10% ($)
0% ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
David A. Stockman 0 0 N/A N/A N/A N/A N/A N/A
Bruce Wasserstein 0 0 N/A N/A N/A N/A N/A N/A
James R. Birle 0 0 N/A N/A N/A N/A N/A N/A
Thomas E. Hannah
(4) 841,230 27.0 3.99 13.14 1/28/04 7,697,255 14,645,814 25,312,611
140,205 4.5 8.26 13.14 1/28/04 684,200 1,842,294 3,620,093
David J. McKittrick 0 0 N/A N/A N/A N/A N/A N/A
Paul W. Meeks (4) 11,403 .4 3.99 13.14 1/28/04 104,337 198,526 343,116
Elizabeth R.
Philipp (4) 83,508 2.7 3.99 13.14 1/28/04 764,098 1,453,874 2,512,756
8,345 .3 8.26 13.14 1/28/04 40,724 109,653 215,468
Robert L. Seelert 0 0 N/A N/A N/A N/A N/A N/A
Robert S. Fenton 0 0 N/A N/A N/A N/A N/A N/A
</TABLE>
(1) Options granted under the 1993 Plan are subject to restrictions on transfer
and exercise. No option granted may be exercised prior to the earlier of the
closing of a Public Offering (as defined under the 1993 Plan) or the
expiration of two years from the Effective Date, subject to acceleration in
the event of a Change in Control of Holdings (as defined in the 1993 Plan)
and subject to the authority of a duly authorized disinterested committee of
the directors of Holdings (the "Committee"). The Committee may set a
schedule of exercisability with regard to each option grant, may, at any
time, accelerate the time at which all or any part of the options may be
exercised and may waive any other conditions to exercise. In the event that
a Public Offering does not occur with respect to Holdings by January 28,
1995 the Committee may amend or terminate the 1993 Plan and a participant's
rights with respect to any options granted prior to such amendment or
termination. Shares of Holdings Common Stock purchased upon exercise of an
option may not be transferred for a period of two years following the Public
Offering, or after such shorter time as the Committee may determine. In
consideration of a grant of options an employee agrees not to engage,
without the written consent of the Committee, in any Competitive Activity
(as defined in the 1993 Plan) during the employee's employment and for one
year following termination of employment. Additionally, in further
consideration of such grant the employee agrees to fully discharge Holdings
and various related entities from any and all claims, liabilities or
obligations under a previously canceled benefits plan known as the Equity
Share Plan, the termination of the Equity Share Plan or the creation of any
new plan.
(2) The options specified hereunder were granted prior to an initial public
offering. Consequently, the market price date of grant is equal to the
estimated fair market value used by Group for accounting purposes to
determine compensation expense related to the option grants.
(3) No option is exercisable after the expiration of ten years from the date of
grant.
24
<PAGE>
(4) Stock options granted to the named individuals under the 1993 Plan vest in
accordance with the following schedule, pursuant to the provisions of their
individual grant agreements:
(a) Mr. Hannah: 50% on June 1, 1995 and 50% on June 1, 1996
(b) Mr. Meeks and Ms. Philipp: 40% on June 1, 1995 and 60% on June 1,
1996
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
Shown below is information with respect to the year-end value of
unexercised options to purchase Holdings' Common Stock granted under the 1993
Plan to the named executive officers and held by them effective as of January
28, 1994.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY-OPTIONS AT
SHARES ACQUIRED VALUE AT FY-END (#) FY-END ($)
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C> <C> <C>
David A. Stockman 0 0 0 0 N/A N/A
Bruce Wasserstein 0 0 0 0 N/A N/A
James R. Birle 0 0 0 0 N/A N/A
Thomas E. Hannah 0 0 0 841,230 N/A 7,697,255
0 0 0 140,205 N/A 684,200
David J. McKittrick 0 0 0 0 N/A N/A
Paul W. Meeks 0 0 0 11,403 N/A 104,337
Elizabeth R. Philipp 0 0 0 83,508 N/A 764,098
0 0 0 8,345 N/A 40,724
Robert L. Seelert 0 0 0 0 N/A N/A
Robert S. Fenton 0 0 0 0 N/A N/A
</TABLE>
DEFINED BENEFIT OR ACTUARIAL PLAN DISCLOSURE
Messrs. Stockman, Wasserstein and Birle have never participated in and have
not received and will not receive any benefits under the Pension Plan, the C&A
Co. Plan, the C&A Co. Excess Benefit Plan or the C&A Co. SRIP Plan described
below. See "Summary Compensation Table", footnote 2. Mr. Seelert has never
participated in the Pension Plan, the C&A Co. Plan, the C&A Co. Excess Benefit
Plan or the C&A Co. SRIP Plan. Mr. Seelert, prior to his resignation from
Kayser-Roth, did participate in Kayser-Roth's Cash Balance Plan, but his entire
interest was unvested and thus forfeited upon his resignation. Mr. Seelert has
not received and will not receive any benefits under such Cash Balance Plan.
PENSION PLAN. Certain current and former employees of the Company,
including certain named executive officers, are entitled to monthly annuities
commencing at age 65 under the Company's Salaried Employees' Pension Plan (the
"Pension Plan"), which was terminated in 1985. All actual plan participants as
of December 31, 1984 as a group will be entitled to benefits from the annuities
purchased for them totaling $5,160,000 per year at age 65. The annual benefits
of Messrs. McKittrick, Meeks, Hannah and Fenton and Ms. Philipp will be
approximately $0, $1,100, $0, $3,600 and $0, respectively.
C&A CO. PLAN. Provided certain eligibility requirements are met, at the end
of each calendar month, pay credits are applied to a participant's account under
the Collins & Aikman Corporation Employees' Pension Account Plan (the "C&A Co.
Plan") based on the participant's length of credited service and compensation
(as defined) during that month. For participants aged 50 or older, the monthly
pay credit is based on either credited service and compensation or age and
compensation, whichever results in the higher amount.
25
<PAGE>
The following chart sets forth how pay credits are determined under the C&A
Co. Plan:
<TABLE>
<CAPTION>
PERCENTAGE OF
COMPENSATION USED TO
DETERMINE PAY CREDITS
UP TO
1/3 OVER 1/3
ELIGIBILITY REQUIREMENT OF THE OF THE
YEARS OF S.S. S.S.
CREDITED SERVICE OR AGE WAGE BASE WAGE BASE
<S> <C> <C> <C> <C>
less than 10 less than 50 2.5% 4.5%
10 - 14 50 - 54 3.0% 5.5%
15 - 19 55 - 59 4.0% 6.5%
20 - 24 60 - 64 5.0% 8.0%
25 or more 65 or more 6.0% 10.0%
</TABLE>
The dollar amounts that result from these percentages are added together
and the total is the pay credit for the month.
In addition, interest credits are applied each month to the account
balance. Participants make no contributions to the C&A Co. Plan. Employer
contributions are 100% vested after five years of service or at age 65,
whichever is earlier, and may vest under certain other circumstances as set
forth in the C&A Co. Plan. The estimated annual benefits payable upon retirement
at normal retirement age under the C&A Co. Plan for Messrs. McKittrick, Meeks,
Hannah and Fenton and Ms. Philipp are $2,600, $13,600, $8,200, $16,900 and
$11,000, respectively. Participants in the C&A Co. Plan have the option,
however, of receiving the value of their vested account in a lump sum following
termination of employment.
C&A CO. EXCESS PLAN. The Excess Benefit Plan of Collins & Aikman
Corporation (the "C&A Co. Excess Plan") works in conjunction with the C&A Co.
Plan (which is described above) and provides to the employee any benefit which
the C&A Co. Plan would have provided but for certain legal limitations under the
Employee Retirement Income Security Act of 1974 and Internal Revenue Service
regulations. The pay credits and interest credits are determined as described
with respect to the C&A Co. Plan as if no legal limitations existed, and then
this plan provides any benefit which is in excess of the benefit provided under
the C&A Co. Plan. The estimated annual benefits payable upon retirement at
normal retirement age under the C&A Co. Excess Plan for Messrs. McKittrick,
Meeks, Hannah, and Fenton and Ms. Philipp are $3,000, $0, $24,700, $100, and
$2,200, respectively.
C&A CO. SRIP. Participation in the Collins & Aikman Corporation
Supplemental Retirement Income Plan (the "C&A Co. SRIP") is solely at the
discretion of the Board of Directors of C&A Co. and is extended to a select
group of key executives. The plan provides a participating employee with a
retirement benefit at age 62. A target benefit is first calculated for each
employee based on Total Annual Compensation (final base salary plus the average
of the bonuses paid for the last three fiscal years) and years of service at
retirement. The benefit payable from the C&A Co. SRIP is determined as the
excess of the target benefit over any pension benefits payable from Social
Security and any other retirement plans sponsored by C&A Co. An employee does
not become vested in a benefit until reaching age 62.
26
<PAGE>
The following table shows, for specified compensation/years of service
classifications, the hypothetical annual target benefits under the C&A Co. SRIP
for employees retiring at age 65, assuming that the retiring participant elects
a single life annuity.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
TOTAL ANNUAL YEARS OF SERVICE
COMPENSATION 10 15 20 25 30 35
<S> <C> <C> <C> <C> <C> <C>
$ 100,000 $ 42,000 $ 51,000 $ 60,000 $ 60,000 $ 60,000 $ 60,000
125,000 52,500 63,750 75,000 75,000 75,000 75,000
150,000 63,000 76,500 90,000 90,000 90,000 90,000
175,000 73,500 89,250 105,000 105,000 105,000 105,000
200,000 84,000 102,000 120,000 120,000 120,000 120,000
225,000 94,500 114,750 135,000 135,000 135,000 135,000
250,000 105,000 127,500 150,000 150,000 150,000 150,000
275,000 115,500 140,250 165,000 165,000 165,000 165,000
300,000 126,000 153,000 180,000 180,000 180,000 180,000
400,000 168,000 204,000 240,000 240,000 240,000 240,000
450,000 189,000 229,500 270,000 270,000 270,000 270,000
500,000 210,000 255,000 300,000 300,000 300,000 300,000
600,000 252,000 306,000 360,000 360,000 360,000 360,000
700,000 294,000 357,000 420,000 420,000 420,000 420,000
800,000 336,000 408,000 480,000 480,000 480,000 480,000
900,000 378,000 459,000 540,000 540,000 540,000 540,000
1,000,000 420,000 510,000 600,000 600,000 600,000 600,000
</TABLE>
Mr. Hannah is the only named executive officer participating in this plan.
He currently has five years of plan service, and at age 65, he will have an
estimated 14 years, 5 months of plan service.
EMPLOYMENT AGREEMENTS
In June 1989, the Company entered into an employment agreement (the
"Original Agreement") with Mr. Fenton at an initial base salary of $200,000 per
year. In the event of involuntary termination for reasons other than cause, the
Original Agreement provided for severance benefits equal to two times annual
base compensation. On December 30, 1992, Mr. Fenton was notified that his
employment with the Company and its subsidiaries pursuant to the Original
Agreement was being involuntarily terminated without cause effective April 1,
1993. Mr. Fenton ceased to be an executive officer of the Company or any of its
subsidiaries on April 1, 1993. Mr. Fenton's severance in the amount of $450,000
pursuant to the Original Agreement is being paid in periodic installments which
commenced after April 1, 1993.
In addition, Mr. Fenton entered into an employment agreement with the
Company dated as of February 25, 1993 (as amended, the "New Agreement") which
provides for his employment with the Company for a term commencing April 1, 1993
and ending April 1, 1995. During the term of the New Agreement, Mr. Fenton will
work on such special projects as may be assigned to him from time to time at an
annual base salary of $150,000 for his first year of employment thereunder and
$75,000 for his second year of employment thereunder; provided, that, upon the
Company's prior approval, any services rendered by Mr. Fenton in excess of 1000
hours during his first year of employment and 500 hours during his second year
of employment will be separately compensated for at the rate of $200 per hour.
The New Agreement provides that Mr. Fenton's employment will not be
involuntarily terminated without cause.
In July 1990, the Company entered into an employment agreement with Ms.
Philipp at an initial base salary of $225,000 per year with a minimum cash bonus
equal to 30% of base salary for the first year of employment. The initial term
of the agreement commenced September 1990 and ended January 30, 1993, with
automatic one
27
<PAGE>
year renewals thereafter. In the event of involuntary termination for reasons
other than cause, including the Company's failure to renew the agreement, any
requirement that Ms. Philipp's office be relocated or any change in control (as
defined), the agreement provides for severance benefits equal to Ms. Philipp's
base salary then in effect for a period of one year from the termination date
plus the pro rata portion of any cash bonuses she would have received had she
been employed for the entire fiscal year.
In May 1991, Kayser-Roth entered into an employment agreement with Mr.
Seelert at an initial base salary of $300,000 per year with minimum cash bonuses
of $150,000 per year for fiscal 1991 and fiscal 1992. The initial term of the
agreement expired May 1, 1993, but was extended until May 1, 1994. In the event
of involuntary termination for reasons other than cause, the agreement provides
for severance benefits equal to his base salary then in effect plus his minimum
bonus for the entire remaining portion of his term of employment. Following the
sale of Kayser-Roth by Group, Mr. Seelert resigned on January 28, 1994.
In March 1992, the Company entered into an employment agreement with Mr.
McKittrick, which was amended as of April 1994. The agreement, as amended,
provides for an initial base salary of $350,000 per year and a cash bonus of not
less than $87,500 for the six months ending July 30, 1994. Pursuant to the
agreement, as amended, Mr. McKittrick ceased to be Vice Chairman and Chief
Operating Officer on April 4, 1994 and became principal financial and accounting
officer with limited responsibilities for a transitional period. The term of the
agreement, as amended, ends July 30, 1994, unless extended by written agreement
of the parties. In the event of termination for reasons other than cause prior
to the expiration of the term of employment (other than a voluntary termination
by Mr. McKittrick prior to July 1, 1994), the agreement provides for payment of
(i) base salary then in effect for the remaining portion of the term of
employment (or, in the case of a voluntary termination, until the termination
date) plus (ii) a pro rata portion of $87,500 (representing the cash bonus for
the current period). In addition, in the event of termination for reasons other
than cause (including for this purpose the expiration of the term of
employment), the agreement, as amended, also provides for payment of (i) the
amount of $17,000 as a retirement severance benefit in addition to the value of
Mr. McKittrick's vested accounts under the PSP and C&A Co. Plan plus (ii) any
amount payable with respect to Mr. McKittrick's phantom equity award. Mr.
McKittrick's award, which was made pursuant to his employment agreement with the
Company, represents phantom equity in Holdings in the amount of $1,000,000 and
vests at the rate of $200,000 per year, with cliff vesting for the first two
years and continuous vesting thereafter (provided Mr. McKittrick does not
voluntarily terminate his employment prior to July 1, 1994). Upon the
termination of Mr. McKittrick's employment without cause, Mr. McKittrick will
receive the vested portion of his phantom equity.
In July 1992, C&A Co. entered into an employment agreement with Mr. Hannah,
which was amended as of February 1994. The agreement, as amended, provides for
an initial base salary of $525,000 and participation in any executive bonus
plan, with a target bonus of 75% of base salary then in effect up to a maximum
of 150% of base salary. The agreement expires January 31, 1997, with automatic
one year renewals thereafter unless C&A Co. notifies Mr. Hannah prior to that
time of its intention to terminate the agreement. In the event of involuntary
termination for reasons other than cause and other than a change of control, the
agreement provides for severance benefits equal to Mr. Hannah's base salary then
in effect for a period of one year from the termination date plus any unpaid
cash bonus for the prior fiscal year and a pro rata portion of any bonus he
would have received had he been employed for the entire fiscal year. C&A Co.
also entered into a letter agreement with Mr. Hannah in May 1991 pursuant to
which Mr. Hannah is entitled to receive an amount equal to two times his base
salary then in effect in the event his employment is terminated by C&A Co.
within three months prior to or one year following a change of control (as
defined) of C&A Co.
In August 1992, Group entered into a letter agreement with Mr. Meeks
pursuant to which Mr. Meeks became an officer of Group at an initial base salary
of $125,000 per year. Mr. Meeks' employment is on an "at will" basis and may be
terminated by Mr. Meeks or Group at any time. The letter agreement provides that
Mr. Meeks is eligible for benefits under the Group severance policy in existence
at the date of the letter agreement (the "Existing Severance Policy") for a
period of 24 months following a change of control (as defined) of Group. The
Existing Severance Policy generally provides for 1.5 weeks of base salary per
year of service, with a minimum of 12 weeks and a maximum of 39 weeks. After 24
months following a change of control, Mr. Meeks will be eligible for severance
benefits under such policy as may be effective at that time within the then
current
28
<PAGE>
organization for persons who may be reasonably considered to have positions
comparable to Mr. Meeks' at that time. If, as a result of a change of control or
other organizational change, a position is offered to Mr. Meeks that is not
reasonably comparable to his then current position, Mr. Meeks has the option of
terminating his employment with severance benefit eligibility per the Existing
Severance Policy.
COMPENSATION OF DIRECTORS
Each director of the Company (or the Partner who designates such director
to the Board of Directors) receives an annual fee of $15,000, payable quarterly,
for serving as a director. See "ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT -- Certain Agreements" and "ITEM 13. CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS" below.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee is currently comprised of Mr.
Stockman, Co-Chairman of the Board and Co-Chief Executive Officer of the
Company, and Mr. Weisenburger, Deputy Chairman of the Company. Prior to July 20,
1993, the Company's Compensation Committee was comprised of Mr. Birle, who was
at that time Co-Chairman of the Board and Co-Chief Executive Officer, and Mr.
Weisenburger. None of Mr. Stockman, Mr. Weisenburger or Mr. Birle is separately
compensated for serving as an executive officer of the Company or any of its
subsidiaries. Mr. Stockman (after July 20, 1993), Mr. Birle (through July 20,
1993) and Mr. Weisenburger deliberated during the last completed fiscal year
concerning compensation of executive officers of the Company who are separately
compensated for serving as executive officers of the Company. None of the
executive officers of the Company who are separately compensated for serving as
executive officers of the Company serve as directors of the Company or serve on
the Compensation Committee of the Company.
Messrs. Birle and Stockman are general partners of Blackstone Group,
Blackstone Management and Blackstone Management Associates L.P. ("Blackstone
Associates"). Mr. Weisenburger is a Managing Director of WP & Co., which is a
subsidiary of WP Group. WP Group formed WP Partners. See "ITEM 12. SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT -- Certain Affiliations."
Group has agreed to pay to each of Blackstone Management and WP & Co. or
their affiliates an annual operating management fee of $1 million. This fee was
paid upon the consummation of the Merger and, thereafter, on each subsequent
anniversary of the consummation of the tender offer in which Holdings acquired
its shares of the Company's Common Stock. Also, effective April 1, 1990, the
Company agreed to pay to each of Blackstone Management and WP & Co. or their
affiliates an annual management and financial advisory services fee of $1.5
million, payable quarterly in advance. Group also reimburses Blackstone
Management and WP & Co. or their affiliates for out-of-pocket expenses in
connection with their management.
The Board of Directors of the Company has authorized the investment by the
Company from time to time of amounts not to exceed $5 million in a short-term
investment fund to which Blackrock Financial Management L.P. serves as
investment advisor. Blackrock Financial Management L.P., an affiliate of
Blackstone, charges annual management fees equal to .3% of the amount invested,
plus nominal out of pocket expenses. Since the beginning of fiscal 1993, the
Company has paid to Blackrock Financial Management L.P. fees of approximately
$7,000.
Since the beginning of fiscal 1993, in connection with the divestiture of
the Engineering Group, Group has paid divestiture fees (i) to Blackstone
Management in the amount of approximately $512,500 and (ii) to WP & Co. and WP
Partners in an aggregate amount of $512,500. Since the beginning of fiscal 1993,
in connection with the consummation of two credit agreements by Group's former
subsidiary, Kayser-Roth, Group has paid fees (i) to Blackstone Management in the
amount of $375,000 and (ii) to WP & Co. and WP Partners in an aggregate amount
of $375,000. Since the beginning of fiscal 1993, Group has paid $1,394,000 to
each of Blackstone Management and WP & Co. or their affiliates in connection
with the divestiture of Kayser-Roth.
In September 1993, Blackstone entered into an agreement with Group to
provide advisory services and assistance in connection with the sale or
disposition by Group of Builders Emporium. The agreement provides for
29
<PAGE>
reimbursement of out-of-pocket expenses plus payment of fees to be paid by Group
to Blackstone of (i) $100,000 per fiscal month, commencing with the fiscal month
ending September 25, 1993 and ending with the fiscal month ending January 29,
1994 and (ii) $100,000 for the fiscal quarter commencing January 30, 1994 and
ending April 30, 1994. Since the beginning of fiscal 1993, Group has paid
$600,000 under this agreement. In addition, Blackstone negotiated with Arkaid
Incorporated, a real estate consultant ("Arkaid"), to receive 20% of the
incentive fees payable to Arkaid by the Company in connection with the
resolution of lease liabilities of Builders Emporium. Since the beginning of
fiscal 1993, no such incentive fees have been accrued or paid to Arkaid.
Wasserstein Perella Securities, Inc. ("WP Securities"), a wholly owned
subsidiary of WP Group, has acted, and may in the future act, as agent for the
Company in the purchase from time to time of the Company's debt securities,
although no amounts have been paid or accrued to WP Securities for this purpose
since the beginning of fiscal 1993.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Set forth in the table below is certain information as of April 28, 1994,
regarding the beneficial ownership of voting securities of the Company by
persons who are known to the Company to own beneficially more than 5% of the
Company's voting stock.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE PERCENT OF
TITLE OF CLASS OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP CLASS
<S> <C> <C> <C>
Common Stock.................. Collins & Aikman Holdings Corporation 47,808,123(1) 100.00%
8320 University Executive Park
Suite 102
Charlotte, North Carolina 28262
Collins & Aikman Holdings II 47,808,123(1) 100.00%
Corporation
8320 University Executive Park
Suite 102
Charlotte, North Carolina 28262
Blackstone Capital Partners L.P. 47,808,123(1) 100.00%
118 North Bedford Road
Suite 300
Mount Kisco, New York 10549
Wasserstein Perella Partners, L.P. 47,808,123(1) 100.00%
31 West 52nd Street
New York, New York 10019
</TABLE>
(1) See "Certain Affiliations" below.
SECURITY OWNERSHIP OF MANAGEMENT
Executive officers and directors of the Company as a group (15 persons)
beneficially own: (i) no shares of Common Stock; (ii) no shares of the Company's
$2.50 Convertible Preferred Stock, Series A, par value $.10 per share (the
"Series A Preferred Stock"); (iii) no shares of the Company's 15 1/2% Junior
Cumulative Exchangeable Redeemable Preferred Stock, par value $0.10 per share
("Intermediate Preferred Stock"); (iv) no shares of the 15 1/2% Cumulative
Exchangeable Redeemable Preferred Stock, par value $0.01 per share (the "Merger
Preferred Stock"), of Holdings; and (v) no shares of Holdings Common Stock. For
further information regarding the securities ownership of the directors of the
Company, see "Certain Affiliations" below.
Messrs. Birle, Stockman, Wasserstein, McKittrick, Meeks, Hannah and Seelert
and Ms. Philipp beneficially own the following securities of the Company and
Holdings: (i) no shares of Common Stock; (ii) no shares of Series A Preferred
Stock; (iii) no shares of Intermediate Preferred Stock; (iv) no shares of Merger
Preferred Stock; and (v) no shares of Holdings Common Stock. For further
information regarding the securities ownership of Messrs. Birle, Stockman and
Wasserstein, see "Certain Affiliations" below. Mr. Fenton beneficially owns the
following securities of the Company and Holdings: (i) no shares of Common Stock;
(ii) no shares of Series A
30
<PAGE>
Preferred Stock; (iii) no shares of Intermediate Preferred Stock; (iv) 11 shares
of Merger Preferred Stock (less than 1% of this class); and (v) no shares of
Holdings Common Stock.
CERTAIN AFFILIATIONS
Blackstone Partners is a Delaware limited partnership formed in 1987 for
the purpose of, among other things, (i) committing capital to facilitate
corporate restructuring, leveraged buyouts, bridge financings and other
investments and (ii) capitalizing affiliates which will engage in investment and
merchant banking activities. The sole general partner of Blackstone Partners is
Blackstone Associates, a Delaware limited partnership, whose general partners
include Messrs. Birle, Schwarzman and Stockman. At present, the business of
Blackstone Associates consists of performing the function of, and serving as,
the general partner of certain limited partnerships, including Blackstone
Partners. Messrs. Birle, Schwarzman and Stockman are also general partners of
Blackstone Management.
WP Partners is a Delaware limited partnership, the general partner of which
is WP Management. Mr. Wasserstein is Chairman and Chief Executive Officer of WP
Management and of WP Group. WP Partners was formed by WP Group for the purpose
of participating in merchant banking activities, including committing capital to
the organization and consummation of leveraged buyout transactions. WP
Management and WP Group are both Delaware corporations. WP Management is engaged
in managing WP Partners. WP Group is an international private advisory and
merchant banking firm. The principal subsidiary of WP Group is WP & Co., an
international investment banking firm.
Holdings and Holdings II are both Delaware corporations formed on September
21, 1988, in connection with the tender offer for the Common Stock and the
Merger. The presently outstanding 35,035,000 shares of Holdings Common Stock are
all owned by Holdings II. Each of Blackstone Partners and WP Partners owns one-
half of the 204,502 shares of common stock, par value $1.00 per share, that
constitute the only outstanding voting stock of Holdings II. WP Partners and
Blackstone Partners and certain of their affiliates own the outstanding Class A
common stock of Holdings II, shares of which have no voting power but otherwise
are identical to the common stock of Holdings II.
No director of the Company beneficially owns any shares of Common Stock,
Series A Preferred Stock or Intermediate Preferred Stock. In addition, no
director beneficially owns any shares of any class of equity securities of
Holdings. Messrs. Birle, Schwarzman and Stockman, in their capacities as general
partners of Blackstone Associates, collectively share with all the general
partners of Blackstone Associates the power to vote and to dispose of 102,251
shares of the outstanding voting common stock of Holdings II (representing 50%
of such class of stock) and the power to dispose of 10,250 shares of the
outstanding non-voting Class A common stock of Holdings II (representing
approximately 22.5% of such class of stock). Similarly, Messrs. Wasserstein,
Weisenburger and Ziebold, in their capacities as executive officers or officers
of WP Group, may be deemed to have the power to vote and to dispose of 102,251
shares of the outstanding voting common stock of Holdings II (representing 50%
of such class of stock) and the power to dispose of 19,625 shares of the
outstanding non-voting Class A common stock of Holdings II (representing
approximately 43.1% of such class of stock). For purposes of this filing under
the Securities Exchange Act of 1934, as amended, Messrs. Birle, Schwarzman and
Stockman, on the one hand, and Messrs. Wasserstein, Weisenburger and Ziebold, on
the other hand, may be deemed to be beneficial owners, respectively, of such
securities; however, each of Messrs. Birle, Schwarzman, Stockman, Wasserstein,
Weisenburger and Ziebold expressly disclaims such beneficial ownership of any
equity securities of Holdings II.
CERTAIN AGREEMENTS
Blackstone Partners, WP Partners, Holdings II and Holdings have entered
into a Stockholders Agreement, as amended (the "Stockholders Agreement")
relating to the corporate governance, management and ownership of Holdings II
and its subsidiaries. Among other things, the Stockholders Agreement provides
that Blackstone Partners and WP Partners each shall designate one-half of the
directors of Holdings II, Holdings and the Company.
31
<PAGE>
The Stockholders Agreement also places limitations on the redemption, purchase
and transfer of any equity securities of Holdings II or its subsidiaries.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
This Item calls for the information required by Item 404 of Regulation S-K.
Pursuant to Instruction 1 to Item 404 of Regulation S-K, no information need be
given in response to Item 404 as to any compensation or transaction reported in
response to Item 402 of Regulation S-K. The compensation or transactions that
would otherwise be required hereunder are set forth under "ITEM 11. EXECUTIVE
COMPENSATION -- Compensation Committee Interlocks and Insider Participation"
pursuant to Item 402(j) of Regulation S-K and as such are not required to be set
forth under this ITEM 13.
For a description of the relationships of the Company's directors with any
of Blackstone Group, Blackstone Partners, Blackstone Management, WP Partners, WP
& Co. or WP Management, see "ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT" and "ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT -- Certain Affiliations" above.
32
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
PAGE
NUMBER
<S> <C> <C>
(A)(1) INDEX TO FINANCIAL STATEMENTS.
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
Report of Independent Public Accountants.................................................. F-1
Consolidated Statements of Operations for the fiscal years ended January 29, 1994, January
30, 1993 and January 25, 1992............................................................ F-2
Consolidated Balance Sheets at January 29, 1994 and January 30, 1993...................... F-3
Consolidated Statements of Other Paid in Capital for the fiscal years ended January 29,
1994, January 30, 1993 and January 25, 1992.............................................. F-4
Consolidated Statements of Accumulated Deficit for the fiscal years ended January 29,
1994, January 30, 1993 and January 25, 1992.............................................. F-4
Consolidated Statements of Cash Flows for the fiscal years ended January 29, 1994, January
30, 1993 and January 25, 1992............................................................ F-5
Notes to Consolidated Financial Statements................................................ F-6
(A)(2) INDEX OF FINANCIAL SCHEDULES.
Report of Independent Public Accountants on Schedules..................................... S-1
Schedule III-Condensed Financial Information of the Registrant............................ S-2
Schedule VIII-Valuation and Qualifying Accounts........................................... S-5
Schedule IX-Short-Term Borrowings......................................................... S-6
Schedule X-Supplementary Statements of Operations Information............................. S-7
</TABLE>
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are omitted
because they are not required, are inapplicable, or the information is included
in the consolidated financial statements or notes thereto.
(A)(3) EXHIBITS.
Please note that in the following description of exhibits, the title of any
document entered into, or filing made, prior to and in some cases on July 15,
1992 reflects the name of the entity a party thereto or filing, as the case may
be, AT SUCH TIME. Accordingly, documents and filings described below may refer
to WCI Holdings II Corporation, WCI Holdings Corporation or Wickes Companies,
Inc., if such documents and filings were made prior to and in some cases on July
15, 1992.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<S> <C> <C>
3.1 -- Restated Certificate of Incorporation of Collins & Aikman Group, Inc.
3.2 -- By-Laws of Collins & Aikman Group, Inc.
3.3 -- Certificate of Merger merging WCI Acquisition Corporation, a Delaware corporation, with and
into Collins & Aikman Group, Inc. (formerly named Wickes Companies, Inc.), a Delaware
corporation, is hereby incorporated by reference to Exhibit 3.3 of Wickes Companies, Inc.'s
Report on Form 10-K for the fiscal year ended January 28, 1989 (SEC File No. 1-6761).
3.4 -- Certificate of Correction Filed to Correct Certain Errors in the Certificate of Merger
merging WCI Acquisition Corporation with and into Collins & Aikman Group, Inc. (formerly
named Wickes Companies, Inc.) is hereby incorporated by reference to Exhibit 3.4 of Wickes
Companies, Inc.'s Report on Form 10-K for the fiscal year ended January 27, 1990.
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<S> <C> <C>
4.1 -- Specimen certificate representing the 15 1/2% Junior Cumulative Exchangeable Redeemable
Preferred Stock of Collins & Aikman Group, Inc. (formerly named Wickes Companies, Inc.) is
hereby incorporated by reference to Exhibit 4.1 of Wickes Companies, Inc.'s Report on Form
10-K for the fiscal year ended January 28, 1989 (SEC File No. 1-6761).
4.2 -- Specimen certificate of Common Stock, par value $0.10 per share, of Collins & Aikman Group,
Inc. (formerly named Wickes Companies, Inc.) is hereby incorporated by reference to Exhibit
4(a) of Wickes Companies, Inc.'s Report on Form 10-K for the fiscal year ended January 30,
1988 (SEC File No. 1-6761).
4.3 -- Indenture dated as of January 26, 1985, pursuant to which 7 1/2%/10% Debentures due 2005 of
Collins & Aikman Group, Inc. (formerly named Wickes Companies, Inc.) were issued is hereby
incorporated by reference to Exhibit T3-C of Wickes Companies, Inc.'s Application for
Qualification of Indentures under the Trust Indenture Act of 1939 on Form T-3, as amended,
dated January 2, 1985 (SEC File No. 22-13520).
4.4 -- Indenture dated as of May 1, 1985, pursuant to which 11 3/8% Usable Subordinated Debentures
due 1997 of Collins & Aikman Group, Inc. (formerly named Wickes Companies, Inc.) were
issued is hereby incorporated by reference to Exhibit 4(f) of Wickes Companies, Inc.'s
Current Report on Form 8-K dated May 21, 1985 (SEC File No. 1-6761).
4.5 -- Indenture dated as of May 1, 1985, pursuant to which 15% Subordinated Notes due 1995 of
Collins & Aikman Group, Inc. (formerly named Wickes Companies, Inc.) were issued is hereby
incorporated by reference to Exhibit 4(g) of Wickes Companies, Inc.'s Current Report on
Form 8-K dated May 21, 1985 (SEC File No. 1-6761).
4.6 -- Indenture dated as of June 1, 1986, pursuant to which 11 7/8% Senior Subordinated
Debentures due 2001 of Collins & Aikman Group, Inc. (formerly named Wickes Companies, Inc.)
were issued is hereby incorporated by reference to Exhibit 4 to Amendment No. 3 to Wickes
Companies, Inc.'s Registration Statement on Form S-3 (Registration No. 33-4401) filed June
5, 1986.
4.7 -- First Supplemental Indenture dated as of January 29, 1993, by and between Collins & Aikman
Group, Inc. and Bank One, Columbus, NA regarding 11 7/8% Senior Subordinated Debentures due
2001 of Collins & Aikman Group, Inc. (formerly named Wickes Companies, Inc.) is hereby
incorporated by reference to Exhibit 4.11 of Collins & Aikman Group Inc.'s Report on Form
10-K for the fiscal year ended January 30, 1993.
4.8 -- Second Supplemental Indenture dated as of January 29, 1993, by and between Collins & Aikman
Group, Inc. and Bank One, Columbus, NA regarding 11 7/8% Senior Subordinated Debentures due
2001 of Collins & Aikman Group, Inc. (formerly named Wickes Companies, Inc.) is hereby
incorporated by reference to Exhibit 4.12 of Collins & Aikman Group Inc.'s Report on Form
10-K for the fiscal year ended January 30, 1993.
4.9 -- Second Amendment and Restatement of Credit Agreement dated as of April 8, 1994, among
Collins & Aikman Group, Inc. and Continental Bank, N.A., Individually and as Issuing Bank.
4.10 -- Credit Agreement dated as of May 15, 1991, among Collins & Aikman Corporation, certain
subsidiaries of Collins & Aikman Corporation, the financial institutions party thereto and
Continental Bank N.A., as Agent,is hereby incorporated by reference to Exhibit 4.18 of
Wickes Companies, Inc.'s Report on Form 10-Q for the quarter ended April 27, 1991.
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<S> <C> <C>
4.11 -- First Amendment to Credit Agreement dated as of March 11, 1992, among Collins & Aikman
Corporation, certain subsidiaries of Collins & Aikman Corporation, the financial
institutions party thereto and Continental Bank N.A., as Agent, is hereby incorporated by
reference to Exhibit 4.21 of Wickes Companies Inc. Report on Form 10-K for the fiscal year
ended January 25, 1992.
Collins & Aikman Group, Inc. agrees to furnish to the Commission upon request in accordance
with Item 601(b)(4)(iii)(A) of Regulation S-K copies of instruments defining the rights of
holders of long-term debt of Collins & Aikman Group, Inc. or any of its subsidiaries, which
debt does not exceed 10% of the total assets of Collins & Aikman Group, Inc. and its
subsidiaries on a consolidated basis.
10.1 -- Stockholders Agreement dated as of December 6, 1988, among Blackstone Capital Partners
L.P., Wasserstein Perella Partners, L.P., WCI Holdings II Corporation, WCI Holdings
Corporation and WCI Acquisition Corporation is hereby incorporated by reference to Exhibit
10.1 of the Registration Statement on Form S-4 of WCI Holdings Corporation and Wickes
Companies, Inc. (Registration No. 33-27143) filed February 22, 1989.
10.2 -- Amendment No.1 to Stockholders Agreement dated as of May 1, 1992 to Stockholders Agreement
dated as of December 6, 1988, among Blackstone Capital Partners L.P., Wasserstein Perella
Partners, L.P., Collins & Aikman Holdings II Corporation, Collins & Aikman Holdings
Corporation, and Collins & Aikman Group, Inc. is hereby incorporated by reference to
Exhibit 10.5 of Collins & Aikman Group, Inc.'s Report on Form 10-Q for the quarter ended
October 24, 1992.
10.3 -- Employment Agreements dated as of June 16, 1989 between Wickes Companies, Inc. and certain
executive officers is hereby incorporated by reference to Exhibit 10.1 of Wickes Companies,
Inc.'s Report on Form 10-K for the fiscal year ended January 27, 1990.*
10.4 -- First Amendment to Employment Agreements dated as of March 20, 1990 between Wickes
Companies, Inc. and certain executive officers is hereby incorporated by reference to
Exhibit 10.2 of Wickes Companies, Inc.'s Report on Form 10-K for the fiscal year ended
January 27, 1990.*
10.5 -- Employment Agreement dated as of July 18, 1990 between Wickes Companies, Inc. and an
executive officer is hereby incorporated by reference to Exhibit 10.3 of Wickes Companies,
Inc.'s Report on Form 10-K for the fiscal year ended January 26, 1991.*
10.6 -- Agreement dated as of February 25, 1993 and First Amendment dated as of March 29, 1993
between Collins & Aikman Group, Inc. and a former executive officer is hereby incorporated
by reference to Exhibit 10.8 of Collins & Aikman Group Inc.'s Report on Form 10-K for the
fiscal year ended January 30, 1993.*
10.7 -- Employment Agreement dated as of May 1, 1991 between Kayser-Roth Corporation and an
executive officer is hereby incorporated by reference to Exhibit 10.6 of Collins & Aikman
Group Inc.'s Report on Form 10-K for the fiscal year ended January 30, 1993.*
10.8 -- First Amendment to Employment Agreement dated as of May 1, 1991 between Kayser-Roth
Corporation and an executive officer is hereby incorporated by reference to Exhibit 10.7 of
Collins & Aikman Group, Inc.'s Report on Form 10-Q for the quarter ended July 31, 1993.*
</TABLE>
* Management contract or compensatory plan or arrangement required to be filed
as an exhibit to this form
pursuant to Item 14(c) of this report.
35
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<S> <C> <C>
10.9 -- Letter Agreement dated as of May 16, 1991 and Employment Agreement dated as of July 22,
1992 between Collins & Aikman Corporation and an executive officer is hereby incorporated
by reference to Exhibit 10.5 of Collins & Aikman Group Inc.'s Report on Form 10-K for the
fiscal year ended January 30, 1993.*
10.10 -- First Amendment to Employment Agreement dated as of February 24, 1994 between Collins &
Aikman Corporation and an executive officer is hereby incorporated by reference to Exhibit
10.7 of the Registration Statement on Form S-2 of Collins & Aikman Holdings Corporation
(File No. 33-53179) filed April 19, 1994.*
10.11 -- Letter Agreements dated as of May 16, 1991 between Collins & Aikman Corporation and certain
executive officers is hereby incorporated by reference to Exhibit 10.14 of the Registration
Statement on Form S-2 of Collins & Aikman Holdings Corporation (File No. 33-53179) filed
April 19, 1994.*
10.12 -- Employment Agreement dated as of February 1, 1992 between Collins & Aikman Corporation and
an executive officer is hereby incorporated by reference to Exhibit 10.15 of the
Registration Statement on Form S-2 of Collins & Aikman Holdings Corporation (File No.
33-53179) filed April 19, 1994.*
10.13 -- Agreement dated as of March 23, 1992 between Collins & Aikman Group, Inc. and an executive
officer is hereby incorporated by reference to Exhibit 10.4 of Collins & Aikman Group
Inc.'s Report on Form 10-K for the fiscal year ended January 30, 1993.*
10.14 -- First Amendment to Agreement dated as of April 4, 1994 between Collins & Aikman Group, Inc.
and an executive officer.*
10.15 -- Employment Agreement dated as of April 27, 1992 between Collins & Aikman Corporation and an
executive officer is hereby incorporated by reference to Exhibit 10.16 of the Registration
Statement on Form S-2 of Collins & Aikman Holdings Corporation (File No. 33-53179) filed
April 19, 1994.*
10.16 -- Letter Agreement dated as of August 12, 1992 between Collins & Aikman Group, Inc. and an
executive officer is hereby incorporated by reference to Exhibit 10.7 of Collins & Aikman
Group Inc.'s Report on Form 10-K for the fiscal year ended January 30, 1993.*
10.17 -- Employment Agreement dated as of March 1, 1993 between Imperial Wallcoverings, Inc. and an
executive officer is hereby incorporated by reference to Exhibit 10.17 of the Registration
Statement on Form S-2 of Collins & Aikman Holdings Corporation (File No. 33-53179) filed
April 19, 1994.*
10.18 -- Employment Agreement dated as of October 1, 1993 between Collins & Aikman Corporation and
an executive officer is hereby incorporated by reference to Exhibit 10.18 of the
Registration Statement on Form S-2 of Collins & Aikman Holdings Corporation (File No.
33-53179) filed April 19, 1994.*
10.19 -- The Wickes Equity Share Plan, is hereby incorporated by reference to Exhibit 10.8 of
Collins & Aikman Group Inc.'s Report on Form 10-K for the fiscal year ended January 30,
1993.*
10.20 -- Warrant Agreement dated as of January 8, 1994 by and between Collins & Aikman Group, Inc.
and Legwear Acquisition Corporation is hereby incorporated by reference to Exhibit 10.20 of
Collins & Aikman Holdings Corporation's Form 10-K for the fiscal year ended January 29,
1994.
</TABLE>
* Management contract or compensatory plan or arrangement required to be filed
as an exhibit to this form
pursuant to Item 14(c) of this report.
36
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<S> <C> <C>
10.21 -- 1993 Employee Stock option Plan is hereby incorporated by reference to Exhibit 10.12 of the
Registration Statement on Form S-2 of Collins & Aikman Holdings Corporation (File No.
33-53179) filed April 19, 1994.
10.22 -- 1994 Employee Stock option Plan is hereby incorporated by reference to Exhibit 10.13 of the
Registration Statement on Form S-2 of Collins & Aikman Holdings Corporation (File No.
33-53179) filed April 19, 1994.
10.23 -- Acquisition Agreement dated as of November 22, 1993 as amended and restated as of January
28, 1994, among Collins & Aikman Group, Inc., Kayser-Roth Corporation and Legwear
Acquisition Corporation is hereby incorporated by reference to Exhibit 2.1 of Collins &
Aikman Group, Inc.'s Current Report on Form 8-K dated February 10, 1994.
21 -- List of subsidiaries of Collins & Aikman Group, Inc.
</TABLE>
(B) REPORTS ON FORM 8-K.
No current reports on Form 8-K were filed during the year for which this
report on Form 10-K is filed.
37
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 3rd day of May,
1994.
COLLINS & AIKMAN GROUP, INC.
<TABLE>
<S> <C> <C> <C>
By: /s/ DAVID A. STOCKMAN By: /s/ BRUCE WASSERSTEIN
David A. Stockman Bruce Wasserstein
CO-CHAIRMAN OF THE BOARD OF DIRECTORS CO-CHAIRMAN OF THE BOARD OF DIRECTORS
AND CO-CHIEF EXECUTIVE OFFICER AND CO-CHIEF EXECUTIVE OFFICER
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<C> <S> <C>
/s/ DAVID A. STOCKMAN Co-Chairman of the Board of Directors May 3, 1994
and Co-Chief Executive Officer
David A. Stockman
/s/ BRUCE WASSERSTEIN Co-Chairman of the Board of Directors May 3, 1994
and Co-Chief Executive Officer
Bruce Wasserstein
/s/ RANDALL J. WEISENBURGER Vice Chairman and Director May 3, 1994
Randall J. Weisenburger
/s/ DAVID J. MCKITTRICK Principal Financial and Accounting Officer May 3, 1994
David J. McKittrick
/s/ JAMES R. BIRLE Director May 3, 1994
James R. Birle
/s/ STEPHEN A. SCHWARZMAN Director May 3, 1994
Stephen A. Schwarzman
/s/ W. TOWNSEND ZIEBOLD, JR. Director May 3, 1994
W. Townsend Ziebold, Jr.
</TABLE>
38
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Collins & Aikman Group, Inc.:
We have audited the accompanying consolidated balance sheets of Collins &
Aikman Group, Inc. (a Delaware corporation) and subsidiaries as of January 29,
1994 and January 30, 1993, and the related consolidated statements of
operations, other paid-in capital, accumulated deficit and cash flows for each
of the three fiscal years in the period ended January 29, 1994. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Collins & Aikman Group, Inc.
and subsidiaries as of January 29, 1994 and January 30, 1993, and the results of
their operations and their cash flows for each of the three fiscal years in the
period ended January 29, 1994, in conformity with generally accepted accounting
principles.
As discussed in Notes 1 and 11 to the Consolidated Financial Statements,
the Company adopted Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions" in the
fiscal year ended January 25, 1992.
ARTHUR ANDERSEN & CO.
Charlotte, North Carolina,
April 27, 1994.
F-1
<PAGE>
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
JANUARY 29, JANUARY 30, JANUARY 25,
1994 1993 1992
<S> <C> <C> <C>
Net sales............................................................... $ 1,305,517 $ 1,277,500 $ 1,184,316
Cost of goods sold...................................................... 995,790 978,473 915,486
Selling, general and administrative expenses............................ 219,028 241,057 224,878
Management equity plan expense.......................................... 26,736 -- --
Restructuring costs..................................................... -- 10,000 --
Goodwill write-down..................................................... 144,800 -- --
1,386,354 1,229,530 1,140,364
Operating income (loss)................................................. (80,837) 47,970 43,952
Interest expense, net of interest income of $4,328, $3,958 and $6,935... 84,241 87,075 87,674
Loss from continuing operations before income taxes..................... (165,078) (39,105) (43,722)
Income taxes............................................................ 11,614 2,299 15,848
Loss from continuing operations......................................... (176,692) (41,404) (59,570)
Discontinued operations:
Income (loss) from operations, net of income taxes (benefit) of
($467), $1,234 and $2,560.......................................... (4,462) (45,849) 3,669
Loss on disposals, net of income tax benefit of $344,
$0 and $0.......................................................... (111,137) (184,000) (38,000)
Loss before extraordinary item.......................................... (292,291) (271,253) (93,901)
Extraordinary gain on early retirement of debt, net of income
taxes of $362......................................................... -- -- 10,949
Cumulative effect on prior years (to January 26, 1991) of change
in accounting principle, net of income taxes of $0.................... -- -- (87,563)
Net loss................................................................ $ (292,291) $ (271,253) $ (170,515)
</TABLE>
The Notes to Consolidated Financial Statements are
an integral part of these consolidated financial statements.
F-2
<PAGE>
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JANUARY 29, JANUARY 30,
1994 1993
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents........................................................... $ 78,363 $ 80,141
Accounts and notes receivable, net.................................................. 200,368 164,655
Inventories......................................................................... 176,062 165,864
Net assets of discontinued operations............................................... -- 205,131
Receivable from sale of business.................................................... 70,000 --
Other............................................................................... 53,397 23,370
Total current assets............................................................. 578,190 639,161
Property, plant and equipment, net.................................................... 292,600 292,434
Goodwill.............................................................................. 612,042 778,776
Other assets.......................................................................... 57,378 102,810
$ 1,540,210 $ 1,813,181
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY
<S> <C> <C>
Current Liabilities:
Notes payable....................................................................... $ 3,789 $ 9,067
Current maturities of long-term debt................................................ 25,895 61,287
Accounts payable.................................................................... 85,591 75,996
Accrued expenses.................................................................... 140,514 166,049
Other............................................................................... 2,671 1,387
Total current liabilities........................................................ 258,460 313,786
Long-term debt........................................................................ 733,448 784,658
Deferred income taxes................................................................. 640 4,823
Other, including postretirement benefit obligation.................................... 337,186 220,475
Commitments and contingencies (Note 17)...............................................
Redeemable preferred stock (aggregate preference in liquidation $129)................. 132 165
Preferred stock (aggregate preference in liquidation $45,145)......................... 181 181
Common stock (47,808 shares issued and outstanding)................................... 4,781 4,781
Other paid-in capital................................................................. 1,001,126 974,339
Accumulated deficit................................................................... (782,179) (485,355)
Foreign currency translation adjustments.............................................. 309 1,174
Pension equity adjustment............................................................. (13,874) (5,846)
Total stockholder's equity....................................................... 210,344 489,274
$ 1,540,210 $ 1,813,181
</TABLE>
The Notes to Consolidated Financial Statements are
an integral part of these consolidated financial statements.
F-3
<PAGE>
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OTHER PAID-IN CAPITAL
(IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
JANUARY 29, JANUARY 30, JANUARY 25,
1994 1993 1992
<S> <C> <C> <C>
Balance at beginning of year.............................................. $ 974,339 $ 974,559 $ 974,559
Management equity plan.................................................... 26,736 -- --
Other..................................................................... 51 (220) --
Balance at end of year.................................................... $ 1,001,126 $ 974,339 $ 974,559
</TABLE>
CONSOLIDATED STATEMENTS OF ACCUMULATED DEFICIT
(IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
JANUARY 29, JANUARY 30, JANUARY 25,
1994 1993 1992
<S> <C> <C> <C>
Balance at beginning of year............................................... $(485,355) $(209,588) $ (34,558)
Net loss................................................................... (292,291) (271,253) (170,515)
Preferred stock dividends declared......................................... (4,533) (4,514) (4,515)
Balance at end of year..................................................... $(782,179) $(485,355) $(209,588)
</TABLE>
The Notes to Consolidated Financial Statements are
an integral part of these consolidated financial statements.
F-4
<PAGE>
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
JANUARY 29, JANUARY 30, JANUARY 25,
1994 1993 1992
<S> <C> <C> <C>
OPERATING ACTIVITIES
Loss from continuing operations............................................ $(176,692) $ (41,404) $ (59,570)
Adjustments to derive cash flow from continuing operating activities:
Depreciation and amortization............................................ 75,225 79,562 78,456
Management equity plan expense........................................... 26,736 -- --
Goodwill write-down...................................................... 144,800 -- --
Restructuring costs...................................................... -- 10,000 --
Decrease in accounts and notes receivable................................ (33,232) (149) (7,166)
Decrease (increase) in inventories....................................... (7,303) 4,308 12,269
Increase (decrease) in accounts payable.................................. 14,145 130 (2,874)
Other, net............................................................... (15,698) (24,703) (30,643)
Net cash provided by (used in) continuing operating activities...... 27,981 27,744 (9,528)
Loss from discontinued operations.......................................... (115,599) (229,849) (34,331)
Adjustments to derive cash flow from discontinued operating activities:
Loss on disposals........................................................ 111,137 184,000 38,000
Depreciation and amortization............................................ 18,075 24,082 24,475
Net change in receivables, inventory and accounts payable................ 70,162 24,163 5,634
Other, net............................................................... (151,192) (15,854) (20,243)
Net cash provided by (used in) discontinued operating
activities....................................................... (67,417) (13,458) 13,535
INVESTING ACTIVITIES
Additions to property, plant and equipment................................. (56,278) (54,181) (61,899)
Sales of property, plant and equipment..................................... 22,710 10,347 7,522
Proceeds from businesses sold.............................................. 148,743 -- 5,598
Other, net................................................................. 43,983 9,223 28,743
Net cash provided by (used in) investing activities................... 159,158 (34,611) (20,036)
FINANCING ACTIVITIES
Issuance of long-term debt................................................. 76,135 60,128 157,587
Reduction of long-term debt and capital lease obligations.................. (179,940) (54,376) (182,760)
Net proceeds (reduction) of short-term borrowings.......................... (5,899) 3,554 (1,057)
Dividends paid............................................................. (4,515) (4,514) (4,515)
Other, net................................................................. (7,281) (2,863) (459)
Net cash provided by (used in) financing activities................... (121,500) 1,929 (31,204)
Decrease in cash and cash equivalents...................................... (1,778) (18,396) (47,233)
Cash and cash equivalents at beginning of year............................. 80,141 98,537 145,770
Cash and cash equivalents at end of year................................... $ 78,363 $ 80,141 $ 98,537
</TABLE>
The Notes to Consolidated Financial Statements are
an integral part of these consolidated financial statements.
F-5
<PAGE>
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
FISCAL YEAR -- The fiscal year of Collins & Aikman Group, Inc. ("Group" or
the "Company") ends on the last Saturday of January. Fiscal 1993 and fiscal 1991
were 52 week years which ended on January 29, 1994 and January 25, 1992,
respectively. Fiscal 1992 was a 53 week fiscal year which ended on January 30,
1993.
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE -- Effective as of the
beginning of fiscal 1991, the Company adopted Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions" ("SFAS 106"). SFAS 106 requires accrual, during the period in which
eligible employees render service, of the expected cost of providing these
benefits to an employee and the employee's beneficiaries and covered dependents.
The Company has recorded the cumulative effect at January 26, 1991, net of tax
of $0, of $87.6 million as of the beginning of fiscal 1991.
ACQUISITION BY COLLINS & AIKMAN HOLDINGS CORPORATION -- On October 25,
1988, the Company, Collins & Aikman Holdings II Corporation (formerly WCI
Holdings II Corporation) ("Holdings II") and Collins & Aikman Holdings
Corporation (formerly WCI Holdings Corporation) ("Holdings") entered into an
Amended and Restated Agreement and Plan of Merger (the "Merger Agreement").
Pursuant to the Merger Agreement, Holdings, a corporation indirectly jointly
owned by Blackstone Capital Partners L.P. and Wasserstein Perella Partners,
L.P., and their respective affiliates, acquired approximately 80% of the shares
of common stock of the Company on December 8, 1988 following a cash tender
offer. Pursuant to the Merger Agreement, on April 13, 1989, a wholly owned
subsidiary of Holdings was merged into the Company (the "Merger"), and the
Company became a direct wholly owned subsidiary of Holdings.
CONSOLIDATION -- The consolidated financial statements include the accounts
of the Company and its subsidiaries. All significant intercompany items have
been eliminated in consolidation.
INCOME TAXES -- During fiscal 1992, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS 109"). SFAS 109 supersedes Statement of Financial Accounting
Standards No. 96, of the same title, which the Company previously followed to
account for income taxes. The adoption of SFAS 109 did not impact the Company's
financial position or results of operations. See also Note 14.
FOREIGN CURRENCY TRANSLATION -- Foreign currency accounts are translated in
accordance with Statement of Financial Accounting Standards No. 52, "Foreign
Currency Translation"("SFAS 52"). SFAS 52 generally provides that the assets and
liabilities of foreign operations be translated at the current exchange rates as
of the end of the accounting period and that revenues and expenses be translated
using average exchange rates. The resulting translation adjustment arising from
foreign currency translation is accumulated as a separate component of
stockholder's equity. Translation adjustments during fiscal 1993, 1992 and 1991
were ($865,000), ($5.8) million, and ($1.9) million, respectively.
CASH AND CASH EQUIVALENTS -- Cash and cash equivalents include all cash
balances and highly liquid investments with an original maturity of three months
or less. Included in cash and cash equivalents at January 29, 1994 is $8.6
million which is held by the Company's Collins & Aikman Corporation subsidiary
("C&A Co.").
INVENTORIES -- Inventories are valued principally at the lower of cost or
market, but not in excess of net realizable value. Cost is determined on the
first-in, first-out basis.
OTHER CURRENT ASSETS -- Other current assets at January 29, 1994 include
$22.8 million which is on deposit with an insurer to cover future deferred
payments.
PROPERTY, PLANT AND EQUIPMENT -- Property, plant and equipment are stated
at cost. Provisions for depreciation are primarily computed on a straight-line
basis over the estimated useful lives of the assets, presently
F-6
<PAGE>
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ranging from 3 to 40 years. Leasehold improvements are amortized over the lesser
of the lease term or the estimated useful life of the improvements.
GOODWILL -- Goodwill is being amortized by the straight-line method over 40
years. Management's policy is to continually review whether there have been any
significant and permanent downturns in the industries in which the Company
operates, loss of a majority of customers, introduction of substitute products
and the current and expected future results of the acquired entities in
assessing the recoverability of the goodwill related to each of its businesses.
When the foregoing considerations suggests that a deterioration of the financial
condition of the Company has occurred, the methodology used by the Company to
determine whether there has been an impairment of goodwill is to assess whether
the forecasted operating results (including a proportionate share of the
Company's projected consolidated interest expense) of each of its business units
will recover the recorded goodwill balance over the remaining amortization
period.
Amortization applicable to continuing operations was $21.9 million, $23.1
million and $23.0 million for fiscal 1993, 1992 and 1991, respectively. During
fiscal 1993, Group wrote down goodwill by $144.8 million related to its
Wallcoverings segment as described in Note 2 below. Accumulated amortization was
$133.6 million and $142.0 million at January 29, 1994 and January 30, 1993,
respectively.
ENVIRONMENT -- Accruals for environmental matters are recorded when it is
probable that a liability has been incurred and the amount of the liability can
be reasonably estimated. Accruals for environmental liabilities are generally
included in the balance sheet as other noncurrent liabilities at undiscounted
amounts and exclude claims for recoveries from insurance or other third parties.
Accruals for insurance or other third party recoveries for environmental
liabilities are recorded when it is probable that the claim will be realized.
RECLASSIFICATIONS -- Certain reclassifications have been made to the fiscal
1992 and 1991 statements of operations and statements of cash flows and to the
January 30, 1993 balance sheet to conform to the fiscal 1993 presentation.
2. GOODWILL:
The substantial losses of Builders Emporium and the inability to sell the
Builders Emporium chain as an ongoing entity left the Company with materially
higher leverage and interest costs than previously anticipated. The inability of
the Company to sell its Dura Convertible division ("Dura") at an acceptable
price along with the sale of Kayser-Roth Corporation ("Kayser-Roth") at a price
and on terms that were worse than management's prior expectations of value were
additional adverse factors. Prior to the end of the third quarter, management
explored debt recapitalization alternatives and the possibility of raising new
equity capital. The indications from the financial community at that time were
that a debt recapitalization was not likely to significantly reduce the
Company's interest burden and that raising new equity capital to deleverage the
Company was not feasible at that time. Although management of the Company, based
on the facts known to it at October 30, 1993, was expecting both cyclical and
long-term improvement in the results of operations, an analysis suggested that,
given the Company's capital structure, a deterioration of the financial
condition of the Company had occurred. As a result, the Company forecasted its
operating results forward 33 years, which approximated the remaining
amortization period of the Company's goodwill at October 30, 1993, to determine
whether cumulative net income would be sufficient to recover the goodwill.
At October 30, 1993, management believed that the projected future results
were the most likely scenario given the Company's current capital structure. In
spite of the fact that the operating results reflected in the forecasts showed
improvement over the historical results achieved during the past few years,
management concluded, based on the forecast, that the net income allocable to
the Company's Wallcoverings segment over the forecast period (including a
proportionate share of the Company's projected consolidated interest expense)
would not be sufficient to recover its entire goodwill balance. Accordingly, the
Company recorded a write-down of $144.8
F-7
<PAGE>
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
million during the third quarter ended October 30, 1993 to reflect the portion
of Wallcoverings' goodwill balance which was not forecasted to be recovered over
the projection period. For the other business units of the Company, net income
over the forecast period was sufficient to recover their respective goodwill
balances.
Management's continuing evaluations have indicated no further impairment in
the ability of Wallcoverings to recover its remaining goodwill and no permanent
impairment with respect to the other operations of the Company.
3. RESTRUCTURING COSTS:
At the end of the third quarter of fiscal 1993, the Company recorded a
restructuring charge of $24.0 million, principally related to the write-down of
certain surplus or under-utilized assets of the Company's Automotive Products
and Wallcoverings segments and to provide for the obsolescence of certain
manufacturing processes as a result of shifts in customer demand. During the
fourth quarter of fiscal 1993, management reevaluated its plan to restructure
these manufacturing facilities and, based on changes in product mix and
underlying improvement in certain of the Company's businesses, management has
concluded that the assets and facilities identified previously can be utilized
at a level of production that would not result in the impairment of the asset
values. Accordingly, in the fourth quarter of fiscal 1993, management has
revised its estimate and reversed these charges.
During fiscal 1992, the Company incurred certain identifiable costs in
connection with the restructuring of Wallcoverings. The restructuring costs,
aggregating $10.0 million, principally related to the closure of certain
manufacturing and distribution facilities.
4. DISCONTINUED OPERATIONS:
During fiscal 1991, Group reclassified the remaining businesses of Wickes
Manufacturing Company consisting of its Dura, Bumper and H. Koch & Sons ("H.
Koch") divisions as discontinued operations. In July 1992, Group sold its Bumper
and H. Koch divisions. As of the end of fiscal 1992, Group reclassified Builders
Emporium and the Engineering Group as discontinued operations. Group recorded a
loss on disposal of discontinued operations of $184 million in the fourth
quarter of fiscal 1992 principally to provide for the expected loss on sale of
Builders Emporium. In March 1993, the Engineering Group was sold for
approximately $51 million.
As of the end of the second quarter of fiscal 1993, the Company determined
that it would be unable to sell Builders Emporium as an ongoing entity. The
Company recorded an additional loss on disposal of discontinued operations of
$109.3 million principally to (i) provide additional reserves for the
significant reduction in estimated proceeds from disposition and other costs in
connection with the sale or disposition of Builders Emporium inventory, real
estate and other assets and (ii) provide for employee severance and other costs.
Builders Emporium's inventory was sold during the third and fourth quarters of
fiscal 1993 and substantially all accounts receivable and accounts payable
balances were settled as of January 29, 1994. Remaining assets and liabilities
of Builders Emporium relate primarily to real estate and insurance liabilities
which continue to be liquidated.
Kayser-Roth was reclassified as a discontinued operation at the end of the
third fiscal quarter ended October 30, 1993 and was sold on January 28, 1994 for
a total price of approximately $170 million (subject to post-closing purchase
price adjustment). In connection with the sale, Group received a 90 day $70
million Senior unsecured bridge note from the purchaser which was collected on
April 27, 1994.
The results of Builders Emporium, Kayser-Roth, the Engineering Group,
Bumper and H. Koch are classified as discontinued operations for all periods
presented. At the end of the second fiscal quarter ended July 31, 1993, Group
decided to retain its Dura business. The results of Dura are now classified in
the automotive products segment and prior reporting periods have been restated
to reflect Dura as a continuing operation.
F-8
<PAGE>
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Summarized statements of operations for periods prior to units being
classified as discontinued operations follow (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
JANUARY 29, JANUARY 30, JANUARY 25,
1994 1993 1992
<S> <C> <C> <C>
Sales............................................................ $ 274,297 $ 977,098 $ 1,042,377
Costs and expenses, other than interest.......................... 268,821 998,703 1,012,309
Interest expense................................................. 10,405 23,010 23,839
Loss before income taxes......................................... (4,929) (44,615) 6,229
Income taxes (benefit)........................................... (467) 1,234 2,560
Income (loss) from discontinued operations....................... $ (4,462) $ (45,849) $ 3,669
</TABLE>
The above summarized results include Builders Emporium and the Engineering
Group through January 30, 1993 and Kayser-Roth through the third quarter ended
October 30, 1993 (the respective dates at which these businesses were
reclassified as discontinued operations). The summarized statement of operations
for fiscal 1991 also includes Bumper and H. Koch through their date of sale.
Sales of Builders Emporium in fiscal 1993 aggregated approximately $410 million
and sales of Kayser-Roth for the fourth quarter of fiscal 1993 aggregated
approximately $95 million. Interest expense of $13.1 million (including $5.5
million of interest expense which was reserved for Builders Emporium and
Kayser-Roth), $19.7 million and $20.9 million during fiscal 1993, 1992 and 1991,
respectively, has been allocated to discontinued operations based upon the ratio
of net book value of discontinued operations (including reserves for loss on
disposal) to consolidated invested capital. Interest expense incurred by
Builders Emporium and Kayser-Roth subsequent to their reclassification as
discontinued operations aggregated $2.2 million. Such amounts were charged to
discontinued operations reserves.
In October 1993, Group received $35.1 million from Wickes Lumber Company in
exchange for a Wickes Lumber Company promissory note and warrant that Group had
received in partial consideration for the sale of Wickes Lumber Company in 1988.
Fees paid or accrued to Blackstone Partners and WP Partners for services
related to divestitures aggregated $4.3 million and $500,000 during fiscal 1993
and 1992, respectively. Divestiture fees in fiscal 1993 include $400,000 paid
and $100,000 accrued to Blackstone Partners for advisory services in connection
with the sale of Builders Emporium's inventory, real estate and other assets.
The majority of Builders Emporium's leased properties have been assigned to
third parties. In addition, Group has assigned leases in connection with the
divestiture of Kayser-Roth, the Engineering Group, Wickes Manufacturing Company
and other divested businesses. Although Group has obtained releases from the
lessors of certain properties, Group remains contingently liable under most of
the leases. Group's future liability for these leases, in management's opinion,
based on the facts presently known to it, will not have a material effect on the
Company's consolidated financial condition or future results of operations.
5. ACCOUNTS AND NOTES RECEIVABLE, NET:
Accounts and notes receivable, net, are summarized below (in thousands):
<TABLE>
<CAPTION>
JANUARY 29, JANUARY 30,
1994 1993
<S> <C> <C>
Accounts and notes receivable.................................................. $ 207,439 $ 171,403
Less allowance for doubtful accounts........................................... (7,071) (6,748)
$ 200,368 $ 164,655
</TABLE>
F-9
<PAGE>
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. INVENTORIES:
Inventory balances are summarized below (in thousands):
<TABLE>
<CAPTION>
JANUARY 29, JANUARY 30,
1994 1993
<S> <C> <C>
Raw materials.................................................................. $ 70,762 $ 62,663
Work in process................................................................ 24,739 26,121
Finished goods................................................................. 80,561 77,080
$ 176,062 $ 165,864
</TABLE>
7. PROPERTY, PLANT AND EQUIPMENT, NET:
Property, plant and equipment, net, are summarized below (in thousands):
<TABLE>
<CAPTION>
JANUARY 29, JANUARY 30,
1994 1993
<S> <C> <C>
Land and improvements.......................................................... $ 28,347 $ 20,747
Buildings...................................................................... 117,275 123,406
Machinery and equipment........................................................ 414,208 374,946
Leasehold improvements......................................................... 1,421 1,431
Construction in progress....................................................... 21,863 20,733
583,114 541,263
Less accumulated depreciation and amortization................................. (290,514) (248,829)
$ 292,600 $ 292,434
</TABLE>
Depreciation and amortization expense of property, plant and equipment
applicable to continuing operations was $42.2 million, $45.5 million and $43.9
million for fiscal 1993, 1992 and 1991, respectively.
8. ACCRUED EXPENSES:
Accrued expenses are summarized below (in thousands):
<TABLE>
<CAPTION>
JANUARY 29, JANUARY 30,
1994 1993
<S> <C> <C>
Payroll and employee benefits.................................................. $ 42,086 $ 37,303
Interest....................................................................... 19,242 24,107
Insurance...................................................................... 15,152 25,122
Other.......................................................................... 64,034 79,517
$ 140,514 $ 166,049
</TABLE>
F-10
<PAGE>
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. LONG-TERM DEBT:
Long-term debt is summarized below (in thousands):
<TABLE>
<CAPTION>
JANUARY 29, JANUARY 30,
1994 1993
<S> <C> <C>
Senior indebtedness:
Mortgage notes............................................................... $ 1,464 $ 1,841
Notes payable to banks....................................................... 7,595 7,891
Notes payable to others...................................................... 8,266 4,744
C&A Co. credit facility, average interest rate of 5.5% and 5.3%.............. 137,129 191,155
Debentures due 2005, interest rate 7 1/2% until January 31, 1994, and 10%
thereafter................................................................ 138,694 138,694
Sinking fund debentures due 1994, interest rate 12%.......................... -- 40,982
Industrial revenue bonds due through 2006, interest rates from 5% to
7 5/8%.................................................................... 11,648 12,754
Unamortized debt discount.................................................... (47,650) (53,239)
257,146 344,822
Senior subordinated indebtedness:
Senior subordinated debentures due 2001, interest rate 11 7/8%............... 347,414 347,414
Unamortized debt discount.................................................... (4,629) (5,019)
342,785 342,395
Subordinated indebtedness:
Subordinated notes due 1995, interest rate 15%............................... 137,359 137,359
Subordinated debentures due 1997, interest rate 11 3/8%...................... 24,500 24,500
Unamortized debt discount.................................................... (2,447) (3,131)
159,412 158,728
Total debt..................................................................... 759,343 845,945
Less current maturities........................................................ (25,895) (61,287)
$ 733,448 $ 784,658
</TABLE>
Group's C&A Co. subsidiary consummated a $225 million credit agreement with
a syndicate of banks on May 22, 1991 that expires on May 15, 1998 (the "C&A Co.
Credit Agreement"). During fiscal 1991, C&A Co. borrowed $152 million under the
C&A Co. Credit Agreement. Out of these borrowings, $120 million was paid to
Group as a dividend to be used for general corporate purposes. During fiscal
1992, C&A Co. paid Group dividends aggregating $110 million, borrowed an
additional $56.0 million and made principal repayments under the C&A Co. Credit
Agreement of $10.3 million. During fiscal 1993, C&A Co. paid Group dividends
aggregating $30 million, borrowed an additional $17.0 million and made principal
repayments under the C&A Co. Credit Agreement of $71.0 million. Availability
under the C&A Co. Credit Agreement is determined monthly based upon C&A Co.'s
receivables balance. The C&A Co. Credit Agreement permits C&A Co. to pay
additional dividends to Group only if C&A Co. satisfies a minimum liquidity
requirement of $25 million and then limits the amount of total dividends to $175
million plus 90% (or 100% if certain specified ratios are met) of C&A Co.'s net
income (excluding the impact of SFAS 106) subsequent to April 27, 1991. As of
January 29, 1994, an additional $54.8 million was available to C&A Co. under the
C&A Co. Credit Agreement. Although as of that date approximately $56 million of
additional dividends could be paid to Group under the dividend restrictions in
the C&A Co. Credit Agreement, other financial covenants in the C&A Co. Credit
Agreement would limit the amount of dividends to approximately $47 million. C&A
Co. and its subsidiaries are separate corporate entities and the assets of C&A
Co. and its subsidiaries are available first and foremost to satisfy the claims
of the creditors of
F-11
<PAGE>
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
C&A Co. and such subsidiaries. At January 29, 1994, receivables and fixed assets
pledged as collateral under the C&A Co. Credit Agreement aggregated
approximately $168 million and $104 million, respectively.
On March 12, 1993, Kayser-Roth and a bank consummated a $40 million credit
agreement. Kayser-Roth initially borrowed $35 million under the credit agreement
of which $26 million was paid to Group as a dividend. On May 27, 1993,
Kayser-Roth completed a $75 million credit facility (the "Kayser-Roth Credit
Agreement") with a group of banks to replace the $40 million credit agreement
and, on July 6, 1993, Kayser-Roth paid an additional dividend of $26 million to
Group. Group used approximately $41 million of the proceeds from the original
and the replacement Kayser-Roth credit facilities to redeem all of its
outstanding 12% Sinking Fund Debentures due January 31, 1994 on July 7, 1993.
Group repaid the outstanding borrowings under the Kayser-Roth Credit Agreement
of $66 million with a portion of the cash proceeds from the sale of Kayser-Roth.
There are limitations on the payment of dividends contained in various debt
agreements of Group. Currently, the most restrictive of such limitations is
contained in the indenture, as amended, (the "11 7/8% Indenture") governing the
11 7/8% Senior Subordinated Debentures due 2001 (the "11 7/8% Securities").
Since January 26, 1991, no additional dividends could be paid to Holdings under
such indenture. Under these provisions as of January 29, 1994, Group would have
needed to earn an additional $866 million of consolidated net income (as defined
in the 11 7/8% Indenture) in order to eliminate the deficit in its dividend
capacity (assuming no change in the other factors used to determine Group's
dividend capacity).
Under the terms of the 11 7/8% Indenture, the Company is required to redeem
$138 million aggregate principal amount of 11 7/8% Securities on each June 1
from 1993 through 2000 ("Mandatory Redemptions") and to repay the remaining
outstanding 11 7/8% Securities at maturity on June 1, 2001. Under the terms of
the 11 7/8% Indenture, if Adjusted Net Worth (as such term is defined in the
11 7/8% Indenture) is equal to or less than $700 million on the last day of any
fiscal quarter (the "Minimum Equity Test"), the Company would be required to
begin on the last day of the second fiscal quarter thereafter (unless the
Minimum Equity Test is satisfied at the end of the intervening fiscal quarter)
semi-annual redemptions ("Accelerated Redemptions") of $138 million aggregate
principal amount of 11 7/8% Securities until all the 11 7/8% Securities are
redeemed or until the Minimum Equity Test is again satisfied. The Company can
reduce its obligation to make any cash Mandatory Redemption or Accelerated
Redemption payment through the application of previously redeemed or purchased
and canceled 11 7/8% Securities as permitted by the 11 7/8% Indenture. The
Company has previously delivered for cancellation $1,033 million in aggregate
principal amount of 11 7/8% Securities, which are available for such purpose.
The Company satisfied the Minimum Equity Test at the end of fiscal 1993. On that
date, Adjusted Net Worth was $753.7 million. If the Company had not satisfied
the Minimum Equity Test at that date and did not subsequently satisfy such test,
the first cash redemption payment (after giving effect to credits for previously
acquired 11 7/8% Securities) would be required at the end of the fiscal quarter
ending January 1997. By comparison, if the Company continues to satisfy the
Minimum Equity Test at all times or cures any failure of such test prior to any
accelerated cash redemption payment becoming due, no cash redemption payment
will be required until June 1, 2000.
The 11 3/8% subordinated debentures of Group become callable on May 1,
1995. The remaining indebtedness of Group is callable at various premiums at the
Company's option.
Maturities of long-term debt during each of the five fiscal years
subsequent to January 29, 1994, are $25.9 million, $170.9 million, $63.3
million, $39.9 million and $20.6 million, respectively. Total interest paid by
the Company on all indebtedness was $101.5 million, $102.5 million and $112.6
million for fiscal 1993, 1992 and 1991, respectively.
F-12
<PAGE>
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
For additional information see "ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" elsewhere herein.
10. LONG-TERM LEASES AND LEASE COMMITMENTS:
The Company is lessee under various long-term operating leases for land and
buildings for periods up to forty years. The majority of these leases contain
renewal provisions. In addition, the Company leases transportation, operating
and administrative equipment for periods ranging from one to ten years.
At January 29, 1994, future minimum lease payments under operating leases
are as follows (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDING
<S> <C> <C>
January 1995................................................. $ 16,568
January 1996................................................. 12,520
January 1997................................................. 9,165
January 1998................................................. 4,128
January 1999................................................. 1,143
Later years.................................................. 2,171
$ 45,695
</TABLE>
Rental expense of continuing operations under operating leases was $19.2
million, $19.0 million and $15.4 million for fiscal 1993, 1992 and 1991,
respectively. Obligations under capitalized leases are not significant.
11. EMPLOYEE BENEFIT PLANS:
The Company and its subsidiaries have in effect defined benefit pension
plans covering substantially all employees who meet eligibility requirements.
Plan benefits are generally based on years of service and employee's
compensation during their years of employment. Funding of retirement costs for
these plans complies with the minimum funding requirements specified by the
Employee Retirement Income Security Act. Assets of the pension plans are held in
a Master Trust which invests primarily in equity and fixed income securities.
Net periodic pension cost of continuing operations for fiscal 1993, 1992
and 1991 included the following components (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
JANUARY 29, JANUARY 30, JANUARY 25,
1994 1993 1992
<S> <C> <C> <C>
Service cost...................................................... $ 5,232 $ 5,313 $ 5,240
Interest cost on projected benefit obligation and service cost.... 6,843 6,220 5,947
Actual return on assets........................................... (6,334) 746 (13,771)
Net amortization and deferral..................................... (1,119) (10,063) 7,136
$ 4,622 $ 2,216 $ 4,552
</TABLE>
F-13
<PAGE>
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table sets forth the plans' funded status and amounts
recognized in the Company's consolidated balance sheets at January 29, 1994 and
January 30, 1993 (in thousands):
<TABLE>
<CAPTION>
JANUARY 29, 1994 JANUARY 30, 1993
PLANS FOR WHICH PLANS FOR WHICH
ASSETS ACCUMULATED ASSETS ACCUMULATED
EXCEED BENEFITS EXCEED BENEFITS
ACCUMULATED EXCEED ACCUMULATED EXCEED
BENEFITS ASSETS BENEFITS ASSETS
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligation:
Vested benefit obligation.............................. $ (21,352) $ (82,248) $ (15,096) $ (76,958)
Accumulated benefit obligation......................... $ (22,214) $ (86,451) $ (15,850) $ (80,432)
Projected benefit obligation............................. $ (24,317) $ (89,435) $ (17,314) $ (83,050)
Plan assets at fair value................................ 24,761 66,795 20,089 72,763
Projected benefit obligation less than (in excess of)
plan assets............................................ 444 (22,640) 2,775 (10,287)
Unrecognized net loss.................................... 2,081 25,315 310 22,122
Prior service cost not yet recognized in net periodic
pension cost........................................... 424 (7,361) 443 (13,608)
Unrecognized net asset at February 1, 1986............... (665) (503) (80) (983)
Adjustment required to recognize minimum liability....... -- (14,068) -- (6,244)
Pension asset (pension liability) recognized in the
consolidated balance sheets............................ $ 2,284 $ (19,257) $ 3,448 $ (9,000)
</TABLE>
The discount rate used in determining the actuarial present value of the
projected benefit obligation was 7% and 8% at January 29, 1994 and January 30,
1993, respectively. The expected rate of increase in future compensation levels
is 4% and 5.5% and the expected long-term rate of return on plan assets is 9%
and 10% in fiscal 1993 and 1992, respectively.
The provisions of Statement of Financial Accounting Standards No. 87,
"Employers' Accounting for Pensions" ("SFAS 87"), require companies with any
plans that have an unfunded accumulated benefit obligation to recognize an
additional minimum pension liability, an offsetting intangible pension asset
and, in certain situations, a contra-equity balance. In accordance with the
provisions of SFAS 87, the consolidated balance sheets at January 29, 1994 and
January 30, 1993 include an intangible pension asset of $194,000 and $398,000;
an additional minimum pension liability of $14.1 million and $6.2 million and a
contra-equity balance of $13.9 million and $5.8 million, respectively.
The Company sponsors defined contribution plans covering employees who meet
eligibility requirements. Company contributions are based on a formula as
specified in the plan agreements. Contributions related to continuing operations
were $4.7 million, $4.0 million and $3.4 million in fiscal 1993, 1992 and 1991,
respectively.
The Company has provided postretirement life, health and medical coverage
for certain retirees under plans currently in effect. Many of the Company's
domestic employees may be eligible for benefits if they reach retirement age
while still employed by the Company.
Effective as of the beginning of fiscal 1991, the Company adopted Statement
of Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions." The Statement requires that costs
of such benefits be accrued as a form of deferred compensation earned during the
period that employees render service, rather than the previously permitted
practice of accounting for such costs as incurred.
F-14
<PAGE>
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company elected to recognize the cumulative effect of this change in
accounting principle as of the beginning of fiscal 1991.
The following table sets forth the amounts included in the Company's
consolidated balance sheets (in thousands):
<TABLE>
<CAPTION>
JANUARY 29, JANUARY 30,
1994 1993
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees..................................................................... $ 48,559 $ 56,497
Fully eligible active plan participants...................................... 12,425 13,145
Other active plan participants............................................... 13,845 26,366
Unrecognized prior service gain from plan amendments......................... 23,764 --
Unrecognized net gain........................................................ 7,408 8,869
Total postretirement benefit obligation................................. $ 106,001 $ 104,877
</TABLE>
Net periodic postretirement benefit cost of continuing operations,
determined on the accrual basis, included the following components (in
thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
JANUARY 29, JANUARY 30, JANUARY 25,
1994 1993 1992
<S> <C> <C> <C>
Service cost -- benefits attributed to service during the year............. $ 2,131 $ 2,168 $ 2,066
Interest cost on accumulated postretirement benefit obligation............. 4,385 6,865 6,574
Amortization of unrecognized net gain...................................... (200) -- --
Net periodic postretirement benefit cost................................... $ 6,316 $ 9,033 $ 8,640
</TABLE>
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7% at January 29, 1994 and 8% at January
30, 1993. The plans are unfunded.
For measurement purposes, a 14% annual rate of increase in the per capita
cost of covered health care benefits was assumed for fiscal 1993; the rate was
assumed to decrease 1% per year to 6% for fiscal 2001 and remain at that level
thereafter. The health care cost trend rate assumption has an impact on the
amounts reported. To illustrate, increasing the assumed health care cost trend
rates by 1 percentage point in each year would increase the accumulated
postretirement benefit obligation as of January 29, 1994 by $878,000 and the
aggregate of the service and interest cost components of net periodic
postretirement benefit cost for the year then ended by $103,000.
Effective April 1, 1994, the Company amended the postretirement benefit
plan which covers substantially all of the eligible current and retired
employees of the Company's continuing operations. Pursuant to the amendment the
Company's obligation for future health care inflation will be limited to 6% per
year through March 31, 1998. Subsequent to March 1998, the Company will not
provide coverage for inflation in health care costs.
12. COMMON STOCK AND PREFERRED STOCK:
At January 29, 1994 and January 30, 1993, 70,000,000 shares of $.10 par
value common stock were authorized and approximately 47,808,000 shares were
issued and outstanding.
At January 29, 1994 and January 30, 1993, 30,000,000 shares of $.10 par
value preferred stock were authorized and approximately 1,806,000 shares of
convertible preferred stock, Series A were outstanding. Each share of Series A
preferred stock, which has an annual dividend of $2.50 per share, is convertible
into 0.50 shares of Merger Preferred Stock of Holdings, subject to subsequent
adjustment pursuant to its terms.
F-15
<PAGE>
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. MANAGEMENT EQUITY PLANS:
Effective on January 28, 1994, Holdings adopted the 1993 Employee Stock
Option Plan ("1993 Plan") for certain key employees of Group. The 1993 Plan was
created primarily for the special purpose of rewarding key employees for the
appreciation earned through prior service under the Company's previous equity
share plan that was terminated on October 29, 1993. Holdings granted options to
acquire 3,119,466 shares of the Common Stock at an average exercise price of
$4.57 per share. The majority of these options vest 40% in June 1995 with the
remaining shares vesting in June 1996. In connection with the adoption of this
plan, the Company recorded a charge of $26.7 million for management equity plan
expense.
In addition, effective in April 1994, Holdings adopted the 1994 Employee
Stock Option Plan ("1994 Plan") as a successor to the 1993 Plan to facilitate
awards to certain key employees and to consultants. The 1994 Plan authorizes the
issuance of up to 2,980,534 shares of Common Stock and provides that no options
may be granted after 10 years from the effective date of this plan. Options for
169,634 shares of Common Stock at an average exercise price of $5.52 per share
were granted to key employees of Group in April 1994. Management equity plan
expense of $1.3 million will be recognized as the options ratably vest over the
next three years.
Upon a change of control of Holdings, as defined, all of the above options
become fully vested and exercisable.
14. INCOME TAXES:
During the first quarter of fiscal 1992, the Company adopted the provisions
of Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS 109"). SFAS 109 supersedes Statement of Financial Accounting
Standards No. 96, of the same title, which the Company previously followed to
account for income taxes. The adoption of SFAS 109 did not impact the Company's
financial position or results of operations.
Deferred income taxes are provided for the temporary differences between
the financial reporting and tax basis of the Company's assets and liabilities.
The components of the net deferred tax liability as of January 29, 1994 and
January 30, 1993 were as follows (in thousands):
<TABLE>
<CAPTION>
JANUARY 29, JANUARY 30,
1994 1993
<S> <C> <C>
Deferred tax assets:
Employee benefits including postretirement benefits.......................... $ 69,245 $ 69,903
Net operating loss carryforwards............................................. 134,928 83,599
Investment tax credit carryforwards.......................................... 11,900 14,567
Alternative minimum tax credits.............................................. 7,000 9,523
Other liabilities and reserves............................................... 130,093 133,586
Valuation allowance.......................................................... (289,204) (251,426)
Total deferred tax asset..................................................... 63,962 59,752
Deferred tax liabilities:
Property, plant and equipment................................................ 51,258 50,213
Unamortized debt discount.................................................... 13,344 14,362
Total deferred tax liability................................................. 64,602 64,575
Net deferred tax liability..................................................... $ 640 $ 4,823
</TABLE>
The valuation allowances of $289.2 million at January 29, 1994 and $251.4
million at January 30, 1993 were established because, in the Company's
assessment, it was uncertain whether the net deferred tax assets would be
realized.
F-16
<PAGE>
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The provisions for income taxes applicable to continuing operations for
fiscal 1993, 1992 and 1991, are summarized as follows (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
JANUARY 29, JANUARY 30, JANUARY 25,
1994 1993 1992
<S> <C> <C> <C>
Current
Federal, including tax sharing payment to (from) Holdings....... $ 337 $(1,222) $ 4,209
State and local................................................. 6,462 4,896 5,470
Foreign......................................................... 7,697 5,739 2,193
14,496 9,413 11,872
Deferred
State and local................................................. (16) (5,936) 3,339
Foreign......................................................... (2,866) (1,178) 637
(2,882) (7,114) 3,976
Income taxes.................................................... $11,614 $ 2,299 $15,848
</TABLE>
Domestic and foreign components of income (loss) from continuing operations
before income taxes are summarized as follows (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
JANUARY 29, JANUARY 30, JANUARY 25,
1994 1993 1992
<S> <C> <C> <C>
Domestic.......................................................... $(175,213) $ (51,574) $ (51,794)
Foreign........................................................... 10,135 12,469 8,072
$(165,078) $ (39,105) $ (43,722)
</TABLE>
A reconciliation between income taxes computed at the statutory Federal
rate (35% for fiscal 1993 and 34% for fiscal 1992 and 1991) and the provisions
for income taxes applicable to continuing operations is as follows (in
thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
JANUARY 29, JANUARY 30, JANUARY 25,
1994 1993 1992
<S> <C> <C> <C>
Amount at statutory Federal rate.................................. $ (57,777) $ (13,296) $ (14,865)
State and local income taxes, net of Federal income tax benefit... 6,229 (2,893) 5,814
Foreign tax more than Federal tax at statutory rate............... 1,284 321 86
Amortization and write-off of goodwill............................ 58,357 7,840 7,835
Valuation allowance............................................... 5,509 6,934 --
Net operating loss generated...................................... -- -- 13,454
Tax sharing payment to Holdings................................... 337 3,848 3,894
Other............................................................. (2,325) (455) (370)
Income taxes...................................................... $ 11,614 $ 2,299 $ 15,848
</TABLE>
In addition, the valuation allowance was increased by $38.4 million in
fiscal 1993 and $68.6 million in fiscal 1992 to offset deferred tax assets
arising from the losses of discontinued operations.
F-17
<PAGE>
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At January 29, 1994, Group had the following tax attribute carryforwards
available for Federal income tax purposes (in thousands):
<TABLE>
<CAPTION>
EXPIRATION
AMOUNT DATES
<S> <C> <C>
Net operating losses -- regular tax
Prior to acquisition of Group by Holdings ("Preacquisition"), subject to
limitations............................................................... $134,000 1996-2003
Postacquisition, unrestricted................................................ 251,000 2006-2008
$385,000
Net operating losses -- alternative minimum tax
Preacquisition, subject to limitations....................................... $118,000 1996-2002
Postacquisition, unrestricted................................................ 202,000 2006-2008
$320,000
Investment tax and other credits
Preacquisition, subject to limitations....................................... $ 11,900 1994-2003
Alternative minimum tax credits................................................ $ 7,000 No limit
</TABLE>
The regular tax net operating loss carryforwards include amounts related to
Kayser-Roth and subsidiaries for preacquisition regular tax purposes, subject to
limitations, of $35 million and postacquisition regular tax purposes,
unrestricted, of $62 million. Alternative minimum tax net operating loss
carryovers include amounts related to Kayser-Roth and subsidiaries of $33
million for preacquisition alternative minimum tax purposes, subject to
limitations, and $51 million for postacquisition alternative minimum tax
purposes, unrestricted. Although the sale agreement provides that an election
will be made (under Section 338(h)(10) of the Internal Revenue Code) to treat
the sale as an asset sale for Federal income tax purposes, there are provisions
whereby the purchaser of Kayser-Roth and the Company can reevaluate this
decision. If the purchaser and the Company mutually agree to treat the
transaction as a stock sale rather than an asset sale, the net operating losses
related to Kayser-Roth and subsidiaries will be transferred from the Company to
the purchaser.
The Internal Revenue Service has examined the returns of C&A Co. and its
subsidiaries for the last three fiscal years prior to its acquisition by the
Company in December 1986. Certain adjustments were agreed to and the effect of
those adjustments, principally reductions to the net operating loss
carryforwards and investment tax credit carryforwards, are reflected in the
amounts discussed above. In the course of an examination of the Company's
Federal income tax returns for fiscal 1988 and 1989, the IRS has challenged the
availability of $176.6 million of the Company's approximately $385.0 million of
current NOLs. The examination is at a preliminary stage and management believes
that the basis for the IRS' position is unclear. Management disputes the IRS'
challenge and believes that substantially all of the NOLs should be available
(subject to certain limitations) to offset its income, if any, in the future. If
the IRS were to maintain its position and all or a majority of such position
were to be upheld in litigation, the amount of the NOLs available to the Company
in future years would be materially reduced.
The Company and its subsidiaries have entered into a tax sharing agreement
with Holdings. The tax sharing agreement provides for payments to (from)
Holdings for utilization of Holdings tax losses by the Company and its
subsidiaries. The agreement provides for tax sharing payments calculated in
accordance with Federal tax regulations. Tax sharing payments paid to Holdings
during fiscal 1993, 1992 and 1991 were $0, $4.5 million and $7.2 million,
respectively. The Company's tax sharing receivable from Holdings of $8.8 million
at January 29, 1994 and the related fiscal 1992 tax sharing benefit result from
the utilization of tax loss carrybacks. This receivable from Holdings is
currently expected to be settled through offset against future years tax sharing
payable amounts.
F-18
<PAGE>
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Income taxes paid including tax sharing payments to Holdings of $0, $4.5
million and $7.2 million, were $3.3 million, $21.3 million and $26.2 million for
fiscal 1993, 1992 and 1991, respectively.
15. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS:
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:
CASH AND CASH EQUIVALENTS, ACCOUNTS AND NOTES RECEIVABLE, AND ACCOUNTS
PAYABLE -- The carrying amount approximates fair value because of the short
maturity of these instruments.
RECEIVABLE FROM SALE OF BUSINESS, LONG-TERM INVESTMENTS -- Fair value
approximates carrying value.
LONG-TERM DEBT -- The fair value of the Company's publicly-traded long-term
debt is based upon the quoted market prices for the issues. The fair value
of the remaining long-term debt of the Company approximates the carrying
value.
The estimated fair values of the Company's financial instruments are
summarized as follows (in thousands):
<TABLE>
<CAPTION>
JANUARY 29, 1994 JANUARY 30, 1993
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
<S> <C> <C> <C> <C>
Receivable from sale of business................................. $ 70,000 $ 70,000 $ -- $ --
Long-term investments............................................ -- -- 32,675 32,675
Long-term debt................................................... 759,343 826,066 845,945 830,875
</TABLE>
16. INFORMATION ABOUT SEGMENTS OF THE COMPANY'S OPERATIONS:
The Company reclassified its industry segments during 1993 to realign its
products based on primary customer groups. Businesses related to the automotive
industry which were part of Specialty Textiles have been renamed Automotive
Products. The decorative fabrics and floorcoverings businesses have been
reclassified as Interior Furnishings. Previously, the floorcoverings business
was part of the Specialty Textiles segment. Wallcoverings products which were
previously part of the Home Furnishings segment have been renamed Wallcoverings.
Industry segment information has been restated for fiscal 1992 and 1991.
For fiscal 1993, 1992 and 1991, sales to General Motors Corporation
approximated 16.1%, 15.3% and 17.2%, respectively, and sales to Chrysler
Corporation approximated 10.0%, 10.2% and 8.3%, respectively, of total
consolidated sales. These sales were part of the Automotive Products segment.
Information about the Company's segments for fiscal 1993, 1992 and 1991
follows (in thousands):
<TABLE>
<CAPTION>
OPERATING DEPRECIATION
NET INCOME AND CAPITAL
FISCAL YEAR ENDED JANUARY 29, 1994 SALES LOSS (B) AMORTIZATION ASSETS (B) EXPENDITURES
<S> <C> <C> <C> <C> <C>
Automotive Products......................... $ 677,867 $ 55,279 $ 36,712 $ 783,718 $ 29,208
Interior Furnishings........................ 407,201 40,683 15,617 350,342 11,768
Wallcoverings............................... 220,449 (138,010) 11,453 209,424 3,751
1,305,517 (42,048)(c) 63,782 1,343,484 44,727
Corporate items............................. -- (38,789)(d) 384 196,726 196
1,305,517 (80,837) 64,166 1,540,210 44,923
Discontinued operations..................... -- -- 18,075 -- 11,355
$ 1,305,517 $ (80,837) $ 82,241 $1,540,210 $ 56,278
</TABLE>
F-19
<PAGE>
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
OPERATING
INCOME DEPRECIATION
NET (LOSS) AND CAPITAL
FISCAL YEAR ENDED JANUARY 30, 1993 (A) SALES (B) AMORTIZATION ASSETS (B) EXPENDITURES
<S> <C> <C> <C> <C> <C>
Automotive Products......................... $ 643,827 $ 42,330 $ 39,771 $ 749,688 $ 20,563
Interior Furnishings........................ 391,778 34,647 15,876 335,708 14,295
Wallcoverings............................... 241,895 (4,960) 12,646 374,706 3,045
1,277,500 72,017(c) 68,293 1,460,102 37,903
Corporate items............................. -- (24,047)(d) 228 147,948 306
1,277,500 47,970 68,521 1,608,050 38,209
Discontinued operations..................... -- -- 24,082 205,131 15,972
$ 1,277,500 $ 47,970 $ 92,603 $1,813,181 $ 54,181
</TABLE>
<TABLE>
<CAPTION>
OPERATING
INCOME DEPRECIATION
NET (LOSS) AND CAPITAL
FISCAL YEAR ENDED JANUARY 25, 1992 SALES (B) AMORTIZATION ASSETS (B) EXPENDITURES
<S> <C> <C> <C> <C> <C>
Automotive Products......................... $ 610,325 $ 45,242 $ 37,195 $ 762,009 $ 24,220
Interior Furnishings........................ 336,773 25,403 16,791 340,269 9,519
Wallcoverings............................... 237,218 (871) 12,712 406,529 5,093
1,184,316 69,774 66,698 1,508,807 38,832
Corporate items............................. -- (25,822) 246 134,447 96
1,184,316 43,952 66,944 1,643,254 38,928
Discontinued operations..................... -- -- 24,475 357,341 22,971
$ 1,184,316 $ 43,952 $ 91,419 $2,000,595 $ 61,899
</TABLE>
(a) The fiscal year ended January 30, 1993 included fifty-three weeks.
(b) Operating income is determined by deducting all operating expenses,
including restructuring costs, goodwill write-down and other costs, from
revenues. Operating expenses do not include interest expense. Assets of the
business segments include goodwill. Operating income reflects related
amortization.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
JANUARY 29, JANUARY 30,
1994 1993
<S> <C> <C> <C>
(IN THOUSANDS)
(c) Segment operating income before goodwill write-down and restructuring costs:........ $ 102,752 $ 82,017
Goodwill write-down................................................................ (144,800) --
Restructuring costs................................................................ -- (10,000)
Segment operating income (loss)..................................................... $ (42,048) $ 72,017
</TABLE>
(d) Corporate items in fiscal 1993 include $26.7 million of management equity
plan expense. Corporate items in fiscal 1993, 1992 and 1991 each include
operating management and advisory fees to affiliates of Holdings of $5.0
million.
17. COMMITMENTS AND CONTINGENCIES:
During 1991, a Fifth Consolidated Amended Complaint was filed in IN RE IVAN
F. BOESKY SECURITIES LITIGATION, involving numerous class actions and individual
claims against a variety of defendants including the Company. Among other
things, this complaint asserts claims on behalf of certain of the Company's
former preferred stockholders alleging a conspiracy to manipulate the price of
the Company's stock in 1986 for the purpose of triggering a redemption of
certain outstanding preferred stock of the Company. In 1992, Advanced
Development
F-20
<PAGE>
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
& Engineering Centre ("ADEC"), a division of an indirect subsidiary of the
Company, filed arbitration demands against the Pakistan Ordnance Factories Board
("POF") concerning ADEC's installation of a munitions facility for POF. POF
filed arbitration counterclaims alleging that ADEC's alleged breach of contract
caused POF to lose its entire investment in the munitions facility.
The ultimate outcome of the legal proceedings to which the Company is a
party will not, in the opinion of the Company's management based on the facts
presently known to it, have a material effect on the Company's consolidated
financial condition or future results of operations.
In 1988, the federal government filed suit in the U.S. District Court for
the District of Rhode Island against Group's former Kayser-Roth Corporation
subsidiary and others in connection with a Superfund site in Rhode Island. The
District Court held Kayser-Roth liable under CERCLA for all past and future
response costs. By Amended Administrative Order issued June 4, 1991, the EPA
directed Kayser-Roth to implement the remedies set forth in its Record of
Decision issued September 18, 1990. Since the beginning of fiscal 1990 to date,
Kayser-Roth has paid approximately $2.9 million for past response costs,
prejudgment interest and remediation. Kayser-Roth is in the process of complying
with the remainder of the order. Group has agreed to indemnify Kayser-Roth with
respect to this matter.
The Company is legally or contractually responsible or alleged to be
responsible for the investigation and remediation of contamination at various
sites. It also has received notices that it is a potentially responsible party
("PRP") in a number of proceedings. The Company may be named as a PRP at other
sites in the future, including with respect to divested and acquired businesses.
It is a normal risk of operating a manufacturing business that liability may be
incurred for investigating and remediating on-site and off-site contamination.
The Company is currently engaged in investigation or remediation at certain
sites. It is difficult to estimate the total cost of investigation and
remediation due to various factors including incomplete information regarding
particular sites and other PRP's, uncertainty regarding the extent of
environmental problems and the Company's share, if any, of liability for such
problems, the selection of alternative compliance approaches, the complexity of
environmental laws and regulations and changes in cleanup standards and
techniques. When it has been possible to provide reasonable estimates of the
Company's liability with respect to environmental sites, provisions have been
made in accordance with generally accepted accounting principles. However, there
can be no assurance that the Company has identified or properly assessed all
potential environmental liability arising from the activities or properties of
the Company, its present and former subsidiaries and their corporate
predecessors. As of January 29, 1994, the Company has established reserves of
approximately $30.8 million for the estimated future costs related to all its
known environmental sites. In the opinion of management, based on the facts
presently known to it, the environmental costs and contingencies will not have a
material adverse effect on the Company's consolidated financial condition or
results of operations.
The Company is subject to increasingly stringent Federal, state and local
environmental laws and regulations that (i) affect ongoing operations and may
increase capital costs and operating expenses and (ii) impose liability for the
costs of investigation and remediation and certain other damages related to
on-site and off-site soil and groundwater contamination. The Company's
management believes that it has obtained, and is in material compliance with,
all material environmental permits and approvals necessary to conduct its
various businesses. Environmental compliance costs for continuing businesses
currently are accounted for as normal operating expenses or capital expenditures
of the business units. In the opinion of management, based on the facts
presently known to it, such environmental compliance costs will not have a
material adverse effect on the Company's consolidated financial condition or
results of operations.
For additional information regarding the foregoing, see "ITEM 3. LEGAL
PROCEEDINGS" appearing elsewhere herein.
F-21
<PAGE>
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
18. QUARTERLY FINANCIAL DATA (UNAUDITED):
Summarized quarterly financial data for fiscal 1993 and 1992 follows (in
thousands):
<TABLE>
<CAPTION>
INCOME (LOSS) FROM
CONTINUING OPERATIONS
BEFORE AFTER NET
GROSS INCOME INCOME INCOME
FISCAL YEAR ENDED JANUARY 29, 1994 NET SALES PROFIT TAXES TAXES (LOSS)
<S> <C> <C> <C> <C> <C>
First Quarter.......................... $ 339,043 $ 78,948 $ 156 $ (5,296) $ (8,504)
Second Quarter......................... 289,694 61,230 (15,043) (17,222) (130,122)
Third Quarter.......................... 334,629 84,445 (161,449) (164,194) (163,685)
Fourth Quarter......................... 342,151 85,104 11,258 10,020 10,020
$1,305,517 $309,727 $(165,078) $(176,692) $(292,291)
<CAPTION>
LOSS FROM
CONTINUING OPERATIONS
BEFORE AFTER
GROSS INCOME INCOME NET
FISCAL YEAR ENDED JANUARY 30, 1993 NET SALES PROFIT TAXES TAXES LOSS
<S> <C> <C> <C> <C> <C>
First Quarter.......................... $ 319,488 $ 72,564 $ (6,812) $ (11,009) $ (16,980)
Second Quarter......................... 319,713 74,081 (7,411) (11,855) (16,406)
Third Quarter.......................... 314,873 70,819 (7,048) (7,764) (16,078)
Fourth Quarter (a)..................... 323,426 81,563 (17,834) (10,776) (221,789)
$1,277,500 $299,027 $ (39,105) $ (41,404) $(271,253)
</TABLE>
(a) The fourth quarter of fiscal 1992 included fourteen weeks.
The quarterly financial data above has been restated to reflect Kayser-Roth
as a discontinued operation and Dura as a continuing operation.
Loss from continuing operations before income taxes in the third quarter of
fiscal 1993 includes the write-down of goodwill of $144.8 million and
restructuring costs of $24.0 million. The fourth quarter of fiscal 1993 includes
management equity plan expense of $26.7 million offset by the reversal of the
third quarter restructuring costs. (See Note 3). Net loss in fiscal 1993
includes provisions for loss on disposal of discontinued operations of $1.8
million and $109.3 million in the first and second quarters, respectively. Loss
from continuing operations before income taxes in fiscal 1992 includes
restructuring costs of $10.0 million in the fourth quarter. Net loss in fiscal
1992 includes provision for loss on disposal of discontinued operations of
$184.0 million in the fourth quarter.
The Company's operations are not subject to significant seasonal
influences.
19. SUBSEQUENT EVENT:
On April 19, 1994, Holdings, as part of a proposed recapitalization (the
"Recapitalization") filed a registration statement on Form S-2 for the issuance
of 20.0 million shares of common stock. The Recapitalization, if effected, would
result in the defeasance and redemption, or repayment, of virtually all
outstanding debt and all preferred stock of Group. The sources of capital for
the Recapitalization are proceeds of the public offering, cash on hand and
amounts to be available under certain proposed new credit facilities aggregating
$775 million. In connection with the Recapitalization, Holdings II, currently
the sole common stockholder of Holdings, will be merged into Holdings and
Holdings will change its name to Collins & Aikman Corporation. Concurrently,
Group will be merged into its wholly owned subsidiary, C&A Co., which will
change its name to C&A Products Co.
F-22
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES
To Collins & Aikman Group, Inc.:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements of Collins & Aikman Group, Inc. and
subsidiaries included in this Form 10-K and have issued our report thereon dated
April 27, 1994. Our audits were made for the purpose of forming an opinion on
the basic financial statements taken as a whole. The schedules listed in the
accompanying index are the responsibility of the Company's management and are
presented for purposes of complying with the Securities and Exchange
Commission's rules and are not part of the basic financial statements. These
schedules have been subjected to the auditing procedures applied in the audits
of the basic financial statements and, in our opinion, fairly state in all
material respects the financial data required to be set forth therein in
relation to the basic consolidated financial statements taken as a whole.
ARTHUR ANDERSEN & CO.
Charlotte, North Carolina,
April 27, 1994.
S-1
<PAGE>
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
SCHEDULE III -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JANUARY 29, JANUARY 30,
1994 1993
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents........................................................... $ 69,403 $ 57,094
Receivable from sale of business.................................................... 70,000 --
Other current assets................................................................ 40,952 37,188
Total current assets............................................................. 180,355 94,282
Investments in and advances to subsidiaries........................................... 893,204 1,190,722
Long-term investments................................................................. -- 33,831
Other assets.......................................................................... 30,140 27,888
$ 1,103,699 $ 1,346,723
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Current maturities of long-term debt................................................ $ -- $ 40,982
Accounts payable and accrued expenses............................................... 96,777 113,436
Other current liabilities........................................................... 3,748 9,067
Total current liabilities........................................................ 100,525 163,485
Long-term debt........................................................................ 593,241 586,579
Other noncurrent liabilities.......................................................... 199,457 107,220
Commitments and contingencies (Note 1)
Redeemable preferred stock............................................................ 132 165
Preferred stock....................................................................... 181 181
Common stock.......................................................................... 4,781 4,781
Other stockholder's equity............................................................ 205,382 484,312
Total stockholder's equity....................................................... 210,344 489,274
$ 1,103,699 $ 1,346,723
</TABLE>
S-2
<PAGE>
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
SCHEDULE III -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
JANUARY 29, JANUARY 30, JANUARY 25,
1994 1993 1992
<S> <C> <C> <C>
Other expenses............................................................. $ (10,753) $ (11,214) $ (13,387)
Interest expense........................................................... (74,977) (90,940) (94,630)
Loss from continuing operations before income taxes and equity in loss of
subsidiaries............................................................. (85,730) (102,154) (108,017)
Income tax benefit......................................................... 681 9,905 13,134
Equity in loss of subsidiaries............................................. (123,242) (42,227) (79,512)
Loss from continuing operations............................................ (208,291) (134,476) (174,395)
Loss from discontinued operations.......................................... (84,000) (136,777) (431)
Loss before extraordinary item and cumulative change in accounting
principle................................................................ (292,291) (271,253) (174,826)
Extraordinary item......................................................... -- -- 10,949
Cumulative effect of change in accounting principle........................ -- -- (6,638)
Net loss................................................................... $(292,291) $(271,253) $(170,515)
</TABLE>
S-3
<PAGE>
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
SCHEDULE III -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
JANUARY 29, JANUARY 30, JANUARY 25,
1994 1993 1992
<S> <C> <C> <C>
Net cash provided by (used in) operating activities........................ $ (84,532) $ 57,000 $ 51,688
Investing Activities:
Proceeds from businesses sold............................................ 148,743 -- 5,598
Sales of property, plant and equipment................................... 22,116 7,288 3,003
Other.................................................................... 52,987 1,285 4,868
Net cash provided by investing activities............................. 223,846 8,573 13,469
Financing Activities:
Net advances to subsidiaries............................................. (74,467) (41,455) (2,515)
Net reductions of long-term debt and capital lease obligations........... (48,023) (32,895) (153,432)
Other.................................................................... (4,515) (4,536) (4,515)
Net cash used in financing activities................................. (127,005) (78,886) (160,462)
Net increase (decrease) in cash............................................ 12,309 (13,313) (95,305)
Cash and cash equivalents at beginning of year............................. 57,094 70,407 165,712
Cash and cash equivalents at end of year................................... $ 69,403 $ 57,094 $ 70,407
</TABLE>
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. PRESENTATION:
These condensed financial statements have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and note disclosures normally included in annual financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to those rules and regulations, although
the Company believes that the disclosures made are adequate to make the
information presented not misleading. For disclosures regarding redeemable
preferred stock and commitments and contingencies, see Notes 12 and 17,
respectively, to Consolidated Financial Statements.
2. LONG-TERM DEBT:
Long-term debt consisted of 7 1/2% to 10% debentures due 2005, 11 7/8%
senior subordinated debentures due 2001, 15% subordinated notes due 1995 and
11 3/8% subordinated debentures due 1997. Maturities of long-term debt during
each of the five fiscal years subsequent to January 29, 1994, are $0,
$137,359,000, $24,500,000, $0 and $0, respectively. For additional disclosures
regarding long-term debt, see Note 9 to Consolidated Financial Statements.
3. SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR ADDITIONAL DISCLOSURES.
S-4
<PAGE>
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS (A)
FOR THE FISCAL YEARS ENDED JANUARY 29, 1994, JANUARY 30, 1993 AND JANUARY 25,
1992
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
CHARGED
BALANCE AT TO COSTS CHARGED BALANCE
BEGINNING AND TO OTHER AT END OF
DESCRIPTION OF YEAR EXPENSES ACCOUNTS DEDUCTIONS YEAR
<S> <C> <C> <C> <C> <C>
FISCAL YEAR ENDED JANUARY 29, 1994
Allowance for doubtful accounts...................... $ 6,748 $ 2,521 $ 720(b) $ (2,918)(c) $ 7,071
Valuation allowance for deferred tax assets.......... $ 251,426 $ 43,896 $ -- $ (6,118) $ 289,204
FISCAL YEAR ENDED JANUARY 30, 1993
Allowance for doubtful accounts...................... $ 6,401 $ 3,700 $ 765(b) $ (4,118)(c) $ 6,748
Valuation allowance for deferred tax assets.......... $ 173,486(d) $ 75,511 $3,758 $ (1,329) $ 251,426
FISCAL YEAR ENDED JANUARY 25, 1992
Allowance for doubtful accounts...................... $ 5,675 $ 4,324 $ 937(b) $ (4,535)(c) $ 6,401
</TABLE>
(a) The fiscal years ended January 30, 1993 and January 25, 1992 have been
restated to exclude amounts related to discontinued operations.
(b) Reclassification and collection of accounts previously written off.
(c) Reclassifications and uncollectible amounts written off.
(d) The valuation allowance for deferred tax assets arose as a result of the
Company's adoption of Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes" as of the beginning of fiscal 1992. See Note
14 to Consolidated Financial Statements.
S-5
<PAGE>
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
SCHEDULE IX -- SHORT-TERM BORROWINGS
FOR THE FISCAL YEARS ENDED JANUARY 29, 1994, JANUARY 30, 1993 AND JANUARY 25,
1992
(IN THOUSANDS)
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE WEIGHTED
INTEREST MAXIMUM AVERAGE AVERAGE
RATE ON AMOUNT AMOUNT INTEREST
BALANCE AT BALANCE OUTSTANDING OUTSTANDING RATE
END OF AT END OF DURING THE DURING THE DURING THE
CATEGORY YEAR YEAR YEAR YEAR (A) YEAR (B)
<S> <C> <C> <C> <C> <C>
FISCAL YEAR ENDED JANUARY 29, 1994
Banks............................................. $ 41 7.3% $ 5,000 $ 388 7.5%
Other............................................. $ 3,748 4.5% $ 4,067 $ 2,455 4.4%
FISCAL YEAR ENDED JANUARY 30, 1993
Banks............................................. $ 5,000 7.5% $ 5,000 $ 385 7.5%
Other............................................. $ 4,067 3.9% $ 4,179 $ 2,908 5.0%
FISCAL YEAR ENDED JANUARY 25, 1992
Banks............................................. $ 2,217 12.5% $11,677 $ 9,912 14.9%
Other............................................. $ 4,179 5.8% $ 5,050 $ 2,396 7.4%
</TABLE>
(a) The average amount outstanding during the year was computed by dividing the
total month-end outstanding principal balances by the number of months.
(b) The weighted average interest rates were computed by dividing the total
interest expense on short-term debt by the average amount outstanding during
the fiscal year.
S-6
<PAGE>
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
SCHEDULE X -- SUPPLEMENTARY STATEMENTS OF OPERATIONS INFORMATION
FOR THE FISCAL YEARS ENDED JANUARY 29, 1994, JANUARY 30, 1993 AND JANUARY 25,
1992
(IN THOUSANDS)
<TABLE>
<CAPTION>
CHARGED TO COSTS AND EXPENSES
FISCAL FISCAL FISCAL
ITEM 1993 1992 1991
<S> <C> <C> <C>
Maintenance and Repairs.......................................................... $36,842 $31,445 $27,862
Advertising Costs................................................................ $ 2,714 $ 2,515 $ 6,569
</TABLE>
S-7
RESTATED CERTIFICATE OF INCORPORATION
OF
COLLINS & AIKMAN GROUP, INC.
Collins & Aikman Group, Inc., a corporation originally
incorporated on March 17, 1971 under the name Five Fifteen, Inc.
and existing under and by virtue of the General Corporation Law
of the State of Delaware DOES HEREBY CERTIFY:
1. That the Restated Certificate of Incorporation of this
corporation be restated to read in full as follows:
FIRST: The name of the Corporation is Collins & Aikman
Group, Inc. (hereinafter sometimes called the "Corporation").
SECOND: The address of the registered office of the
Corporation in the State of Delaware is 32 Loockerman Square,
Suite L-100, in the City of Dover, County of Kent. The name of
the registered agent at that address is The Prentice-Hall
Corporation System, Inc.
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which a corporation may be organized
under the General Corporation Law of Delaware as set forth in
Title 8 of the Delaware Code (the "GCL").
FOURTH: The total number of shares of all classes of stock
which the Corporation shall have authority to issue is One
Hundred Twenty-Three Million, Six Hundred Thousand and One
(123,600,001) consisting of:
(a) Thirty Million (30,000,000) shares of Preferred Stock
of the par value of ten cents ($.10) each (hereinafter referred
to as 'Undesignated Preferred Stock');
(b) In addition to the Undesignated Preferred Stock,
Twenty-Three Million, Six Hundred Thousand (23,600,000) shares of
15-1/2% Junior Cumulative Exchangeable Redeemable Preferred Stock
of the par value of ten cents ($.10) each (hereinafter referred
to together with the Undesignated Preferred Stock, collectively,
as the 'Preferred Stock');
(c) One (1) share of Class A Common Stock of the par value
of ten cents ($.10) each (hereinafter referred to as the 'Class A
Common Stock'); and
(d) Seventy Million (70,000,000) shares of Common Stock of
the par value of ten cents ($.10) each (hereinafter referred to
as 'Common Stock').
A. UNDESIGNATED PREFERRED STOCK
Shares of Undesignated Preferred Stock may be issued from
time to time in one or more series as may from time to time be
determined by the Board of Directors, each of said series to be
distinctly designated. All shares of any one series of
Undesignated Preferred Stock shall be alike in every particular,
except that there may be different dates from which dividends, if
any, thereon shall be cumulative, if made cumulative. The voting
powers and the designations, preferences and relative,
participating, optional or other special rights of each such
series, and the qualifications, limitations or restrictions
thereof, if any, may differ from those of any and all other
series at any time outstanding; and there is hereby expressly
vested in the Board of Directors of the Corporation the authority
to issue one or more series of Undesignated Preferred Stock and
to fix in the resolution or resolutions providing for the issue
of such stock adopted by the Board of Directors of the
Corporation the voting powers and the designations, preferences
and relative, participating, optional or other special rights,
and the qualifications, limitations or restrictions of such
series, including, but without limiting the generality of the
foregoing, the following:
(1) The distinctive designation of, and the number of
shares of Undesignated Preferred Stock which shall constitute,
such series, and such number may be increased (except where
otherwise provided by the Board of Directors) or decreased (but
not below the number of shares thereof then outstanding) from
time to time by like action of the Board of Directors;
(2) The rate and times at which, and the terms and
conditions upon which, dividends, if any, on Undesignated
Preferred Stock of such series shall be paid, the extent of the
preference or relation, if any, of such dividends to the
dividends payable on any other class or classes, or series of the
same or other classes of stock and whether such dividends shall
be cumulative or non-cumulative;
(3) The right, if any, of the holders of Undesignated
Preferred Stock of such series to convert the same into, or
exchange the same for, shares of any other class or classes or of
any series of the same or any other class or classes of stock of
the Corporation and the terms and conditions of such conversion
or exchange;
(4) Whether or not Undesignated Preferred Stock of such
series shall be subject to redemption, and the redemption price
or prices and the time or times at which, and the terms and
conditions upon which, Undesignated Preferred Stock of such
series may be redeemed;
2
(5) The rights, if any, of the holders of Undesignated
Preferred Stock of such series upon the voluntary or involuntary
liquidation, merger, consolidation, distribution or sale of
assets, dissolution or winding-up of the Corporation;
(6) The terms of the sinking fund or redemption or purchase
account, if any, to be provided for the Undesignated Preferred
Stock of such series; and
(7) The extent of the voting powers, of the holders of such
series of Undesignated Preferred Stock which may, without
limiting the generality of the foregoing, include the right,
voting as a series by itself or together with other series or
class of Preferred Stock or all series of Preferred Stock as a
class, to elect one or more directors of the Corporation if there
shall have been a default in the payment of dividends on any one
or more series or class of Preferred Stock or under such other
circumstances and on such conditions as the Board of Directors
may determine; provided, however, that any resolution adopted by
the Board of Directors establishing a series of Undesignated
Preferred Stock shall contain provisions to the effect that in
the event of a continuing default in the payment of dividends
which has not been cured by such payment on the terms and subject
to the conditions set forth in such resolution, the holders of
each series of Undesignated Preferred Stock as to which there is
such a continuing default shall have the right, as a class, to
elect not less than one director as provided in such resolution
until such default has been cured by the payment of any dividends
so in arrears.
B. 15-1/2% JUNIOR CUMULATIVE EXCHANGEABLE REDEEMABLE PREFERRED
STOCK
The powers, designation, preferences and relative,
participating, optional and other special rights, and the
qualifications, limitations and restrictions of the 15-1/2%
Junior Cumulative Exchangeable Redeemable Preferred Stock of the
Corporation are as follows:
(1) Designation. The designation of this class of
23,600,000 shares of Preferred Stock is '15-1/2% Junior
Cumulative Exchangeable Redeemable Preferred Stock, par value
$0.10 per share' (hereinafter called 'this Class'). The number
of shares of this Class may be increased or decreased from time
to time by an amendment or amendments to this subparagraph 1
authorized by a resolution or resolutions of the Board of
Directors of the Corporation pursuant to the authority granted to
it by provisions of subparagraph 5 of Paragraph D of this Article
FOURTH, provided that no such amendment shall reduce the number
of shares of this Class to less than the aggregate number of
shares of this Class then issued and outstanding and issuable
pursuant to warrants then outstanding.
3
(2) Rank. This Class shall, with respect to dividend
rights and rights on liquidation, winding-up and dissolution of
the Corporation, rank senior to the Common Stock and the Class A
Common Stock (collectively, the "Junior Securities"). This Class
shall, with respect to dividend rights and rights on liquidation,
winding-up and dissolution of the Corporation, rank junior to the
Corporation's $2.50 Convertible Preferred Stock, Series A, and
all other classes and series of capital stock of the Corporation
hereafter authorized, designated or issued (collectively, the
"Senior Securities"). There shall be no restrictions or
limitations on the ability of the Corporation to authorize,
designate or issue additional classes, series or shares of Senior
Securities.
(3) Dividends. (a) The holders of shares of this Class
shall be entitled to receive, when, as and if declared by the
Board of Directors of the Corporation and out of the assets of
the Corporation available for the payment of dividends under the
provisions of the GCL, dividends payable at the rate of $3.875
per share per annum. Such dividends shall be payable quarterly
on the first day of February, May, August and November in each
year (each of such dates a 'Dividend Payment Date') commencing
with later of (i) August 1, 1989, and (ii) of the first such date
after the time the merger (the 'Merger') of WCI Acquisition
Corporation, a Delaware corporation, with and into the
Corporation shall become effective (the 'Merger Effective Time');
except that if such day is not a business day then such dividend
shall be payable on the next following business day. (As used in
this Article FOURTH, the term 'business day' shall mean any day
except a Saturday, a Sunday or a day on which banking
institutions are authorized or required by law to close in the
City of New York.) Dividends on each share of this Class shall
begin to accrue and be cumulative on each outstanding share of
this Class (whether or not in any quarterly period there shall be
assets of the Corporation legally available for the payment of
such dividends) from and including the later of (i) the Merger
Effective Time and (ii) the date of initial issuance of such
share. The amount of any dividends 'accrued' on any share of
this Class at any Dividend Payment Date shall be deemed to be the
amount of any unpaid dividends accumulated thereon to and
excluding such Dividend Payment Date, whether or not earned or
declared, and the amount of dividends 'accrued' on any share of
this Class at any date other than a Dividend Payment Date shall
be calculated as the amount of any unpaid dividends accumulated
to and excluding the last preceding Dividend Payment Date,
whether or not earned or declared, plus an amount calculated on
the basis of the annual dividend rate for the period from and
including such last preceding Dividend Payment Date to and
excluding the date as of which the calculation is made.
All dividends on this Class shall be computed on the basis
of the number of days elapsed in a 360-day year consisting of 12
months of 30 days each. Such dividends shall be paid to the
4
holders of record of shares of this Class as they appear on the
stock register of the Corporation on such date as shall be fixed
by the Board of Directors of the Corporation; provided, however,
such date shall not be less than 10 days nor more than 60 days
prior to the applicable Dividend Payment Date.
Dividend arrearages for any past dividend periods may be
declared and paid at any time to holders of record on such date
as may be fixed by the Board of Directors of the Corporation;
provided, however, such date shall not be less than 10 days nor
more than 60 days prior to the date of payment.
(b) All dividends on this Class shall be payable in cash,
except that dividend payments with respect to quarterly dividends
accruing on or prior to February 1, 1995 (whenever such dividends
are actually paid), may be paid in whole or in part in additional
shares of this Class if the Board of Directors of the Corporation
so directs. All such dividends paid in additional shares of this
Class shall be paid at a rate of 0.04 shares of this Class for
each $1 of such dividends not paid in cash. The issuance of
shares of this Class at the prescribed rate shall constitute full
payment of the portion of such dividends payable in kind. All
dividends paid with respect to shares of this Class, whether and
to the extent in cash or in kind, shall be paid pro rata to the
holders entitled thereto. No interest or sum of money in lieu of
interest or additional shares of this Class shall be payable in
respect of any accumulated unpaid dividends on shares of this
Class (whether such unpaid dividends are subsequently paid in
kind or in cash).
(c) Shares of this Class issued upon the payment of
dividends in kind on shares of this Class will be issuable in
fractional shares to the extent applicable.
(d) (i) Holders of shares of this Class shall be entitled
to receive the dividends provided for in subparagraph 3(a) in
preference to and in priority over any dividends upon any of the
Junior Securities.
(ii) The Corporation shall not (x) declare, pay or set apart
funds for payment of any cash dividends on shares of Junior
Securities, (y) purchase, redeem or otherwise retire any Junior
Securities or warrants, rights or options exercisable for shares
of Junior Securities (and shall not set apart funds for such
payment with respect thereto), or (z) make any distributions with
respect to Junior Securities or any warrants, rights or options
exercisable for any Junior Securities (except dividends or
distributions on shares of Junior Securities in shares of any
Junior Securities), unless full cumulative dividends on all
shares of this Class shall have been paid prior to, or shall be
paid concurrently with, the time of such declaration, payment,
setting apart, purchase, redemption, retirement or distribution
for each Dividend Payment Date on or prior to such time.
5
(iii) Notwithstanding anything contained in this
Paragraph B of this Article FOURTH to the contrary, no dividends
on shares of this Class shall be declared by the Board of
Directors of the Corporation or paid or set apart for payment by
the Corporation at such time as the terms and provisions of any
contract or other agreement of the Corporation or any of its
subsidiaries entered into or assumed at or prior to the Merger
Effective Time, or any refinancings (including multiple
refinancings) of such contracts or agreements, prohibit such
declaration, payment or setting apart for payment or provide that
such declaration, payment or setting apart for payment would
constitute a breach thereof or a default thereunder; provided,
however, that nothing contained in this Paragraph B of this
Article FOURTH shall in any way or under any circumstances be
construed or deemed to require the Board of Directors of the
Corporation to declare, or the Corporation to set apart for
payment, any dividends on shares of this Class, whether or not
permitted by any of such agreements. The failure of the Board of
Directors of the Corporation to declare a dividend in reliance
upon the immediately preceding sentence shall not be construed or
deemed to prevent the accrual of such undeclared dividend.
(e) Subject to the foregoing provisions of this
subparagraph 3 of this Paragraph B and to the provisions of
subparagraph 8 of this Paragraph B, the Board of Directors may
declare, and the Corporation may pay, make or set apart for
payment, dividends and other distributions on, and the
Corporation may purchase, redeem or otherwise retire, any Junior
Securities or any warrants, rights or options exercisable for
shares of Junior Securities, and the holders of shares of this
Class shall not be entitled to share therein.
(4) Scheduled Redemption. Subject to the Corporation
having funds legally available therefor, the Corporation shall be
obligated to redeem all outstanding shares of this Class on the
10th anniversary of the Merger Effective Time. Such redemption
of shares of this Class shall be at a redemption price equal to
the Liquidation Preference (as defined below) per share together
with accrued but unpaid dividends (whether or not declared)
through the date fixed for redemption. If the funds of the
Corporation legally available for such a redemption on such 10th
anniversary are insufficient to redeem all shares of this Class
then outstanding, funds to the extent legally available for the
purpose will be used to redeem the number of shares of this Class
that legally may be redeemed. If the Corporation at any time
shall fail to discharge its obligation to redeem shares of this
Class pursuant to this subparagraph 4, such obligation shall be
discharged as soon as the Corporation is able to do so.
(5) Optional Redemption. All or any part of this Class
may be redeemed by the Corporation at its election at any time
and from time to time in whole or in part, by resolution of the
Board
6
of Directors, at a cash price per share equal to the sum of
(i) the Optional Redemption Price plus (ii) any accrued and
unpaid dividends thereon, whether or not declared, to the date
fixed for the redemption; provided, however, that, if and when
any quarterly dividend shall have accrued on shares of this Class
and shall not have been paid or declared and a sufficient sum set
apart for payment for any Dividend Payment Date on or prior to
the date fixed for redemption, the Corporation may not redeem any
shares of this Class unless all shares of this Class then
outstanding are redeemed. The Optional Redemption Price shall
equal for optional redemptions with a date fixed for redemption
(a) that is on or prior to the first anniversary of the Merger
Effective Time, 101% of the Liquidation Preference per share, (b)
after the first anniversary of the Merger Effective Time to and
including the second anniversary of the Merger Effective Time,
101.5% of the Liquidation Preference per share, and (c)
thereafter, 102% of the Liquidation Preference per share.
If fewer than all the outstanding shares of this Class not
previously called for redemption are to be redeemed pursuant to
this subparagraph 5, the Board of Directors of the Corporation
shall select the shares of this Class to be redeemed from
outstanding shares not previously called for redemption by lot or
pro rata as determined by the Board of Directors of the
Corporation in its sole discretion; provided, however, that the
Board of Directors of the Corporation may in selecting shares for
redemption choose to redeem all shares of this Class held by
holders of a number of such shares not to exceed 99 as may be
specified by the Board of Directors (with all other shares to be
redeemed, if any, so selected by lot or pro rata).
(6) Notice of Redemption. At least 30 days but not more
than 60 days prior to the date fixed for any redemption of shares
of this Class, written notice of such redemption shall be mailed
to each holder of record of shares of this Class to be redeemed
at the address shown on the stock transfer books of the
Corporation or, if no such address appears or is given, at the
place where the principal executive office of the Corporation is
located; provided, however, that no failure to give such notice
or any defect therein or in the mailing thereof shall affect the
validity of the proceedings for such redemption. Each such
notice shall specify (i) the number of shares to be redeemed from
such holder, (ii) the numbers of the certificates of the shares
being redeemed, (iii) the date fixed for redemption, (iv) the
redemption price, (v) the place or places at which payment may be
obtained, and (vi) that dividends on the shares to be redeemed
shall cease to accrue on the date fixed for such redemption.
(7) Status of Shares of Preferred Stock upon Redemption.
(a) Upon due surrender of the certificates for any shares of
this Class to be redeemed, such shares shall be redeemed by the
Corporation at the applicable redemption price. In case fewer
than
7
all shares of this Class represented by any such certificate
are redeemed, a new certificate or certificates shall be issued
representing the unredeemed shares of this Class without cost to
the holder thereof. Unless there shall have been a default in
payment of the redemption price, from and after any date fixed
for redemption, dividends on the shares of this Class so called
for redemption shall cease to accrue, such shares shall no longer
be deemed to be outstanding and shall not have the status of
shares of this Class and all rights of the holders thereof as
stockholders of the Corporation (except the right to receive from
the Corporation the redemption price without interest) shall
cease with respect to such shares.
(b) If at any time the Corporation shall have irrevocably
deposited in trust with a trustee for the benefit of the holders
of all shares of this Class money or direct noncallable
obligations of the United States maturing as to principal and
interest in such amounts and at such times as are sufficient to
pay all future dividends on all shares of this Class at the
scheduled Dividend Payment Dates through the 10th anniversary of
the Merger Effective Time (or any earlier date duly fixed for an
optional redemption thereof) and the redemption price thereof,
then, from and after the date on which such provision has been
made such shares of this Class shall no longer be deemed to be
outstanding except for purposes of accruals of quarterly
dividends and shall not have the status of shares of this Class,
and all rights of the holders thereof as stockholders of the
Corporation (except the right to receive from the Corporation
quarterly dividends and the applicable redemption price without
interest) shall cease with respect to such shares.
(c) All moneys so deposited with or held by such trustee
which remain unclaimed by the holders of shares of this Class 730
days after the date such moneys are payable to holders of shares
of this Class shall be paid by such trustee to the Corporation
and thereafter the holders of such shares of this Class shall
look only to the Corporation for payment.
(8) Liquidation, Dissolution or Winding-Up. In the event of
any voluntary or involuntary liquidation, dissolution or winding-
up of the Corporation, holders of shares of this Class shall be
entitled to be paid out of the assets of the Corporation
available for distribution to its stockholders, whether from
capital, surplus or earnings but after payment in full of all
amounts due under or in respect of all classes and series of
capital stock of the Corporation other than Junior Securities, an
amount in cash equal to $25.00 per share (the 'Liquidation
Preference') plus any accrued and unpaid dividends to the date
fixed for liquidation, dissolution or winding-up, whether or not
declared, before any distribution is made on any Junior
Securities. If upon any voluntary or involuntary liquidation,
dissolution or winding-up of the Corporation, the assets of the
Corporation available for
8
distribution to holders of shares of
this Class shall be insufficient to pay the holders of
outstanding shares of this Class the full amounts to which they
shall be entitled under this subparagraph 8, the holders of
shares of this Class shall share equally and ratably in any
distribution of assets of the Corporation in proportion to the
full amount to which they would otherwise be respectively
entitled. After payment of the full amount of Liquidation
Preference to which they are entitled plus all accrued and unpaid
dividends, whether or not declared, the holders of shares of this
Class shall not be entitled to any further participation in any
distribution of assets of the Corporation. However, neither the
voluntary sale, conveyance, exchange or transfer (for cash,
shares of stock, securities or other consideration) of all or any
part of the property or assets of the Corporation, nor the
consolidation or merger or other business combination of the
Corporation with or into any other corporation or corporations,
shall be deemed to be a voluntary or involuntary liquidation,
dissolution or winding-up of the Corporation, unless such
voluntary sale, conveyance, exchange or transfer shall be in
connection with a plan of liquidation, dissolution or winding-up
of the Corporation.
(9) Voting Rights. The holders of shares of this Class
shall not be entitled to any voting rights except to the extent
provided by law.
(10) Rights to Redeem in Exchange for Merger Preferred
Stock. The holders of shares of this Class shall have the right,
at their option, to redeem shares of this Class in exchange for
shares of the 15-1/2% Cumulative Exchangeable Redeemable
Preferred Stock (the 'Merger Preferred Stock') of WCI Holdings
Corporation, a Delaware Corporation ('Holdings'), at any time, on
and subject to the following terms and conditions:
(a) The shares of this Class shall be redeemable, at the
office of the Corporation or of any agent appointed by the
Corporation for that purpose, in exchange for fully paid and
nonassessable shares of Merger Preferred Stock at a rate of one
share of Merger Preferred Stock for each share of this Class.
(b) In order to convert shares of this Class into Merger
Preferred Stock, the holder of shares of this Class shall
surrender, at the office of the Corporation or of any agent
appointed by the Corporation for that purpose the certificate or
certificates therefor, duly endorsed to the Corporation or in
blank, and give written notice to the Corporation at such office
that he elects to redeem such shares in exchange for shares of
Merger Preferred Stock. No payment or adjustment shall be made
upon any redemption under this subparagraph 10 on account of any
dividends accrued (whether or not declared) on the shares of this
Class surrendered for redemption. Shares of this Class shall be
deemed to have been redeemed immediately prior to the close of
9
business on the day of the surrender of such shares for
redemption in accordance with the foregoing provisions of this
subparagraph 10. As promptly as practicable on or after the
redemption date, the Corporation shall cause to be issued and
delivered at such office a certificate or certificates for the
number of full shares of Merger Preferred Stock issuable upon
such redemption. In case any shares of this Class are called for
redemption by the Corporation pursuant to subparagraph 5 of this
Paragraph B, the right of the holder to redeem such shares
pursuant to this subparagraph 10 shall cease and terminate at the
close of business on the redemption date fixed by the Corporation
pursuant to subparagraph 5 of this Paragraph B, unless default
shall be made in payment of the redemption price.
(c) Only whole shares of Merger Preferred Stock will be
issued upon redemption of shares of this Class pursuant to this
subparagraph 10 in exchange for shares of Merger Preferred Stock.
In lieu of the fractional portion of the aggregate number of
shares of Merger Preferred Stock otherwise deliverable to a
record holder of shares of this Class upon such a redemption
('Fractional Shares'), such record holder will receive a payment
in cash equal to such record holder's proportionate interest in
the net proceeds from the sale or sales in the open market of the
aggregate of such Fractional Shares otherwise in connection with
such a redemption; provided, however, the Board of Directors of
the Corporation may, but need not, make other provisions with
respect to payment for such Fractional Shares as it shall
determine in its discretion exercised in good faith. Any such
sale or sales shall be effected promptly.
(d) In case of any consolidation or merger of Holdings with
another corporation or in the case of any sale or conveyance to
another corporation (other than a wholly owned subsidiary of
Holdings) of all or substantially all the property of Holdings,
or in case the Merger Preferred Stock shall be reclassified or
converted, the holder of a share of this Class shall have the
right thereafter, so long as the redemption right under this
subparagraph 10 shall exist, to redeem such share in exchange for
the kind and amount of shares of stock and other securities and
properties receivable upon consummation of such consolidation,
merger, sale, conveyance, reclassification or conversion that
such holder actually would have been entitled to if such holder
had redeemed such share in exchange for Merger Preferred Stock
immediately prior to such consummation (with such adjustments
with respect to fractional shares of this Class as the Board of
Directors of the Corporation shall determine in its discretion
exercised in good faith). If applicable, on or prior to such
consummation, effective provision shall be made, in the
certificate of incorporation of any resulting or surviving
corporation or otherwise, for the protection of the redemption
rights of the shares of this Class set forth in this subparagraph
10 which shall be applicable, as nearly as reasonably may be, to
any such other shares of stock and other
10
securities and property
deliverable upon redemption of shares of this Class at the option
of the holder. In case securities or properties other than
Merger Preferred Stock shall be issuable or deliverable upon
conversion as aforesaid, then all references in this subparagraph
10 shall be deemed to apply, so far as appropriate and as nearly
as may be, to such other securities or property. If any event
shall occur by reason of action taken by Holdings as to which, in
the good faith opinion of the Board of Directors of the
Corporation, the provisions of this subparagraph 10(d) shall not
be strictly applicable, but with respect to which the failure to
make any adjustment to the provisions concerning the property for
which shares of this Class are redeemable in exchange would cause
the redemption rights set forth in this subparagraph 10 not to be
applicable in accordance with the intent and principles of this
subparagraph 10(d), then the Board of Directors of the
Corporation may, in its sole discretion, but shall be under no
obligation to, make such adjustments in the application of the
provisions of this subparagraph 10 on a basis consistent with
such intent and principles.
Whenever an adjustment is made pursuant to this subparagraph
10(d), the Corporation shall promptly mail to holders of shares
of this Class and file with the transfer agent therefor a notice
of the adjustment and file with the transfer agent for this Class
an officer's certificate stating the facts requiring the
adjustment and the manner of computing it. The certificate shall
be conclusive evidence that the adjustment is correct. The
Corporation need not deliver prior notice of any event which
would result in an adjustment pursuant to this subparagraph 10(d)
to the holders of shares of this Class prior to the occurrence of
such event.
The Corporation shall pay any and all taxes that may be
payable in respect of the issue and delivery of shares of Merger
Preferred Stock on redemption of shares of this Class pursuant to
this subparagraph 10(d), except that the Corporation shall not be
required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of shares of Merger
Preferred Stock in a name other than that in which the shares of
this Class so redeemed were registered, and no such issue or
delivery shall be made unless and until the person requesting
such issue has paid to Corporation the amount of any such tax, or
has established to the satisfaction of the Corporation that such
tax has been paid.
(11) Fractional Shares. Fractional shares of this Class
shall be issuable.
C. COMMON STOCK
(1) After the requirements with respect to preferential
dividends on the Preferred Stock (fixed in accordance with the
11
provisions of Paragraph A of this Article FOURTH and set forth in
Paragraph B of this Article FOURTH), if any, shall have been met
and after the Corporation shall have complied with all the
requirements (fixed in accordance with the provisions of
Paragraph A of this Article FOURTH and set forth in Paragraph B
of this Article FOURTH), if any, with respect to the setting
aside of sums as sinking funds or redemption or purchase
accounts, and subject further to any other conditions which may
be fixed in accordance with the provisions of Paragraph A of this
Article FOURTH and which are set forth in Paragraph B of this
Article FOURTH, then, and not otherwise, the holders of Common
Stock and Class A Common Stock shall be entitled to receive such
dividends as may be declared from time to time by the Board of
Directors out of assets of the Corporation legally available
therefor; provided, however, any dividends on the Common Stock
and the Class A Common Stock shall be paid to the holders thereof
ratably in proportion to the number of shares of Common Stock or
Class A Common Stock held by them respectively.
(2) After distribution in full of the preferential amount
(fixed in accordance with the provision of Paragraph A of this
Article FOURTH and set forth in Paragraph B of this Article
FOURTH), if any, to be distributed to the holders of Preferred
Stock in the event of voluntary or involuntary liquidation,
distribution or sale of assets, dissolution or winding-up, of the
Corporation, the holders of the Common Stock and Class A Common
Stock shall be entitled to receive all of the remaining assets of
the Corporation, tangible and intangible, of whatever kind
available for distribution to stockholders, ratably in proportion
to the number of shares of Common Stock and Class A Common Stock
held by them respectively.
(3) Except as may otherwise be required by law or by the
provisions of Paragraph B of this Article FOURTH or of such
resolution or resolutions as may be adopted respecting
Undesignated Preferred Stock by the Board of Directors pursuant
to Paragraph A of this Article FOURTH, each holder of Common
Stock shall have one vote in respect of each share of Common
Stock held by such holder on all matters voted upon by the
stockholders and each holder of Class A Common Stock shall have
one vote in respect of each share of Class A Common Stock held by
such holder on all matters voted upon by the stockholders. The
shares of Common Stock and Class A Common Stock shall be voted
together as a class in any such vote.
D. OTHER PROVISIONS
(1) No holder of any of the shares of any class or series
of stock or of options, warrants or other rights to purchase
shares of any class or series of stock or of other securities of
the Corporation shall have any preemptive right to purchase or
subscribe for any unissued stock of any class or series or any
additional shares of any class or series to be issued by reason
of
12
any increase of the authorized capital stock of the
Corporation of any class or series, or bonds, certificates of
indebtedness, debentures or other securities convertible into or
exchangeable for stock of the Corporation of any class or series,
but any such unissued stock, additional authorized issue of
shares of any class or series of stock or securities convertible
into or exchangeable for stock, or carrying any right to purchase
stock, may be issued and disposed of pursuant to resolution of
the Board of Directors to such persons, firms, corporations or
associations, whether such holders or others, and upon such terms
as may be deemed advisable by the Board of Directors in the
exercise of its sole discretion.
(2) The relative powers, preferences and rights of each
series of Undesignated Preferred Stock in relation to the powers,
preferences and rights of each other series or class of Preferred
Stock shall, in each case, be as fixed from time to time by the
Board of Directors in the resolution or resolutions adopted
pursuant to authority granted in Paragraph A of this Article
FOURTH and the consent, by class or series vote or otherwise, of
the holders of such of the series or classes of Preferred Stock
as are from time to time outstanding shall not be required for
the issuance by the Board of Directors of any other series of
Undesignated Preferred Stock whether or not the powers,
preferences and rights of such other series shall be fixed by the
Board of Directors as senior to, or on a parity with, the powers,
preferences and rights of such outstanding series, or any of
them; provided, however, that the Board of Directors may provide
in the resolution or resolutions as to any series of Undesignated
Preferred Stock adopted pursuant to Paragraph A of this Article
FOURTH that the consent of the holders of a majority (or such
greater proportion as shall be fixed therein) of the outstanding
shares of such series voting thereon shall be required for the
issuance of any or all other series of Undesignated Preferred
Stock.
(3) Subject to the provisions of subparagraph 2 of this
Paragraph D, shares of any series of Preferred Stock may be
issued from time to time as the Board of Directors of the
Corporation shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
(4) Shares of authorized Common Stock and Class A Common
Stock may be issued from time to time as the Board of Directors
of the Corporation shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
(5) Subject to the applicable provisions of the GCL, if
any, the authorized number of shares of Common Stock, of Class A
Common Stock and of Preferred Stock may, without a class or
series vote, be increased or decreased from time to time by the
affirmative vote of the holders of a majority of the stock of the
Corporation entitled to vote thereon.
13
(6) The Corporation shall not issue any shares of stock of
any class or series without voting rights other than shares of
the 15-1/2% Junior Cumulative Exchangeable Redeemable Preferred
Stock.
* * * *
Rights, Preferences, Privileges and Restrictions of
$2.50 Convertible Preferred Stock, Series A.
RESOLVED that pursuant to the authority conferred upon the
Board of Directors by Paragraph A of Article FOURTH of the
Certificate of Incorporation of this Corporation there is hereby
established a series of the authorized preferred shares of this
Corporation having a par value of $.10 per share, which series
shall be designated as "$2.50 Convertible Preferred Stock, Series
A" (the "Convertible Preferred Stock"), shall consist of
18,000,000 shares and shall have the following dividend rights,
dividend rates, voting rights, conversion rights, rights and
terms of redemption, redemption prices and liquidation
preferences.
1. Certain Definitions. Unless the context otherwise
requires, the terms defined in this paragraph 1 shall have, for
all purposes of this resolution, the meanings herein specified.
Acquisition. The term "Acquisition" shall mean the
purchase by the Corporation of the Consumer and Industrial
Products Group of Gulf & Western Industries, Inc. pursuant to the
terms of the agreement between Wickes Companies, Inc. and Gulf &
Western Industries, Inc. dated September, 1985.
Board of Directors. The term "Board of Directors" shall mean
the Board of Directors of this Corporation and, to the extent
permitted by law, any committee of such Board of Directors
authorized to exercise the powers of such Board of Directors.
Closing Price. The term "Closing Price" for any day shall
mean the last reported sale price regular way or, in case no such
reported sale takes place on such day, the average of the closing
bid and asked prices regular way for such day, in either case on
the principal national securities exchange on which the security
is listed or admitted to trading, or if the security is not
listed or admitted to trading on any national securities
exchange, but is traded in the over the counter market, the
closing sale price of the security or, in case no sale is
publicly reported, the average of the closing bid and asked
quotations for the security on NASDAQ or any comparable system
or, if the security is not listed on NASDAQ or a comparable
system, the closing sale price of the security or, in case no
sale is publicly reported, the average of the closing bid and
asked prices, as furnished by two members of the National
Association of Securities Dealers, Inc. selected from time to
time by this Corporation for that purpose.
14
Common Stock. The term "Common Stock" shall mean all shares
now or hereafter authorized of any class of common stock of this
Corporation and any other stock of this Corporation, howsoever
designated, authorized after the Issue Date, which has the right
(subject always to prior rights of any class or series of
preferred shares) to participate in the distribution of the
assets and earnings of this Corporation without limit as to per
share amount.
Conversion Price. The term "Conversion Price" shall mean
the price per share of Common Stock used to determine the number
of shares of Common Stock deliverable upon conversion of a share
of the Convertible Preferred Stock, which price shall initially
be $4.57125 per share. If, on the Effective Date, the Closing
Price of the Common Stock is lower than $4 5/16 per share, the
Conversion Price shall be changed to an amount equal to 106% of
the average of the Closing Price of the Common Stock for the
fifteen trading days immediately preceding the Effective Date, if
such average Closing Price is less than $4 5/16 per share. The
Conversion Price shall be subject to adjustment in accordance
with the provisions of paragraph 6 below.
Convertible Exchangeable Preferred Stock. T h e t e r m
"Convertible Exchangeable Preferred Stock" shall mean any and all
of the outstanding shares of the Corporation's $2.50 Convertible
Exchangeable Preferred Stock issued on May 1, 1985 in accordance
with the Certificate of Designation filed with the Secretary of
State of Delaware on April 29, 1985.
Dividend Payment Dates. The term "Dividend Payment Dates"
shall mean the first days of December, March, June and September
in each year.
Effective Date. The term "Effective Date" shall mean the
date on which the Securities and Exchange Commission first
declares the Registration Statement effective.
Final Redemption Date. The term "Final Redemption Date"
shall mean the date, if any, after a default, if any, by this
Corporation in making payment for shares of Convertible Preferred
Stock on any date fixed for redemption, when this Corporation
makes funds for payment of the Redemption Price for all shares of
Convertible Preferred Stock being redeemed, together with accrued
dividends to such date, available to holders thereof.
Issue Date. The term "Issue Date" shall mean the date
that shares of the Convertible Preferred Stock are first issued
by this Corporation.
Junior Stock. The term "Junior Stock" shall mean Common
Stock, and any other class or series of stock of the Corporation
authorized after the Issue Date not entitled to receive any
dividends in any dividend period unless all dividends required to
15
have been paid or declared and set apart for payment on the
Convertible Preferred Stock shall have been so paid or declared
and set apart for payment and, for purposes of paragraph 4 below,
shall also mean any class or series of stock of the Corporation
authorized after the Issue Date not entitled to receive any
assets upon liquidation, dissolution or winding up of the affairs
of the Corporation until the Convertible Preferred Stock shall
have received the entire amount to which such stock is entitled
upon such liquidation, dissolution or winding up.
Liquidation Price. The term "Liquidation Price" shall mean
$25.00 per share of Convertible Preferred Stock.
Parity Stock. The term "Parity Stock" shall mean the
Convertible Exchangeable Preferred Stock and any other class or
series of stock of the Corporation authorized after the Issue
Date entitled to receive payment of dividends on a parity with
the Convertible Preferred Stock and, for purposes of paragraph 4
below, shall also mean any other class or series of stock of the
Corporation authorized after the Issue Date entitled to receive
assets upon liquidation, dissolution or winding up of the affairs
of the Corporation on a parity with the Convertible Preferred
Stock.
Redemption Price. The term "Redemption Price" shall mean
the price to be paid upon redemption of the Convertible Preferred
Stock, as determined in accordance with paragraph 3 below.
Registration Statement. The term "Registration Statement"
shall mean the registration statement of the Corporation filed
with the Securities and Exchange Commission on an appropriate
form pursuant to the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder, which covers the
entire initial issue of the Convertible Preferred Stock.
Senior Stock. The term "Senior Stock" shall mean any class
or series of stock of the Corporation authorized after the Issue
Date ranking senior to the Convertible Preferred Stock in respect
of the right to receive payment of dividends, and for purposes of
paragraphs 4 and 7 below, shall also mean any class or series of
stock of the Corporation authorized after the Issue Date ranking
senior to the Convertible Preferred Stock in respect of the right
to participate in any distribution upon liquidation, dissolution
or winding up of the affairs of the Corporation.
Tangible Net Worth. The term "Tangible Net Worth" shall mean
the stockholders' equity of the Corporation and its consolidated
subsidiaries less their consolidated Intangible Assets (as
defined below), all as determined on a consolidated basis and
(except as otherwise specifically indicated herein) in accordance
with generally accepted accounting principles. For purposes of
this definition "Intangible Assets" means the amount (to the
extent
16
reflected in determining such consolidated stockholders'
equity) of (i) all write-ups (other than write-ups resulting from
foreign currency translations and write-ups of tangible assets of
a going concern business made within twelve months after the
acquisition of such business) subsequent to the date hereof in
the book value of any asset owned by the Corporation or a
consolidated subsidiary, (ii) all equity investments in
unconsolidated subsidiaries and in persons which are not
subsidiaries (excluding marketable equity securities), and (iii)
all unamortized deferred charges, goodwill, patents, trademarks,
service marks, trade names, copyrights, organization and
developmental expenses and other intangible items, all of the
foregoing as determined in accordance with generally accepted
accounting principles (except to the extent that any of the
foregoing assets was received by the Corporation in connection
with the Acquisition). Also for purposes of this definition, in
determining the stockholders' equity of the Corporation and its
consolidated subsidiaries there shall be added to the total
consolidated liabilities of the Corporation and its subsidiaries
the amount of any indebtedness of any person, other than the
Corporation or its subsidiaries, which the Corporation or its
subsidiaries have guaranteed or which has otherwise become their
legal obligation.
Total Assets. The term "Total Assets" shall mean the total
amount of assets of the Corporation and its subsidiaries as
determined on a consolidated basis in accordance with generally
accepted accounting principles.
2. Dividends. Each issued and outstanding share of
Convertible Preferred Stock shall entitle the holders of record
thereof as of the "record date" to receive, when and as declared
by the Board of Directors, out of any funds legally available
therefor, cash dividends at the rate of $3.00 per annum, and no
more, which shall accrue from the Issue Date and shall be payable
on the Dividend Payment Dates, commencing December 1, 1985. On
the Effective Date, but in no event less than six months from the
Issue Date, the cash dividend payable shall decrease to a rate of
$2.50 per annum; provided, however, that if, six months from the
Issue Date, the Corporation has an insufficient number of shares
of authorized but unissued shares of Common Stock available for
issuance upon the conversion of all of the shares of Convertible
Preferred Stock authorized hereby, the cash dividend payable on
the Convertible Preferred Stock shall remain at a rate of $3.00
per annum until such time as a sufficient number of authorized
but unissued shares of Common Stock shall exist. With respect to
any shares of the Convertible Preferred Stock issued after the
Issue Date pursuant to paragraph 10 hereof, cash dividends shall
accrue from the date of issuance of any such additional shares at
the rate payable on the other outstanding shares of Convertible
Preferred Stock pursuant to the provisions hereof. The quarterly
period between consecutive Dividend Payment Dates shall
hereinafter be referred to as a "Dividend Period". As used
above, the term
17
"record date" means, with respect to dividends
payable on December 1, March 1, June 1 and September 1,
respectively, of each year, November 15, February 15, May 15 and
August 15 of such year, or such other record date designated by
the Board of Directors of this Corporation with respect to the
dividend payable on such respective Dividend Payment Date.
If for any period holders of the Convertible Preferred Stock
shall not receive the full dividends provided for in this
paragraph 2, such unpaid dividends for such period shall be
cumulative, and shall accrue without interest on a day-to-day
basis, whether or not earned or declared, from and after the date
when payment thereof would have been due. Dividends payable for
any period less than a full Dividend Period will be computed on
the basis of a 360-day year.
So long as any shares of Convertible Preferred Stock shall
be outstanding, the Corporation shall not declare or pay on any
Junior Stock any dividend whatsoever, whether in cash, property
or otherwise (other than dividends payable in shares of the class
or series upon which such dividends are declared or paid or
payable in shares of Common Stock with respect to Junior Stock
other than Common Stock, together with cash in lieu of fractional
shares), nor shall the Corporation make any distribution on any
Junior Stock, nor shall any Junior Stock be purchased or redeemed
by the Corporation or any of its subsidiaries of which it owns
not less than a majority of the outstanding voting power, nor
shall any monies be paid or made available for a sinking fund for
the purchase or redemption of any Junior Stock, unless all
dividends to which the holders of Convertible Preferred Stock
shall have been entitled for all previous Dividend Periods shall
have been paid or declared and a sum of money sufficient for the
payment thereof set apart.
In the event that full dividends are not paid or made
available to the holders of all outstanding shares of Convertible
Preferred Stock and of any Parity Stock, and funds available
shall be insufficient to permit payment in full to all such
holders of the preferential amounts to which they are then
entitled, the entire amount available for payment of dividends
shall be distributed among the holders of the Convertible
Preferred Stock and of any Parity Stock ratably in proportion to
the full amount to which they would otherwise be respectively
entitled.
3. Optional Redemption.
(a) Subject to the provisions of subparagraphs (b) and (d)
of this paragraph 3, the shares of Convertible Preferred Stock
may be redeemed, at the option of the Board of Directors, in
whole or from time to time in part on at least 30 days' notice,
at the following redemption prices per share (the "Redemption
Price") if redeemed during the twelve-month period beginning on
September 1
18
in the years specified below:
Redemption Redemption
Year Price Year Price
1985............ $27.50 1991............. $26.00
1986............ 27.25 1992............. 25.75
1987............ 27.00 1993............. 25.50
1988............ 26.75 1994............. 25.25
1989............ 26.50 1995 and thereafter 25.00
1990............ 26.25
plus, in each case, an amount equal to dividends accrued to the
date fixed for redemption.
(b) Notwithstanding the provisions of subparagraph (a), the
shares of Convertible Preferred Stock may not be redeemed by the
Corporation prior to September 1, 1988, unless (i) the
Convertible Preferred Stock is then convertible under
subparagraph (a) of paragraph 6 hereof and (ii) the Closing Price
of the Common Stock for 20 trading days within a period of 30
consecutive trading days ending on the fifth day prior to the
date the notice of redemption is given has been greater than or
equal to 150% of the Conversion Price then in effect (as adjusted
in accordance with paragraph 6).
(c) Notice of every redemption shall be published at least
once not less than 30 days nor more than 60 days prior to the
date fixed for redemption in a daily newspaper printed in the
English language and published and of general circulation in the
City of Los Angeles, California, and in a daily newspaper printed
in the English language and published and of general circulation
in The Borough of Manhattan, City and State of New York. Notice
of every such redemption shall also be mailed, not less than 30
days nor more than 60 days prior to the date fixed for
redemption, to the holders of record of the shares of Convertible
Preferred Stock to be redeemed at their respective addresses as
the same appear upon the books of this Corporation or supplied by
them to this Corporation for the purpose of such notice; but no
failure to mail such notice to particular stockholders or any
defect therein or in the mailing thereof shall affect the
validity of the proceedings for the redemption of any shares of
Convertible Preferred Stock. In case of redemption of less than
all of the Convertible Preferred Stock at the time outstanding,
this Corporation shall select shares to be so redeemed pro rata
or by lot, in such manner as the board of Directors may
determine.
If notice of any redemption by this Corporation shall have
been mailed as hereinbefore provided and if before the redemption
date specified in such notice all funds necessary for such
redemption shall have been set apart so as to be available
therefor and only therefor, then on and after the close of
business on the date fixed for redemption, the shares of
Convertible Preferred
19
Stock called for redemption,
notwithstanding that any certificate therefor shall not have been
surrendered for cancellation, shall no longer be deemed
outstanding and all rights with respect to such shares shall
forthwith cease and terminate, except the right of the holders
thereof to receive upon surrender of their certificates the
amounts payable upon redemption thereof, without interest, and
the right of holders thereof to convert shares of Convertible
Preferred Stock into Common Stock pursuant to paragraph 6;
provided, however, that, if on or prior to the date fixed for
such redemption (but no earlier than 60 days prior to the date
fixed for such redemption) this Corporation shall deposit, as a
trust fund, with any bank or trust company organized under the
laws of the United States of America or any state thereof having
a capital, undivided profits and surplus aggregating at least
$50,000,000, a sum sufficient to redeem on such redemption date
the shares of Convertible Preferred Stock to be redeemed with
irrevocable instructions and authority to the bank or trust
company to mail the notice of redemption (or to complete such
mailing previously commenced, if it has not already been
completed) and to pay, on and after the date fixed for such
redemption or prior thereto, the redemption price of the shares
of Convertible Preferred Stock to be redeemed to their respective
holders upon the surrender of their share certificates, then,
from and after the date of such deposit (although prior to the
date fixed for redemption) the shares of Convertible Preferred
Stock to be redeemed shall be deemed to be redeemed and dividends
on those shares shall cease to accrue after the date fixed for
such redemption. The deposit shall be deemed to constitute full
payment for shares of Convertible Preferred Stock to be redeemed
to their holders and from and after the date of such deposit the
shares shall be deemed to be no longer outstanding and the
holders thereof shall cease to be stockholders with respect to
such shares and shall have no rights with respect thereto, except
the right to receive from the bank or trust company payment of a
sum sufficient to redeem the shares, without interest, upon
surrender of their certificates therefor and the right of holders
thereof to convert shares of Convertible Preferred Stock into
Common Stock pursuant to paragraph 6.
(d) If at any time this Corporation shall have failed to
pay all dividends accrued and payable on the then outstanding
shares of Convertible Preferred Stock, thereafter and until all
dividends accrued and payable on the then outstanding shares of
Convertible Preferred Stock shall have been paid or declared and
set apart for payment in full, this Corporation shall not redeem
any preferred shares, by operation of any sinking fund or
otherwise, including shares of Convertible Preferred Stock,
unless all then outstanding preferred shares are redeemed, and
shall not purchase (or permit any direct or indirect subsidiary
of this Corporation to purchase) any preferred shares, including
shares of Convertible Preferred Stock, and shall not redeem or
purchase (or permit any direct or indirect subsidiary of this
Corporation to purchase) any shares of stock subordinate to the
shares of Convertible Preferred Stock in
20
respect to dividends or
distribution of assets on liquidation.
(e) All shares of Convertible Preferred Stock redeemed
under this paragraph 3 shall be retired and shall be restored to
the status of authorized and unissued preferred stock and may not
be reissued as Convertible Preferred Stock.
4. Distributions Upon Liquidation, Dissolution or Winding
Up. In the event of any voluntary or involuntary liquidation,
dissolution or other winding up of the affairs of the
Corporation, subject to the prior preferences and other rights of
any Senior Stock, but before any distribution or payment shall be
made to the holders of Junior Stock, the holders of the
Convertible Preferred Stock shall be entitled to be paid the
Liquidation Price per share plus an amount equal to any accrued
and unpaid dividends thereon to the date of such liquidation or
dissolution or such other winding up, and no more, in cash or in
property taken at its fair value as determined by the Board of
Directors of the Corporation, or both, at the election of the
Board of Directors. If such payment shall have been made in full
to the holders of the Convertible Preferred Stock, and if payment
shall have been made in full to the holders of any Senior Stock
and Parity Stock of all amounts to which such holders shall be
entitled, the remaining assets and funds of the Corporation shall
be distributed among the holders of Junior Stock, according to
their respective shares. If, upon any such liquidation,
dissolution or other winding up of the affairs of the
Corporation, the net assets of the Corporation distributable
among the holders of all outstanding shares of the Convertible
Preferred Stock and of any Parity Stock shall be insufficient to
permit the payment in full to such holders of the preferential
amounts to which they are entitled, then the entire net assets of
the Corporation remaining after the distributions to holders of
any Senior Stock of the full amounts to which they may be
entitled shall be distributed among the holders of the
Convertible Preferred Stock and of any Parity Stock ratably in
proportion to the full amounts to which they would otherwise be
respectively entitled. Neither the consolidation or merger of
the Corporation into or with another corporation or corporations,
nor the sale of all or substantially all the assets of the
Corporation to another corporation or corporations shall be
deemed a liquidation, dissolution or winding up of the affairs of
the Corporation within the meaning of this paragraph 4.
5. When Corporation May Merge, etc.
The Corporation shall not consolidate or merge with or into,
or transfer or lease all or substantially all of its assets to,
any person unless:
(1) the person formed by or surviving any such
consolidation or merger (if other than the Corporation), or
to which such sale or conveyance shall have been made, is a
corporation
21
organized and existing under the laws of the
United States, any state thereof or the District of
Columbia;
(2) the corporation formed by or surviving any such
consolidation or merger (if other than the Corporation), or
to which such sale or conveyance shall have been made,
assumes all the obligations of the Corporation with respect
to the Convertible Preferred Stock as set forth herein; and
(3) the corporation formed by or surviving any such
consolidation or merger, or to which such sale or conveyance
shall have been made, shall have Total Assets and Tangible
Net Worth (immediately after such transaction) equal to or
greater than the Total Assets and Tangible Net Worth of the
Corporation immediately preceding the transaction.
The surviving corporation shall be the successor
Corporation, but the predecessor Corporation in the case of a
transfer or lease shall not be released from the obligation to
pay any dividends due on the Convertible Preferred Stock.
6. Conversion Rights.
(a) A holder of shares of Convertible Preferred Stock may
convert such shares into shares of Common Stock from the earlier
of (i) eight months from and including the Issue Date, (ii) the
Effective Date or (iii) the first date on which any of the
following events occurs: (1) commencement of a tender offer for
the Common Stock, (2) approval by the Board of Directors of any
merger or sale of assets transaction in which the Corporation is
to be, in substance, acquired by another entity or person, (3)
initiation of a proxy contest to elect directors of the
Corporation or (4) acquisition by a person or entity, or group of
affiliated persons or entities, of beneficial ownership of 20% or
more of the Corporation's outstanding Common Stock. Shares of
Convertible Preferred Stock may be converted into shares of
Common Stock until the close of business on the last business day
prior to the date fixed for redemption of such shares, or, if
default shall be made in the payment of the Redemption Price, at
any time prior to the close of business on the last business day
prior to the Final Redemption Date. For purposes of conversion,
each share of Convertible Preferred Stock shall be valued at the
Liquidation Price, which shall be divided by the Conversion Price
in effect on the Conversion Date (as defined in subparagraph (b)
below) to determine the number of full shares of Common Stock
issuable upon conversion. Upon receipt of shares of Convertible
Preferred Stock surrendered for conversion, the Corporation shall
pay to the holder in cash an amount equal to any and all accrued
but unpaid dividends through the last Dividend Payment Date on
the shares of Convertible Preferred Stock so surrendered for
conversion; provided, however, that if, in the opinion of counsel
to the Company, any such payment would not be legally
permissible, there shall be delivered to such
22
holder, in lieu of
such cash payment, a number of additional shares of Common Stock
having a value (based on the current market price per share of
Common Stock determined in accordance with subparagraph (j)
below) as of the last trading day prior to the Conversion Date
equal to the amount of all accrued but unpaid dividends through
the last Dividend Payment Date. Holders who convert their
Convertible Preferred Stock after the record date for a dividend
thereon and before the payment date will be entitled to the
dividend if they held their shares of Convertible Preferred Stock
on the record date. No adjustment shall be made in respect of
accrued dividends on (i) shares of the Convertible Preferred
Stock surrendered for conversion into shares of Common Stock
except as set forth in the previous two sentences, or (ii) shares
of Common Stock issued upon conversion. No fractional shares of
Common Stock shall be issued upon any conversion, but in lieu
thereof, this Corporation shall, at its option, either (i) pay
therefor in cash an amount equal to the applicable fraction of
the Closing Price on the last trading day prior to the Conversion
Date (as defined in subparagraph (b) below) or (ii) make such
arrangements as the Board of Directors may approve to enable the
person entitled to receive a fractional share to sell such
fractional share of Common Stock or to buy an additional
fractional share of Common Stock sufficient to make a full share
of Common Stock.
(b) In order to convert shares of Convertible Preferred
Stock into shares of Common Stock, a holder shall surrender the
certificate or certificates evidencing the shares of Convertible
Preferred Stock to be converted, duly endorsed, at the office of
the transfer agent for the Convertible Preferred Stock, shall
notify this Corporation at such office of his election to convert
shares of Convertible Preferred Stock and of the number of such
shares which he wishes to convert, shall state in writing the
name or names in which he wishes the certificate or certificates
for shares of Common Stock to be issued, and shall pay any
transfer or similar tax if required. In the event that a holder
fails to notify the Corporation of the number of shares of
Convertible Preferred Stock which he wishes to convert, he shall
be deemed to have elected to convert all shares represented by
the certificate or certificates surrendered for conversion. The
date on which the holder satisfies the last of such requirements
is herein referred to as the "Conversion Date". As soon as
practicable after the Conversion Date, this Corporation shall
deliver through the transfer agent a certificate for the number
of full shares of Common Stock issuable upon the conversion and
either cash for any remaining fractional share of Common Stock or
order forms entitling the holder thereof to sell such fractional
share of Common Stock or to purchase such additional fractional
shares as may be necessary to make a full share of Common Stock,
as provided in subparagraph (a), and a new certificate
representing the unconverted portion, if any, of the shares of
Convertible Preferred Stock represented by the certificate or
certificates surrendered for conversion. The
23
person in whose
name the certificate is registered shall become a stockholder of
record of the Common Stock on the Conversion Date.
(c) In case this Corporation shall at any time after the
Issue Date (i) pay a dividend in shares of Common Stock or make a
distribution in shares of Common Stock, (ii) subdivide the
outstanding shares of Common Stock, (iii) combine the outstanding
Common Stock into a smaller number of shares of Common Stock, or
(iv) issue any shares of its capital stock or other securities by
reclassification of the Common Stock, the Conversion Price in
effect at the time of the record date for such dividend or
distribution or of the effective date of such subdivision,
combination or reclassification shall be proportionately adjusted
so that each holder of shares of Convertible Preferred Stock
converted after such time shall be entitled to receive the
aggregate number and kind of Common Stock or other securities of
this Corporation which, if such shares of Convertible Preferred
Stock had been converted immediately prior to such time, he would
have owned upon such conversion and been entitled to receive by
virtue of such dividend, distribution, subdivision, combination
or reclassification. Such adjustment shall be made successively
whenever any event listed above shall occur.
(d) If this Corporation issues any rights, options or
warrants to all holders of its Common Stock entitling them for a
period expiring within 60 days after the record date mentioned
below to purchase shares of Common Stock (or securities
convertible into or exchangeable for shares of Common Stock) at a
price per share less than the current market price per share on
that record date, the Conversion Price shall be adjusted in
accordance with the formula:
(N x P)
C' = C x O + ( M )
O + N
where
C' = the adjusted Conversion Price.
C = the then current Conversion Price.
O = the number of shares of Common Stock outstanding on the
record date.
N = the number of additional shares of Common Stock offered
or initially issuable upon conversion or exchange of
the convertible or exchangeable securities offered.
P = the offering price or conversion price or exchange
price per share of the additional shares.
24
M = the current market price per share of Common Stock on
the record date. See subparagraph (j) below.
The adjustment shall be made successively whenever any such
rights, options or warrants are issued and shall become effective
immediately after the record date for the determination of
stockholders entitled to receive the rights, options or warrants.
If all of the shares of Common Stock or securities convertible
into or exchangeable for shares of Common Stock subject to such
rights, options or warrants have not been issued when such
rights, options or warrants expire, then the Conversion Price
shall be immediately readjusted to what it would have been if "N"
in the above formula had been the number of shares of Common
Stock actually issued upon the exercise of such rights, options
or warrants or initially issuable based upon the number of
convertible securities or exchangeable securities actually issued
upon the exercise of such rights or warrants.
(e) If this Corporation distributes to all holders of its
Common Stock any of its assets or debt securities or any rights
or warrants to purchase debt securities, assets or other
securities of this Corporation (including Common Stock), the
Conversion Price shall be adjusted in accordance with the
formula:
C' = C x M - F
M
where
C' = the adjusted Conversion Price.
C = the then current Conversion Price.
M = the current market price per share of Common Stock on
the record date mentioned below. See subparagraph (j)
below.
F = the fair market value on the record date of the assets,
securities, rights or warrants applicable to one share
of Common Stock. The Board of Directors shall
determine, in good faith, such fair market value, which
determination shall be conclusive.
The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after
the record date for the determination of stockholders entitled to
receive the distribution.
This subparagraph does not apply to cash dividends or cash
distributions paid out of consolidated current earnings or net
consolidated earnings accumulated after the date hereof as shown
on the books of this Corporation. Also, this subparagraph does
not apply to any rights, options or warrants referred to in
25
subparagraph (d).
(f) If this Corporation issues shares of Common Stock for a
consideration per share less than the current market price per
share on the date this Corporation fixed the offering price of
such additional shares, the Conversion Price shall be adjusted in
accordance with the formula:
P
C' = C x O + M
A
where
C' = the adjusted Conversion Price.
C = the then current Conversion Price.
O = the number of shares of Common Stock outstanding
immediately prior to the issuance of such additional
shares.
P = the aggregate consideration received for the issuance
of such additional shares.
M = the current market price per share of Common Stock on
the date of issuance of such additional shares. See
subparagraph (j) below.
A = the number of shares outstanding immediately after the
issuance of such additional shares.
The adjustment shall be made successively whenever any such
issuance is made, and shall become effective immediately after
such issuance.
This Section does not apply to (i) any of the transactions
described in subparagraphs (d) and (e), (ii) the conversion or
exchange of the Convertible Preferred Stock or other securities
convertible or exchangeable for Common Stock, (iii) Common Stock
issued to this Corporation's employees (other than upon the
exercise of options of the type referred to in clause (iv) below)
under bona fide employee benefit plans adopted by the Board of
Directors and approved by the holders of Common Stock when
required by law, if such Common Stock would otherwise be covered
by this subparagraph (but only to the extent that the aggregate
number of shares excluded by this clause (iii) and issued after
the Issue Date under all such plans shall not exceed 10% of the
Common Stock outstanding at the time of the issuance of the
shares under such plans, exclusive of antidilution adjustments
thereunder), (iv) Common Stock issued upon the exercise of
options granted to employees at a price equal to the fair market
value of such Common
26
Stock at the time such options were granted,
(v) Common Stock issued to stockholders of any person which
merges into this Corporation, or with a subsidiary of this
Corporation, in proportion to their stock holdings in such person
immediately prior to such merger, upon such merger, (vi) Common
Stock issued in a bona fide public offering pursuant to a firm
commitment or best efforts underwriting, (vii) Common Stock
issued in a bona fide private placement through a placement agent
which is a member firm of the National Association of Securities
Dealers, Inc. (except to the extent that any discount from the
current market price attributable to restrictions on
transferability of the Common Stock, as determined in good faith
by the board of Directors and described in a Board resolution,
shall exceed 20%), (viii) Common Stock issued upon the exercise
of the Company's outstanding warrants, issued pursuant to the
Warrant Agreement dated as of January 26, 1985 between the
Company and J. Henry Schroder Bank & Trust Company, or (ix)
Common Stock issued in exchange for outstanding publicly traded
securities of this Corporation pursuant to a bona fide exchange
offer to all holders of such outstanding publicly traded
securities under Section 3(a)(9) of the Securities Act of 1933,
as amended.
For purposes of this subparagraph (f), and clause (iii)
above, shares of Common Stock issuable upon conversion of shares
of Convertible Preferred Stock issued to employees of this
Corporation pursuant to paragraph 10 hereof for less than fair
market value as determined in good faith by the Board of
Directors (which determination shall be conclusive of such fair
market value) shall be deemed issued on the date of issuance of
such Convertible Preferred Stock, at the conversion price then in
effect.
(g) If this Corporation issues any securities convertible
into or exchangeable for Common Stock (other than securities
issued in transactions described in subparagraphs (d) or (e)) for
a consideration per share of Common Stock initially deliverable
upon conversion or exchange of such securities less than the
current market price per share of Common Stock on the date of
issuance of such securities, the Conversion Price shall be
adjusted in accordance with the formula:
P
C' = C x O + M
O + D
where
C' = the adjusted Conversion Price.
C = the then current Conversion Price.
O = the number of shares of Common Stock outstanding
immediately prior to the issuance of such securities.
27
P = the aggregate consideration received for the issuance
of such securities.
M = the current market price per share of Common Stock on
the date of issuance of such securities. See
subparagraph (j) below.
D = the maximum number of shares deliverable upon
conversion or in exchange for such securities at the
initial conversion or exchange rate.
The adjustment shall be made successively whenever any such
issuance is made, and shall become effective immediately after
such issuance. If all of the Common Stock deliverable upon
conversion or exchange of such securities have not been issued
when such securities are no longer outstanding, then the
Conversion Price shall promptly be readjusted to the conversion
price which would then be in effect had the adjustment upon the
issuance of such securities been made on the basis of the actual
number of shares of Common Stock issued upon conversion or
exchange of such securities.
This subparagraph does not apply to (i) convertible
securities issued to stockholders of any person which merges into
this Corporation, or with a subsidiary of this Corporation, in
proportion to their stock holdings in such person immediately
prior to such merger, upon such merger, (ii) convertible
securities issued in a bona fide public offering pursuant to a
firm commitment or best efforts underwriting, (iii) convertible
securities issued in a bona fide private placement through a
placement agent which is a member firm of the National
Association of Securities Dealers, Inc. (except to the extent
that any discount from the current market price attributable to
restrictions on transferability of Common Stock issuable upon
conversion, as determined in good faith by the Board of Directors
and described in a Board resolution, shall exceed 20% of the then
current market price), or (iv) any shares of Convertible
Preferred Stock issued pursuant to paragraph 10 hereof.
(h) For purposes of any computation respecting
consideration received pursuant to subparagraph (f) and (g), the
following shall apply:
(1) in the case of the issuance of shares of Common
Stock for cash, the consideration shall be the amount of such
cash, provided that in no case shall any deduction be made for
any commissions, discounts or other expenses incurred by this
Corporation for any underwriting of the issue or otherwise in
connection therewith;
(2) in the case of the issuance of shares of Common
Stock for a consideration in whole or in part other than cash,
the consideration other than cash shall be deemed to be the fair
market
28
value thereof as determined in good faith by the Board of
Directors (irrespective of the accounting treatment thereof),
whose determination shall be conclusive, and described in a Board
resolution; and
(3) in the case of the issuance of securities
convertible into or exchangeable for shares, the aggregate
consideration received therefor shall be deemed to be the
consideration received by this Corporation for the issuance of
such securities plus the additional minimum consideration, if
any, to be received by this Corporation upon the conversion or
exchange thereof (the consideration in each case to be determined
in the same manner as provided in clauses (1) and (2) of this
subparagraph).
(i) This Corporation at any time or from time to time may
reduce the Conversion Price by any amount for any period of time,
if the period is at least fifteen (15) days and if the reduction
is irrevocable during the period, but in no event shall such
Conversion Price be less than the par value of the Common Stock
at the time such reduction is made. Whenever the Conversion
Price is reduced, the Corporation shall mail to holders of the
Convertible Preferred Stock a notice of the reduction. The
Corporation shall mail the notice at least fifteen (15) days
before the date the reduced Conversion Price takes effect. The
notice shall state the reduced Conversion Price and the period it
will be in effect.
A reduction of the Conversion Price does not change or
adjust the Conversion Price otherwise in effect for purposes of
subparagraphs (d), (e), (f) and (g).
(j) For the purpose of any computation pursuant to
subparagraphs (d), (e), (f) and (g) the current market price per
share of Common Stock on any date shall be deemed to be the
average of the Closing Prices for thirty (30) consecutive trading
days commencing forty-five (45) trading days before the date in
question. In the absence of one or more such quotations, the
Board of Directors shall determine the current market price on
the basis of such quotations as it considers appropriate.
Notwithstanding the foregoing, if any issuance of the type
described in subparagraphs (f) or (g) hereof is made in
connection with any bona fide transaction between the Company and
an unaffiliated third party, which issuance would otherwise
result in an adjustment of the Conversion Price pursuant to the
provisions of said subparagraphs (f) or (g), then the "current
market price per share of Common Stock" for the purposes of said
subparagraphs shall be deemed to be any price which the Board of
Directors reasonably determines, in good faith, adequately
reflects the fair market value of the Common Stock at the time
such issuance is agreed to (without regard to any allowances or
other discounts with respect thereto).
29
(k) No adjustment in the Conversion Price need be made
unless the adjustment would required an increase or decrease of
at least 1% in the Conversion Price. Any adjustments which are
not made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this paragraph 6
shall be made to the nearest cent or to the nearest 1/100th of a
share, as the case may be. The Conversion Price shall not be
adjusted upward except in the event of a combination of the
outstanding shares of Common Stock into a smaller number of
shares of Common Stock or in the event of a readjustment of the
Conversion Price pursuant to subparagraphs (d) or (g) above.
(l) No adjustment need be made for a transaction referred
to in subparagraphs (c), (d), (e), (f) or (g) if holders of
Convertible Preferred Stock are to participate in the transaction
on a basis and with notice that the Board of Directors determines
to be fair and appropriate in light of the basis and notice on
which holders of Common Stock participate in the transaction.
No adjustment need me made for rights to purchase Common
Stock pursuant to a plan for reinvestment of dividends or
interest.
No adjustment need be made for a change in the par value or
no par value of the Common Stock.
To the extent the Convertible Preferred Stock becomes
convertible into cash, no adjustment need be made thereafter as
to the cash. Interest will not accrue on the cash.
(m) Whenever the Conversion Price is adjusted or reduced,
this Corporation shall promptly mail to holders of the
Convertible Preferred Stock and file with the transfer agent
therefor a notice of the adjustment or reduction and, in the case
of an adjustment, file with the transfer agent for the
Convertible Preferred Stock an officer's certificate briefly
stating the facts requiring the adjustment and the manner of
computing it. The certificate shall be conclusive evidence that
the adjustment is correct.
(n) If (i) this Corporation takes any action which would
require an adjustment in the Conversion Price pursuant to
subparagraph (d) or (e), or clause (iv) or (v) of subparagraph
(c); (ii) this Corporation consolidates or merges with or into,
or transfers all or substantially all of its assets to, another
corporation; or (iii) there is a dissolution or liquidation of
this Corporation, a holder of shares of Convertible Preferred
Stock may desire to convert such shares into shares of Common
Stock prior to the record date for or the effective date of the
transaction so that he may receive the rights, warrants,
securities or assets which a holder of Common Stock on that date
may receive. Therefore, this Corporation shall mail to such
holders a notice stating the proposed record or effective date,
as the case may be.
30
The Corporation shall mail the notice at least twenty (20)
days before such date. Failure to mail the notice or any defect
therein shall not affect the validity of any transaction referred
to in clause (i), (ii) or (iii) of this subparagraph (n).
(o) In case of a merger or consolidation which reclassifies
or changes the Common Stock of this Corporation or in the case of
the consolidation or merger of this Corporation with or into
another corporation or corporations or the transfer of all or
substantially all of the assets of this Corporation to another
corporation or corporations, each share of Convertible Preferred
Stock shall thereafter be convertible into the number of shares
of stock or other securities or property to which a holder of the
number of shares of Common Stock deliverable upon conversion of
such shares of Convertible Preferred Stock would have been
entitled upon such reclassification, consolidation, merger or
transfer; and, in any such case, appropriate adjustment (as
determined in good faith by the Board of Directors) shall be made
in the application of the provisions herein set forth with
respect to the rights and interests thereafter of the holders of
the Convertible Preferred Stock, to the end that the provisions
set forth herein (including provisions with respect to changes in
and other adjustments of the Conversion Price) shall thereafter
be applicable, as nearly as reasonably may be, in relation to any
shares of stock or other property thereafter deliverable upon the
conversion of shares of Convertible Preferred Stock. In case of
any such merger or consolidation, the resulting or surviving
corporation (if not this Corporation) shall expressly assume the
obligation to deliver, upon the exercise of the conversion
privilege, such securities or property as the holders of the
Convertible Preferred Stock remaining outstanding, or other
convertible preferred stock received by the holders in place
thereof, shall be entitled to receive pursuant to the provisions
hereof, and to make provisions for the protection of the
conversion right as provided above. If this subparagraph
applies, subparagraph (c) shall not apply.
(p) In any case in which this paragraph 6 shall require
that an adjustment as a result of any event become effective from
and after a record date, this Corporation may elect to defer
until the occurrence of such event (i) the issuance to the holder
of any shares of Convertible Preferred Stock converted after such
record date and before the occurrence of such event of the
additional shares of Common Stock issuable upon such conversion
over and above the shares issuable on the basis of the Conversion
Price in effect immediately prior to adjustment and (ii) the
payment to such holder of any amount in cash in lieu of a
fractional share of Common Stock pursuant to subparagraph (a)
above; provided, however, that this Corporation shall deliver to
such holder a due bill or other appropriate instrument evidencing
such holder's right to receive such additional Common Stock or
such payment in lieu of such fractional shares.
31
(q) The Board of Directors may (but shall not be required
to) make such adjustments in the Conversion Price, in addition to
those required by this paragraph 6, as shall be determined by the
Board of Directors, as evidenced by a Board resolution, to be
advisable in order that any event that would otherwise be treated
for federal income tax purposes as a dividend of stock or stock
rights will, to the extent practicable, not be so treated or not
be taxable to the recipients.
(r) The Board of Directors may interpret the provisions of
this paragraph 6 to resolve any inconsistency or ambiguity which
may arise or be revealed in connection with the adjustment
procedures provided for herein, and if such inconsistency or
ambiguity reflects an inaccurate provision hereof, the Board of
Directors may, in appropriate circumstances, authorize the filing
of a Certificate of Correction.
7. Voting Rights. The holders of Convertible Preferred
Stock shall have one (1) vote per share on all matters to come
before the stockholders. Except as otherwise provided by law or
the certificate of incorporation of this Corporation, or by this
resolution, the holders of Convertible Preferred Stock shall vote
with the holders of the outstanding Common Stock and any other
preferred shares entitled to vote on such matter, and not as a
separate class or series. In addition, the holders of
Convertible Preferred Stock shall have the following voting
rights:
(a) If and whenever accrued dividends on the
Convertible Preferred Stock shall not have been paid or declared
(with a sum sufficient for the payment thereof set aside), for
six consecutive Dividend Periods on all shares of Convertible
Preferred Stock at the time outstanding, then and in such event
the holders of Convertible Preferred Stock, voting separately as
a class, shall be entitled at any annual meeting of the
stockholders or special meeting held in place thereof, or at a
special meeting of the holders of the Convertible Preferred Stock
called as hereinafter provided, to elect two (2) directors and
such right to elect two (2) directors shall be in lieu of the
aforesaid right of the holders of Convertible Preferred Stock to
vote together with the holders of Common Stock for the election
of directors. Such right of the holders of Convertible Preferred
Stock to elect two (2) directors may be exercised until all
dividends in default on the Convertible Preferred Stock shall
have been paid in full or declared and funds sufficient therefor
set aside, and when so paid or provided for, the right of the
holders of Convertible Preferred Stock to elect such number of
directors shall cease and their right to vote together with the
holders of Common Stock for the election of directors shall
resume, but subject always to the same provisions for the vesting
of such special voting rights in the case of any such future
dividend default or defaults. At any time when such special
voting rights shall have so vested in the holders of Convertible
Preferred Stock, the Secretary of the Corporation
32
may, and upon
the written request of the holders of record of 10% or more of
the number of shares of the Convertible Preferred Stock then
outstanding addressed to him at the principal office of the
Corporation, shall, call a special meeting of the holders of the
Convertible Preferred Stock for the election of the two (2)
directors to be elected by them as hereinafter provided, to be
held in the case of such written request within forty (40) days
after delivery of such request, and in either case to be held at
the place and upon the notice provided by law and in the by-laws
for the holding of meetings of stockholders; provided, however,
that the Secretary shall not be required to call such a special
meeting in the case of any such request received less than ninety
(90) days before the date fixed for the next ensuing annual
meeting of stockholders. No such special meeting and no
adjournment thereof shall be held on a date less than thirty (30)
days before the annual meeting of the stockholders or a special
meeting held in place thereof next succeeding the time when the
holders of the Convertible Preferred Stock become entitled to
elect two (2) directors as above provided. If at any such annual
or special meeting or any adjournment thereof the holders of at
least a majority of the Convertible Preferred Stock then
outstanding shall be present or represented by proxy, then by
vote of the holders of at least a majority of the shares of
Convertible Preferred Stock present or so represented at such
meeting, the then authorized number of directors of the
Corporation shall be increased by two (2) and the holders of the
Convertible Preferred Stock shall be entitled to elect the
additional directors so provided for. The directors so elected
shall serve until the next annual meeting or until their
successors shall be elected and qualified, provided, however,
that whenever the holders of the Convertible Preferred Stock
shall be divested of the special rights to elect two (2)
directors as above provided, the term of office of the persons so
elected as directors by the holders of the Convertible Preferred
Stock as a class, or elected to fill any vacancies resulting from
the death, resignation or removal of the directors so elected by
the holders of Convertible Preferred Stock, shall forthwith
terminate, and the authorized number of directors shall be
reduced accordingly.
If, during any interval between any special meeting of the
holders of the Convertible Preferred Stock for the election of
two (2) directors to be elected by them as provided above and the
next ensuing annual meeting of stockholders, or between annual
meetings of stockholders for the election of directors, and while
the holders of the Convertible Preferred Stock shall be entitled
to elect two (2) directors, both of the directors who have been
elected by the holders of the Convertible Preferred Stock shall,
by reason of resignation, death or removal, have departed from
the Board, (i) the vacancies with respect to the directors
elected by the holders of the Convertible Preferred Stock may be
filled by a majority vote of the remaining directors then in
office, although less than a quorum, and (ii) if such vacancy or
vacancies be not so
33
filled within forty (40) days after the
creation thereof, the Secretary of the Corporation shall call a
special meeting of the holders of the Convertible Preferred Stock
and such vacancy or vacancies shall be filled at such special
meeting.
A director elected by the vote of the holders of Convertible
Preferred Stock as a class, or elected by other directors to fill
a vacancy resulting from the death, resignation or removal of a
director elected by such class vote, may be removed from office
without cause only by the vote or written consent of stockholders
holding a majority of the outstanding shares of Convertible
Preferred Stock.
(b) The Certificate of Incorporation of this Corporation
shall not be changed so as to alter in an adverse manner the
powers, preferences or special rights of the Convertible
Preferred Stock without the consent, either in writing or by vote
at a meeting called for that purpose, of the holders of at least
66 2/3% of the number of shares at the time outstanding of the
Convertible Preferred Stock, and all such other series of shares
of preferred stock of this Corporation, if any, whose powers,
preferences or special rights would also be so altered in a
substantially similar manner. In giving such consent, the
holders of the Convertible Preferred Stock and of all other such
series, if any, shall vote as a single class.
(c) So long as any shares of Convertible Preferred Stock
are outstanding, the Corporation shall not create any class or
series of capital stock which is
(i) Senior Stock, or
(ii) pari passu with the Convertible Preferred Stock in
respect of the right to receive payment of dividends or
the right to participate in any distribution upon
liquidation, dissolution or winding up of the affairs
of the Corporation,
without the affirmative vote of, or, if permitted by the
Certificate of Incorporation of the Corporation, the written
consent pursuant to Section 228 of the Delaware General
Corporation Law of, the holders of at least 66-2/3%, in the case
of clause (i) above, or a majority, in the case of clause (ii)
above, of the outstanding shares of Convertible Preferred Stock,
voting separately as a single class. For purposes of this
subparagraph (c), the issuance and reissuance from time to time
in one or more series, or the establishment or re-establishment,
by the Corporation of any class or series of the 30 million
shares of Preferred Stock of the par value of $0.10 each
presently authorized by clause (a) of Article FOURTH of the
Certificate of Incorporation of the Corporation shall not be
deemed to be the creation of a class or series of capital stock
requiring the affirmative vote of,
34
or the written consent
pursuant to Section 228 of the Delaware General Corporation Law
of, the outstanding shares of Convertible Preferred Stock, voting
separately as a single class.
(d) In the event that the Conversion Price is cumulatively
increased or decreased by more than 5%, in accordance with the
provisions of paragraph 6 hereof, the voting rights of each share
of Convertible Preferred Stock will be proportionately decreased
or increased, respectively, by the same percentage amount.
8. Stock Issuable Upon Conversion. To the full extent of
its authorized but unissued and unreserved shares of Common
Stock, the Corporation shall at all times keep reserved, out of
shares of its authorized but unissued Common Stock, a number of
shares sufficient for issuance upon conversion of the Convertible
Preferred Stock in accordance with the provisions of this
resolution. The shares of Common Stock issuable upon conversion
of Convertible Preferred Stock in accordance with the provisions
of this resolution will be, when so issued, validly issued, fully
paid and nonassessable.
9. Repurchase Under Certain Circumstances. The
Corporation agrees promptly to take all action within its power
necessary or desirable to amend its certificate of incorporation
to increase the number of shares of Common Stock that it is
authorized to issue to a number in excess of 250,000,000. In the
event that the Corporation has insufficient shares of Common
Stock available for issuance upon conversion of any shares of
Convertible Preferred Stock presented for conversion, the
Corporation will either (a) purchase such shares of Convertible
Preferred Stock presented for conversion for an amount per share
equal to the Liquidation Price divided by the Conversion Price
multiplied by the Closing Price of the Common Stock on the
Conversion Date or (b) deliver or cause to be delivered to the
holder of such shares of Convertible Preferred Stock presented
for conversion that number of shares of Common Stock issuable
upon conversion of the shares of Convertible Preferred Stock
presented for conversion. In addition to its obligations under
the preceding sentence, the Corporation will be obligated to
deliver or cause to be delivered to any holder of Convertible
Preferred Stock presented for conversion any cash amount or
shares of Common Stock due to such holder pursuant to the
provisions of paragraph 6(a) hereof with respect to any accrued
but unpaid dividends through the last Dividend Payment Date.
The Corporation will not enter into any agreement, make any
acquisition or take any other action following the date of the
initial issuance of Convertible Preferred Stock if as a result of
such agreement, acquisition or action the Corporation would be
prohibited from carrying out its commitments set forth in this
paragraph, or in any way hindered in its ability to so carry out
such commitments; provided however, that nothing contained herein
shall preclude the Corporation from fulfilling its obligations
35
under previously granted or issued options or warrants.
10. Additional Issuances of Convertible Preferred Stock.
Two million shares of Convertible Preferred Stock shall be
reserved for issuance by this Corporation, from time to time, to
employees of this Corporation or its subsidiaries pursuant to the
terms of such plan or arrangements, and for such consideration,
as the Board of Directors shall determine. However, the
Corporation shall require the employees receiving shares of
Convertible Preferred Stock to agree not to convert such shares
until such time as the Corporation shall have available a
sufficient amount of authorized but unissued Common Stock for
issuance upon conversion of all outstanding shares of Convertible
Preferred Stock.
FIFTH: The following provisions are inserted for the
management of the business and the conduct of the affairs of the
Corporation, and for further definition, limitation and
regulation of the powers of the Corporation and of its directors
and stockholders:
A. The business and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors. In
addition to the powers and authority expressly conferred upon
them by the GCL or by this Certificate of Incorporation or the
By-laws of the Corporation, the directors are hereby empowered to
exercise all such powers and do all such acts and things as may
be exercised or done by the Corporation. The Board of Directors
of the Corporation may delegate to the General Counsel of the
Corporation and/or to other person(s) designated by the Board of
Directors or by the General Counsel the determination whether
litigation purportedly commenced in the name of the Corporation
is in the best interests of the Corporation and should be
pursued.
B. The directors of the Corporation need not be elected by
written ballot unless the By-laws so provide.
C. Any action required or permitted to be taken by the
stockholders of the Corporation must be effected at a duly called
annual or special meeting of stockholders of the Corporation and
may not be effected by any consent in writing by such
stockholders. Special meetings of stockholders of the
Corporation may be called only by the Board of Directors pursuant
to a resolution adopted by a majority of the directors then in
office.
SIXTH: Meetings of stockholders may be held within or
without the State of Delaware, as the By-laws may provide. The
books of the Corporation may be kept (subject to any provision
contained in the statutes) outside the State of Delaware at such
place or places as may be designated from time to time by the
Board of Directors or in the By-laws of the Corporation.
36
SEVENTH: The number of directors shall be as from time to
time fixed by, or in the manner provided in, the By-laws of the
Corporation.
EIGHTH: The Board of Directors is expressly empowered to
adopt, amend or repeal By-laws of the Corporation. Except as
hereinafter provided, any adoption, amendment or repeal of By-
laws of the Corporation by the Board of Directors shall require
the approval of a majority of the directors then in office. The
stockholders shall also have power to adopt, amend or repeal the
By-laws of the Corporation. In addition to any vote of the
holders of any class or series of stock of this Corporation
required by law or by this Certificate of Incorporation, the
affirmative vote of the holders of at least a majority of the
voting power of all of the then-outstanding shares of the capital
stock of the Corporation entitled to vote generally in the
election of directors, voting together as a single class, shall
be required to adopt, amend or repeal any provision of the By-
laws of the Corporation.
NINTH: A. Except as provided in Paragraph B below, the
affirmative vote of the holders of shares of voting stock of the
Corporation representing at least a majority of the Non-
Affiliated Shares (as hereinafter defined), voting together as a
single class, shall be required for the approval or authorization
of a Business Combination (as hereinafter defined) with any
Dominant Stockholder (as hereinafter defined) or of any series of
related transactions, which if taken together, would constitute a
Business Combination with any Dominant Stockholder. Such
affirmative vote shall be required notwithstanding any other
provision of this Certificate of Incorporation or any provision
of law which might otherwise permit a lesser vote, no vote, or a
different voting classification and shall be in addition to any
vote of the holders of any class or series of voting stock and
any other requirements under Delaware law, this Certificate of
Incorporation or the Bylaws.
B. The voting requirement set forth above shall not be
applicable if the definitive agreement or other arrangement to
effectuate a Business Combination with a Dominant Stockholder is
approved by the Continuing Directors (as hereinafter defined).
Such determination shall be made by a majority of the Continuing
Directors even if such a majority does not constitute a quorum of
the members of the Board of Directors then in office. In
addition, the voting requirement specified above shall not be
applicable if the cash or fair market value of other
consideration to be received per share by the holders of each
class or series of capital stock of the Corporation in a Business
Combination with a Dominant Stockholder is not less than the
highest per share price (including brokerage commissions and/or
soliciting dealers' fees) paid by such Dominant Stockholder in
acquiring any shares of such class or series, respectively,
within the twenty-four months preceding the date of any such
Business Combination.
37
C. The provisions of this Article NINTH shall also apply
to a Business Combination with any Person (as hereinafter
defined) which at any time within twenty-four months preceding
the date of any such Business Combination has been a Dominant
Stockholder notwithstanding the fact that such Person is no
longer a Dominant Stockholder, if, at the time the definitive
agreement or other arrangements relating to a Business
Combination with such Person were entered into, it was a Dominant
Stockholder or if, as of the record date for the determination of
stockholders entitled to notice of and to vote on or consent to
the Business Combination, such Person is an "Affiliate" (as
hereinafter defined) of the Corporation or of a Dominant
Stockholder.
D. For all purposes of this Article NINTH:
(1) The term "Affiliate" shall mean a Person that
directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with,
the Person specified;
(2) The term "Associate" used to indicate a
relationship with any Person, shall mean (i) any corporation or
organization (other than the Corporation or a majority-owned
subsidiary of the Corporation) of which such Person is an officer
or partner or, directly or indirectly, Beneficially Owns ten
percent (10%) or more of any class of equity securities, (ii) any
trust or other estate in which such Person has a substantial
beneficial interest or as to which such Person serves as trustee
or in a similar fiduciary capacity, and (iii) any relative or
spouse of such Person, or any relative of such spouse, who has
the same home as such Person or who is a director or officer of
the Corporation or any of its parents or subsidiaries.
(3) A Person shall be deemed to "Beneficially Own" any
shares of capital stock of the Corporation (i) which it has the
right to acquire, hold or vote pursuant to any agreement,
arrangement or undertaking or upon exercise of conversion rights,
warrants, options or otherwise, or (ii) which are beneficially
owned, directly or indirectly (including shares deemed owned
through application of the foregoing clause (i)), by any other
Person (A) with which it or its Affiliate or Associate has any
agreement, arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of shares of capital
stock of the Corporation or (B) which is its Affiliate or
Associate;
(4) The term "Business Combination" shall mean (i) any
merger or consolidation of the Corporation with or into any other
Person, (ii) any sale or lease (or series of sales or leases) of
all or any Substantial Part of the assets of the Corporation
(including without limitation any voting securities of a
Subsidiary), (iii) any sale or lease (or series of sales or
leases) of all or any Substantial Part of the assets of any
Person to the
38
Corporation or a Subsidiary in exchange for
securities of the Corporation or a Subsidiary or (iv) any
reclassification or recapitalization of the outstanding shares of
any class of capital stock of the Corporation if the effect of
such transaction is to increase the relative voting power of a
Dominant Stockholder;
(5) The term "Continuing Directors" shall mean the
directors who were in office on the date immediately prior to the
date the Dominant Stockholder became a Dominant Stockholder;
(6) The term "Dominant Stockholder" shall mean any
Person which Beneficially Owns, directly or indirectly, shares of
capital stock of the Corporation representing ten percent (10%)
or more of all votes entitled to be cast in elections of
directors (considered for this purpose as one class);
(7) The term "Non-Affiliated Shares" shall mean all
shares of capital stock of the Corporation entitled to be cast in
the election of directors, considered for purposes hereof as one
class, which are not Beneficially Owned by the Dominant
Stockholder;
(8) The term "other consideration to be received", in
the event of a Business Combination in which the Corporation is
the surviving corporation, shall include the shares of capital
stock of the Corporation retained by its existing public
stockholders;
(9) The term "outstanding shares of any class of
capital stock of the Corporation" shall include shares deemed
owned through the application of clauses (i) and (ii) of
paragraph (3) above but shall not include any other shares which
may be issuable pursuant to any agreement, arrangement or
understanding or upon exercise of conversion rights, warrants,
options or otherwise;
(10) The term "Person" shall mean any corporation,
individual, person, partnership or other person or entity;
(11) The term "Substantial Part" shall mean more than
25 percent of the fair market value of the total assets of the
corporation in question, as determined in good faith by a
majority of Continuing Directors, as of the end of its most
recent fiscal year ending prior to the time the determination is
being made; and
(12) The term "Subsidiary" shall mean any corporation
of which a majority of any class of equity security is owned
directly or indirectly by the Corporation and whose assets
constitute a Substantial Part of the assets of the Corporation,
as determined in good faith by a majority of Continuing
Directors.
E. A majority of the Continuing Directors shall have the
power and duty to make all determinations for the purposes of
this Article NINTH on the basis of information known to them
consistent
39
with their fiduciary obligations.
TENTH: A. Elimination of Directors' Liability for Monetary
Damages in Certain Circumstances. No director of the Corporation
shall be personally liable to the Corporation or its stockholders
for monetary damages for any breach of fiduciary duty by such a
director as a director. Notwithstanding the foregoing sentence,
a director shall be liable to the extent provided by applicable
law (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) pursuant to Section 174 of the
General Corporation Law of the State of Delaware, or (iv) for any
transaction from which such director derived an improper personal
benefit. No amendment to or repeal of this Section A shall apply
to or have any effect on the liability or alleged liability of
any director of the Corporation for or with respect to any acts
or omissions of such director occurring prior to such amendment
or repeal. If the General Corporation Law of the State of
Delaware is amended hereafter to further eliminate or limit the
personal liability of directors, the liability of a director of
this Corporation shall be limited or eliminated to the fullest
extent permitted by such Law, as amended.
B. 1. Right to Indemnification. Each person who was or is
made a party or is threatened to be made a party to or is
involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a
"proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was a
director or officer of the Corporation or is or was serving at
the request of the Corporation as a director or officer of
another corporation or of a partnership, joint venture, trust or
other enterprise, including service with respect to employee
benefit plans, whether the basis of such proceeding is alleged
action in an official capacity as a director or officer or in any
other capacity while serving as a director or officer, shall be
indemnified and held harmless by the Corporation to the fullest
extent authorized by the Delaware General Corporation Law, as the
same exists or may hereafter be amended, (but, in the case of any
such amendment, only to the extent that such amendment permits
the Corporation to provide broader indemnification rights than
said law permitted the Corporation to provide prior to such
amendment) against all expense, liability and loss (including
attorneys' fees, judgments, fines, ERISA excise taxes or
penalties and amounts to be paid in settlement) reasonably
incurred or suffered by such person in connection therewith and
such indemnification shall continue as to a person who had ceased
to be a director or officer and shall inure to the benefit of his
or her heirs, executors and administrators; provided, however,
that except as provided in paragraph 2 hereof with respect to
proceedings seeking to enforce rights to indemnification, the
Corporation shall indemnify any such person
40
seeking
indemnification in connection with a proceeding (or part thereof)
initiated by such person only if such proceeding (or part
thereof) was authorized by the board of directors of the
Corporation. The right to indemnification conferred in this
Section shall be a contract right and shall include the right to
be paid by the Corporation the expenses incurred in defending any
such proceeding in advance of its final disposition; provided,
however, that, if the Delaware General Corporation law requires,
the payment of such expenses incurred by a director or officer in
his or her capacity as a director or officer (and not in any
other capacity in which service was or is rendered by such person
while director or officer, including, without limitation, service
to an employee benefit plan) in advance of the final disposition
of a proceeding, shall be made only upon delivery to the
Corporation of an undertaking, by or on behalf of such director
or officer, to repay all amounts so advanced if it shall
ultimately be determined that such director or officer is not
entitled to be indemnified under this Section or otherwise.
2. Right of Claimant to Bring Suit. If a claim under
paragraph 1 of this Section is not paid in full by the
Corporation within ninety days after a written claim has been
received by the Corporation, except in the case of a claim for
expenses incurred in defending a proceeding in advance of its
final disposition, in which case the applicable period shall be
thirty days, the claimant may at any time thereafter bring suit
against the Corporation to recover the unpaid amount of the claim
and, if successful in whole or in part, the claimant shall be
entitled to be paid also the expense of prosecuting such claim.
It shall be defense to any such action (other than an action
brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required
undertaking, if any is required, has been tendered to the
Corporation) that the claimant has not met the standards of
conduct which make it permissible under the Delaware General
Corporation Law for the Corporation to indemnify the claimant for
the amount claimed, but the burden of proving such defense shall
be on the Corporation. Neither the failure of the Corporation
(including its Board of Directors, independent legal counsel, or
its stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant
is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the Delaware General
Corporation Law, nor an actual determination by the Corporation
(including its Board of Directors, independent legal counsel, or
its stockholders) that the claimant has not met such applicable
standard of conduct, shall be a defense to the action or create a
presumption that the claimant has not met the applicable standard
of conduct.
3. Non-Exclusivity of Rights. The right to
indemnification and the payment of expenses incurred in defending
a proceeding in advance of its final disposition conferred in
this Section shall
41
not be exclusive of any other right which any
person may have or hereafter acquire under any statute, provision
of the Certificate of Incorporation, by-law, agreement, vote of
stockholders or disinterested directors or otherwise.
4. Insurance. The Corporation may maintain insurance,
at its expense, to protect itself and any director, officer,
employee or agent of the Corporation or another corporation,
partnership, joint venture, trust or other enterprise against any
expense, liability or loss, whether or not the Corporation would
have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law.
5. Indemnification of Employees and Agents of the
Corporation. The Corporation may, to the extent authorized from
time to time by the Board of Directors, grant rights to
indemnification, and to be paid by the Corporation the expenses
incurred in defending any proceeding in advance of its final
disposition, to any employee or agent of the Corporation to the
fullest extent of the provisions of this Section with respect to
the indemnification and advancement of expenses of directors and
officers of the Corporation.
ELEVENTH: Whenever a compromise or arrangement is proposed
between this Corporation and its creditors or any class of them
and/or between this Corporation and its stockholders or any class
of them, any court of equitable jurisdiction within the State of
Delaware may, on the application in a summary way of this
Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this
Corporation under the provisions of Section 291 of the GCL or on
the application of trustees in dissolution or of any receiver or
receivers appointed for this Corporation under the provisions of
Section 279 of the GCL order a meeting of the creditors or class
of creditors, and/or of the stockholders or class of stockholders
of this Corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number
representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of
this Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of this Corporation as a
consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if
sanctioned by the court to which the said application has been
made, be binding on all the creditors or class of creditors,
and/or on all the stockholders or class of stockholders, of this
Corporation, as the case may be, and also on this Corporation.
TWELFTH: The Corporation reserves the right to amend or
repeal any provision contained in this Certificate of
Incorporation in the manner prescribed by the laws of the State
of Delaware and all rights conferred upon stockholders are
granted subject to this
42
reservation; provided, however, that,
notwithstanding any other provision of this Certificate of
Incorporation or any provision of law which might otherwise
permit a lesser vote or no vote, but in addition to any vote of
the holders of any class or series of the stock of this
Corporation required by law or by this Certificate of
Incorporation, the affirmative vote of the holders of at lease
sixty-six and two-thirds percent (66 2/3%) of the voting power of
all of the then-outstanding shares of the capital stock of the
Corporation entitled to vote generally in the election of
directors, voting together as a single class, shall be required
to amend or repeal Paragraph C of Article FIFTH of this Restated
Certificate of Incorporation and the affirmative vote of the
holders of shares of voting stock of the Corporation representing
at least a majority of the Non-Affiliated Shares (as defined in
Article NINTH), voting together as a single class, shall be
required to amend or repeal Article NINTH of this Certificate of
Incorporation. Any amendment of this Article TWELFTH which
amends or repeals the provisions hereof respecting the vote
required to amend or repeal Paragraph C of Article FIFTH or
Article NINTH must be approved by a vote at least equal to the
vote required herein to amend or repeal said Paragraph C of
Article FIFTH or Article NINTH, as the case may be.
2. That said restatement was duly adopted in accordance
with the provisions of Section 245 of the General Corporation Law
of the State of Delaware, by approval of the Board of Directors
without a vote of its stockholders and said restatement only
restates and integrates and does not further amend the provisions
of the Corporation's certificate of incorporation as heretofore
amended and there is no discrepancy between those provisions and
the provisions of this Restated Certificate of Incorporation.
IN WITNESS WHEREOF, the undersigned corporation has caused
this Restated Certificate of Incorporation to be executed by its
Vice President and attested to by its Assistant Secretary on this
6th day of April, 1994.
COLLINS & AIKMAN GROUP, INC.
By: /S/ PAUL W. MEEKS
Vice President
Attest:
By: /S/ JOHN F. GROSSBAUER
Assistant Secretary
43
BY-LAWS
OF
COLLINS & AIKMAN GROUP, INC.
A Delaware Corporation
BY-LAWS
OF
COLLINS & AIKMAN GROUP, INC.
(a Delaware corporation)
(as amended through May 1, 1994)
ARTICLE I
Offices
SECTION 1. Registered Office. The registered
office of the Corporation in the State of Delaware shall be
32 Lockerman Square, Suite L-100, City of Dover, County of
Kent. The name of the registered agent is The Prentice-Hall
Corporation System, Inc.
SECTION 2. Other Offices. The Corporation may
also have offices at other places, either within or without
the State of Delaware, as the Board of Directors may from
time to time determine or as the business of the Corporation
may require.
ARTICLE II
Meeting of Stockholders
SECTION 1. Annual Meetings. The annual meeting
of the stockholders for the election of directors and for
the transaction of such other business as may properly come
before the meeting shall be held at such place (within or
without the State of Delaware), date and hour as shall be
designated in the notice thereof.
SECTION 2. Special Meetings. Special meetings of
the stockholders for any purpose or purposes may be called
only by the Board of Directors, pursuant to a resolution
adopted by a majority of the directors then in office, to be
held at such place (within or without the State of
Delaware), date and hour as shall be designated in the
notice thereof.
SECTION 3. Notice of Meeting. Except as
otherwise expressly required by law, notice of each meeting
of the stockholders shall be given not less than 10 or more
than 60 calendar days before the date of the meeting to each
stockholder entitled to vote at such meeting by mailing such
notice, postage prepaid, directed to each stockholder at the
address of such stockholder as appears on the records of the
Corporation. Every such notice shall state the place, date
and hour of the meeting and, in the case of a special
meeting, the purpose or purposes for which the meeting is
called. Except as provided in the next immediate sentence
or as otherwise expressly required by law, notice of any
adjourned meeting of the stockholders need not be given if
the time and place thereof are announced at the meeting at
which the adjournment is taken. If the adjournment is for
more than 30 calendar days, or if after the adjournment a
new record date if fixed for the adjourned meeting, notice
of the adjourned meeting shall be given to each stockholder
entitled to vote at such adjourned meeting.
A written waiver of notice, signed by a
stockholder entitled to notice, whether signed before or
after the time set for a given meeting, shall be deemed
equivalent to notice of such meeting. Attendance of a
stockholder in person or by proxy at a stockholders' meeting
shall constitute a waiver of notice to such stockholder of
such meeting, except when such stockholder attends the
meeting for the express purpose of objecting at the
beginning of the meeting to the transaction of any business
because the meeting is not lawfully called or convened.
SECTION 4. List of Stockholders. It shall be the
duty of the Secretary or other officer of the Corporation
who shall have charge of its stock ledger to prepare and
make, at least 10 calendar days before every meeting of the
stockholders, a complete list of the stockholders entitled
to vote at the meeting, arranged in alphabetical order, and
showing the address of each stockholder and the number of
share registered in the name of each stockholder. Such list
shall be open to the examination of any stockholder, for any
purpose germane to the meeting, during ordinary business
hours, for a period of at least 10 calendar days prior to
the meeting either at a place specified in the notice of the
meeting within the city where the meeting is to be held or,
if not so specified, at the place where the meeting is to be
held. Such list shall also be produced and kept at the time
and place of the meeting during the whole time thereof, and
may be inspected by any stockholder who is present.
SECTION 5. Quorum. At each meeting of the
stockholders, expect as otherwise expressly required by law,
stockholders holding a majority of the votes entitled to be
cast by the stockholders entitled to vote at the meeting
(which if any vote is to be taken by classes shall mean the
holders of a majority of the votes entitled to be cast by
the stockholder of each such class) shall be present in
2
person or by proxy in order to constitute a quorum for the
transaction of business. In the absence of a quorum at any
such meeting or any adjournment or adjournments thereof, a
majority in voting interest of those present in person or by
proxy and entitled to vote thereat or, in the absence
therefrom of all the stockholders, any officer entitled to
preside at, or to act as secretary of, such meeting may
reschedule such meeting from time to time until stockholders
holding the number of votes requisite for a quorum shall be
present in person or by proxy. At any such rescheduled
meeting at which a quorum may be present, any business may
be transacted that might have been transacted at the meeting
as originally called.
SECTION 6. Organization. At each meeting of the
stockholders, one of the following shall act as chairman of
the meeting and preside thereat, in the following order of
precedence:
(a) the Co-Chairman of the Board designated by
the Board to chair such meeting;
(b) if there is no Co-Chairman of the Board or if
both Co-Chairman of the Board shall be absent from such
meeting, the President;
(c) if the Co-Chairman of the Board and the
President shall be absent from such meeting, any other
officer or director of the Corporation designated by
the Board or the Executive Committee to act a chairman
of such meeting and to preside thereat; or
(f) a stockholder of record of the Corporation
who shall be chosen chairman or such meeting by a
majority in voting interest of the stockholders present
in person or by proxy and entitled to vote thereat.
The Secretary or, if the Secretary shall be presiding over
the meeting in accordance with the provisions of this
Section or if he shall be absent from such meeting, the
person (who shall be an Assistant Secretary, if an Assistant
Secretary shall be present thereat) whom the chairman of
such meeting shall appoint, shall act as secretary of such
meeting and keep the minutes thereof.
SECTION 7. Order of Business. The order of
business at each meeting of the stockholder shall be
determined by the chairman of such meeting, but such order
of business may be changed by a majority in voting interest
of those present in person or by proxy at such meeting and
entitled to vote thereat.
3
SECTION 8. Voting. At each meeting of the
stockholders, each holder of voting stock of the Corporation
shall, except as otherwise provided in these By-laws or
required by law or the Restated Certificate of Incorpora-
tion, be entitled to one vote in person or by proxy for each
share of stock of the Corporation held by him and registered
in his name on the books of the Corporation on the date
fixed pursuant to the provisions of Section 4 of Article
VIII of these By-laws as the record date for the determin-
ation of stockholders who shall be entitled to receive
notice of an to vote at such meeting.
Shares of its own stock belonging to the Corpora-
tion or to another corporation, if a majority of the shares
entitled to vote in the election of directors of such other
corporation is held by the Corporation, shall neither be
entitled to vote nor be counted for quorum purposes. Any
vote of stock of the Corporation may be given at any meeting
of thereon either in person or by proxy appointed by an
instrument in writing delivered to the Secretary or an
Assistant Secretary of the Corporation or the secretary of
the meeting. The attendance at any meeting of a stockholder
who may theretofore have given a proxy shall not have the
effect of revoking the same unless he shall in writing so
notify the secretary of the meeting prior to the voting of
the proxy. At all meetings of the stockholders, all
matters, except as otherwise provided by law or in these By-
laws, shall be decided by the vote of a majority of the
votes cast by stockholders present in person or by proxy and
entitled to vote thereat, a quorum being present. Except as
otherwise expressly required by law, the vote at any meeting
of the stockholders on any question need not be by ballot,
unless so directed by the chairman of the meeting. On a
vote by ballot, each ballot shall be signed by the
stockholder voting, or by his proxy, if there be such proxy,
and shall state the number of shares voted.
ARTICLE III
Board of Directors
SECTION 1. General Powers. The business and
affairs of the Corporation shall be managed by or under the
direction of the Board of Directors.
SECTION 2. Number and Term of Office. The Board
of Directors shall consist of six members, but the number of
members constituting the Board of Directors may be increased
or decreased from time to time by resolution adopted by a
majority of the whole Board. Directors need not be
stockholders or citizens or residents of the United States
4
of America. Each of the directors of the Corporation shall
hold office until his term expires and until his successor
is elected and qualified or until his earlier death or until
his earlier resignation or removal in the manner hereinafter
provided.
SECTION 3. Election. At each meeting of the
stockholders for the election of directors at which a quorum
is present, the persons receiving the greatest number of
votes, up to the number of directors to be elected, shall be
the directors.
SECTION 4. Resignation, Removal and Vacancies.
Any director may resign at any time by giving written notice
of his resignation to either Co-Chairman of the Board, the
President or the Secretary of the Corporation. Any such
resignation shall take effect at the time specified therein
or, if the time when it shall become effective shall not be
specified therein, when accepted by action of the Board.
Except as aforesaid, the acceptance of such resignation
shall not be necessary to make it effective.
A director may be removed, either with or without
cause, at any time by a vote of a majority in voting
interest of the stockholders.
Any vacancy or newly created directorship
occurring on the Board for any reason may be filled by a
majority of the directors then in office, through less than
quorum, or by a sole remaining director. The director
elected to fill such vacancy or newly created directorship
shall hold office for the unexpired term in respect of which
such vacancy occurred or such newly created directorship was
created.
SECTION 5. Meetings. (a) Annual Meetings. As
soon as practicable after each annual election of directors,
the Board shall meet for the purpose of organization and the
transaction of other business.
(b) Regular Meetings. Regular meetings of the
Board shall be held at such times and places as the Board
shall from time to time determine.
(c) Special Meetings. Special meetings of the
Board shall be held whenever called by either Co-Chairman of
the Board or the President or a majority of the directors at
the time in office. Any and all business may be transacted
at a special meeting that may be transacted at a regular
meeting of the Board.
5
(d) Place of Meeting. The Board may hold its
meetings at such place or places within or without the State
of Delaware as the Board may from time to time by resolution
determine or as shall be designated in the respective
notices or waivers of notice thereof.
(e) Notice of Meetings. Notices of regular
meetings of the Board or of any adjourned meeting need not
be given.
Notices of special meetings of the Board, or of
any meeting of any committee of the Board that has not been
fixed in advance as to time and place by such committee,
shall be mailed by the Secretary or any Assistant Secretary
to each director or member or such committee, addressed to
him at his residence or usual place of business, so as to be
received at least one calendar day before the day on which
such meeting is to be held, or shall be sent to him by
telegraph, cable or other form of recorded communication or
be delivered personally or by telephone not later than one
calendar day before the day on which such meeting is to be
held. Such notice shall include the time and place of such
meeting. However, notice of any such meeting need not be
given to any director or member of any committee if such
notice is waived by him in writing or by telegraph, cable or
other form of recorded communication, whether before or
after such meeting shall be held, or if he shall be present
at such meeting.
(f) Quorum and Manner of Acting. Except as
otherwise provided by law, the Restated Certificate of
Incorporation or these By-laws, one-half of the total number
of directors shall be present in person at any meeting of
the Board in order to constitute a quorum for the
transaction of business at such meeting. In each case the
vote of a majority of those directors present at any such
meeting at which a quorum is present shall be necessary for
the passage of any resolution or any act of the Board,
except as otherwise expressly required by law or these By-
laws. In the absence of a quorum for any such meeting, a
majority of the directors present thereat may adjourn such
meeting from time to time until a quorum shall be present
thereat.
(g) Action by Communication Equipment. The
directors, or the members of any committee of the Board, may
participate in a meeting of the Board, or of such committee,
by means of conference telephone or similar communications
equipment by means of which all persons participating in the
meeting can hear each other, and such participation shall
constitute presence in person at such meeting.
6
(h) Action by Consent. Any action required or
permitted to be taken at any meeting of the Board, or of any
committee thereof, may be taken without a meeting if all
members of the Board or Committee, as the case may be,
consent thereto in writing and such writing is filed with
the minutes of the proceedings of the Board or such
committee.
(i) Organization. At each meeting of the Board,
one of the following shall act as chairman of the meeting
and preside thereat, in the following order of precedence:
(a) the Co-Chairman of the Board chosen by a majority of the
directors present thereat; (b) the President; or (c) any
director chosen by a majority of the directors present
thereat. The Secretary or, in case of his absence, any
person (who shall be an Assistant Secretary, if an Assistant
Secretary shall be present thereat) whom the chairman shall
appoint, shall act as secretary of such meeting and keep the
minutes thereof.
SECTION 6. Compensation. Directors, as such,
shall not receive any stated salary for their services, but
by resolution of the Board may receive a fixed sum and
expenses incurred in performing the functions of director
and member of any committee of the Board. Nothing herein
contained shall be construed so as to preclude any director
from serving the Corporation in any other capacity and
receiving compensation therefor.
ARTICLE IV
Committees
SECTION 1. (a) Designation and Membership.
The Board may, by resolution passed by a majority of the
whole Board, designate one or more committees consisting of
such number of directors, not less than one, as the Board
shall appoint. The Board may designate one or more
directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of
the committee. Vacancies occurring on any committee for any
reason may be filled by the Board at any time. Any member
of any committee shall be subject to removal, with or
without cause, at any time by the Board or by a majority in
voting interest of the stockholders.
(b) Functions and Powers. Any such committee,
subject to any limitations prescribed by the Board, shall
possess and may exercise, during the intervals between
meetings of the Board, all the powers and authority of the
Board in the management of the business and affairs of the
7
Corporation, and may authorize the seal of the Corporation
to be affixed to all papers that may require it; provided,
however, that no such committee shall have such power or
authority in reference to amending the Certificate of
Incorporation of the Corporation (except that a committee
may, to the extent authorized in resolutions providing for
the issuance of shares of stock adopted by the Board of
Directors, fix any of the preferences or rights of such
shares relating to dividends, redemption, dissolution, any
distribution of assets of the Corporation or the conversion
into, or the exchange of such shares for, shares of any
other class or classes or any other series of the same or
any other class or classes of stock of the Corporation),
adopting an agreement of merger or consolidation under
Section 251 or Section 252 of the General Corporation Law of
the State of Delaware, recommending to the stockholders the
sale, lease or exchange of all or substantially all of the
Corporation's property and assets, recommending to the
stockholders a dissolution of the Corporation or a
revocation of a dissolution, filling vacancies on the Board,
changing the membership or filling vacancies on any
committee of the Board or amending these By-laws. No such
committee shall have the power and authority to declare
dividends, to authorize the issuance of stock of the
Corporation or to adopt a certificate of ownership and
merger pursuant to Section 253 of the General Corporation
Law of the State of Delaware unless such power and authority
shall be expressly delegated to it by a resolution passed by
a majority of the whole Board.
(c) Meetings, Quorum and Manner of Acting. Each
committee shall meet at such times and as often as may be
deemed necessary and expedient and at such places as shall
be determined by such committee. A majority of each such
committee shall constitute a quorum, and the vote of a
majority of those members of each such committee present at
any meeting thereof at which a quorum is present shall be
necessary for the passage of any resolution or act of such
committee. The Board may designate a chairman for each such
committee, who shall preside at meetings thereof, and a vice
chairman, who shall preside at such meetings in the absence
of the chairman.
ARTICLE V
Officers
SECTION 1. Election, Appointment and Term of
Office. The officers of the Corporation shall be two Co-
Chairmen of the Board, a President, who shall also be the
Chief Executive Officer, such number of Vice Chairmen of the
8
Board and Vice Presidents (including any Executive, Senior
and/or First Vice Presidents) as the Board may determine
from time to time, a Treasurer, one or more Assistant
Treasurers, if any, as the Board may determine, a Secretary
and one or more Assistant Secretaries, if any, as the Board
may determine. Any two or more offices may be held by the
same person. Officers need not be stockholders of the
Corporation or citizens or residents of the United States of
America. The Co-Chairmen of the Board, any Vice Chairman of
the Board and the President shall be elected by the Board
from among its members at its annual meeting, and all other
officers may be elected by the Board or the Executive
Committee, and each such officer shall hold office until the
next annual meeting of the Board or the Executive Committee,
as the case may be, and until his successor is elected or
until his earlier death or until his earlier resignation or
removal in the manner hereinafter provided.
The Board or the Executive Committee may elect or
appoint such other officers as it deems necessary, including
a Corporate General Counsel and one or more Associate or
Assistant Corporate General Counsels, Assistant Vice
Presidents, Assistant Treasurers and Assistant Secretaries.
Each such officer shall have such authority and shall
perform such duties as may be provided herein or as the
Board or Executive Committee may prescribe.
If additional officers are elected or appointed
during the year, each of them shall hold office until the
next annual meeting of the Board or Executive Committee at
which officers are regularly elected or appointed and until
his successor is elected or appointed or until his earlier
death or until his earlier resignation or removal in the
manner hereinafter provided.
SECTION 2. Resignation, Removal and Vacancies.
Any officer may resign at any time by giving written notice
to the President or the Secretary of the Corporation, and
such resignation shall take effect at the time specified
therein or, if the time when it shall become effective shall
not be specified therein, when accepted by action of the
Board or the Executive Committee. Except as aforesaid, the
acceptance of such resignation shall not be necessary to
make it effective.
All officers and agents elected or appointed by
the Board or Executive Committee shall be subject to removal
at any time by the Board or the Executive Committee, as the
case may be, with or without cause.
A vacancy in any office may be filled for the
unexpired portion of the term in the same manner as provided
9
for election or appointment to such office.
SECTION 3. Duties and Functions. (a) Co-Chairmen
of the Board. The Co-Chairman of the Board, who shall be a
member thereof, selected by the directors present thereat,
shall preside at all meetings of the Board and of the
stockholders at which one of them shall be present and each
shall perform such other duties and exercise such powers as
may from time to time be prescribed by the Board of
Directors or the Executive Committee.
(b) Vice Chairmen of the Board. Each Vice
Chairman of the Board shall be a member thereof and shall
have such powers and duties as may from time to time be
prescribed by the Board or the Executive Committee.
(c) President. The President shall be a member
of the Board, shall be the Chief Executive Officer of the
Corporation and shall perform such duties and exercise such
powers as are incident to the office of chief executive, and
shall perform such other duties and exercise such other
powers as may from time to time be prescribed by the Board
or the Executive Committee.
(d) Vice Presidents. Each Vice president shall
have such powers and duties as shall be prescribed by the
Board or the Executive Committee.
(e) Treasurer. The Treasurer shall have charge
and custody of, and be responsible for, all funds and
securities of the Corporation and shall deposit all such
funds to the credit of the Corporation in such banks, trust
companies or other depositaries as shall be selected in
accordance with the provisions of these By-laws; he shall
disburse the funds of the Corporation as may be ordered by
the Board or the Executive Committee, making proper vouchers
for such disbursement; and, in general, he shall perform all
the duties incident to the office or Treasurer and such
other duties as from time to time may be assigned to him by
the Board, the Executive Committee or the President. To
such extent as the Board or Executive Committee shall deem
proper, the duties of the Treasurer may be performed by one
or more assistants, to be appointed by the Board or
Executive Committee.
(f) Secretary. The Secretary shall keep the
records of all meetings of the stockholders and of the Board
or committee of the Board. He shall affix the seal of the
Corporation to all instruments requiring the corporate seal
when the same shall have been signed on behalf of the
Corporation by a duly authorized officer. The Secretary
shall be the custodian of all contracts, deeds, documents
10
and all other indicia of title to properties owned by the
Corporation and of its other corporate records and in
general shall perform all duties and have all powers
incident to the office of Secretary. To such extent as the
Board or the Executive Committee shall deem proper, the
duties of Secretary may be performed by one or more
assistants, to be appointed by the Board or Executive
Committee.
(g) Assistant Secretaries and Assistant
Treasurers. Each Assistant Secretary and each Assistant
Treasurer shall perform the duties of and exercise the
powers of the Secretary and the Treasurer, respectively, in
the absence of the Secretary and the Treasurer,
respectively.
ARTICLE VI
Contracts, Checks, Drafts,
Bank Accounts, Proxies, etc.
SECTION 1. Execution of Documents. The
President, each Vice president or any other officer,
employee or agent of the Corporation designated by the
Board, or designated in accordance with corporate policy as
approved by the Board, shall have power to execute and
deliver deeds, leases, contracts, mortgages, bonds,
debentures, checks, drafts and other orders for the payment
of money and other documents for and in the name of the
Corporation, and such power may be delegated (including
power to redelegate) by written instrument to other
officers, employees or agents of the Corporation.
SECTION 2. Deposits. All funds of the
Corporation not otherwise employed shall be deposited from
time to time to the credit of the Corporation or otherwise
in accordance with corporate policy as approved by the
Board.
SECTION 3. Proxies in Respect of Stock or Other
Securities of Other Corporations. The President or any
other officer of the Corporation designated by the Board
shall have the authority (a) to appoint from time to time an
agent or agents of the Corporation to exercise in the name
and on behalf of the Corporation the powers and rights which
the Corporation may have as the holder of stock or other
securities in any other corporation, (b) to vote or consent
in respect of such stock or securities and (c) to execute or
cause to be executed in the name and on behalf of the
Corporation and under its corporate seal, or otherwise, such
written proxies, powers of attorney or other instruments as
11
he may deem necessary or proper in order that the Corpora-
tion may exercise such powers and rights. The President or
any such designated officer may instruct any person or
persons appointed as aforesaid as to the manner or
exercising such powers and rights.
ARTICLE VII
Books and Records
The books and records of the Corporation may be
kept at such places within or without the State of Delaware
as the Board may from time to time determine.
ARTICLE VIII
Shares and Their Transfer; Fixing Record Date
SECTION 1. Certificate for Stock. Every owner of
stock of the Corporation shall be entitled to have a certif-
icate certifying the number of shares owned by him in the
Corporation and designating the class of stock to which such
shares belong, which shall otherwise be in such form as the
Board shall prescribe. Each such certificate shall be
signed by, or in the name of the Corporation by, a Co-
Chairman of the Board, a Vice Chairman of the Board, the
President or a Vice President and by the Treasurer, and
Assistant Treasurer, the Secretary or an Assistant Secretary
of the Corporation. In case any officer who has signed or
whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer before such certificate
is issued, it may nevertheless be issued by the Corporation
with the same effect as if he were such officer at the date
of issue.
SECTION 2. Record. A record shall be kept of the
name of the person, firm or corporation owning the stock
represented by each certificate for stock of the Corporation
issued, the number of shares represented by each such
certificate and the date thereof, and, in the case of
cancellation, the date of cancellation. Except as otherwise
expressly required by law, the person in whose name shares
of stock stand on the books of the Corporation shall be
deemed the owner thereof for all purposes as regards the
Corporation.
SECTION 3. Lost, Stolen, Destroyed or Mutilated
Certificates. The holder of any stock of the Corporation
shall immediately notify the Corporation of any loss, theft,
destruction or mutilation of the certificate therefor. The
12
Corporation may issue a new certificate for stock in the
place of any certificate theretofore issued by it and
alleged to have been lost, stolen, destroyed or mutilated,
and the Board or the President or the Secretary may, in its
or his discretion, require the owner of the lost, stolen,
mutilated or destroyed certificate or his legal representa-
tives to give the Corporation a bond in such sum, limited or
unlimited, in such form and with such surety or sureties as
the Board shall in its discretion determine, to indemnify
the Corporation against any claim that may be made against
it on account of the alleged lost, theft, mutilation or
destruction of any such certificate or the issuance of any
such new certificate.
SECTION 4. Fixing Date for Determination of
Stockholders of Record. (a) In order that the Corporation
may determine the stockholders entitled to notice of or to
vote at any meeting of stockholders or any adjournment
thereof, the Board may fix a record date, which shall not
precede the date upon which the resolution fixing the record
date is adopted by the Board, and which shall not be more
than 60 or less than 10 calendar days before the date of
such meeting. If no record date is fixed by the Board, the
record date for determining stockholders entitled to notice
of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which
notice is given, or, if notice is waived, at the closed of
business on the day next preceding the day on which the
meeting is held. A determination of stockholders of record
entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting;
providing, however, that the Board may fix a new record date
for the adjourned meeting.
(b) If the Restated Certificate of Incorporation
shall permit actions by the stockholders of the Corporation
by written consent without a meeting, the Board may fix a
record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted
by the Board and which date shall not be more than 10
calendar days after the date upon which the resolution
fixing the record date is adopted by the Board. If no
record date has been fixed by the Board, the record date for
determining stockholders entitled to consent to corporate
action in writing without a meeting, when no prior action by
the Board is otherwise required, shall be the first date on
which a signed written consent setting forth the action
taken or proposed to be taken is delivered to the Corpora-
tion by delivery to its registered office in the State of
Delaware, its principal place of business, or an officer or
agent of the Corporation having custody of the book in which
proceeding of meeting of stockholders are recorded.
13
Delivery made to the registered office of the Corporation
shall be by hand or by certified or registered mail, return
receipt requested. If no record date has been fixed by the
Board and prior action by the Board is required, the record
date for determining stockholder entitled to consent to
corporate action in writing without a meeting shall be at
the close of business on the day on which the Board adopts
the resolution taking such prior action.
(c) In order that the Corporation may determine
the stockholders entitled to receive payment of any dividend
or other disbursement or allotment of any rights or the
stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the
purpose of any other lawful action, the Board may fix a
record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted,
and which record date shall be not more than 60 calendar
days prior to such action. If no record date is fixed, the
record date for determining stockholders for any such
purpose shall be at the close of business on the day on
which the Board adopts the resolution relating thereto.
ARTICLE IX
Seal
The Board shall provide a corporate seal, which
shall be in the form of a circle and shall bear the full
name of the corporation, the words "Corporate Seal Delaware"
and in figures the year of its incorporation.
ARTICLE X
Fiscal Year
The fiscal year of the corporation shall be a 52-
53 week fiscal period ending the last Saturday in January.
ARTICLE XI
Indemnification
SECTION 1. Right to Indemnification. The
Corporation shall to the fullest extent permitted by
applicable law as then in effect indemnify any person (the
"Indemnitee") who is or was involved in any manner
(including, without limitation, as a party or a witness) or
is threatened to be made so involved in any threatened,
14
pending or completed investigation, claim, action, suit or
proceeding, whether civil, criminal, administrative or
investigative (including, without limitation, any action,
suit or proceeding by or in the right of the Corporation to
procure a judgment in its favor) (a "Proceeding") by reason
of the fact he is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture,
trust or other enterprise (including, without limitation,
any employee benefit plan), against all expenses (including
attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonable incurred by the
Indemnitee in connection with such Proceeding. Such
indemnification shall be a contract right and shall include
the right to receive payment in advance of any expenses
incurred by the Indemnitee in connection with such
Proceeding, consistent with the provisions of applicable law
as then in effect.
SECTION 2. Insurance, Contracts and Funding. The
Corporation may purchase and maintain insurance to protect
itself and any person entitled to indemnification under this
Article XI against any expenses, judgments, fines and
amounts payable as specified in Article XI, to the fullest
extend permitted by applicable law as then in effect. The
Corporation may enter into contracts with any person
entitled to indemnification under this Article XI in
furtherance of the provisions of this Article XI and may
create a trust fund, grant a security interest or use other
means (including, without limitation, a letter of credit) to
ensure the payment of such amounts as may be necessary to
effect indemnification as provided in this Article XI.
SECTION 3. Indemnification Not Exclusive Right.
The right of indemnification provided in this Article XI
shall not be exclusive of any other right to which those
seeking indemnification may otherwise be entitled, and the
provisions of this Article XI shall inure to the benefit of
the heirs and legal representatives of any person entitled
to indemnification under this Article XI and shall be
applicable to Proceedings commenced or continuing after the
adoption of this Article XI, whether arising from acts or
omissions occurring before or after such adoption.
SECTION 4. Advancement of Expenses. (a) In
furtherance and not in limitation of the foregoing
provisions, all reasonable expenses incurred by or on behalf
of the Indemnitee in connection with any Proceeding shall be
advanced to the Indemnitee by the Corporation within 90
calendar days after the receipt by the Corporation or a
statement or statements from the Indemnitee requesting such
15
advance or advances from time to time, except in the case of
a request for expenses incurred in defending a Proceeding in
advance of its final disposition, in which case the
applicable period shall be 30 calendar days. Such statement
or statements shall reasonably evidence the expenses
incurred by the Indemnitee and, if required by law at the
time of such advance, shall include or be accompanied by an
undertaking by or on behalf of the Indemnitee to repay the
amounts advanced if it should ultimately be determined that
the Indemnitee is not entitled to be indemnified against
such expenses pursuant to this Article XI.
(b) If a claim under the foregoing provisions is
not paid in full by the Corporation within 90 calendar days
after a written claim has been received by the Corporation,
except in the case of a claim for expenses incurred in
defending a Proceeding in advance of its final disposition,
in which case the applicable period shall be 30 calendar
days, the claimant may at any time thereafter bring suit
against the Corporation to recover the unpaid amount of the
claim and, if successful in whole or in part, the claimant
shall be entitled to be paid also the expense of prosecuting
such claim. It shall be a defense to any such action (other
than an action brought to enforce a claim for expenses
incurred in defending any Proceeding in advance of its final
disposition where the required undertaking, if any is
required, has been tendered to the Corporation) that the
claimant has not met the standards of conduct which make it
permissible under the General Corporation Law of the State
of Delaware for the Corporation to indemnify the claimant
for the amount claimed, but the burden of proving such
defense shall be on the Corporation. Neither the failure of
the Corporation (including its Board of Directors,
independent legal counsel, or its stockholders) to have made
a determination prior to the commencement of such action
that indemnification of the claimant is proper in the
circumstances because he or she has met the applicable
standard of conduct set forth in the General Corporation Law
of the State of Delaware, nor an actual determination by the
Corporation (including its Board of Directors, independent
legal counsel, or its stockholders) that the claimant has
not met such applicable standard of conduct, shall be a
defense to the action or create a presumption that the
claimant has not met the applicable standard of conduct.
SECTION 5. Effects of Amendments. Neither the
amendment or repeal of, nor the adoption of a provision
inconsistent with, any provision of this Article XI
(including, without limitation, this Section 5) shall
adversely affect the rights of any Indemnitee under this
Article XI with respect to any Proceeding commenced or
threatened prior to such amendment, repeal or adoption of an
16
inconsistent provision.
SECTION 6. Severability. If any provision or
provisions of this Article XI shall be held to be invalid,
illegal or unenforceable for any reason whatsoever: (a) the
validity, legality and enforceability of the remaining
provision of this Article XI (including, without limitation,
all portions of any such paragraph of this Article XI
containing any such provision held to be invalid, illegal or
unenforceable, that are not themselves invalid, illegal or
unenforceable) shall not in any way be affected or impaired
thereby; and (b) to the fullest extent possible, the
provisions of this Article XI (including, without
limitation, all portions of any paragraph of this Article XI
containing any such provision held to be invalid, illegal or
unenforceable, that are not themselves invalid, illegal or
unenforceable) shall be construed so as to give effect to
the intent manifested by the provision held invalid, illegal
or unenforceable.
ARTICLE XII
Amendments
These By-laws may be amended or repealed by the
Board at any regular or special meeting thereof, subject to
the power of the holders of a majority of the voting power
of all of the then-outstanding shares of the capital stock
of the Corporation entitled to vote in respect thereof, by
their vote at an annual meeting or at any special meeting,
to amend or repeal any By-law.
17
[EXECUTION COPY]
SECOND AMENDMENT AND RESTATEMENT OF CREDIT AGREEMENT
THIS SECOND AMENDMENT AND RESTATEMENT OF CREDIT AGREEMENT
(this "Amendment and Restatement"), dated as of April 8, 1994,
among COLLINS & AIKMAN GROUP, INC. (formerly known as Wickes
Companies, Inc.), a Delaware corporation ("Group" or the "Account
Party") and CONTINENTAL BANK N.A., a national banking association
having its principal office at 231 South LaSalle Street, Chicago,
Illinois 60697, individually ("Continental") and as Issuing Bank
(the "Issuing Bank).
W I T N E S S E T H:
WHEREAS, Collins & Aikman Holdings II Corporation (formerly
known as WCI Holdings II Corporation), Collins & Aikman Holdings
Corporation (formerly known as WCI Holdings Corporation)
("Holdings"), certain Subsidiaries of Holdings, various financial
institutions (the "Lenders") and Continental Bank N.A, as Agent
for the Lenders (the "Agent") have heretofore entered into a
certain Amendment and Restatement of Credit Agreement, dated as
of March 30, 1989 (the "Restated Credit Agreement");
WHEREAS, the Restated Credit Agreement has been successively
amended by a First Amendment to Credit Agreement, dated as of
June 30, 1989, a Second Amendment to Amendment and Restatement of
Credit Agreement, dated as of June 1, 1990, a Third Amendment to
Amendment and Restatement of Credit Agreement, dated as of April
15, 1991, a Fourth Amendment to Amendment and Restatement of
Credit Agreement, dated as of April 16, 1992, a Fifth Amendment
to Amendment and Restatement of Credit Agreement, dated as of
August 6, 1992, a Sixth Amendment to Amendment and Restatement of
Credit Agreement, dated as of November 20, 1992, a Seventh
Amendment to Amendment and Restatement of Credit Agreement, dated
as of March 12, 1993, an Eighth Amendment to Amendment and
Restatement of Credit Agreement, dated as of September 10, 1993,
and a Ninth amendment to Amendment and Restatement of Credit
Agreement, dated as of December 13, 1993, and certain provisions
thereof have been waived by a letter agreement, dated as of
February 26, 1992 and a letter agreement, dated as of March 23,
1992 (the Restated Credit Agreement, as so successively amended
and waived, being called the "Credit Agreement");
WHEREAS, the Account Party and the Issuing Bank now desire
to amend and restate the Credit Agreement in certain other
respects as provided below;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Defined Terms. Unless otherwise
defined herein or the context otherwise requires, the following
terms (whether or not underscored), when used in this Amendment
and Restatement, including its preamble and recitals, shall,
except where the context otherwise requires, have the following
meanings (such meanings to be equally applicable to the singular
and plural forms thereof):
"Account Party" is defined in the preamble.
"Agent" is defined in the first recital.
"Amendment and Restatement" means this Second Amendment and
Restatement of Credit Agreement (as amended, supplemented,
amended and restated or otherwise modified and in effect from
time to time with the written consent of the Issuing Bank).
"Approval" means each and every approval, consent, filing
and registration by or with any federal, state or other
regulatory authority necessary (a) to authorize or permit the
execution, delivery or performance of this Amendment and
Restatement, the Letters of Credit or any other Credit Document
or (b) for the validity or enforceability hereof or thereof.
"Authorized Officer" means, relative to the Account Party,
those of its officers whose signatures and incumbency shall have
been certified to the Issuing Bank pursuant to Section 5.1.1(b).
"Business Day" means any day which is neither a Saturday or
Sunday nor a legal holiday on which banks are authorized or
required to be closed in Chicago, Illinois or New York, New York.
"C & A Credit Agreement" means the Credit Agreement, dated
as of May 15, 1991, among Collins & Aikman Corporation, certain
Subsidiaries of Collins & Aikman Corporation, various financial
institutions (the "Banks") and Bank of America National Trust and
Savings Association, Bankers Trust Company and Chemical Bank, as
Co-Agents for the Banks (the "Co-Agents") and Continental, as
Managing Agent for the Co-Agents and the Banks, as such agreement
may be amended, supplemented, amended and restated or otherwise
modified from time to time.
"Capitalized Lease Liabilities" means all monetary
obligations of the Account Party or any of its Subsidiaries under
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any leasing or similar arrangement which, in accordance with
GAAP, would be classified as capitalized leases, and, for
purposes of this Amendment and Restatement and each other Credit
Document, the amount of such obligations shall be the capitalized
amount thereof, determined in accordance with GAAP, and the
stated maturity thereof shall be the date of the last payment of
rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee
without payment of a penalty.
"Code" means the Internal Revenue Code of 1986, as amended,
reformed, or otherwise modified from time to time.
"Collins & Aikman Corporation" means Collins & Aikman
Corporation, a Delaware corporation and a wholly-owned Subsidiary
of the Account Party.
"Contingent Liability" means any agreement, undertaking or
arrangement by which any Person guarantees, endorses or otherwise
becomes or is contingently liable upon (by direct or indirect
agreement, contingent or otherwise, to provide funds for payment,
to supply funds to, or otherwise to invest in, a debtor, or
otherwise to assure a creditor against loss) the indebtedness,
obligation or any other liability of any other Person (other than
by endorsements of instruments in the course of collection), or
guarantees the payment of dividends or other distributions upon
the shares of any other Person. The amount of any Person's
obligation under any Contingent Liability shall (subject to any
limitation set forth therein) be deemed to be the outstanding
principal amount (or maximum principal amount, if larger) of the
debt, obligation or other liability guaranteed thereby.
"Contractual Obligation" means, relative to Holdings or any
of its Subsidiaries, any provision of any security issued by
Holdings or of any Instrument or undertaking to which Holdings or
such Subsidiary is a party or by which it or any of its property
is bound.
"Controlled Group" means all members of a controlled group
of corporations and all members of a controlled group of trades
or businesses (whether or not incorporated) under common control
which, together with the Account Party, are treated as a single
employer under Section 414(b) or 414(c) of the Code or Section
4001 of ERISA.
"Credit Agreement" is defined in the second recital.
"Credit Document" means this Amendment and Restatement and
the Letters of Credit, and includes any amendments, supplements,
amendments and restatements or other modifications, if any, to
any of the foregoing.
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"Default" means any Event of Default or any condition,
occurrence or event which, after notice or lapse of time or both,
would constitute an Event of Default.
"Disbursement" means any payment made or deemed to be made
pursuant to Section 2.4 under any Letter of Credit by the Issuing
Bank.
"Disbursement Date" is defined in Section 2.2.
"Disclosure Schedule" means the Disclosure Schedule attached
hereto as Schedule I, as it may be amended, supplemented or
otherwise modified from time to time by the Account Party with
the written consent of the Issuing Bank.
"Dollar" and the sign "$" mean lawful money of the United
States.
"Effective Date" means the date this Amendment and
Restatement becomes effective pursuant to Section 9.9.
"Environmental Laws" means all applicable federal, state or
local statutes, laws, ordinances, codes, rules, regulations and
guidelines (including consent decrees and administrative orders)
relating to public health and safety and protection of the
environment.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and any successor statute of similar import,
together with the regulations thereunder, in each case as in
effect from time to time. References to sections of ERISA also
refer to any successor sections.
"Event of Default" is defined in Section 8.1.
"Fiscal Quarter" means each period of three consecutive
calendar months ending on the last Saturday of each April, July,
October and January.
"Fiscal Year" means any period of 52 or 53 weeks ending on
the last Saturday of each January; references to a Fiscal Year
with a number corresponding to any calendar year (e.g. the "1994
Fiscal Year") refer to the Fiscal Year ending on the last
Saturday of January occurring during the following calendar year.
"GAAP" is defined in Section 1.4.
"Hazardous Material" means
(a) any "hazardous substance", as defined by CERCLA;
-4-
(b) any "hazardous waste", as defined by the Resource
Conservation and Recovery Act, as amended;
(c) any petroleum product; or
(d) any pollutant or contaminant or hazardous,
dangerous or toxic chemical, material or substance within
the meaning of any other applicable federal, state or local
law, regulation, ordinance or requirement (including consent
decrees and administrative orders) relating to or imposing
liability or standards of conduct concerning any hazardous,
toxic or dangerous waste, substance or material, all as
amended or hereafter amended.
"Hedging Obligations" means, with respect to any Person, all
liabilities of such Person under interest rate swap agreements,
interest rate cap agreements and interest rate collar agreements,
and all other agreements or arrangements designed to protect such
Person against fluctuations in interest rates or currency
exchange rates.
"herein", "hereof", "hereto", "hereunder" and similar terms
contained in this Amendment or Restatement or any other Credit
Document refer to this Amendment and Restatement or such other
Credit Document, as the case may be, as a whole and not to any
particular Section, paragraph or provision of this Amendment and
Restatement or such other Credit Document.
"Holdings" is defined in the first recital.
"Impermissible Qualification" means, relative to the opinion
or certification of any independent public accountant as to any
financial statement of any Person, any qualification or exception
to such opinion or certification which
(a) is of a "going concern" or similar nature;
(b) relates to the limited scope of examination of
matters relevant to such financial statement; or
(c) relates to the treatment or classification of any
item in such financial statement and which, as a condition
to its removal, would require an adjustment to such item the
effect of which would be to cause such Person to be in
default of any of its obligations under Section 8.2.1.
"including" means including without limiting the generality
of any description preceding such term, and, for purposes of this
Amendment and Restatement and each other Credit Document, the
parties hereto agree that the rule of ejusdem generis shall not
be applicable to limit a general statement, which is followed by
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or referable to an enumeration of specific matters, to matters
similar to the matters specifically mentioned.
"Indebtedness" of any Person means, without duplication:
(a) all obligations of such Person for borrowed money
and all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments;
(b) all obligations, contingent or otherwise, relative
to the face amount of all letters of credit, whether or not
drawn, and banker's acceptances issued for the account of
such Person;
(c) all obligations of such Person as lessee under
leases which have been or should be, in accordance with
GAAP, recorded as Capitalized Lease Liabilities;
(d) all other items which, in accordance with GAAP,
would be included as liabilities on the liability side of
the balance sheet of such Person as of the date at which
Indebtedness is to be determined;
(e) net liabilities of such Person under all Hedging
Obligations;
(f) whether or not so included as liabilities in
accordance with GAAP, all obligations of such Person to pay
the deferred purchase price of property or services, and
indebtedness (excluding prepaid interest thereon) secured by
a Lien on property owned or being purchased by such Person
(including indebtedness arising under conditional sales or
other title retention agreements), whether or not such
indebtedness shall have been assumed by such Person or is
limited in recourse; and
(g) all Contingent Liabilities of such Person in
respect of any of the foregoing.
For all purposes of this Amendment and Restatement, the
Indebtedness of any Person shall include the Indebtedness of any
partnership or joint venture in which such Person is a general
partner or a joint venturer.
"Indemnified Liabilities" is defined in Section 9.5.
"Indemnified Parties" is defined in Section 9.5.
"Independent Public Accountant" means any of the six largest
public accounting firms in the United States selected by the
Account Party, or any other public accounting firm of recognized
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national standing selected by the Account Party and consented to
by the Issuing Bank.
"Instrument" means any contract, agreement, letter of
credit, indenture, mortgage, document or writing (whether by
formal agreement, letter or otherwise) under which any obligation
is evidenced, assumed or undertaken, or any Lien (or right or
interest therein) is granted or perfected.
"Issuing Bank" is defined in the preamble.
"Lenders" is defined in the first recital.
"Letters of Credit" means those letters of credit listed on
Schedule II hereto.
"Letter of Credit Maximum Amount" means, at any time, the
lesser of (a) the aggregate amount of Letter of Credit
Outstandings and (b) $557,100.
"Letter of Credit Outstandings" means, on any date, an
amount equal to the sum of
(a) the then aggregate amount which is undrawn and
available under all of the Letters of Credit
plus
(b) the then aggregate amount of all unpaid and
outstanding Reimbursement Obligations in respect thereof.
"Lien" means any security interest, mortgage, pledge,
hypothecation, assignment, deposit arrangement, encumbrance, lien
(statutory or otherwise), charge against or interest in property
to secure payment of a debt or performance of an obligation or
other priority or preferential arrangement of any kind or nature
whatsoever.
"Materially Adverse Effect" means, relative to any
occurrence of whatever nature (including any adverse
determination in any litigation, arbitration or governmental
investigation or proceeding), a materially adverse effect on:
(a) the assets, revenues or financial condition of the
Account Party and its Subsidiaries taken as a whole; or
(b) the ability of the Account Party to perform any of
its payment or other material obligations under this
Amendment and Restatement or any other Credit Document.
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"Obligations" means all obligations (monetary or otherwise)
of the Account Party arising under or in connection with this
Amendment and Restatement and each other Credit Document.
"Organic Document" means, relative to the Account Party, its
certificate of incorporation, its by-laws and all shareholder
agreements, voting trusts and similar arrangements applicable to
any of its authorized shares of capital stock.
"PBGC" means the Pension Benefit Guaranty Corporation and
any entity succeeding to any or all of its functions under ERISA.
"Pension Plan" means a "pension plan", as such term is
defined in section 3(2) of ERISA, which is subject to Title IV of
ERISA (other than a multiemployer plan as defined in section
4001(a)(3) of ERISA), and with respect to which any member of the
Controlled Group may have liability, including any liability by
reason of having been a substantial employer within the meaning
of section 4063 of ERISA at any time during the preceding five
years, or by reason of being deemed to be a contributing sponsor
under section 4069 of ERISA.
"Person" means any natural person, corporation, partnership,
firm, association, trust, government, governmental agency or any
other entity, whether acting in an individual, fiduciary or other
capacity.
"Plan" means any Pension Plan or Welfare Plan.
"Reference Rate" means, on any date, a fluctuating rate of
interest per annum equal to the higher of
(a) the rate of interest then most recently announced
by Continental Bank N.A. at Chicago, Illinois as its
reference rate; and
(b) the Federal Funds Rate plus a margin of 1/2 of 1%.
The Reference Rate is not necessarily intended to be the lowest
rate of interest determined by Continental Bank N.A. in
connection with extensions of credit. Changes in the rate of
interest on any Obligations will take effect simultaneously with
each change in the Alternate Base Rate.
"Reimbursement Obligation" is defined in Section 2.3.
"Release" means a "release", as such term is defined in
CERCLA.
-8-
"Resource Conservation and Recovery Act" means the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq.,
as in effect from time to time.
"Stated Expiry Date" with respect to each Letter of Credit
means the date on which such Letter of Credit is stated to
expire.
"St. Clair Indebtedness" means the Indebtedness of Collins &
Aikman Corporation created under and pursuant to the $8,000,000
Principal Amount Limited Obligation Revenue Bonds (Collins &
Aikman Corporation Project) of Michigan Strategic Fund and all of
the credit documents related thereto, including, without
limitation, the Trust Indenture between Michigan Strategic Fund
and Society Bank, Michigan as Trustee, dated as of August 1,
1991, the Loan Agreement between Collins & Aikman Corporation and
Michigan Strategic Fund, dated as of August 1, 1991, the
Reimbursement Agreement, dated as of August 1, 1991, made by
Collins & Aikman Corporation in favor of NBD Bank, N.A. and the
Security Agreement, dated as of August 1, 1991, between Collins &
Aikman Corporation and NBD Bank, N.A.
"Subsidiary" means, with respect to any Person, any
corporation of which more than 50% of the outstanding capital
stock having ordinary voting power to elect a majority of the
board of directors of such corporation (irrespective of whether
at the time capital stock of any other class or classes of such
corporation shall or might have voting power upon the occurrence
of any contingency) is at the time directly or indirectly owned
by such Person, by such Person and one or more other Subsidiaries
of such Person, or by one or more other Subsidiaries of such
Person.
"Taxes" is defined in Section 4.2.
"Termination Date" means September 13, 1994.
"United States" or "U.S." means the United States of
America, its fifty States and the District of Columbia.
"Welfare Plan" means a "welfare plan", as such term is
defined in section 3(1) of ERISA.
SECTION 1.2. Use of Defined Terms. Unless otherwise
defined or the context otherwise requires, terms for which
meanings are provided in this Amendment and Restatement shall
have such meanings when used in each Credit Document, notice and
other communication delivered from time to time in connection
with this Amendment and Restatement or any other Credit Document.
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SECTION 1.3. Cross-References. Unless otherwise specified,
references in this Amendment and Restatement and in each other
Credit Document to any Article or Section are references to such
Article or Section of this Amendment and Restatement or such
other Credit Document, as the case may be, and, unless otherwise
specified, references in any Article, Section or definition to
any clause are references to such clause of such Article, Section
or definition.
SECTION 1.4. Accounting and Financial Determinations.
Unless otherwise specified, all accounting terms used herein or
in any other Credit Document shall be interpreted, all accounting
determinations and computations hereunder or thereunder shall be
made, and all financial statements required to be delivered
hereunder or thereunder shall be prepared in accordance with,
those generally accepted accounting principles ("GAAP") applied
in the preparation of the financial statements referred to in
Section 7.1; provided, however, that all financial statements
required to be delivered hereunder shall be prepared in
accordance with GAAP as in effect from time to time.
ARTICLE II
LETTERS OF CREDIT
SECTION 2.1. Letters of Credit. The Letters of Credit are
currently outstanding and have been issued by the Issuing Bank
for the account of the Account Party. From and after the date
hereof, the Letters of Credit shall be deemed to be outstanding
pursuant to the terms of this Amendment and Restatement.
SECTION 2.2. Disbursements, etc. The Issuing Bank will
notify the Account Party promptly of the presentment for payment
of each Letter of Credit, together with notice of the date (the
"Disbursement Date") such payment shall be made. Subject to the
terms and provisions of the applicable Letter of Credit and this
Amendment and Restatement, the Issuing Bank shall make such
payment to the beneficiary of such Letter of Credit; provided,
however, that the Issuing Bank shall have no obligations with
respect to any Letter of Credit after the Termination Date. The
Account Party agrees to reimburse the Issuing Bank on each
Disbursement Date for all amounts which the Issuing Bank has
disbursed under each Letter of Credit (or that are otherwise due
and payable to the Issuing Bank hereunder). Interest on any late
payment will be payable together with any such payment and will
be calculated in the manner described in Section 3.2 and at a
rate per annum equal to the rate then in effect pursuant to
Section 3.2.
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SECTION 2.3. Reimbursement. The obligation (a
"Reimbursement Obligation") of the Account Party under Section
2.2 to reimburse the Issuing Bank with respect to each
Disbursement (including interest thereon) shall be absolute and
unconditional under any and all circumstances and irrespective of
any setoff, counterclaim or defense to payment which the Account
Party may have or have had against the Issuing Bank, including
any defense based upon the failure of any Disbursement to conform
to the terms of the applicable Letter of Credit (if, in the
Issuing Bank's good faith opinion, such Disbursement is
determined to be appropriate) or any non-application or
misapplication by the beneficiary of the proceeds of any Letter
of Credit; provided, however, that after paying in full its
Reimbursement Obligation and all other amounts payable to the
Issuing Bank hereunder, nothing herein shall adversely affect the
right of the Account Party to commence any proceeding against the
Issuing Bank for any wrongful Disbursement made by the Issuing
Bank under any Letter of Credit as a result of acts or omissions
constituting gross negligence or wilful misconduct on the part of
the Issuing Bank.
SECTION 2.4. Deemed Disbursements. Upon the occurrence and
during the continuation of an Event of Default
(a) an amount equal to the Letter of Credit
Outstandings attributable to the then aggregate amount which
is undrawn and available under all of the Letters of Credit
shall, without demand upon or notice to the Account Party or
any other Person, be deemed to have been paid and disbursed
by the Issuing Bank (notwithstanding that such amount may
not in fact have been so paid or disbursed); and
(b) upon notification by the Issuing Bank to the
Account Party of its obligations under this Section, the
Account Party shall be immediately obligated to reimburse
the Issuing Bank for the amount deemed to have been so paid
or disbursed.
Any amounts so payable by the Account Party pursuant to this
Section shall be deposited in cash with the Issuing Bank for the
payment of the Obligations when due in connection with any Letter
of Credit. At such time when the Event of Default shall have
been cured or waived, the Issuing Bank shall return to the
Account Party all amounts then on deposit with the Issuing Bank
pursuant to this Section, net of any amounts applied to the
payment of any Reimbursement Obligations.
SECTION 2.5. Nature of Reimbursement Obligations. The
Account Party shall assume all risks of the acts, omissions or
misuse of each Letter of Credit by the beneficiary (and its
transferees) thereof. The Issuing Bank (except to the extent of
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its own gross negligence or wilful misconduct) shall not be
responsible for:
(a) the form, validity, sufficiency, accuracy,
genuineness or legal effect of any Letter of Credit or any
document submitted by any party in connection with the
application for and issuance of any Letter of Credit, even
if it should in fact prove to be in any or all respects
invalid, insufficient, inaccurate, fraudulent or forged;
(b) the form, validity, sufficiency, accuracy,
genuineness or legal effect of any instrument transferring
or assigning or purporting to transfer or assign any Letter
of Credit or the rights or benefits thereunder or the
proceeds thereof in whole or in part, which may prove to be
invalid or ineffective for any reason;
(c) the failure of the beneficiary of any Letter of
Credit to comply fully with conditions required in order to
demand payment under such Letter of Credit;
(d) errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, cable,
telegraph, telex, facsimile or otherwise; or
(e) any loss or delay in the transmission or otherwise
of any document or draft required in order to make a
Disbursement under any Letter of Credit.
None of the foregoing shall affect, impair or prevent the vesting
of any of the rights or powers granted to the Issuing Bank. In
furtherance and extension and not in limitation or derogation of
any of the foregoing, any action taken or omitted to be taken by
the Issuing Bank in connection with any Letter of Credit in good
faith (and not constituting gross negligence or willful
misconduct) shall be binding upon the Account Party and shall not
put the Issuing Bank under any resulting liability to the Account
Party or any other Person.
ARTICLE III
INTEREST, FEES, ETC.
SECTION 3.1. Letter of Credit Fee. The Account Party
hereby agrees to pay to the Issuing Bank a Letter of Credit fee
in an amount equal to 1 1/4% per annum of the average daily
aggregate amount of the Letter of Credit Maximum Amount for the
immediately preceding Fiscal Quarter, payable quarterly in
arrears and on each Stated Expiry Date (or, if earlier, on the
date of the termination of this Amendment and Restatement).
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SECTION 3.2. Interest. Interest will accrue on any amount
remaining unpaid by the Account Party to the Issuing Bank under
Section 2.3 from (and including) the Disbursement Date to (but
excluding) the date of reimbursement in full at the Reference
Rate; provided, however, that if the Account Party reimburses the
Issuing Bank on a Disbursement Date prior to 3:00 p.m., New York
City time, for any amount which the Issuing bank has disbursed on
such Disbursement Date, no interest shall accrue on such amount
so disbursed.
ARTICLE IV
INCREASED CAPITAL COSTS,
TAXES AND CERTAIN OTHER PROVISIONS
SECTION 4.1. Change of Circumstances. (a) If, after the
date hereof, the introduction of or any change in or in the
interpretation of, or any change in the application of, any law
or any regulation or guideline issued by any central bank or
other governmental authority (whether or not having the force of
law), including, without limitation, any reserve or special
deposit requirement or any tax (other than tax on the Issuing
Bank's general income) or any capital requirement, has, due to
the Issuing Bank's compliance the effect directly or indirectly,
of (i) increasing the cost to the Issuing Bank of performing its
obligations hereunder or under any Letter of Credit;
(ii) reducing any amount received or receivable by the Issuing
Bank hereunder or its effective return hereunder or under any
Letter of Credit or on its capital; or (iii) causing the Issuing
Bank to make any payment or to forego any return based on any
amount received or receivable by the Issuing Bank hereunder or
under any Letter of Credit, then upon demand from time to time
the Account Party shall be obligated to pay such amount as shall
compensate the Issuing Bank for any such cost, reduction, payment
or foregone return; provided, however, that the Account Party
shall be obligated under this paragraph to compensate the Issuing
Bank for capital adequacy requirements measured against its
outstanding obligations hereunder only to the extent such capital
adequacy requirements are in excess of the capital adequacy
requirements required in connection with the implementation in
the country where the Issuing Bank's principal office is located
of the agreement announced by the Bank for International
Settlements in Basle on July 11, 1988, concerning the
international convergence of capital measurement and capital
standards. Any certificate of the Issuing Bank in respect of the
foregoing will be conclusive and binding upon the Account Party,
except for demonstrable error; provided, that the Issuing Bank
shall determine the amounts owing to it in good faith using any
reasonable averaging and attribution methods.
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(b) The Issuing Bank agrees that, as promptly as
practicable after it becomes aware of the occurrence of an event
or the existence of a condition that would cause it to seek
additional amounts from the Account Party pursuant to clause (a)
above, it will exercise commercially reasonable efforts to issue,
or maintain each Letter of Credit through another lending office
to take such other actions as it deems appropriate if as a result
thereof the additional moneys which would otherwise be required
to be paid in respect of such Letter of Credit pursuant to
clause (a) would be reduced and if, as determined by the Issuing
Bank in its sole discretion, the issuance or maintaining of any
Letter of Credit through such other lending office or the taking
of such other actions would not otherwise adversely affect such
Letter of Credit or rights to repayment hereunder or the Issuing
Bank and would not, in the Issuing Bank's sole discretion, be
commercially unreasonable.
SECTION 4.2. Taxes. All payments by the Account Party of
amounts in respect of each Letter of Credit and all other amounts
payable hereunder shall be made free and clear of and without
deduction for any present or future income, excise, stamp or
franchise taxes and other taxes, fees, duties, withholdings or
other charges of any nature whatsoever imposed by any taxing
authority, but excluding franchise taxes and taxes imposed on or
measured by the Issuing Bank's net income or receipts (such non-
excluded items being called "Taxes"). In the event that any
withholding or deduction from any payment to be made by the
Account Party hereunder is required in respect of any Taxes
pursuant to any applicable law, rule or regulation, then the
Account Party will
(a) pay directly to the relevant authority the full
amount required to be so withheld or deducted;
(b) promptly forward to the Issuing Bank an official
receipt or other documentation satisfactory to the Issuing
Bank evidencing such payment to such authority; and
(c) pay to the Issuing Bank such additional amount or
amounts as is necessary to ensure that the net amount
actually received by the Issuing Bank will equal the full
amount the Issuing Bank would have received had no such
withholding or deduction been required.
Moreover, if any Taxes are directly asserted against the Issuing
Bank with respect to any payment received by the Issuing Bank
hereunder, the Issuing Bank may pay such Taxes and the Account
Party will promptly pay such additional amounts (including any
penalties, interest or expenses) as is necessary in order that
the net amount received by the Issuing Bank after the payment of
such Taxes (including any Taxes on such additional amount) shall
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equal the amount the Issuing Bank would have received had not
such Taxes been asserted.
If the Account Party fails to pay any Taxes when due to the
appropriate taxing authority or fails to remit to the Issuing
Bank the required receipts or other required documentary
evidence, the Account Party shall indemnify the Issuing Bank for
any incremental Taxes, interest or penalties that may become
payable by the Issuing Bank as a result of any such failure.
SECTION 4.3. Payments, Computations, etc. Unless otherwise
expressly provided, all payments by the Account Party pursuant to
this Amendment and Restatement shall be made by the Account Party
to the Issuing Bank for the account of the Issuing Bank. All
such payments required to be made to the Issuing Bank shall be
made, without setoff, deduction or counterclaim, not later than
12:00 noon, New York City time, on the date due, in same day or
immediately available funds, to such account as the Issuing Bank
shall specify from time to time by notice to the Account Party.
Funds received after that time shall be deemed to have been
received by the Issuing Bank on the next succeeding Business Day.
All interest and fees shall be computed on the basis of the
actual number of days (including the first day but excluding the
last day) occurring during the period for which such interest or
fee is payable over a year comprised of 365 days. Whenever any
payment to be made shall otherwise be due on a day which is not a
Business Day, such payment shall be made on the next succeeding
Business Day and such extension of time shall be included in
computing interest and fees, if any, in connection with such
payment.
SECTION 4.4. Setoff. The Issuing Bank shall, upon the
occurrence of any Default described in clauses (a) through (d) of
Section 8.1.4 or upon the occurrence of any other Event of
Default, have the right to appropriate and apply to the payment
of the Obligations owing to it hereunder or under the Letters of
Credit any and all balances, credits, deposits, accounts or
moneys of the Account Party then or thereafter maintained with
the Issuing Bank, including, without limitation, any amounts then
or thereafter held in the Deposit Account. The Issuing Bank
agrees promptly to notify the Account Party after any such setoff
and application made by the Issuing Bank; provided, however, that
the failure to give such notice shall not affect the validity of
such setoff and application. The rights of the Issuing Bank
under this Section are in addition to other rights and remedies
(including other rights of setoff under applicable law or
otherwise) which the Issuing Bank may have.
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ARTICLE V
CONDITIONS PRECEDENT
SECTION 5.1. Conditions to Effectiveness. The
effectiveness of this Amendment and Restatement shall be subject
to the prior or concurrent satisfaction of each of the conditions
precedent set forth in this Section 5.1.
SECTION 5.1.1. Resolutions, etc. The Issuing Bank shall
have received from the Account Party a certificate, dated the
date of the issuance of the initial Letter of Credit, duly
executed and delivered by its Authorized Officer as to
(a) resolutions of its Board of Directors or a duly
authorized committee thereof then in full force and effect
authorizing the execution, delivery and performance of this
Amendment and Restatement and each other document to be
executed by it and the transactions contemplated hereby and
thereby,
(b) the incumbency and signatures of those of its
officers authorized to act with respect to this Amendment
and Restatement and each other document to be executed by
it, and
(c) each Organic Document of the Account Party,
upon which certificates the Issuing Bank may conclusively rely
until it shall have received a further certificate of the
Authorized Officer of the Account Party canceling or amending
such prior certificate.
SECTION 5.1.2. Opinion of Counsel. The Issuing Bank shall
have received an opinion, dated the Effective Date and addressed
to the Issuing Bank, from the general counsel of the Account
Party, in form and substance satisfactory to the Issuing Bank and
its counsel.
SECTION 5.1.3. Satisfactory Legal Form. All documents
executed or submitted pursuant hereto by or on behalf of the
Account Party shall be satisfactory in form and substance to the
Issuing Bank and its counsel, and the Issuing Bank and its
counsel shall have received all other information, approvals,
opinions, documents or instruments as the Issuing Bank or its
counsel may reasonably request.
SECTION 5.1.4. Closing Fees, Expenses, etc. The Issuing
Bank shall have received for its own account (a) an extension fee
in the amount of $25,000 and (b) all fees, costs and expenses due
and payable, if then invoiced.
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SECTION 5.1.5. Compliance with Warranties, No Default, etc.
The following statements shall be true and correct:
(a) the representations and warranties set forth in
Article VI shall be true and correct as of the Effective
Date; and
(b) no Default shall have occurred and be continuing.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
In order to induce the Issuing Bank to enter into this
Amendment and Restatement, the Account Party represents and
warrants unto the Issuing Bank as set forth in this Article VI.
SECTION 6.1. Organization, Power, Authority, etc. The
Account Party and each of its Subsidiaries is a corporation
validly organized and existing and in good standing under the
laws of the jurisdiction of its incorporation, is duly qualified
to do business and is in good standing as a foreign corporation
in each jurisdiction where the nature of its business requires
such qualification, and has full power and authority and holds
all requisite governmental licenses, permits and other approvals
to enter into and perform its Obligations under this Amendment
and Restatement and each other Credit Document to which it is a
party, to own and hold under lease its property and to conduct
its business substantially as currently conducted by it and to
obtain Letters of Credit hereunder.
SECTION 6.2. Due Authorization, etc. The execution,
delivery and performance by the Account Party of this Amendment
and Restatement and each other Credit Document executed or to be
executed by it are within the Account Party's corporate powers,
have been duly authorized by all necessary corporate action, do
not require any Approval (other than any Approvals which have
been made or obtained), do not and will not conflict with, result
in any violation of, or constitute any default under, any
provision of any Organic Document or material Contractual
Obligation (other than any material Contractual Obligation which,
in the event of any such conflict, violation or default the
applicable Person has made provision for the repayment or
satisfaction thereof) or any law or governmental regulation or
court decree or order binding upon the Account Party or any of
its Subsidiaries and will not result in or require the creation
or imposition of any material Lien on any properties pursuant to
the provisions of any Contractual Obligation.
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SECTION 6.3. Validity, etc. This Amendment and Restatement
constitutes, and each other Credit Document executed by the
Account Party will, on the due execution and delivery thereof,
constitute, the legal, valid and binding obligations of the
Account Party enforceable in accordance with their respective
terms subject to the effect of any applicable bankruptcy,
insolvency, moratorium or similar laws affecting creditors'
rights generally.
SECTION 6.4. Financial Information. The audited financial
information of the Account Party set forth in the Form 10-K
annual report for its Fiscal Year ended January 30, 1993, and the
unaudited financial information of the Account Party set forth in
the Form 10-Q quarterly report for its Fiscal Quarter ended
October 30, 1993, copies of which have been furnished to the
Issuing Bank, have been prepared in accordance with GAAP
consistently applied and, except as set forth in the notes to
such financial information, present fairly the consolidated
financial condition of the corporations covered thereby as at the
dates thereof and the results of their operations for the periods
then ended.
SECTION 6.5. No Material Adverse Change. Since October 30,
1993, there have been no occurrences, of whatsoever nature, which
individually or in the aggregate have had a Materially Adverse
Effect on the financial condition of the Account Party and its
Subsidiaries reflected in the financial information for the
Fiscal Quarter ended October 30, 1993, referred to in Section
6.4.
SECTION 6.6. Absence of Default. Neither the Account Party
nor any of its Subsidiaries is in default in the payment of (or
in the performance of any obligation applicable to) any
Indebtedness outstanding in a principal amount exceeding
$7,500,000, which default, if other than in the payment of
principal, would permit the acceleration of the principal of such
Indebtedness prior to the maturity thereof, or in default under
any governmental regulation or court decree or order which
individually or in the aggregate could reasonably be expected to
have a Materially Adverse Effect except as otherwise disclosed on
the Disclosure Schedule.
SECTION 6.7. Litigation, etc. There is no pending or, to
the knowledge of the Account Party, threatened litigation,
arbitration or governmental investigation, proceeding or inquiry
against the Account Party or any of its Subsidiaries or to which
any of the properties, assets or revenues of any thereof is
subject as to which there is a reasonable possibility of adverse
determination and which, if adversely determined,
(a) would have a Materially Adverse Effect; and
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(b) would adversely affect the legality, validity,
binding effect or enforceability of this Amendment and
Restatement, the Letters of Credit or any other Credit
Document.
SECTION 6.8. Ownership of Properties. The Account Party
and each of its Subsidiaries owns good and, in the case of real
property, marketable title to all of its material properties and
assets, real and personal, of any nature whatsoever.
SECTION 6.9. Subsidiaries. The Account Party has no
Subsidiaries, except those Subsidiaries which are identified in
Item 6.9 ("Existing Subsidiaries") of the Disclosure Schedule.
SECTION 6.10. Patents, Trademarks, etc. Each of the
Account Party and its Subsidiaries owns and possesses all such
patents, patent rights, trademarks, trademark rights, trade
names, trade name rights, service marks, service mark rights and
copyrights as it considers necessary for the conduct of its
businesses as now conducted without, individually or in the
aggregate, any infringement upon right of other Persons which
could reasonably be expected to have a Materially Adverse Effect.
SECTION 6.11. Regulations G, T, U and X. Neither the
Account Party nor any of its Subsidiaries is engaged principally,
or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying margin
stock, and less than 25% of the assets of the Account Party,
individually and on a consolidated basis with its Subsidiaries,
consists of margin stock. No proceeds of any Letter of Credit
will be used for a purpose which violates, or would be
inconsistent with, Federal Reserve System Board Regulation G, T,
U or X. Terms for which meanings are provided in Federal Reserve
System Board Regulation G, T, U or X or any regulations
substituted therefor, as from time to time in effect, are used in
this Section with such meanings.
SECTION 6.12. Government Approval, Regulation, etc.
Neither the Account Party nor any of its Subsidiaries is an
"investment company" within the meaning of the Investment Company
Act of 1940, as amended, or a "holding company", or a "subsidiary
company" of a "holding company", or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company",
within the meaning of the Public Utility Holding Company Act of
1935, as amended.
SECTION 6.13. Taxes. Each of the Account Party and its
Subsidiaries has filed all tax returns and reports required by
law to have been filed by it (or has properly filed for an
extension of the date of filing) and has paid all taxes and
governmental charges thereby shown to be owing, except any such
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taxes or charges which are being diligently contested in good
faith by appropriate proceedings and for which adequate reserves
in accordance with GAAP shall have been set aside on its books.
SECTION 6.14. Letters of Credit. The Stated Expiry Date of
each Letter of Credit is on or before the Termination Date and
the amount of Letter of Credit Outstandings does not exceed the
Letter of Credit Maximum Amount.
SECTION 6.15. Accuracy of Information. All factual
information heretofore or contemporaneously furnished by or on
behalf of the Account Party in writing to the Issuing Bank for
purposes of or in connection with this Amendment and Restatement
or any transaction contemplated hereby is, and all other such
factual information hereafter furnished by or on behalf of the
Account Party to the Issuing Bank will be, true and accurate in
every material respect on the date as of which such information
is dated or certified and as of the date of execution and
delivery of this Amendment and Restatement by the Issuing Bank,
and such information is not, or shall not be, as the case may be,
incomplete by omitting to state any material fact necessary to
make such information not misleading.
ARTICLE VII
COVENANTS
SECTION 7.1. Affirmative Covenants. The Account Party
agrees with the Issuing Bank that, until all Obligations have
been paid and performed in full, the Account Party will perform
the obligations set forth in this Section 7.1.
SECTION 7.1.1. Financial Information, Reports, Notices,
etc. The Account Party will furnish, or will cause to be
furnished, to the Issuing Bank copies of the following financial
statements, reports, notices and information:
(a) as soon as available and in any event within 55
days after the end of each of the first three Fiscal
Quarters of each Fiscal Year of the Account Party,
consolidated balance sheets of the Account Party and its
Subsidiaries as of the end of such Fiscal Quarter and
consolidated statements of earnings and cash flow of the
Account Party and its Subsidiaries for such Fiscal Quarter
and for the period commencing at the end of the previous
Fiscal Year and ending with the end of such Fiscal Quarter,
certified by the chief financial Authorized Officer of the
Account Party;
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(b) as soon as available and in any event within 120
days after the end of each Fiscal Year of the Account Party,
a copy of the annual audit report for such Fiscal Year for
the Account Party and its Subsidiaries, including therein
consolidated balance sheets of the Account Party and its
Subsidiaries as of the end of such Fiscal Year and
consolidated statements of earnings and cash flow of the
Account Party and its Subsidiaries for such Fiscal Year, in
each case certified (without any Impermissible
Qualification) in a manner acceptable to the Issuing Bank by
an Independent Public Accountant;
(c) as soon as possible and in any event within three
days after the occurrence of each Default, a statement of
the chief financial Authorized Officer of the Account Party
setting forth details of such Default and the action which
the Account Party has taken and proposes to take with
respect thereto;
(d) promptly after the sending or filing thereof,
copies of all reports which the Account Party sends to any
of its securityholders, and all reports and registration
statements which the Account Party or any of its
Subsidiaries files with the Securities and Exchange
Commission or any national securities exchange; and
(e) such other information respecting the condition or
operations, financial or otherwise, of the Account Party or
any of its Subsidiaries as the Issuing Bank may from time to
time reasonably request.
SECTION 7.1.2. Maintenance of Corporate Existences, etc.
The Account Party will cause to be done at all times all things
necessary to maintain and preserve the corporate existences of
the Account Party and each of its Subsidiaries, and the Account
Party will own and hold all of the outstanding shares of capital
stock of each Subsidiary directly or indirectly through one or
more other Subsidiaries and free and clear of all Liens.
SECTION 7.1.3. Foreign Qualification. The Account Party
will, and will cause each Subsidiary to, cause to be done at all
times all things necessary to be duly qualified to do business
and be in good standing as a foreign corporation in each
jurisdiction where the failure so to qualify would have a
Materially Adverse Effect.
SECTION 7.1.4. Payment of Taxes, etc. The Account Party
will, and will cause each of its Subsidiaries to, pay and
discharge, as the same may become due and payable, all federal,
state, local and foreign taxes, assessments, fees and other
governmental charges or levies against it or on any of its
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property, as well as other due and payable claims of any kind
which, if unpaid, might become a material Lien upon any one of
its properties; provided, however, that the foregoing shall not
require the Account Party or any of its Subsidiaries to pay or
discharge any such tax, assessment, fee, charge, levy or Lien so
long as it shall be diligently contesting the validity thereof in
good faith by appropriate proceedings and shall have set aside on
its books adequate reserves in accordance with GAAP with respect
thereto, nor shall the foregoing prohibit the Account Party or
any of its Subsidiaries from properly filing for the extension of
the filing of any tax return.
SECTION 7.1.5. Insurance. The Account Party will, and will
cause each of its Subsidiaries to, maintain or cause to be
maintained with responsible insurance companies insurance with
respect to its properties and business against such casualties
and contingencies and of such types and in such amounts as is
customary in the case of similar businesses in similar locations
(including, where appropriate, customary amounts of self-
insurance) and will, upon request of the Issuing Bank, furnish to
the Issuing Bank at reasonable intervals a certificate of an
Authorized Officer setting forth the nature and extent of all
insurance (including levels of self-insurance) maintained by the
Account Party and its Subsidiaries in accordance with this
Section.
SECTION 7.1.6. Books and Records. The Account Party will,
and will cause each of its Subsidiaries to, keep books and
records which accurately reflect all of its business affairs and
transactions and permit the Issuing Bank or any of its
representatives, at reasonable times and intervals, to visit all
of its offices, to discuss its financial matters with its
officers and independent public accountant (and the Account Party
hereby authorizes such independent public accountant to discuss
the Account Party's financial matters with the Issuing Bank or
its representatives whether or not any representative of the
Account Party is present) and to examine (and, at the expense of
the Account Party, photocopy extracts from) any of its books or
other corporate records. The Account Party shall pay any fees of
such independent public accountant incurred in connection with
the Issuing Bank's exercise of its rights pursuant to this
Section.
SECTION 7.2. Negative Covenants. The Account Party agrees
with the Issuing Bank that, until all Commitments have terminated
and all Obligations have been paid and performed in full, the
Account Party will perform the obligations set forth in this
Section 7.2.
SECTION 7.2.1. Consolidation, Merger, etc. The Account
Party will not, and will not permit any of its Subsidiaries to,
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liquidate or dissolve, consolidate with, or merge into or with,
any other corporation, or purchase or otherwise acquire all or
substantially all of the assets of any Person (or of any division
thereof) except
(a) any such Subsidiary may liquidate or dissolve
voluntarily into, and may merge with and into, the Account
Party or any other Subsidiary, and the assets or stock of
any Subsidiary may be purchased or otherwise acquired by the
Account Party or any other Subsidiary;
(b) so long as no Default has occurred and is
continuing or would occur after giving effect thereto, the
Account Party or any of its Subsidiaries may purchase all or
substantially all of the assets of any Person, or acquire
such Person by merger; and
(c) so long as no Default has occurred and is
continuing or would occur after giving effect thereto, the
Account Party may merge with and into Holdings, any direct
or indirect wholly-owned Subsidiary of Holdings, or Collins
& Aikman Corporation, which Person will, upon the
effectiveness of any such merger, become the Account Party
hereunder.
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.1. Events of Default. The occurrence of any of
the following events shall be an "Event of Default" hereunder.
SECTION 8.1.1. Non-Payment of Obligations. The Account
Party shall fail to pay any amount payable under any provision of
this Amendment and Restatement when due, and such default shall
continue unremedied for a period of five days.
SECTION 8.1.2. Nonperformance of Certain Covenants, etc.
The Account Party shall default in the due performance and
observance of any of its obligations under Section 7.2, or the
Account Party shall cease to maintain an average daily balance in
excess of $1,700,000 in an interest bearing deposit account with
Continental.
SECTION 8.1.3. Nonperformance of Other Covenants and
Obligations. The Account Party shall default in the due
performance and observance of any other agreement contained
herein or in any other Credit Document, and such default shall
continue unremedied for a period of 30 days after notice thereof
shall have been given to the Account Party by the Issuing Bank.
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SECTION 8.1.4. Bankruptcy, Insolvency, etc. The Account
Party or any Subsidiary of the Account Party shall
(a) become insolvent or admit in writing its inability
or unwillingness generally to pay, debts as they become due;
(b) apply for, consent to, or acquiesce in, the
appointment of a trustee, receiver, sequestrator or other
custodian for the Account Party or any Subsidiary of the
Account Party or all or substantially all of the property of
any thereof, or make a general assignment for the benefit of
creditors;
(c) in the absence of such application, consent or
acquiescence, permit or suffer to exist the appointment of a
trustee, receiver, sequestrator or other custodian for the
Account Party or any Subsidiary of the Account Party or for
all or substantially all of the property of any thereof, and
such trustee, receiver, sequestrator or other custodian
shall not be discharged within 60 days;
(d) permit or suffer to exist the commencement of any
bankruptcy, reorganization, debt arrangement or other case
or proceeding under any bankruptcy or insolvency law, or any
dissolution, winding up or liquidation proceeding, in
respect of the Account Party or any Subsidiary of the
Account Party, and, if such case or proceeding is not
commenced by the Account Party or such Subsidiary, such case
or proceeding shall be consented to or acquiesced in by the
Account Party or such Subsidiary, as the case may be, or
shall result in the entry of an order for relief or shall
remain for 60 days undismissed; or
(e) take any corporate action authorizing, or in
furtherance of, any of the foregoing.
SECTION 8.1.5. Breach of Warranty. Any representation or
warranty of the Account Party made or deemed to be made hereunder
or in any other writing or certificate furnished by or on behalf
of the Account Party to the Issuing Bank for the purposes of or
in connection with this Amendment and Restatement, is or shall be
incorrect when made or deemed to have been made in any material
respect.
SECTION 8.1.6. Default on Other Indebtedness. A default
shall occur (a) in the payment when due (subject to any
applicable grace period), whether by acceleration or otherwise,
of any Indebtedness (other than Indebtedness described in Section
8.1.1 or the St. Clair Indebtedness) of the Account Party having
a principal amount, individually or in the aggregate, in excess
of $5,000,000; (b) in the performance or observance of any
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obligation or condition with respect to such Indebtedness if the
effect of such default is to accelerate the maturity of any such
Indebtedness or such default shall continue unremedied for any
applicable period of time sufficient to permit the holder or
holders of such Indebtedness, or any trustee or agent for such
holders, to cause or declare such Indebtedness to become due and
payable prior to its expressed maturity; or (c) in the payment
when due (subject to any applicable grace period), whether by
acceleration or otherwise, of any Indebtedness under the C & A
Credit Agreement.
SECTION 8.1.7. Pension Plans. Any of the following events
shall occur with respect to any Pension Plan:
(a) the institution of any steps by the Account Party
or any of its Subsidiaries or any other Person to terminate
a Pension Plan if, as a result of such termination, the
Account Party or any of its Subsidiaries would be required
to make a contribution to such Pension Plan, or would incur
a liability or obligation to such Pension Plan, in excess of
$5,000,000; or
(b) a contribution failure occurs with respect to any
Pension Plan of the Account Party or any of its Subsidiaries
sufficient to give rise to the enforcement of a Lien in
excess of $5,000,000 under section 302(f) of ERISA.
SECTION 8.1.8. Judgments. Any final judgment or order for
the payment of money which, together with other such outstanding
final judgments against the Account Party or its Subsidiaries (in
each case to the extent not covered by insurance), exceeds
$7,500,000, shall be rendered against the Account Party or any of
its Subsidiaries and, for 30 consecutive days after entry
thereof, such judgment shall not have been discharged or
execution thereof stayed pending appeal, or, for 30 consecutive
days after the expiration of any such stay, such judgment shall
not have been discharged.
SECTION 8.2. Action if Bankruptcy. If any Event of Default
described in clauses (a) through (d) of Section 8.1.4 shall
occur, all outstanding Obligations shall automatically be and
become immediately due and payable, without notice or demand.
SECTION 8.3. Action if Other Event of Default. If any
Event of Default (other than any Event of Default described in
clauses (a) through (d) of Section 8.1.4) shall occur for any
reason, whether voluntary or involuntary, and be continuing, the
Issuing Bank shall, upon notice or demand, declare any or all
outstanding Obligations to be due and payable, without further
notice, demand or presentment.
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ARTICLE IX
MISCELLANEOUS
SECTION 9.1. No Waiver. No failure or delay on the part of
the Issuing Bank in exercising any power or right under this
Amendment and Restatement or any other document executed and
delivered in connection herewith shall operate as a waiver
thereof, nor shall any single or partial exercise of any such
power or right preclude any other or further exercise thereof or
the exercise of any other power or right. No notice to or demand
on the Account Party in any case shall entitle it to any notice
or demand in similar or other circumstances. No waiver or
approval by the Issuing Bank shall, except as may be otherwise
stated in such waiver or approval, be applicable to subsequent
transactions. No waiver or approval hereunder shall require any
similar or dissimilar waiver or approval thereafter to be granted
hereunder. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 9.2. Amendments, etc. No amendment, modification,
termination or waiver of any provision of this Amendment and
Restatement nor consent to any departure herefrom, shall in any
event be effective unless the same shall be in writing and signed
by the Account Party and the Issuing Bank, and then such waiver
or consent shall be effective only in the specific instance and
for the specific purpose for which given.
SECTION 9.3. Notices. All notices and other communications
provided to any party hereto under this Amendment and Restatement
shall be in writing or by telecopy addressed and delivered or
transmitted to such party at its address set forth below its
signature hereto or telecopy number set forth below its signature
hereto or at such other address or telecopy number as may be
designated by such party in a notice to the other parties. Any
notice, if mailed and properly addressed with postage prepaid or
if properly addressed and sent by pre-paid courier service, shall
be deemed given when received; any notice, if transmitted by
telecopy, shall be deemed given when transmitted (receipt
confirmed).
SECTION 9.4. Payment of Costs and Expenses. The Account
Party agrees to pay on demand all expenses of the Issuing Bank
(including the fees and out-of-pocket expenses of counsel to the
Issuing Bank) in connection with
(a) the negotiation, preparation, execution, delivery
and enforcement of this Amendment and Restatement and of
each other Credit Document, including schedules and
exhibits, and any amendments, waivers, consents, supplements
or other modifications to this Amendment and Restatement or
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any other Credit Document as may from time to time hereafter
be required, whether or not the transactions contemplated
hereby are consummated, and
(b) the preparation and review of the form of any
document or instrument relevant to this Amendment and
Restatement or any other Credit Document.
The Account Party further agrees to pay, and to save the Issuing
Bank harmless from all liability for, any stamp or other taxes
which may be payable in connection with the execution or delivery
of this Amendment and Restatement, the issuance of the Letters of
Credit, or any other Credit Documents. The Account party also
agrees to reimburse the Issuing Bank upon demand for all
reasonable out-of-pocket expenses (including attorneys' fees and
legal expenses) incurred by the Issuing Bank in connection with
(x) the negotiation of any restructuring or "work-out", whether
or not consummated, of any Obligations and (y) the enforcement of
any Obligations.
SECTION 9.5. Indemnification. In consideration of the
execution and delivery of this Amendment and Restatement by the
Issuing Bank, the Account Party hereby indemnifies, exonerates
and holds the Issuing Bank and each of its officers, directors,
employees and agents (collectively, the "Indemnified Parties")
free and harmless from and against any and all actions, causes of
action, suits, losses, costs, liabilities and damages, and
expenses incurred in connection therewith (irrespective of
whether any such Indemnified Party is a party to the action for
which indemnification hereunder is sought), including reasonable
attorneys' fees and disbursements (collectively, the "Indemnified
Liabilities"), incurred by the Indemnified Parties or any of them
as a result of, or arising out of, or relating to
(a) any transaction financed or to be financed in
whole or in part, directly or indirectly, with the use of
any Letter of Credit;
(b) the entering into and performance of this
Amendment and Restatement and any other Credit Document by
any of the Indemnified Parties;
(c) any investigation, litigation or proceeding
related to any environmental cleanup, audit, compliance or
other matter relating to the protection of the environment
or the Release by the Account Party or any of its
Subsidiaries of any Hazardous Material; or
(d) the presence on or under, or the escape, seepage,
leakage, spillage, discharge, emission, discharging or
releases from, any real property owned or operated by the
-27-
Account Party or any Subsidiary thereof of any Hazardous
Material (including any losses, liabilities, damages,
injuries, costs, expenses or claims asserted or arising
under any Environmental Law), regardless of whether caused
by, or within the control of, the Account Party or such
Subsidiary,
except for any such Indemnified Liabilities arising for the
account of a particular Indemnified Party by reason of the
relevant Indemnified Party's gross negligence or wilful
misconduct. If and to the extent that the foregoing undertaking
may be unenforceable for any reason, the Account Party hereby
agrees to make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law.
SECTION 9.6. Survival. The obligations of the Account
Party under Sections 4.1, 4.2, 9.4 and 9.5 shall in each case
survive any termination of this Amendment and Restatement and the
payment in full of all Obligations. The representations and
warranties made by the Account Party in this Amendment and
Restatement and in each other Credit Document shall survive the
execution and delivery of this Amendment and Restatement and each
such other Credit Document.
SECTION 9.7. Severability. Any provision of this Amendment
and Restatement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to
the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the
validity or enforceability of such provision in any other
jurisdiction.
SECTION 9.8. Headings. The various headings of this
Amendment and Restatement and each other Credit Document are
inserted for convenience only and shall not affect the meaning or
interpretation of this Amendment and Restatement or such other
Credit Document or any provisions hereof or thereof.
SECTION 9.9. Execution in Counterparts, Effectiveness, etc.
This Amendment and Restatement hereto may be executed by the
parties hereto in several counterparts, each of which shall be
deemed to be an original and all of which shall constitute
together but one and the same agreement. This Amendment and
Restatement shall become effective when counterparts hereof
executed on behalf of the Account Party and the Issuing Bank
shall have been received by the Issuing Bank.
SECTION 9.10. Governing Law; Entire Agreement, etc. THIS
AMENDMENT AND RESTATEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. This
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Amendment and Restatement, the Letters of Credit and the other
Credit Documents constitute the entire understanding among the
parties hereto with respect to the subject matter hereof and
supersede any prior agreements, written or oral, with respect
thereto. EACH PARTY TO THIS AMENDMENT AND RESTATEMENT HEREBY
IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE OR
FEDERAL COURT SITTING IN NEW YORK CITY IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AMENDMENT AND
RESTATEMENT AND EACH CREDIT DOCUMENT AND EACH HEREBY IRREVOCABLY
AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING
MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE OR FEDERAL
COURT. EACH PARTY TO THIS AMENDMENT AND RESTATEMENT HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO
SO, THE DEFENSE OF ANY INCONVENIENT FORUM TO THE MAINTENANCE OF
SUCH ACTION OR PROCEEDING.
SECTION 9.11. Successors and Assigns. This Amendment and
Restatement shall be binding upon the Account Party, its
successors and assigns, and inure to the benefit of the Issuing
Bank and its successors, transferees and assigns. The Account
Party shall have no right to assign its rights hereunder or any
interest herein (except for any assignment by operation of law
pursuant to a merger permitted by clause (c) of Section 7.2.2)
without the prior written consent of the Issuing Bank.
SECTION 9.12. Waiver of Jury Trial. THE ISSUING BANK AND
THE ACCOUNT PARTY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS AMENDMENT AND RESTATEMENT, THE LETTERS OF
CREDIT OR ANY OTHER CREDIT DOCUMENT, OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR
ACTIONS OF THE ISSUING BANK OR THE ACCOUNT PARTY. THE ACCOUNT
PARTY ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND
SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER
PROVISION OF EACH OTHER CREDIT DOCUMENT TO WHICH IT IS A PARTY)
AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE ISSUING
BANK ENTERING INTO THIS AMENDMENT AND RESTATEMENT AND EACH SUCH
OTHER CREDIT DOCUMENT.
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IN WITNESS WHEREOF, the parties hereto have caused this
Amendment and Restatement to be duly executed and delivered by
their respective officers thereunto duly authorized as of the
date first above written.
COLLINS & AIKMAN GROUP, INC.
(formerly known as Wickes
Companies, Inc.)
By /s/ Paul W. Meeks
Name: Paul W. Meeks
Title: Vice President & Treasurer
Address: 8320 University Executive Park
Suite 102
Charlotte, North Carolina
28262
Facsimile No.: 704-548-2360
Attention: Treasurer
CONTINENTAL BANK N.A., as Issuing
Bank, and as Lender and Agent
under the Credit Agreement
By /s/ John Orrechio
Name: John Orrechio
Title: Vice President
Address: 231 South LaSalle Street
Chicago, Illinois 60697
Facsimile No.: 312-974-9102
Attention: Virginia Marroquin
-30-
FIRST AMENDMENT dated as of April 4, 1994 to AGREEMENT
(the "Agreement") dated as of March 23, 1992, between Collins &
Aikman Group, Inc. (the "Company") and David J. McKittrick
("Employee").
WHEREAS, the Company and Employee desire to amend the
Agreement as hereinafter provided;
NOW, THEREFORE, in consideration of the premises and
mutual covenants contained herein and for other good and valuable
consideration, the parties hereto hereby agree as follows:
1. Section 1 of the Agreement is hereby amended by
changing "March 24, 1994" to "July 30, 1994".
2. The first sentence of Section 2 of the Agreement is
hereby deleted and replaced with the following:
"From March 23, 1992 until April 4, 1994, Employee
shall be the Vice Chairman and Chief Operating Officer of
the Company. From April 4, 1994 until further notice from
the Company, Employee shall be the Principal Financial and
Accounting Officer of the Company, and thereafter Employee
shall have such other title consistent with his limited
responsibilities as the Company and Employee shall agree.
During the term of this Agreement, Employee shall perform
such services for the Company and its subsidiaries as may be
assigned to him from time to time by the Vice-Chairman and
the Co-Chairman of the Board of Directors of the Company."
3. The third sentence of Section 2 of the Agreement is
hereby amended by adding the following at the end thereof after
the words "his duties in such positions":
"; provided, however, that during the period from April 4,
1994 until July 30, 1994, Employee shall be permitted to
initiate a job search."
4. The first sentence of Section 3.2(a) of the Agreement
is hereby amended by adding the following at the end thereof
after the words "January 29, 1994":
"and a cash bonus of not less than $87,500 for the six
months ending July 30, 1994."
5. The last sentence of Section 3.2(a) of the Agreement is
hereby amended to add the following at the end thereof after the
word "relate":
"except that the bonus for the period ending July 30, 1994
shall be payable to the extent of 50% not later than August
30, 1994 and to the extent of 50% not later than November
30, 1994."
6. Clause (i) of Section 3.2(b) is hereby amended by
adding the words "or portion thereof" after the words "fiscal
year" the first time they appear and by changing the words "the
last day of such fiscal year" to "July 1, 1994".
7. Clause (ii) of Section 3.2(b) of the Agreement is
hereby
amended to read in its entirety as follows:
"(ii) if Employee is employed hereunder for less than the
period from January 30, 1994 to July 30, 1994 for any reason
other than a voluntary termination by Employee (excluding,
however, a voluntary termination by Employee after July 1,
1994) or a termination for Cause by the Company, Employee
shall be entitled to receive, in lieu of any bonus under
Section 3.2(a) for such period, a pro rata portion (based on
the number of weeks of such period during which Employee was
actually employed hereunder over 26) of $87,500.
8. Sections 3.3 (a) through (e) of the Agreement are
hereby amended to read in their entirety as follows:
"(a) Subject to the vesting provisions set forth
herein, Employee shall receive an award (the
"Investment") having an aggregate "Value" equal to
$1,000,000.
(b) The Investment that Employee is eligible to
receive shall vest as follows: (i) 20% of the
aggregate Value shall vest at the end of each of
the first two 12-month periods during which
Employee is employed by the Company and its
affiliates and (ii) an amount equal to $547.95
shall vest daily thereafter for the period during
which Employee is employed by the Company and its
affiliates, provided that Employee is so employed
until July 1, 1994 or is involuntarily terminated
by the Company without Cause prior to that date,
until 100% of the aggregate Value is vested.
(c) Upon termination of Employee's employment with the
Company and its affiliates for any reason other
than termination for Cause, Employee shall receive
the vested Value of the Investment calculated
pursuant to Section 3.3 (a) and (b).
(d) Employee's rights with respect to the Investment
shall not continue after Employee's termination of
employment with the Company and its affiliates,
except for rights to payment under Section 3.3(c)
with respect to Employee's termination of
employment.
(e) Payments under this Section 3.3 shall be made in a
lump sum cash payment upon Employee's termination
of employment without Cause."
2
9. Section 3.4(a) of the Agreement is hereby amended to
read in its entirety as follows:
"(a) If Employee's employment with the Company and its
affiliates terminates after March 23, 1994, for whatever
reason (including, without limitation, termination at the
end of the term of employment under Section 1, as extended
by written mutual agreement) other than termination for
Cause, Employee shall receive as a retirement severance
benefit $17,000 payable in cash promptly after such
termination. In addition, the Company hereby acknowledges
that if Employee's employment with the Company terminates
after March 24, 1994, Employee shall be fully vested under
the Collins & Aikman Corporation Profit Sharing Plan and the
Collins & Aikman Corporation Employees' Pension Account Plan
and will receive the value of his vested accounts in a lump
sum following termination of employment."
10. The third sentence of Section 3.4(b) of the Agreement
is hereby amended to read in its entirety as follows:
"Upon termination of Employee's employment with the Company,
provided that such termination is after July 1, 1994 or is
an involuntary termination by the Company without Cause,
Employee shall be given ownership of such automobile and
shall not be required to pay any purchase price in
connection therewith."
11. Section 3.4(c) of the Agreement is hereby amended to
read in its entirety as follows:
"Employee shall be entitled to four weeks of paid vacation
per 12 month period of his employment hereunder, which shall
accrue on a continuous basis (i.e. 1.67 vacation days for
every month of employment). Upon termination of Employee's
employment with the Company, provided that such termination
is after July 1, 1994 or is an involuntary termination by
the Company without Cause, Employee shall be entitled to
cash in a lump sum for any unused vacation days (rounded up
to the nearest whole day)."
12. Section 5.3 of the Agreement is hereby amended to add
the following at the end thereof:
"Upon termination of Employee's employment with the Company,
provided that such termination is after July 1, 1994 or is
an involuntary termination by the Company without Cause,
Employee shall be given ownership of his personal office
equipment, including his computer and peripherals, home fax
and cellular phone, and shall not be required to pay any
purchase price in connection therewith."
3
13. Clauses II and III of Section 6.1 are hereby amended to
read in their entirety as follows:
"(ii) any unpaid cash bonus that Employee may be entitled to
receive pursuant to Section 3.2, and (iii) any amounts that
may be due to Employee pursuant to Sections 3.3, 3.4(a) and
3.4(c)."
14. The validity, interpretation and performance of this
Amendment shall be governed by the internal laws of the State of
New York, regardless of the laws that might be applied under
applicable principles of conflicts of laws. Each of the parties
hereby waives any right such party may have to a trial by jury.
15. All references in the Agreement to this "Agreement"
shall mean the Agreement, as amended hereby. Except as expressly
amended hereby, the Agreement shall continue in full force and
effect in accordance with the provisions thereof.
16. In consideration of the Company entering into this
Amendment, Employee unconditionally releases the Company and its
subsidiaries and affiliates and directors, officers, employees
and stockholders thereof, from any and all claims, liabilities
and obligations of any nature pertaining to the termination of
his employment, other than those explicitly provided for by the
Agreement as amended hereby and amounts payable with respect to
Employee under benefit plans covering Employee, including,
without limitation, any claims arising out of alleged legal
restrictions on the Company's rights to terminate its employees,
such as any termination contrary to public policy or to laws
prohibiting discrimination (including, without limitation, the
Age Discrimination in Employment Act).
IN WITNESS WHEREOF, the parties hereto have executed
this Amendment as of the day and year first above written.
/s/ David J. McKittrick [L.S.]
David J. McKittrick
COLLINS & AIKMAN GROUP, INC.
By /s/ David A. Stockman
David A. Stockman
Title: Co-Chairman and Co-Chief
Executive Officer
By /s/ Randall J. Weisenburger
Randall J. Weisenburger
Title: Vice Chairman
4
April 28, 1994
Subsidiaries of Collins & Aikman Group, Inc.
Company Jurisdiction
Builders Emporium Payroll Services, Inc. Delaware
Cepco Incorporated Delaware
Collins & Aikman Corporation Delaware
Ackerman Associates, Inc. New York
Ack-Ti-Lining, Inc. New York
Collins & Aikman Automotive International, Inc. Delaware
Collins & Aikman Holdings Canada Canada
WCA Canada, Inc. Canada
Imperial Wallcoverings (Canada), Inc.1 Canada
Collins & Aikman Lease Co. Delaware
Collins & Aikman United Kingdom, Ltd. United Kingdom
Imperial Wallcoverings, Inc. Delaware
Marketing Service, Inc. Delaware
The Akro Corporation Delaware
Dura Acquisition Corp. Delaware
Dura Convertible Systems de Mexico, S.A. de C.V.2 Mexico
(1% owned by Collins & Aikman Corporation)
Warner Fabrics plc United Kingdom
(Owned with Wickes International Corporation)
Harris Fabrics Limited United Kingdom
Warner & Sons, Ltd. United Kingdom
(1 share owned by Warner Fabrics plc; 1 share
owned by Warner Fabrics plc and Nicholas E. Joels,
as joint holders)
Collins & Aikman de Mexico, S.A. de C.V.3 Mexico
Gamble Development Company Minnesota
Greeff Fabrics, Inc. New York
Hopkins Realty Company Minnesota
Ole's, Inc. California
Ole's Nevada, Inc. Nevada
Simmons Universal Corporation Delaware
Wickes Asset Management, Inc. Delaware
Wickes Guaranteed Parts, Ltd. Canada
Wickes International Corporation Delaware
Design Edition Limited United Kingdom
(50% ownership with Warner Fabrics plc)
Warner Weaving Company Limited United Kingdom
(50% ownership with Warner Fabrics plc)
Wickes Manufacturing Company Delaware
Wickes Products, Inc. Delaware
Wickes ELCO Corporation Delaware
Wickes Manufacturing Services Company, Inc. Delaware
Wickes Realty, Inc. Delaware
Wickes Venture Capital, Inc. Delaware
Sequoia Pacific Development Company Delaware
1 24% owned by Imperial Wallcoverings, Inc.
2 In formation.
3 1% owned by The Akro Corporation. In formation.
